<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BLUE RHINO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 5984 56-1870472
(STATE OR OTHER (PRIMARY (I.R.S.
JURISDICTION OF STANDARD EMPLOYER
INCORPORATION OR INDUSTRIAL IDENTIFICATION
ORGANIZATION) CLASSIFICATION NUMBER)
CODE NUMBER)
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-----------
BILLY D. PRIM
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
104 CAMBRIDGE PLAZA DRIVE
WINSTON-SALEM, NORTH CAROLINA 27104
TELEPHONE (336) 659-6900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
SUSAN M. HERMANN LARRY A. BARDEN
PEDERSEN & HOUPT, P.C. SIDLEY & AUSTIN
161 N. CLARK STREET, SUITE 3100 ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60601 CHICAGO, ILLINOIS 60603
TELEPHONE (312) 641-6888 TELEPHONE (312) 853-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If the Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $.001 per
share................................. 3,105,000 shares $14.00 $43,470,000 $12,824
</TABLE>
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(1) Includes 405,000 shares of Common Stock which the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
-----------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAW OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 10, 1998
PROSPECTUS
- -------
2,700,000 SHARES
logo TK
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by the
Company.
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price will be between $12.00 and $14.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Company has applied to have the Common Stock approved for
quotation on the Nasdaq National Market under the symbol "RINO."
--------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
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Per Share........................ $ $ $
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Total (3)........................ $ $ $
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</TABLE>
(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company, estimated at $750,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 405,000 additional shares of Common Stock solely to cover over-
allotments, if any. If all such shares are purchased, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
--------
The shares of Common Stock are offered by the several Underwriters subject to
prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1998 at the office of the agent of
Hambrecht & Quist LLC in New York, New York.
HAMBRECHT & QUIST
NATIONSBANC MONTGOMERY SECURITIES LLC
DAIN RAUSCHER INCORPORATED
April , 1998
<PAGE>
[ON THIS PAGE WILL APPEAR (1) A PHOTOGRAPH OF A BLUE RHINO GRILL CYLINDER AND
(2) A GRAPH OF THE BLUE RHINO BUSINESS MODEL INCLUDING THE FLOW OF
TRANSACTIONS AMONG CONSUMERS, RETAILERS, DISTRIBUTORS AND BLUE RHINO]
The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent auditors and will
make available copies of quarterly reports for the first three quarters of
each fiscal year containing unaudited financial information.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
The Blue Rhino(R) name, rhino logo, RhinoTUFF(R) and Tri-Safe(TM) are
registered trademarks of the Company. This prospectus also includes trademarks
of companies other than the Company.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. The Common Stock offered hereby
involves a high degree of risk. See "Risk Factors."
THE COMPANY
Blue Rhino is the leading provider of grill cylinder exchange in the United
States with cylinder exchange displays at over 6,600 retail locations in 41
states. Cylinder exchange provides consumers with a convenient means to
exchange empty grill cylinders for clean, safer, precision-filled cylinders.
Blue Rhino cylinder exchange is offered at many of the major home
center/hardware, mass merchant, grocery and convenience stores such as Home
Depot, Lowe's, Sears Hardware, Wal.Mart, Kroger and SuperAmerica. Blue Rhino
partners retailers and independent distributors to provide consumers a
nationally branded product as an alternative to traditional grill cylinder
refill. The Company is focused on promoting its Blue Rhino brand through
retailers and leveraging its network of 51 independent propane distributors.
Because the distributors make the necessary investments in distribution
infrastructure, Blue Rhino can dedicate its efforts and capital to brand
development, value-added marketing, customer service and management information
systems ("MIS"). During the twelve months ended January 31, 1998 the Company's
sales increased 78% from the prior year's comparable period to approximately
$18.0 million as a result of the growth of sales at existing locations and the
addition of over 3,000 new retail locations.
Outdoor barbecuing is increasingly one of the most popular outdoor activities
in the United States driven by consumer trends to healthier food preparation
and the desire to spend more time outside at family and social gatherings. The
popularity of propane grills has increased significantly in recent years with
propane grill sales now exceeding the combined sales of charcoal, natural gas
and electric grills. According to a 1997 survey conducted on behalf of the
Barbecue Industry Association ("BIA"), approximately 38.5 million United States
households own a propane grill, with the average propane grill owner using 1.8
cylinders of propane per year. Based on this study's estimate of 69.0 million
cylinder transactions per year, the Company believes the annual retail market
for grill cylinder refills is approximately $1.0 billion.
Blue Rhino is creating a new paradigm for the grill cylinder exchange market
which provides benefits to consumers, retailers and distributors. Blue Rhino
offers consumers a new, convenient, branded product alternative to grill
cylinder refilling. Blue Rhino provides retailers with a high margin, turn-key
branded service which has the potential to increase customer traffic and
utilization of exterior retail space. Blue Rhino's cylinder exchange program
provides independent distributors with a counter-seasonal complement to their
traditional propane business as well as access to major retail accounts,
sophisticated MIS and marketing support.
Blue Rhino's business strategy is to capitalize on its leading position in
this growing market by: (i) promoting the Blue Rhino brand, driving consumer
awareness and building consumer and retailer loyalty, (ii) expanding
relationships and increasing sales with retailers by opening new locations and
generating additional sales within existing retail accounts, (iii) leveraging
its national distributor network by aggressively increasing each distributor's
market penetration and the Company's overall profitability, (iv) pursuing
strategic acquisitions of smaller regional cylinder exchange businesses with
established retail accounts and (v) expanding on its national sales and
distribution capabilities by introducing new Blue Rhino products to the
backyard living category.
Blue Rhino was incorporated in North Carolina on March 24, 1994 and
reincorporated in Delaware on December 16, 1994. The Company maintains its
executive offices at 104 Cambridge Plaza Drive, Winston-Salem, North Carolina
27104. The Company's telephone number is (336) 659-6900. The Company's web site
is www.bluerhino.com. The Company's web site is not and shall not be deemed to
be a part of this Prospectus.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company... 2,700,000 shares
Common Stock to be outstanding after 7,208,297 shares(1)
the offering.........................
Use of proceeds....................... The net proceeds to the Company from the
offering will be used to repay certain
indebtedness and for other general
corporate purposes, including working
capital and potential acquisitions
Proposed Nasdaq National Market RINO
symbol...............................
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA AND SELECTED OPERATING DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
---------------------------- -----------------------
JULY 31, JULY 28, JULY 31, JANUARY 31, JANUARY 31,
1995 1996 1997 1997 1998
-------- -------- -------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales................. $ 2,728 $ 8,216 $14,211 $ 4,509 $ 8,314
Gross profit.............. (795) 316 2,567 503 1,943
Loss from operations (2).. (4,398) (6,130) (4,105) (2,043) (1,737)
Net loss (2).............. $(4,660) $(7,431) $(5,584) $(2,781) $(2,564)
Loss available to common
stockholders (3)......... $(5,055) $(8,067) $(6,271) $(3,120) $(2,932)
Basic and diluted loss per
share (2)................ $ (0.14) $ (0.22) $ (0.17) $ (0.08) $ (0.08)
Shares used in calculation
of net loss per
share (4)................ 36,998 36,998 36,998 36,998 36,998
Pro forma basic and di-
luted loss per share (5). $ (2.24) $ (1.05)
======= =======
Pro forma shares used in
calculation of net loss
per share (5)............ 2,798 2,798
SELECTED OPERATING DATA:
Retail locations (at pe-
riod end)................ 1,608 2,981 4,400 3,116 6,600
Cylinder transactions
(000's).................. 306 769 1,239 387 715
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31, 1998
----------------------
AS
ACTUAL ADJUSTED (6)
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(UNAUDITED)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 1,207 $11,067
Working capital.................................... 296 12,374
Total assets....................................... 11,995 21,955
Notes payable to bank.............................. 1,468 --
Long-term obligations, less current portion........ 19,357 992
Total stockholders' (deficit) equity............... (21,420) 20,527
</TABLE>
- --------------------
(1) Based on the number of shares outstanding as of January 31, 1998, after
giving effect to the Recapitalization (as such term is described in
"Capitalization"). Excludes (a) an aggregate of 904,862 shares of Common
Stock reserved for issuance under the Company's stock option plans, of
which 182,607 shares are subject to outstanding and vested options as of
the date hereof at a weighted average exercise price of $6.03 per share,
(b) 81,915 shares reserved for issuance pending the exercise of the
warrants issued to certain stockholders in January 1998 at an exercise
price of $13.00 per share (the "1998 Warrants") and (c) approximately
14,300 shares of Common Stock to be issued upon the conversion of
approximately $185,000 of dividends accruing on the Company's outstanding
shares of Series A Convertible Participating Preferred Stock ("Preferred
Stock") between January 31, 1998 and the estimated consummation of the
offering. See "Capitalization," "Management--Stock Incentive Plan," "--
Director Option Plan" and "--Distributor Option Plan" and Note 20 of Notes
to Financial Statements.
4
<PAGE>
(2) Includes nonrecurring charges for fiscal 1996 and 1997 of $1,363 and
$1,084, respectively, and for the first six months of fiscal years 1997 and
1998 of $188 and $408, respectively. See Note 12 of Notes to Consolidated
Financial Statements.
(3) Includes net loss less Preferred Stock dividends of $395, $636, $687 and
$339 and $368 for fiscal years ended 1995, 1996, 1997 and the six months
ended January 31, 1997 and 1998, respectively.
(4) Based on the number of shares outstanding as of January 31, 1998, including
shares issuable upon the exercise of all outstanding stock options and
stock warrants as of such date.
(5) Based on the number of shares outstanding as of January 31, 1998, including
shares issuable upon the exercise of all outstanding stock options and
stock warrants as of such date, and the 1 for 13.22513 reverse stock split
with respect to the Common Stock to be effected immediately prior to the
consummation of this offering.
(6) As adjusted to give effect to the Recapitalization (as described in Note 2
to "Capitalization") and to reflect the issuance and sale of 2,700,000
shares of Common Stock by the Company hereby at an assumed initial public
offering price of $13.00 per share and the application of the estimated
net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
-------------------
All references to the "Company" and "Blue Rhino" mean Blue Rhino Corporation
and its subsidiary, Rhino Services, L.L.C., a Delaware limited liability
company, unless the context indicates otherwise. Except as otherwise noted,
all information in this Prospectus assumes no exercise of the Underwriters'
over-allotment option and the consummation of the Recapitalization which is
described in Note 2 to "Capitalization."
5
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results and the timing of certain events could differ
materially from those discussed in the forward-looking statements as a result
of certain factors, including those set forth below and elsewhere in this
Prospectus. The following risk factors should be considered carefully in
addition to the other information in this Prospectus before purchasing the
shares of Common Stock offered hereby.
History of Losses; Uncertainty of Future Profitability. The Company
commenced operations in May 1994 and has not earned a profit in any period to
date. As of January 31, 1998, the Company had an accumulated deficit of
approximately $20.6 million. The Company had a net loss of approximately $5.6
million for fiscal 1997, and $2.6 million for the first six months of fiscal
1998. The Company also anticipates net losses in the quarter ending April 30,
1998. There can be no assurance that the Company will be able to operate
profitably in the future. See "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Management of Growth. Over the past several years the Company has
experienced significant growth in its business activities, including an
increase in the number of retail locations offering Blue Rhino cylinder
exchange and the development of an independent distributor network. As of July
31, 1995, the Company had less than 1,000 retail exchange locations,
substantially all of which were in its south/southeast region of the United
States and no independent distributor network. As of January 31, 1998, the
Company had 51 independent distributors servicing approximately 6,600 retail
locations in 41 states. The Company's future growth will depend in large part
on the Company's ability to continue to expand its number of retail locations
and increase sales within existing locations. This growth has required and
will continue to require skilled management of the Company and its retailer
and distributor relationships by the Company's executive officers, none of
whom have prior experience managing a public company. The Company remains
subject to the risks and uncertainties inherent in the growth of a business in
its industry, including finding productive new retail locations, displaying to
consumers the benefits of cylinder exchange, maintaining relationships with
competent distributors, refining and maintaining a management infrastructure
sufficient to support growth and securing access to capital to fund growth.
The Company's failure to effectively manage any such growth, including its
ability to accurately forecast the pace of retail location and sales growth,
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Seasonal and Quarterly Fluctuations. The Company's business is subject to
seasonal fluctuations, especially in colder regions of the United States,
which have caused, and are expected to continue to cause, significant
fluctuations in its quarterly results of operations. The Company anticipates
that it will derive the majority of its operating revenues from the spring and
summer seasons when consumers are more likely to grill out, which coincide
with the Company's third and fourth fiscal quarters (quarters ending in April
and July, respectively). Sustained periods of poor weather, particularly in
the spring and summer seasons, can negatively impact sales and gross margin.
The Company's timing and rate of establishing new retail locations and
expenses incurred in anticipation of increased sales also have caused, and may
continue to cause, quarterly fluctuations in the Company's results of
operations. Accordingly, the results of operations in any quarter will not
necessarily be indicative of the results that may be achieved for a full
fiscal year or any future quarter. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Selected Quarterly Results
of Operations."
Concentration of Customer Accounts. The Company depends upon its
relationships with a limited number of major retailers for a significant
portion of its sales. Home Depot, Lowe's and Wal.Mart each represented in
excess of 10% of the Company's sales for fiscal 1997 and the first six months
of fiscal 1998. These retailers, as a group, represented approximately 58% of
the Company's sales for fiscal 1997 and 49% for the first six months of fiscal
1998 with Home Depot representing 29% and 30%, respectively, of the Company's
sales for these periods. As a result, the Company's success depends, in part,
upon the business success and growth of such retailers and such retailers'
willingness to offer Blue Rhino cylinder exchange.
6
<PAGE>
There can be no assurance that the Company will be able to maintain
relationships with these retailers or significantly increase the number of
their stores at which Blue Rhino cylinder exchange is offered. Failure to
maintain relationships with or increase penetration with any of these
retailers or any significant downturn in the business or financial condition
of any such retailer could have a material adverse effect on the Company's
business, financial condition and results of operations.
Lack of Contractual Relationships with Retailers. None of the Company's
retail accounts is contractually bound to offer Blue Rhino cylinder exchange.
In the absence of contracts, there can be no assurance that retailers will
continue to provide Blue Rhino cylinder exchange or that they will not offer a
competitor's cylinder exchange program. Continued relations with a retailer
depend upon various factors, including customer service, consumer demand,
competition and cost. Termination of the Company's business relations with any
retailer representing a significant number of the Company's locations or the
unwillingness of any such retailer to expand its relationship with the Company
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "--Volatile Product; Potential
Product Liability."
Dependence on Consumer Acceptance of a New Retailing Concept. The
availability of cylinder exchange at major retailers is a relatively new
retailing concept and there can be no assurance that this concept will be
widely accepted by consumers or retailers. According to a 1997 survey (the
"1997 BIA Study") conducted on behalf of the Barbecue Industry Association
("BIA"), traditional grill cylinder refilling, rather than cylinder exchange,
currently accounts for approximately 79% of consumer propane sales. The
Company's success will depend in large part on whether consumers begin to
select cylinder exchange over traditional refilling methods and whether
retailers begin to and continue to offer cylinder exchange.
Dependence on Distributor Relationships. The Company relies exclusively on
independent distributors to deliver its products to retailers. The Company's
success will depend, in part, on its ability to successfully maintain existing
distributor relationships and on the ability of the distributors to set up and
adequately service Blue Rhino's retail accounts. There can be no assurance
that the Company will be successful in maintaining such relationships or that
such relationships will ultimately result in the sales anticipated by the
Company. While the Company establishes performance goals with its
distributors, it exercises only limited influence over the resources that any
particular distributor devotes to cylinder exchange. The Company could suffer
a loss of consumer or retailer goodwill if its distributors do not adhere to
the Company's quality control and service guidelines or fail to ensure an
adequate and timely supply of cylinders. If any distributor were to
discontinue servicing one or more retailers or terminate its distributor
agreement with the Company, the Company's business in that distributor's
territory would be adversely affected until the Company retained and developed
a replacement distributor. In addition, failure of a distributor to adequately
service locations of national retailers also may result in the loss of
affiliated locations served by other distributors. In the event the Company is
not successful in attracting, developing and maintaining successful
distributors, the Company's business, financial condition and results of
operations could be materially adversely affected. See "Business--Distributor
Network."
Concentration of Accounts With Certain Distributors. Approximately 66% of
the Company's retail locations are serviced by five of the Company's 51
distributors. Sales by these key distributors resulted in approximately 50%
and 49% of the Company's revenues for fiscal 1997 and the first six months of
fiscal 1998, respectively. Platinum Propane Holding, L.L.C. and its
subsidiaries (collectively, "Platinum Propane") accounted for approximately
37% and 34% of the Company's revenues for fiscal 1997 and the first six months
of fiscal 1998, respectively. A disruption in service by one or more of these
key distributors would adversely affect the Company's results of operations.
The inability of one or more of these key distributors to adequately service
designated retail accounts also could have a material adverse effect on the
Company's business, financial condition and results of operations.
Cross-Ownership of Distributors. Billy D. Prim and Andrew J. Filipowski, the
Chairman and Chief Executive Officer and the Vice Chairman of the Company,
respectively, indirectly own approximately 40% of
7
<PAGE>
Platinum Propane, the Company's largest distributor measured by locations
served and sales revenues generated. In addition, Messrs. Filipowski and Prim
own in the aggregate approximately 45% of each of Caribou Cylinder Exchange,
L.L.C. ("Caribou Propane") and Javilina Cylinder Exchange, L.L.C. ("Javilina
Propane"), two of the Company's distributors. In the event any of Platinum
Propane, Caribou Propane or Javilina Propane fail to meet performance goals,
the cross-ownership of these distributors and Blue Rhino could reduce the
Company's incentive to terminate distribution agreements or take other actions
against any of them. See "Business--Distributor Network--Dedicated
Distributors" and "Certain Transactions."
Varying Local Permitting Processes. The storage and sale of propane
cylinders is subject to local permitting of each retailer location depending
on local ordinance. Such ordinances have had and can be expected to have an
increasing influence on the acceptance of cylinder exchange by retailers,
distribution methods, cylinder packaging and storage. The ability and timing
of obtaining necessary permits varies from jurisdiction to jurisdiction and
delays in obtaining permits have from time to time delayed installation of new
retail locations. In addition, some jurisdictions have refused to issue the
necessary permits and thereby prevented a limited number of installations.
There can be no assurance that certain jurisdictions in which the Company
operates will not impose additional restrictions on the Company's ability to
market and the distributors' ability to maintain the cylinder exchange
program. Revisions to these regulations or the failure of the Company or its
distributors to adhere to terms of current and future regulations could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Governmental Regulation."
Competition. The grill cylinder refilling industry is highly fragmented and
intensely competitive. The Company competes primarily on the basis of quality
of product, service, perceived safety and price. The 1997 BIA Study results
indicated that approximately 79% of the retail demand for grill cylinders was
provided by traditional propane refilling stations rather than exchange. The
Company's primary competition comes from the approximately 20,000 bulk
refilling stations owned and operated by propane dealers, as well as certain
rental outlets, recreational vehicle centers and hardware stores. Major
propane providers such as AmeriGas Propane Partners, L.P. and Suburban Propane
Partners, L.P. offer cylinder exchange in limited locations and could expand
their cylinder exchange business nationally. These major propane providers
have greater resources than the Company and may be able to undertake more
extensive marketing campaigns and adopt more aggressive pricing policies than
the Company. The Company also competes with numerous regional cylinder
exchange programs which typically have operated in one or two states. There
can be no assurance that these competitors will not expand their cylinder
exchange programs nationwide. Furthermore, there can be no assurance that the
Company will be able to compete effectively with current or future competitors
or that the competitive pressures faced by the Company will not have a
material adverse effect on the Company's business, financial condition and
results of operations.
Acquisition of Accounts. A component of the Company's growth strategy is the
acquisition of retail accounts from competing local and regional exchange
providers. The Company's ability to expand successfully through acquisitions
of retail accounts depends on many factors, including the successful
identification of quality retail accounts, the ability of the Company's
distributors to adequately service such acquired accounts and the ability of
the Company and the distributor to convert the acquired retail accounts to
Blue Rhino cylinder exchange. In addition, there can be no assurance that
acquired retail accounts will achieve anticipated sales. The Company
anticipates competition for acquisitions from regional and national propane
distributors in selected areas. The Company recently acquired the rights to
provide cylinder exchange at approximately 1,000 retail locations through two
acquisitions, including 750 locations from Bison Propane Bottle Exchange,
L.L.C. (the "Bison Acquisition") and intends to make select acquisitions in
the future. The failure of the Company to execute its acquisition strategy
successfully could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Business
Strategy--Pursue Strategic Account Acquisitions."
Volatile Product; Potential Product Liability. Propane is a gas which, if
exposed to flame or high pressure, may ignite or explode, potentially causing
significant property damage and/or bodily harm. No assurance can
8
<PAGE>
be given that accidents will not occur during the refurbishing, refilling,
transport, storage, exchange, use or disposal of Blue Rhino cylinders. The
Company believes that, because the Blue Rhino name and rhino logo are
prominently displayed on all the Company's cylinders and cylinder displays,
the Company could be subjected to claims for damage under various legal
theories, including negligence and strict liability. In any such event, the
Company could incur substantial expense, receive adverse publicity and/or
suffer a loss of sales. A grill cylinder-related accident involving personal
injury, particularly if occurring at a retail location, could result in
product liability actions against the Company or its distributors and could
affect the willingness of retailers to offer cylinder exchange. Adverse
publicity relating to any such incident could also affect the Company's
reputation and the perceived benefits of cylinder exchange. Although the
Company maintains liability insurance coverage and requires its distributors
to maintain designated amounts of such coverage with the Company as an
additional named insured, there can be no assurance that it will provide
sufficient coverage in any particular case. In addition, there can be no
assurance that the Company or its distributors will be able to obtain
insurance coverage at acceptable levels and cost in the future.
Prior to May 1996, the Company operated a propane refilling facility in
Booneville, North Carolina. In July 1995, the Company experienced an explosion
at this facility when a filled cylinder fell from a conveyor belt, began to
leak and subsequently ignited. This explosion resulted in significant
structural damage to the plant. In September 1997, one of the Company's
distributors had a fire at its cylinder refurbishing facility when a cylinder
was left unattended on a sleeve application machine and caught fire. In August
1997, Rotorix, Inc., the distributor of Ceodux cylinder valves, issued a
recall of Ceodux valves placed on Worthington cylinders after July 16, 1997.
The Company instructed distributors to inventory the cylinders at their plants
and retail locations and remove any cylinders with the recalled valves. The
Company believes distributors have removed from circulation most of the
approximately 2,000 cylinders with recalled valves. To date, the Company is
not aware of any accident or injury occurring as a result of the use of the
recalled valves sold by its distributors. However, there can be no assurance
that damage or injury will not occur as a result of faulty valves or that
future product failures or accidents will not occur.
Geographic Concentration. As of January 31, 1998, approximately 38% of the
Company's retail locations were in, and 57% of its revenues were derived from
its south/southeast region of the United States. Should this region, or a
substantial portion of it, experience weather or other conditions which reduce
consumers' inclination to grill or use the Company's cylinder exchange
program, such geographic concentration may have an adverse effect on the
Company's business, financial condition and results of operations.
Dependence Upon a Single Product; Potential Adverse Effect of Change in
Consumer Lifestyle Trends or Buying Patterns. The Company's sole line of
business is the marketing and implementation of its cylinder exchange program.
According to the 1997 BIA Study, approximately 21% of consumers exchange their
grill cylinders while approximately 79% of consumers refill their grill
cylinders. There can be no assurance that cylinder exchange programs can
capture increased market share from refills. In addition, should electric
grills, quicker lighting charcoal or more fuel-efficient propane grills be
developed and gain popularity at the expense of currently available propane
grills, lifestyle trends or consumer preferences change or cylinder exchange
fail to be accepted by consumers, the Company would experience a material
adverse effect on its business, financial condition and results of operations.
Regulation of Propane. The transportation, handling, storage and sale of
propane is subject to regulation by authorities on a federal, state and local
level in order to protect consumers, employees, property and the environment.
The handling of propane in most regions of the United States is governed by
guidelines published by the National Fire Protection Association ("NFPA") in
Pamphlets 54 and 58. The NFPA has also recently revised guidelines concerning
the type of valve used on grill cylinders; all cylinders produced or
recertified after September 30, 1998 must be fitted with an overfill
prevention device valve ("OPD Valve"). Failure of the Company's distributors
to comply with these regulations could subject the Company to potential
governmental action for violation of such regulations which could result in
fines, penalties and/or injunctions. See "Business--Governmental Regulation."
9
<PAGE>
Dependence on Key Personnel. The Company believes that its success will
depend to a significant extent upon the services of a limited number of key
management and sales personnel, as well as its ability to attract and retain
highly qualified personnel in the future. The Company faces competition for
such personnel from other companies and organizations and there can be no
assurance that the Company will be successful in hiring or retaining qualified
personnel. The Company does not have written employment agreements with its
key personnel or any other employees and such key personnel could leave the
Company with little or no prior notice. The Company's loss of key personnel or
the Company's inability to hire or retain key personnel in the future could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Dependence on Vendors. The Company uses a number of third party vendors to
provide it with staffing and services in strategic areas. In particular, the
Company's staff of five management information systems ("MIS") professionals
relies heavily on the support of Information Management System Services
("IMSS"), a division of R. J. Reynolds Tobacco Company, as well as five other
information systems vendors. Customer service support is handled entirely
outside the Company by Ruppman Marketing Technologies, Inc. Any disruptions in
these relationships could affect the Company's ability to service its accounts
and could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Customer Service" and "--
Management Information Systems."
Dependence on Management Information Systems; Year 2000 Compliance. The
Company depends on its MIS to process orders, manage inventory and accounts
receivable collections, maintain distributor and customer information, assist
distributors in delivering products on a timely basis and in maintaining cost-
efficient operations. Any disruption in the operation of the Company's MIS,
the loss of employees knowledgeable about such systems or the Company's
failure to continue to effectively modify such systems as its business expands
could have a material adverse effect upon the Company's business, financial
condition and results of operations. See "Business--Management Information
Systems." Certain of the Company's MIS use two digit data fields which
recognize dates using the assumption that the first two digits are "19" (i.e.,
the number 97 is recognized as the year 1997). Therefore, the Company's date
critical functions relating to the year 2000 and beyond, such as sales,
distribution, inventory control and financial systems, may be adversely
affected unless changes are made to these computer systems. The Company
expects that upgrades to its MIS with respect to the year 2000 problem will
require capital expenditures of approximately $35,000. However, no assurance
can be given that these issues can be resolved in a cost-effective or timely
manner or that the Company will not incur significantly greater expense in
resolving these issues.
Dependence on Trademarks, Proprietary Information and Copyrights. The
Company considers its trademarks, particularly the Blue Rhino brand name and
rhino logo and the design of its product packaging to be of considerable value
to its business and the establishment of its national branded cylinder
exchange program. The Company relies on a combination of copyright and
trademark laws and other arrangements to protect its proprietary rights. To
enforce its rights under copyright or trademark laws, the Company may be
required to incur substantial expense which could have a material adverse
effect on the Company's business, financial condition and results of
operations. The requirement to change any trademark, service mark or trade
name of the Company would result in the loss of any goodwill associated with
that trademark, service mark or trade name, could entail significant expense
and could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company may apply for copyrights and
additional trademarks in the future. There can be no assurance that future
applications will be granted or that any issued copyrights or trademarks will
provide competitive advantages to the Company or will not be successfully
challenged or circumvented by competitors or other third parties.
Unpredictable Propane Supplies and Costs. The Company's distributors
purchase propane from natural gas providers and oil refineries which produce
propane as a by-product of the refining process. The supply and price of
propane fluctuates depending upon underlying natural gas and oil prices and
the ability of suppliers to deliver propane. While the Company's distributors
are responsible for procuring propane, an
10
<PAGE>
increase in propane prices could lead to decreased profit margins for
distributors and adversely affect their ability or desire to service the
Company's retail accounts.
Dependence on Suppliers. To adequately service the Company's retail
accounts, the Company's distributors need a sufficient supply of cylinders and
valves. To facilitate the supply of cylinders, the Company provides its
distributors the option to enter into supply agreements with Manchester Tank
and Equipment Co., Inc. There can be no assurance that sufficient quantities
of cylinders will be available in the future. In addition, the Company has
loaned $635,000 to Bison Valve, L.L.C. ("Bison Valve"), an entity formed to
develop and produce an OPD Valve with the intention of marketing its valve to
Blue Rhino distributors. There can be no assurance that the OPD Valve produced
by Bison Valve will obtain the necessary regulatory approvals or that Bison
Valve will be able to produce a sufficient number of OPD Valves to fulfill the
needs of the Company's distributors. If the distributors were unable to obtain
sufficient quantities of cylinders, valves or propane, delays or reductions in
cylinder availability could occur which would have a material adverse effect
on the Company's business, financial condition and results of operations.
Laws Governing Sales of Franchises or Business Opportunities. Various state
and federal laws define and govern the sale of franchises and business
opportunities. These laws require, among other things, that sellers of
franchises and business opportunities register such offerings with
governmental authorities and provide prescribed disclosure documents to
potential purchasers. The Company believes that its relationships with
distributors are not subject to such laws. If the Company's activities were
considered to involve the sale of franchises or business opportunities,
distributors could have recourse against the Company, including the ability to
rescind their distribution agreements and recover monetary damages. In
addition, the Company could be subject to potential governmental action for
violation of such laws which could result in fines, penalties, injunctions or
a combination thereof.
Control by Existing Stockholders. Upon completion of this offering, current
executive officers, directors and entities affiliated with them will
beneficially own, in the aggregate, approximately 47.9% of the Company's
outstanding Common Stock (approximately 45.4% if the Underwriters' over-
allotment option is exercised in full). As a result, these stockholders will
be able to elect the entire Board of Directors and will retain the voting
power to control all matters requiring stockholder approval, including
approval of significant corporate transactions, provided that they vote
together on such matters. Such a concentration of ownership may have the
effect of delaying or preventing a change in control of the Company, and also
may impede or preclude transactions in which stockholders might otherwise
receive a premium for their shares over then current market prices.
Management's Discretion as to Use of Unallocated Net Proceeds; Benefits to
Existing Stockholders. The Company has designated a specific use for only a
portion of the net proceeds to the Company resulting from the sale of Common
Stock in this offering. The Company expects to use approximately $25.6 million
of such net proceeds to retire outstanding indebtedness and certain lease
obligations; a significant portion of the outstanding indebtedness is owed to
certain stockholders of the Company. The remainder of the proceeds will be
used for working capital and other general corporate purposes and potential
acquisitions. Consequently, the Board of Directors and management of the
Company will have discretion in allocating a significant portion of the net
proceeds to the Company from this offering. In addition to the repayment of
outstanding indebtedness of which a portion is held by existing stockholders,
existing stockholders will benefit from this offering as a result of an
increase in the market value and liquidity of their investments in the
Company. See "Use of Proceeds," "Principal Stockholders" and "Certain
Transactions."
Future Capital Requirements. The Company anticipates that continuing
operations and the expansion of the Company's business will require
substantial expenditures. After application of the net proceeds of this
offering, the Company may need to borrow funds or issue debt or equity
securities to sustain continuing operations and growth if cash flow from
operations is not sufficient. There can be no assurance that the Company will
be able to obtain additional capital resources on terms acceptable to the
Company. Any additional equity financing, if available, may be dilutive to the
Company's stockholders, and any debt
11
<PAGE>
financing, if available, may involve restrictive covenants which limit the
Company's operations and/or ability to issue dividends. The Company's
inability to fund its capital requirements would have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
No Prior Public Market; Possible Volatility of Stock Price. Prior to this
offering, there has been no public market for the Common Stock, and there can
be no assurance that an active public market for the Common Stock will develop
or, if one develops, that it will be sustained. The initial public offering
price for the shares of Common Stock offered hereby was determined by
negotiation between the Company and the representatives of the Underwriters
(as defined herein) based upon several factors and may not be indicative of
the market price of the Common Stock after this offering. See "Underwriting."
The market price of the Common Stock may be volatile and could be adversely
affected by fluctuations in the Company's operating results, the failure of
the Company's operating results to meet the expectations of research analysts
or investors, changes in research analysts' recommendations regarding the
Company, general market conditions, or other events and factors, some of which
may be beyond the Company's control. In addition, the equity markets have from
time to time experienced extreme price and volume fluctuations that often have
been unrelated or disproportionate to the performance of a particular company.
Immediate and Substantial Dilution. The initial public offering price per
share is substantially higher than the net tangible book value per share of
Common Stock. New investors purchasing Common Stock in this offering
accordingly will incur immediate dilution of $10.32 in the net tangible book
value per share of Common Stock purchased (at an assumed initial public
offering price of $13.00 and after the deduction of underwriting discounts and
commissions and estimated offering expenses payable by the Company). See
"Dilution."
Shares Eligible for Future Sale; Registration Rights. Sales of substantial
amounts of the Common Stock in the public market following this offering
(including shares issued upon the exercise of stock options and warrants) or
the perception that such sales might occur could adversely affect the market
price of the Common Stock and the Company's ability to raise additional equity
capital. Upon completion of the offering, the Company will have 7,222,550
shares of Common Stock outstanding. Of these outstanding shares, the 2,700,000
shares of Common Stock sold in this offering will be freely tradeable without
restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"), unless held by an "affiliate" of the Company,
as that term is defined under Rule 144 of the Securities Act, which shares
will be subject to certain resale limitations of Rule 144. Certain
stockholders of the Company, including the executive officers and directors,
who will own in the aggregate 3,579,206 shares of Common Stock after the
offering, have agreed that they will not, without the prior written consent of
Hambrecht & Quist LLC, directly or indirectly sell, offer, contract to sell,
transfer the economic risk of ownership in, make any short sale, pledge or
otherwise dispose of any shares of Common Stock or any securities convertible
or exchangeable for or any other rights to purchase or acquire Common Stock
owned by them during the 180-day period following the date of this Prospectus.
The Company has agreed that it will not, without the prior written consent of
Hambrecht & Quist LLC, directly or indirectly sell, offer, contract to sell,
transfer the economic risk of ownership in, make any short sale, pledge or
otherwise dispose of any shares of Common Stock or any securities convertible
or exchangeable for or any other rights to purchase or acquire Common Stock
during the 180-day period following the date of this Prospectus, except that
the Company may issue shares upon the exercise of options granted prior to the
date hereof, and may grant additional options under its stock option plans,
provided, that, without the prior written consent of Hambrecht & Quist LLC,
such additional options shall not be exercisable during such period. Upon
expiration of such 180-day period, all of the shares of Common Stock subject
to such agreements will be eligible for sale subject, in certain cases, to
certain volume and other limitations of Rule 144 under the Securities Act
applicable to affiliates of the Company. Following consummation of this
offering, the Company intends to file registration statements under the
Securities Act to register the sale of 459,734 shares of Common Stock reserved
for issuance under the Stock Incentive Plan (the "Stock Incentive Plan"),
84,000 shares of Common Stock reserved for issuance pursuant to the Company's
Non-Employee
12
<PAGE>
Director Stock Option Plan (the "Director Option Plan") and 361,128 shares
reserved for issuance under the Distributor Incentive Stock Option Plan (the
"Distributor Option Plan"). Upon expiration of the lock-up agreements referred
to above, holders of approximately 3,073,003 shares of Common Stock will be
entitled to certain registration rights, at the Company's expense, with
respect to such shares. The sale of a substantial number of shares, whether
pursuant to a subsequent public offering, the exercise of registration rights
or otherwise, or the perception that such sales could occur, could adversely
affect the market price of the Common Stock and could materially impair the
Company's future ability to raise capital through an offering of equity
securities. See "Shares Eligible for Future Sale."
Forward-Looking Statements. This Prospectus contains certain forward-looking
statements, including without limitation, statements concerning the Company's
operations, economic performance and financial condition, including in
particular, the ability of the Company to place Blue Rhino cylinder exchange
at additional retail locations. These forward-looking statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The words "believe," "expect," "anticipate" and other
similar expressions generally identify forward-looking statements. Investors
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of their dates. These forward-looking statements are based
largely on the Company's current expectations and are subject to a number of
risks and uncertainties, including without limitation, those identified in
this section as "Risk Factors" and elsewhere in this Prospectus and other
risks and uncertainties indicated from time to time in the Company's filings
with the Securities and Exchange Commission (the "Commission"). Actual results
could differ materially from these forward-looking statements. In addition,
important factors to consider in evaluating such forward-looking statements
include changes in external market factors, changes in the Company's business
or growth strategy or an inability to execute its strategy due to changes in
its industry or the economy generally, the emergence of new or growing
competitors and various other competitive factors. In light of these risks and
uncertainties, there can be no assurance that the forward-looking statements
contained in this Prospectus will in fact occur.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,700,000 shares of
Common Stock offered hereby by the Company are estimated to be $31,893,000
($36,789,450 if the Underwriters' over-allotment option is exercised in full)
at an assumed initial public offering price of $13.00 per share after
deducting the underwriting discount and estimated offering expenses. The
Company intends to use the net proceeds from this offering primarily for
repayment of substantially all outstanding indebtedness and to obtain working
capital for general corporate purposes. In addition, the Company may use a
portion of the net proceeds from this offering to make one or more
acquisitions. The Company's outstanding indebtedness consists of: (i)
approximately $16.3 million ($15.1 million as of January 31, 1998) of senior
discount notes (the "Senior Discount Notes") due October 11, 2000 which bear
interest at 10.5% per annum, the proceeds of which were used to fund
development of the Company, (ii) approximately $3.2 million ($1.5 million as
of January 31, 1998) outstanding under a $9.0 million bank credit facility
with NationsBank, N.A. (the "Bank Credit Facility") due on November 30, 1998
which bears interest at 9.0% per annum, the proceeds of which were used for
working capital of the Company, (iii) approximately $2.7 million ($2.2 million
as of January 31, 1998) to purchase cylinder displays which are financed under
a $3.0 million operating lease facility and (iv) approximately $3.4 million
($3.3 million as of January 31, 1998) outstanding under subordinated loans
from four stockholders of the Company ("1998 Stockholder Loans"). The 1998
Stockholder Loans bear interest at 10.5% per annum and are due on the earlier
of December 31, 2000 or the consummation of a public offering of securities by
the Company the net proceeds of which are at least $30.0 million. A portion of
the proceeds of the 1998 Stockholder Loans was used to make a $635,000
convertible loan to Bison Valve and for additional working capital. Pending
such uses, the net proceeds of this offering will be invested in short term
investment grade, interest bearing securities. See "Risk Factors--Management's
Discretion as to Use of Unallocated Net Proceeds; Benefits to Existing
Stockholders," "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources," "Business--
Business Strategy--Pursue Strategic Account Acquisitions" and "Certain
Transactions."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on shares of its
Common Stock. The Company currently intends to retain its earnings for future
growth and, therefore, does not anticipate paying any cash dividends in the
foreseeable future. The payment of cash dividends in the future will be at the
discretion of the Board of Directors and may be prohibited under any then
existing financing agreements. There can be no assurance that the Company will
pay any dividends in the future.
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
January 31, 1998 (i) on an actual basis, (ii) on a pro forma basis after
giving effect to the Recapitalization (as defined in Note 2 below) and (iii)
on a pro forma basis as adjusted to reflect the issuance and sale by the
Company of the shares offered hereby at an assumed initial public offering
price of $13.00 per share and the application of the estimated net proceeds
therefrom. See "Use of Proceeds." This table should be read in conjunction
with the Consolidated Financial Statements and the Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JANUARY 31, 1998
----------------------------
PRO AS
ACTUAL FORMA ADJUSTED
-------- -------- --------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C>
Short-term obligations........................... $ 2,490 $ 1,740 $ 272
-------- -------- --------
Long-term obligations, less current portion (1).. 19,357 19,357 992
-------- -------- --------
Series A Convertible Participating Preferred
Stock, par value $0.001, 20,796,172 shares
authorized, issued and outstanding (actual)..... 9,304 -- --
-------- -------- --------
Stockholders' deficit:
Common Stock, par value $0.001, 68,000,000
shares authorized; 23,526,456 shares issued
and outstanding (actual); 4,508,297 shares
issued and outstanding (pro forma) and
7,208,297 issued and outstanding (as adjusted)
(2)........................................... 23 5 7
Preferred Stock, par value $0.001, 20,000,000
shares authorized; no shares issued and
outstanding................................... -- -- --
Additional paid-in capital..................... -- 10,072 41,963
Accumulated deficit............................ (21,443) (21,443) (21,443)
-------- -------- --------
Total stockholders' equity (deficit)......... (21,420) (11,366) 20,527
-------- -------- --------
Total capitalization....................... $ 9,731 $ 9,731 $ 21,791
======== ======== ========
</TABLE>
- ---------------------
(1) See Note 9 of Notes to Consolidated Financial Statements.
(2) Reflects (i) a 1 for 13.22513 reverse stock split (the "Reverse Stock
Split") with respect to the Common Stock, (ii) the conversion of all
outstanding shares of Series A Convertible Participating Preferred Stock
("Preferred Stock") into 1,572,474 shares of Common Stock, (iii) the
conversion of the $2,084,918 accrued dividend on the Preferred Stock (the
"Preferred Dividend") into 160,378 shares of Common Stock, (iv) the
cashless exercise of outstanding warrants, except for the 1998 Warrants,
to purchase 938,832 shares of Common Stock and (v) the issuance of 57,692
shares of Common Stock to Bison Propane Bottle Exchange, L.L.C. as partial
consideration for accounts and other assets acquired by the Company in
January 1998 (the "Bison Acquisition"). Excludes (a) the issuance of
81,915 shares of Common Stock reserved for issuance upon exercise of the
1998 Warrants at an exercise price of $13.00 per share, (b) an aggregate
of 904,862 shares of Common Stock reserved for issuance under the Stock
Incentive Plan, Director Option Plan and the Distributor Option Plan, of
which 182,607 shares are subject to outstanding and vested options as of
the date hereof at a weighted average exercise price of $6.03 per share
and (c) approximately 14,300 shares of Common Stock to be issued upon the
conversion of approximately $185,000 of dividends accruing on the
Preferred Stock between January 31, 1998 and the estimated consummation of
the offering. The transactions described in clauses (i) through (v) are
collectively referred to herein as the "Recapitalization" which will be
effected upon consummation of the offering. See "Description of Capital
Stock," "Certain Transactions," "Management--Stock Incentive Plan," "--
Director Option Plan," and "--Distributor Option Plan."
15
<PAGE>
DILUTION
As of January 31, 1998 the Company had a pro forma negative net tangible
book value of $(12,604,000) or $(2.80) per share of Common Stock. The pro
forma negative net tangible book value per share represents the amount of the
Company's total tangible assets less its total liabilities divided by the
number of shares of Common Stock outstanding, after giving effect to the
Recapitalization. (The negative net tangible book value as of January 31, 1998
prior to giving effect to the Recapitalization was $(22,658,000) or $(0.96)
per share.) The pro forma negative net tangible book value per share does not
include the issue of 81,915 shares of Common Stock reserved for issuance upon
the exercise of the 1998 Warrants at an exercise price of $13.00 per share or
182,607 shares of Common Stock reserved for issuance upon the exercise of
vested options with a weighted average exercise price of $6.03 per share which
were granted under the Stock Incentive Plan. Without taking into account any
changes in net tangible book value after January 31, 1998, other than to give
effect to the sale by the Company of 2,700,000 shares offered hereby (at an
assumed initial public offering price of $13.00 per share, after deducting the
underwriting discount and estimated offering expenses), the Company's pro
forma net tangible book value at January 31, 1998 would have been $19,289,000,
or $2.68 per share. This represents an immediate dilution in pro forma
negative net tangible book value of $10.32 per share to investors purchasing
shares in this offering and an immediate increase in pro forma net tangible
book value of $5.48 per share to existing stockholders. The following table
illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $13.00
Pro forma net tangible book value per share before the
offering................................................... $(2.80)
Increase per share attributable to new investors............ 5.48
------
Pro forma net tangible book value per share after the
offering..................................................... 2.68
------
Dilution per share to new investors........................... $10.32
======
</TABLE>
The following table summarizes, on a pro forma basis, as of January 31,
1998, the differences between existing stockholders and the new investors with
respect to the number of shares of Common Stock purchased from the Company,
the total consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION
-------------------- ------------------ AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
--------- ---------- ------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 4,508,297 62.5% $ 9,327 21.0% $ 2.07
New investors........... 2,700,000 37.5 35,100 79.0 13.00
--------- ----- ------- -----
Total................. 7,208,297 100.0% $44,427 100.0%
========= ===== ======= =====
</TABLE>
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial
Statements, including the Notes thereto, appearing elsewhere in this
Prospectus. The selected consolidated financial data for the fiscal years
ended July 31, 1995, July 28, 1996 and July 31, 1997 are derived from the
Consolidated Financial Statements of the Company included elsewhere in this
Prospectus that have been audited by Coopers & Lybrand L.L.P., independent
auditors. The selected financial data for the period ended July 31, 1994 are
derived from the financial statements of the Company not included elsewhere in
this Prospectus that have been audited by The Daniel Professional Group, Inc.,
independent auditors. The selected consolidated financial data for the six
months ended January 31, 1997 and 1998 are derived from unaudited financial
statements which, in the opinion of management of the Company, reflect all
adjustments, consisting only of normal recurring adjustments, that the Company
considers necessary for a fair presentation of the consolidated financial
position and results of operations for these periods. The operating results
for the periods presented are not necessarily indicative of the results to be
expected for any other interim period or any other future fiscal year.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS
------------------------------------- ENDED
JANUARY 31,
JULY 31, JULY 31, JULY 28, JULY 31, ----------------
1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AND (UNAUDITED)
SELECTED OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales--distributors. $ -- $ -- $ 2,386 $13,060 $ 3,501 $ 8,314
Net sales--direct....... 56 2,728 5,830 1,151 1,008 --
------ ------- ------- ------- ------- -------
Total net sales......... 56 2,728 8,216 14,211 4,509 8,314
Cost of sales--
distributors........... -- -- 1,811 9,873 2,638 6,371
Cost of sales--direct... 59 3,523 6,089 1,771 1,368 --
------ ------- ------- ------- ------- -------
Total cost of sales..... 59 3,523 7,900 11,644 4,006 6,371
------ ------- ------- ------- ------- -------
Gross profit............ (3) (795) 316 2,567 503 1,943
Operating expenses
(income):
Sales and marketing..... 0 532 1,112 1,950 653 1,027
General and
administrative......... 374 2,787 3,192 2,908 1,398 1,706
Lease expense
(income)--net.......... -- -- (89) (143) (93) 23
Depreciation and
amortization........... 3 284 868 873 400 516
Nonrecurring charges
(1).................... -- -- 1,363 1,084 188 408
------ ------- ------- ------- ------- -------
Total operating
expenses............. 377 3,603 6,446 6,672 2,546 3,680
------ ------- ------- ------- ------- -------
Loss from operations.... (380) (4,398) (6,130) (4,105) (2,043) (1,737)
Other expense (income):
Interest expense........ -- 287 1,469 1,665 817 929
Other income--net....... -- (25) (168) (186) (79) (102)
------ ------- ------- ------- ------- -------
Net loss.............. $ (380) $(4,660) $(7,431) $(5,584) $(2,781) $(2,564)
====== ======= ======= ======= ======= =======
Loss available to
common stockholders
(2).................. $ -- $(5,055) $(8,067) $(6,271) $(3,120) $(2,932)
====== ======= ======= ======= ======= =======
Net loss per share:
Basic and diluted (3)... $(0.01) $ (0.14) $ (0.22) $ (0.17) $ (0.08) $ (0.08)
====== ======= ======= ======= ======= =======
Shares used in per share
calculations
Basic and diluted (3)... 36,998 36,998 36,998 36,998 36,998 36,998
Pro forma basic and
diluted per share...... -- -- -- $ (2.24) -- $ (1.05)
Pro forma shares used in
calculation of net loss
per share.............. -- -- -- 2,798 -- 2,798
SELECTED OPERATING DATA:
Retail locations (at
period end)............ 331 1,608 2,981 4,400 3,116 6,600
Cylinder transactions
(000's)................ 5 306 769 1,239 387 715
<CAPTION>
JULY 31, JULY 31, JULY 28, JULY 31, JANUARY 31,
1994 1995 1996 1997 1998
-------- -------- -------- -------- ----------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash and cash
equivalents............ $ 150 $ 209 $ 1,126 $ 325 $ 1,207
Working capital......... 109 (3,264) 1,580 737 296
Total assets............ 631 10,424 11,897 9,974 11,995
Long-term obligations,
less current
maturities............. 518 1,361 14,174 16,110 19,357
Total stockholders'
(deficit) equity....... (179) (5,149) (13,217) (18,488) (21,420)
</TABLE>
- ---------------------
(1) See Note 12 of Notes to Consolidated Financial Statements for an
explanation of the nonrecurring charges.
(2) Includes net loss redeemable preferred stock dividends of $395, $636,
$687, $339 and $368 for fiscal years ended 1995, 1996, 1997 and the six
months ended January 31, 1997 and 1998, respectively.
(3) See Note 15 of Notes to Consolidated Financial Statements for an
explanation of the determination of shares used in computing basic and
diluted net loss per share.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Company's Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.
Except for the historical information contained herein, the discussion in this
Prospectus contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they may appear in this Prospectus. The Company's actual results
could differ materially from those discussed herein. Factors that could cause
or contribute to such differences include, but are not limited to, those
discussed in "Risk Factors" as well as those discussed elsewhere herein.
Unless otherwise indicated, all references to years in this section of the
Prospectus refer to the Company's fiscal years, which ran as follows: from
August 1, 1994 through July 31, 1995, August 1, 1995 through July 28, 1996 and
July 29, 1996 through July 31, 1997.
OVERVIEW
Blue Rhino was founded in March 1994 and has become the leading provider of
grill cylinder exchange in the United States offering consumers a convenient
means to obtain fuel for their barbecue grills. The Company originally focused
on serving markets in the southeastern United States and has since developed a
network of 51 independent distributors which deliver Blue Rhino grill cylinder
exchange to over 6,600 retail locations in over 41 states. During the twelve
months ended January 31, 1998, the Company's sales increased 78% from the
prior year's comparable period to approximately $18.0 million as a result of
the growth of sales at existing locations and the addition of over 3,000 new
retail locations.
Since its formation, the Company has focused on creating an infrastructure
to support its nationwide cylinder exchange program. Initially, the Company
developed a vertically integrated operation, purchasing and leasing grill
cylinders, cylinder displays, filling sites, refurbishing equipment and
delivery trucks while at the same time developing a sales, marketing and MIS
infrastructure. In March 1996, the Company began to transition from a
vertically integrated business model to an independent distributor business
model in order to implement its cylinder exchange program in a more capital
efficient manner and to accelerate development of its program. At this time,
the Company began to dispose of distribution assets and began to enter into
exclusive agreements with independent distributors to refurbish and refill
cylinders and service Blue Rhino's retail accounts. As a result, the Company
has significantly accelerated the growth of its nationwide service, pursued
additional retailer relationships and invested in the sales, marketing and MIS
infrastructure to support its growing cylinder exchange program. The Company
expects to focus future capital investments on cylinders, cylinder displays
and continued enhancement of its MIS. The transition to a 100% independent
distributor business model was completed in the third quarter of fiscal 1997.
The Company currently offers three types of grill cylinder transactions: (i)
like for like cylinder exchanges; (ii) cylinders with valve upgrades offering
additional safety features; and (iii) outright cylinder sales. The Company's
net sales from cylinder exchanges, cylinder upgrades and cylinder sales
comprised 82%, 10% and 8%, respectively, of the Company's net sales for fiscal
1997 and 81%, 9% and 10%, respectively, for the first six months of fiscal
1998. The Company recognizes net sales at the time its distributor makes a
delivery at a retail location. The Company invoices its retailers, receives
payment and remits a fixed portion of this payment to its distributors for
their services. The Company's net sales growth depends on increasing sales at
existing locations and increasing the number of new retail locations that it
serves. Other factors which influence net sales include seasonality, consumer
awareness, weather conditions, new grill sales, alternative uses for grill
cylinders, promotional activities and advertising.
The Company's cost of sales are comprised of a fixed charge per cylinder
transacted which is paid to distributors based upon the type of transaction
and determined on a contractual basis. Cylinder sales have the highest cost of
sales while cylinder exchanges have the lowest cost of sales. Selling and
marketing expenses
18
<PAGE>
are primarily comprised of compensation, commissions and promotional and
travel costs. General and administrative expenses are primarily comprised of
compensation, professional fees, rent, software development and travel costs.
Lease expense (income)--net is comprised of revenue from cylinder displays and
certain plant facilities and equipment leased to distributors offset by rent
expense paid by the Company to lease the cylinder displays under an operating
lease. Depreciation and amortization consist primarily of depreciation of
cylinder displays and to a lesser extent, depreciation on equipment,
buildings, computer hardware and software and amortization of intangibles.
Operating expenses also include non-recurring charges of approximately $1.4
million, $1.1 million, $188,000 and $408,000 incurred during fiscal 1996 and
1997 and for the first six months of fiscal 1997 and 1998, respectively, as
the Company transitioned from a vertically integrated business model to its
present independent distributor business model. The Company does not
anticipate incurring any additional charges in connection with this transition
after the quarter ended July 31, 1998.
While the Company believes that it has created the infrastructure necessary
to support a nationwide cylinder exchange program, development of this
infrastructure has resulted in an accumulated deficit of approximately $21.4
million as of January 31, 1998. This has resulted in a net operating loss
carryforward for federal income tax purposes of approximately $20.5 million
which is available to be used to offset future taxable income, if any. In the
event of a change in ownership of the Company, the extent to which the loss-
carryforwards can be used to offset future taxable income may be limited as
provided in the Tax Reform Act of 1996. Based on the Company's history of
operating losses, the Company has recorded a valuation allowance to the full
extent of its net deferred tax assets.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship of certain items from the Company's statement of operations to
net sales. Due to the Company's recent change in its business model and its
rapid sales growth, any trends reflected by the following table may not be
indicative of future results.
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL NET SALES
-------------------------------------------------------
SIX MONTHS
ENDED
FISCAL YEAR ENDED JANUARY 31,
----------------------------------------- -------------
JULY 31, 1995 JULY 28, 1996 JULY 31, 1997 1997 1998
------------- ------------- ------------- ----- -----------
<S> <C> <C> <C> <C> <C> <C>
Total net sales......... 100.0% 100.0% 100.0% 100.0% 100.0%
Total cost of sales..... 129.1 96.2 81.9 88.8 76.6
------ ----- ----- ----- -----
Gross margin............ (29.1) 3.8 18.1 11.2 23.4
Operating expenses
(income):
Sales and marketing... 19.5 13.5 13.7 14.5 12.4
General and
administrative....... 102.2 38.9 20.5 31.0 20.5
Lease expense
(income)--net........ -- (1.1) (1.0) (2.1) 0.3
Depreciation and
amortization......... 10.4 10.6 6.1 8.9 6.2
Nonrecurring charges.. -- 16.5 7.6 4.2 4.9
------ ----- ----- ----- -----
Total operating
expenses........... 132.1 78.4 46.9 56.5 44.3
------ ----- ----- ----- -----
Loss from operations.... (161.2) (74.6) (28.8) (45.3) (20.9)
Other expense (income):
Interest expense...... 10.5 17.8 11.7 18.1 11.2
Other income--net..... (0.9) (2.0) (1.3) (1.8) (1.2)
------ ----- ----- ----- -----
Net loss................ (170.8)% (90.4)% (39.2)% (61.6)% (30.9)%
====== ===== ===== ===== =====
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEAR ENDED JANUARY 31,
----------------------------------------- -------------
JULY 31, 1995 JULY 28, 1996 JULY 31, 1997 1997 1998
------------- ------------- ------------- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
As a Percentage of Total
Net Sales
Net sales--
distributors......... -- 29.0% 91.9% 77.6% 100.0%
Net sales--direct..... 100.0% 71.0% 8.1% 22.4% --
Total gross margin...... (29.1)% 3.8% 18.1% 11.2% 23.4%
Gross margin of net
sales--distributors.. -- 24.1% 24.4% 24.7% 23.4%
Gross margin of net
sales--direct........ (29.1)% (4.4)% (53.9)% (35.7)% --
</TABLE>
COMPARISON OF SIX MONTHS ENDED JANUARY 31, 1997 AND 1998
Net sales. Net sales consist of net sales from the Company's previous
vertically integrated distribution operations ("net sales--direct") and net
sales from the Company's current independent distributor network ("net sales--
distributors"). During the third quarter of fiscal 1997, the Company completed
its transition to the independent distributor business model and, as a result,
all of the Company's net sales for the first six months of fiscal 1998 were
and thereafter will be net sales--distributors. Total net sales increased
84.4% from approximately $4.5 million for the first six months of fiscal 1997
to approximately $8.3 million for the first six months of fiscal 1998. Net
sales--distributors increased 137.5% from approximately $3.5 million in the
first six months of fiscal 1997 to approximately $8.3 million in the first six
months of fiscal 1998. The increase in net sales--distributors was due
primarily to the Company's transition from a vertically integrated business
model to an independent distributor business model, as well as to the increase
in the number of retail locations placed in service and the corresponding
increase in the number of cylinder transactions during the period. The
installed base of retail locations increased 106.3% from approximately 3,200
locations at January 31, 1997 to approximately 6,600 locations at January 31,
1998. The number of cylinders transacted increased 84.8% from approximately
387,000 units in the first six months of fiscal 1997 to approximately 715,000
units in the first six months of fiscal 1998.
Gross margin. Gross margin increased from 11.2% in the first six months of
fiscal 1997 to 23.4% in the first six months of fiscal 1998. This increase was
due to the shift in net sales from a vertically integrated business model to
an independent distributor business model. With respect to net sales--
distributors, gross margin decreased from 24.7% in the first six months of
fiscal 1997 to 23.4% in the first six months of fiscal 1998. This decrease was
due to a shift in the mix of cylinders transacted, with cylinder sales
accounting for a larger percentage of total net sales than in previous
quarters.
Sales and marketing expenses. Sales and marketing expenses increased 57.3%
from approximately $653,000 in the first six months of fiscal 1997 to
approximately $1.0 million in the first six months of fiscal 1998 but
decreased as a percentage of total net sales from 14.5% in the first six
months of fiscal 1997 to 12.4% in the first six months of fiscal 1998. The
increase in absolute sales and marketing expense was due primarily to
additional compensation, promotional and advertising expenditures. The
decrease in sales and marketing expenses as a percentage of net sales was due
primarily to the fact that a significant portion of the compensation of the
Company's sales and marketing staff is fixed and, as a result, sales and
marketing expenses increased at a slower rate than net sales.
General and administrative expenses. General and administrative expenses
increased 22.0% from approximately $1.4 million in the first six months of
fiscal 1997 to approximately $1.7 million in the first six months of fiscal
1998 but decreased as a percentage of total net sales from 31.0% in the first
six months of fiscal 1997 to 20.5% in the first six months of fiscal 1998. The
increase in absolute general and administrative expenses was due primarily to
additional compensation costs. The decrease in general and administrative
expense as a percentage of net sales was due primarily to the fact that a
significant portion of compensation is fixed and, as a result, general and
administrative expenses increased at a slower rate than net sales.
20
<PAGE>
Lease expense (income)--net. Gross lease income for the first six months of
fiscal 1997 and 1998 increased from $108 to $244, respectively, while gross
rent expense for the same period increased from $15 to $267. The increase in
lease income and rent expense was due to the implementation of a plant
facilities and equipment lease with a distributor during the second quarter of
fiscal 1997 and the addition of new retail locations resulting in an increase
in the number of cylinder displays under lease.
Depreciation and amortization. Depreciation and amortization increased from
approximately $400,000 in the first six months of fiscal 1997 to approximately
$516,000 in the first six months of fiscal 1998 primarily due to the
acquisition of cylinder display panels and computer equipment.
Nonrecurring charges. Nonrecurring charges increased from approximately
$188,000 in the first six months of fiscal 1997 to approximately $408,000 for
the first six months of fiscal 1998. Nonrecurring charges are associated with
the Company's transition from a vertically integrated business model to an
independent distributor business model and consist primarily of the write-down
of facilities and equipment purchased to support the vertically integrated
business model.
Interest expense. Interest expense increased from approximately $817,000 in
the first six months of fiscal 1997 to approximately $929,000 in the first six
months of fiscal 1998. The increase in interest expense was due to accretion
of interest on Senior Discount Notes, additional borrowings under lines of
credit and, to a lesser extent, borrowings from stockholders.
Other income--net. Other income--net increased from approximately $79,000 in
the first six months of fiscal 1997 to approximately $102,000 in the first six
months of fiscal 1998. Other income--net consists primarily of interest income
from various notes receivable and excess cash balances.
COMPARISON OF YEARS ENDED JULY 28, 1996 AND JULY 31, 1997
Net sales. Total net sales increased 73.0% from approximately $8.2 million
for fiscal year 1996 to approximately $14.2 million for fiscal 1997. Net
sales--distributors increased from approximately $2.4 million for fiscal year
1996 to approximately $13.1 million for fiscal 1997. The increase in net
sales--distributors was due primarily to the Company's transition from a
vertically integrated business model to an independent distributor business
model, as well as an increase in the number of retail locations placed in
service and an increase in the number of cylinder transactions during the
period. The installed base of retail locations increased 46.7% from
approximately 3,000 locations at the end of fiscal 1996 to approximately 4,400
locations at the end of fiscal 1997. The number of cylinders transacted
increased 61.1% from approximately 769,000 units for fiscal 1996 to
approximately 1,239,000 units for fiscal 1997.
Gross margin. Gross margin increased from 3.8% for fiscal 1996 to 18.1% for
fiscal 1997. This increase was due to the shift in net sales from a vertically
integrated business model to an independent distributor business model. With
respect to net sales--distributors, gross margin increased from 24.1% for
fiscal year 1996 to 24.4% for fiscal 1997.
Sales and marketing expenses. Sales and marketing expenses increased 75.4%
from approximately $1.1 million for fiscal 1996 to approximately $2.0 million
for fiscal 1997 and as a percentage of total net sales increased from 13.5%
for fiscal 1996 to 13.7% for fiscal 1997. The increase in absolute sales and
marketing expense was due primarily to additional compensation, promotional
and advertising expenditures.
General and administrative expenses. General and administrative expenses
decreased 8.9% from approximately $3.2 million for fiscal 1996 to
approximately $2.9 million for fiscal 1997, and decreased as a percentage of
total net sales from 38.9% for fiscal 1996 to 20.5% for fiscal 1997. The
decrease in absolute general and administrative expenses was due to the
transition to the independent distributor business model.
21
<PAGE>
Lease expense (income)--net. Lease expense (income)--net increased 60.7%
from $89,000 for fiscal 1996 to approximately $143,000 for fiscal 1997. The
increase in lease expense (income)--net was due to the implementation of
certain plant facilities and equipment leases with distributors during the
fourth quarter of fiscal 1996 and the second quarter of fiscal 1997 and the
addition of new retail locations resulting in an increase in the number of
cylinder displays under lease.
Depreciation and amortization. Depreciation and amortization increased from
approximately $868,000 for fiscal 1996 to approximately $873,000 for fiscal
1997.
Nonrecurring charges. Nonrecurring charges are associated with the
transition to the independent distributor model and decreased from
approximately $1.4 million for fiscal 1996 to approximately $1.1 million for
fiscal 1997.
Interest expense. Interest expense increased from approximately $1.5 million
for fiscal 1996 to approximately $1.7 million for fiscal 1997 due to accretion
of interest on Senior Discount Notes and additional borrowings under the
Company's Bank Credit Facility.
Other income--net. Other income--net increased from approximately $168,000
for fiscal 1996 to approximately $186,000 for fiscal 1997.
COMPARISON OF YEARS ENDED JULY 31, 1995 AND JULY 28, 1996
Net sales. Total net sales increased 201.2% from approximately $2.7 million
for fiscal 1995 to approximately $8.2 million for fiscal 1996 while net
sales--direct increased 113.7% from approximately $2.7 million to
approximately $5.8 million. During fiscal 1996, the Company initiated its
transition from a vertically integrated business model to an independent
distributor business model with the addition of 12 distributors. As a result,
net sales--distributors contributed approximately $2.4 million to total net
sales in fiscal 1996. These increases are due primarily to the increases in
the number of new retail locations placed in service and a corresponding
increase in the number of cylinder transactions during the period.
Gross margin. Gross margin was negative for fiscal 1995 and 3.8% for fiscal
1996. The negative gross margin for fiscal 1995 and subsequent improvement in
fiscal 1996 was related to a limited number of retail locations in the
Company's first years of business.
Sales and marketing expenses. Sales and marketing expenses increased 109.0%
from approximately $532,000 for fiscal 1995 to approximately $1.1 million for
fiscal 1996, but decreased as a percentage of total net sales from 19.5% for
fiscal 1995 to 13.5% for fiscal 1996. The increase in sales and marketing
expense was due primarily to the development of the Blue Rhino brand and its
sales force. The decrease of sales and marketing expenses as a percentage in
net sales was due primarily to the fact that the Company's total sales
increased at a rate higher than selling and marketing expenses.
General and administrative expenses. General and administrative expenses
increased 14.5% from approximately $2.8 million for fiscal 1995 to
approximately $3.2 million for fiscal 1996, but decreased as a percentage of
total net sales from 102.2% for fiscal 1995 to 38.9% for fiscal 1996. The
increase in absolute general and administrative expenses was due to increased
compensation. The decrease in general and administrative expense as a
percentage of net sales was due primarily to the increase in total net sales.
Lease expense (income)--net. Lease expense (income)--net was approximately
$89,000 for fiscal 1996. There was no lease expense (income)--net in fiscal
1995.
Depreciation and amortization. Depreciation and amortization increased from
approximately $284,000 for fiscal 1995 to approximately $868,000 for fiscal
1996, due primarily to investments in facilities related to the Company's
previous vertically integrated business model.
Nonrecurring charges. Nonrecurring charges associated with the Company's
transition from a vertically integrated business model to an independent
distributor business model were approximately $1.4 million in fiscal 1996.
There were no nonrecurring charges in fiscal 1995.
22
<PAGE>
Interest expense. Interest expense increased from approximately $287,000 for
fiscal 1995 to approximately $1.5 million for fiscal 1996 due primarily to the
issuance of Senior Discount Notes for approximately $12.6 million with an
aggregate principal amount of approximately $17.2 million.
Other income--net. Other income--net increased from approximately $25,000
for fiscal 1995 to $168,000 for fiscal 1996. This increase was due primarily
to interest income generated from excess cash balances.
SELECTED QUARTERLY RESULTS OF OPERATIONS
The Company has experienced and is expected to continue to experience
significant seasonal fluctuations in net sales and net income. The Company's
net sales generally are highest in the third and fourth quarters, which
include the majority of the grilling season, and historically have been lower
in the first and second quarters which include the winter months. Sustained
periods of poor weather, particularly in the spring and summer seasons, can
negatively impact sales. The Company's rate of establishing new retail
locations and expenses incurred in anticipation of increased sales also cause
quarterly fluctuations in the Company's results of operations. Accordingly,
the results of operations in any quarter will not necessarily be indicative of
the results that may be achieved for a full fiscal year or any future quarter.
See "Risk Factors--Seasonality and Quarterly Fluctuations" and "--Varying
Local Permitting Processes."
The following table sets forth selected unaudited quarterly financial
information and operating data for the last five quarters. This information
has been prepared on the same basis as the Consolidated Financial Statements
and includes, in the opinion of management, all normal and recurring
adjustments that management considers necessary for a fair statement of the
quarterly results for the periods. Given the Company's limited operating
history, seasonal demand for its product and market acceptance of cylinder
exchange by retailers and consumers, there may be significant variation in the
Company's operating results for any quarter. The operating results and data
for any quarter are not necessarily indicative of the results for future
periods.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------
JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 31,
1997 1997 1997 1997 1998
----------- --------- -------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Total net sales......... $ 2,018 $ 3,000 $ 6,702 $ 4,139 $ 4,175
Total cost of sales..... 1,800 2,478 5,160 3,154 3,217
-------- -------- -------- -------- --------
Gross profit.......... 218 522 1,542 985 958
-------- -------- -------- -------- --------
Operating expenses
(income)
Sales and marketing... 380 489 666 564 463
General and
administrative ...... 710 751 900 844 862
Lease expense
(income)--net........ (50) (31) (19) 8 15
Depreciation and
amortization......... 212 223 251 245 271
Nonrecurring charges.. 145 672 224 281 127
-------- -------- -------- -------- --------
Total operating
expenses........... 1,397 2,104 2,022 1,942 1,738
-------- -------- -------- -------- --------
Loss from operations.... (1,179) (1,582) (480) (957) (780)
Other expense (income)
Interest expense...... 424 432 415 434 495
Other income--net..... (37) (43) (63) (51) (51)
-------- -------- -------- -------- --------
Net loss................ $ (1,566) $ (1,971) $ (832) $ (1,340) $ (1,224)
======== ======== ======== ======== ========
Loss available to common
stockholders........... $ (1,737) $ (2,140) $ (1,010) $ (1,447) $ (1,485)
======== ======== ======== ======== ========
Basic and diluted net
loss per share......... $ (0.05) $ (0.06) $ (0.03) $ (0.04) $ (0.04)
======== ======== ======== ======== ========
Shares used in
computation of net loss
per share (1).......... 36,998 36,998 36,998 36,998 36,998
======== ======== ======== ======== ========
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL NET SALES
-------------------------------------------------------
QUARTER ENDED
-------------------------------------------------------
JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 31,
1997 1997 1997 1997 1998
----------- --------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total net sales......... 100.0% 100.0% 100.0% 100.0% 100.0%
Total cost of sales..... 89.2 82.6 77.0 76.2 77.1
----- ----- ----- ----- -----
Gross margin.......... 10.8 17.4 23.0 23.8 22.9
Operating expenses
(income)
Sales and marketing... 18.8 16.3 9.9 13.6 11.1
General and
administrative....... 35.2 25.0 13.4 20.4 20.6
Lease expense
(income)--net........ (2.5) (1.0) (0.3) 0.2 0.4
Depreciation and
amortization......... 10.5 7.4 3.7 5.9 6.5
Nonrecurring charges.. 7.2 22.4 3.5 6.8 3.0
----- ----- ----- ----- -----
Total operating
expenses........... 69.2 70.1 30.2 46.9 41.6
----- ----- ----- ----- -----
Loss from operations.... (58.4) (52.7) (7.2) (23.1) (18.7)
Other expense (income)
Interest expense...... 21.0 14.4 6.1 10.5 11.8
Other income--net..... (1.8) (1.4) (0.9) (1.2) (1.2)
----- ----- ----- ----- -----
Net loss................ (77.6)% (65.7)% (12.4)% (32.4)% (29.3)%
===== ===== ===== ===== =====
</TABLE>
- ---------------------
(1) See Note 15 of Notes to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds have been the issuance of stock and
warrants and the incurrence of debt. The Company had working capital of
approximately $296,000 as of January 31, 1998.
Net cash used in operations was approximately $2.1 million and approximately
$694,000 for the first six months of fiscal 1998 and 1997, respectively. Net
cash used in operations was approximately $2.2 million and approximately $5.2
million for fiscal 1997 and 1996, respectively. For all periods net cash used
in operations resulted primarily from net losses from operations.
Net cash used in investing activities was approximately $776,000 for the
first six months of fiscal 1998 and net cash provided by investing activities
was approximately $134,000 for the first six months of fiscal 1997. Net cash
provided by investing activities was approximately $342,000 for fiscal 1997
and net cash used in investing activities was approximately $1.4 million for
fiscal 1996. The primary components of cash used in investing activities
included acquisitions and investments in property and equipment. The primary
components of cash provided from investing included collection on notes
receivable and proceeds from the sale of property and equipment.
Net cash provided by financing activities was approximately $3.7 million for
the first six months of fiscal 1998 and net cash used in financing activities
was approximately $257,000 for the first six months of fiscal 1997. Net cash
provided by financing activities was approximately $1.0 million for fiscal
1997 and approximately $7.5 million for fiscal 1996. The primary components of
cash provided by financing activities included proceeds from the issuance of
Senior Discount Notes, stockholder loans and bank borrowings. The primary
components of cash used in financing activities included payments on various
notes payable, long-term debt and capital lease obligations.
In September 1996, the Company entered into a $3.0 million operating lease
facility to finance cylinder displays. Approximately $2.2 million of the
facility was outstanding at January 31, 1998.
In December 1997, the Company entered into a Loan Agreement with
NationsBank, N.A. (the "Bank Credit Facility") which allows for maximum
borrowing of $9.0 million including a $3.0 million revolving line
24
<PAGE>
of credit with a $1.0 million overadvance provision, a $1.0 million capital
expenditure line of credit and a $4.0 million acquisition line of credit. The
amounts outstanding under the Bank Credit Facility are due on November 30,
1998. The Bank Credit Facility is collateralized by a lien on substantially
all of the assets of the Company. The Bank Credit Facility requires the
Company to meet certain covenants, including minimum current, net worth and
cash flow ratios and restricts the level of capital expenditures. The Company
is in compliance with these covenants as of the date hereof. The loans under
the Bank Credit Facility bear interest at the prime rate plus 0.5% per annum.
As of the consummation of this offering, the Company expects to have
approximately $3.2 million outstanding under the Bank Credit Facility which
will be repaid with a portion of the net proceeds of this offering. See "Use
of Proceeds."
The Company anticipates that the total capital expenditures for 1998 and
1999 will be approximately $2.4 million and $5.3 million, respectively, and
will relate primarily to investments in cylinders, cylinder displays, computer
hardware and software development. The Company's capital expenditure and
working capital requirements in the foreseeable future will change depending
on the rate of the Company's expansion, the Company's operating results and
any other adjustments in its operating plan as needed in response to
competition, acquisition opportunities or unexpected events. The Company
believes that existing borrowing capacity under lines of credit, together with
the proceeds from the offering and cash provided by operations, will be
sufficient to meet the Company's working capital requirements through fiscal
1999. However, there can be no assurance that the Company will not seek or
require additional capital in the future as a result of expansion or
otherwise.
In December 1994, the Company raised approximately $6.7 million pursuant to
an offering of its Series A Convertible Participating Preferred Stock and
warrants to purchase 318,650 shares of Common Stock at an exercise price of
$0.45 per share. The Company used the proceeds primarily to fund development
of cylinder refurbishing and distribution plants and to establish the
infrastructure for its national cylinder exchange program. See "Certain
Transactions." The Preferred Stock will be converted into Common Stock and the
warrants will be exercised upon consummation of this offering. See
"Description of Capital Stock--Recapitalization."
In October 1995, the Company sold 12,575 units (the "Units") for $1,000 per
Unit, each Unit being comprised of a 10.5% Senior Discount Note due October
11, 2000 with a face value of $1,364.93 and a warrant to purchase
approximately 40 shares of Common Stock at an exercise price of approximately
$4.59 per share. The Senior Discount Notes accrete in value until October 11,
1998 and, thereafter, cash interest will be paid semi-annually. The gross
proceeds of the Unit offering was approximately $12.6 million. See "Certain
Transactions." The Senior Discount Notes will be repaid in full with a portion
of the proceeds of the offering and the warrants will be exercised upon
consummation of the offering. See "Use of Proceeds" and "Description of
Capital Stock--Recapitalization."
In January 1998, the Company received $3.25 million in loans from four of
its stockholders (the "1998 Stockholder Loans"). The 1998 Stockholder Loans
bear interest at 10.5% per annum and are due on the earlier of December 31,
2000 or the successful completion of a public offering of the Company's Common
Stock with net proceeds of at least $30.0 million. There is currently $3.4
million outstanding under the 1998 Stockholder Loans. In addition, the Company
issued warrants to purchase an aggregate 81,915 shares at an exercise price of
$13.00 per share to these stockholders in connection with the 1998 Stockholder
Loans. The 1998 Stockholder Loans will be repaid in full with a portion of the
proceeds of the offering. See "Use of Proceeds."
INFLATION
The Company does not believe that inflation has had a material adverse
effect on net sales or the results of operations. However, there can be no
assurance that the Company's business will not be affected by inflation in the
future.
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IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 130 ("Statement
130") establishes standards for reporting and display of comprehensive income
and its components (revenues, gains, expenses, losses) in a full set of
general purpose financial statements and is effective for fiscal years
beginning after December 15, 1997. Management of the Company does not expect
Statement 130 to have a significant impact, if any, on the Company's
Consolidated Financial Statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information"
("Statement 131"). Statement 131 requires public business enterprises to adopt
its provisions for periods beginning after December 15, 1997, and to report
certain information about operating segments in complete sets of financial
statements of the enterprise and in condensed financial statements of interim
periods issued to shareholders. The Company is evaluating the provisions of
Statement 131, but has not yet determined if additional disclosures will be
required.
YEAR 2000 COMPLIANCE
Certain of the Company's MIS use two digit data fields which recognize dates
using the assumption that the first two digits are "19" (i.e., the number 97
is recognized as the year 1997). Therefore, the Company's date critical
functions relating to the year 2000 and beyond, such as sales, distribution,
inventory control and financial systems, may be adversely affected unless
changes are made to these computer systems. The Company expects that upgrades
to its MIS with respect to the year 2000 problem will require capital
expenditures of approximately $35,000. However, no assurance can be given that
these issues can be resolved in a cost-effective or timely manner or that the
Company will not incur significantly greater expense in resolving these
issues.
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BUSINESS
OVERVIEW
Blue Rhino is the leading provider of grill cylinder exchange in the United
States with Blue Rhino branded cylinder exchange displays at over 6,600 retail
locations in 41 states. Cylinder exchange provides consumers with a convenient
means to exchange empty grill cylinders for clean, safer, precision-filled
cylinders. Blue Rhino cylinder exchange is offered at leading home
center/hardware, mass merchant, grocery and convenience stores, including Home
Depot, Lowe's, Sears Hardware, Wal-Mart, Kroger and SuperAmerica. Blue Rhino
brand grill cylinders are delivered to retailers through a national network of
51 independent distributors. These independent distributors make the capital
investment in grill cylinders, refilling and refurbishing equipment and
vehicles necessary to operate a cylinder exchange business. This allows the
Company to focus on promoting brand identity, developing additional retail
relationships and supporting its distributor network by providing value-added
marketing, customer service and management information systems ("MIS").
Cylinder exchange is a relatively new retail concept and the Company
believes that consumer awareness of the benefits of cylinder exchange will
increase as the service becomes more widely available. During the twelve
months ended January 31, 1998, Blue Rhino cylinder exchange displays have been
installed at over 3,000 additional retail locations. The Company believes that
there are approximately 225,000 potential grill cylinder exchange locations in
the Company's target markets. The Company's growth strategy includes
increasing consumer awareness of cylinder exchange, further promoting the Blue
Rhino brand, increasing penetration in both new and existing retail accounts
and selectively pursuing strategic acquisitions.
INDUSTRY BACKGROUND
Barbecue Grill Market. Outdoor barbecuing is increasingly one of the most
popular outdoor activities in the United States driven by consumer trends to
healthier food preparation, as well as the desire to spend more time outside
at family and social gatherings. The popularity of propane grills has
increased significantly in recent years with propane grill sales now exceeding
the combined sales of charcoal, natural gas and electric grills. Consumers
enjoy the convenience of propane grills over charcoal grills as they light
easier, heat up faster and require less preparation and clean up time.
Furthermore, a 1997 survey ("1997 BIA Study") conducted on behalf of the
Barbecue Industry Association ("BIA") indicates that approximately 68% of
propane grill owners use their grills throughout the year.
According to the 1997 BIA Study, approximately 38.5 million United States
households own a propane grill, with the number of propane grill purchases
growing at a rate of 8% per year from 3.2 million in 1990 to more than 6.0
million in 1997. The 1997 BIA Study also indicates that the average propane
grill owner uses 1.8 cylinders of propane per year, creating an estimated
market for grill cylinder fills of approximately 69.0 million per year. Based
on these estimates, the Company believes the annual retail market for grill
cylinder refills is approximately $1.0 billion.
Grill Cylinder Exchange. In recent years, cylinder exchange has emerged as a
convenient alternative to refilling cylinders at traditional propane filling
stations. Cylinder exchange, in which the consumer exchanges an empty grill
cylinder for one which is full, is available at retail locations such as home
center/hardware, mass merchant, grocery and convenience stores. These
retailers typically have longer business hours and are more convenient for
consumers than filling stations. The Company believes that as cylinder
exchange becomes more widely available consumers will embrace it in place of
refilling, which often involves traveling to a remote location and waiting for
a refill. Growing consumer acceptance of cylinder exchange is indicated by BIA
estimates that cylinder exchange increased from less than 10% of grill
cylinder transactions in 1995 to 21% in 1997.
The Company believes that the grill cylinder exchange industry is highly
fragmented with numerous regional distributors typically serving less than 500
locations each. The Company believes this fragmentation
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<PAGE>
results in part from the relative newness of cylinder exchange and the unique
set of challenges cylinder exchange poses to commercially focused traditional
propane distributors. To build critical mass at the consumer level, propane
distributors must establish and maintain relationships with major retailers,
many of which prefer to stock quality, branded products supplied by reliable,
sophisticated vendors. To service retail cylinder exchange accounts, propane
distributors must make capital investments in cylinder displays, grill
cylinders, refurbishing equipment and vehicles not used in their traditional
propane business. Finally, to properly account for complex exchange, upgrade
and sale transactions, propane distributors must invest in sophisticated
management information and accounting systems tailored to servicing retailers.
THE BLUE RHINO SOLUTION
Blue Rhino is creating a new paradigm for the cylinder exchange market which
provides benefits to consumers, retailers and distributors. Blue Rhino offers
consumers a new, convenient, branded product alternative to grill cylinder
refilling. Blue Rhino provides retailers with a high margin, turn-key branded
service which has the potential to increase customer traffic and utilization
of exterior retail space. In addition, Blue Rhino offers retailers a full
service program, including direct delivery, regular inventory maintenance,
centralized billing, electronic data interchange ("EDI") and detailed
reporting typically unavailable from traditional propane distributors. For
Blue Rhino's independent distributors, this cylinder exchange program provides
a counter-seasonal complement to their traditional propane business as well as
access to major retail accounts, sophisticated MIS and marketing support.
BUSINESS STRATEGY
Blue Rhino's strategy is to continue to build its national brand and
capitalize on its position as the leading grill cylinder exchange provider
through the following initiatives:
Promote the Blue Rhino Brand and Drive Consumer Awareness. The Company's
branding efforts focus on developing and maintaining a brand identity
synonymous with a convenient, clean and safer product. Blue Rhino has created
a distinctive Blue Rhino brand name and rhino logo which are prominently
displayed on cylinder sleeves and displays. The Company also plans to
undertake brand marketing and promotional initiatives, including point of
purchase displays, cross marketing promotions with other barbecue-related
products, print media and cooperative advertising. The Company's recognized
brand also provides a platform to introduce new Blue Rhino products to the
backyard living category.
Deliver Clean, Safer Cylinders at Convenient Locations. The Company believes
that convenience and safety are critical factors in achieving consumer
acceptance of cylinder exchange. Blue Rhino cylinder exchange allows consumers
to exchange empty cylinders for clean, precision-filled, cylinders at a
variety of well known, convenient retail locations. Blue Rhino distributors
refill and resleeve cylinders according to prescribed standards designed to
prevent overfills or refills of unsafe cylinders. Each Blue Rhino cylinder has
a consistent, like-new appearance, which the Company believes enhances retail
sales and consumer loyalty.
Expand Relationships and Increase Sales with Retailers. The Company's
relationships with major retailers such as Home Depot, Lowe's, Sears Hardware,
Wal-Mart, Kroger and SuperAmerica, allow it to place cylinders in a large
number of convenient, high traffic locations. The Company believes that its
ability to provide national and regional retailers with a single vendor for
branded grill cylinder exchange supported by value-added customer service,
marketing and MIS gives it a competitive advantage over traditional propane
distributors. The Company believes there are approximately 225,000 potential
grill cylinder exchange locations in its targeted markets of which it
currently services over 6,600. The Company plans to continue to increase the
number of new retail locations by driving sales within existing retail
accounts. In the twelve months ended January 31, 1998, the Company has added
over 3,000 retail locations. Historically, the Company's locations have
experienced substantial sales growth in the first year of operations. As a
result, the Company believes that as these locations mature they will
experience higher sales volumes.
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<PAGE>
Leverage National Distributor Network. Over the past two years the Company
has established a network of 51 independent distributors serving 41 states.
The Company believes that this distribution network strategically positions it
to cover approximately 90% of the grilling markets in the United States. The
Company plans to leverage this network by aggressively increasing each
distributor's market penetration by adding new retail locations. Additionally,
four of these distributors are dedicated exclusively to developing and
providing Blue Rhino cylinder exchange in certain of the Company's key
geographic markets.
Pursue Strategic Account Acquisitions. Given the highly fragmented and
regionally focused nature of the cylinder exchange industry, the Company
believes that opportunities exist to expand through selective acquisitions of
smaller cylinder exchange businesses with established retail accounts. The
Company has added over 1,000 retail locations in the past six months as a
result of the acquisitions of such cylinder exchange providers. See "Risk
Factors--Acquisition of Accounts."
BLUE RHINO CYLINDER EXCHANGE PROGRAM
A typical cylinder exchange transaction begins when a Blue Rhino distributor
visits a retail location to replenish the grill cylinder display. The
distributor enters an inventory of the cylinders in the display rack into a
handheld computer which, utilizing an advanced algorithm in the Company's
proprietary Blue Rhino Electronic Accounting System ("BREAS") software,
automatically calculates the number and type of cylinder exchanges, upgrades
and sales for the location and creates a delivery ticket for the retailer.
Distributors electronically transfer their delivery and inventory information
to Blue Rhino routinely. Blue Rhino then prepares a centralized bill for each
retailer which typically is transmitted in a customized electronic format
compatible with their existing systems. Blue Rhino collects invoiced amounts
directly from the retailers and in turn remits a fixed amount per cylinder
transaction to its distributors. The following graph illustrates the cylinder
exchange process:
[DIAGRAM OF BLUE RHINO BUSINESS MODEL. INCLUDES FLOW OF TRANSACTIONS AMONG
CONSUMERS, RETAILERS, DISTRIBUTORS AND BLUE RHINO.]
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<PAGE>
BLUE RHINO BRAND MARKETING
The Company's marketing efforts focus primarily on developing and
maintaining a brand identity synonymous with a convenient, clean and safer
product which enhances consumer loyalty and builds retailer and distributor
relationships. The Company's brand marketing efforts include the following
Company initiatives:
Blue Rhino Cylinder Packaging. Blue Rhino cylinders are covered with a
distinctive and colorful RhinoTUFF cylinder sleeve. The RhinoTUFF cylinder
sleeve contains safety and use information along with a prominent display of
the Blue Rhino name and rhino logo. The RhinoTUFF sleeve also protects the
cylinders from damage during shipping and handling and from exposure to the
elements. The Company believes that this unique branded packaging increases
consumer recognition and loyalty.
Blue Rhino Cylinder Displays. Blue Rhino cylinder displays, which
prominently feature the Blue Rhino name and logo, are typically located near a
retailer's main entrance or in their lawn and garden department providing
"billboard" advertising for the Company's products. These cylinder displays
enhance consumer awareness of the Blue Rhino brand and reinforce the
association of Blue Rhino with convenient, clean and safer grilling.
Promotions. Blue Rhino has selectively placed targeted broadcast and print
media advertising campaigns that focus on raising consumer awareness of the
Blue Rhino name and service. Such advertising may also include certain special
promotions to encourage purchases of spare filled cylinders before the
grilling season. Blue Rhino is actively involved with consumer, trade and
regulatory associations in an effort to promote the growth of cylinder
exchange. Ongoing Blue Rhino promotions include development of the Company's
web site (www.bluerhino.com), co-operative advertising programs, cooking and
safety demonstrations and direct mail initiatives.
RETAILER RELATIONSHIPS
The Company targets the following four categories of retailers:
Retail Category Major Accounts
--------------- --------------
Home Centers/Hardware Stores Home Depot, Lowe's, Sears Hardware
Mass Merchants Wal.Mart, Kmart, Meijer
Grocery Stores Kroger, Food Lion, Winn Dixie
Convenience Stores SuperAmerica, Emro-Speedway, Minit
Mart Foods
Retailer Opportunity. Blue Rhino offers retailers the opportunity to
increase sales and profits with minimal time and financial investment. Blue
Rhino cylinder exchange is available to retailers nationally, providing
retailers with attractive sales margins while utilizing exterior retail space.
In addition, Blue Rhino has the potential to increase retailers' sales of
ancillary products through increased traffic from repeat cylinder exchange
customers and cross-marketing initiatives with other barbecue-related
products.
Account Set-Up. Blue Rhino actively assists distributors and retailers in
obtaining local permits to set up cylinder exchange program and developing a
site plan for cylinder displays. The permitting process is generally completed
within sixty days. Typically, within two weeks of obtaining the necessary
permits or other approvals, the distributor installs the cylinder displays at
the retail location. During the set-up process, Blue Rhino's customer service
and training personnel conduct in-store training and provide safety manuals to
store employees. See "Risk Factors--Varying Local Permitting Processes."
Account Service. Blue Rhino cylinder exchange is a turn-key program in which
the Company and its distributors set up new accounts, train store employees,
deliver the cylinders directly to retail locations, maintain the display racks
and cylinder inventory and provide ongoing marketing and sales support. In
addition, through its nationwide distributor network, the Company can install
and service the Blue Rhino program at almost any domestic location of the
retailer.
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<PAGE>
Sales Support. The Company's retail sales organization is divided into four
regions and includes seven corporate sales managers supported by a network of
approximately 500 independent sales representatives and grocery brokers. This
sales force is responsible for selling the Blue Rhino program to targeted
retailers and developing value-added relationships with manufacturers of
grills and other barbecue-related products. Blue Rhino's sales managers
analyze sales volume by location and coordinate promotions to maximize sales
opportunities.
Systems Support. Through the use of its BREAS electronic accounting
software, the Company provides accurate, timely customized invoices and can
provide EDI to relieve store managers of processing invoices generated by a
local propane distributor. The Company, through the use of its Online Account
Sales Information System ("OASIS"), also has the capability to provide
retailers with detailed information regarding sales trends at each of its Blue
Rhino locations.
Customer Service. The Company places a high priority on customer service and
as a result has hired a telemarketing service company, Ruppman Marketing
Technologies, Inc. ("Ruppman"), to provide customer and retailer assistance.
Ruppman is an experienced customer service organization providing similar
services for a variety of major consumer product companies, including Saturn,
Motorola Inc. and Sony Corp. By staffing this function through an experienced
outside vendor, the Company believes it provides a vital service to its end-
users while taking advantage of the cost savings associated with a dedicated
third party provider.
Home Depot represented 29% and 30%, respectively, of the Company's sales for
fiscal 1997 and the first six months of fiscal 1998. See "Risk Factors--
Concentration of Customer Accounts."
DISTRIBUTOR NETWORK
In an effort to build a strong national cylinder exchange program, Blue
Rhino has sought to attract experienced, well-capitalized, safety conscious
propane distributors to service its target gas grilling markets nationwide.
The following map shows the location of and the territory served by the
Company's 51 distributors:
[MAP OF U.S. WITH LOCATIONS OF BLUE RHINO DISTRIBUTORS.]
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<PAGE>
Distributor Opportunity. Propane distributors have traditionally generated a
large part of their sales during cold weather months. Blue Rhino provides
distributors with an attractive counter-seasonal propane business and access
to major retail accounts in a growing market. The Company continually pursues
new relationships and additional locations with existing retail partners to
increase the density of each distributor's territory. The Company also offers
distributors such services as its cylinder display rack leasing program,
cooperative propane buying program and cylinder financing program. Blue Rhino
personnel are experienced in regulatory matters and assist distributors in
completing the permitting and set-up process. The Company intends to establish
the Distributor Option Plan pursuant to which it will reserve 361,128 shares
of its Common Stock for issuance upon the exercise of options granted to
distributors.
Distributor Standards. The Company sets standards for and continually
monitors its distributors to ensure a high level of account service.
Distributors are encouraged to develop an infrastructure sufficient to: (i)
complete customer installations within two weeks of receipt of all necessary
permits and governmental approvals, (ii) resolve stock-outs within 48 hours,
(iii) respond to emergency requests within 30 minutes and (iv) refurbish and,
when necessary, recertify cylinders according to prescribed standards. The
Company helps ensure product quality by regularly checking on distributor
compliance with Blue Rhino refilling, packaging, safety and delivery
standards.
Distributor Selection Process. Blue Rhino has selectively identified and
pursued high quality distributors through direct contacts and industry trade
forums. The Company screens all distributor candidates by reviewing credit
reports and safety records and conducting management reference checks. As a
result of this thorough selection process, Blue Rhino has replaced only one
distributor to date.
Distributor Services. Blue Rhino employs business development managers to
cultivate and manage ongoing distributor relationships, address set-up and
servicing problems and provide distributors with marketing feedback and
industry updates. Blue Rhino also employs safety and training personnel who
provide set-up seminars and safety training. This continuing support allows
distributors to concentrate their efforts on opening and servicing retail
locations.
Dedicated Distributors. In order to establish a presence in and rapidly
develop certain key markets, the Company has entered into distribution
agreements with four distributors dedicated solely to providing Blue Rhino
cylinder exchange. Platinum Propane, the Company's largest distributor by
locations served and sales revenues generated, covers the Company's
south/southeast, Chicago and Los Angeles markets and Ceramic Industries Inc.
serves the Houston and Dallas markets. Two newly formed distributors, Caribou
Propane and Javilina Propane, service the Pacific northwest and Phoenix
markets, respectively. See "Risk Factors--Cross Ownership of Distributors."
Distribution Agreements. The Company has entered into distribution
agreements with each of its 51 distributors on substantially similar terms.
Pursuant to these agreements, each distributor must meet prescribed service
standards and maintain designated amounts of liability insurance naming the
Company as an additional insured party. The agreements typically run for a
term of five years and may be terminated by the Company if, among other
things, the distributor does not meet certain required service levels. Each
agreement also includes a two-year non-compete clause in the event an
agreement is terminated.
MANAGEMENT INFORMATION SYSTEMS
The Company has made a substantial investment in MIS which enhances its
ability to serve retailers and helps to differentiate the Company from other
providers of cylinder exchange and cylinder refill services. Blue Rhino's
technology utilizes highly integrated, scalable software applications which
cost-effectively support the Company's growing retail location base. The
Company's systems also allow the Company to use historical data to further
enhance the execution, service and identification of new markets and marketing
opportunities. The primary components of the Company's systems include the
following:
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Sales and Marketing Support System. In partnership with Information
Management System Services ("IMSS"), a subsidiary of R.J. Reynolds Tobacco
Company, the Company has developed and implemented a custom relational
database and information repository known as OASIS (Online Account Sales
Information System). This system facilitates the exchange of information
between distributors and the Company and allows the Company to develop a
database to track delivery and transaction statistics.
Distributor Level Technology. Each distributor is electronically linked to
the Company's accounting and database systems which allow drivers to provide
delivery, inventory and invoicing information through handheld computers. This
technology provides retailers with accurate and timely inventory and invoices
and assists the distributor in avoiding location stock-outs.
Financial Systems. The Company uses BREAS, a custom software module which
bridges the handheld computers used by the distributors to the Company's
accounting and financial reporting system. All delivery transaction
information entered into the handheld computers is uploaded routinely into
BREAS where it is validated and transmitted to the Company's accounting system
for invoice processing. Many retailers are invoiced via EDI, eliminating paper
processing of those transactions. The Company pays distributors via electronic
deposits to further minimize administrative costs.
COMPETITION
The grill cylinder refilling industry is highly fragmented and intensely
competitive. The Company competes primarily on the basis of quality of
product, service, perceived safety and price. The 1997 BIA Study results
indicated that approximately 79% of the retail demand for grill cylinders was
provided by traditional propane refilling stations rather than exchange. The
Company's primary competition comes from the approximately 20,000 bulk
refilling stations owned and operated by propane dealers, as well as certain
rental outlets, recreational vehicle centers and hardware stores. Major
propane providers such as AmeriGas Propane Partners, L.P. and Suburban Propane
Partners, L.P. offer cylinder exchange in limited locations and could expand
their cylinder exchange business nationally. These major propane providers
have greater resources than the Company and may be able to undertake more
extensive marketing campaigns and adopt more aggressive pricing policies than
the Company. The Company also competes with numerous regional cylinder
exchange programs which typically have operated in one or two states. There
can be no assurance that these competitors will not expand their cylinder
exchange programs nationwide. Furthermore, there can be no assurance that the
Company will be able to compete effectively with current or future competitors
or that the competitive pressures faced by the Company will not have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Risk Factors--Competition."
GOVERNMENTAL REGULATION
The storing and dispensing of propane is governed by guidelines published by
the NFPA in Pamphlets 54 and 58. Recent NFPA initiatives include a requirement
that all grill cylinders placed in use or recertified after September 30, 1998
be fitted with an overfill prevention device valve ("OPD Valve") and all grill
cylinders refilled after April 2002 have an OPD Valve. The Company plans to
have an OPD Valve for its cylinder exchange program in April 1998. The
distributor is also governed by local laws and regulations which vary by
municipality and state. Typically, a distributor is required to obtain permits
from a local fire marshal for each location at which propane is sold. The
Company's regional and corporate staffs attempt to assist the distributors in
this process whenever feasible. The Company plays an active role in drafting
model state legislation through the National Propane Gas Association ("NPGA"),
an industry association, which attempts to make state and local legislation
uniform to provide consumers, retailers and distributors with up to date and
appropriate regulations and safety. See "Risk Factors--Governmental
Regulations" and "--Volatile Product; Potential Product Liability."
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<PAGE>
PROPRIETARY RIGHTS
The Company has invested substantial time, effort and capital in
establishing the Blue Rhino brand name and believes that its trademarks are an
important part of its business strategy. The Company has a trademark for the
use of the Blue Rhino name and logo and the RhinoTUFF name and a trademark
application pending for Tri-Safe name. While the Company may apply for
additional trademarks or copyrights in the future, no assurance can be given
that any trademarks or copyrights will be issued, that any of the Company's
trademarks or patents will be held valid if subsequently challenged or that
others will not claim rights in or ownership of the trademarks or copyrights
and other proprietary rights held by the Company. See "Risk Factors--
Dependence on Trademarks, Proprietary Information and Copyrights."
LITIGATION
In the ordinary course of its business, the Company is involved in certain
pending or threatened legal proceedings from time to time. In the opinion of
management, none of such legal proceedings currently pending or threatened
will have a material effect on the financial position or results of operations
of the Company. See "Risk Factors--Volatile Product; Potential Product
Liability."
EMPLOYEES
As of February 28, 1998, the Company had 51 employees, of whom 15 were
engaged in sales and marketing, 12 in distributor services, 5 in information
systems and 9 in administration and finance. The Company has not experienced
any work stoppages and considers its relations with its employees to be good.
See "Risk Factors--Dependence on Key Personnel."
FACILITIES
The Company's headquarters are located in Winston-Salem, North Carolina in
facilities leased by the Company under a three year lease with automatic three
year renewals. The Company also owns and leases assets associated with its
previous operations as a propane distributor, including a refilling facility
in Livingston, Texas which the Company owns and is currently leasing to
Ceramic Industries, the Blue Rhino distributor for the Houston and Dallas
markets.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Executive officers and directors of the Company, and their ages as of the
date hereof are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Billy D. Prim (1)....... 42 Chairman of the Board, President and Chief Executive Officer
Andrew J. Filipowski 47 Vice Chairman
(1)....................
Mark Castaneda.......... 33 Chief Financial Officer
Kay B. Word............. 45 Chief Information Officer
Richard E. Belmont...... 38 Vice President, Sales and Marketing
Joseph T. Culp.......... 40 Vice President, Partner Development
Steven D. Devick (2).... 46 Director
Craig J. Duchossois 53 Director
(1)(2).................
S. H. Fogleman, III 42 Director
(2)(3).................
James P. Liautaud (3)... 61 Director
John H. Muehlstein (3).. 43 Director
Robert S. Steel (3)..... 43 Director
</TABLE>
---------------------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
Billy D. Prim 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 Company,
Inc., a North Carolina based holding company which until April 1995 was also a
distributor of propane gas, home heating oil, diesel fuel and kerosene. Mr.
Prim is a director of several privately-held companies, including Platinum
Propane, Caribou Propane and Javilina Propane which act as distributors for
the Company, and Bison Valve, L.L.C. which borrowed $635,000 from the Company
pursuant to a convertible loan. Mr. Prim is also a director of Southern
Community Bank & Trust and the NPGA.
Andrew J. Filipowski 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., Eagle River Interactive, System Software Associates, Inc.
and several privately-held companies including Platinum Propane, Caribou
Propane and Javilina Propane which act as distributors for the Company.
Mark Castaneda has served as Chief Financial Officer since October 1997.
Prior to joining the Company, Mr. Castaneda served as the vice president of
finance and the chief financial officer for All Star Gas Corporation, from
July 1995 until October 1997; served as a director of planning and the
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.
Kay B. Word has served as Chief Information Officer since March 1997. Prior
to joining the Company, Ms. Word served as the director of information
resources for R.J. Reynolds Tobacco Company from March 1988 to March 1997.
35
<PAGE>
Richard E. Belmont has served as Vice President of Sales and Marketing since
March 1995. Prior to joining the Company, Mr. Belmont was the product planning
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 BIA.
Joseph T. Culp has served as Vice President of Partner Development since
November 1995. Prior to joining the Company, Mr. Culp was the general manager
of Skelgas Propane, Inc. from February 1994 to November 1995, and as a
regional manager for Suburban Propane Partners, L.P. from January 1981 to
February 1994.
Steven D. 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 president
since January 1996. Mr. Devick is the chief executive officer of DDE, Inc. and
is also a director of Platinum Technology, Inc., as well as serving as an
officer and director of several privately-held companies.
Craig J. Duchossois has served as a director since May 1994. Mr. Duchossois
has been the chief executive officer of Duchossois Industries, Inc., a
privately-held diversified manufacturing and service company since 1995, and
as its President from 1986 to 1995. Mr. Duchossois has also served as a
director of Platinum Entertainment, Inc., and currently serves as a director
of Bissell, Inc. and LaSalle National Bank as well as several privately-held
companies, including Bison Valve, L.L.C.
S.H. Fogleman, III, has served as a director since May 1994. Mr. Fogleman
was the Chief Financial Officer and Vice President, Finance of the Company
from May 1994 to December 1995. Mr. Fogleman has been the chief financial
officer and vice president, finance of Platinum Rotisserie Corporation since
November 1993 and was the chief financial officer/controller of Zack's Famous
Frozen Yogurt, Inc. from July 1990 to November 1993.
James P. Liautaud has served as a director since May 1994. Since 1968, Mr.
Liautaud has been the chairman of the board of Gabriel, Inc., a private
investment company. Mr. Liautaud serves as a director and trustee for the
Entrepreneurship Institute and the University of Illinois Family Business
Council.
John H. 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 director
of Einstein/Noah Bagel Corp. and several privately-held corporations.
Robert S. Steel has served as a director of the Company since May 1995.
Since 1977, Mr. Steel has been the president and chief executive officer of
K.A. Steel Chemicals, Inc. Mr. Steel is also the general partner and principal
of Vision Capital Partners, L.L.C., a venture capital and investment
partnership. Mr. Steel also serves as the secretary and as a director of
Whittman-Hart Inc., a director of Monterey Pasta Co., and as an officer and
director of several privately-held companies.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Executive Committee, a Compensation Committee
and an Audit Committee. The Executive Committee 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 makes recommendations to the Board of
Directors concerning salaries and incentive compensation for the Company's
officers and employees, administers the Stock Incentive Plan ("Stock Incentive
Plan") and will administer the Company's Distributor Incentive Stock Option
Plan ("Distributor Option Plan") and Non-employee Director Stock Option Plan
("Director Option Plan") when they become effective upon consummation of this
offering. Prior to September 1997, decisions concerning the compensation of
officers were made by the Board of Directors as a whole. The Audit Committee
makes
36
<PAGE>
recommendations to the Board of Directors regarding the selection of
independent auditors, reviews the results and scope of the audit and other
accounting related services and reviews and evaluates the Company's internal
control functions.
DIRECTOR COMPENSATION
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.
Prior to the consummation of this offering, the directors were eligible to
receive stock options under the Stock Incentive Plan. After the consummation
of this offering directors will receive options under the Director Option
Plan. In April 1995, the Company issued to each of six directors an option to
purchase 3,780 shares of Common Stock at a purchase price of $4.50 per share
and in August 1996 identical grants were made to two additional directors. The
Board of Directors has approved an annual grant under the Director Option Plan
to each director of an option to purchase 1,000 shares of Common Stock at a
price per share equal to the fair market value per share of Common Stock as of
the grant date for each quarterly director's meeting which such director
attended during the previous year (aggregating a maximum grant of 4,000
options per year). See "--Director Option Plan."
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company for the fiscal year ended July 31, 1997 to the Company's
Chief Executive Officer and its other executive officers whose total salary
plus bonus exceeded $100,000 for such fiscal year ("Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
----------------- --------------------
SHARES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) STOCK OPTIONS (#)(1)
--------------------------- ---- --------- --------------------
<S> <C> <C> <C>
Billy D. Prim, 1997 $125,250 57,089
Chief Executive Officer
Richard E. Belmont, 1997 $106,727 1,890
Vice President Sales and Marketing
Joseph T. Culp, 1997 $104,242 1,890
Vice President of Partner Development
</TABLE>
- ---------------------
(1) The number of shares underlying the stock options reflects the Reverse
Stock Split.
37
<PAGE>
OPTION GRANTS
The following table sets forth information on grants of stock options to the
Named Officers pursuant to the Company's Stock Incentive Plan during fiscal
1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
NUMBER OF % OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE OPTION TERM(3)
OPTIONS EMPLOYEES IN PER EXPIRATION ---------------------
NAME GRANTED(1)(2) FISCAL YEAR SHARE(2) DATE 5% 10%
- ---- ------------- ------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Billy D. Prim (4)....... 57,089 54.8% $7.05(5) 6/15/07 $ 253,116 $ 641,445
Richard E. Belmont...... 1,890 6.6% $6.61 3/20/07 $ 7,857 $ 19,911
Joseph T. Culp.......... 1,890 6.6% $6.61 11/15/06 $ 7,857 $ 19,911
</TABLE>
- ---------------------
(1) The options are granted pursuant to the Company's Stock Incentive Plan.
These options have a term of ten years and, except as described in note 4
below, are nonqualified stock options and have an exercise price equal to
the estimated fair value of the Company's Common Stock on the date of
grant. In determining the fair market value of the Company's 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.
(2) The number of securities underlying options granted and exercise price per
share have been adjusted to reflect the Reverse Stock Split.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of the Company's future
Common Stock prices.
(4) 19,282 of these options are nonqualified stock options issued at an
exercise price of $6.61 per share and 37,807 of these options are
qualified stock options issued at an exercise price of $7.27 per share
which represents the Board of Directors' estimate of fair market value
plus 10%.
(5) Weighted average exercise price.
The following table sets forth information with respect to unexercised stock
options granted under the Company's Stock Incentive Plan as of the end of
fiscal 1997. The Named Officers did not exercise any stock options during such
fiscal year.
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-
NUMBER OF UNEXERCISED THE-MONEY
OPTIONS OPTIONS AT JULY 31,
HELD AT JULY 31, 1997(1) 1997(3)
---------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE
- ---- ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
Billy D. Prim............ 1,512 59,357 $3,190 $ 2,268
Richard E. Belmont....... 3,781 9,451 7,978 15,954
Joseph T. Culp........... 2,268 10,964 4,785 19,144
</TABLE>
- ---------------------
(1) The number of underlying options has been adjusted to reflect the Reverse
Stock Split.
(2) All unexercisable options will become exercisable upon consummation of
this offering.
(3) Calculated by determining the difference between the fair market value of
the securities underlying the options at July 31, 1997 ($0.50 per share
($6.61 per share post Reverse Stock Split) as determined by the Board of
Directors) and the exercise price of the Named Officer's option.
38
<PAGE>
STOCK INCENTIVE PLAN
The Stock Incentive Plan was adopted by the Board of Directors and approved
by the stockholders in December 1994 and has 459,734 shares of Common Stock
reserved for issuance upon the exercise of Options granted thereunder. As of
January 31, 1998, options to purchase 182,607 shares of Common Stock at a
weighted average exercise price of $6.03 per share were outstanding under the
Stock Incentive Plan. Upon consummation of the offering, the Company intends
to accelerate the vesting of all outstanding options under its Stock Incentive
Plan. See "Description of Capital Stock--Recapitalization."
Pursuant to the Stock Incentive Plan, the Company may make grants of
options, stock appreciation rights, restricted stock and deferred stock to
officers, employees, consultants and advisors of the Company. Options granted
under the Stock Incentive Plan may be "qualified stock options," as that term
is defined in Section 422(b) of the Internal Revenue Code of 1986, as amended
(the "Code") or nonqualified stock options. The Compensation Committee of the
Board of Directors administers the Stock Incentive Plan and has the power to
select officers, employees, consultants and advisors for participation,
determine the number of shares of Common Stock subject to each grant and the
price and terms of exercise for each option granted thereunder. The
Compensation Committee also may 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
Stock Incentive Plan typically have a term of ten years and vest over five
years with 20% vesting on the first anniversary of issuance and on each
subsequent anniversary thereafter until fully vested. 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
optionee, only by such optionee.
DIRECTOR OPTION PLAN
All non-employee directors are entitled to participate in the Non-Employee
Director Stock Option Plan (the "Director Option Plan"). The Director Option
Plan was adopted by the Board of Directors and approved by the stockholders in
November, 1997, but will not become effective until the consummation of this
offering. The Company has reserved 84,000 shares of Common Stock for issuance
under the Director Option Plan. The Board of Directors has approved an annual
grant to each Director under the Director Option Plan of options to purchase
4,000 shares of Common Stock at a price per share equal to the fair market
value per share of the Common Stock as of the grant date consisting 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 three
anniversaries of the grant date. See "--Director Compensation."
Options granted under the Director Option Plan are not "qualified stock
options," as that term is defined in Section 422(b) of 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 ten 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 optionee only by such optionee.
DISTRIBUTOR OPTION PLAN
In November 1997, the Board of Directors adopted and the stockholders
approved the Distributor Incentive Stock Option Plan (the "Distributor Option
Plan") to be effective upon the consummation of this offering. The Company has
reserved 361,128 shares of Common Stock for issuance upon the exercise of
options granted under the Distributor Option Plan. Of this amount, the Board
of Directors has authorized and is expected to grant options to purchase
approximately 250,000 shares of Common Stock to existing Blue Rhino
distributors at an exercise price equal to the initial public offering price.
Blue Rhino distributors and their stockholders, partners, members, directors,
general partners, managers, officers, employees and consultants are eligible
to receive options under the Distributor Option Plan.
39
<PAGE>
Blue Rhino adopted the Distributor Option Plan to assist in attracting and
retaining distributors, provide distributors an incentive to offer quality
service to and increase the number of Blue Rhino customer accounts and to
promote the identification of the distributor's interests with those of the
Company's stockholders. Options issued under the Distributor Option Plan will
not be "qualified stock options" as that term is defined in Section 422(b) of
the Code, nor is the Distributor Option Plan an "employee benefit plan" as
that term is defined under Rule 405 promulgated under the Securities Act. The
Compensation Committee of the Board of Directors administers the Distributor
Option Plan and has the power to select distributors for participation and to
determine the number of shares of Common Stock subject to each grant. The
exercise price for options granted to distributors under the Distributor
Option Plan will be the market price of the Company's Common Stock on the date
of the option grant. Options granted under the Distributor Option Plan will
typically have a term of ten years and vest over four years with 25% vesting
on the first anniversary of issuance and on each subsequent anniversary
thereafter until fully vested. The Company intends to register the shares of
Common Stock reserved for sale to distributors upon the exercise of vested
options granted under the Distributor Option Plan. In the event the Company
does not or is unable to register shares in a sufficient number to issue to
distributors upon their exercise of vested options issued under the
Distributor Option Plan, the options shall be exercisable only in the event
exemptions from registration under the Securities Act and state "blue sky"
laws exist for the issuance of shares upon the exercise of the option.
401(K) PLAN
The Company's employees participate in the Platinum Service Corporation
401(k) plan, a multi-employer plan established in July 1994 to serve employees
of Blue Rhino and its subsidiaries, Platinum Propane and its subsidiaries and
Platinum Rotisserie, Inc., and its subsidiaries. All employees of the Company
who have been employed for one year or more are eligible to participate in the
plan beginning on the first day of the first fiscal quarter following the
completion of 1,000 hours of service. Participants in the 401(k) plan may
contribute up to 10% of their total base compensation to the plan. Each
employee's interest in contributions of the Company, if any, vests 20% per
year of service with the Company. Contributions by the Company are at the
Company's discretion and no such contributions have been made to date.
40
<PAGE>
CERTAIN TRANSACTIONS
The share numbers in this section reflect the Reverse Stock Split.
TRANSACTIONS WITH STOCKHOLDERS AND DIRECTORS
Billy D. Prim and Andrew J. Filipowski founded the Company in March 1994
contributing the assets of American Cylinder Exchange, Inc. in consideration
for 746,692 and 589,792 shares of the Company's Common Stock, respectively.
In December 1994, the Company sold 1,570,221 shares of Series A Convertible
Participating Preferred Stock and warrants to purchase 318,650 shares of
Common Stock at an exercise price of approximately $0.45 per share for an
aggregate purchase price of approximately $6.7 million. Mr. Prim purchased
3,268 shares of preferred stock for $15,000 and Mr. Filipowski purchased
444,630 shares of preferred stock and warrants to purchase 127,037 shares of
Common Stock for an aggregate purchase price of approximately $2.0 million.
In May 1995, Messrs. Filipowski, Duchossois and Steel, each a director and
stockholder of the Company, and Peter H. Huizenga, a former director of the
Company, loaned $800,000 in aggregate to Blue Rhino at 7.84% per annum. Each
also received a warrant to purchase 2,179 shares of Common Stock at an
exercise price of $4.59 per share. The Company has repaid this loan in full.
At the same time, Platinum Venture Partners I, L.P. ("PVP"), a stockholder of
the Company, loaned the Company $600,000 at 7.84% per annum and received a
warrant to purchase 6,537 shares of Common Stock at an exercise price of $4.59
per share. Messrs. Devick, Liautaud, Filipowski, Prim, Duchossois and Steel,
each a director of the Company, hold a limited partnership interest in PVP.
The Company has repaid this loan in full.
In June 1995, the Company entered into a $6.0 million credit facility with
Bank of America, Illinois. Messrs. Prim, Filipowski, Duchossois, Steel and
Huizenga executed limited guarantees of this indebtedness and received a
warrant to purchase Common Stock at an exercise price of $4.59 per share in
consideration therefor. Messrs. Prim, Filipowski and Duchossois each received
a warrant to purchase 39,219 shares; Mr. Huizenga received a warrant to
purchase 52,293 shares; and Mr. Steel received a warrant to purchase 26,146
shares. In addition, PVP received a warrant to purchase 19,610 shares of
Common Stock in connection with this credit facility. The Company has repaid
and terminated the credit facility and the obligations of the aforementioned
stockholders under the guarantees have lapsed.
In October 1995, the Company sold 12,575 Units for $1,000 per Unit, each
Unit consisting of a 10.5% Senior Discount Note with a face value of $1,364.93
and a warrant to purchase approximately 40 shares of Common Stock at an
exercise price of approximately $4.59 per share. Mr. Prim, individually and
through affiliates, purchased 25 Units, Mr. Filipowski purchased 200 Units and
Mr. Duchossois and his affiliates purchased 1,000 Units. In consideration for
their assistance in securing financing, certain individuals received in the
aggregate 72,589 warrants to purchase Common Stock at an exercise price of
$4.59 per share which included 7,561 warrants issued to Mr. Huizenga and
27,095 warrants issued to Mr. Duchossois and his affiliates. All outstanding
Senior Discount Notes will be repaid in full with a portion of the proceeds
from this offering and the warrants will be exercised upon consummation of the
offering.
In June 1996, the Company awarded distributorships for North Carolina, South
Carolina, Georgia, Florida and parts of Virginia and Tennessee to Platinum
Propane Corporation ("PPC"), an entity indirectly owned and managed by Messrs.
Prim and Filipowski. The terms of the distribution agreements are
substantially the same as those negotiated with other Blue Rhino distributors.
In March 1997, Messrs. Prim and Filipowski contributed the assets and certain
liabilities of PPC to Platinum Propane Holding, L.L.C. ("Platinum Propane") in
exchange for approximately 40% of the membership interests in Platinum
Propane. In March 1997, Platinum Propane raised approximately $4.8 million in
a private placement of membership interests pursuant to which Mr. Duchossois
and his affiliates invested $375,000. On March 1, 1997, the Company sold
151,229 shares of Common Stock and a warrant to purchase 113,422 shares of
Common Stock at an exercise price of $6.61 per share to Platinum Propane for
an aggregate purchase price of $1.0 million. At the same time, the Company
entered into distributor agreements with subsidiaries of Platinum Propane
covering the Chicago, Illinois and Los Angeles, California territories, in
addition to the territories previously
41
<PAGE>
served by PPC. Messrs. Prim and Filipowski have the ability to select, and
currently occupy, two of the seven director positions at Platinum Propane. In
fiscal 1996 and 1997, PPC and Platinum Propane received approximately $1.6
million and $5.3 million, respectively, from the Company on behalf of cylinder
distribution services performed by them. The Company has also entered into
display rack financing leases with Platinum Propane requiring lease payments
of $12,116 per month as of January 31, 1998.
From March 1994 until June 1996, the Company leased a 13,000 square foot
warehouse and refurbishing facility in Booneville, North Carolina from Mr.
Prim. The lease provided for $1,000 rent per month on a triple net basis. The
Company also leased equipment at this facility from American Oil and Gas, Inc.
of which Messrs. Prim and Filipowski own approximately 91% of the outstanding
stock. These leases were assigned to PPC in June 1996.
In January 1998, Messrs. Filipowski, Duchossois and Liautaud and Lennard
Carlson, a stockholder, collectively loaned the Company $3.25 million (the
"1998 Stockholder Loans"). The 1998 Stockholder Loans are repayable in full on
the earlier of December 31, 2000 or the initial public offering of the
Company's Common Stock in which the net proceeds to the Company equal at least
$30.0 million. The 1998 Stockholder Loans bear interest at 10.5% per annum,
accruing for one year and payable quarterly thereafter until paid in full. The
1998 Stockholder Loans will be repaid in full with a portion of the proceeds
from this offering. Messrs. Filipowski, Duchossois, Liautaud and Carlson also
received warrants to purchase approximately .08 shares of Common Stock for
every $3.00 they loaned to the Company for a total of 81,916 shares (the "1998
Warrants"). The 1998 Warrants may be exercised prior to December 31, 2008 at a
price per share of $13.00. The 1998 Warrants will remain outstanding following
the consummation of the offering. See "Use of Proceeds" and "Risk Factors--
Management's Discretion as to Use of Unallocated Net Proceeds; Benefits to
Existing Stockholders."
Mr. Muehlstein, a director of the Company, is also a stockholder in the firm
of Pedersen & Houpt, P.C., legal counsel to the Company.
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.
42
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of March 1, 1998 and as adjusted to reflect
the sale of the Common Stock offered hereby by (i) each person known by the
Company to own beneficially more than 5% of the Common Stock; (ii) each
director of the Company; (iii) each Named Officer; and (iv) all executive
officers and directors as a group.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED
THE AFTER THE
OFFERING(1)(2) OFFERING(1)(3)
----------------- -----------------
NAME AND ADDRESS NUMBER PERCENT NUMBER PERCENT
- ---------------- ------ ------- --------- -------
<S> <C> <C> <C> <C>
DIRECTORS AND OFFICERS:
Andrew J. Filipowski(4)
1815 S. Meyers Road
Oakbrook Terrace, IL 60181 ............... 1,772,795 40.8% 1,847,431 25.6%
Billy D. Prim(5)
104 Cambridge Plaza Drive
Winston-Salem, NC 27104................... 1,324,371 30.5 1,344,118 18.6
Craig J. Duchossois(6)
845 Larch Avenue
Elmhurst, IL 60126........................ 374,380 8.6 400,577 5.6
Richard G. Belmont(7)
104 Cambridge Plaza Drive
Winston-Salem, NC 27104................... 15,123 * 15,123 *
Joseph T. Culp(7)
104 Cambridge Plaza Drive
Winston-Salem, NC 27104................... 15,123 * 15,123 *
S.H. Fogleman, III(8)
100 Cambridge Plaza Drive
Winston-Salem, NC 27104................... 18,904 * 18,904 *
James P. Liautaud(9)
132 East Delaware
Chicago, IL 60611......................... 152,809 3.5 165,125 2.3
John H. Muehlstein(7)
161 N. Clark Street, Suite 3100
Chicago, IL 60601......................... 3,781 * 3,781 *
Robert F. Steel(10)
445 East 4th Street
Hinsdale, IL 60521........................ 50,406 1.1 52,870 *
Steven D. Devick(11)
2001 Butterfield Road, Suite 1400
Downers Grove, IL 60515................... 306,737 7.1 331,639 4.5
Directors and executive officers as a group
(12 individuals).......................... 3,341,128 76.8 3,459,206 47.9
5% STOCKHOLDERS:
Platinum Venture Partners I, L.P.(12)
2001 Butterfield Road, Suite 1400
Downers Grove, IL 60515................... 302,956 7.0 327,858 4.5
</TABLE>
- ---------------------
*Less than 1%.
43
<PAGE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange 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 March 1, 1998 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) The Shares Beneficially Owned Prior to the Offering reflects the shares
outstanding following the Recapitalization.
(3) The Shares Beneficially Owned After the Offering reflects 2,700,000
shares of Common Stock to be issued pursuant to the offering.
(4) Includes 882,003 shares of Common Stock owned by Mr. Filipowski, 18,903
shares of Common Stock issuable upon the exercise of vested Options held
by Mr. Filipowski, 111,798 shares of Common Stock to be issued upon the
cashless exercise of warrants held by Mr. Filipowski, except the 1998
Warrants, in connection with this offering, 36,547 shares of Common Stock
to be issued upon exercise of the 1998 Warrants, 32,452 shares of Common
Stock issued in payment of the Preferred Dividend following the
consummation of the offering, 155,619 shares of Common Stock owned by
American Oil and Gas, Inc., of which Mr. Filipowski owns 42% of the
issued and outstanding shares, 42,893 shares of Common Stock to be issued
upon the cashless exercise of a warrant held by American Oil and Gas,
Inc. in connection with this offering, 17,282 shares of Common Stock
issued to American Oil and Gas, Inc. in payment of the Preferred Dividend
following the consummation of the offering, 151,227 shares owned by
Platinum Propane, of which Mr. Filipowski acts as a director and
indirectly owns 16% of the membership interests, 55,728 shares of Common
Stock to be issued upon the cashless exercise of a warrant held by
Platinum Propane in connection with this offering, 224,235 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, 78,721 shares of Common Stock to be issued upon
the cashless exercise of a warrant held by PVP in connection with this
offering, 24,902 shares of Common Stock issued to PVP in payment of the
Preferred Dividend following the consummation of the offering, 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 Champney as trustee on behalf
of the Alexandra Filipowski Trust, 1,890 shares of Common Stock
beneficially owned by Veronica Champney as trustee on behalf of the James
Meadows Trust and 7,561 shares of Common Stock beneficially owned by
Veronica Champney.
(5) Includes 811,222 shares of Common Stock held by Mr. Prim, 64,181 shares
of Common Stock issuable upon the exercise of vested Options held by Mr.
Prim, 32,160 shares of Common Stock to be issued upon the cashless
exercise of warrants held by Mr. Prim in connection with this offering,
2,465 shares of Common Stock issued in payment of the Preferred Dividend
following the consummation of the offering, 155,619 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, 42,893 shares
of Common Stock to be issued upon the cashless exercise of a warrant held
by American Oil and Gas, Inc. in connection with this offering, 17,282
shares of Common Stock issued to American Oil and Gas, Inc. in payment of
the Preferred Dividend following the consummation of the offering,
151,227 shares owned by Platinum Propane, of which Mr. Prim acts as a
director and indirectly owns 20.4% of the membership interests, 55,728
shares of Common Stock to be issued upon the cashless exercise of a
warrant held by Platinum Propane in connection with this offering, 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 Sarcaneda Westmoreland and 1,890 shares of Common Stock beneficially
owned by Debbie W. Prim as trustee on behalf of Anthony G. Westmoreland.
(6) Includes 165,371 shares of Common Stock owned by Mr. Duchossois, 3,781
shares of Common Stock issuable upon the exercise of vested Options held
by Mr. Duchossois, 57,350 shares of Common Stock to be issued upon the
cashless exercise of warrants held by Mr. Duchossois in connection with
this offering, 36,547 shares of Common Stock to be issued upon exercise
of the 1998 Warrants, 18,365 shares of Common Stock issued in payment of
the Preferred Dividend following the consummation of the offering, 12,038
shares of Common Stock beneficially owned by the Craig Duchossois
Revocable Trust of which Mr. Duchossois is the trustee, 30,608 shares of
Common Stock to be issued upon the cashless exercise of a warrant held by
such Trust in connection with this offering, 1,337 shares of Common Stock
issued to such Trust in payment of the Preferred Dividend following the
consummation of the offering, 58,483 shares of Common Stock beneficially
owned by the Kimberly Family Discretionary Trust over which Mr.
Duchossois has voting and investment control, 10,202 shares of Common
Stock to be issued upon the cashless exercise of a warrant held by such
Trust in connection with this offering and 6,495 shares of Common Stock
issued to such Trust in payment of the Preferred Dividend following the
consummation of the offering.
(7) Represents the number of shares issuable upon the exercise of vested
Options.
(8) Includes 15,123 shares of Common Stock owned by Mr. Fogleman and 3,781
shares of Common Stock issuable upon the exercise of vested Options held
by Mr. Fogleman.
(9) Includes 3,781 shares of Common Stock issuable upon the exercise of
vested Options held by Mr. Liautaud, 7,561 shares of Common Stock to be
issued upon the exercise of the 1998 Warrants held by Mr. Liautaud,
30,567 shares of Common Stock issued upon the cashless exercise of
Warrants held by Mr. Liautaud in connection with the offering, 12,316
shares of Common Stock issued in payment of the Preferred Dividend
following the consummation of the offering and 110,900 shares of Common
Stock owned by Gabriel, Inc., of which Mr. Liautaud is the sole
stockholder and has sole voting and investment power.
(10) Includes 22,185 shares of Common Stock owned jointly by Mr. Steel and his
wife, Jennifer Steel, 3,781 shares of Common Stock issuable upon the
exercise of vested Options held by Mr. Steel, 2,464 shares of Common
Stock issued in payment of the Preferred
44
<PAGE>
Dividend following the consummation of the offering and 24,440 shares of
Common Stock to be issued upon the cashless exercise of a Warrant held by
Mr. Steel in connection with this offering.
(11) Includes 3,781 shares issuable upon the exercise of vested Options held
by Mr. Devick and 224,235 shares owned beneficially by PVP and 78,721
shares of Common Stock to be issued upon the cashless exercise of a
warrant held by PVP , the general partner of which is PVP, Inc., in
connection with this offering, 24,902 shares of Common Stock issued in
payment to PVP of the Preferred Dividend following the consummation of
the offering. Mr. Devick is President, serves as a director and owns
22.5% of the outstanding shares of PVP, Inc.
(12) Includes 224,235 shares owned beneficially by PVP, the general partner of
which is PVP, Inc., 78,721 shares of Common Stock to be issued in
connection with this offering upon the cashless exercise of a warrant
held by PVP and 24,902 shares of Common Stock issued to PVP in payment of
the Preferred Dividend following the consummation of the offering.
45
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of this offering, there will be approximately 7,222,550
shares of Common Stock outstanding. The 2,700,000 shares (or up to 3,105,000
shares if the Underwriters' overallotment option is exercised in full) of
Common Stock issued and sold in this offering will be freely tradeable (other
than by an "affiliate" of the Company as such term is defined in the
Securities Act) without restriction under the Securities Act. The remaining
shares of Common Stock then outstanding will be deemed "restricted securities"
within the meaning of Rule 144 under the Securities Act (the "Restricted
Shares") and may be resold only in compliance with the registration provisions
of the Securities Act or an exemption thereunder.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially
owned Restricted Shares for at least one year from the later of the date such
Restricted Shares were acquired from the Company or (if applicable) from an
affiliate or the date on which they were fully paid, is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of 1% of the then-outstanding shares of Common Stock or the average
weekly trading volume in the public market as reported through the Nasdaq
National Market during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain requirements as to the manner and
notice of sale and the availability of public information concerning the
Company.
Restricted Shares held by affiliates of the Company are subject to the
foregoing volume limitations, holding period and other restrictions under Rule
144. Affiliates may sell shares other than Restricted Shares in accordance
with the foregoing volume limitations and other restrictions, but without
regard to any holding period.
Further, under Rule 144(k), if a period of at least two years has elapsed
since the later of the date Restricted Shares were acquired from the Company
or from an affiliate of the Company or the date on which they were fully paid,
a holder of such Restricted Shares who is not an affiliate of the Company at
the time of the sale, and has not been an affiliate of the Company for at
least three months prior to the sale, would be entitled to sell the shares
immediately without regard to volume limitations and the other conditions
described above.
Prior to this offering, there has been no market for the Common Stock and no
prediction can be made as to the effect, if any, that market sales of shares
or the availability of such shares for sale will have on the market price of
the Common Stock from time to time. Nevertheless, sales of substantial amounts
of Common Stock in the public market could have an adverse impact on such
market price and the Company's ability to raise additional equity capital.
Certain stockholders of the Company, including the executive officers and
directors, who will own in the aggregate 3,579,206 shares of Common Stock
after the offering, have agreed that they will not, without the prior written
consent of Hambrecht & Quist LLC, directly or indirectly sell, offer, contract
to sell, transfer the economic risk of ownership in, make any short sale,
pledge or otherwise dispose of any shares of Common Stock or any securities
convertible or exchangeable for or any other rights to purchase or acquire
Common Stock owned by them during the 180-day period following the date of
this Prospectus. The Company has agreed that it will not, without the prior
written consent of Hambrecht & Quist LLC, directly or indirectly sell, offer,
contract to sell, transfer the economic risk of ownership in, make any short
sale, pledge or otherwise dispose of any shares of Common Stock or any
securities convertible or exchangeable for or any other rights to purchase or
acquire Common Stock during the 180-day period following the date of this
Prospectus, except that the Company may issue shares upon the exercise of
options granted prior to the date hereof, and may grant additional options
under it stock option plans, provided, that, without the prior written consent
of Hambrecht & Quist LLC, such additional options shall not be exercisable
during such period. Upon expiration of such 180-day period, all of the shares
of Common Stock subject to such agreements will be eligible for sale subject,
in certain cases, to certain volume and other limitations of Rule 144 under
the Securities Act
46
<PAGE>
applicable to affiliates of the Company. Following consummation of this
offering, the Company intends to file registration statements under the
Securities Act to register the sale of 459,734 shares of Common Stock reserved
for issuance under the Stock Incentive Plan, 84,000 shares of Common Stock
reserved for issuance under the Director Option Plan and 361,128 shares
reserved for issuance under the Distributor Option Plan. The Company intends
on granting approximately 250,000 options under the Distributor Option Plan
shortly after the consummation of the offering. Upon expiration of the lock-up
agreements referred to above, holders of approximately 3,073,003 shares of
Common Stock will be entitled to certain registration rights, at the Company's
expense, with respect to such shares. The sale of a substantial number of
shares, whether pursuant to a subsequent public offering, the exercise of
registration rights or otherwise, or the perception that such sales could
occur, could adversely affect the market price of the Common Stock and could
materially impair the Company's future ability to raise capital through an
offering of equity securities.
47
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the filing of the Second Amended and Restated Certificate of
Incorporation of the Company (the "Charter") prior to the consummation of this
offering, the authorized capital stock of the Company shall consist of
40,000,000 shares of Common Stock having a par value of $0.001 per share and
20,000,000 shares of "blank check" preferred stock having a par value of
$0.001 per share.
The following description of the proposed Recapitalization, the Company's
capital stock and certain provisions of the Charter and the Company's By-laws
is qualified in its entirety by the provisions of the Charter and By-laws
(which are included as exhibits to the Registration Statement of which this
Prospectus is a part) and the General Corporation Law of the State of Delaware
(the "DGCL").
RECAPITALIZATION
The Company intends to consummate the Recapitalization in connection with
the consummation of this offering. Pursuant to the Recapitalization, all
outstanding Preferred Stock and Warrants (except for the 1998 Warrants) will
be converted into Common Stock immediately prior to the consummation of the
offering. The Company will then effect the Reverse Stock Split, resulting in
7,208,227 shares of Common Stock outstanding immediately prior to the sale of
Common Stock offered hereby. Pursuant to the Recapitalization, 182,607 Options
(post Reverse Stock Split) exercisable at a weighted average exercise price of
$6.03 per share will be deemed fully vested upon consummation of the offering.
The pre-offering capitalization of the Company includes 1,778,921 shares of
issued and outstanding Common Stock and 1,572,474 shares of issued and
outstanding Preferred Stock. Each share of Preferred Stock will be converted
into one share of Common Stock. In addition, each share of Preferred Stock is
entitled to an 8% cumulative preferred dividend (the "Preferred Dividend")
payable in cash or Common Stock. The Preferred Dividend is estimated to be
$2,270,209 upon consummation of this offering and will be converted into
174,631 shares of Common Stock in connection therewith. The Company has issued
Warrants to purchase (i) 318,650 shares of Common Stock at a purchase price of
$0.45 per share, (ii) 803,574 shares of Common Stock at a purchase price of
approximately $4.59 per share, (iii) 227,049 shares of Common Stock at a
purchase price of $6.61 and (iv) 81,916 shares of Common Stock at a purchase
price of $13.00 per share.
Each holder of warrants (except for the holders of the 1998 Warrants) will
exercise their Warrants in a cashless exercise whereby the number of shares of
Common Stock with a value at the initial public offering price equal to the
exercise price will be deducted from the total number of shares which the
warrant holder would have been entitled to receive had they exercised their
Warrant in full. The following table summarizes the projected recapitalization
of the Company:
<TABLE>
<CAPTION>
TOTAL TOTAL SHARES
SHARES SHARES OF OF COMMON
OUTSTANDING COMMON STOCK
OR ISSUABLE WARRANT STOCK OUTSTANDING
UPON EXERCISE OUTSTANDING AFTER THE
EXERCISE OF PRICE PER POST REVERSE
CLASS OF SECURITY WARRANTS SHARE CONVERSION STOCK SPLIT
- ----------------- ----------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Common Stock................... 23,526,456 -- 23,526,456 1,778,921
Preferred Stock................ 20,796,172 -- 20,796,172 1,572,474
Preferred Stock Dividend....... -- -- 2,309,524 174,631
Warrants....................... 4,214,185 $0.034704 4,065,403 307,400
Warrants....................... 10,627,364 $0.347037 6,875,406 519,874
Warrants....................... 3,002,745 $0.500000 1,475,372 111,558
Warrants....................... 1,083,333 $0.982977 1,083,333 81,916
---------- ---------- ---------
Totals..................... 63,250,255 60,131,666 4,546,774(1)
========== ========== =========
</TABLE>
- ---------------------
(1) The total shares of Common Stock outstanding after the Reverse Stock Split
(a) includes 81,916 shares issuable upon the exercise of the 1998 Warrants
which will not be exercised in connection with the offering and (b)
excludes 57,692 shares of Common Stock to be issued in connection with the
Bison Acquisition.
48
<PAGE>
COMMON STOCK
All outstanding shares of Common Stock are, and the shares offered hereby
will be, fully paid and nonassessable. The holders of Common Stock are
entitled to one vote for each share held of record on all matters voted upon
by stockholders and may not cumulate votes. Thus, the owners of a majority of
the Common Stock outstanding may elect all of the directors if they choose to
do so, and the owners of the balance of such shares would not be able to elect
any directors. Subject to the rights of holders of any future series of
Preferred Stock that may be designated, each share of outstanding Common Stock
is entitled to participate equally in any distribution of net assets made to
the stockholders in a liquidation, dissolution or winding up of the Company
and is entitled to participate equally in dividends if, as and when declared
by the Board. There are no redemption, sinking fund, conversion or preemptive
rights with respect to the shares of Common Stock. All shares of Common Stock
have equal rights and preferences. See "Risk Factors--Control by Existing
Stockholders."
PREFERRED STOCK
The Board of Directors is authorized, subject to certain limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to 20,000,000 shares of Preferred Stock and to determine the price,
rights, preferences and privileges of those shares. In addition, the terms of
the Preferred Stock and the rights of the holders of Preferred Stock may
adversely affect the rights of the holders of Common Stock. While the Company
has no present intention to issue shares of preferred stock, such issuance
could have the effect of making it more difficult for a third party to acquire
a majority of the outstanding voting stock of the Company. In addition, such
preferred stock may have other rights, including economic rights senior to the
Common Stock, and, as a result, the issuance thereof could have a material
adverse effect on the market value of the Common Stock.
CERTAIN PROVISIONS OF DELAWARE LAW
Business Combination Provision. The Company is subject to the provisions of
Section 203 of the DGCL. Subject to certain exceptions, Section 203 prohibits
a publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless
the interested stockholder attained such status with the approval of the Board
or unless the business combination is approved in a prescribed manner. A
"business combination" includes mergers, assets sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
certain exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
the corporation's voting stock.
Limitation on Liability. As permitted by the provisions of the DGCL, the
Company's Charter eliminates, in certain circumstances, the monetary liability
of directors of the Company for a breach of their fiduciary duty as directors.
These provisions do not eliminate the liability of a director: (i) for a
breach of a director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions by a director not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for liability
arising under Section 174 of the DGCL (relating to the declaration of
dividends and purchase or redemption of shares in violation of the DGCL), or
(iv) for any transaction from which the director derived an improper personal
benefit. In addition, these provisions do not eliminate the liability of a
director for violations of federal securities laws, nor do they limit the
rights of the Company or its stockholders, in appropriate circumstances, to
seek equitable remedies such as injunctive or other forms of non-monetary
relief. Such remedies may not be effective in all cases.
If the DGCL is amended to authorize a further limitation or elimination of
the liability of directors or officers, then the liability of a director or
officer of the Company shall, in addition to the limitation of personal
liability provided in the Charter, be limited or eliminated to the fullest
extent permitted by the DGCL, as from time to time amended.
49
<PAGE>
ANTI-TAKEOVER EFFECT OF PROVISIONS OF CHARTER AND BY-LAWS
Certain provisions of the Company's Charter and By-laws could discourage
potential acquisition proposals and could delay or prevent a change in control
of the Company. These provisions are intended to enhance the likelihood of
continuity and stability in the composition of the Board and in the policies
formulated by the Board and to discourage certain types of transactions that
may involve an actual or threatened change of control of the Company, such as
an unsolicited acquisition proposal. Because these provisions could have the
effect of discouraging a third party from acquiring control of the Company,
they may inhibit fluctuations in the market price of shares of Common Stock
that could otherwise result from actual or rumored takeover attempts and,
therefore could deprive stockholders of an opportunity to realize a takeover
premium. These provisions also may have the effect of limiting the price that
certain investors might be willing to pay in the future for shares of the
Company's Common Stock and of preventing changes in the management of the
Company.
Election and Removal of Directors. The Company's Board of Directors is
divided into three classes of directors serving staggered three year terms,
thereby preventing a change in a majority of the Board in any single year.
Ordinary vacancies in the Board may be filled by the affirmative vote of the
Board members then in office.
Stockholder Consent. The Charter provides that stockholder action can be
taken only at an annual or special meeting of stockholders and cannot be taken
by written consent in lieu of a meeting. In addition, the Charter provides
that, except as otherwise required by law, special meetings of the
stockholders can be called only pursuant to a resolution adopted by a majority
of the Board, the Chairman of the Board or the President. Stockholders
desiring to nominate persons for the election of directors or to have other
business placed on the agenda of a meeting of the stockholders must give
written notice to the Board of Directors of such request 90 days in advance of
the date that notice of such meeting will be sent to all stockholders.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock will be determined
prior to the completion of the offering.
50
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), for whom Hambrecht & Quist LLC,
NationsBanc Montgomery Securities LLC and Dain Rauscher Incorporated are
acting as representatives (the "Representatives"), have severally agreed to
purchase from the Company the following respective numbers of shares of Common
Stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Hambrecht & Quist LLC...........................................
NationsBanc Montgomery Securities LLC...........................
Dain Rauscher Incorporated......................................
------
Total...........................................................
======
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in the Company's business and the receipt of certain
certificates, opinions and letters from the Company, its counsel and
independent auditors. The nature of the Underwriters' obligations is such that
they are committed to purchase all shares of Common Stock offered hereby if
any of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to the
public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
re-allow, a concession not in excess of $ per share to certain other
dealers. After the initial public offering of the shares, the offering price
and other selling terms may be changed by the Representatives. The
Representatives have advised the Company that the Underwriters do not intend
to confirm discretionary sales in excess of 5% of the shares of Common Stock
offered hereby.
The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 405,000
additional shares of Common Stock at the initial public offering price, less
the underwriting discount, set forth on the cover page of this Prospectus. To
the extent that the Underwriters exercise this option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased
by it shown in the above table bears to the total number of shares of Common
Stock offered hereby. The Company will be obligated, pursuant to the option,
to sell shares to the Underwriters to the extent the option is exercised. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of shares of Common Stock offered hereby.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the
right to reject an order for the purchase of shares in whole or in part.
51
<PAGE>
The Company has agreed to indemnify the Underwriters against certain
liabilities, including labilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.
Certain stockholders of the Company, including the executive officers and
directors, who will own in the aggregate 3,779,379 shares of Common Stock
after the offering, have agreed that they will not, without the prior written
consent of Hambrecht & Quist LLC, directly or indirectly sell, offer, contract
to sell, transfer the economic risk of ownership in, make any short sale,
pledge or otherwise dispose of any shares of Common Stock or any securities
convertible or exchangeable for or any other rights to purchase or acquire
Common Stock owned by them during the 180-day period following the date of
this Prospectus. The Company has agreed that it will not, without the prior
written consent of Hambrecht & Quist LLC, directly or indirectly sell, offer,
contract to sell, transfer the economic risk of ownership in, make any short
sale, pledge or otherwise dispose of any shares of Common Stock or any
securities convertible or exchangeable for or any other rights to purchase or
acquire Common Stock during the 180-day period following the date of this
Prospectus, except that the Company many issue shares upon the exercise of
options granted prior to the date hereof, and may grant additional options
under its stock option plans, provided, that, without the prior written
consent of Hambrecht & Quist LLC, such additional options shall not be
exercisable during such period.
NationsBanc Montgomery Securities LLC ("NationsBanc Montgomery") is
affiliated with NationsBank, N.A. ("NationsBank") which is a lender to the
Company pursuant to the Bank Credit Facility (see "Use of Proceeds"). As of
the date of this Prospectus, NationsBank has advanced approximately $3.4
million to the Company pursuant to the Bank Credit Facility, all of which will
be repaid with a portion of the proceeds from the offering. The decision of
NationsBanc Montgomery to underwrite the offering was made independently of
NationsBank, which had no involvement in determining whether or when to
underwrite the offering or the terms thereof. NationsBanc Montgomery will not
receive any benefit from the offering other than its respective portion of the
underwriting commission payable by the Company. Because it is anticipated that
more than 10% of the proceeds from the offering (excluding the underwriting
commission) will be received by NationsBank pursuant to the repayment of
amounts outstanding under the Bank Credit Facility, and NationsBank is an
affiliate of NationsBanc Montgomery, a member of the National Association of
Securities Dealers, Inc. ("NASD"), the offering is being conducted pursuant to
Rule 2710(c)(8) of the NASD. In accordance with such rule, Hambrecht & Quist
LLC has agreed to act as a qualified independent underwriter ("QIU") pursuant
to the requirements of Rule 2720(c)(3) of the NASD. In connection with Rule
2720(c)(3), the initial public offering price of the Common Stock will be set
at a price which is no higher than that recommended by Hambrecht & Quist LLC,
as a QIU. Moreover, Hambrecht & Quist LLC, as a QIU, has performed due
diligence investigations and has reviewed and participated in the preparation
of this Prospectus.
Prior to the offering, there has been no public market for the Common Stock.
The initial public offering price of the Common Stock was determined by
negotiation between the Company and the Representatives. Among the factors
considered in determining the initial public offering price were prevailing
market and economic conditions, sales and earnings of the Company, market
valuations of other companies engaged in activities similar to the Company,
estimates of the business potential and prospects of the Company, the present
state of the Company's business operations, the Company's management and other
factors deemed relevant. The estimated initial public offering price range set
forth on the cover of this Prospectus is subject to change as a result of
market conditions and other factors.
Certain persons participating in the offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the
open market, including by entering stabilizing bids, effecting syndicate
covering transactions or imposing penalty bids. A stabilizing bid means the
placing of any bid or effecting of any purchase, for the purpose of pegging,
fixing or maintaining the price of the Common Stock. A syndicate covering
transaction means the placing of any bid on behalf of the underwriting
syndicate or the effecting of any purchase to reduce a short position created
in connection with the offering. A penalty bid means an arrangement that
52
<PAGE>
permits the Underwriters to reclaim a selling concession from a syndicate
member in connection with the offering when shares of Common Stock sold by the
syndicate member are purchased in syndicate covering transactions. Such
transactions may be effected on the Nasdaq National Market, in the over-the-
counter market, or otherwise. Such stabilizing, if commenced, may be
discontinued at any time.
LEGAL MATTERS
The legality of the Common Stock being offered hereby will be passed upon
for the Company by Pedersen & Houpt, P.C., Chicago, Illinois ("Pedersen &
Houpt"). John H. Muehlstein, a director of the Company, is also a stockholder
of Pedersen & Houpt. Certain legal matters will be passed upon for the
Underwriters by Sidley & Austin, Chicago, Illinois.
EXPERTS
The consolidated financial statements of the Company as of July 28, 1996 and
July 31, 1997 and for each of the three years in the period ended July 31,
1997 included in this Prospectus have been audited by Coopers & Lybrand
L.L.P., independent auditors as stated in their report appearing herein and
are included in reliance upon such report given upon the authority of that
firm as experts in accounting and auditing.
The financial information appearing in this prospectus for the period March
24, 1994 (date of inception) through July 31, 1994 has been audited by The
Daniel Professional Group, Inc., independent auditors, and is included in
reliance upon the authority of that firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act
with respect to the Common Stock offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement and the
exhibits and schedules filed therewith. Statements contained in this
Prospectus as to the contents of any contract or other document referred to
are not necessarily complete, and in each instance reference is made to the
copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and to
the exhibits and schedules thereto. The Registration Statement, including
exhibits and schedules thereto may be inspected without charge at the
principal office of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, the New York Regional Office located at 7 World Trade Center, Suite
1300, New York, New York 10048, and the Chicago Regional Office located at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, and copies of all or
any part thereof may be obtained at prescribed rates from the Commission's
Public Reference Section at its principal office. The Commission maintains a
World Wide Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. The address of the Commission's World Wide Web site is
http://www.sec.gov.
53
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
BLUE RHINO CORPORATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets as of July 28, 1996, July 31, 1997 and January
31, 1998 (unaudited)..................................................... F-3
Consolidated Statements of Operations for the Fiscal Years Ended July 31,
1995, July 28, 1996 and July 31, 1997 and for the Six Months Ended
January 31, 1997 (unaudited) and 1998 (unaudited)........................ F-4
Consolidated Statements of Changes in Stockholders' Deficit for the Fiscal
Years Ended July 31, 1995, July 28, 1996 and July 31, 1997 and for the
Six Months Ended January 31, 1998 (unaudited)............................ F-5
Consolidated Statements of Cash Flows for the Fiscal Years Ended July 31,
1995, July 28, 1996 and July 31, 1997 and for the Six Months Ended
January 31, 1997 (unaudited) and 1998 (unaudited)........................ F-6
Notes to Consolidated Financial Statements................................ F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Blue Rhino Corporation:
We have audited the accompanying consolidated balance sheets of Blue Rhino
Corporation as of July 28, 1996 and July 31, 1997, and the related
consolidated statements of operations, changes in stockholders' deficit and
cash flows for the fiscal years ended July 31, 1995, July 28, 1996 and July
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company
as of July 28, 1996 and July 31, 1997, and the consolidated results of their
operations and their cash flows for the fiscal years ended July 31, 1995, July
28, 1996 and July 31, 1997 in conformity with generally accepted accounting
principles.
Greensboro, North Carolina
September 5, 1997, except for Note 7
for which the date is December 18, 1997
F-2
<PAGE>
BLUE RHINO CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF JULY 28, 1996, JULY 31, 1997 AND JANUARY 31, 1998 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
JULY 28, JULY 31, JANUARY 31,
ASSETS 1996 1997 1998
------ -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash and cash equivalents..................... $ 1,126 $ 325 $ 1,207
Trade accounts receivable, net................ 1,924 3,110 2,487
Inventories................................... 1,154 240 701
Notes receivable.............................. 237 417 438
Prepaid expenses and other current assets..... 230 61 217
-------- -------- --------
Total current assets...................... 4,671 4,153 5,050
Property and equipment, net................... 5,666 4,438 4,569
Notes receivable.............................. 1,356 1,196 1,005
Goodwill, net................................. 117 104 1,238
Other assets.................................. 87 83 133
-------- -------- --------
Total assets.............................. $ 11,897 $ 9,974 $ 11,995
======== ======== ========
<CAPTION>
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT
-------------------------------------------
<S> <C> <C> <C>
Trade accounts payable........................ $ 1,354 $ 2,407 $ 1,791
Notes payable to bank......................... -- -- 1,468
Acquisition notes payable..................... 117 81 840
Note payable to vendor........................ 752 -- --
Current portion of long-term debt and capital
lease obligations............................ 179 165 182
Accrued liabilities........................... 689 763 473
-------- -------- --------
Total current liabilities................. 3,091 3,416 4,754
Long-term debt, less current maturities....... 13,764 15,142 19,179
Notes payable to bank......................... -- 840 --
Capital lease obligations, less current
maturities................................... 410 128 178
-------- -------- --------
Total liabilities......................... 17,265 19,526 24,111
-------- -------- --------
Redeemable Preferred Stock, Series A
convertible, participating, $0.001 par
value, 25,000,000 shares authorized,
20,796,172 shares issued and outstanding,
liquidating preference $0.347037 per share,
at redemption value........................ 7,849 8,936 9,304
-------- -------- --------
Stockholders' deficit:
Common stock, $0.001 par value, 68,000,000
shares authorized, 21,526,426, 23,526,456
and 23,526,456 shares issued and
outstanding at July 28, 1996, July 31, 1997
and January 31, 1998....................... 21 23 23
Additional paid-in capital.................. -- 311 --
Accumulated deficit......................... (13,238) (18,822) (21,443)
-------- -------- --------
Total stockholders' deficit............... (13,217) (18,488) (21,420)
-------- -------- --------
Total liabilities, redeemable preferred
stock and stockholders' deficit.......... $ 11,897 $ 9,974 $ 11,995
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
BLUE RHINO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED JULY 31, 1995, JULY 28, 1996 AND JULY 31, 1997
AND FOR THE SIX MONTHS ENDED JANUARY 31, 1997 (UNAUDITED) AND 1998 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEARS ENDED JANUARY 31,
------------------------- ----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales--distributors........... $ -- $ 2,386 $13,060 $ 3,501 $ 8,314
Net sales--direct................. 2,728 5,830 1,151 1,008 --
------- ------- ------- ------- -------
Total net sales............... 2,728 8,216 14,211 4,509 8,314
------- ------- ------- ------- -------
Cost of sales:
Cost of sales--distributors..... -- 1,811 9,873 2,638 6,371
Cost of sales--direct........... 3,523 6,089 1,771 1,368 --
------- ------- ------- ------- -------
Total cost of sales........... 3,523 7,900 11,644 4,006 6,371
------- ------- ------- ------- -------
Gross profit.................. (795) 316 2,567 503 1,943
------- ------- ------- ------- -------
Operating expenses (income):
Sales and marketing............. 532 1,112 1,950 653 1,027
General and administrative...... 2,787 3,192 2,908 1,398 1,706
Lease expense (income)--net..... -- (89) (143) (93) 23
Depreciation and amortization... 284 868 873 400 516
Nonrecurring charges............ -- 1,363 1,084 188 408
------- ------- ------- ------- -------
Total operating expenses...... 3,603 6,446 6,672 2,546 3,680
------- ------- ------- ------- -------
Loss from operations.......... (4,398) (6,130) (4,105) (2,043) (1,737)
Other expense (income):
Interest expense................ 287 1,469 1,665 817 929
Other income--net............... (25) (168) (186) (79) (102)
------- ------- ------- ------- -------
Net loss...................... $(4,660) $(7,431) $(5,584) $(2,781) $(2,564)
======= ======= ======= ======= =======
Basic and diluted loss per
common share (Note 15)......... $ (0.14) $ (0.22) $ (0.17) $ (0.08) $ (0.08)
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
BLUE RHINO CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE FISCAL YEARS ENDED JULY 31, 1995, JULY 28, 1996 AND JULY 31, 1997
AND FOR THE SIX MONTHS ENDED JANUARY 31, 1998 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON ADDITIONAL
------------------ PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balances, July 31, 1994.... 20,060,000 $ 20 $181 $ (380) $ (179)
Issuance of 2,256,456
shares of common stock.... 2,256,456 2 83 -- 85
Preferred dividends........ -- -- (264) (131) (395)
Net loss................... -- -- -- (4,660) (4,660)
---------- ---- ---- -------- --------
Balances, July 31, 1995.... 22,316,456 22 -- (5,171) (5,149)
Cancellation of restricted
stock for nonvested
terminations.............. (790,000) (1) -- -- (1)
Preferred dividends........ -- -- -- (636) (636)
Net loss................... -- -- -- (7,431) (7,431)
---------- ---- ---- -------- --------
Balances, July 28, 1996.... 21,526,456 21 -- (13,238) (13,217)
Issuance of 2,000,000
shares of common stock.... 2,000,000 2 998 -- 1,000
Preferred dividends........ -- -- (687) -- (687)
Net loss................... -- -- -- (5,584) (5,584)
---------- ---- ---- -------- --------
Balances, July 31, 1997.... 23,526,456 23 311 (18,822) (18,488)
Preferred dividends
(unaudited)............... -- -- (311) (57) (368)
Net loss (unaudited)....... -- -- -- (2,564) (2,564)
---------- ---- ---- -------- --------
Balances, January 31, 1998
(unaudited)............... 23,526,456 $ 23 $-- $(21,443) $(21,420)
========== ==== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
BLUE RHINO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED JULY 31, 1995, JULY 28, 1996 AND JULY 31, 1997
AND FOR THE SIX MONTHS ENDED JANUARY 31, 1997 AND 1998 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JANUARY
FISCAL YEAR ENDED 31,
------------------------- ----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss........................ $(4,660) $(7,431) $(5,584) $(2,781) $(2,564)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Accreted interest on senior
discount notes............... -- 1,049 1,489 719 815
Depreciation and amortization. 284 868 873 400 516
Nonrecurring charges.......... -- 1,268 963 193 --
Loss on disposal of assets.... -- -- -- -- 261
Changes in operating assets
and liabilities, net of
business acquisitions:
Trade accounts receivable... (886) (990) (1,186) 1,077 623
Inventories................. (249) (473) 127 194 (491)
Other current assets........ (164) 35 166 161 (247)
Accounts payable............ 535 624 1,045 (392) (696)
Accrued liabilities......... 565 (120) (85) (265) (293)
------- ------- ------- ------- -------
Net cash used in operating
activities................ (4,575) (5,170) (2,192) (694) (2,076)
------- ------- ------- ------- -------
Cash flows from investing
activities:
Business acquisitions........... (299) -- -- -- (790)
Acquisition of intangible
assets......................... (93) -- -- -- --
Proceeds from disposals of
cylinders...................... -- 29 340 -- --
Purchases of property and
equipment...................... (3,925) (1,840) (537) (32) (286)
Proceeds from disposals of
property and equipment......... -- 360 159 76 39
Collections on notes receivable. -- 58 380 90 261
------- ------- ------- ------- -------
Net cash (used in) provided
by investing activities... (4,317) (1,393) 342 134 (776)
------- ------- ------- ------- -------
Cash flows from financing
activities:
Proceeds from issuance of common
stock.......................... 85 -- 1,000 -- --
Proceeds from issuance of
preferred stock................ 6,218 100 400 -- --
Proceeds from issuance of senior
discount notes................. -- 12,575 -- -- --
Proceeds from stockholders loan. -- -- -- -- 3,250
Proceeds from note payable to
bank........................... 3,600 2,700 3,995 850 5,044
Payments on acquisition notes
payable........................ -- (669) (90) (63) (20)
Payments on note payable to
bank........................... (880) (4,900) (3,155) (524) (4,416)
Payment of debt issuance costs.. -- (57) (58) -- --
Repayment of note payable to
vendor......................... -- (948) (752) -- --
Payments on long-term debt and
capital lease obligations...... (73) (1,321) (291) (520) (124)
------- ------- ------- ------- -------
Net cash provided by (used
in) financing activities.. 8,950 7,480 1,049 (257) 3,734
------- ------- ------- ------- -------
Increase (decrease) in cash and
cash equivalents............... 58 917 (801) (817) 882
Cash and cash equivalents at
beginning of period............ 151 209 1,126 1,126 325
------- ------- ------- ------- -------
Cash and cash equivalents at end
of period...................... $ 209 $ 1,126 $ 325 $ 309 $ 1,207
======= ======= ======= ======= =======
Supplemental disclosure of cash
paid for:
Interest........................ $ 156 $ 428 $ 176
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
BLUE RHINO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE FISCAL YEARS ENDED JULY 31, 1995, JULY 28, 1996 AND JULY 31, 1997
AND FOR THE SIX MONTHS ENDED JANUARY 31, 1997 AND 1998 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Supplemental schedule of non-cash investing activities:
During the fiscal years ended July 31, 1995, July 28, 1996, July 31, 1997,
the Company entered into capital lease obligations in the amounts of
approximately $913, $541, and $243, respectively, for computers, vehicles and
certain equipment.
In connection with the conversion to an independent distributor network, as
further discussed in Note 1, the Company consummated the following
transactions:
. In the fiscal years ended July 28, 1996 and July 31, 1997, the Company
transferred to distributors capital leases for vehicles with remaining
book values of $282 and $351 and remaining obligations of approximately
$302 and $344, respectively.
. In the fiscal years ended July 28, 1996 and July 31, 1997, the Company
sold cylinders and certain equipment aggregating approximately $1,652 and
$310, respectively in exchange for notes receivable from distributors
(Notes 5 and 16).
. In the fiscal year ended July 28, 1996, the Company transferred the
remaining book value of certain vehicles along with their related
obligations under capital leases and financing arrangements of
approximately $562 and $504, respectively, to Platinum Propane Holding,
LLC ("PPH"), an affiliate, and recorded a receivable of $37 (Note 16).
. In the fiscal year ended July 31, 1997, certain assets approximating $70
were reclassified as notes receivable.
Certain equipment amounting to $925 was acquired by the Company in fiscal
year ended July 31, 1995 through the issuance of long-term debt.
In December 1994, the Company converted $500 of notes payable into 1,441
shares of preferred stock.
During the fiscal year ended July 31, 1995, the Company purchased certain
assets from an existing cylinder exchange company of liquid propane gas under
various agreements which have been recorded as follows:
<TABLE>
<CAPTION>
1995
------
<S> <C>
Property and equipment............................................ $ 356
Cylinders......................................................... 310
Goodwill.......................................................... 501
------
$1,167
======
Cash paid......................................................... $ 299
Due to sellers.................................................... 868
------
$1,167
======
</TABLE>
The Company accreted preferred dividends from paid in capital and
accumulated deficit of $395, $636 and $687 for the fiscal years ended July 31,
1995, July 28, 1996 and July 31, 1997, respectively.
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
BLUE RHINO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION:
Blue Rhino Corporation (the "Company" or "Blue Rhino") was founded in March
1994 and has become the leading provider of grill cylinder exchange in the
United States offering consumers a convenient means to obtain fuel for their
barbecue grills. The Company currently offers three types of grill cylinder
transactions: (i) like for like cylinder exchanges; (ii) cylinders with valve
upgrades offering additional safety features; and (iii) outright cylinder
sales. The Company originally focused on serving markets in the southeastern
United States and has since developed a network of independent distributors
which deliver Blue Rhino grill cylinder exchange to retail locations across
the United States.
Since its formation, the Company has focused on creating an infrastructure
to support its nationwide cylinder exchange program. Initially, the Company
developed a vertically integrated operation, purchasing and leasing grill
cylinders, cylinder displays, filling sites, refurbishing equipment and
delivery trucks while at the same time developing a sales, marketing and MIS
infrastructure. In March 1996, the Company began to transition from a
vertically integrated business model to an independent distributor business
model in order to implement its cylinder exchange program in a more capital
efficient manner and to accelerate development of its program. At this time,
the Company began to dispose of distribution assets and began to enter into
exclusive agreements with independent distributors to refurbish and refill
cylinders and service Blue Rhino's retail accounts. As a result, the Company
has significantly accelerated the growth of its nationwide service, pursued
additional retailer relationships and invested in the sales, marketing and MIS
infrastructure to support its growing cylinder exchange program. The Company
expects to focus future capital investments on cylinders, cylinder displays
and continued enhancement of its MIS. The transition to a 100% independent
distributor network was completed in the fourth quarter of 1997.
While the Company believes that it has created the infrastructure necessary
to support a nationwide cylinder exchange program, development of this
infrastructure has resulted in an accumulated deficit of approximately $18
million as of July 31, 1997. Management believes by leveraging from the
distributor's existing infrastructure the Company has eliminated the
significant capital requirements necessary to support the geographic expansion
and further penetration throughout the nation's significant demographic
markets and consequently, will continue to positively impact cash flows.
These consolidated financial statements include the accounts of Blue Rhino
and its wholly owned subsidiary Rhino Services, L.L.C., formed in March 1997.
All intercompany transactions and balances have been eliminated in
consolidation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition--Revenues are recognized upon delivery of cylinders to
customer locations. Sales returns, which are immaterial, occur principally
upon removal of cylinders and deinstallation of cylinder displays from
customer locations.
Cash and Cash Equivalents--The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. The Company's cash and cash equivalents are placed in major
domestic banks. Cash equivalents consisting of certificates of deposit totaled
$65 and $115 at July 28, 1996 and July 31, 1997, respectively.
Trade Accounts Receivable, Net--Trade accounts receivable, net include
allowances for doubtful accounts of approximately $82, and $154 at July 28,
1996 and July 31, 1997 respectively.
F-8
<PAGE>
BLUE RHINO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Inventories--Inventories are valued at the lower of cost or market
determined on a first-in, first-out (FIFO) basis.
Property and Equipment, Net--Property and equipment are stated at cost and
depreciated over the estimated useful lives of the related assets using the
straight-line method. The estimated useful lives are principally 30 years for
buildings and leasehold improvements, 10 years for machinery and equipment,
vehicles and cylinder displays, 5 years for computer hardware and 3 years for
computer software. Equipment leased under capital leases are amortized over
their estimated useful lives.
In the event that facts and circumstances indicate that the cost of property
and equipment, or other long-lived assets may not be recoverable, the
estimated future undiscounted cash flows is compared to the asset's carrying
value and if less, recognize an impairment loss in an amount by which the
carrying amount exceeds its fair value. As a result of changes the Company
made to its business strategy (Note 12), impairments to property and equipment
recorded in 1996 and 1997 were $814 and $736, respectively.
Goodwill--Excess cost over fair value of assets acquired (goodwill) is being
amortized using the straight-line method over 10 to 30 years. The carrying
value of intangible assets is periodically reviewed by the Company, as well
as, the amortization period to determine whether the current events and
circumstances warrant adjustments to the carrying values and/or revised
estimates of useful lives. This valuation is performed using the expected
future undiscounted cash flows associated with the intangible assets compared
to the carrying value to determine if a writedown is required. To the extent
such projection indicates that the undiscounted cash flow is not expected to
be adequate to recover the carrying amounts the assets are written down to
discounted cash flow. In fiscal 1996, an impairment to goodwill of $355 was
recorded (Note 12).
Income Taxes--The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. A valuation allowance is
recorded when it is more likely than not that the deferred tax asset will not
be realized (Note 17).
Financial Instruments--The Company values all financial instruments as
required by SFAS No. 107, "Disclosures about Fair Values of Financial
Instruments." Financial instruments consist of cash and cash equivalents,
accounts receivable, notes receivable, short-term debt and long-term,
variable-rate and fixed-rate debt. The Company estimates the fair value of its
long-term, fixed-rate debt using a discounted cash flow analysis based on
interest rates for similar types of debt currently available in the
marketplace. At July 28, 1996 and July 31, 1997 the carrying amounts of the
Company's financial instruments approximate their fair values.
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of temporary cash investments and trade
accounts receivable. The Company places its temporary cash investments with
major domestic financial institutions. At times, such deposits may be in
excess of the FDIC insurance limit. The Company performs ongoing credit
evaluations of its customers' financial condition and, generally, requires no
collateral from its customers. Due to the geographic dispersion and the high
credit
F-9
<PAGE>
BLUE RHINO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
quality of the Company's significant customers, credit risk relating to trade
accounts receivable is limited. The Company's largest customers accounted for
approximately 55%, 46% and 58%, of sales in the fiscal years ended July 31,
1995, July 28, 1996 and July 31, 1997 as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Customer A................................................. 30% 30% 29%
Customer B................................................. 25 16 16
Customer C................................................. -- -- 13
--- --- ---
55% 46% 58%
=== === ===
</TABLE>
Approximately 35% and 32% of trade accounts receivable at July 28, 1996 and
July 31, 1997 were from these customers respectively. If the financial
condition and operations of these customers deteriorate, the Company's
operating results could be adversely affected.
Use of Estimates--The preparation of the consolidated financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the dates of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from these estimates.
Statement of Accounting Standards not yet Adopted--Statement of Financial
Accounting Standards ("SFAS") No. 130 ("Statement 130") establishes standards
for reporting and display of comprehensive income and its components
(revenues, gains, expenses, losses) in a full set of general purpose financial
statements and is effective in Fiscal 1998 for the Company. Management of the
Company does not expect Statement 130 to have a significant impact, if any, on
the Company's Consolidated Financial Statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information"
("Statement 131"). Statement 131 requires public business enterprises to adopt
its provisions for periods beginning after December 15, 1997, and to report
certain information about operating segments in complete sets of financial
statements of the enterprise and in condensed financial statements of interim
periods issued to shareholders. The Company is evaluating the provisions of
Statement 131, but has not yet determined if additional disclosures will be
required.
Reclassification--Certain prior year amounts have been reclassified to
conform to the presentation adopted in fiscal 1998.
F-10
<PAGE>
BLUE RHINO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
3. INVENTORIES:
Inventories consist of the following at:
<TABLE>
<CAPTION>
JULY 28, JULY 31,
1996 1997
-------- --------
<S> <C> <C>
Cylinders............................................... $ 945 $220
Other supplies.......................................... 174 20
Liquid propane gas...................................... 35 --
------ ----
$1,154 $240
====== ====
</TABLE>
4. PROPERTY AND EQUIPMENT, NET:
Property and equipment consists of the following at:
<TABLE>
<CAPTION>
JULY 28, JULY 31,
1996 1997
-------- --------
<S> <C> <C>
Land................................................... $ 83 $ 20
Building and leasehold improvements.................... 896 661
Cylinder displays, including panel graphics............ 2,945 3,188
Machinery and equipment................................ 1,746 1,361
Computer hardware and software......................... 95 175
Equipment leased under capital leases.................. 592 346
------- ------
6,357 5,751
Less accumulated depreciation and amortization (includ-
ing $51 and $65, respectively, for equipment under
capital lease)........................................ (691) (1,313)
------- ------
$ 5,666 $4,438
======= ======
</TABLE>
Depreciation and amortization expense for the fiscal years ended July 31,
1995, July 28, 1996 and July 31, 1997 was $282, $683 and $764, respectively.
5. NOTES RECEIVABLE:
In connection with the conversion to the distributor program discussed in
Note 1, the Company has financed the sale of cylinders and certain equipment
principally to distributors, including PPH (Note 16), who now service
territories previously serviced by the Company. The notes receivable are
payable monthly with interest ranging from 9.25% to 12.5%. The aggregate
maturities of these notes receivable at July 31, 1997 are as follows:
<TABLE>
<S> <C>
1998............................................................... $ 417
1999............................................................... 395
2000............................................................... 350
2001............................................................... 443
2002............................................................... 8
------
$1,613
======
</TABLE>
Interest income related to these notes for the fiscal years ended July 28,
1996 and July 31, 1997 was approximately $47 and $182, respectively. The notes
receivable from the sale of cylinders are collateralized by the cylinders.
F-11
<PAGE>
BLUE RHINO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
6. GOODWILL:
Excess costs over fair value of assets acquired (goodwill) consist of the
following at:
<TABLE>
<CAPTION>
JULY 28, JULY 31,
1996 1997
-------- --------
<S> <C> <C>
Excess costs over fair value of assets acquired......... $124 $124
Accumulated amortization................................ (7) (20)
---- ----
$117 $104
==== ====
</TABLE>
Amortization expense for the fiscal years ended July 28, 1996 and July 31,
1997 was $7 and $14, respectively.
7. NOTE PAYABLE TO BANK:
In October 1996, the Company entered into an agreement with a bank to
provide up to $2 million in financing through a line of credit at an interest
rate of prime (8.50% at July 31, 1997) plus 1%. At July 31, 1997, $840 of the
line of credit was outstanding. This amount was subsequently paid in full on
December 18, 1997 (Note 20).
8. NOTE PAYABLE TO VENDOR:
Prior to the conversion to the distributor program, the Company financed the
acquisition of certain cylinders with its primary cylinder vendor. The
original line of credit was for purchases up to approximately $1.9 million and
was to be repaid in various installments including interest at prime (8.25% at
July 28, 1996) plus 1%. The balance due on this note was $752 at July 28, 1996
and was paid in full at July 31, 1997.
9. LONG-TERM DEBT:
Long-term debt consists of the following at:
<TABLE>
<CAPTION>
JULY 28, JULY 31,
1996 1997
-------- --------
<S> <C> <C>
Senior discount notes due October 2000................. $13,624 $15,113
Various equipment and vehicle notes bearing interest at
rates varying from 8% to 15%, due in monthly
installments through December 1999.................... 211 65
------- -------
13,835 15,178
Less amounts due within one year....................... 71 36
------- -------
$13,764 $15,142
======= =======
</TABLE>
The aggregate maturities of long-term debt at July 31, 1997 are as follows:
<TABLE>
<S> <C> <C> <C>
1998...................................................... $ 36
1999...................................................... 27
2000...................................................... 2
2001...................................................... 15,113
---------------
$15,178
=======
</TABLE>
F-12
<PAGE>
BLUE RHINO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
In October 1995, the Company issued 12,575 units, each consisting of
approximately $1 principal amount (approximately $17.2 million aggregate) of
senior discount notes due in October 2000 and warrants to purchase 525.88 (pre
Reverse Stock Split) shares of common stock. The gross proceeds were $12,575.
The notes accrete in value until October 11, 1998 at an effective rate of
10.5%. Thereafter, cash interest will be payable semi-annually at a rate of
10.5%. The notes are redeemable in whole or in part at any time at 100% of the
accreted value plus accrued and unpaid interest, if any. Each warrant, when
exercised will entitle the holders to acquire one share of common stock
(subject to adjustment as described in the agreement) for $0.347037 per share,
which represented approximately 10% of the common stock outstanding on a fully
diluted basis at the time of issuance of the warrants. The note agreement
contains certain restrictive covenants relating to issuance of additional
debt, issuance of equity securities, and the payment of dividends without the
consent of a majority (as defined) of note holders. The Company is not in
default of any of the restrictive covenants. The Company did not assign any
value to the warrants because the valuation was not material.
The various equipment and vehicle notes are guaranteed by an affiliated
company and certain Blue Rhino shareholders.
10. CAPITAL LEASE OBLIGATIONS:
Capital lease obligations for computer equipment as of July 31, 1997 are as
follows:
<TABLE>
<S> <C>
1998................................................................. $161
1999................................................................. 108
2000................................................................. 31
----
Total minimum lease payments......................................... 300
Less imputed interest at varying rates ranging from 11.75% to 19%.... 43
----
Present value of minimum lease payments.............................. 257
Less current maturities.............................................. 129
----
$128
====
</TABLE>
11. OPERATING LEASE COMMITMENTS:
The Company leases certain office, plant facilities and vehicle equipment
under noncancelable operating leases with original terms ranging from 36 to 51
months. Additionally, the Company has a land lease with an original term of 5
years. This lease carries 3 renewal options for periods of 5 years each.
Rent expense on these facilities and equipment for the fiscal years ended
1995, 1996 and 1997 was $497, $511 and $120, respectively.
In addition, the Company leases certain plant facilities and equipment to
distributors including PPH (Note 16). Lease income under these leases was $62
and $118 for the fiscal years ending 1996 and 1997, respectively.
In September 1996, the Company entered into a $3 million operating lease
facility to finance cylinder displays. At July 31, 1997, approximately $1.3
million of the facility was outstanding. Rental expense under this lease for
the year ended 1997 was approximately $155.
F-13
<PAGE>
BLUE RHINO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Future minimum lease payments at July 31, 1997 from non-cancelable operating
leases with both affiliates (Note 16) and non-affiliates with initial or
remaining terms of one year or more are as follows:
<TABLE>
<S> <C>
1998................................................................. $504
1999................................................................. 453
2000................................................................. 415
2001................................................................. 306
</TABLE>
The Company also executes operating lease agreements with its distributors
including PPH (Note 16) for cylinder displays (both leased and owned) for use
within each distributor's territory. Under these leases, the distributor
(lessee) is obligated for all maintenance, installation, deinstallation, taxes
and insurance related to the cylinder displays. The terms of the leases
continue until either party terminates upon 60 days written notice to the
other party. The monthly rental amounts are based on 1% of the original fair
market value of the cylinder displays. Lease income for the fiscal years ended
1996 and 1997 was approximately $27 and $177, respectively. As of July 31,
1997, estimated future minimum rental payments to be received are
approximately $300 per year through the year 2002.
12. NONRECURRING CHARGES:
As described in Note 1, during fiscal 1997 and 1996 the Company made changes
to its business strategy, including the conversion to an independent
distributor network. As a result, the Company recorded certain nonrecurring
charges in 1996 and 1997 as summarized below:
<TABLE>
<CAPTION>
JULY 28, JULY 31,
1996 1997
-------- --------
<S> <C> <C>
Adjust property and
equipment to net
realizable value....... $ 814 $ 736
Impairment of goodwill.. 355 --
Severance, professional
fees and other......... 194 234
Distributor network set-
up charges............. -- 114
------ ------
$1,363 $1,084
====== ======
</TABLE>
13. REDEEMABLE PREFERRED STOCK:
On December 21, 1994, the Company issued 20,796,172 shares of Series A
cumulative preferred stock and warrants to purchase 4,214,185 shares of common
stock to investors through a private placement offering. The warrants are
exercisable at any time prior to their expiration date of December 1, 2004.
The exercise price for these warrants is $0.0347037 per share.
Holders of Series A preferred stock may convert any portion of the preferred
shares into common shares at any time. Each share of Series A preferred is
convertible to one share of common stock. The conversion price is based on a
formula as described in the agreement. The preferred shares have a liquidation
preference equal to the liquidation value of $0.347037 as defined in the
Certificate of Incorporation. The preferred shares rank senior to the common
stock in respect to dividend rights and have full voting rights.
The Company shall offer to redeem the outstanding Series A preferred shares
in equal increments semiannually between October 31, 2000 and April 30, 2002.
After April 30, 2002, any holder of outstanding Series A preferred shares may
elect to have their shares redeemed. Upon such an election, the Company shall
offer to redeem any other outstanding shares within five (5) days. The
redemption price is $0.347037 per share plus undeclared, accrued dividends at
a rate of 8% compounded daily of $1,031, $1,718 and $2,086 at July 28, 1996,
July 31, 1997 and January 31, 1998 (unaudited), respectively. Dividends are
cumulative until declared by the Board.
F-14
<PAGE>
BLUE RHINO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
14. STOCKHOLDERS' DEFICIT:
At July 31, 1997, 41,055,467 common shares were reserved for issuance upon
conversion of Series A preferred shares, exercise of warrants and exercise of
common stock options issuable to employees, directors, or consultants of the
Company.
Common Stock Options and Restricted Stock--The Company has a stock incentive
plan (the "Plan") and has reserved 3,500,000 shares of common stock for use
and distribution under terms of the Plan. Under the Plan, the Company may, at
its discretion, issue incentive or non-qualified stock options, stock
appreciation rights, restricted stock or deferred stock. The terms and
conditions of the awards made under the plan vary but, in general, are at the
discretion of the Board of Directors or its appointed committee to the Plan.
In November 1994, the Company issued 1,875,000 shares of its common stock
under the Plan, at par $0.001, to key management employees under a restricted
stock agreement. Under this agreement, the stockholders' rights to the stock
are subject to length of employment and are restricted with regard to
transferability. The employees' rights vest quarterly over periods determined
by management. After five (5) years, the employee may sell any vested shares
with a bona fide reason, the Company at its option may repurchase all unvested
shares and any vested shares, provided no public offering of the Company's
equity securities has occurred. The repurchase price may vary, depending upon
the reasons for termination, and range from market value for all vested shares
to $1 for any and all shares. During 1996, 790,000 shares were canceled due to
termination of employment.
The Company has granted 2,450,000 options through July 31, 1997, of which
281,800 options have been forfeited. Under the Plan, the option exercise price
is determined by the Stock Option Committee of the Board of Directors. Non-
qualified stock options granted expire 10 years from the date of grant and are
exercisable in five equal installments commencing one year from the date of
grant. As of July 31, 1997, the Company had 2,168,200 options outstanding, no
options have been exercised and 283,000 options are exercisable. The exercise
price for outstanding warrants and common stock options range from $0.0347037
to $0.55.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting For Stock-Based Compensation." Accordingly, since options were
granted at fair value, no compensation cost has been recognized for stock
options granted to date. Had compensation cost for these plans been determined
for options granted since August 1, 1995 consistent with SFAS No. 123, the
Company's net loss and loss per share would have increased to the following
pro forma amounts.
<TABLE>
<CAPTION>
FOR THE
FISCAL YEARS
ENDED
----------------
1996 1997
------- -------
<S> <C> <C>
Net loss: As reported.................................. $(7,431) $(5,584)
Pro forma............................................. (7,454) (5,649)
Basic and
Diluted EPS:As reported............................... $ (0.22) $ (0.17)
Pro forma............................................. $ (0.22) $ (0.17)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants since August 1, 1995: expected lives of 5 years;
expected volatility 0.0% and a risk-free interest rate of 9.25%
SFAS No. 123 method of accounting has not been applied to options granted
prior to August 1, 1995, therefore, the resulting pro forma compensation cost
may not be representative of that to be expected in future years.
F-15
<PAGE>
BLUE RHINO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
A summary of the status of the Company's Plan at July 31, 1995, July 28,
1996, and July 31, 1997 and changes during the periods then ended is presented
in the table and narrative below:
<TABLE>
<CAPTION>
1995 1996 1997
----------------- ----------------- -------------------
WTD AVG WTD AVG WTD AVG
SHARES EX PRICE SHARES EX PRICE SHARES EX PRICE
------- --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ -- $ -- 575,000 $0.347037 953,000 $0.355062
Granted................. 575,000 0.347037 499,000 0.362364 1,376,000 0.505602
Exercised............... -- -- -- -- -- --
Forfeited............... -- -- 121,000 0.347037 160,800 0.366749
------- --------- ------- --------- --------- ---------
Outstanding at end of
year................... 575,000 $0.347037 953,000 $0.355062 2,168,200 $0.449732
======= ========= ======= ========= ========= =========
Exercisable at end of
year................... -- $ -- 95,000 $0.347037 283,000 $0.353069
======= ========= ======= ========= ========= =========
Weighted average fair
value of options
granted................ $ 0.126 $ 0.116 $ 0.167
========= ========= =========
</TABLE>
Warrants--In fiscal 1997, the Company issued approximately 3,000,000
warrants in connection with the new cylinder display lease facility (Note 9),
and the issuance of the common stock to PPH (Note 16). In addition, during
fiscal years 1996 and 1995, the Company issued approximately 4,014,000
warrants to individuals to purchase common stock for their assistance in
connection with various debt placements. The exercise price for these warrants
ranges from $0.347037 to $0.50 per share. The Company did not assign any value
to the warrants because the valuation was considered immaterial.
15. LOSS PER SHARE:
The Company has retroactively adopted SFAS No. 128, "Earnings Per Share."
The impact of adopting this statement had no effect on loss per share for
fiscal year 1996 and 1995. The basic and diluted loss per share was determined
as follows:
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEARS ENDED ENDED
------------------------------------- -----------
JULY 31, JULY 28, JULY 31, JANUARY 31,
1995 1996 1997 1998
----------- ----------- ----------- -----------
(UNAUDITED)
Basic and diluted loss per share:
<S> <C> <C> <C> <C>
Net loss................ $ (4,660) $ (7,431) $ (5,584) $ (2,564)
Less: Redeemable
Preferred Stock
dividends.............. 395 636 687 368
----------- ----------- ----------- -----------
Loss available to common
shareholders........... $ (5,055) $ (8,067) $ (6,271) $ (2,932)
Weighted average common
shares................. 36,998,827 36,998,827 36,998,827 36,998,827
----------- ----------- ----------- -----------
Basic and diluted loss
per share............ $ (0.14) $ (0.22) $ (0.17) $ (0.08)
=========== =========== =========== ===========
</TABLE>
The weighted average common shares outstanding includes the effect of all
shares, stock options and stock warrants issued prior to the filing date of
the Company's Form S-1 for all periods presented. In addition, the assumed
conversion of preferred shares would have been anti-dilutive. Therefore, basic
and diluted loss per share are the same.
F-16
<PAGE>
BLUE RHINO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
16. RELATED PARTY TRANSACTIONS:
Platinum Propane Holdings ("PPH"), an affiliate, began operations as a
distributor during fiscal 1996. The following represents related party
balances outstanding at July 28, 1996, and July 31, 1997 and transactions for
the fiscal years then ended, respectively:
<TABLE>
<CAPTION>
JULY 28, JULY 31,
1996 1997
-------- --------
<S> <C> <C>
Notes receivable........................................ $1,399 $1,191
Trade accounts payable.................................. 407 648
Cost of sales--distributors............................. 1,561 5,319
Interest income......................................... 43 142
Lease income............................................ 25 160
Issuance of common stock................................ -- 1,000
</TABLE>
Certain operational and financial management services were provided to the
Company by an affiliate through common ownership. Fees for these services for
the fiscal years ended July 31, 1995, July 28, 1996 and July 31, 1997 were
approximately $721, $519, and $154, respectively.
The Company leases a facility from an affiliate under a noncancelable
operating lease which expires in December 1998. Future minimum lease payments
for the lease are $82 and $34 for the fiscal years ending 1998 and 1999,
respectively. Rent expense under this lease was $22 and $76 for the fiscal
years ended July 28, 1996 and July 31, 1997, respectively.
The Company leases a facility and certain equipment to PPH. Lease income
from PPH for the fiscal years ended July 31, 1995, July 28, 1996, and July 31,
1997, was $24, $62, and $56, respectively.
17. INCOME TAXES:
There is no current or deferred tax expense for the fiscal years ended July
31, 1995, July 28, 1996 and July 31, 1997.
A reconciliation of the differences between the statutory federal income tax
rate of 34% and the effective rate of income tax expense is as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------
JULY 31, JULY 28, JULY 31,
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Federal statutory tax rate........................... 34.0% 34.0% 34.0%
Operating losses having no current tax benefit..... (33.7) (33.8) (33.9)
Permanent Differences and Other.................... (0.3) (0.2) (0.1)
----- ----- -----
Effective tax rate................................... 0.0% 0.0% 0.0%
===== ===== =====
</TABLE>
F-17
<PAGE>
BLUE RHINO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liability are as follows at:
<TABLE>
<CAPTION>
JULY 28, JULY 31,
1996 1997
-------- --------
<S> <C> <C>
Assets:
Net operating loss carry forward.......................... $ 4,842 $ 6,981
Allowance for doubtful accounts........................... 32 60
Inventory capitalization.................................. 19 4
Organization costs........................................ 37 24
Other..................................................... 34 78
Depreciation and amortization............................. -- 1
------- -------
Total gross deferred tax assets......................... 4,964 7,148
Valuation allowance....................................... (4,960) (7,148)
------- -------
Net deferred tax assets................................. $ 4 $ --
======= =======
Liability:
Depreciation and amortization............................. $ 4 $ --
======= =======
</TABLE>
At July 31, 1997, the Company had a net operating loss carryforward for
federal income tax purposes of approximately $18.0 million which is available
to offset future federal taxable income, if any, in varying amounts through
2012.
18. DEFINED CONTRIBUTION PLAN:
The Company has a 401(k) plan, sponsored by an affiliate, which allows
participants to make voluntary pretax contributions, through payroll
deductions, up to 10% of total compensation, subject to Internal Revenue
Service limitations. All employees who have at least one year of service and
1,000 hours within that year of service are eligible to participate in this
plan. The plan provides for discretionary profit sharing contributions by the
Company. The Company made no contributions to the plan during fiscal 1995,
1996 and 1997.
19. CHANGE IN FISCAL YEAR END:
In 1997, the Company changed from a 52-53 week year end, to a July 31 fiscal
year end. The effect of this change was not material.
20. EVENTS SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITOR'S REPORT
(UNAUDITED):
The interim consolidated financial data with respect to January 31, 1997 and
1998 have been prepared without audit; however, in the opinion of management,
all adjustments (which are normal and recurring) necessary to present fairly
the consolidated financial position at January 31, 1998 and the results of
operations and cash flows for the six month periods ended January 31, 1998 and
1997, have been made. The results for six months ended January 31, 1998 are
not necessarily indicative of the results of operations for a full year.
Interim financial data conforms to the requirements of Article X of Regulation
S-X and, therefore, does not include all the disclosures normally required
under generally accepted accounting principles.
F-18
<PAGE>
BLUE RHINO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
On December 18, 1997, the Company entered into a short-term loan Agreement
(the "Bank Credit Facility") which allows for maximum borrowings of $9.0
million including a $3.0 million revolving line of credit based on 80% of
eligible receivables with a $1.0 million overadvance provision, a $1.0 million
capital expenditures line of credit and a $4.0 million acquisition line of
credit. These lines of credit mature on November 30, 1998 and bear interest at
the prime rate (8.50% at January 31, 1998) plus 0.5%. As of January 31, 1998,
the Company had $1,468 outstanding under the Bank Credit Facility.
The agreement requires payment of a fee of 0.25 percent of the average
unused portion of the revolving line of credit, as well as requires the
Company to meet certain covenants, including minimum net worth and earnings
before interest, taxes, depreciation and amortization and restricts the level
of capital expenditures, as defined. The Company was in compliance with these
covenants as of January 31, 1998.
The Bank Credit Facility is personally guaranteed by a principle shareholder
and an affiliated company up to a maximum amount of $6.0 million each.
The Company has pledged receivables and inventory and all of its rights,
titles and interest to indebtedness due from shareholders, affiliates and
related companies, including the remaining balance of $1.2 million on the note
receivable due from PPH (Note 16).
In December 1997, the Company entered into a services agreement with
Information Management System Services ("IMSS") whereby IMSS will provide
certain electronic data processing and telecommunications services including
the provision of customized software and hardware.
In January 1998, several stockholders collectively loaned the Company $3.25
million (the "1998 Stockholder Loans"). The 1998 Stockholder Loans are
repayable in full on the earlier of December 31, 2000 or the successful
initial public offering of the Company's Common Stock in which the net
proceeds to the Company after deducting all offering expenses equal at least
$30.0 million. The 1998 Stockholders Loans accrue interest at 10.5% per annum,
for one year from issuance date and with principle and interest payable
quarterly thereafter until paid in full. The stockholders also received
warrants to purchase one share of Common Stock for every $3.00 they loaned to
the Company for a total of 1,083,333 warrants (the "1998 Warrants"). The 1998
Warrants may be exercised prior to December 31, 2008 at a price per warrant
equal to the initial public offering price.
The Company completed two acquisitions, the first in October 1997 and the
second in January 1998, for approximately $90 and $1.5 million, respectively,
related to assets including cylinder display racks, and rights, title and
interest in and to sellers' retail propane cylinder exchange accounts and
locations.
The Company paid a combined $790 in cash of which $750 was provided by the
Bank Credit Facility and $40 from available cash. The remaining $750
associated with the January 1998 acquisition will be completed by the transfer
and delivery of unregistered common stock to the seller valued at the same
sales price as sold to the public in the anticipated initial public offering
("IPO"). However, if the IPO is not completed within twelve months, the seller
may receive the balance in cash plus a sum equal to 8% annual interest from
the closing date. The January 1998 acquisition also includes a future
contingent payment based on the number of locations transferred to the
Company.
The excess cost over market value of net assets acquired for the above
acquisitions was approximately $1.1 million, which is being amortized on a
straight-line basis over 30 years.
F-19
<PAGE>
BLUE RHINO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
On February 12, 1998, the Company loaned $635 to Bison Valve, L.L.C. ("Bison
Valve"), an entity formed to market, produce and sell a specialty valve to the
Company's distributors and third parties.
The loan is convertible into 65% of the membership units, at $1 per unit, of
Bison Valve at the option of the Company. In the event of non-conversion the
loan accrues interest at 9.5% for four (4) years after which the principal and
accrued interest will be amortized over two (2) years.
In February 1998, Caribou Cylinder Exchange, L.L.C. ("Caribou Propane") and
Javilina Cylinder Exchange, L.L.C. ("Javilina Propane"), affiliates through
common ownership, began operations as distributors.
On March 9, 1998, the Board of Directors increased the authorized shares of
common stock from 65,000,000 to 68,000,000 shares.
On November 17, 1997, the Board approved the following matters for which
shareholder consent was received effective December 31, 1997 that will be
executed contemporaneously with the closing of the IPO:
. A reverse stock split of 1 share of common stock for 13.225130 shares of
the Company's common shares outstanding. The reverse stock split has not
been reflected in the average shares outstanding, shares outstanding and
loss per share amounts in the balance sheets, statements of operations
and changes in shareholders deficit. All other per share information
included in the footnotes do not reflect the affect of the reverse stock
split.
. The authorized shares of the Capital Stock shall be decreased to
60,000,000 comprised of 40,000,000 shares of Common Stock par value 0.001
per share and 20,000,000 shares of preferred, with terms to be determined
by the Board.
. Give the Company the right to convert preferred stock on a one for one
basis into common stock and to issue common stock payment for accrued
dividends payable.
. Issue shares of common stock to the holders of outstanding warrants to
satisfy their right to receive common stock (assuming a cashless exercise
of their warrants).
. Accelerate the vesting of all outstanding options.
. Adoption of a stock option plan for employees which will replace the 1994
Stock Incentive Plan. Approximately 5% of the shares of common stock (on
a past offering basis) will be reserved for issuance to the Company's
directors, officers, employees, consultants and agents.
. Adoption of a distributor option plan whereby approximately 5% of the
shares of Common Stock (on a post offering basis) will be reserved for
the issuance to the Company's distributors.
F-20
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Consolidated Financial Data..................................... 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 27
Management............................................................... 35
Certain Transactions..................................................... 41
Principal Stockholders................................................... 43
Shares Eligible for Future Sale.......................................... 46
Description of Capital Stock............................................. 48
Underwriting............................................................. 51
Legal Matters............................................................ 53
Experts.................................................................. 53
Additional Information................................................... 53
Index to Consolidated Financial Statements............................... F-1
</TABLE>
-----------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHARES
[LOGO]
COMMON STOCK
--------------
PROSPECTUS
--------------
HAMBRECHT & QUIST
NATIONSBANC MONTGOMERY SECURITIES LLC
DAIN RAUSCHER INCORPORATED
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be borne by the
Company in connection with the registration, issuance, and distribution of the
securities be registered hereby, other than underwriting discounts and
commissions. All amounts are estimates except the SEC registration fee, the
NASD filing fee, and the Nasdaq listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 12,824
NASD filing fee................................................. $ 4,847
Nasdaq listing fee.............................................. $ 69,375
Transfer agent and registrar's fee and expenses................. $ 25,000
Blue Sky fees and expenses...................................... $ 10,000
Printing and engraving expenses................................. $125,000
Legal fees and expenses......................................... $350,000
Accounting fees and expenses.................................... $125,000
Miscellaneous................................................... $ 27,954
--------
Total....................................................... $750,000
========
</TABLE>
- ---------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") authorizes
indemnification of directors, officers, employees and agents of the Company;
allows the advancement of costs of defending against litigation; and permits
companies incorporated in Delaware to purchase insurance on behalf of
directors, officers, employees and agents against liabilities whether or not
in the circumstances such companies would have the power to indemnify against
such liabilities under the provisions of the statute. The Company's Second
Amended and Restated Certificate of Incorporation ("Charter") provides that
the Company will indemnify its directors and officers to the fullest extent
permitted by law.
Under the provisions of the Company's Charter, any director or officer who,
in his or her capacity as such, is made or threatened to be made a party to
any suit or proceeding shall be indemnified if the Board of Directors
determines such director or officer acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
Company or, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The Company will
not however indemnify any director or officer where such director or officer:
(a) breaches his or her duty of loyalty to the Company or its stockholders;
(b) fails to act in good faith or engages in intentional misconduct or knowing
violation of law; (c) authorizes payment of an unlawful dividend or stock
repurchase or redemption; or (d) obtains an improper personal benefit. While
liability for monetary damages has been eliminated, equitable remedies such as
injunctive relief or rescission remain available. In addition, a director is
not relieved of his or her responsibilities under any other law, including the
federal securities laws.
Indemnification under the Company's Charter and Amended and Restated By-laws
("By-laws") includes payment by the Company of expenses in defending an
action, suit or proceeding in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by the indemnified party to
repay such advance if it is ultimately determined that such person is not
entitled to indemnification under the Charter, which undertaking may be
accepted without reference to the financial ability of such person that makes
such repayments. The Company is not responsible for the indemnification of any
person seeking indemnification in connection with a proceeding initiated by
such person unless the initiation was approved by the Board of Directors of
the Company. The Charter and the DGCL further provide that such
II-1
<PAGE>
indemnification is not exclusive of any other rights to which such individuals
may be entitled under the Charter, the Bylaws, any agreement, any vote of
stockholders or disinterested directors, or otherwise. The Company intends to
obtain directors and officers insurance covering its executive officers and
directors.
Insofar as indemnification by the Company for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers and controlling persons of the Company pursuant to the
foregoing provisions, the Company has been advised that in the opinion of the
Securities and Exchange Commission (the "Commission"), such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In October 1995, the Company issued units (the "Units"), each comprised of a
10.5% Senior Discount Note due October 2000 with a face value of $1,364.93 per
Unit and a warrant to purchase approximately 40 shares of Common Stock at an
exercise price of approximately $4.59 per share for $1,000 per Unit (the "1995
Unit Offering"). The Company sold 12,575 Units representing a face value of
$17.2 million of Senior Discount Notes and warrants to purchase an aggregate
of 500,028 shares of Common Stock. The gross proceeds from the sale of the
Units were approximately $12.6 million. The discounted portion of the Senior
Discount Notes represent a yield of 10.5% compounded semi-annually from the
date of issuance until October 11, 1998. Thereafter, interest is payable semi-
annually at a rate of 10.5% per annum. The Senior Discount Notes are
redeemable by the Company in whole or part at any time at their face value
less unearned interest. The warrants may be exercised at any time before
October 2005. The Senior Discount Notes were issued without registration under
the Securities Act in reliance on Section 4(2) of the Securities Act.
On September 24, 1996, the Company issued a warrant to purchase 227,048
shares of its Common Stock at an exercise price of $6.61 per share to
Forsythe/Lunn Technology Partners, L.P. in connection with the execution of a
master lease agreement between the Company and Forsythe/McArthur & Associates,
Inc. The warrants may be exercised at any time before September 24, 2006.
These warrants were issued without registration under the Securities Act in
reliance on Section 4(2) of the Securities Act.
On April 30, 1997, the Company sold 151,227 shares of its Common Stock and
warrants to purchase an additional 113,420 shares of its Common Stock with an
exercise price of $6.61 per share to Platinum Propane Holding, L.L.C.
("Platinum Propane") for total consideration of $1,000,000 in cash. The
warrants may be exercised at any time prior to April 30, 2007. The shares and
warrants sold to Platinum Propane were issued without registration under the
Securities Act in reliance on Section 4(2) of the Securities Act and Rule 506
of Regulation D promulgated thereunder.
On January 1, 1998, the Company issued $3,250,000 of 10.5% Subordinated
Notes and warrants to purchase in the aggregate 81,915 shares of Common Stock
with an exercise price equal to the initial public offering price of the
Common Stock offered hereby (the "1998 Warrants") to four stockholders of the
Company for total consideration of $3,250,000 in cash. The Subordinated
Promissory Notes bear interest at 10.5% per annum and are due on the earlier
of a qualified public offering of the Company's Common Stock or December 31,
2000. The warrants may be exercised at any time before December 31, 2008. The
Subordinated Promissory Notes and warrants purchased by the stockholders were
offered and sold without registration under the Securities Act in reliance on
Section 4(2) of the Securities Act and Rule 505 of Regulation D promulgated
thereunder.
Since formation, the Company has granted options for 182,607 shares of
Common Stock pursuant to its Stock Incentive Plan at a weighted average
exercise price of $6.03 per share, of which options to purchase 0 shares have
been exercised and options to purchase 24,559 shares are currently
exercisable. Under the proposed recapitalization in connection with this
offering, all outstanding options under the Stock Incentive Plan will be
vested upon the completion of the offering. The options were issued without
registration under the Securities Act in reliance on Section 4(2) and Rule 701
promulgated thereunder.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The exhibits to the Registration Statement are listed in the Exhibit Index
which appears elsewhere in this Registration Statement and is hereby
incorporated herein by reference.
All other schedules are omitted because of the absence of the condition
under which they are required or because the information is included in the
consolidated financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to provide to the Underwriters,
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as the Company may be permitted to indemnify directors, officers and
controlling persons of the Company for liabilities arising under the
Securities Act pursuant to the provisions described under Item 14 above or
otherwise, the Company has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted against the Company by such director, officer, or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN WINSTON-SALEM, NORTH
CAROLINA, ON MARCH 10, 1998.
Blue Rhino Corporation
/s/ Billy D. Prim
By___________________________________
Billy D. Prim
President and Chairman of the
Board
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS BILLY D. PRIM, AS HIS TRUE AND LAWFUL ATTORNEY-
IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, TO ACT,
WITHOUT THE OTHER, FOR HIM OR HER AND IN HIS OR HER NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS (INCLUDING POST-
EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME,
WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH
THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEY-IN-FACT
AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND
THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY
TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY
RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT, OR ANY OF
THEM, OR THEIR SUBSTITUTES MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE
HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT, HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MARCH 6, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Billy D. Prim President and Chairman of the Board
___________________________________________ (Principal Executive Officer)
Billy D. Prim
/s/ Mark Castaneda Secretary and Chief Financial Officer
___________________________________________ (Principal Financial and Accounting
Mark Castaneda Officer)
/s/ Andrew J. Filipowski Vice Chairman of the Board
___________________________________________
Andrew J. Filipowski
/s/ Craig J. Duchossois Director
___________________________________________
Craig J. Duchossois
/s/ Steven D. Devick Director
___________________________________________
Steven D. Devick
/s/ S.H. Fogleman III Director
___________________________________________
S.H. Fogleman III
/s/ James P. Liautaud Director
___________________________________________
James P. Liautaud
/s/ John H. Muehlstein Director
___________________________________________
John H. Muehlstein
/s/ Robert S. Steel Director
___________________________________________
Robert S. Steel
</TABLE>
II-5
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S> <C>
1.1 Underwriting Agreement*
3.1 Form of Second Amended and Restated Certificate of Incorpora-
tion of the Company
3.2 Amended and Restated Bylaws of the Company
4.1 Form of Certificate of Common Stock of the Company*
5.1 Legal Opinion of Pedersen & Houpt, P.C.*
10.1(a) Loan Agreement, dated as of December 18, 1997, between the
Company and NationsBank, N.A.
10.1(b) Security Agreement, dated as of November 26, 1997 between the
Company and NationsBank, N.A.*
10.2 Note Purchase Agreement, dated as of January 1, 1998, among
the Company and Craig J. Duchossois, Andrew Filipowski, James
Liautaud and Lennard Carlson
10.3(a) Cylinder Display Rack Lease Agreement, dated as of September
16, 1996, between the Company and Forsythe McArthur Associ-
ates, Inc.
10.3(b) Master Equipment Lease Agreement, dated as of September 24,
1996, between the Company and Forsythe McArthur Associates,
Inc.
10.4(a) Asset Purchase Agreement, dated as of December 9, 1997, be-
tween the Company and Bison Propane Bottle Exchange, LLC
10.4(b) First Amendment to the Asset Purchase Agreement, dated as of
December 10, 1997, between the Company and Bison Propane Bot-
tle Exchange, LLC
10.5 Multi-Draw Convertible Secured Promissory Note, dated as of
February 12, 1998, by Bison Valve, L.L.C. to the Company
10.6 Collateral Assignment of License Agreement, dated as of Febru-
ary 12, 1998, by Bison Valve, L.L.C. to the Company
10.7(a) Form of Distribution Agreement of the Company and Its Distrib-
utors
10.7(b) Form of Sublease of Personal Property between the Company and
Its Distributors
10.8(a) Form of Security Agreement to Secure the Sale of Cylinders
between the Company and Its Distributors*
10.8(b) Form of Promissory Note Evidencing the Sale of Cylinders
between the Company and Its Distributors*
10.9 Series A Securities Purchase Agreement, dated as of December
1, 1994, among the Company and the Purchasers of the Series A
Convertible Participating Preferred Stock
10.10 Unit Purchase Agreement of a 10.5% Senior Discount Note and a
Warrant to purchase Common Stock of the Company, dated as of
October 11, 1995, between the Company and Purchasers named
therein
10.11 Securities Purchase Agreement, dated as of March 1, 1997, be-
tween the Company and Platinum Propane Holding, L.L.C.
10.12 Director Option Plan of the Company*
10.13 Distributor Stock Option Plan of the Company*
10.14 Stock Incentive Plan of the Company
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S> <C>
10.15 Amended and Restated Registration Rights Agreement, dated as
of March 1, 1997, among the Company, Forsythe/Lunn Technology
Partners, L.L.C., Platinum Propane Holding, L.L.C., the Pur-
chasers of Units pursuant to the Unit Purchase Agreement dated
October 11, 1995 and the Purchasers of the Company's Series A
Convertible Participating Preferred Stock
10.16 The Shareholders' Agreement, dated as of December 1, 1994,
among the Company and its Stockholders
10.17 First Amendment to the Shareholders' Agreement, dated as of
October 11, 1995, among the Company and its Stockholders
21.1 Subsidiary of the Company
23.1 Consent of Pedersen & Houpt, P.C.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of The Daniel Professional Group, Inc.
24.1 Power of Attorney
27.1 Financial Data Schedule*
</TABLE>
- ---------------------
*To be filed by amendment.
II-7
<PAGE>
EXHIBIT 3.1
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF BLUE RHINO CORPORATION
(Incorporated on November 29, 1994)
BLUE RHINO CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: Pursuant to Section 242 and 245 of the General Corporation Law of the
State of Delaware (the "Delaware Law"), the Amended and Restated Certificate of
Incorporation, as amended, of BLUE RHINO CORPORATION, a Delaware corporation
(the "Corporation"), is hereby restated and amended to read in its entirety as
follows:
"SECOND AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION"
-----------------
FIRST: The name of the Corporation is Blue Rhino Corporation.
SECOND: The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle. The
name of the registered agent of the Corporation at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall have
authority to issue is Sixty Million (60,000,000) shares consisting of:
Forty Million (40,000,000) shares of Common Stock with a par value of $.001
per share (the "Common Stock"); and
Twenty Million (20,000,000) shares of Preferred Stock, with a par value of
$.001 per share (the "Preferred Stock")
Except as otherwise required by law or expressly provided herein, the holder
of each share of Common Stock shall have one vote on each matter submitted to a
vote of the stockholders of the Corporation.
The holders of the Common Stock shall be entitled to receive dividends at
such times and in such amounts as may be determined by the Board of Directors of
the Corporation.
<PAGE>
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Corporation, the holders of
Common Stock, shall be entitled to share ratably in the remaining assets of the
Corporation.
The holders of the Preferred Stock shall be entitled to such rights and
preferences as may be approved from time to time by the Board of Directors of
the Corporation as set forth in a Certificate of Designation filed pursuant to
the Delaware Law.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The following provisions are included for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Board of Directors and stockholders:
1. The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the By-laws of the Corporation, subject to any limitation
thereof contained in the By-laws. The stockholders shall also have the power to
adopt, amend or repeal the By-laws of the Corporation; provided, however, that,
in addition to any vote of the holders of capital stock of the Corporation
required by law or by this Second Amended and Restated Certificate of
Incorporation, the affirmative vote of the holders of at least seventy-five
percent (75%) of the voting power of all of the then outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors shall be required to adopt, amend or repeal any provision of the By-
laws of the Corporation.
2. Upon the consummation of an initial public offering of Common Stock (the
"Initial Public Offering Date"), stockholders of the Corporation may not
thereafter take any action by written consent in lieu of a meeting.
3. Special meetings of stockholders may be called at any time only by the
Chairman of the Board of Directors, the President or a majority of the Board of
Directors. Business transacted at any special meeting of stockholders shall be
limited to matters relating to the purpose or purposes stated in the notice of
meeting.
4. The books of the Corporation may be kept at such place within or without
the State of Delaware as the By-laws of the Corporation may provide or as may be
designated from time to time by the Board of Directors of the Corporation.
5. Election of directors need not be by written ballot unless the By-laws of
the Corporation so provide.
2
<PAGE>
SEVENTH:
1. Number of Directors. The number of directors which shall constitute
the whole Board of Directors shall be not less than three as determined by
resolution of a majority of the Board of Directors. The number of directors may
be decreased at any time and from time to time by a majority of the directors
then in office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more directors. The
directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote on such election. Directors need not be
stockholders of the Corporation.
2. Classification and Term of Directors. The Board of Directors shall be
divided into three classes, Class A, Class B and Class C, as nearly equal in
numbers as the then total number of directors constituting the entire Board
permits with the term of office of one class expiring each year. The Board
shall designate the class of each of the existing Directors. At the first
annual meeting of stockholders after the filing of this Second Amended and
Restated Certificate, the Class A Directors shall be elected to hold office for
a three year term. At the second annual meeting of the stockholders after the
filing of this Certificate, the Class B Directors shall be elected to hold
office for a three year term. At the third annual meeting of the stockholders
after the date of filing of this Certificate, the Class C Directors shall be
elected to hold office for a term expiring at the third succeeding annual
meeting. Any vacancies in the Board of Directors for any reason, and any
directorships resulting from any increase in the number of directors, maybe
filled by the Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen shall hold
office until the next election of the class for which such directors shall have
been chosen and until their successors shall be elected and qualified. At each
annual meeting of stockholders the successors to the class of directors whose
term shall then expire shall be elected to hold office for a term expiring at
the third succeeding annual meeting.
3. Increases or Decreases in the Number of Directors. In the event of any
increase or decrease in the authorized number of directors, each director then
serving as such shall nevertheless continue as director until the expiration of
such director's current term or his or her prior death, retirement or
resignation. No decrease in the number of directors constituting the whole Board
of Directors shall shorten the term of an incumbent director.
4. Removal. Following the Initial Public Offering Date, any one or more
or all of the directors may be removed only with cause, and then only by the
holders of at least a majority of the shares then entitled to vote at an
election of directors.
5. Stockholder Nominations and Introduction of Business, Etc. Following
the Initial Public Offering Date, advance notice of stockholder nominations for
election of directors and other business to be brought by stockholders before a
meeting of stockholders shall be given in the manner provided in the By-laws of
the Corporation.
3
<PAGE>
EIGHTH: A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit. If the General Corporation Law of the State of
Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. Any repeal or modification of this Article Eighth by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
NINTH: Each person who is or was a director or officer of the Corporation,
and each person who serves or served at the request of the Corporation as a
director or officer of another enterprise, shall be indemnified by the
Corporation in accordance with, and to the fullest extent authorized by, the
General Corporation Law of Delaware as it may be in effect from time to time.
The right of indemnity provided herein shall not be deemed exclusive of any
other rights to which any person may be entitled under any By-law, agreement,
vote of stockholders or directors, or otherwise. The Corporation may provide
indemnification to any such person, by agreement or otherwise, on such terms and
conditions as the Board of Directors may approve. Any agreement for
indemnification of any director, officer, employee or other person may provide
indemnification rights which are broader or otherwise differ from those set
forth herein. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the By-laws of the Corporation regarding the manner and conditions under
which indemnification shall be provided hereunder by the Corporation and the
extent thereof from time to time as deemed appropriate by the Board of Directors
in the best interests of the Corporation.
TENTH: The Board of Directors of the Corporation, when evaluating any offer
of another party to (a) make a tender or exchange offer for any equity security
of the Corporation; (b) merge or consolidate the Corporation with another
Corporation; or (c) purchase or otherwise acquire all or substantially all of
the properties and assets of the Corporation may, in connection with the
exercise of its judgment in determining what is in the best interests of the
Corporation and its stockholders, give due consideration to all factors the
directors deem relevant, including without limitation (i) the effects upon the
employees, suppliers, customers, creditors and others having similar relations
with the Corporation, upon the communities in which the Corporation conducts its
business or on such other constituencies of the Corporation as the Board of
Directors considers relevant under the circumstances; (ii) not only the
consideration being offered (after taking into account taxes) in relation to the
then current market price for the Corporation's outstanding shares of capital
stock, but also the Board of Directors' estimate of the (A) future value of the
Corporation (including the unrealized value of its properties and assets) as an
4
<PAGE>
independent going concern and (B) the current value of the Corporation in a
freely negotiated transaction; (iii) the purpose of the Corporation, and any of
its subsidiaries, to provide quality products and services on a long term basis;
(iv) whether the proposed transaction might violate federal or state laws; and
(v) the long-term as well as short-term interests of the Corporation and its
stockholders, including the possibility that such interests may be best served
by the continued independence of the Corporation. If, on the basis of such
factors, the Board of Directors so determines that a proposal or offer to
acquire or merge the Corporation, or to sell its assets, is not in the best
interests of the Corporation, it may reject the proposal or offer. If the Board
of Directors determines to reject any such proposal or sale, the Board of
Directors shall have no obligation to facilitate, to remove any barriers to, or
to refrain from impeding the proposal or offer except as may be required by
applicable law. Except to the extent required by applicable law, the
consideration of any or all of such factors shall not be a violation of the
business judgment rule or of any duty of the directors to the stockholders or a
group of stockholders, even if the directors reasonably determine that any such
factor or factors outweigh the financial or other benefits to the Corporation or
a shareholder or group of stockholders.
ELEVENTH: The Corporation has elected to be governed by Section 203 of the
Delaware Law.
TWELFTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Second Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon the stockholders herein are granted subject to this
reservation; provided, however, that, following the Initial Public Offering
Date, in addition to any vote of the holders of the capital stock of the
Corporation required by law or this Second Amended and Restated Certificate of
Incorporation, the affirmative vote of the holders of shares of voting stock of
the Corporation representing at least seventy-five percent (75%) of the voting
power of all of the then outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors shall be
required to (i) reduce or eliminate the number of authorized shares of capital
stock set forth in Article Fourth or (ii) amend or repeal or adopt any provision
inconsistent with Articles Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, and
this Article Twelfth of this Second Amended and Restated Certificate of
Incorporation."
SECOND: The Board of Directors of the Corporation, at a meeting duly called
at which a quorum existed, duly adopted resolutions proposing and approving the
Second Amended and Restated Certificate of Incorporation of the Corporation and
directing that such Second Amended and Restated Certificate of Incorporation be
submitted to the stockholders of the Corporation to consider and adopt the same.
THIRD: Pursuant to Section 228 of the Delaware Law, the adoption of the
Second Amended and Restated Certificate of Incorporation was consented to in
writing by a majority of the holders of the voting power of all shares of
capital stock of the Corporation entitled to vote thereon.
5
<PAGE>
FOURTH: The Second Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of the General Corporation Law of the
State of Delaware, including Section 242 thereof.
IN WITNESS WHEREOF, BLUE RHINO CORPORATION has caused this Certificate to be
signed by its President, and its corporate seal to be hereunto affixed and
attested by its Secretary this _____ day of ________________, 1998
BLUE RHINO CORPORATION
By: __________________________
Billy D. Prim
President
SEAL
ATTEST:
By: __________________________
Mark Castaneda
Secretary
6
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS OF BLUE RHINO CORPORATION
ARTICLE I
STOCKHOLDERS MEETINGS
Section 1.1 Annual Meetings. An annual meeting of stockholders shall be
held for the election of directors at such date, time and place as may be fixed
by resolution of the Board of Directors from time to time.
Section 1.2 Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time only by the Chairman of the Board,
if any, the President, or by a majority of the Board of Directors, and by no
other person. The business transacted at a special meeting of stockholders shall
be limited to the purpose or purposes for which such meeting is called, except
as otherwise determined by the Board of Directors or the chairman of the
meeting.
Section 1.3 Notice of Meetings. A written notice of each annual or special
meeting of stockholders shall be given stating the place, date and time of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, the Certificate
of Incorporation or these By-laws, as such may be amended or restated from time
to time, such notice of meeting shall be given not less than ten (10) nor more
than sixty (60) days before the date of the meeting to each stockholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be given when deposited in the mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
Corporation.
Section 1.4 Adjournments. Any annual or special meeting of stockholders may
be adjourned from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the date, time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for more than 30 days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the adjourned meeting in accordance with Section 1.3.
Section 1.5 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these By-laws, as such may be amended or restated from time to
time, the presence in person or by proxy of the holders of stock having a
majority of the votes which could be cast by the holders of all outstanding
stock entitled to vote at the meeting shall constitute a quorum at each meeting
of stockholders. In the absence of a quorum, the stockholders so present may, by
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affirmative vote of the holders of stock having a majority of the votes which
could be cast by all such holders, adjourn the meeting from time to time in the
manner provided in Section 1.4 of these By-laws until a quorum is present. If a
quorum is present when a meeting is convened, the subsequent withdrawal of
stockholders, even though less than a quorum remains, shall not affect the
ability of the remaining stockholders lawfully to transact business.
Section 1.6 Organization. Meetings of stockholders shall be presided over
by the Chairman of the Board, if any, or if there is none or in his or her
absence, by the Vice Chairman of the Board, if any, or if there is none or in
his or her absence by the President, or in his or her absence, by a chairman
designated by the Board of Directors, or in the absence of such designation by a
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his or her absence, the chairman of the meeting may appoint any
person to act as secretary of the meeting.
Section 1.7 Voting.
(a) Except as otherwise provided by the Certificate of Incorporation, as
such may be amended or restated from time to time, each stockholder entitled to
vote at any meeting of stockholders shall be entitled to one vote for each share
of stock held by such stockholder which has voting power on the matter in
question.
(b) Voting at meetings of stockholders need not be by written ballot and
need not be conducted by inspectors of election unless so required by Section
1.9 of these By-laws or so determined by the holders of stock having a majority
of the votes which could be cast by the holders of all outstanding stock
entitled to vote which are present in person or by proxy at such meeting. Unless
otherwise provided in the Certificate of Incorporation, as such may be amended
or restated from time to time, directors shall be elected by a plurality of the
votes cast in the election of directors. Each other question shall, unless
otherwise provided by law, the Certificate of Incorporation or these By-laws, as
such may be amended or restated from time to time, be decided by the vote of the
holders of stock having a majority of the votes which could be cast by the
holders of all stock entitled to vote on such question which are present in
person or by proxy at the meeting.
(c) Stock of the Corporation standing in the name of another corporation and
entitled to vote may be voted by such officer, agent or proxy as the by-laws or
other internal regulations of such other corporation may prescribe or, in the
absence of such provision, as the board of directors or comparable body of such
other corporation may determine.
(d) Stock of the Corporation standing in the name of a deceased person, a
minor, an incompetent or a debtor in a case under Title 11, United States Code,
and entitled to vote may be voted by an administrator, executor, guardian,
conservator, debtor-in-possession or trustee, as the case may be, either in
person or by proxy, without transfer of such shares into the name of the
official or other person so voting.
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(e) A stockholder whose voting stock of the Corporation is pledged shall be
entitled to vote such stock unless on the transfer records of the Corporation
the pledgor has expressly empowered the pledgee to vote such shares, in which
case only the pledgee, or such pledgee's proxy, may represent such shares and
vote thereon.
(f) If voting stock is held of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in common,
tenants by the entirety or otherwise, or if two or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (i) if only
one votes, such act binds all; (ii) if more than one vote, the act of the
majority so voting binds all; and (iii) if more than one votes, but the vote is
evenly split on any particular matter each faction may vote such stock
proportionally, or any person voting the shares, or a beneficiary, if any, may
apply to the Court of Chancery of the State of Delaware or such other court as
may have jurisdiction to appoint an additional person to act with the persons so
voting the stock, which shall then be voted as determined by a majority of such
persons and the person appointed by the Court. If the instrument so filed shows
that any such tenancy is held in unequal interests, a majority or even split for
the purpose of this subsection shall be a majority or even split in interest.
(g) Stock of the Corporation belonging to the Corporation, or to another
corporation a majority of the shares entitled to vote in the election of
directors of which are held by the Corporation, shall not be voted at any
meeting of stockholders and shall not be counted in the total number of
outstanding shares for the purpose of determining whether a quorum is present.
Nothing in the Section 1.7 shall limit the right of the Corporation to vote
shares of stock of the Corporation held by it in a fiduciary capacity.
Section 1.8 Proxies.
(a) Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for such stockholder by proxy filed
with the Secretary before or at the time of the meeting. No such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing with the Secretary an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date.
(b) A stockholder may authorize another person or persons to act for such
stockholder as proxy (i) by executing a writing authorizing such person or
persons to act as such, which execution may be accomplished by such stockholder
or such stockholder's authorized officer, director, partner, employee or agent
(or, if the stock is held in a trust or estate, by a trustee, executor or
administrator thereof) signing such writing or causing his or her signature to
be
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affixed to such writing by any reasonable means, including, but not limited
to, facsimile signature, or (ii) by transmitting or authorizing the transmission
of a telegram, cablegram or other means of electronic transmission (a
"Transmission") to the person who will be the holder of the proxy or to a proxy
solicitation firm, proxy support service organization or like agent duly
authorized by the person who will be the holder of the proxy to receive such
Transmission; provided that any such Transmission must either set forth or be
submitted with information from which it can be determined that such
Transmission was authorized by such stockholder.
(c) Any inspector or inspectors appointed pursuant to Section 1.9 of these
By-laws shall examine Transmissions to determine if they are valid. If no
inspector or inspectors are so appointed, the Secretary or such other person or
persons as shall be appointed from time to time by the Board of Directors shall
examine Transmissions to determine if they are valid. If it is determined a
Transmission is valid, the person or persons making that determination shall
specify the information upon which such person or persons relied. Any copy,
facsimile telecommunication or other reliable reproduction of such a writing or
Transmission may be substituted or used in lieu of the original writing or
Transmission for any and all purposes for which the original writing or
Transmission could be used; provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or Transmission.
Section 1.9 Voting Procedures and Inspectors of Elections.
(a) If the Corporation has a class of voting stock that is (i) listed on a
national securities exchange, (ii) authorized for quotation on an interdealer
quotation system of a registered national securities association or (iii) held
of record by more than 2,000 stockholders, the Board of Directors shall, in
advance of any meeting of stockholders, appoint one or more inspectors
(individually an "Inspector," and collectively the "Inspectors") to act at such
meeting and make a written report thereof. The Board of Directors may designate
one or more persons as alternate Inspectors to replace any Inspector who shall
fail to act. If no Inspector or alternate is able to act at such meeting, the
chairman of the meeting shall appoint one or more other persons to act as
Inspectors. Each Inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath faithfully to execute the duties of
Inspector with strict impartiality and according to the best of his or her
ability.
(b) The Inspectors shall (i) ascertain the number of shares of stock of the
Corporation outstanding and the voting power of each, (ii) determine the number
of shares of stock of the Corporation present in person or by proxy at such
meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the Inspectors and
(v) certify their determination of the number of such shares present in person
or by proxy at such meeting and their count of all votes and ballots. The
Inspectors may appoint or retain other persons or entities to assist them in the
performance of their duties.
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(c) The date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting shall be announced at
such meeting. No ballots, proxies or votes, nor any revocations thereof or
changes thereto, shall be accepted by the Inspectors after the closing of the
polls unless the Court of Chancery of the State of Delaware upon application by
any stockholder shall determine otherwise.
(d) In determining the validity and counting of proxies and ballots, the
Inspectors shall be limited to an examination of the proxies, any envelopes
submitted with such proxies, any information referred to in paragraphs (b) and
(c) of Section 1.8 of these By-laws, ballots and the regular books and records
of the Corporation, except that the Inspectors may consider other reliable
information for the limited purpose of reconciling proxies and ballots submitted
by or on behalf of banks, brokers, their nominees or similar persons which
represent more votes than the holder of a proxy is authorized by a stockholder
of record to cast or more votes than such stockholder holds of record. If the
Inspectors consider other reliable information for the limited purpose permitted
herein, the Inspectors, at the time they make their certification pursuant to
paragraph (b) of this Section 1.9, shall specify the precise information
considered by them, including the person or persons from whom such information
was obtained, when and the means by which such information was obtained and the
basis for the Inspectors' belief that such information is accurate and reliable.
Section 1.10 Fixing Date of Determination of Stockholders of Record.
(a) In order that the corporation may determine the stockholders entitled
(i) to notice of or to vote at any meeting of stockholders or any adjournment
thereof, (ii) to receive payment of any dividend or other distribution or
allotment of any rights, (iii) to exercise any rights in respect of any change,
conversion or exchange of stock or (iv) to take, receive or participate in any
other action, the Board of Directors may fix a record date, which shall not be
earlier than the date upon which the resolution fixing the record date is
adopted by the Board of Directors and which (1) in the case of a determination
of stockholders entitled to notice of or to vote at any meeting of stockholders
or adjournment thereof, shall, unless otherwise required by law, be not more
than sixty (60) nor less than ten (10) days before the date of such meeting; (2)
in the case of a determination of stockholders entitled to express consent to
corporate action in writing without a meeting, shall be not more than ten (10)
days after the date upon which the resolution fixing the record date is adopted
by the Board of Directors; and (3) in the case of any other action, shall be not
more than sixty (60) days before such action.
(b) If no record date is fixed, (i) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; and (ii) the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
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(c) A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting,
but the Board of Directors may fix a new record date for the adjourned meeting.
Section 1.11 List of Stockholders Entitled to Vote. The Secretary shall
prepare, at least ten (10) days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present. The stock ledger shall be the only
evidence as to who are the stockholders entitled to examine the stock ledger,
the list of stockholders or the books of the corporation, or to vote in person
or by proxy at any meeting of stockholders.
Section 1.12 Stockholder Proposals and Board Nominations.
(a) At any annual meeting of the Corporation's stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (ii) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (iii) otherwise
properly brought before the meeting by a stockholder in accordance with these
By-laws. Business may be properly brought before an annual meeting by a
stockholder only if written notice of the stockholder's intent to propose such
business has been delivered, either by personal delivery, United States mail,
first class postage prepaid, or other similar means, to the Secretary of the
Corporation not later than 90 calendar days in advance of the anniversary date
of the release of the Corporation's proxy statement to stockholders in
connection with the preceding year's annual meeting of stockholders, except that
if no annual meeting was held in the previous year or the date of the annual
meeting has been changed by more than 30 calendar days from the anniversary of
the annual meeting date stated in the previous year's proxy statement, a
stockholder proposal shall be received by the Corporation a reasonable time
before the solicitation is made.
(b) Each notice of new business must set forth: (i) the name and address of
the stockholder who intends to raise the new business; (ii) the business desired
to be brought forth at the meeting and the reasons for conducting such business
at the meeting; (iii) a representation that the stockholder is a holder of
record of stock of the Corporation entitled to vote with respect to such
business and intends to appear in person or by proxy at the meeting to move the
consideration of such business; (iv) such stockholder's total beneficial
ownership of the Corporation's voting stock; and (v) such stockholder's interest
in such business. The chairman of the meeting may refuse to acknowledge a motion
to consider any business that he determines was not made in compliance with the
foregoing procedures.
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(c) An adjourned meeting, if notice of the adjourned meeting is not required
to be given to stockholders, shall be regarded as a continuation of the original
meeting, and any notice of new business must have met the foregoing requirements
as of the date of the original meeting. In the event of an adjourned meeting
where notice of the adjourned meeting is required to be given to stockholders,
any notice of new business made by a stockholder with respect to the adjourned
meeting must meet the foregoing requirements based upon the date on which notice
of the date of the adjourned meeting was given.
(d) Nominations for the election of directors may be made by the Board of
Directors or a committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of directors generally. However,
any stockholder entitled to vote in the election of directors may nominate one
or more persons for election as director(s) at a meeting only if written notice
of such stockholder's intent to make such nomination or nominations has been
delivered, either by personal delivery, United States mail, first class postage
prepaid, or other similar means, to the Secretary of the Corporation not later
than (i) with respect to an election to be held at an annual meeting of
stockholders, 90 calendar days in advance of the anniversary date of the release
of the Corporation's proxy statement to stockholders in connection with the
preceding year's annual meeting of stockholders, except that if no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than 30 calendar days from the anniversary of the annual meeting
date stated in the previous year's proxy statement, a nominee proposal shall be
received by the Corporation a reasonable time before the solicitation is made,
and (ii) with respect to an election to be held at a special meeting of
stockholders for the election of directors, the close of business on the 10th
day following the date on which notice of such meeting is first given to
stockholders.
(e) Each such notice shall set forth: (i) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (ii) a representation that the stockholder is a holder of record
of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (iii) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (iv) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or intended
to be nominated, by the Board of Directors; and (v) the consent of each nominee
to serve as a director of the Corporation if so elected.
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ARTICLE II
BOARD OF DIRECTORS
Section 2.1 Number. The Board of Directors shall consist of such number of
directors as may be determined from time to time by resolution of the Board of
Directors.
Section 2.2 Election; Resignation; Vacancies.
(a) Directors shall be elected at each annual meeting of stockholders at
which their term of office expires. Directors shall each hold office until the
annual meeting of stockholders at which their term of office expires and the
election and qualification of his or her successor, or until his or her earlier
death, resignation or removal.
(b) Any director may resign at any time by giving written notice to the
Chairman of the Board, if any, the President or the Secretary. Unless otherwise
stated in a notice of resignation, it shall take effect when received by the
officer to whom it is directed, without any need for its acceptance.
(c) Any newly created directorship or any vacancy occurring in the Board of
Directors for any reason may be filled by a majority of the remaining directors,
although less than a quorum, or by a plurality of the votes cast in the election
of directors at a meeting of stockholders. Each director elected to replace a
former director shall hold office until the expiration of the term of office of
the director whom he or she has replaced and the election and qualification of
his or her successor, or until his or her earlier death, resignation or removal.
A director elected to fill a newly created directorship shall serve until the
next annual meeting of the stockholders and the election and qualification of
his or her successor, or until his or her earlier death, resignation or removal.
Section 2.3 Regular Meetings. A regular annual meeting of the Board of
Directors shall be held, without call or notice, immediately after and at the
same place as the annual meeting of stockholders, for the purpose of organizing
the Board of Directors, electing officers and transacting any other business
that may properly come before such meeting. Additional regular meetings of the
Board of Directors may be held without call or notice at such times as shall be
fixed by resolution of the Board of Directors.
Section 2.4 Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, if any, the President, the
Secretary, or by a majority of the Board of Directors. Notice of a special
meeting of the Board of Directors shall be given by the person or persons
calling the meeting at least twenty-four hours before the special meeting. The
purpose or purposes of a special meeting need not be stated in the call or
notice.
Section 2.5 Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or if there is none or in
his or her absence, by the Vice Chairman
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of the Board, if any, or if there is none or in his or her absence, by the
President, or in his or her absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his or her absence the
chairman of the meeting may appoint any person to act as secretary of the
meeting. A majority of the directors present at a meeting, whether or not they
constitute a quorum, may adjourn such meeting to any other date, time or place
without notice other than announcement at the meeting.
Section 2.6 Quorum; Vote Required for Action. At all meetings of the Board
of Directors a majority of the whole Board of Directors shall constitute a
quorum for the transaction of business. Unless the Certificate of Incorporation
or these By-laws, as such may be amended or restated from time to time,
otherwise provide, the vote of a majority of the directors present at a meeting
at which a quorum is present shall be the act of the Board of Directors.
Section 2.7 Compensation Committee. Two or more directors of the
Corporation shall be appointed by the Board of Directors to act as a
Compensation Committee, each of whom shall be a director who is not an employee
of the Corporation or any subsidiary thereof. The Compensation Committee shall
have the power and authority to set the compensation of the officers and other
employees and agents of the Company and shall possess the power and authority to
act with respect to the compensation, option and other benefit plans of the
Corporation. The Compensation Committee shall also recommend fees to be paid to
members of the Board of Directors for services to the Corporation.
Section 2.8 Audit Committee. Two or more directors of the Corporation shall
be appointed by the Board of Directors to act as an Audit Committee, each of
whom shall be a director who is not an employee of the Corporation or any
subsidiary thereof. The Audit Committee shall have general oversight
responsibility with respect to the Corporation's financial reporting. In
performing its oversight responsibility, the Audit Committee shall make
recommendations to the Board of Directors as to the selection, retention, or
change in the independent accountants of the Corporation, review with the
independent accountants the scope of their examination and other matters
(relating to both audit and non-audit activities), and review generally the
internal auditing procedures of the Corporation. In undertaking the foregoing
responsibilities, the Audit Committee shall have unrestricted access, if
necessary, to the Corporation's personnel and documents and shall be provided
with the resources and assistance necessary to discharge its responsibilities,
including periodic reports from management assessing the impact of regulation,
accounting, and reporting of other significant matters that may affect the
Corporation. The Audit Committee shall review the financial reporting and
adequacy of internal controls of the Corporation, consult with the internal
auditors and certified public accountants, and from time to time, but not less
than annually, report to the Board of Directors.
Section 2.9 Other Committees. The Board of Directors may from time to time,
in its discretion, by resolution passed by a majority of the entire Board of
Directors, designate other committees of the Board of Directors consisting of
such number of directors as the Board of
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Directors shall determine, which shall have and may exercise such lawfully
delegable powers and duties of the Board of Directors as shall be conferred or
authorized by such resolution. The Board of Directors shall have the power to
change at any time the members of any such committee, to fill vacancies and to
dissolve any such committee.
Section 2.10 Alternates. The Board of Directors may from time to time
designate from among the directors alternates to serve on any committee of the
Board of Directors to replace any absent or disqualified member at any meeting
of such committee. Whenever a quorum cannot be secured for any meeting of any
committee from among the regular members thereof and designated alternates, the
member or members of such committee present at such meeting and not disqualified
from voting, whether or not constituting a quorum, may unanimously appoint
another director to act at such meeting in place of any absent or disqualified
member.
Section 2.11 Quorum and Manner of Acting-Committees. A majority of the
members of any committee of the Board of Directors shall constitute a quorum for
the transaction of business at any meeting of such committee, and the act of a
majority of the members present at any meeting at which a quorum is present
shall be the act of such committee.
Section 2.12 Committee Chairman, Books and Records, Etc. The chairman of
each committee of the Board of Directors shall be selected from among the
members of such committee by the Board of Directors.
Each committee shall keep a record of its acts and proceedings, and all
actions of each committee shall be reported to the Board of Directors when
required.
Each committee shall fix its own rules of procedure not inconsistent with
these By-laws or the resolution of the Board of Directors designating such
committee and shall meet at such times and places and upon such call or notice
as shall be provided by such rules.
Section 2.13 Telephonic Meetings. Directors, or any committee of directors
designated by the Board of Directors, may participate in a meeting of the Board
of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section 2.13 shall constitute presence in person at such meeting.
Section 2.14 Informal Action by Directors. Unless otherwise restricted by
the Certificate of Incorporation or these By-laws, as such may be amended or
restated from time to time, any action required or permitted to be taken at any
meeting of the Board of Directors, or of any committee thereof, may be taken
without a meeting if all members of the Board of Directors or such committee, as
the case may be, consent thereto in writing (which may be in counterparts), and
the written consent or consents are filed with the minutes of proceedings of the
Board of Directors or such committee.
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Section 2.15 Reliance upon Records. Every director, and every member of any
committee of the Board of Directors, shall, in the performance of his or her
duties, be fully protected in relying in good faith upon the records of the
Corporation and upon such information, opinions, reports or statements presented
to the Corporation by any of its officers or employees, or committees of the
Board of Directors, or by any other person as to matters the director or member
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Corporation, including, but not limited to, such records, information, opinions,
reports or statements as to the value and amount of the assets, liabilities
and/or net profits of the Corporation, or any other facts pertinent to the
existence and amount of surplus or other funds from which dividends might
properly be declared and paid, or with which the Corporation's capital stock
might properly be purchased or redeemed.
Section 2.16 Interested Directors. A director who is directly or indirectly
a party to a contract or transaction with the Corporation, or is a director or
officer of or has a financial interest in any other corporation, partnership,
association or other organization which is a party to a contract or transaction
with the Corporation, may be counted in determining whether a quorum is present
at any meeting of the Board of Directors or a committee thereof at which such
contract or transaction is considered or authorized, and such director may
participate in such meeting and vote on such authorization to the extent
permitted by applicable law, including Section 144 of the General Corporation
Law of the State of Delaware.
Section 2.17 Compensation. Unless otherwise restricted by the Certificate of
Incorporation, as such may be amended or restated from time to time, the Board
of Directors shall have the authority to fix the compensation of directors. The
directors shall be paid their reasonable expenses, if any, of attendance at each
meeting of the Board of Directors or a committee thereof and may be paid a fixed
sum for attendance at each such meeting and an annual retainer or salary for
services as a director or committee member. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 2.18 Presumption of Assent. Unless otherwise provided by the laws of
the State of Delaware, a director who is present at a meeting of the Board of
Directors or a committee thereof at which action is taken on any matter shall be
presumed to have assented to the action taken unless his or her dissent shall be
entered in the minutes of such meeting or unless he or she shall file his or her
written dissent to such action with the person acting as secretary of such
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary immediately after the adjournment of such
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
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ARTICLE III
OFFICERS
Section 3.1 Number and Designation. The officers of the Corporation shall be
a Chairman of the Board, a President, one or more Vice Presidents, a Secretary
and a Treasurer, and such Assistant Secretaries, Assistant Treasurers or other
officers or agents as may be elected or appointed by the Board of Directors. Any
two or more offices may be held by the same person unless the Certificate of
Incorporation or these By-laws, as such may be amended or restated from time to
time, provide otherwise.
Section 3.2 Election and Term of Office. The officers of the Corporation
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after the election of directors. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as may be convenient. Vacancies may be filled or new offices created
and filled at any meeting of the Board of Directors. Each officer shall hold
office until his or her successor shall have been duly elected and shall have
qualified or until his or her earlier death, resignation or removal.
Section 3.3 Removal and Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed by the Board of Directors
whenever in its judgment the best interests of the Corporation would be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed. Any officer or agent may resign at any time by
giving written notice to the Board of Directors, to the Chairman of the Board or
to the Secretary. Any such resignation shall take effect at the time of receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, acceptance of such resignation shall not be necessary to make
it effective.
Section 3.4 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise may be filled by the Board
of Directors for the unexpired portion of the term.
Section 3.5 Chairman of the Board. The Chairman of the Board shall be the
chief executive officer of the Corporation and shall in general supervise and
control all of the business and affairs of the Corporation. The Chairman of the
Board may execute, alone or with the Secretary or any other officer of the
Corporation authorized by the Board of Directors, any deeds, mortgages, bonds,
contracts or other instruments which the Board of Directors or a committee
thereof has authorized to be executed, except in cases where the execution
thereof shall be expressly delegated by the Board of Directors or a committee
thereof or by these By-laws to some other officer or agent of the Corporation,
or shall be required by law to be otherwise executed, and in general he or she
shall perform all duties incident to the office of Chairman of the Board and
such other duties as from time to time may be prescribed by the Board of
Directors or a committee thereof. When present, he or she shall preside at all
meetings of the stockholders and of the Board of Directors.
Section 3.10 Vice Chairman of the Board. In the absence of the Chairman of
the Board, or
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in the event of his or her inability to act, the Vice Chairman of the Board
shall perform the duties and exercise the powers of the Chariman of theBoard. In
addition, the Vice Chairman of the Board shall, in general, perform such duties
as may be assigned to them by the Chairman of the Board or the Board of
Directors.
Section 3.6 President. The President shall (if different from the Chairman
of the Board) be the chief operating officer of the Corporation, second only to
the Chairman of the Board and Vice Chairman of the Board. In the absence of the
Chairman of the Board and Vice Chairman of the Board or in the event of their
inability to act as Chairman of the Board or Vice Chairman of the Board, the
President shall perform the duties of the Chairman of the Board and, when so
acting, shall have all the powers of, and be subject to all the restrictions
placed upon the Chairman of the Board. He or she may execute, alone or with the
Secretary or any other officer of the Corporation authorized by the Board of
Directors, any deeds, mortgages, bonds, contracts or other instruments which the
Board of Directors or a committee thereof has authorized to be executed, except
in cases where the execution thereof shall be expressly delegated by the Board
of Directors or a committee thereof or by these By-laws to some other officer or
agent of the Corporation, or shall be required by law to be otherwise executed,
and in general he or she shall perform all duties incident to the office of
President and such other duties as from time to time may be prescribed by the
Chairman of the Board, the Board of Directors or a committee thereof.
Section 3.7 The Vice Presidents. In the absence of the President or in the
event of his or her inability to act, the Vice President (or in the event there
shall be more than one Vice President, the Vice Presidents in the order
determined by the Board of Directors or, if there shall have been no such
determination, then in the order of their election) shall perform the duties of
the President and, when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. The Board of Directors may also
designate certain Vice Presidents as being in charge of designated divisions,
plants or functions of the Corporation's business and add appropriate
descriptions to their titles. In addition, any Vice President shall perform such
duties as from time to time may be assigned to him or her by the Chairman of the
Board, the President or the Board of Directors.
Section 3.8 The Secretary. The Secretary shall (a) keep the minutes of
proceedings of the stockholders, the Board of Directors and any committee of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these By-laws or
as required by law; (c) be custodian of the corporate records and of the seal of
the Corporation; (d) affix the seal of the Corporation or a facsimile thereof,
or cause it to be affixed, and, when so affixed, attest the seal by his or her
signature, to all certificates for shares of capital stock of the Corporation
prior to the issue thereof and to all other documents the execution of which on
behalf of the Corporation under its seal is duly authorized by the Board of
Directors or otherwise in accordance with the provisions of these By-laws; (e)
keep a register of the post office address of each stockholder, director or
committee member, which shall be furnished to the Secretary by such stockholder,
director or member; (f) have general charge of the stock transfer books of the
Corporation; and (g) in general perform all duties incident to the
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office of Secretary and such other duties as from time to time may be assigned
to him or her by the Chairman of the Board, the President or the Board of
Directors.
Section 3.9 The Treasurer. The Treasurer shall have charge and custody of
and be responsible for all funds and securities of the Corporation, receive and
give receipts for moneys due and payable to the Corporation from any source
whatsoever, deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article IV of these By-laws, disburse the funds of the
Corporation as ordered by the Board of Directors or the Chairman of the Board or
as otherwise required in the conduct of the business of the Corporation and
render to the Chairman of the Board, President or the Board of Directors, upon
request, an accounting of all his or her transactions as Treasurer and a report
on the financial condition of the Corporation. The Treasurer shall in general
perform all the duties incident to the office of Treasurer and such other duties
as from time to time may be assigned to him or her by the Chairman of the Board,
President or the Board of Directors.
Section 3.10 Assistant Treasurers and Secretaries. In the absence of the
Secretary or the Treasurer, as the case may be, or in the event of his or her
inability to act, the Assistant Secretaries and the Assistant Treasurers,
respectively, in the order determined by the Board of Directors (or if there
shall have been no such determination, then in the order of their election),
shall perform the duties and exercise the powers of the Secretary or the
Treasurer, as the case may be. In addition, the Assistant Secretaries and the
Assistant Treasurers shall, in general, perform such duties as may be assigned
to them by the Chairman of the Board, the President, the Secretary, the
Treasurer or the Board of Directors.
Section 3.11 Salaries. The salaries of the officers and agents of the
Corporation shall be fixed from time to time by the Board of Directors or by
such officer as it shall designate for such purpose. No officer shall be
prevented from receiving such salary by reason of the fact that he or she is
also a director of the Corporation.
Section 3.12 Appointments. In addition to the elected officers described
above, the Chairman of the Board may from time to time designate persons to be
appointed Vice Presidents or bear such other title or titles as the Chairman of
the Board shall specify. The powers and duties of each such appointed person
shall be as prescribed by the Chairman of the Board from time to time. Such
appointed persons shall not be deemed elected or executive officers of the
Corporation. Each such appointed person shall serve until the successor thereof
is appointed or until the earlier resignation or removal of such appointed
person.
ARTICLE IV
STOCK CERTIFICATES AND TRANSFERS
Section 4.1 Certificate. Every holder of stock shall be entitled to have a
certificate signed
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by or in the name of the Corporation by the Chairman of the Board, if any, or
the President or a Vice President, and by the Secretary or an Assistant
Secretary, of the Corporation, certifying the number of shares owned by such
stockholder in the Corporation. Any of or all the signatures on the certificate
may be facsimile. In case any officer, transfer agent, or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such officer, transfer agent, or registrar continued to be such at the
date of issue.
Section 4.2 Lost, Stolen or Destroyed Certificates; Issuance of New
Certificates. The Corporation may issue a new certificate for stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or such stockholder's legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 4.3 Transfers of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for stock of the Corporation
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer or, if the relevant stock certificate is claimed to have
been lost, stolen or destroyed, upon compliance with the provisions of Section
4.2 of these By-laws, and upon payment of applicable taxes with respect to such
transfer, and in compliance with any restrictions on transfer applicable to such
stock certificate or the shares represented thereby of which the Corporation
shall have notice and subject to such rules and regulations as the Board of
Directors may from time to time deem advisable concerning the transfer and
registration of stock certificates, the Corporation shall issue a new
certificate or certificates for such stock to the person entitled thereto,
cancel the old certificate and record the transaction upon its books. Transfers
of stock shall be made only on the books of the Corporation by the registered
holder thereof or by such holder's attorney or successor duly authorized as
evidenced by documents filed with the Secretary or transfer agent of the
Corporation. Whenever any transfer of stock shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of transfer
if, when the certificate or certificates representing such stock are presented
to the Corporation for transfer, both the transferor and transferee request the
Corporation to do so.
Section 4.4 Stockholders of Record. The Corporation shall be entitled to
treat the holder of record of any stock of the Corporation as the holder thereof
and shall not be bound to recognize any equitable or other claim to or interest
in such stock on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise required by the laws of the
State of Delaware.
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ARTICLE V
NOTICES
Section 5.1 Manner of Notice. Except as otherwise provided by law, the
Certificate of Incorporation or these By-laws, as such may be amended or
restated from time to time, whenever notice is required to be given to any
stockholder, director or member of any committee of the Board of Directors, such
notice may be given by personal delivery or by depositing it, in a sealed
envelope, in the United States mails, first class, postage prepaid, addressed,
or by delivering it to a telegraph company, charges prepaid, for transmission,
or by transmitting it via telecopier, to such stockholder, director or member,
either at the address of such stockholder, director or member as it appears on
the records of the Corporation or, in the case of such a director or member, at
his or her business address; and such notice shall be deemed to be given at the
time when it is thus personally delivered, deposited, delivered or transmitted,
as the case may be. Such requirement for notice shall also be deemed satisfied,
except in the case of stockholder meetings, if actual notice is received orally
or by other writing by the person entitled thereto as far in advance of the
event with respect to which notice is being given as the minimum notice period
required by law or these By- laws.
Section 5.2 Dispensation with Notice.
(a) Whenever notice is required to be given by law, the Certificate of
Incorporation or these By-laws, as such may be amended or restated from time to
time, to any stockholder to whom (i) notice of two consecutive annual meetings
of stockholders, and all notices of meetings of stockholders or of the taking of
action by stockholders by written consent without a meeting to such stockholder
during the period between such two consecutive annual meetings, or (ii) all, and
at least two, payments (if sent by first class mail) of dividends or interest on
securities of the Corporation during a 12-month period, have been mailed
addressed to such stockholder at the address of such stockholder as shown on the
records of the Corporation and have been returned undeliverable, the giving of
such notice to such stockholder shall not be required. Any action or meeting
which shall be taken or held without notice to such stockholder shall have the
same force and effect as if such notice had been duly given. If any such
stockholder shall deliver to the Corporation a written notice setting forth the
then current address of such stockholder, the requirement that notice be given
to such stockholder shall be reinstated.
(b) Whenever notice is required to be given by law, the Certificate of
Incorporation or these By-laws, as such may be amended or restated from time to
time, to any person with whom communication is unlawful, the giving of such
notice to such person shall not be required, and there shall be no duty to apply
to any governmental authority or agency for a license or permit to give such
notice to such person. Any action or meeting which shall be taken or held
without notice to any such person with whom communication is unlawful shall have
the same force and effect as if such notice had been duly given.
Section 5.3 Waivers of Notice. Any written waiver of notice, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice.
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Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of any regular special meeting of the
stockholders, directors, or members of a committee or directors need be
specified in any written waiver of notice.
ARTICLE VI
INDEMNIFICATION
Section 6.1 Right to Indemnification.
(a) The Corporation shall indemnify and hold harmless, to the fullest extent
permitted by law as in effect on the date of adoption of these By-laws or as
they may thereafter be amended or restated from time to time, any person who was
or is made or is threatened to be made a party or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including any action by or in the right of the Corporation) (a
"proceeding") by reason of the fact that he or she, or a person for whom he or
she is the legal representative, is or was a director, officer or employee of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture or other enterprise, against any and all liability and loss (including
judgments, fines, penalties and amounts paid in settlement) suffered or incurred
and expenses reasonably incurred by such person (including attorneys' fees and
related expenses); provided that any standard of conduct applicable to whether a
director or officer may be indemnified shall be equally applicable to an
employee under this Article VI. The Corporation shall not be required to
indemnify a person in connection with a proceeding initiated by such person,
including a counterclaim or crossclaim, unless the proceeding was authorized by
the Board of Directors.
(b) For purposes of this Article VI: (i) any reference to "other enterprise"
shall include all plans, programs, policies, agreements, contracts and payroll
practices and related trusts for the benefit of or relating to employees of the
Corporation and its related entities ("employee benefit plans"); (ii) any
reference to "fines", "penalties", "liability" and "expenses" shall include any
excise taxes, penalties, claims, liabilities and reasonable expenses (including
reasonable legal fees and related expenses) assessed against or incurred by a
person with respect to any employee benefit plan; (iii) any reference to
"serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation or trustee or
administrator of any employee benefit plan which imposes duties on, or involves
services by, such director, officer, employee or agent with respect to an
employee benefit plan, its participants, beneficiaries, fiduciaries,
administrators and service providers; (iv) any reference to serving at the
request of the Corporation as a director, officer, employee or agent of a
partnership or trust shall include service as a partner or trustee; and (v) a
person who acted in good faith and in a manner he or she reasonably believed to
be in the interest of the participants and beneficiaries of
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an employee benefit plan shall be deemed to have acted in a manner "not opposed
to the best interests of the Corporation" for purposes of this Article VI.
Section 6.2 Prepayment of Expenses. The Corporation may pay or reimburse the
reasonable expenses incurred in defending any proceeding in advance of its final
disposition if the Corporation has received in advance an undertaking by the
person receiving such payment or reimbursement to repay all amounts advanced if
it should be ultimately determined that he or she is not entitled to be
indemnified under this Article VI or otherwise. The Corporation may require
security for any such undertaking.
Section 6.3 Claims. If a claim for indemnification or payment of expenses
under this Article VI is not paid in full within 30 days after a written claim
therefor has been received by the Corporation, the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification or payment of expenses under
applicable law.
Section 6.4 Insurance. The Corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer
or employee of the Corporation or was serving at the request of the Corporation
as a director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise (including service with respect to any
employee benefit plan) against any liability asserted against him and incurred
by him in any such capacity, whether or not the Corporation would have the power
to indemnify such person against such liability under this Article VI.
Section 6.5 Non-Exclusivity of Rights. The rights conferred on any person by
this Article VI shall not be exclusive of any other rights which such person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation or these By-laws, as such may be amended or restated from time to
time, agreement, vote of stockholders or disinterested directors or otherwise,
and shall continue as to a person who has ceased to be a director, officer or
employee and shall inure to the benefit of the heirs, executors, administrators
and personal representatives of such a person.
Section 6.6 Other Indemnification. The Corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a director,
officer, employee, partner or agent of another corporation, partnership, joint
venture or other enterprise shall be reduced by any amount such person may
collect as indemnification from such other corporation, partnership, joint
venture or other enterprise.
Section 6.7 Amendment or Repeal. Any repeal or modification of the foregoing
provisions of this Article VI shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
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Section 6.8 Merger or Consolidation. For purposes of this Article VI,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees, so that any person who is or was a director,
officer or employee of such a constituent corporation, or is or was serving at
the request of such a constituent corporation as a director, officer or employee
of another corporation, partnership, joint venture, trust or other enterprise
(including service with respect to any employee benefit plan), shall stand in
the same position under this Article VI with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
Section 6.9 Indemnification of Agents. The Corporation may, to the extent
authorized from time to time by the Board of Directors, grant rights to
indemnification and to the advancement of expenses to any agent of the
Corporation to the fullest extent of the provisions of this Article VI with
respect to the indemnification and advancement of expenses of directors,
officers and employees of the Corporation.
ARTICLE VII
GENERAL
Section 7.1 Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors. Absent such determination,
the fiscal year of the Corporation shall end on July 31 of each year.
Section 7.2 Seal. The corporate seal shall have the name of the Corporation
inscribed thereon and shall be in such form as may be approved from time to time
by the Board of Directors.
Section 7.3 Form of Records. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 7.4 Amendment of By-laws by the Board of Directors. These By-laws
may be altered, amended or repealed, or new By-laws may be adopted, by the
affirmative vote of a majority of the directors present at any regular or
special meeting of the Board of Directors at which a quorum is present.
Section 7.5 Amendment of the By-laws by the Stockholders. These By-laws may
be altered, amended or repealed, or new By-laws may be adopted, by the
affirmative vote of the
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holders of seventy five percent (75%) of the shares of the capital stock of the
Corporation issued and outstanding and entitled to vote at any regular meeting
of the stockholders or at any special meeting of the stockholders, provided
notice of such alteration, amendment, repeal or adoption of new By-laws shall
have been stated in the notice of such meeting.
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EXHIBIT 10.1(a)
NATIONSBANK, N.A.
LOAN AGREEMENT
--------------
This Loan Agreement (the "Agreement") dated as of December 18, 1997, by
and between NATIONSBANK, N.A., a national banking association ("Bank") and the
Borrower described below:
In consideration of the Loans described below and the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, Bank and
Borrower agree as follows:
1. DEFINITIONS AND REFERENCE TERMS. In addition to any other terms
defined herein, the following terms shall have the meaning set forth with
respect thereto:
A. Affiliate. As to any Person, each of the Persons that directly
or indirectly, through one or more intermediaries, owns or controls, or is
controlled by or under common control with, such Person or any individual
related to such Person. For the purpose of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of management and policies, whether through the ownership of voting
securities, by contract or otherwise.
B. Borrower. Blue Rhino Corporation, a Delaware corporation.
C. Borrower's Address: 104 Cambridge Plaza Drive
Winston-Salem, NC 27104
D. Collateral. The property and interests in property securing
payment and performance of the Loans, as set forth in Section 3 hereof.
E. Debt Service Coverage. The quotient of net income after taxes
plus depreciation and amortization and any change in deferred taxes, divided by
the sum of the prior year's maturities of long-term debt and capital leases
actually paid, plus cash dividends actually paid.
F. EBITDA. Earnings before interest expense, taxes, depreciation and
amortization.
G. Equipment. All machinery and equipment, including fixtures, now
owned or hereafter acquired by the Borrower.
H. Funded Debt. Debt incurred by borrowing money, specifically
excluding trade debt or accruals arising in the ordinary course of business, but
including, without limitation (i) purchase money indebtedness, (ii) the
principal portion of obligations under capital leases, and (iii) all obligations
<PAGE>
guaranteeing or intended to guarantee any debt of any other entity, whether such
obligation is direct or indirect.
I. Guarantors. Jointly and severally, Billy D. Prim, a citizen and
resident of Winston-Salem, North Carolina, and American Oil and Gas Company, a
North Carolina corporation.
J. Hazardous Materials. All materials defined as hazardous wastes or
substances under any local, state or federal environmental laws, rules or
regulations, and petroleum, petroleum products, oil and asbestos.
K. Inventory. Means all non-obsolete inventory of Borrower of every
kind or character, wherever located, for which Borrower:
(i) has full title, free and clear of any security interest,
liens and claims whatsoever; and
(ii) has the right to convey such inventory as security for the
Obligations; and
(iii) such inventory is in first class order, condition and
repair.
L. LIBOR. The London Interbank Offered Rate for thirty-day deposits,
adjusted for applicable reserves, as determined by the Bank, from time to time.
M. Loans. Collectively, the loans described in Section 2 hereof and
any other existing or subsequent loan by Bank to the Borrower that is subject to
this Agreemeent.
N. Loan Documents. Loan Documents means this Loan Agreement and any
and all promissory notes executed by Borrower in favor of Bank and all other
documents, instruments guarantees, certificates and agreements executed and/or
delivered by Borrower, any guarantor or third party in connection with any Loan.
O. Material Adverse Effect. Any material adverse effect on (i) the
business, assets, operations or financial or other condition of Borrower and its
subsidiaries or Affiliates, (ii) the Borrower's ability to pay the Obligations
in accordance with the terms thereof, or (iii) the Collateral or Bank's security
interest in the Collateral or the priority of such security interest. Without
limiting the foregoing, any adverse effect on the business, assets, operations
or financial or other condition of Borrower and its subsidiaries (if any)
involving, individually or in the aggregate, a liability of the Borrower or any
of its subsidiaries in excess of applicable insurance coverage by more
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than $100,000 shall be deemed to be a "Material Adverse Effect" within the
meaning of the applicable provisions of this Agreement.
P. Notes. Collectively, the Revolver Note, the Working Capital Note,
the Capex Note and the Acquisition Note, as such terms are defined herein.
Q. Obligations. The Loans and all other loans, advances,
indebtedness, liabilities, obligations, covenants and duties (including post-
petition interest on the foregoing, to the extent lawful) owing, arising, due or
payable from the Borrower to the Bank of any kind or nature, present or future,
arising under this Agreement or any of the other Loan Documents, whether direct
or indirect (including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising.
The term includes, without limitation, all interest, charges, reasonable
expenses, reasonable fees, reasonable attorneys' fees and any other sums
chargeable to the Borrower by the Bank under this Agreement or any of the other
Loan Documents
R. Person. A corporation, an association, a joint venture, a limited
liability company, a partnership, an organization, a business, an individual, a
trust or a government or political subdivision thereof or any government agency
or any other legal entity.
S. Prime Rate. That rate of interest determined by the Bank from
time to time to be its "prime rate" for commercial loans, whether or not such
rate shall be publicly announced.
T. Platinum. Platinum Propane Holding, LLC, a Delaware limited
liability company that is affiliated with the Borrower through common ownership.
U. Tangible Net Worth. The amount by which Borrower's total assets
exceed total liabilities in accordance with GAAP, minus (i) goodwill, (ii)
contract rights, (iii) assets representing claims on (A) shareholders,
directors, or officers or (B) Affiliates, and (iv) other assets constituting
intangible assets, including, without limitation, any patents, trademarks,
tradenames, copyrights or similar intellectual property.
Accounting Terms. All accounting terms not specifically defined or
specified herein shall have the meanings generally attributed to such terms
under generally accepted accounting principles ("GAAP"), as in effect from time
to time, consistently applied. All financial computations made under this
Agreement for the purpose of determining compliance with the financial
requirements of this Agreement shall be made, and all financial
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information required under this Agreement shall be prepared, in accordance with
GAAP, as in effect on the date hereof.
2. LOANS. Subject to the terms of this Agreement, Bank hereby agrees to
make a loan to Borrower, as follows:
A. Revolving Line of Credit. (i) Subject to the terms hereof, Bank agrees
to extend a revolving line of credit (the "Revolver") to Borrower, in the
original principal amount of Three Million Dollars ($3,000,000), for the purpose
of refinancing the Borrower's existing revolving line of credit at LaSalle Bank,
and to finance its short-term working capital needs. The Revolver will be
available during the period commencing on the date hereof and continuing until
November 30, 1998 (which date, as extended in accordance with the terms hereof,
shall be the "Maturity Date"). Borrower may from time to time borrow, repay and
re-borrow, subject to the Borrowing Base Agreement attached hereto as Exhibit
"A" and by reference made a part hereof, and the Borrowing Base set forth
therein (the "Borrowing Base"). Borrower shall execute and deliver to Bank a
promissory note (the "Revolver Note") in the principal amount of $3,000,000,
which Revolver Note shall bear interest and be payable in accordance with the
terms set forth hereinbelow. It is further provided that the commitment of the
Bank to continue to make the Revolver available to the Borrower beyond the
Maturity Date is subject to annual review by the Bank (subject to and following
receipt of the Borrower's annual report of audit as provided hereinafter), and
the Bank may, in its sole discretion, elect to renew the commitment for an
additional year, whereupon the Maturity Date shall be extended to the date that
is one year after the then-current Maturity Date.
(ii) Interest and Principal. Interest on the principal amount outstanding
under the Revolver from time to time shall accrue at the rate of the Prime Rate,
plus one-half percent (1/2%) per annum, which accrued interest shall be payable
monthly in arrears. The principal of the Revolver Note shall be repaid in full,
if not sooner paid, on the Maturity Date, together with all accrued but unpaid
interest thereon.
(iii) Fees. Borrower shall pay to Bank a commitment fee in the amount of
one and one-half percent (1 1/2%) of the principal amount of the Revolver Loan
at the closing thereof. Borrower shall also pay Bank, quarterly as invoiced by
Bank, an availability fee in the amount of one-quarter percent (1/4%) of the
average unused amount of the Revolver.
(iv) Collateral Security. Repayment in full of the Revolver shall be
secured by all Accounts Receivable (as such term is defined in the borrowing
base agreement attached hereto), and all Inventory and Equipment of Borrower,
now owned or hereafter acquired, including all proceeds thereof.
4
<PAGE>
(v) Administration of Accounts. (a) Borrower agrees to submit to Bank,
within thirty (30) days of the end of each quarterly period during the term of
the Revolver, a summary aged trial balance of all accounts existing as of the
last day of such quarterly period, in form satisfactory to the Bank. Borrower
agrees to keep accurate and complete records of its accounts, and of all
payments and collections thereof.
(b) Monthly, within thirty (30) days after the end of each monthly
period, Borrower shall submit a borrowing base certificate to Bank setting forth
the amount of Borrower's Eligible Accounts Receivable (as defined in the
Borrowing Base Agreement) as of the last day of such monthly period.
(c) Whether or not an Event of Default has occurred, Borrower shall
permit Bank, including any of its officers, agents or designees, to inspect and
verify the amount of or any other matter relating to the Borrower's accounts.
Borrower agrees to cooperate fully with Bank in such inspection and verification
process.
(d) Bank shall have the right at any time after the occurrence of an
Event of Default to notify any or all account debtors that Borrower's accounts
have been assigned to Bank and to collect the accounts in its name.
B. Working Capital Line of Credit. (i) Subject to the terms hereof, Bank
agrees to extend a revolving line of credit (the "Working Capital Revolver") to
Borrower, in the original principal amount of One Million Dollars ($1,000,000),
for the purpose of financing the Borrower's general working capital needs. The
Working Capital Revolver will be available during the period commencing on the
date hereof and continuing until November 30, 1998 (which date, as extended in
accordance with the terms hereof, shall be the "Maturity Date"). Borrower may
from time to time borrow, repay and re-borrow, subject to the Borrowing Base
Agreement and the Borrowing Base. As a condition of any advance under the
Working Capital Revolver, Borrower shall inform Bank as to the purpose and
intended use of such advance. Borrower shall execute and deliver to Bank a
promissory note (the "Working Capital Note") in the principal amount of
$1,000,000, which Working Capital Note shall bear interest and be payable in
accordance with the terms set forth herein below.
(ii) Interest and Principal. Interest on the principal amount outstanding
under the Working Capital Revolver from time to time shall accrue at the rate of
the Prime Rate, plus one-half percent (1/2%) per annum, which accrued interest
shall be payable monthly in arrears. The principal of the Working Capital Note
shall be repaid in full, if not sooner paid, on the Maturity Date, together with
all accrued but unpaid interest thereon.
5
<PAGE>
(iii) Fees. Borrower shall pay to Bank a commitment fee in the amount of
one and one-half percent (1 1/2%) of the principal amount of the Working Capital
Revolver at the closing thereof. Borrower shall also pay Bank, quarterly as
invoiced by Bank, an availability fee in the amount of one-quarter percent
(1/4%) of the average unused amount of the Working Capital Revolver.
(iv) Collateral Security. Repayment in full of the Working Capital
Revolver shall be secured by all Accounts Receivable, Inventory and Equipment of
Borrower, now owned or hereafter acquired, including all proceeds thereof.
C. Capital Expenditures Line of Credit. (i) Subject to the terms hereof,
the Bank may, in its sole discretion, extend an additional uncommitted revolving
line of credit (the "Capex Revolver") to Borrower, in the original principal
amount of One Million Dollars ($1,000,000), for the purpose of financing the
Borrower's capital expenditures. Advances and readvances under the Capex
Revolver will be made available to the Borrower in the Bank's sole discretion,
subject to the Bank's satisfaction with the Borrower's financial condition and
with the purpose and intended use of the loan proceeds by the Borrower. Borrower
may repay advances under the Capex Revolver at any time prior to the Maturity
Date. Any advances under the Capex Revolver that are not sooner paid shall be
payable in full on November 30, 1998 (which date, as extended in accordance with
the terms hereof, shall be the "Maturity Date"). Borrower shall execute and
deliver to Bank a promissory note (the "Capex Note") in the principal amount of
$1,000,000, which Capex Note shall bear interest and be payable in accordance
with the terms set forth herein below.
(ii) Interest and Principal. Interest on the principal amount outstanding
under the Capex Revolver from time to time shall accrue at the rate of the Prime
Rate, plus one-half percent (1/2%) per annum, which accrued interest shall be
payable monthly in arrears. The principal of the Capex Note shall be repaid in
full, if not sooner paid, on the Maturity Date, together with all accrued but
unpaid interest thereon.
(iii) Fees. Borrower shall pay to Bank a commitment fee in the amount of
one and one-half percent (1 1/2%) of the principal amount of each advance under
the Capex Revolver at the time such advance is made.
(iv) Collateral Security. Repayment in full of the Capex Revolver shall
be secured by all Accounts Receivable, Inventory and Equipment of Borrower, now
owned or hereafter acquired, including all proceeds thereof.
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<PAGE>
D. Acquisition Loan. (i) Subject to the terms hereof, Bank agrees to
extend a short-term loan (the "Acquisition Loan") to Borrower, in the original
principal amount of Four Million Dollars ($4,000,000), for the purpose of
providing a portion of the funds to finance the acquisition by Borrower and
Platinum of certain assets of USA Cylinder Exchange, Inc. The proceeds of the
Acquisition Loan will be available to Borrower at the closing of such
acquisition. To evidence the Acquisition Loan, Borrower shall execute and
deliver to Bank a promissory note (the "Acquisition Note") in the principal
amount of $4,000,000, which Acquisition Note shall bear interest and be payable
in accordance with the terms set forth herein below.
(ii) Interest and Principal. Interest on the principal amount outstanding
under the Acquisition Loan from time to time shall accrue at the rate of the
Prime Rate, plus one-half percent (1/2%) per annum, which accrued interest shall
be payable monthly in arrears. The principal of the Acquisition Note shall be
repaid in consecutive equal quarterly installments of $250,000 each, together
with accrued interest thereon, commencing May 1, 1998 and continuing on the
first day of each consecutive quarterly period thereafter, with a final payment
of all remaining principal and accrued but unpaid interest on November 30, 1998.
(iii) Fees. Borrower shall pay to Bank a commitment fee in the amount of
one and one-half percent (1 1/2%) of the principal amount of the Acquisition
Loan at the closing thereof.
(iv) Collateral Security. Repayment in full of the Acquisition Loan shall
be secured by all Accounts Receivable, Inventory and Equipment of Borrower, now
owned or hereafter acquired, including all proceeds thereof.
E. Other Interest Rate Provisions Applicable to the Loans.
(a) Following the completion of an initial public offering of capital
stock by the Borrower, Bank agrees that it will, upon the Borrower's request,
convert the interest rate applicable to the Loans to a LIBOR-based rate. Such
rate will vary, according to the Borrower's compliance with certain financial
ratios, as set forth below, as computed by the Borrower's certified public
accountants, in a manner reasonably acceptable to the Bank. The financial ratios
shall be calculated annually and, if satisfied, shall apply to the Loans during
the next succeeding year. At any time that the Borrower does not meet the
requirements of such financial ratios, however, the interest rate will be or
revert to the rate of the Bank's Prime Rate plus one-half percent. It is further
provided that the Borrower must be in compliance with all of the terms and
provisions of this Agreement to receive the following rates:
7
<PAGE>
<TABLE>
<CAPTION>
Debt
If Funded Debt/ to Tangible Then the Rate
EBITDA is: Net Worth is: will be:
- -------------------------------------------------------------------------------
<S> <C> <C>
(a) less than or equal 2.0 or less, LIBOR + 175 basis
to 2.5; and points
(b) less than or equal 1.5 or less, LIBOR + 150 basis
to 2.0; and points
(c) less than or equal 1.0 or less, LIBOR + 125 basis
to 1.5; and points
</TABLE>
(b) Borrower shall also have the option to fix the interest rate on all or
any portion of the Loans, at any time, through the use of a Hedge Agreement
purchased from the Bank at the market rate for such products. For purposes
hereof, a "Hedge Agreement" means any agreement between Borrower and Bank, or
any affiliate of Bank, now existing or hereafter entered into, which provides
for an interest rate or commodity swap, cap, floor, collar, forward foreign
exchange transaction, currency swap, cross-currency swap, currency option, or
any combination of, or option with respect to, these or similar transactions,
for the purpose of hedging Borrower's exposure to fluctuations in interest
rates, currency valuations or commodity prices. Notwithstanding any other terms
of this Agreement, any loan subject to a Hedging Agreement shall be prepayable
only in accordance with, and subject to any fees imposed under, the terms of
such Hedging Agreement.
3. COLLATERAL SECURITY; SUBORDINATIONS. (i) Payment and performance of
the Notes shall be secured by the collateral security for such Notes described
above, and the Borrower hereby grants, conveys, transfers and assigns to the
Bank a security interest in and lien upon all of such Collateral for such Notes.
All Obligations of the Borrower to the Bank pursuant to the Revolver Note, the
Working Capital Note, the Capex Note and the Acquisition Note shall be cross-
collateralized, such that all Collateral for any such Note shall be deemed to
secure all such Notes.
Borrower further agrees to pledge and assign to Bank all of its right,
title and interest in and to all indebtedness due from shareholders, Affiliates
and related companies including, without limitation, that certain promissory
note made by Platinum payable to Borrower, dated June 30, 1997, in the original
principal amount of $1,733,648, as additional collateral security for the Loans.
(ii) Borrower further agrees that all indebtedness due to shareholders,
Affiliates and related companies, now existing or hereafter incurred, including,
without limitation, Platinum and Platinum Venture Partners, shall be
subordinated, both as to right and priority of payment, to the prior payment in
full of all
8
<PAGE>
indebtedness of Borrower to the Bank. Borrower shall cause each Person to whom
such indebtedness is owed to acknowledge such subordination, in form
satisfactory to Bank. It is expressly provided, however, that notwithstanding
the aforesaid subordination, Borrower may repay such subordinated indebtedness
following any public offering by the Borrower if, at the same time, the
Borrower's indebtedness to the Bank is also repaid in full.
(iii) Borrower agrees and undertakes to execute and deliver to the Bank
such security agreements, pledge agreements, assignments, financing statements,
subordinations, certificates, waivers, estoppel agreements, and other
documentation, in form acceptable to the Bank, as may be requested by the Bank
in connection with the Collateral.
4. GUARANTORS. Payment in full of the Loans, together with all accrued
interest, fees and other charges applicable thereto, shall be guaranteed,
jointly and severally, by Billy D. Prim and American Oil and Gas Company,
pursuant to guaranty agreements in form satisfactory to the Bank. It is
expressly provided, however, that each of the guarantees of such Guarantors
shall be limited to a principal amount of $6,000,000, together with interest
thereon and fees applicable thereto. The Guarantors further agree to maintain,
at all times that the Loans remain unpaid, combined liquidity in the amount of
not less than $2,500,000. For purposes hereof, "liquidity" shall mean cash, cash
equivalents and readily-marketable securities owned by such Guarantors that are
not pledged, subject to any lien, restricted or encumbered in any fashion.
5. CONDITIONS PRECEDENT. The Bank's agreement to extend the Loans to the
Borrower is subject to the fulfillment, to the Bank's satisfaction, of all of
the following conditions:
A. Bank shall have received, on or before the date hereof (i) a copy of
the resolutions of the Board of Directors of the Borrower, certified on such
date by an officer of the Borrower, authorizing the execution and delivery of
this Agreement, the borrowings hereunder and the execution and delivery of the
Revolver Note, the Working Capital Note, the Capex Note, the Acquisition Note,
the other Loan Documents and the Collateral, and (ii) such additional documents
and requirements as the Bank or counsel for the Bank may reasonably request.
B. Bank shall have received, on or before the date hereof (i) a copy of
the resolutions of the Board of Directors of American Oil and Gas Company,
certified on such date by an officer of such Guarantor, authorizing the
execution and delivery of the guaranty agreement for such Guarantor, and (ii)
such additional documents and requirements as the Bank or counsel for the Bank
may reasonably request.
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<PAGE>
C. The Borrower and the Guarantors shall have executed and delivered all
documentation for the Loans and the guaranties, as requested by the Bank, which
shall be in form and content reasonably acceptable to the Bank and its counsel.
D. The Borrower shall have provided to the Bank, in form satisfactory to
the Bank, all financial and other information requested by Bank as to its
business and affairs of Borrower, the business and affairs of Platinum, and the
personal financial condition of Billy D. Prim.
E. The Borrower shall have provided to the Bank, in form and content
satisfactory to the Bank and its counsel, satisfactory evidence that the
Borrower is a corporation duly organized, validly existing and in good standing
under the laws of the State of North Carolina, and has the corporate and legal
authority to own its property and carry on its business as now being conducted.
F. All terms and conditions of the Bank's commitment letter to the
Borrower for the Loans have been satisfied and fulfilled, to the reasonable
satisfaction of the Bank.
G. No event has occurred or failed to occur that would have a Material
Adverse Effect on the financial condition of the Borrower as set forth in its
most recent annual financial statements and internally-prepared quarterly
financial statements submitted to Bank.
H. The Borrower shall have certified that the execution of the Loan
Documents shall not cause any default under any other contract or agreement to
which the Borrower is subject.
I. The Bank shall have conducted, or caused to be conducted, an audit of
the Borrower's Accounts Receivable, with results that are satisfactory to the
Bank in its sole discretion.
6. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants
to Bank as follows:
A. Good Standing. Borrower is a corporation, duly organized, validly
existing and in good standing under the laws of the State of North Carolina and
has the power and authority to own its property and to carry on its business in
each jurisdiction in which Borrower does business.
B. Authority and Compliance. Borrower has full power and authority
to execute and deliver the Loan Documents and to incur and perform the
obligations provided for therein, all of which have been duly authorized by all
proper and necessary action of the appropriate governing body of Borrower,
respectively. No consent or approval of any public authority or other third
party is
10
<PAGE>
required as a condition to the validity of any Loan Document, and Borrower is in
compliance with all laws and regulatory requirements to which it is subject.
C. Binding Agreement. This Agreement and the other Loan Documents
executed by Borrower constitute valid and legally binding obligations of
Borrower, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, reorganization and similar laws and other laws generally affecting
the enforceability of Creditors rights and to general principles of equity.
D. Litigation. There is no proceeding involving Borrower pending or,
to the knowledge of Borrower, threatened before any court or governmental
authority, agency or arbitration authority, except as disclosed to Bank in
writing and acknowledged by Bank prior to the date of this Agreement.
E. No Conflicting Agreements. There is no charter, bylaw, stock
provision, partnership agreement or other document pertaining to the
organization, power or authority of Borrower and no provision of any existing
agreement, mortgage, indenture or contract binding on Borrower or affecting its
property, which would conflict with or in any way prevent the execution,
delivery or carrying out of the terms of this Agreement and the other Loan
Documents.
F. Ownership of Assets. Borrower has good title to its assets, and
its assets are free and clear of liens, except those granted to Bank and as
disclosed to Bank in writing prior to the date of this Agreement
G. Taxes. All material taxes and assessments due and payable by
Borrower have been paid or are being contested in good faith by appropriate
proceedings and Borrower has filed all material tax returns which it is
required to file.
H. Financial Statements. The financial statements of Borrower
heretofore delivered to Bank have been prepared in accordance with GAAP applied
on a consistent basis throughout the period involved and fairly present
Borrower's financial condition as of the date or dates thereof, and there has
been no material adverse change in Borrower's financial condition or operations
since July 31, 1997. To the best of its knowledge, all factual information
furnished by Borrower to Bank in connection with this Agreement and the other
Loan Documents is and will be accurate and complete on the date as of which such
information is delivered to Bank.
I. Place of Business. Borrower's chief executive office is located
at: 104 Cambridge Plaza Drive, Winston-Salem, North Carolina 27104.
11
<PAGE>
J. Environmental Matters. The conduct of Borrower's business
operations does not and will not violate any federal laws, rules or ordinances
for environmental protection, regulations of the Environmental Protection
Agency, any applicable local or state law, rule, regulation or rule of common
law or any judicial interpretation thereof relating primarily to the
environment or Hazardous Materials, and Borrower will not use or permit any
other party to use any Hazardous Materials at Borrower's places of business
except such materials as are incidental to Borrower's normal course of business,
maintenance and repairs and which are handled in compliance with all applicable
environmental laws. Borrower agrees to permit Bank, its agents, contractors and
employees to enter and inspect any of Borrower's places of business or any other
property of Borrower at any reasonable times upon three (3) days prior notice
for the purposes of conducting an environmental investigation and audit
(including taking physical samples) to insure that Borrower is complying with
this covenant and Borrower shall reimburse Bank on demand for the costs of any
such environmental investigation and audit. Borrower shall provide Bank, its
agents, contractors, employees and representatives with access to and copies of
any and all data and documents relating to or dealing with any Hazardous
Materials used, generated, manufactured, stored or disposed of by Borrower's
business operations within five (5) days of the request therefor.
K. No Material Adverse Effect. To the best of the Borrower's
knowledge, neither this Agreement nor any of the Loan Documents, nor any
statements furnished to the Bank by or on behalf of the Borrower in connection
with the Loans or the Loan Documents, contain any untrue statement of a
material fact. To the best knowledge of the Borrower, there is no fact that the
Borrower has not disclosed to the Bank in writing that would have a Material
Adverse Effect.
L. Continuation of Representation and warranties. All
representations and warranties made under this Agreement shall be deemed to be
made at and as of the date hereof and at and as of the date of any future
advance under any Loan (except insofar as such representations and warranties
relate expressly to an earlier date, and except for the representations and
warranties in Section 6. D and H, which shall be deemed to be made solely on the
date of this Agreement).
7. AFFIRMATIVE COVENANTS. Until full payment and performance of all
Obligations of Borrower under the Loan Documents, Borrower will, unless Bank
consents otherwise in writing (and without limiting any requirement of any other
Loan Document):
12
<PAGE>
A. Financial Condition. Maintain Borrower's financial condition as
follows, determined in accordance with GAAP applied on a consistent basis
throughout the period involved except to the extent modified by the following
definitions:
(i) Achieve a Tangible Net Worth, plus subordinated debt, of not less
than $25,000,000 as of October 31, 1998.
(ii) Achieve EBITDA that is not less than:
(a) ($500,000) for the three months ending January 31, 1998;
(b) $-0- for the three months ending April 30, 1998;
(c) $1,600,000 for the three months ending July 31, 1998; and
(d) $1,750,000 for the three months ending October 31, 1998.
B. Financial Statements and Other Information. Maintain a system of
accounting satisfactory to Bank and in accordance with GAAP applied on a
consistent basis throughout the period involved, permit Bank's officers or
authorized representatives to visit and inspect Borrower's books of account and
other records at such reasonable times and as often as Bank may desire. Borrower
shall pay the reasonable fees and disbursements of any accountants or other
agents of Bank selected by Bank for the foregoing purposes one time each year
during the term of the Loans. Unless written notice of another location is given
to Bank, Borrower's books and records will be located at Borrower's chief
executive office set forth above. All financial statements called for below
shall be prepared in form and content acceptable to Bank and by independent
certified public accountants acceptable to Bank.
In addition, Borrower will:
(i) Furnish to Bank audited financial statements of Borrower for each
fiscal year of Borrower, within 120 days after the close of each such fiscal
year.
(ii) Furnish to Bank quarterly financial statements (including a balance
sheet and profit and loss statement) of Borrower, which shall be prepared by
Borrower, for each quarter of each fiscal year of Borrower, within 30 days after
the close of each such period.
(iii) Furnish to Bank a compliance certificate for (and executed by an
authorized representative of) Borrower concurrently with and dated as of the
date of delivery of each of the financial statements as required in paragraphs i
and ii above, containing (a) a certification that the financial statements of
even date are true and correct and that the Borrower is not in default under the
terms of this Agreement, and (b) computations and conclusions, in such
13
<PAGE>
detail as Bank may request, with respect to compliance with this Agreement, and
the other Loan Documents, including computations of all quantitative covenants.
Such compliance certificates shall be substantially in the form of Exhibit B
attached hereto.
(iv) Furnish to Bank promptly such additional information, reports and
statements respecting the business operations and financial condition of
Borrower, from time to time, as Bank may reasonably request.
C. Insurance. Except as otherwise provided herein, maintain
insurance with insurance companies reasonably acceptable to the Bank on such of
its properties, in such amounts and against such risks as is customarily
maintained by similar businesses operating in the same vicinity, specifically to
include fire and extended coverage insurance covering all assets, business
interruption insurance, and liability insurance, all to be with such companies
and in such amounts as are satisfactory to Bank. Satisfactory evidence of such
insurance will be supplied to Bank prior to funding under the Loans and 30 days
prior to each policy renewal. Bank acknowledges and agrees that Borrower is
self-insured for collision damage on all vehicles constituting equipment; that
it requires its lessees to maintain collision insurance on all vehicles
constituting inventory held for lease, which insurance names the Borrower as
loss payee; and that it is self-insured for workers compensation insurance.
Borrower agrees that it will notify Bank immediately if separate insurance
coverage is hereafter purchased by Borrower covering such risks, such insurance
to be subject to the terms of this section.
D. Existence and Compliance. Maintain its existence, good standing
and qualification to do business, where required and comply with all laws,
regulations and governmental requirements including, without limitation,
environmental laws applicable to it or to any of its property, business
operations and transactions.
E. Adverse Conditions or Events. Promptly advise Bank in writing of
(i) any condition, event or act which comes to its attention that would or
might have a Material Adverse Effect on Borrower's financial condition or
operations, the Collateral, or Bank's rights under the Loan Documents, (ii)
any litigation filed by or against Borrower seeking in excess of $50,000 in
damages, (iii) any event that has occurred that would constitute an event of
default under any Loan Documents and (iv) any uninsured or partially uninsured
loss through fire, theft, liability or property damage in which the uninsured
damages are in excess of an aggregate of $100,000.00.
F. Taxes and Other Obligations. Pay all of its taxes, assessments
and other obligations, including, but not limited to taxes, costs or other
expenses arising out of this transaction, as
14
<PAGE>
the same become due and payable, except to the extent the same are being
contested in good faith by appropriate proceedings in a diligent manner.
G. Maintenance. Maintain all of its tangible property in good
condition and repair, except for those properties deemed to be obsolete by the
Borrower, and make all necessary replacements thereof, and preserve and maintain
all licenses, trademarks, privileges, permits, franchises, certificates and the
like necessary for the operation of its business.
H. Notification of Environmental Claims. Borrower shall immediately
advise Bank in writing of (i) any and all enforcement, cleanup, remedial,
removal, or other governmental or regulatory actions instituted, completed or
threatened pursuant to any applicable federal, state, or local laws, ordinances
or regulations relating to any Hazardous Materials affecting Borrower's business
operations; and (ii) all claims made or threatened by any third party against
Borrower relating to damages, contribution, cost recovery, compensation, loss or
injury resulting from any Hazardous Materials. Borrower shall immediately notify
Bank of any remedial action taken by Borrower with respect to Borrower's
business operations.
8. NEGATIVE COVENANTS. Until full payment and performance of all
obligations of Borrower under the Loan Documents, Borrower will not, without the
prior written consent of Bank (and without limiting any requirement of any other
Loan Documents):
A. Ownership and Management. Make or permit to be made any material
change in the ownership or executive management of the Borrower; provided,
however, that the Borrower shall not be prohibited by this covenant from
conducting an initial public offering of its capital stock.
B. Transfer of Assets or Control. Sell, lease, sell and leaseback,
assign or otherwise dispose of or transfer any assets, except in the normal
course of its business, or enter into any merger or consolidation, or transfer
control or ownership of the Borrower, or form or acquire any subsidiary,
except for a wholly-owned subsidiary which has executed a guaranty of the
Loans, in form satisfactory to the Bank. Notwithstanding the foregoing, however,
Borrower may dispose of assets formerly used in its distribution business having
an aggregate value of up to $250,000 during the first year after the date
hereof, and up to $50,000 in any subsequent year.
C. Liens. Grant, suffer or permit any contractual or noncontractual
lien on or security interest in its assets, except in favor of Bank, or fail to
promptly pay when due all lawful claims, whether for labor, materials or
otherwise.
15
<PAGE>
D. Extensions of Credit. Make any loan or advance to any individual,
partnership, corporation or other entity, except (i) as previously disclosed to
Bank in writing, and (ii) other loans, not in excess of an aggregate principal
amount of $300,000, in connection with acquisitions made by the Borrower.
E. Borrowings. Create, incur, assume or become liable in any manner
for any indebtedness (for borrowed money, deferred payment for the purchase of
assets, lease payments, as surety or guarantor for the debt for another, or
otherwise), other than to Bank, except for normal trade debts incurred and
capital leases entered into in the ordinary course of Borrower's business, and
except for existing indebtedness disclosed to Bank in writing and acknowledged
by Bank prior to the date of this Agreement. Borrower shall also be permitted to
incur indebtedness to Affiliates, shareholders or related companies hereafter,
as long as the incurrence of such indebtedness is disclosed to Bank and all such
indebtedness is fully subordinated to Borrower's indebtedness to Bank, in form
satisfactory to Bank.
F. Dividends and Distributions. At any time Borrower is in default
under this Agreement, or would be in default following or as a result thereof,
make any distribution (other than dividends payable in capital stock of
Borrower) on any shares of any class of its capital stock, or apply any of its
property or assets to the purchase, redemption or other retirement of any shares
of any class of capital stock of Borrower, or in any way amend its capital
structure.
G. Character of Business. Change the general character of business
as conducted at the date hereof, or engage in any type of business not
reasonably related to its business as presently conducted.
9. DEFAULT. Borrower shall be in default under this Agreement and under
each of the other Loan Documents (an "Event of Default") if it shall default in
the payment of any amounts due and owing under the Loans, or any of them.
Borrower shall also be in default if it should fail to timely and properly
observe, keep or perform any term, covenant, agreement or condition in any Loan
Document or in any other loan agreement, promissory note, security agreement,
deed of trust, assignment, pledge or other contract securing or evidencing
payment of any indebtedness of Borrower to Bank or any affiliate or subsidiary
of NationsBank Corporation, and such default shall continue uncured for a period
of thirty (30) days. Additionally, it shall constitute an Event of Default
hereunder if the Borrower does not complete an initial public offering of its
capital stock on or before July 31, 1998 and the Borrower's year to date EBITDA
as of such date has resulted in losses greater than $450,000.
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<PAGE>
10. REMEDIES UPON DEFAULT. If an Event of Default shall occur, Bank
shall have all rights, powers and remedies available under each of the Loan
Documents as well as all rights and remedies available at law or in equity.
11. NOTICES. All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to the other party at the following
address:
Borrower: Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
ATTN: Mark Casteneda
Chief Financial Officer
Bank: NationsBank, N.A.
380 Knollwood Street
Winston-Salem, NC 27103
ATTN: Simpson O. Brown, Jr.
Senior Vice President
or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or made
as follows:
A. If sent by hand delivery, upon delivery;
B. If sent by mail, upon the earlier of the date of receipt or five
(5) days after deposit in the U.S. Mail, first class postage prepaid.
12. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Bank
immediately upon demand the full amount of all costs and expenses, including
reasonable attorneys fees, incurred by Bank in connection with Bank's collection
of, or attempts to collect, any Obligations due hereunder or under the Notes.
13. MISCELLANEOUS. Borrower and Bank further covenant and agree as
follows, without limiting any requirement of any other Loan Document:
A. Cumulative Rights and No Waiver. Each and every right granted to
Bank under any Loan Document, or allowed it by law or equity shall be cumulative
of each other and may be exercised in addition to any and all other rights of
Bank, and no delay in exercising any right shall operate as a waiver thereof,
nor shall any single or partial exercise by Bank of any right preclude any other
or future exercise thereof or the exercise of any other right. Borrower
expressly waives any presentment, demand, protest or other notice of any kind,
including but not limited to notice of
17
<PAGE>
intent to accelerate and notice of acceleration. No notice to or demand on
Borrower in any case shall, of itself, entitle Borrower to any other or future
notice or demand in similar or other circumstances.
B. Applicable Law. This Loan Agreement and the rights and
obligations of the parties hereunder shall be governed by and interpreted in
accordance with the laws of the State of North Carolina and applicable federal
law.
C. Amendment. No modification, consent, amendment or waiver of any
provision of this Loan Agreement, nor consent to any departure by either party
therefrom, shall be effective unless the same shall be in writing and signed by
each party, and then shall be effective only in the specified instance and for
the purpose for which given. This Loan Agreement is binding upon Borrower, its
successors and assigns, and inures to the benefit of Bank, its successors and
assigns; however, no assignment or other transfer of Borrower's rights or
obligations hereunder shall be made or be effective without Bank's prior written
consent, nor shall it relieve Borrower of any obligations hereunder. There is no
third party beneficiary of this Loan Agreement.
D. Documents. All documents, certificates and other items required
under this Loan Agreement to be executed and/or delivered to Bank shall be in
form and content satisfactory to Bank and its counsel.
E. Partial Invalidity. The unenforceability or invalidity of any
provision of this Loan Agreement shall not affect the enforceability or validity
of any other provision herein and the invalidity or unenforceability of any
provision of any Loan Document to any person or circumstance shall not affect
the enforceability or validity of such provision as it may apply to other
persons or circumstances.
F. Indemnification. Borrower shall indemnify, defend and hold Bank
and its successors and assigns harmless from and against any and all claims,
demands, suits, losses, damages, assessments, fines, penalties, costs or other
expenses (including reasonable attorneys' fees and court costs) ("Indemnified
Damages") arising from or in any way related to any of the transactions
contemplated hereby, except Indemnified Damages occurring as a result of willful
or negligent conduct of the Bank, including but not limited to actual or
threatened damage to the environment, agency costs of investigation, personal
injury or death, or property damage, due to a release or alleged release of
Hazardous Materials, arising from Borrower's business operations, any other
property owned by Borrower or in the surface or ground water arising from
Borrower's business operations, or gaseous emissions arising from Borrower's
business operations or any other condition
18
<PAGE>
existing or arising from Borrower's business operations resulting from the use
or existence of Hazardous Materials, whether such claim proves to be true or
false. Borrower further agrees that its indemnity obligations shall include, but
are not limited to, liability for damages resulting from the personal injury or
death of an employee of the Borrower, regardless of whether the Borrower has
paid the employee under the worker's compensation laws of any state or other
similar federal or state legislation for the protection of employees. The term
"property damage" as used in this paragraph includes, but is not limited to,
damage to any real or personal property of the Borrower, the Bank, and of any
third parties. The Borrower's obligations under this paragraph shall survive the
repayment of the Loans and foreclosure of the Collateral.
G. Survivability. All covenants, agreements, representations and
warranties made herein or in the other Loan Documents shall survive the making
of the Loans and shall continue in full force and effect so long as the Loans
are outstanding or the obligation of the Bank to make any advances under the
Loans shall not have expired.
H. Updated Appraisals and Maintenance of Collateral Value. Bank may
at its option, at Borrower's expense, obtain an appraisal of the Collateral
securing payment of the Loans. The costs of each such appraisal shall be payable
by Borrower to Bank on demand. If such appraisal shows the market value of the
Collateral has declined, Borrower agrees that, upon demand by Bank, it will
immediately either pledge additional collateral in form and substance
satisfactory to Bank or make such payments as shall be necessary to reduce the
principal balance outstanding under the Loan.
14. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
HERETO, INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON
OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN
ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE
APPLICABLE STATE LAW). THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION
OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE, INC., OR ANY SUCCESSOR THEREOF
("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY
INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION
AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS
AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO
COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES
IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
19
<PAGE>
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY
OF THE BORROWER'S DOMICILE AT TIME OF THE EXECUTION OF THIS AGREEMENT AND
ADMINISTERED BY J.A.M.S., WHICH WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS
UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE
AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE
COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR
SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF
SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION
SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE
STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR
(II) BE A WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC.
91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE
BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO)
SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR
(C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT
LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A
RECEIVER. THE BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
AGREEMENT. NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR
MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES
SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN
ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING
RESORT TO SUCH REMEDIES.
15. NO ORAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.
[Signatures appear on following page.]
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.
BORROWER:
--------
BLUE RHINO CORPORATION
ATTEST: By: /s/ BILLY D. PRIM
------------------------------
- ------------------------------ Title: CEO
Secretary ---------------------------
[Corporate Seal]
BANK:
----
NATIONSBANK, N.A.
By:
------------------------------
Title:
---------------------------
21
<PAGE>
EXHIBIT A
BORROWING BASE AGREEMENT
1. Borrowing Base. The aggregate principal amount of all amounts from
time to time advanced pursuant to the terms of that promissory note dated
December __ , 1997 in the principal amount of $3,000,000 (the "Revolver Note")
and that promissory note dated December __, 1997 in the principal amount of
$1,000,000 (the "Working Capital Note") shall not exceed the Maximum Amount.
"Maximum Amount" shall mean the lesser of $4,000,000 or the
Borrowing Base. The "Borrowing Base" at any time, shall be equal to 80% of
Eligible Accounts Receivable, plus overadvances up to $1,000,000.
"Eligible Accounts Receivable" shall mean all accounts receivable of
Borrower which have been created in the ordinary course of Borrower's business
and for which Borrower's right to receive payment is absolute and not contingent
upon the fulfillment of any condition whatsoever, and shall not include:
(i) any invoice which is more than ninety (90) days past due;
(ii) any account for which there exists a right of set off, defense
or discount (except regular discounts allowed in the ordinary course of business
to promote prompt payment) and for which no defense or counterclaim has been
asserted;
(iii) any account which represents an obligation of any local, state
or federal governmental agency or entity;
(iv) any account which arises out of a contract or order which, by
its terms, forbids or makes void or unenforceable any assignment by Borrower to
Bank of the account receivable arising with respect thereto;
(v) any account arising from a "sale on approval," "sale or
return," "consignment," or subject to any other repurchase or return agreement;
(vi) any account which represents an obligation of a customer which
is not a resident of the United States or its territories unless such account is
supported by a letter of credit in form and substance acceptable to Bank;
(vii) any account which arises from the sale or lease to or
performance of services for, or represents an obligation of, an employee,
affiliate, partner, parent or subsidiary of Borrower;
(viii) any account which represents an obligation of a customer of
Borrower when 80% or more of Borrower's accounts from such customer are not
eligible pursuant to the foregoing formula; and
(ix) any unapplied credits over 90 days old.
"Accounts Receivable" shall mean all of the Borrower's accounts,
instruments, contract rights, chattel paper, document, and general intangibles
arising from the sale of goods and/or the rendition of services by the Borrower
in the ordinary course of business, and the proceeds thereof and all security
and guaranties therefor, whether now existing or hereafter created, and all
returned, reclaimed or repossessed goods, and all books and records pertaining
to the foregoing.
22
<PAGE>
2. Advances. The amounts of advances under the Revolver Note shall be
determined consistent with the value of the Eligible Accounts Receivable, taking
into account all fluctuations of the value thereof. The Bank shall be under no
obligation to make any advance to Borrower in excess of the limitations stated
above.
3. Reporting. In addition to any reporting requirements required under
the Loan Agreement to which this Borrowing Base Agreement is attached, the
borrower will submit the following in form and substance satisfactory to Bank:
(i) Accounts Receivable Aging. Not later than forty-five (45) days
after the end of each fiscal quarter, Borrower will submit a borrowing Base
Certificate in the form attached hereto as Exhibit A-1.
4. [x]Lock box Arrangement. Bank and Borrower shall, upon request of
Bank, establish and maintain one or more special lock box or blocked accounts
for the collection of the Accounts Receivables. Each such special account shall
be with a bank satisfactory to the Bank (which may be an affiliate of the Bank)
and shall be subject to the Bank's standard form agreement. Any checks or other
remittances against Accounts Receivables which are received by the Borrower
shall be held in trust for the Bank and turned over by the borrower to the Bank
or to a person designated by the Bank in the identical form received (except for
any necessary endorsement) as speedily as possible.
5. Mandatory Payment. In the event the aggregate principal outstanding
balance of advances under the Revolver Note exceeds the Maximum Amount, Borrower
shall immediately and without notice or demand of any kind, make such payments
as shall be necessary to reduce the principal balance of the Revolver Note below
the Maximum Amount.
Borrower: Bank:
BLUE RHINO CORPORATION NATIONSBANK, N.A.
By: /s/ Mark Castaneda By:
------------------------ (Seal) --------------------------
Name: Mark Castaneda Name:
----------------------- -------------------------
Title: CFO Title:
--------------------- -----------------------
<PAGE>
EXHIBIT B
COMPLIANCE CERTIFICATE
----------------------
This Compliance Certificate is delivered pursuant to Section 6(B)(iii) of
the Loan Agreement dated as of December __, 1997 (together with all amendments
and modifications, if any, from time to time made thereto, the "Loan
Agreement"), between Blue Rhino Corporation (the "Borrower") and NationsBank,
N.A. The covenants set forth below apply to the Borrower under the Loan
Agreement. Unless otherwise defined, terms used herein (including the
attachments hereto) have the meanings provided in the Loan Agreement.
The undersigned, being the duly elected, qualified and acting Chief
Financial Officer of the Borrower, on behalf of the Borrower and solely in his
or her capacity as an officer of the Borrower, hereby Certifies and warrants
that:
1. He/she is the Chief Financial Officer of the Borrower and that, as
such, he/she is authorized to execute this certificate on behalf of the
Borrower.
2. As of ___________________, 19__:
(a) Tangible Net Worth plus subordinated debt was $_________________;
(b) Borrower's EBITDA for the three months ending as of such
date was $_________________.
(c) The Borrower was not in default of any of the provisions of the
Loan Agreement during the period as to which this Compliance
Certificate relates;
IN WITNESS WHEREOF, the undersigned has executed and delivered this
certificate, this ______________ day of _______________, 19__.
BLUE RHINO CORPORATION
By:___________________________________
Title: Chief Financial Officer
<PAGE>
Blue Rhino Corporation
Schedule of Indebtedness
As of November 30, 1997
-----------------------
Notes Payable
Equipment
AT&T $ 17,953.70
Heller Financial Corp 8,843.91 26,797.61
-----------
Capital Leases
Handhelds
Nelco 64,561.15
Leasing Innovations 118,470.51
GreenTree 80,675.46 263,707.12
-----------
Suburban Propane 60,450.00
Senior Discount Notes 15,644,715.38
--------------
Total $15,995,670.11
==============
<PAGE>
TAXES
The Company previously and currently owned display racks and other property
which was used in counties throughout the United States. In connection with the
ownership and use of these display racks and other property, the Company never
paid any county, local or other municipal property tax. Most of this property
has been sold or leased to the Company's distributors who are now responsible
for the filing and payment of local property taxes in the future. However, given
the small amount of the total tax liability compared with the expense in
preparing the tax filings, the Company has determined that it is in its best
interest not to file returns unless it receives a tax assessment by a county or
other municipalities. The Company has reserved approximately $30,000 for these
tax liabilities which it believes is an adequate amount.
<PAGE>
EXHIBIT A-1
BORROWING BASE CERTIFICATE
Status as of ___________________, 19___.
In accordance with the terms of the Borrowing Base Agreement attached as Exhibit
A to that Loan Agreement dated December ___, 1997, by and between blue Rhino
Corporation and NationsBank, N.A., we hereby represent and warrant as follows:
1. Total Accounts Receivable $_____________________
2. Less ineligible accounts receivable
(as set forth in the borrowing Base
Agreement) $_____________________
3. Eligible Accounts Receivable $_____________________
4. a. 80% of Eligible Accounts Receivable, $_____________________
b. plus, up to $1,000,000 overadvance, $_____________________
c. = Total Available: $_____________________
5. Maximum loan amount $4,000,000.00
6. Outstanding balance as of report date $_____________________
7. Available for further advances (lesser of
line 4 or line 5 minus line 6) $_____________________
8. If line 7 is negative, amount to be
repaid immediately to Bank $_____________________
The undersigned does hereby certify that the foregoing is true and correct.
The undersigned does further acknowledge that the Bank is relying upon this
certificate and any supporting documents to grant or continue to grant credit to
it, and further warrants and represents that no event of default has occurred,
or would, with the passage of time or the giving of notice, or both, occur under
the above-referenced Loan Agreement.
Borrower:
BLUE RHINO CORPORATION
By: /s/ Mark Castaneda
-------------------------------
Name: Mark Castaneda
-----------------------------
Title: CFO
----------------------------
<PAGE>
TAXES
The Company previously and currently owned display racks and other property
which was used in counties throughout the United States. In connection with the
ownership and use of these display racks and other property, the Company never
paid any county, local or other municipal property tax. Most of this property
has been sold or leased to the Company's distributors who are now responsible
for the filing and payment of local property taxes in the future. However, given
the small amount of the total tax liability compared with the expense in
preparing the tax filings, the Company has determined that it is in its best
interest not to file returns unless it receives a tax assessment by a county or
other municipalities. The Company has reserved approximately $30,000 for these
tax liabilities which it believes is an adequate amount.
<PAGE>
EXHIBIT 10.2
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (the "Agreement") is made as of January 1,
1998, by and between Blue Rhino Corporation, a Delaware corporation (the
"Corporation"), and the purhcasers of the notes as set forth on Exhibit A hereto
(collectively referred to therein as the "Purchasers").
The Corporation and the Purchasers hereby agree as follows:
SECTION 1
Authorization, Purchase and Sale of the Note
--------------------------------------------
1.1 Authorization of the Note. The Corporation has authorized the
-------------------------
issuance and sale of four (4) 10.5% Subordinated Notes, due December 31, 2000,
in the aggregate original principal amount of $3,250,000 to the Purchasers, the
form of which Note is attached hereto as Exhibit B (the "Notes").
1.2 Sale and Purchase of the Notes. At the Closing, and subject to the
------------------------------
terms and conditions hereof and in reliance upon the representations, warranties
and agreements contained herein, the Purchasers will each purchase one Note at a
purchase price equal to the principal amount of each of the Notes.
1.3 Issuance of Warrant. At the Closing, and subject to the terms and
-------------------
conditions hereof and in reliance upon the representations, warranties and
agreements contained herein, the Corporation shall issue each of the Purchasers
a warrant to purchase up to one share of Common Stock of the Corporation for
each $3.00 of the initial principal balance of the Note purchased by such
Purchaser as additional consideration for the issuance of the Note. A form of
the Warrant is attached hereto as Exhibit C (the "Warrant").
SECTION 2
Closing, Payment and Delivery
-----------------------------
2.1 Closing Date and Place of Closing. The closing shall be held on
---------------------------------
January 2, 1998 or such other date as the Corporation and the Purchasers may
agree to (the "Closing Date") and shall be conducted by mail or standard courier
service (the "Closing").
2.2 Payment and Delivery. At the Closing, the Purchasers will pay to the
--------------------
Corporation by check or wire funds transfer the entire purchase price of the
Notes and the Corporation will deliver to each of the Purchasers their
respective Note and the Warrant, registered in such name or names as the
Purchasers may reasonably designate.
<PAGE>
2.3 Covenant of Best Efforts and Good Faith. The Corporation and the
---------------------------------------
Purchasers agree to use their respective best efforts and to act in good faith
to cause to occur all conditions to Closing which are in their respective
control.
SECTION 3
Representations and Warranties of the Corporation.
-------------------------------------------------
The Corporation hereby represents and warrants to the Purchasers that:
3.1 Corporate Power, Qualification and Standing. The Corporation is
-------------------------------------------
validly existing and in good standing under the laws of the jurisdiction of
incorporation and is qualified to transact business in each jurisdiction in
which its ownership of property or conduct of activities requires such
qualification. The Corporation has all requisite corporate power and authority
to enter into this Agreement, to sell the Note, to issue the Warrant and to
carry out and perform its other obligations under this Agreement.
3.2 Financial Statements. The Corporation has heretofore delivered to
--------------------
Purchasers the audited financial statements of the Corporation for the fiscal
years ended July 31, 1996 and July 31, 1997 and the unaudited financial
statements of the Corporation for the interim period ended October 31, 1997 (the
"Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as stated in such
Financial Statements or the notes thereto) and fairly present the financial
position of the Corporation and its consolidated subsidiaries as of the dates
thereof and the results of their operations and changes in financial position
for the periods then ended. Except as disclosed by the Corporation in the
Financial Statements or otherwise, since the end of the most recent of said
fiscal years there has been no material adverse change in the business,
financial condition, or results of operations of the Corporation and its
subsidiaries taken together, and there is no existing condition, event or series
of events which can reasonably be expected to adversely affect the business,
financial condition or results of operations of the Corporation and its
subsidiaries taken together, or its ability to perform its obligations under
this Agreement.
3.3 Authorization; No Conflict. Execution and delivery of this Agreement,
--------------------------
issuance and sale of the Note and issuance of the Warrant have been duly
authorized by all necessary corporate action of the Corporation. Performance by
the Corporation of its obligations under this Agreement will not conflict with
or violate (i) the articles of incorporation or bylaws of the Corporation, (ii)
any indenture, loan agreement, lease, mortgage or other agreement binding on the
Corporation, (iii) any order of a court or administrative agency binding on the
Corporation, or (iv) any applicable law or governmental regulation; and such
performance does not and will not require the permission or approval of any
governmental agency, and will not result in the imposition or creation of any
lien or charge against any assets of the Corporation.
2
<PAGE>
3.4 Properties. The Corporation (i) has good title to the properties and
----------
assets reflected in the Financial Statements as owned by them, (ii) have valid
leasehold interests in the properties leased by them, and (iii) own or have the
right to use under valid license agreements all trademarks, trade names,
copyrights, patents and other intellectual property rights regularly utilized by
them; subject in each case to no liens, security interests or adverse claims
except as disclosed in the Financial Statements and liens on substantially all
of the Corporation's assets granted in favor of NationsBank, N.A.
3.5 Litigation. There are no material legal actions, arbitrations, or
----------
administrative proceedings pending against the Corporation or its subsidiaries,
except for the matters disclosed in the Financial Statements.
3.6 Other Matters. The Corporation is not now and will not be after
-------------
giving effect to the receipt of the proceeds from the sale of the Note an
"Investment Company" within the meaning of the Investment Company Act of 1940,
nor will it be controlled by or acting on behalf of any person which is such an
investment company. The Corporation does not own any "margin stock" within the
meaning of Regulation G of the Board of Governors of the Federal Reserve System
and is not selling the Note "for the purpose of purchasing or carrying any
margin stock" within the meaning of said Regulation G.
SECTION 4
Representations and Warranties of the Purchasers
------------------------------------------------
Each of the Purchasers represent and warrant to the Corporation on their
own behalf that:
4.1 Power and Authority. Each of the Purchasers has all requisite power
-------------------
and authority to enter into this Agreement and carry out its obligations
hereunder and has taken all actions necessary to authorize it to enter into this
Agreement and carry out such obligations.
4.2 Investment. Each of the Purchasers is acquiring the Note and Warrant
----------
solely for his own account (and not for the account of others) for investment
and is not being purchased with a view to or for the resale, distribution,
subdivision; or fractionalization thereof; he has no present plans to enter into
any contract, undertaking, agreement, or arrangement relating thereto. Each of
the Purchasers has been afforded the opportunity to discuss the transactions
contemplated hereby with the Corporation and its officers and has had the
opportunity to obtain such information pertaining to the Corporation as has been
reasonably requested. Each of the Purchasers understands that neither the Note,
the Warrant or the Common Stock issuable upon the exercise of the Warrant has
been registered under the Securities Act of 1933 or qualified under any State
blue sky law by reason of specified exemptions therefrom which depend upon,
among other things, the bona fide nature of its investment intent as expressed
herein. Each Purchaser understands that no federal or state agency has made any
finding or determination as to
3
<PAGE>
the fairness of an investment in, or any recommendation or endorsement of, the
Note and Warrant or the Common Stock issuable upon the exercise of the Warrant.
4.3 Representations. He understands that he is purchasing the Interests
----------------
without being furnished any offering literature or prospectus. In making his
decision to purchase the Interests herein subscribed for, the undersigned has
relied solely upon independent investigations made by him, and he has received
no representation or warranty from the Company of any of its affiliates,
employees or agents except as set forth in this Agreement.
4.4 Accredited Investor. Each of the Purchasers (i) has an individual
--------------------
net worth, or joint net worth with his spouse, in excess of US$1,000,000 or (ii)
had an individual income in excess of US$200,000 in each of the two most recent
years or joint income with his spouse in excess of US$300,000 in each of those
years and has a reasonable expectation of reaching the same income level in the
current year. Furthermore, each of the Purchasers (i) can bear the economic risk
of losing his entire investment herein and (ii) has such knowledge and
experience in financial matters that he is capable of evaluating the relative
risks and merits of this investment
4.5 Financial Condition. Each of the Purchasers' financial condition is
-------------------
such that they have no need for liquidity with respect to their investment in
the Note or the Warrant to satisfy any existing or contemplated undertaking or
indebtedness and they are not seeking a current cash return with respect to
their investment in the Note or the Warrant and they have no need for a current
return on their investment in the Company.
4.6 Speculative Investment. Each of the Purchasers acknowledges and is
----------------------
aware of the following:
(i) That the Note, the Warrant and the Common Stock issuable upon the
exercise of the Warrant are speculative investments which involve a high
degree of risk of loss including the loss of the Purchaser's entire
investment;
(ii) That there are substantial restrictions on the transferability of
the Note, the Warrant and the Common Stock issuable upon the exercise of
the Warrant; the Note, the Warrant and the Common Stock issuable upon the
exercise of the Warrant will not be, and, except as set forth in the
Registration Rights Agreement, investors in the Company have no rights to
require that the Note, the Warrant or the Common Stock issuable upon the
exercise of the Warrant be, registered under the 1933 Act of the Company,
there will be no public market for the Note or Warrant or the Common Stock
issuable upon the exercise of the Warrant; and, accordingly, he may have to
hold the Interests indefinitely and it may not be possible for him to
liquidate his investment in the Company.
(iii) That there is no guarantee that he will realize any gain from his
investment in the Company.
4
<PAGE>
4.7 Not an Investment Company Each Purchaser understands that the Company
-------------------------
is not registered as an investment company under the Investment Company Act of
1940, as amended, or under any similar law enacted by any other jurisdiction,
and that as a result, the Company is not subject to provisions contained in such
laws designed to protect investors in pooled investment entities.
4.8 Residency. The address set forth at the foot of this Agreement for
---------
each Purchaser is his true and correct residence and he has no present intention
of becoming a resident of any other state or jurisdiction.
SECTION 5
Conditions to Obligations of the Purchasers
-------------------------------------------
The obligation of the Purchasers to purchase the Note is subject to the
fulfillment on or prior to the Closing Date of each of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Corporation shall be true and correct in all material respects
on the Closing Date.
(b) Performance. All covenants, agreements and conditions contained
-----------
in this Agreement to be performed or complied with by the Corporation on or
prior to the Closing Date shall have been performed or complied with in all
material respects.
(c) Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be satisfactory in form and
substance to the Purchasers and their counsel.
SECTION 6
Conditions to Obligations of the Corporation
--------------------------------------------
The Corporation's obligation to sell the Note is subject to the fulfillment
on or prior to the Closing Date of each of the following conditions:
(a) Representations. The representations made by the Purchasers shall
---------------
be true and correct in all material respects on the Closing Date.
5
<PAGE>
SECTION 7
Affirmative Covenants of the Corporation
----------------------------------------
The Corporation hereby covenants that during such time as the Purchasers
(or one of his affiliates) owns the Note that it will, and will cause it
subsidiaries to (i) maintain its corporate existence, rights, powers and
privileges in good standing, (ii) pay promptly when due all taxes, assessments
and governmental charges properly imposed on it, except where the same are
contested in good faith, (iii) maintain its properties in workable condition and
repair, (iv) comply in all material respects with all laws and governmental
regulations and restrictions applicable to its business or properties, (v)
maintain with financially sound insurers such insurance coverage against
liability, fire and other risks as is reasonably prudent and customary for
companies similarly situated, (vi) keep records and books of account and
maintain a system of internal accounting controls in accordance with generally
accepted accounting principles and (vii) retain independent public accountants
of recognized national standing as auditors of the Corporation's annual
financial statements.
SECTION 8
Legend on Note
--------------
The Note (and any certificates representing capital stock of the Company
issued upon exercise of the Warrant) shall be stamped or otherwise imprinted
with a legend substantially in the following form (in addition to any legend
required under any applicable state securities laws):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITY UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED IS DELIVERED TO THE CORPORATION.
Upon request of a holder of a Note the Corporation shall remove the
foregoing legend or issue to such holder a new certificate therefor free of any
such legend, if the Corporation shall have received either an opinion of counsel
or a "no-action" letter of the SEC, in either case reasonably satisfactory in
substance to the Corporation and its counsel, to the effect that such legend is
no longer required.
6
<PAGE>
SECTION 9
Miscellaneous
-------------
9.1 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware, insofar as it relates to the
internal affairs of the Corporation, which is a Delaware corporation whose
principal business office is located in North Carolina. In other respects this
Agreement shall be governed by and construed in accordance with the laws of
North Carolina.
9.2 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of and be binding upon
the successors and assigns of the parties.
9.3 Entire Agreement; Amendment. This Agreement (including any Exhibits
---------------------------
hereto) and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated except by a written instrument signed
by the Corporation and the Purchasers.
9.4 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be mailed by first-class mail, postage prepaid, or
delivered either by hand or by messenger, addressed (a) if to the Purchasers, as
indicated below the Purchasers's signature, or at such other address as the
Purchasers shall have furnished to the Corporation in writing, or (b) if to any
other holder of the Note, at the address of such holder as shown on the records
of the Corporation, or (c) if to the Corporation, at its address set forth below
its signature or at such other address as the Corporation shall have furnished
to the Purchasers and each such other holder in writing. All such notices or
communications shall be deemed given when actually delivered by hand, messenger,
facsimile or mailgram or, if mailed, three days after deposit in the U.S. mail.
9.5 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party to this Agreement (including any holder of
the Note or the Warrant), upon any breach or default of another party under this
Agreement, shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. All remedies, either
under this Agreement or by law or otherwise afforded to any party, shall be
cumulative and not alternative.
9.6 Severability. In case any provision of the Agreement shall be
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
7
<PAGE>
9.7 Titles and Pronouns. The titles of the Sections and subsections of
-------------------
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, singular and plural as the
identity of that person or entity referred to requires.
9.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers as of the day and year first
above written.
Blue Rhino Corporation
By /s/ Billy D. Primm
-------------------------------------
Its__________________________________
Address: 104 Cambridge Plaza Drive
Winston-Salem, NC 27104
Purchasers:
/s/ Craig Duchossois
---------------------------------------
Craig Duchossois
Address: 845 Larch Ave.
Elmhurst, IL 60126
/s/ Andrew Filipowski
---------------------------------------
Andrew Filipowski
Address: Platinum Technology, Inc.
1815 South Meyers Road
Oakbrook Terrace, IL 60181
/s/ James Liautaud
---------------------------------------
James Liautaud
8
<PAGE>
Address: 1500 Executive Drive
Elgin, IL 60123
/s/ Lennard Carlson
---------------------------------------
Lennard Carlson
Address: 1340 N. Dearborn
Apt. 15C
Chicago, IL 60610
9
<PAGE>
EXHIBIT A
PURCHASERS
<TABLE>
<S> <C>
Craig Duchossois $1,450,000.00
Andrew Filipowski $1,450,000.00
James Liautaud $ 300,000.00
Lennard Carlson $ 50,000.00
</TABLE>
<PAGE>
EXHIBIT B
BLUE RHINO CORPORATION
----------------------
10.5% SUBORDINATED NOTE
DUE DECEMBER 31, 2000
$___________________ ________________
Principal Amount Issue Date
Blue Rhino Corporation, a Delaware corporation (the "Company"), for value
received, hereby promises to pay to the order of ___________________________
(together with his successors and permitted assigns, "Lender") lawful money of
the United States the principal amount of _____________________________________
Dollars ($_____________) with interest thereon as hereinafter provided on the
earlier of (the Maturity Date):
(a) December 31, 2000;
(b) The date of closing of a registered initial public offering of the
Company's Common Stock, the proceeds to the Company of which (after
underwriters discounts and over allotments offering expenses) are in
excess of Thirty Million and No/100's Dollars ($30,000,000)(an "IPO");
(c) the recapitalization, or reorganization of the Company,
(d) the occurrence of an event of default under the terms of this Note.
This Note is one in a series of four (4) Notes (the "Notes") issued pursuant to
the terms of that certain Note Purchase Agreement (the "Note Purchase
Agreement") dated of even date herewith aggregating in the amount of $3,250,000
which Notes rank pari passu with one another.
The Principal Amount due hereunder shall due in twenty-four equal
installment payments. Payment of said principal installments shall commence on
January 1, 1999, and shall be due and payable on the first day of each calendar
quarter thereafter, until the Maturity Date, at which time the entire remaining
balance of unpaid principal shall be due and payable.
The principal amount of this Note shall bear interest from the Issue Date
of this Note until the Maturity Date at the rate of 10.5% per annum (the
"Rate"), accrued and compounded monthly until paid. Interest accrued after the
first anniversary of the Issue Date shall be paid in monthly installments
beginning January 1, 1999, on the first of each month thereafter until the
Maturity Date, at which time any and all accrued, unpaid interest shall be due
and payable. All payments on account of the indebtedness evidenced by this Note
shall be first applied to interest on the principal amount and the remainder to
the principal amount.
<PAGE>
In each case such interest shall be computed on the basis of actual days
elapsed on the basis of a 365/366 day year on so much of the principal amount as
is from time to time outstanding.
All cash payments made hereunder may be made by check or bank wire transfer
with said check mailed to the address or such bank wire transfer made to an
account designated by the holder of this Note on the records of the Company or
such other address or account as the record holder hereof shall previously have
notified the Company in writing.
After an IPO by the Company, the Company may at its election repay the
outstanding principal and interest balance on this Note by issuing or
transferring to the Lender, shares of the Common Stock of the Company with a
fair market value equal to the balance of principal and interest due on this
Note. In the event the Common Stock issued or transferred is not registered
under the Securities and Exchange Act of 1933, as amended and, if necessary, the
Exchange Act of 1934, as amended, the fair market value of such shares shall be
deemed equal to 90% of the the closing price for a share of Common Stock as
listed on any national securities exchange or quoted on the NASDAQ National
Market, the NASDAQ Small Capitalization Market or the over-the-counter market.
This Note may be prepaid in whole or in part by the Company without premium
or penalty. Provided, however, the Company and the holder of this Note
acknowledge that any prepayment of this Note may only occur if all outstanding
amounts due from the Company to (i) NationsBank, N.A. under that certain Loan
Agreement dated as of December __, 1997 between the Company and the Bank (the
"Loan Agreement") and (ii) to the holders of the Company's 10.5% Senior Discount
Notes, as set forth on Exhibit A attached hereto (the "Senior Discount Notes"),
are also prepaid in whole.
This Note shall be subordinated in right of payment of principal and
interest to all outstanding indebtedness of the Company as shall exist from time
to time (including, but not limited to, any secured or unsecured indebtedness of
the Company, accounts payable, trade payables, leasehold payments, and
indebtedness under bank facilities and lines of credit) which does not expressly
subordinate itself hereto or rank itself on a parity herewith by written
reference to this Note, including but not limited to the obligations of the
Company under (i) the Loan Agreement and (ii) Senior Discount Notes.
The occurrence of any of the following events shall be deemed an event of
default ("Event of Default") under the terms of this Note (a) the failure by the
Company to pay amounts due under this Note when due (b) the violation of any
representation, warranty, covenenant or agreement of the Company under the Note
Purchase Agreement, (b) the occurrence of an event of default by the Company
under the Loan Agreement, the Senior Discount Notes or any other agreements
executed by the Company in connection therewith (c) the declaration of
bankruptcy, assignment for the benefit of creditors or the seeking of protection
under any Federal or State
- 2 -
<PAGE>
bankruptcy or insolvency law. Upon the occurrence of an Event of Default, the
Lender may declare the entire amount of principal and interest due under this
Note immediately due and payable, subject to the subordination of such Note to
the rights of the lenders under the Loan Agreement and Senior Discount Notes,
and may take such other actions and seek such other remedies as may be available
at law or in equity.
The Lender shall receive, as additional consideration for the issue of this
Note, a warrant (a "Warrant") to purchase Four Hundred Eighty Three Thousand
Three Hundred Thirty Three (483,333) shares of Common Stock of the Company.
This Note and all obligations and rights hereunder shall be binding upon
the successors and assigns of the Company and shall inure to the benefit of the
record holder hereof and his successors and assigns. The registered holder
hereof shall be treated as the owner of this Note for all purposes.
If any term or provision of this Note or the application thereof to any
person or circumstance shall to any extent be invalid or unenforceable, the
remainder of this Note, or the application of such term or provision to person
or circumstances other than those as to which it is invalid or unenforceable,
shall not be affected thereby, and each term and provision of this Note shall be
valid and enforceable to the fullest extent permitted by law. If any payments
required to be made under this Note shall be in excess of the amounts allowed by
law, the amounts of such payments shall be reduced to the maximum amounts
permitted by law.
In the event any payment required hereunder is not paid when due, such
overdue payment shall bear interest from the date such payment was due until
paid at the Rate, plus four (4) percentage points.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NORTH CAROLINA.
This Note may not be modified or terminated except by a written agreement
executed by the Company and the holder of this Note.
A director, officer, employee, or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under this Note
or for any claim based on, in respect of or by reason of such obligations or
their creation. By accepting this Note, the registered holder hereof waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of this Note.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
- 3 -
<PAGE>
BLUE RHINO CORPORATION
By____________________________
Its President
ATTEST
By____________________________
Its Secretary
- 4 -
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in form below:
I or we assign and transfer this Note to _________________ (insert
assignee's social security number or tax I.D. number)
______________________________
______________________________
______________________________
______________________________
(Print or type ASSIGNEE'S name, address, and zip code)
and irrevocably appoint ____________________________________
agent to transfer this Note on the books of THE Corporation. The agent may
substitute another to act for him.
Date _________________________ _________________________________
(Sign exactly as your name appears on the
first page of this Note)
- 5 -
<PAGE>
EXHIBIT A
BLUE RHINO 10.5% SENIOR NOTEHOLDERS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NOTEHOLDER NOTE AMOUNT
- --------------------------------------------------------------------------------
<S> <C>
Mike Arrington $ 632,206.67
- --------------------------------------------------------------------------------
Dean Buntrock $1,264,413.34
- --------------------------------------------------------------------------------
Conant Family Partnership $ 631,761.65
- --------------------------------------------------------------------------------
Cornelius & Lothian, L.P. $ 316,103.33
- --------------------------------------------------------------------------------
Peter Desnoes $ 636,206.67
- --------------------------------------------------------------------------------
Doerge-Blue Rhino, L.P. $1,264,413.34
- --------------------------------------------------------------------------------
Donald Flynn $ 421,471.96
- --------------------------------------------------------------------------------
Kevin F. Flynn June 1992 Non-Exempt Trust $ 421,470.69
- --------------------------------------------------------------------------------
Brian J. Flynn June 1992 Non-Exempt Trust $ 421,470.69
- --------------------------------------------------------------------------------
Richard Forsythe $ 632,206.67
- --------------------------------------------------------------------------------
William Hulligan $1,264,413.34
- --------------------------------------------------------------------------------
Douglas Gray $ 316,103.33
- --------------------------------------------------------------------------------
Joseph Cusimano $ 316,103.33
- --------------------------------------------------------------------------------
David Meltzer $ 316,103.33
- --------------------------------------------------------------------------------
Peer Pedersen $1,264,413.34
- --------------------------------------------------------------------------------
Charles Reeder $ 632,206.67
- --------------------------------------------------------------------------------
J. Christopher Reyes $ 632,206.67
- --------------------------------------------------------------------------------
M. Jude Reyes $ 632,206.67
- --------------------------------------------------------------------------------
Ryan Holding Corporation $1,264,413.34
- --------------------------------------------------------------------------------
Howard Warren $1,264,413.34
- --------------------------------------------------------------------------------
Arthur Watson $ 316,103.33
- --------------------------------------------------------------------------------
</TABLE>
- 6 -
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Craig Duchossois Revocable Trust $ 948,310.00
- --------------------------------------------------------------------------------
Kimberly Family Discretionary Trust $ 316,103.33
- --------------------------------------------------------------------------------
Richard L. Duchossois Revocable Trust $ 632,206.67
- --------------------------------------------------------------------------------
Richard Brenner $ 126,441.33
- --------------------------------------------------------------------------------
Andrew J. Filipowski $ 252,882.67
- --------------------------------------------------------------------------------
Billy D. Prim $ 31,610.33
- --------------------------------------------------------------------------------
</TABLE>
- 7 -
<PAGE>
EXHIBIT B
FORM OF WARRANT
- 8 -
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OFFERED FOR
SALE UNLESS REGISTERED UNDER SAID ACT OR UNLESS THE HOLDER OF THIS WARRANT
DELIVERS TO BLUE RHINO CORPORATION AN OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO BLUE RHINO CORPORATION STATING THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER
ARE ALSO BENEFITED BY AND SUBJECT TO A SERIES A SECURITIES PURCHASE AGREEMENT, A
REGISTRATION RIGHTS AGREEMENT EACH DATED AS OF DECEMBER 1, 1994, AND EACH BY AND
AMONG BLUE RHINO CORPORATION, A DELAWARE CORPORATION, PLATINUM VENTURE PARTNERS
I, L.P., A DELAWARE LIMITED PARTNERSHIP, AND CERTAIN OTHER INVESTORS, AND A
SHAREHOLDERS' AGREEMENT DATED THE SAME DATE, BY AND AMONG BLUE RHINO
CORPORATION, A DELAWARE CORPORATION, THE INVESTORS AND THE MANAGEMENT
STOCKHOLDERS, COPIES OF WHICH ARE ON FILE WITH THE CORPORATION.
Dated: December 1, 1994
WARRANT
To Purchase _______ Shares of Common Stock (Subject to adjustment herein)
____________________________
Expiring December 1, 2004
THIS IS TO CERTIFY THAT, for value received, _________________________ or
registered assigns is entitled to purchase from Blue Rhino Corporation, a
Delaware corporation (the "CORPORATION"), at any time and from time to time
prior to 5:00 p.m., Chicago, Illinois time, on December 1, 1994, at the
principal office of the Corporation which is currently 104 Cambridge Park,
Winston-Salem, North Carolina 27104 (or such other address as the Corporation
shall specify by notice to all Warrantholders), at the Exercise Price, the
number of shares of Common Stock, $0.001 par value (the "COMMON STOCK"), of the
Corporation shown above, all subject to adjustment and upon the terms and
conditions as hereinafter provided, and is entitled also to exercise the other
appurtenant rights, powers and privileges hereinafter described.
This Warrant is one of the one or more warrants (the "WARRANTS"), of the
same form and having substantially the same terms as this Warrant, which have
been or will be issued pursuant to the Securities Purchase Agreement.
Certain terms used in this Warrant are defined in Article VI.
<PAGE>
ARTICLE I
EXERCISE OF WARRANTS
1.1 Method of Exercise and Payment.
------------------------------
(a) Method of Exercise. To exercise this Warrant in whole or in part,
------------------
the Holder shall deliver to the Corporation, at the principal office of the
Corporation, (a) this Warrant, (b) a written notice, in substantially the form
of the Subscription Notice attached hereto, of such Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased or converted into, as the case may be, the denominations
of the share certificate or certificates desired and the name or names in which
such certificates are to be registered, and (c) payment to the Corporation of
the amount equal to the product of the then applicable Exercise Price multiplied
by the number of shares of Common Stock then being purchased pursuant to one of
the payment methods permitted under Section 1.l(b) below.
(b) Method of Payment. Payment shall be made either (1) by cash,
-----------------
money order, certified or bank cashier's check, (2) by wire transfer, (3) by
converting the Warrant, or any portion thereof, into Common Stock pursuant to
Section 1.1 (c) below ("WARRANT CONVERSION") or (4) any combination of the
foregoing at the option of the Holder.
(c) Payment by Warrant Conversion. Subject to any limitations set
-----------------------------
forth in this Warrant, the Holder may exercise the purchase right represented by
this Warrant with respect to a particular number of shares of Common Stock
subject to this Warrant ("CONVERTED WARRANT STOCK") and elect to pay for the
Converted Warrant Stock through Warrant Conversion as defined in Section 1.1(b),
by specifying such election in the Subscription Notice. In such event, the
Corporation shall deliver to the Holder (without payment by the Holder of any
Exercise Price or any cash or other consideration) that number of shares of
Common Stock equal to the quotient obtained by dividing (x) the value of this
Warrant (or the specified portion hereof) on the Exercise Date, which value
shall be determined by subtracting (A) the aggregate Exercise Price of the
Converted Warrant Stock immediately prior to the exercise of the Warrant from
(B) the aggregate Fair Market Value of the Converted Warrant Stock issuable upon
exercise of this Warrant (or the specified portion hereof) on the Exercise Date,
by (y) the Fair Market Value of one share of Common Stock on the Exercise Date.
For purposes of this Section 1, "FAIR MARKET VALUE" of a share of Common Stock
as of a particular date shall mean:
(i) If the Corporation's registration under the Securities Act,
covering its initial underwritten public offering of stock had been
declared effective by the Commission, then the fair market value of a share
of Common Stock as of the last Business Day immediately prior to the
Exercise Date.
(ii) If such a registration statement has not been declared effective,
or if it has been declared effective but the offering is not consummated in
accordance with the terms of
<PAGE>
the underwriting agreement between the Corporation and its underwriters
relating to such registration statement, then as determined in good faith
by the Board upon review of the relevant factors; provided, however, that
if the Exercise Date falls within one day prior to the effective date of
such registration statement, the fair market value of a share of Common
Stock will be deemed to be the public offering price per share provided for
in such registration statement.
(d) Mechanics. The Corporation shall as promptly as practicable and
---------
in any event within three days after delivery of a Subscription Notice as
described above, execute and deliver or cause to be executed and delivered,
in accordance with such Subscription Notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in
said Subscription Notice. The share certificate or certificates so
delivered shall be in such denominations as may be specified in such
Subscription Notice or, if such Subscription Notice shall not specify
denominations, in denominations of 100 shares each, and shall be issued in
the name of the Holder or such other name or names as shall be designated
in such Subscription Notice. Such certificate or certificates shall be
deemed, to have been issued (and this Warrant or the portion thereof
specified in the Subscription Notice shall be deemed to have been
exercised) and such Holder or any other Person so designated to be named
therein shall be deemed for all purposes to have become a holder of record
of such shares, as of the date the aforementioned Subscription Notice is
received by the Corporation, or delivery thereof is refused (the "EXERCISE
DATE"). If this Warrant shall have been exercised only in part, the
Corporation shall, at the time of delivery of the certificate or
certificates, deliver to the Holder a new Warrant evidencing the rights to
purchase or convert the remaining shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with
this Warrant, or, at the request of the Holder, appropriate notation may be
made on this Warrant which shall then be returned to the Holder. The
Corporation shall pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of share
certificates and new Warrants, except that, if share certificates or new
Warrants shall be registered in a name or names other than the name of the
Holder, funds sufficient to pay all transfer taxes payable as a result of
such transfer shall be paid by the Holder at the time of delivering the
aforementioned notice of exercise or promptly upon receipt of a written
request of the Corporation for payment.
1.2 Shares to Be Fully Paid and Nonassessable. All shares of Common Stock
-----------------------------------------
issued upon the exercise of this Warrant shall be validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder, and from
all taxes, liens and charges with respect to the issue thereof (other than
transfer taxes) and, if the Common Stock is then listed on any national
securities exchanges (as defined in the Exchange Act) or quoted on NASDAQ, shall
be duly listed or quoted thereon, as the case may be.
- 2 -
<PAGE>
1.3 No Fractional Shares to Be Issued. The Corporation shall, not be
---------------------------------
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon any exercise of this Warrant, in lieu of such fractional share the
Corporation may pay to the Holder, in cash, an amount equal to such share of
fraction of the fair market value (as determined in good faith by the Board) per
share of outstanding Common Stock of the Corporation in the Business Day
immediately prior to the date of such exercise.
1.4 Share Legends. Each certificate for shares of Common Stock issued
-------------
upon exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend:
"This security has not been registered under the Securities Act of
1933 and may not be sold or offered for sale unless registered pursuant to
such Act or unless the holder hereof delivers to Blue Rhino Corporation an
opinion of counsel reasonably acceptable to Blue Rhino Corporation stating
that an exemption from such registration is available."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act) shall also bear such legend unless, in the opinion of counsel
selected by the holder of such certificate (who may be an employee of such
holder) and reasonably acceptable to the Corporation, the securities represented
thereby need no longer be subject to restrictions on resale under the Securities
Act. Each certificate for shares of Common Stock issued upon exercise of this
Warrant shall also bear any legends required under the Shareholders' Agreement,
to the extent required thereby. Any certificate issued at any time in exchange
or substitution for any certificate bearing such legend shall also bear such
legend unless in the opinion of counsel selected by the holder of such
certificate (who may be an employee of such holder) and reasonably acceptable to
the Corporation, the restrictions contained in such Shareholders' Agreement no
longer apply because of the occurrence of one or more of certain events
described therein.
1.5 Reservation; Authorization. The Corporation has reserved and will
--------------------------
keep available for issuance upon exercise of the Warrants the total number of
shares of Common Stock deliverable upon exercise of all Warrants from time to
time outstanding. The issuance of the shares of Common Stock upon exercise of
the Warrants has been duly and validly authorized and, when issued and sold in
accordance with the Warrants, such shares of Common Stock will be duly and
validly issued, fully paid and nonassessable. The Corporation will take all
such actions as are necessary in order to insure the foregoing.
1.6 Result of Exercise. On the Exercise Date the rights of the holder of
------------------
such Warrant as such holder will cease and the Person or Persons in whose name
or names any certificate or certificates for shares of Common Stock are to be
issued upon such exercise will be deemed to have become the holder or holders of
record of the shares of Common Stock represented thereby.
- 3 -
<PAGE>
1.7 Not Close Books Until Exercise. The Corporation will not close its
------------------------------
books against the transfer of this Warrant or shares of Common Stock issued or
issuable upon exercise of this Warrant in any manner which interferes with the
timely exercise of this Warrant.
ARTICLE II
TRANSFER, EXCHANGE AND REPLACEMENT OF WARRANTS
2.1 Ownership of Warrant. The Corporation may deem and treat the Person
--------------------
in whose name this Warrant is registered as the holder and owner hereof for all
purposes and shall not be affected by any notice to the contrary, until this
Warrant is presented for registration of transfer as provided in this Article
II.
2.2 Transfer of Warrant. The Corporation agrees to maintain books for the
-------------------
registration of transfers of the Warrants, and any transfer, in whole or in
part, of this Warrant and all rights hereunder shall be registered on such
books, upon surrender of this Warrant at the principal office of the Corporation
together with a written assignment of this Warrant duly executed by the Holder
or his, her or its duly authorized agent or attorney and funds sufficient to pay
any transfer taxes payable upon such transfer. Upon surrender the Corporation
shall execute and deliver a new Warrant or Warrants in the name of the assignee
or assignees and in the denominations specified in the instrument of assignment,
and this Warrant shall promptly be canceled. Notwithstanding the foregoing, a
Warrant may be exercised by a new holder without having a new Warrant issued.
This Warrant may not be transferred in whole or in part, and the Corporation
shall not be required to register any transfers unless the Corporation has
received an opinion of counsel selected by the transferor (who may be an
employee of such party) and reasonably satisfactory to the Corporation that such
transfer is exempt from the registration requirements of the Securities Act.
If the Warrantholder delivers to the Corporation an opinion of counsel
selected by such holder (who may be an employee of such holder) and reasonably
acceptable to the Corporation, that no subsequent transfer of the Warrant will
require registration under the Securities Act, the Corporation will promptly
deliver to such holder or his, her or its designee, new Warrants in exchange for
the Warrant delivered by such holder, which will not bear the Securities Act
legend set forth at the beginning of the first page of the Warrant, and
thereafter no further opinions of counsel shall be required in connection with
the subsequent transfer of such Warrant.
2.3 Division or Combination of Warrants. This Warrant may be divided or
-----------------------------------
combined with other Warrants upon surrender hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Corporation, together
with a written notice specifying the names and denominations in which the new
Warrant or Warrants are to be issued, signed by the holders hereof and thereof
or their respective duly authorized agents or attorneys. Subject to compliance
with Section 2.2 as to any transfer which may be involved in the division or
combination, the Corporation
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<PAGE>
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
2.4 Loss, Theft, Destruction of Warrant Certificates. Upon receipt of
------------------------------------------------
evidence reasonably satisfactory to the Corporation (an affidavit of the
registered holder will be satisfactory) of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Corporation (an Original Warrantholder's indemnity being satisfactory
indemnity in the event of loss, theft or destruction of any Warrant owned by
such holder), or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Corporation will (at its expense) make and
deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new
Warrant of like tenor and representing the right to purchase the same aggregate
number of shares of Common Stock.
2.5 Expenses of Delivery of Warrants. The Corporation shall pay all
--------------------------------
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of Warrants and Warrant
Stock hereunder. If, pursuant to Section 2.2, the opinion of counsel provides
that registration is not required for the proposed exercise or transfer of this
Warrant or the proposed transfer of the Warrant Stock and that the proposed
exercise or transfer in the absence of registration would require the
Corporation to take any action including executing and filing forms or other
documents with the Commission or any state securities agency, or delivering to
the Warrantholder any form or document in order to establish the right of the
Warrantholder to effectuate the proposed exercise or transfer, the Corporation
agrees promptly, at its expense, to take any such action; and provided, further,
that the Corporation will reimburse the Warrantholder in full for any expenses
(including but not limited to the fees and disbursements of such counsel, but
excluding brokers' commissions) incurred by the Warrantholder or owner of
Warrant Stock on his, her or its behalf in connection with such exercise or
transfer of the Warrant or transfer of Warrant Stock.
ARTICLE III
CERTAIN RIGHTS
3.1 Rights Under Securities Purchase Agreement, Registration Agreement and
----------------------------------------------------------------------
Shareholders' Agreement. This Warrant and the Warrant Stock are entitled to the
- -----------------------
benefits of and are subject to the Securities Purchase Agreement, Registration
Agreement and the Shareholders' Agreement to the extent provided therein. The
Corporation shall keep a copy of the Securities Purchase Agreement, Registration
Agreement, the Shareholders' Agreement, and any amendments, restatements,
modifications and supplements thereto, at the principal office of the
Corporation and shall furnish copies thereof to any Holder or any transferee
upon request.
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<PAGE>
ARTICLE IV
ANTIDILUTION PROVISIONS
4.1 Adjustments Generally. The Exercise Price and the number of shares of
---------------------
Common Stock (or other securities or property) issuable upon exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events, as provided in this Article IV.
4.2 Exercise of Warrant. At any time and from time to time, any holder of
-------------------
this Warrant may exercise all or any portion of this Warrant into the number of
shares of Common Stock computed by (i) multiplying the number of shares of
Common Stock sought to be purchased pursuant to this Warrant by $0.0347037 and
(ii) dividing the resulting product by the Exercise Price then in effect.
4.3 Exercise Price.
--------------
(a) Exercise Price Based on Conversion Price. The "EXERCISE PRICE"
----------------------------------------
shall be one-tenth of the Conversion Price then in effect pursuant to the
Certificate of Incorporation of the Corporation. In order to prevent dilution
of the exercise rights granted to the holder of this Warrant, the Conversion
Price and consequently the Exercise Price will be subject to adjustment from
time to time pursuant to this Section 4.3 and Sections 4.5 and 4.6 below. For
purposes of this Section 4.3, the Corporation shall be deemed to have issued or
sold Common Stock as set forth in Section 4.4 below.
(b) Adjustment for Dilutive Events. If and whenever on or after the
------------------------------
original date of issuance of this Warrant the Corporation issues or sells, or in
accordance with Section 4.4 below is deemed to have issued or sold, any shares
of Common Stock for consideration per share less than the Conversion Price (the
"DILUTED SHARE PRICE") in effect immediately prior to the time of such issue or
sale (a "DILUTIVE EVENT"), then forthwith upon the occurrence of any such
Dilutive Event the Conversion Price will be reduced so that the Conversion Price
in effect immediately following the Dilutive Event will equal the Diluted Share
Price. Notwithstanding the foregoing, the issuance by the Corporation of up to
2,000,000 shares of Common Stock, or securities convertible into or options to
acquire up to 2,000,000 shares of Common Stock, issued pursuant to stock option
plans or grants to officers or employees approved by the Board or the issuance
of Common Stock upon conversion of the Series A Preferred Shares issued pursuant
to the Securities Purchase Agreement shall not constitute a Dilutive Event. As
used in this Section 4.3(b) and in Section 4.4 below, the term "COMMON STOCK"
shall include Common Stock Equivalents. Notwithstanding anything contained
herein to the contrary, the Exercise Price of this Warrant held by a particular
holder shall not be adjusted pursuant to this Article 4 in connection with a
particular Dilutive Event, or any subsequent Dilutive Event, if such holder of
this Warrant fails to purchase, after being offered by the Corporation the
opportunity to purchase, a percentage of the securities, rights or options, or
any
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<PAGE>
combination thereof, the sale of which constitute the Dilutive Event, which
is equal to or greater than 75 % of the percentage ownership of the
Corporation's Common Stock on a fully diluted basis held by such holder
immediately prior to such Dilutive Event. A Warrant which is no longer subject
to adjustment as a result of the preceding sentence shall remain subject to such
limitation regardless of any subsequent transfers, and at each time that any
Warrant so loses its rights to such adjustment, all Warrants which have lost
their right to such adjustment as of such time shall be automatically classified
into (and the outstanding Warrant representing such Warrant will automatically
be deemed to represent) new sub-series A-1, A-2, A-3, etc. , consecutively,
beginning with A-1. The holders of Warrants of each such sub-series shall
promptly deliver such Warrants to the Corporation upon the Corporation's
request, for exchange or notation to reflect such sub-series. If any such
Warrants are not delivered to the Corporation, the Corporation shall make
appropriate notations on its stock records, which may include stop transfer
instructions, and may place in escrow, pending receipt of such Warrants, all
dividend payments or other distributions owing with respect to the Warrants
represented by such Warrants.
4.4 Issuance and Sale of Common Stock. For purposes of determining the
---------------------------------
adjusted Exercise Price pursuant to Sections 4.3 above the following events
shall be deemed to be an issuance and sale of Common Stock by the Corporation:
(a) Issuance of Rights or Options. If (i) the Corporation in any
-----------------------------
manner grants any rights or options to subscribe for or to purchase shares of
Common Stock or any securities convertible into or exchangeable for shares of
Common Stock (such rights or options referred to herein as "OPTIONS" and such
convertible or exchangeable stock or securities referred to herein as
"CONVERTIBLE SECURITIES") and (ii) the Price Per Share of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities is less than the Conversion Price in effect
immediately prior to the time of the granting of such Options then the shares of
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities will be deemed to have been issued and
sold by the Corporation for such Price Per Share. For the purposes of this
Section 4.4(a), the "PRICE PER SHARE" is determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of all such Options, plus
in the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price will be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
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<PAGE>
(b) Issuance of Convertible Securities. If (i) the Corporation in any
----------------------------------
manner issues or sells any Convertible Securities and (ii) the Price Per Share
of shares of Common Stock issuable upon such conversion or exchange is less than
the Conversion Price in effect immediately prior to the time of such issue or
sale then the shares of Common Stock issuable upon the conversion or exchange of
such Convertible Securities will be deemed to have been issued and sold by the
Corporation for such Price Per Share. For the purposes of this Section 4.4(b),
the "PRICE PER SHARE" will be determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Conversion Price will be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments to the Conversion Price had been
or are to be made pursuant to Section 4.4(a) above, no further adjustment of the
Conversion Price will be made by reason of such issue or sale.
(c) Change in Option Price or Conversion Price. If at any time there
------------------------------------------
is a change in (i) the purchase price provided for in any Options, (ii) the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities, or (iii) the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock, then the Conversion Price
in effect at the time of such change will be readjusted to the Conversion Price
which would have been in effect had those Options or Convertible Securities
still outstanding at the time of such change provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time such Options or Convertible Securities were initially granted,
issued or sold; provided that if such adjustment would result in an increase of
the Conversion Price then in effect, such adjustment will not be effective until
30 days after written notice thereof has been given by the Corporation to all
holders of Warrants.
(d) Calculation of Consideration Received. If any shares of Common
-------------------------------------
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor or the Price Per
Share, as the case may be, will be deemed to be the net amount received or to be
received, respectively, by the Corporation therefor. In case any shares of
Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than cash
received by the Corporation or the non-cash portion of the Price Per Share, as
the case may be, will be the fair value of such consideration received or to be
received, respectively, by the Corporation; except where such consideration
consists of securities, in which case the amount of consideration received or to
be received, respectively, by the Corporation will be the Market Price thereof
as of the date of receipt. If any shares of Common Stock, Options or
Convertible Securities are issued in connection with any merger in which the
Corporation is the surviving corporation, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving
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<PAGE>
corporation as is attributable to such shares of Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash and securities will be determined jointly by the Corporation and
the holders of a majority of the outstanding Warrants. If such parties are
unable to reach agreement within a reasonable period of time, the fair value of
such consideration will be determined by an independent appraiser jointly
selected by the Corporation and the holders of a majority of the outstanding
Warrants.
(e) Integrated Transactions. In case any Option is issued in
-----------------------
connection with the issuance or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
will be deemed to have been issued for a consideration of $.01.
(f) Record Date. If the Corporation takes a record of the holders of
-----------
Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in shares of Common Stock, Options or in Convertible
Securities or (ii) to subscribe for or purchase shares of Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issuance or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
4.5 Subdivision or Combination of Common Stock. If the Corporation at any
------------------------------------------
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced. If the Corporation at any
time combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be
proportionately increased.
4.6 Organic Change. Prior to the consummation of any Organic Change, the
--------------
Corporation will make appropriate provisions (in form and substance satisfactory
to the holders of a majority of the Warrants then outstanding) to insure that
each of the holders of Warrants with respect to all or any of the Warrants held
thereby will thereafter have the right to acquire and receive, in lieu of or in
addition to the shares of Common Stock immediately theretofore acquirable and
receivable upon the exercise of such holder's Warrants, such shares of stock,
securities or assets as such holder would have received in connection with such
Organic Change if such holder had exercised his, her or its Warrants immediately
prior to such Organic Change. In any such case, the Corporation will make
appropriate provisions (in form and substance satisfactory to the holders of a
majority of the Warrants then outstanding) to insure that the provisions of this
Section 4.6 will thereafter be applicable to the Warrants (including, an
immediate adjustment of the Conversion Price to the value for the Common Stock
reflected by the terms of such Organic Change and a corresponding immediate
adjustment in the number of shares of Common Stock acquirable and receivable
upon exercise of the Warrants, if the value so reflected is less than the
Conversion Price in effect
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<PAGE>
immediately prior to such Organic Change). The Corporation will not effect any
such Organic Change, unless prior to the consummation thereof, the successor
Corporation resulting from such Organic Change assumes by written instrument (in
form reasonably satisfactory to the holders of a majority of the Warrants then
outstanding), the obligation to deliver to each such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to acquire.
All other terms of the Warrants shall remain in full force and effect
following such an Organic Change. The provisions of this Section 4.6 shall
similarly apply to successive Organic Changes.
4.7 Notices.
-------
(a) Immediately upon any adjustment of the Exercise Price, the
Corporation shall give written notice thereof to all holders of Warrants
specifying the Exercise Price in effect thereafter with respect to the
particular holder.
(b) The Corporation shall give written notice to all holders of
Warrants at least 20 days prior to the date on which the Corporation closes its
books or takes a record for determining rights to vote with respect to any
Organic Change, Change in Control, Change of Ownership, Fundamental Change or
other reorganization, dissolution or liquidation. The Corporation shall also
give written notice to the holders of Warrants at least 20 days prior to the
date on which any Organic Change, Change in Control, Change of Ownership,
Fundamental Change or other reorganization, dissolution or liquidation shall
occur.
4.8 Certain Other Events. The Company will not, by amendment of its
--------------------
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issues or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Warrantholders
against dilution or other impairment. If any event occurs as to which the
foregoing provisions of this Article IV are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board, fairly
protect the purchase rights of the Warrants in accordance with the essential
intent and principles of such provisions, then the Board shall make such
adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of the Board, to protect such purchase rights as aforesaid, but in
no event shall any such adjustment have the effect of increasing the Exercise
Price or decreasing the number of shares of Common Stock subject to purchase
upon exercise of this Warrant.
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<PAGE>
4.9 Proceedings Prior to Any Action Requiring Adjustment As a condition
----------------------------------------------------
precedent to the taking of any action which would require an adjustment pursuant
to this Article IV, the Corporation shall take any action which may be
necessary, including obtaining regulatory approvals or exemptions, in order that
the Corporation may thereafter validly and legally issue as fully paid and
nonassessable all shares of Common Stock which the holders of Warrants are
entitled to receive upon exercise thereof, and if all such approvals and actions
are not taken, the Corporation shall take any action which would cause the
Corporation to be able to issue to the holders of Warrants the full number of
shares issuable upon exercise hereof in accordance with the terms hereof.
ARTICLE V
LIQUIDATION, DISSOLUTION, DISTRIBUTIONS OR DIVIDENDS
5.1 Liquidation or Dissolution. In case the Corporation at any time while
--------------------------
this Warrant shall remain unexpired and unexercised, shall dissolve, liquidate,
or wind up its affairs other than in connection with an Organic Change, the
Holder shall have the right to exercise this Warrant for a period of sixty (60)
days after the later of (i) such event having occurred and (ii) receipt by the
Holder of a notice from the Company indicating the kind and amount of securities
or assets issuable or distributable to holders of shares of Common Stock with
respect to such event, and upon exercise of this Warrant during such period, the
Holder shall have the right to receive in lieu of each share of the Warrant
Stock, the same kind and amount of any securities or assets as may be issuable,
distributable, or payable upon any such dissolution, liquidation, or winding up
with respect to each of the shares of the Common Stock.
5.2 Dividends and Distributions With Respect to Common Stock. If legal
--------------------------------------------------------
under the applicable General Corporation Law of the State of Delaware at any
time the Corporation pays any dividends or makes any other distributions with
respect to the Common Stock, the Corporation shall pay at such time to each
holder of a Warrant the dividends or other distributions which such holder would
have been entitled to receive had such holder exercised all of his, her or its
rights to acquire or receive Common Stock under such Warrant(s) on the date as
of which the holders of Common Stock of record entitled to such dividends or
other distributions were determined.
ARTICLE VI
DEFINITIONS
Capitalized terms used herein and not otherwise defined herein shall have
the meanings set forth in the Securities Purchase Agreement. The following
terms, as used in this Warrant, have the following respective meanings:
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<PAGE>
"BOARD" means the Corporation's Board of Directors.
"BUSINESS DAY" shall mean (a) if any class of Common Stock is listed or
admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (b) if no class of Common
Stock is so listed or admitted to trading, a day on which any New York Stock
Exchange member firm is open for business.
"CHANGE IN OWNERSHIP" means any sale or issuance or series of sales and/or
issuances of shares of the Corporation's capital stock by the Corporation or any
holders thereof which results in any Person or group of affiliated Persons
(other than the holders of Common Stock and Series A Securities as of the date
of the Securities Purchase Agreement) owning capital stock of the Corporation
possessing the voting power (under ordinary circumstances) to elect a majority
of the Board.
"CHANGE OF CONTROL" means any transaction, circumstance or event that shall
cause or result in Billy Prim and Andrew Filipowski either (a) owning, directly
or indirectly, beneficial or record ownership of shares of the Corporation's
capital stock or securities having less than 20% of the issued and outstanding
shares of the Corporation entitled to vote on matters submitted to the
Corporation's shareholders, or (b) resigning or being removed or otherwise not
serving as a member of the Board.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK EQUIVALENT" means, collectively, any capital stock of any
class of the Corporation hereafter authorized which is not limited to a fixed
sum or percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Corporation or similar equity like
participation rights or phantom stock interests but specifically excludes the
Warrants.
"FUNDAMENTAL CHANGE" means (a) a sale or transfer of all or substantially
all of the assets of the Corporation, or of the Corporation and its Subsidiaries
on a consolidated basis, in any transaction or series of transactions, and (b)
any merger or consolidation to which the Corporation is a party, except for a
merger in which the Corporation is the surviving Corporation and, after giving
effect to such merger, the holders of the Corporation's outstanding capital
stock immediately prior to the merger shall own the Corporation's outstanding
capital stock possessing the voting power (under ordinary circumstances) to
elect a majority of the Board after such merger.
"HOLDER" means the Person in whose name this Warrant is registered on the
books of the Corporation maintained for such purpose or the Person in whose name
any Warrant Stock is registered on such books.
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<PAGE>
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"ORGANIC CHANGE" means any capital reorganization, reclassification,
consolidation, merger, lease, or sale of all or substantially all of the
Corporation's assets to another Person (other than a dissolution, liquidation or
winding up of the Company as indicated in Section 5.1 above) which is effected
in such a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for shares of Common Stock.
"ORIGINAL WARRANTHOLDER" means Platinum or any Investor holding a Warrant.
"MARKET PRICE" of any security means the average of the closing prices of
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on the primary
exchange on which such security is listed at the end of such day, or, if on any
day such security is not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if
on any day such security is not quoted in the NASDAQ System, the average of the
highest bid and lowest asked prices on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged over a period of 21
days consisting of the day as of which "MARKET PRICE" is being determined and
the 20 consecutive business days prior to such day. The "MARKET PRICE" of a
note or other obligation which is not listed on a securities exchange or quoted
in the NASDAQ System or reported by the National Quotation Bureau, Incorporated,
the total consideration received by the Corporation (including interest) will be
discounted at the prime rate of interest at the First National Bank of Chicago
in effect at the time the note or obligation is deemed to have been issued. If
at any other time such security is not listed on any securities exchange or
quoted in the NASDAQ System or the over-the-counter market, the "MARKET PRICE"
will be the fair value thereof determined jointly by the Corporation and the
holders of a majority of the Warrants. If such parties are unable to reach
agreement within a reasonable period of time, such fair value will be determined
by an independent appraiser jointly selected by the Corporation and the holders
of a majority of the Warrants.
"PERSON" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"PLATINUM" means Platinum Venture Partners 1, L.P., a Delaware limited
partnership.
"REGISTRATION AGREEMENT" means the Registration Rights Agreement, of even
date herewith, by and among the Corporation, Platinum and the Investors (as
defined in the Registration
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<PAGE>
Agreement), as such agreement may be amended, restated, modified or supplemented
from time to time in accordance with its terms.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES PURCHASE AGREEMENT" means the Series A Securities Purchase
Agreement, of even date herewith, by and among the Corporation, Platinum and the
Investors (as defined in the Securities Purchase Agreement), as such agreement
may be amended, restated, modified or supplemented from time to time in
accordance with its terms.
"SHAREHOLDERS' AGREEMENT" means the Shareholders' Agreement, of even date
herewith, by and among the Corporation, the Investors (as defined in the
Shareholders' Agreement) and the Management Stockholders (as defined in the
Shareholders' Agreement), as such agreement may be amended, restated, modified
or supplemented from time to time in accordance with its terms.
"SUBSIDIARY" means any corporation, association or other business entity of
which securities or other ownership interests representing more than fifty
percent (50%) of the ordinary voting power are, at the time as of which any
determination is being made, owned or controlled by the Corporation or one or
more Subsidiaries of the Corporation or by the Corporation and one or more
Subsidiaries of the Corporation.
"VOTING STOCK" of any Person means securities of any class or classes of
such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the directors of such Person.
"WARRANTHOLDER" means a Holder of a Warrant.
"WARRANTS" shall have the meaning set forth in the second paragraph of this
Warrant.
"WARRANT STOCK" means the shares of Common Stock purchased by the
Warrantholders upon the exercise of the Warrants, including any such shares of
Common Stock transferred to any transferee of such Warrantholder, other than a
transferee who acquires such shares after the same have been publicly sold
pursuant to a Registration Statement under the Securities Act.
ARTICLE VII
MISCELLANEOUS
7.1 Notices. Notices and other communications provided for herein shall
-------
be in writing and shall, unless otherwise expressly required, be given in the
manner and with the effect provided in the Securities Purchase Agreement. In
the case of the Holder, such notices and communications
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<PAGE>
shall be addressed to his, her or its address as shown on the books maintained
by the Corporation, unless the Holder shall notify the Corporation that notices
and communications should be sent to a different address (or telecopy number),
in which case such notices and communications shall be sent to the address (or
telecopy number) specified by the Holder.
7.2 Waivers; Amendments. No failure or delay of the Holder in exercising
-------------------
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Holder are cumulative and not exclusive of any rights
or remedies which it would otherwise have. The provisions of this Warrant may
be amended, modified or waived with (and only with) the written consent of the
Corporation and the Warrantholders voting as a single class, entitling such
Warrantholders to purchase a majority of the Common Stock subject to purchase
upon exercise of such Warrants at the time outstanding (exclusive of Warrants
then owned by the Corporation or any Subsidiary or Affiliate thereof); provided,
however, that no such amendment, modification or waiver shall, without the
written consent of each holder of Warrants whose interest might be adversely
affected by such amendment, modification or waiver, (a) change the number of
shares of Common Stock subject to purchase upon exercise of this Warrant, the
Exercise Price or provisions for payment thereof or (b) amend, modify or waive
the provisions of this Section or Article III, IV or V hereof. The provisions
of the Securities Purchase Agreement, the Shareholders' Agreement and the
Registration Agreement may be amended, modified or waived only in accordance
with the respective provisions thereof.
Any such amendment, modification or waiver effected pursuant to this
Section or the applicable provisions of the Securities Purchase Agreement, the
Shareholders' Agreement or the Registration Agreement shall be binding upon the
holders of all Warrants and Warrant Stock, upon each future holder thereof and
upon the Corporation. In the event of any such amendment, modification or
waiver, the Corporation shall give prompt notice thereof to all Warrantholders
and, if appropriate, notation thereof shall be made on all Warrants thereafter
surrendered for registration of transfer or exchange.
No notice or demand on the Corporation in any case shall entitle the
Corporation to any other or further notice or demand in similar or other
circumstances.
7.3 Governing Law. This Warrant shall be construed in accordance with and
-------------
governed by the internal laws of the State of Delaware, without regard to
principles of conflicts of laws.
7.4 Survival of Agreements; Representations and Warranties, etc. All
-----------------------------------------------------------
warranties, representations and covenants made by the Corporation herein or in
any certificate or other instrument delivered by or on behalf of it in
connection with the Warrants shall be considered to have been relied upon by the
Holder and shall survive the issuance and delivery of the Warrants, regardless
of any investigation made by the Holder, and shall continue in full force and
effect so long
- 15 -
<PAGE>
as this Warrant or any Warrant Stock is outstanding. All statements in any such
certificate or other instrument shall constitute representations and warranties
hereunder.
7.5 Covenants to Bind Successor and Assigns. All covenants, stipulations,
---------------------------------------
promises and agreements in this Warrant contained by or on behalf of the
Corporation shall bind its successors and assigns, whether so expressed or not.
7.6 Severability. In case any one or more of the provisions contained in
------------
the Securities Purchase Agreement, the Shareholders' Agreement, the Registration
Agreement or this Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby.
7.7 Section Headings. The section headings used herein are for
----------------
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
7.8 No Rights as Stockholder. This Warrant shall not entitle the
------------------------
Warrantholder to any rights as a stockholder of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed
in its corporate name by one of its officers thereunto duly authorized, and its
corporate seal to be hereunto affixed, attested by its Secretary or an Assistant
Secretary, all as of the day and year first above written.
Blue Rhino Corporation, a Delaware corporation
By:___________________________________________
Billy Prim, Chief Executive Officer
Attest:
_______________________________________
S.H. Fogleman, III, Assistant Secretary
- 16 -
<PAGE>
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
To_________________:
[Choose one or both of first two paragraphs, as applicable]
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the attached Warrant for, and to purchase thereunder,
________________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the Exercise Price in full in the form of certified or bank
cashier's check or wire transfer.
The undersigned hereby irrevocably elects to exercise the right of
conversion represented by the attached Warrant for, and to convert thereunder,
_______________ shares of Common Stock, as provided for therein.
Please issue a certificate or certificates for such shares of Common Stock
in the
following name or names and denominations:
If said number of shares shall riot be all the shares issuable upon
exercise of the attached Warrant, a new Warrant is to be issued in the name of
the undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
Dated: ______________, 19__
_________________________________________________
_________________________
NOTE: The above signature should correspond
exactly with the name on the face of the attached
Warrant or with the name of the assignee appearing
in the assignment form below.
<PAGE>
ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, ______________________________________ hereby sells,
assigns and transfers unto the attached Warrant, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
_______________________ attorney to transfer said Warrant on the books of Blue
Rhino Corporation, with full power of substitution in the premises.
_________________________________________________
_______________________
NOTE: The above signature should correspond
exactly with the name on the face of the attached
Warrant.
Dated:
<PAGE>
EXHIBIT 10.3(a)
[LOGO] FORSYTHE MCARTHUR
September 16, 1996
Forsythe McArthur Associates, Inc.
Mr. Larry W. Brumfield Subsidiary of Forsythe Technology Inc.
V.P. Finance/C.F.O. 7500 Frontage Road
Blue Rhino Corporation Skokie, Illinois 60077
104 Cambridge Plaza Drive 847-675-8000 Main
Winston-Salem, NC 27104 867-675-2130 Fax
Dear Mr. Brumfield:
This letter shall serve as an agreement ("Agreement") between Blue Rhino
Corporation ("Lessee") and Forsythe/McArthur Associates, Inc. ("FMA") whereby
FMA agrees to lease to Lessee, and Lessee agrees to lease from FMA, certain
cylinder display racks as more fully described in Exhibit A (the "Equipment").
The essential terms of the leases and/or of this Agreement shall be in
accordance with the following:
1. All Equipment purchased by FMA for the purposes of leasing to Lessee under
this Agreement shall become subject to one or more equipment schedules
("Schedule(s)") which shall describe the Equipment and incorporate the
terms and provisions of FMA's standard form Master Equipment Lease
Agreement (with such changes, if any, thereto as FMA may agree to make)
(the "Master Lease") to be executed by Lessee and delivered to FMA no later
than September 30, 1996.
2. The Equipment will be delivered and installed at Lessee's location(s)
within the continental U.S. during one or more periods of time as set forth
below (each such period of time is referred to as an "In-service Period"):
<TABLE>
<CAPTION>
In-Service Period No. In-Service Period Dates
----------------------- -----------------------
<S> <C>
A 09/01/96 - 10/31/96
B 11/01/96 - 01/31/97
C 02/01/97 - 04/30/97
D 05/01/97 - 07/31/97
E 08101/97 - 08/31/97
</TABLE>
All items of Equipment to be leased by FMA to Lessee pursuant to a Schedule
must be delivered and accepted by Lessee no later than the date that the
last In-Service Period ends. FMA's obligation to purchase Equipment
pursuant to this Agreement shall cease on August 31, 1997, (unless this
Agreement is extended by mutual agreement of FMA and Lessee in writing)
except for those items of Equipment with a Commencement Date on or before
August 31, 1997.
3. Each Schedule shall provide for a minimum lease term ("Minimum Term") of
forty-eight months beginning the first day of the month after the end of
the applicable In-Service Period and shall provide for forty-eight payments
of monthly rent ("Monthly Rent"). The Monthly Rent shall be determined
using a monthly lease rate factor of .025611, subject to adjustment as set
<PAGE>
September 16, 1996
Mr. Larry W. Brumfield
Blue Rhino Corporation
Page 2
form below, and shall be due monthly in advance commencing on the first day
of the month following the end of the applicable In-Service Period. The
applicable monthly lease rate factor is multiplied by the total cost of the
Equipment resulting in the Monthly Rent (for example, a monthly lease rate
factor of .03 means that 3% of $500,000, a hypothetical Equipment cost,
equals a Monthly Rent of $15,000).
4. Each Schedule shall be generated by FMA promptly following the last day of
the applicable In-Service Period. Lessee agrees to execute and deliver each
Schedule to FMA within 10 days of Lessee's receipt thereof. In addition to
Monthly Rent, each Schedule shall also provide for rent to accrue upon the
installation of each item of Equipment (the "Commencement Date"). Rent
shall accrue from the Commencement Date up to, but not including, the first
day of the month following the applicable In-Service Period ("Interim
Rent"). The parties have agreed that the Commencement Date for all items of
Equipment shall be the mid-point of each applicable In-Service Period, as
follows:
<TABLE>
<CAPTION>
In-Service Period No. Commencement Date
--------------------- -----------------
<S> <C>
A 10/01/96
B 12/15/96
C 03/15/97
D 06/15/97
E 08/15/97
</TABLE>
Interim Rent shall be calculated on a per diem basis by applying the
monthly lease rate factor to the cost of the particular item of Equipment
multiplied by 1/30 (based on a 30 day month). Interim Rent shall be due
along with the first installment of Monthly Rent.
5. The total net-of-tax cost of the Equipment for all In-Service Periods shall
not exceed $3,000,000. FMA must be satisfied as to the quantity, prices and
location of the Equipment as detailed in vendor invoices and documentation
to be provided by Lessee. Sales/Use tax shall be the responsibility of
Lessee, and shall be invoiced on a monthly basis along with the Monthly
Rent. Lessee shall be responsible for the cost of shipping, insurance,
installation, maintenance and related costs.
6. Lessee shall provide FMA with Lessee's purchase orders for the Equipment
along with an assignment of Lessee's purchase rights. Lessee shall direct
the vendor to invoice FMA for the purchase price of the Equipment. Promptly
following the delivery and acceptance of the Equipment by Lessee, Lessee
shall deliver to FMA a certificate of delivery and acceptance in a form
approved by FMA ("Certificate"). The Certificate must set forth the
Commencement Date. At such time as FMA has received a copy of the purchase
order, a vendor invoice and the Certificate, FMA shall pay the vendor the
purchase price of the Equipment. Upon FMA's payment to the vendor, Lessee's
obligation to lease the Equipment from FMA in accordance with this
Agreement shall be absolute and unconditional.
7. If for any reason Lessee fails to execute and deliver the Master Lease or
any Schedule to FMA as required herein, or if Lessee fails to fulfill any
term or condition required to be fulfilled
<PAGE>
September 16, 1996
Mr. Larry W. Brumfield
Blue Rhino Corporation
Page 3
pursuant to this Agreement and any applicable Schedule, FMA may terminate
its obligations to acquire and/or lease the Equipment with respect to the
applicable Schedule and Lessee shall, upon demand, pay to FMA an amount
equal to the full amount of all payments made by FMA to the vendors of the
Equipment (and the sale price of any Equipment supplied by FMA) and any
taxes or other amounts paid by FMA, together with interest thereon at a
rate equal to the Prime Rate (i.e., the per annum interest rate as
published in The Wall Street Journal calculated on the basis of a 360-day
year and 30-day month) from time to time in effect plus 4%, at which time
title to the Equipment will be transferred to Lessee on an as-is, where-is
basis free and clear of all liens and encumbrances created by or arising
through FMA.
8. Each Schedule shall contain the following provisions:
(a) "Provided Lessee is not in default of any condition of this Lease and
with 90 days prior written notice, FMA agrees to sell the Equipment
described herein to Lessee, at Lessee's option, free and clear of all
liens and encumbrances for a price equal to 15.3664% of the original
Equipment cost, plus any applicable sales taxes. This purchase option
may not be exercised prior to the expiration of the Minimum Term as
set forth herein."; and
(b) "Provided Lessee is not in default of any condition of this Lease and
with 90 days prior written notice, FMA herein grants Lessee the option
to return the Equipment described herein and terminate this Lease
Schedule at the end of 36 full months of the Minimum Term. The payment
to be made by Lessee upon such termination shall be an amount equal to
15.2144% of the original Equipment cost and shall be in addition to
any rental payments due prior to and including the month of
termination."
9. The obligations of FMA hereunder are contingent upon (i) the proper
execution by Lessee and receipt by FMA of this Agreement by September 20,
1996, and (ii) the completion of a Due Diligence audit by FMA prior to
FMA's purchase of any Equipment pursuant hereto, the results of which
shall be acceptable to FMA in its sole and absolute discretion. The Due
Diligence audit shall include, without limitation, a review of Lessee's
physical operations and facilities; a review of Lessee's corporate records
including articles of incorporation, by-laws, stock options, employment
agreements and other matters pertaining to Lessee's organization; a review
of all agreements pertaining to Lessee's business operations such as
agreements with distributors and customers; and a review of Lessee's
financial operations and systems including a review of Lessee's accounts
receivable agings, collection practices and procedures, payables, etc. It
is agreed that the costs associated with performing such Due Diligence
shall be paid by Lessee in an amount not to exceed $10,000.
In addition, assuming that FMA is satisfied with the results of its Due
Diligence audit and the parties begin processing lease transactions
pursuant hereto, it is agreed that the obligations of FMA to continue to
purchase Equipment pursuant to this Agreement on an on-going basis shall be
subject to the following conditions: (i) that Lessee shall provide a
standard monthly financial reporting package to FMA within 10 business days
following the end of each calendar month and a weekly cash report within 2
business days after the end of each week which shall be in a form
acceptable to FMA; (ii) that at the end of each week, Lessee shall
<PAGE>
September 16, 1996
Mr. Larry W. Brumfield
Blue Rhino Corporation
Page 4
have a cash balance equal to or greater than $300,000 (iii) no event shall
occur (and Lessee shall provide written notice to FMA within 5 business
days after occurrence) which adversely affects the business or financial
condition of Lessee (as, by way of example and not as a limitation, the
termination of any significant account or the termination of a significant
distributor relationship or Lessee's default under any agreement between
Lessee and any third party which, in the reasonable opinion of FMA, may
have a material affect on Lessee's business or financial condition).
10. In consideration of FMA's entering into this Agreement, and as a condition
to FMA's obligations hereunder, Lessee shall issue warrants to acquire
common stock of Blue Rhino Corporation as outlined in the term sheet
attached hereto as Exhibit B.
11. FMA agrees to review the results of Lessee's performance and financial
condition as of July 31, 1997 for the purpose of determining whether or
not FMA will thereafter continue to purchase equipment and enter into lease
transactions with Lessee, it being the intent that if Lessee has reached or
exceeded the performance as outlined and anticipated in its 1997 Business
Plan (as presented to FMA as of the date hereof) as of July 31, 1997, the
parties will negotiate in good faith toward continuing the relationship set
forth herein on terms acceptable to both parties.
12. It is acknowledged and agreed that FMA intends to assign this Agreement and
the Master Lease and Schedules, including, without limitation, all of FMA's
rights hereunder with respect to the warrants to be provided by Lessee
pursuant hereto, to Forsythe Technology/Lunn Partners Venture Leasing, L.P.
("FT/LP") after FT/LP has been formed.
Upon your signature below, and upon the signature of a duly authorized officer
of FMA in the space set forth below acknowledging FMA's acceptance and agreement
hereto, this letter shall become a legally binding agreement on the terms and
conditions set forth herein. The undersigned represents that he/she is duly
authorized to execute this agreement on behalf of Lessee.
ACCEPTED AND AGREED:
Blue Rhino Corporation
Inc.
By: /s/ Larry Brumfield
-------------------
Name: Larry Brumfield
Title: VP Finance and Administration
Forsythe/McArthur Associates, Inc.
By: /s/ Gordon Decker
-------------------
Name: Gordon Decker
Title: Senior Vice President - Finance
and Administration
<PAGE>
Exhibit A
Equipment Description
The Equipment shall consist of 18" steel display racks as shown below having a
cost of approximately $265.00 each (and such other equipment as may be
acceptable to FMA).
18 Display
Width: 46"
Height: 66"
[photo] Depth: 30"
Display Weight: 250 lbs.
Shipping Weight: 280 lbs.
No. of Doors: 1 [photo]
<PAGE>
Exhibit B
Term Sheet - Warrants
As consideration for Forsythe/McArthur Associates, Inc. (herein, with its
assigns, called the "Holders") entering into lease transactions with Lessee
pursuant to this Agreement, Lessee shall enter into a Warrant Purchase Agreement
with the Holders within 30 days after the date of this Agreement (the "Warrant
Purchase Agreement" or "WPA") in form and substance acceptable to the Holders
and Lessee, whereby Lessee shall grant to the Holders, warrants to purchase
stock of Lessee ("Warrants") in accordance with the following terms:
A. The WPA shall grant the Holders the right to purchase three million shares
of common stock, which is approximately 5% of the total common shares and
equivalents outstanding. The purchase price of such shares shall be $1.00
per share.
At the option of the Holders, the Holders may convert the Warrants into a
reduced number of shares of common stock equal to the number of Warrants
multiplied by a fraction the numerator of which is the profit spread and
the denominator of which is the current market price.
B. The WPA shall provide that the Warrants will be protected against dilution
including dilution caused by issuance of new shares or warrants below the
exercise price.
The Warrants shall provide that the Holders will receive a pro rata share
(i.e., 5%) of all dividends paid to the holders of common shares and
equivalents.
C. The exercise period for the Warrants shall be ten years after issuance
thereof and the Warrants shall be fully vested at the time of issuance
thereof.
D. The Warrants shall be fully assignable, subject only to such restrictions
as may be imposed by applicable securities laws.
E. The WPA shall require that the Holders be provided with monthly financial
statements and audited annual financial statements and that the Holders
shall have access to such other financial information as the Holders may
reasonably request from time to time. The WPA shall also provide that the
members of Lessee's management shall meet with the Holders periodically to
discuss such matters as the Holders deem of interest such as Lessee's
business plans, results, stock offerings, etc.
F. The WPA shall provide the Holders with the same identical registration
rights as are currently held by the holders of Series A Preferred Shares of
Lessee as set forth and defined in The Blue Rhino Corporation Registration
Rights Agreement dated as of December 1, 1994, as amended by that certain
First Amendment thereto dated May 10, 1995 and by that certain Second
Amendment thereto dated October 11, 1995. Lessee shall take all steps
necessary in order to fully accomplish the foregoing including amending
said Registration Rights Agreement to include the Holders.
G. The WPA shall provide that Lessee shall bear all expenses associated with
the issuance and maintenance of the Warrants, and that the WPA and all
Warrants conform to all applicable state and federal securities laws.
<PAGE>
EXHIBIT 10.3(b)
MASTER EQUIPMENT LEASE AGREEMENT
Blue Rhino Corporation F27125
__________________________________ (Lessee) No.______________
104 Cambridge Plaza Drive, Winston-Salem, NC 27104 09/24/96
__________________________________________________ (Address) Date____________
Forsythe/McArthur Associates, Inc. ("FMA" or "Lessor"), by its acceptance
hereof, agrees to lease to Lessee, and Lessee agrees to lease from FMA, in
accordance with the terms and conditions hereinafter set forth, the equipment
("Equipment") described in equipment schedules ("Schedule(s)") which are
executed from time to time by FMA and Lessee. Each Schedule shall refer to and
incorporate by reference this Agreement and, when signed by the parties, shall
constitute a separate lease (a "Lease") for the Equipment therein described on
the terms and conditions stated therein and, to the extent not inconsistent with
such Schedule, on the terms and conditions stated in this Agreement.
1. TERM OF LEASE: The term of a Lease as to any item of Equipment shall commence
(the "Commencement Date") on the date set forth in the Schedule on which such
item of Equipment is described (herein a "related Schedule") and shall continue
in force thereafter until the Lease is terminated as to such item of Equipment
by either party upon not less than 90 days prior written notice to the other
party; provided, however, that a Lease shall in no event be terminated as to any
item of Equipment prior to the expiration of the minimum term specified therefor
("Minimum Term") in the related Schedule, and that no notice of termination
shall be effective if given more than 180 days before the date of termination.
Any notice of termination given by either party may not be withdrawn without the
written consent of the other party. Except as otherwise expressly provided
herein, each Lease is irrevocable for the full term thereof and for the
aggregate rental therein provided. If, after notice of termination is given by
Lessee with respect to a Lease in accordance herewith, Lessee and FMA agree in
writing to renew such Lease prior to the end of the Minimum Term thereof, such
renewal shall become effective on the later of (i) the last day of the Minimum
Term of such Lease, or (ii) the date 45 days after the date of such agreement to
renew, and such Lease shall continue in force until the effective date of such
renewal.
2. RENTAL CHARGES & TAXES: The monthly rental charge ("Monthly Rent") for each
item of Equipment as set forth in the related Schedule shall begin on the
Commencement Date and shall be due and payable by Lessee in advance on the first
day of each month thereafter (except for the first payment which shall be a pro
rata portion of the Monthly Rent, calculated on a 30-day basis, due and payable
on the Commencement Date). All payments payable by Lessee under a Lease shall be
absolute and unconditional and shall not be subject to any defense, setoff,
counterclaim or xxxxxx for any reason whatsoever, and such amounts shall be and
continue to be payable in all events.
Lessee covenants and agrees to pay when due or reimburse and indemnify and hold
FMA harmless from and against all taxes, fees or other charges of any nature
whatsoever (together with any related interest or penalties not arising from
negligence on the part of FMA) now or hereafter imposed or assessed during the
term of a Lease against FMA, Lessee or the Equipment by any federal, state,
county, or local government authority upon or with respect to the Equipment or
upon the ordering, purchase, sale, ownership, delivery, leasing, possession,
use, operation, return or other disposition thereof or upon the rents, receipts
or earnings arising therefrom or upon or with respect to any Schedule (excepting
only federal, state and local taxes based on or measured by the net income of
FMA or any franchise tax upon FMA measured by FMA's capital, capital stock or
net worth). FMA shall be responsible for the filing of all personal property tax
returns relating to the Equipment and shall pay all taxes indicated thereon on
behalf of Lessee. Lessee shall reimburse FMA for all taxes paid by FMA which are
the responsibility of Lessee hereunder within 10 days of receipt of FMA's
invoice therefor.
3. OVERDUE PAYMENTS: For each payment of Monthly Rent or other sum due hereunder
that is not paid when due, and for each month in which such payment remains past
due, Lessee agrees to pay FMA a delinquency charge at the rate of 1.5% of such
payment, provided that such a delinquency charge is not prohibited by law,
otherwise at the highest rate Lessee can legally obligate itself to pay and/or
FMA can legally collect. Any sum due hereunder other than Monthly Rent shall be
considered past due 5 days after the due date shown on FMA's invoice therefor.
4. USE OF EQUIPMENT: Each item of Equipment will be kept by Lessee in its sole
possession and control, will at all times be located at the location stated in
the related Schedule, and will not be removed therefrom without the prior
written consent of FMA. All costs and expenses of every nature that may be
incurred in connection with the permitted movement of the Equipment between
locations (including any additional property taxes or other taxes resulting from
such movement) shall be borne by Lessee. if Lessee fails to so notify FMA and,
as a result of such failure, FMA has paid or is required by the jurisdiction
where the Equipment was originally located to continue to pay taxes of the sort
for which Lessee is responsible under this Agreement, then Lessee shall
reimburse FMA for such taxes, which payment (less FMA's reasonable costs and
expenses) will be refunded to Lessee if and when FMA receives a corresponding
refund from said jurisdiction. Lessee will not make or permit to be made any
alteration or addition to the Equipment (other than manufacturer's approved
engineering changes).
FMA shall not be liable to Lessee for any loss, damage or expense of any kind or
nature whatsoever and howsoever, directly or indirectly, caused (including,
without limitation, any loss of business) by (a) any item of Equipment, (b) the
use, maintenance, repair, service or adjustment thereof, (c) any delay or
failure to provide any maintenance, repair, service or adjustment thereto or (d)
any interruption of service or loss of use thereof.
5. LOSS OF OR DAMAGE TO EQUIPMENT - INSURANCE: Lessee shall be responsible for
and hereby assumes the entire risk of the Equipment being lost, damaged,
destroyed, stolen or otherwise rendered unfit or unavailable for use from the
date of its shipment to Lessee until the date of return to and receipt therefor
by FMA. If any item of Equipment is lost, damaged, destroyed, stolen or
otherwise rendered unfit or unavailable for use, Lessee shall give FMA immediate
notice thereof and the Lease to which such Equipment is subject shall continue
in full force and effect without any abatement in the Monthly Rent applicable to
such item of Equipment. Lessee shall determine, and notify FMA, within 15 days
after the date of the occurrence of xxxxx damage to any item of Equipment
whether such item can be repaired. In the event Lessee determines that such item
of Equipment can be repaired, xxxxxxxx at its expense, shall cause such item to
be promptly repaired. If an item of Equipment is lost, destroyed or stolen, or
if Lessee determines that a damaged item of Equipment cannot be repaired, Lessee
shall, at FMA's direction, within 30 days of such occurrence, either replace the
item with an
Page 1 of 4
<PAGE>
identical item of Equipment, the title to which shall thereupon vest in FMA and
which thereafter shall be considered the item of Equipment subject to the
related Schedule with no abatement in the Monthly Rent applicable thereto or, in
FMA's sole discretion, pay to FMA an amount equal to the sum of (i) all unpaid
Monthly Rent in respect of such item of Equipment through the end of the Minimum
Term applicable thereto as set forth in the related Schedule (or the last day of
any extended term then in effect with respect to such item) and (ii) FMA's
estimate of the fair market value of such item of Equipment at the end of the
Minimum Term applicable thereto as set forth in the related Schedule (or at the
end of any extended term then in effect with respect to such item). Upon such
payment, Lessee's obligation to pay Monthly Rent for such item of Equipment
shall cease.
Lessee shall cause the Equipment to be insured against loss or damage for not
less than the insurance value set forth in the related Schedule, and shall carry
comprehensive general liability and property damage insurance covering the
Equipment and its use. All such insurance shall be in form and amount and with
companies approved by FMA and shall name FMA (or any Assignee, as hereinafter
defined) as an additional insured, as its interest may appear. Lessee shall pay
the premiums for such insurance and shall deliver said policies or duplicates
thereof or certificates thereunder to FMA, together with endorsements thereon or
independent instruments whereby each insurer agrees that it will give FMA a
right to 30 days written notice before said policies can be altered or cancelled
and the right to payment of premium without obligation. The proceeds of such
insurance, at the option of FMA, shall be applied (i) toward the replacement,
restoration or repair of the Equipment or (ii) toward payment of the obligations
of Lessee under the Lease to which such Equipment is subject. Lessee hereby
appoints FMA as Lessee's attorney-in-fact to make claims for, receive payment
of, and execute and endorse all documents, checks or drafts for, loss or damage
under any said insurance policies.
6. MAINTENANCE, REPAIRS AND INSTALLATION: Lessee shall, at its expense, (a)
obtain and keep in full effect, throughout the term of a Lease, a contract from
the manufacturer of the Equipment subject to the Lease (or from another
reputable computer maintenance organization approved by FMA) providing for
standard maintenance service (as that term is defined by the manufacturer) and
(b) otherwise maintain the Equipment in good working order and appearance and
make all necessary adjustments and repairs thereto. Lessee will provide required
suitable electric current to operate the Equipment and a suitable place of
installation for the Equipment with all appropriate facilities as specified by
the manufacturer. Lessee will grant access to the Equipment to FMA, its
designee, or the organization providing computer maintenance services for the
Equipment during normal working hours for inspection, repair, maintenance,
installation of engineering changes and for any other reasonable purpose. Lessee
shall immediately notify FMA of all details concerning any accident arising out
of the alleged or apparent improper manufacture, functioning or operation of the
Equipment. Lessee will at all times cooperate with the manufacturer of the
Equipment so as to permit the prompt installation of all engineering changes on
the Equipment as and when determined necessary or desirable by the manufacturer.
Prior to termination of a Lease as to any item of Equipment, Lessee, at its sole
expense, shall return such item of Equipment in the same condition as when
received by Lessee, reasonable wear and tear resulting from proper use thereof
alone excepted, to FMA at such location as shall be designated by FMA. If any
item of Equipment is maintained by other than the manufacturer thereof, Lessee
shall cause such item of Equipment to be eligible, at Lessee's sole expense, for
such manufacturer's standard maintenance service prior to its return to FMA and
shall provide suitable evidence thereof.
7. TITLE AND UPGRADE: Each item of Equipment shall remain personal property of,
and the title thereto shall remain in, FMA or its Assignee exclusively, and
Lessee shall have no right, title or interest therein and no right to purchase
or otherwise acquire title to or ownership of such item except as set forth in
the related Schedule. All replacement parts, additions and accessories
(excluding feature additions and model changes, as those terms are defined by
the manufacturer) incorporated in or affixed to the Equipment after the
commencement of a Lease to which such Equipment is subject shall be the property
of FMA. Any feature addition or model change ("Upgrade") shall be incorporated
in or affixed to the Equipment only with the prior written consent of FMA. FMA
shall have the right of first refusal to match any proposal for the purchase or
lease of an Upgrade. If an Upgrade has been incorporated in or affixed to the
Equipment and such Upgrade was not leased by FMA, FMA shall have the option to
purchase such Upgrade at the end of the Minimum Term of the related Schedule for
the fair market value thereof (based on the average of three appraisals from
dealers who deal in equipment of that type, one selected by FMA, one by Lessee
and one by the other two). If FMA does not purchase such Upgrade, Lessee shall,
at the request of FMA (and absent such request, at its option, Lessee may),
before the related Schedule terminates, at Lessee's expense, remove the Upgrade
and restore the Equipment using identical components removed therefrom (if any).
Lessee shall at its expense protect and defend FMA's title to the Equipment
against all persons claiming against or through Lessee, at all times keeping the
Equipment free from any legal process or encumbrance whatsoever, including, but
not limited to, liens, attachments, levies and executions (except any placed
thereon by FMA), and shall give FMA immediate written notice of any such legal
process or encumbrance and shall indemnify FMA from any loss caused thereby.
Lessee shall execute or obtain from third parties and deliver to FMA, upon FMA's
request, such further instruments and assurances as FMA deems necessary or
advisable for the confirmation or perfection of FMA's rights hereunder.
In the event a Lease is determined to be a security agreement, Lessee hereby (i)
grants to FMA a security interest in the Equipment subject thereto to secure the
payment and performance of Lessee's obligations thereunder and (ii) authorizes
FMA, at Lessee's expense, to cause the Lease (including a carbon, photographic
or other reproduction thereof), or any statement or other instrument relating to
the Lease showing the interest of FMA in the Equipment, including Uniform
Commercial Code financing statements, to be filed or recorded and re-filed or
re-recorded, and Lessee grants FMA the right to execute Lessee's name to any
such statement or instrument. Lessee agrees to execute and deliver any statement
or instrument requested by FMA for such purpose, and agrees to pay or reimburse
FMA for any searches, any filing, recording or stamp fees, and any expenses or
taxes arising from the filing or recording of any such instrument or statement.
The Equipment is, and shall at all times be and remain, personal property,
notwithstanding that the Equipment or any part thereof may now be, or hereafter
become, in any manner affixed or attached to real property or any improvements
thereon.
8. NO WARRANTIES: FMA MAKES TO LESSEE NO WARRANTY, GUARANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT, INCLUDING, BUT NOT LIMITED
TO, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, QUALITY OR CAPACITY OF
THE EQUIPMENT, WORKMANSHIP, COMPLIANCE WITH THE REQUIREMENTS OF ANY LAW, RULE,
SPECIFICATION OR CONTRACT PERTAINING TO THE EQUIPMENT OR PATENT INFRINGEMENT OR
PATENT DEFECTS. LESSEE ACKNOWLEDGES THAT EACH LEASE OF THE EQUIPMENT IS "AS IS."
FMA IS NOT RESPONSIBLE OR LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES OR LOSSES RESULTING FROM THE INSTALLATION, OPERATION OR
USE OF THE EQUIPMENT OR ANY PRODUCTS MANUFACTURED THEREBY. FURTHER,
NOTWITHSTANDING FMA'S ACCEPTANCE OF ANY ORDER OR SUPPLEMENTAL ORDER, FMA IS NOT
RESPONSIBLE OR LIABLE FOR ANY SUCH DAMAGES OR LOSSES, RESTITUTION, SPECIFIC
PERFORMANCE OR ANY OTHER REMEDY IN THE EVENT THAT FOR ANY REASON ANY VENDOR OF
GOODS FAILS TO TIMELY DELIVER THE SAME TO FMA OR LESSEE OR IN ANY OTHER MANNER
OR RESPECT BREACHES OR FAILS TO PERFORM ITS CONTRACT WITH FMA. FMA MAKES NO
WARRANTY AS TO THE TREATMENT OF A LEASE FOR TAX OR ACCOUNTING PURPOSES.
TRANSPORTATION AND INSTALLATION: All transportation, rigging, drayage,
in-transit insurance, and other charges payable for delivery of the equipment to
and from Lessee, and all installation and disconnect charges, shall be paid by
Lessee.
10. NON-WAIVER: FMA's failure at any time to require strict performance by
Lessee of any of the provisions of a Lease shall not waive or diminish FMA's
right thereafter to demand strict compliance therewith or with any other
provision. Waiver of any default shall not waive any other default. FMA's rights
under a Lease are cumulative and not alternative and may be exercised
successively or concurrently.
11. QUIET POSSESSION: Conditioned upon Lessee's performing its obligations under
a Lease, FMA covenants to and with Lessee that Lessee shall
<PAGE>
peaceably and quietly hold and use the Equipment subject to the Lease during the
term thereof without let or hindrance.
12. DEFAULT AND REMEDIES: The occurrence of any one or more of the following
events ("Events of Default") shall constitute a default under any Lease: (a)
Lessee fails to pay the Monthly Rent or any other amount due FMA on or before
the fifth day after the same is due; (b) any financial statement, information or
representation or warranty given to FMA is false or misleading as of the date it
was given by or on behalf of Lessee; (c) Lessee fails to preserve or perform any
other term, condition, obligation, agreement or covenant set forth in such
Lease, and such failure continues for a period of 10 days after receipt of
written notice thereof from FMA; (d) Lessee assigns or attempts to assign such
Lease, or removes, transfers, encumbers, sublets or parts with possession of any
item of Equipment subject to such Lease, or attempts to do any of the foregoing,
or suffers or permits any of the foregoing to occur except as expressly
permitted in such Lease; (e) Lessee ceases doing business as a going concern, or
it or its shareholders or partners take any action looking toward its
dissolution or liquidation; (f) Lessee becomes insolvent, or generally fails or
admits in writing its inability or unwillingness to pay its debts as they become
due, or makes a general assignment for the benefit of creditors; or Lessee
applies for, acquiesces in or consents to the appointment of any receiver,
trustee or other custodian for it or for all or any substantial part of its
property; or such receiver, trustee or other custodian is appointed without its
application or consent, and such appointment continues undischarged for a period
of 60 days; or any bankruptcy, reorganization, debt arrangement or other case or
preceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding is commenced with respect to Lessee and, if such case or
preceeding is not commenced by Lessee, it is consented to or acquiesced in by
Lessee, or remains for 60 days undismissed; or Lessee takes any action to
authorize, or in furtherance of, any of the foregoing; (g) an Event of Default
by Lessee under any other Lease; or (h) an event of default or event which, with
the giving of notice or the passage of time, or both, would constitute a default
under any other lease or agreement between FMA and Lessee.
If an Event of Default occurs, FMA may, at its option, do any or all of the
following to the full extent permitted by law: (i) recover from Lessee, as
liquidated damages for loss of a bargain and not as a penalty, as to any or all
Leases, an amount equal to the present value of all Monthly Rent to be paid by
Lessee during the remaining Minimum Term or any extended term then in effect,
discounted at the rate of 6% per annum, which amount shall be accelerated and
become immediately due and payable; (ii) sue for and recover all rents and other
amounts due or to become due with respect to any or all items of Equipment;
(iii) require Lessee to assemble all Equipment at Lessee's expense, at a place
reasonably designated by FMA; or (iv) remove any physical obstructions for
removal of the Equipment from the place where the Equipment is located and take
possession of any or all items of Equipment, without notice or demand, wherever
the same may be used located, disconnecting and separating all such Equipment
from any other property, with or without any court order or pre-taking hearing
or other process of law. Lessee hereby waives any and all damages occasioned by
such retaking. FMA may, at its option, ship, store, repair or lease all
Equipment so removed and sell or otherwise dispose of any such Equipment at a
private or public sale. FMA may expose Equipment at Lessee's premises at
reasonable business hours without being required to remove the Equipment.
In the event that Lessee shall have paid to FMA the liquidated damages referred
to in the preceding paragraph, FMA hereby agrees to pay to Lessee, promptly
after receipt thereof, either (a) if FMA re-leases the Equipment, all rentals or
proceeds received from the reletting of the Equipment during the balance of the
Minimum Term of the related Schedule or any successive period then in effect
(after deduction of all expenses incurred by FMA), or (b) if FMA sells the
Equipment, all proceeds received from the sale (after deduction of the estimated
fair market value of the Equipment as of the end of the Minimum Term or at the
end of any extended term then in effect and of all expenses incurred by FMA),
said amount never to exceed the amount of the liquidated damages paid by Lessee.
For purposes of the foregoing, in the event of any reletting by FMA of any item
of Equipment, "all rentals or proceeds received from the reletting of the
Equipment" shall mean the present value (discounted to the Commencement Date of
the re-lease using the interest rate at which FMA has non-recourse financing or
a non-recourse financing or a non-recourse financing commitment with respect to
such re-lease) of the monthly rent for such item under re-lease to a third
party, taking into account only that monthly rent of such re-lease which is
payable on or before the last day of the Minimum Term of the related Schedule
(or the last day of any extended term then in effect with respect to such item
of Equipment). Lessee agrees that FMA shall have no obligation to sell the
Equipment. Lessee shall in any event remain fully liable for reasonable damages
as provided by law and all costs and expenses incurred by FMA as a result of
such default including, but not limited to, all court costs and reasonable
attorneys' fees. Lessee hereby agrees that, in any event, it will be liable for
any deficiency after any sale, lease or other disposition by FMA. The rights
afforded FMA hereunder shall not be deemed to be exclusive, but shall be in
addition to any rights or remedies provided by law.
If, upon the termination of the related Schedule as to any item of Equipment,
Lessee fails or refuses to return and deliver possession of such item of
Equipment to Lessor on the prescribed date, in addition to all other rights and
remedies available to FMA, Lessee shall be liable to FMA for Monthly Rent
applicable to such item of Equipment until the last day of the month in which
such item is returned to FMA, and any damages FMA may suffer by reason of being
unable to deliver such item of Equipment to another party.
13. ASSIGNMENTS: Neither a Lease nor Lessee's rights thereunder shall be
assignable by Lessee. FMA shall have the right to assign a Lease or any part
thereof. If FMA assigns the rents reserved therein or all or any of FMA's other
rights thereunder, or amounts equal thereto, the right of FMA's assignee
("Assignee") to receive the rentals as well as any other right assigned
thereunder shall not be subject to any defense, setoff, counterclaim or
recoupment which may arise out of any breach of any obligation of FMA
thereunder or by reason of any other indebtedness or liability at any time owing
by FMA to Lessee. All rentals due thereunder shall be payable to Assignee by
Lessee whether or not the Lease is terminated by operation of law or otherwise,
including, without limitation, termination arising out of bankruptcy,
reorganization or similar proceedings involving FMA. On receipt of notification
of such assignment, Lessee, subject to its rights thereunder, shall hold the
Equipment for and on behalf of Assignee and will relinquish possession thereof
only to Assignee or pursuant to its written order. Lessee on receiving notice of
any such assignment shall abide thereby and make payment as may therein be
directed, and agrees to acknowledge such assignment to Assignee. Following any
such assignment the term "FMA" shall be deemed to include or refer to Assignee
provided that such Assignee shall not be deemed to assume any obligation or duty
imposed upon FMA under the Lease and Lessee shall look only to FMA for
performance thereof.
14. LIABILITY: Lessee shall indemnify and save FMA harmless from, and defend
FMA against, any and all claims, actions, proceedings, injuries, deaths,
expenses, damages and liabilities, including attorneys' fees, arising in
connection with the Equipment or any Lease, including without limitation, the
manufacture, selection, purchase, delivery, possession, use, operation,
maintenance, leasing and return of the Equipment and acts of Lessee in failing
to maintain the Equipment in good repair.
15. PERFORMANCE AND EXECUTION: Lessee represents and warrants to FMA that (i)
the execution and performance of this Agreement and each Schedule has been duly
authorized by Lessee and that, upon execution by Lessee and FMA of this
Agreement and each Schedule, such Schedule will constitute a valid obligation
binding upon, and enforceable against, Lessee in accordance with its terms, (ii)
neither the execution of this Agreement or any Schedule nor the due performance
thereof by Lessee will result in a breach of, or constitute a default under or
violation of Lessee's certificate or articles of incorporation and by-laws (or
other organizational documents) or any agreement to which Lessee is a party or
by which any interest of Lessee may be affected, (iii) Lessee is duly organized
and in good standing under the laws of its jurisdiction of organization and is
and will continue to be duly qualified to do business and in good standing in
any jurisdiction where any item of Equipment is to be located, (iv) the person
excecuting this Agreement on behalf of Lessee has been and each person executing
a Schedule, upon execution of such Schedule, will be duly authorized to do so,
and (v) any xxxxxx financial statements and other information with respect to
Lessee furnished by Lessee to FMA will be, when furnished, and will remain at
the time of execution of any Schedule, true and correct without any misleading
ommissions, excepting any changes which have been disclosed in a written notice
to FMA.
16. ADDITIONAL DOCUMENTATION: Lessee shall deliver promptly to FMA the following
documentation as and when requested by FMA: (i) financial
Page 3 of 4
<PAGE>
information, including without limitation a copy of Lessee's balance sheets and
income statements for Lessee's three prior fiscal years, certified by
independent certified accounts, and such other current financial information
with respect to the financial condition and operation of Lessee as FMA from time
to time may reasonably request; (ii) a certificate of the resolutions of the
board of directors of lessee duly authorizing or ratifying this Agreement or any
Schedule; (iii) a certificate of incumbency setting forth the names and
signatures of those persons authorized to execute this Agreement or any Schedule
on behalf of Lessee; (iv) landlord and mortgagee waivers in form and substance
satisfactory to FMA or any Assignee (or secured party) with respect to any
premises upon which any item of Equipment is located; (v) an opinion of counsel
for Lessee as to the matters set forth in clauses (i) though (iv) of Section 15
hereof, and as to such other matters as FMA reasonably may request; and (vi)
such documentation confirming the execution of any Lease necessary or desirable
to effect any assignment, perfect any interest of FMA, any secured party or
Assignee, or for such other purposes relating to any Lease or any assignment
thereof as FMA reasonably may request. If such a request for documentation is
made prior to the deliver of any item of Equipment, receipt of such
documentation shall be a condition precedent to FMA's obligation to deliver such
item.
17. PERFORMANCE BY FMA: In the event Lessee fails to comply with any provision
of a Lease, FMA shall have the right, but shall not be obligated, to effect such
compliance on behalf of Lessee upon five days prior written notice to Lessee. In
such event, all monies advanced or expended by FMA, and all expenses incurred
by FMA in effecting such compliance, shall be deemed to be additional rent, and
shall be paid by Lessee to FMA at the time of the next payment of Monthly Rent.
18. MISCELLANEOUS: Any notice or other communication relating to a Lease shall
be delivered or mailed, by first-class mail, postage prepaid, to FMA or Lessee
at its address above shown or at any later address last known to the sender. Any
notice or other communication mailed as aforesaid shall be deemed to have been
given three days after the date sent.
In the event that any Lease is terminated as to any item of Equipment, FMA shall
advise Lessee in writing of those items of Equipment which remain subject to
such Lease, the Monthly Rent payable in respect of such items and the aggregate
insurance value thereof. Upon Lessee's receipt of such written advice, such
Lease shall, without further action on the part of either party, be deemed
amended to the extent set forth in such advice.
If more than one Lessee is named in a Lease, the liability of each shall be
joint and several. Lessee will not affix any item of Equipment to any real
property or any improvements thereof if, as a result thereof, such item will
become a fixture under applicable law. All representations, warranties,
indemnities and covenants contained in this Agreement and in any Schedule shall
continue in full force and effect and shall survive notwithstanding the full
payment of all amounts due hereunder and thereunder or the termination of
Lessee's right of possession and/or the taking of possession by FMA of any item
of Equipment. Each Lease shall inure to the benefit of and shall be binding upon
Lessee and FMA and their respective successors and assigns. If FMA supplies
Lessee with labels, Lessee shall label any and all items of Equipment and shall
keep the same affixed in a prominent place.
If the provisions of any Schedule are inconsistent with the provisions of this
Agreement, the provisions of such Schedule shall prevail.
Each Lease shall be deemed to have been made in Cook County, Illinois,
regardless of the order in which the signatures of the parties shall be affixed
thereto, and shall be interpreted, and the rights and liabilities of the parties
hereto determined, in accordance with the internal laws of the State of
Illinois. Lessee hereby consents and agrees to the exclusive jurisdiction of any
State or Federal court within the State of Illinois for resolution of any
matters in connection with the interpretation, construction and enforcement of
any Lease.
This Agreement and any Schedule may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts together
shall constitute but one and the same instrument. If FMA grants a security
interest in all or any part of a Schedule, the Equipment covered thereby and/or
sums payable thereunder, only that counterpart of the Schedule marked "Secured
Party Original" shall constitute chattel paper and shall be effective to
transfer FMA's rights therein.
19. SEVERABILITY: If any provision of a Lease or any remedy therein provided
shall be invalid under any applicable law, such provision shall be inapplicable
and deemed omitted, but the remaining provisions thereof, including the
remaining default remedies, shall be given effect in accordance with their
manifest intent.
20. ENTIRE AGREEMENT. This Agreement and each Schedule into which this
Agreement is incorporated reference collectively shall constitute the entire
agreement between the parties with respect to a Lease. No supplier or agent of
FMA is authorized to bind FMA or to waive or modify any term hereof or thereof.
Not term or condition of this Agreement or any Schedule may be waived or amended
except in writing and executed by a duly authorized representative of each
party.
Each party to this Agreement warrants and represents that is signatory whose
signature appears below is duly authorized by all necessary corporate action to
execute this Agreement as of the date first above written.
See addendum No. 1 to Master Equipment Lease Agreement No. F27125 dated 09/24/96
attached hereto and made a part hereof for additional terms and provisions.
FORSYTHE/McARTHUR ASSOCIATES, INC. BLUE RHINE CORPORATION
By: /s/ Gordon Decker By: /s/ Larry Brumfield
------------------------------- --------------------------------------
Name: Gordon Decker Name: Larry Brumfield
Title: President Title: Vice President-Financial-Secretary-
Treasurer
Each Schedule can be accepted by FMA only if signed at FMA's office in Illinois
by an executive officer of FMA.
Page 4 of 4
<PAGE>
ADDENDUM NO. 1
TO MASTER EQUIPMENT LEASE AGREEMENT NO. F27125
DATED SEPTEMBER 24, 1996 ("MASTER LEASE")
BY AND BETWEEN
FORSYTHE/McARTHUR ASSOCIATES, INC. ("FMA")
AND
BLUE RHINO CORPORATION ("LESSEE")
The terms and provisions of the Master Lease are hereby amended as follows:
1. It is agreed that the obligations of FMA to lease Equipment pursuant
to this Master Lease on an on-going basis shall be subject to the
following conditions: (i) that Lessee shall provide a standard monthly
financial reporting package to FMA within 15 business days following
the end of each calendar month and a weekly cash report within 2
business days after the end of each week which shall be in a form
acceptable to FMA; (ii) that at the end of each week, Lessee shall
have a cash balance equal to or greater than $300,000; (iii) no event
shall occur (and Lessee shall provide written notice to FMA within 5
business days after occurrence) which adversely affects the business
or financial condition of Lessee (as, by way of example and not as a
limitation, the termination of any significant account or the
termination of a significant distributor relationship or Lessee's
default under any agreement between Lessee and any third party which,
in the reasonable opinion of FMA, may have a material affect on
Lessee's business or financial condition).
2. It is acknowledged and agreed by the parties that FMA intends to
assign this Master Lease and any Schedule(s) hereto to Forsythe
Technology/Lunn Partners Venture Leasing, L.P. ("FT/LP") after FT/LP
has been formed.
Except as specifically modified hereby, the terms and provisions of the Master
Lease shall remain in full force and effect.
Dated: September 24, 1996
ACCEPTED AND AGREED
FORSYTHE/McARTHUR ASSOCIATES, INC. BLUE RHINO CORPORATION
By: /s/ Gordon Decker By: /s/ Larry Brumfield
-------------------------------- ----------------------------------
Name: Gordon Decker Name: Larry Brumfield
Title: President Title: Vice President - Finance
<PAGE>
ADDENDUM NO. 2
TO MASTER EQUIPMENT LEASE AGREEMENT NO. F27125
DATED SEPTEMBER 24, 1996 ("MASTER LEASE")
BY AND BETWEEN
FORSYTHE/McARTHUR ASSOCIATES, INC. ("FMA")
AND
BLUE RHINO CORPORATION ("LESSEE")
The terms and provisions of the Master Lease are hereby amended as follows:
1. SECTION 2. RENTAL CHARGES & TAXES: Delete the second sentence of the second
paragraph in its entirety.
2. SECTION 4. USE OF EQUIPMENT:
(a) Delete the first and second sentences of the first paragraph and
insert the following sentences which read: "Lessee shall, at its sole
discretion determine the location of the Equipment (at all times to be
within the continental United States unless otherwise provided for in
a Lease) and will at all times know the exact distributor or sublessee
location with respect to each item of Equipment. Lessee shall, upon
FMA's request, make available to FMA a report as to the distributor or
sublessee location of each item of Equipment. Lessee acknowledges that
because the Equipment may be relocated from the location stated in the
related Schedule, FMA's Schedules and other related records may not be
accurate with respect to the location of the Equipment. All costs,
expenses and taxes of every nature (including, without limitation, any
additional property taxes or other taxes resulting from such movement)
that may be incurred in connection with the Equipment and/or its
movement to a location other than the location on the related Schedule
will be the responsibility of Lessee," in lieu thereof.
(b) in the fourth line of the first paragraph, delete "Lessee fails to so
notify FMA and, as a result of such failure,".
3. SECTION 9. TRANSPORTATION AND INSTALLATION: Delete the sentence in its
entirety and insert the following in lieu thereof: "All transportation, in-
transit insurance, and other charges payable for delivery of the Equipment
to Lessee, and all installation charges, shall be paid by FMA. All
transportation, in-transit insurance, and other charges payable for the
return of the Equipment from Lessee to FMA, and all de-installation and
disconnect charges, shall be paid by Lessee."
4. SECTION 13. ASSIGNMENTS: After the first paragraph insert the following
paragraph: "Lessee shall have the right to sublease the Equipment leased
hereunder only if, (i) no Event of Default has occurred and is continuing
with respect to the related Lease, (ii) any
6
<PAGE>
such sublease expressly provides that it is subject and subordinate to the
terms of the related Lease (including this Master Lease) and does not
diminish any of Lessee's obligations to FMA under this Master Lease or any
Schedule thereto, (iii) Lessee provides FMA with the sublessee's name and
address and the sublessee location (within the Continental United States
only) of each item of subleased Equipment prior to delivery to the
sublessee's facility, (v) sublessee is prohibited from further subleasing
the Equipment and (vii) Lessee files against the sublessee all financing
statements deemed by FMA to be necessary or appropriate. FMA reserves the
right to review and approve all sublease documentation.
Lessee shall assign and transfer to FMA the Lessee's interest in any
permitted sublease and all rentals and income arising therefrom, subject
however to terms of this Section 13. FMA agrees that until a default shall
occur in the performance of Lessee's obligations under the Master Lease,
that Lessee may receive, collect and enjoy the rents accruing under any
permitted sublease. However, if Lessee shall default in the performance of
its obligations to FMA, then FMA may at its option, receive and collect,
directly from the sublessee, all rent owing and to be owed under the
applicable sublease. FMA shall not, by reason of the assignment of any
sublease nor by reason of the collection of the rents from any sublessee,
be deemed liable to any sublessee for any failure of the Lessee to perform
and comply with Lessee's remaining obligations.
Lessee shall irrevocably authorize and direct any sublessee, upon receipt
of any written notice from FMA stating that a default exists in the
performance of Lessee's obligations under the Master Lease, to pay to FMA
the rents due and to become due under the permitted sublease. Lessee agrees
that sublessee shall have the right to rely upon any such statement and
request from FMA, and that the sublessee shall pay such rents to FMA
without any obligation or right to inquire as to whether such default
exists and notwithstanding any notice from or claim from Lessee to the
contrary and Lessee shall have not right or claim against the sublessee for
any such rents so paid by sublessee."
Except as specifically modified hereby, the terms and provisions of the Master
Lease shall remain in full force and effect.
Dated: October 14, 1996
ACCEPTED AND AGREED
FORSYTHE/McARTHUR ASSOCIATES, INC. BLUE RHINO CORPORATION
BY:_/s/ Gordon Decker BY:_/s/ Larry Brumfield___
TITLE:_Gordon Decker - President TITLE:_Vice President -
Finance and Administration
7
<PAGE>
EXHIBIT 10.4(a)
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made this the 9th day of
December, 1997 by and among Blue Rhino Corporation, a Delaware corporation
("Buyer") and Bison Propane Bottle Exchange LLC, a Kansas limited liability
company, ("Seller").
R E C I T A L S:
---------------
The Seller desires to sell to the Buyer and the Buyer desires to purchase
from the Seller its propane gas cylinder exchange business and certain operating
assets of the Seller, upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereinafter expressed, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
---------------------------
1.1 Assets to be Purchased. Subject to the terms and conditions hereof,
----------------------
on the Closing Date (as hereinafter defined), the Seller agrees to sell to the
Buyer and the Buyer agrees to purchase from the Seller the following assets and
business of the Seller ("Assets").
(a) All right title and interest in and to all of Seller's retail propane
cylinder exchange accounts and locations ("Locations") as set forth on
Schedule 1.1(a) hereto and all other Locations acquired or set by the
Seller prior to the Closing Date. It is estimated that approximately
eight hundred fifty (850) to nine hundred (900) Locations will be
purchased and transferred as a part of this transaction. No Locations
set forth on Schedule 1.1(a) will be closed after
<PAGE>
October 23, 1997 except (i) in the ordinary course of business or (ii)
with the written consent of Buyer.
(b) All of the racks or displays ("Racks") located at the Locations as set
forth on Schedule 1.1(a) hereto. It is estimated that there will be
approximately nine hundred (900) Racks as of the Closing and no Racks
may be removed from any such Location after October 23, 1997 until
Closing except (i) in the ordinary course of business or (ii) with the
written consent of Buyer.
(c) The propane gas cylinder exchange business as conducted by the Seller
as of October 23, 1997 at the Locations set forth on Schedule 1.1(a)
adjusted for changes in the ordinary course of business until Closing.
(d) All of the goodwill, records, trade secrets, proprietary data,
franchises, dealer agreements and all other intangible rights of the
Seller used or useful in the propane gas cylinder exchange business of
the Seller and relating to the Assets.
(e) All business records relating to the Assets including (but not limited
to) all sales data, customer lists, records and files, accounts,
contracts, performance data, and all other data and information
applicable to the operation of Seller's cylinder exchange business.
1.2 Liabilities and Obligations to be Assumed. Subject to the terms and
-----------------------------------------
conditions hereof, as of the Closing Date, the Seller agrees to assign and
transfer to the Buyer and the Buyer agrees to pay or assume the unperformed
contracts, purchase and sale commitments, and other agreements or instruments to
which the Seller is a party, of the Seller which are listed and described in
Schedule 1.2 hereof.
The liabilities referred to in this Section are herein sometimes
collectively called the "Assumed Obligations."
- 2 -
<PAGE>
Notwithstanding the foregoing, if the assignment and transfer of any of the
Assumed Obligations would cause a breach thereof and if no required consent to
such assignment and transfer has been obtained from the third party involved,
then such obligation or instrument shall not be assigned and transferred, but
the Buyer shall act as agent for the Seller in order to obtain for the Buyer the
benefits under such obligation or instrument.
Notwithstanding anything to the contrary contained herein, the following
liabilities are not to be paid or assumed by the Buyer hereunder.
---
(a) any liability for any federal, state or local income taxes of the
Seller or its owners, all of which taxes will be timely paid and borne
entirely by the Seller and the owners; Seller and the owners shall be
solely responsible for paying whatever federal, state or local income
taxes are incurred by them as a result of this transaction and the
Buyer's purchase of the Assets pursuant to this Agreement, and the
Buyer shall have absolutely no liability therefor;
(b) any litigation, or claims and assessments of Seller not yet in
litigation, whether or not identified on Schedule 2.14 arising prior
to the Closing Date;
(c) any labor or unfair labor practices or employment discrimination
claims;
(d) any obligations of the Seller under any profit-sharing or any other
employee benefit plans; and
(e) any other liability of any kind whatsoever, known or unknown.
1.3 Purchase Price; Payment. Subject to the terms and conditions of this
-----------------------
Agreement and in reliance on the representations and warranties of the Seller
contained herein, and in consideration of the sale, conveyance, transfer and
delivery of all of the Assets, the Buyer agrees to pay to the Seller a purchase
price of one million five hundred thousand ($1,500,000) dollars (in addition to
the assumption of liabilities as set
- 3 -
<PAGE>
forth in Section 1.2), subject to adjustment as herein provided, if any, which
amount shall be payable as follows:
(a) If Buyer has a SEC registered public offering ("IPO") prior to or
simultaneously with the Closing, then fifty (50%) percent of the total
purchase price shall be paid by transfer and delivery of Seller's
unregistered common stock at the same price as sold in the IPO and
fifty (50%) percent of the total purchase price in cash; or
(b) If Buyer does not have an IPO but has a private placement common
stock offering prior to or simultaneously with the Closing, the
purchase price will be paid fifty (50%) percent in cash and Seller
shall have an option to receive the balance in either cash or Seller's
unregistered common stock priced at the same price as the private
placement; or
(c) If Buyer does not have any IPO or private placement stock offering
prior to the Closing, the purchase price shall be payable fifty (50%)
percent in cash at Closing and the balance as follows:
(1) If the Buyer has an IPO within twelve (12) months after the
Closing, the balance by transfer and delivery of unregistered
common stock of the Seller valued at the same sales price as sold
to the public in the IPO; or
(2) If the Buyer does not have an IPO but has a private placement of
common stock of at least $2,000,000 within twelve (12) months
after the Closing, then the Seller shall have the option to
receive the balance in either cash (plus a sum equal to eight
(8%) percent annual interest from the Closing Date) or
unregistered common stock of the Seller valued at the same price
as the private offering either payable or deliverable at the date
of the closing of the private placement; or
(3) If the Buyer does not have an IPO or private placement of at
least $2,000,000 within twelve (12) months after the Closing,
then the balance plus interest at eight
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<PAGE>
(8%) percent annual rate from the Closing Date, due in cash
twelve (12) months after the Closing.
1.4 Adjustments to Purchase Price. The purchase price will be adjusted as
-----------------------------
follows:
(a) Increase: The purchase price will be increased by one thousand six
hundred sixty-six ($1,666) dollars per Location for all Locations in
excess of nine (900) hundred transferred to Buyer at the Closing.
(b) Decrease: The purchase price will be decreased by one thousand six
hundred sixty-six ($1,666) dollars per Location for all Locations less
than eight hundred fifty (850) transferred to Buyer at the Closing.
(c) Exclusion: Any Location with less than an average of four (4)
cylinder exchanges per month over the twelve (12) months prior to the
Closing in which it is transferred shall be excluded in this purchase
price adjustment except that any Locations set less than six (6)
months prior to Closing will be included by mutual agreement of the
parties, subject to arbitration as set forth in this Agreement.
(d) Method of adjustment: Any adjustment in the purchase price shall be
made at the Closing. There will be a ninety (90) day period after the
Closing for Buyer to verify the accuracy of the Locations transferred
to Buyer as set forth in this Section. Any adjustment resulting from
Buyer's verification will be paid in cash within ninety (90) days
after the Closing.
1.5 Closing. The Closing transactions contemplated hereby (the "Closing"
-------
or "Closing Date") will occur at 10:00 a.m. on or before the earlier of (i) the
closing of Buyer's IPO or (ii) January 5, 1998 at the offices of the Seller or
at such other time, date or place as the parties may agree, provided that all
conditions to the Closing have been satisfied or waived in writing. On the
Closing Date, the Seller shall
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<PAGE>
execute and deliver to the Buyer appropriate instruments of assignment, transfer
and conveyance and such other documents as the Buyer or its counsel shall
reasonably request or as specified in this Agreement. In exchange, the Buyer
shall deliver to the Seller the purchase price due and such other instruments of
assumption and documents as the Seller or its counsel shall reasonably request
or as specified in this Agreement. The Seller will cooperate with and assist the
Buyer in planning and orderly transfer of the business and the Assets to the
Buyer and will cooperate in good faith with the Buyer in achieving the Closing
on or before the date set forth above.
1.6 Bulk Sales Act. The parties hereto agree to waive compliance with the
--------------
Bulk Sales Act as in effect in the State of Kansas.
1.7 Allocation of Purchase Price. The purchase price shall be allocated
----------------------------
as set forth in Schedule 1.7 attached hereto.
1.8 Proration. All revenue and cash expenses of the Locations and
---------
property taxes relating to the Assets shall be prorated between the parties as
of the Closing Date.
1.9 Lockup Agreement. If the Seller receives part of the purchase price
----------------
in unregistered common stock of Buyer as set forth in Section 1.3(c), then
Seller agrees to enter into any lockup agreement for such stock as required by
Buyer's underwriters of any IPO for all then existing security holders.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
-------------------------------------------------------
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<PAGE>
The Seller hereby makes the following representations, warranties and
covenants, each of which is true and correct on the date hereof and will be true
and correct on the Closing Date and each of them shall survive the Closing Date
and the sale contemplated hereby.
2.1 Limited Liability Company Existence and Qualification of Seller. The
---------------------------------------------------------------
Seller is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Kansas. The Seller has the power
and authority to own and use its properties and to transact the business in
which it is engaged, holds all franchises, licenses and permits necessary and
required therefor, and is licensed in all jurisdictions where it is required to
be licensed or qualified to do business as a foreign company in any other
jurisdiction.
2.2 Approval of Agreement. The execution and delivery of this Agreement
---------------------
has been duly authorized and approved by the Manager of the Seller and by its
Members. Pursuant to such authorization and approval, the Seller has full power
and authority to enter into this Agreement and to perform its obligations
hereunder.
2.3 Financial Information. Attached hereto as Schedule 2.3 is the
---------------------
Financial Information prepared by the Seller relating to the revenues and
cylinder exchanges for each of the Locations over the twelve (12) months ending
December 31, 1996 and September 30, 1997 (to be updated as of one month prior
the Closing). Such Financial Information is hereinafter referred to as the
"Financial Information." The Financial Information is true, complete and
correct and has been prepared by the Seller and presents fairly and accurately
the Financial Information as of the dates indicated.
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<PAGE>
2.4 Events Subsequent to September 30, 1997. Since September 30, 1997,
---------------------------------------
except as set forth on Schedule 2.4 hereto, there has been no (a) change in the
condition of the Assets or liabilities (ordinary wear and tear excepted)
relating to the cylinder exchange business of the Seller other than changes in
the ordinary course of business, none of which have been materially adverse; or
(b) damage, destruction or loss, whether covered by insurance or not, affecting
the Assets or cylinder exchange business of the Seller.
2.5 Assumed Obligations. The Assumed Obligations to be assumed by the
-------------------
Buyer under the provisions of Section 1.2 hereof are all valid and in full force
and effect and no party to any such Assumed Obligation is in default with
respect to any term or condition thereof, nor has any event occurred which,
through the passage of time or the giving of notice, or both, would constitute a
default thereunder or would cause the acceleration of any obligation of any
party thereto. Except as specifically set forth on Schedule 2.5 hereto, none of
the Assumed Obligations will result in a penalty upon termination. The Assumed
Obligations will be valid and in full force and effect on the Closing Date.
Each Assumed Obligation will be duly assigned to the Buyer at the Closing and
upon such assignment, the Buyer will acquire all of the Seller's right, title
and interest in and to such Assumed Obligation and will be substituted for the
Seller under the terms of such Assumed Obligation. The Seller has delivered to
the Buyer true, correct and complete copies of the contracts, agreements or
other documents creating or evidencing each Assumed Obligation.
2.6 True and Complete Copies. Copies of agreements, written contracts and
------------------------
documents delivered and to be delivered hereunder by the Seller and the
Shareholders are and will be true and complete copies of such agreements,
contracts and documents.
2.7 Personal Property. Except as set forth on Schedule 2.7 hereto, the
-----------------
Seller has good and marketable title to all personal property comprising the
Assets, except any subsequently sold in the ordinary
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<PAGE>
course of business, free and clear of all mortgages, options, liens, charges,
security interests, leases, covenants, conditions, agreements, claims,
restrictions and other encumbrances of every kind and there exists no
restriction on the use or transfer of such property.
2.8 Real and Personal Property - Leased by the Seller. The Seller does
-------------------------------------------------
not lease any of the Assets.
2.9 Patents, Trademarks and Other Intangible or Intellectual Property.
-----------------------------------------------------------------
Set forth on Schedule 2.9 hereto is a customer list which is true and correct as
of the date indicated.
2.10 Use and Condition of Property. All of the Assets to be transferred
-----------------------------
to Buyer are in good operating condition and repair as required for their use in
the business of the Seller as presently conducted or planned, and to the best of
Seller's knowledge conform to all applicable laws, and no notice of any
violation of any law, statute, ordinance, or regulation relating to any of such
property or assets has been received by the Seller, to the best of its
knowledge, except such as have been fully complied with. All Assets comply with
all applicable zoning and building code ordinances and all applicable fire,
environmental, occupational safety and health standards established by law or
regulation and the same use thereof by the Buyer will not result in any
violation of any such code, ordinance, or standard. To the best of Seller's
knowledge, there is no pending, or to the best of the Seller's and the
Shareholders' knowledge, no proposed or threatened change in any such code,
ordinance or standard which would materially adversely affect the business of
the Seller or the use of the Assets.
2.11 Licenses and Permits. To the best of its knowledge, Seller has all
--------------------
licenses and permits required for the conduct of its cylinder exchange and such
licenses and permits are valid and in full force and effect.
- 9 -
<PAGE>
To the best of Seller's knowledge, such licenses and permits are freely
transferable by the Seller, and following the consummation of the transactions
contemplated hereby, and the Buyer will have all right, title and interest of
the holder thereof.
2.12 Contracts and Commitments. Except as set forth in Schedule 2.12
-------------------------
hereto and relating only to the cylinder exchange business, the Seller does not
have outstanding:
(a) Any arrangement or other agreement which involves (i) a sharing of
profits, (ii) future payments to other persons, or (iii) any joint
venture contract or arrangement.
(b) Any contract containing covenants materially limiting the freedom of
the Seller to compete in its business or with any person or in any
area except as limited by Seller's Articles of Organization.
(c) Any contract or commitment not made in the ordinary course of business
which is material to the cylinder exchange business, financial
condition or operations of the Seller.
(d) Any other material contract or commitment which is not cancelable
without penalty on thirty (30) days notice or less and which is not
specifically set forth on any other Schedule hereto.
2.13 No Breach of Statute, Decree, Order or Contract. As it relates to
-----------------------------------------------
the Assets, Seller is not in default under or in violation of, any applicable
statute, law, ordinance, decree, order, rule, or regulation of any governmental
body, or the provisions of any franchise or license, or in default under, or in
violation of, any provision of its articles or operating agreement, by-laws, any
promissory note, indenture or any evidence of indebtedness or security therefor,
lease, contract, purchase or other commitment or any other agreement to which
the Seller is a party or by which it is bound which may result in an adverse
effect on the business or condition, financial or otherwise, of the Seller; and
the execution of this Agreement and the consummation
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<PAGE>
of the transactions contemplated hereby has not and will not constitute or
result in any such default, breach or violation or in the creation of any lien,
charge or encumbrance upon any Asset.
2.14 Litigation. Except as set forth on Schedule 2.14 hereto, there is no
----------
suit, claim, action or proceeding now pending or to Seller's knowledge,
threatened before any court, administrative or regulatory body, or any
governmental agency, nor are there any grounds therefor, to which the Seller is
a party or which may result in any judgment, order, decree, liability or other
determination which will, or could, have any adverse effect upon any Asset or
Assumed Obligation. No such judgment, order or decree has been entered against
the Seller nor has any such liability been incurred which has, or could have,
such effect. There is no claim, action or proceeding now pending or threatened
before any court, administrative or regulatory body, or any governmental agency,
which will, or could, prevent or hamper the consummation of the transactions
contemplated by this Agreement.
2.15 Insurance Policies. Set forth on Schedule 2.15 hereto is a list of
------------------
all insurance policies and bonds in force covering the Seller and any of its
properties, operations or personnel. Policies thereon described evidence
insurance in such amounts and against such risks and losses as are generally
maintained with respect to comparable businesses and properties.
2.16 Books and Records. As relates to the Assets, the books of account,
-----------------
limited liability company books and other records of the Seller are in all
material respects complete and correct, have been maintained in accordance with
good business practices and the matters contained therein are accurately
reflected on the Financial Information, to the extent appropriate.
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<PAGE>
2.17 Products Liability. To the best of Seller's knowledge, there exist
------------------
no claims, whether known or unknown, against the Seller for injury to person or
property of its employees or any third persons suffered as a result of the sale
of any products or services sold by the Seller prior to the date of this
Agreement, including, but not limited to, claims arising because of the
defective or unsafe nature of its equipment or service. The Seller has and on
the Closing Date will have full and adequate insurance coverage for potential
products liability claims against it.
2.18 Investment Representations.
--------------------------
(a) The Seller is a "U.S. Person" (as defined in Rule 902(17 CFR Section
230.902) under the Federal Securities Act of 1933, as amended
("Securities Act").
(b) The Seller is a Kansas limited liability company whose situs for
purposes of securities laws is the State of Kansas.
(c) The Seller is acquiring the shares to be delivered as a portion of the
consideration for the Assets sold hereunder or acquired pursuant
hereto for its own account with the present intention of holding such
securities for purposes of investment, and that it has no intention of
selling such securities in a public distribution in violation of the
federal securities laws or any applicable state securities laws. Each
certificate for the stock will be imprinted with a legend in
substantially the following form:
"The securities represented by this certificate were originally
issued on _______ ___, 1998, and have not been registered under
the Federal Securities Act of 1933, as amended. The transfer of
the securities represented by this certificate is subject to the
terms of the Asset Purchase Agreement, dated November ___, 1997,
between Blue Rhino Corporation (the "Issuer") and Bison Propane
Bottle Exchange LLC; and the Issuer reserves the right to refuse
the transfer of such securities until such conditions have been
fulfilled with respect to such transfer."
- 12 -
<PAGE>
(d) The Seller has the financial ability to bear the economic risk of an
investment in the securities, has adequate means of providing for its
current needs and contingencies, has no need for liquidity in such
investment and could afford a complete loss of such investment.
(e) The Seller was not formed for the specific purpose of acquiring the
shares to be issued in this transaction.
(f) The Seller's overall commitment to investments which are not readily
marketable is not disproportionate to its net worth and its investment
in the Buyer will not cause such overall commitment to become
excessive.
(g) The Seller has such knowledge and experience in financial and business
matter that it is capable of evaluating the merits and risks of its
investment in the common stock of Buyer.
(h) The Seller has been given full opportunity to ask questions of and to
receive answers from representatives of the Buyer concerning the terms
and conditions of the investment and the business of the Buyer and
such other information as it desires in order to evaluate an
investment in the securities and all such questions have been answered
to the full satisfaction of the Seller.
(i) In making its decision to acquire the shares, the Seller has relied
solely upon independent investigations made by it. In addition, the
Seller initially learned of the investment through a direct
communication, and was never presented or solicited by (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or
radio; (ii) any seminar or meeting whose attendees, including the
Seller, had been invited as a result of, subsequent to or pursuant to
any of the foregoing; or (iii) any other form of general solicitation.
(j) The Seller understands that the shares have not been registered under
the Securities Act, the securities laws of any state, and are being
issued in reliance upon specific exemptions from
- 13 -
<PAGE>
registration thereunder, and the Seller agrees that the shares may not
be sold, offered for sale, transferred, pledged, hypothecated or
otherwise disposed of except pursuant to (i) a registration statement
with respect to such securities which is effective under the
Securities Act and under the securities act of any state; (ii) Rule
144 under the Securities Act; or (iii) any other exemption from
registration under the Securities Act or under the securities act of
any state relating to the disposition of securities, provided an
opinion of counsel is furnished, reasonably satisfactory in form and
substance to the Buyer, that an exemption from the registration
requirements of the Securities Act and such state act is available.
The Seller understands the legal consequences of the foregoing to mean
that it may be required to bear the economic risk of its investment in
the shares for an indefinite period or time. The Seller understands
that any instruments initially representing the shares shall bear
legends restricting the transfer thereof. The Seller agrees not to
resell or otherwise dispose of all or any shares except as permitted
by law, including, without limitation, any and all applicable
provisions of this Section, this Agreement and any regulations under
the Securities Act and any state law or regulations.
(k) The Seller understands that no federal or state agency has made any
finding or determination as to the fairness of an investment in, or
any recommendation or endorsement of, the shares.
2.19 No Material Misstatement or Omissions. Sections 2.1 through and
-------------------------------------
including 2.18 of this Article II, including the material contained in the
Schedules referred to in said Sections, do not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not materially false or misleading. There is no fact which materially
adversely affects or in the future may (so far as the Seller reasonably
foresees) materially adversely affect the business, properties or financial or
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<PAGE>
business condition of the Seller which has not been set forth therein. The
representations, warranties and covenants made in this Article will be true and
complete on and as of the Closing with the same force and effect as though made
on and as of the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
The Buyer hereby makes the following representations and warranties, each
of which is true and correct on the date hereof and will be true and correct on
the Closing Date, and each of which shall survive the Closing Date and the sale
contemplated hereby.
3.1 Corporate Existence of Buyer. The Buyer is be a corporation duly
----------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. The Buyer has the corporate power and authority to own and use its
properties and to transact the business in which it is engaged.
3.2 Approval of Agreement. The execution and delivery of this Agreement
---------------------
will have been duly authorized and approved by proper corporate action of the
Buyer. Pursuant to such authorization and approval, the Buyer will have full
power and authority to enter into this Agreement and to perform its obligations
hereunder.
3.3 No Breach of Statute, Decree, Order or Contract. The execution of
-----------------------------------------------
this Agreement and the consummation of the transactions contemplated hereby have
not and will not constitute or result in the breach of any of the provisions of
or constitute a default under, the articles or certificate of incorporation or
by-laws of the Buyer, or any promissory note, indenture, evidence of
indebtedness or security therefor, lease,
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<PAGE>
contract, purchase or other commitment or any other agreement to which the Buyer
is a party or by which it is bound which would have a material adverse effect on
the Buyer, taken as a whole.
ARTICLE IV
COVENANTS CONCERNING THE SELLER
-------------------------------
The Seller covenants and agrees with the Buyer that, from and after the
date of this Agreement and until the Closing, the Seller will conduct its
business subject to the following provisions and limitations:
4.1 Operation of Business. Unless the prior written consent of the Buyer
---------------------
is otherwise obtained as relates to the cylinder exchange business, the Seller
will:
(a) not enter into any contract or commitment or engage in any transaction
which is not in the usual and ordinary course of business or which is
inconsistent with past practices;
(b) not sell or dispose of or encumber any of the Assets;
(c) not create, assume, incur or guarantee any indebtedness other than (i)
in the usual and ordinary course of business and with a maturity date
of less than one year or (ii) that incurred pursuant to existing
contracts disclosed in the Schedules delivered pursuant hereto;
(d) not make or institute any unusual or novel method of transacting
business or change any accounting procedures or practices or its
financial structure;
(e) not perform any act, or attempt to do any act, or permit any act or
omission to act, which will cause a breach of any material contract,
commitment or obligation to which the Seller is a party;
(f) operate its business in the usual, regular and ordinary course;
(g) maintain its assets and properties in good repair, order and
condition, reasonable wear and tear excepted;
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<PAGE>
(h) insure all property owned or leased by it against all ordinary and
insurable risks (except in respect of any leased property where the
terms of the lease do not impose on the lessee the obligation to
maintain insurance) and will operate, maintain and repair all its
property in a careful, prudent and efficient manner;
(i) maintain and keep in full force and effect, fire and other insurance
on assets and property, and liability and other casualty insurance
providing substantially the amount and type of coverage in effect on
the date hereof;
(j) not take any action which would interfere with the ability of the
Seller to perform this Agreement, which would prevent the performance
of this Agreement, or which would impair the value of the business or
assets being acquired by the Buyer in this transaction;
(k) use its best efforts to preserve its business organizations intact and
keep available to the Buyer, to the extent desired by the Buyer, the
services of its present employees and agents, and also use its best
efforts to preserve the goodwill of suppliers, customers, distributors
and others having material business relations with it.
4.2 Full Access. As relates to the Assets, representatives of the Buyer
-----------
shall have full access at all reasonable times to all premises, properties,
records and contracts of the Seller, and the Seller will furnish to the Buyer
any information in respect of the business and affairs of the Seller as the
Buyer may from time to time request. Such examination and investigation by the
Buyer shall not affect the warranties and representations of the Seller
contained in this Agreement.
ARTICLE V
CONDITIONS TO THE BUYER'S OBLIGATIONS
-------------------------------------
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<PAGE>
The obligations of the Buyer to consummate the transactions provided for in
this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of the Buyer to
waive any one or more of such conditions:
5.1 Representations and Warranties of Seller. The representations and
----------------------------------------
warranties of the Seller contained in this Agreement and in the certificates and
papers to be delivered to the Buyer pursuant hereto and in connection herewith
shall be true and correct in all respects on the date hereof and on the Closing
Date (except for changes specifically permitted hereunder) as though such
representations and warranties were made on the Closing Date.
5.2 Performance of this Agreement. The Seller shall have duly performed
-----------------------------
or complied with all of the obligations to be performed or complied with by it
under the terms of this Agreement on or prior to the Closing Date.
5.3 Material Adverse Change. There shall have been no material adverse
-----------------------
change, casualty or loss actual or threatened, in the Assets or Assumed
Obligations, cylinder exchange business or condition, financial or otherwise, of
the Seller whether or not covered by insurance, as a result of any cause
whatsoever.
5.4 No Violations of Law or Litigation. At the Closing Date there shall
----------------------------------
exist no violations of any federal, state or local law or regulations materially
affecting the assets, goodwill or the business of the Seller, and no
governmental agency or body shall have made charges of any such violations or
shall have instituted, threatened or intimated any action which would have a
material adverse effect on and/or preclude the transaction contemplated by this
Agreement.
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<PAGE>
5.5 Receipt of Documents. The Buyer shall have received, in form and
--------------------
content satisfactory to it, all documents required to be delivered to it
hereunder, and such other documents (in addition to the foregoing) as may
reasonably be required by the Buyer in connection with this Agreement and the
transaction hereunder.
5.6 Certificate of the Seller. The Buyer shall have received a
-------------------------
certificate signed by the Manager of the Seller dated as of the Closing Date,
and subject to no qualification, certifying that the conditions set forth in
this Article have been fully satisfied. Such certificate shall be deemed a
representation and warranty of the Seller under this Agreement.
5.7 Authorization and Good Standing. The Buyer shall have received from
-------------------------------
the Seller:
(a) A certificate that this Agreement has been duly executed and
delivered on behalf of the Seller, is valid, binding and enforceable
against the Seller in accordance with its terms, and has received all
requisite approval by the Manager and Members of the Seller.
(b) A certificate that the Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of
Kansas. The Seller is duly qualified as a foreign company in good
standing under the laws of any states where the nature of its
business and its operations require such qualification. The Seller
has full power and authority to own and use its properties and carry
on its business as being conducted immediately prior to the Closing
Date.
(c) A Certificate of Good Standing from the State of Kansas.
(d) Such Uniform Commercial Code, judgement and tax reports sufficient to
show that the Assets and Assumed Obligations are not subject to any
liens or encumbrances.
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<PAGE>
5.8 No Lawsuits. No suit, action or other proceeding or investigation
-----------
shall be threatened or pending before or by any court or governmental agency
concerning this Agreement or the consummation of the transactions contemplated
hereby, or in connection with any material claim against the Seller not
disclosed on the Schedules hereto. No governmental agency shall have threatened
or directed any request for information concerning this Agreement, the
transaction contemplated hereby or the consequences or implications of such
transaction to the Buyer or the Seller, or any member, officer, director,
employee or agent of either of them.
5.9 No Restrictions. There shall exist no conditions, restrictions or
---------------
reservations affecting the title to or utility of the Assets and Assumed
Obligations which would prevent the Buyer from occupying and utilizing the
Assets and Assumed Obligations, or any part thereof, to the same full extent
that the Seller might continue to do so if the sale and transfer contemplated
hereby did not take place.
5.10 Consents. All consents and approvals necessary to insure that the
--------
Buyer will continue to have the same full rights in respect to the Assets and
Assumed Obligations as the Seller had immediately prior to the consummation of
the transaction contemplated hereunder shall have been obtained. The Seller
makes no representations or warranty that any of Seller's current customers will
remain with Buyer after the Closing.
5.11 Documents. The Buyer shall receive from the Seller on the Closing
---------
Date:
(a) Appropriate documents conveying to the Buyer good and marketable
title to the Assets being transferred; and
(b) Assignments of the Assumed Obligations being assumed by the Buyer
pursuant to the provisions of Section 1.2 hereof, with related
consents if any are so required.
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<PAGE>
5.12 Delivery of Certain Records. All books and records of the Seller
---------------------------
relating to the Assets being transferred and all other information and records
requested by the Buyer, shall have been made available to the Buyer for
inspection, and shall be in form and content satisfactory to the Buyer and its
counsel. The Seller shall have delivered the business records promised to the
Buyer pursuant to Section 1.1(e) hereof.
5.13 Approval of Counsel. The validity of the transaction herein
-------------------
contemplated and the form and substance of all opinions, instruments and other
documents or certificates to be delivered by the Seller hereunder shall be
reasonably satisfactory to House Law Firm, counsel for the Buyer.
5.14 Purchase of Cylinders. Simultaneously with this Closing, the Buyer
---------------------
or its Distributors shall purchase all of the propane gas cylinders owned by
Seller at a purchase price of seventy-five (75%) percent of retail cost for
cash, excepting those cylinders located in Colorado.
5.15 Colorado. An agreement has been negotiated and finalized between
--------
Seller and Anamo Services, Inc., the existing Buyer's Distributor in Colorado to
combine the Seller's Assets located in said state with the Assets and business
of Anamo Services, Inc. to operate a cylinder exchange business and such
business has become the Buyer's Distributor for Colorado.
5.16 Further Assurances. The Buyer shall have received such further
------------------
instruments and documents as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained and the performance of all conditions to the
consummation of such transactions.
ARTICLE VI
- 21 -
<PAGE>
CONDITIONS TO THE SELLER'S OBLIGATIONS
--------------------------------------
The obligations of the Seller to consummate the transactions provided for
in this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of the Seller to
waive any one or more of such conditions:
6.1 Representations and Warranties of the Buyer. The representations and
-------------------------------------------
warranties of the Buyer contained in this Agreement and in the certificates and
papers to be delivered to the Seller pursuant hereto and in connection herewith
shall be true and correct in all respects on the date hereof and on the Closing
Date (except for changes specifically permitted hereunder) as though such
representations and warranties were made on the Closing Date.
6.2 Performance of this Agreement. The Buyer shall have duly performed
-----------------------------
or complied with all of the obligations to be performed or complied with by it
under the terms of this Agreement on or prior to the Closing Date.
6.3 Certificate of the Buyer. The Seller shall have received a
------------------------
certificate signed by the President of the Buyer dated as of the Closing Date
and subject to no qualification certifying that the conditions set forth in this
Article have been fully satisfied. Such certificate shall be deemed a
representation and warranty of the Buyer hereunder.
6.4 Authorization and Good Standing. The Seller shall have received from
-------------------------------
the Buyer:
(a) A certificate that this Agreement has been duly executed and
delivered on behalf of the Buyer and is binding and enforceable
against it in accordance with its terms.
(b) A Certificate of Good Standing from the State of Delaware.
- 22 -
<PAGE>
6.5 Payment of Purchase Price and Assumption of Liabilities and
-----------------------------------------------------------
Obligations. The Seller shall receive from the Buyer on the Closing Date the
- -----------
purchase price provided for in this Agreement and appropriate documents assuming
the Assumed Obligations as provided in Section 1.2 hereof.
6.6 Purchase of Cylinders. Simultaneously with this Closing, the Buyer
---------------------
or its Distributors will have purchased all of the propane gas cylinders owned
by Seller at a purchase price of seventy-five (75%) percent of retail cost for
cash, excepting those cylinders located in Colorado.
6.7 Colorado. An agreement has been negotiated and finalized between
--------
Seller and Anamo Services, Inc., the existing Buyer's Distributor in Colorado to
combine the Seller's Assets located in said state with the Assets and business
of Anamo Services, Inc. to operate a cylinder exchange business and such
business has become the Buyer's Distributor for Colorado.
6.8 Further Assurances. The Seller shall have received such further
------------------
instruments and documents as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained and the performance of all conditions to the
consummation of such transactions.
ARTICLE VII
INDEMNIFICATION
---------------
7.1 Indemnification of Buyer. For a term of three years after the
------------------------
Closing Date, the Seller hereby agrees to indemnify and hold the Buyer, any
subsidiary or affiliated corporation of the Buyer or any officer, director,
agent, employee, parent or affiliate of them (an "Indemnified Person") harmless
from and against any and all losses, claims, damages, liabilities, costs,
counsel fees and other expenses of every nature
- 23 -
<PAGE>
whatsoever incurred or asserted against them, resulting from or arising out of
(i) any breach by the Seller of any representation, warranty, covenant,
agreement or other obligation of the Seller made or incurred under or pursuant
to this Agreement; (ii) any claim relating to the business of the Seller (except
for Assumed Obligations, as defined herein) based on a state of facts existing
prior to or on the Closing Date (other than a claim arising out of acts of
Buyer's employees, agents, or representatives), whether or not such claim
constitutes a breach of any representations, warranty, covenant, agreement or
other obligation of the Seller; and (iii) any liability or obligation of the
Seller which is not expressly assumed by the Buyer under this Agreement; [(i)
through (iii) herein collectively referred to as "Indemnifiable Losses"].
7.2 Indemnification of Seller. For a term of three years after the
-------------------------
Closing Date, the Buyer hereby agrees to indemnify and hold the Seller, any
subsidiary or affiliated corporation of the Seller or any officer, director,
agent, employee, parent or affiliate of them (an "Indemnified Person") harmless
from and against any and all losses, claims, damages, liabilities, costs,
counsel fees and other expenses of every nature whatsoever incurred or asserted
against them, resulting from or arising out of (i) any breach by the Buyer of
any representation, warranty, covenant, agreement or other obligation of the
Buyer made or incurred under or pursuant to this Agreement; and (ii) any claim
relating to the Assets described herein of the Buyer based on a state of facts
occurring after the Closing Date (other than a claim arising out of acts of
Seller's employees, agents, or representatives), whether or not such claim
constitutes a breach of any representations, warranty, covenant, agreement or
other obligation of the Buyer [(i) and (ii) herein collectively referred to as
"Indemnifiable Losses"].
7.3 Participation in Litigation. In the event any suit or other
---------------------------
proceeding is initiated against an Indemnified Person with respect to which such
Indemnified Person alleges the other party is or may be obligated to indemnify
such Indemnified Person hereunder, the other party shall be entitled to
participate
- 24 -
<PAGE>
in such suit or proceeding, at its expense and by counsel of its choosing,
provided that (a) such counsel is reasonably satisfactory to the Indemnified
Person, and (b) the Indemnified Person and its counsel shall retain primary
control over such suit or proceeding. If defense is undertaken by an insurance
company of either party, then either Buyer or Seller may participate at their
own expense. Such counsel shall be afforded access to all information pertinent
to the suit or proceeding in question. The Indemnified Person shall not settle
or otherwise compromise any such suit or proceeding without the prior consent of
the other party, which consent shall not be unreasonably withheld, if the effect
of such settlement or compromise would be to impose liability on the other party
hereunder.
7.4 Payment of Indemnity. In the event an Indemnified Person suffers an
--------------------
Indemnifiable Loss, then the other party shall pay such Indemnifiable Loss in
cash or make such escrow or other arrangements for the payment of such
Indemnifiable Loss as will absolve the Indemnified Person of any liability
therefor. Acknowledged payment by either party's insurance company shall
constitute acceptable arrangements for payment hereunder.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Survival of Warranties and Representations. Notwithstanding any
------------------------------------------
investigation by either the Seller or the Buyer, all representations, warranties
and agreements of the Seller and Buyer made under or pursuant to this Agreement
shall survive the Closing Date hereunder for a period of three (3) years.
8.2 Assignment; Binding Agreement.
-----------------------------
(a) This Agreement and all or any part of the Buyer's rights and
obligations hereunder may not be assigned by the Buyer at any time
without the prior consent of Seller which shall not be
- 25 -
<PAGE>
unreasonably withheld but such assignment will not relieve Buyer of
any of Buyer's obligations, duties or liabilities under this
Agreement.
(b) Neither this Agreement nor any of the Seller's rights or obligations
hereunder may be assigned by the Seller without the Buyer's prior
written consent which shall not be unreasonably withheld but such
assignment shall not relieve Seller of any of Seller's obligations,
duties and liabilities under this Agreement.
(c) This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and to their respective successors and
permitted assigns.
8.3 Termination of this Agreement. This Agreement and the transactions
-----------------------------
contemplated hereby may be terminated prior to the Closing Date only as follows:
(a) By mutual consent of the Buyer and the Seller.
(b) If any of the conditions precedent to the Closing are not met on or
at the Closing.
8.4 Remedies. Nothing contained herein is intended to or shall be
--------
construed so as to limit the remedies which either party may have against the
other in the event of a breach by either party of any representation, warranty
or agreement made under or pursuant to this Agreement, it being intended that
any remedies shall be cumulative and not exclusive. The parties agree that if
any party hereto is obligated to, but nevertheless does not, consummate this
transaction, then any other party, in addition to all other rights or remedies,
shall be entitled to the remedy of specific performance mandating that the other
party or parties consummate this transaction. In an action for specific
performance by any party against another party, the other party shall not plead
adequacy of damages at law.
- 26 -
<PAGE>
8.5 Entire Agreement and Modification. This Agreement, including the
---------------------------------
Schedules attached hereto and the documents delivered pursuant hereto,
constitutes the entire agreement between the parties. No changes of,
modifications of, or additions to this Agreement shall be valid unless the same
shall be in writing and signed by all parties hereto.
8.6 Severability. If any provision of this Agreement shall be determined
------------
to be contrary to law and unenforceable by any court of law, the remaining
provisions shall be severable and enforceable in accordance with their terms.
8.7 Counterparts. This Agreement may be executed in one or more
------------
identical counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
8.8 Headings. The table of contents and article and section headings
--------
contained in this Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of the Agreement.
8.9 Governing Law. This Agreement shall be construed and interpreted
-------------
according to the laws of the State of North Carolina.
8.10 Payment of Fees and Expenses. Except as may be other-wise provided
----------------------------
herein, each party hereto shall pay all fees and expenses of such party's
respective counsel, accountants and other experts and all other expenses
incurred by such party incident to the negotiation, preparation and execution of
this Agreement and the consummation of the transaction contemplated hereby. Each
party agrees to indemnify
- 27 -
<PAGE>
and hold the other party harmless from and against any claim or liability for
any brokerage fees, commissions or finders' fees in connection with the
transactions contemplated herein.
8.11 Further Documents. The Seller and Buyer hereby agree to deliver to
-----------------
the other party such other and further agreements, consents, documents or
instruments of conveyance, assignment or transfer and to do such other things
and to take such other actions, supplemental or confirmatory, as may be required
for the purpose of or in connection with the consummation or evidencing of the
transactions contemplated hereunder.
8.12 Schedules a Part of Agreement. The Schedules to this Agreement
-----------------------------
constitute an integral part of this Agreement.
8.13 No Public Announcement. The parties hereto agree that they will make
----------------------
no public announcements concerning the sale of the Assets and Assumed
Obligations hereunder or which make reference to said sale (or the sale of the
business represented thereby), unless each party has previously agreed to the
content of such announcement or unless it is otherwise required by law.
8.14 Notices. All notices, requests, demands and other communications
-------
hereunder shall be deemed to have been duly given if the same shall be in
writing and shall be delivered personally or sent by registered or certified
mail, postage prepaid, overnight courier or telecopy and addressed as set forth
below:
(a) If to Buyer: Blue Rhino Corporation
ATTN: Mr. Billy D. Prim
Chief Executive Officer
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
- 28 -
<PAGE>
copy to: Don R. House
House Law Firm
3325 Healy Drive
Winston-Salem, NC 27103
(b) If to Seller: Bison Propane Bottle Exchange LLC
ATTN: Mr. C. J. Lett III, Manager
9320 East Central
Wichita, Kansas 67206
copy to: D. Keith McFall
Phillips McFall McCaffrey
McVay & Murrah, P.C.
One Leadership Square, 12th Floor
211 North Robinson
Oklahoma City, OK 73102
Any party may change the address to which notices are to be addressed by
giving the other parties notice in the manner herein set forth.
8.15 Arbitration. The parties hereto agree to submit to arbitration any
-----------
and all matters in dispute or in controversy among them concerning the terms and
provisions of this Agreement. All such disputes and controversies shall be
determined and adjudged by an arbitrator or arbitrators selected in accordance
with the commercial arbitration rules (the "Rules") of the American Arbitration
Association. The arbitration shall be held in Memphis, Tennessee or such other
location as agreed by all of the parties, and shall be conducted in accordance
with the Rules, and the decision of the arbitrator(s) shall be final and binding
on the parties. The determination of which party (or combination thereof) shall
bear the costs and expenses incurred in any such arbitration proceedings shall
be determined by the arbitrator(s). Any such decision and satisfaction thereof
may be enforced in any court having jurisdiction over the subject matter or the
parties. Notwithstanding the foregoing, either party may institute a civil
action in a court for the sole purpose of maintaining the status quo during the
pendency of any arbitration proceeding and the parties agrees that said court
has personal jurisdiction over the parties.
- 29 -
<PAGE>
8.16 Attorney Fees. In the event an arbitration, suit or action is
-------------
brought by any party under this Agreement to enforce any of its terms, or in any
appeal therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or
appellate court.
8.17 Non-Compete. Seller and C. J. Lett, III, John Stephens and Hal
-----------
Ramsey individually, each agree that during the term of three (3) years after
the Closing, they shall not, without the prior written consent of the Buyer,
directly or indirectly, for their individual benefit or the benefit of another
person, firm or corporation either:
(a) engage in the purchase, storage, distribution, sales, rental, or
exchange of propane gas and propane gas cylinders within fifty (50)
miles of any of the Locations except (i) pursuant to a Buyer's
Distributors Agreement; and (ii) Hal Ramsey's existing operation
located in Hutchinson, Kansas, provided, however, that Seller may
liquidate any or all of its propane gas assets not purchased by Buyer
pursuant to this Agreement;
(b) have any material ownership in any corporation, partnership, firm,
association or business (except Buyer) which is primarily engaged in
the cylinder exchange of propane gas within fifty (50) miles of any
of the Locations are located;
(c) request any past or present customers of Seller within fifty (50)
miles of any of the Locations to curtail or cancel their business
with Buyer;
(d) disclose to any person, firm or corporation the names of customers of
the Seller; or
(e) induce or attempt to influence any employee of Buyer to terminate his
employment.
8.18 Seller's Put Option. If Seller receives part of the purchase price
-------------------
in unregistered common stock of Buyer as set forth in Section 1.3(c) and the
stock does not become freely transferable under applicable Federal Security Laws
by registration or otherwise on or prior to twelve (12) months after the Closing
then
- 30 -
<PAGE>
Seller shall have the put option to require Buyer to purchase and redeem all of
such stock from Seller for cash in the amount of the original purchase price
plus interest at eight (8%) per annum from the Closing Date. The Seller must
exercise its put option by written notice to Buyer on or before twelve (12)
months after the Closing and the purchase and redemption shall be closed within
ten (10) days after Buyer's receipt of Seller's notice at a time and place
agreed by the parties.
8.19 Binding Effect. This Agreement and all the provisions hereof shall
--------------
be binding upon and enure to the benefit of the parties hereto and their
respective successors and allowed assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of
the day and year first above written.
BUYER:
BLUE RHINO CORPORATION
By:__/s/ Billy Prim____
Officer
SELLER:
BISON PROPANE BOTTLE EXCHANGE LLC
By:__/s/ C.J. Lett III___
Manager
By:__/s/ Hal Ramsey______
Manager
_____/s/ C.J. Lett III_________(SEAL)
C. J. Lett, III, Individually
as to Section 8.17
- 31 -
<PAGE>
____/s/ John Stephens________(SEAL)
John Stephens, Individually
as to Section 8.17
____/s/ Hal Ramsey__________(SEAL)
Hal Ramsey, Individually
as to Section 8.17
- 32 -
<PAGE>
LIST OF SCHEDULES
-----------------
1.1(a) List of Locations
1.2 Assumed Obligations
1.7 Allocation of Purchase Price
2.3 Financial Information
2.4 Subsequent Events
2.5 Default in Assumed Obligations
2.7 Liens and Encumbrances on Assets
2.9 Customer List
2.12 Contracts and Commitments
2.14 Litigation
2.15 Insurance
<PAGE>
THE SHARES OF COMMON STOCK TO BE ISSUED AS PARTIAL CONSIDERATION FOR THE
ASSETS TO BE ACQUIRED PURSUANT TO THE TERMS HEREOF ARE ONLY OFFERED TO PERSONS
WHO ACQUIRE SUCH COMMON STOCK AS LONG-TERM INVESTMENT WITHOUT A VIEW TOWARD
FURTHER DISTRIBUTION.
AN INVESTMENT IN BUYER IS SPECULATIVE AND ENTAILS A HIGH DEGREE OF RISK.
SELLER MUST CONSULT AND RELY UPON THE ADVICE OF ITS OWN COUNSEL AND OTHER
ADVISERS WITH RESPECT TO THE TAX, FINANCIAL AND OTHER CONSEQUENCES OF AN
INVESTMENT IN BUYER.
THE COMMON STOCK DESCRIBED HEREIN WILL NOT BE REGISTERED WITH THE U.S.
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE,
BUT WILL BE OFFERED IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION PROVISIONS
OF THE SECURITIES ACT OF 1933, AS AMENDED, AND COMPARABLE PROVISIONS OF THE LAWS
OF APPLICABLE STATES. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY
STATE SECURITIES LAW ADMINISTRATOR HAS APPROVED OR DISAPPROVED THE SECURITIES
DESCRIBED HEREIN OR PASSED ON OR ENDORSED THE MERITS OF THE INVESTMENT DESCRIBED
HEREIN. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SELLER AND ITS REPRESENTATIVES SHALL BE ENTITLED TO OBTAIN FROM BUYER AND
ITS MANAGEMENT SUCH ADDITIONAL INFORMATION AS MAY BE REASONABLY REQUESTED TO
VERIFY OR CLARIFY ANY INFORMATION CONTAINED HEREIN OR REQUIRED TO JUDGE THE
MERITS OF AN INVESTMENT IN THE BUYER, TO THE EXTENT SUCH INFORMATION IS
AVAILABLE OR MAY BE OBTAINED WITHOUT UNREASONABLE DIFFICULTY OR EXPENSE. EXCEPT
AS AFORESAID, NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
STATEMENT NOT CONTAINED IN THIS AGREEMENT AND THE SCHEDULES AND EXHIBITS
ATTACHED HERETO, AND ANY INFORMATION OR STATEMENT NOT CONTAINED IN THIS
AGREEMENT OR THE SCHEDULES OR EXHIBITS ATTACHED HERETO CANNOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY BUYER OR ITS PROFESSIONAL ADVISORS. ANY REPRODUCTION
OR DISTRIBUTION OF THIS AGREEMENT, THE SCHEDULES AND EXHIBITS HERETO, OR ANY
INFORMATION PROVIDED UPON THE REQUEST OF THE SELLER, IN WHOLE OR IN PART, OR THE
DIVULGENCE OF ANY OF ITS CONTENTS, IS PROHIBITED WITHOUT THE PRIOR WRITTEN
CONSENT OF BUYER.
THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED.
THE DELIVER OF THIS AGREEMENT OR ANY INFORMATION REQUESTED BY THE SELLER IN
CONNECTION HEREWITH AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS AGREEMENT HAS BEEN PREPARED FOR THE EXCLUSIVE USE AND BENEFIT OF THE
SELLER AND ITS ADVISERS. UNDER NO CIRCUMSTANCES SHALL IT CONSTITUTE AN
<PAGE>
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY UNLESS THE SELLER SATISFIES
THE SUITABILITY STANDARDS REQUIRED BY APPLICABLE SECURITIES LAWS.
(i)
- 35 -
<PAGE>
EXHIBIT 10.4(b)
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT ("Amendment") is made this
the 10th day of December, 1997 by and among Blue Rhino Corporation, a Delaware
corporation ("Buyer") and Bison Propane Bottle Exchange LLC, a Kansas limited
liability company, ("Seller").
R E C I T A L S:
---------------
WHEREAS, the parties entered into an Asset Purchase Agreement dated
December 9, 1997 ("Agreement"); and
WHEREAS, the parties now desire to amend the Agreement as hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereinafter expressed, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
A. The parties acknowledge that as of the date of this Amendment, the Seller
has approximately eight hundred thirteen (813) Locations plus which
includes approximately twenty (20) locations that averaged less than four
(4) cylinder exchanges per month over the prior twelve (12) months. The
parties agree that Seller shall have up to ninety (90) days after Closing
to continue to set Locations to be owned by the Buyer. All expenses
including specifically payroll and Racks relating to the setting of said
additional Locations shall be paid by Seller. This procedure shall continue
for a period of the earlier of (i) until the total of the Locations
transferred to Buyer at Closing plus the additional new Locations equal
eight hundred fifty (850); or (ii) ninety (90) days after Closing. If, at
the end of ninety (90) days after Closing, the total Locations including
the Locations transferred
<PAGE>
to Buyer at Closing plus all of the additional Locations set up by Seller
equal less than eight hundred fifty (850), then the Purchase Price shall be
adjusted as provided by Section 1.4 of the Agreement.
B. Section 1.4(c) Exclusion is deleted from the Agreement.
---------
C. Except as set forth herein, all the terms and provisions of the Agreement
are ratified and reaffirmed.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, as of the day and year first above written.
BUYER:
BLUE RHINO CORPORATION
By:__/s/ Mark Castaneda_____________
Officer
SELLER:
BISON PROPANE BOTTLE EXCHANGE LLC
By:__/s/ C.J. Lett III___
Manager
By:__/s/ Hal Ramsey_________________
Manager
- 2 -
<PAGE>
EXHIBIT 10.5
MULTI-DRAW
CONVERTIBLE SECURED NOTE
------------------------
$635,000.00 February 12, 1998
FOR VALUE RECEIVED, Bison Valve, L.L.C., an Illinois limited liability
company (the "Company"), promises to pay to the order of Blue Rhino Corporation,
a Delaware corporation ("Blue Rhino"), at such place as Blue Rhino may from time
to time designate in writing, in lawful money of the United States of America
and in immediately available funds, the principal sum of Six Hundred Thirty-Five
Thousand and 00/lOOths Dollars ($635,000.00) (the "Principal") (also referred to
herein as the "Loan"), in accordance with the repayment provisions set forth
below, plus interest (calculated on the basis of a 360-day year), in accordance
with the interest payment provisions set forth below.
This Multi-Draw Convertible Secured Note (the "Note") evidences the Loan
made hereunder, and is secured by a collateral assignment of the Company's
rights under a certain License Agreement of even date (the "Security
Agreement").
1. Interest & Additional Principal. Interest shall accrue daily, commencing
as of the date of this Note, on the aggregate outstanding Principal due under
the Note at a per annum rate equal to nine and one-half percent (9.5%). Interest
on the outstanding Principal shall accrue from the date of this Note through the
fourth (4th) anniversary of the Note, at which time such accrued interest shall
convert into additional principal ("Additional Principal") which shall be
amortized over a twenty-four (24) month period. Interest thereafter on the
aggregate of the Principal and the Additional Principal for the next two (2)
years shall be paid monthly on the first day of each month beginning with the
first day of the first month following the fourth (4th) anniversary of this
Note. Interest on the Principal and Additional Principal shall accrue daily at a
per annum rate equal to nine and one-half percent (9.5%). Interest shall be
computed on the basis of a 360-day year and the actual number of days elapsed.
2. Disbursement & Repayment. disbursements of the Principal under this
Promissory Note shall be made as follows: (i) $635,000 to be disbursed on the
date of this Note. All disbursements of the Principal made under this
Promissory Note shall be amortized over a twenty-four (24) month period. Payment
of the Principal and Additional Principal shall be made in twenty-four (24)
equal monthly payments beginning on the first day of the first month following
the fourth (4th) anniversary of the Note, and on the first (1st) day of each
month thereafter. Final payment of all outstanding Principal,
<PAGE>
Additional Principal and interest due and payable under this Note shall be due
on the first day of the seventy-second (72nd) month following the date of this
Note.
3. Default Rate. Any principal payments due under this Note not paid when
due, whether at stated maturity, by notice of repayment, by acceleration or
otherwise, shall, to the extent permitted by applicable law, thereafter bear
interest (compounded monthly and payable upon demand) at a rate which is 2% per
annum in excess of the rate of interest otherwise payable under this Note in
respect of such principal amount until such unpaid amount has been paid in full
(whether before or after judgment).
4. Prepayment. Principal under this Note may be prepaid after thirty (30)
days written notice from the Company to Blue Rhino. Interest under this Note may
be prepaid without notice at any time. All payments made hereunder shall be
applied first to interest and then to outstanding principal.
5. Payment on Holiday. If payment hereunder becomes due and payable on a
Saturday, Sunday, or legal holiday, under the laws of the State of Illinois, the
due date thereof shall be extended to the next succeeding business day.
6. Waiver of Demand and Presentment. Demand, presentment, protest,
diligence, notice of dishonor, and any other formality are hereby expressly
waived by the Company and any endorser or guarantor.
7. Conversion. The holder of this Note shall have the right, at such
holder's Option, to convert, subject to the terms, conditions and provisions of
this Note, the outstanding Principal and any Additional Principal due under this
Note, or any portion thereof, into units of common membership interest (the
"Units") at the price of (a) $1,000.00 ("Conversion Price") per unit at any
time, on demand. In the event any or all of the Principal or Additional
Principal due this Note is to be converted, the holder shall surrender this Note
to the Company at any time during usual business hours together with written
notice (hereinafter referred to as "Conversion Notice") that the holder elects
to convert this Note into Units in accordance with the provisions of this Note
and the Loan Agreement, and specifying the name or names in which the Units to
be issued upon such conversion shall be registered, together with the addresses
and social security numbers, in the case of natural persons, or federal employer
identification numbers, in the case of entities, of the persons so named, and,
if so required by the Company, accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company duly executed by the
registered holder or his attorney duly authorized in writing and the persons in
whose names the Units are to be issued.
In the event this Note is to be converted in part only, the Company shall,
upon surrender of this Note, execute and deliver to the holder thereof, at the
expense of the Company, a new Note in principal amount equal to the unconverted
portion of this Note. The Conversion Price and the number of Units (or other
securities or property) to be
2
<PAGE>
issued upon the conversion of the amounts due under this Note shall be subject
to adjustment from time to time upon the occurrence of certain events, as
provided in this Note. The Company shall be under no obligation to convert this
Note if the issuance of Units with respect thereto would violate any state or
federal securities laws. The holder shall, as a condition of any conversion,
make its own investigation into the financial condition of the Company and shall
jointly and severally represent and warrant with the persons to whom the Units
are to be issued (the "Transferee") that: (a) the Units that the Transferee
acquires are acquired for investment purposes, and not for resale, (b) the
Transferee can bear the economic risk of his, her or its investment in the Units
for an indefinite period of time, (c) that the Transferee's experience and
training in financial affairs is sufficient for the Transferee to evaluate the
risks of investing in and holding the Units, (d) the Transferee understands and
has agreed that there is then no public market for the Units and the Company is
not under any obligation to facilitate a public market, and (e) the Units may
not be transferred or sold without registration (with which the Company has no
obligation to participate or permit) or the availability of an exemption from
the registration requirements of applicable securities laws. The Units will
include an appropriate legend with restrictions on transfer contained in the
Company's certificate of incorporation and operating agreement which
restrictions shall include, among other requirements, the ability of the Company
to require an opinion of counsel that a proposed transfer does not violate
applicable state or federal securities laws prior to permitting any transfer.
a. Conversion Price.
i. Conversion Price. The "Conversion Price" shall be $1,000.00 per
Unit. In order to prevent dilution of the conversion rights granted pursuant to
this Note the Conversion Price will be subject to adjustment from time to time
will be pursuant to this Section 7. For purposes of this Section 7(a), the
Company shall be deemed to have issued, sold Units or granted a membership
interest in the Company as set forth in Section 7(b) below.
ii. Adjustment for Dilutive Events. If and whenever on or after the
date of this Note, the Company issues, sells grants a membership interest in, or
in accordance with Section 7(b) below is deemed to have issued, sold or granted
a membership in, the Company for consideration per Unit less than the Conversion
Price (the "Diluted Share Price") in effect immediately prior to the time of
such issue or sale (a "Dilutive Event"), then any conversion after the
occurrence of any such Dilutive Event shall be at a Conversion Price reduced so
that the Conversion Price in effect for conversions following the Dilutive Event
will equal the Diluted Share Price provided, however, that if the Company shall
have, at least fifteen days (15) prior to the Dilutive Event, offered to the
holder the opportunity to add to this Note the option to purchase a
proportionate share of the units proposed to be issued or sold in the Dilutive
Event (the "Dilutive Units") and the holder shall have declined or failed to
respond to such proposed sale, the Conversion Price shall not change. If the
holder exercises the
3
<PAGE>
opportunity to add to this note the option to purchase the Dilutive Units within
such fifteen day period, then, on the day of the closing of the proposed sale of
such units the holder shall loan to the Company an amount equal to the proposed
purchase price of such Dilutive Units pursuant to the terms of this note which
shall become additional Principal of this note, subject to all of the terms of
this note, and the conversion option shall include the Dilutive Units at the
proposed purchase price therefor. The proportionate share of any Units proposed
to be issued shall be determined by multiplying the number of Units proposed to
be issued by the quotient of the Units that would be issued to the holder if all
then outstanding Principal was converted at the then applicable conversion price
(the "Option Units") divided by the sum of the number of Units outstanding
immediately prior to such issuance plus the Option Units. As used in this
Section 7(a) and in Section 7(b) below, the term "Units" shall include Unit
Equivalents.
b. Issuance and Sale of Units. For purposes of determining the adjusted
Conversion Price pursuant to Section 7(a) above the following events shall be
deemed to be an issuance and sale of Units by the Company:
i. Issuance of Rights or Options. If (i) the Company in any manner
hereafter grants any rights or Options to subscribe for or to purchase Units or
any securities convertible into or exchangeable for Units or any other
membership interest in the Company (such rights or Options referred to herein as
"Options" and such convertible or exchangeable stock or securities referred to
herein as "Convertible Securities") and (ii) the Price Per Unit of the Units
issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities is less than the Conversion Price in effect
immediately prior to the time of the granting of such Options then the Units
issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities will be deemed to have been issued and sold by the
Company for such Price Per Unit. For the purposes of this Section 7(b)(i) the
"Price Per Unit" is determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration payable
to the Company upon exercise of all such Options, plus in the case of such
Options which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the issuance or
sale of such Convertible Securities and the conversion or exchange thereof, by
(ii) the total maximum number of Units issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options. No further adjustment of the
Conversion Price will be made when Convertible Securities are actually issued
upon the exercise of such Options or when Units is actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
ii. Issuance of Convertible Securities. If (i) the Company in any
manner issues or sells any Convertible Securities and (ii) the Price Per Unit of
Units issuable upon such conversion or exchange is less than the Conversion
Price in effect immediately prior to
4
<PAGE>
the time of such issue or sale then the Units issuable upon the conversion or
exchange of such Convertible Securities will be deemed to have been issued and
sold by the Company for such Price Per Unit. For the purposes of this Section
7(b)(ii), the "Price Per Unit" will be determined by dividing (i) the total
amount received or receivable by the Company as consideration for the issue or
sale of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (ii) the total maximum number of Units issuable upon the
conversion or exchange of all such Convertible Securities. No further adjustment
of the Conversion Price will be made when Units is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustments to the Conversion Price had been or are to be made pursuant to
Section 7(b)(i) above, no further adjustment of the Conversion Price will be
made by reason of such issue or sale.
iii. Change in Option Price or Conversion Rate. If at any time there
is a change in (i) the purchase price provided for in any Options, (ii) the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities, or (iii) the rate at which any Convertible Securities
are convertible into or exchangeable for Units, then the Conversion Price in
effect at the time of such change will be readjusted to the Conversion Price
which would have been in effect had those Options or Convertible Securities
still outstanding at the time of such change provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time such Options or Convertible Securities were initially granted,
issued or sold; provided that if such adjustment would result in an increase of
the Conversion Price then in effect, such adjustment will not be effective until
30 days after written notice thereof has been given by the Company to Blue
Rhino.
iv. Calculation of Consideration Received. If any Units, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor or the Price Per Unit, as the case
may be, will be deemed to be the net amount received or to be received,
respectively, by the Company therefor. In case any Units, Options or Convertible
Securities are issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Company or the non-cash
portion of the Price Per Unit, as the case may be, will be the fair value of
such consideration received or to be received, respectively, by the Company;
except where such consideration consists of securities, in which case the amount
of consideration received or to be received, respectively, by the Company will
be the Market Price thereof as of the date of receipt. If any Units, Options or
Convertible Securities are issued in connection with any merger in which the
Company is the surviving Company, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving Company as is attributable to such Units, Options or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash and securities will be determined jointly by the Company and
Blue Rhino. If such parties are
5
<PAGE>
unable to reach agreement within a reasonable period of time, the fair value of
such consideration will be determined by an independent appraiser jointly
selected by the Company and Blue Rhino.
v. Integrated Transactions. In case any Option is issued in connection
with the issuance or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Option by the parties thereto, the Option will be deemed to
have been issued for a consideration of $.01.
vi. Record Date. If the Company takes a record of the holders of Units
for the purpose of entitling them (i) to receive a dividend or other
distribution payable in Units, Options or in Convertible Securities or (ii) to
subscribe for or purchase Units, Options or Convertible Securities, then such
record date will be deemed to be the date of the issuance or sale of the Units
deemed to have been issued or sold upon the declaration of such dividend or upon
the making of such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
c. Subdivision or Combination of Units. If the Company at any time
subdivides one or more classes of its outstanding Units into a greater number of
Units, or decreases the percentage interest attributable to any Unit, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines one or more classes
of its outstanding Units into a smaller number of Units or increases the
percentage interest attributable to the Units, the Conversion Price in effect
immediately prior to such combination will be proportionately increased.
d. Organic Change. Prior to the consummation of any Organic Change, the
Company will make appropriate provisions (in form and substance satisfactory to
Blue Rhino) to insure that the holder of this Note will thereafter have the
right to acquire and receive, in lieu of or in addition to the Units immediately
theretofore acquirable and receivable upon the conversion of this Note, such
shares of stock, membership interests, partnership interests, securities or
assets as such holder would have received in connection with such Organic Change
if the holder had converted the entire principal balance of this Note
immediately prior to such Organic Change. In any such case, the Company will
make appropriate provisions (in form and substance satisfactory to Blue Rhino)
to insure that the provisions of this Section 7(d) will thereafter be applicable
to this Note (including, an immediate adjustment of the Conversion Price to the
value for the Units reflected by the terms of such Organic Change and a
corresponding immediate adjustment in the number of Units acquirable and
receivable upon conversion of this Note, if the value so reflected is less than
the Conversion Price in effect immediately prior to such Organic Change). The
Company will not effect any such Organic Change, unless prior to the
consummation thereof, the successor Company resulting from such Organic Change
assumes by written instrument (in form reasonably satisfactory to Blue Rhino),
the obligation to deliver to each such holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire.
6
<PAGE>
e. Certain Limitations. Notwithstanding anything to the contrary contained
in this Note: (a) the total percentage of the Company's Units issued pursuant to
the Conversion Option shall not exceed sixty-five percent (65%) of the Company's
Units at the time that the Conversion Option is exercised, (b) the Conversion
Option may only be exercised once and shall terminate as to any Units subject to
the Conversion Option but not acquired upon its exercise or in the following
year pursuant to this paragraph, (c) the Conversion Option shall expire upon
acceleration of the obligations evidenced by this Note pursuant to Section 10
hereof, and (d) in the event that the Conversion Units to be issued upon
exercise of the Conversion Option would, if issued all in one year, cause a
termination of the Company for tax purposes the Company may reserve and issue on
the first business day of the next year the number of units the issuance of
which would have caused the termination for tax purposes if issued in the year
of the exercise of the Conversion Option. The Company shall remain indebted
pursuant to the terms of this Note for all Principal, Additional Principal and
interest not applied to the purchase of Units upon exercise of the Conversion
Option.
All other terms of this Note shall remain in full force and effect
following such an Organic Change. The provisions of this Section 7(d) shall
similarly apply to successive Organic Changes.
f. Notices.
i. Immediately upon any adjustment of the Conversion Price, the
Company shall give written notice thereof to the holder of this Note specifying
the Conversion Price in effect thereafter with respect to the particular holder.
ii. The Company shall give written notice to the holder of this Note
at least twenty (20) days prior to the date on which the Company closes its
books or takes a record for determining rights to vote with respect to any
Organic Change, change of control, change in ownership, fundamental change or
other reorganization, dissolution or liquidation. The Company shall also give
written notice to the holder of this Note at least twenty (20) days prior to the
date on which any Organic Change, change of control, change in ownership,
fundamental change or other reorganization, dissolution or liquidation shall
occur.
g. Certain other Events. The Company will not, by amendment of its
certificate of in Company or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issues or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Note, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of Blue Rhino from
dilution or other impairment. If any event occurs as to which the foregoing
provisions of this Section 7 are not strictly applicable or, if strictly
applicable, would not, in the good faith judgment of the Board of Directors of
the Company, fairly protect the conversion rights of this Note in accordance
with the essential intent and principles of such provisions, then the Board of
Directors of the Company shall make such adjustments in the application of such
provisions,
7
<PAGE>
in accordance with such essential intent and principles, as shall be reasonably
necessary, in the good faith opinion of the Board of Directors of the Company,
to protect such conversion rights as aforesaid, but in no event shall any such
adjustment have the effect of increasing the Conversion Price or decreasing the
number of Units subject to purchase upon conversion of this Note.
h. Proceedings Prior to Any Action Requiring Adjustment. As a condition
precedent to the taking of any action which would require an adjustment pursuant
to this Section 7, the Company shall take any action which may be necessary,
including obtaining regulatory approvals or exemptions, in order that the
Company may thereafter validly and legally admit the holder of this Note as a
member of the Company with all rights and privileges of a member of the Company
pursuant to the limited liability company agreement of the Company upon
conversion of any amount owning under this Note.
i. Partial Conversion. Conversion of any portion of the principal balance
of this Note shall not relieve the Company of its obligation to pay any accrued
but unpaid interest on the portion of the principal balance of this Note so
converted. To the extent that any portion of this Note is not converted into
Units, such portion shall remain a secured debt of the Company payable in
accordance with the terms of this Note and the Loan Agreement.
8. Security. The obligations of the Company hereunder are secured by the
Security Agreement between the Company and Blue Rhino of even date herewith and
all other security agreements which may be made by or security interests in
property granted by the Company to Blue Rhino from time to time hereafter.
9. Events of Default. The occurrence of any one of the following events
shall constitute a default ("Event of Default") by the Company: (a) if the
Company fails to make any payment hereunder when due and fails to cure such non
payment within ten (10) days of notice of such non payment; (b) the Company
fails or neglects to perform, keep or observe any term, provision, condition,
covenant, warranty or representation contained in this Note or in the Security
Agreement or any other agreement or instrument securing the obligations
evidenced by this Note, which is required to be performed, kept or observed by
the Company and such failure continues for more than thirty days after notice
thereof; (c) if any of the Company's assets are attached, seized, subjected to a
writ of distress warrant, or are levied upon, or come within the possession any
receiver, trustee, custodian or assignee for the benefit of creditors and such
attachment, levy, writ or possession is not terminated within sixty (60) days of
the commencement thereof; (d) if a petition under the Bankruptcy Reform Act of
1978 or any similar law or regulation shall be filed by or against the Company
or if the Company shall make an assignment for the benefit of his creditors or
if any case or proceeding is filed by or against the Company for its dissolution
or liquidation, or if the Company is enjoined, restrained or in any way
prevented by court order or otherwise from conducting all or a material part of
his or its business affairs and such petition, assignment, case, proceeding or
order is not dismissed, terminated or vacated within sixty (60) days of
8
<PAGE>
the commencement or entry thereof; (e) the dissolution of the Company; and (f)
the failure of the Company within thirty (30) days of a request therefore by the
holder to elect nominees of the holder who constitute up to two-fifths (2/5) of
the Board of Directors of the holder or the removal without consent of the
holder of any directors so elected and (g) the failure of the Company to refrain
from the following actions without the affirmative vote of a director nominated
by the holder: (i) the sale, assignment or transfer of all or substantially all
of the assets of the Company, (ii) default under the License Agreement of even
date, (iii) the guarantee of the indebtedness of any third party, (iv) the
merger or consolidation with any third person or entity, (v) the purchase of
the equity securities of any third party or debt of any third party, other than
commercial paper issued by parties who are not affiliates of the Company, short
term obligations of governmental units of the United States or any state and
deposit accounts or certificates of deposit with any commercial bank insured by
the Federal Deposit Insurance Company, (vi) admission of any person as a member
of the Company other than the purchasers of Dilutive Units that the holder
elects not to include the Conversion Option and other units issued as a part of
the offering of Dilutive Units and purchasers of units at a price in excess of
the Conversion Price, (vii) the entry into a transaction with an affiliate of
any member of the Company except transactions that are upon fair and reasonable
terms at least as favorable to the Company as comparable transactions between
unrelated parties, (viii) the payment of bonuses to any employee during the
continuance of an Event of Default or after notice of a Default that remains
uncured, (ix) any change in the number of directors of the Company, (x)
amendment or alteration of the terms of the Company's LLC Operating Agreement,
(xi) issue any additional Units or admit any new members, or (xii) violation of
any of the affirmative covenants contained in Section 16 of this Note.
10. Remedies Upon Default. Upon any Event of Default under this Note, the
holder of this Note may, upon written notice to the Company, declare this Note
due and payable in full and exercise such other rights and remedies as are
available to the holder under the Loan Agreement or applicable law. In addition
upon the occurrence of a Default, unless and until cured within the applicable
cure period, the holder may refuse to make further disbursements hereunder.
If there is any Default under this Note, and this Note is placed in the
hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, the Company promises to pay to the order of the
holder hereof such holder's reasonable attorneys' fees and court costs incurred
in collecting or attempting to collect or securing or attempting to secure this
Note or enforcing the holder's rights with respect to the Collateral, to the
extent allowed by the laws of the State of Illinois or any state in which any
Collateral is situated.
The holder of this Note may, with or without notice to any party, and
without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Note (i) extend the time for
payment of either principal or interest
9
<PAGE>
from time to time, (ii) release or discharge any one or more parties liable on
this Note, (iii) suspend the right to enforce this Note with respect to any
persons, (iv) change, exchange, or release any property in which the holder has
any interest securing this Note, (v) justifiably or otherwise, encumber any of
the Collateral or suspend the right to enforce against any such Collateral, and
(vi) at any time it deems it necessary or proper, call for and, should it be
made available, accept, as additional security, the signature or signatures of
additional parties or a security interest in property of any kind or description
or both.
11. GOVERNING LAW. THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF
LAW PROVISIONS THEREOF.
12. Maximum Interest. Any provision herein, or in the Loan Agreement, or
any other document executed or delivered in connection herewith or therewith, or
in any other agreement or commitment, whether written or oral, expressed or
implied, to the contrary notwithstanding, neither Blue Rhino nor any holder
hereof shall in any event be entitled to receive or collect, nor shall any
amounts received hereunder be credited, so that Blue Rhino or any holder hereof
shall be paid, as interest, a sum greater than the maximum amount permitted by
applicable law to be charged to the person primarily obligated to pay this Note
at the time in question. If any construction of this Note or the Loan Agreement,
or any and all other papers, agreements or commitments, indicate a different
right given to Blue Rhino or any holder hereof to ask for, demand, or receive
any larger sum as interest, such is a mistake in calculation or wording which
this clause shall override and control, it being the intention of the parties
that this Note, the Loan Agreement, and all other documents executed or
delivered in connection herewith shall in all ways comply with applicable law
and proper adjustments shall automatically be made accordingly.
13. FORUM. THE COMPANY AND HOLDER IRREVOCABLY AGREE THAT ALL LEGAL ACTIONS
OR PROCEEDINGS IN ANY MANNER OR RESPECT ARISING OUT OF OR RELATED TO THIS
PROMISSORY NOTE OR THE LOAN AGREEMENT, ANY AGREEMENTS OR DOCUMENTS DELIVERED TO
BLUE RHINO IN CONNECTION HEREWITH OR THEREWITH, OR THE COLLATERAL SHALL BE
BROUGHT AND LITIGATED ONLY IN COURTS HAVING SITUS WITHIN LAKE COUNTY ILLINOIS.
10
<PAGE>
14. Headings. The section headings and numbers are for convenience of
reference only, do not constitute a part of this Note and will not be deemed to
limit or otherwise affect any of the provisions hereof. References to sections,
unless otherwise indicated are references to sections hereof.
15. Notices. Except as otherwise provided in this Note, all notices
requests, consents, and other communications required or permitted under this
Note shall be in writing and signed by the party giving notice, and shall be
deemed to have been given when hand-delivered by personal delivery, or by
Federal Express or similar courier service or three (3) business days after
being deposited in the United States mail, registered or certified mail, with
postage prepaid, return receipt requested, addressed to the holder at the
address provided in the books of the Company for the payment of interest or
addressed to the Company c/o Bison Valve, L.L.C., 782 Church Road, Elgin,
Illinois 60123, Attention: President, or to such other address as either party
may designate for himself or itself by notice given to the other party from time
to time in accordance with the provisions of this Note.
16. Affirmative Covenants. The Company shall, until the Principal,
Additional Principal and interest under this Note have been paid or converted
pursuant to the Conversion Option:
(a) Prepare and keep books of account in accordance with generally
accepted accounting principles, consistently applied;
(b) Deliver to the holder within 120 days following the end of each
fiscal year of the Company financial statements including a
balance sheet and income statement, audited by certified public
accountants selected by the Company and reasonably approved by
the holder or, if the holder fails to approve three selections of
certified public accountants, one of the eight largest firms of
certified public accountants in the United States, as the Company
may select;
(c) Deliver to the holder within 45 days following the end of each
calendar month a balance sheet as of the last day or last
business day of such month and an income statement for such
month, unaudited, and certified by an employee of the Company to
have been prepared in accordance with generally accepted
accounting principles, consistently applied without the notes or
adjustments that would accompany an year end audited balance
sheet and income statement; and
(d) Not favor any customer over Blue Rhino Corporation and its
authorized distributors in pricing and delivery of OPD Valves, as
that term is used in the License Agreement.
11
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Convertible Secured Note to
be executed as of the day and year first written above.
BISON VALVE, L.L.C.
By /s/ Michael Waters
-------------------------------
Its Chairman & CEO
---------------------------
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<PAGE>
EXHIBIT 10.6
COLLATERAL ASSIGNMENT OF LICENSE AGREEMENT
------------------------------------------
THIS COLLATERAL ASSIGNMENT OF LICENSE AGREEMENT ("Agreement") made as of
this 12th day of February, 1998 by Bison Valve, L.L.C., an Illinois limited
liability company, having its principal place of business at 782 Church Road,
Elgin, Illinois 60123 ("Borrower"), in favor of Blue Rhino Corporation, a
Delaware corporation, with its principal place of business located at 104
Cambridge Plaza Drive, Winston-Salem, North Carolina 27104 ("Lender"):
R E C I T A L S:
- - - - - - - -
A. Borrower desires to borrow from the Lender and Lender desires to lend
to Borrower $630,000 pursuant to the terms of that certain Multi-Draw
Convertible Secured Promissory Note (the "Note") made by Borrower in favor of
the Lender of even date herewith.
B. Borrower is the licensee pursuant to that certain License Agreement
("License Agreement") between the Borrower and Michael Waters ("Licensor") of
even date herewith, a copy of which is attached hereto as Exhibit A, pursuant
to which the Borrower has an exclusive license to make, use and vend a small
cylinder service valve and overfill prevention device designed by the Licensor.
C. To provide collateral security for the obligations ("Obligations") of
the Borrower to the Lender under the Note, the Borrower desires to assign to and
grant a security interest in the Borrower's rights under the License Agreement
and all other now existing or hereafter acquired intellectual property of the
Borrower.
NOW, THEREFORE, in consideration of the premises set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower agrees as follows:
1. Grant of Security Interest. To secure payment and performance of all
--------------------------
liabilities and obligations of the Borrower under the terms of the Note,
Borrower hereby:
a. grants to Lender a continuing security interest in and to all
right, title and interest of Borrower in, to and under the License
Agreement. The rights granted to Lender pursuant to the terms hereof shall
include, but not be limited to, the right upon the occurrence of an Event
of Default and during the continuation thereof to enforce all of Borrower's
rights under the License Agreement and all representations, warranties,
covenants, indemnifications of Licensor under the License Agreement.
b. mortgages, hypothecates and transfers to Lender the entire right,
title and interest of Borrower in and to all inventions of products related
to the categories listed on
<PAGE>
Exhibit B hereto, including all of the trademarks, tradenames, tradedress,
copyrights and patents of Borrower covering products of a type listed on
Exhibit B, whether registered or unregistered, now owned or existing, or
hereafter acquired or arising, including all goodwill associated with any
of the above; and
(1) all patent, copyright or trademark applications therefor,
(2) all renewals of any patent, copyright or trademark therefor,
(3) all income, royalties, damages and payments now and
hereafter due and/or payable with respect thereto, including, without
limitation, damages and payments for past or future infringements
thereof,
(4) the right to sue for past, present and future infringements
thereof;
(5) all rights corresponding thereto throughout the world; and
(6) all improvements thereto; and
(7) all proceeds thereof.
c. grants to Lender a continuing Security Interest in and to all
right, title and interest of the Borrower in any tooling, molds, designs,
patterns, drawings or computer code used to produce any product licensed
under the License Agreement or described on Exhibit B.
2. Restrictions on Future Agreements. Borrower agrees that until the
---------------------------------
Obligations shall have been satisfied in full and the Note shall have been
terminated, Borrower will not, without Lender's prior written consent, which
shall not be unreasonably withheld, enter into any agreement (for example, a
license agreement or sub-license agreement) which is inconsistent with
Borrower's obligations under this Agreement, and Borrower further agrees that it
will not take any action, or permit any action to be taken by others subject to
its control, including licensees, or fail to take any action, which would affect
the validity or enforcement of the rights transferred to Lender under this
Agreement other than the delivery of molds, dies, designs, patterns, drawings or
computer code which are subject to the security interests granted pursuant to
this agreement to manufacturers located outside of the United States for the
purpose of producing the product related thereto.
3. New Trademarks, Copyrights and Patents. Borrower represents and
--------------------------------------
warrants that it has neither owns or holds any registered copyrights, trademarks
and patents. If, before the Obligations shall have been satisfied in full,
Borrower shall (i) obtain rights to any registered
- 2 -
<PAGE>
trademarks, registered copyrights or registered patents for products of a type
set forth on Exhibit A, or (ii) become entitled to the benefit of any registered
trademark, registered copyright or registered patent for a product of a type set
forth on Exhibit B, the provisions of paragraph 1 above shall automatically
apply thereto and Borrower shall give to Lender written notice thereof on each
anniversary of the date hereof. Borrower agrees to execute all documents
reasonably necessary to record or preserve Lender's interest in all such
trademarks, copyrights and patents added as additional collateral security,
pursuant to this paragraph 3. Notwithstanding anything to the contrary set forth
herein, the Borrower shall not have any duty to register or record any patent,
trademark or copyright in any jurisdiction outside of the United States.
4. Term. The term of this Agreement shall extend until the Obligations
----
have been paid in full.
5. Events of Default. The occurrence of any of the following shall
------------------
constitute an "Event of Default" hereunder:
a. A default by Borrower in the observance or performance of any
obligation, covenant, condition or agreement hereof, which is not cured within
thirty (30) days after written notice thereof to Borrower unless such default
impairs the first priority security interest of the Lender granted pursuant to
paragraph 1, in which case such default shall be deemed and Event of Default
without provision for cure or notice (however the failure to maintain the
Borrower's first priority security interest in any collateral located outside of
the United States for the purpose of producing goods on behalf of the Borrower
shall not be deemed and Event of Default); or
b. Any representation or warranty made by Borrower herein which is
not true and correct in any material respect as of the date hereof; or
c. An "Event of Default" under the Note or License Agreement which
shall not be cured within any applicable grace period.
6. Lender's Rights.
---------------
a. Upon the occurrence of any Event of Default hereunder, Lender
shall have the right (but not the obligation), without demand on Borrower: (1)
to declare all sums evidenced or secured by the Note and this Agreement
immediately due and payable; (2) to exercise any and all rights and remedies
provided under this Agreement and the Note as well as such remedies as may be
available at law or in equity, including, without limitation, all rights and
remedies of a "secured party" under the Illinois Uniform Commercial Code
("Code"), and (3) to correct any such default in such manner and to such extent
as Lender may deem necessary or desirable to protect the security hereof,
including specifically, without limitation, the right (but not the obligation)
to appear in and defend any action or proceeding purporting to affect the
- 3 -
<PAGE>
security hereof or the rights or powers of Lender, and also the right (but not
the obligation) to perform and discharge each and every obligation, covenant,
condition and agreement of Borrower under the License Agreement or to make any
application for patent, copyright, trademark or other intellectual rights
registration, with any federal, state or foreign agency or registry, and, in
exercising any such powers, to pay necessary costs and expenses, employ counsel
and incur and pay reasonable attorneys fees and expenses. Lender shall not be
obligated to perform or discharge, nor does it hereby undertake to perform or
discharge, any obligation, duty or liability under the License Agreement, by
reason of this Agreement, or to make any application for patent, trademark,
copyright or the registration of any intellectual property right on behalf of
the Borrower or Lender.
b. That at any time after the occurrence of an Event of Default,
Lender may, at its option and without regard to the adequacy of security for the
indebtedness hereby secured, either in person or by agent, with or without
bringing any action or proceeding, or by a receiver to be appointed by a court
at any time hereafter, enforce for its own benefit the License Agreement, and
utilize the property licensed thereunder. The exercise of any rights under this
Agreement shall not be deemed to cure or waive any default under this Agreement
or the Note, or waive, modify or affect any notice of default under this
Agreement or the Note, or invalidate any act done pursuant to such notice.
c. That the Licensor upon written notice from Lender of the
occurrence of an Event of Default, shall be and is hereby authorized by Borrower
to perform as required under the License Agreement for the benefit of Lender in
accordance with the terms and conditions thereof without any obligation to
determine whether or not such an Event of Default has in fact occurred.
7. Duties of Borrower. Borrower shall cause any patent, copyright,
------------------
trademark or patent, copyright or trademark application which is subject to the
License or the security interest granted pursuant to this Agreement to contain
or have filed in the appropriate office a notice of the security interest
granted pursuant to this Agreement.
8. Waivers. No course of dealing between Borrower and Lender, nor any
-------
failure to exercise, nor any delay in exercising, on the part of Lender, any
right, power or privilege hereunder or under the Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
9. Severability. The provisions of this Agreement are severable, and if
------------
any clause or provision shall be held invalid and unenforceable in whole or part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner effect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
- 4 -
<PAGE>
10. Modification. This Agreement cannot be altered, amended or modified
------------
in any way except by a writing signed by the parties hereto.
11. Cumulative Remedies; Effect on Note. All of Lender's rights and
-----------------------------------
remedies with respect to the License Agreement, trademarks, copyrights, patents,
or other intellectual property whether established hereby or by the Note, or by
any other agreements or by law shall be cumulative and may be exercised
singularly or concurrently. Borrower acknowledges and agrees that this
Agreement is not intended to limit or restrict in any way the rights and
remedies of Lender under the Note but rather is intended to facilitate the
exercise of such rights and remedies.
12. Binding Effect; Benefits. This Agreement shall be binding upon
------------------------
Borrower and its respective successors and assigns, and shall inure to the
benefit of Lender, its nominees and assigns.
13. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Illinois.
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
BISON VALVE, L.L.C.
By: /s/ Michael Waters
----------------------------------
Michael Waters, Manager
STATE OF ILLINOIS )
) ss
COUNTY OF KANE )
I, Sue Metzzer, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY THAT Michael Waters, manager of Bison Valve,
L.L.C., personally known to me to be the same person whose name is subscribed to
the foregoing instrument, appeared before me this day in person, and
acknowledged that he signed and delivered the said instrument as his own free
and voluntary act and as the act of said corporation for the uses and purposes
therein set forth.
GIVEN under my hand and notarial seal, this 12th day of February, 1998.
/s/ Sue Metzzer
-------------------------
Notary Public
My Commission Expires:
- 6 -
<PAGE>
EXHIBIT A
---------
LICENSE AGREEMENT
- 7 -
<PAGE>
Exhibit A
LICENSE AGREEMENT
-----------------
THIS LICENSE AGREEMENT (the "Agreement") dated as of the 1/st/ day of
----------------------
January, 1998, by and between by and between BISON VALVE, L.L.C., an Illinois
limited liability company (the "Licensee"), whose principal place of business is
782 Church Road, Elgin, Illinois 60123, and MICHAEL A. WATERS ("Licensor"),
residing at 372 N. Bateman Circle, Barrington Hills, Illinois 60010.
W I T N E S S E T H:
- - - - - - - - - -
THAT, WHEREAS, Licensor has developed and is the owner of all right, title,
and interest in and to the design of a certain small cylinder service valve and
overfill prevention device (the "OPD Valve"); and
WHEREAS, Licensor is applying to the United States Patent & Trademark
Office, for a patent on the inventions included in the design of the OPD Valve;
and
WHEREAS, Licensor has the right to grant licenses to use the OPD Valve and
trade secret technology related to the production of the float, assembly, and
testing of the OPD Valve (the "Trade Secret Technology"); and
WHEREAS, Licensee desires to acquire from Licensor a license to use and
sell the OPD Valve and the Trade Secret Technology upon the terms and conditions
herein set forth; and
WHEREAS, Licensor desires to accept such license upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, each of the parties hereto agree as follows:
1. GRANT OF LICENSE. Unless sooner terminated or modified as hereinafter
----------------
provided, for a period of ten (10) years from the date of this Agreement (the
"Term"), Licensor hereby grants to Licensee the right and license (A) to
manufacture, have manufactured, use and sell the OPD Valve throughout the United
States (the "Territory") and (B) to use the Trade Secret Technology for the sole
purpose of manufacturing, having manufactured, using, and selling the OPD Valve
in the Territory.
2. POWER TO SUBLICENSE. Licensor hereby grants Licensee the right and
-------------------
power to issue sublicenses to manufacture the OPD Valve throughout the Territory
and to disclose the Trade Secret Technology to such sublicensees during the
Term, provided, however, that such
<PAGE>
manufacture is for sale only to Licensee and provided further that Licensee
requires any such sublicensee, pursuant to a written agreement, to maintain the
confidentiality of the Trade Secret Technology and use the Trade Secret
Technology solely for the purpose of manufacturing the OPD Valve for sale only
to Licensee. Any such sublicense may be for all or any portion of the Territory
and for all or less than the Term. Licensee shall promptly give reasonable
notice to Licensor of any such sublicense and its basic terms and promptly
provide Licensor with copies of any and all agreements relating thereto.
3. ROYALTIES. In consideration of the license granted in this Agreement,
---------
Licensee agrees to pay to Licensor royalties derived from sales of the OPD
Valves, whether by Licensee or by sublicensees, as hereinafter provided. The
Schedule of Royalties below is based on the Benchmark Price at open market (the
"Fair Market Value") of the OPD Valve and the gross profits from sales of the
OPD Valve (the "Gross Profits"). For purposes of this Agreement, "Benchmark
Price" shall mean the price at which the OPD Valves are sold, unless otherwise
agreed by the parties in good faith. For purposes of this Agreement, Gross
Profits shall mean the profit from sales of OPD Valves at Fair Market Value
minus all Costs of Goods Sold. For purposes of this Agreement, "Costs of Goods
Sold" shall mean cost of material, direct labor, subcontract production,
warranty, duty, freight in, shop supplies, and shipping supplies and production
machinery depreciation and production tooling depreciation, as determined in
accordance with generally accepted accounting principles consistently applied.
SCHEDULE OF ROYALTIES
---------------------
If Gross Profits are greater than or equal to seventy percent (E70%) of the
Fair Market Value sales of the OPD Valves, then the Royalties shall be
twelve and one-half percent (12.5%) of the Fair Market Value sales of
the OPD Valves.
If Gross Profits are greater than or equal to sixty percent (E60%) but less
than seventy percent (I70%) of the Fair Market Value sales of the OPD
Valves, then the Royalties shall be ten percent (10%) of the Fair Market
Value sales of the OPD Valves.
If Gross Profits are greater than or equal to fifty percent (E50%) but less
than sixty percent (I60%) of the Fair Market Value sales of the OPD
Valves, then the Royalties shall be seven and one-half percent (7.5%) of
the Fair Market Value sales of the OPD Valves.
If Gross Profits are greater than or equal to forty percent (E40%) but less
than fifty percent (I50%) of the Fair Market Value sales of the OPD
Valves, then the Royalties shall be five percent (5%) of the Fair Market
Value sales of the OPD Valves.
If Gross Profits are less than forty percent (I40%) of the Fair Market
Value sales
<PAGE>
of the OPD Valves, then the Royalties shall be two and one-half
percent (2.5%) of the Fair Market Value sales of the OPD Valves.
Licensee shall pay Licensor royalties pursuant to the Schedule of Royalties
within thirty (30) days of the close of each and every calendar quarter of the
Term, except that Licensee shall pay Licensor royalties for the last quarter of
the year within ninety (90) days of the close of each and every calendar year of
the Term, at which time adjustments, if any, to Gross Profit and royalties will
be made based on fiscal year end audited financial statements of the Licensee
or, if audited financial statements are not prepared by an independent
accountant, on the reviewed or compiled financial statements of the Licensee as
approved by the Licensee's Board of Directors. Licensee's royalty payments to
Licensor shall be accompanied by a royalty report setting forth sales of the OPD
Valve, Fair Market Value, Gross Profit, and sales for the appropriate period(s).
Licensee will keep records showing the products sold or otherwise disposed of
during the Term of this Agreement in such detail as to enable the amounts
payable hereunder to be easily determined. Licensee shall also permit its books
and records to be examined by Licensor up to twice annually to the extent
necessary to verify the sales, Gross Profit, Fair Market Value, Cost of Good
Sold, and royalty payments provided for herein. Such examination shall be made
during normal business hours, at times convenient to Licensor and Licensee.
4. EXCLUSIVITY AND MINIMUM ROYALTY PAYMENT. The license for the Territory
---------------------------------------
granted by Licensor to Licensee under this Agreement shall be exclusive unless
and until the Minimum Annual Royalty Payment (defined below) is not paid or not
paid within the time set forth in this Agreement. During each year of the Term
of this Agreement, Licensee agrees to pay a minimum annual royalty (the "Minimum
Annual Royalty Payment") to Licensor as set forth below:
<TABLE>
<CAPTION>
PERIOD MINIMUM ANNUAL ROYALTY PAYMENT TO
-------
MAINTAIN EXCLUSIVE LICENSE
----------------------------------
<S> <C>
(a) Prior to December 31, Earned royalty payment only.
1998
No Minimum
(b) January 1, 1999 through $50,000.00, payable
December 31, 1999
by March 31, 2000
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(c) Each calendar year $100,000.00, payable
thereafter commencing on on the succeeding March 31
January 1, 2001
</TABLE>
Without limiting any other rights or remedies that Licensor may have at law or
in equity, in the event that the Minimum Annual Royalty Payment is not paid in
full or on time, for any reason, then after thirty (30) days notice from
Licensor to Licensee, Licensor may license others to make, use or vend the OPD
Valve and use the Trade Secret Technology in the Territory without payment or
further notice to the Licensee.
5. INFRINGEMENT. In the event it appears that one or more third parties are
------------
infringing any right of Licensor, Licensee shall notify Licensor of such
apparent infringement. Licensor, after notice thereof to Licensee, may
immediately commence and prosecute all legal proceedings necessary to prevent
such infringement and shall be responsible for all costs relating to such legal
proceedings. Licensee agrees to cooperate with the Licensor in connection with
any infringement matters. Any payment by an infringer made in settlement of or
by way of judgment or award or otherwise shall belong to Licensor. If Licensor
fails to prevent any such infringement, Licensee may (a) upon written notice to
Licensor, immediately commence and prosecute, at its cost and expense, all legal
proceedings necessary to prevent such infringement itself, or (b) immediately
terminate this Agreement by written notice to Licensor, with no liability for
any royalty payments beyond the date of said notice of termination.
6. CONFIDENTIALITY. Licensee acknowledges and agrees that (a) Licensor has
---------------
expended significant time, energy and money to develop, and maintain the secrecy
of, the Trade Secret Technology, and (b) if the Trade Secret Technology were
disclosed to another person or entity contrary to this Agreement or used for the
benefit of anyone other than Licensor or Licensee, Licensor would suffer
irreparable harm, loss and damage. Accordingly, Licensee acknowledges and agrees
that, unless the Trade Secret Technology becomes publicly known through
legitimate origins:
the Trade Secret Technology is, and at all times hereafter shall
remain, the sole property of Licensor; and
except as otherwise specifically permitted by this Agreement with
respect to sublicensees, Licensee shall use its best efforts and the
utmost diligence to guard and protect the Trade Secret Technology from
any unauthorized use or disclosure to any other person or other entity.
Licensee also acknowledges and agrees that all documentary and tangible Trade
Secret Technology is supplied or made available by Licensor to Licensee solely
for the purposes of the license granted herein. Licensee further agrees that if
the
<PAGE>
Term of the licensee granted herein terminates or is terminated at any time for
any reason, Licensee and its sublicensees shall immediately return to Licensor
all documentary and/or tangible Trade Secret Technology in their possession,
custody, or control and not make or keep any copies, notes, abstracts,
summaries, tapes or other record of any type of Trade Secret Technology.
7. DEFAULT. Should a party to this Agreement consider the other party to
-------
be in breach of this Agreement, it shall notify the breaching part as to the
breach. The breaching party shall have ten (10) days from the notice to correct
the breach and give notice of the correction to the non-breaching party. Should,
after the ten (10) day period following the notice of breach, the breach not be
corrected, the non-breaching party may notify the breaching party that the
Agreement is terminated, and the Agreement shall be terminated.
8. MARKING AGREEMENT. Licensee agrees to mark each product which is the
-----------------
subject of claims of any issued and subsisting patent with appropriate notice of
such patent pursuant to 35 U.S.C. (S)287(a).
9. EXCLUSIVITY AND NONASSIGNABILITY. The license granted to Licensee under
--------------------------------
this Agreement shall be nondivisble and shall not be transferable without the
Licensor's prior express written consent. Except for sublicensing as provided in
Section 2 of this Agreement, Licensee shall not sell, assign, transfer, convey,
license, or encumber this Agreement, or any right or interest accruing under
this Agreement, in whole or in part, without Licensor's prior express written
consent. This Agreement shall be assignable by Licensor to any assignee it
designates.
10. NOTICES. Except as otherwise provided in this Agreement, all notices
-------
requests, consents, and other communications required or permitted under this
Agreement shall be in writing and signed by the party giving notice, and shall
be deemed to have been given when hand-delivered by personal delivery, or by
Federal Express or similar courier service or three (3) business days after
being deposited in the United States mail, registered or certified mail, with
postage prepaid, return receipt requested, addressed to the Licensor at his
residence set forth above, or addressed to the Licensee c/o its principal place
of business as set forth above, Attention: President, or to such other address
as either party may designate for himself or itself by notice given to the other
party from time to time in accordance with the provisions of this Agreement.
11. WAIVER OF BREACH. No delay on the part of any party in the exercise of
----------------
any right or remedy shall operate as a waiver thereof, and no single or partial
exercise by any party of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy. The waiver of any
breach or condition of this Agreement by either party shall not constitute a
precedent in the future enforcement of any of the terms and conditions of this
Agreement.
<PAGE>
12. HEADINGS AND RECITALS. The headings of Sections contained in this
---------------------
Agreement are merely for convenience of reference and shall not affect the
interpretation of any of the provisions of this Agreement. This Agreement is
deemed to have been drafted jointly by the parties, and any uncertainty or
ambiguity shall not be construed for or against either party as an attribution
of drafting to either party. Whenever the context so requires, the singular
shall include the plural and vice versa. All words and phrases shall be
construed as masculine, feminine or neuter gender, according to the context. The
recitals to this Agreement are hereby incorporated herein as part of this
Agreement.
13. SEVERABILITY. Whenever possible, each provision of this Agreement shall
------------
be construed and interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement or the application
thereof to any party or circumstance shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition without invalidating the remainder of such provision or any other
provision of this Agreement or the application of such provision to other
parties or circumstances.
14. ENTIRE AGREEMENT. All discussions, correspondence, understandings, and
----------------
agreements heretofore had or made between the parties relating to its subject
matter are superseded by and merged into this Agreement, which alone fully and
completely expresses the agreement between the parties regarding the Trade
Secret Technology and the OPD Valve and the license to make, use and sell such
devise, and the same is entered into with no party relying upon any statement or
representation made by or on behalf of any party not embodied in this Agreement.
Any modification of this Agreement may be made only by a written agreement
signed by both of the parties to this Agreement.
15. ARBITRATION. Any dispute between the parties arising under this
-----------
Agreement which cannot be amicably resolved between the parties shall be
resolved by arbitration in the Chicago metropolitan area in accordance with the
following terms and conditions: Either party may deliver a notice to the other
party which shall set forth in detail all issues which it believes constitute a
dispute or grievance. Within twenty (20) days of the delivery of such notice,
counsel for the parties shall mutually select an arbitrator. If the parties are
unable to agree upon the selection of an arbitration within said twenty (20)
days, then within seven (7) days thereafter, either party may request the
JAMS/Endispute to submit a single panel consisting of a list of seven (7)
disinterested persons who are qualified and willing to act as impartial
arbitrators. Upon receipt of this list, the parties shall promptly flip a coin
to determine who shall have first choice to strike a name, and then the parties
shall proceed to strike alternatively and the person whose name remains shall be
the arbitrator. Unless otherwise agreed by the parties, (a) the arbitration
shall be conducted in accordance with the commercial arbitration rules of
JAMS/Endispute, and (b) the arbitrator shall commence hearings within thirty
(30) days
<PAGE>
after he is selected and shall render his award in writing, together with his
written findings and conclusions, as soon as possible after the hearing. The
decision of the arbitrator shall be final and binding on the parties and may be
confirmed by a court of competent jurisdiction. The arbitrator may consider only
the particular issue or issues presented to him by the parties, and his decision
must be based upon the provisions of this Agreement and any amendments hereto.
The arbitrator shall have no power to add to, subtract from, alter or modify
this Agreement or any amendments hereto. The arbitrator shall assess the costs
of the arbitration of the parties as he determines to be appropriate. The
parties to this Agreement agree that this Section has been included to resolve
rapidly and inexpensively any disputes which may arise, and that submission of a
dispute to arbitration in accordance with this Agreement shall constitute
grounds for dismissal of any action commenced by any party with respect to a
dispute arising out of or from any provisions of this Agreement.
16. CHOICE OF LAW. This Agreement is being executed and delivered in the
-------------
State of Illinois, and the validity, construction, and enforceability of this
Agreement shall be governed in all respects by the domestic laws of the United
States and the State of Illinois applicable to agreements made and to be
performed entirely within the State of Illinois, without regard to the conflicts
of laws principles of the State of Illinois or any other state.
17. COUNTERPARTS. This Agreement may be executed in any one or more
------------
counterparts, each of which shall constitute an original, no other counterpart
needing to be produced, and all of which, when taken together, shall constitute
but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Licensing
Agreement as of the date and year first above written.
MICHAEL A. WATERS (Licensor) BISON VALVE, L.L.C. (Licensee)
/s/ Michael A. Waters By: /s/ Michael A. Waters
- ------------------------------ ------------------------------
Michael A. Waters Its President
<PAGE>
EXHIBIT B
---------
CATEGORIES OF ASSIGNED INVENTIONS
Liquid Propane Valves
Liquid Propane Grills and other Cooking Devices
Barbecue Grill Parts and Accessories
Liquid Petroleum and Propane Gas Heaters
Propane Gas Lighting
Liquid Propane Gas Cylinders
Propane Gas Regulators
Propane Gas Leak Detection Systems
Propane Cylinder Vending Machines
Automatic Propane Gas Filling Systems
Insect Zappers
<PAGE>
EXHIBIT 10.7(a)
DISTRIBUTION AGREEMENT
----------------------
THIS DISTRIBUTION AGREEMENT (the "Agreement") is entered into as of the
________ day of ____________, 19___, by and between BLUE RHINO CORPORATION, a
Delaware corporation ("Company"), and ________________., a __________________
corporation ("Distributor").
W I T N E S E T H:
-----------------
WHEREAS, Company is in the business of offering Cylinders for exchange,
upgrade and sale pursuant to a proprietary system including the use of certain
marks owned by Company (the "Business"); and
WHEREAS, the parties hereto desire to effect an arrangement whereby
Distributor will provide Cylinder exchange service, including sales and upgrades
of Cylinders, to Company's customers using Company's Marks.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS. Wherever the following words appear herein their
-----------
meanings shall be as follows:
"Company" shall mean Blue Rhino Corporation, a Delaware corporation,
---------
or its successors and assigns.
"Company's Accounts" shall mean all customers serviced by Distributor
--------------------
other than Distributor's Accounts.
"Company's Marks" shall mean the trademarks, service marks and trade
-----------------
names set forth in Exhibit A.
"Cylinders" shall mean 20 lb. cylinders of liquid propane fuel.
-----------
"Distributor" shall mean ______________ a __________corporation.
-------------
"Distributor's Accounts" shall mean those customers listed on Exhibit
------------------------
B.
"NFPA" shall mean the National Fire Protection Association.
------
"Sleeve" shall mean the shrink-wrap covering to be applied to all
--------
Cylinders, the form of which shall be prescribed by Company.
<PAGE>
"Term" shall mean, subject to Section 15 hereof, the period beginning
------
on the date hereof and continuing until the _______ anniversary of the
date hereof. The Term shall thereafter be automatically renewed for
successive one-year periods until either party shall deliver to the
other written notice not less than ninety (90) days prior to the end
of any such one-year period, of such party's intent to terminate this
Agreement as of such year end.
"Territory" shall mean the area described on Exhibit C attached
-----------
hereto.
2. APPOINTMENT. Company hereby appoints Distributor during the Term of
-----------
this Agreement as its exclusive distributor of Cylinders using Company's Marks
in the Territory, upon the terms and conditions hereinafter set forth, and
Distributor hereby accepts said appointment. Distributor acknowledges that it
has paid no consideration to Company in exchange for this appointment. The
Company will not appoint any additional distributors for Cylinders in the
Territory during the Term without Distributor's consent.
In consideration of Distributor's agreement to sell and distribute the
Cylinders using Company's Marks, Company shall pay to Distributor the
consideration described on Exhibit D attached hereto. All payments due from
Company to Distributor for services provided in any month shall be made within
forty-five (45) days of the date of invoice, except as set forth on Exhibit E,
and except for delays in the payment by the customer due to disputes relating to
the servicing of such customer by Distributor. Company shall have the right to
set off any amounts due from Distributor to Company against amounts due to
Distributor pursuant to this Section 2.
3. DISTRIBUTOR'S DUTIES.
--------------------
(a) Exchanges, Upgrades, Sales, and Inventory. Distributor shall
-----------------------------------------
provide Cylinder exchange service, including exchanges, upgrades, and sales of
Cylinders, to Company's customers (as designated by Company) at such prices as
Company from time to time shall designate in writing. Distributor shall
maintain a sufficient supply of Cylinders to fully stock all Cylinder racks
installed at a customer's place of business and shall maintain a sufficient
quantity of Cylinders in inventory (float) to properly service the customers in
accordance with this Agreement.
(b) Setup Process. Distributor shall be solely responsible for
-------------
implementing the Cylinder exchange program at Company's customer's place of
business and shall elicit such customer's input and cooperation. Distributor's
duties shall include, but not be limited to, those duties which are described on
Exhibit F attached hereto.
(c) Customer Delivery. Distributor shall plan and execute such
-----------------
deliveries of filled Cylinders to each of Company's customers in the Territory
so as to avoid stock-out situations. Distributor acknowledges that it is
Company's policy that no customer be out of filled
2 of 1
<PAGE>
Cylinders for more than forty-eight(48) hours. Distributor agrees that no more
than 5% of its deliveries shall consist of deliveries to out-of-stock customers.
Distributor shall be responsible for monitoring the sales history and demand
information of each location and compiling sales reports for the customer and
Company so as to avoid stock-outs. To assist Distributor, Company shall provide
Distributor with sales data and customer history on a monthly basis.
(d) Refurbishment and Refilling. Distributor shall transport the
---------------------------
exchanged Cylinders to its plant for refurbishment and refilling. Distributor
shall refurbish and refill the Cylinders in accordance with the procedures and
standards as outlined in Exhibit G and other procedures and standards that are
communicated from time to time by Company to Distributor.
(e) Reporting. Distributor shall use its best efforts to comply with
---------
Company's reporting requirements as described on Exhibit H attached hereto.
(f) Billing and Collection. Company will be responsible for all
----------------------
invoicing and collection matters. Notwithstanding the foregoing, if so
requested by Company, Distributor shall invoice customers for Cylinders and
collect the receipts or shall make deliveries on a COD basis.
(g) Insurance. Distributor shall carry, at its sole cost and expense,
---------
(i) public and products liability insurance in an amount not less than
$5,000,000 for personal injury, death, or property damage, which shall include
coverage "X" of "XCU" coverage; (ii) comprehensive automobile liability
insurance providing third party liability insurance with $1,000,000 inclusive
limits, covering all licensed vehicles owned or operated by or on behalf of
Distributor; (iii) workman's compensation insurance, in such amounts as required
by law; and (iv) products liability insurance as Company shall specify from time
to time. All policies of insurance procured by Distributor shall (i) be issued
in form acceptable to Company by insurance companies with a financial rating of
not less than A-8 as rated in the most current available "Best's" insurance
reports, and licensed to do business in the Territory; (ii) be written as
primary policies and not contributing with, nor in excess of, coverage that
Company may carry; (iii) include Company as a additional insured; and (iv)
contain endorsements that such policies may not be materially changed, amended,
or canceled with respect to Company except after thirty (30) days' prior notice
from the insurance company to Company. Certificates of such insurance and
copies of current Insurance Policies shall be furnished to Company by
Distributor upon Company's request.
(h) Disposal of Cylinders. Distributor shall dispose of Cylinders
---------------------
when such Cylinders are no longer fit for use in the business. Prior to
disposal, Distributor shall remove from the Cylinders all Marks and any other
identifying labels or other markings associated with Company.
4. ELECTRONIC ACCOUNTING SYSTEM. Distributors will use the Blue Rhino
----------------------------
3 of 1
<PAGE>
Electronic Accounting System (BREAS) to conduct all customer transactions and
report these transactions to Company. The BREAS consists of: (A) P. C. as
provided by Blue Rhino Corporation, (B) Handheld Terminal(s) (HHT), HHT
printer(s), (C) National Data Datacomputer Interface components, and (D) BREAS
software provided by Company. HHT's will be used to print delivery tickets for
all store deliveries. Delivery data entered into the handhelds will be
transferred to Company via electronic communication. Distributor will obtain
sufficient BREAS hardware to meet the above requirements pursuant to lease
agreements with Company supplier. Company will provide, free of charge, the
BREAS software required for system use and electronic communications.
5. SUPPLIES. Distributor acknowledges that Company has an interest in
--------
controlling all materials identifying Company to be used in connection with the
Cylinders including, but not limited to, the Sleeve, the Company's Marks,
marketing materials, and labels to be applied to the Cylinders. Therefore,
Distributor agrees to purchase all such items directly from Company or a
supplier approved by Company.
6. OWNERSHIP OF ACCOUNTS. Distributor agrees that all sales of
---------------------
Cylinders pursuant to this Agreement shall be for the benefit of Company and
Distributor shall have no interest in such accounts or the underlying customer
including, but not limited to, those customers who are initially contacted by
Distributor, except as expressly set forth herein.
7. MARKETING. Company will supply to Distributor point of purchasing
---------
advertising material and a reasonable number of vehicle decals at Company's
expense. Distributor shall display such advertising material as directed by
Company. All other materials desired by Distributor will be at Distributor's
sole cost and expense.
8. INDEMNITIES. Distributor agrees to protect, defend, indemnify, and
-----------
hold Company harmless against any and all loss, cost or expense whatsoever,
including without limitation attorney's fees and disbursements, resulting from
any breach of a representation or warranty, or arising out of any claims,
proceedings, demands or causes of action of every kind and character made,
instituted, or asserted against Company alleging personal injuries, death or
damage to property, occurring, arising out of, incident to, or resulting
directly or indirectly from the operation of the Cylinder exchange business
including as such may pertain to the handling, filling, and sale of Cylinders.
Company agrees to protect, defend, indemnify, and hold Distributor
harmless against any and all loss, cost or expense whatsoever, including without
limitation attorney's fees and disbursements, resulting from any breach of a
representation or warranty, or arising out of any claims, proceedings, demands
or causes of action of every kind and character made, instituted, or asserted
against Distributor alleging personal injuries, death, or damage to property,
occurring, arising out of, incident to, or resulting directly or indirectly from
the operation of Company's business.
9. SALES OF COMPETING PRODUCTS. Distributor will not, directly or
---------------------------
indirectly, engage in the business of the exchange of 20 lb. cylinders of liquid
propane fuel in the Territory during the term of this Agreement except as set
forth in this Agreement.
10. NON-SOLICITATION OF CUSTOMERS.
-----------------------------
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<PAGE>
(a) Distributor will not, for a period of two years from the
termination of this Agreement, directly or indirectly solicit Company's Accounts
in connection with the sale, exchange, or upgrade of Cylinders.
(b) Company will not, for a period of two years from the termination
of this Agreement, directly or indirectly solicit Distributor's Accounts in
connection with the sale, exchange, or upgrade of Cylinders.
11. CONFIDENTIALITY. Each party acknowledges that during the term of this
---------------
Agreement, it will have access to and will become familiar with various trade
secrets and confidential information of the other party including but not
limited to materials or records of a proprietary nature; trade secrets,
engineering or technical data; records and policy matters relating to research,
finance, accounting, sales, personnel, management and operations; matters
particularly relating to operations such as customer lists, price lists,
specifications and information regarding customers and their requirements, costs
of providing service and equipment and equipment maintenance costs (the
"Confidential Information"). Each party agrees not to communicate, divulge or
use for the benefit of any other person, partnership or corporation, any such
Confidential Information of the other party during the term of this Agreement
and thereafter, or any similar data which came to such party as a result of its
participation in the distribution arrangement described herein.
12. INJUNCTIVE RELIEF. Distributor acknowledges that compliance with
-----------------
Sections 3(b), 9,10 and 11 of this Agreement is necessary to protect the
business, customers and goodwill of Company and that a breach of this Agreement
will irreparably and continually damage Company for which money damages may not
be adequate, and therefore, Company will be entitled to injunctive relief
restraining such breach in addition to any other remedy provided by law.
Company acknowledges that compliance with Section 11 of this Agreement is
necessary to protect the business, customers and goodwill of Distributor and
that a breach of Section 11 of this Agreement will irreparably and continually
damage Distributor for which money damages may not be adequate, and therefore,
Distributor will be entitled to injunctive relief restraining such breach in
addition to any other remedy provided by law.
13. NO AGENCY RELATIONSHIP. It is the intention of the parties that the
----------------------
relationship existing between them shall be that of independent contractors;
that nothing herein contained or done pursuant hereto shall constitute
Distributor the agent of Company for any purpose whatever; and that all acts and
things done and to be done by Distributor pursuant to the provisions hereof or
done by Distributor in anticipation of this agreement, unless expressly
otherwise provided herein, shall be at Distributor's own cost and expense.
14. USE OF COMPANY'S MARKS.
----------------------
(a) Distributor is hereby granted a nonexclusive right and license to
use Company's Marks only in connection with services performed by Distributor
pursuant to this Agreement, subject to the following conditions:
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(i) Distributor shall use Company's Marks only in connection
with Cylinders that are of a quality which comply with such standards and
requirements as outlined on Exhibit G attached hereto, and for the purpose of
ascertaining the quality of such Cylinders, Company through such representative
as it may designate shall have the right at all reasonable times to inspect all
of Distributor's places of business and to examine the services rendered by
Distributor (including the refurbishment and filling of Cylinders) and records
of Distributor to verify Distributor's compliance with the requirements of this
Agreement.
(ii) Distributor will not use any of Company's Marks as part of
the corporate or business name of Distributor without prior written approval of
Company.
(iii) Any and all displays or uses of Company's Marks by
Distributor shall comply with the provisions and requirements of this Agreement
as or amended from time to time.
(iv) Distributor acknowledges the validity of each of Company's
Marks.
(v) Distributor will not threaten or undertake any legal action
based upon a claim that someone else's use of a mark conflicts with or infringes
any of Company's Marks, but Distributor will promptly call to Company's
attention any conflict with or infringement of any of Company's Marks which come
to Distributor's attention.
(b) In the event of termination of this Agreement, any and all
authorization or approval for the use, in whole or in part, of any of Company's
Marks shall automatically terminate. Distributor shall thereupon promptly
delete all Company's Marks, and parts thereof, from all places where used by
Distributor, and shall completely discontinue all use thereof. Thereafter
Distributor shall not use in relation to any business in which Distributor may
engage any word, name, title or expression which so resembles any of Company's
Marks, or part thereof, as to be likely to lead to confusion or uncertainty.
TERMINATION BY COMPANY. Company may terminate this Agreement upon the
----------------------
occurrence of any of the following events:
(a) Distributor's breach of its obligation described in the second
sentence of section 3(c) for two consecutive quarters;
(b) Distributor's failure to remedy its default of any other material
obligation under this Agreement within ten (10) business days of receipt of
written notice of such default from Company;
(c) Distributor or any controlling owner of Distributor is convicted
or pleads
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no contest to a felony or other crime or offense that is likely to adversely
affect the reputation of Distributor or Company;
(d) Distributor makes any unauthorized use of Company's Marks; or
(e) If a petition in bankruptcy is filed by or against Distributor; or
if any action is taken by or against Distributor under any law the purpose or
effect of which is or may be to relieve Distributor in any manner from any of
its debts, or to extend the time of payment thereof; or if Distributor makes an
assignment for the benefit of creditors or makes any conveyance of any of its
property which in the opinion of Company may be to the detriment of
Distributor's creditors; or if a receiver or trustee is appointed with authority
to take possession of Distributor's property or of any part thereof.
Upon the termination of this Agreement, Company shall purchase
Distributor's inventory of new or refurbished Cylinders in racks at 75% of
Company's then current cost for similar Cylinders.
16. PAYMENTS AFTER TERMINATION. Termination of this Agreement shall not
--------------------------
release either party from the payment of any sum then or thereafter owing to the
other. Either party may at its option apply any sums due, or to become due,
from it to the other party to the payment of any sums, accounts or obligations
(whether or not contingent and whether or not matured) which are due, or which
may become due, from such other party or any of its subsidiaries, paying any
balance, when finally determined, to such other party.
17. SEVERABILITY. The provisions of this Agreement shall be severable,
------------
and the invalidity or unenforceability of any provisions hereof shall not affect
the validity or enforceability of the remaining provisions.
18. ASSIGNMENT. This Agreement shall be binding upon, and inure to the
----------
benefit of, the parties hereto and their heirs, successors and assigns;
provided, however, that Distributor's rights hereunder shall not be assigned or
transferred, in whole or in part, directly or indirectly, whether by Distributor
by operation of law or otherwise, to any person or firm, or corporation, without
the prior written consent of Company.
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<PAGE>
THIS AGREEMENT shall take effect as of the ____ day of ____ 19__.
BLUE RHINO CORPORATION
By_______________________________
(Title)__________________________
DISTRIBUTOR CORPORATE REPRESENTATIVE
By_______________________________
(Title)__________________________
_________________________________
_________________________________
_________________________________
(Address of Distributor)
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<PAGE>
LIST OF EXHIBITS
TO
DISTRIBUTION AGREEMENT
Exhibit A Company's Marks
Exhibit B Distributor's Accounts
Exhibit C Territory
Exhibit D Commission Schedule
Exhibit E Exceptions to Commission Payment Schedule
Exhibit F Distributor Duties
Exhibit G Appearance & Standards for Cylinders\Displays
Exhibit H Distributor Reporting Needs
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<PAGE>
EXHIBIT A
COMPANY'S MARKS
---------------
Blue Rhino
RhinoTUFF
Picture of Blue Rhino with flame horn
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<PAGE>
EXHIBIT B
DISTRIBUTOR'S ACCOUNTS
----------------------
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<PAGE>
EXHIBIT C
TERRITORY
---------
Examples of territory descriptions:
The Territory shall be as follows:
a. Lake County, Illinois, Will County, Illinois, and DuPage County,
Illinois.
b. The area bounded by the following:
(1) Interstate 80 on the South;
(2) the Illinois state line on the East;
(3) the Culp River on the North; and
(4) the Filipowski/Prim county line on the West.
c. The metropolitan Chicago Area of Dominant Influence, as determined by
Arbitron.
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<PAGE>
EXHIBIT D
COMMISSION SCHEDULE
-------------------
A. Company Accounts (per Cylinder):
EXCHANGES: $_________
UPGRADES: $_________
SALES: $_________
B. Distributor Accounts (per Cylinder):
Customer Sales Exchanges Upgrades
-------- ----- --------- ---------
_______ _____ _________ _________
_______ _____ _________ _________
_______ _____ _________ _________
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<PAGE>
EXHIBIT E
EXCEPTIONS TO COMMISSION PAYMENT SCHEDULE
-----------------------------------------
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<PAGE>
EXHIBIT F
DISTRIBUTOR DUTIES
------------------
In the setup process the distributor will complete the following duties:
_ Preparation of site plan (if required)
_ Obtaining permits
_ Obtaining inspections and approvals
_ Delivery of rack
_ Rack installation in accordance with all codes that are applicable
_ Crash protection if required
_ Placement of signage
_ Employee and store training
_ Movement of display if required by local authorities or by
customer
24 Hour Emergency Service, 7 days a week that provides the Company
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<PAGE>
with a maximum telephonic response time of 30 minutes.
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<PAGE>
EXHIBIT G
APPEARANCE AND STANDARDS FOR CYLINDERS/DISPLAYS
-----------------------------------------------
These standards will apply to Cylinders both at the time they are ready for
transport to the retail location and upon placement in the display unit. No
allowance is made for degradation of quality during the movement of Cylinders to
the retail location.
Quality, as it applies to the finished product, implies that the product meets
all standards for appearance and safety. A Cylinder without high standards for
both appearance and safety is not an acceptable Blue Rhino Cylinder.
Cylinders
- ---------
- - In accordance with DOT regulations, NFPA 58, and applicable state and local
ordinances, all Cylinders will be completely free of leaks from the time
they are loaded on the transport and through the time of sale to the
consumer.
_ The Cylinder will contain 20 pounds of propane (+/-0.5 pounds) unless local
regulations dictate otherwise. The distributor accepts responsibility for
accuracy of Cylinder filling and any penalties which may be assessed due to
non-compliance of distributor's cylinders with regulatory requirements.
_ The foot ring will be completely intact, functional and will have no sharp
edges or loose weld seams.
_ The Collar of the Cylinder will be completely intact, functional and will
have no loose weld seams.
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_ The valve is intact and operational. The handwheel is securely attached
and there is no indication of valve malfunction.
_ All labels will be securely attached to the Cylinder in a manner in which
is not likely to be disturbed by the consumer or damaged in transit.
_ The Cylinder has at least twelve months remaining before qualification
lapses.
_ The Cylinder will be free of all rust.
_ The Cylinder will have no pits, dents or cuts which exceed the standards of
the CGA Bulletin C-6 and the current edition of NFPA Procedure 118 for the
visual inspection of Cylinders.
_ The Cylinder will be painted in accordance with Company standards.
_ All POL type valves will have a tightly secured POL plug inserted during
transport and while in rack.
_ No adapters will be permitted on valves which extend beyond the protection
of the collar.
_ All Cylinders will be free of dirt, fat, barbecue sauce, grease, dust and
other dirt so as to provide a clean appearance.
_ Present a clean and "like new" cosmetic appearance.
_ Be "labeled" in accordance with marketing objectives as defined by Blue
Rhino Corporate Marketing.
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<PAGE>
Displays
- --------
_ The display unit will meet all applicable state and local requirements and
will be approved by the local fire authorities or other applicable
authorities.
_ The display unit will be free of dust and dirt and will be kept in good
repair.
_ The display unit will be lockable and will have protection to preclude
unauthorized opening of the valves.
_ The display unit will bear all the required markings and warnings as set
forth by the NFPA 58 and applicable state and local codes.
_ Meet construction and safety regulations as defined by federal, state and
local laws including but not limited to DOT, NFPA 58 and CGA.
_ Shall be located to assist in maximizing unit sales while meeting all
federal, state and local regulations for safety.
_ Shall have signage installed as defined by Blue Rhino Corporate Marketing.
_ Present a clean and professional appearance.
_ The display unit will be painted and maintained in accordance with Company
standards.
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<PAGE>
EXHIBIT H
DISTRIBUTOR REPORTING NEEDS
---------------------------
Accounting
- ----------
Distributor will need to ensure that all deliveries are entered into the Blue
Rhino Electronic Accounting system (BREAS),including deliveries made where BREAS
Hand Held Terminals (HHTs) were not used.
Distributor needs to report the following to Company:
_ Profiles for existing customers including display / rack capacity and
product mix (by valve type).
_ Customer profiles for to Distributor's new accounts developed
subsequent to becoming a BRC distributor (these accounts will become Company
accounts unless specifically exempted by this contract)
_ Change of product mix at any customer location.
(The above information will be used to update the BRC customer data base and
track inventory and total sales capacity).
Cash
- ----
_ Cash sales summary - for cash sales, Company enters a debit in the
accounting system and deducts amount from Distributor's month-end payment.
Checks
- ------
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<PAGE>
_ If check is made payable to Distributor, it is considered same as
cash. "Cash" is indicated on the delivery ticket and Distributor deposits the
check. A deduction will be made for the amount of the check from the distributor
payment made by Company.
_ If check is made out to Company "check" must be indicated on the
delivery ticket and the check should be attached to the delivery ticket and
forwarded to Company.
Credit Accounts
- ---------------
_ Credit accounts will be serviced, delivery tickets prepared and
transactions reported in accordance with current billing instructions as
provided by Company.
Marketing and Sales
- -------------------
Incoming Customer Calls (weekly) - totals by account by question or complaint
category (setups, service, quality and billings).
Setup Status (weekly) list of stores by phase (site plan, display, cylinders,
permit) with actual and planned dates.
<PAGE>
EXHIBIT 10.7(b)
NORTH CAROLINA )
)
) SUB-LEASE
)
FORSYTH COUNTY )
_________________________________________________________________
THIS SUBLEASE is made and entered into as of this ________ day of _______
1997 by BLUE RHINO CORPORATION ("Sublessor") a Delaware corporation and
______________________("Sublessee") a ______________ corporation.
W I T N E S S E T H:
-------------------
WHEREAS, Sublessor, as lessee, and Forsythe/McArthur Associates, Inc.,
("Lessor"), have entered into Master Equipment Lease Agreement No. F27125 dated
September 24, 1996, incorporated herein by reference, (the "Master Lease"),
whereby Sublessor leases certain cylinder display racks from Lessor;
WHEREAS, Sublessor and Sublessee have agreed that Sublessor shall sublet to
Sublessee certain cylinder display racks leased to Sublessor pursuant to the
Master Lease and described in Exhibit A attached hereto (the "Equipment");
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein contained, the Sublessor and Sublessee covenant and agree as
follows:
1. Personal Property Subleased. The Sublessor subleases to the Sublessee the
---------------------------
equipment listed on Exhibit A attached hereto as amended from time to time.
2. Commencement and Term. The Sublessee shall have and hold the subleased
---------------------
equipment for the monthly term and commencing as set forth on Exhibit A
attached hereto as amended from time to time unless earlier terminated as
provided herein. Sublessor does not grant to Sublessee any rights of
renewal, extension or purchase hereunder.
3. "Master Lease. This Sublease is subject and subordinate to the Master
-------------
Lease, and Sublessee expressly acknowledges Lessor's rights as lessor under
the Master Lease. Except as shall be inconsistent with the terms hereof, or
where the context can be applied only to the parties to the Master Lease,
all the terms, covenants and conditions contained in the Master Lease shall
be applicable to this Sublease with the same force and effect as if
Sublessor were the lessor under the Master Lease and Sublessee were the
lessee."
Default and Remedies. If Sublessee ceases doing business as a going
--------------------
concern, or if any credit or financial information submitted to Sublessor
by Sublessee is materially untrue, or if a petition in bankruptcy,
arrangement, insolvency, or reorganization is filed by or against Sublessee
or any guarantor of Sublessee's obligations hereunder, or if Sublessee
defaults in payment or other performance required under this Sublease or
under any other sublease or agreement between Sublessor and Sublessee,
Sublessor may exercise any one or more of the following remedies:
1
<PAGE>
a. To declare the entire balance of rent hereunder immediately due and
payable and to similarly accelerate the balances under any other
subleases between Sublessor and Sublessee without notice or demand.
b. To sue for and recover all rents, and other properties due, with
respect to any and all items of equipment to the extent permitted by
law.
c. To require Sublessee to assemble all of the equipment at Sublessee's
expense at a place reasonably designated by Sublessor.
d. To take possession of any or all items of equipment, without demand or
notice, wherever the same shall be located, separating all such
equipment from any other property with or without court order or other
process of law.
e. To exercise any and all other remedies granted under the Uniform
Commercial Code.
All of Sublessor's remedies hereunder are cumulative, are in addition to
any other remedies provided for by law, and may, to the extent permitted by
law, be exercised concurrently or separately. The exercise of any one
remedy shall not be deemed to be an election of such remedy or to preclude
the exercise of any other remedy. No failure on the part of the Sublessor
to exercise and no delay in exercising any right or remedy shall operate as
a waiver thereof or modify the terms of this Lease.
4. Assignment of Sublease. As Security and collateral for the Master Lease,
-----------------------
Sublessor does assign and transfer to Lessor the Sublessor's interest in
this Sublease and all rentals and income arising therefrom. Upon payment
of the Master Lease, Lessor shall reassign and transfer to the Sublessor
all interest in this Sublease and rentals and income arising therefrom.
Lessor shall not, by reason of this assignment of the Sublease nor by
reason of the collection of the rents from the Sublessee, be deemed liable
to Sublessee for any failure of the Sublessor to perform and comply with
Sublessor's remaining obligations.
Upon default by the Sublessor under the Master Lease, Sublessor hereby
irrevocably authorizes and directs Sublessee, upon receipt of any written
notice from Lessor stating that a default exists in the performance of
Sublessor's obligations under the Master Lease, to pay to Lessor the rents
due and to become due under the Sublease. Sublessor agrees the Sublessee
shall have the right to rely upon any such statement and request from
Lessor, and that Sublessee shall pay such rents to Lessor without any
obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Sublessor to the contrary and
Sublessor shall have no right or claim against Sublessee for any such rents
so paid by Sublessee.
Title of the Property. The leased equipment is, and shall at all times
---------------------
remain, the Lessor's property, and the Sublessee shall have no right, title
or interest therein, except as may otherwise be herein set forth, and no
right to purchase or otherwise acquire title to or ownership of any of the
leased equipment. Sublessor is hereby authorized by Sublessee, at
Sublessee's expense, to cause this Sublease, or any statement or other
instrument in respect to this Subease showing the interest of Sublessor in
the subleased equipment, including Uniform Commercial Code Financing
Statements, to be filed or recorded and re-filed and re-recorded, and
grants Sublessor the right to execute Sublessee's name thereto. Sublessee
shall execute and deliver any statement or instrument requested by
Sublessor for such purpose, and agrees to pay or reimburse Sublessor for
any searches, filings, recordings or fees or taxes arising from the filing
or recording of any such instrument or statement. Sublessee shall, at its
expense, protect and defend Sublessor's title against all
2
<PAGE>
persons claiming through or against Sublessee, at all times keeping the
leased equipment free from any legal process or encumbrance whatsoever,
including, but not limited to, liens, attachments, judgments, levies, and
executions, and shall give Sublessor immediate written notice thereof and
shall indemnify Sublessor from any cost caused thereby. The leased
equipment is, and shall at all times be and remain, personal equipment,
notwithstanding that the leased equipment or any part thereof may now be,
or hereafter become, in any manner affixed or attached to the real estate
or any improvements located thereon.
5. Amount of Rent. Sublessee agrees to pay to Sublessor the monthly sums set
--------------
forth on Exhibit A attached hereto as amended from time to time as rent for
the sublease of the equipment for the full term of this Sublease. The rent
shall be paid on the first (1st) day of each consecutive month for the full
term of this Agreement.
6. Maintenance and Insurance. During the term of this Agreement, the
-------------------------
Sublessee shall maintain, service and keep in good repair each item of
subleased equipment at its own expense, except for normal wear, tear and
depreciation. The Sublessee shall not alter the subleased equipment without
Sublessor's prior written consent. The Sublessor shall have the right to
inspect the subleased equipment at any reasonable time. The Sublessee shall
comply with all laws and regulations applicable to the equipment. All risk
of loss or damage to each item of subleased equipment shall be borne by the
Sublessee. The Sublessee shall further, at its own expense, keep each item
of equipment insured against all risk of loss or damage and shall likewise
insure the equipment thereon under the liability insurance policy. All such
insurance shall name Sublessor as a Loss Payee, as Sublessor's interest may
appear or additional insured, as the case may be. Sublessee shall pay the
premiums therefor and deliver said policies, or duplicates thereof, or
certificates of coverage thereunder, to Sublessor with the Loss Payable
endorsement upon the policy or policies or by independent instrument that
gives Sublessor a right to thirty (30) days written notice before the
policy can be altered or canceled. If Sublessee shall fail to provide such
insurance coverage, Sublessor may (but is not required) obtain such desired
coverage and charge the premium therefor as additional rent to Sublessee.
7. Risk of Loss. The Sublessee shall bear all risks of loss and of damage to
------------
the subleased equipment from any cause. In the event of loss or damage,
Sublessee, at Sublessor's option, shall: (a) repair the damaged equipment
to good condition and working order; or (b) replace lost or damaged
equipment with like equipment in good repair, condition and working order
with documentation creating a clear title thereto in Sublessor with said
equipment becoming subject to the terms of this Sublease Agreement; or (c)
pay to Sublessor the then unpaid balance of the aggregate rent reserved
under this Sublease plus the value of Sublessor's residual interest in the
subleased equipment, if any. Upon Sublessor's receipt of such payment,
Sublessee and/or Sublessee's insurer shall be entitled to Sublessor's
interest in said equipment for salvage purposes, in its then condition and
location, as is, without warranties, express or implied.
8. Net Lease, Taxes. The Parties intend the rental payments hereunder to be
----------------
net to Sublessor. Sublessee shall pay all sales, use, excise, personal
property, stamp, documentary and ad valorem taxes, license and registration
fees, assessments, fines, penalties and similar charges imposed on the
ownership, possession or use of the subleased equipment during the term of
this Sublease, and shall pay all taxes (except income taxes) imposed on
Sublessor or Sublessee with respect to the rental payments hereunder.
Sublessee shall reimburse Sublessor upon demand for any and all taxes paid
by or advanced by Sublessor. Sublessee shall file all returns required
therefor and furnish copies to Sublessor. Any amounts unpaid by Sublessee
shall be added by Sublessor to
3
<PAGE>
total rent due to Sublessor.
9. Indemnity. The Sublessee shall forever and further protect, save, and keep
---------
Sublessor harmless and indemnify Sublessor against and from any and all
claims, demands, losses, costs, damages, suits, judgments, penalties,
expenses, and liabilities, of any kind or nature whatsoever, arising
directly or indirectly out of or in connection with the leasing of the
equipment.
10. Assignment and Subletting. The Sublessee shall not assign all or any
-------------------------
portion of this Sublease and shall not sublet all or any portion of the
subleased equipment without having first obtained the written consent of
the Lessor and the Sublessor.
11. No Warranties by Sublessor. SUBLESSOR MAKES NO WARRANTY, EXPRESS OR
--------------------------
IMPLIED, TO ANYONE, AS TO THE FITNESS, MERCHANTABILITY, DESIGN, CONDITION,
CAPACITY, PERFORMANCE OR ANY OTHER ASPECT OF THE EQUIPMENT OR ITS MATERIAL
OR WORKMANSHIP. Sublessor further disclaims any further liability for loss,
damage or injury to sublessee or third parties as a result of any defects,
latent or otherwise, in the subleased equipment, whether arising from
Sublessor's negligence or application of the laws or strict liability.
Regardless of cause, Sublessor shall not be liable for loss of profits or
any other direct, special, or consequential damages. As to the Sublessor,
the Sublessee subleases the equipment "AS IS." Sublessor shall have no
obligation to maintain, test, adjust, or service the subleased equipment.
12. Compliance with Laws. The Sublessee shall conduct its business and
--------------------
maintain the subleased equipment in strict compliance with all applicable
laws, ordinances, regulations and other requirements of any federal, state,
county, municipal or other government and will obtain all necessary
permits, licenses, or other consents for the operation of its business.
13. Titles of Paragraphs. The various titles of the paragraphs herein are
--------------------
used solely for convenience and shall not be used for interpreting or
construing this Agreement.
14. Benefit. The covenants, terms, conditions, provisions and undertakings of
-------
this Agreement or any renewals, extensions or modifications thereof shall
extend to an be binding upon the heirs, executors, administrators,
successors, and assigns of the respective parties hereto.
15. Severability and Governing Law. This Agreement shall be interpreted under
------------------------------
the laws of the State of North Carolina. Any provision hereof found to be
prohibited by law shall be ineffective to the extent of such prohibition
without invalidating the rest of this Agreement.
16. Jury Waiver. The Sublessor and Sublessee waive trial by jury in any action
-----------
concerning this Lease.
17. Entire Agreement. This Agreement represents the entire understanding and
----------------
contract between the parties hereto and there are no collateral or oral
agreements or understandings. This Agreement shall not be modified in any
manner except by instrument in writing executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal the day and year first above written.
4
<PAGE>
SUBLESSOR:
BLUE RHINO CORPORATION
By:__________________________________
Officer
SUBLESSEE:
_____________________________
[Print Name]
By:__________________________________
Officer, Partner or Manager
5
<PAGE>
BLUE RHINO CORPORATION
SUBLEASE OF PERSONAL PROPERTY
EXHIBIT A
A. Name and Address of sublessee:
_______________________________________
_______________________________________
_______________________________________
B. List of Equipment
SEE EXHIBIT "B" ATTACHED
---------------------------
C. Term: Term continues until either party terminates upon sixty (60) days
written notice to the other party and until return of all equipment to
Sublessor.
D. Rent:
1. Original rent of $ per month beginning
2. Plus additional $ per month beginning
3. Plus additional $ per month beginning
4. Plus additional $ per month beginning
5. Plus additional $ per month beginning
6. Plus additional $ per month beginning
B RHINO
_______ -------
E. Original Date: Parties Initials:
Amended Date: Parties Initials:
Amended Date: Parties Initials:
Amended Date: Parties Initials:
Amended Date: Parties Initials:
Amended Date: Parties Initials:
6
<PAGE>
Exhibit 10.9
INDEX
1. Series A Securities Purchase Agreement, dated as of December 1, 1994, by
and among the Blue Rhino Corporation, a Delaware corporation and the
"Purchasers" (as defined in such Purchase Agreement)
Schedules
---------
1 Investors/Investors Allocation
2 Shareholders
5.1 Organization of Corporation
5.5 Owners of Capital Stock
5.10 Undisclosed Liabilities
5.12 Contracts, Leases, Etc.
5.13 Employee Benefit Plans
5.14 Employee Salaries
5.15 Personnel Contracts, Agreements, Etc.
5.16 Arrangements with Affiliates
5.18 Insurance
5.22 Proprietary Rights
5.24 Licenses and Permits
7.08(p) Liens
Exhibits
--------
A Form of Certificate of Incorporation
B Form of Noncompete Agreements
C Form of Registration Agreement (See Tab 2)
D Form of Shareholders' Agreement (See Tab 3)
E Form of Warrants
F Form of Opinion of Counsel to the Corporation
G Business Plan (Not Enclosed - Previously Delivered)
2. Registrations Rights Agreement dated as of December 1, 1994 by and among
the Corporation and Purchasers.
Schedules
---------
1 Investors
3. Shareholders' Agreement dated as of December 1, 1994 by and among the
Corporation and Purchasers.
Schedules
---------
1 Investors
2 Management Stockholders
<PAGE>
PURCHASE OF
SERIES A CONVERTIBLE
PARTICIPATING PREFERRED STOCK
FROM
BLUE RHINO CORPORATION,
a Delaware corporation
Dated December 1, 1994
<PAGE>
BLUE RHINO CORPORATION
SERIES A SECURITIES PURCHASE AGREEMENT
This Series A Securities Purchase Agreement (this "Agreement") is
dated as of December 1, 1994, by and among BLUE RHINO CORPORATION, a Delaware
corporation (the "Corporation"), and PLATINUM VENTURE PARTNERS I, L.P., a
Delaware limited partnership ("Platinum") and the Persons listed on Schedule 1
attached hereto (collectively, the "Investors"). Platinum and the Investors are
sometimes referred to herein, individually, as a "Purchaser," and collectively,
as the "Purchasers."
RECITALS
A. The Corporation is in the business of distributing propane gas
cylinders (the "Business").
B. Purchasers desire to purchase from the Corporation, and the Corporation
desires to issue and sell to the Purchasers, 20,796,172 shares of Series A
Convertible Participating Preferred Stock of the Corporation, $0.001 par value
per share, at a purchase price of $0.347037 per share, and 4,214,185 Warrants at
an exercise price of $0.0347037 for an aggregate purchase price of
$7,217,026.33, which shall be allocated among Purchasers as set forth on
Schedule 1 attached hereto.
AGREEMENTS
----------
In consideration of the premises and the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement:
"Affiliate" as applied to any Person means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. The term "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as applied to
any Person, means the possession, directly or indirectly, of the power to vote
10% or more of the Voting Stock (or in the case of a Person which is not a
corporation, 10% or more of the ownership interest, beneficial or otherwise) of
such Person or otherwise to direct or cause the direction of the management and
policies of that Person, whether through the ownership of Voting Stock or other
ownership interest, by contract or otherwise. All of the Corporation's executive
officers, 10% shareholders, directors,
<PAGE>
Subsidiaries, joint ventures and partners shall be deemed to be Affiliates
of the Corporation for purposes of this Agreement.
"Board" means the Board of Directors of the Corporation.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Corporation in the form and substance of that attached hereto as Exhibit
A to be adopted in accordance with Section 2.1 of this Agreement.
"Closing" means the closing of the sale and purchase of the Series A
Securities pursuant to this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Common Shares" means shares of common stock of the Corporation, $0.001 par
value per share.
"Default" means the failure of the Corporation or any Subsidiary to duly
observe or perform any covenant, condition or agreement required to be performed
by the Corporation or a Subsidiary under the Merger Agreement, this Agreement,
the Related Agreements or the Certificate of Incorporation or an Event of
Noncompliance under the Certificate of Incorporation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" means generally accepted accounting principles, consistently
applied.
"Hazardous Substances" means hazardous substances or hazardous wastes,
as those terms are defined by the Resource Conservation and Recovery Act 42
U.S.C. (S)6901, et seq. ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)9601, et seq. ("CERCLA") or any
applicable federal, state, or local law, regulation, ordinance or requirement,
as amended, or hereafter amended. "Hazardous Substances" shall also include,
but not be limited to, petroleum, including but not limited to, crude oil or any
fraction thereof which is liquid at standard conditions of temperature and
pressure (60 degrees Fahrenheit and 14.7 pounds per square inch absolute) and
any radioactive material, including but not limited to, any source, special
nuclear or by-product material as defined at 42 U.S.C. (S) 2011, et. seq.,
as amended or hereafter amended and asbestos in any form or condition.
"Indebtedness" of any Person shall mean the principal of, premium, if any,
and unpaid interest on: (a) indebtedness for money borrowed from others; (b)
indebtedness guaranteed, directly or indirectly, in any manner by such Person,
or in effect guaranteed, directly or indirectly, in any manner by such Person
through an agreement, contingent or otherwise, to supply funds to, or in any
other manner invest in, the debtor, or to purchase indebtedness, or to purchase
and pay for property if not delivered or pay for services if not performed,
primarily for the purpose of enabling the debtor to make payment of the
indebtedness or to assure the
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<PAGE>
owners of the indebtedness against loss; (c) all indebtedness secured by any
mortgage, lien, pledge, charge or other encumbrance upon property owned by such
Person, even though such Person has not in any manner become liable for the
payment of such indebtedness; (d) all indebtedness of such Person created or
arising under any conditional sale, lease (intended primarily as a financing
device) or other title retention or security agreement with respect to property
acquired by such Person even though the rights and remedies of the seller,
lessor or lender under such agreement or lease in the event of default may be
limited to repossession or sale of such property; and (e) renewals, extensions
and refundings of any such indebtedness.
"Investment" as applied to any Person means (a) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest of any other Person and (b)
any capital contribution by such Person to any other Person.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien, claim or charge of any kind, including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction and including any lien or charge
arising by statute or other law.
"Noncompete Agreements" means those certain Noncompete Agreements by and
between the Corporation and each of Billy Prim, S.H. Fogleman, III, Craig
Erbland, Jim Mizelle, Doug Mele, Steve Rash and Baxter Kiger in the form of
Exhibit B attached hereto, to be executed and delivered as a condition to
Closing by the Purchasers under Section 4.7 of this Agreement.
"Permitted Lien" shall mean (a) Liens for taxes and assessments or
governmental charges or levies not at the time due or in respect of which the
validity thereof shall currently be contested in good faith by appropriate
proceedings conducted with due diligence and for which the Corporation has
furnished adequate security for payment; (b) Liens in respect of pledges or
carriers', warehousemen's, mechanics', laborers' and materialmen's and similar
liens, if the obligations secured by such Liens are not then delinquent or are
being contested in good faith by appropriate proceedings conducted with due
diligence and for which the Corporation has furnished adequate security for
payment; and (c) statutory Liens incidental to the conduct of the business of
the Corporation or any Subsidiary which were not incurred in connection with the
borrowing of money or the obtaining of advances or credits and which do not in
the aggregate materially detract from the value of its property or materially
impair the use thereof in the operation of its business.
"Person" means a natural person, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
"Proprietary Rights" means all proprietary information of the Corporation,
including all patents, patent applications, patent disclosures and inventions
(whether or not patentable and whether or not reduced to practice); all
trademarks, service marks, trade dress, trade names and corporate names; all
registered and unregistered statutory and common law copyrights; all
registrations, applications and renewals for any of the foregoing; all trade
secrets, confidential
-3-
<PAGE>
information, ideas, formulae, compositions, know-how, manufacturing and
production processes and techniques, research and development information,
drawings, specifications, designs, plans, improvements, proposals,
technical and computer data, documentation and software, financial,
business and marketing plans, and customer and supplier lists and related
information and all other proprietary rights.
"Registration Agreement" means the Registration Rights Agreement by and
among the Corporation and the Purchasers in the form of Exhibit C attached
hereto, to be executed and delivered as a condition to Closing by the Purchasers
under Section 4.5 of this Agreement.
"Related Agreements" means the Registration Agreement, the Shareholders'
Agreement, and the Warrants.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Shares" means shares of the Corporation's Series A
Convertible Participating Preferred Stock, $0.001 par value per share, to be
sold to Purchasers pursuant to this Agreement.
"Series A Securities" means the Series A Preferred Shares and the Warrants,
collectively.
"Shareholders" means those Persons listed on Schedule 2, being all of the
holders of the Common Shares issued and outstanding as of the Closing.
"Shareholders' Agreement" means the Shareholders' Agreement by and among
the Corporation, the Shareholders and the Purchasers in the form of Exhibit D
attached hereto, to be executed and delivered as a condition to Closing by the
Purchasers under Section 4.6 of this Agreement.
"Subsidiary" means any corporation, association or other business entity of
which securities or other ownership interests representing more than fifty
percent (50%) of the ordinary voting power are, at the time as of which any
determination is being made, owned or controlled by the Corporation or one or
more Subsidiaries of the Corporation or by the Corporation and one or more
Subsidiaries of the Corporation.
"Voting Stock" of any Person means securities of any class or classes of
such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the directors of such Person.
"Warrants" mean the warrants to purchase Common Shares in the form of
Exhibit E attached hereto, to be issued to certain Purchasers pursuant to this
Agreement.
-4-
<PAGE>
ARTICLE II
AUTHORIZATION AND SALE OF SERIES A SECURITIES
---------------------------------------------
2.1 Authorization. The Corporation will, prior to the Closing, (a) take
all actions necessary to make the Merger and the Merger Agreement valid, binding
and fully effective, (b) file the Merger Agreement and the Certificate of
Incorporation with the Secretary of State of the State of Delaware, and (c)
authorize the issuance to the Purchasers of the Series A Securities.
2.2 Sale of Series A Securities to Purchasers. Subject to the
satisfaction of the terms and conditions herein set forth and in reliance upon
the respective representations and warranties of the parties set forth herein or
in any document delivered pursuant hereto, the Corporation agrees to sell to the
Purchasers, free and clear of any Liens, and the Purchasers agrees to purchase
from the Corporation, at the Closing, 20,796,172 Series A Preferred Shares and
4,214,185 Warrants for the aggregate purchase price of $7,217,026.33.
ARTICLE III
CLOSING; DELIVERY
-----------------
3.1 Closing. The Closing will be held at the offices of Katten Muchin &
Zavis, 525 West Monroe, Suite 1600, Chicago, Illinois 60661, on December 1,
1994, at 10:00 a.m., Chicago time, or at such other time, date and place or
manner as may be agreed to by the Corporation and the Purchasers' counsel.
3.2 Delivery. At the Closing, the Corporation will deliver to each
Purchaser a certificate for the number of Series A Preferred Shares and Warrants
indicated on Schedule 1 attached hereto, duly executed and registered in the
name of such Purchaser, against (i) the principal and accrued interest on any
promissory note or loan owed to such Purchaser by the Corporation as indicated
on Schedule 1 and/or (ii) payment by the Purchaser of the amount indicated on
Schedule 1 attached hereto, by check drawn on a United States domiciled bank
payable to the order of the Corporation or by wire transfer of funds to an
account designated by the Corporation.
ARTICLE IV
CONDITIONS TO CLOSING BY THE PURCHASERS
---------------------------------------
The obligation of Purchasers to purchase Series A Securities at the Closing
is subject to the fulfillment to their satisfaction of each of the following
conditions:
4.1 Representations and Warranties Correct. The representations and
warranties made by the Corporation in Article V shall be true and correct when
made, and shall be true and correct in all material respects as of the Closing
as if made at the Closing.
-5-
<PAGE>
4.2 Performance. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Corporation at or prior
to the Closing shall have been performed or complied with in all material
respects.
4.3 Compliance Certificate. At the Closing, the Corporation shall have
delivered to Purchasers' counsel a certificate of the Corporation, executed by
its Chief Executive Officer dated the date of Closing, certifying to the
fulfillment of the conditions specified in Sections 4.1 and 4.2 of this
Agreement and such other matters as the Purchasers shall have reasonably
requested.
4.4 Secretary's Certificate. At the Closing, the Corporation shall have
delivered to Purchasers' counsel copies of each of the following, in each case
certified by the Secretary of the Corporation to be in full force and effect on
the date of the Closing:
(i) the certificate of incorporation of the Corporation as of the
Closing (which shall be the Certificate of Incorporation) certified by the
Secretary of State of the State of Delaware as of a date not more than
fifteen days prior to the Closing;
(ii) a long-form good standing certificate with respect to the
Corporation certified by the Secretary of State of Delaware as of a date
not more than fifteen days prior to the Closing;
(iii) a good standing certificate with respect to the Corporation
certified by the Secretary of State of the State of North Carolina as of a
date not more than fifteen days prior to the Closing;
(iv) good standing certificates with respect to the Corporation
certified by the Secretaries of State of the states in which the conduct of
its business requires it to be in good standing, in each case as of a date
not more than fifteen days prior to the Closing;
(v) a copy of the Merger Agreement (the "Merger Agreement") between
the Corporation and Blue Rhino Corporation, a North Carolina corporation
("BRC-North Carolina") as filed with and certified by the Secretary of
State of the State of Delaware;
(vi) the by-laws of the Corporation, acceptable in form and substance
to Purchasers' counsel; and
(vii) resolutions of the Board, and, as necessary, the Shareholders,
the form and substance of which are satisfactory to Purchasers' counsel,
authorizing the adoption, execution and filing of the Certificate of
Incorporation, and authorizing the execution, delivery and performance of
the Merger Agreement, this Agreement and the Related Agreements, and the
transactions contemplated hereby and thereby, including the issuance and
sale of the Series A Securities to the Purchasers.
4.5 Registration Agreement. At or prior to the Closing, the Corporation
and the Purchasers shall have executed and delivered the Registration Agreement.
-6-
<PAGE>
4.6 Shareholders' Agreements. At or prior to the Closing, the Corporation
and each of Shareholders and the Purchasers shall have executed and delivered
the Shareholders' Agreement.
4.7 Noncompete Agreements. At or prior to the Closing, the Corporation
and each of Billy Prim, S.H. Fogleman, III, Craig Erbland, Jim Mizelle, Doug
Mele, Steve Rash and Baxter Kiger shall have executed and delivered the
Noncompete Agreements.
4.8 Legal Opinion. At the Closing, the Corporation shall have delivered
to Purchasers' counsel the opinion of House Law Firm, counsel to the
Corporation, dated the date of Closing, addressed to the Purchasers and in the
form of that attached hereto as Exhibit F.
4.9 Legal Investment. As of the Closing, the purchase of Series A
Securities by the Purchasers hereunder shall be legally permitted by all laws
and regulations to which the Purchasers and the Corporation are subject.
4.10 Proceedings and Documents. As of the Closing, all corporate and other
proceedings in connection with the transactions contemplated hereby and by the
Related Agreements, and all documents and instruments incident to such
transactions, shall be satisfactory in form and substance to the Purchasers, and
Purchasers' counsel shall have received at or prior to the Closing all such
documents as they shall have reasonably requested.
4.11 Qualifications. As of the Closing, all authorizations, approvals, or
permits of, or filings with, any governmental authority, including state
securities or "Blue Sky" offices, that are required by law in connection with
the lawful offer, sale and issuance of the Series A Securities shall have been
obtained by the Corporation, and shall be effective as of the Closing.
4.12 Due Diligence. Purchasers and their advisers, including legal
counsel, shall have completed their due diligence review of the Corporation and
its business with results satisfactory to Purchasers, in their sole discretion.
4.13 Expenses. At Closing, the Corporation shall have reimbursed the
Purchasers for their expenses and out-of-pocket costs incurred in connection
with their negotiation of the Merger Agreement, this Agreement and the Related
Agreements, documentation of the transactions contemplated hereunder and
thereunder and closing costs, including without limitation, reasonable
attorneys' fees and expenses.
4.14 Election of Directors. At or prior to Closing the Board shall have
been constituted and elected in accordance with the Shareholders' Agreement.
-7-
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
-------------------------------------------------
The Corporation hereby represents and warrants to the Purchasers as
follows:
5.1 Organization and Standing. The Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Corporation has the requisite legal and corporate power and
authority to own all the properties owned by it, and to conduct its business as
presently being conducted and as proposed to be conducted by it. The Corporation
is duly qualified to do business in those jurisdictions listed in Schedule 5.1.
The Corporation does not own or lease property or engage in any activity in any
jurisdiction which might require its qualification to do business as a foreign
corporation in any jurisdiction not listed on Schedule 5.1.
5.2 Corporate Power; Successor Corporation. The Corporation has all
requisite legal and corporate power and authority to enter into the Merger
Agreement, this Agreement and the Related Agreements, to issue and sell the
Series A Securities and to carry out and perform its obligations under the
terms of the Merger Agreement, this Agreement and the Related Agreements. The
Corporation is the successor corporation of BRC-North Carolina pursuant to a
statutory merger (the "Merger") under Delaware Law in which the Corporation is
the survivor and is successor to all rights, titles and interests of BRC-North
Carolina. Where appropriate, references to the Corporation in this Article V
shall mean both the Corporation and BRC-North Carolina as its predecessor.
5.3 Subsidiaries; Investments. The Corporation has no Subsidiaries. The
Corporation does not own of record or beneficially any Investment other than
Investments of the type permitted under Section 7.9(i) of this Agreement.
5.4 Minute Books. The minute books of the Corporation contain a complete
and correct summary of all meetings of the Board and the Corporation's
shareholders since the time of incorporation of the Corporation.
5.5 Capitalization. As of the Closing, the Corporation's authorized
capital stock will consist of (a) 60,000,000 Common Shares, and (b) 25,000,000
Series A Preferred Shares. As of the Closing, except as disclosed on Schedule
5.5, there shall be no declared but unpaid dividends or undeclared dividend
arrearages on any shares of capital stock of the Corporation. After giving
effect to the consummation of the transactions contemplated by this Agreement,
the only shares of capital stock issued and outstanding, reserved for issuance
or committed to be issued will be:
(a) 22,260,000 fully paid and non-assessable Common Shares, duly
issued and outstanding and owned of record and beneficially by the persons,
and issued on the dates, and for the consideration, listed on Schedule
5.5;
(b) 465,000 Common Shares reserved for issuance to the employees,
directors or consultants;
-8-
<PAGE>
(c) 2,000,000 Common Shares reserved for future grants under the
Corporation's stock incentive plan;
(d) 20,796,172 fully paid and non-assessable Series A Preferred
Shares, duly issued and outstanding and owned of record and beneficially by
the Purchasers;
(e) 35,275,000 Common Shares reserved for issuance upon conversion of
the Series A Preferred Shares and/or exercise of the Warrants.
There are no outstanding preemptive, conversion or other rights, options,
warrants or agreements granted or issued by or binding upon the Corporation for
the purchase or acquisition of any shares of its capital stock, other than
those issued, reserved or committed to be issued pursuant to this Agreement or
as provided for in the Shareholders' Agreement or the Certificate of
Incorporation. All outstanding securities of the Corporation were issued in
compliance with all federal and state securities laws.
The provisions of this section notwithstanding, as of the Closing,
4,203,828 shares of the Series A Preferred Stock shall be authorized and
reserved for issuance as provided in Section 9.14 hereof. In the event that such
shares shall not be issued on or prior to January 31, 1995, the authorization
for issuance of such shares shall be deemed to be cancelled.
5.6 Authorization. All corporate action on the part of the Corporation,
its directors and shareholders necessary for the authorization, execution,
delivery and performance by the Corporation of the Merger Agreement, this
Agreement and the Related Agreements, and the consummation of the transactions
contemplated hereby and thereby, and for the authorization, issuance and
delivery of the Series A Securities, has been taken. The Merger Agreement, this
Agreement and the Related Agreements are legal, valid and binding obligations of
the Corporation, enforceable against the Corporation in accordance with their
terms.
5.7 No Violation. None of the execution and delivery of the Merger
Agreement, this Agreement and the Related Agreements, the consummation of the
transactions provided for herein and therein or contemplated hereby and thereby,
and the fulfillment by the Corporation of the terms hereof or thereof, will
(with or without notice or passage of time or both) (a) conflict with or result
in a breach of any provision of the certificate of incorporation or by laws of
the Corporation, (b) result in a default, give rise to any right of termination,
cancellation or acceleration, or require any consent or approval (other than
approval by the Board and, in the case of the adoption of the Certificate of
Incorporation, the Shareholders) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, loan, factoring arrangement,
license, agreement, lease or other instrument or obligation to which the
Corporation is a party or by which it or any of its assets may be bound or (c)
violate any law, judgment, order, writ, injunction, decree, statute, rule or
regulation of any court, administrative agency, bureau, board, commission,
office, authority, department or other governmental entity applicable to the
Corporation or any of its assets.
5.8 Validity of Stock. The Series A Securities, when issued, sold and
delivered in accordance with the terms of this Agreement, will be duly and
validly issued, fully paid, nonassessable and free and clear of all Liens. The
Common Shares issuable upon conversion of the
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<PAGE>
Series A Preferred Shares have been duly and validly reserved and, upon issuance
in accordance with the conversion provisions of the Series A Preferred Shares,
will be duly and validly issued, fully paid, non-assessable and free and clear
of all Liens. The Common Shares issuable upon exercise of the Warrants have been
duly and validly reserved and, upon issuance in accordance with the exercise
provisions of the Warrants, will be duly and validly issued, fully paid,
nonassessable and free and clear of all Liens.
5.9 Financial Statements. The Corporation has furnished Purchasers' with
(a) the unaudited balance sheet of the Corporation for the period ended October
31, 1994 (the "Unaudited Balance Sheet"), together with the unaudited statements
of income and changes in financial position for the period then ended
(collectively, including the Unaudited Balance Sheet, the "Unaudited Financial
Statements"), and (b) its projected consolidated balance sheet and statement of
income and changes in financial position for the one fiscal year ending December
31, 1994 (the "Projected Financial Statements"). The Unaudited Financial
Statements have been prepared in accordance with GAAP, subject to the absence of
footnotes and statements in changes in cash and changes resulting from normal
year-end adjustments, and fairly and accurately present the financial position
of the Corporation as of October 31, 1994, and the results of its operations for
the year then ended. The Projected Financial Statements have been prepared by
the Corporation in good faith, based upon information and assumptions reasonably
believed by it to be sound and accurate, and represent, to its best knowledge
and belief, reasonable forecasts as to the Corporation's future operations and
financial performance. All the books, records and accounts of the Corporation
are in all material respects accurate and complete, are in all material respects
in accordance with good business practice and all laws, regulations and rules
applicable to the Corporation and the conduct of its business and accurately
present and reflect in all material respects all of the transactions described
therein.
5.10 Absence of Undisclosed Liabilities. As of the Closing, the
Corporation will not have any material debts, liabilities or obligations of any
nature (whether accrued, absolute, contingent, direct, indirect, perfected,
inchoate, unliquidated or otherwise and whether due or to become due) arising
out of transactions entered into on or prior to the Closing, or any transaction,
series of transactions, action or inaction occurring on or prior to the Closing,
or any state of facts or condition existing on or prior to the Closing
(regardless of when such liability or obligation is asserted), including but not
limited to liabilities or obligations on account of taxes or governmental
charges or penalties, interest or fines thereon or in respect thereof, except
(a) as and to the extent clearly and accurately reflected and accrued for or
reserved against in the Unaudited Balance Sheet, (b) for liabilities
specifically delineated on Schedule 5.10, and (c) for liabilities and
obligations arising after October 31, 1994 in the ordinary course of business
consistent with past customs and practice and in accordance with the Budget or
which would not exceed $50,000 in the aggregate.
5.11 Absence of Certain Changes. Since October 31, 1994, there has not
been (a) any change, occurrence, condition or development that has materially
and adversely affected, or is likely to materially and adversely affect, the
Corporation's business, affairs, assets, prospects, operations, employee
or vendor relations or condition, financial or otherwise or ability to meet its
obligations hereunder, (b) any dividend or other distribution, or any
recapitalization, combination or subdivision with respect to, or any purchase or
redemption by the Corporation of; any shares of its capital stock, (c) any
Indebtedness incurred by the Corporation, (d) any
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<PAGE>
sale, transfer, lease, mortgage or pledge of, grant of security interest in or
other Lien against any of the Corporation's assets or cancellation of any claims
of, or Indebtedness or obligations owing to, the Corporation except as a result
of payments of obligations in the ordinary course of business, (e) any increase
or change, (or offer or promise thereof, whether or not legally binding) in
salaries or other compensation or employee benefits with respect to any
employees of the Corporation, (f) any purchase of or agreement to purchase any
additional assets by the Corporation at a cost of greater than $2,500 in any one
instance, (g) cancellation or compromise by the Corporation of any debt or
claim, or waiver or release of any right or material value, (h) any physical
damage, destruction or loss (whether or not covered by insurance) adversely
affecting the properties, business or prospects of the Corporation, (i) any
changes in the accounting principles, methods or practices followed by the
Corporation or depreciation or amortization policies or rates theretofore
adopted, or (j) any action taken by the Corporation, its directors or officers
or its shareholders to authorize any of the actions contemplated by clauses
(a) - (i) above.
5.12 Contracts, Leases, and Other Agreements. Except as set forth on
Schedule 5.12, Schedule 5.13 or Schedule 5.15, the Corporation has no contract,
lease, agreement, plan, license, arrangement, obligation or commitment
(collectively, "Contracts") (a) involving aggregate payments or delivery or
licensing by or to the Corporation of money, goods or other assets or services
having, in each case, an aggregate value of more than $10,000, (b) which is a
lease of real property, (c) which is a requirement or output contract, or (d)
that is otherwise material to the business of the Corporation. All Contracts to
which the Corporation is a party or by which it or any of its assets may be
bound are valid, binding and in full force and effect, and no material breach or
default, or event which, with notice or lapse of time or both, would constitute
any such material breach or default by the Corporation (or, to the best
knowledge of the Corporation, by any other party thereto), exists with respect
thereto. The Corporation has not received any notice of cancellation or non-
renewal of any Contract.
5.13 Employment Arrangements. Except as set forth in Schedule 5.13,
neither the Corporation nor any Plan Affiliate has maintained, sponsored,
adopted, made contributions to or obligated itself to make contributions to or
to pay any benefits or grant rights under or with respect to any "Employee
Pension Benefit Plan" (as defined in Section 3(2) of ERISA), "Employee Welfare
Benefit Plan" (as defined in Section 3(1) of ERISA), "multi-employer plan" (as
defined in Section 3(37) of ERISA), plan of deferred compensation, medical plan,
life insurance plan, long-term disability plan, dental plan or other plan
providing for the welfare of any of the Corporation's or any Plan Affiliate's
employees or former employees or beneficiaries thereof, personnel policy
(including but not limited to vacation time, holiday pay, bonus programs. moving
expense reimbursement programs and sick leave), excess benefit plan, bonus or
incentive plan (including but not limited to stock options, restricted stock,
stock bonus and deferred bonus plans), salary reduction agreement, change-of-
control agreement, employment agreement, consulting agreement, workers
compensation law, unemployment compensation law, social security law or any
other benefit, program or contract (all such plans listed on Schedule 5.13
collectively, "Employee Benefit Plans"), whether written, voluntary or pursuant
to a collective bargaining agreement or law, which could give rise to or result
in the Corporation or such Plan Affiliate having any debt, liability, claim or
obligation of any kind or nature, whether accrued, absolute, contingent, direct,
indirect, known or unknown, perfected or inchoate or otherwise and whether or
not due or to become due. Correct and complete copies or
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descriptions of all Employee Benefit Plans previously have been furnished to
Purchasers counsel. For purposes of this Agreement, "Plan Affiliate" means any
person or entity with which the Corporation constitutes all or part of a
controlled group of corporations, a group of trades or businesses under common
control or an affiliated service group, as each of those terms are defined in
Section 414 of the Code.
5.14 Employee Salaries; Proprietary Agreements. Schedule 5.14 contains
a true, correct and complete list setting forth the names and current salaries
of the five employees of the Corporation receiving the highest annual
compensation and the names and total annual compensation as a group for all
other employees of the Corporation and independent contractors who render
services on a regular basis to the Corporation whose current annual compensation
and/or estimated annual commissions is $50,000 or more. Each officer and
technical employee of the Corporation has executed an agreement regarding
confidentiality and proprietary information of the Corporation. The Corporation
is not aware that any such employee is in violation thereof and will use its
best efforts to prevent any such violation. The Corporation is not aware of any
of its employees being obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of his or her best efforts to promote the interests of
the Corporation or that would conflict with the Corporation's business as
conducted or as proposed to be conducted or that would prevent any such employee
from assigning inventions to the Corporation. The Corporation does not believe
that it is or will be necessary for the Corporation to utilize any inventions of
its employees (or people the Corporation currently intends to hire) made prior
to their employment by the Corporation.
5.15 Personnel Contracts Agreements, Plans and Arrangements. Except as
listed in Schedule 5.13 and 5.15, the Corporation is not a party to or obligated
in connection with its business, with respect to any (a) outstanding contracts
with employees, agents, consultants, advisers, salesmen, sales representatives,
distributors sales agents or dealers or (b) collective bargaining agreements or
contracts with any labor union or other representative of employees or any
employee benefits provided for by any such agreement. The Corporation has
furnished Purchasers' counsel with a true and complete copy of each document
listed in Schedule 5.15. No strike, union organizational activity, allegation,
charge or complaint of employment discrimination or other similar occurrence
occurred during the Corporation's past five completed fiscal years, or is
pending or threatened against the Corporation or otherwise might affect its
business; nor does the Corporation know any basis for any such allegation,
charge, or complaint.
5.16 Arrangements with Officers, Directors and, Others. Except for
Platinum Rotisserie Corp. and Platinum Service Corp. or as set forth on Schedule
5.16, there are no existing Contracts or arrangements or proposed transactions
between the Corporation and any Affiliate of the Corporation. No employees of
the Corporation are subject to any restrictive covenant or any other similar
agreement of which the Corporation is aware which would prohibit such employee
from being employed by the Corporation.
5.17 Tax Liabilities. The Corporation has filed all federal, state and
local tax reports and returns required by any law or regulation to be filed by
it, and such returns are true and correct. The Corporation has paid all taxes,
interest and penalties, if any, reflected on such tax
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returns or otherwise due and payable by it. The reserves for taxes reflected on
the Unaudited Balance Sheet are adequate in amount for the payment of all
liabilities for all taxes (whether or not disputed) of the Corporation accrued
through the dates of such balance sheets. Any deficiencies proposed as a result
of any governmental audits of such tax returns have been paid or settled, and
there are no present disputes as to taxes payable by the Corporation.
5.18 Insurance. Schedule 5.18 is a correct and complete list and
description, including policy numbers, of all past and present insurance
policies owned by the Corporation or otherwise pertaining to its business,
correct and complete copies of which policies have previously been delivered to
Purchasers' counsel. The present insurance policies are in full force and
effect, and the Corporation is not in default under any of them. The Corporation
has not received any notice of cancellation or intent to cancel or increase
premiums with respect to present insurance policies nor, to its knowledge, is
there any basis for any such action. Schedule 5.18 also contains a list of all
pending claims with any insurance company and any instances of a denial of
coverage of the Corporation by any insurance company.
5.19 Litigation. There are no actions, suits, proceedings or
investigations (whether or not purportedly on behalf of the Corporation) pending
or threatened (nor, to the best knowledge of the Corporation, does any basis
exist therefor) against or affecting the Corporation at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, agency or instrumentality, domestic or foreign, nor has any
such action, suit, proceeding or investigation been pending during the last two
years. The Corporation is not operating under or subject to, nor in default with
respect to, any order, writ, injunction or decree of any court or federal,
state, municipal or other governmental department, commission, board, agency or
instrumentality, foreign or domestic, and the Corporation has not been charged
or threatened with a charge of violation, or under investigation with respect to
possible violation, of any provision of any federal, state or local law or
administrative ruling or regulation relating to them or their business, affairs,
assets, prospects, operations, employee relations or condition, financial or
otherwise. The Corporation has not received any material complaint from any of
its customers or suppliers.
5.20 Consents. All consents, approvals, qualifications, orders or
authorizations of, or filings with, any governmental authority, including state
securities or "Blue Sky" offices, required in connection with the Corporation's
valid execution, delivery or performance of the Merger Agreement, this Agreement
and the Related Agreements, the offer, sale and issuance of the Series A
Securities, and the consummation of any other transaction contemplated on the
part of the Corporation hereby or thereby have been obtained or made.
5.21 Title to Properties; Liens and Encumbrances. The Unaudited Balance
Sheet reflects all of the assets of the Corporation as of the date thereof. The
Corporation has good and marketable title to all of the assets reflected in the
Unaudited Balance Sheet (except as disposed of in the ordinary course of
business since the date of the Unaudited Balance Sheet), free and clear of any
Liens except as set forth on Schedule 7.08(p). The Corporation has good and
marketable title to all of the assets necessary to conduct its business as
presently conducted or as proposed to be conducted, free and clear of any Liens.
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5.22 Proprietary Rights. Schedule 5.22 contains a complete and correct
list of all patented and registered Proprietary Rights owned by the Corporation
and all pending patent applications and applications for the registration of
other Proprietary Rights owned or filed by the Corporation. Schedule 5.22 also
contains a complete and correct list of all trade or corporate names used by the
Corporation and a complete and correct list of all licenses and other rights
granted by the Corporation to any third party with respect to Proprietary Rights
and licenses and other rights granted by any third party to the Corporation.
Except as set forth on Schedule 5.22, (a) the Corporation owns and possesses all
right, title and interest in and to, or has a valid license to use, all of the
Proprietary Rights necessary for the operation of its business as presently
conducted and none of such Proprietary Rights have been abandoned; (b) no claim
by any third party contesting the validity, enforceability, use or ownership of
any such Proprietary Rights has been made, is currently outstanding or is
threatened, and there is no reasonable basis for any such claim; (c) neither the
Corporation nor any registered agent of the Corporation has received any notices
of, nor is the Corporation aware of any reasonable basis for, an allegation of,
any infringement or misappropriation by, or conflict with, any third party with
respect to such Proprietary Rights, nor has the Corporation or any registered
agent of the Corporation received any claims of infringement or misappropriation
of or other conflict with any Proprietary Rights of any third party; and (d) the
Corporation has not infringed, misappropriated or otherwise violated any
Proprietary Rights of any third parties, and the Corporation is not aware of any
infringement, misappropriation or conflict which will occur as a result of the
continued operation of its business.
5.23 Offering; Conversion. Subject in part to the truth and accuracy of
the representations of the Purchasers set forth in this Agreement, (i) the
offer, sale and issuance of the Series A Securities and (ii) the conversion of
the Series A Securities into Common Shares, as contemplated by this Agreement,
are exempt from the registration requirements of the Securities Act and all
applicable state securities laws.
5.24 Compliance with Law and Other Instruments. The Corporation is not in
violation of any term of its certificate of incorporation or by-laws or of the
provisions of any mortgage, indenture, contract, agreement, instrument,
judgment, decree, order, statute, rule or regulation to which it is subject and
a violation of which could have a material adverse effect on its business,
affairs, assets, prospects, operations, employee relations or condition,
financial or otherwise, or the Corporation's ability to perform its obligations
hereunder or under the Related Agreements. The Corporation has all franchises,
permits, licenses and approvals, necessary to conduct its business as presently
conducted. The Corporation has no knowledge of or reason to expect any change to
any law, statute, rule or regulation which could adversely affect the ability of
the Corporation to conduct its business as presently conducted or as proposed to
be conducted. Schedule 5.24 is a complete list of all permits, licenses and
approvals necessary to conduct the Corporation's business as currently conducted
and as contemplated to be conducted as described in the Business Plan.
5.25 Hazardous Substances. Except for the propane (Chemical Abstract
Series Number 74-98-6) (the "Propane"), the polystyrene racks used to hold the
propane cylinders (the "Polystyrene"), and the water-reducible acrylic coating
(Product Number F78QXA0515-4368) used to paint the propane cylinders (the
"Paint"), used by the Corporation in the ordinary course of its Business, the
Corporation has never generated, transported, treated, stored nor disposed,
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nor, in any manner, arranged for disposal or treatment within the meaning of
RCRA, CERCLA or any applicable federal, state or local law, regulation,
ordinance or requirement, as amended or hereinafter amended of any Hazardous
Substances. Except for the Propane, Polystyrene and Paint used by the
Corporation in the ordinary course of its Business, there are no Hazardous
Substances on, in, or under the premises leased or possessed by the Corporation
(including, without limitation, those which may be contained in underground
storage tanks). There have not been and there are not any past or present
events, conditions, circumstances, activities, practices, incidents or actions
which could reasonably be expected to interfere with or prevent continued
compliance with any federal, state, or local law, regulation, or ordinance, or
requirement relating to health and safety and protection of the environment
("Environmental Laws") or which may give rise to any legal liability or
otherwise forms the basis of any claim, action, suit, proceeding, hearing or
investigation against or involving the Corporation based on any condition or any
violation or alleged violation of any Environmental Laws.
5.26 Agreements Between Shareholders. Other than the Related Agreements,
there exists no agreement between any of the Shareholders related to the
Corporation or its capital stock.
5.27 Registration Rights. Except as provided for in the Registration
Agreement, the Corporation is not under any obligation to register under the
Securities Act any of its currently outstanding securities or any of its
securities which may hereafter be issued.
5.28 Fees and Commissions. The Corporation has retained no finder, broker,
agent, financial advisor or other intermediary (collectively "Intermediary") in
connection with the transactions contemplated by this Agreement and the
Corporation agrees to indemnify and hold harmless the Purchasers from liability
for any compensation to any Intermediary and the fees and expenses of defending
against such liability or alleged liability.
5.29 Disclosure. This Agreement, the schedules and exhibits hereto, and
the financial statements and other materials referred to herein as having been
delivered to the Purchasers and/or Purchasers' counsel, do not contain any
untrue statement of a material fact and do not omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading in the light of the circumstances under which they were made. There
is no fact reasonably known to the Corporation relating to the business,
affairs, assets, prospects, operations, employee relations or condition,
financial or otherwise, of the Corporation that may materially adversely affect
the same which has not been disclosed in writing to the Purchasers and
Purchasers' counsel by the Corporation.
ARTICLE VI
COVENANTS, REPRESENTATIONS AND WARRANTIES
-----------------------------------------
OF THE PLATINUM AND INVESTORS
-----------------------------
6.1 Platinum covenants, represents and warrants to the Corporation as
follows:
(a) Organization and Standing. Platinum is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
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(b) Authorization; Power. Platinum has all requisite legal power to
enter into this Agreement and the Related Agreements, and to carry out and
perform its obligations under the terms of this Agreement and the Related
Agreements. All action on the part of Platinum, its general partner and the
directors and shareholders of its general partner necessary for the
authorization, execution, delivery and performance by Platinum of this
Agreement and the Related Agreements, and the consummation of the
transactions contemplated hereby and thereby, and for the authorization,
issuance and delivery of the Series A Securities, has been taken. This
Agreement and the Related Agreements are legal, valid and binding
obligations of Platinum, enforceable against Platinum in accordance with
their terms.
(c) No Violation. None of the execution and delivery of this Agreement
and the Related Agreements, the consummation of the transactions provided
for herein and therein or contemplated hereby and thereby, and the
fulfillment by Platinum of the terms hereof or thereof, will (with or
without notice or passage of time or both) (a) conflict with or result in a
breach of any provision of the limited partnership agreement or the
certificate of limited partnership of Platinum, (b) result in a default,
give rise to any right of termination, cancellation or acceleration, or
require any consent or approval under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, loan, license,
agreement, lease or other instrument or obligation to which Platinum is a
party or by which it or any of its assets may be bound or (c) violate any
law, judgment, order, writ, injunction, decree, statute, rule or regulation
of any court, administrative agency, bureau, board, commission, office,
authority, department or other governmental entity applicable to Platinum
or any of its assets.
6.2 Each Investor severally and not jointly covenants, represents and
warrants for himself, herself or itself, as the case may be, to the Corporation
as follows:
(a) Organization and Standing. Such Investor, if not an individual, is
duly organized or formed, validly existing and in good standing under the
laws of the applicable state as indicated on the signature page attached
hereto.
(b) Authorization; Power. Such Investor has all requisite legal power
to enter into this Agreement and the Related Agreements, and to carry out
and perform his, her or its obligations under the terms of this Agreement
and the Related Agreements. All action on the part of such Investor, if not
an individual, necessary for the authorization, execution, delivery and
performance by such Investor of this Agreement and the Related Agreements,
and the consummation of the transactions contemplated hereby and thereby,
and for the authorization, issuance and delivery of the Series A
Securities, has been taken. This Agreement and the Related Agreements are
legal, valid and binding obligations of such Investor, enforceable against
such Investor in accordance with their terms.
(c) No Violation. None of the execution and delivery of this Agreement
and the Related Agreements, the consummation of the transactions provided
for herein and therein or contemplated hereby and thereby, and the
fulfillment by such Investor of the terms hereof or thereof, will (with or
without notice or passage of time or both) (a) if
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such Investor is not an individual, conflict with or result in a breach of
any provision of the organizational documents of such Investor, (b) result
in a default, give rise to any right of termination, cancellation or
acceleration, or require any consent or approval under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, loan,
license, agreement, lease or other instrument or obligation to which such
Investor is a party or by which he, she or it or any of his, her or its
assets may be bound or (c) violate any law, judgment, order, writ,
injunction, decree, statute, rule or regulation of any court,
administrative agency, bureau, board, commission, office, authority,
department or other governmental entity applicable to such Investor or any
of his, her or its assets.
6.3 Each Purchaser severally and not jointly covenants, represents and
warrants for himself, herself or itself, as the case may be, to the Corporation
as follows:
(a) Purchase for Investment. Such Purchaser will acquire the Series A
Securities, for investment and not with a view to distributing all or any
part thereof in any transaction which would constitute a "distribution"
within the meaning of the Securities Act. Such Purchaser acknowledges that
the Series A Securities have not been registered under the Securities Act
and, except as provided in the Registration Agreement, the Corporation is
under no obligation to file a registration statement with the Commission
with respect to the Series A Securities.
(b) Investor Qualifications. Such Purchaser is an "accredited
investor" as such term is defined under Rule 215 adopted by the Commission
under the Securities Exchange Act of 1934, as amended. Such Purchaser (a)
has such knowledge and experience in financial and business matters that
he, she or it is capable of evaluating the merits and risks of his, her or
its investment in the Series A Securities; (b) understands that his, her or
its investment in the Series A Securities is extremely risky and
acknowledges and agrees that he, she or it is able to bear the complete
loss of his, her or its investment in such Series A Securities; and (c) has
had the opportunity to ask questions of, and receive answers from, the
Corporation and its management concerning the terms and conditions of the
offering of the Series A Securities and to obtain additional information.
Such Purchaser is not an entity formed solely to make this investment.
Such Purchaser is not relying upon any statements or instruments made or
issued by any other Purchaser or any other Person other than the
Corporation and its officers in making its decision to invest in the Series
A Securities.
(c) Future Disposition. Such Purchaser will not, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of any of the Series A Securities (or solicit any offers to buy,
purchase, or otherwise acquire or take a pledge of any of the Series A
Securities), except in compliance with the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations under the Securities Act and the Exchange Act.
(d) Business Plan. Such Purchaser has received a copy of the
"management write-up," "marketing plan" and "projections" for the Business
in the forms attached hereto as Exhibit G (the "Business Plan").
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(e) Residence or Principal Place of Business. The mailing address
listed for such Purchaser on Schedule 1 is such Purchaser's principal residence,
if an individual, or principal place of business, if other than an individual.
(f) Indemnity. Such Purchaser agrees to indemnify, pay and hold the
Corporation harness from and against, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever, which may be imposed on,
incurred by, or asserted against Corporation, arising out of any material
falsity of the representations and warranties of such Purchaser in this
Agreement, except that such Purchaser shall have no obligation hereunder to
indemnify the Corporation with respect to any such indemnified liabilities
arising from the gross negligence or wilful misconduct of the Corporation.
ARTICLE VII
COVENANTS OF THE CORPORATION
----------------------------
7.1 Financial Statements and Other Information. So long as any Series A
Securities remain outstanding, the Corporation will deliver to each holder of
Series A Securities:
(a) Audited Annual Financial Statements. As soon as practicable after
the end of each fiscal year of the Corporation, and in any event within
ninety (90) days thereafter, consolidated and consolidating balance sheets
of the Corporation and its Subsidiaries, as of the end of such year, and
consolidated and consolidating statements of operations and sources and
uses of funds of the Corporation and its Subsidiaries, for such fiscal
year, prepared in accordance with GAAP and setting forth in each case in
comparative form the figures for the previous fiscal year, all in
reasonable detail and, in the case of the consolidated statements,
certified, without qualification or explanation, by Daniel & Company for
the fiscal year ending July 31, 1995 and thereafter by a nationally
recognized independent public accountants selected by the Corporation and
acceptable to the Purchasers;
(b) Unaudited Monthly Financial Statements. As soon as practicable
after the end of each month and in any event within thirty (30) days
thereafter, consolidated and consolidating balance sheets of the
Corporation and its Subsidiaries as of the end of such period, and
consolidated and consolidating statements of operations of the Corporation
and its Subsidiaries for such period and for the current fiscal year to
date, prepared in accordance with GAAP, subject to the absence of footnotes
and statements in changes in cash and changes resulting from normal year-
end adjustments, and setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year, together with a
comparison of such statements to the Budget, subject to changes resulting
from normal year-end audit adjustments, all in reasonable detail and
certified by the principal financial officer of the Corporation;
(c) Budget. Not less than thirty (30) days prior to the commencement
of each fiscal year, an annual business plan, including a budget and
detailed financial projections
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for the Corporation and its Subsidiaries, for each month during such period
(the "Budget"), all in reasonable detail, together with underlying
assumptions and approved by a majority of the entire Board;
(d) Auditors' Reports. Promptly upon receipt thereof, copies of all
other reports, if any, submitted to the Corporation by independent public
accountants in connection with any annual or interim audit of the books
of the Corporation and its Subsidiaries made by such accountants;
(e) Lender Information. A copy of each financial statement, report,
notice or communication that the Corporation or any Subsidiary delivers to
any of their lenders or creditors;
(f) Litigation. Promptly upon the Corporation's learning thereof,
notice of any litigation, suit or administrative proceeding that could
reasonably be expected to have a material adverse affect on the
Corporation's or any Subsidiary's business, affairs, assets, prospects,
operations, employee relations or condition, financial or otherwise,
whether or not the claim is considered by the Corporation to be covered by
insurance;
(g) Default. Promptly upon the occurrence thereof notice of any
Default;
(h) Material Adverse Developments. Promptly upon the occurrence
thereof, notice of any event which has had, or could reasonably be expected
to have, a material adverse impact on the business, affairs, assets,
prospects, operations, employee relations or condition, financial or
otherwise, of the Corporation or any Subsidiary, including, without
limitation, the institution or threat of any material litigation or
investigation with respect to the Corporation or any Subsidiary or any
material disputes with customers; and
(k) Other Information. With reasonable promptness, all press releases
issued by the Corporation or any Subsidiary, any filings made with the
Commission by the Corporation or any Subsidiary and such other data and
information as from time to time may be reasonably requested by the
Purchasers or Purchasers' counsel or such other data as the Corporation may
from time to time furnish to any of the holders of its securities or its
directors in their capacities as such.
7.2 Budget Review. Platinum shall have the right to review, discuss
and be involved in the preparation of the Corporation's Budget each year, prior
to its required delivery to the holders of the Series A Securities under Section
7.1(c) above.
7.3 Accounting. The Corporation will maintain and will cause each of
its Subsidiaries to maintain a system of accounting established and administered
in accordance with GAAP and all financial statements or information delivered
under Section 7.1 will be prepared in accordance with GAAP, except as otherwise
provided in Section 7.1(b).
7.4 Insurance. The Corporation agrees to maintain or cause to be
maintained, with financially sound and reputable insurers rated A or above by
A.M. Best, insurance with respect to-its assets and business and the assets and
business of its Subsidiaries against loss or damage
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of the kinds customarily insured against by similarly situated corporations of
established reputation engaged in the same or similar businesses, in adequate
amounts, and at the request of any Purchasers or Purchasers' counsel shall
furnish such Purchasers with evidence of the same. The Corporation further
agrees to cause to be maintained, with financially sound and reputable insurers
rated A or above by A.M. Best, term life insurance payable to the Corporation on
the life of Billy Prim in the amount of at least $1,000,000.
7.5 Payment of Taxes. The Corporation agrees to pay or cause to be paid
all taxes, assessments and other governmental charges levied upon any of its
assets or those of its Subsidiaries or in respect of its or their respective
franchises, businesses, income or profits, all trade accounts payable in
accordance with usual and customary business terms, and all claims for work,
labor or materials, which if unpaid might become a Lien upon any asset of the
Corporation or any Subsidiary, before the same become delinquent, except that
(unless and until foreclosure, distraint, sale or other similar proceedings
shall have been commenced) no such charge need be paid if being contested in
good faith and by appropriate measures promptly initiated and diligently
conducted if (a) such reserve or other appropriate provision, if any, as shall
be required by sound accounting practice shall have been made therefor, and (b)
such contest does not have a material adverse effect on the financial condition
of the Corporation or the ability of the Corporation to pay any Indebtedness and
no assets are in imminent danger of forfeiture.
7.6 Compliance With Laws. The Corporation agrees to use its best efforts
to comply, and shall use its best efforts to cause each Subsidiary to comply,
with all laws, rules, regulations, judgments, orders and decrees of any
governmental or regulatory authority applicable to it and its respective assets,
and with all contracts, and agreements to which it is a party or shall become a
party, and to perform all obligations which it has or shall incur the violation
of which could have a material adverse effect on the business, affairs, assets,
prospects, operations or condition, financial or otherwise, of the Corporation
and its Subsidiaries taken as a whole. Neither the Corporation nor anyone acting
on its behalf will take any action hereafter that would cause the loss of its
exemption from the registration requirements of the Securities Act.
7.7 Preservation of Corporate Existence and Property; Operations. The
Corporation agrees to preserve, protect, and maintain, and cause each Subsidiary
to preserve, protect, and maintain, (a) its corporate existence, and (b) all
rights, franchises, accreditations, privileges, and properties the failure of
which to preserve, protect, and maintain could have a material adverse effect on
the business, affairs, assets, prospects, operations, or condition, financial or
otherwise, of the Corporation and its Subsidiaries taken as a whole. The
Corporation and its Subsidiaries will comply with all material agreements and
contracts, including, without limitation, all leases and loan agreements.
7.8 Negative Covenants. So long as any Series A Securities remain
outstanding, without the approval, by vote or written consent, of the holders of
not less than the majority of the Series A Preferred Shares then outstanding,
the Corporation will not:
(a) Dividends. Directly or indirectly declare or pay, or permit any
Subsidiary which is not a wholly owned Subsidiary to declare or pay any
dividends, or make or
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permit any Subsidiary which is not a wholly owned Subsidiary to make, any
distributions upon any of its equity securities;
(b) Redemptions. Directly or indirectly redeem, purchase or otherwise
acquire, or permit any Subsidiary to directly or indirectly redeem,
purchase or otherwise acquire, any of the Corporation's or any Subsidiary's
equity securities, except as required by the terms of the Series A
Securities and by Restricted Stock Agreements with employees previously
approved by the Board;
(c) Issuances. Authorize, issue, or enter into any agreement providing
for the issuance (contingent or otherwise) of, (x) any notes or debt
securities containing equity features (including, without limitation, any
notes or debt securities convertible into or exchangeable for equity
securities, issued in connection with the issuance of equity securities or
containing profit participation features) or (y) any equity securities (or
any securities convertible into or exchangeable for any equity securities),
except for Common Shares or options to acquire 2,000,000 Common Shares as
incentives to key employees, directors and consultants of the Corporation
which may be issued by the Board only after the approval of at least two
directors elected by the holders of Series A Preferred Shares;
(d) Mergers. Merge or consolidate with any Person or permit any
Subsidiary to merge or consolidate with any Person (other than, in the case
of a wholly-owned Subsidiary, with or into the Corporation or any other
wholly-owned Subsidiary);
(e) Sale of Assets. Sell, lease or otherwise dispose of, or permit any
Subsidiary to sell, lease or otherwise dispose of, assets in one or a
series of related transactions that represent 10% or more of the
Corporation's assets or income, or are valued at $1,000,000, whichever is
less;
(f) Liquidations. Liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction;
(g) Charter Amendments. Make any amendment to the Corporation's
certificate of incorporation or by-laws, including without limitation, an
amendment altering, changing or otherwise amending the preferences or
rights of the Series A Securities or increasing or decreasing the number of
directors constituting the Board, or file any resolution of the Board with
the Secretary of State of Delaware;
(h) Affiliate Transactions. Enter into, or permit any Subsidiary to
enter into, any transaction with any of its or any Subsidiary's Affiliates
in excess of $25,000, except for normal employment arrangements and benefit
programs on reasonable terms; provided, however, nothing in this paragraph
(h) shall be deemed to prohibit transactions contemplated by this Agreement
and the Related Agreements; provided further, however, nothing in this
paragraph (h) shall be deemed to prohibit transactions among the
Corporation and Platinum Rotisserie Corp. and/or Platinum Service Corp. if
(i) such transactions are on arm's length terms which are no less favorable
to the Corporation then the Corporation could obtain from a non-Affiliate
and (ii) at least two (2) Series A
-21-
<PAGE>
Preferred Directors (as defined in the Certificate of Incorporation) shall
have approved or ratified such transactions at any Board meeting;
(i) Investments. Make or permit to exist, or permit any Subsidiary
to make or permit to exist, any Investment other than: (i) Investments in
short term obligations issued by, or guaranteed by, the United States
Government, (ii) Investments in negotiable certificates of deposit,
bankers' acceptances or money market securities issued by any bank or
branch of a bank having capital and surplus of at least $50 million in the
aggregate at all times, and (iii) Investments in commercial paper rated P1
or A1 by Moody's Investors Service, Inc. or Standard & Poor's Corporation,
respectively;
(j) Loans. Make, or permit any Subsidiary to make, any loans or
advances to, or guarantees for the benefit of, any Person, other than
travel advances and similar loans to employees not to exceed $25,000 at any
one time in the aggregate;
(k) Other Business. Enter into (directly or indirectly through a new
Subsidiary), or permit any Subsidiary to enter into, the ownership, active
management or operation of any business other than the business or type of
business conducted by the Corporation or such Subsidiary as of the date of
Closing, or acquire the business or assets of any other Person other than
acquiring assets in the ordinary course of business;
(l) Subsidiaries. Establish or acquire any Subsidiaries;
(m) Indebtedness. Create, incur, assume or suffer to exist, or permit
the Corporation and its Subsidiaries, taken as a whole, to create, incur,
assume or suffer to exist, Indebtedness other than as indicated in the
Business Plan and other than purchase money obligations or trade debt in
the ordinary course of business;
(n) Capital Expenditures. Make, or permit the Corporation and its
Subsidiaries, taken as a whole, to make, any capital expenditure or series
of related capital expenditures (including, without limitation, payments
with respect to capitalized leases) or any other acquisition of assets
other than as indicated in the Business Plan;
(o) Related Agreements. Amend, modify or waive any provision of any of
the Related Agreements, fail to enforce the provisions of any of the
Related Agreements or avail itself of all rights and remedies thereunder;
(p) Liens. Create, assume or permit, or permit any Subsidiary to
create, assume or permit, any Lien upon any of its properties or assets,
whether now owned or hereafter acquired, except (i) Liens existing as of
the date hereof as disclosed in Schedule 7.08(p), (ii) any Lien existing on
any asset prior to the acquisition thereof by the Corporation and not
created in contemplation of such event, (iii) any Lien created on any real
property or equipment in connection with the leasing of such real property
or equipment, (iv) Permitted Liens, and (v) Liens contemplated by the
Business Plan;
(q) Leases. Enter into any leases or other rental agreements
(including capitalized leases) other than as indicated in the Business
Plan;
-22-
<PAGE>
(r) Restrictive Agreements. Become subject to, or permit any of its
Subsidiaries to become subject to, any agreement or instrument, which by
its terms would (under any circumstances) restrict the Corporation's right
to perform any of its obligations pursuant to the terms of this Agreement,
the Related Agreements, the Certificate of Incorporation or the
Corporation's by-laws (including, without limitation, all obligations
relating to payment of dividends on and making redemptions of the Series A
Securities); or
(s) Investment Bankers. Select or permit any Subsidiary to select,
any investment banker or underwriter in connection with any public offering
by the Corporation.
7.9 Legend. Until (a) the securities represented by such certificate
are effectively registered under the Securities Act, or (b) the holder of such
securities delivers to the Corporation a written opinion of counsel to such
holder to the effect that such legend is no longer necessary under the
Securities Act, the Corporation will cause each certificate representing its
securities to be stamped or otherwise imprinted with a legend to substantially
the following effect:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and thus may
not be transferred unless so registered or unless an exemption from
registration is available."
7.10 Rule 144A. In connection with any prospective transfer pursuant to
Rule 144A promulgated by the Commission, to the extent permitted under such
rule, of (a) Series A Preferred Shares or Warrants, (b) Common Shares issued
upon conversion of Series A Preferred Shares or exercise of Warrants, or (c)
Common Shares or other securities issued as, or upon conversion or exercise of
other securities issued as, a dividend or other distribution with respect to or
in replacement of any shares referred to in clause (a) or (b), upon the written
request of any holder of such shares, the Corporation will make available to
such holder and any prospective purchaser of such shares, promptly after such
request, the information required pursuant to paragraph (d)(4)(i) of Rule 144A
of the Commission. This provision shall not limit the Corporation's ability to
publicly list Common Shares or any other shares of its capital stock.
7.11 Small Business Stock. The Corporation will cooperate with the
Purchasers, and take all actions reasonably necessary, to comply, to the extent
reasonably possible, with the reporting and recordkeeping requirements
applicable to shares of "Small Business Stock" under Section 1202 of the Code.
7.12 Best Effort Upon Exercise of Warrants. Upon the exercise of any
Warrant, the Corporation will cooperate and use its best efforts to insure that
the Common Shares issued upon exercise of such Warrant are exempt from the
registration requirements of the Securities Act and all applicable state
securities laws or if exemptions from the such registration requirements are
unavailable, to obtain or make, as applicable, all authorizations, approvals, or
permits of, or filings with, any governmental authority, including state
securities or "Blue Sky" offices, that are required by law in connection with
the exercise of such Warrant.
-23-
<PAGE>
7.13 Compliance With Environmental Laws. The Corporation agrees to use all
Hazardous Substances (including the Propane, Polystyrene and Paint if any or all
of them are deemed Hazardous Substances) in compliance with all Environmental
Laws and to obtain all required permits, licenses, certificates and
registrations relating to health, safety or protection of the environment which,
if not possessed, would have a material adverse effect on the Corporation or
result in a violation of any applicable Environmental Laws.
ARTICLE VIII
INDEMNIFICATION
---------------
8.1. Expenses. The Corporation agrees to pay on demand: (a) all costs and
expenses of compliance with all agreements and conditions contained in the
Merger Agreement, this Agreement and in the Related Agreements; (b) the fees,
expenses and disbursements of counsel to the Purchasers, in connection with the
administration of the Merger Agreement, this Agreement and the Related
Agreements and any amendments hereto or thereto, waivers hereof and thereof and
consents hereunder and thereunder; (c) all other out-of-pocket expenses incurred
by the Purchasers in connection with the performance of the Merger Agreement,
this Agreement and the Related Agreements by Purchasers after the Closing; and
(d) all costs and expenses (including attorney's fees and costs) incurred by the
Purchasers or any holder of Series A Securities arising out of or in connection
with the enforcement or preservation of any rights under the Merger Agreement,
this Agreement and the Related Agreements.
8.2. General Indemnity.
(a) The Corporation agrees to indemnify, pay and hold the Purchasers
and its Affiliates and any subsequent holder of any Series A Securities,
and the officers, directors, employees and agents of the Purchasers and
its Affiliates and such holders (collectively called the "Indemnities"),
harmless from and against, any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs,
expenses and disbursements of any kind or nature whatsoever including,
without limitation, the fees and disbursements of counsel for such
Indemnities in connection with any investigative, administrative or
judicial proceeding, whether or not such Indemnities shall be designated a
party thereto, which may be imposed on, incurred by, or asserted against
such Indemnitee, in any manner relating to or arising out of the
transactions contemplated by this Agreement and the ownership of any Series
A Securities (a "Claim"), except that the Corporation shall have no
obligation hereunder to an Indemnitee with respect to any such indemnified
liabilities arising from the gross negligence or wilful misconduct of such
Indemnitee. If any indemnity provided for in the preceding sentence is not
available solely because it is found to be contrary to public policy or
otherwise unlawful, then the Corporation and the Indemnities shall
contribute to the amount payable in such proportion as is appropriate to
reflect the relative faults and benefits and any other relevant equitable
considerations. Each Indemnitee shall reimburse the Corporation for any
amounts paid to such Indemnitee by the Corporation pursuant to this Section
8.2 with respect to claims by the Corporation against such Indemnitee
which are finally determined by a court of competent jurisdiction in favor
of the Corporation against such Indemnitee.
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<PAGE>
(b) If any Claim or alleged Claim shall be brought against any
Indemnitee in respect of which such Indemnitee may be indemnified under
this Section 8.2 by the Corporation, such Indemnitee shall promptly notify
the Corporation in writing. No indemnity in respect of such Claim shall be
available under this Section 8.2 to such Indemnitee if such notice was not
given to the Corporation and the Corporation was unaware of such action and
was materially prejudiced by such Indemnitee's failure to give such notice,
but in no event shall such failure relieve the Corporation from any
liability which it may have to such Indemnitee arising otherwise than under
this Section 8.2. The Corporation at its option may assume the defense of
any action in respect of which it has acknowledged its obligation to
indemnify such Indemnitee under this Section 8.2. If the Corporation
assumes the defense of any action, the Indemnitee shall not be liable for
any settlement thereof without its consent (but such consent will not be
unreasonably withheld). If the Corporation assumes the defense of any such
action, such Indemnitee shall have the right to employ separate counsel in
such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be paid by such Indemnitee unless in the
reasonable opinion of such Indemnitee there may be a conflict between the
positions of the Corporation and of such Indemnitee in conducting the
defense of such action or that there may be legal defenses available to
such Indemnitee different from or in addition to those which counsel to the
Corporation would be able to raise, in which event the fees and expenses of
such counsel shall be paid by the Corporation.
8.3. Taxes. The Corporation agrees to pay all governmental assessments,
charges or taxes (except income or other similar taxes imposed on a Purchasers
or any other holder of Series A Securities), including any interest or penalties
thereon, at any time payable or ruled to be payable in respect of the existence,
execution, delivery or performance of the Merger Agreement, this Agreement and
the Related Agreements or the issuance or existence of Series A Securities, by
reason of an existing or hereafter enacted Federal, state or local statute, and
to indemnify and hold the Purchasers, and each and every holder of Series A
Shares, harmless against liability in connection with any such assessments,
charges or taxes.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 Consent to Amendments; Waivers. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended or waived at
any time only by the written agreement of the Corporation and holders of not
less than 66 2/3% of the Series A Preferred Shares then outstanding. Any waiver,
permit, consent or approval of any kind or character on the part of any such
holder of any provisions or conditions of this Agreement must be made in writing
and shall be effective only to the extent specifically set forth in such
writing. No course of dealing between the Corporation and any holder and no
delay in exercising any right, remedy, or power conferred hereby, by the Related
Agreements, or the Certificate of Incorporation, or now or hereafter existing at
law or under equity, by statute or otherwise, shall operate as a waiver of or
otherwise prejudice any such right, power or remedy.
-25-
<PAGE>
9.2 Representations and Warranties. All representations and warranties
contained herein or made in writing by any party in connection herewith will
survive the execution and delivery of this Agreement and any investigation made
at any time by or on behalf of the Purchasers or holders of Series A Securities.
9.3 Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto, whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for the benefit of the Purchasers or
holders of Series A Securities are also for the benefit of, and enforceable by,
any subsequent holders of such shares.
9.4 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
9.5 Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience of reference only and do not constitute a part of and
shall not be utilized in interpreting this Agreement.
9.6 Notices. Any notices required or permitted to be sent hereunder shall
be delivered personally or mailed, certified mail, return receipt requested, or
delivered by overnight courier service to the following addresses, or such other
address as any party hereto designates by written notice to the Corporation, and
shall be deemed to have been given upon delivery, if delivered personally, three
days after mailing, if mailed, or one business day after delivery to the
courier, if delivered by overnight courier service:
If to the Corporation, to:
Blue Rhino Corporation
104 Cambridge Park
Winston-Salem, North Carolina 27104
Attention: Billy Prim, Chief Executive Officer
with a copy to:
House Law Firm
P.O. Drawer 26015
Winston-Salem, North Carolina 27114-6015
Attention: Don R. House, Esq.
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<PAGE>
If to Purchasers, to:
Platinum Venture Partners I, L.P.
1815 S. Meyers Road
Oakbrook Terrace, Illinois 60181
Attention: Michael A. Santer
with a copy to:
Katten Muchin & Zavis
525 W. Monroe Street, Suite 1600
Chicago, Illinois 60661
Attention: Matthew S. Brown, Esq.
9.7 Governing Law. All questions concerning the construction, validity
and interpretation of this Agreement, and the performance of the obligations
imposed by this Agreement, shall be governed by the laws of the State of
Delaware applicable to contracts made and wholly to be performed in that state.
9.8 Exhibits and Schedules. All exhibits and schedules hereto are an
integral part of this Agreement.
9.9 Exchange of Certificates. Upon surrender by any holder to the
Corporation of any certificate or certificates evidencing any shares of stock of
the Corporation, the Corporation at its expense will issue in exchange therefor,
and deliver to such holder, a new certificate or certificates representing such
shares of stock of the Corporation, in such denomination or denominations as may
be requested by such holder. Upon receipt of evidence satisfactory to the
Corporation of the loss, theft, destruction or mutilation of any certificate
representing any shares of stock of the Corporation, and in case of any such
loss, theft or destruction, upon delivery of an indemnity agreement satisfactory
to the Corporation, or in case of any such mutilation, upon surrender and
cancellation of such certificate, the Corporation at its expense will issue and
deliver to any such holder a new certificate evidencing such shares of stock of
the Corporation of like tenor, in lieu of such lost, stolen, destroyed or
mutilated certificate.
9.10 Final Agreement. This Agreement, together with the Merger Agreement,
the Related Agreements and the Certificate of Incorporation, constitutes the
complete and final agreement of the parties concerning the matters referred to
herein, and supersedes all prior agreements and understandings.
9.11 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute one
instrument.
9.12 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be used against any party.
-27-
<PAGE>
9.13 Breach of Covenant. Without limiting the rights of the parties (the
"Non-Breaching Parties") to pursue all other legal and equitable rights
available to them for the other parties' failure to perform any of their
respective obligations under the Merger Agreement, this Agreement, the Related
Agreements or the Certificate of Incorporation, the parties hereto acknowledge
and agree that, while the Non-Breaching Parties will be entitled to seek to
recover damages and to exercise all other rights granted by law, the remedy at
law for any failure by the other parties to perform any such obligations may be
inadequate and that the Non-Breaching Parties will be entitled to specific
performance, injunctive relief or other equitable remedies in the event of any
such inadequacy.
9.14 Additional Issuance of Series A Preferred Shares. On or prior to
January 31, 1995, the Corporation may issue up to 4,203,828 additional Series A
Preferred Shares (but no Warrants) to any "accredited investor" (as such term is
defined under Rule 215 adopted by the Commission under the Securities Exchange
Act of 1934, as amended) ("Potential Investors") so long as such Series A
Preferred Shares shall be issued on the same terms and conditions as the Series
A Preferred Shares issued to the Purchasers at the Closing. Upon such purchase,
the purchaser or purchasers of such Series A Preferred Shares shall be deemed to
be a party to this Agreement and included within the term "Purchasers" hereunder
and added to Schedule 1 hereto. Such purchaser or purchasers shall execute a
counterpart of the Registration Agreement and thereby such purchaser or
purchasers shall be deemed to be a party to such agreement and included within
the term "Purchasers" thereunder and added to Schedule 1 thereto. Such
purchasers of purchasers shall execute a counterpart of the Shareholders'
Agreement and thereby such purchaser or purchasers shall be deemed to be a party
to such agreement and included within the term "Investors" thereunder and added
to Schedule 1 thereto. Notice of issuance of any Series A Preferred Shares as
permitted under this Section 9.14 shall be given promptly to the Purchasers.
9.15 Adjustments. The Corporation acknowledges and agrees that the
addition of Potential Investors pursuant to Section 9.14 is an accommodation and
as such to the extent that the Conversion Price (as defined in the Certificate
of Incorporation) or the Exercise Price (as defined in the Warrants) needs to be
adjusted to equitably account for the addition of such Potential Investors, the
Corporation will accept the Purchasers recommended adjustments, if any, to the
Conversion Price and Exercise Price, unless such recommendations by the
Purchasers are manifestly in error.
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<PAGE>
The parties hereto have executed this Series A Securities Purchase
Agreement on the date first set forth above.
Signatures
BLUE RHINO CORPORATION
By: /s/ BILLY PRIM
------------------
Billy Prim, Chief Executive Officer
PLATINUM VENTURE PARTNERS I, L.P.
By: PLATINUM VENTURE PARTNERS, INC.
By: /s/ MICHAEL SANTER
----------------------
Michael Santer, Vice President
/s/ ANDREW J. FILIPOWSKI
------------------------
Andrew J. Filipowski
/s/ CRAIG J. DUCHOSSOIS
-----------------------
Craig J. Duchossois
/s/ BOBBY SLATE
---------------
Bobby Slate
/s/ JAMES R. HARDIN
-------------------
James R. Hardin
/s/ ROBERT F. STEEL & JENNIFER STEEL
------------------------------------
Robert F. Steel & Jennifer Steel JTWROS
/s/ THOMAS E. GLEITSMAN
-----------------------
Thomas E. Gleitsman
/s/ TOM AUSTIN
--------------
Tom Austin
/s/ RAY MAYNARD
---------------
Ray Maynard
/s/ ROBERT L. JACOBS
--------------------
Robert L. Jacobs
/s/ FRANK MURNANE. SR.
----------------------
Frank Murnane, Sr.
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<PAGE>
/s/ FRANK MURNANE JR.
---------------------
Frank Murnane, Jr.
GABRIEL, INC.
By: /s/ JIMMY LIAUTAUD
----------------------
Jimmy Liautaud, Director
/s/ JAMES ALAN BOOE
-------------------
James Alan Booe
/s/ JOE WALLACE
---------------
Joe Wallace
/s/ LENNARD CARLSON
-------------------
Lennard Carlson
/s/ RICHARD CARLSON
-------------------
Richard Carlson
/s/ BAXTER KIGER
----------------
Baxter Kiger
/s/ PETER VITULLI
-----------------
Peter Vitulli
/s/ BARRY SYLVESTER
-------------------
Barry Sylvester
/s/ JAMES BARZYK
----------------
James Barzyk
/s/ ALEXANDER DANZBERGER
------------------------
Alexander Danzberger
COLE TAYLOR BANK CUSTODIAN FBO
ARTHUR FRIGO IRA #8417
By: /s/ NORMA E. COLON
----------------------
Norma E. Colon, Trust Officer, IRA
HUIZENGA CAPITAL MANAGEMENT
By: /s/ PETER H. HUIZENGA
-------------------------
Peter H. Huizenga, Sole Proprietor
PETER H. HUIZENGA TESTAMENTARY TRUST
By: /s/ PETER H. HUIZENGA
-------------------------
Peter H. Huizenga, Trustee
-30-
<PAGE>
/s/ BILLY PRIM
--------------
Billy Prim
KIMBERLY FAMILY DISCRETIONARY TRUST
By: /s/ CRAIG J. DUCHOSSOIS
---------------------------
Craig J. Duchossois, Trustee
/s/ EDWARD A. FORTINO & DAYLE DUCHOSSOIS-FORTINO
Edward A. Fortino & Dayle Duchossois-Fortino JTWROS
-31-
<PAGE>
EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
Schedules
---------
<C> <S>
1 Investors/Investors Allocation
2 Shareholders
5.1 Organization of Corporation
5.5 Owners of Capital Stock
5.10 Undisclosed Liabilities
5.12 Contracts, Leases, Etc.
5.13 Employee Benefit Plans
5.14 Employee Salaries
5.15 Personnel Contracts, Agreements, Etc.
5.16 Arrangements with Affiliates
5.18 Insurance
5.22 Proprietary Rights
5.24 Licenses and Permits
7.08(p) Liens
Exhibits
--------
A Form of Certificate of Incorporation
B Form of Noncompete Agreements
C Form of Registration Agreement
D Form of Shareholders' Agreement
E Form of Warrants
F Form of Opinion of Counsel to the Corporation
G Business Plan
</TABLE>
<PAGE>
Schedule 1
Investors List/Allocations
<TABLE>
<CAPTION>
Purchase Amount
Series A via loan or purchase
Investor Preferred Shares Warrants through 12/21/94
- -------- ---------------- --------- --------------------
<S> <C> <C> <C>
Platinum Venture Partners I, L.P. 2,965,539 847,297 $1,029,150.68
Attn: Michael A. Santer
1815 S. Meyers Road
Oakbrook Terrace, IL 60181
Andrew J. Filipowski 5,880,236 1,680,067 $2,040,657.53
1815 S. Meyers Road
Oakbrook Terrace, IL 60181
Craig Duchossois 2,187,048 419,047 $758,986.30
Duchossois Industries, Inc.
845 Larch Avenue
Elmhurst, IL 60126
Bobby Slate 1,466,664 419,047 $508,986.30
415 N. Trade Street
Winston-Salem, MC 27101
James R. Hardin 293,333 83,809 $101,797.26
4440 Coquina Harbour Drive, 40D
Little River, SC 29566
Robert F. Steel & 293,396 83,827 $101,819.18
Jennifer Steel JTWROS
445 E. 4th Street
Hinsdale, IL 60521
Thomas E. Gleitsman 293,522 83,864 $101,863.01
6496 Thunderbird Drive
Indian Head Park, IL 60525
Tom Austin 292,953 41,905 $101,655.75
P.O. Box 187
Jonesville, NC 28642
Ray Maynard 146,951 41,986 $50,997.26
P.O. Box 698
Yadkinville, NC 27055
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Robert L. Jacobs 73,349 20,957 $25,454.79
304 51st Street
Western Springs, IL 60558
Frank Murnane, Sr. 73,333 20,952 $25,449.32
157 Briarwood North
Oak Brook, IL 60521
Frank Murnane, Jr. 73,333 20,952 $25,449.32
1510 Lloyd Court
Wheaton, IL 60187
Gabriel, Inc. 1,466,664 419,047 $508,986.30
c/o Jimmy Liautaud
132 E. Delaware
Chicago, IL 60611
James Alan Booe 73,333 20,952 $25,449.32
3004 Lookout Court
Winston-Salem, NC 27106
Joe Wallace 58,414 0 $20,271.78
Industrial Advisory Group, Inc.
6127 Brookshire Drive
Pittsboro, IN 46167
Lennard Carlson 248,957 0 $86,397.26
5300 Newport Drive
Rolling Meadows, IL 60008
Richard Carlson 73,223 0 $25,410.96
1447 Altgeld
Chicago, IL 60614
Baxter Kiger 58,313 0 $20,236.71
1605 Beechwood Lane
Yadkinville, NC 27055
Peter Vitulli 58,212 0 $20,201.64
1917 N. Mohawk
Chicago, IL 60614
Barry Sylvester 14,524.5 0 $5,040.5
2728 Agatite Avenue
Chicago, IL 60625
James Barzyk 14,524.5 0 $5,040.5
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
530 N. Park
La Grange Park, IL 60525
Alexander Danzberger 36,667 10,476 $12,724.66
370 Central Park West #514
New York, NY 10025
Cole Taylor Bank Custodian 288,154 0 $ 100,000
FBO Arthur Frigo IRA #8417
MBA Walton Inc.
6250 River Road, Suite 4030
Rosemont, IL 60018
Huizenga Capital Management 1,440,769 0 $ 500,000
c/o Peter Huizenga
2215 York Road, Suite 500
Oak Brook, IL 60521
Attn: Ron Kinney
Peter H. Huizenga Testamentary Trust 1,440,769 0 $ 500,000
c/o Peter Huizenga, sole trustee
2215 York Road, Suite 500
Oak Brook, IL 60521
Attn: Ron Kinney
Billy Prim 43,223 0 $ 15,000
104 Cambridge Park
Winston-Salem, N.C. 27104
Kimberly Family Discretionary Trust 720,384 0 $ 250,000
c/o Craig Duchossois, Trustee
845 Larch Avenue
Elmhurst, IL 60126
Edward A. Fortino &
Dayle Duchossois-Fortino JTWROS 720,384 0 $ 250,000
2218 N. Orchard
Chicago, IL 60614
</TABLE>
<PAGE>
Schedule 2
Shareholders
Shareholder Number of Common Shares
- ----------- -----------------------
Billy D. Prim 9,935,000
325 Bing Crosby Blvd.
Bermuda Run, NC 27006
Andrew J. Filipowski 7,800,000
1815 S. Meyers Road
Oakbrook Terrace, IL 60181
Debbie W. Prim 100,000
325 Bing Crosby Blvd.
Bermuda Run, NC 27006
Mayo M. McCormick 100,000
P.O. Box 50
Yadkinville, NC 27055
Jeannie Cannon 25,000
435 Creekway Drive
Fuquey Varina, NC 27526
Luanne Holden 25,000
Route 1, Box 586
Jonesville, NC 28642
Chris Holden 25,000
Route 1, Box 586
Jonesville, NC 28642
Debbie W. Prim 25,000
Trustee for Sarkanda U. Westmoreland
325 Bing Crosby Blvd.
Advance, NC 27005
Debbie W. Prim 25,000
Trustee for Anthony G. Westmoreland
325 Bing Crosby Blvd.
Advance, NC 27005
Veronica Champney 100,000
125 Bradford Park Lane
Lewisville, NC 27023
-1-
<PAGE>
Jennifer R. Filipowski 25,000
100 Cambridge Park
Winston-Salem, NC 27104
Andrew J. Filipowski 25,000
Trustee for Andrew E. Filipowski
1815 S. Meyers Road
Oakbrook Terrace, IL 60181
Veronica Champney 25,000
Trustee for Alexandria Filipowski
125 Bradford Park Lane
Lewisville, NC 270233
Veronica Champney 25,000
Trustee for James Meadows
125 Bradford Park Lane
Lewisville, NC 27023
Angell Family Limited Partnership 1,600,000
c/o Don G. Angell
6000 Market Square, Suite 200
Clemmons, NC 27012
Dr. Thomas Austin 200,000
P.O. Box 187
Jonesville, NC 28642
- -------------------------------------------------------------------------------
Total 20,060,000
-2-
<PAGE>
Restricted Stock Shareholders
Shareholder Number of Restricted Common Shares
- ----------- ----------------------------------
Billy D. Prim 500,000
325 Bing Crosby Blvd.
Bermuda Run, NC 27006
Jeremiah Callahan 750,000
1655 Middle Street
Sullivan's Island, SC 29482
Craig Erbland 500,000
305 Chason Wood Way
Roswell, GA 30076
S.H. Fogleman, III 200,000
3750 Benchley Road
Winston-Salem, NC 27104
Jim Mizelle 100,000
106 Brookridge Drive
Cary, NC 27511
Doug Mele 75,000
Telenitche Marketing
1956 N. Daytona
Chicago, IL 60614
Steve Rash 50,000
3213 Cross Tree Road
Winston-Salem, NC 27106
Baxter Kiger 25,000
1605 Beechwood Lane
Yadkinville, NC 27055
- --------------------------------------------------------------------------------
Total 2,200,000
-3-
<PAGE>
Blue Rhino Corporation
Series A Securities Purchase Agreement
Schedule 5.1 - Organization of Corporation
------------------------------------------
1. State of Incorporation: Delaware
Qualified: None
2. State of Incorporation: North Carolina
Qualified: Texas
Applied to be Qualified:
Arizona - in process
California - in process
Florida - in process
Georgia - in process
Louisiana - in process
Tennessee - in process
<PAGE>
BLUE RHINO CORPORATION
SERIES A SECURITIES PURCHASE AGREEMENT
EXHIBIT 5.5
(Page 1 of 2)
A. BLUE RHINO CORPORATION
Common Stock
Shareholder Certificate /Number of Shares/Date Issued
- ----------- -----------------------------------------
Billy D. Prim #1 - 6,420,000 - 3/25/94
#2 - 40,000 - 3/25/94
#3 - 3,455,000 - 5/01/94
#3A - 20,000 - 5/01/94
Andrew J. Filipowski #4 - 5,200,000 - 3/25/94
#5 - 2,600,000 - 5/01/94
Debbie W. Prim #6 - 100,000 - 5/01/94
Mayo M. McCormick #7 - 100,000 - 5/01/94
Jeannie Cannon #8 - 25,000 - 5/01/94
Luanne Holden #9 - 25,000 - 5/01/94
Chris Holden #10 - 25,000 - 5/01/94
Debbie W. Prim #11 - 25,000 - 5/01/94
Trustee for
Sarkanda U. Westmoreland
Debbie W. Prim #12 - 25,000 - 5/01/94
Trustee for
Anthony G. Westmoreland
Veronica Champney #13 - 100,000 - 5/01/94
Jennifer R. Filipowski #14 - 25,000 - 5/01/94
Andrew J Filipowski #15 - 25,000 - 5/01/94
Trustee for
Andrew E. Filipowski
Veronica Champney #16 - 25,000 - 5/01/94
Trustee for
Alexandria Filipowski
<PAGE>
EXHIBIT 5.5
(Page 2 of 2)
Veronica Champney #17 - 25,000 - 5/01/94
Trustee for
James Meadows
Angell Family #18 - 1,600,000 - 5/01/94
Limited Partnership
Dr Thomas Austin #19 - 200,000 - 5/01/94
----------
TOTAL 20,060,000
BLUE RHINO CORPORATION
Restricted Class A Common Stock
Shareholder Certificate/Number of Shares/Date Issued
- ----------- ----------------------------------------
Billy D. Prim #1 - 500,000 - 11/01/94
Jeremiah Callahan #2 - 750,000 - 11/01/94
Craig Erbland #3 - 500,000 - 11/01/94
S. H. Fogleman, III #4 - 200,000 - 11/01/94
Jim Mizelle #5 - 100,000 - 11/01/94
Doug Mele #6 - 75,000 - 11/01/94
Steve Rash #7 - 50,000 - 11/01/94
Baxter J. Kiger #8 - 25,000 - 11/01/94
---------
TOTAL 2,200,000
B. All of the above common Shares were issued at a purchase price of $0.001
per share.
C. There are no declared but unpaid dividends or undeclared dividend arrearage
on the above Common Stock.
<PAGE>
Blue Rhino Corporation
----------------------
Series A Securities Purchase Agreement
--------------------------------------
Schedule 5.10 - Undisclosed Liabilities
---------------------------------------
None
<PAGE>
Blue Rhino Corporation
Series A Securities Purchase Agreement
Schedule 5.12 - Contracts, Leases. Etc.
---------------------------------------
1. Oral Ground Lease for Boonville Distribution Facility from Prim family with
rent of $1,500 per month.
2. Oral Lease for 30,000 gallon propane tank located at Boonville Distribution
Facility from American Oil & Gas which is an Affiliate. Proposed rent is
$500 per month
3. Negotiations are in process for the lease of real estate in California for
a distribution facility.
4. Negotiations are in process for the lease of real estate in Florida for a
distribution facility.
<PAGE>
Blue Rhino Corporation
----------------------
Series A Securities Purchase Agreement
--------------------------------------
Schedule 5.13 - Employee Benefits
---------------------------------
1. Platinum 401(k) Retirement Plan
2. The Platinum Plan (a self-funded welfare benefit plan)
3. Platinum Life Insurance Plan for Salaried Employees
4. Platinum Life Insurance Plan for Hourly Employees
5. Platinum Long-term Disability Plan for Salaried Employees
6. Paid Vacation
7. Holiday Pay
<PAGE>
Blue Rhino Corporation
----------------------
Series A Securities Purchase Agreement
--------------------------------------
Schedule 5.14 - Employee Salaries
---------------------------------
<TABLE>
<CAPTION>
<S> <C>
Billy D. Prim, Chairman, Chief Executive Officer 125,000*
Andrew J. Filipowski, Vice Chairman 125,000*
Jeremiah M. Callahan - President, Chief Operating Officer 150,000
Craig A. Erbland - Vice President of Sales 110,000
S.H. Fogleman, III - Chief Financial Officer, Secretary, Treasurer 100,000*
All others with annual salaries exceeding $50,000 $210,000
</TABLE>
* - Paid through Platinum Service Corporation
<PAGE>
Blue Rhino Corporation
Series A Securities Purchase Agreement
Schedule 5.15 - Personnel Contracts, Agreements, Etc.
-----------------------------------------------------
1. Executive Employment Agreement dated April 22, 1994 between Blue Rhino
Corporation and Craig A. Erbland.
2. Marketing Agreement with Marshall Associates, Inc.
<PAGE>
Schedule 5.16
Arrangements with Affiliates
Management Agreement. Management Agreement between Blue Rhino Corporation and
Platinum Service Corporation, in draft form and not yet finalized, covering
primarily human resources, risk management, employee benefits, accounting and
finance which services shall be provided at cost and in no event will exceed the
charges for such services from an independent third party. Such Management
Agreement will be subject to approval by the Board and at least two (2) Series A
Preferred Directors.
Management Bonus Compensation Plan. Management Bonus Compensation Plan as set
forth in October 7, 1994 Term Sheet from Platinum Venture which provides in
pertinent part that:
The Purchasers desire to provide additional cash incentives to management to
meet and exceed operating plans. Accordingly, an additional cash bonus incentive
pool for management will be established equal to 10% of pre-tax profits, payable
to the extent that pre-tax profits after the bonus pool exceed the annual agreed
upon operating plan. For example, if the approved operating plan forecasts pre-
tax profit of $1.0 million, the first $110,000 of pre-tax profit over the
$1,000,000 threshold will be payable as a bonus and thereafter the bonus pool
will increase pro rate 1:10 for every additional $10 of pre-tax income.
This profit sharing arrangement will be reviewed annually by the Board and will
be subject to approval by two (2) Series A Preferred Directors.
Oral Leases. Oral Leases for Boonville Distribution Facility and storage tank
set forth on Schedule 5.12.
<PAGE>
Blue Rhino Corporation
----------------------
Series A Securities Purchase Aqreement
--------------------------------------
Schedule 5.1 8 - Insurance
--------------------------
<TABLE>
<CAPTION>
Type Insurer Policy # Expiration Date
- ---- ------- ------- ---------------
<S> <C> <C> <C>
General Liability Federated 2031615 10/01/94
Automobile Liability Federated 2031615 10/01/94
Excess Liability Federated 2031616 10/01/94
Worker's Compensation Federated 2031617 10/01/94
General Liability U.S. Fire Ins. Co 541-006557-3 07/31/95
Automobile Liability U.S. Fire Ins. Co 138-007052-1 07/31/95
Excess Liability U.S. Fire Ins. Co 553-0176801 07/31/95
Worker's Compensation U.S. Fire Ins. Co 406-006282-8 07/31/95
</TABLE>
<PAGE>
Blue Rhino Corporation
Series A Securities Purchase Agreement
Schedule 5.22 - Proprietary Rights
----------------------------------
1. Application for federal trademark registration for the name Blue Rhino and
the logo of the blue rhino animal character.
<PAGE>
Blue Rhino Corporation
Series A Securities Purchase Agreement
Schedule 5.24 - Permits, Licenses and Approvals
-----------------------------------------------
l. North Carolina, Forsyth County and Yadkin County privilege licenses.
2. Qualification in states other than Delaware - see Schedule 5.1.
3. Approval for Distribution Facility in Polk County, Texas by Railway
Commissioner of Texas, Liquified Petroleum Gas Division, dated November 17,
1994.
4. Application for Air Quality Permit for Distribution Facility located in
Boonville, North Carolina - in process.
5. Liquified Petroleum Gas License for Florida dated August 2, 1994.
6. Conditional Use Permit for Distribution Facility in Montclair, California
dated November 15, 1994.
7. Each retail cylinder exchange location is required to have local city or
county approval. These approvals are in various stages of completion and
will require continuous processing.
<PAGE>
Blue Rhino Corporation
Series A Securities Purchase Agreement
Schedule 7.08(p) Liens
-----------------------
1. Security interest under finance leases on the following:
Trailers - 4
Truck - 1
Tractors - 4
Pick-ups - 3
Flat Trailers - 3
Box Trailers - 2
<PAGE>
Exhibit A
CERTIFICATE OF INCORPORATION
OF
BLUE RHINO CORPORATION
FIRST: The name of the Corporation is Blue Rhino Corporation (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, County of New Castle. The
name of the registered agent of the Corporation at such address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares which the Corporation shall have
authority to issue is 85,000,000 which are divided into two classes as follows:
(a) 25,000,000 shares of Series A Convertible Participating Preferred
Stock, $0.001 par value per share (the "Series A Preferred" and shares of
Series A Preferred the "Series A Preferred Shares"); and
(b) 60,000,000 shares of common stock of the Corporation, $0.001 par
value per share (the "Common Stock").
The powers, preferences and relative, participating, optional or other
rights of the capital stock and the qualifications, limitations or restrictions
thereof are as follows:
PART A. TERMS APPLICABLE TO SERIES A PREFERRED
Section 1. Liquidation.
1.1 Preference.
(a) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the holders of Series A Preferred will be
entitled to be paid, before any distribution or payment is made upon any
Common Stock, an amount in cash equal to the aggregate Liquidation Value of
all shares of Series A Preferred outstanding. If upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, the assets available for distribution to the shareholders of
the Corporation (the "Distributable Funds") shall be insufficient to permit
the payment to the holders of Series A Preferred Shares of the aforesaid
full preferential amount, then the Distributable Funds shall be distributed
to the holders of Series A Preferred Shares, ratably in proportion to the
number of Series A Preferred Shares held by each such holder on the date of
liquidation, dissolution or winding up of the Corporation.
(b) After the payment or the setting aside for such payment of the
preferential amounts payable pursuant to the preceding paragraph, the
holders of the Series A
<PAGE>
Preferred Shares shall be entitled to receive a ratable portion of all of
the remaining assets of the Corporation (together with the holders of the
Common Stock), if any, based upon the number (including any fraction) of
shares of Common Stock into which the Series A Preferred Shares then held
by such holders are then convertible.
(c) The Corporation will mail written notice of such liquidation,
dissolution or winding up, not less than 60 days prior to the payment date
stated therein, to each record holder of Series A Preferred.
1.2 Other Liquidation Events. A Change of Control, Change in Ownership
(as hereinafter defined), Fundamental Change (as hereinafter defined) or other
reorganization in which the stockholders of the Corporation immediately prior to
the transaction possess less than 50% of the voting power of the surviving
entity (or its parent) immediately after the transaction shall be deemed to be a
liquidation for purposes of Section 1.l above, unless the holders of a majority
of the Series A Preferred Shares outstanding elect by written notice to the
Corporation that such Change in Control, Change of Ownership, Fundamental Change
or other reorganization shall not be deemed a liquidation. The term "Change in
Ownership" means any sale or issuance or series of sales and/or issuances of
shares of the Corporation's capital stock by the Corporation or any holders
thereof which results in any Person or group of affiliated Persons (other than
the holders of Common Stock and Series A Preferred Shares as of the date of the
Securities Purchase Agreement) owning capital stock of the Corporation
possessing the voting power (under ordinary circumstances) to elect a majority
of the Board. The term "Fundamental Change" means (a) a sale or transfer of all
or substantially all of the assets of the Corporation, or of the Corporation and
its Subsidiaries on a consolidated basis, in any transaction or series of
transactions, and (b) any merger or consolidation to which the Corporation is a
party, except for a merger in which the Corporation is the surviving Corporation
and, after giving effect to such merger, the holders of the Corporation's
outstanding capital stock immediately prior to the merger shall own the
Corporation's outstanding capital stock possessing the voting power (under
ordinary circumstances) to elect a majority of the Board after such merger.
Nothing contained in this Section 1.2 shall be deemed to prevent any holder
of Series A Preferred Shares from (i) exercising such holder's right of
conversion pursuant to Section 4.1 hereof, with respect to any share of Series A
Preferred at any time prior to the liquidation, including following the giving
of any notice of such liquidation, or (ii) as a holder of Series A Preferred
Shares, participating in, or being a party to, the reorganization or the
transaction in which a Change in Control, Change of Ownership, Fundamental
Change or other reorganization shall occur, as described in this Section 1.2.
Section 2. Dividends.
2.1 General Obligation. When and as declared by the Board and to the
extent legally permissible, the Corporation will pay preferential dividends as
provided in this Section 2 to the holders of the Series A Preferred. Except as
otherwise provided herein, dividends on each Series A Preferred Share will
accumulate cumulatively on a daily basis at the rate of 8% per annum of the
Liquidation Value thereof, from and including the date of issuance of such
Series A Preferred Share. Such dividends will accumulate whether or not they
have been declared and whether or not there are profits, surplus or other funds
of the Corporation legally
-2-
<PAGE>
available for the payment of dividends. The date on which the Corporation
initially issues any Series A Preferred Share will be deemed to be its "date of
issuance" regardless of the number of times transfer of such Series A Preferred
Share is made on the stock records maintained by or for the Corporation and
regardless of the number of certificates which may be issued to evidence such
Series A Preferred Share.
2.2 Distribution of Partial Dividend Payments. If at any time the
Corporation declares less than the total amount of dividends then accumulated
with respect to the Series A Preferred, such dividends will be payable to the
holders of the Series A Preferred, ratably in proportion to the number of Series
A Preferred Shares held by each such holder on the date such dividends were
declared.
2.3 Dividends With Respect to Common Stock. If at any time the
Corporation pays any dividends or makes any other distributions with respect to
the Common Stock, the Corporation shall pay at such time to each holder of
Series A Preferred the dividends or other distributions which such holder would
have been entitled to receive had such holder converted all of his, her or its
Series A Preferred Shares into Common Stock on the date as of which the holders
of Common Stock of record entitled to such dividends or other distributions were
determined.
Section 3. Voting Rights. The Series A Preferred shall have those voting
rights set forth for the Series A Preferred in Part C below.
Section 4. Conversion
4.1 Conversion Procedure.
(a) At any time and from time to time, any holder of Series A
Preferred may convert all or any portion of the Series A Preferred Shares
(including any fraction of a share) held by such holder into the number of
shares of Common Stock computed by (i) multiplying the number of Series A
Preferred Shares to be converted by $0.347037 and (ii) dividing the
resulting product by the Conversion Price then in effect.
(b) Each conversion of Series A Preferred Shares will be deemed to
have been effected as of the close of business on the date on which the
certificate or certificates representing the Series A Preferred Shares to
be converted have been surrendered at the principal office of the
Corporation. At such time as such conversion has been effected, the rights
of the holder of such Series A Preferred Shares as such holder will cease
and the Person or Persons in whose name or names any certificate or
certificates for shares of Common Stock are to be issued upon such
conversion will be deemed to have become the holder or holders of record of
the shares of Common Stock represented thereby.
(c) As soon as possible after a conversion has been effected (but in
any event within 10 business days in the case of Section 4.1(c)(i) below),
the Corporation will deliver to the converting holder:
-3-
<PAGE>
(i) a certificate or certificates representing the number of shares of
Common Stock issuable by reason of such conversion in such name or names
and such denomination or denominations as the converting holder has
specified;
(ii) payment in an amount equal to the amount payable under Section
4.1(f) below with respect to such conversion; and
(iii) a certificate representing any Series A Preferred Shares which
were represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which were not
converted.
(d) The issuance of certificates for shares of Common Stock upon conversion
of Series A Preferred Shares will be made without charge to the holders of such
Series A Preferred Shares for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and the related
issuance of shares of Common Stock. Upon conversion of each Series A Preferred
Share, the Corporation will take all such actions as are necessary in order to
insure that the Common Stock issuable with respect to such conversion will be
validly issued, fully paid and nonassessable.
(e) The Corporation will not close its books against the transfer of Series
A Preferred Shares or shares of Common Stock issued or issuable upon conversion
of Series A Preferred Shares in any manner which interferes with the timely
conversion of Series A Preferred Shares.
(f) If any fractional interest in a share of Common Stock would, except for
the provisions of this Section 4.l(f), be deliverable upon any conversion of
the Series A Preferred Shares, the Corporation, in lieu of delivering the
fractional share therefor, may pay an amount to the holder thereof equal to the
fair market value (as determined by the Board) of such fractional interest as of
the date of conversion.
4.2 Conversion Price.
(a) Initial Conversion Price. The initial Conversion Price will be
determined by the following formula:
$8,000,000 - .067/.933 (PI)
--------------------------
$20,060,000(1 + .067/.933)
Where
PI = The total dollar amount invested in Series A Preferred
Shares pursuant to the Securities Purchase Agreement.
By way of illustration, in the event PI equals $7,500,000 the
initial Conversion Price will be approximately $0.347.
-4-
<PAGE>
In order to prevent dilution of the conversion rights granted to holders of
Series A Preferred hereunder, the Conversion Price will be subject to
adjustment from time to time pursuant to this Section 4.2 and Sections 4.4
and 4.5 below. For purposes of this Section 4.2, the Corporation shall be
deemed to have issued or sold Common Stock as set forth in Section 4.3
below.
(b) Adjustment for Dilutive Events. If and whenever on or after the
original date of issuance of the Series A Preferred the Corporation issues
or sells, or in accordance with Section 4.3 below is deemed to have issued
or sold, any shares of Common Stock for consideration per share less than
the Conversion Price (the "Diluted Share Price") in effect immediately
prior to the time of such issue or sale (a "Dilutive Event"), then
forthwith upon the occurrence of any such Dilutive Event the Conversion
Price will be reduced so that the Conversion Price in effect immediately
following the Dilutive Event will equal the Diluted Share Price.
Notwithstanding the foregoing, the issuance by the Corporation of up to
2,000,000 shares of Common Stock, or securities convertible into or options
to acquire up to 2,000,000 shares of Common Stock, issued pursuant to stock
option plans or grants to officers or employees approved by the Board or
the issuance of Common Stock pursuant to the Warrants issued pursuant to
the Securities Purchase Agreement shall not constitute a Dilutive Event. As
used in this Section 4.2(b) and in Section 4.3 below, the term "Common
Stock" shall include Common Stock Equivalents. Notwithstanding anything
contained herein to the contrary, the Conversion Price of Series A
Preferred held by a particular holder shall not be adjusted pursuant to
this Section 4 in connection with a particular Dilutive Event, or any
subsequent Dilutive Event, if such holder of Series A Preferred fails to
purchase, after being offered by the Corporation the opportunity to
purchase, a percentage of the securities, rights or options, or any
combination thereof, the sale of which constitute the Dilutive Event, which
is equal to or greater than 75% of the percentage ownership of the
Corporation's Common Stock on a fully diluted basis held by such holder
immediately prior to such Dilutive Event. Series A Preferred which is no
longer subject to adjustment as a result of the preceding sentence shall
remain subject to such limitation regardless of any subsequent transfers,
and at each time that any Series A Preferred so loses its rights to such
adjustment, all shares of Series A Preferred which have lost their right to
such adjustment as of such time shall be automatically classified into (and
the outstanding certificates representing such Series A Preferred will
automatically be deemed to represent) new sub-series A-1, A-2, A-3, etc.,
consecutively, beginning with A-1. The holders of shares of each such sub-
series shall promptly deliver the certificate(s) representing such stock to
the Corporation upon the Corporation's request, for exchange or notation to
reflect such sub-series. If any such certificates are not delivered to the
Corporation, the Corporation shall make appropriate notations on its stock
records, which may include stop transfer instructions, and may place in
escrow, pending receipt of such certificates, all dividend payments or
other distributions owing with respect to the shares represented by such
certificates.
4.3 Issuance and Sale of Common Stock. For purposes of determining the
adjusted Conversion Price pursuant to Section 4.2(b) above the following events
shall be deemed to be an issuance and sale of Common Stock by the Corporation:
-5-
<PAGE>
(a) Issuance of Rights or Options. If (i) the Corporation in any
manner grants any rights or options to subscribe for or to purchase shares
of Common Stock or any securities convertible into or exchangeable for
shares of Common Stock (such rights or options referred to herein as
"Options" and such convertible or exchangeable stock or securities referred
to herein as "Convertible Securities") and (ii) the Price Per Share of
shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities is less than the
Conversion Price in effect immediately prior to the time of the granting of
such Options then the shares of Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible Securities
will be deemed to have been issued and sold by the Corporation for such
Price Per Share. For the purposes of this Section 4.3(a), the "Price Per
Share" is determined by dividing (i) the total amount, if any, received or
receivable by the Corporation as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration
payable to the Corporation upon exercise of all such Options, plus in the
case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the
Corporation upon the issuance or sale of such Convertible Securities and
the conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or upon
the conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options. No further adjustment of the Conversion Price
will be made when Convertible Securities are actually issued upon the
exercise of such Options or when Common Stock is actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(b) Issuance of Convertible Securities. If (i) the Corporation in any
manner issues or sells any Convertible Securities and (ii) the Price Per
Share of shares of Common Stock issuable upon such conversion or exchange
is less than the Conversion Price in effect immediately prior to the time
of such issue or sale then the shares of Common Stock issuable upon the
conversion or exchange of such Convertible Securities will be deemed to
have been issued and sold by the Corporation for such Price Per Share. For
the purposes of this Section 4.3(b), the "Price Per Share" will be
determined by dividing (i) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration,
if any, payable to the Corporation upon the conversion or exchange thereof,
by (ii) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities. No further
adjustment of the Conversion Price will be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is
made upon exercise of any Options for which adjustments to the Conversion
Price had been or are to be made pursuant to Section 4.3(a) above, no
further adjustment of the Conversion Price will be made by reason of such
issue or sale.
(c) Change in Option Price or Conversion Rate. If at any time there is
a change in (i) the purchase price provided for in any Options, (ii) the
additional consideration, if any, payable upon the conversion or exchange
of any Convertible
-6-
<PAGE>
Securities, or (iii) the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock, then the Conversion
Price in effect at the time of such change will be readjusted to the
Conversion Price which would have been in effect had those Options or
Convertible Securities still outstanding at the time of such change
provided for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time such Options or
Convertible Securities were initially granted, issued or sold; provided
that if such adjustment would result in an increase of the Conversion Price
then in effect, such adjustment will not be effective until 30 days after
written notice thereof has been given by the Corporation to all holders of
the Series A Preferred.
(d) Calculation of Consideration Received. If any shares of Common
Stock, Option or Convertible Security is issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor or the
Price Per Share, as the case may be, will be deemed to be the net amount
received or to be received, respectively, by the Corporation therefor. In
case any shares of Common Stock, Options or Convertible Securities are
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation or the non-cash
portion of the Price Per Share, as the case may be, will be the fair value
of such consideration received or to be received, respectively, by the
Corporation; except where such consideration consists of securities, in
which case the amount of consideration received or to be received,
respectively, by the Corporation will be the Market Price thereof as of the
date of receipt. If any shares of Common Stock, Options or Convertible
Securities are issued in connection with any merger in which the
Corporation is the surviving corporation, the amount of consideration
therefor will be deemed to be the fair value of such portion of the net
assets and business of the non-surviving corporation as is attributable to
such shares of Common Stock, Options or Convertible Securities, as the case
may be. The fair value of any consideration other than cash and securities
will be determined jointly by the Corporation and the holders of a majority
of the outstanding Series A Preferred Shares. If such parties are unable to
reach agreement within a reasonable period of time, the fair value of such
consideration will be determined by an independent appraiser jointly
selected by the Corporation and the holders of a majority of the
outstanding Series A Preferred Shares.
(e) Integrated Transactions. In case any Option is issued in
connection with the issuance or sale of other securities of the
Corporation, together comprising one integrated transaction in which no
specific consideration is allocated to such Option by the parties thereto,
the Option will be deemed to have been issued for a consideration of $.01.
(f) Record Date. If the Corporation takes a record of the holders of
Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in shares of Common Stock, Options or in
Convertible Securities or (ii) to subscribe for or purchase shares of
Common Stock, Options or Convertible Securities, then such record date will
be deemed to be the date of the issuance or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such
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dividend or upon the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
4.4 Subdivision or Combination of Common Stock. If the Corporation at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced. If the Corporation at any time
combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be
proportionately increased.
4.5 Organic Change. Prior to the consummation of any Organic Change, the
Corporation will make appropriate provisions (in form and substance satisfactory
to the holders of a majority of the shares of Series A Preferred then
outstanding) to insure that each of the holders of Series A Preferred Shares
with respect to all or any of the shares of Series A Preferred held thereby will
thereafter have the right to acquire and receive (in addition to the
liquidation, redemption and other relative rights and preferences of the Series
A Preferred Shares), in lieu of or in addition to the shares of Common Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's shares of Series A Preferred, such shares of stock, securities or
assets as such holder would have received in connection with such Organic Change
if such holder had converted his, her or its Series A Preferred Shares
immediately prior to such Organic Change. In any such case, the Corporation will
make appropriate provisions (in form and substance satisfactory to the holders
of a majority of the shares of Series A Preferred then outstanding) to insure
that the provisions of this Section 4.5 will thereafter be applicable to the
Series A Preferred (including, an immediate adjustment of the Series A Preferred
Conversion Price to the value for the Common Stock reflected by the terms of
such Organic Change and a corresponding immediate adjustment in the number of
shares of Common Stock acquirable and receivable upon conversion of shares of
Series A Preferred, if the value so reflected is less than the Series A
Preferred Conversion Price in effect immediately prior to such Organic Change).
The Corporation will not effect any such Organic Change, unless prior to the
consummation thereof, the successor Corporation resulting from such Organic
Change assumes by written instrument (in form reasonably satisfactory to the
holders of a majority of the shares of Series A Preferred then outstanding), the
obligation to deliver to each such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire.
All other terms of the Series A Preferred shall remain in full force and
effect following such an Organic Change. The provisions of this Section 4.5
shall similarly apply to successive Organic Changes.
4.6 Notices.
(a) Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to all holders of Series A
Preferred specifying the Conversion Price in effect thereafter with respect
to the particular holder.
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(b) The Corporation shall give written notice to all holders of Series
A Preferred at least 20 days prior to the date on which the Corporation
closes its books or takes a record for determining rights to vote with
respect to any Organic Change, Change in Control, Change of Ownership,
Fundamental Change, other reorganization, dissolution or liquidation. The
Corporation shall also give written notice to the holders of Series A
Preferred at least 20 days prior to the date on which any Organic Change,
Change in Control, Change of Ownership, Fundamental Change, other
reorganization, dissolution or liquidation shall occur.
4.7 Mandatory Conversion.
(a) If the Corporation shall effect a firm commitment underwritten
Public Offering of shares of its Common Stock in which (a) the aggregate
price paid by the public for the shares will be at least $15 million and
(b) the price per share paid by the public for such shares will be at least
four times the Conversion Price then in effect ("Qualified Public
Offering") then the Corporation shall require the conversion of, and the
holders shall convert, all of the outstanding Series A Preferred Shares
into shares of Common Stock and upon such conversion each holder of Series
A Preferred Shares shall also receive from the Corporation in respect to
each share of Series A Preferred so converted, at such holder's election,
either (i) a cash amount equal to the Liquidation Value, or (ii) an
additional number of shares of registered Common Stock equal to the number
obtained by dividing the Liquidation Value by the price per share received
by the Corporation in such Qualified Public Offering, all without any
further action by the holders of such Series A Preferred Shares and whether
or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent. Any such mandatory conversion shall only
be effected at the time of and subject to the closing of the sale of such
shares pursuant to such Qualified Public Offering and upon written notice
of such mandatory conversion delivered to all holders of Series A Preferred
at least seven but not more than 20 days prior to such closing.
(b) If (i) the Corporation shall effect a firm commitment underwritten
Public Offering of shares of its Common Stock which is not a Qualified
Public Offering (a "Non-Qualified Public Offering") and (ii) the holders
of at least 66 2/3% of the Series A Preferred Shares outstanding at such
time shall approve such Non-Qualified Public Offering then the Corporation
shall require the conversion of, and the holders shall convert, all of the
outstanding Series A Preferred Shares into shares of Common Stock and upon
such conversion each holder of Series A Preferred Shares shall also receive
from the Corporation in respect to each share of Series A Preferred so
converted, at such holder's election, either (i) a cash amount equal to the
Liquidation Value, or (ii) an additional number of shares of registered
Common Stock equal to the number obtained by dividing the Liquidation Value
by the price per share received by the Corporation in such Non-Qualified
Public Offering, all without any further action by the holders of such
Series A Preferred Shares and whether or not the certificates representing
such shares are surrendered to the Corporation or its transfer agent. Any
such mandatory conversion shall only be effected at the time of and subject
to the closing of the sale of such shares pursuant to such Non-Qualified
Public Offering and upon written notice of such
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mandatory conversion delivered to all holders of Series A Preferred at
least seven but not more than 20 days prior to such closing.
4.8 Certain Events. If any event similar to or of the type contemplated
by the provisions of this Section 4, but not expressly provided for by such
provisions, occurs, then the Board will make an appropriate and equitable
adjustment in the Conversion Price so as to protect the rights of the holders of
Series A Preferred; provided that no such adjustment will increase the
Conversion Price as otherwise determined pursuant to this Section 4 or decrease
the number of shares of Common Stock issuable upon conversion of each Series A
Preferred Share.
Section 5. Redemptions.
5.1 Scheduled and Optional Redemptions.
(a) The Corporation shall offer to redeem a number of Series A
Preferred Shares equal to 25% of the Series A Preferred Shares outstanding
as of October 31, 2000 on each of October 31, 2000, April 30, 2001 and
October 31, 2001 (each such date a "Scheduled Redemption Date") at a price
per share equal to the Series A Liquidation Value. The Corporation shall
offer to redeem all of the Series A Preferred Shares remaining outstanding
on April 30, 2002 (the "Final Redemption Date"), at a price per share equal
to the Series A Liquidation Value.
(b) Any holder of outstanding Series A Preferred Shares outstanding
after the Final Redemption Date may elect to require the Corporation to
redeem any or all of such outstanding Series A Preferred Shares at a price
per share equal to the Series A Liquidation Value by giving written notice
to the Corporation of such election (an "Optional Redemption Notice").
Within five days of receipt of such Optional Redemption Notice, the
Corporation shall give written notice of such election to all other holders
of Series A Preferred Shares, and such other holders may elect to require
the Corporation to redeem all or any portion of their Series A Preferred
Shares by giving written notice of such election to the Corporation within
30 days of receipt of the Corporation's notice. Upon receipt of such
elections, the Corporation shall be obligated to redeem from such holders,
at a price per share equal to the Series A Liquidation Value, all shares of
Series A Preferred with respect to which redemption elections have been
received within 60 days of receipt of the Optional Redemption Notice (the
"Optional Redemption Date").
(c) In the event that any Series A Preferred Shares scheduled to be
redeemed in a redemption under Section 5.1 are not redeemed ("Unredeemed
Shares"), the Corporation shall give written notice to each holder of
Series A Preferred Shares who redeemed shares in such redemption
("Redeeming Shareholders") that such Redeeming Shareholder may elect to
have redeemed his, her or its ratable portion of such Unredeemed Shares
based on the number of Series A Preferred Shares held by all such Redeeming
Shareholders at a price per share equal to the Series A Liquidation Value
by giving written notice to the Corporation of such election (an
"Additional Redemption Notice"). Upon receipt of such Additional Redemption
Notice, the Corporation shall be obligated to redeem from such Redeeming
Shareholders, at a price per share equal to the
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Series A Liquidation Value, all shares of Series A Preferred (but not more
than the Unredeemed Shares) with respect to which redemption elections have
been received within 60 days of receipt of the Additional Redemption Notice
(the "Additional Redemption Date").
(d) Nothing contained in this Section 5 shall be deemed to prevent any
holder of Series A Preferred Shares from (i) exercising such holder's right
of conversion pursuant to Section 4.1 hereof with respect to any share of
Series A Preferred or (ii) electing by written notice to the Corporation to
retain the Series A Preferred Shares held by such holder, at any time prior
to the redemption of shares of Series A Preferred, including following the
giving of any notice of such redemption.
5.2 Redemption Payment. For each Series A Preferred Share that is to be
redeemed, the Corporation shall be obligated on the Scheduled Redemption Date,
the Final Redemption Date, the Optional Redemption Date or the Additional
Redemption Date, as the case may be (each a "Redemption Date"), to pay to the
holder thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such Series A Preferred Share) an amount
in immediately available funds equal to the Series A Liquidation Value of such
Series A Preferred Share. If the funds of the Corporation legally available for
redemption of Series A Preferred on any Redemption Date are insufficient to
redeem the total number of Series A Preferred Shares to be redeemed on such
date, those funds which are legally available shall be used first, to pay any
and all accumulated and unpaid dividends on the Series A Preferred Shares to be
redeemed, and thereafter, to redeem the Series A Preferred to be redeemed on
such Redemption Date, paid to the holders of the Series A Preferred ratably in
proportion to the number of Series A Preferred Shares held by each such holder
on such Redemption Date. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of Series A Preferred
Shares, such funds shall immediately be used to redeem the balance of the Series
A Preferred Shares which the Corporation had become obligated to redeem but had
not redeemed, paid to the holders of the Series A Preferred ratably in
proportion to the number of Series A Preferred Shares held by each such holder
on the date such funds become legally available. In case fewer than the total
number of Series A Preferred Shares represented by any certificate are redeemed,
a new certificate representing the number of unredeemed Series A Preferred
Shares shall be issued to the holder thereof without cost to such holder within
three business days after surrender of the certificate representing the redeemed
Series A Preferred Shares.
5.3 Determination of Each Holder's Series A Preferred Shares to be
Redeemed. The number of Series A Preferred Shares to be redeemed from each
holder thereof in redemptions under Section 5.1 shall be the number of Series A
Preferred Shares equal to (i) the total number of Series A Preferred Shares to
be redeemed from all holders of Series A Preferred in such redemption, times
(ii) the quotient derived by dividing the total number of Series A Preferred
Shares then held by such holder by the total number of Series A Preferred Shares
then outstanding.
5.4 No Rights After Redemption. No Series A Preferred Share which has
been redeemed is entitled to any dividends declared after the date on which the
Series A Liquidation Value of such Series A Preferred Share is paid to the
holder thereof. On such date all rights
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of the holder of such Series A Preferred Share shall cease, and such Series A
Preferred Share shall no longer be deemed to be outstanding.
5.5 Redeemed or Otherwise Acquired Shares. No share or shares of Series A
Preferred acquired by the Corporation by reason of redemption, conversion or
otherwise shall be reissued, and all such shares shall be cancelled, retired and
eliminated from the shares which the Corporation shall be authorized to issue.
5.6 Events of Noncompliance.
(a) An Event of Noncompliance shall be deemed to have occurred:
(i) If the Corporation fails to pay dividends that have been
declared by the Board on the Series A Preferred (and such failure
continues for a period of 30 days);
(ii) If the Corporation fails to make any redemption payment with
respect to the Series A Preferred that it is obligated to make
hereunder;
(iii) If the Corporation breaches or otherwise fails to perform
or observe any other covenant or agreement contained herein or in the
Securities Purchase Agreement or the Related Agreements (as defined in
the Securities Purchase Agreement) and such failure to perform or
observe a covenant or agreement is not cured within 20 days after the
Corporation receives notice of the occurrence thereof;
(iv) If any representation, warranty or information contained in
the Securities Purchase Agreement or required to be furnished to any
holder of the Series A Preferred pursuant to the Securities Purchase
Agreement, or any writing furnished by the Corporation to any holder
of the Series A Preferred, is false or misleading in any material
respect on the date made or furnished;
(v) If the Corporation or any Subsidiary makes an assignment for
the benefit of creditors or admits in writing its inability to pay its
debts generally as they become due; or an order, judgment or decree is
entered adjudicating the Corporation or any Subsidiary bankrupt or
insolvent; or any order for relief with respect to the Corporation or
any Subsidiary is entered under the United States Bankruptcy Code; or
the Corporation or any Subsidiary petitions or applies to any tribunal
for the appointment of a custodian, trustee, receiver or liquidator of
the Corporation or any Subsidiary, or of any substantial part of the
assets of the Corporation or any Subsidiary, or commences any
proceeding (other than a proceeding for the voluntary liquidation and
dissolution of any Subsidiary) relating to the Corporation or any
Subsidiary under any bankruptcy reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction; or any such petition or application is filed, or
any such proceeding is commenced, against the Corporation or any
Subsidiary and either (x) the Corporation or any such Subsidiary by
any act indicates its
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approval thereof, consent thereto or acquiescence therein or (y) such
petition, application or proceeding is not dismissed within sixty (60)
days;
(vi) If any money judgment, writ or warrant of attachment, or
similar process involving an amount in any individual case in excess
of $50,000 or an amount in the aggregate in excess of $200,000 is
entered or filed against the Corporation or any of its Subsidiaries or
any of their respective assets and remains undischarged, unvacated,
unbonded or unstayed for a period of 30 days; or
(vii) If the Corporation or any Subsidiary defaults in the
performance of any obligation or obligations if the effect of such
default is to cause an amount having an individual principal amount in
excess of $100,000 or having an aggregate principal amount in excess
of $200,000 to become due prior to its stated maturity or to permit
the holder or holders of such obligation or obligations to cause an
amount having an individual principal amount in excess of $100,000 or
having an aggregate principal amount in excess of $200,000 to become
due prior to its stated maturity.
(b) If an Event of Noncompliance of the type described in Section
5.6(a)(v) above shall have occurred, the Corporation shall become obligated
to immediately redeem all of the Series A Preferred Shares outstanding at a
price per share equal to the Series A Liquidation Value, without any demand
or other action on the part of the holders thereof.
(c) If any Event of Noncompliance shall have occurred, the holders of
a majority of the Series A Preferred Shares then outstanding may demand by
written notice delivered to the Corporation immediate redemption of all or
any portion of the Series A Preferred Shares owned by such holder or
holders at a price per share equal to Series A Liquidation Value. The
Corporation shall give prompt written notice of any such election to the
other holders of Series A Preferred (but in any event within five days
after the receipt of the initial demand for redemption), and each such
other holder may demand immediate redemption of all or any portion of such
holder's Series A Preferred Shares by giving written notice thereof to the
Corporation within seven days after receipt of the Corporation's notice. If
any holder or holders of the Series A Preferred demands immediate
redemption of all or any portion of such holder's Series A Preferred Shares
pursuant to the terms of this Section 5.6(c), the Corporation shall pay to
such holder or holders the aggregate Series A Liquidation Value of the
Series A Preferred Shares requested to be redeemed by such holder or
holders within 10 days after receipt of the initial demand for redemption;
provided that if at any time after the requisite number of holders of
Series A Preferred Shares shall have demanded immediate redemption pursuant
to this Section 5.6(c), the Corporation shall pay all accumulated and
unpaid dividends on the Series A Preferred Shares and make all redemption
payments (if any) with respect to the Series A Preferred Shares which it
shall have been obligated to make otherwise than pursuant to this Section
5.6(c), and all Events of Noncompliance (other than nonpayment of dividends
and failure to make any redemption payment due and payable solely by virtue
of this Section 5.6(c)) shall be remedied or waived by such
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holders, then, and in every such case, such holders may, by written notice
to the Corporation, rescind and annul such demand for immediate redemption
and its consequences.
5.7 Pro Rata Redemptions. The Corporation shall not, and shall not permit
any Subsidiary of the Corporation to, purchase or acquire any shares of Series A
Preferred other than pursuant to the terms of this Section or pursuant to an
offer made on the equivalent terms to all holders of Series A Preferred Shares
at the time outstanding.
Section 6. Purchase Rights. If at any time the Corporation grants, issues
or sells any equity securities or rights to purchase stock, warrants, securities
or other property pro rata to the record holders of Common Stock ("Purchase
Rights"), then each holder of Series A Preferred will be entitled to such
Purchase Rights, ratably in proportion to the number of shares of Common Stock
each such holder would have held if each had converted all Series A Preferred
Shares held by it into Common Stock on the date on which a record is taken for
the grant, issuance or sale of such Purchase Rights, or, if no such record is
taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issuance or sale of such Purchase Rights.
Section 7. Miscellaneous.
7.1 Registration of Transfer. The Corporation will keep at its principal
office a register for the registration of Series A Preferred Shares. Upon the
surrender of any certificate representing Series A Preferred Shares at such
place, the Corporation will, at the request of the record holder of such
certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the aggregate
the number of Series A Preferred Shares represented by the surrendered
certificate. Each such new certificate will be registered in such name and will
represent such number of Series A Preferred Shares as is requested by the holder
of the surrendered certificate and will be substantially identical in form to
the surrendered certificate, and dividends will accrue on the Series A Preferred
Shares represented by such new certificate from the date to which dividends have
been fully paid on such Series A Preferred Shares represented by the surrendered
certificate.
7.2 Replacement. Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder will be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing Series A Preferred Shares, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is an institutional investor its own
agreement will be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation will (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
the number of Series A Preferred Shares of such class represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate, and dividends will accrue on the
Series A Preferred Shares represented by such new certificate from the date to
which dividends have been fully paid on such lost, stolen, destroyed or
mutilated certificate.
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7.3 Amendment and Waiver. No amendment, modification or waiver will be
binding or effective with respect to any provision of this Article IV without
the prior written consent of the holders of at least 66 2/3% of the Series A
Preferred Shares outstanding at the time such action is taken; provided that no
action will discriminate against any holder of Series A Preferred other than as
a result of a difference in the number of Series A Preferred Shares held by such
holders.
7.4 Notices. Except as otherwise expressly provided, all notices referred
to herein will be in writing and will be delivered by registered or certified
mail, return receipt requested, postage prepaid and will be deemed to have been
given on the third day after mailing (a) to the Corporation, at its principal
executive offices and (b) to any shareholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated in
writing by such holder).
PART B. TERMS APPLICABLE TO COMMON STOCK
Section 1. Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation and after the payment
of any preferential amounts to be distributed to the holders of Series A
Preferred, the remaining Distributable Funds shall be distributed to the holders
of Common Stock and to the holders of the Series A Preferred, ratably in
proportion to the number of shares of Common Stock that each such holder holds,
or would hold if each holder of the Series A Preferred had converted all of the
Series A Preferred Shares held by it into Common Stock on the date of
liquidation, dissolution or winding up of the Corporation.
Section 2. Dividends. Whenever preferential dividends upon the Series A
Preferred, to the extent such stock may be entitled thereto, shall have been
paid or declared and set apart for payment, and not otherwise, the Board may
declare a dividend or distribution upon the Common Stock. Subject to the right
of the holders of the Series A Preferred to participate in such dividend or
distribution, dividends or distributions so declared by the Board shall be paid
to the holders of Common Stock ratably in proportion to the number of shares of
Common Stock held by each such holder on the date as of which the holders of
Common Stock of record entitled to receive such dividends or distribution were
determined.
Section 3. Voting Rights. The Common Stock shall have those voting rights
set forth for the Common Stock in Part C below.
PART C. VOTING RIGHTS
Section 1. In General. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by this Certificate of Incorporation
or any amendments thereto, on all matters submitted to a vote of the
shareholders of the Corporation, the Common Stock and Series A Preferred shall
vote together as a single class. For purposes of this Section 1, each holder of
Series A Preferred shall have the number of votes equal to the number of shares
of Common Stock which such holder would have been entitled to receive had such
holder converted all of his, her or its Series A Preferred Shares into Common
Stock on the date as of which the holders of Common Stock of record entitled to
vote were determined (assuming for this purpose only that Series A Preferred
Shares are convertible into fractional shares) and each holder of
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Common Stock shall have one vote per share of Common Stock held by such holder
on the date as of which the holders of Common Stock of record entitled to vote
were determined.
Section 2. Series A Preferred Directors.
2.1 Number of Series A Preferred Directors. The Board of Directors of the
Corporation shall include four directors designated as "Series A Preferred
Directors," who shall be nominated and elected in accordance with the provisions
of this Section 2.
2.2 Series A Preferred Directors.
(a) The Series A Preferred Directors shall be nominated by the holders
of a majority of the issued and outstanding Series A Preferred Shares
entitled to vote thereon, voting as a separate class. Once nominated, the
Series A Preferred Directors shall be elected to the Board by the holders
of a majority of the issued and outstanding Series A Preferred Shares
entitled to vote thereon, voting as a separate class, at any annual meeting
of the shareholders or special meeting of the shareholders called for that
purpose or by written consent in lieu of a meeting.
(b) The Series A Preferred Directors may be removed with or without
cause at any time by the holders of a majority of the issued and
outstanding Series A Preferred Shares entitled to vote thereon, voting as a
separate class.
(c) Vacancies of Series A Preferred Directors shall be filled in the
same manner as set forth for the election of Series A Preferred Directors
in Section 2.2 (a) above.
(d) Each Series A Preferred Director shall be entitled to cast one (1)
vote on each matter submitted to the Board for a vote, unless an Event of
Noncompliance shall have occurred, in which case each Series A Preferred
Director shall be entitled to cast three (3) votes on each matter submitted
to the Board. The special voting rights granted to Series A Preferred
Directors in this Section 2.2(d) shall continue for one year from the date
the Event of Noncompliance giving rise to such "super" voting rights ceases
to exist, but automatically will apply again if an additional Event of
Noncompliance occurs.
2.3 Quorum, Required Vote and Adjournment. At all meetings of the Board,
directors entitled to cast a majority of the votes of the entire Board shall
constitute a quorum for the transaction of business and the act of directors
entitled to cast a majority of the votes present at any meeting at which there
is a quorum shall be the act of the Board, except as may be otherwise
specifically provided by the General Corporation Law of the State of Delaware or
by this Certificate of Incorporation or any amendments thereto. Notwithstanding
the foregoing, a quorum shall not be present for the transaction of business of
the Board unless at least one Series A Preferred Director shall be present at a
meeting of the Board. If a quorum shall not be present at any meeting of the
Board, then the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
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Section 3. Special Matters. The affirmative vote of the holders of at
least a majority of the outstanding shares of the Corporation entitled to vote
thereon shall be required to approve: (a) any amendment to this Certificate of
Incorporation; and (b) any merger, consolidation or share exchange; provided
that where, pursuant to the General Corporation Law of the State of Delaware,
the holders of the outstanding shares of any class shall be entitled to vote as
a class in respect of any such amendment or transaction, the proposed amendment
or transaction shall be approved upon receiving the affirmative vote of the
holders of at least a majority of the outstanding shares of each class of shares
entitled to vote as a class in respect thereof and of the total outstanding
shares entitled to vote. In addition, so long as any Series A Preferred Shares
remain outstanding the Corporation shall not, without the affirmative vote or
written consent by the holders of not less than 51% of the Series A Preferred
Shares then outstanding:
(a) Issuances. Authorize, issue, or enter into any agreement providing
for the issuance (contingent or otherwise) of, (x) any notes or debt
securities containing equity features (including, without limitation, any
notes or debt securities convertible into or exchangeable for equity
securities, issued in connection with the issuance of equity securities or
containing profit participation features) or (y) any equity securities (or
any securities convertible into or exchangeable for any equity securities),
except for Common Stock or options to acquire Common Stock representing no
more than five percent (5%) of the fully diluted equity capital which may
be issued by the Board only after the approval of at least two of the
Series A Preferred Directors, as incentives to key employees, consultants
and directors of the Corporation;
(b) Mergers. Merge or consolidate with any Person or permit any
Subsidiary to merge or consolidate with any Person;
(c) Sale of Assets. Sell, lease or otherwise dispose of, or permit any
Subsidiary to sell, lease or otherwise dispose of, assets in one or a
series of related transactions that represent 10% or more of the
Corporation's assets or income, or are valued at $1,000,000, whichever is
less;
(d) Liquidations. Liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction;
(e) Charter Amendments. Make any amendment to the Corporation's
certificate of incorporation or by-laws, including without limitation, an
amendment altering, changing or otherwise amending the preferences or
rights of the Series A Preferred Shares or increasing or decreasing the
number of directors constituting the Board, or file any resolution of the
Board with the Secretary of State of Delaware.
PART D. DEFINITIONS IN THIS CERTIFICATE OF INCORPORATION
"Board" means the Corporation's Board of Directors.
"Change of Control" means any transaction, circumstance or event that shall
cause or result in Billy Prim and Andrew Filipowski either (a) owning, directly
or indirectly, beneficial or record ownership of shares of the Corporation's
capital stock or securities having less than
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20% of the issued and outstanding shares of the Corporation entitled to vote on
matters submitted to the Corporation's shareholders, or (b) resigning or being
removed or otherwise not serving as a member of the Board.
"Common Stock Equivalent" means, collectively, any capital stock of any
class of the Corporation hereafter authorized which is not limited to a fixed
sum or percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Corporation or similar equity like
participation rights or phantom stock interests.
"Liquidation Value" of any share of Series A Preferred as of any particular
date will be equal to $0.347037 (adjusted for any divisions, whether by stock
split, stock dividend or otherwise, or combinations, whether by reverse stock
split or otherwise, of the Series A Preferred Shares) plus accumulated but
unpaid dividends on such share.
"Market Price" of any security means the average of the closing prices of
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on the primary
exchange on which such security is listed at the end of such day, or, if on any
day such security is not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if
on any day such security is not quoted in the NASDAQ System, the average of the
highest bid and lowest asked prices on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged over a period of 21
days consisting of the day as of which "Market Price" is being determined and
the 20 consecutive business days prior to such day. The "Market Price" of a note
or other obligation which is not listed on a securities exchange or quoted in
the NASDAQ System or reported by the National Quotation Bureau, Incorporated,
the total consideration received by the Corporation (including interest) will be
discounted at the prime rate of interest at the First National Bank of Chicago
in effect at the time the note or obligation is deemed to have been issued. If
at any other time such security is not listed on any securities exchange or
quoted in the NASDAQ System or the over-the-counter market, the "Market Price"
will be the fair value thereof determined jointly by the Corporation and the
holders of a majority of the Series A Preferred Shares. If such parties are
unable to reach agreement within a reasonable period of time, such fair value
will be determined by an independent appraiser jointly selected by the
Corporation and the holders of a majority of the Series A Preferred Shares.
"Organic Change" means any capital reorganization, reclassification,
consolidation, merger, lease, or sale of all or substantially all of the
Corporation's assets to another Person (other than a liquidation as determined
under Section 1.1 above) which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for shares of Common
Stock.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
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<PAGE>
"Public Offering" means any offering by the Corporation of its equity
securities to the public pursuant to an effective registration statement under
the Securities Act of 1933, as then in effect, or any comparable statement under
any similar federal statute then in force; provided that for purposes of Section
4.7 above a Public Offering will not include an offering made in connection with
a business acquisition or an employee benefit plan.
"Securities Purchase Agreement" means the Series A Securities Purchase
Agreement, dated as of or about December 1, 1994, by and among the Corporation
and Platinum Venture Partners I, L.P. and the Investors (as defined in the
Securities Purchase Agreement), as such agreement may be amended from time to
time in accordance with its terms.
"Subsidiary" means any corporation, association or other business entity of
which securities or other ownership interests representing more than fifty
percent (50%) of the ordinary voting power are, at the time as of which any
determination is being made, owned or controlled by the Corporation or one or
more Subsidiaries of the Corporation or by the Corporation and one or more
Subsidiaries of the Corporation.
FIFTH: In furtherance and not in limitation of the powers conferred by
statute, the Board is, by action of the full Board, expressly authorized to
adopt, amend or repeal the by-laws of the Corporation.
SIXTH: Except as otherwise provided in this Certificate of Incorporation,
the Corporation reserves the right to amend, alter or repeal any provision
contained in this Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon the stockholders herein are
granted subject to this reservation.
SEVENTH: Each person who is or was a director or officer of the Corporation
and each person who serves or served at the request of the Corporation as a
director, officer or partner of another enterprise shall be indemnified by the
Corporation in accordance with, and to the fullest extent authorized by, the
General Corporation Law of the State of Delaware as the same now exists or may
be hereafter amended. No amendment to or repeal of this ARTICLE SEVENTH shall
apply to or have any effect on the rights of any individual referred to in this
ARTICLE SEVENTH for or with respect to acts or omissions of such individual
occurring prior to such amendment or repeal.
EIGHTH: To the fullest extent permitted by the General Corporation Law of
the State of Delaware as the same now exists or may be hereafter amended, a
director of the Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director. No
amendment to or repeal of this ARTICLE EIGHTH shall apply to or have any effect
on the liability or alleged liability of any director of the Corporation for or
with respect to any acts or omissions of such director occurring prior to the
effective date of such amendment or repeal.
NINTH: Meetings of stockholders may be held within or outside of the State
of Delaware, as the by-laws of the Corporation may provide. The books of the
Corporation may be kept outside the State of Delaware at such place or places as
may be designated from time
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<PAGE>
to time by the Board or in the by-laws of the Corporation. Election of directors
need not be by written ballot unless the by-laws of the Corporation so provide.
TENTH: The name and address of the incorporator is:
Jody Rollenhagen
Katten Muchin & Zavis
525 W. Monroe Street, Suite 1600
Chicago, Illinois 60661
I, THE UNDERSIGNED, being the incorporator hereinabove named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this Certificate of Incorporation, hereby declaring
and certifying that this is my act and deed and the facts herein stated are
true, and accordingly have hereunto set my hand this 29th day of November, 1994.
---------------------------------
Jody Rollenhagen
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<PAGE>
Exhibit B
NONCOMPETITION AGREEMENT
------------------------
This Noncompetition Agreement (the "Agreement") is made as of November 23,
1994, by and among the undersigned employee ("Employee") and Blue Rhino
Corporation, a Delaware corporation (the "Company").
RECITALS:
--------
WHEREAS, the Company is engaged in the business of distributing propane gas
cylinders (the "Businesses").
WHEREAS, Employee is an employee of and shareholder in the Company.
WHEREAS, if Employee were to compete with Company great harm would come to
the Company, destroying part of the goodwill associated with the Company;
WHEREAS, to provide working capital for the development of its Business,
the Company on the date hereof is entering into a Series A Securities Purchase
Agreement (the "Securities Purchase Agreement") with the Purchasers for the sale
to the Purchasers of Series A Preferred Shares and Warrants of the Company on
the terms and subject to the conditions therein.
WHEREAS, Pursuant to the Securities Purchase Agreement, the execution of
this Agreement is a condition of the Closing of the Securities Purchase
Agreement.
AGREEMENTS
----------
For and in consideration of the sum of Ten and No/100 Dollars ($10.00) in
hand paid and other good and valuable consideration, the receipt, adequacy and
sufficiency of which hereby are acknowledged, the Company and Employee hereby
agree as follows:
ARTICLE I
Covenant Not to Compete
-----------------------
1.1 Employee's Knowledge. Employee acknowledges and agrees that he has and
will occupy a position of trust and confidence with the Company and in the
course of his past employment and his engagement hereunder with the Company, has
and will become familiar with the Company's trade secrets and other proprietary
and confidential information concerning the Company. Employee acknowledges and
agrees that his services are of a special, unique, and extraordinary value to
the Company and that the Company would be irreparably damaged if Employee were
to provide similar services to any person or entity in violation of the
provisions of this Agreement.
<PAGE>
1.2 Non-Compete. Employee hereby agrees that, during the period beginning
as of the date first above written, and ending when Employee ceases, for any
reason, to be a consultant to, employee or director of the Company (the
"Employment periods"), and thereafter, through the period ending on the second
anniversary of the Employment Period (such later period together with the
Employment Period being collectively, the "Restricted Period"), he shall not,
directly or indirectly, as employee, agent, consultant, stockholder, director,
co-partner, or in any other individual or representative capacity, own, operate,
manage, control, engage in, invest in, or participate in any manner in, act as a
consultant or advisor to, render services for (alone or in association with any
person, firm, corporation, or entity), or otherwise assist any person or entity
that engages in or owns, invests in, operates, manages, or controls any venture
or enterprise that directly or indirectly engages or proposes to engage in, the
Business anywhere in the United States (the "Territory"); provided, however,
that nothing contained herein shall be construed to prevent Employee from
investing in the stock of any competing corporation listed on a national
securities exchange or traded in the over-the-counter market, but only if
Employee is not involved in the business of said corporation and if Employee and
his associates (as such term is defined in Regulation 14(A) promulgated under
the Securities Exchange Act of 1934, as in effect on the date hereof),
collectively, do not own more than an aggregate of two (2%) percent of the stock
of such corporation. With respect to the Territory, Employee specifically
acknowledges that the Company plans to expand the Business throughout the
Territory.
1.3 Non-Solicitation. Without limiting the generality of the provisions of
Section 1.2 hereof, Employee hereby agrees that, during the Restricted Period,
he will not, directly or indirectly, solicit or participate as employee, agent,
consultant, stockholder, director, partner, or in any other individual or
representative capacity, in any business which solicits business from any
person, firm, corporation, or other entity which was a client of the Company
during the Restricted Period, or which was a "Hot Prospect" (as hereinafter
defined), or from any successor in interest to any such person, firm,
corporation or other entity for the purpose of securing business or contracts
related to the Business; provided, however, that nothing contained herein shall
be construed to prohibit or restrict Employee, if applicable, from soliciting
business from any such parties on behalf of the Company in performance of his
duties as an employee of the Company. The term "hot Prospect" shall mean those
persons or entities to whom the Company shall have submitted a written
presentation to provide services or products within six (6) months prior to the
termination of the Employment Period.
1.4 Interference with Relationships. During the Restricted Period,
Employee shall not, directly or indirectly, as employee, agent, consultant,
stockholder, director, co-partner, or in any other individual or representative
capacity: (i) except on behalf of the Company, employ or engage, recruit, or
solicit for employment or engagement, any person who is or becomes employed or
engaged by the Company during the Restricted Period, or otherwise
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seek to influence or alter any such person's relationship with the Company, or
(ii) solicit or encourage any client of the Company to terminate or otherwise
alter his, her, or its relationship with the Company.
1.5 Confidential Information. Employee agrees that during the Employment
Period or at any time thereafter, he shall not disclose to any person not
employed by the Company and not engaged to render services to the Company or
otherwise use any Confidential Information obtained while in the employ of the
Company, except on behalf of the Company in accordance with its policies or as
such disclosure may be required by law or a court order. As used in this
Agreement, "Confidential Information" shall mean any information relating to the
business or affairs of the Company or its clients, including but not limited to
information relating to: financial statements, client identities, potential
clients, employees, information, analyses, or other proprietary information used
by the Company in connection with the Business; provided, however, that
Confidential Information shall not include any information which is in the
public domain through no wrongful act on the part of Employee. Employee
acknowledges that the Confidential Information is vital, sensitive,
confidential, and proprietary to the Company.
1.6 Blue-Pencil. If any court of competent jurisdiction shall at any time
deem the term of this Agreement or any particular Restrictive Covenant (as
defined) too lengthy or the Territory too extensive, the other provisions of
this Section 1 shall nevertheless stand, the Restricted Period herein shall be
deemed to be the longest period permissible by law under the circumstances, and
the Territory herein shall be deemed to comprise the largest territory
permissible by law under the circumstances. The court in each case shall reduce
the time period and/or Territory to permissible duration or size.
1.7 Remedies.
(a) Employee agrees that the recitals to this Agreement are true and
are part of this Agreement. Further, Employee has carefully considered the
nature and extent of the restrictions upon him and the rights and remedies
conferred upon the Company under this Agreement, and Employee hereby
acknowledges and agrees that such restrictions, rights and remedies are
reasonable in time and territory, are designed to eliminate competition
which otherwise would be unfair to the Company, do not stifle the inherent
skill and experience of Employee, would not operate as a bar to Employee's
sole means of support, are fully required to protect the legitimate
interests of the Company, and do not confer upon the Company a benefit
disproportionate tithe detriment to Employee.
(b) Employee acknowledges and agrees that the covenants set forth in
this Section 1 (collectively, the "Restrictive Covenants") are reasonable
and necessary for the protection of the Company's business interests, that
irreparable injury will result to the Company if Employee breaches any of
the terms of
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<PAGE>
said Restrictive Covenants, and that in the event of Employee's actual or
threatened breach of any such Restrictive Covenants, the Company will have
no adequate remedy at law. Employee accordingly agrees that in the event of
any actual or threatened breach by him of any of the Restrictive Covenants,
the Company shall be entitled to immediate temporary injunctive and other
equitable relief, without bond and without the necessity of showing actual
monetary damages, subject to hearing as soon thereafter as possible.
Nothing contained herein shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of any damages which it is able to prove.
ARTICLE II
Miscellaneous
-------------
2.1 Notices. Any notices, consents, or other communication required to be
sent or given hereunder by any of the parties shall in every case be in writing
and shall be deemed properly served if (a) delivered personally, (b) sent by
registered or certified mail, in all such cases with first class postage
prepaid, return receipt requested, (c) delivered by a recognized overnight
courier service, or (d) sent by facsimile transmission (along with a copy sent
by first-class mail) to the parties at the addresses as set forth below or at
such other addresses as may be furnished in writing.
If to Company: Blue Rhino Corporation
104 Cambridge Park
Winston-Salem, North Carolina 27104
Attention: Mr. Billy D. Prim
If to Employee: At the address set forth on the signature page hereto.
Date of service of such notice shall be (w) the date such notice is personally
delivered, (x) three (3) days after the date of mailing if sent by certified or
registered mail, (y) one (1) day after date of delivery to the overnight courier
if sent by overnight courier, or (z) the next succeeding business day after
transmission by facsimile.
2.2 Severability. The unenforceability or invalidity of any provision of
this Agreement shall not affect the enforceability or validity of any other
provision.
2.3 Entire Agreement. This Agreement constitutes the entire Agreement
between the parties with respect to the subject matter hereof; this Agreement
supersedes any and other Agreements, either oral or in writing, between the
parties hereto with respect to the subject matter hereof.
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<PAGE>
2.4 Counterparts. This Agreement may be executed on separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
2.5 Assignment. This Agreement will be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto.
2.6 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
hereto.
2.7 Amendment and Waiver. Any provision of this Agreement may be amended,
or any provision of this Agreement may be waived, provided that any such
amendment or waiver will be binding on the Company or Employee only if such
amendment or waiver is set forth in a writing executed by the Company and
Employee. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other breach.
2.8 Construction. This Agreement shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the laws
of the State of North Carolina, without giving effect to provisions thereof
regarding conflict of laws.
2.9 WAIVER OF JURY TRIAL. EMPLOYEE AND THE COMPANY HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS TRANSACTION AND THE RELATIONSHIP THAT IS BEING
ESTABLISHED HEREBY. EMPLOYEE AND THE COMPANY ALSO WAIVE ANY BOND OR SURETY OR
SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE
OTHER PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
EMPLOYEE AND THE COMPANY ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT
TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE
WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EMPLOYEE AND THE COMPANY FURTHER
WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS, OR HIS, AS
THE CASE MAY BE, LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES
ITS, OR HIS, AS THE CASE MAY BE, JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED HEREBY.
IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO
A TRIAL BY THE COURT.
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<PAGE>
2.10 Employee Acknowledgment. Employee acknowledges (a) that he has
consulted with or has had the opportunity to consult with independent counsel of
his own choice concerning this Agreement and has been advised to do so by the
Company and (b) that he has read and understands the Agreement, is fully aware
of its legal effect, and has entered into it freely based on his own judgment
2.11 Not Employment Agreement; Disclaimer. This Agreement is intended to
protect the Company from competition and disclosure of Confidential Information
and is not an "Employment Agreement." The Company has no express or implied
contract with Employee concerning the terms and conditions of employment.
Nothing in this Agreement shall alter or change Employee's "at will" employment
relationship (meaning that either the Company or Employee may terminate the
employment relationship at any time, with or without cause, and with or without
notice) and the existence of this Agreement shall not be deemed a waiver of a
right or defense with respect to such employment relationship.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
BLUE RHINO CORPORATION:
----------------------------------
Billy D. Prim
Chief Executive Officer
EMPLOYEE:
(SEAL)
----------------------------------
[Signature]
Print Name:
------------------------------------
Address:
------------------------------------
------------------------------------
------------------------------------
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<PAGE>
Exhibit C
See Tab 2 for Registration Agreement
<PAGE>
Exhibit D
See Tab 3 for Shareholders' Agreement
<PAGE>
Exhibit E
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OFFERED FOR
SALE UNLESS REGISTERED UNDER SAID ACT OR UNLESS THE HOLDER OF THIS WARRANT
DELIVERS TO BLUE RHINO CORPORATION AN OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO BLUE RHINO CORPORATION STATING THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER ARE
ALSO BENEFITED BY AND SUBJECT TO A SERIES A SECURITIES PURCHASE AGREEMENT, A
REGISTRATION RIGHTS AGREEMENT EACH DATED AS OF DECEMBER 1, 1994, AND EACH BY AND
AMONG BLUE RHINO CORPORATION, A DELAWARE CORPORATION, PLATINUM VENTURE PARTNERS
I, L.P., A DELAWARE LIMITED PARTNERSHIP, AND CERTAIN OTHER INVESTORS, AND A
SHAREHOLDERS' AGREEMENT DATED THE SAME DATE, BY AND AMONG BLUE RHINO
CORPORATION, A DELAWARE CORPORATION, THE INVESTORS AND THE MANAGEMENT
STOCKHOLDERS, COPIES OF WHICH ARE ON FILE WITH THE CORPORATION.
Dated: December 1, 1994
WARRANT
To Purchase ______ Shares of Common Stock (Subject to adjustment herein)
-------------------------------
Expiring December 1, 2004
THIS IS TO CERTIFY THAT, for value received, _____________________, or
registered assigns is entitled to purchase from Blue Rhino Corporation, a
Delaware corporation (the "Corporation"), at any time and from time to time
prior to 5:00 p.m., Chicago, Illinois time, on December 1, 1994, at the
principal office of the Corporation which is currently 104 Cambridge Park,
Winston-Salem, North Carolina 27104 (or such other address as the Corporation
shall specify by notice to all Warrantholders), at the Exercise Price, the
number of shares of Common Stock, $0.001 par value (the "Common Stock"), of
the Corporation shown above, all subject to adjustment and upon the terms and
conditions as hereinafter provided, and is entitled also to exercise the other
appurtenant rights, powers and privileges hereinafter described.
This Warrant is one of the one or more warrants (the "Warrants"), of the
same form and having substantially the same terms as this Warrant, which have
been or will be issued pursuant to the Securities Purchase Agreement.
Certain terms used in this Warrant are defined in Article VI.
-1-
<PAGE>
ARTICLE I
EXERCISE OF WARRANTS
1.1 Method of Exercise and Payment.
(a) Method of Exercise. To exercise this Warrant in whole or in part,
the Holder shall deliver to the Corporation, at the principal office of the
Corporation, (a) this Warrant, (b) a written notice, in substantially the
form of the Subscription Notice attached hereto, of such Holder's election
to exercise this Warrant, which notice shall specify the number of shares
of Common Stock to be purchased or converted into, as the case may be, the
denominations of the share certificate or certificates desired and the name
or names in which such certificates are to be registered, and (c) payment
to the Corporation of the amount equal to the product of the then
applicable Exercise Price multiplied by the number of shares of Common
Stock then being purchased pursuant to one of the payment methods permitted
under Section l.l(b) below.
(b) Method of Payment. Payment shall be made either (1) by cash, money
order, certified or bank cashier's check, (2) by wire transfer, (3) by
converting the Warrant, or any portion thereof, into Common Stock pursuant
to Section 1.l(c) below ("Warrant Conversion") or (4) any combination of
the foregoing at the option of the Holder.
(c) Payment by Warrant Conversion. Subject to any limitations set
forth in this Warrant, the Holder may exercise the purchase right
represented by this Warrant with respect to a particular number of shares
of Common Stock subject to this Warrant ("Converted Warrant Stock") and
elect to pay for the Converted Warrant Stock through Warrant Conversion as
defined in Section l.l(b), by specifying such election in the Subscription
Notice. In such event, the Corporation shall deliver to the Holder (without
payment by the Holder of any Exercise Price or any cash or other
consideration) that number of shares of Common Stock equal to the quotient
obtained by dividing (x) the value of this Warrant (or the specified
portion hereof) on the Exercise Date, which value shall be determined by
subtracting (A) the aggregate Exercise Price of the Converted Warrant Stock
immediately prior to the exercise of the Warrant from (B) the aggregate
Fair Market Value of the Converted Warrant Stock issuable upon exercise of
this Warrant (or the specified portion hereof) on the Exercise Date, by (y)
the Fair Market Value of one share of Common Stock on the Exercise Date.
For purposes of this Section 1, "Fair Market Value" of a share of Common
Stock as of a particular date shall mean:
(i) If the Corporation's registration under the Securities Act,
covering its initial underwritten public offering of stock had been
declared effective by the Commission, then the fair market value of a
share of Common Stock as of the last Business Day immediately prior to
the Exercise Date.
(ii) If such a registration statement has not been declared
effective, or if it has been declared effective but the offering is
not consummated in accordance
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with the terms of the underwriting agreement between the Corporation
and its underwriters relating to such registration statement, then as
determined in good faith by the Board upon review of the relevant
factors; provided, however, that if the Exercise Date falls within one
day prior to the effective date of such registration statement, the
fair market value of a share of Common Stock will be deemed to be the
public offering price per share provided for in such registration
statement.
(d) Mechanics. The Corporation shall, as promptly as practicable and
in any event within three days after delivery of a Subscription Notice as
described above, execute and deliver or cause to be executed and delivered,
in accordance with such Subscription Notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in
said Subscription Notice. The share certificate or certificates so
delivered shall be in such denominations as may be specified in such
Subscription Notice or, if such Subscription Notice shall not specify
denominations, in denominations of 100 shares each, and shall be issued in
the name of the Holder or such other name or names as shall be designated
in such Subscription Notice. Such certificate or certificates shall be
deemed to have been issued (and this Warrant or the portion thereof
specified in the Subscription Notice shall be deemed to have been
exercised), and such Holder or any other Person so designated to be named
therein shall be deemed for all purposes to have become a holder of record
of such shares, as of the date the aforementioned Subscription Notice is
received by the Corporation, or delivery thereof is refused (the "Exercise
Date"). If this Warrant shall have been exercised only in part, the
Corporation shall, at the time of delivery of the certificate or
certificates, deliver to the Holder a new Warrant evidencing the rights to
purchase or convert the remaining shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with
this Warrant, or, at the request of the Holder, appropriate notation may be
made on this Warrant which shall then be returned to the Holder. The
Corporation shall pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of share
certificates and new Warrants, except that, if share certificates or new
Warrants shall be registered in a name or names other than the name of the
Holder, funds sufficient to pay all transfer taxes payable as a result of
such transfer shall be paid by the Holder at the time of delivering the
aforementioned notice of exercise or promptly upon receipt of a written
request of the Corporation for payment.
1.2 Shares to Be Fully Paid and Nonassessable. All shares of Common Stock
issued upon the exercise of this Warrant shall be validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder, and from
all taxes, liens and charges with respect to the issue thereof (other than
transfer taxes) and, if the Common Stock is then listed on any national
securities exchanges (as defined in the Exchange Act) or quoted on NASDAQ, shall
be duly listed or quoted thereon, as the case may be.
1.3 No-Fractional Shares to Be Issued. The Corporation shall not be
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon any exercise of this Warrant, in lieu of such fractional share the
Corporation may pay to the Holder, in cash, an amount equal to such
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<PAGE>
fraction of the fair market value (as determined in good faith by the Board) per
share of outstanding Common Stock of the Corporation in the Business Day
immediately prior to the date of such exercise.
1.4 Share Legends. Each certificate for shares of Common Stock issued
upon exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend:
"This security has not been registered under the Securities Act of
1933 and may not be sold or offered for sale unless registered pursuant to
such Act or unless the holder hereof delivers to Blue Rhino Corporation an
opinion of counsel reasonably acceptable to Blue Rhino Corporation stating
that an exemption from such registration is available."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act) shall also bear such legend unless, in the opinion of counsel
selected by the holder of such certificate (who may be an employee of such
holder) and reasonably acceptable to the Corporation, the securities represented
thereby need no longer be subject to restrictions on resale under the Securities
Act. Each certificate for shares of Common Stock issued upon exercise of this
Warrant shall also bear any legends required under the Shareholders' Agreement,
to the extent required thereby. Any certificate issued at any time in exchange
or substitution for any certificate bearing such legend shall also bear such
legend unless in the opinion of counsel selected by the holder of such
certificate (who may be an employee of such holder) and reasonably acceptable to
the Corporation, the restrictions contained in such Shareholders' Agreement no
longer apply because of the occurrence of one or more of certain events
described therein.
1.5 Reservation: Authorization. The Corporation has reserved and will
keep available for issuance upon exercise of the Warrants the total number of
shares of Common Stock deliverable upon exercise of all Warrants from time to
time outstanding. The issuance of the shares of Common Stock upon exercise of
the Warrants has been duly and validly authorized and, when issued and sold in
accordance with the Warrants, such shares of Common Stock will be duly and
validly issued, fully paid and nonassessable. The Corporation will take all such
actions as are necessary in order to insure the foregoing.
1.6 Result of Exercise. On the Exercise Date the rights of the holder
of such Warrant as such holder will cease and the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock are to
be issued upon such exercise will be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
1.7 Not Close Books Until Exercise. The Corporation will not close its
books against the transfer of this Warrant or shares of Common Stock issued or
issuable upon exercise of this Warrant in any manner which interferes with
the timely exercise of this Warrant.
ARTICLE II
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TRANSFER, EXCHANGE AND
REPLACEMENT OF WARRANTS
2.1 Ownership of Warrant. The Corporation may deem and treat the Person
in whose name this Warrant is registered as the holder and owner hereof for all
purposes and shall not be affected by any notice to the contrary, until this
Warrant is presented for registration of transfer as provided in this Article
II.
2.2 Transfer of Warrant. The Corporation agrees to maintain books for the
registration of transfers of the Warrants, and any transfer, in whole or in
part, of this Warrant and all rights hereunder shall be registered on such
books, upon surrender of this Warrant at the principal office of the Corporation
together with a written assignment of this Warrant duly executed by the Holder
or his, her or its duly authorized agent or attorney and funds sufficient to pay
any transfer taxes payable upon such transfer. Upon surrender the Corporation
shall execute and deliver a new Warrant or Warrants in the name of the assignee
or assignees and in the denominations specified in the instrument of assignment,
and this Warrant shall promptly be canceled. Notwithstanding the foregoing, a
Warrant may be exercised by a new holder without having a new Warrant issued.
This Warrant may not be transferred in whole or in part, and the Corporation
shall not be required to register any transfers unless the Corporation has
received an opinion of counsel selected by the transferor (who may be an
employee of such party) and reasonably satisfactory to the Corporation that such
transfer is exempt from the registration requirements of the Securities Act.
If the Warrantholder delivers to the Corporation an opinion of counsel
selected by such holder (who may be an employee of such holder) and reasonably
acceptable to the Corporation, that no subsequent transfer of the Warrant will
require registration under the Securities Act, the Corporation will promptly
deliver to such holder or his, her or its designee, new Warrants in exchange for
the Warrant delivered by such holder, which will not bear the Securities Act
legend set forth at the beginning of the first page of the Warrant, and
thereafter no further opinions of counsel shall be required in connection with
the subsequent transfer of such Warrant.
2.3 Division or Combination of Warrants. This Warrant may be divided or
combined with other Warrants upon surrender hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Corporation, together
with a written notice specifying the names and denominations in which the new
Warrant or Warrants are to be issued, signed by the holders hereof and thereof
or their respective duly authorized agents or attorneys. Subject to compliance
with Section 2.2 as to any transfer which may be involved in the division or
combination, the Corporation shall execute and deliver a new Warrant or Warrants
in exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
2.4 Loss, Theft, Destruction of Warrant Certificates. Upon receipt of
evidence reasonably satisfactory to the Corporation (an affidavit of the
registered holder will be satisfactory) of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Corporation (an Original Warrantholder's indemnity being satisfactory
indemnity in the event of loss, theft or destruction of any Warrant owned by
such holder), or, in the case of any such mutilation, upon surrender and
cancellation of such warrant, the Corporation will (at its
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expense) make and deliver, in lieu of such lost, stolen, destroyed or mutilated
Warrant, a new Warrant of like tenor and representing the right to purchase the
same aggregate number of shares of Common Stock.
2.5 Expenses of Delivery of Warrants. The Corporation shall pay all
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of Warrants and Warrant
Stock hereunder. If, pursuant to Section 2.2, the opinion of counsel provides
that registration is not required for the proposed exercise or transfer of this
Warrant or the proposed transfer of the Warrant Stock and that the proposed
exercise or transfer in the absence of registration would require the
Corporation to take any action including executing and filing forms or other
documents with the Commission or any state securities agency, or delivering to
the Warrantholder any form or document in order to establish the right of the
Warrantholder to effectuate the proposed exercise or transfer, the Corporation
agrees promptly, at its expense, to take any such action; and provided, further,
that the Corporation will reimburse the Warrantholder in full for any expenses
(including but not limited to the fees and disbursements of such counsel, but
excluding brokers' commissions) incurred by the Warrantholder or owner of
Warrant Stock on his, her or its behalf in connection with such exercise or
transfer of the Warrant or transfer of Warrant Stock.
ARTICLE III
CERTAIN RIGHTS
3.1 Rights Under Securities Purchase Agreement, Registration Agreement
and Shareholders' Agreement. This Warrant and the Warrant Stock are entitled to
the benefits of and are subject to the Securities Purchase Agreement,
Registration Agreement and the Shareholders' Agreement to the extent provided
therein. The Corporation shall keep a copy of the Securities Purchase Agreement,
Registration Agreement, the Shareholders' Agreement, and any amendments,
restatements, modifications and supplements thereto, at the principal office of
the Corporation and shall furnish copies thereof to any Holder or any transferee
upon request.
ARTICLE IV
ANTIDILUTION PROVISIONS
4.1 Adjustments Generally. The Exercise Price and the number of shares of
Common Stock (or other securities or property) issuable upon exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events, as provided in this Article IV.
4.2 Exercise of Warrant. At any time and from time to time, any holder
of this Warrant may exercise all or any portion of this Warrant into the number
of shares of Common Stock computed by (i) multiplying the number of shares of
Common Stock sought to be purchased pursuant to this Warrant by $0.0347037 and
(ii) dividing the resulting product by the Exercise Price then in effect.
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4.3 Exercise Price.
(a) Exercise Price Based on Conversion Price. The "Exercise Price"
shall be one-tenth of the Conversion Price then in effect pursuant to the
Certificate of Incorporation of the Corporation. In order to prevent
dilution of the exercise rights granted to the holder of this Warrant, the
Conversion Price and consequently the Exercise Price will be subject to
adjustment from time to time pursuant to this Section 4.3 and Sections 4.5
and 4.6 below. For purposes of this Section 4.3, the Corporation shall be
deemed to have issued or sold Common Stock as set forth in Section 4.4
below.
(b) Adjustment for Dilutive Events. If and whenever on or after the
original date of issuance of this Warrant the Corporation issues or sells,
or in accordance with Section 4.4 below is deemed to have issued or sold,
any shares of Common Stock for consideration per share less than the
Conversion Price (the "Diluted Share Price") in effect immediately prior to
the time of such issue or sale (a "Dilutive Event"), then forthwith upon
the occurrence of any such Dilutive Event the Conversion Price will be
reduced so that the Conversion Price in effect immediately following the
Dilutive Event will equal the Diluted Share Price. Notwithstanding the
foregoing, the issuance by the Corporation of up to 2,000,000 shares of
Common Stock, or securities convertible into or options to acquire up to
2,000,000 shares of Common Stock, issued pursuant to stock option plans or
grants to officers or employees approved by the Board or the issuance of
Common Stock upon conversion of the Series A Preferred Shares issued
pursuant to the Securities Purchase Agreement shall not constitute a
Dilutive Event. As used in this Section 4.3(b) and in Section 4.4 below,
the term "Common Stock" shall include Common Stock Equivalents.
Notwithstanding anything contained herein to the contrary, the Exercise
Price of this Warrant held by a particular holder shall not be adjusted
pursuant to this Article 4 in connection with a particular Dilutive Event,
or any subsequent Dilutive Event, if such holder of this Warrant fails to
purchase, after being offered by the Corporation the opportunity to
purchase, a percentage of the securities, rights or options, or any
combination thereof, the sale of which constitute the Dilutive Event, which
is equal to or greater than 75% of the percentage ownership of the
Corporation's Common Stock on a fully diluted basis held by such holder
immediately prior to such Dilutive Event. A Warrant which is no longer
subject to adjustment as a result of the preceding sentence shall remain
subject to such limitation regardless of any subsequent transfers, and at
each time that any Warrant so loses its rights to such adjustment, all
Warrants which have lost their right to such adjustment as of such time
shall be automatically classified into (and the outstanding Warrant
representing such Warrant will automatically be deemed to represent) new
sub-series A-1, A-2, A-3, etc., consecutively, beginning with A-1. The
holders of Warrants of each such sub-series shall promptly deliver such
Warrants to the Corporation upon the Corporation's request, for exchange or
notation to reflect such sub-series. If any such Warrants are not delivered
to the Corporation, the Corporation shall make appropriate notations on its
stock records, which may include stop transfer instructions, and may place
in escrow, pending receipt of such Warrants, all dividend payments or
other distributions owing with respect to the Warrants represented by such
Warrants.
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4.4 Issuance and Sale of Common Stock. For purposes of determining the
adjusted Exercise Price pursuant to Sections 4.3 above the following events
shall be deemed to be an issuance and sale of Common Stock by the Corporation:
(a) Issuance of Rights or Options. If (i) the Corporation in any
manner grants any rights or options to subscribe for or to purchase shares
of Common Stock or any securities convertible into or exchangeable for
shares of Common Stock (such rights or options referred to herein as
"Options" and such convertible or exchangeable stock or securities referred
to herein as "Convertible Securities") and (ii) the Price Per Share of
shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities is less than the
Conversion Price in effect immediately prior to the time of the granting
of such Options then the shares of Common Stock issuable upon the exercise
of such Options or upon conversion or exchange of such Convertible
Securities will be deemed to have been issued and sold by the Corporation
for such Price Per Share. For the purposes of this Section 4.4(a), the
"Price Per Share" is determined by dividing (i) the total amount, if any,
received or receivable by the Corporation as consideration for the granting
of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of all such Options,
plus in the case of such Options which relate to Convertible Securities,
the minimum aggregate amount of additional consideration, if any, payable
to the Corporation upon the issuance or sale of such Convertible Securities
and the conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or upon
the conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options. No further adjustment of the Conversion Price
will be made when Convertible Securities are actually issued upon the
exercise of such Options or when Common Stock is actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(b) Issuance of Convertible Securities. If (i) the Corporation in any
manner issues or sells any Convertible Securities and (ii) the Price Per
Share of shares of Common Stock issuable upon such conversion or exchange
is less than the Conversion Price in effect immediately prior to the time
of such issue or sale then the shares of Common Stock issuable upon the
conversion or exchange of such Convertible Securities will be deemed to
have been issued and sold by the Corporation for such Price Per Share. For
the purposes of this Section 4.4(b), the "Price Per Share" will be
determined by dividing (i) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration,
if any, payable to the Corporation upon the conversion or exchange thereof,
by (ii) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities. No further
adjustment of the Conversion Price will be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is
made upon exercise of any Options for which adjustments to the Conversion
Price had been or are to be made pursuant to Section 4.4(a) above, no
further adjustment of the Conversion Price will be made by reason of
such issue or sale.
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(c) Change in Option Price or Conversion Rate. If at any time there is
a change in (i) the purchase price provided for in any Options, (ii) the
additional consideration, if any, payable upon the conversion or exchange
of any Convertible Securities, or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock, then the
Conversion Price in effect at the time of such change will be readjusted to
the Conversion Price which would have been in effect had those Options or
Convertible Securities still outstanding at the time of such change
provided for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time such Options or
Convertible Securities were initially granted, issued or sold; provided
that if such adjustment would result in an increase of the Conversion Price
then in effect, such adjustment will not be effective until 30 days after
written notice thereof has been given by the Corporation to all holders of
Warrants.
(d) Calculation of Consideration Received. If any shares of Common
Stock, Option or Convertible Security is issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor or the
Price Per Share, as the case may be, will be deemed to be the net amount
received or to be received, respectively, by the Corporation therefor. In
case any shares of Common Stock, Options or Convertible Securities are
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation or the non-cash
portion of the Price Per Share, as the case may be, will be the fair value
of such consideration received or to be received, respectively, by the
Corporation; except where such consideration consists of securities, in
which case the amount of consideration received or to be received,
respectively, by the Corporation will be the Market Price thereof as of the
date of receipt. If any shares of Common Stock, Options or Convertible
Securities are issued in connection with any merger in which the
Corporation is the surviving corporation, the amount of consideration
therefor will be deemed to be the fair value of such portion of the net
assets and business of the non-surviving corporation as is attributable to
such shares of Common Stock, Options or Convertible Securities, as the case
may be. The fair value of any consideration other than cash and securities
will be determined jointly by the Corporation and the holders of a majority
of the outstanding Warrants. If such parties are unable to reach agreement
within a reasonable period of time, the fair value of such consideration
will be determined by an independent appraiser jointly selected by the
Corporation and the holders of a majority of the outstanding Warrants.
(e) Integrated Transactions. In case any Option is issued in
connection with the issuance or sale of other securities of the
Corporation, together comprising one integrated transaction in which no
specific consideration is allocated to such Option by the parties thereto,
the Option will be deemed to have been issued for a consideration of $.01.
(f) Record Date. If the Corporation takes a record of the holders of
Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in shares of Common Stock, Options or in
Convertible Securities or (ii) to subscribe for or purchase shares of
Common Stock, Options or Convertible Securities, then such record date will
be deemed to be the date of the issuance or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such
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dividend or upon the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
4.5 Subdivision or Combination of Common Stock. If the Corporation at
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced. If the Corporation at any time
combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be
proportionately increased.
4.6 Organic Change. Prior to the consummation of any Organic Change, the
Corporation will make appropriate provisions (in form and substance satisfactory
to the holders of a majority of the Warrants then outstanding) to insure that
each of the holders of Warrants with respect to all or any of the Warrants held
thereby will thereafter have the right to acquire and receive, in lieu of or in
addition to the shares of Common Stock immediately theretofore acquirable and
receivable upon the exercise of such holder's Warrants, such shares of stock,
securities or assets as such holder would have received in connection with such
Organic Change if such holder had exercised his, her or its Warrants immediately
prior to such Organic Change. In any such case, the Corporation will make
appropriate provisions (in form and substance satisfactory to the holders of a
majority of the Warrants then outstanding) to insure that the provisions of this
Section 4.6 will thereafter be applicable to the Warrants (including, an
immediate adjustment of the Conversion Price to the value for the Common Stock
reflected by the terms of such Organic Change and a corresponding immediate
adjustment in the number of shares of Common Stock acquirable and receivable
upon exercise of the Warrants, if the value so reflected is less than the
Conversion Price in effect immediately prior to such Organic Change). The
Corporation will not effect any such Organic Change, unless prior to the
consummation thereof, the successor Corporation resulting from such Organic
Change assumes by written instrument (in form reasonably satisfactory to the
holders of a majority of the Warrants then outstanding), the obligation to
deliver to each such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
acquire.
All other terms of the Warrants shall remain in full force and effect
following such an Organic Change. The provisions of this Section 4.6 shall
similarly apply to successive Organic Changes.
4.7 Notices.
(a) Immediately upon any adjustment of the Exercise Price, the
Corporation shall give written notice thereof to all holders of Warrants
specifying the Exercise Price in effect thereafter with respect to the
particular holder.
(b) The Corporation shall give written notice to all holders of
Warrants at least 20 days prior to the date on which the Corporation closes
its books or takes a record for determining rights to vote with respect to
any Organic Change, Change in Control, Change of Ownership, Fundamental
Change or other reorganization, dissolution or
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liquidation. The Corporation shall also give written notice to the holders
of Warrants at least 20 days prior to the date on which any Organic Change,
Change in Control, Change of Ownership, Fundamental Change or other
reorganization, dissolution or liquidation shall occur.
4.8 Certain Other Events. The Company will not, by amendment of its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issues or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Warrantholders
against dilution or other impairment. If any event occurs as to which the
foregoing provisions of this Article IV are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board, fairly
protect the purchase rights of the Warrants in accordance with the essential
intent and principles of such provisions, then the Board shall make such
adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of the Board, to protect such purchase rights as aforesaid, but in
no event shall any such adjustment have the effect of increasing the Exercise
Price or decreasing the number of shares of Common Stock subject to purchase
upon exercise of this Warrant.
4.9 Proceedings Prior to Any Action Requiring Adjustment. As a condition
precedent to the taking of any action which would require an adjustment pursuant
to this Article IV, the Corporation shall take any action which may be
necessary, including obtaining regulatory approvals or exemptions, in order that
the Corporation may thereafter validly and legally issue as fully paid and
nonassessable all shares of Common Stock which the holders of Warrants are
entitled to receive upon exercise thereof, and if all such approvals and actions
are not taken, the Corporation shall take any action which would cause the
Corporation to be able to issue to the holders of Warrants the full number of
shares issuable upon exercise hereof in accordance with the terms hereof.
ARTICLE V
LIQUIDATION, DISSOLUTION, DISTRIBUTIONS OR DIVIDENDS
5.1 Liquidation or Dissolution. In case the Corporation at any time while
this Warrant shall remain unexpired and unexercised, shall dissolve, liquidate,
or wind up its affairs other than in connection with an Organic Change, the
Holder shall have the right to exercise this Warrant for a period of sixty (60)
days after the later of (i) such event having occurred and (ii) receipt by the
Holder of a notice from the Company indicating the kind and amount of securities
or assets issuable or distributable to holders of shares of Common Stock with
respect to such event, and upon exercise of this Warrant during such period, the
Holder shall have the right to receive in lieu of each share of the Warrant
Stock, the same kind and amount of any securities or assets as may be
issuable, distributable or payable upon any such dissolution, liquidation, or
winding up with respect to each of the shares of the Common Stock.
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5.2 Dividends and Distributions With Respect to Common Stock. If legal
under the applicable General Corporation Law of the State of Delaware at any
time the Corporation pays any dividends or makes any other distributions with
respect to the Common Stock, the Corporation shall pay at such time to each
holder of a Warrant the dividends or other distributions which such holder would
have been entitled to receive had such holder exercised all of his, her or its
rights to acquire or receive Common Stock under such Warrant(s) on the date as
of which the holders of Common Stock of record entitled to such dividends or
other distributions were determined.
ARTICLE VI
DEFINITIONS
Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in the Securities Purchase Agreement. The following
terms, as used in this Warrant, have the following respective meanings:
"Board" means the Corporation's Board of Directors.
"Business Day" shall mean (a) if any class of Common Stock is listed or
admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (b) if no class of Common
Stock is so listed or admitted to trading, a day on which any New York Stock
Exchange member firm is open for business.
"Change in Ownership" means any sale or issuance or series of sales and/or
issuances of shares of the Corporation's capital stock by the Corporation or any
holders thereof which results in any Person or group of affiliated Persons
(other than the holders of Common Stock and Series A Securities as of the date
of the Securities Purchase Agreement) owning capital stock of the Corporation
possessing the voting power (under ordinary circumstances) to elect a majority
of the Board.
"Change of Control" means any transaction, circumstance or event that shall
cause or result in Billy Prim and Andrew Filipowski either (a) owning, directly
or indirectly, beneficial or record ownership of shares of the Corporation's
capital stock or securities having less than 20% of the issued and outstanding
shares of the Corporation entitled to vote on matters submitted to the
Corporation's shareholders, or (b) resigning or being removed or otherwise not
serving as a member of the Board.
"Commission" means the Securities and Exchange commission.
"Common Stock Equivalent" means, collectively, any capital stock of any
class of the Corporation hereafter authorized which is not limited to a fixed
sum or percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Corporation or similar equity
like participation rights or phantom stock interests but specifically excludes
the Warrants.
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"Fundamental Change" means (a) a sale or transfer of all or substantially
all of the assets of the Corporation, or of the Corporation and its Subsidiaries
on a consolidated basis, in any transaction or series of transactions, and (b)
any merger or consolidation to which the Corporation is a party, except for a
merger in which the Corporation is the surviving Corporation and, after giving
effect to such merger, the holders of the Corporation's outstanding capital
stock immediately prior to the merger shall own the Corporation's outstanding
capital stock possessing the voting power (under ordinary circumstances) to
elect a majority of the Board after such merger.
"Holder" means the Person in whose name this Warrant is registered on the
books of the Corporation maintained for such purpose or the Person in whose name
any Warrant Stock is registered on such books.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Organic Change" means any capital reorganization, reclassification,
consolidation, merger, lease, or sale of all or substantially all of the
Corporation's assets to another Person (other than a dissolution, liquidation or
winding up of the Company as indicated in Section 5.1 above) which is effected
in such a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for shares of Common Stock.
"Original Warrantholder" means Platinum or any Investor holding a Warrant.
"Market Price" of any security means the average of the closing prices of
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on the primary
exchange on which such security is listed at the end of such day, or, if on any
day such security is not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if
on any day such security is not quoted in the NASDAQ System, the average of the
highest bid and lowest asked prices on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged over a period of 21
days consisting of the day as of which "Market Price" is being determined and
the 20 consecutive business days prior to such day. The "Market Price" of a note
or other obligation which is not listed on a securities exchange or quoted in
the NASDAQ System or reported by the National Quotation Bureau, Incorporated,
the total consideration received by the Corporation (including interest) will be
discounted at the prime rate of interest at the First National Bank of Chicago
in effect at the time the note or obligation is deemed to have been issued. If
at any other time such security is not listed on any securities exchange or
quoted in the NASDAQ System or the over-the-counter market, the "Market Price"
will be the fair value thereof determined jointly by the Corporation and the
holders of a majority of the Warrants. If such parties are unable to reach
agreement within a reasonable period of time, such fair value will be
determined by an independent appraiser jointly selected by the Corporation and
the holders of a majority of the Warrants.
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.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"Platinum" means Platinum Venture Partners I, L.P., a Delaware limited
partnership.
"Registration Agreement" means the Registration Rights Agreement, of even
date herewith, by and among the Corporation, Platinum and the Investors (as
defined in the Registration Agreement), as such agreement may be amended,
restated, modified or supplemented from time to time in accordance with its
terms.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Purchase Agreement" means the Series A Securities Purchase
Agreement, of even date herewith, by and among the Corporation, Platinum and the
Investors (as defined in the Securities Purchase Agreement), as such agreement
may be amended, restated, modified or supplemented from time to time in
accordance with its terms.
"Shareholders' Agreement" means the Shareholders' Agreement, of even date
herewith, by and among the Corporation, the Investors (as defined in the
Shareholders' Agreement) and the Management Stockholders (as defined in the
Shareholders' Agreement), as such agreement may be amended, restated, modified
or supplemented from time to time in accordance with its terms.
"Subsidiary" means any corporation, association or other business entity of
which securities or other ownership interests representing more than fifty
percent (50%) of the ordinary voting power are, at the time as of which any
determination is being made, owned or controlled by the Corporation or one or
more Subsidiaries of the Corporation or by the Corporation and one or more
Subsidiaries of the Corporation.
"Voting Stock" of any Person means securities of any class or classes of
such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the directors of such Person.
"Warrantholder" means a Holder of a Warrant.
"Warrants" shall have the meaning set forth in the second paragraph of this
Warrant.
"Warrant Stock" means the shares of Common Stock purchased by the
Warrantholders upon the exercise of the Warrants, including any such shares of
Common Stock transferred to any transferee of such Warrantholder, other than a
transferee who acquires such shares after the same have been publicly sold
pursuant to a Registration Statement under the Securities Act.
ARTICLE VII
MISCELLANEOUS
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7.1 Notices. Notices and other communications provided for herein shall
be in writing and shall, unless otherwise expressly required, be given in the
manner and with the effect provided in the Securities Purchase Agreement. In the
case of the Holder, such notices and communications shall be addressed to his,
her or its address as shown on the books maintained by the Corporation, unless
the Holder shall notify the Corporation that notices and communications should
be sent to a different address (or telecopy number), in which case such notices
and communications shall be sent to the address (or telecopy number) specified
by the Holder.
7.2 Waivers; Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Corporation and the Warrantholders voting as a
single class, entitling such Warrantholders to purchase a majority of the
Common Stock subject to purchase upon exercise of such Warrants at the time
outstanding (exclusive of Warrants then owned by the Corporation or any
Subsidiary or Affiliate thereof); provided, however, that no such amendment,
modification or waiver shall, without the written consent of each holder of
Warrants whose interest might be adversely affected by such amendment,
modification or waiver, (a) change the number of shares of Common Stock subject
to purchase upon exercise of this Warrant, the Exercise Price or provisions for
payment thereof or (b) amend, modify or waive the provisions of this Section or
Article III, IV or V hereof. The provisions of the Securities Purchase
Agreement, the Shareholders' Agreement and the Registration Agreement may be
amended, modified or waived only in accordance with the respective provisions
thereof.
Any such amendment, modification or waiver effected pursuant to this
Section or the applicable provisions of the Securities Purchase Agreement, the
Shareholders' Agreement or the Registration Agreement shall be binding upon the
holders of all Warrants and Warrant Stock, upon each future holder thereof and
upon the Corporation. In the event of any such amendment, modification or
waiver, the Corporation shall give prompt notice thereof to all Warrantholders
and, if appropriate, notation thereof shall be made on all Warrants thereafter
surrendered for registration of transfer or exchange.
No notice or demand on the Corporation in any case shall entitle the
Corporation to any other or further notice or demand in similar or other
circumstances.
7.3. Governing Law. This Warrant shall be construed in accordance with
and governed by the internal laws of the State of Delaware, without regard to
principles of conflicts of laws.
-15-
<PAGE>
7.4 Survival of Agreements; Representations and Warranties, etc. All
warranties, representations and covenants made by the Corporation herein or in
any certificate or other instrument delivered by or on behalf of it in
connection with the Warrants shall be considered to have been relied upon by the
Holder and shall survive the issuance and delivery of the Warrants, regardless
of any investigation made by the Holder, and shall continue in full force and
effect so long as this Warrant or any Warrant Stock is outstanding. All
statements in any such certificate or other instrument shall constitute
representations and warranties hereunder.
7.5 Covenants to Bind Successor and Assigns. All covenants, stipulations,
promises and agreements in this Warrant contained by or on behalf of the
Corporation shall bind its successors and assigns, whether so expressed or not.
7.6 Severability In case any one or more of the provisions contained in
the Securities Purchase Agreement, the Shareholders' Agreement, the Registration
Agreement or this Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby.
7.7 Section Headings. The section headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting
this Warrant.
7.8 No Rights as Stockholder. This Warrant shall not entitle the
Warrantholder to any rights as a stockholder of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed
in its corporate name by one of its officers thereunto duly authorized, and its
corporate seal to be hereunto affixed, attested by its Secretary or an Assistant
Secretary, all as of the day and year first above written.
Blue Rhino Corporation, a Delaware corporation
By:
--------------------------------------------
Billy Prim, Chief Executive Officer
Attest:
- --------------------------------------------
S.H. Fogleman, III, Assistant Secretary
-16-
<PAGE>
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
To_________________________:
[Choose one or both of first two paragraphs, as applicable]
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the attached Warrant for, and to purchase thereunder,
_______________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the Exercise Price in full in the form of certified or bank
cashier's check or wire transfer.
The undersigned hereby irrevocably elects to exercise the right of
conversion represented by the attached Warrant for, and to convert thereunder,
__________________ shares of Common Stock, as provided for therein.
Please issue a certificate or certificates for such shares of Common
Stock in the following name or names and denominations:
If said number of shares shall not be all the shares issuable upon
exercise of the attached Warrant, a new Warrant is to be issued in the name of
the undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
Dated: , 19
----------------------------------
- ----------------------------------
NOTE: The above signature should
correspond exactly with the name on
the face of the attached Warrant or
with the name of the assignee appearing
in the assignment form below.
-17-
<PAGE>
Exhibit F
---------
HOUSE LAW FIRM
108 CAMBRIDGE PARK, SUITE 200
WINSTON-SALEM, NORTH CAROLINA 27104
DON R. HOUSE MAILING ADDRESS
MARC W. INGERSOLL P. O. DRAWER 26015
WINSTON-SALEM, N.C. 27114-6015
December 29, 1994 -------
(910) 768-2225
FAX (910) 768-3369
To: Purchasers under Securities Purchase Agreement
Ladies and Gentlemen:
We have represented Blue Rhino Corporation, a Delaware Corporation (the
"Company") and the Company's predecessor, Blue Rhino Corporation, a North
Carolina corporation ("BRC-North Carolina") in connection with the transaction
which is the subject of that certain Series A Securities Purchase Agreement (the
"Agreement") dated as of December 1, 1994 between the Purchasers (as defined in
the Agreement) and the Company with respect to sale by the Company to the
Purchasers of Series A Preferred Shares and Warrants. This opinion is being
rendered pursuant to Section 4.8 of the Agreement. Unless otherwise defined
herein, the definitions of capitalized terms used in this opinion shall be the
same as those set forth in the Agreement.
In connection with this opinion, we have reviewed the following documents:
1. Agreement and other documents as identified in the Agreement;
2. Articles of Incorporation, By-Laws and Minutes of the Company;
3. Articles of Incorporation, By-Laws and Minutes of BRC-North
Carolina;
4. Shareholders' Agreement between the Company and the Shareholders
dated as of December 1, 1994;
5. Registration Rights Agreement dated as of December 1, 1994 between
the Company and the Investors;
6. Agreement and Plan of Merger, Articles of Merger for North Carolina
and the Certificate of Merger for Delaware; and
7. such other documents, records and papers as we have deemed
necessary or relevant in order to render this opinion.
Based upon and subject to the foregoing, and subject to the qualifications
set forth below, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has full power and
authority to carry on its business as it is now being conducted.
<PAGE>
December 29, 1994
Page 2
- -------------------------
2. Prior to the Merger, BRC-North Carolina was a corporation duly organized,
validly existing and in good standing under the laws of the State of
North Carolina, had full power and authority to carry on its business as
it was being conducted and was either qualified or had applied to be
qualified, to do business in all other jurisdictions in which it
conducted business or owned property except where the failure would not
have a material adverse effect.
3. The Merger Agreement was duly authorized, executed and delivered by the
Company and BRC-North Carolina, and their respective directors and
shareholders as necessary, and such agreement is a valid and binding
obligation of the Company and BRC-North Carolina enforceable in
accordance with its terms. The Merger has been duly consummated in
accordance with the terms of the Merger Agreement and accordingly the
Company is the successor corporation to BRC-North Carolina, is the
survivor of the Merger, and is successor to all rights, titles and
interests of BRC-North Carolina.
4. The Company's entire authorized capital stock consists of 60,000,000
Common Shares, par value $0.001 per share and 25,000,000 Series A
Preferred Shares, par value $0.001. There are presently issued and
outstanding 22,260,000 Common Shares and 20,796,172 Series A Preferred
Shares; 35,275,000 Common Shares are reserved for issuance upon the
exercise of the conversion of the Series A Preferred Shares and the
exercise of the Warrants; 2,000,000 Common Shares are reserved for future
grants under the Stock Incentive Plan; and 465,000 Common Shares are
reserved for issue to employees, directors and consultants.
5. Prior to the Merger, BRC-North Carolina's entire authorized capital stock
consisted of 50,000,000 Class A common shares, par value $.001 per
share, 60,000 Class B common shares, par value $.001 and 6,000,000
preferred shares, par value $.001 per share and there were issued and
outstanding 22,200,000 Class A common stock, 60,000 Class B common stock
and no preferred shares.
6. Prior to the Merger, the record and, to our best knowledge, beneficial
owners of the outstanding Class A common stock and Class B common stock
of BRC-North Carolina are as set forth on Exhibit A attached hereto
("BRC-Common Stock") and the offering and sale of the BRC-Common Stock
did not require registration or qualification under the Securities Act
or under any applicable state securities laws.
<PAGE>
December 29, 1994
Page 3
- -------------------------
7. The offering, sale and issuance of the Series A Preferred Shares and
Warrants under the Agreement, and the issuance of the Common Stock upon
conversion of the Series A Preferred Shares or Exercise of the Warrants,
do not require registration under the Securities Act or registration or
qualification under any state securities laws, except no opinion is
expressed regarding the conversion of the Warrants for North Carolina and
Illinois residents.
8. Prior to the Merger, the certificates representing the BRC-Common Stock
were duly authorized by BRC-North Carolina, such BRC-Common Stock was
validly issued and outstanding, fully paid and nonassessable, and there
were no statutory, or to our best knowledge contractual, or other
preemptive rights of stockholders with respect to the issuance of such
BRC-Common Stock.
9. The certificates representing the Common Shares have been duly
authorized, executed and delivered by the Company, such Common Shares
have been validly issued and are outstanding, fully paid and
nonassessable, and there are no statutory, or to our best knowledge
contractual, or other preemptive rights of stockholder with respect to
the issuance of such Common Shares except the agreements set forth
herein.
10. The certificates representing the Series A Preferred Shares have been
duly authorized, executed and delivered by the Company, such Series A
Preferred Shares have been validly issued and are outstanding, fully paid
and nonassessable, and there are no statutory, or to our best knowledge
contractual, or other preemptive rights of stockholder with respect to
the issuance of such Series A Preferred Shares except the agreements set
forth herein.
11. The Common Stock issuable upon conversion of the Series A Preferred
Shares or exercise of the Warrants has been duly authorized and reserved
for issuance by the Company, there are no statutory, or to our best
knowledge contractual, or other preemptive rights of stockholders with
respect to the issuance of such Common Stock, and the Common Stock to be
issued upon conversion of such Series A Preferred Shares or exercise of
such Warrants will upon such issuance be validly issued, fully paid and
nonassessable.
12. To the best of our knowledge, except for the Series A Preferred Shares
and the Warrants there are (a) no outstanding shares of stock or
securities convertible into or
<PAGE>
December 29, 1994
Page 5
- -------------------------
in the creation of any lien, mortgage, security interest, charge or other
encumbrance upon the Company's capital stock or assets pursuant to, (d)
give any third party the right to accelerate any obligation under, (e)
result in a violation of, or (f) require any authorization, consent,
approval, exemption or other action by or notice to any court or
administrative or governmental body pursuant to, the Company's
Certificate of Incorporation, the Company's By-Laws, any law, statute,
rule or regulation to which the Company is subject, or any agreement,
instrument, order, judgement or decree to which the Company is subject
and which is known to us.
16. The Company has all necessary corporate power and authority and all
material licenses, permits and authorizations necessary to own its
properties and to conduct its business in the manner and in the locations
presently conducted except as set forth in paragraph 17 hereof.
17. Except for the qualification of the Company to do business in North
Carolina, Arizona, California, Florida, Georgia, Louisiana, Tennessee and
Texas, no consents, approvals or other actions by, or notices to or
filing with, governmental authorities in connection with the Merger are
necessary.
18. No action of or filing with any governmental or public body or authority
is required to authorize or is otherwise required for the validity of
execution, delivery, and performance by the Company of the Agreement, the
Shareholders' Agreement, the Registration Agreement, the Warrants or the
other agreements contemplated by the Agreement to which the Company is a
party.
19. The Company does not own directly or indirectly any equity securities in
any corporation.
20. We have not prepared or delivered any opinion or memorandum or rendered
any legal advice to the effect that the Company or BRC-North Carolina is
or was exposed, from a legal standpoint, to any liability or disadvantage
which may be material to the Company's business except a memorandum dated
November 17, 1994, a copy of which is attached hereto.
21. We do not know of or have reason to believe that the Company is or BRC-
North Carolina was a party to any pending suit, action, investigation or
inquiry by any person or governmental body, or arbitration proceedings or
any material
<PAGE>
December 29, 1994
Page 6
- -------------------------
labor dispute relating to or affecting the Company, its assets or its
business except applications for local permits for retail propane
cylinder exchange locations.
22. No fact or circumstance has come to our attention which gives us cause to
believe that any representation or warranty by the Company set forth in
the Agreement is untrue.
In rendering the foregoing opinion we have relied to the extent we deem
such reliance appropriate, without investigation, on certificates and other
communications from public officials, from the register of the Company's
securities and from officers of the Company and on representations by the
Company set forth in the Agreement.
We have assumed that documents we have reviewed in connection with this
opinion which purport to have been executed by parties other than the Company
and BRC-North Carolina, have been duly executed by such parties and that such
parties had all requisite power to enter into and perform all obligations
thereunder, that execution and delivery thereof has been duly authorized by all
requisite action and that the subject instruments are valid and binding upon
said parties.
We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures thereon, the legal capacity of
natural persons executing such documents and the conformity to originals of all
documents submitted to us as copies.
We are qualified to practice law in the State of North Carolina and we do
not purport to be experts in and do not express any opinion herein concerning
any law other than the law of the State of North Carolina and the United States
of America and matters governed by the General Corporation Law of the State of
Delaware.
The opinions expressed herein are subject to the following qualifications:
A. As to matters wherein our opinion is stated to be "to the best of our
knowledge" or "to our knowledge", our opinion with respect to such
matters is limited to our actual knowledge and said phrases shall not
imply any inquiry or constructive knowledge on our part.
B. The enforceability of obligations and the availability of remedies are
subject to and may be limited by (i) bankruptcy, insolvency,
reorganization, arrangement, fraudulent transfer, moratorium and
similar laws affecting creditors' rights
<PAGE>
December 29, 1994
Page 7
- -------------------------
generally and (ii) general principles of equity (including, but not
limited to, concepts of materiality, reasonableness, good faith and
fair dealing and principles that may limit the availability of
specific performance or injunctive or other equitable relief) whether
such enforceability of obligations or availability of remedies is
considered in a proceeding in equity or at law.
This opinion is solely for the information of the addressees hereof and is
not to be quoted in whole or in part or otherwise referred to, nor is it to be
filed with any government agency or any other person without our prior written
consent and no one other than the addressees hereof is entitled to rely on this
opinion.
Very truly yours
HOUSE LAW FIRM
By: /s/ DON R. HOUSE
-------------------------------------
Don R. House
<PAGE>
EXHIBIT A
(Page 1 of 2)
BLUE RHINO CORPORATION
Common Stock
<TABLE>
<CAPTION>
Shareholder Certificate & Number of Shares
- ----------- -------------------------------
<S> <C> <C> <C>
CLASS B COMMON:
Billy D. Prim #2 - 40,000
#3A - 20,000
---------
TOTAL 60,000
CLASS A COMMON:
Billy D. Prim #1 - 6,420,000
#3 - 3,455,000
Andrew J. Filipowski #4 - 5,200,000
#5 - 2,600,000
Debbie W. Prim #6 - 100,000
Mayo M. McCormick #7 - 100,000
Jeannie Cannon #8 - 25,000
Luanne Holden #9 - 25,000
Chris Holden #10 - 25,000
Debbie W. Prim #11 - 25,000
Trustee for
Sarkanda U. Westmoreland
Debbie W. Prim #12 - 25,000
Trustee for
Anthony G. Westmoreland
Veronica Champney #13 - 100,000
Jennifer R. Filipowski #14 - 25,000
Andrew J. Filipowski #15 - 25,000
Trustee for
Andrew E. Filipowski
</TABLE>
<PAGE>
EXHIBIT A
(Page 2 of 2)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Veronica Champney #16 - 25,000
Trustee for
Alexandria Filipowski
Veronica Champney #17 - 25,000
Trustee for
James Meadows
Angell Family #18 - 1,600,000
Limited Partnership
Dr. Thomas Austin #19 - 200,000
----------
TOTAL 20,000,000
BLUE REINO CORPORATION
Restricted Class A Common Stock
Shareholder Certificate & Number of Shares
- ----------- ------------------------------
Billy D. Prim #1 - 500,000
Jeremiah Callahan #2 - 750,000
Craig Erbland #3 - 500,000
S. H. Fogleman, III #4 - 200,000
Jim Mizelle #5 - 100,000
Doug Mele #6 - 75,000
Steve Rash #7 - 50,000
Baxter J. Kiger #8 - 25,000
----------
TOTAL 2,200,000
</TABLE>
<PAGE>
Memorandum dated 11/17/94 - Available Upon Request
<PAGE>
Exhibit G
Business Plan Not Enclosed - Previously Delivered and Available Upon Request
<PAGE>
BLUE RHINO CORPORATION
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is dated as of
December 1, 1994 by and among BLUE RHINO CORPORATION, a Delaware corporation
(the "Corporation"), and PLATINUM VENTURE PARTNERS I, L.P., a Delaware limited
partnership ("Platinum") and the Persons listed on Schedule 1 attached hereto
(collectively, the "Investors"). Platinum and the Investors are sometimes
referred to herein, collectively, as the "Purchasers."
R E C I T A L S:
A. Purchasers have agreed to purchase shares of the Corporation's Series
A Convertible Participating Preferred Stock (the "Series A Preferred Shares")
and Warrants (the "Warrants") pursuant to that certain Series A Securities
Purchase Agreement of even date herewith (the "Securities Purchase Agreement")
provided that the parties hereto enter into this Agreement.
B. The Corporation deems it desirable to enter into this Agreement in
order to induce Purchasers to purchase the Series A Securities pursuant to the
Securities Purchase Agreement.
AGREEMENTS
In consideration of the premises and the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. As used in this Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $0.001 par value per share, of the
Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Person" means a natural person, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
"Public Offering" means any offering by the Corporation of its equity
securities to the public pursuant to an effective registration statement under
the Securities Act or any comparable statement under any comparable federal
statute then in effect.
<PAGE>
"Registrable Shares" means at any time (i) any shares of Common Stock then
outstanding which were issued upon conversion of the Series A Securities; (ii)
any shares of Common Stock then issuable upon conversion or exercise of the then
outstanding Series A Securities; (iii) any shares of Common Stock then
outstanding which were issued as, or were issued directly or indirectly upon the
conversion or exercise of other securities issued as, a dividend or other
distribution with respect or in replacement of any shares referred to in (i) or
(ii); and (iv) any shares of Common Stock then issuable directly or indirectly
upon the conversion or exercise of other securities which were issued as a
dividend or other distribution with respect to or in replacement of any shares
referred to in (i) or (ii); provided, however, that Registrable Shares shall not
include any shares which have been registered pursuant to the Securities Act or
which have been sold to the public pursuant to Rule 144 of the Commission under
the Securities Act. For purposes of this Agreement, a person will be deemed to
be a holder of Registrable Shares whenever such person has the then-existing
right to acquire such Registrable Shares (by conversion or otherwise), whether
or not such acquisition actually has been effected.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Securities" means the Series A Preferred Shares and the Warrants,
collectively.
2. Demand Registration.
2.1 Requests for Registration. Subject to the terms of this
Agreement, the holders of at least 51% of the then outstanding Registrable
Shares may, at any time request registration under the Securities Act of
all or part of their Registrable Shares on Form S-1 or any similar long-
form registration ("Long-Form Registrations") or, if available, on Form S-2
or S-3 or any similar short-form registration ("Short-Form Registrations").
Within 10 days after receipt of any request pursuant to this Section 2.1,
the Corporation will give written notice of such request to all other
holders of Registrable Shares and will include in such registration all
Registrable Shares with respect to which the Corporation has received
written requests for inclusion within 15 days after delivery of the
Corporation's notice. All registrations requested pursuant to this Section
2.1 are referred to herein as "Demand Registrations."
2.2 Long-Form Registrations. The holders of the Registrable Shares
will be entitled to request two Long-Form Registrations in which the
Corporation will pay all Registration Expenses (as defined in Section 6
below). A registration will not count as one of the permitted Long-Form
Registrations until it has become effective (unless such Long-Form
Registration has not become effective due solely to the fault of the
holders requesting such registration), and the second or any subsequent
Long-Form Registration will not count as one of the permitted Long-Form
Registrations unless the holders of the Registrable Shares are able to
register and sell at least 90% of the Registrable Shares requested to be
included in such registration; provided, however, that in any event the
Corporation will pay all Registration Expenses in connection with any
registration initiated as a Long-Form Registration.
-2-
<PAGE>
2.3 Short-Form Registrations. In addition to the Long-Form
Registrations provided pursuant to Section 2.2 above, the holders of
Registrable Shares will be entitled to request an unlimited number of
Short-Form Registrations in which the Company will pay all Registration
Expenses. Demand Registrations will be Short-Form Registrations whenever
the Corporation is permitted to use any applicable short form. Once the
Corporation has become subject to the reporting requirements of the
Exchange Act, the Corporation will use its best efforts to make Short-Form
Registrations available for the sale of Registrable Shares.
2.4 Priority. The Corporation will not include in any Demand
Registration any securities which are not Registrable Shares without the
written consent of the holders of at least 51% of the Registrable Shares
included in such Demand Registration. If other securities are permitted to
be included in a Demand Registration which is an underwritten offering and
the managing underwriters advise the Corporation in writing that in their
opinion the number of Registrable Shares and other securities requested to
be included exceeds the number of Registrable Shares and other securities
which can be sold in such offering, the Corporation will include in such
registration, first, the Registrable Shares requested to be included in
such Demand Registration, pro rata among the holders of such securities on
the basis of the number of Registrable Shares which are owned by such
holders, and second, other securities to be included in such Demand
Registration.
2.5 Restrictions. The Corporation will not be obligated to effect any
Long-Form Registration within nine months after the effective date of a
previous Long-Form Registration. The Corporation may postpone for up to
three months the filing or the effectiveness of a registration statement
for a Demand Registration if the Corporation reasonably believes that such
Demand Registration would have an adverse effect on any proposal or plan by
the Corporation or any of its subsidiaries to engage in any acquisition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other significant transaction.
2.6 Selection of Underwriters. The holders of at least 51% of the
Registrable Shares included in any Demand Registration shall have the right
to select the investment banker(s) and manager(s) to administer the
offering, subject to the Corporation's approval which will not be
unreasonably withheld.
2.7 Preemption. The Corporation will have the right to preempt any
Long-Form Registration with a primary registration by delivering written
notice of such intention to the holders of Registrable Shares who have
requested such Long-Form Registration within fifteen (15) days after the
Corporation has received a request for such registration. In the ensuing
primary registration, the holders of Registrable Shares will have such
piggyback registration rights as are set forth in Section 3 hereof. Upon
the Corporation's preemption of a requested Long-Form Registration, such
requested registration will not count as one of the permitted Long-Form
Registrations.
-3-
<PAGE>
3. Piggyback Registration.
3.1 Right to Piggyback. Whenever the Corporation proposes to register
any of its securities under the Securities Act (other than pursuant to a
Demand Registration hereunder) and the registration form to be used may be
used for the registration of any Registrable Shares (a "Piggyback
Registration"), the Corporation will give prompt written notice to all
holders of the Registrable Shares of its intention to effect such a
registration and will include in such registration all Registrable Shares
(in accordance with the priorities set forth in Sections 3.2 and 3.3 below)
with respect to which the Corporation has received written requests for
inclusion within 15 days after the delivery of fee Corporation's notice.
3.2 Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Corporation and the
managing underwriters advise the Corporation in writing that in their
opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering, the
Corporation will include in such registration first, the securities that
the Corporation proposes to sell, second, the Registrable Shares requested
to be included in such registration, pro rata among the holders of such
Registrable Shares on the basis of the number of shares which are owned by
such holders, and third, other securities requested to be included in such
registration.
3.3 Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the
Corporation's securities and the managing underwriters advise the
Corporation in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can
be sold in such offering, the Corporation will include in such registration
first, the securities requested to be included therein by the holders
requesting such registration and the Registrable Shares requested to be
included in such registration, pro rata among the holders of such
securities on the basis of the number of shares of Common Stock or
Registrable Shares which are owned by such holders, and second, other
securities requested to be included in such registration.
3.4 Other Registrations. If the Corporation has previously filed a
registration statement with respect to Registrable Shares pursuant to
Section 2 or pursuant to this Section 3, and if such previous registration
has not been withdrawn or abandoned, the Corporation will not file or cause
to be effected any other registration of any of its equity securities or
securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Form S-8 or any successor
form), whether on its own behalf or at the request of any holder or
holders of such securities, until a period of at least 180 days has elapsed
from the effective date of such previous registration.
3.5 Selection of Underwriters. In connection with any Piggyback
Registration, the holders of at least 51% of the Registrable Shares
requested to be registered shall have the right to select the managing
underwriters to administer any offering of the Corporation's securities in
which the Corporation does not participate, and the
-4-
<PAGE>
Corporation will have such right in any offering in which it participates,
provided that in either case such managing underwriters shall be qualified
nationally recognized underwriters.
4. Holdback Agreements.
4.1 Holders' Agreements. Each holder of Registrable Shares agrees not
to effect any public sale or distribution of equity securities of the
Corporation, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven (7) days prior to, and
during the 120 days following, the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration in which
Registrable Shares are included (except as part of such underwritten
registration), unless the underwriters managing the registered public
offering otherwise agree.
4.2 Corporation's Agreements. The Corporation agrees (i) not to
effect any public sale or distribution of its equity securities, or any
securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to, and during the 120 days
following, the effective date of any underwritten Demand Registration or
any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or any
successor form), unless the underwriters managing the registered public
offering otherwise agree and (ii) to cause each holder of at least 1% (on
a fully diluted basis) of its equity securities, or any securities
convertible into or exchangeable or exercisable for such securities to
agree not to effect any public sale or distribution of any such securities
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered
public offering otherwise agree.
5. Registration Procedures. Whenever the holders of Registrable Shares
have requested that any Registrable Shares be registered pursuant to this
Agreement, the Corporation will use its best efforts to effect the registration
and sale of such Registrable Shares in accordance with the intended method of
disposition thereof and, pursuant thereto, the Corporation will as expeditiously
as possible:
(a) prepare and file with the Commission a registration statement with
respect to such Registrable Shares and use its best efforts to cause such
registration statement to become effective (provided that before filing a
registration statement or prospectus, or any amendments or supplements
thereto, the Corporation will furnish copies of all such documents proposed
to be filed to the counsel or counsels for the sellers of the Registrable
Shares covered by such registration statement);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus(es) used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than nine months and comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period
in
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<PAGE>
accordance with the intended methods of disposition by the sellers thereof
set forth in such registration statement;
(c) furnish to each seller of Registrable Shares such number of copies
of such registration statement, each amendment and supplement thereto, the
prospectus(es) included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may
reasonably request in order to facilitate the disposition of the
Registrable Shares owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Shares under such other securities or blue sky laws of such jurisdictions
as any seller reasonably requests and do any and all other acts and things
which may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the Registrable Shares
owned by such seller (provided that the Corporation will not be required to
(i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject
itself to taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction);
(e) notify each seller of such Registrable Shares, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Corporation will prepare a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such Registrable
Shares, such prospectus will not contain any untrue statement of a material
fact or omit to state any fact necessary to make the statements therein not
misleading;
(f) cause all such Registrable Shares to be listed on each securities
exchange on which similar securities issued by the Corporation are then
listed;
(g) provide a transfer agent and registrar for all such Registrable
Shares not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
holders of a majority of the Registrable Shares being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Shares (including, without limitation,
effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of Registrable Shares,
any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Corporation,
and cause the Corporation's officers, directors, employees and independent
-6-
<PAGE>
accountants to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
(j) advise each seller of such Registrable Shares, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding
for such purpose and promptly use all reasonable efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order
should be issued;
(k) at least 48 hours prior to the filing of any registration
statement or prospectus, or any amendment or supplement to such
registration statement or prospectus, furnish a copy thereof to each seller
of such Registrable Shares and refrain from filing any such registration
statement, prospectus, amendment or supplement to which counsel selected by
the holders of a majority of the Registrable Shares being registered shall
have reasonably objected on the grounds that such document does not comply
in all material respects with the requirements of the Securities Act or the
rules and regulations thereunder, unless, in the case of an amendment or
supplement, in the opinion of counsel for the Corporation the filing of
such amendment or supplement is reasonably necessary to protect the
Corporation from any liabilities under any applicable federal or state law
and such filing will not violate applicable laws; and
(l) at the request of any seller of such Registrable Shares in
connection with an underwritten offering, furnish on the date or dates
provided for in the underwriting agreement: (i) an opinion of counsel,
addressed to the underwriters and the sellers of Registrable Shares,
covering such matters as such underwriters and sellers may reasonably
request, including such matters as are customarily furnished in connection
with an underwritten offering; and (ii) a letter or letters from the
independent certified public accountants of the Corporation addressed to
the underwriters and the sellers of Registrable Shares, covering such
matters as such underwriters and sellers may reasonably request, in which
letter(s) such accountants shall state, without limiting the generality of
the foregoing, that they are independent certified public accountants
within the meaning of the Securities Act and that in their opinion the
financial statements and other financial data of the Corporation included
in the registration statement, the prospectus(es), or any amendment or
supplement thereto, comply in all material respects with the applicable
accounting requirements of the Securities Act.
6. Registration Expenses.
6.1 Corporation's Expenses. All expenses incident to the Corporation's
performance of or compliance with this Agreement, including without
limitation all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, printing expenses, messenger
and delivery expenses, and fees and disbursements of counsel for the
Corporation and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other persons retained by the
Corporation (all such expenses being herein called "Registration
Expenses"), will be borne by the Corporation.
-7-
<PAGE>
6.2 Holder's Expenses. Notwithstanding anything to the contrary
contained herein, each holder of Registrable Shares will pay all attorney
fees and disbursements for counsel they retain in connection with the
registration of Registrable Shares, except that the Corporation will
reimburse the holders of Registrable Shares for the reasonable fees and
disbursements of one counsel chosen by the holders of at least 51% of such
Registrable Shares in connection with a Demand Registration.
7. Indemnification.
7.1 By the Corporation. The Corporation agrees to indemnify, to the
extent permitted by law, each holder of Registrable Shares, its officers
and directors and each person who controls such holder (within the meaning
of the Securities Act) against all losses, claims, damages, liabilities and
expenses (including without limitation, attorney's fees) caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus, or any
amendment thereof or supplement thereto, or any omission or alleged
omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as the same are
caused by or contained in any information furnished in writing to the
Corporation by such holder expressly for use therein or by such holder's
failure to deliver a copy of the registration statement or prospectus or
any amendments or supplements thereto after the Corporation has furnished
such holder with a sufficient number of copies of the same. In connection
with an underwritten offering, the Corporation will indemnify such
underwriters, their officers and directors and each person who controls
such underwriters (within the meaning of the Securities Act) to the same
extent as provided above with respect to the indemnification of the holders
of Registrable Shares. The payments required by this Section 7.1 will be
made periodically during the course of the investigation or defense, as and
when bills are received or expenses incurred.
7.2 By Each Holder. In connection with any registration statement in
which a holder of Registrable Shares is participating, each such holder
will furnish to the Corporation in writing such information and affidavits
as the Corporation reasonably requests for use in connection with any such
registration statement or prospectus and, to the extent permitted by law,
will indemnify the Corporation, its directors and officers and each person
who controls the Corporation (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities and expenses resulting
from any untrue or alleged untrue statement of material fact contained in
the registration statement, prospectus or preliminary prospectus, or any
amendment thereof or supplement thereto, or any omission or alleged
omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading, but only to the extent that
such untrue statement or omission is contained in any information or
affidavit so furnished in writing by such holder; provided that the
obligation to indemnify will be several, not joint and several, among such
holders of Registrable Shares and the liability of each such holder of
Registrable Shares will be in proportion to and limited to the net amount
received by such holder from the sale of Registrable Shares pursuant to
such registration statement.
-8-
<PAGE>
7.3 Procedure. Any person entitled to indemnification hereunder will
(i) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party. If such defense
is assumed, the indemnifying party will not be subject to any liability for
any settlement made by the indemnified party without its consent (but such
consent will not be unreasonably withheld). An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not
be obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim.
7.4 Survival. The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation made
by or on behalf of the indemnified party or any officer, director or
controlling person of such indemnified party and will survive the transfer
of securities. The Corporation also agrees to make such provisions as are
reasonably requested by any indemnified party for contribution to such
party in the event the Corporation's indemnification is unavailable for any
reason.
8. Compliance with Rule 144. In the event that the Corporation (a)
registers a class of securities under Section 12 of the Exchange Act or (b)
commences to file reports under Section 13 or l5(d) of the Exchange Act, then at
the request of any holder who proposes to sell securities in compliance with
Rule 144 of the Commission, the Corporation will (i) forthwith furnish to such
holder a written statement of compliance with the filing requirements of the
Commission as set forth in Rule 144, as such rules may be amended from time to
time and (ii) make available to the public and such holders such information as
will enable the holders to make sales pursuant to Rule 144.
9. Participation in Underwritten Registrations. No person may participate
in any registration hereunder which is underwritten unless such person (a)
agrees to sell its securities on the basis provided in any underwriting
arrangements approved by such person or persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, custody agreements, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting arrangements.
10. Miscellaneous.
10.1 No Inconsistent Agreements. The Corporation will not hereafter
enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the holders of Registrable Shares
in this Agreement.
10.2 Adjustments Affecting Registrable Shares. The Corporation will
not take any action, or permit any change to occur, with respect to its
securities which would adversely affect the ability of the holders of
Registrable Shares to include such
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<PAGE>
Registrable Shares in a registration undertaken pursuant to this Agreement
or which would adversely affect the marketability of such Registrable
Shares in any such registration, including, without limitation, effecting a
stock split or combination of shares.
10.3 Other Registration Rights. Except as provided in this Agreement,
the Corporation will not hereafter grant to any person or persons the right
to request the Corporation to register any equity securities of the
Corporation, or any securities convertible or exchangeable into or
exercisable for such securities, without the prior written consent of the
holders of at least 51% of the Registrable Shares. The Corporation will not
include in any Demand Registration any securities which are not Registrable
Shares (for the purposes of Section 2) unless and until all Registrable
Shares requested to be registered have first been so included.
10.4 Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto will bind and inure to the benefit of
the respective successors and assigns of the parties hereto, whether so
expressed or not. In addition, and whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit
of the Purchasers or holders of registrable Shares are also for the benefit
of, and enforceable by, any subsequent holders of such Registrable Shares.
10.5 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
10.6 Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part
of and shall not be utilized in interpreting this Agreement.
10.7 Notices. Any notices required or permitted to be sent hereunder
shall be delivered personally or mailed, certified mail, return receipt
requested, or delivered by overnight courier service to the following
addresses, or such other address as any party hereto designates by written
notice to the Corporation, and shall be deemed to have been given upon
delivery, if delivered personally, three days after mailing, if mailed, or
one business day after delivery to the courier, if delivered by overnight
courier service:
If to the Corporation, to:
Blue Rhino Corporation
104 Cambridge Park
Winston-Salem, North Carolina 27104
Attention: Billy Prim, Chief Executive Officer
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<PAGE>
with a copy to:
House Law Firm
P.O. Drawer 26015
Winston-Salem, North Carolina 27114-6015
Attention: Don R. House, Esq.
If to Purchasers, to:
Platinum Venture Partners I, L.P.
1815 S. Meyers Road
Oakbrook Terrace, Illinois 60181
Attention: Michael A. Santer
with a copy to:
Katten Muchin & Zavis
525 W. Monroe Street, Suite 1600
Chicago, Illinois 60661
Attention: Matthew S. Brown, Esq.
10.8 Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement, and the performance of the
obligations imposed by this Agreement, shall be governed by the laws of the
State of Delaware applicable to contracts made and wholly to be performed
in that state.
10.9 Final Agreement. This Agreement, together with the Securities
Purchase Agreement and all other agreements entered into by the parties
hereto pursuant to the Securities Purchase Agreement, constitutes the
complete and final agreement of the parties concerning the matters referred
to herein, and supersedes all prior agreements and understandings.
10.10 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall
be deemed an original, and such counterparts together shall constitute one
instrument.
10.11 No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be used against any
party.
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<PAGE>
The parties hereto have executed this Registration Rights Agreement on the
date first set forth above.
Signatures
BLUE RHINO CORPORATION
By: /s/ BILLY PRIM
-----------------------------------
Billy Prim, Chief Executive Officer
PLATINUM VENTURE PARTNERS I, L.P.
By: PLATINUM VENTURE PARTNERS, INC.
By: /s/ MICHAEL SANTER
------------------------------
Michael Santer, Vice President
/s/ ANDREW J. FILIPOWSKI
----------------------------------------
Andrew J. Filipowski
/s/ CRAIG J. DUCHOSSOIS
----------------------------------------
Craig J. Duchossois
/s/ BOBBY SLATE
----------------------------------------
Bobby Slate
/s/ JAMES R. HARDIN
----------------------------------------
James R. Hardin
/s/ ROBERT F. STEEL & JENNIFER STEEL
----------------------------------------
Robert F. Steel & Jennifer Steel JTWROS
/s/ THOMAS E. GLEITSMAN
----------------------------------------
Thomas E Gleitsman
/s/ TOM AUSTIN
----------------------------------------
Tom Austin
/s/ RAY MAYNARD
----------------------------------------
Ray Maynard
/s/ ROBERT L. JACOBS
----------------------------------------
Robert L. Jacobs
/s/ FRANK MURNANE, SR.
----------------------------------------
Frank Murnane, Sr.
/s/ FRANK MURNANE, JR.
----------------------------------------
Frank Murnane, Jr.
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<PAGE>
GABRIEL, INC.
By: /s/ JIMMY LIAUTAUD
-------------------------
Jimmy Liautaud, Director
/s/ JAMES ALAN BOOE
-----------------------------
James Alan Booe
/s/ JOE WALLACE
-----------------------------
Joe Wallace
/s/ LENNARD CARLSON
-----------------------------
Lennard Carlson
/s/ RICHARD CARLSON
-----------------------------
Richard Carlson
/s/ BAXTER KIGER
-----------------------------
Baxter Kiger
/s/ PETER VITULLI
-----------------------------
Peter Vitulli
/s/ BARRY SYLVESTER
-----------------------------
Barry Sylvester
/s/ JAMES BARZYK
-----------------------------
James Barzyk
/s/ ALEXANDER DANZBERGER
-----------------------------
Alexander Danzberger
COLE TAYLOR BANK CUSTODIAN FBO
ARTHUR FRIGO IRA #8417
By: /s/ NORMA E. COLON
-------------------------
Norma E. Colon, Trust Officer, IRA
HUIZENGA CAPITAL MANAGEMENT
By: /s/ PETER H. HUIZENGA
-------------------------
Peter H. Huizenga, Sole Proprietor
PETER H. HUIZENGA TESTAMENTARY TRUST
By: /s/ PETER H. HUIZENGA
-------------------------
Peter H. Huizenga, Trustee
/s/ BILLY PRIM
--------------
Billy Prim
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<PAGE>
KIMBERLY FAMILY DISCRETIONARY TRUST
By: /s/ CRAIG J. DUCHOSSOIS
---------------------------------------
Craig J. Duchossois, Trustee
/s/ EDWARD A. FORTINO & DAYLE
DUCHOSSOIS-FORTINO
--------------------------------------------
Edward A. Fortino & Dayle Duchossois-Fortino
JTWROS
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<PAGE>
Schedule 1
Investors
---------
Platinum Venture Partners I, L.P.
Andrew J. Filipowski
Craig Duchossois
Bobby Slate
James R. Hardin
Robert F. Steel & Jennifer Steel JTWROS
Thomas E. Gleitsman
Tom Austin
Ray Maynard
Robert L. Jacobs
Frank Murnane, Sr.
Frank Murnane, Jr.
Gabriel, Inc. (c/o Jimmy Liautaud)
James Alan Booe
Joe Wallace
Lennard Carlson
Richard Carlson
Baxter Kiger
Peter Vitulli
Barry Sylvester
James Barzyk
Alexander Danzberger
Cole Taylor Bank Custodian FBO Arthur Frigo IRA #8417
Huizenga Capital Management
Peter H. Huizenga Testamentary Trust
Billy Prim
Kimberly Family Discretionary Trust (c/o Craig Duchossois)
Edward A. Fortino & Dayle Duchossois-Fortino JTWROS
<PAGE>
SHAREHOLDERS' AGREEMENT
-----------------------
THIS SHAREHOLDERS' AGREEMENT (this "Agreement"), dated as of December 1,
1994, is by and between BLUE RHINO CORPORATION, a Delaware corporation (the
"Corporation"), the persons and entities identified on Schedule 1 attached
hereto (the "Investors"), and the persons identified on Schedule 2 attached
hereto (the "Management Stockholders").
RECITALS
--------
A. The Investors have agreed to purchase the Series A Preferred
Securities (as defined in Section 1 below) pursuant to that certain Series A
Securities Purchase Agreement dated as of an even date herewith (the "Securities
Purchase Agreement") provided that the parties hereto enter into this Agreement.
B. To induce the Investors to purchase the Series A Preferred Securities,
the Corporation and the Management Stockholders deem it desirable to enter into
this Agreement.
AGREEMENTS
----------
In consideration of the recitals and the mutual promises, covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Definitions.
"Commission" means the Securities and Exchange Commission.
"Common Shares" means the shares of Common Stock which have not been sold
to the public (i) pursuant to a registration statement declared effective by the
Commission, or (ii) pursuant to Rule 144 promulgated by the Commission under the
Securities Act. For the purposes of this Agreement, any Holder will be deemed to
own, in addition to any Common Shares such Holder actually owns, any Common
Shares which would then be directly or indirectly issuable upon the conversion
or exercise (whether nor not then convertible or exercisable) of any other
Securities owned by such Holder and such other Securities shall be deemed to
represent such Common Shares.
"Common Stock" means the Common Stock, par value $0.001 per share, of the
Corporation.
"Holder" is any holder (or deemed holder) of Securities who is a party to
this Agreement (or becomes a party hereto pursuant to Section 14 hereof) or is a
successor or assign or subsequent holder contemplated by Section 19 hereof.
<PAGE>
"Management Securities" means, at any time, (i) Securities then held by
Management Stockholders, (ii) Securities that were on or after the date hereof
held by a Management Stockholder but are then held by (A) a successor or assign
of such Management Stockholder (other than an Investor) or (B) a subsequent
Holder (other than an Investor), and (iii) Securities that were issued as, or
upon conversion or exercise of other Securities issued as, a dividend or other
distribution with respect to or in replacement of other Management Securities
and are then held by (1) a Management Stockholder, (2) a successor or assign of
such Management Stockholder (other than an Investor) or (3) a subsequent Holder
(other than an Investor); provided, however, that Management Securities shall
not include any securities which have been sold to the public pursuant to a
registration statement declared effective by the Commission or pursuant to Rule
144 promulgated by the Commission under the Securities Act. For purposes of
this Agreement, the calculation of the number of Management Securities (to the
extent such Securities are not Common Shares) shall be determined on an as-
converted basis into Common Shares.
"New Securities" means (i) any capital stock of the Corporation or any
other securities or other obligations of the Corporation, including any equity
or equity like profit participation rights, whether now authorized or not, (ii)
any rights, options, or warrants to purchase any such capital stock or rights,
or to purchase any securities of any type whatsoever that are, or may become,
convertible into any such capital stock, and (iii) any securities of any type
whatsoever that are, or may become convertible into any such capital stock or
rights; provided, however that "New Securities" will not include (A) securities
offered to the public pursuant to a registration statement under the Securities
Act, (B) options or securities issued to, or securities issued upon exercise of
options issued to officers, directors or employees of the Corporation, (C)
securities issued upon conversion of the Series A Preferred Shares or the
Warrants, (D) securities issued pursuant to the Securities Purchase Agreement,
(E) securities issued in connection with the acquisition of another corporation
by the Corporation by merger, purchase of all or substantially all of such other
corporation's assets, or by other reorganization whereby the Corporation ends up
owning, directly or indirectly, greater than 50% of the voting power of such
corporation, and/or (F) Common Stock issued upon exercise of options
outstanding on the date hereof.
"Person" means a natural person, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or other entity, or a governmental entity or any department, agency
or political subdivision thereof.
"Platinum" means Platinum Venture Partners I, L.P., a Delaware limited
partnership.
"Qualified Public Offering" has the meaning ascribed to it in Section 4.7
of ARTICLE FOUR of the Certificate of Incorporation of the Corporation, as in
effect on the date hereof.
"Securities" means Common Shares or shares of capital stock or other
securities directly or indirectly exercisable for or convertible into Common
Shares; provided, however, that Securities shall not include any securities
which have been sold to the public pursuant to a registration statement declared
effective by the Commission or pursuant to Rule 144 promulgated by the
Commission under the Securities Act.
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<PAGE>
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Securities" means, at any time, (i) Series A Preferred
Shares, (ii) Common Shares issued upon conversion of Series A Preferred Shares,
(iii) Warrants, (iv) Common Shares issued upon exercise of the Warrants and (v)
Common Shares or other securities issued upon the conversion or in replacement
of other Series A Preferred Securities. For purposes of this Agreement, the
calculation of the number of Series A Preferred Securities shall be determined
on an as-converted (or as exercised) basis into Common Shares.
"Series A Preferred Shares" means those shares of Series A Convertible
Participating Preferred Stock, par value $0.01 per share, of the Corporation
duly issued and outstanding on the date hereof.
"Warrants" means the warrants to purchase Common Stock issued pursuant to
the Securities Purchase Agreement and any securities issued as a dividend or
other distribution with respect to or in replacement of the Warrants.
"Subsidiary" means, with respect to any corporation, any Person of which
securities or other ownership interests representing more than 50% of the
ordinary voting power are, at the time as of which any determination is being
made, owned or controlled by such corporation or one or more Subsidiaries of
such corporation or by such corporation and one or more Subsidiaries of such
corporation.
2. Disposition of Securities. No Holder of Management Securities will
transfer, sell, convey, exchange or otherwise dispose of (herein referred to as
a "disposition" or "to dispose of") such Management Securities, except in a
Qualified Public Offering or in compliance with Sections 3 and 4 or as permitted
by Section 5.
3. Right of First Refusal--Outstanding Management Securities.
(a) Subject to the limitations of Section 2 hereof, if any Holder of
Management Securities (the "Selling Management Holder") desires to dispose
of any Management Securities in compliance with this Section, such Selling
Management Holder will first give written notice (the "Management
Securities Offer Notice") to the Corporation which will, within five (5)
days of the date of receipt of such notice (the "Management Securities
Offer Date"), send or deliver a copy of the Management Securities Offer
Notice to each Holder of Series A Preferred Securities, to the effect that
such Selling Management Holder wishes to dispose of such Management
Securities (the "Offered Management Securities"), stating the price at and
other material terms upon which such Selling Management Holder wishes to
dispose of such Management Securities and offering to sell such Management
Securities, in whole or in part (the "Management Securities Offer"), first
to the Corporation, and then to the Holders of Series A Preferred
Securities, pursuant to this Section, at the price and on the other
material terms described in the Management Securities Offer Notice.
(b) The Corporation may accept the Management Securities Offer in
whole or indicate a desire to accept the Management Securities Offer in
part by giving written
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<PAGE>
notice thereof to the Selling Management Holder within fifteen (15) days
of the Management Securities Offer Date.
(c) In the event the Corporation does not accept the Management
Securities Offer in its entirety as provided in subsection (b) of this
Section, the Corporation will promptly notify in writing the Holders of the
Series A Preferred Securities, and such Holders may elect to purchase, pro
rata according to the number of Common Shares that would be held on an as-
converted basis by each such Holder that wishes to purchase such
securities, or in such other proportions as such Holders may agree upon,
the Offered Management Securities with respect to which the Management
Securities Offer has not then been accepted by the Corporation, by giving
written notice to the Corporation and the Selling Management Holder within
thirty (30) days of the Management Securities Offer Date. For example,
assuming (for the purpose of this example only) (i) a Management
Stockholder desires to dispose of 100 Management Securities, (ii) the
Corporation purchases 10 of such Management Securities pursuant to
paragraph (b) of this Section 3, (iii) Platinum is deemed to hold 40 of the
100 Common Shares that would be held (or deemed to be held) by each Holder
of Series A Preferred Securities and (iv) all Holders of Series A Preferred
Securities wish to purchase such Management Securities, then Platinum would
be entitled to purchase 36 of the remaining 90 Management Securities
pursuant to this Section 3 and the other Holders of Series A Preferred
Securities would be entitled to purchase 54 Management Securities pro rata.
Similarly, assuming (for the purpose of this example only) (i) a Management
Stockholder desires as above to dispose of 100 Management Securities, (ii)
the Corporation purchases as above 10 of said Management Securities
pursuant to paragraph (b) of this Section 3, (iii) the Holders of 50 of the
100 Common Shares that would be held (or deemed to be held) by the Holders
of Series A Preferred Securities wish to purchase such Management
Securities, and (iv) Platinum holds 10 of such 50 Common Shares, then
Platinum would be entitled to purchase 18 of the remaining 90 Management
Securities hereunder and the other Holders of Series A Preferred Securities
who wish to purchase such Management Securities would be entitled to
purchase 72 Management Securities pro rata.
(d) In the event that the Management Securities Offer has not been
accepted in its entirety by the Corporation, or the other Holders of the
Series A Preferred Securities, or both in accordance with this Section, the
Selling Management Holder may dispose of all, and the Corporation and the
other Holders of the Series A Preferred Securities shall not be entitled to
purchase any, of the Offered Management Securities, subject to the
provisions of Section 4, to one or more purchasers who each agree in
writing to be bound by the terms of this Agreement as a Management
Stockholder and a Holder of Management Securities, on substantially the
same terms stated in the Management Securities Offer Notice at any time up
to one hundred (100) days after the Management Securities Offer Date.
Thereafter, the provisions of this Section will again apply.
4. Take-along.
(a) After satisfying the requirements of Section 3, a Management
Stockholder (the "Disposing Management Stockholder") may sell or transfer
Management Securities
-4-
<PAGE>
in a transaction other than a Qualified Public Offering only to a
transferee who purchases such Management Securities as part of a
transaction in which a pro rata portion (as hereinafter defined) of the
aggregate number of Securities being purchased by such transferee is being
purchased from each Holder of Series A Preferred Securities who chooses to
participate in such transaction. For purposes of the preceding sentence,
"pro rata portion" means, with respect to any Holder of Series A Preferred
Securities, the proportion equal to (a) the number of Common Shares held
(or deemed held) by such Holder of Series A Preferred Securities divided by
(b) the sum of (1) the number of Common Shares held (or deemed held) by all
Holders of Series A Preferred Securities who choose to participate in such
transaction and (2) the number of Common Shares held (or deemed held) by
the Disposing Management Stockholder. Before a Disposing Management
Stockholder accepts any offer for the sale of any Management Securities for
which this Section is to apply, such Disposing Management Stockholder shall
give written notice (the "Take-along Notice") to the Corporation (which
shall, within five (5) days of the date of receipt of such notice (the
"Take-along Notice Date"), send or deliver a copy of the Take-along Notice
to each Holder of Series A Preferred Securities), stating the material
terms of the offer. If a Holder of Series A Preferred Securities wishes to
participate in such sale, such Holder of Series A Preferred Securities will
give the Corporation and the Disposing Management Stockholder notice to
such effect within twenty (20) days of the Take-along Notice Date. For
example, assuming (for the purpose of this example only) (i) a Management
Stockholder who holds (or is deemed to hold) 60 Common Shares wishes to
dispose of 30 of such Common Shares, (ii) Platinum holds 40 of the 100
Common Shares held (or deemed held) by the Holders of participating Series
A Preferred Securities, (iii) the other participating Holders of Series A
Preferred Securities hold 60 of such 100 Common Shares, (iv), then Platinum
would be entitled to sell 7.5 Common Shares hereunder, the participating
Holders of Series A Preferred Securities would be entitled to sell 11.25
Common Shares hereunder, and the Management Stockholder would be entitled
to sell 11.25 Common Shares hereunder.
(b) In connection with any sale under this Section 4 in which
Holders of Series A Preferred Securities elect to participate, the total
consideration for any such transaction shall be allocated among the shares
being sold by the Disposing Management Stockholder and the Series A
Preferred Shares being sold such that an amount equal to the Liquidation
Value of the Series A Preferred Shares (as defined in the Corporation's
Certificate of Incorporation as in effect on the date hereof) being sold
shall first be paid with respect to such Series A Preferred Shares and any
remaining consideration shall be paid ratably for the Management Securities
being sold and the number of shares of Common Stock into which the Series A
Preferred Shares being sold are then convertible.
5. Permitted Transfers. Any Holder of Management Securities may transfer
such Management Securities without complying with Section 3 or Section 4, to
Permitted Transferees who consent in a writing delivered to the Corporation to
be bound by the terms of this Agreement as Management Stockholders. With respect
to any Holder of Management Securities, "Permitted Transferee" means the
Corporation, any other Management Stockholder, the spouse or lineal descendants
of such Holder, any trust for the benefit of such Holder or the benefit of the
spouse or lineal descendants of such Holder, any corporation or partnership in
which such Holder, the spouse and the lineal descendants of such Holder are the
direct and beneficial owners
-5-
<PAGE>
of all of the equity interests (provided such Holder, spouse and lineal
descendants agree in writing to remain the direct and beneficial owners of all
such equity interests), and the personal representative of such Holder upon such
Holder's death for purposes of administration of such Holder's estate or upon
such Holder's incompetency for purposes of the protection and management of
the assets of such Holder.
6. Pledges. No Holder of Management Securities will pledge or otherwise
grant a security interest in any Management Securities.
7. Confidentiality. Each Holder agrees to at all times hold in confidence
and keep secret and inviolate all of the Corporation's confidential information,
including, without limitation, all unpublished matters relating to the business,
property, accounts, books, records, customers and contracts of the Corporation
which such Holder may or hereafter come to know; provided, however, that any
Holder may disclose any such information which has otherwise entered the public
domain or as to which such Holder has obtained knowledge from sources other than
the Corporation or the executive officers or directors of the Corporation
(provided that such source is not bound by a confidentiality agreement with the
Corporation) or which it is required to disclose to any governmental authority
by law or subpoena or judicial process or in connection with a registered public
offering under the Securities Act or a sale to the public pursuant to Rule 144
promulgated by the Commission under the Securities Act or in a private sale
which is permitted or not prohibited hereunder; provided further, however, that
Platinum may disclose summary financial information and descriptive information
pertaining to the Corporation to its limited partners in its routine reports.
8. Board of Directors.
(a) Each of the Holders agrees to take all action necessary including,
without limitation, the voting of its shares of stock of the Corporation,
the execution of written consents, the calling of special meetings, the
removal of directors, the filling of vacancies on the Board of Directors,
the waiving of notice and the attending of meetings, so as to cause (i) the
number of members of the Board of Directors to be nine and (ii) the Board
of Directors of the Corporation to be at all times comprised of the
following persons:
(A) the Chief Executive Officer of the Corporation, who is
Billy Prim as of the date hereof;
(B) the President of the Corporation, who is Jeremiah
Callahan as of the date hereof;
(C) the Vice Chairman of the Corporation, who is Andrew
Filipowski as of the date hereof;
(D) the Chief Financial Officer of the Corporation, who is
S. H. Fogleman, III, as of the date hereof (in the event that any two
or more of the offices in clauses (A), (B), (C) and (D) of this
Section 8(a) are filled by one person or are vacant, then such other
senior executive officer(s) of the Corporation as the Holders of
Common Shares may designate);
-6-
<PAGE>
(E) four persons designated by the Holders of Series A
Preferred Securities, which four persons shall include two persons
designated by Platinum; and
(F) one person, who is not an employee or officer of the
Corporation or any of its Subsidiaries and who has significant
relevant industry experience, designated by a majority of the other
members of the Board of Directors.
(b) Notwithstanding the provisions of paragraph (a) of this Section,
the Holders of Series A Preferred Securities shall possess all of the
rights provided for in the Certificate of Incorporation of the Corporation,
as in effect on the date hereof, upon the occurrence of an Event of
Noncompliance (as defined therein) and the exercise of such rights shall
not violate the provisions of this Section.
(c) The Corporation shall hold quarterly meetings of the Board of
Directors.
9. Observation Rights. So long as Platinum or its nominee is a Holder of
Series A Preferred Securities:
(a) Platinum shall have the right to select, at any time and from
time to time, one representative (the "Representative") to attend and
observe each meeting of the Board of Directors and any other strategic
planning or similar type meeting of the Board of Directors or trade shows
or other similar events relating to the business of the Corporation and the
Corporation shall pay or cause to be paid on behalf of the Corporation the
reasonable out-of-pocket travel expenses incurred by such Representative in
connection with his or her attendance at such meetings or events;
(b) The Corporation shall give Platinum (i) at least 15 days' advance
notice of each regular meeting of the Board of Directors and such advance
notice as is reasonable under the circumstances to enable the
Representative to attend each special or emergency meeting of the Board of
Directors, (ii) on or prior to the date of each meeting of the Board of
Directors, all information given to the directors of the Corporation at or
in connection with such meeting, and (iii) as soon as available but in any
event not later than 45 days after each meeting of the Board of Directors,
copies of the minutes of such meeting. In the event that the Board of
Directors shall act by unanimous written consent in lieu of a meeting, the
Corporation shall give Platinum and the Representative a copy of such
written consent at least five business days prior to the earlier of the
adoption or effective date thereof, together with all information given to
the directors of the Corporation in connection with such action; provided,
however, that in the event immediate action is required to address an
emergency situation, the Corporation shall be in compliance with this
sentence if the Corporation shall send Platinum and the Representative a
copy of such written consent and information by telecopier at the same time
as such consent and information is sent to the members of the Board of
Directors for their review and signature.
-7-
<PAGE>
(c) The Corporation shall comply with all provisions of its by-laws
relating to meetings of the Board of Directors, including, without
limitation, those relating to notice and to the time and date of meetings
and action by written consent; and
(d) The Representative shall have the right (but not the obligation)
to consult with and advise the management of the Corporation at any time or
from time to time, by telephone or in person, on such matters relating to
the operation of the Corporation as the Representative shall deem
appropriate (including, without limitation, matters regarding capital
expenditures, acquisitions and management compensation).
10. Compensation Committee. The Board of Directors and the Corporation
will maintain a "Compensation Committee" which will be comprised of one
director designated by Platinum and two directors designated by the Holders of
Common Shares (the "Compensation Committee"). The Compensation Committee shall
be responsible for and have authority to establish the compensation of the
executive officers of the Corporation with the approval of the committee member
who is designated by Platinum.
11. Board Reimbursements. The Corporation shall reimburse all Persons
serving as directors of the Corporation for their reasonable out-of-pocket
expenses in connection with attending meetings of the Board of Directors and all
committees thereof and all reasonable expenses otherwise incurred in fulfilling
their duties as directors.
12. Right of First Refusal.
(a) Each Holder or Series A Preferred Securities shall have the right
of first refusal to purchase his, her or its proportionate number, or any lesser
number, of any New Securities for which the Corporation has received a bona fide
offer from a prospective purchaser and which the Corporation proposes to sell
and issue to such purchaser. Each Holder of Series A Preferred Securities shall
have rights of over-allotment such that, if any Holder of Series A Preferred
Securities fails to exercise his, her or its rights hereunder to purchase his,
her or its proportionate number of New Securities, the Holders of Series A
Preferred Securities may purchase the non-purchasing Holder's portion on a pro
rata basis within ten days from the date on which they receive written notice
that such non-purchasing Holder has failed to exercise his, her or its right
hereunder to purchase his, her or its proportionate number. For purposes of this
Section, a Holder's "proportionate number" means the product obtained by
multiplying the number of New Securities proposed to be sold and issued by a
fraction, the numerator of which will be the number of Common Shares owned (or
deemed owned) by such Holder of Series A Preferred Securities and the
denominator of which will be the total number of Common Shares owned (or deemed
owned) by all Holders of Series A Preferred Securities. For purposes of this
Section, "pro rata" among the Holders of Series A Preferred Securities means in
proportion to the number of Common Shares owned (or deemed owned) by such
Holders of Series A Preferred Securities.
(b) In the event the Corporation receives a bona fide offer for the
purchase of New Securities from a prospective purchaser and the Corporation
proposes to sell and issue such New Securities, the Corporation will submit to
each Holder of Series A
-8-
<PAGE>
Preferred Securities written notice identifying the prospective purchaser
and describing the New Securities and the price and terms upon which the
Corporation would issue and sell the same, and setting forth the total
number of New Securities to be issued and sold and such Holder's
proportionate number. Each such Holder of Series A Preferred Securities
will have fifteen (15) days from the date of receipt of any notice to agree
to purchase his, her or its proportionate number or any lesser number of
such New Securities, for the price and upon the terms specified in the
notice by giving written notice to the Corporation and stating therein the
quantity of New Securities to be purchased. If two or more types of New
Securities are to be issued or New Securities are to be issued together
with other types of securities, including, without limitation, debt
securities, in a single transaction or related transactions, the rights to
purchase New Securities granted to Holders of Series A Preferred Securities
under this Section must be exercised to purchase all types of New
Securities and such other securities in the same proportion as such New
Securities and other securities are to be issued by the Corporation.
(c) In the event the Holders of Series A Preferred Securities fail to
exercise the right of first refusal within said 15-day period and after the
expiration of the l0-day period for the exercise of over-allotment rights
pursuant to subsection (a) above, with respect to all the New Securities,
the Corporation will have 90 days thereafter to sell or enter into a
binding and unconditional agreement (pursuant to which the sale of New
Securities covered thereby will be, and is, consummated within 90 days from
the date of said agreement) to sell the New Securities as to which such
Holders' right was not exercised, to the prospective purchaser identified
in, and at the price and upon the terms specified in, the Corporation's
notice. In the event the Corporation has not sold such New Securities
within said 90-day period (or sold and issued such new Securities in
accordance with the foregoing within 90 days from the date of said
agreement), the Corporation will not thereafter issue or sell any New
Securities to a prospective purchaser without first offering such New
Securities to the Holders of Series A Preferred Securities in the manner
provided above.
13. Execution. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered will be deemed an
original, and such counterparts together will constitute one instrument.
14. Subsequent Management Stockholders.
(a) The Corporation will not issue or sell any Securities to any
employee or officer of the Corporation who, after giving effect to such
issuance or sale, owns, directly or indirectly, one percent (1%) or more of
the outstanding Securities of the Corporation (on a fully diluted basis),
unless such employee or officer agrees in writing to be bound by the terms
of this Agreement as a Management Stockholder and a Holder of Management
Securities. Upon the delivery to the Corporation of such written consent,
such officer or employee shall be bound by and entitled to the benefits of
this Agreement in such capacity.
-9-
<PAGE>
15. Legend. The Corporation will stamp or imprint each certificate or
other instrument representing Securities, throughout the term of this Agreement,
with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
PROVISIONS, INCLUDING, AMONG OTHERS, RESTRICTIONS ON VOTING AND
TRANSFER, SET FORTH IN A CERTAIN SHAREHOLDERS' AGREEMENT DATED AS OF
DECEMBER 1, 1994, A COPY OF WHICH IS AVAILABLE AT THE PRINCIPAL OFFICE
OF BLUE RHINO CORPORATION."
16. Remedies. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages will not be an adequate remedy for any breach of the
provisions of this Agreement and that a party may in its sole discretion apply
to any court of law or equity of competent jurisdiction for specific performance
or injunctive relief (without the necessity of posting a bond) in order to
enforce or prevent any violations of the provisions of this Agreement.
17. Notices. Any notices desired, required or permitted to be given
hereunder shall be delivered personally or mailed, certified or registered mail,
return receipt requested, or delivered by overnight courier service, to the
following addresses, or such other addresses as shall be given by notice
delivered hereunder, and shall be deemed to have been given upon delivery, if
delivered personally, five days after mailing, if mailed, or one business day
after delivery to the overnight courier service, if delivered by overnight
courier service:
If to the Corporation, to:
Blue Rhino Corporation
104 Cambridge Park
Winston-Salem, North Carolina 27104
Attention: Billy Prim, Chief Executive Officer
with a copy to:
House Law Firm
P.O. Drawer 26015
Winston-Salem, North Carolina 27114-6015
Attention: Don R. House, Esq.
If to the Holders of Management Securities; to the addresses set forth on
the stock record books of the Corporation.
If to the Holders of Series A Preferred Securities, to the addresses set
forth on the stock record books of the Corporation.
-10-
<PAGE>
With a copy to:
Katten Muchin & Zavis
525 W. Monroe Street, Suite 1600
Chicago, Illinois 60661
Attention: Matthew S. Brown, Esq.
18. Amendments and Waivers. The provisions of this Agreement may be
amended upon the written agreement of the Corporation, the Holder or Holders of
two-thirds of the Series A Preferred Securities and the Holder or Holders of a
majority of the Management Securities. Any waiver, permit, consent or approval
of any kind or character on the part of any Holders of any provision or
condition of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in writing.
19. Successors and Assigns. All covenants and agreements in this Agreement
by or on behalf of any of the parties hereto will bind and inure to the benefit
of the respective successors and assigns of the parties hereto, and each
transferee of all or any portion of the Securities held by the parties hereto,
whether so expressed or not.
20. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
21. Governing Law. All questions concerning the construction, validity and
interpretation of, and the performance of the obligations imposed by, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware applicable to contracts made and wholly to be performed in
that state.
22. Termination of this Agreement. Except as otherwise provided herein,
this Agreement shall terminate upon the earlier of (a) the date on which less
than 10% of the Series A Preferred Securities at any time issued shall remain
outstanding or (b) the closing of a Qualified Public Offering.
23. References to Sections; Headings. References to Sections shall be
references to Sections in this Agreement, unless otherwise indicated. Section
headings are for reference only and shall not be given meaning in interpreting
this Agreement.
-11-
<PAGE>
This Shareholders' Agreement was executed as of the date first set forth
above.
Signatures
CORPORATION:
BLUE RHINO CORPORATION
By: /s/ BILLY PRIM
------------------
Billy Prim, Chief Executive Officer
INVESTORS:
PLATINUM VENTURE PARTNERS I, L.P.
By: PLATINUM VENTURE PARTNERS, INC.
By: /s/ MICHAEL SANTER
----------------------
Michael Santer, Vice President
/s/ ANDREW J. FILIPOWSKI
------------------------
Andrew J. Filipowski
/s/ CRAIG J. DUCHOSSOIS
-----------------------
Craig J. Duchossois
/s/ BOBBY SLATE
---------------
Bobby Slate
/s/ JAMES R. HARDIN
-------------------
James R. Hardin
/s/ ROBERT F. STEEL & JENNIFER STEEL
------------------------------------
Robert F. Steel & Jennifer Steel JTWROS
/s/ THOMAS E. GLEITSMAN
-----------------------
Thomas E. Gleitsman
/s/ TOM AUSTIN
--------------
Tom Austin
/s/ RAY MAYNARD
---------------
Ray Maynard
/s/ ROBERT L. JACOBS
--------------------
Robert L. Jacobs
/s/ FRANK MURNANE, SR.
----------------------
Frank Murnane, Sr.
-12-
<PAGE>
/s/ FRANK MURNANE, JR.
----------------------
Frank Murnane, Jr.
GABRIEL, INC.
By: /s/ JIMMY LIAUTAUD
----------------------
Jimmy Liautaud, Director
/s/ JAMES ALAN BOOE
-------------------
James Alan Booe
/s/ JOE WALLACE
---------------
Joe Wallace
/s/ LENNARD CARLSON
-------------------
Lennard Carlson
/s/ RICHARD CARLSON
-------------------
Richard Carlson
/s/ BAXTER KIGER
----------------
Baxter Kiger
/s/ PETER VITULLI
-----------------
Peter Vitulli
/s/ BARRY SYLVESTER
-------------------
Barry Sylvester
/s/ JAMES BARZYK
----------------
James Barzyk
/s/ ALEXANDER DANZBERGER
------------------------
Alexander Danzberger
COLE TAYLOR BANK CUSTODIAN FBO
ARTHUR FRIGO IRA #8417
By: /s/ NORMA E. COLON
----------------------
Norma E. Colon, Trust Officer, IRA
HUIZENGA CAPITAL MANAGEMENT
By: /s/ PETER H. HUIZENGA
-------------------------
Peter H. Huizenga, Sole Proprietor
PETER H. HUIZENGA TESTAMENTARY TRUST
By: /s/ PETER H. HUIZENGA
-------------------------
-13-
<PAGE>
Peter H. Huizenga, Trustee
/s/ BILLY PRIM
--------------
Billy Prim
KIMBERLY FAMILY DISCRETIONARY TRUST
By: /s/ CRAIG J. DUCHOSSOIS
---------------------------
Craig J. Duchossois, Trustee
/s/ EDWARD A. FORTINO & DAYLE DUCHOSSOIS-FORTINO
Edward A. Fortino & Dayle Duchossois-Fortino JTWROS
MANAGEMENT STOCKHOLDERS:
/s/ BILLY D. PRIM
-----------------
Billy D. Prim
/s/ ANDREW J. FILIPOWSKI
------------------------
Andrew J. Filipowski
/s/ DEBBIE W. PRIM
------------------
Debbie W. Prim
/s/ MAYO M. MCCORMICK
---------------------
Mayo M. McCormick
/s/ JEANNIE CANNON
------------------
Jeannie Cannon
/s/ LUANNE HOLDEN
-----------------
Luanne Holden
/s/ CHRIS HOLDEN
----------------
Chris Holden
DEBBIE W. PRIM, TRUSTEE FOR SARKANDA
U. WESTMORELAND
By: /s/ DEBBIE W. PRIM
----------------------
Debbie W. Prim, Trustee
DEBBIE W. PRIM, TRUSTEE FOR ANTHONY
G. WESTMORELAND
By: /s/ DEBBIE W. PRIM
----------------------
Debbie W. Prim, Trustee
-14-
<PAGE>
/s/ VERONICA CHAMPNEY
---------------------
Veronica Champney
/s/ JENNIFER R. FILIPOWSKI
--------------------------
Jennifer R. Filipowski
ANDREW J. FILIPOWSKI, TRUSTEE FOR
ANDREW E. FILIPOWSKI
By: /s/ ANDREW J. FILIPOWSKI
----------------------------
Andrew J. Filipowski, Trustee
VERONICA CHAMPNEY, TRUSTEE FOR
ALEXANDRIA FILIPOWSKI
By: /s/ VERONICA CHAMPNEY
-------------------------
Veronica Champney, Trustee
VERONICA CHAMPNEY, TRUSTEE FOR
JAMES MEADOWS
By: /s/ VERONICA CHAMPNEY
-------------------------
Veronica Champney, Trustee
ANGELL FAMILY LIMITED PARTNERSHIP
By: ANGELL FAMILY COMPANY
By: /s/ DON G. ANGELL
---------------------
Don G. Angell, President
/s/ TOM AUSTIN
--------------
Tom Austin
/s/ JEREMIAH CALLAHAN
---------------------
Jeremiah Callahan
/s/ CRAIG ERBLAND
-----------------
Craig Erbland
/s/ S.H. FOGLEMAN, III
----------------------
S.H. Fogleman, III
/s/ JIM MIZELLE
---------------
Jim Mizelle
/s/ DOUG MELE
-------------
Doug Mele
/s/ STEVE RASH
--------------
Steve Rash
-15-
<PAGE>
/s/ BAXTER KIGER
----------------
Baxter Kiger
-16-
<PAGE>
Schedule I
Investors List/Allocations
<TABLE>
<CAPTION>
Purchase Amount
Series A via loan or purchase
Investor Preferred Shares Warrants through 12/21/94
<S> <C> <C> <C>
Platinum Venture Partners I, L.P. 2,965,539 847,297 $1,029,150.68
Attn: Michael A. Santer
1815 S. Meyers Road
Oakbrook Terrace, IL 60181
Andrew J. Filipowski 5,880,236 1,680,067 $2,040,657.53
1815 S. Meyers Road
Oakbrook Terrace, IL 60181
Craig Duchossois 2,187,048 419,047 $ 758,986.30
Duchossois Industries, Inc.
845 Larch Avenue
Elmhurst, IL 60126
Bobby Slate 1,466,664 419,047 $ 508,986.30
415 N. Trade Street
Winston-Salem, NC 27101
James R. Hardin 293,333 83,809 $ 101,797.26
4440 Coquina Harbour Drive, 40D
Little River, SC 29566
Robert F. Steel &
Jennifer Steel JTWROS 293,396 83,827 $ 101,819.18
445 E. 4th Street
Hinsdale, IL 60521
Thomas E. Gleitsman 293,522 83,864 $ 101,863.01
6496 Thunderbird Drive
Indian Head Park, IL 60525
Tom Austin 292,953 41,905 $ 101,655.75
P.O. Box 187
Jonesville, NC 28642
Ray Maynard 146,951 41,986 $ 50,997.26
P.O. Box 698
Yadkinville, NC 27055
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Robert L. Jacobs 73,349 20,957 $ 25,454.79
304 5lst Street
Western Springs, IL 60558
Frank Murnane, Sr. 73,333 20,952 $ 25,449.32
157 Briarwood North
Oak Brook, IL 60521
Frank Murnane, Jr. 73,333 20,952 $ 25,449.32
1510 Lloyd Court
Wheaton, IL 60187
Gabriel, Inc. 1,466,664 419,047 $508,986.30
c/o Jimmy Liautaud
132 E. Delaware
Chicago, IL 60611
James Alan Booe 73,333 20,952 $ 25,449.32
3004 Lookout Court
Winston-Salem, NC 27106
Joe Wallace 58,414 0 $ 20,271.78
Industrial Advisory Group, Inc.
6127 Brookshire Drive
Pittsboro, IN 46167
Lennard Carlson 248,957 0 $ 86,397.26
5300 Newport Drive
Rolling Meadows, IL 6008
Richard Carlson 73,223 O $ 25,410.96
1447 Altgeld
Chicago, IL 60614
Baxter Kiger 58,313 O $ 20,236.71
1605 Beechwood Lane
Yadkinville, NC 27055
Peter Vitulli 58,212 O $ 20.201.64
1917 N. Mohawk
Chicago, IL 60614
Barry Sylvester 14,524.5 O $ 5,040.5
2728 W. Agatite Avenue
Chicago, IL 60625
James Barzyk 14,524.5 O $ 5,040.2
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C> <C>
530 N. Park
La Grange Park, IL 60525
Alexander Danzberger 36,667 10,476 $12,724.66
370 Central Park West #514
New York, NY 10025
Cole Taylor Bank Custodian 288,154 0 $100,000
FBO Arthur Frigo IRA #8417
MBA Walton Inc.
6250 River Road, Suite 4030
Rosemont, IL 60018
Huizenga Capital Management 1,440,769 0 $500,000
c/o Peter Huizenga
2215 York Road, Suite 500
Oak Brook, IL 60521
Attn: Ron Kinney
Peter H. Huizenga Testamentary Trust 1,440,769 0 $100,000
c/o Peter Huizenga, sole trustee
2215 York Road, Suite 500
Oak Brook, IL 60521
Attn: Ron Kinney
Billy Prim 43,223 0 $15,000
104 Cambridge Park
Winston-Salem, N.C. 27104
Kimberly Family Discretionary Trust 720,384 0 $250,000
c/o Craig Duchossois, Trustee
845 Larch Avenue
Elmhurst, IL 60126
Edward A. Fortino &
Dayle Duchossois-Fortino JTWROS 720,384 0 $250,000
2218 N. Orchard
Chicago, IL 60614
</TABLE>
-3-
<PAGE>
Schedule 2
Management Stockholders
-----------------------
Billy D. Prim
Andrew J. Filipowski
Debbie W. Prim
Mayo M. McCormick
Jeannie Cannon
. Luanne Holden
. Chris Holden
Debbie W. Prim, Trustee for Sarkanda U. Westmoreland
Debbie W. Prim, Trustee for Anthony G. Westmoreland
Veronica Champney
Jennifer R. Filipowski
Andrew J. Filipowski, Trustee for Andrew E. Filipowski
Veronica Champney, Trustee for Alexandria Filipowski
Veronica Champney, Trustee for James Meadows
Angell Family Limited Partnership (c/o Don G. Angell)
Tom Austin
Jeremiah Callahan
Craig Erbland
S.H. Fogleman, III
Jim Mizelle
Doug Mele
Steve Rash
Baxter Kiger
<PAGE>
EXHIBIT 10.10
UNIT PURCHASE AGREEMENT
DATED AS OF OCTOBER 11, 1995
AMONG
BLUE RHINO CORPORATION
AND
THE PURCHASERS LISTED ON THE
SCHEDULE OF PURCHASERS
<PAGE>
TABLE OF CONTENTS
-----------------
1. Authorization of the Units.............................................. 1
2. Subscriptions; Issuance; and Closing.................................... 1
A. Subscriptions...................................................... 1
B. Delivery of Notes.................................................. 1
C. Warrant Issuance................................................... 1
D. Closing Mechanics.................................................. 2
3. Conditions of Each Purchaser's Obligation at the Closing................ 2
4. Covenants............................................................... 4
A. Financial Statements and Other Information......................... 4
B. Negative Covenants................................................. 5
C. Affirmative Covenants.............................................. 7
5. Transfer of Restricted Securities....................................... 9
6. Representations and Warranties of the Corporation....................... 10
A. Organization and Corporate Power................................... 10
B. Corporate Power; Successor Corporation............................. 11
C. Capitalization..................................................... 11
D. Authorization...................................................... 12
E. No Violation....................................................... 12
F. Validity of Securities............................................. 13
G. Financial Statements............................................... 13
H. Absence of Undisclosed Liabilities................................. 13
I. Tax Liabilities.................................................... 14
J. Litigation......................................................... 14
K. Consents........................................................... 15
L. Title to Properties; Liens and Encumbrances........................ 15
M. Offering; Conversion............................................... 15
N. Compliance with Law and Other Instruments.......................... 15
O. Hazardous Substances............................................... 15
P. Registration Rights................................................ 16
Q. Fees and Commissions............................................... 16
R. Disclosure......................................................... 16
7. Definitions........................................................ 17
8. Miscellaneous...................................................... 22
A. Expenses........................................................... 22
B. Remedies........................................................... 22
C. Purchaser's Investment Representations............................. 22
D. Additional Covenants of the Purchaser.............................. 25
<PAGE>
E. Shareholders' Agreement............................................ 25
F. Consent to Amendments/Waivers...................................... 25
G. Survival of Representations and Agreements......................... 26
H. Successors and Assigns............................................. 26
I. Capital and Surplus................................................ 26
J. Severability....................................................... 27
K. Counterparts....................................................... 27
L. Descriptive Headings............................................... 27
M. Governing Law...................................................... 27
N. Notices............................................................ 27
O. Understanding Among the Purchasers................................. 28
<PAGE>
UNIT PURCHASE AGREEMENT
-----------------------
THIS AGREEMENT is made as of October 11, 1995, among Blue Rhino
Corporation, a Delaware corporation (the "Corporation"), and those Persons
listed on the Schedule of Purchasers (the Purchasers on the Schedule of
Purchasers attached hereto are collectively referred to herein as the
"Purchasers" and individually as a "Purchaser"). Except as otherwise indicated
herein, capitalized terms used herein are defined in Section 7 hereof.
R E C I T A L S:
- - - - - - - -
The Corporation desires to sell to the Purchasers and the Purchasers desire
to purchase up to 13,850 units ("Units"), each Unit consisting of a $1,359.35
principal amount 10.5% Senior Discount Note ("Note" and collectively "Notes")
due October 11, 2000 and a Warrant to purchase 487.14 shares ("Warrant" or
collectively "Warrants") of Common Stock of the Corporation, par value $.01 per
share (the "Common Stock") at a price of $1,000.00 per unit.
NOW THEREFORE, the parties hereto agree as follows:
1. Authorization of the Units. The Corporation has authorized the
issuance and sale to the Purchasers of 6,746,889 shares of its Common Stock, par
value $0.01 per share upon the exercise of the Warrants. The Corporation has
also authorized the execution and delivery to the Purchasers of the Notes and
Warrants.
2. Subscriptions; Issuance; and Closing.
A. Subscriptions. Each of the Purchasers hereby severally agrees to
purchase that number of Units set forth opposite such Purchaser's name on the
Schedule of Purchasers attached hereto at a price of $1,000.00 per Unit. The
sale of Units to each Purchaser at the Closing (as defined below) shall
constitute a separate sale hereunder.
B. Delivery of Notes. At the Closing (as defined below) the
Corporation shall deliver to each Purchaser the Note to be purchased by each
Purchaser. The Note shall be in form and substance substantially similar to
Exhibit A attached hereto. The Corporation and the Purchasers acknowledge that
the Notes may be prepaid in whole or in part by the Corporation as long as any
prepayment is on a pro rata basis to all Holders of outstanding Notes issued
pursuant to the terms of this Agreement.
C. Warrant Issuance. In consideration of each Purchaser's
subscription to purchase Units, as described above, the Corporation agrees to
issue that number of Warrants set forth opposite each Purchaser's name on the
Schedule of Purchasers attached hereto to the Purchasers at the Closing. The
Warrants shall be in form and substance substantially similar to Exhibit B
attached hereto.
<PAGE>
D. Closing Mechanics. The closing (the "Closing") for the purchase
and sale of the Units will take place at the offices of Pedersen & Houpt, 161
North Clark, Suite 3100, Chicago, Illinois at 10:00 a.m. on October 11, 1995
(the "Closing Date"), or at such other place or on such other date as may be
mutually agreeable to the Corporation and each Purchaser. At the Closing, the
Corporation will deliver to each Purchaser the Note and Warrant to be purchased
as part of the Units, registered on the books of the Corporation in such
Purchaser's or its nominee's name. Payment of the purchase price for the Units
shall be by a cashier's or certified check, or by wire transfer of immediately
available funds to the Corporation's account at a bank specified in a notice to
the Purchasers.
3. Conditions of Each Purchaser's Obligation at the Closing.
A. The obligation of each Purchaser to purchase and pay for the
Units at the Closing is subject to the satisfaction as of the Closing Date of
the following conditions:
(i) Representations and Warranties. The representations and
warranties contained in Section 6 hereof will be true and correct in all
material respects at and as of the Closing as though then made.
(ii) Amendment and Restatement of Certificate of Incorporation.
The Corporation's Certificate of Incorporation (the "Certificate of
Incorporation") will have been amended and restated in form and substance
as set forth in Exhibit C hereto, will be in full force and effect under
the laws of the State of Delaware as of the Closing as so amended and will
not have been further amended or modified.
(iii) Registration Rights Agreement. The Corporation, the
Purchasers and certain other investors in the Corporation will have entered
into a Registration Rights Agreement in form and substance substantially
similar to Exhibit D attached hereto (the "Registration Rights Agreement"),
and the Registration Rights Agreement will be in full force and effect.
(iv) Blue Sky Clearances. The Corporation will have made all
filings under applicable state securities laws, and will have taken all
other action, necessary to consummate the issuance of the Units pursuant to
this Agreement in compliance with such laws.
(v) Closing Documents. The Corporation will have delivered to
each Purchaser at the Closing all of the following documents:
(a) an Officer's Certificate, dated the date of the Closing,
stating that the conditions specified in Section 1 and this Section 3A
have been
- 2 -
<PAGE>
fully satisfied and that all representations and warranties contained
in Section 6 of this Agreement are true and correct as of the Closing
Date;
(b) copies of the resolutions duly adopted by the
Corporation's Board of Directors authorizing the execution, delivery
and performance of this Agreement, the Registration Rights Agreement,
and each of the other agreements contemplated hereby, the filing of
the amendment to the Certificate of Incorporation referred to in
Section 3A(ii), the issuance and sale of the Notes and Warrants as
part of the Units, and the reservation for issuance upon exercise of
the Warrants of an aggregate of 6,746,889 shares of Common Stock;
(c) copies of the resolutions duly adopted by the
Corporation's Board of Directors authorizing execution and delivery of
the Notes and Warrants purchased at the Closing;
(d) copies of the Certificate of Incorporation and the
Corporation's bylaws;
(e) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of
the transactions hereunder (including, without limitation, all blue
sky law filings and waivers of all preemptive rights and rights of
first refusal), if any; and
(f) such other documents relating to the transactions
contemplated by this Agreement as any Purchaser may reasonably
request.
(vi) Proceedings. All corporate and other proceedings taken or
required to be taken in connection with the transactions contemplated
hereby to be consummated at or prior to the Closing and all documents
incident thereto will be satisfactory in form and substance to each
Purchaser.
(vii) Opinion of Corporation's Counsel. Prior to the Closing
Date, each Purchaser will have received from Pedersen & Houpt, counsel for
the Corporation, the opinion addressed to each Purchaser in the form as
attached hereto as Exhibit E.
B. Waiver. Any condition specified in this Section 3 may be waived
if consented to by each Purchaser; provided that no such waiver will be
effective against any Purchaser unless it is set forth in a writing executed by
such Purchaser. Any Purchaser that waives is obligated to purchase and pay for
its Units.
4. Covenants.
- 3 -
<PAGE>
A. Financial Statements and Other Information. So long as any Notes
or Warrants remain outstanding, the Corporation will deliver to each Holder of
Notes or Warrants:
(i) Audited Annual Financial Statements. As soon as practicable
after the end of each fiscal year of the Corporation, and in any event
within ninety (90) days thereafter, consolidated and consolidating
balance sheets of the Corporation and its Subsidiaries, as of the end
of such year, and consolidated and consolidating statements of
operations and sources and uses of funds of the Corporation and its
Subsidiaries, for such fiscal year, prepared in accordance with GAAP
and setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and, in the case of the
consolidated statements, certified, without qualification or
explanation, by a nationally recognized independent public accountants
selected by the Corporation and acceptable to the Purchasers;
(ii) Unaudited Monthly Financial Statements. As soon as
practicable after the end of each month and in any event within thirty
(30) days thereafter, consolidated and consolidating balance sheets of
the Corporation and its Subsidiaries as of the end of such period, and
consolidated and consolidating statements of operations of the
Corporation and its Subsidiaries for such period and for the current
fiscal year to date, prepared in accordance with GAAP, subject to the
absence of footnotes and statements of changes in cash and changes
resulting from normal year-end adjustments, and setting forth in
comparative form the figures for the corresponding periods of the
previous fiscal year, together with a comparison of such statements to
the Business Plan, subject to changes resulting from normal year-end
audit adjustments, all in reasonable detail and certified by the
principal financial officer of the Corporation;
(iii) Default. Promptly upon the occurrence thereof notice of
any Default;
(iv) Material Adverse Developments. Promptly upon the occurrence
thereof, notice of any event which has had, or could reasonably be
expected to have, a material adverse impact on the business, affairs,
assets, prospects, operations, employee relations or condition,
financial or otherwise, of the Corporation of any Subsidiary,
including, without limitation, the institution or threat of any
material litigation or investigation with respect to the Corporation
or any Subsidiary or any material disputes with customers; and
- 4 -
<PAGE>
(v) Other Information. With reasonable promptness, all press
releases issued by the Corporation or any Subsidiary, any filings made
with the Commission by the Corporation or any Subsidiary and such
other data and information as from time to time may be reasonably
requested by the Purchasers or Purchasers' counsel or such other data
as the Corporation may from time to time furnish to any of the holders
of its securities or its directors in their capacities as such.
B. Negative Covenants. So long as any Notes remain outstanding,
without the approval, by vote or written consent, of the Holders of not less
than the majority of the principal balance of the Notes then outstanding, the
Corporation will not:
(i) Dividends. Directly or indirectly declare or pay, or permit
any Subsidiary which is not a wholly owned Subsidiary to declare or
pay, any dividends, or make or permit any Subsidiary which is not a
wholly owned Subsidiary to make, any distributions upon any of its
equity securities;
(ii) Redemptions. Directly or indirectly redeem, purchase or
otherwise acquire, or permit any Subsidiary to directly or indirectly
redeem, purchase or otherwise acquire, any of the Corporation's or any
Subsidiary's equity securities, except the repurchase of Common Stock
from employees of the Corporation upon termination of employment
pursuant to an incentive stock plan or a stock option plan which may
be adopted by the Board of Directors and as required by the terms of
the Series A Preferred Stock and Existing Warrants;
(iii) Issuances. Authorize, issue, or enter into any agreement
providing for the issuance (contingent or otherwise) of, (a) any
Indebtedness pari passu with or senior to the Notes except for (u)
Notes issued in connection with the Chicago Dearborn Private Placement
and (v) Indebtedness arising in the ordinary course of business
consistent with past customs and practice or which would not exceed
$50,000 in the aggregate; (b) any notes or debt securities containing
equity features (including, without limitation, any notes or debt
securities convertible into or exchangeable for equity securities,
issued in connection with the issuance of equity securities or
containing profit participation features) or (c) any equity securities
(or any securities convertible into or exchangeable for any equity
securities), except for (w) Common Stock or options to acquire
2,000,000 Common Stock as incentives to key employees, directors and
consultants of the Corporation which may be issued by the
- 5 -
<PAGE>
Board only after the approval of at least two directors elected by the
holders of Series A Preferred Shares, (x) Warrants to purchase Common
Stock to be issued to certain Investors upon the renewal of the loans
to the Corporation from Bank of America and Platinum Venture Partners
I, L.P., (y) the HDP Warrants and (z) Warrants to purchase Common
Stock to be issued in connection with the Chicago Dearborn Private
Placement;
(iv) Mergers. Merge or consolidate with any Person or permit any
Subsidiary to merge or consolidate with any Person (other than, in the
case of a wholly-owned Subsidiary, with or into the Corporation or any
other wholly-owned Subsidiary);
(v) Liquidations. Liquidate, dissolve or effect a
recapitalization or reorganization in any form of transaction; and
(vi) Charter Amendments. Make any amendment to the Corporation's
certificate of incorporation or by-laws, or file any resolution of the
Board with the Secretary of State of Delaware.
C. Affirmative Covenants. So long as any Notes or Warrants remain
outstanding, the Corporation will:
(i) Accounting. The Corporation will maintain and will cause
each of its Subsidiaries to maintain a system of accounting established and
administered in accordance with GAAP and all financial statements or
information delivered under Section 4A will be prepared in accordance with
GAAP, except as otherwise provided in Section 4A;
(ii) Insurance. The Corporation agrees to maintain or cause to
be maintained, with financially sound and reputable insurers rated A or
above by A.M. Best, insurance with respect to its assets and business and
the assets and business of its Subsidiaries against loss or damage of the
kinds customarily insured against by similarly situated corporations of
established reputation engaged in the same or similar businesses, in
adequate amounts, and at the request of any Purchasers shall furnish such
Purchasers with evidence of the same. The Corporation further agrees to
cause to be maintained, with financially sound and reputable insurers rated
A or above by A.M. Best, term life insurance payable to the Corporation on
the life of Billy Prim in the amount of at least $1,000,000;
(iii) Payment of Taxes. The Corporation agrees to pay or cause
to be paid all taxes, assessments and other governmental charges levied
upon any of its
- 6 -
<PAGE>
assets or those of its Subsidiaries or in respect of its or their
respective franchises, businesses, income or profits, all trade accounts
payable in accordance with usual and customary business terms, and all
claims for work, labor or materials, which if unpaid might become a Lien
upon any asset of the Corporation or any Subsidiary, before the same become
delinquent, except that (unless and until foreclosure, distraint, sale or
other similar proceedings shall have been commenced) no such charge need be
paid if being contested in good faith and by appropriate measures promptly
initiated and diligently conducted if (a) such reserve or other appropriate
provision, if any, as shall be required by sound accounting practice shall
have been made therefor, and (b) such contest does not have a material
adverse effect on the financial condition of the Corporation or the ability
of the Corporation to pay any Indebtedness and no assets are in imminent
danger of forfeiture;
(iv) Compliance With Laws. The Corporation agrees to use its
best efforts to comply, and shall use its best efforts to cause each
Subsidiary to comply, with all laws, rules, regulations, judgments, orders
and decrees of any governmental or regulatory authority applicable to it
and its respective assets, and with all contracts, and agreements to which
it is a party or shall become a party, and to perform all obligations which
it has or shall incur the violation of which could have a material adverse
effect on the business, affairs, assets, prospects, operations or
condition, financial or otherwise, of the Corporation and its Subsidiaries
taken as a whole. Neither the Corporation nor anyone acting on its behalf
will take any action hereafter that would cause the loss of its exemption
from the registration requirements of the Securities Act except as provided
for under the Registration Rights Agreement;
(v) Preservation of Corporate Existence and Property; Operations.
The Corporation agrees to preserve, protect, and maintain, and cause each
Subsidiary to preserve, protect, and maintain, (a) its corporate existence,
and (b) all rights, franchises, accreditations, privileges, and properties
the failure of which to preserve, protect, and maintain could have a
material adverse effect on the business, affairs, assets, prospects,
operations, or condition, financial or otherwise, of the Corporation and
its Subsidiaries taken as a whole. The Corporation and its Subsidiaries
will comply with all material agreements and contracts, including, without
limitation, all leases and loan agreements;
(vi) Reservation of Common Stock. The Corporation will at all
times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of issuance upon the exercise of
the Warrants, such number of shares of Common Stock issuable upon the
exercise of all outstanding Warrants. All shares of Common Stock which are
so issuable will, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Corporation
will take all such actions as may be necessary to assure that all such
shares of
- 7 -
<PAGE>
Common Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities
exchange upon which shares of common stock may be listed (except for
official notice of issuance which will be immediately transmitted by the
Corporation upon issuance); and
(vii) Compliance With Environmental Laws. The Corporation will
use all Hazardous Substances (including the Propane, Polystyrene and Paint
if any or all of them are deemed Hazardous Substances) in compliance with
all Environmental Laws and to obtain all required permits, licenses,
certificates and registrations relating to health, safety or protection of
the environment which, if not possessed, would have a material adverse
effect on the Corporation or result in a violation of any applicable
Environmental Laws.
5. Transfer of Restricted Securities.
A. Restricted Securities are transferable pursuant to (i) public
offerings registered under the Securities Act, (ii) Rule 144 of the Commission
(or any similar rule then in force) if such rule is available, (iii) the
conditions specified in Subsection B below, (iv) subject to Subsection D below,
and (iv) subject to Subsection E below.
B. In connection with the transfer of any Restricted Securities
(other than a transfer described in Subsection 5A(i) or (ii) above), the Holder
thereof will deliver written notice to the Corporation describing in reasonable
detail the transfer or proposed transfer, together with an opinion of Pedersen &
Houpt or other counsel which (to the Corporation's reasonable satisfaction) is
knowledgeable in securities law matters to the effect that such transfer of
Restricted Securities may be effected without registration of such Restricted
Securities under the Securities Act. In addition, if the Holder of the
Restricted Securities delivers to the Corporation an opinion of Pedersen & Houpt
or such other counsel that no subsequent transfer of such Restricted Securities
will require registration under the Securities Act, the Corporation will
promptly upon such contemplated transfer deliver new certificates for such
Restricted Securities which do not bear the Securities Act legend set forth in
Section 8C. If the Corporation is not required to deliver new certificates for
such Restricted Securities not bearing such legend, the Holder thereof will not
transfer the same until the prospective transferee has confirmed to the
Corporation in writing its agreement to be bound by the conditions contained in
this Section and Section 8C.
C. The Corporation shall place, and shall instruct any transfer
agent of the Corporation to place, a stop-transfer order on the Corporation's
shareholder record books which prohibits the Corporation, or any transfer agent
of the Corporation, from registering on the Corporation's books (i) any transfer
of the shares of Restricted Securities and (ii) the issuance of shares of Common
Stock upon any exercise of the Warrants that, in each case, were originally
- 8 -
<PAGE>
granted or sold to Purchasers who are not "U.S. Persons" (as defined in Rule
902 under the Securities Act) unless such transfer or conversion is made in
accordance with the provisions of Regulation S (17 CFR (S)(S) 230.902 - 230.904)
under the Securities Act.
D. In the event any Holder of Restricted Securities desires to sell,
assign, transfer or convey any Restricted Securities (other than to such
Holder's spouse or lineal descendants, a trust or retirement account or fund for
the benefit of such Holder or his spouse or lineal descendants, any corporation,
limited liability company or partnership in which such Holder and or his spouse
and lineal descendants are the direct and beneficial owners of all of the equity
interests, provided such Holder, spouse and lineal descendants agree in writing
to remain the direct and beneficial owners of all such equity interests, which
transfer shall be a permitted transfer subject, however, to the provisions of
Subsection B above), such Holder (the "Transferor") shall deliver written notice
of such proposed sale, assignment, transfer or conveyance (the "Notice") to the
other Holders of the Warrants, the Common Stock and the Notes (the "Other
Holders"). Such notice shall include the name of the transferee, the number of
shares of capital stock to be transferred, the amount of the Notes to be
transferred and the proposed terms and conditions of such conveyance. The Other
Holders shall have a right to purchase the Transferor's Warrants, Common Stock
and Notes proposed to be transferred.
The shares of Common Stock, Warrants and/or Notes to be transferred by the
Transferor shall be offered to each of the Other Holders on a pro rata basis
according to their percentage ownership Common Stock, Warrants and Notes as
compared to that held by the participating Other Holders. Each Other Holder
shall be required to notify the Transferor within fifteen (15) days of receipt
of the Notice as to whether they wish to accept their pro rata share of such
Common Stock, Warrants or Notes upon the terms and conditions contained in the
Notice. The Other Holders may not acquire less than all of each of their pro
rata share of capital stock and/or Notes to be transferred. If any Other Holder
elects not to acquire its pro rata share of the capital stock and/or Notes to be
transferred, such other Holder's pro rata share of the capital stock and/or
Notes to be transferred shall be offered to the other Holders on a pro rata
basis in the fashion described above. The closing of this sale shall occur as
provided in the Notice.
6. Representations and Warranties of the Corporation. As a material
inducement to the Purchasers to enter into this Agreement and purchase the
Units, the Corporation hereby represents and warrants that:
A. Organization and Corporate Power. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and is qualified to do business in every jurisdiction in which its
ownership of property or conduct of business requires it to qualify, except
where the failure to so qualify could not reasonably be expected to have a
material adverse effect on the financial condition, operating results, assets,
operations or business prospects of the Corporation. The Corporation has all
requisite corporate power and
- 9 -
<PAGE>
authority and all material licenses, permits and authorizations necessary to own
and operate its properties, to carry on its businesses as now conducted and to
carry out the transactions contemplated by this Agreement.
B. Corporate Power; Successor Corporation. The Corporation has all
requisite legal and corporate power and authority to enter into this Agreement
and all other agreements entered into pursuant hereto, to issue and sell the
Units and to carry out and perform its obligations under the terms of this
Agreement and all other agreements entered into pursuant hereto. The
Corporation is the successor corporation of BRC-North Carolina pursuant to a
statutory merger under Delaware Law in which the Corporation is the survivor and
is successor to all rights, titles and interest of BRC-North Carolina. Where
appropriate, references to the Corporation in this Section 6 shall mean both the
Corporation and BRC-North Carolina as its predecessor.
C. Capitalization. As of the Closing Date, the Corporation's
authorized capital stock will consist of (a) 66,000,000 Common Shares, and (b)
20,796,172 Series A Preferred Shares. As of the Closing Date, there shall be no
declared but unpaid dividends or undeclared dividend arrearage on any shares of
capital stock of the Corporation. After giving effect to the consummation of
the transactions contemplated by this Agreement, the only shares of capital
stock issued and outstanding, reserved for issuance or committed to be issued
will be:
(i) 22,125,341 issued and outstanding shares of Common Stock;
(ii) 6,746,889 shares of Common Stock reserved for issuance upon
exercise of the Warrants;
(iii) 960,000 shares of Common Stock reserved for issuance upon
exercise of the HDP Warrants;
(iv) 2,440,277 shares of Common Stock reserved for issuance upon
exercise of the Warrants to be issued in connection with the Chicago
Dearborn Private Placement;
(v) 9,170,435 shares of Common Stock reserved for issue upon the
exercise of the Existing Warrants;
(vi) 465,000 shares of Common Stock reserved for future
issuances to employees, directors or consultants;
(vii) 2,000,000 shares of Common Stock reserved for future
grants pursuant to a stock option plan or stock incentive plan which the
directors may choose to enact;
- 10 -
<PAGE>
(viii) 20,796,172 shares of Common Stock reserved for issuance
upon the conversions of the Series A Preferred Stock; and
(ix) 20,796,172 issued and outstanding shares of Series A
Preferred Stock.
There are no outstanding preemptive, conversion or other rights, options,
warrants or agreements granted or issued by or binding upon the Corporation for
the purchase or acquisition of any shares of its capital stock, other than those
issued, reserved or committed to be issued pursuant to or listed in this
Agreement or as provided for in the Shareholders' Agreement or the Certificate
of Incorporation. All outstanding securities of the Corporation were issued in
compliance with all federal and state securities laws.
D. Authorization. All corporate action on the part of the
Corporation, its directors and shareholders necessary for the authorization,
execution, delivery and performance by the Corporation of this Agreement and all
other agreements entered into pursuant hereto and the consummation of the
transactions contemplated hereby and thereby, and for the authorization,
issuance and delivery of the Notes and Warrants, has been taken. This Agreement
and all other agreements entered into pursuant hereto, including the Notes and
Warrants, are legal, valid and binding obligations of the Corporation,
enforceable against the Corporation in accordance with their terms.
E. No Violation. The execution and delivery of this Agreement and
all other agreements entered into pursuant hereto, the consummation of the
transactions provided for herein and therein or contemplated hereby and thereby,
and the fulfillment by the Corporation of the terms hereof or thereof, will not
(with or without notice or passage of time or both) (i) conflict with or result
in a breach of any provision of the certificate of incorporation or bylaws of
the Corporation, (ii) result in a default, give rise to any right of
termination, cancellation or acceleration, or require any consent or approval
which has not been obtained under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, loan, factoring arrangement, license,
agreement, lease or other instrument or obligation to which the Corporation is a
party or by which it or any of its assets may be bound or (iii) violate any law,
judgment, order, writ, injunction, decree, statute, rule or regulation of any
court, administrative agency, bureau, board, commission, office, authority,
department or other governmental entity applicable to the Corporation or any of
its assets.
F. Validity of Securities. The Warrants and Notes, when issued,
sold and delivered in accordance with the terms of this Agreement, will be duly
and validly issued, fully paid, non-assessable and free and clear of all Liens.
The Underlying Common Stock issuable upon exercise of the Warrants have been
duly and validly reserved and, upon issuance in
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accordance with the exercise provisions of the Warrants, will be duly and
validly issued, fully paid, non-assessable and free and clear of all Liens.
G. Financial Statements. The Corporation has furnished Purchasers'
with (a) the unaudited balance sheet of the Corporation for the period ended
July 31, 1995 (the "Unaudited Balance Sheet"), together with the unaudited
statements of income and changes in financial position for the period then ended
(collectively, including the Unaudited Balance Sheet, the "Unaudited Financial
Statements"), and (b) the audited balance sheet of the Corporation for the
fiscal year ended July 31, 1994 (the "Audited Balance Sheet"), together with the
audited statements of income and changes in financial position for the period
then ended (collectively, including the Audited Balance Sheet, the "Audited
Financial Statements"), The Unaudited Financial Statements have been prepared
in accordance with GAAP, subject to the absence of footnotes and statements in
changes in cash and changes, resulting from normal year-end adjustments, and
fairly and accurately present the financial position of the Corporation as of
July 31, 1995, and the results of its operations for the period then ended. The
Audited Financial Statements have been prepared in accordance with GAAP, fairly
and accurately present the financial position of the Corporation as of July 31,
1994, and the results of its operations for the year then ended. All the books,
records and accounts of the Corporation are in all material respects accurate
and complete, are in fall material respects in accordance with good business
practice and all laws, regulations and rules applicable to the Corporation and
the conduct of its business and accurately present and reflect in all material
respects of all the transactions described therein.
H. Absence of Undisclosed Liabilities. As of the Closing Date, the
Corporation will not have any material debts, liabilities or obligations of any
nature (whether accrued, absolute, contingent, direct, indirect, perfected,
inchoate unliquidated or otherwise and whether due or to become due) arising out
of transactions entered into on or prior to the Closing Date, or any
transaction, series of transactions, action or inaction occurring on or prior to
the Closing Date, or any state of facts or condition existing on or prior to the
Closing (regardless of when such liability or obligation is asserted), including
but not limited to liabilities or obligations on account of taxes and
governmental charges or penalties, interest or fines thereon or in respect
thereof, except (i) as and to the extent clearly and accurately reflected and
accrued for or reserved against in the Unaudited Balance Sheet and (ii) for
liabilities and obligations arising after July 31, 1995 in the ordinary course
of business consistent with past customs and practice or which would not exceed
$50,000 in the aggregate.
I. Tax Liabilities. The Corporation has filed all federal, state
and local tax reports and returns required by any law or regulation to be filed
by it, and such returns are true and correct. The Corporation has paid all
taxes, interest and penalties, if any, reflected on such tax returns or
otherwise due and payable by it. The reserves for taxes reflected on the
Unaudited Balance Sheet are adequate in amount of the payment of all liabilities
for all taxes (whether or
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not disputed) of the Corporation accrued through the dates of such balance
sheets. Any deficiencies proposed as a result of any governmental audits of
such tax returns have been paid or settled, and there are no present disputes as
to taxes payable by the Corporation.
J. Litigation. There are no actions, suits, proceedings or
investigations (whether or not purportedly on behalf of the Corporation) pending
or threatened (nor, to the best knowledge of the Corporation, does nay basis
exist therefor) against or affecting the Corporation at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, agency or instrumentality, domestic or foreign, nor has any
such action, suit, proceeding or investigation been pending during the last two
years. The Corporation is not operating under or subject to, nor in default
with respect to, any order, writ, injunction or decree of any court or federal,
state, municipal or other governmental department, commission, board, agency or
instrumentality, foreign or domestic, and the Corporation has not been charged
or threatened with a charge of violation, or under investigation with respect to
possible violation, of any provision of any federal, state or local law or
administrative ruling or regulation relating to them or their business, affairs,
assets, prospects, operations, employee relations or condition, financial or
otherwise. The Corporation has not received any material complaint from any of
its customers or suppliers.
K. Consents. All consents, approvals, qualifications, orders or
authorizations of, or filings with, any governmental authority, including state
securities or "Blue Sky" offices, required in connection with the Corporation's
valid execution, delivery or performance of this Agreement and all other
agreements entered into pursuant hereto, the offer, sale and issuance of the
Notes and Warrants, and the consummation of any other transaction contemplated
on the part of the Corporation hereby or thereby have been obtained or made.
L. Title to Properties; Liens and Encumbrances. The Unaudited
Balance Sheet reflects all of the assets of the Corporation as of the date
thereof. The Corporation has good and marketable title to all of the assets
necessary to conduct its business as presently conducted or as proposed to be
conducted, free and clear of any Liens.
M. Offering; Conversion. Subject in part to the truth and accuracy
of the representations of the Purchasers set forth in this Agreement, (i) the
offer, sale and issuance of the Units and (ii) the conversion of the Warrants
into Common Stock, as contemplated by this Agreement, are exempt from the
registration requirements of the Securities Act and all applicable state
securities laws.
N. Compliance with Law and Other Instruments. The Corporation is
not in violation of any term of its Certificate of Incorporation or by-laws or
of the provisions of any mortgage, indenture, contract, agreement, instrument,
judgment, decree, order, statute, rule or regulation to which it is subject and
a violation of which could have a material adverse effect on
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its business, affairs, assets, prospects, operations, employee relations or
condition, financial or otherwise, or the Corporation's ability to perform its
obligations hereunder or under any agreement entered pursuant hereto. The
Corporation has all franchises, permits, licenses and approvals, necessary to
conduct its business as presently conducted. The Corporation has no knowledge of
or reason to expect any change to any law, statute, rule or regulation which
could adversely affect the ability of the Corporation to conduct its business as
presently conducted or as proposed to be conducted.
O. Hazardous Substances. Except for the propane (Chemical Abstract
Series Number 74-98-6) (the "Propane"), the polystyrene racks used to hold the
propane cylinders (the "Polystyrene"), and the water-reducible acrylic coating
(Product Number F78QXA0515-4368) used to paint the propane cylinders (the
"Paint"), used by the Corporation in the ordinary course of its business, the
Corporation has never generated, transported, treated, stored nor disposed, nor,
in any manner, arranged for disposal or treatment within the meaning of RCRA,
CERCLA or any applicable federal, state or local law, regulation, ordinance or
requirement, as amended or hereinafter amended of any Hazardous Substances.
Except for the Propane, Polystyrene and Paint used by the Corporation in the
ordinary course of its Business, there are no Hazardous Substances on, in, or
under the premises leased or possessed by the Corporation (including, without
limitation, those which may be contained in underground storage tanks). There
have not been and there are not any past or present events, conditions,
circumstances, activities, practices, incidents or actions which could
reasonably be expected to interfere with or prevent continued compliance with
any federal, state, or local law, regulation, or ordinance, or requirement
relating to health and safety and protection of the environment ("Environmental
Laws") or which may give rise to any legal liability or otherwise forms the
basis of any claim, action, suit, proceeding, hearing or investigation against
or involving the Corporation bases on any condition or any violation or alleged
violation of any Environmental Laws.
P. Registration Rights. Except as provided for in the Registration
Rights Agreement, the Corporation is not under any obligation to register under
the Securities Act any of its currently outstanding securities or any of its
securities which may hereafter be issued.
Q. Fees and Commissions. The Corporation has retained no finder,
broker, agent, financial advisor or other intermediary (collectively
"Intermediary") in connection with the transactions contemplated by this
Agreement and the Corporation agrees to indemnify and hold harmless the
Purchasers from liability for any compensation to any Intermediary and the fees
and expenses of defending against such liability or alleged liability.
R. Disclosure. This Agreement, the schedules and exhibits hereto,
and the financial statements and other materials referred to herein as having
been delivered to the Purchasers and/or Purchasers' counsel, do not contain any
untrue statement of a material fact and do not omit to state a material fact
necessary in order to make the statements contained herein or
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therein not misleading in the light of the circumstances under which they were
made. There is no fact reasonably known to the Corporation relating to the
business, affairs, assets, prospects, operations, employee relations or
condition, financial or otherwise, of the Corporation that may materially
adversely affect the same which has not been disclosed in writing to the
Purchasers by the Corporation.
7. Definitions. For the purpose of this Agreement, the following terms
have the meanings set forth below:
"Affiliate" of any particular person or entity means any other person
or entity controlling, controlled by or under common control with such
particular person or entity.
"Board of Directors" means the Corporation's duly elected Board of
Directors.
"Business Day" means (i) if any class of Common Stock is listed or
admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (ii) if no class of Common
Stock is so listed or admitted to trading, a day on which any New York Stock
Exchange member firm is open for business.
"Chicago Dearborn Private Placement" means the sale of up to 5,000
Units to Chicago Dearborn Corporation which the Corporation is authorized to
enter into within the next 3 months.
"Commission" means the Securities and Exchange Commission and any
governmental body or agency succeeding to the functions thereof.
"Default" means the failure of the Corporation or any Subsidiary to
duly observe or perform any covenant, condition or agreement required to be
performed by the Corporation or a Subsidiary under this Agreement, any agreement
entered into pursuant hereto or the Certificates of Incorporation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Existing Warrants" means the Warrants to purchase (i) 4,214,185
shares of Common Stock at $0.0347037 per share, issued to certain investors on
December 1, 1994, (ii) 115,264 shares of Common Stock at $0.347037 per share,
issued to Peter Huizenga ("Huizenga"), Andrew Filipowski ("Filipowski"), Craig
Duchossois ("Duchossois") and Robert F. Steele ("Steele") in connection with a
bridge loan in May 1995, (iii) 2,593,385 shares of Common Stock at $0.347037 per
share issued to Huizenga, Filipowski, Duchossois, Steele, and
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Billy D. Prim ("Prim") in connection with their guarantee of loan to the
Corporation in June 1995, (iv) 86,446 shares of Common Stock at $0.347037 per
share issued to Platinum Ventures Partners I, L.P. in connection with a loan to
the Corporation in May 1995, (v) 259,338 shares of Common Stock at $0.347037 per
share issued to Platinum Ventures Partners I, L.P. in connection with the
extension of the maturity on its loan to the Corporation on August 14, 1995,
(vi) 172,892 shares of Common Stock at $0.347037 per share to be issued to
Platinum Ventures Partners I, L.P. upon the renewal of its loan to the
Corporation in June 1996, and (vii) 1,728,925 shares of Common Stock at
$0.347037 per share to be issued to Huizenga, Filipowski, Duchossois, Steele,
and Prim upon the extension of the repayment period on the loan from Bank of
America to the Corporation in December 1995.
"GAAP" means the generally accepted accounting principles,
consistently applied.
"Hazardous Substances" means hazardous substances or hazardous wastes,
as those terms are defined by the Resource Conservation and Recovery Act 42
U.S.C (S)6901, et seq. ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)6901, et seq. ("CERCLA") or any
applicable federal, state, or local law, regulation, ordinance or requirement,
as amended, or hereafter amended. "Hazardous Substances" shall also include, but
not limited to, petroleum, including but not limited to, crude oil or any
fraction thereof which is liquid at standard conditions of temperature and
pressure (60 degrees Fahrenheit and 14.7 pounds per square inch absolute) and
any radioactive material, including but not limited to, any source, special
nuclear or by-product material as defined at 42 U.S.C. (S)2100, et seq., as
amended or hereafter amended and asbestos in any form or condition.
"HDP Warrants" means the Warrants to purchase 960,000 shares of the
Corporation's Common Stock at an exercise price of $0.347037 per share to be
issued to Peter Huizenga, Craig Duchossois and Peer Pedersen as compensation for
their assistance in consummating the sale of Units pursuant to this Agreement.
"Holder" of at least a certain percentage or number of Warrants,
Common Stock, or other securities shall mean any single Holder beneficially
owning at least such designated percentage or number of such securities, or each
member of a Group (hereinafter defined) if the Group has beneficial ownership
of, in the aggregate, at least such percentage or number of such securities.
"Indebtedness" of any Person shall mean the principal of, premium, if
any, and unpaid interest on: (i) indebtedness for money borrowed from others;
(ii) indebtedness guaranteed, directly or indirectly, in any manner by such
Person, or in effect guaranteed, directly or indirectly, in any manner by such
Person through an agreement, contingent or otherwise, to supply funds to, or in
any other manner invest in, the debtor, or to purchase indebtedness, or to
purchase and pay for property if not delivered or pay for services if not
performed, primarily for
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the purpose of enabling the debtor to make payment of the indebtedness or to
assure the owners of the indebtedness against loss; (iii) all indebtedness
secured by any mortgage, lien, pledge, charge or other encumbrance upon property
owned by such Person, even though such Person has not in any manner become
liable for the payment of such indebtedness; (iv) all indebtedness of such
Person crated or arising under any conditional sale, lease (intended primarily
as a financing device) or other title retention or security agreement with
respect to property acquired by such Person even though the rights and remedies
of the seller, lessor or lender under such agreement or lease in the event of
default may be limited to repossession or sale of such property; and (v)
renewals, extensions and refundings of any such indebtedness.
"Investment" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien, claim or charge of any kind, including, without limitation,
any conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction and including any lien or charge
arising by statute or other law.
"Officer's Certificate" means a certificate signed by the
Corporation's president, its chief financial officer, its chief operating
officer or its chairman of the board, stating that (i) the officer signing such
certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to the best of such officer's knowledge, such
certificate does not misstate any material fact and does not omit to state any
material fact necessary to make the certificate not misleading.
"Permitted Lien" shall mean (i) Liens for taxes and assessments or
governmental charges or levies not at the time due or in respect of which the
validity thereof shall currently be contested in good faith by appropriate
proceedings conducted with due diligence and for which the Corporation has
furnished adequate security for payment; (ii) Liens in respect of pledges or
carriers', warehousemen's, mechanics', laborers' and materialmen's and similar
liens, if the obligations secured by such Liens are not then delinquent or are
being contested in good faith by appropriate proceedings conducted with due
diligence and for which the Corporation has furnished adequate security for
payment; and (iii) statutory Liens incidental to the conduct of the business of
the Corporation or any Subsidiary which were not incurred in connection with the
borrowing of money or the obtaining of advances or credits and which do not in
the aggregate materially detract from the value of its property or materially
impair the use thereof in the operation of its business.
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"Person" means any individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"Registration Rights Agreement" means that certain Registration Rights
Agreement dated as of December 1, 1994 by and between the Corporation and
certain of its investors as amended by that certain First Amendment to Blue
Rhino Corporation Registration Rights Agreement dated May 10, 1995 and that
certain Second Amendment to Blue Rhino Corporation Registration Rights Agreement
dated of even date herewith.
"Restricted Securities" means (i) the Warrants, (ii) the Common Stock
issued upon exercise of Warrants, (iii) any securities issued with respect to
the securities referred to in clauses (i) through (ii) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, and (iv) if
applicable, the Notes. As to any particular Restricted Securities, such
securities will cease to be Restricted Securities when they have (a) been
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) become eligible for sale
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act or (c) been otherwise transferred and new certificates for them
not bearing the Securities Act legend set forth in Section 8C herein have been
delivered by the Corporation in accordance with Section 5B. Whenever any
particular securities cease to be Restricted Securities under (a) or (b) above,
the Holder thereof will be entitled to receive from the Corporation, without
expense, new securities of like tenor not bearing a Securities Act legend of the
character set forth in Section 8C.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
"Series A Preferred Stock" means the Corporation's Series A
Convertible Participating Preferred Stock.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly
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or indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall be deemed to
have a majority ownership interest in a partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
partnership, association or other business entity gains or losses or shall be or
control the managing director or general partner of such partnership,
association or other business entity.
"Underlying Common Stock" means (i) the Corporation's Common Stock
issued or issuable upon exercise of the Warrants, and (ii) any Common Stock
issued or issuable with respect to the securities referred to in clause (i)
above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. Any Person who holds Warrants will be deemed to be the Holder of
the Common Stock obtainable upon the exercise of the Warrants in connection with
the transfer thereof or otherwise regardless of any restriction or limitation on
the conversion. As to any particular shares of Underlying Common Stock, such
shares will cease to be Underlying Common Stock when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them or (b) distributed to the public
through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force).
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8. Miscellaneous.
A. Expenses. The Corporation agrees to pay, and hold each Purchaser
and all Holders of the Warrants, Underlying Common Stock and the Notes harmless
against liability for the payment of, (i) the reasonable fees and expenses
incurred with respect to any amendments or waivers (whether or not the same
become effective) under or in respect of this Agreement, the agreements
contemplated hereby, the Certificate of Incorporation (including, without
limitation, in connection with any proposed merger or sale of the Corporation),
(ii) stamp and other taxes which may be payable in respect of the execution and
delivery of this Agreement or the issuance, delivery or acquisition of any
Warrants, any Notes or any shares of Common Stock issuable upon exercise of the
Warrants, (iii) reasonable fees and expenses incurred with respect to the
enforcement of the rights granted under this Agreement, the agreements
contemplated hereby, the Certificate of Incorporation, the Shareholders'
Agreement or the Registration Rights Agreement (iv) reasonable fees and expenses
of counsel for a Purchaser or such Holder in rendering a legal opinion in
connection with the sale or assignment of a Purchaser's or such Holder's
Warrants or Notes if a Purchaser or such Holder desires to sell or otherwise
transfer any or all of the Warrants or Notes held by it and counsel for the
Corporation declines to render a legal opinion to such Purchaser or such Holder,
whether or not registration under the Securities Act will be required for such
sale or transfer and (v) the reasonable fees and expenses incurred by any such
Person in connection with any transaction, claim or event which such Person
reasonably believes affects its investment in the Corporation and as to which
such Person seeks advice of counsel.
B. Remedies. Each Holder will have all rights and remedies set
forth in this Agreement, the Certificate of Incorporation and all rights and
remedies which such Holders have been granted at any time under any other
agreement or contract and all of the rights which such Holders have under any
law. Any Person having any rights under any provision of this Agreement will be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
C. Purchaser's Investment Representations. Each Purchaser hereby
severally represents to the Corporation the following:
(i) the Purchaser is a "U.S. Person" (as defined in Rule 902
(17 CFR (S) 230.902) under the Securities Act);
(ii) the Purchaser's state of residency for security law
purposes is the state referred to next to the Purchaser's name on the
signature pages hereto;
(iii) (a) the Purchaser is acquiring the Restricted Securities
purchased hereunder or acquired pursuant hereto for its own account with
the present
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intention of holding such securities for purposes of investment, and that
it has no intention of selling such securities in a public distribution in
violation of the federal securities laws or any applicable state securities
laws; provided that nothing contained herein will prevent any Purchaser and
subsequent Holders of Restricted Securities from transferring such
securities in compliance with the provisions hereof. Each certificate for
Restricted Securities purchased hereunder will be imprinted with a legend
in substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be sold or offered for sale unless registered under said Act
or unless the holder of this certificate delivers to Blue Rhino
Corporation an opinion of counsel reasonably acceptable to Blue
Rhino Corporation stating that an exemption from such
registration is available.
(b) The Purchaser has the financial ability to bear the
economic risk of an investment in the Restricted Securities, has
adequate means of providing for his, her or its current needs and
personal contingencies, has no need for liquidity in such investment
and could afford a complete loss of such investment.
(c) The Purchaser was not formed for the specific purpose of
acquiring the Restricted Securities offered in this transaction.
(d) The Purchaser is an "accredited investor" as defined in
Rule 501(a) of Regulation D of the Securities Act.
(iv) The Purchaser's overall commitment to investments which
are not readily marketable is not disproportionate to his, her or its net
worth and his, her or its investment in the Corporation will not cause such
overall commitment to become excessive;
(v) The Purchaser has such knowledge and experience in
financial and business matters that he, she or it is capable of evaluating
the merits and risks of his, her or its investment in the Restricted
Securities; and
(vi) (a) The Purchaser expressly acknowledges receipt of the
financial information distributed in connection with this offering. The
Purchaser acknowledges and agrees that the Purchaser has read and
understood the terms and conditions set forth in the financial information.
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(b) The Purchaser has been given full opportunity to ask
questions of and to receive answers from representatives of the
Corporation concerning the terms and conditions of the investment and
the business of the Corporation and such other information as he, she
or it desires in order to evaluate an investment in the Restricted
Securities, and all such questions have been answered to the full
satisfaction of the Purchaser.
(c) In making his, her or its decision to acquire the
Restricted Securities, the Purchaser has relied solely upon
independent investigations made by him, her or it. In addition, the
Purchaser initially learned of the investment through a direct
communication, and was never presented or solicited by (x) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or
radio, (y) any seminar or meeting whose attendees, including the
Purchaser, had been invited as a result of, subsequent to or pursuant
to any of the foregoing, or (z) any other form of general
solicitation.
(d) The Purchaser understands that the shares of the
Restricted Securities have not been registered under the Securities
Act, the securities laws of any state, and are being issued in
reliance upon specific exemptions from registration thereunder, and
the Purchaser agrees that the shares of the Restricted Securities may
not be sold, offered for sale, transferred, pledged, hypothecated or
otherwise disposed of except pursuant to (x) a registration statement
with respect to such securities which is effective under the
Securities Act or under the securities act of any state, (y) Rule 144
under the Securities Act or (z) any other exemption from registration
under the Securities Act or under the securities act of any state
relating to the disposition of securities, provided an opinion of
counsel is furnished, reasonably satisfactory in form and substance to
the Corporation, that an exemption from the registration requirements
of the Securities Act of such state act is available. The Purchaser
understands the legal consequences of the foregoing to mean that he,
she or it may be required to bear the economic risk of his, her or its
investment in the shares of the Restricted Securities for an
indefinite period or time. The Purchaser understands that any
instruments initially representing the shares of the Restricted
Securities shall bear legends restricting the transfer thereof. The
Purchaser agrees not to resell or otherwise dispose of all or any
shares of Restricted Securities acquired by the Purchaser, except as
permitted by law, including, without limitation, any and all
applicable provisions of this Section, the Agreement and any
regulations under the Securities Act and any state law or regulations.
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(e) The Purchaser understands that no federal or state
agency has made any finding or determination as to the fairness of an
investment in, or any recommendation or endorsement of, the shares of
the Restricted Securities.
D. Additional Representations of the Purchaser. Each Purchaser
represents for purposes of the Hart-Scott-Rodino Antitrust Improvement Acts of
1976, as amended (the "Act"), that such purchaser controls no other Purchaser as
that term is defined in the regulations promulgated under the Act.
E. Shareholders' Agreement. Each certificate for shares of Common
Stock issued upon exercise of the Warrants shall bear any legends required under
the Shareholders' Agreement dated as of December 1, 1994 between the Corporation
and certain investors and management shareholders described therein, to the
extent required thereof. Any certificate issued at any time in exchange or
substitution for any certificate bearing such legend shall also bear such legend
unless in the opinion of counsel elected by the holder of such certificate (who
may be an employee of such holder) and reasonably acceptable to the Corporation,
the restrictions contained in such Shareholders' Agreement no longer apply
because of the occurrence of one or more events described therein.
F. Consent to Amendments/Waivers. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended or waived and
the Corporation may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, if and only if the Corporation has
obtained the written consent of the Holders of a majority of the Warrants
outstanding and the Holders of the Notes representing a majority of the
principal balance of such Notes; provided that if there are no Warrants and
Notes outstanding, the provisions of this Agreement may be amended or waived and
the Corporation may take any action herein prohibited, if and only if the
Corporation has obtained the written consent of the Holders of a majority of the
Common Stock. No other course of dealing between the Corporation and the Holder
of any Warrants, the Notes or any Common Stock or any delay in exercising any
rights hereunder or under the Certificate of Incorporation will operate as a
waiver of any rights of any such Holders. For purposes of this Agreement,
Warrants or Common Stock held by the Corporation will not be deemed to be
outstanding. If the Corporation pays any consideration to any Holder of
Warrants, the Notes or Common Stock for such Holder's consent to any amendment,
modification or waiver, the Corporation shall also pay each other Holder
granting its consent hereunder equivalent consideration computed on a pro rata
basis.
G. Survival of Representations and Agreements. All representations,
warranties and agreements contained herein or made in writing by any party in
connection herewith will survive the execution and delivery of this Agreement
and the consummation of the
- 23 -
<PAGE>
transactions contemplated hereby, regardless of any investigation made by any
Purchaser or on its behalf.
H. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind and may be enforced by the respective
successors and assigns of the parties hereto whether so expressed or not. In
addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Purchaser's benefit as a
purchaser or Holder of Warrants, the Notes, or the Underlying Common Stock are
also for the benefit of, and enforceable by, any Affiliate of such Purchaser
which becomes the Holder of such Warrants, the Notes or such Underlying Common
Stock (whether by sale, assignment or otherwise), and, in addition, any Holder
of at least 10% of the Underlying Common Stock at any time outstanding.
I. Capital and Surplus. The Corporation agrees that the capital of
the Corporation (as such term is used in Section 154 of the General Corporation
Law of Delaware) in respect of the Common Stock issued pursuant to this
Agreement will be equal to the aggregate par value of such shares. The
Corporation further agrees that, except as contemplated herein, it will not
increase the capital of the Corporation with respect to any shares of the
Corporation's capital stock at any time on or after the date of this Agreement.
J. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
K. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
L. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
M. Governing Law. The corporate law of Delaware will govern all
issues concerning the relative rights of the Corporation and its shareholders.
All other questions concerning the construction, validity and interpretation of
this Agreement and the exhibits and schedules hereto will be governed by the law
of Illinois.
N. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by
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<PAGE>
reputable express courier service (charges prepaid) or mailed to the recipient
by certified or registered mail, return receipt requested and postage prepaid.
Such notices, demands and other communications will be sent to each Purchaser at
the address indicated on the Schedule of Purchasers and to the Corporation at
the address indicated below:
Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
Attn: Billy D. Prim
Chief Executive Officer
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
O. Understanding Among the Purchasers. The determination of each
Purchaser to purchase the Notes and Warrants pursuant to this Agreement has been
made by such Purchaser independent of any statements or opinions as to the
advisability of such purchase or as to the properties, business, prospects or
condition (financial or otherwise) of the Corporation which may have been made
or given by any other Purchaser or by any agent or employee of any other
Purchaser.
- 25 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
BLUE RHINO CORPORATION
By /s/ Billy Prim
----------------------------------------
Its President
-----------------
INVESTORS:
__/s/ Dean Buntrock_____________________
Dean L. Buntrock
Conant Family Partnership, a general
partnership consisting of nine trusts
By:__/s/ Paul Vishny____________________
Paul H. Vishny, Trustee of each of the
aforesaid trusts and not individually
__/s/ Peter B. Desnoes__________________
Peter B. Desnoes
Doerge-Blue Rhino, L.P.
By: Avalon Corporation
Its: General Partner
__/s/ David Doerge______________________
David Doerge, President
Craig Duchossois Revocable Trust
__/s/ Craig Duchossois__________________
Craig Duchossois, Trustee
- 26 -
<PAGE>
Richard L. Duchossois Revocable Trust
__/s/ Craig Duchossois, Under Power of
Attorney for Richard L. Duchossois, Trustee
Richard L. Duchossois, Trustee
__/s/ Andrew J. Filipowski__________________
Andrew J. Filipowski
__/s/ Donald Flynn__________________________
Donald Flynn
Kevin F. Flynn June 1992
Non-Exempt Trust
By:__/s/Kevin F. Flynn______________________
Kevin F. Flynn, Trustee
Brian J. Flynn June 1992
Non-Exempt Trust
By:__/s/ Brian J. Flynn_____________________
Brian J. Flynn, Trustee
__/s/ Richard Forsythe______________________
Richard Forsythe
__/s/ William Hulligan______________________
William Hulligan
Kimberly Family Discretionary Trust
__/s/ Craig Duchossois______________________
Craig Duchossois, Trustee
- 27 -
<PAGE>
__/s/ Douglas Gray__________________________
Douglas Gray
Joseph Cusimano IRA
By:__/s/ Joseph Cusimano____________________
__/s/ Michael Arrington ____________________
Michael Arrington
__/s/ David Meltzer_________________________
David Meltzer
__/s/ Peer Pedersen_________________________
Peer Pedersen
__/s/ Charles Reeder________________________
Charles Reeder
__/s/ J. Christopher Reyes__________________
J. Christopher Reyes
__/s/ M. Jude Reyes_________________________
M. Jude Reyes
Ryan Holding Corporation
By:__/s/ Patrick J. Ryan____________________
Its:__President___________________________
Cornelius and Lothian, L.P.
- 28 -
<PAGE>
By:__/s/ C.G. Gerst______________________
Its:__General Partner
__/s/ Howard Warren______________________
Howard Warren
__/s/ Arthur Watson______________________
Arthur Watson
__/s/ Richard Brenner____________________
Richard Brenner
__/s/ Billy D. Prim______________________
Billy D. Prim
- 29 -
<PAGE>
Schedule of Purchasers
<TABLE>
<CAPTION>
Investor Number of Units
- -------- ---------------
<S> <C>
Michael Arrington 500
Richard Brenner 100
Dean Buntrock 1,000
Conant Family Partnership 500
Cornelius and Lothian, L.P. 250
Joseph Cusimano IRA 250
Peter Desnoes 500
Doerge-Blue Rhino, L.P. 1,000
Craig Duchossois
Revocable Trust 750
Richard L. Duchossois
Revocable Trust 500
Andrew J. Filipowski 200
Donald Flynn 334
Kevin F. Flynn June 1992
Non-Exempt Trust 333
Brian J. Flynn June 1992
Non-Exempt Trust 333
Richard Forsythe 500
Douglas Gray 250
William Hulligan 1,000
Kimberly Family
</TABLE>
- 30 -
<PAGE>
<TABLE>
<S> <C>
Discretionary Trust 250
David Meltzer 250
Peer Pedersen 1,000
Billy D. Prim 25
Charles Reeder 500
J. Christopher Reyes 500
M. Jude Reyes 500
Ryan Holding Corporation 1,000
Howard Warren 1,000
Arthur Watson 250
</TABLE>
- 31 -
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT
BE SOLD OR OFFERED FOR SALE UNLESS REGISTERED UNDER SAID ACT OR UNLESS THE
HOLDER OF THIS WARRANT DELIVERS TO BLUE RHINO CORPORATION AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO BLUE RHINO CORPORATION STATING THAT AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE.
10.5% SENIOR DISCOUNT NOTE
--------------------------
$679,677.09 October 11, 1995
Chicago, Illinois
The undersigned, BLUE RHINO CORPORATION, a Delaware corporation
("Borrower"), for value received, hereby promises to pay to the order of Michael
Arrington (together with its successors and permitted assigns, "Lender"), on or
before October 11, 2000 (the "Maturity Date") the amount of Six Hundred Seventy-
Nine Thousand Six Hundred Seventy-Seven and 09/l00ths Dollars ($679,677.09) (the
"Loan"). Borrower further promises to pay interest on the unpaid principal
amount of the Loan at the rate and at the times herein provided. This Note is
one in a series of Notes (the "Notes") potentially aggregating in the amount of
$18,453,233.00 which Notes rank pari passu with one another.
The principal amount of this Note shall bear interest from the third
anniversary of the date of this Note until the Maturity Date at the rate of
10.5% per annum, accrued and compounded semi-annually on April 30th, and October
31st of each year until paid. Interest accrued after the third anniversary of
the Issue Date shall be paid in semi-annual installments on October 31st and
April 30th of each year beginning April 30, 1999, until the Maturity Date. All
payments on account of the indebtedness evidenced by this Note shall be first
applied to interest on the principal amount and the remainder to the principal
amount.
In each case such interest shall be computed on the basis of actual days
elapsed on the basis of a 365 day year on so much of the principal amount and
accrued interest as is from time to time outstanding.
All payments made hereunder may be made by certified check of the
Corporation mailed to the address of the holder of this Note on the records of
the Corporation or such other address as the record holder hereof shall
previously have notified the Corporation in writing.
This Note may be prepaid in whole or in part by the Corporation without
premium or penalty. However, should the Corporation choose to prepay this Note,
the Corporation shall
<PAGE>
prepay the principal balance of the Notes to each Holder on a pro rata basis. In
the event the Corporation prepays the principal on this Note prior to the third
anniversary of the issuance date of this Note, the balance of the Note payable
shall be discounted by the amount prepaid plus the product of the following
formula compounded semi-annually at 10.5% for each April 30 and October 31
between the date of prepayment and the third anniversary of the date of this
Note:
(Number of days prior to third
Balance (Anniversary of issuance date
Prepaid x (Prepayment occurs
------------------------------------ x 10.5%)
(365
Upon the occurrence of any event described in Section 1.2 of the
Corporation's Certificate of Incorporation, the Corporation will provide the
Holder of this Note with written notice of such event. Within 30 days of the
receipt of this notice, which shall be deemed received within one day of its
deposit by the Corporation with U.S. Postal Service for first class delivery,
the Holder of this Note may demand in writing that the Corporation to repurchase
this Note for 100% of the outstanding principal balance plus any accrued and
unpaid interest. If such demand is not received by the Corporation within the 30
day period, the right to demand payment shall be deemed waived by the Holder.
Upon the recapitalization, or reorganization of the Company, or the sale,
transfer or assignment or other disposition of all or substantially all of the
assets or capital stock of the Corporation, including a general assignment for
the benefit of creditors and the reorganization or sale of the Company or its
assets under any bankruptcy or insolvency law, this Note shall become
immediately due and payable.
This Note shall not be subject to the operation of any purchase,
retirement, or sinking fund.
This Note shall be senior to (i) all Indebtedness incurred after the date
hereof except for (a) Notes issued in connection with the Chicago Dearborn
Private Placement and (b) Indebtedness arising in the ordinary course of
business consistent with past customs and practice or which would not exceed
$50,000 in the aggregate; (ii) equity securities (including, without limitation,
warrants, options and other rights to acquire equity securities) and (iii) the
payment of any dividends on Corporation's Common Stock or Series A Preferred
Stock, or the redemption, purchase or other acquisition of or payments on any
equity security other than (a) repurchase of Common Stock from employees of the
Corporation upon termination of employment pursuant to an incentive stock plan
or a stock option plan which may be adopted
-2-
<PAGE>
by the Board of Directors, and (b) issuance of Common Stock upon conversion of
the Series A Preferred Stock or the exercise of the Existing Warrants, the HDP
Warrants or the Warrants issued in connection with the Chicago Dearborn Private
Placement; prior to the payment in full of this Note shall be a Default unless
consented to in writing by the holder of this Note.
The Note is transferable pursuant to (i) public offerings registered under
the Securities Act, (ii) Rule 144 of the Commission (or any similar rule then in
force) if such rule is available, (iii) the conditions specified in that certain
Unit Purchase Agreement dated October 11, 1995, between the Corporation and
those persons named therein (the "Unit Purchase Agreement").
This Note and all obligations and rights hereunder shall be binding upon
the successors and assigns of the Corporation and shall inure to the benefit of
the record holder hereof and its successors and assigns. The registered holder
hereof shall be treated as the owner of this Note for all purposes.
If any term or provision of this Note or the application thereof to any
person or circumstance shall to any extent be invalid or unenforceable, the
remainder of this Note, or the application of such term or provision to person
or circumstances other than those as to which it is invalid or unenforceable,
shall not be affected thereby, and each term and provision of this Note shall be
valid and enforceable to the fullest extent permitted by law. If any payments
required to be made under this Note shall be in excess of the amounts allowed by
law, the amounts of such payments shall be reduced to the maximum amounts
permitted by law.
In the event any payment required hereunder is not paid when due, such
overdue payment shall bear interest from the date such payment was due until
paid at twelve and one-half percent (12.5%).
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.
This Note may not be modified or terminated except by a written agreement
executed by the Corporation and the holder of this Note.
A director, officer, employee, or stockholder, as such, of the Corporation
shall not have any liability for any obligations of the Corporation under this
Note or for any claim based on, in respect of or by reason of such obligations
or their creation. By accepting this Note, the registered holder hereof waives
and
-3-
<PAGE>
releases all such liability. The waiver and release are part of the
consideration for the issue of this Note.
This Note evidences indebtedness incurred under, and is subject to the
terms and provisions of the Unit Purchase Agreement. Terms used herein and not
otherwise defined herein shall have such meanings ascribed to such terms in the
Unit Purchase Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Note as of the day
and year first above written.
BLUE RHINO CORPORATION
By_____________________________
Its__________________________
ATTEST
By____________________________
Its_________________________
-4-
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in form below:
I or we assign and transfer this Note to _______________ (insert
assignee's social security number or tax I.D. number)
_____________________________
_____________________________
_____________________________
_____________________________
(Print or type assignee's name, address, and zip code)
and irrevocably appoint ______________________________ agent to transfer this
Note on the books of the Corporation. The agent may substitute another to act
for him.
Date _____________________________ _________________________________________
(Sign exactly as your name appears on the
first page of this Note)
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OFFERED FOR
SALE UNLESS REGISTERED UNDER SAID ACT OR UNLESS THE HOLDER OF THIS WARRANT
DELIVERS TO BLUE RHINO CORPORATION AN OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO BLUE RHINO CORPORATION STATING THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER
ARE ALSO BENEFITED BY AND SUBJECT TO A SERIES A SECURITIES PURCHASE AGREEMENT, A
REGISTRATION RIGHTS AGREEMENT EACH DATED AS OF DECEMBER 1, 1994, AND EACH BY AND
AMONG BLUE RHINO CORPORATION, A DELAWARE CORPORATION, PLATINUM VENTURE PARTNERS
I, L.P., A DELAWARE LIMITED PARTNERSHIP, AND CERTAIN OTHER INVESTORS, AND A
SHAREHOLDERS' AGREEMENT DATED THE SAME DATE, BY AND AMONG BLUE RHINO
CORPORATION, A DELAWARE CORPORATION, THE INVESTORS AND THE MANAGEMENT
STOCKHOLDERS, COPIES OF WHICH ARE ON FILE WITH THE CORPORATION.
Dated: December 1, 1994
WARRANT
To Purchase _______ Shares of Common Stock (Subject to adjustment herein)
____________________________
Expiring December 1, 2004
THIS IS TO CERTIFY THAT, for value received, _________________________ or
registered assigns is entitled to purchase from Blue Rhino Corporation, a
Delaware corporation (the "Corporation"), at any time and from time to time
prior to 5:00 p.m., Chicago, Illinois time, on December 1, 1994, at the
principal office of the Corporation which is currently 104 Cambridge Park,
Winston-Salem, North Carolina 27104 (or such other address as the Corporation
shall specify by notice to all Warrantholders), at the Exercise Price, the
number of shares of Common Stock, $0.001 par value (the "Common Stock"), of the
Corporation shown above, all subject to adjustment and upon the terms and
conditions as hereinafter provided, and is entitled also to exercise the other
appurtenant rights, powers and privileges hereinafter described.
This Warrant is one of the one or more warrants (the "Warrants"), of the
same form and having substantially the same terms as this Warrant, which have
been or will be issued pursuant to the Securities Purchase Agreement.
Certain terms used in this Warrant are defined in Article VI.
<PAGE>
ARTICLE I
EXERCISE OF WARRANTS
1.1 Method of Exercise and Payment.
(a) Method of Exercise. To exercise this Warrant in whole or in part,
the Holder shall deliver to the Corporation, at the principal office of the
Corporation, (a) this Warrant, (b) a written notice, in substantially the form
of the Subscription Notice attached hereto, of such Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased or converted into, as the case may be, the denominations
of the share certificate or certificates desired and the name or names in which
such certificates are to be registered, and (c) payment to the Corporation of
the amount equal to the product of the then applicable Exercise Price multiplied
by the number of shares of Common Stock then being purchased pursuant to one of
the payment methods permitted under Section 1.l(b) below.
(b) Method of Payment. Payment shall be made either (1) by cash,
money order, certified or bank cashier's check, (2) by wire transfer, (3) by
converting the Warrant, or any portion thereof, into Common Stock pursuant to
Section 1.1 (c) below ("Warrant Conversion") or (4) any combination of the
foregoing at the option of the Holder.
(c) Payment by Warrant Conversion. Subject to any limitations set
forth in this Warrant, the Holder may exercise the purchase right represented by
this Warrant with respect to a particular number of shares of Common Stock
subject to this Warrant ("Converted Warrant Stock") and elect to pay for the
Converted Warrant Stock through Warrant Conversion as defined in Section 1.1(b),
by specifying such election in the Subscription Notice. In such event, the
Corporation shall deliver to the Holder (without payment by the Holder of any
Exercise Price or any cash or other consideration) that number of shares of
Common Stock equal to the quotient obtained by dividing (x) the value of this
Warrant (or the specified portion hereof) on the Exercise Date, which value
shall be determined by subtracting (A) the aggregate Exercise Price of the
Converted Warrant Stock immediately prior to the exercise of the Warrant from
(B) the aggregate Fair Market Value of the Converted Warrant Stock issuable upon
exercise of this Warrant (or the specified portion hereof) on the Exercise Date,
by (y) the Fair Market Value of one share of Common Stock on the Exercise Date.
For purposes of this Section 1, "Fair Market Value" of a share of Common Stock
as of a particular date shall mean:
(i) If the Corporation's registration under the Securities Act,
covering its initial underwritten public offering of stock had been
declared effective by the Commission, then the fair market value of a share
of Common Stock as of the last Business Day immediately prior to the
Exercise Date.
(ii) If such a registration statement has not been declared effective,
or if it has been declared effective but the offering is not consummated in
accordance with the terms of
<PAGE>
the underwriting agreement between the Corporation and its underwriters
relating to such registration statement, then as determined in good faith
by the Board upon review of the relevant factors; provided, however, that
if the Exercise Date falls within one day prior to the effective date of
such registration statement, the fair market value of a share of Common
Stock will be deemed to be the public offering price per share provided for
in such registration statement.
(d) Mechanics. The Corporation shall as promptly as practicable and
in any event within three days after delivery of a Subscription Notice as
described above, execute and deliver or cause to be executed and delivered,
in accordance with such Subscription Notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in
said Subscription Notice. The share certificate or certificates so
delivered shall be in such denominations as may be specified in such
Subscription Notice or, if such Subscription Notice shall not specify
denominations, in denominations of 100 shares each, and shall be issued in
the name of the Holder or such other name or names as shall be designated
in such Subscription Notice. Such certificate or certificates shall be
deemed, to have been issued (and this Warrant or the portion thereof
specified in the Subscription Notice shall be deemed to have been
exercised) and such Holder or any other Person so designated to be named
therein shall be deemed for all purposes to have become a holder of record
of such shares, as of the date the aforementioned Subscription Notice is
received by the Corporation, or delivery thereof is refused (the "Exercise
Date"). If this Warrant shall have been exercised only in part, the
Corporation shall, at the time of delivery of the certificate or
certificates, deliver to the Holder a new Warrant evidencing the rights to
purchase or convert the remaining shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with
this Warrant, or, at the request of the Holder, appropriate notation may be
made on this Warrant which shall then be returned to the Holder. The
Corporation shall pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of share
certificates and new Warrants, except that, if share certificates or new
Warrants shall be registered in a name or names other than the name of the
Holder, funds sufficient to pay all transfer taxes payable as a result of
such transfer shall be paid by the Holder at the time of delivering the
aforementioned notice of exercise or promptly upon receipt of a written
request of the Corporation for payment.
1.2 Shares to Be Fully Paid and Nonassessable. All shares of Common Stock
issued upon the exercise of this Warrant shall be validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder, and from
all taxes, liens and charges with respect to the issue thereof (other than
transfer taxes) and, if the Common Stock is then listed on any national
securities exchanges (as defined in the Exchange Act) or quoted on NASDAQ, shall
be duly listed or quoted thereon, as the case may be.
- 2 -
<PAGE>
1.3 No Fractional Shares to Be Issued. The Corporation shall, not be
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon any exercise of this Warrant, in lieu of such fractional share the
Corporation may pay to the Holder, in cash, an amount equal to such share of
fraction of the fair market value (as determined in good faith by the Board) per
share of outstanding Common Stock of the Corporation in the Business Day
immediately prior to the date of such exercise.
1.4 Share Legends. Each certificate for shares of Common Stock issued
upon exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend:
"This security has not been registered under the Securities Act of
1933 and may not be sold or offered for sale unless registered pursuant to
such Act or unless the holder hereof delivers to Blue Rhino Corporation an
opinion of counsel reasonably acceptable to Blue Rhino Corporation stating
that an exemption from such registration is available."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act) shall also bear such legend unless, in the opinion of counsel
selected by the holder of such certificate (who may be an employee of such
holder) and reasonably acceptable to the Corporation, the securities represented
thereby need no longer be subject to restrictions on resale under the Securities
Act. Each certificate for shares of Common Stock issued upon exercise of this
Warrant shall also bear any legends required under the Shareholders' Agreement,
to the extent required thereby. Any certificate issued at any time in exchange
or substitution for any certificate bearing such legend shall also bear such
legend unless in the opinion of counsel selected by the holder of such
certificate (who may be an employee of such holder) and reasonably acceptable to
the Corporation, the restrictions contained in such Shareholders' Agreement no
longer apply because of the occurrence of one or more of certain events
described therein.
1.5 Reservation; Authorization. The Corporation has reserved and will
keep available for issuance upon exercise of the Warrants the total number of
shares of Common Stock deliverable upon exercise of all Warrants from time to
time outstanding. The issuance of the shares of Common Stock upon exercise of
the Warrants has been duly and validly authorized and, when issued and sold in
accordance with the Warrants, such shares of Common Stock will be duly and
validly issued, fully paid and nonassessable. The Corporation will take all
such actions as are necessary in order to insure the foregoing.
1.6 Result of Exercise. On the Exercise Date the rights of the holder of
such Warrant as such holder will cease and the Person or Persons in whose name
or names any certificate or certificates for shares of Common Stock are to be
issued upon such exercise will be deemed to have become the holder or holders of
record of the shares of Common Stock represented thereby.
- 3 -
<PAGE>
1.7 Not Close Books Until Exercise. The Corporation will not close its
books against the transfer of this Warrant or shares of Common Stock issued or
issuable upon exercise of this Warrant in any manner which interferes with the
timely exercise of this Warrant.
ARTICLE II
TRANSFER, EXCHANGE AND REPLACEMENT OF WARRANTS
2.1 Ownership of Warrant. The Corporation may deem and treat the Person
in whose name this Warrant is registered as the holder and owner hereof for all
purposes and shall not be affected by any notice to the contrary, until this
Warrant is presented for registration of transfer as provided in this Article
II.
2.2 Transfer of Warrant. The Corporation agrees to maintain books for the
registration of transfers of the Warrants, and any transfer, in whole or in
part, of this Warrant and all rights hereunder shall be registered on such
books, upon surrender of this Warrant at the principal office of the Corporation
together with a written assignment of this Warrant duly executed by the Holder
or his, her or its duly authorized agent or attorney and funds sufficient to pay
any transfer taxes payable upon such transfer. Upon surrender the Corporation
shall execute and deliver a new Warrant or Warrants in the name of the assignee
or assignees and in the denominations specified in the instrument of assignment,
and this Warrant shall promptly be canceled. Notwithstanding the foregoing, a
Warrant may be exercised by a new holder without having a new Warrant issued.
This Warrant may not be transferred in whole or in part, and the Corporation
shall not be required to register any transfers unless the Corporation has
received an opinion of counsel selected by the transferor (who may be an
employee of such party) and reasonably satisfactory to the Corporation that such
transfer is exempt from the registration requirements of the Securities Act.
If the Warrantholder delivers to the Corporation an opinion of counsel
selected by such holder (who may be an employee of such holder) and reasonably
acceptable to the Corporation, that no subsequent transfer of the Warrant will
require registration under the Securities Act, the Corporation will promptly
deliver to such holder or his, her or its designee, new Warrants in exchange for
the Warrant delivered by such holder, which will not bear the Securities Act
legend set forth at the beginning of the first page of the Warrant, and
thereafter no further opinions of counsel shall be required in connection with
the subsequent transfer of such Warrant.
2.3 Division or Combination of Warrants. This Warrant may be divided or
combined with other Warrants upon surrender hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Corporation, together
with a written notice specifying the names and denominations in which the new
Warrant or Warrants are to be issued, signed by the holders hereof and thereof
or their respective duly authorized agents or attorneys. Subject to compliance
with Section 2.2 as to any transfer which may be involved in the division or
combination, the Corporation
- 4 -
<PAGE>
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
2.4 Loss, Theft, Destruction of Warrant Certificates. Upon receipt of
evidence reasonably satisfactory to the Corporation (an affidavit of the
registered holder will be satisfactory) of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Corporation (an Original Warrantholder's indemnity being satisfactory
indemnity in the event of loss, theft or destruction of any Warrant owned by
such holder), or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Corporation will (at its expense) make and
deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new
Warrant of like tenor and representing the right to purchase the same aggregate
number of shares of Common Stock.
2.5 Expenses of Delivery of Warrants. The Corporation shall pay all
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of Warrants and Warrant
Stock hereunder. If, pursuant to Section 2.2, the opinion of counsel provides
that registration is not required for the proposed exercise or transfer of this
Warrant or the proposed transfer of the Warrant Stock and that the proposed
exercise or transfer in the absence of registration would require the
Corporation to take any action including executing and filing forms or other
documents with the Commission or any state securities agency, or delivering to
the Warrantholder any form or document in order to establish the right of the
Warrantholder to effectuate the proposed exercise or transfer, the Corporation
agrees promptly, at its expense, to take any such action; and provided, further,
that the Corporation will reimburse the Warrantholder in full for any expenses
(including but not limited to the fees and disbursements of such counsel, but
excluding brokers' commissions) incurred by the Warrantholder or owner of
Warrant Stock on his, her or its behalf in connection with such exercise or
transfer of the Warrant or transfer of Warrant Stock.
ARTICLE III
CERTAIN RIGHTS
3.1 Rights Under Securities Purchase Agreement, Registration Agreement and
Shareholders' Agreement. This Warrant and the Warrant Stock are entitled to the
benefits of and are subject to the Securities Purchase Agreement, Registration
Agreement and the Shareholders' Agreement to the extent provided therein. The
Corporation shall keep a copy of the Securities Purchase Agreement, Registration
Agreement, the Shareholders' Agreement, and any amendments, restatements,
modifications and supplements thereto, at the principal office of the
Corporation and shall furnish copies thereof to any Holder or any transferee
upon request.
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ARTICLE IV
ANTIDILUTION PROVISIONS
4.1 Adjustments Generally. The Exercise Price and the number of shares of
Common Stock (or other securities or property) issuable upon exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events, as provided in this Article IV.
4.2 Exercise of Warrant. At any time and from time to time, any holder of
this Warrant may exercise all or any portion of this Warrant into the number of
shares of Common Stock computed by (i) multiplying the number of shares of
Common Stock sought to be purchased pursuant to this Warrant by $0.0347037 and
(ii) dividing the resulting product by the Exercise Price then in effect.
4.3 Exercise Price.
(a) Exercise Price Based on Conversion Price. The "Exercise Price"
shall be one-tenth of the Conversion Price then in effect pursuant to the
Certificate of Incorporation of the Corporation. In order to prevent dilution
of the exercise rights granted to the holder of this Warrant, the Conversion
Price and consequently the Exercise Price will be subject to adjustment from
time to time pursuant to this Section 4.3 and Sections 4.5 and 4.6 below. For
purposes of this Section 4.3, the Corporation shall be deemed to have issued or
sold Common Stock as set forth in Section 4.4 below.
(b) Adjustment for Dilutive Events. If and whenever on or after the
original date of issuance of this Warrant the Corporation issues or sells, or in
accordance with Section 4.4 below is deemed to have issued or sold, any shares
of Common Stock for consideration per share less than the Conversion Price (the
"Diluted Share Price") in effect immediately prior to the time of such issue or
sale (a "Dilutive Event"), then forthwith upon the occurrence of any such
Dilutive Event the Conversion Price will be reduced so that the Conversion Price
in effect immediately following the Dilutive Event will equal the Diluted Share
Price. Notwithstanding the foregoing, the issuance by the Corporation of up to
2,000,000 shares of Common Stock, or securities convertible into or options to
acquire up to 2,000,000 shares of Common Stock, issued pursuant to stock option
plans or grants to officers or employees approved by the Board or the issuance
of Common Stock upon conversion of the Series A Preferred Shares issued pursuant
to the Securities Purchase Agreement shall not constitute a Dilutive Event. As
used in this Section 4.3(b) and in Section 4.4 below, the term "Common Stock"
shall include Common Stock Equivalents. Notwithstanding anything contained
herein to the contrary, the Exercise Price of this Warrant held by a particular
holder shall not be adjusted pursuant to this Article 4 in connection with a
particular Dilutive Event, or any subsequent Dilutive Event, if such holder of
this Warrant fails to purchase, after being offered by the Corporation the
opportunity to purchase, a percentage of the securities, rights or options, or
any
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combination thereof, the sale of which constitute the Dilutive Event, which is
equal to or greater than 75 % of the percentage ownership of the Corporation's
Common Stock on a fully diluted basis held by such holder immediately prior to
such Dilutive Event. A Warrant which is no longer subject to adjustment as a
result of the preceding sentence shall remain subject to such limitation
regardless of any subsequent transfers, and at each time that any Warrant so
loses its rights to such adjustment, all Warrants which have lost their right to
such adjustment as of such time shall be automatically classified into (and the
outstanding Warrant representing such Warrant will automatically be deemed to
represent) new sub-series A-1, A-2, A-3, etc., consecutively, beginning with
A-1. The holders of Warrants of each such sub-series shall promptly deliver such
Warrants to the Corporation upon the Corporation's request, for exchange or
notation to reflect such sub-series. If any such Warrants are not delivered to
the Corporation, the Corporation shall make appropriate notations on its stock
records, which may include stop transfer instructions, and may place in escrow,
pending receipt of such Warrants, all dividend payments or other distributions
owing with respect to the Warrants represented by such Warrants.
4.4 Issuance and Sale of Common Stock. For purposes of determining the
adjusted Exercise Price pursuant to Sections 4.3 above the following events
shall be deemed to be an issuance and sale of Common Stock by the Corporation:
(a) Issuance of Rights or Options. If (i) the Corporation in any
manner grants any rights or options to subscribe for or to purchase shares of
Common Stock or any securities convertible into or exchangeable for shares of
Common Stock (such rights or options referred to herein as "Options" and such
convertible or exchangeable stock or securities referred to herein as
"Convertible Securities") and (ii) the Price Per Share of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities is less than the Conversion Price in effect
immediately prior to the time of the granting of such Options then the shares of
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities will be deemed to have been issued and
sold by the Corporation for such Price Per Share. For the purposes of this
Section 4.4(a), the "Price Per Share" is determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of all such Options, plus
in the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price will be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
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(b) Issuance of Convertible Securities. If (i) the Corporation in any
manner issues or sells any Convertible Securities and (ii) the Price Per Share
of shares of Common Stock issuable upon such conversion or exchange is less than
the Conversion Price in effect immediately prior to the time of such issue or
sale then the shares of Common Stock issuable upon the conversion or exchange of
such Convertible Securities will be deemed to have been issued and sold by the
Corporation for such Price Per Share. For the purposes of this Section 4.4(b),
the "Price Per Share" will be determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Conversion Price will be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments to the Conversion Price had been
or are to be made pursuant to Section 4.4(a) above, no further adjustment of the
Conversion Price will be made by reason of such issue or sale.
(c) Change in Option Price or Conversion Price. If at any time there
is a change in (i) the purchase price provided for in any Options, (ii) the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities, or (iii) the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock, then the Conversion Price
in effect at the time of such change will be readjusted to the Conversion Price
which would have been in effect had those Options or Convertible Securities
still outstanding at the time of such change provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time such Options or Convertible Securities were initially granted,
issued or sold; provided that if such adjustment would result in an increase of
the Conversion Price then in effect, such adjustment will not be effective until
30 days after written notice thereof has been given by the Corporation to all
holders of Warrants.
(d) Calculation of Consideration Received. If any shares of Common
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor or the Price Per
Share, as the case may be, will be deemed to be the net amount received or to be
received, respectively, by the Corporation therefor. In case any shares of
Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than cash
received by the Corporation or the non-cash portion of the Price Per Share, as
the case may be, will be the fair value of such consideration received or to be
received, respectively, by the Corporation; except where such consideration
consists of securities, in which case the amount of consideration received or to
be received, respectively, by the Corporation will be the Market Price thereof
as of the date of receipt. If any shares of Common Stock, Options or
Convertible Securities are issued in connection with any merger in which the
Corporation is the surviving corporation, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving
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corporation as is attributable to such shares of Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash and securities will be determined jointly by the Corporation and
the holders of a majority of the outstanding Warrants. If such parties are
unable to reach agreement within a reasonable period of time, the fair value of
such consideration will be determined by an independent appraiser jointly
selected by the Corporation and the holders of a majority of the outstanding
Warrants.
(e) Integrated Transactions. In case any Option is issued in
connection with the issuance or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
will be deemed to have been issued for a consideration of $.01.
(f) Record Date. If the Corporation takes a record of the holders of
Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in shares of Common Stock, Options or in Convertible
Securities or (ii) to subscribe for or purchase shares of Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issuance or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
4.5 Subdivision or Combination of Common Stock. If the Corporation at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced. If the Corporation at any
time combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be
proportionately increased.
4.6 Organic Change. Prior to the consummation of any Organic Change, the
Corporation will make appropriate provisions (in form and substance satisfactory
to the holders of a majority of the Warrants then outstanding) to insure that
each of the holders of Warrants with respect to all or any of the Warrants held
thereby will thereafter have the right to acquire and receive, in lieu of or in
addition to the shares of Common Stock immediately theretofore acquirable and
receivable upon the exercise of such holder's Warrants, such shares of stock,
securities or assets as such holder would have received in connection with such
Organic Change if such holder had exercised his, her or its Warrants immediately
prior to such Organic Change. In any such case, the Corporation will make
appropriate provisions (in form and substance satisfactory to the holders of a
majority of the Warrants then outstanding) to insure that the provisions of this
Section 4.6 will thereafter be applicable to the Warrants (including, an
immediate adjustment of the Conversion Price to the value for the Common Stock
reflected by the terms of such Organic Change and a corresponding immediate
adjustment in the number of shares of Common Stock acquirable and receivable
upon exercise of the Warrants, if the value so reflected is less than the
Conversion Price in effect
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immediately prior to such Organic Change). The Corporation will not effect any
such Organic Change, unless prior to the consummation thereof, the successor
Corporation resulting from such Organic Change assumes by written instrument (in
form reasonably satisfactory to the holders of a majority of the Warrants then
outstanding), the obligation to deliver to each such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to acquire.
All other terms of the Warrants shall remain in full force and effect
following such an Organic Change. The provisions of this Section 4.6 shall
similarly apply to successive Organic Changes.
4.7 Notices.
(a) Immediately upon any adjustment of the Exercise Price, the
Corporation shall give written notice thereof to all holders of Warrants
specifying the Exercise Price in effect thereafter with respect to the
particular holder.
(b) The Corporation shall give written notice to all holders of
Warrants at least 20 days prior to the date on which the Corporation closes its
books or takes a record for determining rights to vote with respect to any
Organic Change, Change in Control, Change of Ownership, Fundamental Change or
other reorganization, dissolution or liquidation. The Corporation shall also
give written notice to the holders of Warrants at least 20 days prior to the
date on which any Organic Change, Change in Control, Change of Ownership,
Fundamental Change or other reorganization, dissolution or liquidation shall
occur.
4.8 Certain Other Events. The Company will not, by amendment of its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issues or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Warrantholders
against dilution or other impairment. If any event occurs as to which the
foregoing provisions of this Article IV are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board, fairly
protect the purchase rights of the Warrants in accordance with the essential
intent and principles of such provisions, then the Board shall make such
adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of the Board, to protect such purchase rights as aforesaid, but in
no event shall any such adjustment have the effect of increasing the Exercise
Price or decreasing the number of shares of Common Stock subject to purchase
upon exercise of this Warrant.
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4.9 Proceedings Prior to Any Action Requiring Adjustment As a condition
precedent to the taking of any action which would require an adjustment pursuant
to this Article IV, the Corporation shall take any action which may be
necessary, including obtaining regulatory approvals or exemptions, in order that
the Corporation may thereafter validly and legally issue as fully paid and
nonassessable all shares of Common Stock which the holders of Warrants are
entitled to receive upon exercise thereof, and if all such approvals and actions
are not taken, the Corporation shall take any action which would cause the
Corporation to be able to issue to the holders of Warrants the full number of
shares issuable upon exercise hereof in accordance with the terms hereof.
ARTICLE V
LIQUIDATION, DISSOLUTION, DISTRIBUTIONS OR DIVIDENDS
5.1 Liquidation or Dissolution. In case the Corporation at any time while
this Warrant shall remain unexpired and unexercised, shall dissolve, liquidate,
or wind up its affairs other than in connection with an Organic Change, the
Holder shall have the right to exercise this Warrant for a period of sixty (60)
days after the later of (i) such event having occurred and (ii) receipt by the
Holder of a notice from the Company indicating the kind and amount of securities
or assets issuable or distributable to holders of shares of Common Stock with
respect to such event, and upon exercise of this Warrant during such period, the
Holder shall have the right to receive in lieu of each share of the Warrant
Stock, the same kind and amount of any securities or assets as may be issuable,
distributable, or payable upon any such dissolution, liquidation, or winding up
with respect to each of the shares of the Common Stock.
5.2 Dividends and Distributions With Respect to Common Stock. If legal
under the applicable General Corporation Law of the State of Delaware at any
time the Corporation pays any dividends or makes any other distributions with
respect to the Common Stock, the Corporation shall pay at such time to each
holder of a Warrant the dividends or other distributions which such holder would
have been entitled to receive had such holder exercised all of his, her or its
rights to acquire or receive Common Stock under such Warrant(s) on the date as
of which the holders of Common Stock of record entitled to such dividends or
other distributions were determined.
ARTICLE VI
DEFINITIONS
Capitalized terms used herein and not otherwise defined herein shall have
the meanings set forth in the Securities Purchase Agreement. The following
terms, as used in this Warrant, have the following respective meanings:
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"Board" means the Corporation's Board of Directors.
"Business Day" shall mean (a) if any class of Common Stock is listed or
admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (b) if no class of Common
Stock is so listed or admitted to trading, a day on which any New York Stock
Exchange member firm is open for business.
"Change in Ownership" means any sale or issuance or series of sales and/or
issuances of shares of the Corporation's capital stock by the Corporation or any
holders thereof which results in any Person or group of affiliated Persons
(other than the holders of Common Stock and Series A Securities as of the date
of the Securities Purchase Agreement) owning capital stock of the Corporation
possessing the voting power (under ordinary circumstances) to elect a majority
of the Board.
"Change of Control" means any transaction, circumstance or event that shall
cause or result in Billy Prim and Andrew Filipowski either (a) owning, directly
or indirectly, beneficial or record ownership of shares of the Corporation's
capital stock or securities having less than 20% of the issued and outstanding
shares of the Corporation entitled to vote on matters submitted to the
Corporation's shareholders, or (b) resigning or being removed or otherwise not
serving as a member of the Board.
"Commission" means the Securities and Exchange Commission.
"Common Stock Equivalent" means, collectively, any capital stock of any
class of the Corporation hereafter authorized which is not limited to a fixed
sum or percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Corporation or similar equity like
participation rights or phantom stock interests but specifically excludes the
Warrants.
"Fundamental Change" means (a) a sale or transfer of all or substantially
all of the assets of the Corporation, or of the Corporation and its Subsidiaries
on a consolidated basis, in any transaction or series of transactions, and (b)
any merger or consolidation to which the Corporation is a party, except for a
merger in which the Corporation is the surviving Corporation and, after giving
effect to such merger, the holders of the Corporation's outstanding capital
stock immediately prior to the merger shall own the Corporation's outstanding
capital stock possessing the voting power (under ordinary circumstances) to
elect a majority of the Board after such merger.
"Holder" means the Person in whose name this Warrant is registered on the
books of the Corporation maintained for such purpose or the Person in whose name
any Warrant Stock is registered on such books.
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"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Organic Change" means any capital reorganization, reclassification,
consolidation, merger, lease, or sale of all or substantially all of the
Corporation's assets to another Person (other than a dissolution, liquidation or
winding up of the Company as indicated in Section 5.1 above) which is effected
in such a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for shares of Common Stock.
"Original Warrantholder" means Platinum or any Investor holding a Warrant.
"Market Price" of any security means the average of the closing prices of
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on the primary
exchange on which such security is listed at the end of such day, or, if on any
day such security is not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if
on any day such security is not quoted in the NASDAQ System, the average of the
highest bid and lowest asked prices on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged over a period of 21
days consisting of the day as of which "Market Price" is being determined and
the 20 consecutive business days prior to such day. The "Market Price" of a
note or other obligation which is not listed on a securities exchange or quoted
in the NASDAQ System or reported by the National Quotation Bureau, Incorporated,
the total consideration received by the Corporation (including interest) will be
discounted at the prime rate of interest at the First National Bank of Chicago
in effect at the time the note or obligation is deemed to have been issued. If
at any other time such security is not listed on any securities exchange or
quoted in the NASDAQ System or the over-the-counter market, the "Market Price"
will be the fair value thereof determined jointly by the Corporation and the
holders of a majority of the Warrants. If such parties are unable to reach
agreement within a reasonable period of time, such fair value will be determined
by an independent appraiser jointly selected by the Corporation and the holders
of a majority of the Warrants.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"Platinum" means Platinum Venture Partners 1, L.P., a Delaware limited
partnership.
"Registration Agreement" means the Registration Rights Agreement, of even
date herewith, by and among the Corporation, Platinum and the Investors (as
defined in the Registration
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Agreement), as such agreement may be amended, restated, modified or supplemented
from time to time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Purchase Agreement" means the Series A Securities Purchase
Agreement, of even date herewith, by and among the Corporation, Platinum and the
Investors (as defined in the Securities Purchase Agreement), as such agreement
may be amended, restated, modified or supplemented from time to time in
accordance with its terms.
"Shareholders' Agreement" means the Shareholders' Agreement, of even date
herewith, by and among the Corporation, the Investors (as defined in the
Shareholders' Agreement) and the Management Stockholders (as defined in the
Shareholders' Agreement), as such agreement may be amended, restated, modified
or supplemented from time to time in accordance with its terms.
"Subsidiary" means any corporation, association or other business entity of
which securities or other ownership interests representing more than fifty
percent (50%) of the ordinary voting power are, at the time as of which any
determination is being made, owned or controlled by the Corporation or one or
more Subsidiaries of the Corporation or by the Corporation and one or more
Subsidiaries of the Corporation.
"Voting Stock" of any Person means securities of any class or classes of
such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the directors of such Person.
"Warrantholder" means a Holder of a Warrant.
"Warrants" shall have the meaning set forth in the second paragraph of this
Warrant.
"Warrant Stock" means the shares of Common Stock purchased by the
Warrantholders upon the exercise of the Warrants, including any such shares of
Common Stock transferred to any transferee of such Warrantholder, other than a
transferee who acquires such shares after the same have been publicly sold
pursuant to a Registration Statement under the Securities Act.
ARTICLE VII
MISCELLANEOUS
7.1 Notices. Notices and other communications provided for herein shall
be in writing and shall, unless otherwise expressly required, be given in the
manner and with the effect provided in the Securities Purchase Agreement. In
the case of the Holder, such notices and communications
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shall be addressed to his, her or its address as shown on the books maintained
by the Corporation, unless the Holder shall notify the Corporation that notices
and communications should be sent to a different address (or telecopy number),
in which case such notices and communications shall be sent to the address (or
telecopy number) specified by the Holder.
7.2 Waivers; Amendments. No failure or delay of the Holder in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Holder are cumulative and not exclusive of any rights
or remedies which it would otherwise have. The provisions of this Warrant may
be amended, modified or waived with (and only with) the written consent of the
Corporation and the Warrantholders voting as a single class, entitling such
Warrantholders to purchase a majority of the Common Stock subject to purchase
upon exercise of such Warrants at the time outstanding (exclusive of Warrants
then owned by the Corporation or any Subsidiary or Affiliate thereof); provided,
however, that no such amendment, modification or waiver shall, without the
written consent of each holder of Warrants whose interest might be adversely
affected by such amendment, modification or waiver, (a) change the number of
shares of Common Stock subject to purchase upon exercise of this Warrant, the
Exercise Price or provisions for payment thereof or (b) amend, modify or waive
the provisions of this Section or Article III, IV or V hereof. The provisions
of the Securities Purchase Agreement, the Shareholders' Agreement and the
Registration Agreement may be amended, modified or waived only in accordance
with the respective provisions thereof.
Any such amendment, modification or waiver effected pursuant to this
Section or the applicable provisions of the Securities Purchase Agreement, the
Shareholders' Agreement or the Registration Agreement shall be binding upon the
holders of all Warrants and Warrant Stock, upon each future holder thereof and
upon the Corporation. In the event of any such amendment, modification or
waiver, the Corporation shall give prompt notice thereof to all Warrantholders
and, if appropriate, notation thereof shall be made on all Warrants thereafter
surrendered for registration of transfer or exchange.
No notice or demand on the Corporation in any case shall entitle the
Corporation to any other or further notice or demand in similar or other
circumstances.
7.3 Governing Law. This Warrant shall be construed in accordance with and
governed by the internal laws of the State of Delaware, without regard to
principles of conflicts of laws.
7.4 Survival of Agreements; Representations and Warranties, etc. All
warranties, representations and covenants made by the Corporation herein or in
any certificate or other instrument delivered by or on behalf of it in
connection with the Warrants shall be considered to have been relied upon by the
Holder and shall survive the issuance and delivery of the Warrants, regardless
of any investigation made by the Holder, and shall continue in full force and
effect so long
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as this Warrant or any Warrant Stock is outstanding. All statements in any such
certificate or other instrument shall constitute representations and warranties
hereunder.
7.5 Covenants to Bind Successor and Assigns. All covenants, stipulations,
promises and agreements in this Warrant contained by or on behalf of the
Corporation shall bind its successors and assigns, whether so expressed or not.
7.6 Severability. In case any one or more of the provisions contained in
the Securities Purchase Agreement, the Shareholders' Agreement, the Registration
Agreement or this Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby.
7.7 Section Headings. The section headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
7.8 No Rights as Stockholder. This Warrant shall not entitle the
Warrantholder to any rights as a stockholder of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed
in its corporate name by one of its officers thereunto duly authorized, and its
corporate seal to be hereunto affixed, attested by its Secretary or an Assistant
Secretary, all as of the day and year first above written.
Blue Rhino Corporation, a Delaware corporation
By:____________________________________________
Billy Prim, Chief Executive Officer
Attest:
_______________________________________
S.H. Fogleman, III, Assistant Secretary
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SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
To__________________:
[Choose one or both of first two paragraphs, as applicable]
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the attached Warrant for, and to purchase thereunder,
________________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the Exercise Price in full in the form of certified or bank
cashier's check or wire transfer.
The undersigned hereby irrevocably elects to exercise the right of
conversion represented by the attached Warrant for, and to convert thereunder,
_______________ shares of Common Stock, as provided for therein.
Please issue a certificate or certificates for such shares of Common Stock
in the following name or names and denominations:
If said number of shares shall riot be all the shares issuable upon
exercise of the attached Warrant, a new Warrant is to be issued in the name of
the undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
Dated: ______________, 19__
__________________________________________________
__________________________
NOTE: The above signature should correspond
exactly with the name on the face of the attached
Warrant or with the name of the assignee appearing
in the assignment form below.
<PAGE>
ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, ______________________________________ hereby sells,
assigns and transfers unto the attached Warrant, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
_______________________ attorney to transfer said Warrant on the books of Blue
Rhino Corporation, with full power of substitution in the premises.
_________________________________________________
__________________________
NOTE: The above signature should correspond
exactly with the name on the face of the attached
Warrant.
Dated:
<PAGE>
AMENDMENT TO BLUE RHINO CORPORATION
Certificate of Incorporation
----------------------------
Pursuant to Section 242 of the Delaware General Corporation Law and Section 3 of
the Certificate of Incorporation of Blue Rhino Corporation, a Delaware
corporation (the "Certificate of Incorporation") the Certificate of
Incorporation filed with the Secretary of State of Delaware on November 29, 1994
is hereby amended as follows:
1. Section FOURTH is hereby amended to read in its entirety as follows:
FOURTH: The total number of shares which the Corporation shall have
authority to issue is 86,796,172 which are divided into two classes as
follows:
(a) 20,796,172 shares of Series A Convertible Participating Preferred
Stock, $0.001 par value per share (the "Series A Preferred" and shares of
Series A Preferred the "Series A Preferred Shares"); and
(b) 66,000,000 shares of common stock of the Corporation, $0.001 par
value per share (the Common Stock).
2. All other terms and conditions of the Certificate of Incorporation
remain unchanged and in full force and effect.
I the undersigned, in my capacity as secretary of Blue Rhino Corporation
and pursuant to the General Corporation Law of the State of Delaware, do hereby
make this Amendment to Certificate of Incorporation, hereby declaring and
certifying that this is my act and deed and the facts herein are true, and
accordingly have hereunto set my hand this ___ day of October, 1995.
BLUE RHINO CORPORATION
By /s/ S. H. Fogleman III
----------------------------
S. H. Fogleman III,
Assistant Secretary
<PAGE>
ARTICLES OF INCORPORATION
OF
BLUE RHINO CORPORATION
The undersigned submits these Articles of Incorporation for the purpose of
forming a business corporation under and by virtue of the laws of the State of
North Carolina, as contained in Chapter 55 of the General Statutes of North
Carolina, entitled the "NORTH CAROLINA BUSINESS CORPORATION ACT," and to that
end sets forth:
ARTICLE ONE
The name of the Corporation is Blue Rhino Corporation.
ARTICLE TWO
2.1. Authorized Stock. The total number of shares of capital stock which
the Corporation shall have authority to issue is 20,020,000 shares, which shall
be divided as follows: (a) 3,000,000 shares of preferred stock, par value $.001,
the preferences, terms, limitations, relative rights and qualifications of any
class or series of which shall be established by the Board of Directors of the
Corporation within the limitations set forth in the North Carolina Business
Corporation Act, as amended from time to time (the "Preferred Stock"); (b)
17,000,000 shares of Class A common stock, par value $.001 per share (the "Class
A Common Stock"); and (c) 20,000 shares of Class B common stock, par value $.001
per share (the "Class B Common Stock"). The term "Common Stock" when used herein
shall collectively mean the Class A Common Stock and the Class B Common Stock.
2.2. Common Stock Provisions.
(a) Voting Rights. Except as otherwise required by law or expressly
provided herein, the holder of each share of Class A Common Stock shall
have one (1) vote per share on all matters submitted to a vote of the
Corporation's shareholders. The holder of each share of Class B Common
Stock shall have one thousand (1,000) votes per share on each matter
submitted to a vote of the shareholders of the Corporation.
(b) Dividend Rights. Subject to all of the rights of the Preferred
Stock herein authorized, the holders of the Common Stock shall be entitled
to receive dividends at such time and in such amounts as may be determined
<PAGE>
by the Board of Directors of the Corporation. Dividends shall be declared
and paid to holders of either Class A Common Stock or Class B Common Stock
only if such dividends are declared and paid to holders of both classes on
an equal per share basis.
If at any time the distribution of any Class A Common Stock, Class B
Common Stock or any other securities of the Corporation is to be made to
the holders of either Class A Common Stock or Class B Common Stock (a
"Share Distribution"), such Share Distribution may be declared and paid
only as follows:
(i) A Share Distribution of Class A Common Stock to holders of
Class A Common Stock; provided there shall also be a simultaneous
Share Distribution consisting of shares of Class B Common Stock to the
holders of Class B Common Stock on an equal per share basis; or
(ii) A Share Distribution consisting of Class B Common Stock to
holders of Class B Common Stock; provided there shall also be a
simultaneous Share Distribution consisting of shares of Class A Common
Stock to the holders of Class A Common Stock on an equal per share
basis; or
(iii) A Share Distribution consisting of any other class of
securities of the Corporation to the holders of Class A Common Stock
and Class B Common Stock on an equal per share basis.
(c) Liquidation Rights. In the event of any liquidation, dissolution
or winding up of the affairs of the Corporation, whether voluntary or
involuntary, after payment or provision for payment of the debts and other
liabilities of the Corporation and the preferential amounts to which the
holders of the Preferred Stock shall be entitled upon dissolution,
liquidation or winding up, each holder of shares of Common Stock shall
receive distributions of available remaining assets of the Corporation on
an equal per share basis.
(d) Merger or Consolidation Rights. In the event of a merger or
consolidation of the Corporation with or into another entity, each holder
of shares of Common Stock shall receive such assets of the Corporation as
are available for distribution to such shareholders, or stock into which
the Common Stock shall have been converted, on an equal per share basis;
provided, however, in any merger or consolidation in which shares of
capital stock are distributed, such shares distributed to the holders of
Class A
2
<PAGE>
Common Stock and Class B Common Stock may differ to the extent, and only to the
extent, that the voting rights of the Class A Common Stock and Class B Common
Stock differ as provided herein.
(e) Conversion. Shares of Class B Common Stock shall be convertible into
shares of Class A Common Stock at the option of the holder thereof at any time,
on a share-for-share basis. The ratio for such conversion shall in all events be
accurately preserved in the event of any recapitalization of the Corporation by
means of a stock dividend on, or stock split or combination of, outstanding
shares of Class A Common Stock or Class B Common Stock, or in the event of any
merger, consolidation or other reorganization of the Corporation with another
corporation. Upon the conversion of shares of Class B Common Stock into shares
of Class A Common Stock, such shares of Class B Common Stock shall be retired,
and shall not be subject to reissuance.
Each share of Class B Common Stock shall automatically be converted into
one (1) share of Class A Common Stock upon its sale, gift, assignment,
distribution, conveyance or other disposition or transfer, whether by operation
of law or otherwise (collectively a "Transfer") to other than a Permitted
Transferee (as herein defined). The term "Transfer" as used herein shall not
include a pledge or hypothecation of shares of Class B Common Stock; provided,
however, that a Transfer shall have occurred if the pledgee or party to whom
such shares are hypothecated forecloses thereon. The term "Permitted Transferee"
as used herein shall mean:
(i) Billy D. Prim or any of his descendants (including adopted
children), any spouses, widows or widowers or any of their respective
descendants (including adopted children) (collectively the "Prim Family
Holders");
(ii) Andrew J. Filipowski or any of his descendants (including adopted
children), any spouses, widows or widowers or any of their respective
descendants (including adopted children) (collectively the "Filipowski
Family Holders");
(iii) Any trust, a majority of interest of which is held, directly or
indirectly, by or for the benefit of one or more of the Prim Family
Holders, or one or more of the Filipowski Family Holders, or any entity or
entities described in clauses (iv), (v), (vi) or (vii) of this Section
2.2(e).
3
<PAGE>
(iv) Any estate of a Prim Family Holder, or Filipowski Family Holder;
(v) Any foundation or charitable organization established by one or
more of the Prim Family Holders, or by one or more of the Filipowski Family
Holders, that qualifies as an exempt organization under the Internal
Revenue Code of 1986, as amended, or any successor statute;
(vi) Any charitable lead trust or charitable remainder trust
established by one or more of the Prim Family Holders, or by one or more of
the Filipowski Family Holders; or
(vii) Any corporation or partnership or other entity of which voting
control is held, directly or indirectly, by or for the benefit of one or
more of the Prim Family Holders, or by one or more of the Filipowski Family
Holders, or any entity or entities described in clauses (iii), (iv), (v) or
(vi) above. For purposes of this clause (vii), "voting control" shall mean
either: (a) the beneficial ownership, direct or indirect, of more than
fifty percent (50%) of the outstanding voting securities of a corporation,
or in the case of an unincorporated entity, of a similar power to control
the affairs of such entity, or (b) the contractual power to elect or
designate a majority of the directors of a corporation or in the case of an
unincorporated entity, of individuals exercising similar functions.
If any shares of Class B Common Stock are held by a Permitted Transferee
as described in clauses (iii), (iv), (v) or (vi) of this Section 2.2(e), and
such Permitted Transferee shall cease to be a Permitted Transferee, then such
shares of Class B Common Stock shall automatically be converted into an equal
number of shares of Class A Common Stock.
A majority of the Board of Directors of the Corporation shall have the
power and duty to determine for purposes of this Section 2.2(e), on the basis of
information known to the Board of Directors after reasonable inquiry, (a)
whether a person or entity is a Permitted Transferee or shall have ceased to be
a Permitted Transferee, and (b) whether a Transfer of shares of Class B Common
Stock shall have occurred, so as to effect a conversion of such shares of Class
B Common Stock to an equal number of shares of Class A Common Stock. The holders
of Class B Common Stock shall, upon demand, disclose to the Board of Directors
in writing such information with respect to the
4
<PAGE>
ownership of such shares of Class B Common Stock as the Board of Directors
deemed necessary to make the determination required pursuant to this paragraph.
(f) Stock Splits, Divisions and Combinations. The Corporation may not
split, divide or combine the shares of the Class A Common Stock or the Class B
Common Stock, unless, simultaneously therewith, the Corporation splits, divides
or combines, as the case may be, the shares of the other class of Common Stock
in the same proportion and manner.
(g) Issuance of Additional Shares of Class B Common Stock. Additional
shares of Class B Common Stock may only be issued to Prim and his heirs, or to
Filipowski and his heirs, unless such issuance to such other persons is approved
by a majority of the issued and outstanding shares of Class B Common Stock.
ARTICLE THREE
The address of the initial registered office of the Corporation is P. O.
Box 50, Highway 601 North, Yadkinville, Yadkin County, North Carolina 27055; and
the name of the initial registered agent at such address is Billy D. Prim.
ARTICLE FOUR
The name and address of the Incorporator are:
Name Address
---- -------
Don R. House 215 Executive Park Blvd.
Winston-Salem, N.C. 27103
ARTICLE FIVE
To the fullest extent permitted by applicable law, as it now exists or may
hereafter be amended, the Corporation shall indemnify all persons serving as
directors of the Corporation against all liability and litigation expense,
including but not limited to reasonable attorneys' fees, arising out of their
status as such or their activities in the foregoing capacity, regardless of when
such status existed or activity occurred and regardless of whether or not they
are directors of the Corporation at the time such indemnification is sought or
obtained. Without limiting the generality
5
<PAGE>
of the foregoing indemnity, such persons may also recover from the Corporation
all reasonable costs, expenses and attorneys' fees in connection with the
enforcement of rights to indemnification granted by this Article. The provisions
of this Article are in addition to and not in limitation of the power of the
Corporation with respect to, and the rights of any director of the Corporation
to receive the benefits of, any other or further indemnification, insurance,
elimination of liability or other right or benefit which is either required by
the NORTH CAROLINA BUSINESS CORPORATION ACT or permitted thereby and duly
adopted by the Corporation in accordance therewith.
ARTICLE SIX
To the fullest extent permitted by applicable law, as it now exists or may
hereafter be amended, no director of the Corporation shall have any personal
liability arising out of any action, whether by or in the right of the
Corporation or otherwise, for monetary damages for breach of his or her duty as
a director. This Article shall not impair any right to receive indemnity or
insurance from the Corporation or any third party which any director may now or
hereafter have. Any repeal or modification of this Article shall not impair or
otherwise adversely affect any limitation on, or elimination of, the personal
liability of a director effected hereby with respect to acts or omissions
occurring prior to such repeal or modification.
IN WITNESS WHEREOF, I have set my hand this ______ day of March, 1994.
INCORPORATOR:
/s/ Don R. House
Don R. House
<PAGE>
SECOND AMENDMENT TO BLUE RHINO CORPORATION
REGISTRATION RIGHTS AGREEMENT
THIS SECOND AMENDMENT is dated as of October 11, 1995 by and among BLUE
RHINO CORPORATION, a Delaware corporation (the "Corporation") and the persons
listed on Schedule 1 attached hereto (the "Additional Investors") and the
persons listed on Schedule 2 attached hereto are consenting and agreeing to this
Second Amendment under separate consents (the "Consenting Investors").
W I T N E S S E T H:
WHEREAS, the Corporation, Platinum and the Investors have heretofore
entered into a Registration Rights Agreement dated as of December 1, 1994, as
amended by that certain First Amendment to Blue Rhino Corporation Registration
Rights Agreement dated May 10, 1995 (together the "Registration Rights
Agreement");
WHEREAS, the parties hereto (including the Investors) wish to amend the
Registration Rights Agreement;
WHEREAS, to induce the Additional Investors to purchase units consisting of
a 10.5% Senior Discount Note and Warrant to purchase the Corporation's Common
Stock (the "Units") pursuant to a Unit Purchase Agreement between the
Corporation and the Additional Investors of even date herewith (the "Unit
Purchase Agreement") the Corporation deems it desirable to enter into this
Second Amendment;
WHEREAS, the Consenting Investors, holding in excess of 51% of the total
outstanding Registerable Shares have consented to this Second Amendment in
writing.
AGREEMENTS
In consideration of the promises and the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. The Registration Rights Agreement is amended as provided herein.
2. The definition of "1995 Warrants" is amended to read in its entirety:
The "1995 Warrants" means the Warrants to purchase up to (i) 28,819
shares of Common Stock at $0.347037 per share, issued to Peter
Huizenga ("Huizenga"), Andrew Filipowski ("Filipowski"), Craig
Duchossois ("Duchossois") and Robert
<PAGE>
F. Steele ("Steele") in connection with a bridge loan in May 1995,
(ii) 2,593,385 shares of Common Stock at $0.347037 per share issued to
Huizenga, Filipowski, Duchossois, Steele, and Billy D. Prim ("Prim")
in connection with their guarantee of loan to the Corporation in June
1995, (iii) 86,446 shares of Common Stock at $0.347037 per share
issued to Platinum Ventures Partners I, L.P. in connection with a loan
to the Corporation in May 1995, (iv) 259,338 shares of Common Stock at
$0.347037 per share issued to Platinum Ventures Partners I, L.P. in
connection with the extension of the maturity on its loan to the
Corporation on August 14, 1995, (v) 172,892 shares of Common Stock at
$0.347037 per share to be issued to Platinum Ventures Partners I, L.P.
upon the renewal of its loan to the Corporation in June 1996, (vi)
1,728,925 shares of Common Stock at $0.347037 per share to be issued
to Huizenga, Filipowski, Duchossois, Steele, and Prim upon the
extension of the repayment period on the loan from Bank of America to
the Corporation in December 1995 (vii) 6,612,926 shares of Common
Stock at $0.347037 to certain investors pursuant to the sale by the
Corporation of Units on October 11, 1995 (viii) 960,000 shares of
Common Stock at $0.347037 to Huizenga, Duchossois and Peer Pedersen
and their assigns by the Corporation on October 11, 1995 as
compensation for their service to the Corporation in the $13,000,000
Private Placement and (ix) 2,438,122 shares of Common Stock at
$0.347037 to Chicago Dearborn Corporation upon the purchase by Chicago
Dearborn Corporation of up to 5,000 Units consisting of Notes and
Warrants from the Corporation.
3. Except as herein specifically modified, the Agreement shall remain in
full force and effect.
4. This Second Amendment may be executed in any number of counterparts,
each of which when so executed and delivered, shall be deemed an original and
such counterparts shall together constitute one instrument.
5. The Second Amendment is subject to receipt of the consent of the
Investors listed on Schedule 1 attached hereto.
-2-
<PAGE>
The parties hereto have executed this Second Amendment to Registration
Rights Agreement on the date first set forth above.
BLUE RHINO CORPORATION
By_____________________________________
Billy Prim, Chief Executive Officer
ADDITIONAL INVESTORS:
_______________________________________
Dean L. Buntrock
Conant Family Partnership
By:____________________________________
Paul H. Vishney, general partner
_______________________________________
Peter B. Desnoes
Doerge-Blue Rhino, L.P.
By: Avalon Corporation
Its: General Partner
_______________________________________
David Doerge, President
Craig Duchossois Revocable
Trust
_______________________________________
Craig Duchossois, Trustee
Richard L. Duchossois Revocable
-3-
<PAGE>
Trust
_______________________________________
Richard L. Duchossois, Trustee
_______________________________________
Andrew J. Filipowski
_______________________________________
Donald Flynn
Kevin F. Flynn June 1992
Non-Exempt Trust
By:____________________________________
Kevin F. Flynn, Trustee
Brian J. Flynn June 1992
Non-Exempt Trust
By:____________________________________
Brian J. Flynn, Trustee
_______________________________________
Richard Forsythe
_______________________________________
William Hulligan
Kimberly Family Discretionary Trust
_______________________________________
Craig Duchossois, Trustee
_______________________________________
Douglas Gray
-4-
<PAGE>
Joseph Cusimano IRA
By:__________________________
_____________________________
Michael Arrington
_____________________________
David Meltzer
_____________________________
Peer Pedersen
_____________________________
Charles Reeder
_____________________________
J. Christopher Reyes
_____________________________
M. Jude Reyes
Ryan Holding Corporation
By:__________________________
Its:_____________________
Cornelius and Lothian, L.P.
By:__________________________
Its______________________
_____________________________
Howard Warren
_____________________________
-5-
<PAGE>
Arthur Watson
________________________________
Richard Brenner
________________________________
Billy D. Prim
-6-
<PAGE>
Schedule 1
Additional Investors
Michael Arrington
Richard Brenner
Dean Buntrock
Conant Family Partnership
Cornelius and Lothian, L.P.
Joseph Cusimano IRA
Peter Desnoes
Doerge-Blue Rhino, L.P.
Craig Duchossois Revocable Trust
Richard L. Duchossois Revocable Trust
Andrew J. Filipowski
Donald Flynn
Kevin F. Flynn June 1992 Non-Exempt Trust
Brian J. Flynn June 1992 Non-Exempt Trust
Richard Forsythe
Douglas Gray
William Hulligan
Kimberly Family Discretionary Trust
David Meltzer
Peer Pedersen
Billy D. Prim
Charles Reeder
J. Christopher Reyes
M. Jude Reyes
Ryan Holding Corporation
Howard Warren
Arthur Watson
-7-
<PAGE>
Schedule 2
Investors
Platinum Venture Partners I, L.P.
Andrew J. Filipowski
Craig Duchossois
Bobby Slate
James R. Hardin
Robert F. Steele & Jennifer Steele JTWROS
Robert F. Steele
Thomas E. Gleitsman
Tom Austin
Ray Maynard
Robert L. Jacobs
Frank Murnane, Sr.
Frank Murnane, Jr.
Gabriel, Inc. (c/o Jimmy Liautaud)
James Alan Booe
Joe Wallace
Lennard Carlson
Richard Carlson
Baxter Kiger
Peter Vitulli
Barry Sylvester
James Barzyk
Alexander Danzberger
Cole Taylor Bank Custodian FBO Arthur Frigo IRA #8417
Huizenga Capital Management
Peter H. Huizenga Testamentary Trust
Peter H. Huizenga
Billy D. Prim
Kimberly Family Discretionary Trust (c/o Craig J. Duchossois)
Edward A. Fortino & Dayle Duchossois-Fortino JTWROS
-8-
<PAGE>
February 19, 1998
Page 1
October 11, 1995
To the Investors listed
on Exhibit A
Gentlemen:
We have acted as counsel for Blue Rhino Corporation (the "Company") in
connection with the Company's sale of Units (the "Units") pursuant to a Unit
Purchase Agreement (the "Unit Purchase Agreement") dated October 11, 1995
between the Company and you. This opinion is given pursuant to Section 3.A of
the Unit Purchase Agreement. Capitalized terms not otherwise defined herein
have the meanings ascribed to them in the Unit Purchase Agreement.
In rendering this opinion, we have examined the Unit Purchase Agreement and
the following documents (together with the Unit Purchase Agreement the "Loan
Documents"):
1. the Note;
2. the Warrants;
3. the Second Amendment to the Registration Rights Agreement;
<PAGE>
February 19, 1998
Page 2
4. the First Amendment to the Shareholders' Agreement; and
5. the Amendment to the Certificate of Incorporation.
We have also examined originals, or copies certified or otherwise
identified to our satisfaction, of such records, documents, certificates and
other instruments as in our judgment are necessary or appropriate for the
purposes of the opinions contained herein. We have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as originals
and the conformity to original documents of all documents submitted to us as
certified or photostatic copies. We have further assumed, with respect to all
documents we have reviewed, the due authorization, execution and delivery
thereof by parties other than the Company. We have relied as to factual matters
upon certificates or statements of such public officials and such officers and
duly appointed agents of the Company as we have deemed relevant or necessary.
Except as otherwise stated herein, we have undertaken no independent
investigation or verification of such matters. The words "to our knowledge" and
"known to us" and similar language used herein are intended to be limited to the
knowledge of lawyers within our firm who have recently worked on matters on
behalf of the Company.
We are members of the Bar of the State of Illinois, and we express no
opinion with respect to laws other than the laws of the State of Illinois and
the General Corporation Law of the State of Delaware.
Based upon the foregoing, and subject to the qualifications and limitations
stated herein, we are of the opinion that:
<PAGE>
February 19, 1998
Page 3
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware.
2. The Company has the corporate power and authority to enter into the
Loan Documents and to perform its obligations thereunder.
3. The Loan Documents have been duly authorized, executed and delivered
by the Company and constitute the valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms.
4. The execution and delivery of the Loan Documents by the Company and
the performance by the Company of its obligations thereunder (based on waiver
and consents received by the Company) do not and will not conflict with or
result in a violation of any agreement or instrument, known to us to which the
Company is a party or by which it may be bound.
5. Sufficient shares of the Company's common stock have been reserved to
satisfy its obligations under the Warrants. The issuance of the stock pursuant
to the Warrants has been duly authorized and such stock when issued in
accordance with the Warrant will be fully paid and nonassessable.
The foregoing opinions are limited by the following qualifications:
(a) The opinions expressed in paragraph 3 are limited by the effect
upon the enforceability of the provisions of the Agreement of bankruptcy,
reorganization, insolvency, avoidable transfers, moratorium, or other laws which
affect generally the enforcement of creditors' rights. Further, the use of the
term "enforceable" does not imply any opinion as to the availability of any
equitable remedy.
<PAGE>
February 19, 1998
Page 4
(b) These opinions and this letter may not be used or relied on by or
published or communicated to any party other than the addressees without our
written consent.
Very truly yours,
/s/ Pedersen & Houpt, P.C.
<PAGE>
Exhibit A
Investors
---------
Michael Arrington
Dean Buntrock
Conant Family Partnership
Cornelius & Lothian, L.P.
Joseph Cusimano
Peter Desnoes
Doerge-Blue Rhino, L.P.
Donald Flynn
Kevin F. Flynn June 1992 Non-Exempt Trust
Brian J. Flynn June 1992 Non-Exempt Trust
Richard Forsythe
Douglas Gray
William Hulligan
David Meltzer
Peer Pedersen
<PAGE>
February 19, 1998
Page 6
Charles Reeder
J. Christopher Reyes
M. Jude Reyes
Ryan Holding Corporation
Howard Warren
Arthur Watson
Craig Duchossois Revocable Trust
Kimberly Family Discretionary Trust
Richard L. Duchossois Revocable Trust
Richard Brenner
Andrew J. Filipowski
Billy D. Prim
<PAGE>
February 19, 1998
Page 7
<PAGE>
EXHIBIT 10.11
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is made as of March 1,
1997, among Blue Rhino Corporation, a Delaware corporation (the "Corporation"),
and Platinum Propane Holding, L.L.C., a Delaware limited liability company (the
"Purchaser").
R E C I T A L S:
- - - - - - - -
The Corporation desires to sell to the Purchaser and the Purchaser desires
to purchase from the Corporation (a) 2,000,000 shares of Common Stock of the
Corporation, par value $0.01 per share at a price of $0.50 per share (the
"Shares") and (b) a Warrant to purchase 1,500,000 shares ("Warrant") of Common
Stock of the at a warrant price of $0.50 per share (together the Shares and
Warrant referred to herein as the "Securities")
NOW THEREFORE, the parties hereto agree as follows:
1. Authorization of the Securities. The Corporation has authorized the
-------------------------------
issuance and sale to the Purchaser of 2,000,000 Shares upon the execution of
this Agreement and an additional 1,500,000 shares of its Common Stock upon the
exercise of the Warrant. The Corporation has also authorized issuance of and
delivery to the Purchasers of the Warrant.
2. Subscriptions; Issuance; and Closing.
------------------------------------
A. Subscription. The Purchaser hereby agrees to purchase the Shares
------------
and the Warrant for a total purchase price of $1,000,000.00.
B. Delivery of Shares. At the Closing (as defined below) the
------------------
Corporation shall deliver to the Purchaser a certificate representing the Shares
registered in the name of the Purchaser.
C. Warrant Issuance. In consideration of the Purchaser's
----------------
subscription to purchase Shares, as described above, the Corporation agrees to
issue the Warrant to purchase an additional 1,500,000 shares of the
Corporation's Common Stock. The Warrant shall be in form and substance
substantially similar to Exhibit A attached hereto.
D. Closing Mechanics. The closing (the "Closing") for the purchase
-----------------
and sale of the Securities will take place at the offices of the Corporation on
March 1, 1997 (the "Closing Date"), or at such other place or on such other date
as may be mutually agreeable to the Corporation and the Purchaser. At the
Closing, the Corporation will deliver to the Purchaser the Shares and Warrant to
be purchased as part of the Securities, registered on the books of the
Corporation in the Purchaser's or its nominee's name. Payment of the purchase
price for the
<PAGE>
Securities shall be by a cashier's or certified check, or by wire transfer of
immediately available funds to the Corporation's account at a bank specified by
the Corporation.
3. Conditions of the Purchaser's Obligation at the Closing.
-------------------------------------------------------
A. The obligation of Purchaser to purchase and pay for the
Securities at the Closing is subject to the satisfaction as of the Closing Date
of the following conditions:
(i) Representations and Warranties. The representations and
------------------------------
warranties contained in Section 6 hereof will be true and correct in all
material respects at and as of the Closing as though then made.
(ii) Amendment and Restatement of Certificate of Incorporation.
---------------------------------------------------------
The Corporation's Certificate of Incorporation (the "Certificate of
Incorporation") will have been amended and restated in form and substance
as set forth in Exhibit B hereto, will be in full force and effect under
the laws of the State of Delaware as of the Closing as so amended and will
not have been further amended or modified.
(iii) Amendment and Restatement of Registration Rights Agreement.
----------------------------------------------------------
The Registration Rights Agreement (the "Registration Rights Agreement")
shall have been amended and restated in form and substance as set forth in
Exhibit C hereto, the Purchaser shall have become a party to the
Registration Rights Agreement, and the Registration Rights Agreement will
be in full force and effect.
(iv) Blue Sky Clearances. The Corporation will have made all
-------------------
filings under applicable state securities laws, and will have taken all
other action, necessary to consummate the issuance of the Securities
pursuant to this Agreement in compliance with such laws.
(v) Closing Documents. The Corporation will have delivered to
-----------------
the Purchaser at the Closing all of the following documents:
(a) copies of the resolutions duly adopted by the
Corporation's Board of Directors authorizing the execution, delivery
and performance of this Agreement, the Registration Rights Agreement,
the Amended and Restated Articles of Incorporation and each of the
other agreements contemplated hereby, the filing of the amendment to
the Certificate of Incorporation referred to in Section 3A(ii), the
issuance and sale of the Shares and Warrant, and the reservation for
issuance upon exercise of the Warrant of an aggregate of 1,500,000
shares of Common Stock;
- 2 -
<PAGE>
(b) Consent of a majority of the holders of the 10.5%
Senior Discount Notes issued by the Corporation authorizing execution
and delivery of the Registration Rights Agreement, the Amended and
Restated Articles of Incorporation and each of the other agreements
contemplated thereby, the filing of the amendment to the Certificate
of Incorporation referred to in Section 3A(ii), the issuance and sale
of the Shares and Warrant, and the reservation for issuance upon
exercise of the Warrant of an aggregate of 1,500,000 shares of Common
Stock;
(c) Consent of 66.7% of the Series A Preferred Shareholders
of the Corporation authorizing execution and delivery of the
Registration Rights Agreement, the Amended and Restated Articles of
Incorporation and each of the other agreements contemplated thereby,
the filing of the amendment to the Certificate of Incorporation
referred to in Section 3A(ii), the issuance and sale of the Shares and
Warrant, and the reservation for issuance upon exercise of the Warrant
of an aggregate of 1,500,000 shares of Common Stock;
(d) Consent of Forseyth/McArthur Associates, Inc.
authorizing execution and delivery of the Registration Rights
Agreement;
(e) copies of the Amended and Restated Certificate of
Incorporation and the Corporation's bylaws;
(f) such other documents relating to the transactions
contemplated by this Agreement as any Purchaser may reasonably
request.
(vi) Proceedings. All corporate and other proceedings taken or
-----------
required to be taken in connection with the transactions contemplated
hereby to be consummated at or prior to the Closing and all documents
incident thereto will be satisfactory in form and substance to the
Purchaser.
B. Waiver. Any condition specified in this Section 3 may be waived
------
if consented to by the Purchaser; provided that no such waiver will be effective
against any Purchaser unless it is set forth in a writing executed by the
Purchaser.
4. Covenants.
---------
A. Negative Covenants. So long as any Shares or Warrants remain
------------------
outstanding, the Corporation will not:
- 3 -
<PAGE>
(i) Mergers. Merge or consolidate with any Person or permit any
-------
subsidiary to merge or consolidate with any Person (other than, in the case
of a wholly-owned subsidiary, with or into the Corporation or any other
wholly-owned subsidiary);
(ii) Liquidations. Liquidate, dissolve or effect a
------------
recapitalization or reorganization in any form of transaction; and
(iii) Charter Amendments. Make any amendment to the
------------------
Corporation's certificate of incorporation or by-laws, or file any
resolution of the Board with the Secretary of State of Delaware.
B. Affirmative Covenants. So long as any Shares or Warrants remain
---------------------
outstanding, the Corporation will:
(i) Preservation of Corporate Existence and Property;
------------------------------------------------
Operations. The Corporation agrees to preserve, protect, and maintain,
----------
and cause each subsidiary to preserve, protect, and maintain, (a) its
corporate existence, and (b) all rights, franchises, accreditations,
privileges, and properties the failure of which to preserve, protect, and
maintain could have a material adverse effect on the business, affairs,
assets, prospects, operations, or condition, financial or otherwise, of the
Corporation and its subsidiaries, if any, taken as a whole. The Corporation
and its subsidiaries, if any, will comply with all material agreements and
contracts, including, without limitation, all leases and loan agreements;
(ii) Reservation of Common Stock. The Corporation will at all
---------------------------
times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of issuance upon the exercise of
the Warrant, such number of shares of Common Stock issuable upon the
exercise of all outstanding Warrants. All shares of Common Stock which are
so issuable will, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Corporation
will take all such actions as may be necessary to assure that all such
shares of Common Stock may be so issued without violation of any applicable
law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of common stock may be listed (except
for official notice of issuance which will be immediately transmitted by
the Corporation upon issuance); and
5. Transfer of Restricted Securities.
---------------------------------
A. Restricted Securities are transferable pursuant to (i) public
offerings registered under the Securities Act, (ii) Rule 144 of the Commission
(or any similar rule then in
- 4 -
<PAGE>
force) if such rule is available, (iii) the conditions specified in Subsection B
below, (iv) subject to Subsection D below, and (iv) subject to Subsection E
below.
B. In connection with the transfer of any Restricted Securities
(other than a transfer described in Subsection 5A(i) or (ii) above), the Holder
thereof will deliver written notice to the Corporation describing in reasonable
detail the transfer or proposed transfer, together with an opinion of counsel
which (to the Corporation's reasonable satisfaction) is knowledgeable in
securities law matters to the effect that such transfer of Restricted Securities
may be effected without registration of such Restricted Securities under the
Securities Act. In addition, if the Holder of the Restricted Securities
delivers to the Corporation an opinion of counsel acceptable to the Corporation
that no subsequent transfer of such Restricted Securities will require
registration under the Securities Act, the Corporation will promptly upon such
contemplated transfer deliver new certificates for such Restricted Securities
which do not bear the Securities Act legend set forth in Section 5C. If the
Corporation is not required to deliver new certificates for such Restricted
Securities not bearing such legend, the Holder thereof will not transfer the
same until the prospective transferee has confirmed to the Corporation in
writing its agreement to be bound by the conditions contained in this Section
and Section 5C.
C. The Corporation shall place, and shall instruct any transfer
agent of the Corporation to place, a stop-transfer order on the Corporation's
shareholder record books which prohibits the Corporation, or any transfer agent
of the Corporation, from registering on the Corporation's books (i) any transfer
of the shares of Restricted Securities and (ii) the issuance of shares of Common
Stock upon any exercise of the Warrants that, in each case, were originally
granted or sold to Purchasers who are not "U.S. Persons" (as defined in Rule
902 under the Securities Act) unless such transfer or conversion is made in
accordance with the provisions of Regulation S (17 CFR (S)(S) 230.902 - 230.904)
under the Securities Act.
6. Representations and Warranties of the Corporation. As a material
-------------------------------------------------
inducement to the Purchasers to enter into this Agreement and purchase the
Units, the Corporation hereby represents and warrants that:
A. Organization and Corporate Power. The Corporation is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of Delaware and is qualified to do business in every jurisdiction in which its
ownership of property or conduct of business requires it to qualify, except
where the failure to so qualify could not reasonably be expected to have a
material adverse effect on the financial condition, operating results, assets,
operations or business prospects of the Corporation. The Corporation has all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
businesses as now conducted and to carry out the transactions contemplated by
this Agreement.
- 5 -
<PAGE>
B. Corporate Power; Successor Corporation. The Corporation has all
--------------------------------------
requisite legal and corporate power and authority to enter into this Agreement
and all other agreements entered into pursuant hereto, to issue and sell the
Units and to carry out and perform its obligations under the terms of this
Agreement and all other agreements entered into pursuant hereto. The Corporation
is the successor corporation of Blue Rhino Corporation, a North Carolina
corporation ("BRC - North Carolina") pursuant to a statutory merger under
Delaware Law in which the Corporation is the survivor and is successor to all
rights, titles and interest of BRC-North Carolina. Where appropriate, references
to the Corporation in this Section 6 shall mean both the Corporation and BRC-
North Carolina as its predecessor.
C. Capitalization. As of the Closing Date, the Corporation's
--------------
authorized capital stock will consist of (a) 64,500,000 Common Shares, and (b)
20,796,172 Series A Preferred Shares. As of the Closing Date, there shall be no
declared but unpaid dividends or undeclared dividend arrearage on any shares of
capital stock of the Corporation. After giving effect to the consummation of
the transactions contemplated by this Agreement, the only shares of capital
stock issued and outstanding, reserved for issuance or committed to be issued
will be:
(i) 21,385,341 issued and outstanding shares of Common Stock;
(ii) 1,502,745 shares of Common Stock reserved for issuance upon
the exercis e of the Warrant;
(iii) 16,344,294 shares of Common Stock reserved for issuance
upon th e exercise of the Existing Warrants;
(iv) 1,405,000 shares of Common Stock reserved for future grants
pursuant to the Corporation's stock option plan;
(v) 1,010,000 shares of Common Stock reserved for issuance upon
exercise of outstanding grants pursuant to the Corporation's stock option
plan.
(vi) 20,796,172 shares of Common Stock reserved for issuance
upon the conversions of the Series A Preferred Stock; and
(vii) 20,796,172 issued and outstanding shares of Series A
Preferred Stock.
There are no outstanding preemptive, conversion or other rights, options,
warrants or agreements granted or issued by or binding upon the Corporation for
the purchase or acquisition of any shares of its capital stock, other than those
issued, reserved or committed to be issued pursuant to or listed in this
Agreement or as provided for in the Shareholders' Agreement or the
- 6 -
<PAGE>
Amended and Restated Certificate of Incorporation. All outstanding securities of
the Corporation were issued in compliance with all federal and state securities
laws.
D. Authorization. All corporate action on the part of the
-------------
Corporation, its directors and shareholders necessary for the authorization,
execution, delivery and performance by the Corporation of this Agreement and all
other agreements entered into pursuant hereto and the consummation of the
transactions contemplated hereby and thereby, and for the authorization,
issuance and delivery of the Shares and Warrant, has been taken. This
Agreement and all other agreements entered into pursuant hereto, including the
Warrant, are legal, valid and binding obligations of the Corporation,
enforceable against the Corporation in accordance with their terms.
E. No Violation. The execution and delivery of this Agreement and
------------
all other agreements entered into pursuant hereto, the consummation of the
transactions provided for herein and therein or contemplated hereby and thereby,
and the fulfillment by the Corporation of the terms hereof or thereof, will not
(with or without notice or passage of time or both) (i) conflict with or result
in a breach of any provision of the certificate of incorporation or bylaws of
the Corporation, (ii) result in a default, give rise to any right of
termination, cancellation or acceleration, or require any consent or approval
which has not been obtained under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, loan, factoring arrangement, license,
agreement, lease or other instrument or obligation to which the Corporation is a
party or by which it or any of its assets may be bound or (iii) violate any law,
judgment, order, writ, injunction, decree, statute, rule or regulation of any
court, administrative agency, bureau, board, commission, office, authority,
department or other governmental entity applicable to the Corporation or any of
its assets.
F. Validity of Securities. The Shares and Warrant, when issued,
----------------------
sold and delivered in accordance with the terms of this Agreement, will be duly
and validly issued, fully paid, non-assessable and free and clear of all liens.
The underlying Common Stock issuable upon exercise of the Warrant has been duly
and validly reserved and, upon issuance in accordance with the exercise
provisions of the Warrant, will be duly and validly issued, fully paid, non-
assessable and free and clear of all liens.
G. Title to Properties; Liens and Encumbrances. The Corporation has
-------------------------------------------
good and marketable title to all of the assets necessary to conduct its business
as presently conducted or as proposed to be conducted.
H. Compliance with Law and Other Instruments. The Corporation is not
-----------------------------------------
in violation of any term of its Certificate of Incorporation or by-laws or of
the provisions of any mortgage, indenture, contract, agreement, instrument,
judgment, decree, order, statute, rule or regulation to which it is subject and
a violation of which could have a material adverse effect on
- 7 -
<PAGE>
its business, affairs, assets, prospects, operations, employee relations or
condition, financial or otherwise, or the Corporation's ability to perform its
obligations hereunder or under any agreement entered pursuant hereto. The
Corporation has all franchises, permits, licenses and approvals, necessary to
conduct its business as presently conducted. The Corporation has no knowledge of
or reason to expect any change to any law, statute, rule or regulation which
could adversely affect the ability of the Corporation to conduct its business as
presently conducted or as proposed to be conducted.
I. Registration Rights. Except as provided for in the Registration
-------------------
Rights Agreement, the Corporation is not under any obligation to register under
the Securities Act any of its currently outstanding securities or any of its
securities which may hereafter be issued.
7. Definitions. For the purpose of this Agreement, the following terms
-----------
have the meanings set forth below:
"Affiliate" of particular person or entity means any other person
or entity controlling, controlled by or under common control with such
particular person or entity.
"Board of Directors" means the Corporation's duly elected Board of
Directors.
"Commission" means the Securities and Exchange Commission and any
governmental body or agency succeeding to the functions thereof.
"Default" means the failure of the Corporation or any subsidiary to
duly observe or perform any covenant, condition or agreement required to be
performed by the Corporation or a subsidiary under this Agreement, any agreement
entered into pursuant hereto or the certificates of Incorporation.
"Existing Warrants" means the Warrants to purchase (i) 4,214,185
shares of Common Stock at $0.0347037 per share, issued to certain investors on
December 1, 1994, (ii) 115,264 shares of Common Stock at $0.347037 per share,
issued to Peter Huizenga ("Huizenga"), Andrew Filipowski ("Filipowski"), Craig
Duchossois ("Duchossois") and Robert F. Steele ("Steele") in connection with a
bridge loan in May 1995, (iii) 2,593,385 shares of Common Stock at $0.347037 per
share issued to Huizenga, Filipowski, Duchossois, Steele, and Billy D. Prim
("Prim") in connection with their guarantee of loan to the Corporation in June
1995, (iv) 86,446 shares of Common Stock at $0.347037 per share issued to
Platinum Venture Partners I, L.P. in connection with a loan to the Corporation
in May 1995, (v) 259,338 shares of Common Stock at $0.347037 per share issued to
Platinum Venture Partners I, L.P. in connection with the extension of the
maturity on its loan to the Corporation on August 14, 1995, (vi) 6,612,926
shares of Common Stock at $0.347037 per share to be issued to the purchasers of
the 10.5% Senior Discount Notes and Warrants pursuant to that certain Unit
Purchase Agreement
- 8 -
<PAGE>
dated November 4, 1995 (the "Unit Purchase Agreement"), (vii) 960,000 shares of
Common Stock at $0.347037 per share issued to Huizenga, Duchossois and Peer
Pedersen or their assigns pursuant to the Unit Purchase Agreement and (viii)
1,502,745 shares of Common Stock at $0.50 per share issued to Lunn/Forseyth L.P.
upon the extension of lease financing to the Corporation.
"Holder" of at least a certain percentage or number of Warrants,
Common Stock, or other securities shall mean any single Holder beneficially
owning at least such designated percentage or number of such securities, or each
member of a Group (hereinafter defined) if the Group has beneficial ownership
of, in the aggregate, at least such percentage or number of such securities.
"Person" means any individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"Registration Rights Agreement" means that certain Amended and
Restated Registration Rights Agreement dated of even date herewith which amends
and restates in its entirety that certain Registration Rights Agreement dated
December 1, 1994 by and between the Corporation and certain of its investors.
"Restricted Securities" means (i) the Warrant, (ii) the Common Stock
issued upon exercise of Warrants, (iii) any securities issued with respect to
the securities referred to in clauses (i) through (ii) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, and (iv) if
applicable, the Notes. As to any particular Restricted Securities, such
securities will cease to be Restricted Securities when they have (a) been
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) become eligible for sale
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act or (c) been otherwise transferred and new certificates for them
not bearing the Securities Act legend set forth in Section 8C herein have been
delivered by the Corporation in accordance with Section 5B. Whenever any
particular securities cease to be Restricted Securities under (a) or (b) above,
the Holder thereof will be entitled to receive from the Corporation, without
expense, new securities of like tenor not bearing a Securities Act legend of the
character set forth in Section 8C.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
- 9 -
<PAGE>
"Series A Preferred Stock" means the Corporation's Series A
Convertible Participating Preferred Stock.
"Shareholder's Agreement" means that certain Shareholder's Agreement
dated December 1, 1994 by and between the Corporation and its shareholders, as
amended.
"Underlying Common Stock" means (i) the Corporation's Common Stock
issued or issuable upon exercise of the Warrant, and (ii) any Common Stock
issued or issuable with respect to the securities referred to in clause (i)
above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. Any Person who holds the Warrant will be deemed to be the Holder
of the Common Stock obtainable upon the exercise of the Warrant in connection
with the transfer thereof or otherwise regardless of any restriction or
limitation on the conversion. As to any particular shares of Underlying Common
Stock, such shares will cease to be Underlying Common Stock when they have been
(a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them or (b) distributed to
the public through a broker, dealer or market maker pursuant to Rule 144 under
the Securities Act (or any similar provision then in force).
8. Miscellaneous.
-------------
A. Expenses. The Corporation agrees to pay, and hold each Purchaser
--------
and all Holders of the Warrants, Underlying Common Stock and the Notes harmless
against liability for the payment of, (i) the reasonable fees and expenses
incurred with respect to any amendments or waivers (whether or not the same
become effective) under or in respect of this Agreement, the agreements
contemplated hereby, the Certificate of Incorporation (including, without
limitation, in connection with any proposed merger or sale of the Corporation),
(ii) stamp and other taxes which may be payable in respect of the execution and
delivery of this Agreement or the issuance, delivery or acquisition of any
Warrants, any Notes or any shares of Common Stock issuable upon exercise of the
Warrants, (iii) reasonable fees and expenses incurred with respect to the
enforcement of the rights granted under this Agreement, the agreements
contemplated hereby, the Certificate of Incorporation, the Shareholders'
Agreement or the Registration Rights Agreement (iv) reasonable fees and expenses
of counsel for a Purchaser or such Holder in rendering a legal opinion in
connection with the sale or assignment of a Purchaser's or such Holder's
Warrants or Notes if a Purchaser or such Holder desires to sell or otherwise
transfer any or all of the Warrants or Notes held by it and counsel for the
Corporation declines to render a legal opinion to such Purchaser or such Holder,
whether or not registration under the Securities Act will be required for such
sale or transfer and (v) the reasonable fees and expenses incurred by any such
Person in connection with any transaction, claim or event which such Person
reasonably believes affects its investment in the Corporation and as to which
such Person seeks advice of counsel.
- 10 -
<PAGE>
B. Remedies. Each Holder will have all rights and remedies set
--------
forth in this Agreement, the Certificate of Incorporation and all rights and
remedies which such Holders have been granted at any time under any other
agreement or contract and all of the rights which such Holders have under any
law. Any Person having any rights under any provision of this Agreement will be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
C. Purchaser's Investment Representations. Each Purchaser hereby
--------------------------------------
severally represents to the Corporation the following:
(i) the Purchaser is a "U.S. Person" (as defined in Rule 902
(17 CFR (S) 230.902) under the Securities Act);
(ii) the Purchaser's state of residency for security law
purposes is the state referred to next to the Purchaser's name on the
signature pages hereto;
(iii) (a) the Purchaser is acquiring the Restricted
Securities purchased hereunder or acquired pursuant hereto for its own
account with the present intention of holding such securities for purposes
of investment, and that it has no intention of selling such securities in a
public distribution in violation of the federal securities laws or any
applicable state securities laws; provided that nothing contained herein
will prevent any Purchaser and subsequent Holders of Restricted Securities
from transferring such securities in compliance with the provisions hereof.
Each certificate for Restricted Securities purchased hereunder will be
imprinted with a legend in substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be sold or offered for sale unless registered under said Act
or unless the holder of this certificate delivers to Blue Rhino
Corporation an opinion of counsel reasonably acceptable to Blue
Rhino Corporation stating that an exemption from such
registration is available.
(b) The Purchaser has the financial ability to bear
the economic risk of an investment in the Restricted Securities, has
adequate means of providing for its current needs and personal
contingencies, has no need for liquidity in such investment and could
afford a complete loss of such investment.
(c) The Purchaser was not formed for the specific
purpose of acquiring the Restricted Securities offered in this
transaction.
- 11 -
<PAGE>
(d) The Purchaser is an "accredited investor" as
defined in Rule 501(a) of Regulation D of the Securities Act.
(iv) The Purchaser's overall commitment to investments which
are not readily marketable is not disproportionate to its net worth and its
investment in the Corporation will not cause such overall commitment to
become excessive;
(v) The Purchaser has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and risks of its investment in the Restricted Securities; and
(vi) (a) The Purchaser expressly acknowledges receipt of
the financial information distributed in connection with this offering. The
Purchaser acknowledges and agrees that the Purchaser has read and
understood the terms and conditions set forth in the financial information.
(b) The Purchaser has been given full opportunity to
ask questions of and to receive answers from representatives of the
Corporation concerning the terms and conditions of the investment and
the business of the Corporation and such other information as it
desires in order to evaluate an investment in the Restricted
Securities, and all such questions have been answered to the full
satisfaction of the Purchaser.
(c) In making its decision to acquire the Restricted
Securities, the Purchaser has relied solely upon independent
investigations made by it. In addition, the Purchaser initially
learned of the investment through a direct communication, and was
never presented or solicited by (x) any advertisement, article, notice
or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio, (y) any seminar or
meeting whose attendees, including the Purchaser, had been invited as
a result of, subsequent to or pursuant to any of the foregoing, or (z)
any other form of general solicitation.
(d) The Purchaser understands that the shares of the
Restricted Securities have not been registered under the Securities
Act, the securities laws of any state, and are being issued in
reliance upon specific exemptions from registration thereunder, and
the Purchaser agrees that the shares of the Restricted Securities may
not be sold, offered for sale, transferred, pledged, hypothecated or
otherwise disposed of except pursuant to (x) a registration statement
with respect to such securities which is effective under the
Securities Act or under the securities act of any state, (y) Rule 144
under the Securities Act
- 12 -
<PAGE>
or (z) any other exemption from registration under the Securities Act
or under the securities act of any state relating to the disposition
of securities, provided an opinion of counsel is furnished, reasonably
satisfactory in form and substance to the Corporation, that an
exemption from the registration requirements of the Securities Act of
such state act is available. The Purchaser understands the legal
consequences of the foregoing to mean that he, she or it may be
required to bear the economic risk of its investment in the shares of
the Restricted Securities for an indefinite period or time. The
Purchaser understands that any instruments initially representing the
shares of the Restricted Securities shall bear legends restricting the
transfer thereof. The Purchaser agrees not to resell or otherwise
dispose of all or any shares of Restricted Securities acquired by the
Purchaser, except as permitted by law, including, without limitation,
any and all applicable provisions of this Section, the Agreement and
any regulations under the Securities Act and any state law or
regulations.
(e) The Purchaser understands that no federal or state
agency has made any finding or determination as to the fairness of an
investment in, or any recommendation or endorsement of, the shares of
the Restricted Securities.
D. Shareholders' Agreement. Each certificate for shares of Common
-----------------------
Stock issued upon exercise of the Warrants shall bear any legends required under
the Shareholders' Agreement to the extent required thereof. Any certificate
issued at any time in exchange or substitution for any certificate bearing such
legend shall also bear such legend unless in the opinion of counsel elected by
the holder of such certificate (who may be an employee of such holder) and
reasonably acceptable to the Corporation, the restrictions contained in such
Shareholders' Agreement no longer apply because of the occurrence of one or more
events described therein.
E. Consent to Amendments/Waivers. Except as otherwise expressly
-----------------------------
provided herein, the provisions of this Agreement may be amended or waived and
the Corporation may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, if and only if the Corporation has
obtained the written consent of the Purchaser. No other course of dealing
between the Corporation and the Purchaser or any delay in exercising any rights
hereunder or under the Certificate of Incorporation will operate as a waiver of
any rights of the Purchaser.
F. Survival of Representations and Agreements. All representations,
------------------------------------------
warranties and agreements contained herein or made in writing by any party in
connection herewith will survive the execution and delivery of this Agreement
and the consummation of the
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<PAGE>
transactions contemplated hereby, regardless of any investigation made by the
Purchaser or on its behalf.
G. Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind and may be enforced by the respective
successors and assigns of the parties hereto whether so expressed or not. In
addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for the Purchaser's benefit as a
purchaser or Holder of the Warrant, Shares, or the Underlying Common Stock are
also for the benefit of, and enforceable by, any Affiliate of the Purchaser
which becomes the Holder of the Warrant, the Shares or the Underlying Common
Stock or any part thereof (whether by sale, assignment or otherwise).
H. Capital and Surplus. The Corporation agrees that the capital of
-------------------
the Corporation (as such term is used in Section 154 of the General Corporation
Law of Delaware) in respect of the Common Stock issued pursuant to this
Agreement will be equal to the aggregate par value of such shares. The
Corporation further agrees that, except as contemplated herein, it will not
increase the capital of the Corporation with respect to any shares of the
Corporation's capital stock at any time on or after the date of this Agreement.
I. Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
J. Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
K. Descriptive Headings. The descriptive headings of this
--------------------
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
L. Governing Law. This agreement shall be governed by the corporate
-------------
law of Delaware.
M. Notices. All notices, demands or other communications to be
-------
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable express courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
- 14 -
<PAGE>
communications will be sent to the Purchaser and to the Corporation at the
address indicated below:
Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
Attn: Billy D. Prim
Chief Executive Officer
Platinum Propane Holding, L.L.C.
108 Cambridge Plaza Drive
Winston-Salem, NC 27104
Attn: Daryl F. McClendon
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
- 15 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
BLUE RHINO CORPORATION
By /s/ Billy D. Prim
-------------------------------
Billy D. Prim, President
PLATINUM PROPANE HOLDING, L.L.C.
By: /s/ Daryl F. McClendon
-------------------------------
Daryl F. McClendon, Manager
- 16 -
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OFFERED FOR
SALE UNLESS REGISTERED UNDER SAID ACT OR UNLESS THE HOLDER OF THIS WARRANT
DELIVERS TO BLUE RHINO CORPORATION AN OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO BLUE RHINO CORPORATION STATING THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER
ARE ALSO BENEFITED BY AND SUBJECT TO A SERIES A SECURITIES PURCHASE AGREEMENT, A
REGISTRATION RIGHTS AGREEMENT EACH DATED AS OF DECEMBER 1, 1994, AND EACH BY AND
AMONG BLUE RHINO CORPORATION, A DELAWARE CORPORATION, PLATINUM VENTURE PARTNERS
I, L.P., A DELAWARE LIMITED PARTNERSHIP, AND CERTAIN OTHER INVESTORS, AND A
SHAREHOLDERS' AGREEMENT DATED THE SAME DATE, BY AND AMONG BLUE RHINO
CORPORATION, A DELAWARE CORPORATION, THE INVESTORS AND THE MANAGEMENT
STOCKHOLDERS, COPIES OF WHICH ARE ON FILE WITH THE CORPORATION.
Dated: December 1, 1994
WARRANT
To Purchase _______ Shares of Common Stock (Subject to adjustment herein)
____________________________
Expiring December 1, 2004
THIS IS TO CERTIFY THAT, for value received, _________________________ or
registered assigns is entitled to purchase from Blue Rhino Corporation, a
Delaware corporation (the "CORPORATION"), at any time and from time to time
prior to 5:00 p.m., Chicago, Illinois time, on December 1, 1994, at the
principal office of the Corporation which is currently 104 Cambridge Park,
Winston-Salem, North Carolina 27104 (or such other address as the Corporation
shall specify by notice to all Warrantholders), at the Exercise Price, the
number of shares of Common Stock, $0.001 par value (the "COMMON STOCK"), of the
Corporation shown above, all subject to adjustment and upon the terms and
conditions as hereinafter provided, and is entitled also to exercise the other
appurtenant rights, powers and privileges hereinafter described.
This Warrant is one of the one or more warrants (the "WARRANTS"), of the
same form and having substantially the same terms as this Warrant, which have
been or will be issued pursuant to the Securities Purchase Agreement.
Certain terms used in this Warrant are defined in Article VI.
<PAGE>
ARTICLE I
EXERCISE OF WARRANTS
1.1 Method of Exercise and Payment.
------------------------------
(a) Method of Exercise. To exercise this Warrant in whole or in part,
------------------
the Holder shall deliver to the Corporation, at the principal office of the
Corporation, (a) this Warrant, (b) a written notice, in substantially the form
of the Subscription Notice attached hereto, of such Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased or converted into, as the case may be, the denominations
of the share certificate or certificates desired and the name or names in which
such certificates are to be registered, and (c) payment to the Corporation of
the amount equal to the product of the then applicable Exercise Price multiplied
by the number of shares of Common Stock then being purchased pursuant to one of
the payment methods permitted under Section 1.l(b) below.
(b) Method of Payment. Payment shall be made either (1) by cash,
-----------------
money order, certified or bank cashier's check, (2) by wire transfer, (3) by
converting the Warrant, or any portion thereof, into Common Stock pursuant to
Section 1.1 (c) below ("WARRANT CONVERSION") or (4) any combination of the
foregoing at the option of the Holder.
(c) Payment by Warrant Conversion. Subject to any limitations set
-----------------------------
forth in this Warrant, the Holder may exercise the purchase right represented by
this Warrant with respect to a particular number of shares of Common Stock
subject to this Warrant ("CONVERTED WARRANT STOCK") and elect to pay for the
Converted Warrant Stock through Warrant Conversion as defined in Section 1.1(b),
by specifying such election in the Subscription Notice. In such event, the
Corporation shall deliver to the Holder (without payment by the Holder of any
Exercise Price or any cash or other consideration) that number of shares of
Common Stock equal to the quotient obtained by dividing (x) the value of this
Warrant (or the specified portion hereof) on the Exercise Date, which value
shall be determined by subtracting (A) the aggregate Exercise Price of the
Converted Warrant Stock immediately prior to the exercise of the Warrant from
(B) the aggregate Fair Market Value of the Converted Warrant Stock issuable upon
exercise of this Warrant (or the specified portion hereof) on the Exercise Date,
by (y) the Fair Market Value of one share of Common Stock on the Exercise Date.
For purposes of this Section 1, "FAIR MARKET VALUE" of a share of Common Stock
as of a particular date shall mean:
(i) If the Corporation's registration under the Securities Act,
covering its initial underwritten public offering of stock had been
declared effective by the Commission, then the fair market value of a share
of Common Stock as of the last Business Day immediately prior to the
Exercise Date.
(ii) If such a registration statement has not been declared effective,
or if it has been declared effective but the offering is not consummated in
accordance with the terms of
<PAGE>
the underwriting agreement between the Corporation and its underwriters
relating to such registration statement, then as determined in good faith
by the Board upon review of the relevant factors; provided, however, that
if the Exercise Date falls within one day prior to the effective date of
such registration statement, the fair market value of a share of Common
Stock will be deemed to be the public offering price per share provided for
in such registration statement.
(d) Mechanics. The Corporation shall as promptly as practicable and
---------
in any event within three days after delivery of a Subscription Notice as
described above, execute and deliver or cause to be executed and delivered,
in accordance with such Subscription Notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in
said Subscription Notice. The share certificate or certificates so
delivered shall be in such denominations as may be specified in such
Subscription Notice or, if such Subscription Notice shall not specify
denominations, in denominations of 100 shares each, and shall be issued in
the name of the Holder or such other name or names as shall be designated
in such Subscription Notice. Such certificate or certificates shall be
deemed, to have been issued (and this Warrant or the portion thereof
specified in the Subscription Notice shall be deemed to have been
exercised) and such Holder or any other Person so designated to be named
therein shall be deemed for all purposes to have become a holder of record
of such shares, as of the date the aforementioned Subscription Notice is
received by the Corporation, or delivery thereof is refused (the "EXERCISE
DATE"). If this Warrant shall have been exercised only in part, the
Corporation shall, at the time of delivery of the certificate or
certificates, deliver to the Holder a new Warrant evidencing the rights to
purchase or convert the remaining shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with
this Warrant, or, at the request of the Holder, appropriate notation may be
made on this Warrant which shall then be returned to the Holder. The
Corporation shall pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of share
certificates and new Warrants, except that, if share certificates or new
Warrants shall be registered in a name or names other than the name of the
Holder, funds sufficient to pay all transfer taxes payable as a result of
such transfer shall be paid by the Holder at the time of delivering the
aforementioned notice of exercise or promptly upon receipt of a written
request of the Corporation for payment.
1.2 Shares to Be Fully Paid and Nonassessable. All shares of Common Stock
-----------------------------------------
issued upon the exercise of this Warrant shall be validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder, and from
all taxes, liens and charges with respect to the issue thereof (other than
transfer taxes) and, if the Common Stock is then listed on any national
securities exchanges (as defined in the Exchange Act) or quoted on NASDAQ, shall
be duly listed or quoted thereon, as the case may be.
- 2 -
<PAGE>
1.3 No Fractional Shares to Be Issued. The Corporation shall, not be
---------------------------------
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon any exercise of this Warrant, in lieu of such fractional share the
Corporation may pay to the Holder, in cash, an amount equal to such share of
fraction of the fair market value (as determined in good faith by the Board) per
share of outstanding Common Stock of the Corporation in the Business Day
immediately prior to the date of such exercise.
1.4 Share Legends. Each certificate for shares of Common Stock issued
-------------
upon exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend:
"This security has not been registered under the Securities Act of
1933 and may not be sold or offered for sale unless registered pursuant to
such Act or unless the holder hereof delivers to Blue Rhino Corporation an
opinion of counsel reasonably acceptable to Blue Rhino Corporation stating
that an exemption from such registration is available."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act) shall also bear such legend unless, in the opinion of counsel
selected by the holder of such certificate (who may be an employee of such
holder) and reasonably acceptable to the Corporation, the securities represented
thereby need no longer be subject to restrictions on resale under the Securities
Act. Each certificate for shares of Common Stock issued upon exercise of this
Warrant shall also bear any legends required under the Shareholders' Agreement,
to the extent required thereby. Any certificate issued at any time in exchange
or substitution for any certificate bearing such legend shall also bear such
legend unless in the opinion of counsel selected by the holder of such
certificate (who may be an employee of such holder) and reasonably acceptable to
the Corporation, the restrictions contained in such Shareholders' Agreement no
longer apply because of the occurrence of one or more of certain events
described therein.
1.5 Reservation; Authorization. The Corporation has reserved and will
--------------------------
keep available for issuance upon exercise of the Warrants the total number of
shares of Common Stock deliverable upon exercise of all Warrants from time to
time outstanding. The issuance of the shares of Common Stock upon exercise of
the Warrants has been duly and validly authorized and, when issued and sold in
accordance with the Warrants, such shares of Common Stock will be duly and
validly issued, fully paid and nonassessable. The Corporation will take all
such actions as are necessary in order to insure the foregoing.
1.6 Result of Exercise. On the Exercise Date the rights of the holder of
------------------
such Warrant as such holder will cease and the Person or Persons in whose name
or names any certificate or certificates for shares of Common Stock are to be
issued upon such exercise will be deemed to have become the holder or holders of
record of the shares of Common Stock represented thereby.
- 3 -
<PAGE>
1.7 Not Close Books Until Exercise. The Corporation will not close its
------------------------------
books against the transfer of this Warrant or shares of Common Stock issued or
issuable upon exercise of this Warrant in any manner which interferes with the
timely exercise of this Warrant.
ARTICLE II
TRANSFER, EXCHANGE AND REPLACEMENT OF WARRANTS
2.1 Ownership of Warrant. The Corporation may deem and treat the Person
--------------------
in whose name this Warrant is registered as the holder and owner hereof for all
purposes and shall not be affected by any notice to the contrary, until this
Warrant is presented for registration of transfer as provided in this Article
II.
2.2 Transfer of Warrant. The Corporation agrees to maintain books for the
-------------------
registration of transfers of the Warrants, and any transfer, in whole or in
part, of this Warrant and all rights hereunder shall be registered on such
books, upon surrender of this Warrant at the principal office of the Corporation
together with a written assignment of this Warrant duly executed by the Holder
or his, her or its duly authorized agent or attorney and funds sufficient to pay
any transfer taxes payable upon such transfer. Upon surrender the Corporation
shall execute and deliver a new Warrant or Warrants in the name of the assignee
or assignees and in the denominations specified in the instrument of assignment,
and this Warrant shall promptly be canceled. Notwithstanding the foregoing, a
Warrant may be exercised by a new holder without having a new Warrant issued.
This Warrant may not be transferred in whole or in part, and the Corporation
shall not be required to register any transfers unless the Corporation has
received an opinion of counsel selected by the transferor (who may be an
employee of such party) and reasonably satisfactory to the Corporation that such
transfer is exempt from the registration requirements of the Securities Act.
If the Warrantholder delivers to the Corporation an opinion of counsel
selected by such holder (who may be an employee of such holder) and reasonably
acceptable to the Corporation, that no subsequent transfer of the Warrant will
require registration under the Securities Act, the Corporation will promptly
deliver to such holder or his, her or its designee, new Warrants in exchange for
the Warrant delivered by such holder, which will not bear the Securities Act
legend set forth at the beginning of the first page of the Warrant, and
thereafter no further opinions of counsel shall be required in connection with
the subsequent transfer of such Warrant.
2.3 Division or Combination of Warrants. This Warrant may be divided or
-----------------------------------
combined with other Warrants upon surrender hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Corporation, together
with a written notice specifying the names and denominations in which the new
Warrant or Warrants are to be issued, signed by the holders hereof and thereof
or their respective duly authorized agents or attorneys. Subject to compliance
with Section 2.2 as to any transfer which may be involved in the division or
combination, the Corporation
- 4 -
<PAGE>
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
2.4 Loss, Theft, Destruction of Warrant Certificates. Upon receipt of
------------------------------------------------
evidence reasonably satisfactory to the Corporation (an affidavit of the
registered holder will be satisfactory) of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Corporation (an Original Warrantholder's indemnity being satisfactory
indemnity in the event of loss, theft or destruction of any Warrant owned by
such holder), or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Corporation will (at its expense) make and
deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new
Warrant of like tenor and representing the right to purchase the same aggregate
number of shares of Common Stock.
2.5 Expenses of Delivery of Warrants. The Corporation shall pay all
--------------------------------
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of Warrants and Warrant
Stock hereunder. If, pursuant to Section 2.2, the opinion of counsel provides
that registration is not required for the proposed exercise or transfer of this
Warrant or the proposed transfer of the Warrant Stock and that the proposed
exercise or transfer in the absence of registration would require the
Corporation to take any action including executing and filing forms or other
documents with the Commission or any state securities agency, or delivering to
the Warrantholder any form or document in order to establish the right of the
Warrantholder to effectuate the proposed exercise or transfer, the Corporation
agrees promptly, at its expense, to take any such action; and provided, further,
that the Corporation will reimburse the Warrantholder in full for any expenses
(including but not limited to the fees and disbursements of such counsel, but
excluding brokers' commissions) incurred by the Warrantholder or owner of
Warrant Stock on his, her or its behalf in connection with such exercise or
transfer of the Warrant or transfer of Warrant Stock.
ARTICLE III
CERTAIN RIGHTS
3.1 Rights Under Securities Purchase Agreement, Registration Agreement and
----------------------------------------------------------------------
Shareholders' Agreement. This Warrant and the Warrant Stock are entitled to the
- -----------------------
benefits of and are subject to the Securities Purchase Agreement, Registration
Agreement and the Shareholders' Agreement to the extent provided therein. The
Corporation shall keep a copy of the Securities Purchase Agreement, Registration
Agreement, the Shareholders' Agreement, and any amendments, restatements,
modifications and supplements thereto, at the principal office of the
Corporation and shall furnish copies thereof to any Holder or any transferee
upon request.
- 5 -
<PAGE>
ARTICLE IV
ANTIDILUTION PROVISIONS
4.1 Adjustments Generally. The Exercise Price and the number of shares of
---------------------
Common Stock (or other securities or property) issuable upon exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events, as provided in this Article IV.
4.2 Exercise of Warrant. At any time and from time to time, any holder of
-------------------
this Warrant may exercise all or any portion of this Warrant into the number of
shares of Common Stock computed by (i) multiplying the number of shares of
Common Stock sought to be purchased pursuant to this Warrant by $0.0347037 and
(ii) dividing the resulting product by the Exercise Price then in effect.
4.3 Exercise Price.
--------------
(a) Exercise Price Based on Conversion Price. The "EXERCISE PRICE"
----------------------------------------
shall be one-tenth of the Conversion Price then in effect pursuant to the
Certificate of Incorporation of the Corporation. In order to prevent dilution
of the exercise rights granted to the holder of this Warrant, the Conversion
Price and consequently the Exercise Price will be subject to adjustment from
time to time pursuant to this Section 4.3 and Sections 4.5 and 4.6 below. For
purposes of this Section 4.3, the Corporation shall be deemed to have issued or
sold Common Stock as set forth in Section 4.4 below.
(b) Adjustment for Dilutive Events. If and whenever on or after the
------------------------------
original date of issuance of this Warrant the Corporation issues or sells, or in
accordance with Section 4.4 below is deemed to have issued or sold, any shares
of Common Stock for consideration per share less than the Conversion Price (the
"DILUTED SHARE PRICE") in effect immediately prior to the time of such issue or
sale (a "DILUTIVE EVENT"), then forthwith upon the occurrence of any such
Dilutive Event the Conversion Price will be reduced so that the Conversion Price
in effect immediately following the Dilutive Event will equal the Diluted Share
Price. Notwithstanding the foregoing, the issuance by the Corporation of up to
2,000,000 shares of Common Stock, or securities convertible into or options to
acquire up to 2,000,000 shares of Common Stock, issued pursuant to stock option
plans or grants to officers or employees approved by the Board or the issuance
of Common Stock upon conversion of the Series A Preferred Shares issued pursuant
to the Securities Purchase Agreement shall not constitute a Dilutive Event. As
used in this Section 4.3(b) and in Section 4.4 below, the term "COMMON STOCK"
shall include Common Stock Equivalents. Notwithstanding anything contained
herein to the contrary, the Exercise Price of this Warrant held by a particular
holder shall not be adjusted pursuant to this Article 4 in connection with a
particular Dilutive Event, or any subsequent Dilutive Event, if such holder of
this Warrant fails to purchase, after being offered by the Corporation the
opportunity to purchase, a percentage of the securities, rights or options, or
any
- 6 -
<PAGE>
combination thereof, the sale of which constitute the Dilutive Event, which is
equal to or greater than 75 % of the percentage ownership of the Corporation's
Common Stock on a fully diluted basis held by such holder immediately prior to
such Dilutive Event. A Warrant which is no longer subject to adjustment as a
result of the preceding sentence shall remain subject to such limitation
regardless of any subsequent transfers, and at each time that any Warrant so
loses its rights to such adjustment, all Warrants which have lost their right to
such adjustment as of such time shall be automatically classified into (and the
outstanding Warrant representing such Warrant will automatically be deemed to
represent) new sub-series A-1, A-2, A-3, etc. , consecutively, beginning with A-
1. The holders of Warrants of each such sub-series shall promptly deliver such
Warrants to the Corporation upon the Corporation's request, for exchange or
notation to reflect such sub-series. If any such Warrants are not delivered to
the Corporation, the Corporation shall make appropriate notations on its stock
records, which may include stop transfer instructions, and may place in escrow,
pending receipt of such Warrants, all dividend payments or other distributions
owing with respect to the Warrants represented by such Warrants.
4.4 Issuance and Sale of Common Stock. For purposes of determining the
---------------------------------
adjusted Exercise Price pursuant to Sections 4.3 above the following events
shall be deemed to be an issuance and sale of Common Stock by the Corporation:
(a) Issuance of Rights or Options. If (i) the Corporation in any
-----------------------------
manner grants any rights or options to subscribe for or to purchase shares of
Common Stock or any securities convertible into or exchangeable for shares of
Common Stock (such rights or options referred to herein as "OPTIONS" and such
convertible or exchangeable stock or securities referred to herein as
"CONVERTIBLE SECURITIES") and (ii) the Price Per Share of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities is less than the Conversion Price in effect
immediately prior to the time of the granting of such Options then the shares of
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities will be deemed to have been issued and
sold by the Corporation for such Price Per Share. For the purposes of this
Section 4.4(a), the "PRICE PER SHARE" is determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of all such Options, plus
in the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price will be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
- 7 -
<PAGE>
(b) Issuance of Convertible Securities. If (i) the Corporation in any
----------------------------------
manner issues or sells any Convertible Securities and (ii) the Price Per Share
of shares of Common Stock issuable upon such conversion or exchange is less than
the Conversion Price in effect immediately prior to the time of such issue or
sale then the shares of Common Stock issuable upon the conversion or exchange of
such Convertible Securities will be deemed to have been issued and sold by the
Corporation for such Price Per Share. For the purposes of this Section 4.4(b),
the "PRICE PER SHARE" will be determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Conversion Price will be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments to the Conversion Price had been
or are to be made pursuant to Section 4.4(a) above, no further adjustment of the
Conversion Price will be made by reason of such issue or sale.
(c) Change in Option Price or Conversion Price. If at any time there
------------------------------------------
is a change in (i) the purchase price provided for in any Options, (ii) the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities, or (iii) the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock, then the Conversion Price
in effect at the time of such change will be readjusted to the Conversion Price
which would have been in effect had those Options or Convertible Securities
still outstanding at the time of such change provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time such Options or Convertible Securities were initially granted,
issued or sold; provided that if such adjustment would result in an increase of
the Conversion Price then in effect, such adjustment will not be effective until
30 days after written notice thereof has been given by the Corporation to all
holders of Warrants.
(d) Calculation of Consideration Received. If any shares of Common
-------------------------------------
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor or the Price Per
Share, as the case may be, will be deemed to be the net amount received or to be
received, respectively, by the Corporation therefor. In case any shares of
Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than cash
received by the Corporation or the non-cash portion of the Price Per Share, as
the case may be, will be the fair value of such consideration received or to be
received, respectively, by the Corporation; except where such consideration
consists of securities, in which case the amount of consideration received or to
be received, respectively, by the Corporation will be the Market Price thereof
as of the date of receipt. If any shares of Common Stock, Options or
Convertible Securities are issued in connection with any merger in which the
Corporation is the surviving corporation, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving
- 8 -
<PAGE>
corporation as is attributable to such shares of Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash and securities will be determined jointly by the Corporation and
the holders of a majority of the outstanding Warrants. If such parties are
unable to reach agreement within a reasonable period of time, the fair value of
such consideration will be determined by an independent appraiser jointly
selected by the Corporation and the holders of a majority of the outstanding
Warrants.
(e) Integrated Transactions. In case any Option is issued in
-----------------------
connection with the issuance or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
will be deemed to have been issued for a consideration of $.01.
(f) Record Date. If the Corporation takes a record of the holders of
-----------
Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in shares of Common Stock, Options or in Convertible
Securities or (ii) to subscribe for or purchase shares of Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issuance or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
4.5 Subdivision or Combination of Common Stock. If the Corporation at any
------------------------------------------
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced. If the Corporation at any
time combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be
proportionately increased.
4.6 Organic Change. Prior to the consummation of any Organic Change, the
--------------
Corporation will make appropriate provisions (in form and substance satisfactory
to the holders of a majority of the Warrants then outstanding) to insure that
each of the holders of Warrants with respect to all or any of the Warrants held
thereby will thereafter have the right to acquire and receive, in lieu of or in
addition to the shares of Common Stock immediately theretofore acquirable and
receivable upon the exercise of such holder's Warrants, such shares of stock,
securities or assets as such holder would have received in connection with such
Organic Change if such holder had exercised his, her or its Warrants immediately
prior to such Organic Change. In any such case, the Corporation will make
appropriate provisions (in form and substance satisfactory to the holders of a
majority of the Warrants then outstanding) to insure that the provisions of this
Section 4.6 will thereafter be applicable to the Warrants (including, an
immediate adjustment of the Conversion Price to the value for the Common Stock
reflected by the terms of such Organic Change and a corresponding immediate
adjustment in the number of shares of Common Stock acquirable and receivable
upon exercise of the Warrants, if the value so reflected is less than the
Conversion Price in effect
- 9 -
<PAGE>
immediately prior to such Organic Change). The Corporation will not effect any
such Organic Change, unless prior to the consummation thereof, the successor
Corporation resulting from such Organic Change assumes by written instrument (in
form reasonably satisfactory to the holders of a majority of the Warrants then
outstanding), the obligation to deliver to each such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to acquire.
All other terms of the Warrants shall remain in full force and effect
following such an Organic Change. The provisions of this Section 4.6 shall
similarly apply to successive Organic Changes.
4.7 Notices.
-------
(a) Immediately upon any adjustment of the Exercise Price, the
Corporation shall give written notice thereof to all holders of Warrants
specifying the Exercise Price in effect thereafter with respect to the
particular holder.
(b) The Corporation shall give written notice to all holders of
Warrants at least 20 days prior to the date on which the Corporation closes its
books or takes a record for determining rights to vote with respect to any
Organic Change, Change in Control, Change of Ownership, Fundamental Change or
other reorganization, dissolution or liquidation. The Corporation shall also
give written notice to the holders of Warrants at least 20 days prior to the
date on which any Organic Change, Change in Control, Change of Ownership,
Fundamental Change or other reorganization, dissolution or liquidation shall
occur.
4.8 Certain Other Events. The Company will not, by amendment of its
--------------------
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issues or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Warrantholders
against dilution or other impairment. If any event occurs as to which the
foregoing provisions of this Article IV are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board, fairly
protect the purchase rights of the Warrants in accordance with the essential
intent and principles of such provisions, then the Board shall make such
adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of the Board, to protect such purchase rights as aforesaid, but in
no event shall any such adjustment have the effect of increasing the Exercise
Price or decreasing the number of shares of Common Stock subject to purchase
upon exercise of this Warrant.
- 10 -
<PAGE>
4.9 Proceedings Prior to Any Action Requiring Adjustment As a condition
----------------------------------------------------
precedent to the taking of any action which would require an adjustment pursuant
to this Article IV, the Corporation shall take any action which may be
necessary, including obtaining regulatory approvals or exemptions, in order that
the Corporation may thereafter validly and legally issue as fully paid and
nonassessable all shares of Common Stock which the holders of Warrants are
entitled to receive upon exercise thereof, and if all such approvals and actions
are not taken, the Corporation shall take any action which would cause the
Corporation to be able to issue to the holders of Warrants the full number of
shares issuable upon exercise hereof in accordance with the terms hereof.
ARTICLE V
LIQUIDATION, DISSOLUTION, DISTRIBUTIONS OR DIVIDENDS
5.1 Liquidation or Dissolution. In case the Corporation at any time while
--------------------------
this Warrant shall remain unexpired and unexercised, shall dissolve, liquidate,
or wind up its affairs other than in connection with an Organic Change, the
Holder shall have the right to exercise this Warrant for a period of sixty (60)
days after the later of (i) such event having occurred and (ii) receipt by the
Holder of a notice from the Company indicating the kind and amount of securities
or assets issuable or distributable to holders of shares of Common Stock with
respect to such event, and upon exercise of this Warrant during such period, the
Holder shall have the right to receive in lieu of each share of the Warrant
Stock, the same kind and amount of any securities or assets as may be issuable,
distributable, or payable upon any such dissolution, liquidation, or winding up
with respect to each of the shares of the Common Stock.
5.2 Dividends and Distributions With Respect to Common Stock. If legal
--------------------------------------------------------
under the applicable General Corporation Law of the State of Delaware at any
time the Corporation pays any dividends or makes any other distributions with
respect to the Common Stock, the Corporation shall pay at such time to each
holder of a Warrant the dividends or other distributions which such holder would
have been entitled to receive had such holder exercised all of his, her or its
rights to acquire or receive Common Stock under such Warrant(s) on the date as
of which the holders of Common Stock of record entitled to such dividends or
other distributions were determined.
ARTICLE VI
DEFINITIONS
Capitalized terms used herein and not otherwise defined herein shall have
the meanings set forth in the Securities Purchase Agreement. The following
terms, as used in this Warrant, have the following respective meanings:
- 11 -
<PAGE>
"BOARD" means the Corporation's Board of Directors.
"BUSINESS DAY" shall mean (a) if any class of Common Stock is listed or
admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (b) if no class of Common
Stock is so listed or admitted to trading, a day on which any New York Stock
Exchange member firm is open for business.
"CHANGE IN OWNERSHIP" means any sale or issuance or series of sales and/or
issuances of shares of the Corporation's capital stock by the Corporation or any
holders thereof which results in any Person or group of affiliated Persons
(other than the holders of Common Stock and Series A Securities as of the date
of the Securities Purchase Agreement) owning capital stock of the Corporation
possessing the voting power (under ordinary circumstances) to elect a majority
of the Board.
"CHANGE OF CONTROL" means any transaction, circumstance or event that shall
cause or result in Billy Prim and Andrew Filipowski either (a) owning, directly
or indirectly, beneficial or record ownership of shares of the Corporation's
capital stock or securities having less than 20% of the issued and outstanding
shares of the Corporation entitled to vote on matters submitted to the
Corporation's shareholders, or (b) resigning or being removed or otherwise not
serving as a member of the Board.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK EQUIVALENT" means, collectively, any capital stock of any
class of the Corporation hereafter authorized which is not limited to a fixed
sum or percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Corporation or similar equity like
participation rights or phantom stock interests but specifically excludes the
Warrants.
"FUNDAMENTAL CHANGE" means (a) a sale or transfer of all or substantially
all of the assets of the Corporation, or of the Corporation and its Subsidiaries
on a consolidated basis, in any transaction or series of transactions, and (b)
any merger or consolidation to which the Corporation is a party, except for a
merger in which the Corporation is the surviving Corporation and, after giving
effect to such merger, the holders of the Corporation's outstanding capital
stock immediately prior to the merger shall own the Corporation's outstanding
capital stock possessing the voting power (under ordinary circumstances) to
elect a majority of the Board after such merger.
"HOLDER" means the Person in whose name this Warrant is registered on the
books of the Corporation maintained for such purpose or the Person in whose name
any Warrant Stock is registered on such books.
- 12 -
<PAGE>
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"ORGANIC CHANGE" means any capital reorganization, reclassification,
consolidation, merger, lease, or sale of all or substantially all of the
Corporation's assets to another Person (other than a dissolution, liquidation or
winding up of the Company as indicated in Section 5.1 above) which is effected
in such a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for shares of Common Stock.
"ORIGINAL WARRANTHOLDER" means Platinum or any Investor holding a Warrant.
"MARKET PRICE" of any security means the average of the closing prices of
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on the primary
exchange on which such security is listed at the end of such day, or, if on any
day such security is not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if
on any day such security is not quoted in the NASDAQ System, the average of the
highest bid and lowest asked prices on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged over a period of 21
days consisting of the day as of which "MARKET PRICE" is being determined and
the 20 consecutive business days prior to such day. The "MARKET PRICE" of a
note or other obligation which is not listed on a securities exchange or quoted
in the NASDAQ System or reported by the National Quotation Bureau, Incorporated,
the total consideration received by the Corporation (including interest) will be
discounted at the prime rate of interest at the First National Bank of Chicago
in effect at the time the note or obligation is deemed to have been issued. If
at any other time such security is not listed on any securities exchange or
quoted in the NASDAQ System or the over-the-counter market, the "MARKET PRICE"
will be the fair value thereof determined jointly by the Corporation and the
holders of a majority of the Warrants. If such parties are unable to reach
agreement within a reasonable period of time, such fair value will be determined
by an independent appraiser jointly selected by the Corporation and the holders
of a majority of the Warrants.
"PERSON" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"PLATINUM" means Platinum Venture Partners 1, L.P., a Delaware limited
partnership.
"REGISTRATION AGREEMENT" means the Registration Rights Agreement, of even
date herewith, by and among the Corporation, Platinum and the Investors (as
defined in the Registration
- 13 -
<PAGE>
Agreement), as such agreement may be amended, restated, modified or
supplemented from time to time in accordance with its terms.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES PURCHASE AGREEMENT" means the Series A Securities Purchase
Agreement, of even date herewith, by and among the Corporation, Platinum and the
Investors (as defined in the Securities Purchase Agreement), as such agreement
may be amended, restated, modified or supplemented from time to time in
accordance with its terms.
"SHAREHOLDERS' AGREEMENT" means the Shareholders' Agreement, of even date
herewith, by and among the Corporation, the Investors (as defined in the
Shareholders' Agreement) and the Management Stockholders (as defined in the
Shareholders' Agreement), as such agreement may be amended, restated, modified
or supplemented from time to time in accordance with its terms.
"SUBSIDIARY" means any corporation, association or other business entity of
which securities or other ownership interests representing more than fifty
percent (50%) of the ordinary voting power are, at the time as of which any
determination is being made, owned or controlled by the Corporation or one or
more Subsidiaries of the Corporation or by the Corporation and one or more
Subsidiaries of the Corporation.
"VOTING STOCK" of any Person means securities of any class or classes of
such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the directors of such Person.
"WARRANTHOLDER" means a Holder of a Warrant.
"WARRANTS" shall have the meaning set forth in the second paragraph of this
Warrant.
"WARRANT STOCK" means the shares of Common Stock purchased by the
Warrantholders upon the exercise of the Warrants, including any such shares of
Common Stock transferred to any transferee of such Warrantholder, other than a
transferee who acquires such shares after the same have been publicly sold
pursuant to a Registration Statement under the Securities Act.
ARTICLE VII
MISCELLANEOUS
7.1 Notices. Notices and other communications provided for herein shall
-------
be in writing and shall, unless otherwise expressly required, be given in the
manner and with the effect provided in the Securities Purchase Agreement. In
the case of the Holder, such notices and communications
- 14 -
<PAGE>
shall be addressed to his, her or its address as shown on the books maintained
by the Corporation, unless the Holder shall notify the Corporation that notices
and communications should be sent to a different address (or telecopy number),
in which case such notices and communications shall be sent to the address (or
telecopy number) specified by the Holder.
7.2 Waivers; Amendments. No failure or delay of the Holder in exercising
-------------------
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Holder are cumulative and not exclusive of any rights
or remedies which it would otherwise have. The provisions of this Warrant may
be amended, modified or waived with (and only with) the written consent of the
Corporation and the Warrantholders voting as a single class, entitling such
Warrantholders to purchase a majority of the Common Stock subject to purchase
upon exercise of such Warrants at the time outstanding (exclusive of Warrants
then owned by the Corporation or any Subsidiary or Affiliate thereof); provided,
however, that no such amendment, modification or waiver shall, without the
written consent of each holder of Warrants whose interest might be adversely
affected by such amendment, modification or waiver, (a) change the number of
shares of Common Stock subject to purchase upon exercise of this Warrant, the
Exercise Price or provisions for payment thereof or (b) amend, modify or waive
the provisions of this Section or Article III, IV or V hereof. The provisions
of the Securities Purchase Agreement, the Shareholders' Agreement and the
Registration Agreement may be amended, modified or waived only in accordance
with the respective provisions thereof.
Any such amendment, modification or waiver effected pursuant to this
Section or the applicable provisions of the Securities Purchase Agreement, the
Shareholders' Agreement or the Registration Agreement shall be binding upon the
holders of all Warrants and Warrant Stock, upon each future holder thereof and
upon the Corporation. In the event of any such amendment, modification or
waiver, the Corporation shall give prompt notice thereof to all Warrantholders
and, if appropriate, notation thereof shall be made on all Warrants thereafter
surrendered for registration of transfer or exchange.
No notice or demand on the Corporation in any case shall entitle the
Corporation to any other or further notice or demand in similar or other
circumstances.
7.3 Governing Law. This Warrant shall be construed in accordance with and
-------------
governed by the internal laws of the State of Delaware, without regard to
principles of conflicts of laws.
7.4 Survival of Agreements; Representations and Warranties, etc. All
-----------------------------------------------------------
warranties, representations and covenants made by the Corporation herein or in
any certificate or other instrument delivered by or on behalf of it in
connection with the Warrants shall be considered to have been relied upon by the
Holder and shall survive the issuance and delivery of the Warrants, regardless
of any investigation made by the Holder, and shall continue in full force and
effect so long
- 15 -
<PAGE>
as this Warrant or any Warrant Stock is outstanding. All statements in any such
certificate or other instrument shall constitute representations and warranties
hereunder.
7.5 Covenants to Bind Successor and Assigns. All covenants, stipulations,
---------------------------------------
promises and agreements in this Warrant contained by or on behalf of the
Corporation shall bind its successors and assigns, whether so expressed or not.
7.6 Severability. In case any one or more of the provisions contained in
------------
the Securities Purchase Agreement, the Shareholders' Agreement, the Registration
Agreement or this Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby.
7.7 Section Headings. The section headings used herein are for
----------------
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
7.8 No Rights as Stockholder. This Warrant shall not entitle the
------------------------
Warrantholder to any rights as a stockholder of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed
in its corporate name by one of its officers thereunto duly authorized, and its
corporate seal to be hereunto affixed, attested by its Secretary or an Assistant
Secretary, all as of the day and year first above written.
Blue Rhino Corporation, a Delaware corporation
By:___________________________________________
Billy Prim, Chief Executive Officer
Attest:
_______________________________________
S.H. Fogleman, III, Assistant Secretary
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<PAGE>
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
To___________________:
[Choose one or both of first two paragraphs, as applicable]
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the attached Warrant for, and to purchase thereunder, ___________
shares of Common Stock, as provided for therein, and tenders herewith payment
of the Exercise Price in full in the form of certified or bank cashier's check
or wire transfer.
The undersigned hereby irrevocably elects to exercise the right of
conversion represented by the attached Warrant for, and to convert thereunder,
_______________ shares of Common Stock, as provided for therein.
Please issue a certificate or certificates for such shares of Common Stock
in the following name or names and denominations:
If said number of shares shall riot be all the shares issuable upon
exercise of the attached Warrant, a new Warrant is to be issued in the name of
the undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
Dated: ______________, 19__
_________________________________________________
_________________________
NOTE: The above signature should correspond
exactly with the name on the face of the attached
Warrant or with the name of the assignee appearing
in the assignment form below.
<PAGE>
ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, ______________________________________ hereby sells,
assigns and transfers unto the attached Warrant, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
_______________________ attorney to transfer said Warrant on the books of Blue
Rhino Corporation, with full power of substitution in the premises.
________________________________________________
___________________________
NOTE: The above signature should correspond
exactly with the name on the face of the attached
Warrant.
Dated:
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BLUE RHINO CORPORATION
(Incorporated 11/29/94)
FIRST: The name of the Corporation is Blue Rhino Corporation (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, County of New Castle. The
name of the registered agent of the Corporation at such address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares which the Corporation shall have
authority to issue is 85,296,172 which are divided into two classes as follows:
(a) 20,796,172 shares of Series A Convertible Participating Preferred
Stock, $0.001 par value per share (the "Series A Preferred" and shares of Series
A Preferred the "Series A Preferred Shares"); and
(b) 64,500,000 shares of common stock of the Corporation, $0.001 par value
per share (the "Common Stock").
The powers, preferences and relative, participating, optional or other
rights of the capital stock and the qualifications, limitations or restrictions
thereof are as follows:
PART A. TERMS APPLICABLE TO SERIES A PREFERRED
Section 1. Liquidation.
1.1 Preference.
----------
(a) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the holders of Series A Preferred will be
entitled to be paid, before any distribution or payment is made upon any Common
Stock, an amount in cash equal to the aggregate Liquidation Value of all shares
of Series A Preferred outstanding. If upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the assets
available for distribution to the shareholders of the Corporation (the
"Distributable Funds") shall be insufficient to permit the payment to the
holders of Series A Preferred Shares of the
<PAGE>
aforesaid full preferential amount, then the Distributable Funds shall be
distributed to the holders of Series A Preferred Shares, ratably in proportion
to the number of Series A Preferred Shares held by each such holder on the date
of liquidation, dissolution or winding up of the Corporation.
(b) After the payment or the setting aside for such payment of the
preferential amounts payable pursuant to the preceding paragraph, the holders of
the Series A Preferred Shares shall be entitled to receive a ratable portion of
all of the remaining assets of the Corporation (together with the holders of the
Common Stock), if any, based upon the number (including any fraction) of shares
of Common Stock into which the Series A Preferred Shares then held by such
holders are then convertible.
(c) The Corporation will mail written notice of such liquidation,
dissolution or winding up, not less than 60 days prior to the payment date
stated therein, to each record holder of Series A Preferred.
1.2 Other Liquidation Events. A Change of Control, Change in Ownership
------------------------
(as hereinafter defined), Fundamental Change (as hereinafter defined) or other
reorganization in which the stockholders of the Corporation immediately prior to
the transaction possess less than 50% of the voting power of the surviving
entity (or its parent) immediately after the transaction shall be deemed to be a
liquidation for purposes of Section 1.1 above, unless the holders of a majority
of the Series A Preferred Shares outstanding elect by written notice to the
Corporation that such Change in Control, Change of Ownership, Fundamental Change
or other reorganization shall not be deemed a liquidation. The term "Change in
Ownership" means any sale or issuance or series of sales and/or issuances of
shares of the Corporation's capital stock by the Corporation or any holders
thereof which results in any Person or group of affiliated Persons (other than
the holders of Common Stock and Series A Preferred Shares as of the date of the
Securities Purchase Agreement) owning capital stock of the Corporation
possessing the voting power (under ordinary circumstances) to elect a majority
of the Board. The term "Fundamental Change" means (a) a sale or transfer of all
or substantially all of the assets of the Corporation, or of the Corporation and
its Subsidiaries on a consolidated basis, in any transaction or series of
transactions, and (b) any merger or consolidation to which the Corporation is a
party, except for a merger in which the Corporation is the surviving Corporation
and, after giving effect to such merger, the holders of the Corporation's
outstanding capital stock immediately prior to the merger shall own the
Corporation's outstanding capital stock possessing the voting power (under
ordinary circumstances) to elect a majority of the Board after such merger.
Nothing contained in this Section 1.2 shall be deemed to prevent any holder
of Series A Preferred Shares from (i) exercising such holder's right of
conversion pursuant to Section 4.1 hereof, with respect to any share of Series A
Preferred at any time prior to the liquidation, including following the giving
of any notice of such liquidation, or (ii) as a holder of Series A Preferred
Shares, participating in, or being a party to, the reorganization or the
transaction in which a Change in Control, Change of Ownership, Fundamental
Change or other reorganization
- 2 -
<PAGE>
shall occur, as described in this Section 1.2.
Section 2. Dividends.
2.1 General Obligation. When and as declared by the Board and to the
------------------
extent legally permissible, the Corporation will pay preferential dividends as
provided in this Section 2 to the holders of the Series A Preferred. Except as
otherwise provided herein, dividends on each Series A Preferred Share will
accumulate cumulatively on a daily basis at the rate of 8% per annum of the
Liquidation Value thereof, from and including the date of issuance of such
Series A Preferred Share. Such dividends will accumulate whether or not they
have been declared and whether or not there are profits, surplus or other funds
of the Corporation legally available for the payment of dividends. The date on
which the Corporation Initially issues any Series A Preferred Share will be
deemed to be its "date of issuance" regardless of the number of times transfer
of such Series A Preferred Share is made on the stock records maintained by or
for the Corporation and regardless of the number of certificates which may be
issued to evidence such Series A Preferred Share.
2.2 Distribution of Partial Dividend Payments. If at any time the
-----------------------------------------
Corporation declares less than the total amount of dividends then accumulated
with respect to the Series A Preferred, such dividends will be payable to the
holders of the Series A Preferred, ratably in proportion to the number of Series
A Preferred Shares held by each such holder on the date such dividends were
declared.
2.3 Dividends With Respect to Common Stock. If at any time the
--------------------------------------
Corporation pays any dividends or makes any other distributions with respect to
the Common Stock, the Corporation shall pay at such time to each holder of
Series A Preferred the dividends or other distributions which such holder would
have been entitled to receive had such holder converted all of his, her or its
Series A Preferred Shares into Common Stock on the date as of which the holders
of Common Stock of record entitled to such dividends or other distributions were
determined.
Section 3. Voting Rights. The Series A Preferred shall have those voting
rights set forth for the Series A Preferred in Part C below.
Section 4. Conversion.
4.1 Conversion Procedure.
--------------------
(a) At any time and from time to time, any holder of Series A
Preferred may convert all or any portion of the Series A Preferred Shares
(including any fraction of a share) held by such holder into the number of
shares of Common Stock computed by (i) multiplying the number of Series A
Preferred Shares to be converted by $0.347037 and (ii) dividing the resulting
- 3 -
<PAGE>
product by the Conversion Price then in effect.
(b) Each conversion of Series A Preferred Shares will be deemed to
have been effected as of the close of business on the date on which the
certificate or certificates representing the Series A Preferred Shares to be
converted have been surrendered at the principal office of the Corporation. At
such time as such conversion has been effected, the rights of the holder of such
Series A Preferred Shares as such holder will cease and the Person or Persons in
whose name or names any certificate or certificates for shares of Common Stock
are to be issued upon such conversion will be deemed to have become the holder
or holders of record of the shares of Common Stock represented thereby.
(c) As soon as possible after a conversion has been effected (but in
any event within 10 business days in the case of Section 4.1(c)(i) below), the
Corporation will deliver to the converting holder:
(i) a certificate or certificates representing the number of
shares of Common Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting
holder has specified;
(ii) payment in an amount equal to the amount payable under
Section 4.1(f) below with respect to such conversion; and
(iii) a certificate representing any Series A Preferred Shares
which were represented by the certificate or certificates delivered to
the Corporation in connection with such conversion but which were not
converted.
(d) The issuance of certificates for shares of Common Stock upon
conversion of Series A Preferred Shares will be made without charge to the
holders of such Series A Preferred Shares for any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with such
conversion and the related issuance of shares of Common Stock. Upon conversion
of each Series A Preferred Share, the Corporation will take all such actions as
are necessary in order to insure that the Common Stock issuable with respect to
such conversion will be validly issued, fully paid and nonassessable.
(e) The Corporation will not close its books against the transfer of
Series A Preferred Shares or shares of Common Stock issued or issuable upon
conversion of Series A Preferred Shares in any manner which interferes with the
timely conversion of Series A Preferred Shares.
(f) If any fractional interest in a share of Common Stock would,
except for the provisions of this Section 4.1(f), be deliverable upon any
conversion of the Series A Preferred
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<PAGE>
Shares, the Corporation, in lieu of delivering the fractional share therefor,
may pay an amount to the holder thereof equal to the fair market value (as
determined by the Board) of such fractional interest as of the date of
conversion.
4.2 Conversion Price.
----------------
(a) Initial Conversion Price. The initial Conversion Price will be
------------------------
determined by the following formula:
$ 8,000,000 - .067/.933 (PI)
----------------------------
$20,060,000(l +.067/.933)
Where
PI = The total dollar amount invested in Series A Preferred Shares
pursuant to the Securities Purchase Agreement.
By way of illustration, in the event PI equal $7,500,000 the
initial Conversion Price will be approximately $0.347.
In order to prevent dilution of the conversion rights granted to holders of
Series A Preferred hereunder, the Conversion Price will be subject to adjustment
from time to time pursuant to this Section 4.2 and Sections 4.4 and 4.5 below.
For purposes of this Section 4.2, the Corporation shall be deemed to have issued
or sold Common Stock as set forth in Section 4.3 below.
(b) Adjustment for Dilutive Events. If and whenever on or after the
------------------------------
original date of issuance of the Series A Preferred the Corporation issues or
sells, or in accordance with Section 4.3 below is deemed to have issued or sold,
any shares of Common Stock for consideration per share less than the Conversion
Price (the "Diluted Share Price") in effect immediately prior to the time of
such issue or sale (a "Dilutive Event"), then forthwith upon the occurrence of
any such Dilutive Event the Conversion Price will be reduced so that the
Conversion Price in effect immediately following the Dilutive Event will equal
the Diluted Share Price. Notwithstanding the foregoing, the issuance by the
Corporation of up to 3,500,000 shares of Common Stock, or securities convertible
into or options to acquire up to 3,500,000 shares of Common Stock, issued
pursuant to stock option plans or grants to officers or employees approved by
the Board or the issuance of Common Stock pursuant to the Warrants issued
pursuant to the Securities Purchase Agreement shall not constitute a Dilutive
Event. As used in this Section 4.2(b) and in Section 4.3 below, the term
"Common Stock" shall include Common Stock Equivalents. Notwithstanding anything
contained herein to the contrary, the Conversion Price of Series A Preferred
held by a particular holder shall not be adjusted pursuant to this Section 4 in
connection with a particular Dilutive Event, or any subsequent Dilutive Event,
if such holder of Series A Preferred fails to purchase, after being offered by
the Corporation the
- 5 -
<PAGE>
opportunity to purchase, a percentage of the securities, rights or options, or
any combination thereof, the sale of which constitute the Dilutive Event, which
is equal to or greater than 75 % of the percentage ownership of the
Corporation's Common Stock on a fully diluted basis held by such holder
immediately prior to such Dilutive Event. Series A Preferred which is no longer
subject to adjustment as a result of the preceding sentence shall remain subject
to such limitation regardless of any subsequent transfers, and at each time that
any Series A Preferred so loses its rights to such adjustment, all shares of
Series A Preferred which have lost their right to such adjustment as of such
time shall be automatically classified into (and the outstanding certificates
representing such Series A Preferred will automatically be deemed to represent)
new sub-series A-1, A-2, A-3, etc., consecutively, beginning with A-1. The
holders of shares of each such sub-series shall promptly deliver the
certificate(s) representing such stock to the Corporation upon the Corporation's
request, for exchange or notation to reflect such sub-series. If any such
certificates are not delivered to the Corporation, the Corporation shall make
appropriate notations on its stock records, which may include stop transfer
instructions, and may place in escrow, pending receipt of such certificates, all
dividend payments or other distributions owing with respect to the shares
represented by such certificates.
4.3 Issuance and Sale of Common Stock. For purposes of determining the
---------------------------------
adjusted Conversion Price pursuant to Section 4.2(b) above the following events
shall be deemed to be an issuance and sale of Common Stock by the Corporation:
(a) Issuance of Rights or Options. If (i) the Corporation in any
-----------------------------
manner grants any rights or options to subscribe for or to purchase shares of
Common Stock or any securities convertible into or exchangeable for shares of
Common Stock (such rights or options referred to herein as "Options" and such
convertible or exchangeable stock or securities referred to herein as
"Convertible Securities") and (ii) the Price Per Share of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities is less than the Conversion Price in effect
immediately prior to the time of the granting of such Options then the shares of
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities will be deemed to have been issued and
sold by the Corporation for such Price Per Share. For the purposes of this
Section 4.3(a), the "Price Per Share" is determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of all such Options, plus
in the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price will be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such
- 6 -
<PAGE>
Convertible Securities.
(b) Issuance of Convertible Securities. If (i) the Corporation in
----------------------------------
any manner issues or sells any Convertible Securities and (ii) the Price Per
Share of shares of Common Stock issuable upon such conversion or exchange is
less than the Conversion Price in effect immediately prior to the time of such
issue or sale then the shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities will be deemed to have been issued and
sold by the Corporation for such Price Per Share. For the purposes of this
Section 4.3(b), the "Price Per Share" will be determined by dividing (i) the
total amount received or receivable by the Corporation as consideration for the
issue or sale of such Convertible Securities, plus the minimum aggregate amount
of additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities. No further adjustment of the Conversion Price will be made when
Common Stock is actually issued upon the conversion or exchange of such
Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments to the
Conversion Price had been or are to be made pursuant to Section 4.3(a) above, no
further adjustment of the Conversion Price will be made by reason of such issue
or sale.
(c) Change in Option Price or Conversion Rate. If at any time there
-----------------------------------------
is a change in (i) the purchase price provided for in any Options, (ii) the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities, or (iii) the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock, then the Conversion Price
in effect at the time of such change will be readjusted to the Conversion Price
which would have been in effect had those Options or Convertible Securities
still outstanding at the time of such change provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time such Options or Convertible Securities were initially granted,
issued or sold; provided that if such adjustment would result in an increase of
the Conversion Price then in effect, such adjustment will not be effective until
30 days after written notice thereof has been given by the Corporation to all
holders of the Series A Preferred.
(d) Calculation of Consideration Received. If any shares of Common
-------------------------------------
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor or the Price Per
Share, as the case may be, will be deemed to be the net amount received or to be
received, respectively, by the Corporation therefor. In case any shares of
Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than cash
received by the Corporation or the non-cash portion of the Price Per Share, as
the case may be, will be the fair value of such consideration received or to be
received, respectively, by the Corporation; except where such consideration
consists of securities, in which case the amount of consideration received or to
be received, respectively, by the Corporation will be the Market Price thereof
as of
- 7 -
<PAGE>
the date of receipt. If any shares of Common Stock, Options or Convertible
Securities are issued in connection with any merger in which the Corporation is
the surviving corporation, the amount of consideration therefor will be deemed
to be the fair value of such portion of the net assets and business of the non-
surviving corporation as is attributable to such shares of Common Stock, Options
or Convertible Securities, as the case may be. The fair value of any
consideration other than cash and securities will be determined jointly by the
Corporation and the holders of a majority of the outstanding Series A Preferred
Shares. If such parties are unable to reach agreement within a reasonable period
of time, the fair value of such consideration will be determined by an
independent appraiser jointly selected by the Corporation and the holders of a
majority of the outstanding Series A Preferred Shares.
(e) Integrated Transactions. In case any Option is issued in
-----------------------
connection with the issuance or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
will be deemed to have been issued for a consideration of $.01.
(f) Record Date. If the Corporation takes a record of the holders of
-----------
Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in shares of Common Stock, Options or in Convertible
Securities or (ii) to subscribe for or purchase shares of Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issuance or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
4.4 Subdivision or Combination of Common Stock. If the Corporation at any
------------------------------------------
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced. If the Corporation at any
time combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be
proportionately increased.
4.5 Organic Change. Prior to the consummation of any Organic Change, the
--------------
Corporation will make appropriate provisions (in form and substance satisfactory
to the holders of a majority of the shares of Series A Preferred then
outstanding) to insure that each of the holders of Series A Preferred Shares
with respect to all or any of the shares of Series A Preferred held thereby will
thereafter have the right to acquire and receive (in addition to the
liquidation, redemption and other relative rights and preferences of the Series
A Preferred Shares), in lieu of or in addition to the shares of Common Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's shares of Series A Preferred, such shares of stock, securities or
assets as such holder would have received in connection with such Organic Change
if such
- 8 -
<PAGE>
holder had converted his, her or its Series A Preferred Shares immediately prior
to such Organic Change. In any such case, the Corporation will make appropriate
provisions (in form and substance satisfactory to the holders of a majority of
the shares of Series A Preferred then outstanding) to insure that the provisions
of this Section 4.5 will thereafter be applicable to the Series A Preferred
(including, an immediate adjustment of the Series A Preferred Conversion Price
to the value for the Common Stock reflected by the terms of such Organic Change
and a corresponding immediate adjustment in the number of shares of Common Stock
acquirable and receivable upon conversion of shares of Series A Preferred, if
the value so reflected is less than the Series A Preferred Conversion Price in
effect immediately prior to such Organic Change). The Corporation will not
effect any such Organic Change, unless prior to the consummation thereof, the
successor Corporation resulting from such Organic Change assumes by written
instrument (in form reasonably satisfactory to the holders of a majority of the
shares of Series A Preferred then outstanding, the obligation to deliver to each
such holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to acquire.
All other terms of the Series A Preferred shall remain in full force and
effect following such an Organic Change. The provisions of this Section 4.5
shall similarly apply to successive Organic Changes.
4.6 Notices.
-------
(a) Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to all holders of Series A
Preferred specifying the Conversion Price in effect thereafter with respect to
the particular holder.
(b) The Corporation shall give written notice to all holders of
Series A Preferred at least 20 days prior to the date on which the Corporation
closes its books or takes a record for determining rights to vote with respect
to any Organic Change, Change in Control, Change of Ownership, Fundamental
Change, other reorganization, dissolution or liquidation. The Corporation shall
also give written notice to the holders of Series A Preferred at least 20 days
prior to the date on which any Organic Change, Change in Control, Change of
Ownership, Fundamental Change, other reorganization, dissolution or liquidation
shall occur.
4.7 Mandatory Conversion.
--------------------
(a) If the Corporation shall effect a firm commitment underwritten
Public Offering of shares of its Common Stock in which (a) the aggregate price
paid by the public for the shares will be at least $15 million and (b) the price
per share paid by the public for such shares will be at least four times the
Conversion Price then in effect ("Qualified Public Offering") then the
Corporation shall require the conversion of, and the holders shall convert, all
of the outstanding Series A Preferred Shares into shares of Common Stock and
upon such conversion
- 9 -
<PAGE>
each holder of Series A Preferred Shares shall also receive from the Corporation
in respect to each share of Series A Preferred so converted, at such holder's
election, either (i) a cash amount equal to the Liquidation Value, or (ii) an
additional number of shares of registered Common Stock equal to the number
obtained by dividing the Liquidation Value by the price per share received by
the Corporation in such Qualified Public Offering, all without any further
action by the holders of such Series A Preferred Shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer agent. Any such mandatory conversion shall only be effected at the time
of and subject to the closing of the sale of such shares pursuant to such
Qualified Public Offering and upon written notice of such mandatory conversion
delivered to all holders of Series A Preferred at least seven but not more than
20 days prior to such closing.
(b) If (i) the Corporation shall effect a firm commitment
underwritten Public Offering of shares of its Common Stock which is not a
Qualified Public Offering (a "Non-Qualified Public Offering") and (ii) the
holders of at least 66-2/3% of the Series A Preferred Shares outstanding at such
time shall approve such Non-Qualified Public Offering then the Corporation shall
require the conversion of, and the holders shall convert, all of the outstanding
Series A Preferred Shares into shares of Common Stock and upon such conversion
each holder of Series A Preferred Shares shall also receive from the Corporation
in respect to each share of Series A Preferred so converted, at such holder's
election, either (i) a cash amount equal to the Liquidation Value, or (ii) an
additional number of shares of registered Common Stock equal to the number
obtained by dividing the Liquidation Value by the price per share received by
the Corporation in such Non-Qualified Public Offering, all without any further
action by the holders of such Series A Preferred Shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer agent. Any such mandatory conversion shall only be effected at the time
of and subject to the closing of the sale of such shares pursuant to such Non-
Qualified Public Offering and upon written notice of such mandatory conversion
delivered to all holders of Series A Preferred at least 7 but not more than 20
days prior to such closing.
4.8 Certain Events. If any event similar to or of the type contemplated
--------------
by the provisions of this Section 4, but not expressly provided for by such
provisions, occurs, then the Board will make an appropriate and equitable
adjustment in the Conversion Price so as to protect the rights of the holders of
Series A Preferred; provided that no such adjustment will increase the
Conversion Price as otherwise determined pursuant to this Section 4 or decrease
the number of shares of Common Stock issuable upon conversion of each Series A
Preferred Share.
Section 5. Redemptions.
5.1 Scheduled and Optional Redemptions.
----------------------------------
(a) The Corporation shall offer to redeem a number of Series A
Preferred Shares equal to 25 % of the Series A Preferred Shares outstanding as
of October 31, 2000 on
- 10 -
<PAGE>
each of October 31, 2000, April 30, 2001 and October 31, 2001 (each such date a
"Scheduled Redemption Date") at a price per share equal to the Series A
Liquidation Value. The Corporation shall offer to redeem all of the Series A
Preferred Shares remaining outstanding on April 30, 2002 (the "Final Redemption
Date"), at a price per share equal to the Series A Liquidation Value.
(b) Any holder of outstanding Series A Preferred Shares outstanding
after the Final Redemption Date may elect to require the Corporation to redeem
any or all of such outstanding Series A Preferred Shares at a price per share
equal to the Series A Liquidation Value by giving written notice to the
Corporation of such election (an "Optional Redemption Notice"). Within five
days of receipt of such Optional Redemption Notice, the Corporation shall give
written notice of such election to all other holders of Series A Preferred
Shares, and such other holders may elect to require the Corporation to redeem
all or any portion of their Series A Preferred Shares by giving written notice
of such election to the Corporation within 30 days of receipt of the
Corporation's notice. Upon receipt of such elections, the Corporation shall be
obligated to redeem from such holders, at a price per share equal to the Series
A Liquidation Value, all shares of Series A Preferred with respect to which
redemption elections have been received within 60 days of receipt of the
Optional Redemption Notice (the "Optional Redemption Date").
(c) In the event that any Series A Preferred Shares scheduled to be
redeemed in a redemption under section 5.1 are not redeemed ("Unredeemed
Shares"), the Corporation shall give written notice to each holder of Series A
Preferred Shares who redeemed shares in such redemption ("Redeeming
Shareholders") that such Redeeming Shareholder may elect to have redeemed his,
her or its ratable portion of such Unredeemed Shares based on the number of
Series A Preferred Shares held by all such Redeeming Shareholders at a price per
share equal to the Series A Liquidation Value by giving written notice to the
Corporation of such election (an "Additional Redemption Notice"). Upon receipt
of such Additional Redemption Notice, the Corporation shall be obligated to
redeem from such Redeeming Shareholders, at a price per share equal to the
Series A Liquidation Value, all shares of Series A Preferred (but not more then
the Unredeemed Shares) with respect to which redemption elections have been
received within 60 days of receipt of the Additional Redemption Notice (the
"Additional Redemption Date").
(d) Nothing contained in this Section 5 shall be deemed to prevent
any holder of Series A Preferred Shares from (i) exercising such holder's right
of conversion pursuant to Section 4.1 hereof with respect to any share of Series
A Preferred or (ii) electing by written notice to the Corporation to retain the
Series A Preferred Shares held by such holder, at any time prior to the
redemption of shares of Series A Preferred, including following the giving of
any notice of such redemption.
5.2 Redemption Payment. For each Series A Preferred Share that is to be
------------------
redeemed, the Corporation shall be obligated on the Scheduled Redemption Date,
the Final Redemption
- 11 -
<PAGE>
Date, the Optional Redemption Date or the Additional Redemption Date, as the
case may be (each a "Redemption Date"), to pay to the holder thereof (upon
surrender by such holder at the Corporation's principal office of the
certificate representing such Series A Preferred Share) an amount in immediately
available funds equal to the Series A Liquidation Value of such Series A
Preferred Share. If the funds of the Corporation legally available for
redemption of Series A Preferred on any Redemption Date are insufficient to
redeem the total number of Series A Preferred Shares to be redeemed on such
date, those funds which are legally available shall be used first, to pay any
and all accumulated and unpaid dividends on the Series A Preferred Shares to be
redeemed, and thereafter, to redeem the Series A Preferred to be redeemed on
such Redemption Date, paid to the holders of the Series A Preferred ratably in
proportion to the number of Series A Preferred Shares held by each such holder
on such Redemption Date. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of Series A Preferred
Shares, such funds shall immediately be used to redeem the balance of the Series
A Preferred Shares which the Corporation had become obligated to redeem but had
not redeemed, paid to the holders of the Series A Preferred ratably in
proportion to the number of Series A Preferred Shares held by each such holder
on the date such funds become legally available. In case fewer than the total
number of Series A Preferred Shares represented by any certificate are redeemed,
a new certificate representing the number of unredeemed Series A Preferred
Shares shall be issued to the holder thereof without cost to such holder within
three business days after surrender of the certificate representing the redeemed
Series A Preferred Shares.
5.3 Determination of Each Holder's Series A Preferred Shares to be
--------------------------------------------------------------
Redeemed. The number of Series A Preferred Shares to be redeemed from each
- --------
holder thereof in redemptions under Section 5.1 shall be the number of Series A
Preferred Shares equal to (i) the total number of Series A Preferred Shares to
be redeemed from all holders of Series A Preferred in such redemption, times
(ii) the quotient derived by dividing the total number of Series A Preferred
Shares then held by such holder by the total number of Series A Preferred Shares
then outstanding.
5.4 No Rights After Redemption. No Series A Preferred Share which has
--------------------------
been redeemed is entitled to any dividends declared after the date on which the
Series A Liquidation Value of such Series A Preferred Share is paid to the
holder thereof. On such date all rights of the holder of such Series A
Preferred Share shall cease, and such Series A Preferred Share shall no longer
be deemed to be outstanding.
5.5 Redeemed or Otherwise Acquired Shares. No share or shares of Series A
-------------------------------------
Preferred acquired by the Corporation by reason of redemption, conversion or
otherwise shall be reissued, and all such shares shall be canceled, retired and
eliminated from the shares which the Corporation shall be authorized to issue.
- 12 -
<PAGE>
5.6 Events of Noncompliance.
-----------------------
(a) An Event of Noncompliance shall be deemed to have occurred:
(i) If the Corporation fails to pay dividends that have been
declared by the Board on the Series A Preferred (and such failure
continues for a period of 30 days);
(ii) If the Corporation fails to make any redemption payment
with respect to the Series A Preferred that it is obligated to make
hereunder;
(iii) If the Corporation breaches or otherwise fails to perform
or observe any other covenant or agreement contained herein or in the
Securities Purchase Agreement or the Related Agreements (as defined in
the Securities Purchase Agreement) and such failure to perform or
observe a covenant or agreement is not cured within 20 days after the
Corporation receives notice of the occurrence thereof;
(iv) If any representation, warranty or information contained in
the Securities Purchase Agreement or required to be furnished to any
holder of the Series A Preferred pursuant to the Securities Purchase
Agreement, or any writing furnished by the Corporation to any holder
of the Series A Preferred, is false or misleading in any material
respect on the date made or furnished;
(v) If the Corporation or any Subsidiary makes an assignment
for the benefit of creditors or admits in writing its inability to pay
its debts generally as they become due; or an order, judgment or
decree is entered adjudicating the Corporation or any Subsidiary
bankrupt or insolvent; or any order for relief with respect to the
Corporation or any Subsidiary is entered under the United States
Bankruptcy Code; or the Corporation or any Subsidiary petitions or
applies to any tribunal for the appointment of a custodian, trustee,
receiver or liquidator of the Corporation or any Subsidiary, or of any
substantial part of the assets of the Corporation or any Subsidiary,
or commences any proceeding (other than a proceeding for the voluntary
liquidation and dissolution of any Subsidiary) relating to the
Corporation or any Subsidiary under any bankruptcy reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction; or any such petition or
application is filed, or any such proceeding is commenced, against the
Corporation or any Subsidiary and either (x) the Corporation or any
such Subsidiary by any act indicates its approval thereof, consent
thereto or acquiescence therein or (y) such petition, application or
proceeding is not dismissed within sixty (60) days;
- 13 -
<PAGE>
(vi) If any money judgment, writ or warrant of attachment, or
similar process involving an amount in any individual case in excess
of $50,000 or an amount in the aggregate in excess of $200,000 is
entered or filed against the Corporation or any of its Subsidiaries or
any of their respective assets and remains undischarged, unvacated,
unbonded or unstayed for a period of 30 days; or
(vii) If the Corporation or any Subsidiary defaults in the
performance of any obligation or obligations if the effect of such
default is to cause an amount having an individual principal amount in
excess of $100,000 or having an aggregate principal amount in excess
of $200,000 to become due prior to its stated maturity or to permit
the holder or holders of such obligation or obligations to cause an
amount having an individual principal amount in excess of $100,000 or
having an aggregate principal amount in excess of $200,000 to become
due prior to its stated maturity.
(b) If an Event of Noncompliance of the type described in Section
5.6(a)(v) above shall have occurred, the Corporation shall become obligated to
immediately redeem all of the Series A Preferred Shares outstanding at a price
per share equal to the Series A Liquidation Value, without any demand or other
action on the part of the holders thereof.
(c) If any Event of Noncompliance shall have occurred, the holders of
a majority of the Series A Preferred Shares then outstanding may demand by
written notice delivered to the Corporation immediate redemption of all or any
portion of the Series A Preferred Shares owned by such holder or holders at a
price per share equal to Series A Liquidation Value. The Corporation shall give
prompt written notice of any such election to the other holders of Series A
Preferred (but in any event within five days after the receipt of the initial
demand for redemption), and each such other holder may demand immediate
redemption of all or any portion of such holder's Series A Preferred Shares by
giving written notice thereof to the Corporation within seven days after receipt
of the Corporation's notice. If any holder or holders of the Series A Preferred
demands immediate redemption of all or any portion of such holder's Series A
Preferred Shares pursuant to the terms of this Section 5.6(c), the Corporation
shall pay to such holder or holders the aggregate Series A Liquidation Value of
the Series A Preferred Shares requested to be redeemed by such holder or holders
within 10 days after receipt of the initial demand for redemption; provided that
if at any time after the requisite number of holders of Series A Preferred
Shares shall have demanded immediate redemption pursuant to this Section 5.6(c),
the Corporation shall pay all accumulated and unpaid dividends on the Series A
Preferred Shares and make all redemption payments (if any) with respect to the
Series A Preferred Shares which it shall have been obligated to make otherwise
than pursuant to this Section 5.6(c), and all Events of Noncompliance (other
than nonpayment of dividends and failure to make any redemption payment due and
payable solely by virtue of this Section 5.6(c)) shall be remedied or waived by
such holders, then, and in every such case, such holders may, by written notice
to the Corporation, rescind and annul such demand for immediate redemption and
its consequences.
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<PAGE>
5.7 Pro Rata Redemptions. The Corporation shall not, and shall not permit
--------------------
any Subsidiary of the Corporation to, purchase or acquire any shares of Series A
Preferred other than pursuant to the terms of this Section or pursuant to an
offer made on the equivalent terms to all holders of Series A Preferred Shares
at the time outstanding.
Section 6. Purchase Rights. If at any time the Corporation grants,
issues or sells any equity securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of Common Stock
("Purchase Rights"), then each holder of Series A Preferred will be entitled to
such Purchase Rights, ratably in proportion to the number of shares of Common
Stock each such holder would have held if each had converted all Series A
Preferred Shares held by it into Common Stock on the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issuance or sale of such Purchase Rights.
Section 7. Miscellaneous.
7.1 Registration of Transfer. The Corporation will keep at its principal
------------------------
office a register for the registration of Series A Preferred Shares. Upon the
surrender of any certificate representing Series A Preferred Shares at such
place, the Corporation will, at the request of the record holder of such
certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the aggregate
the number of Series A Preferred Shares represented by the surrendered
certificate. Each such new certificate will be registered in such name and will
represent such number of Series A Preferred Shares as is requested by the holder
of the surrendered certificate and will be substantially identical in form to
the surrendered certificate, and dividends will accrue on the Series A Preferred
Shares represented by such new certificate from the date to which dividends have
been fully paid on such Series A Preferred Shares represented by the surrendered
certificate.
7.2 Replacement. Upon receipt of evidence reasonably satisfactory to the
-----------
Corporation (an affidavit of the registered holder will be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing Series A Preferred Shares, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is an institutional investor its own
agreement will be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation will (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
the number of Series A Preferred Shares of such class represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate, and dividends will accrue on the
Series A Preferred Shares represented by such new certificate from the date to
which dividends have been fully paid on such lost, stolen, destroyed or
mutilated certificate.
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<PAGE>
7.3 Amendment and Waiver. No amendment, modification or waiver will be
--------------------
binding or effective with respect to any provision of this Article IV without
the prior written consent of the holders of at least 66-2/3 % of the Series A
Preferred Shares outstanding at the time such action is taken; provided that no
action will discriminate against any holder of Series A Preferred other than as
a result of a difference in the number of Series A Preferred Shares held by such
holders.
7.4 Notices. Except as otherwise expressly provided, all notices referred
-------
to herein will be in writing and will be delivered by registered or certified
mail, return receipt requested, postage prepaid and will be deemed to have been
given on the third day after mailing (a) to the Corporation, at its principal
executive offices and (b) to any shareholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated in
writing by such holder).
PART B. TERMS APPLICABLE TO COMMON STOCK
Section 1. Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation and after the payment
of any preferential amounts to be distributed to the holders of Series A
Preferred, the remaining Distributable Funds shall be distributed to the holders
of Common Stock and to the holders of the Series A Preferred, ratably in
proportion to the number of shares of Common Stock that each such holder holds,
or would hold if each holder of the Series A Preferred had converted all of the
Series A Preferred Shares held by it into Common Stock on the date of
liquidation, dissolution or winding up of the Corporation.
Section 2. Dividends. Whenever preferential dividends upon the Series A
Preferred, to the extent such stock may be entitled thereto, shall have been
paid or declared and set apart for payment, and not otherwise, the Board may
declare a dividend or distribution upon the Common Stock. Subject to the right
of the holders of the Series A Preferred to participate in such dividend or
distribution, dividends or distributions so declared by the Board shall be paid
to the holders of Common Stock ratably in proportion to the number of shares of
Common Stock held by each such holder on the date as of which the holders of
Common Stock of record entitled to receive such dividends or distribution were
determined.
Section 3. Voting Rights. The Common Stock shall have those voting rights
set forth for the Common Stock in Part C below.
PART C. VOTING RIGHTS
Section 1. In General. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by this Certificate of Incorporation
or any amendments thereto, on all matters submitted to a vote of the
shareholders of the Corporation, the Common Stock and Series
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<PAGE>
A Preferred shall vote together as a single class. For purposes of this Section
1, each holder of Series A Preferred shall have the number of votes equal to the
number of shares of Common Stock which such holder would have been entitled to
receive had such holder converted all of his, her or its Series A Preferred
Shares into Common Stock on the date as of which the holders of Common Stock of
record entitled to vote were determined (assuming for this purpose only that
Series A Preferred Shares are convertible into fractional shares) and each
holder of Common Stock shall have one vote per share of Common Stock held by
such holder on the date as of which the holders of Common Stock of record
entitled to vote were determined.
Section 2. Series A Preferred Directors.
2.1 Number of Series A Preferred Directors. The Board of Directors of the
--------------------------------------
Corporation shall include four directors designated as "Series A Preferred
Directors," who shall be nominated and elected in accordance with the provisions
of this Section 2.
2.2 Series A Preferred Directors.
----------------------------
(a) The Series A Preferred Directors shall be nominated by the
holders of a majority of the issued and outstanding Series A Preferred Shares
entitled to vote thereon, voting as a separate class. Once nominated, the Series
A Preferred Directors shall be elected to the Board by the holders of a majority
of the issued and outstanding Series A Preferred Shares entitled to vote
thereon, voting as a separate class, at any annual meeting of the shareholders
or special meeting of the shareholders called for that purpose or by written
consent in lieu of a meeting.
(b) The Series A Preferred Directors may be removed with or without
cause at any time by the holders of a majority of the issued and outstanding
Series A Preferred Shares entitled to vote thereon, voting as a separate class.
(c) Vacancies of Series A Preferred Directors shall be filled in the
same manner as set forth for the election of Series A Preferred Directors in
Section 2.2 (a) above.
(d) Each Series A Preferred Director shall be entitled to cast one
(1) vote on each matter submitted to the Board for a vote, unless an Event of
Noncompliance shall have occurred, in which case each Series A Preferred
Director shall be entitled to cast three (3) votes on each matter submitted to
the Board. The special voting rights granted to Series A Preferred Directors in
this Section 2.2(d) shall continue for one year from the date the Event of
Noncompliance giving rise to such "super" voting rights ceases to exist, but
automatically will apply again if an additional Event of Noncompliance occurs.
2.3 Quorum, Required Vote and Adjournment. At all meetings of the Board,
-------------------------------------
directors entitled to cast a majority of the votes of the entire Board shall
constitute a quorum for
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<PAGE>
the transaction of business and the act of directors entitled to cast a majority
of the votes present at any meeting at which there is a quorum shall be the act
of the Board, except as may be other-wise specifically provided by the General
Corporation Law of the State of Delaware or by this Certificate of Incorporation
or any amendments thereto. Notwithstanding the foregoing, a quorum shall not be
present for the transaction of business of the Board unless at least one Series
A Preferred Director shall be present at a meeting of the Board. If a quorum
shall not be present at any meeting of the Board, then the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 3. Special Matters. The affirmative vote of the holders of at
least a majority of the outstanding shares of the Corporation entitled to vote
thereon shall be required to approve: (a) any amendment to this Certificate of
Incorporation; and (b) any merger, consolidation or share exchange; provided
that where, pursuant to the General Corporation Law of the State of Delaware,
the holders of the outstanding shares of any class shall be entitled to vote as
a class in respect of any such amendment or transaction, the proposed amendment
or transaction shall be approved upon receiving the affirmative vote of the
holders of at least a majority of the outstanding shares of each class of shares
entitled to vote as a class in respect thereof and of the total outstanding
shares entitled to vote. In addition, so long as any Series A Preferred Shares
remain outstanding the Corporation shall not, without the affirmative vote or
written consent by the holders of not less than 51 % of the Series A Preferred
Shares then outstanding:
(a) Issuances. Authorize, issue, or enter into any agreement
---------
providing for the issuance (contingent or otherwise) of, (x) any notes or debt
securities containing equity features (including, without limitation, any notes
or debt securities convertible into or exchangeable for equity securities,
issued in connection with the issuance of equity securities or containing profit
participation features) or (y) any equity securities (or any securities
convertible into or exchangeable for any equity securities), except for Common
Stock or options to acquire Common Stock representing no more than five percent
(5 %) of the fully diluted equity capital which may be issued by the Board only
after the approval of at least two of the Series A Preferred Directors, as
incentives to key employees, consultants and directors of the Corporation; to
merge or consolidate with any Person;
(b) Mergers. Merge or consolidate with any Person or permit any
-------
Subsidiary to merge or consolidate with any Person;
(c) Sale of Assets. Sell, lease or otherwise dispose of, or permit
--------------
any Subsidiary to sell, lease or otherwise dispose of, assets in one or a series
of related transactions that represent 10% or more of the Corporation's assets
or income, or are valued at $1,000,000, whichever is less;
(d) Liquidations. Liquidate, dissolve or effect a recapitalization
------------
or
- 18 -
<PAGE>
reorganization in any form of transaction;
(e) Charter Amendments. Make any amendment to the Corporation's
------------------
certificate of incorporation or by-laws, including without limitation, an
amendment altering, changing or otherwise amending the references or rights of
the Series A Preferred Shares or increasing or decreasing the number of
directors constituting the Board, or file any resolution of the Board with the
Secretary of State of Delaware.
PART D. DEFINITIONS IN THIS CERTIFICATE OF INCORPORATION
"Board" means the Corporation's Board of Directors.
"Change of Control" means any transaction, circumstance or event that shall
cause or result in Billy Prim and Andrew Filipowski either (a) owning, directly
or indirectly, beneficial or record ownership of shares of the Corporation's
capital stock or securities having less than 20% of the issued and outstanding
shares of the Corporation entitled to vote on matters submitted to the
Corporation's shareholders, or (b) resigning or being removed or otherwise not
serving as a member of the Board.
"Common Stock Equivalent" means, collectively, any capital stock of any
class of the Corporation hereafter authorized which is not limited to a fixed
sum or percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Corporation or similar equity like
participation rights or phantom stock interests.
"Liquidation Value" of any share of Series A Preferred as of any particular
date will be equal to $0.347037 (adjusted for any divisions, whether by stock
split, stock dividend or otherwise, or combinations, whether by reverse stock
split or otherwise, of the Series A Preferred Shares) plus accumulated but
unpaid dividends on such share.
"Market Price" of any security means the average of the closing prices of
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on the primary
exchange on which such security is listed at the end of such day, or, if on any
day such security is not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if
on any day such security is not quoted in the NASDAQ System, the average of the
highest bid and lowest asked prices on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged over a period of 21
days consisting of the day as of which "Market Price" is being determined and
the 20 consecutive business days prior to such day. The "Market Price" of a
note or other obligation
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<PAGE>
which is not listed on a securities exchange or quoted in the NASDAQ System or
reported by the National Quotation Bureau, Incorporated, the total consideration
received by the Corporation (including interest) will be discounted at the prime
rate of interest at the First National Bank of Chicago in effect at the time the
note or obligation is deemed to have been issued. If at any other time such
security is not listed on any securities exchange or quoted in the NASDAQ System
or the over-the-counter market, the "Market Price" will be the fair value
thereof determined jointly by the Corporation and the holders of a majority of
the Series A Preferred Shares. If such parties are unable to reach agreement
within a reasonable period of time, such fair value will be determined by an
independent appraiser jointly selected by the Corporation and the holders of a
majority of the Series A Preferred Shares.
"Organic Change" means any capital reorganization, reclassification,
consolidation, merger, lease, or sale of all or substantially all of the
Corporation's assets to another Person (other than a liquidation as determined
under Section 1.1 above) which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for shares of Common
Stock.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"Public Offering" means any offering by the Corporation of its equity
securities to the public pursuant to an effective registration statement under
the Securities Act of 1933, as then in effect, or any comparable statement under
any similar federal statute then in force; provided that for purposes of Section
4.7 above a Public Offering will not include an offering made in connection with
a business acquisition or an employee benefit plan.
"Securities Purchase Agreement" means the Series A Securities Purchase
Agreement, dated as of or about December 1, 1994, by and among the Corporation
and Platinum Venture Partners I, L.P. and the Investors (as defined in the
Securities Purchase Agreement), as such agreement may be amended from time to
time in accordance with its terms.
"Subsidiary" means any corporation, association or other business entity of
which securities or other ownership interests representing more than fifty
percent (50%) of the ordinary voting power are, at the time as of which any
determination is being made, owned or controlled by the Corporation or one or
more Subsidiaries of the Corporation or by the Corporation and one or more
Subsidiaries of the Corporation.
FIFTH: In furtherance and not in limitation of the powers conferred by
statute, the Board is, by action of the full Board, expressly authorized to
adopt, amend or repeal the by-laws of the Corporation.
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<PAGE>
SIXTH: Except as otherwise provided in this Certificate of
Incorporation, the Corporation reserves the right to amend, alter or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon the stockholders
herein are granted subject to this reservation.
SEVENTH: Each person who is or was a director or officer of the
Corporation and each person who serves or served at the request of the
Corporation as a director, officer or partner of another enterprise shall be
indemnified by the Corporation in accordance with, and to the fullest extent
authorized by, the General Corporation Law of the State of Delaware as the same
now exists or may be hereafter amended. No amendment to or repeal of this
ARTICLE SEVENTH shall apply to or have any effect on the rights of any
individual referred to in this ARTICLE SEVENTH for or with respect to acts or
omissions of such individual occurring prior to such amendment or repeal.
EIGHTH: To the fullest extent permitted by the General Corporation Law of
the State of Delaware as the same now exists or may be hereafter amended, a
director of the Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
No amendment to or repeal of this ARTICLE EIGHTH shall apply to or have any
effect on the liability or alleged liability of any director of the Corporation
for or with respect to any acts or omissions of such director occurring prior to
the effective date of such amendment or repeal.
NINTH: Meetings of stockholders may be held within or outside of the
State of Delaware, as the by-laws of the Corporation may provide. The books of
the Corporation may be kept outside the State of Delaware at such place or
places as may be designated from time to time by the Board or in the by-laws of
the Corporation. Election of directors need not be by written ballot unless the
by-laws of the Corporation so provide.
BLUE RHINO CORPORATION
By: /s/ Billy D. Prim
---------------------------
Billy D. Prim, President
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<PAGE>
BLUE RHINO CORPORATION
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this "Agreement")
is dated as of March 1, 1997 by and among BLUE RHINO CORPORATION, a Delaware
corporation (the "Corporation"), and the Persons listed on Schedule 1 attached
----------
hereto (collectively, the "Purchasers"). This Agreement amends and restates in
its entirety that certain Registration Rights Agreement dated December 1, 1994,
as amended.
RECITALS:
A. Purchasers have agreed to purchase shares of the Corporation's Series
A Convertible Participating Preferred Stock (the "Series A Preferred Shares"),
shares of the Corporation's Common Stock (the "Common Shares") and Warrants (the
"Warrants") pursuant to certain agreements that provide that the parties hereto
enter into this Agreement.
B. The Corporation deems it desirable to enter into this Agreement in
order to induce Purchasers to purchase the Series A Preferred Shares, the Common
Shares and the Warrants.
AGREEMENTS
In consideration of the premises and the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. As used in this Agreement.
-----------
"Agreement" shall meant this Amended and Restated Registration Rights
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $0.001 par value per share, of the
Corporation.
"Common Shares" means the 2,000,000 shares of Common Stock purchased by
Platinum Propane Holding, L.L.C. pursuant to that certain Securities Purchase
Agreement dated March 1, 1997.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Person" means a natural person, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or any
<PAGE>
department, agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its equity
securities to the public pursuant to an effective registration statement under
the Securities Act or any comparable statement under any comparable federal
statute then in effect.
"Registrable Shares" means at any tune (i) any shares of Common Stock then
outstanding which were issued upon conversion of the Securities; (ii) any shares
of Common Stock then issuable upon conversion or exercise of the then
outstanding Securities; (iii) the Common Shares; (iv) any shares of Common Stock
then outstanding which were issued as, or were issued directly or indirectly
upon the conversion or exercise of other securities issued as, a dividend or
other distribution with respect or in replacement of any shares referred to in
(i), (ii) or (iii); and (v) any shares of Common Stock then issuable directly or
indirectly upon the conversion or exercise of other securities which were issued
as a dividend or other distribution with respect to or in replacement of any
shares referred to in (i), (ii) or (iii); provided, however, that Registrable
Shares shall not include any shares which have been registered pursuant to the
Securities Act or which have been sold to the public pursuant to Rule 144 of the
Commission under the Securities Act. For purposes of this Agreement, a person
will be deemed to be a holder of Registrable Shares whenever such person has the
then-existing right to acquire such Registrable Shares (by conversion or
otherwise), whether or not such acquisition actually has been effected.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities" means the Series A Preferred Shares, Common Shares and the
Warrants, collectively.
"Warrants" means the Warrants to purchase (i) 4,214,185 shares of Common
Stock at $0.0347037 per share, issued to certain investors on December 1, 1994,
(ii) 115,264 shares of Common Stock at $0.347037 per share, issued to Peter
Huizenga ("Huizenga"), Andrew Filipowski ("Filipowski"), Craig Duchossois
("Duchossois") and Robert F. Steele ("Steele") in connection with a bridge loan
in May 1995, (iii) 2,593,385 shares of Common Stock at $0.347037 per share
issued to Huizenga, Filipowski, Duchossois, Steele, and Billy D. Prim ("Prim")
in connection with their guarantee of loan to the Corporation in June 1995,
(iv) 86,446 shares of Common Stock at $0.347037 per share issued to Platinum
Venture Partners I, L.P. in connection with a loan to the Corporation in May
1995, (v) 259,338 shares of Common Stock at $0.347037 per share issued to
Platinum Venture Partners I, L.P. in connection with the extension of the
maturity on its loan to the Corporation on August 14, 1995, (vi) 6,612,926
shares of Common Stock at $0.347037 per share to be issued to the purchasers of
the 10.5% Senior Discount Notes and Warrants pursuant to that certain Unit
Purchase Agreement dated November 4, 1995 (the "Unit Purchase Agreement"), (vii)
960,000 shares of Common Stock at $0.347037 per share issued to Huizenga,
Duchossois and Peer Pedersen or their assigns pursuant to the Unit Purchase
Agreement, (viii) 1,502,745 shares of Common Stock at $0.50 per share issued to
Lunn/Forseyth L.P. upon the extension of lease financing to the Corporation, and
(ix) 1,500,000
2
<PAGE>
shares of Common Stock at $0.50 per share issued to Platinum Propane Holding,
L.L.C. pursuant to that certain Securities Purchase Agreement dated March 1,
1997.
2. Demand Registration.
-------------------
2.1 Requests for Registration. Subject to the terms of this
-------------------------
Agreement, the holders of at least 51% of the then outstanding Registrable
Shares may, at any time request registration under the Securities Act of
all or part of their Registrable Shares on Form S-1 or any similar long-
form registration ("Long-Form Registrations") or, if available, on Form S-2
or S-3 or any similar short-form registration ("Short-Form Registrations").
Within 10 days after receipt of any request pursuant to this Section 2.1,
the Corporation will give written notice of such request to all other
holders of Registrable Shares and will include in such registration all
Registrable Shares with respect to which the Corporation has received
written requests for inclusion within 15 days after delivery of the
Corporation's notice. All registrations requested pursuant to this Section
2.1 are referred to herein as "Demand Registrations."
2.2 Long-Form Registrations. The holders of the Registrable Shares
-----------------------
will be entitled to request two Long-Form Registrations in which the
Corporation will pay all Registration Expenses (as defined in Section 6
below). A registration will not count as one of the permitted Long-Form
Registrations until it has become effective (unless such Long-Form
Registration has not become effective due solely to the fault of the
holders requesting such registration), and the second or any subsequent
Long-Form Registration will not count as one of the permitted Long-Form
Registrations unless the holders of the Registrable Shares are able to
register and sell at least 90% of the Registrable Shares requested to be
included in such registration; provided however, that in any event the
Corporation will pay all Registration Expenses in connection with any
registration initiated as a Long-Form Registration.
2.3 Short-Form Registrations. In addition to the Long-Form
------------------------
Registrations provided pursuant to Section 2.2 above, the holders of
Registrable Shares will be entitled to request an unlimited number of
Short-Form Registrations in which the Company will pay all Registration
Expenses. Demand Registrations will be Short-Form Registrations whenever
the Corporation is permitted to use any applicable short form. Once the
Corporation has become subject to the reporting requirements of the
Exchange Act, the Corporation will use its best efforts to make Short-Form
Registrations available for the sale of Registrable Shares.
2.4 Priority. The Corporation will not include in any Demand
--------
Registration any securities which are not Registrable Shares without the
written consent of the holders of at least 51% of the Registrable Shares
included in such Demand Registration. If other securities are permitted to
be included in a Demand Registration which is an underwritten offering and
the managing underwriters advise the Corporation in writing that in their
opinion the number of Registrable Shares and other securities requested to
be included
3
<PAGE>
exceeds the number of Registrable Shares and other securities which can be
sold in such offering, the Corporation will include in such registration,
first, the Registrable Shares requested to be included in such Demand
Registration, pro rata among the holders of such securities on the basis of
--------
the number of Registrable Shares which are owned by such holders, and
second, other securities to be included in such Demand Registration.
2.5 Restrictions. The Corporation will not be obligated to effect
------------
any Long Form Registration within nine months after the effective date of a
previous Long-Form Registration. The Corporation may postpone for up to
three months the filing or the effectiveness of a registration statement
for a Demand Registration if the Corporation reasonably believes that such
Demand Registration would have an adverse effect on any proposal or plan by
the Corporation or any of its subsidiaries to engage in any acquisition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other significant transaction.
2.6 Selection of Underwriters. The holders of at least 51% of the
-------------------------
Registrable Shares included in any Demand Registration shall have the right
to select the investment banker(s) and manager(s) to administer the
offering, subject to the Corporation's approval which will not be
unreasonably withheld.
2.7 Preemption. The Corporation will have the right to preempt any
----------
Long Form Registration with a primary registration by delivering written
notice of such intention to the holders of Registrable Shares who have
requested such Long-Form Registration within fifteen (15) days after the
Corporation has received a request for such registration. In the ensuing
primary registration, the holders of Registrable Shares will have such
piggyback registration rights as are set forth in Section 3 hereof. Upon
the Corporation's preemption of a requested Long-Form Registration, such
requested registration will not count as one of the permitted Long-Form
Registrations.
3. Piggyback Registration.
----------------------
3.1 Right to Piggyback. Whenever the Corporation proposes to
------------------
register any of its securities under the Securities Act (other than
pursuant to a Demand Registration hereunder) and the registration form to
be used may be used for the registration of any Registrable Shares (a
"Piggyback Registration"), the Corporation will give prompt written notice
to all holders of the Registrable Shares of its intention to effect such a
registration and will include in such registration all Registrable Shares
(in accordance with the priorities set forth in Sections 3.2 and 3.3 below)
with respect to which the Corporation has received written requests for
inclusion within 15 days after the delivery of the Corporation's notice.
3.2 Priority on Primary Registrations. If a Piggyback Registration
---------------------------------
is an underwritten primary registration on behalf of the Corporation and
the managing underwriters advise the Corporation in writing that in their
opinion the number of securities
4
<PAGE>
requested to be included in such registration exceeds the number which can
be sold in such offering, the Corporation will include in such registration
first, the securities that the Corporation proposes to sell, second, the
Registrable Shares requested to be included in such registration, pro rata
--------
among the holders of such Registrable Shares on the basis of the number of
shares which are owned by such holders, and third, other securities
requested to be included in such registration.
3.3 Priority on Secondary Registrations. If a Piggyback Registration
-----------------------------------
is an underwritten secondary registration on behalf of holders of the
Corporation's securities and the managing underwriters advise the
Corporation in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can
be sold in such offering, the Corporation will include in such registration
first, the securities requested to be included therein by the holders
requesting such registration and the Registrable Shares requested to be
included in such registration, pro rata among the holders of such
--------
securities on the basis of the number of shares of Common Stock or
Registrable Shares which are owned by such holders, and second, other
securities requested to be included in such registration.
3.4 Other Registrations. If the Corporation has previously filed a
-------------------
registration statement with respect to Registrable Shares pursuant to
Section 2 or pursuant to this Section 3, and if such previous registration
has not been withdrawn or abandoned, the Corporation will not file or cause
to be effected any other registration of any of its equity securities or
securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Form S-8 or any successor
form), whether on its own behalf or at the request of any holder or holders
of such securities, until a period of at least 180 days has elapsed from
the effective date of such previous registration.
3.5 Selection of Underwriters. In connection with any Piggyback
-------------------------
Registration, the holders of at least 51% of the Registrable Shares
requested to be registered shall have the right to select the managing
underwriters to administer any offering of the Corporation's securities in
which the Corporation does not participate, and the Corporation will have
such right in any offering in which it participates, provided that in
either case such managing underwriters shall be qualified nationally
recognized underwriters.
4. Holdback Agreements.
-------------------
4.1 Holders' Agreements. Each holder of Registrable Shares agrees
-------------------
not to effect any public sale or distribution of equity securities of the
Corporation, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven (7) days prior to, and
during the 120 days following, the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration in which
Registrable Shares are included (except as part of such underwritten
registration), unless the underwriters managing the registered public
offering otherwise agree.
5
<PAGE>
4.2 Corporation's Agreements. The Corporation agrees (i) not to
------------------------
effect any public sale or distribution of its equity securities, or any
securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to, and during the 120 days
following, the effective date of any underwritten Demand Registration or
any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or any
successor form), unless the underwriters managing the registered public
offering otherwise agree and (ii) to cause each holder of at least 1% (on a
fully diluted basis) of its equity securities, or any securities
convertible into or exchangeable or exercisable for such securities to
agree not to effect any public sale or distribution of any such securities
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered
public offering otherwise agree.
5. Registration Procedures. Whenever the holders of Registrable Shares
-----------------------
have requested that any Registrable Shares be registered pursuant to this
Agreement, the Corporation will use its best efforts to effect the registration
and sale of such Registrable Shares in accordance with the intended method of
disposition thereof and, pursuant thereto, the Corporation will as expeditiously
as possible:
(a) prepare and file with the Commission a registration statement with
respect to such Registrable Shares and use its best efforts to cause such
registration statement to become effective (provided that before filing a
registration statement or prospectus, or any amendments or supplements
thereto, the Corporation will furnish copies of all such documents proposed
to be filed to the counsel or counsels for the sellers of the Registrable
Shares covered by such registration statement);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus(es) used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than nine months and comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period
in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Shares such number of copies
of such registration statement, each amendment and supplement thereto, the
prospectus(es) included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may
reasonably request in order to facilitate the disposition of the
Registrable Shares owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Shares under such other securities or blue sky laws of such jurisdictions
as any seller reasonably requests and do any and all other acts and things
which may be reasonably necessary or advisable to
6
<PAGE>
enable such seller to consummate the disposition in such jurisdictions of
the Registrable Shares owned by such seller (provided that the Corporation
will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this subparagraph, (ii) subject itself to taxation in any such jurisdiction
or (iii) consent to general service of process in any such jurisdiction);
(e) notify each seller of such Registrable Shares, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Corporation will prepare a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such Registrable
Shares, such prospectus will not contain any untrue statement of a material
fact or omit to state any fact necessary to make the statements therein not
misleading;
(f) cause all such Registrable Shares to be listed on each securities
exchange on which similar securities issued by the Corporation are then
listed;
(g) provide a transfer agent and registrar for all such Registrable
Shares not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
holders of a majority of the Registrable Shares being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Shares (including, without limitation,
effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of Registrable Shares,
any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Corporation,
and cause the Corporation's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
(j) advise each seller of such Registrable Shares, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding
for such purpose and promptly use all reasonable efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order
should be issued;
(k) at least 48 hours prior to the filing of any registration
statement or prospectus,
7
<PAGE>
or any amendment or supplement to such registration statement or
prospectus, furnish a copy thereof to each seller of such Registrable
Shares and refrain from filing any such registration statement, prospectus,
amendment or supplement to which counsel selected by the holders of a
majority of the Registrable Shares being registered shall have reasonably
objected on the grounds that such document does not comply in all material
respects with the requirements of the Securities Act or the rules and
regulations thereunder, unless, in the case of an amendment or supplement,
in the opinion of counsel for the Corporation the filing of such amendment
or supplement is reasonably necessary to protect the Corporation from any
liabilities under any applicable federal or state law and such filing will
not violate applicable laws; and
(l) at the request of any seller of such Registrable Shares in
connection with an underwritten offering, furnish on the date or dates
provided for in the underwriting agreement: (i) an opinion of counsel,
addressed to the underwriters and the sellers of Registrable Shares,
covering such matters as such underwriters and sellers may reasonably
request, including such matters as are customarily furnished in connection
with an underwritten offering; and (ii) a letter or letters from the
independent certified public accountants of the Corporation addressed to
the underwriters and the sellers of Registrable Shares, covering such
matters as such underwriters and sellers may reasonably request, in which
letter(s) such accountants shall state, without limiting the generality of
the foregoing, that they are independent certified public accountants
within the meaning of the Securities Act and that in their opinion the
financial statements and other financial data of the Corporation included
in the registration statement, the prospectus(es), or any amendment or
supplement thereto, comply in all material respects with the applicable
accounting requirements of the Securities Act.
6. Registration Expenses.
---------------------
6.1 Corporation's Expenses. All expenses incident to the
----------------------
Corporation's performance of or compliance with this Agreement, including
without limitation all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, printing expenses, messenger
and delivery expenses, and fees and disbursements of counsel for the
Corporation and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other persons retained by the
Corporation (all such expenses being herein called "Registration
Expenses"), will be borne by the Corporation.
6.2 Holder's Expenses. Notwithstanding anything to the contrary
-----------------
contained herein, each holder of Registrable Shares will pay all attorney
fees and disbursements for counsel they retain in connection with the
registration of Registrable Shares, except that the Corporation will
reimburse the holders of Registrable Shares for the reasonable fees and
disbursements of one counsel chosen by the holders of at least 51% of such
Registrable Shares in connection with a Demand Registration.
8
<PAGE>
7. Indemnification.
---------------
7.1 By the Corporation. The Corporation agrees to indemnify, to the
------------------
extent permitted by law, each holder of Registrable Shares, its officers
and directors and each person who controls such holder (within the meaning
of the Securities Act) against all losses, claims, damages, liabilities and
expenses (including without limitation, attorney's fees) caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus, or any
amendment thereof or supplement thereto, or any omission or alleged
omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as the same are
caused by or contained in any information furnished in writing to the
Corporation by such holder expressly for use therein or by such holder's
failure to deliver a copy of the registration statement or prospectus or
any amendments or supplements thereto after the Corporation has furnished
such holder with a sufficient number of copies of the same. In connection
with an underwritten offering, the Corporation will indemnify such
underwriters, their officers and directors and each person who controls
such underwriters (within the meaning of the Securities Act) to the same
extent as provided above with respect to the indemnification of the holders
of Registrable Shares. The payments required by this Section 7.1 will be
made periodically during the course of the investigation or defense, as and
when bills are received or expenses incurred.
7.2 By Each Holder. In connection with any registration statement in
--------------
which a holder of Registrable Shares is participating, each such holder
will furnish to the Corporation in writing such information and affidavits
as the Corporation reasonably requests for use in connection with any such
registration statement or prospectus and, to the extent permitted by law,
will indemnify the Corporation, its directors and officers and each person
who controls the Corporation (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities and expenses resulting
from any untrue or alleged untrue statement of material fact contained in
the registration statement, prospectus or preliminary prospectus, or any
amendment thereof or supplement thereto, or any omission or alleged
omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading, but only to the extent that
such untrue statement or omission is contained in any information or
affidavit so furnished in writing by such holder; provided that the
obligation to indemnify will be several, not joint and several, among such
holders of Registrable Shares and the liability of each such holder of
Registrable' Shares will be in proportion to and limited to the net amount
received by such holder from the sale of Registrable Shares pursuant to
such registration statement.
7.3 Procedure. Any person entitled to indemnification hereunder will
---------
(i) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with
counsel
9
<PAGE>
reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party will not be subject to any liability for
any settlement made by the indemnified party without its consent (but such
consent will not be unreasonably withheld). An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not
be obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim.
7.4 Survival. The indemnification provided for under this Agreement
--------
will remain in full force and effect regardless of any investigation made
by or on behalf of the indemnified party or any officer, director or
controlling person of such indemnified party and will survive the transfer
of securities. The Corporation also agrees to make such provisions as are
reasonably requested by any indemnified party for contribution to such
party in the event the Corporation's indemnification is unavailable for any
reason.
8. Compliance with Rule 144. In the event that the Corporation (a)
------------------------
registers a class of securities under Section 12 of the Exchange Act or (b)
commences to file reports under Section 13 or 15(d) of the Exchange Act, then at
the request of any holder who proposes to sell securities in compliance with
Rule 144 of the Commission, the Corporation will (i) forthwith furnish to such
holder a written statement of compliance with the filing requirements of the
Commission as set forth in Rule 144, as such rules may be amended from time to
time and (ii) make available to the public and such holders such information as
will enable the holders to make sales pursuant to Rule 144.
9. Participation in Underwritten Registrations. No person may
-------------------------------------------
participate in any registration hereunder which is underwritten unless such
person (a) agrees to sell its securities on the basis provided in any
underwriting arrangements approved by such person or persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, custody agreements, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
10. Miscellaneous.
-------------
10.1 No Inconsistent Agreements. The Corporation will not hereafter
--------------------------
enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the holders of Registrable Shares
in this Agreement.
10.2 Adjustments Affecting Registrable Shares. The Corporation will
----------------------------------------
not take any action, or permit any change to occur, with respect to its
securities which would adversely affect the ability of the holders of
Registrable Shares to include such Registrable Shares in a registration
undertaken pursuant to this Agreement or which Shares in any such would
adversely affect the marketability of such Registrable registration,
including, without limitation, effecting a stock split or combination of
shares.
10
<PAGE>
10.3 Amendments and Other Registration Rights. Except as provided
----------------------------------------
in this Agreement, without the prior written consent of holders of at least
51% of the Registerable Shares, (a) this Agreement shall not be amended and
(b) the Corporation will not hereafter grant to any person or persons the
right to request the Corporation to register any equity securities of the
Corporation or any securities convertible or exchangeable into or
exercisable for such securities. The Corporation will not include in any
demand registration any securities which are not Registerable Shares (for
the purposes of Section 2) unless and until all Registerable Shares
requested to be registered have first been so included.
10.4 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and, agreements contained in this Agreement by or on
behalf of any of the parties hereto will bind and inure to the benefit of
the respective successors and assigns of the parties hereto, whether so
expressed or not. In addition, and whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit
of the Purchasers or holders of Registrable Shares are also for the benefit
of, and enforceable by, any subsequent holders of such Registrable Shares.
10.5 Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
10.6 Descriptive Headings. The descriptive headings of this Agreement
--------------------
are inserted for convenience of reference only and do not constitute a part
of and shall not be utilized in interpreting this Agreement.
10.7 Notices. Any notices required or permitted to be sent hereunder
-------
shall be delivered personally or mailed, certified mail, return receipt
requested, or delivered by overnight courier service to the following
addresses, or such other address as any party hereto designates by written
notice to the Corporation, and shall be deemed to have been given upon
delivery, if delivered personally, three days after mailing, if mailed, or
one business day after delivery to the courier, if delivered by overnight
courier service:
If to the Corporation, to:
Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, North Carolina 27104
Attention: Billy Prim, Chief Executive Officer
11
<PAGE>
with a copy to:
House Law Firm
P.O. Drawer 26015
Winston-Salem, North Carolina 27114-6015
Attention: Don R. House, Esq.
If to Purchasers, to:
Platinum Venture Partners I, L.P.
1815 S. Meyers Road
Oakbrook Terrace, Illinois 60181
Attention: Michael A. Santer
with a copy to:
Katten Muchin & Zavis
525 W. Monroe Street, Suite 1600
Chicago, Illinois 60661
Attention: Matthew S. Brown, Esq.
10.8 Governing Law. All questions concerning the construction,
-------------
validity and interpretation of this Agreement, and the performance of the
obligations imposed by this Agreement, shall be governed by the laws of the
State of Delaware applicable to contracts made and wholly to be performed
in that state.
10.9 Final Agreement. This Agreement, together with the Securities
---------------
Purchase Agreement and all other agreements entered into by the parties
hereto pursuant to the Securities Purchase Agreement, constitutes the
complete and final agreement of the parties concerning the matters referred
to herein, and supersedes all prior agreements and understandings.
10.10 Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts, each of which when so executed and delivered shall
be deemed an original, and such counterparts together shall constitute one
instrument.
10.11 No Strict Construction. The language used in this Agreement will
----------------------
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be used against any
party.
12
<PAGE>
The parties hereto have executed this Amended and Restated Registration
Rights Agreement on the date first set forth above.
BLUE RHINO CORPORATION
By: /s/ Billy Prim
------------------------------------
Billy Prim, Chief Executive Officer
PLATINUM PROPANE HOLDING, L.L.C.
By: /s/ Daryl F. McClendon
------------------------------------
Daryl F. McClendon, Manager
FORSEYTH TECHNOLOGY/LUNN PARTNERS VENTURE LEASING,
L.P.
By:___________________________
Name:_________________________
Title:________________________
Billy D. Prim, not personally but as attorney in
fact for the persons listed on Exhibit A hereto
pursuant to that certain power of attorney granted
under the Consent, Agreement and Waiver executed
by each of them.
/s/ Billy D. Primm
---------------------------------------
Billy D. Prim, Attorney in Fact
13
<PAGE>
EXHIBIT 10.14
Blue Rhino Corporation
STOCK INCENTIVE PLAN
Effective Date: November 1, 1994
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
ESTABLISHMENT.................................................... 1
ARTICLE II
DEFINITIONS...................................................... 1
ARTICLE III
ADMINISTRATION................................................... 5
3.1 Committee Structure and Authority........................... 5
ARTICLE IV
STOCK SUBJECT TO PLAN............................................ 7
4.1 Number of Shares............................................ 7
4.2 Release of Shares........................................... 8
4.4 Stockholder Rights.......................................... 8
4.5 Best Efforts To Register.................................... 8
ARTICLE V
ELIGIBILITY...................................................... 9
5.1 Eligibility................................................. 9
ARTICLE VI
STOCK OPTIONS.................................................... 9
6.1 General..................................................... 10
6.2 Grant and Exercise.......................................... 10
6.3 Terms and Conditions........................................ 10
6.4 Termination by Reason of Death.............................. 12
6.5 Termination by Reason of Disability......................... 13
6.6 Other Termination........................................... 13
6.7 Cashing Out of Option....................................... 13
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII
STOCK APPRECIATION RIGHTS........................................ 13
7.1 General..................................................... 13
7.2 Grant....................................................... 14
7.3 Terms and Conditions........................................ 14
ARTICLE VIII
RESTRICTED STOCK................................................. 16
8.1 General..................................................... 16
8.2 Awards and Certificates..................................... 16
8.3 Terms and Conditions........................................ 16
ARTICLE IX
DEFERRED STOCK................................................... 17
9.1 General..................................................... 17
9.2 Terms and Conditions........................................ 18
ARTICLE X
PROVISIONS APPLICABLE TO STOCK
ACQUIRED UNDER THE PLAN.......................................... 19
10.1 Transfer of Shares......................................... 19
10.2 Limited Transfer During Offering........................... 19
10.3 Committee Discretion....................................... 19
10.4 No Company Obligation...................................... 20
ARTICLE XI
CHANGE IN CONTROL PROVISIONS..................................... 20
11.1 Impact of Event............................................ 20
11.2 Definition of Change in Control............................ 21
11.3 Change in Control Price.................................... 21
ARTICLE XII
MISCELLANEOUS.................................................... 22
12.1 Amendments and Termination................................. 22
12.2 Unfunded Status of Plan.................................... 22
12.3 General Provisions......................................... 22
12.4 Mitigation of Excise Tax................................... 24
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
12.5 Rights with Respect to Continuance of
Employment................................................. 24
12.6 Awards in Substitution for Awards Granted
by Other Corporations...................................... 25
12.7 Procedure for Adoption..................................... 25
12.8 Procedure for Withdrawal................................... 25
12.9 Delay...................................................... 25
12.10 Headings................................................... 25
12.11 Severability............................................... 25
12.12 Successors and Assigns..................................... 26
12.13 Entire Agreement........................................... 26
</TABLE>
iii
<PAGE>
Blue Rhino Corporation
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 promote the overall financial objectives of the Company and its stockholders
by motivating those persons selected to participate in the Plan to achieve long-
term growth in stockholder equity in the Company and by retaining the
association of those individuals who are instrumental in achieving this growth.
The Plan is adopted effective as of November 11 1994.
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 "AWARD AGREEMENT" means, individually or collectively, any
agreement entered into pursuant to the Plan pursuant to which an Award is
granted to a Participant.
"AWARD" means a Stock Option, Stock Appreciation Right, Restricted Stock or
Deferred Stock.
"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 of Employment 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
<PAGE>
means, unless otherwise defined in the Agreement (or Award Agreement) with
respect to the corresponding Award, (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.
"CHANGE IN CONTROL" and "CHANGE IN CONTROL PRICE" have the meanings set
forth in Sections 11.2 and 11.3, respectively.
"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 person or persons appointed by the Board of Directors
to administer the Plan, as further described in the Plan.
"COMMON STOCK" means the shares of the Class A voting Common Stock, $0.001
par value, 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.
"COMPANY" means Blue Rhino Corporation, a North Carolina 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.
"DEFERRED STOCK" means an award made pursuant to Article IX.
"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
- 2 -
<PAGE>
construed to be an admission of disability for any other purpose.
"DISINTERESTED PERSON" has the meaning set forth in Rule 16b-3(d)(3), or
any successor definition adopted by the Commission, provided the person is also
an it outside director" under Section 162(m) of the Code.
"EFFECTIVE DATE" means November 1, 1994.
"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 an Award is granted pursuant
to the Plan.
"INCENTIVE STOCK OPTION" means any Stock Option intended to be and
designated as an "INCENTIVE STOCK OPTION" within the meaning of Section 422 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 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.
- 3 -
<PAGE>
"PARTICIPANT" means a person who satisfies the eligibility conditions of
Article V and to whom an Award has been granted by the Committee under the Plan,
and if a Representative is appointed for a Participant or a former spouse
becomes a Representative, 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.
Notwithstanding the foregoing, the term"TERMINATION OF EMPLOYMENT" means the
Termination of Employment of the Participant.
"PLAN" means the Blue Rhino Corporation 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; (c) the person or entity which is the
beneficiary of the Participant upon or following the Participant's death; or (d)
any person to whom an Option has been permissibly transferred; provided that
only one of the foregoing will be the Representative at any point in time as
determined under applicable law and recognized by the Committee.
"RESTRICTED STOCK" means an award under Article VII.
"RETIREMENT" means the Participant's Termination of Employment 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 APPRECIATION RIGHT" means a right granted under Article VII.
"STOCK OPTION" or "OPTION" means an option granted under Article VI.
"TERMINATION OF EMPLOYMENT" means the occurrence of any act or event,
whether pursuant to an employment agreement or otherwise, that actually or
effectively causes or results
- 4 -
<PAGE>
in the person's ceasing, for whatever reason, to be an officer, director,
employee, consultant or advisor of the Company or of any Affiliate, or to be an
officer, director, employee, consultant or advisor of any entity that provides
services to the Company or an Affiliate, including, without limitation, death,
Disability, dismissal, 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 Agreement will establish what act or event will
constitute a Termination of Employment for purposes of the Plan. A Termination
of Employment 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.
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 Disinterested Persons (and no other
persons) as is required for application of Rule 16b-3. In the absence of
appointment of the Committee the entire Board of Directors will constitute the
Committee. A majority of the Committee will constitute a quorum at any meeting
thereof (thereof (including telephone conference) and the acts of a majority of
the members present, or acts approved in writing by a majority of the 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 Awards may be granted from time
to time;
- 5 -
<PAGE>
(b) to determine whether and to what extent Stock Options, Stock
Appreciation Rights, Restricted Stock and Deferred Stock or any combination
thereof are to be granted hereunder;
(c) to determine the number of shares of Common Stock to be covered
by each Award granted hereunder;
(d) to determine the terms and conditions of any Award 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 Award and the shares of Common Stock relating thereto);
(e) to adjust the terms and conditions, at any time or from time to
time, of any Award, subject to the limitations of Section 12.1;
(f) to determine to what extent and under what circumstances Common
Stock and other amounts payable with respect to an Award will be deferred;
(g) to determine under what circumstances an Award may be settled in
cash or Common Stock;
(h) to provide for the forms of Agreement to be utilized in
connection with the Plan;
(i) to determine whether a Participant has a Disability or a
Retirement;
(j) to determine what securities law requirements are applicable to
the Plan, Awards, and the issuance of shares of Common Stock and to require of a
Participant that appropriate action be taken with respect to such requirements;
(k) to cancel, with the consent of the Participant or as otherwise
provided in the Plan or an Agreement, outstanding Awards;
(l) to require as a condition of the exercise of an Award 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;
(m) to determine whether and with what effect a Participant has
incurred a Termination of Employment;
(n) to determine whether the ' Company or any other person has a
right or
- 6 -
<PAGE>
obligation to purchase Common Stock from a Participant and, if so, the terms and
conditions on which such Common Stock is to be purchased;
(o) to determine the restrictions or limitations on the transfer of
Common Stock;
(p) to determine whether an Award is to be adjusted, modified or
purchased, or is to become fully exercisable, under the Plan or the terms of an
Agreement;
(q) to determine the permissible methods of Award exercise and
payment, including cashless exercise arrangements;
(r) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan; and
(s) 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 Award issued under the Plan (and any Agreement) and to otherwise
supervise the administration of the Plan. The Committee's policies and
procedures may differ with respect to Awards 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 an Award, may be made at the time of the grant of the Award or,
unless in contravention of any express term of the Plan or an 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 Awards under the Plan will be 2,665,000 share 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.
- 7 -
<PAGE>
4.2 Release of Shares. Subject to Section 7.3(f), if any shares of Common
-----------------
Stock that have been optioned cease to be subject to an Award, if any shares of
Common Stock that are subject to any Award are forfeited or if any Award
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 Awards under the Plan.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise
----------------------
of an Award 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 Award 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 an
Award, 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
an Award 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 an Award until, after proper exercise of
the Award 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 Award 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
Agreement.
4.5 Best Efforts To Register. The Company will register under the
------------------------
Securities Act the Common Stock delivered or deliverable pursuant to Awards on
Commission Form S-8 if 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 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
- 8 -
<PAGE>
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 Award.
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, Company share
offering 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 Awards under the Plan, the
number of shares of Common Stock covered by outstanding Awards, the exercise
price per share of outstanding Awards, and any other characteristics or terms of
the Awards 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.
ARTICLE V
---------
ELIGIBILITY
-----------
5.1 Eligibility. Except as herein provided, the persons who will be
-----------
eligible to participate in the Plan and be granted Awards will those persons who
are officers, directors, 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. Of those persons described in the preceding sentence, the
Committee may, from time to time, select persons to be, granted Awards and
determine the terms and conditions with respect thereto. In making any such
selection and in determining the form of the Award, 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
----------
STOCK OPTIONS
-------------
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<PAGE>
6.1 General. The Committee will have authority to grant Options under the
-------
Plan at any time or from time to time. Stock Options may be granted alone or in
addition to other Awards and may be either Incentive Stock Options or 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 Agreement (the terms and
provisions of which may differ from other 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 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 Agreement will become
effective upon execution by the Participant. Only a person who is a common-law
employee of the Company, any parent corporation of the Company or a subsidiary
of the Company (as such terms are defined in Section 424 of the Code) on the
date of grant will be eligible to be granted an Option which is intended to be
and is an Incentive Stock Option. To the extent that any Stock Option is not
designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it will constitute a Non-Qualified Stock
Option. Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to Incentive Stock Options will be interpreted, amended or
altered, nor will any discretion or authority granted under the Plan be
exercised, so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any Incentive
Stock Option under such Section 422.
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 date the Stock Option is granted. In the case
of an Incentive Stock Option granted to an individual who owns more than
10% of the combined voting power of all classes of stock of the Company, a
corporation which is a parent corporation of the Company or any subsidiary
of the Company (each as defined in Section 424 of the Code), the Option
Period will not exceed five (5) years from the date of grant. No Option
which is intended to be an Incentive Stock Option will be granted more than
10 years from the date the Plan is adopted by the Company or the date the
Plan is approved by the stockholders of the Company, whichever is earlier.
(b) Option Price. The Option Price per share of the Common Stock
------------
purchasable under an Option will be determined by the Committee; provided,
however, that the option Price per share for any Option intended to qualify
as an Incentive Stock Option will be not less than the Fair Market Value
per share on the date the Option is
- 10 -
<PAGE>
granted. If such Option is intended to qualify as an Incentive Stock Option
and is granted to an individual who owns or who is deemed to own stock
possessing more than 10% of the combined voting power of all classes of
stock of the Company, a corporation which is a parent corporation of the
Company or any subsidiary of the Company (each as defined in Section 424 of
the Code), the Option Price per share will not be less than 110% of such
Fair Market Value per share.
(c) Exercisability. Subject to Section 11.1, Stock Options will 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 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 the execution and delivery of a note or
other evidence of indebtedness (and any security agreement thereunder)
satisfactory to the Committee and permitted in accordance with Section
6.3(e); (iii) 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;
(iv) 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 (v) by any combination of the foregoing. If payment of the
Option Price of a Non-Qualified Stock Option is made in whole or in part in
the form of Restricted Stock or Deferred Stock, the number of shares of
Common Stock to be received upon such exercise that is equal to the number
of shares of Restricted Stock or Deferred Stock used for payment of the
Option Price will be subject to the same forfeiture restrictions or
deferral limitations to which such Restricted Stock or Deferred Stock was
subject, unless otherwise determined by the Committee. In the case of an
Incentive Stock Option, the right to make a payment in the form of already
owned shares of Common Stock of the same class as the Common Stock subject
to the Stock Option may be authorized only at the time the Stock Option is
granted. No shares of Common Stock will be issued until full payment
therefor has been made. Subject to any forfeiture restrictions or deferral
limitations that may apply if a Stock Option is exercised using Restricted
Stock or
- 11 -
<PAGE>
Deferred Stock, a Participant will have all of the rights of a stockholder
of the Company holding the class of Common Stock that is subject to such
Stock Option (including, if applicable, the right to vote the shares and
the right to receive dividends), when the Participant has given written
notice of exercise, has paid in full for such shares, and such shares have
been recorded on the Company's official stockholder records as having been
issued or transferred.
(e) Company Loan or Guarantee. Upon the exercise of any Option and
-------------------------
subject to the pertinent Agreement and the discretion of the Committee, the
Company may at the request of the Participant:
(i) lend to the Participant, with recourse, an amount equal to
such portion of the Option Price as the Committee may determine; or
(ii) guarantee a loan obtained by the Participant from a third-
party for the purpose of tendering the Option Price.
The terms and conditions of any loan or guarantee, including the term,
interest rate, and any security interest thereunder, will be determined by
the Committee, except that no extension of credit or guarantee will
obligate the Company for an amount to exceed the lesser of the aggregate
Fair Market Value per share of the Common Stock on the date of exercise,
less the par value of the shares of Common Stock to be purchased upon the
exercise of the Award, or the amount permitted under applicable laws or the
regulations and rules of the Federal Reserve Board and any other
governmental agency having jurisdiction.
(f) Non-transferability of Options. Except as provided herein or in
------------------------------
an Agreement, no Stock Option or interest therein will be transferable by
the Participant other than by will or by the laws of descent and
distribution, and all Stock Options will be exercisable during the
Participant's lifetime only by the Participant. If the Committee adopts
Securities Exchange Act Release 34-28869 of the Securities Exchange
Commission the Committee may permit an Award to be transferred pursuant to
a domestic relations order which would be a "qualified domestic relations
order" as defined in Section 414 of the Code if such section applied to the
Award, but only to the extent consistent with an Award's intended status as
an Incentive Stock Option.
6.4 Termination by Reason of Death. Unless otherwise provided in an
------------------------------
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment 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.
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<PAGE>
6.5 Termination by Reason of Disability. Unless otherwise provided in an
-----------------------------------
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment 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 of
Employment or until the expiration of the Option Period, whichever period is
shorter, and the Participant's death at any time following such Termination of
Employment due to Disability will not affect the foregoing. In the event of
Termination of Employment by reason of Disability, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
6.6 Other Termination. Unless otherwise provided in an Agreement or
-----------------
determined by the Committee, if a Participant incurs a Termination of Employment
due to Retirement, or the Termination of Employment 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
the 90-day period commencing with the date of such Termination of Employment or
until the expiration of the Option Period. If the Participant incurs a
Termination of Employment 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 of Employment otherwise provided herein will not extend the time
permitted to exercise an Option.
6.7 Cashing Out of Option. Unless otherwise provided in the 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. Cash outs relating to Options held by
Participants who are actually or potentially subject to Section 16(b) of the
Exchange Act will comply with the "window period" provisions of Rule 16b-3, to
the extent applicable, and, in the case of cash outs of Non-Qualified Stock
Options held by such Participants, the Committee may determine Fair Market Value
under the pricing rule set forth in Section 7.3(b).
ARTICLE VII
-----------
STOCK APPRECIATION RIGHTS
-------------------------
7.1 General. The Committee will have authority to grant Stock
-------
Appreciation Rights under the Plan at any time or from time to time. Subject to
the Participant's satisfaction in full of
- 13 -
<PAGE>
any conditions, restrictions or limitations imposed in accordance with the Plan
or an Agreement, a Stock Appreciation Right will entitle the Participant to
surrender to the Company the Stock Appreciation Right and to be paid therefor in
shares of the Common Stock, cash or a combination thereof as herein provided,
the amount described in Section 7.3(b).
7.2 Grant. Stock Appreciation Rights may be granted in conjunction with
-----
all or part of any Stock Option granted under the Plan, in which case the
exercise of the Stock Appreciation Right will require the cancellation of a
corresponding portion of the Stock Option, and the exercise of a Stock Option
will result in the cancellation of a corresponding portion of the Stock
Appreciation Right. In the case of a Non-Qualified Stock Option, such rights
may be granted either at or after the time of grant of such Stock Option. In
the case of an Incentive Stock Option, such rights may be granted only at the
time of grant of such Stock Option. A Stock Appreciation Right may also be
granted on a stand alone basis. The grant of a Stock Appreciation Right will
occur as of the date the Committee determines. Each Stock Appreciation Right
granted under this Plan will be evidenced by an Agreement, which will embody the
terms and conditions of such Stock Appreciation Right and which will be subject
to the terms and conditions set forth in the Plan.
7.3 Terms and Conditions. Stock Appreciation Rights will be subject to
--------------------
such terms and conditions as will be determined by the Committee, including the
following:
(a) Period and Exercise. The term of a Stock Appreciation Right will
-------------------
be established by the Committee. If granted in conjunction with a Stock
Option, the Stock Appreciation Right will have a term which is the same as
the Option Period and will be exercisable only at such time or times and to
the extent the related Stock Options would be exercisable in accordance
with the provisions of Article VI. A Stock Appreciation Right which is
granted on a stand alone basis will be for such period and will be
exercisable at such times and to the extent provided in an Agreement.
Stock Appreciation Rights will be exercised by the Participant's giving
written notice of exercise on a form provided by the Committee (if
available) to the Company specifying the portion of the Stock Appreciation
Right to be exercised.
(b) Amount. Upon the exercise of a Stock Appreciation Right granted
------
in conjunction with a Stock Option, a Participant will be, entitled to
receive an amount in cash, shares of Common Stock or both as determined by
the Committee or as otherwise permitted in an Agreement equal in value to
the excess of the Fair Market Value per share of Common Stock over the
Option Price per share of Common Stock specified in the related Agreement
multiplied by the number of shares in respect of which the Stock
Appreciation Right is exercised. In the case of a Stock Appreciation Right
granted on a stand alone basis, the Agreement will specify the value to be
used in lieu of the Option Price per share of Common Stock. The aggregate
Fair Market Value per share of the
- 14 -
<PAGE>
Common Stock will be determined as of the date of exercise of such Stock
Appreciation Right.
(c) Special Rules. In the case of Stock Appreciation Rights relating
-------------
to Stock Options held by Participants who are actually or potentially
subject to Section 16(b) of the Exchange Act:
(i) The Committee may require that such Stock Appreciation
Rights be exercised only in accordance with the applicable "window period"
provisions of Rule 16b-3;
(ii) The Committee may provide that the amount to be paid upon
exercise of such Stock Appreciation Rights (other than those relating to
Incentive Stock Options) during a Rule 16b-3 "window period" will be based
on the highest mean sales price of the Common Stock on the principal
exchange on which the Common Stock is traded, NASDAQ or other relevant
market for determining value on any day during such "window period"; and
(iii) No Stock Appreciation Right will be exercisable during the
first six months of its term, except that this limitation will not apply in
the event of death or Disability of the Participant prior to the expiration
of the six-month period.
(d) Non-transferability of Stock Appreciation Rights. Stock
------------------------------------------------
Appreciation Rights will be transferable only when and to the extent that a
Stock Option would be transferable under the Plan unless otherwise provided
in an Agreement.
(e) Termination. A Stock Appreciation Right will terminate at such
-----------
time as a Stock Option would terminate under the Plan, unless otherwise
provided in an Agreement.
(f) Effect on Shares Under the Plan. Upon the exercise of a Stock
-------------------------------
Appreciation Right, the Stock Option or part thereof to which such Stock
Appreciation Right is related will be deemed to have been exercised for the
purpose of the limitation set forth in Section 4.2 on the number of shares
of Common Stock to be issued under the Plan, but only to the extent of the
number of shares of Common Stock covered by the Stock Appreciation Right at
the time of exercise based on the value of the Stock Appreciation Right at
such time.
(g) Incentive Stock Option. A Stock Appreciation Right granted
----------------------
in tandem with an Incentive Stock Option will not be exercisable unless the Fair
Market Value of the Common Stock on the date of exercise exceeds the Option
Price. In no event will any
- 15 -
<PAGE>
amount paid pursuant to the Stock Appreciation Right exceed the difference
between the Fair Market Value on the date of exercise and the Option Price.
ARTICLE VII
-----------
RESTRICTED STOCK
----------------
8.1 General. The Committee will have authority to grant Restricted Stock
-------
under the Plan at any time or from time to time. Shares of Restricted Stock may
be awarded either alone or in addition to other Awards granted under the Plan.
The Committee will determine the persons to whom and the time or times at which
grants of Restricted Stock will be awarded, the number of shares of Restricted
Stock to be awarded to any Participant, the time or times within which such
Awards may be subject to forfeiture, and any other terms and conditions of the
Awards. Each Award will be confirmed by, and be subject to the terms of, an
Agreement. The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals by the Participant or by the Company
or an Affiliate (including a division or department of the Company or an
Affiliate) for or within which the Participant is primarily employed or upon
such other factors or criteria as the Committee may determine. The provisions
of Restricted Stock Awards need not be the same with respect to any Participant.
8.2 Awards and Certificates. Notwithstanding the limitations on issuance
-----------------------
of shares of Common Stock otherwise provided in the Plan, each Participant
receiving air Award of Restricted Stock will be issued a certificate in respect
of such shares of Restricted Stock. Such certificate will be registered in the
name of such Participant and will bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Award as determined by
the Committee. The Committee may require that the certificates evidencing such
shares be held in custody by the Company until the restrictions thereon have
lapsed and that, as a condition of any Award of Restricted Stock, the
Participant must have delivered a stock power, endorsed in blank, relating to
the Common Stock covered by such Award.
8.3 Terms and Conditions. Shares of Restricted Stock will be subject to
--------------------
the following terms and conditions:
(a) Limitations on Transferability. Subject to the provisions of the
------------------------------
Plan and the Agreement, during a period set by the Committee, commencing
with the date of such Award (the "Restriction Period"), the Participant
will not be permitted to sell, assign, transfer, pledge or otherwise
encumber any interest in shares of Restricted Stock.
(b) Rights. Except as provided in Section 8.3(a), the Participant
------
will have, with respect to the shares of Restricted Stock, all of the
rights of a stockholder of the Company holding the class of Common Stock
that is the subject of the Restricted Stock,
- 16 -
<PAGE>
including, if applicable, the right to vote the shares and the right to
receive any cash dividends. Unless otherwise determined by the Committee
and subject to the Plan, cash dividends on the class of Common Stock that
is the subject of the Restricted Stock will be automatically deferred and
reinvested in additional Restricted Stock, and dividends on the class of
Common Stock that is the subject of the Restricted Stock payable in Common
Stock will be paid in the form of Restricted Stock of the same class as the
Common Stock on which such dividend was paid.
(c) Acceleration. Based on service, performance by the Participant or
------------
by the Company or the Affiliate, including any division or department for
which the Participant is employed, or such other factors or criteria as the
Committee may determine, the Committee may provide for the lapse of
restrictions in installments and may accelerate the vesting of all or any
part of any Award and waive the restrictions for all or any part of such
Award.
(d) Forfeiture. Unless otherwise provided in an Agreement or
----------
determined by the Committee, if the Participant incurs a Termination of
Employment during the Restriction Period due to death or Disability, the
restrictions will lapse and the Participant will be fully vested in the
Restricted Stock. Except to the extent otherwise provided in the
applicable Agreement and the Plan, upon a Participant's Termination of
Employment for any reason during the Restriction Period other than death or
Disability, all shares of Restricted Stock still subject to restriction
will be forfeited by the Participant, except the Committee will have the
discretion to waive in whole or in part any or all remaining restrictions
with respect to any or all of such Participant's shares of Restricted
Stock.
(e) Delivery. If and when the Restriction Period expires without a
--------
prior forfeiture of the Restricted Stock subject to such Restriction
Period, unlegended certificates for such shares will be delivered to the
Participant.
(f) Election. A Participant may elect to further defer receipt of the
--------
Restricted Stock for a specified period or until a specified event, subject
in each case to the Committee's approval and to such terms as are
determined by the Committee. Subject to any exceptions adopted by the
Committee, such election must be made one year prior to completion of the
Restriction Period.
ARTICLE IX
----------
DEFERRED STOCK
--------------
9.1 General. The Committee will have authority to grant Deferred Stock
-------
under the Plan at any time or from time to time. Shares of Deferred Stock may
be awarded either alone or
- 17 -
<PAGE>
in addition to other Awards granted under the Plan. The Committee will determine
the persons to whom and the time or times at which Deferred Stock will be
awarded, the number of shares of Deferred Stock to be awarded to any
Participant, the duration of the period (the "Deferral Period') prior to which
the Common Stock will be delivered, and the conditions under which receipt of
the Common Stock will be deferred and any other terms and conditions of the
Awards. Each Award will be confirmed by, and be subject to the terms of, an
Agreement. The Committee may condition the grant of Deferred Stock upon the
attainment of specified performance goals by the Participant or by the Company
or an Affiliate, including a division or department of the Company or an
Affiliate for or within which the Participant is primarily employed, or upon
such other factors or criteria as the Committee may determine. The provisions of
Deferred Stock Awards need not be the same with respect to any Participant.
9.2 Terms and Conditions. Deferred Stock Awards will be subject to the
--------------------
following terms and conditions:
(a) Limitations on Transferability. Subject to the provisions of the
------------------------------
Plan and the Agreement, Deferred Stock Awards, or any interest therein, may
not be sold, assigned, transferred, pledged or otherwise encumbered during
the Deferral Period. At the expiration of the Deferral Period (or Elective
Deferral Period as defined in Section 9.2(e), where applicable), the
Committee may elect to deliver Common Stock, cash equal to the Fair Market
Value of such Common Stock or a combination of cash and Common Stock, to
the Participant for the shares covered by the Deferred Stock Award.
(b) Rights. Unless otherwise determined by the Committee and subject
------
to the Plan, cash dividends on the Common Stock that is the subject of the
Deferred Stock Award will be automatically deferred and reinvested in
additional Deferred Stock, and dividends on the Common Stock that is the
subject of the Deferred Stock Award payable in Common Stock will be paid in
the form of Deferred Stock of the same class as the Common Stock on which
such dividend was paid.
(c) Acceleration. Based on service, performance by the Participant or
------------
by the Company or the Affiliate, including any division or department for
which the Participant is employed, or such other factors or criteria as the
Committee may determine, the Committee may provide for the lapse of
deferral limitations in installments and may accelerate the vesting of all
or any part of any Award and waive the deferral limitations for all or any
part of such Award.
(d) Forfeiture. Unless otherwise provided in an Agreement or
----------
determined by the Committee, if the Participant incurs a Termination of
Employment during the Deferral Period due to death or Disability, the
restrictions will lapse and the Participant will be fully vested in the
Deferred Stock. Unless otherwise provided in an Agreement or determined by
the Committee, upon a Participant's Termination of Employment for any
- 18 -
<PAGE>
reason during the Deferral Period other than death or Disability, the
rights to the shares still covered by the Award will be forfeited by the
Participant, except the Committee will have the discretion to waive in
whole or in part any or all remaining deferral limitations with respect to
any or all of such Participant's Deferred Stock.
(e) Election. A Participant may elect to further defer receipt of the
--------
Deferred Stock payable under an Award (or an installment of an Award) for a
specified period or until a specified event, subject in each case to the
Committee's approval and to such terms as are determined by the Committee.
Subject to any exceptions adopted by the Committee, such election must be
made at one year prior to completion of the Deferral Period for the Award
(or of the applicable installment thereof).
ARTICLE X
---------
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE PLAN
------------------------------------------------------
10.1 Transfer of Shares. Subject to the restriction in any 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 an Award to his parents,
spouse or descendants or to any trust for the benefit of the foregoing or to a
custodian under a uniform gifts to minors act or similar statute for the benefit
of any of the Participant's descendants. Any transfer of shares received
pursuant to the exercise of an Award 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 Agreement, provided that
"Termination of Employment" will continue to refer to the Termination of
Employment of the Participant.
10.2 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 an Award.
10.3 Committee Discretion. The Committee may in its sole discretion
--------------------
include in any Agreement an obligation that the Company purchase a Participant's
shares of Common Stock received upon the exercise of an Award (including the
purchase of any unexercised Awards which have not expired), or may obligate a
Participant to sell shares of Common Stock to the Company upon such terms and
conditions as the Committee may determine and set forth in an Agreement. The
provisions of this Article X will be construed by the Committee in its sole
discretion, and will be subject to such other terms and conditions as the
Committee may from time to time determine. Notwithstanding any provision herein
to the contrary, the Company may
- 19 -
<PAGE>
upon determination by the Committee assign its right to purchase shares of
Common Stock under this Article X, whereupon the assignee of such right will
have all the rights, duties and obligations of the Company with respect to
purchase of the shares of Common Stock.
10.4 No Company Obligation. None of the Company, an Affiliate, or the
---------------------
Committee will have any duty or obligation to affirmatively disclose to a record
or beneficial holder of Common Stock or an Award, and such holder will have no
right to be advised of, any material information regarding the Company or any
Affiliate at any time prior to, upon or in connection with receipt or the
exercise of an Award or the Company's purchase of Common Stock or an Award from
such holder in accordance with the terms hereof.
ARTICLE XI
----------
CHANGE IN CONTROL PROVISIONS
----------------------------
11.1 Impact of Event. An Agreement may provide that in the event of a
---------------
Change in Control (as defined in Section 11.2):
(a) Any Stock Appreciation Rights and Stock Options outstanding as of
the date such Change in Control and not then exercisable will become fully
exercisable to the full extent of the original grant.
(b) The restrictions and deferral limitations applicable to any
Restricted Stock and Deferred Stock will lapse, and such Restricted Stock
and Deferred Stock will become free of all restrictions and become fully
vested and transferable to the full extent of the original grant.
(c) After the Company has an effective registration under the
Securities Act (other than on a Form S-8), a Participant will have the
right, whether or not the Award is fully exercisable or may be otherwise
realized by the Participant, by giving notice during the 60-day period from
and after a Change in Control to the Company, to elect to surrender all or
part of the Award to the Company and to receive cash, within 30 days of
such notice, in an amount equal to the amount by which the "Change in
Control Price" (as defined in Section 11.3) per share of Common Stock on
the date of such election exceeds the amount which the Participant must pay
to exercise the Award per share of Common Stock under the Award (the
"Spread") multiplied by the number of shares of Common Stock granted under
the Award as to which the right granted under this Section 11.1 have been
exercised; provided, however, that if the end of such 60-day period from
and after a Change in Control is within six months of the date of grant of
the Award held by a Participant (except a Participant who has died during
such six month period) who is an officer or director of the Company (within
the meaning of Section 16(b) of the Exchange Act), such Award will be
canceled in exchange for a payment to the Participant, at the time of the
Participant's Termination of Employment, equal to the Spread multiplied by
the number of shares of Common Stock granted under the Award, plus interest
on such amount at the prime rate compounded annually and determined from
time to time. With respect to any Participant who is an officer or
director of the Company (within the meaning of Section 16(b) of the
Exchange
- 20 -
<PAGE>
Act), such Award will be canceled in exchange for a payment to the
Participant, at the time of the Participant's Termination of Employment,
equal to the Spread multiplied by the number of shares of Common Stock
granted under the Award, plus interest on such amount at the prime rate
compounded annually and determined from time to time. With respect to any
Participant who is an officer or director of the Company (within the
meaning of Section 16(b) of the Exchange Act), the 60-day period will be
extended, if necessary, to include the "window period" of Rule 16(b)-3
which first commences on or after the date of the Change in Control, and
the Committee will have sole discretion, if necessary, to approve the
Participant's exercise hereunder and the date in which the Spread is
calculated may be adjusted, if necessary, to a later date if necessary to
avoid liability to such Participant under Section 16(b).
11.2 Definition of Change in Control. For purposes of this Plan, unless
-------------------------------
otherwise specified in the Agreement (or Award Agreement) with respect to the
corresponding Award, a "Change in Control" will be deemed to have occurred if
(a) any corporation, person or other entity (other than the Company, a majority-
owned subsidiary of the Company or any of its subsidiaries, or an employee
benefit plan (or related trust) sponsored or maintained by the Company),
including a "group" as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, becomes the beneficial owner of stock representing more
than eighty percent of the combined voting power of the Company's then
outstanding securities; (b)(i) the stockholders of the Company approve a
definitive agreement to merge or consolidate the Company with or into another
corporation other than a majority-owned subsidiary of the Company, or to sell or
otherwise dispose of all or substantially all of the Company's assets, and (ii)
the persons who were the members of the Board of Directors prior to such
approval do not represent a majority of the directors of the surviving,
resulting or acquiring entity or the parent thereof; or (c) the stockholders of
the Company approve a plan of liquidation of the Company.
11.3 Change in Control Price. For purposes of the Plan, unless otherwise
-----------------------
specified in the Agreement (or Award Agreement) with respect to the
corresponding Award, "Change in Control Price" means the higher of (a) the
highest reported sales price of a share of Common Stock in any transaction
reported on the principal exchange on which such shares are listed or on NASDAQ
during the 60-day period prior to and including the date of a Change in Control
or (b) if the Change in Control is the result of a tender or exchange offer or a
Corporate Transaction, the highest price per share of Common Stock paid in such
tender or exchange offer or a Corporate Transaction, except that, in the case of
Incentive Stock Options and Stock Appreciation Rights relating to Incentive
Stock Options, such price will be based only on the Fair Market Value of the
Common Stock on the date such Incentive Stock Option or Stock Appreciation Right
is exercised. To the extent that the consideration paid in any such transaction
described above consists all or in part of securities or other non-cash
consideration, the value of such securities or other non-cash consideration will
be determined in the sole discretion of the Committee.
- 21 -
<PAGE>
ARTICLE XII
-----------
MISCELLANEOUS
-------------
12.1 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 (a) impair the rights of a Participant
under a Stock Option, Stock Appreciation Right, Restricted Stock Award or
Deferred Stock Award theretofore granted without the Participant's consent,
except such an amendment made to cause the Plan to qualify for the exemption
provided by Rule 16b-3 or (b) disqualify the Plan from the exemption provided by
Rule 16b-3. In addition, no such amendment may be made without the approval of
the Company's stockholder to the extent such approval is required by law or
agreement.
The Committee may amend the Plan at any time provided that (a) no amendment
may impair the rights of any Participant under any Award theretofore Granted
without the Participant's consent, (b) no amendment may disqualify the Plan from
the exemption provided by Rule 16b-3 and (c) any amendment may be subject to the
approval or rejection of the Board.
The Committee may amend the terms of any Award or other Award 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 Award to qualify for the exemption provided
by Rule 16b-3. The Committee may also substitute new Stock Options or Stock
Appreciation Rights for previously granted Stock Options, including previously
granted Stock Options or Stock Appreciation Rights having higher Option Prices
but no such substitution may be made which would impair the rights of the
Participant under such Stock Options or Stock Appreciation Rights 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 and accounting rules, as well
as other developments, and to grant Awards which qualify for beneficial
treatment under such rules without stockholder approval.
12.2 Unfunded Status of Plan. It is intended that the Plan be an
-----------------------
"unfunded" plan for incentive and deferred compensation. The Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or make payments; provided,
however, that, unless the Committee otherwise determines, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of the
Plan.
12.3 General Provisions.
------------------
- 22 -
<PAGE>
(a) Representation. The Committee may require each person purchasing
--------------
or receiving shares pursuant to an Award 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 Award, 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 amount required in
order for the Company or an Affiliate to obtain a current deduction. If
the Participant disposes of shares of Common Stock acquired pursuant to an
Incentive Stock Option in any transaction considered to be a disqualifying
transaction under the Code, the Participant must give written notice of
such transfer and the Company will have the right to deduct any taxes
required by law to be withheld from any amounts otherwise payable to the
Participant. Unless otherwise determined by the Committee, withholding
obligations may be settled with Common Stock, including Common Stock that
is part of the Award 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) Reinvestment. The reinvestment of dividends in additional
------------
Deferred or Restricted Stock at the time of any dividend payment will only
be permissible if sufficient shares of Common Stock are available under the
Plan for such reinvestment (taking into account then outstanding Options
and other Awards).
(e) 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.
(f) Controlling Law. The Plan and all Awards made and actions taken
---------------
thereunder will be governed by and construed in accordance with the laws of
the State of Illinois (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,
- 23 -
<PAGE>
an Affiliate or a Participant, including, without limitation, liability
under Section 16(b) of the Exchange Act.
(g) 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 Agreement to be transferred to the Participant, and no shares of
Common Stock, cash or other thing of value under this Plan or an 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.
12.4 Mitigation of Excise Tax. If any payment or right accruing to a
------------------------
Participant Under this Plan (without the application of this Section 12.4),
either alone or together With other payments or rights accruing to the
Participant from the Company or an Affiliate ("Total Payments") would constitute
a "parachute payment" (as defined in Section 28OG of the Code and regulations
thereunder), such payment or right will be reduced to the largest amount or
greatest right that will result in no portion of the amount payable or right
accruing under the Plan being subject to an excise tax under Section 4999 of the
Code or being disallowed as a deduction under Section 28OG of the Code. The
determination of whether any reduction in the rights or payments under this Plan
is to apply will be made by the Committee in good faith after consultation with
the Participant, and such determination will be conclusive and binding on the
Participant. The Participant will cooperate in good faith with the Committee in
making such determination and providing the necessary information for this
purpose. The foregoing provisions of this Section 12.4 will apply with respect
to any person only if, after reduction for any applicable federal excise tax
imposed by Section 4999 of the Code and federal income tax imposed by the Code,
the Total Payments accruing to such person would be less than the amount of the
Total Payments as reduced, if applicable, under the foregoing provisions of the
Plan and after reduction for only federal income taxes.
12.5 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 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 as existed
prior to the individual becoming a Participant in this Plan.
- 24 -
<PAGE>
12.6 Awards in Substitution for Awards Granted by Other Corporations.
---------------------------------------------------------------
Awards may be granted under the Plan from time to time in substitution for
awards held by employees, directors or service providers of other corporations
who are about to become officers, directors or employees 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 a designated employer under the Plan. The terms and
conditions of the Awards 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 awards in substitution for which they are granted.
12.7 Procedure for Adoption. Any Affiliate of the Company may by
----------------------
resolution of, such Affiliate's board of directors, with the consent of the
Board of Directors and subject to such conditions as may be imposed by the Board
of Directors, adopt the Plan for the benefit of its employees as of the date
specified in the board resolution.
12.8 Procedure for Withdrawal. Any Affiliate which has adopted the Plan
------------------------
may, by resolution of the board of directors of such Affiliate, with the consent
of the Board of Directors and subject to such conditions as may be imposed by
the Board of Directors, terminate its adoption of the Plan.
12.9 Delay. If at the time a Participant incurs a Termination of
-----
Employment (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 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, or
the period for exercise of a Stock Appreciation Right as provided in the
Agreement, whichever is shorter. The Company will have the right to suspend or
delay any time period described in the Plan or an 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.
12.10 Headings. The headings in this Plan are for reference purposes only
--------
and will not affect the meaning or interpretation of this Plan.
12.11 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.
- 25 -
<PAGE>
12.12 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.
12.13 Entire Agreement. This Plan and the Agreement constitute the entire
----------------
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of this Plan will control.
CONSENT OF SHAREHOLDERS OF
BLUE RHINO CORPORATION
TO ACTION WITHOUT MEETING
October 31, 1994
THE UNDERSIGNED, being the all of the Shareholders of BLUE RHINO
CORPORATION, (the "Corporation") do hereby adopt the following resolution by
signing their written consent thereto:
RESOLVED: That the Corporation,'s Stock Incentive Plan with an effective
--------
date of November 1, 1994, a copy of which is attached hereto, be, and
hereby is, ratified and approved.
THIS action is effective this the 31st day of October, 1994.
SHAREHOLDERS:
_/s/_ Billy D. Prim_________________________
Billy D. Prim
_/s/_ Andrew J. Filipowski__________________
Andrew J. Filipowski
_/s/_ Debbie W. Prim________________________
Debbie W. Prim
[Signatures continued on following page.]
- 26 -
<PAGE>
_/s/_ Mayo M. Prim______________________
Mayo M. Prim
_/s/_ Jeannie Cannon____________________
Jeannie Cannon
_/s/_ Luanne Holden_____________________
Luanne Holden
_/s/_ Chris Holden______________________
Chris Holden
_/s/_ Debbie W. Prim____________________
Debbie W. Prim Trustee for
Sarkanda U. Westmoreland
_/s/_ Debbie W. Prim____________________
Debbie W. Prim Trustee for
Anthony G. Westmoreland
_/s/_ Veronica Champney_________________
Veronica Champney
_/s/_ Jennifer R. Filipowski____________
Jennifer R. Filipowski
_/s/_ Andrew J. Filipowski______________
Andrew J. Filipowski Trustee for
Andrew E. Filipowski
_/s/_ Veronica Champney_________________
Veronica Champney Trustee for
Alexandria Filipowski
_/s/_ Veronica Champney_________________
Veronica Champney Trustee for
James Meadows
_/s/_ Don Angell________________________
Angell Family Limited Partnership
- 27 -
<PAGE>
_/s/_ Dr. Thomas Austin__________________
Dr. Thomas Austin
CONSENT OF DIRECTORS OF
BLUE RHINO CORPORATION
TO ACTION WITHOUT MEETING
November ____, 1994
THE UNDERSIGNED, being the all of the Directors of BLUE RHINO CORPORATION,
(the "Corporation") do hereby adopt the following resolutions by signing their
written consent thereto:
RESOLVED: That the Corporation's Stock Incentive Plan, a copy of which is
--------
attached hereto, be, and hereby is, authorized and approved.
RESOLVED FURTHER: That the Corporation's Restricted Stock Agreement, a
----------------
copy of which is attached hereto, be, and it hereby is, authorized and
approved.
RESOLVED FURTHER: That shares of Class A Common Stock be issued to the
----------------
following individuals at a purchase price of $.001 per share:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES PRICE
- --------------------- ---------------- -----
<S> <C> <C>
Billy D. Prim 500,000 $500
Jeremiah Callahan 750,000 $750
Craig Erbland 500,000 $500
S. H. Fogleman, III 200,000 $200
Jim Mizelle 100,000 $100
Dough Mele 75,000 $ 75
Steve Rash 50,000 $ 50
Bud Kiger 25,000 $ 25
</TABLE>
- 28 -
<PAGE>
RESOLVED FURTHER: That as a condition of the issue of said shares,
----------------
each of the individual shareholders shall be required to execute the
approved Restricted Stock Agreement.
RESOLVED FURTHER: That the Stock Incentive Plan be submitted to a vote
----------------
of the Shareholders as appropriate.
THIS action is effective this the ____ day of November, 1994.
DIRECTORS:
_/s/_ Billy D. Prim_______________ _/s/_ Jeremiah Callahan____________
Billy D. Prim Jeremiah Callahan
_/s/_ Andrew J. Filipowski________ _/s/_ S. H. Fogleman, III__________
Andrew J. Filipowski S. H. Fogleman, III
- 29 -
<PAGE>
EXHIBIT 10.15
BLUE RHINO CORPORATION
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this "Agreement")
is dated as of March 1, 1997 by and among BLUE RHINO CORPORATION, a Delaware
corporation (the "Corporation"), and the Persons listed on Schedule 1 attached
----------
hereto (collectively, the "Purchasers"). This Agreement amends and restates in
its entirety that certain Registration Rights Agreement dated December 1, 1994,
as amended.
RECITALS:
A. Purchasers have agreed to purchase shares of the Corporation's Series
A Convertible Participating Preferred Stock (the "Series A Preferred Shares"),
shares of the Corporation's Common Stock (the "Common Shares") and Warrants (the
"Warrants") pursuant to certain agreements that provide that the parties hereto
enter into this Agreement.
B. The Corporation deems it desirable to enter into this Agreement in
order to induce Purchasers to purchase the Series A Preferred Shares, the Common
Shares and the Warrants.
AGREEMENTS
In consideration of the premises and the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. As used in this Agreement.
-----------
"Agreement" shall meant this Amended and Restated Registration Rights
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $0.001 par value per share, of the
Corporation.
"Common Shares" means the 2,000,000 shares of Common Stock purchased by
Platinum Propane Holding, L.L.C. pursuant to that certain Securities Purchase
Agreement dated March 1, 1997.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Person" means a natural person, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or any
<PAGE>
department, agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its equity
securities to the public pursuant to an effective registration statement under
the Securities Act or any comparable statement under any comparable federal
statute then in effect.
"Registrable Shares" means at any tune (i) any shares of Common Stock then
outstanding which were issued upon conversion of the Securities; (ii) any shares
of Common Stock then issuable upon conversion or exercise of the then
outstanding Securities; (iii) the Common Shares; (iv) any shares of Common Stock
then outstanding which were issued as, or were issued directly or indirectly
upon the conversion or exercise of other securities issued as, a dividend or
other distribution with respect or in replacement of any shares referred to in
(i), (ii) or (iii); and (v) any shares of Common Stock then issuable directly or
indirectly upon the conversion or exercise of other securities which were issued
as a dividend or other distribution with respect to or in replacement of any
shares referred to in (i), (ii) or (iii); provided, however, that Registrable
Shares shall not include any shares which have been registered pursuant to the
Securities Act or which have been sold to the public pursuant to Rule 144 of the
Commission under the Securities Act. For purposes of this Agreement, a person
will be deemed to be a holder of Registrable Shares whenever such person has the
then-existing right to acquire such Registrable Shares (by conversion or
otherwise), whether or not such acquisition actually has been effected.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities" means the Series A Preferred Shares, Common Shares and the
Warrants, collectively.
"Warrants" means the Warrants to purchase (i) 4,214,185 shares of Common
Stock at $0.0347037 per share, issued to certain investors on December 1, 1994,
(ii) 115,264 shares of Common Stock at $0.347037 per share, issued to Peter
Huizenga ("Huizenga"), Andrew Filipowski ("Filipowski"), Craig Duchossois
("Duchossois") and Robert F. Steele ("Steele") in connection with a bridge loan
in May 1995, (iii) 2,593,385 shares of Common Stock at $0.347037 per share
issued to Huizenga, Filipowski, Duchossois, Steele, and Billy D. Prim ("Prim")
in connection with their guarantee of loan to the Corporation in June 1995, (iv)
86,446 shares of Common Stock at $0.347037 per share issued to Platinum Venture
Partners I, L.P. in connection with a loan to the Corporation in May 1995, (v)
259,338 shares of Common Stock at $0.347037 per share issued to Platinum Venture
Partners I, L.P. in connection with the extension of the maturity on its loan to
the Corporation on August 14, 1995, (vi) 6,612,926 shares of Common Stock at
$0.347037 per share to be issued to the purchasers of the 10.5% Senior Discount
Notes and Warrants pursuant to that certain Unit Purchase Agreement dated
November 4, 1995 (the "Unit Purchase Agreement"), (vii) 960,000 shares of Common
Stock at $0.347037 per share issued to Huizenga, Duchossois and Peer Pedersen or
their assigns pursuant to the Unit Purchase Agreement, (viii) 1,502,745 shares
of Common Stock at $0.50 per share issued to Lunn/Forseyth L.P. upon the
extension of lease financing to the Corporation, and (ix) 1,500,000
2
<PAGE>
shares of Common Stock at $0.50 per share issued to Platinum Propane Holding,
L.L.C. pursuant to that certain Securities Purchase Agreement dated March 1,
1997.
2. Demand Registration.
-------------------
2.1 Requests for Registration. Subject to the terms of this
-------------------------
Agreement, the holders of at least 51% of the then outstanding Registrable
Shares may, at any time request registration under the Securities Act of
all or part of their Registrable Shares on Form S-1 or any similar long-
form registration ("Long-Form Registrations") or, if available, on Form S-2
or S-3 or any similar short-form registration ("Short-Form Registrations").
Within 10 days after receipt of any request pursuant to this Section 2.1,
the Corporation will give written notice of such request to all other
holders of Registrable Shares and will include in such registration all
Registrable Shares with respect to which the Corporation has received
written requests for inclusion within 15 days after delivery of the
Corporation's notice. All registrations requested pursuant to this Section
2.1 are referred to herein as "Demand Registrations."
2.2 Long-Form Registrations. The holders of the Registrable Shares
-----------------------
will be entitled to request two Long-Form Registrations in which the
Corporation will pay all Registration Expenses (as defined in Section 6
below). A registration will not count as one of the permitted Long-Form
Registrations until it has become effective (unless such Long-Form
Registration has not become effective due solely to the fault of the
holders requesting such registration), and the second or any subsequent
Long-Form Registration will not count as one of the permitted Long-Form
Registrations unless the holders of the Registrable Shares are able to
register and sell at least 90% of the Registrable Shares requested to be
included in such registration; provided however, that in any event the
Corporation will pay all Registration Expenses in connection with any
registration initiated as a Long-Form Registration.
2.3 Short-Form Registrations. In addition to the Long-Form
------------------------
Registrations provided pursuant to Section 2.2 above, the holders of
Registrable Shares will be entitled to request an unlimited number of
Short-Form Registrations in which the Company will pay all Registration
Expenses. Demand Registrations will be Short-Form Registrations whenever
the Corporation is permitted to use any applicable short form. Once the
Corporation has become subject to the reporting requirements of the
Exchange Act, the Corporation will use its best efforts to make Short-Form
Registrations available for the sale of Registrable Shares.
2.4 Priority. The Corporation will not include in any Demand
--------
Registration any securities which are not Registrable Shares without the
written consent of the holders of at least 51% of the Registrable Shares
included in such Demand Registration. If other securities are permitted to
be included in a Demand Registration which is an underwritten offering and
the managing underwriters advise the Corporation in writing that in their
opinion the number of Registrable Shares and other securities requested to
be included
3
<PAGE>
exceeds the number of Registrable Shares and other securities which can be
sold in such offering, the Corporation will include in such registration,
first, the Registrable Shares requested to be included in such Demand
Registration, pro rata among the holders of such securities on the basis of
--------
the number of Registrable Shares which are owned by such holders, and
second, other securities to be included in such Demand Registration.
2.5 Restrictions. The Corporation will not be obligated to effect
------------
any Long Form Registration within nine months after the effective date of a
previous Long-Form Registration. The Corporation may postpone for up to
three months the filing or the effectiveness of a registration statement
for a Demand Registration if the Corporation reasonably believes that such
Demand Registration would have an adverse effect on any proposal or plan by
the Corporation or any of its subsidiaries to engage in any acquisition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other significant transaction.
2.6 Selection of Underwriters. The holders of at least 51% of the
-------------------------
Registrable Shares included in any Demand Registration shall have the right
to select the investment banker(s) and manager(s) to administer the
offering, subject to the Corporation's approval which will not be
unreasonably withheld.
2.7 Preemption. The Corporation will have the right to preempt any
----------
Long Form Registration with a primary registration by delivering written
notice of such intention to the holders of Registrable Shares who have
requested such Long-Form Registration within fifteen (15) days after the
Corporation has received a request for such registration. In the ensuing
primary registration, the holders of Registrable Shares will have such
piggyback registration rights as are set forth in Section 3 hereof. Upon
the Corporation's preemption of a requested Long-Form Registration, such
requested registration will not count as one of the permitted Long-Form
Registrations.
3. Piggyback Registration.
----------------------
3.1 Right to Piggyback. Whenever the Corporation proposes to
------------------
register any of its securities under the Securities Act (other than
pursuant to a Demand Registration hereunder) and the registration form to
be used may be used for the registration of any Registrable Shares (a
"Piggyback Registration"), the Corporation will give prompt written notice
to all holders of the Registrable Shares of its intention to effect such a
registration and will include in such registration all Registrable Shares
(in accordance with the priorities set forth in Sections 3.2 and 3.3 below)
with respect to which the Corporation has received written requests for
inclusion within 15 days after the delivery of the Corporation's notice.
3.2 Priority on Primary Registrations. If a Piggyback Registration
---------------------------------
is an underwritten primary registration on behalf of the Corporation and
the managing underwriters advise the Corporation in writing that in their
opinion the number of securities
4
<PAGE>
requested to be included in such registration exceeds the number which can
be sold in such offering, the Corporation will include in such registration
first, the securities that the Corporation proposes to sell, second, the
Registrable Shares requested to be included in such registration, pro rata
--------
among the holders of such Registrable Shares on the basis of the number of
shares which are owned by such holders, and third, other securities
requested to be included in such registration.
3.3 Priority on Secondary Registrations. If a Piggyback
-----------------------------------
Registration is an underwritten secondary registration on behalf of holders
of the Corporation's securities and the managing underwriters advise the
Corporation in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can
be sold in such offering, the Corporation will include in such registration
first, the securities requested to be included therein by the holders
requesting such registration and the Registrable Shares requested to be
included in such registration, pro rata among the holders of such
--------
securities on the basis of the number of shares of Common Stock or
Registrable Shares which are owned by such holders, and second, other
securities requested to be included in such registration.
3.4 Other Registrations. If the Corporation has previously filed a
-------------------
registration statement with respect to Registrable Shares pursuant to
Section 2 or pursuant to this Section 3, and if such previous registration
has not been withdrawn or abandoned, the Corporation will not file or cause
to be effected any other registration of any of its equity securities or
securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Form S-8 or any successor
form), whether on its own behalf or at the request of any holder or holders
of such securities, until a period of at least 180 days has elapsed from
the effective date of such previous registration.
3.5 Selection of Underwriters. In connection with any Piggyback
-------------------------
Registration, the holders of at least 51% of the Registrable Shares
requested to be registered shall have the right to select the managing
underwriters to administer any offering of the Corporation's securities in
which the Corporation does not participate, and the Corporation will have
such right in any offering in which it participates, provided that in
either case such managing underwriters shall be qualified nationally
recognized underwriters.
4. Holdback Agreements.
-------------------
4.1 Holders' Agreements. Each holder of Registrable Shares agrees
-------------------
not to effect any public sale or distribution of equity securities of the
Corporation, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven (7) days prior to, and
during the 120 days following, the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration in which
Registrable Shares are included (except as part of such underwritten
registration), unless the underwriters managing the registered public
offering otherwise agree.
5
<PAGE>
4.2 Corporation's Agreements. The Corporation agrees (i) not to
------------------------
effect any public sale or distribution of its equity securities, or any
securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to, and during the 120 days
following, the effective date of any underwritten Demand Registration or
any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or any
successor form), unless the underwriters managing the registered public
offering otherwise agree and (ii) to cause each holder of at least 1% (on a
fully diluted basis) of its equity securities, or any securities
convertible into or exchangeable or exercisable for such securities to
agree not to effect any public sale or distribution of any such securities
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered
public offering otherwise agree.
5. Registration Procedures. Whenever the holders of Registrable Shares
-----------------------
have requested that any Registrable Shares be registered pursuant to this
Agreement, the Corporation will use its best efforts to effect the registration
and sale of such Registrable Shares in accordance with the intended method of
disposition thereof and, pursuant thereto, the Corporation will as expeditiously
as possible:
(a) prepare and file with the Commission a registration statement
with respect to such Registrable Shares and use its best efforts to cause
such registration statement to become effective (provided that before
filing a registration statement or prospectus, or any amendments or
supplements thereto, the Corporation will furnish copies of all such
documents proposed to be filed to the counsel or counsels for the sellers
of the Registrable Shares covered by such registration statement);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus(es) used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than nine months and comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period
in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Shares such number of
copies of such registration statement, each amendment and supplement
thereto, the prospectus(es) included in such registration statement
(including each preliminary prospectus) and such other documents as such
seller may reasonably request in order to facilitate the disposition of the
Registrable Shares owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Shares under such other securities or blue sky laws of such jurisdictions
as any seller reasonably requests and do any and all other acts and things
which may be reasonably necessary or advisable to
6
<PAGE>
enable such seller to consummate the disposition in such jurisdictions of
the Registrable Shares owned by such seller (provided that the Corporation
will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this subparagraph, (ii) subject itself to taxation in any such jurisdiction
or (iii) consent to general service of process in any such jurisdiction);
(e) notify each seller of such Registrable Shares, at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Corporation will prepare a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such Registrable
Shares, such prospectus will not contain any untrue statement of a material
fact or omit to state any fact necessary to make the statements therein not
misleading;
(f) cause all such Registrable Shares to be listed on each
securities exchange on which similar securities issued by the Corporation
are then listed;
(g) provide a transfer agent and registrar for all such Registrable
Shares not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
holders of a majority of the Registrable Shares being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Shares (including, without limitation,
effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of Registrable
Shares, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Corporation,
and cause the Corporation's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
(j) advise each seller of such Registrable Shares, promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding
for such purpose and promptly use all reasonable efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order
should be issued;
(k) at least 48 hours prior to the filing of any registration
statement or prospectus,
7
<PAGE>
or any amendment or supplement to such registration statement or
prospectus, furnish a copy thereof to each seller of such Registrable
Shares and refrain from filing any such registration statement, prospectus,
amendment or supplement to which counsel selected by the holders of a
majority of the Registrable Shares being registered shall have reasonably
objected on the grounds that such document does not comply in all material
respects with the requirements of the Securities Act or the rules and
regulations thereunder, unless, in the case of an amendment or supplement,
in the opinion of counsel for the Corporation the filing of such amendment
or supplement is reasonably necessary to protect the Corporation from any
liabilities under any applicable federal or state law and such filing will
not violate applicable laws; and
(l) at the request of any seller of such Registrable Shares in
connection with an underwritten offering, furnish on the date or dates
provided for in the underwriting agreement: (i) an opinion of counsel,
addressed to the underwriters and the sellers of Registrable Shares,
covering such matters as such underwriters and sellers may reasonably
request, including such matters as are customarily furnished in connection
with an underwritten offering; and (ii) a letter or letters from the
independent certified public accountants of the Corporation addressed to
the underwriters and the sellers of Registrable Shares, covering such
matters as such underwriters and sellers may reasonably request, in which
letter(s) such accountants shall state, without limiting the generality of
the foregoing, that they are independent certified public accountants
within the meaning of the Securities Act and that in their opinion the
financial statements and other financial data of the Corporation included
in the registration statement, the prospectus(es), or any amendment or
supplement thereto, comply in all material respects with the applicable
accounting requirements of the Securities Act.
6. Registration Expenses.
---------------------
6.1 Corporation's Expenses. All expenses incident to the
----------------------
Corporation's performance of or compliance with this Agreement, including
without limitation all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, printing expenses, messenger
and delivery expenses, and fees and disbursements of counsel for the
Corporation and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other persons retained by the
Corporation (all such expenses being herein called "Registration
Expenses"), will be borne by the Corporation.
6.2 Holder's Expenses. Notwithstanding anything to the contrary
-----------------
contained herein, each holder of Registrable Shares will pay all attorney
fees and disbursements for counsel they retain in connection with the
registration of Registrable Shares, except that the Corporation will
reimburse the holders of Registrable Shares for the reasonable fees and
disbursements of one counsel chosen by the holders of at least 51% of such
Registrable Shares in connection with a Demand Registration.
8
<PAGE>
7. Indemnification.
---------------
7.1 By the Corporation. The Corporation agrees to indemnify, to
------------------
the extent permitted by law, each holder of Registrable Shares, its
officers and directors and each person who controls such holder (within the
meaning of the Securities Act) against all losses, claims, damages,
liabilities and expenses (including without limitation, attorney's fees)
caused by any untrue or alleged untrue statement of material fact contained
in any registration statement, prospectus or preliminary prospectus, or any
amendment thereof or supplement thereto, or any omission or alleged
omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as the same are
caused by or contained in any information furnished in writing to the
Corporation by such holder expressly for use therein or by such holder's
failure to deliver a copy of the registration statement or prospectus or
any amendments or supplements thereto after the Corporation has furnished
such holder with a sufficient number of copies of the same. In connection
with an underwritten offering, the Corporation will indemnify such
underwriters, their officers and directors and each person who controls
such underwriters (within the meaning of the Securities Act) to the same
extent as provided above with respect to the indemnification of the holders
of Registrable Shares. The payments required by this Section 7.1 will be
made periodically during the course of the investigation or defense, as and
when bills are received or expenses incurred.
7.2 By Each Holder. In connection with any registration statement
--------------
in which a holder of Registrable Shares is participating, each such holder
will furnish to the Corporation in writing such information and affidavits
as the Corporation reasonably requests for use in connection with any such
registration statement or prospectus and, to the extent permitted by law,
will indemnify the Corporation, its directors and officers and each person
who controls the Corporation (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities and expenses resulting
from any untrue or alleged untrue statement of material fact contained in
the registration statement, prospectus or preliminary prospectus, or any
amendment thereof or supplement thereto, or any omission or alleged
omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading, but only to the extent that
such untrue statement or omission is contained in any information or
affidavit so furnished in writing by such holder; provided that the
obligation to indemnify will be several, not joint and several, among such
holders of Registrable Shares and the liability of each such holder of
Registrable' Shares will be in proportion to and limited to the net amount
received by such holder from the sale of Registrable Shares pursuant to
such registration statement.
7.3 Procedure. Any person entitled to indemnification hereunder
---------
will (i) give prompt written notice to the indemnifying party of any claim
with respect to which it seeks indemnification and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with
counsel
9
<PAGE>
reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party will not be subject to any liability for
any settlement made by the indemnified party without its consent (but such
consent will not be unreasonably withheld). An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not
be obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim.
7.4 Survival. The indemnification provided for under this
--------
Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director or controlling person of such indemnified party and will survive
the transfer of securities. The Corporation also agrees to make such
provisions as are reasonably requested by any indemnified party for
contribution to such party in the event the Corporation's indemnification
is unavailable for any reason.
8. Compliance with Rule 144. In the event that the Corporation (a)
------------------------
registers a class of securities under Section 12 of the Exchange Act or (b)
commences to file reports under Section 13 or 15(d) of the Exchange Act, then at
the request of any holder who proposes to sell securities in compliance with
Rule 144 of the Commission, the Corporation will (i) forthwith furnish to such
holder a written statement of compliance with the filing requirements of the
Commission as set forth in Rule 144, as such rules may be amended from time to
time and (ii) make available to the public and such holders such information as
will enable the holders to make sales pursuant to Rule 144.
9. Participation in Underwritten Registrations. No person may
-------------------------------------------
participate in any registration hereunder which is underwritten unless such
person (a) agrees to sell its securities on the basis provided in any
underwriting arrangements approved by such person or persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, custody agreements, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
10. Miscellaneous.
-------------
10.1 No Inconsistent Agreements. The Corporation will not hereafter
--------------------------
enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the holders of Registrable Shares
in this Agreement.
10.2 Adjustments Affecting Registrable Shares. The Corporation will
----------------------------------------
not take any action, or permit any change to occur, with respect to its
securities which would adversely affect the ability of the holders of
Registrable Shares to include such Registrable Shares in a registration
undertaken pursuant to this Agreement or which Shares in any such would
adversely affect the marketability of such Registrable registration,
including, without limitation, effecting a stock split or combination of
shares.
10
<PAGE>
10.3 Amendments and Other Registration Rights. Except as provided
----------------------------------------
in this Agreement, without the prior written consent of holders of at least
51% of the Registerable Shares, (a) this Agreement shall not be amended and
(b) the Corporation will not hereafter grant to any person or persons the
right to request the Corporation to register any equity securities of the
Corporation or any securities convertible or exchangeable into or
exercisable for such securities. The Corporation will not include in any
demand registration any securities which are not Registerable Shares (for
the purposes of Section 2) unless and until all Registerable Shares
requested to be registered have first been so included.
10.4 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and, agreements contained in this Agreement by or on
behalf of any of the parties hereto will bind and inure to the benefit of
the respective successors and assigns of the parties hereto, whether so
expressed or not. In addition, and whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit
of the Purchasers or holders of Registrable Shares are also for the benefit
of, and enforceable by, any subsequent holders of such Registrable Shares.
10.5 Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
10.6 Descriptive Headings. The descriptive headings of this
--------------------
Agreement are inserted for convenience of reference only and do not
constitute a part of and shall not be utilized in interpreting this
Agreement.
10.7 Notices. Any notices required or permitted to be sent
-------
hereunder shall be delivered personally or mailed, certified mail, return
receipt requested, or delivered by overnight courier service to the
following addresses, or such other address as any party hereto designates
by written notice to the Corporation, and shall be deemed to have been
given upon delivery, if delivered personally, three days after mailing, if
mailed, or one business day after delivery to the courier, if delivered by
overnight courier service:
If to the Corporation, to:
Blue Rhino Corporation
104 Cambridge Plaza Drive
Winston-Salem, North Carolina 27104
Attention: Billy Prim, Chief Executive Officer
11
<PAGE>
with a copy to:
House Law Firm
P.O. Drawer 26015
Winston-Salem, North Carolina 27114-6015
Attention: Don R. House, Esq.
If to Purchasers, to:
Platinum Venture Partners I, L.P.
1815 S. Meyers Road
Oakbrook Terrace, Illinois 60181
Attention: Michael A. Santer
with a copy to:
Katten Muchin & Zavis
525 W. Monroe Street, Suite 1600
Chicago, Illinois 60661
Attention: Matthew S. Brown, Esq.
10.8 Governing Law. All questions concerning the construction,
-------------
validity and interpretation of this Agreement, and the performance of the
obligations imposed by this Agreement, shall be governed by the laws of the
State of Delaware applicable to contracts made and wholly to be performed
in that state.
10.9 Final Agreement. This Agreement, together with the Securities
---------------
Purchase Agreement and all other agreements entered into by the parties
hereto pursuant to the Securities Purchase Agreement, constitutes the
complete and final agreement of the parties concerning the matters referred
to herein, and supersedes all prior agreements and understandings.
10.10 Execution in Counterparts. This Agreement may be executed in
-------------------------
any number of counterparts, each of which when so executed and delivered
shall be deemed an original, and such counterparts together shall
constitute one instrument.
10.11 No Strict Construction. The language used in this Agreement
----------------------
will be deemed to be the language chosen by the parties hereto to express
their mutual intent, and no rule of strict construction will be used
against any party.
12
<PAGE>
The parties hereto have executed this Amended and Restated Registration
Rights Agreement on the date first set forth above.
BLUE RHINO CORPORATION
By: /s/ Billy Prim
---------------------------------------------------
Billy Prim, Chief Executive Officer
PLATINUM PROPANE HOLDING, L.L.C.
By: /s/ Daryl F. McClendon
---------------------------------------------------
Daryl F. McClendon, Manager
FORSYTHE TECHNOLOGY/LUNN PARTNERS
VENTURE LEASING, L.P.
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
Billy D. Prim, not personally but as attorney in fact
for the persons listed on Exhibit A hereto pursuant to
that certain power of attorney granted under the
Consent, Agreement and Waiver executed by each of
them.
/s/ Billy D. Prim
------------------------------------------------------
Billy D. Prim, Attorney in Fact
13
<PAGE>
EXHIBIT 10.16
SHAREHOLDERS' AGREEMENT
-----------------------
THIS SHAREHOLDERS' AGREEMENT (this "Agreement"), dated as of December 1,
1994, is by and between BLUE RHINO CORPORATION, a Delaware corporation (the
"Corporation"), the persons and entities identified on Schedule 1 attached
hereto (the "Investors"), and the persons identified on Schedule 2 attached
hereto (the "Management Stockholders").
RECITALS
--------
A. The Investors have agreed to purchase the Series A Preferred
Securities (as defined in Section 1 below) pursuant to that certain Series A
Securities Purchase Agreement dated as of an even date herewith (the "Securities
Purchase Agreement") provided that the parties hereto enter into this Agreement.
B. To induce the Investors to purchase the Series A Preferred Securities,
the Corporation and the Management Stockholders deem it desirable to enter into
this Agreement.
AGREEMENTS
----------
In consideration of the recitals and the mutual promises, covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Definitions.
"Commission" means the Securities and Exchange Commission.
"Common Shares" means the shares of Common Stock which have not been sold
to the public (i) pursuant to a registration statement declared effective by the
Commission, or (ii) pursuant to Rule 144 promulgated by the Commission under the
Securities Act. For the purposes of this Agreement, any Holder will be deemed to
own, in addition to any Common Shares such Holder actually owns, any Common
Shares which would then be directly or indirectly issuable upon the conversion
or exercise (whether nor not then convertible or exercisable) of any other
Securities owned by such Holder and such other Securities shall be deemed to
represent such Common Shares.
"Common Stock" means the Common Stock, par value $0.001 per share, of the
Corporation.
"Holder" is any holder (or deemed holder) of Securities who is a party to
this Agreement (or becomes a party hereto pursuant to Section 14 hereof) or is a
successor or assign or subsequent holder contemplated by Section 19 hereof.
<PAGE>
"Management Securities" means, at any time, (i) Securities then held by
Management Stockholders, (ii) Securities that were on or after the date hereof
held by a Management Stockholder but are then held by (A) a successor or assign
of such Management Stockholder (other than an Investor) or (B) a subsequent
Holder (other than an Investor), and (iii) Securities that were issued as, or
upon conversion or exercise of other Securities issued as, a dividend or other
distribution with respect to or in replacement of other Management Securities
and are then held by (1) a Management Stockholder, (2) a successor or assign of
such Management Stockholder (other than an Investor) or (3) a subsequent Holder
(other than an Investor); provided, however, that Management Securities shall
not include any securities which have been sold to the public pursuant to a
registration statement declared effective by the Commission or pursuant to Rule
144 promulgated by the Commission under the Securities Act. For purposes of this
Agreement, the calculation of the number of Management Securities (to the extent
such Securities are not Common Shares) shall be determined on an as-converted
basis into Common Shares.
"New Securities" means (i) any capital stock of the Corporation or any
other securities or other obligations of the Corporation, including any equity
or equity like profit participation rights, whether now authorized or not, (ii)
any rights, options, or warrants to purchase any such capital stock or rights,
or to purchase any securities of any type whatsoever that are, or may become,
convertible into any such capital stock, and (iii) any securities of any type
whatsoever that are, or may become convertible into any such capital stock or
rights; provided, however that "New Securities" will not include (A) securities
offered to the public pursuant to a registration statement under the Securities
Act, (B) options or securities issued to, or securities issued upon exercise of
options issued to officers, directors or employees of the Corporation, (C)
securities issued upon conversion of the Series A Preferred Shares or the
Warrants, (D) securities issued pursuant to the Securities Purchase Agreement,
(E) securities issued in connection with the acquisition of another corporation
by the Corporation by merger, purchase of all or substantially all of such other
corporation's assets, or by other reorganization whereby the Corporation ends up
owning, directly or indirectly, greater than 50% of the voting power of such
corporation, and/or (F) Common Stock issued upon exercise of options outstanding
on the date hereof.
"Person" means a natural person, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or other entity, or a governmental entity or any department, agency
or political subdivision thereof.
"Platinum" means Platinum Venture Partners I, L.P., a Delaware limited
partnership.
"Qualified Public Offering" has the meaning ascribed to it in Section 4.7
of ARTICLE FOURTH of the Certificate of Incorporation of the Corporation, as in
effect on the date hereof.
"Securities" means Common Shares or shares of capital stock or other
securities directly or indirectly exercisable for or convertible into Common
Shares; provided, however, that Securities shall not include any securities
which have been sold to the public pursuant to a registration statement declared
effective by the Commission or pursuant to Rule 144 promulgated by the
Commission under the Securities Act.
-2-
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Securities" means, at any time, (i) Series A Preferred
Shares, (ii) Common Shares issued upon conversion of Series A Preferred Shares,
(iii) Warrants, (iv) Common Shares issued upon exercise of the Warrants and (v)
Common Shares or other securities issued upon the conversion or in replacement
of other Series A Preferred Securities. For purposes of this Agreement, the
calculation of the number of Series A Preferred Securities shall be determined
on an as-converted (or as exercised) basis into Common Shares.
"Series A Preferred Shares" means those shares of Series A Convertible
Participating Preferred Stock, par value $0.01 per share, of the Corporation
duly issued and outstanding on the date hereof.
"Warrants" means the warrants to purchase Common Stock issued pursuant to
the Securities Purchase Agreement and any securities issued as a dividend or
other distribution with respect to or in replacement of the Warrants.
"Subsidiary" means, with respect to any corporation, any Person of which
securities or other ownership interests representing more than 50% of the
ordinary voting power are, at the time as of which any determination is being
made, owned or controlled by such corporation or one or more Subsidiaries of
such corporation or by such corporation and one or more Subsidiaries of such
corporation.
2. Disposition of Securities. No Holder of Management Securities will
transfer, sell, convey, exchange or otherwise dispose of (herein referred to as
a "disposition" or "to dispose of") such Management Securities, except in a
Qualified Public Offering or in compliance with Sections 3 and 4 or as permitted
by Section 5.
3. Right of First Refusal - Outstanding Management Securities.
(a) Subject to the limitations of Section 2 hereof, if any Holder of
Management Securities (the "Selling Management Holder") desires to dispose
of any Management Securities in compliance with this Section, such Selling
Management Holder will first give written notice (the "Management
Securities Offer Notice") to the Corporation which will, within five (5)
days of the date of receipt of such notice (the "Management Securities
Offer Date"), send or deliver a copy of the Management Securities Offer
Notice to each Holder of Series A Preferred Securities, to the effect that
such Selling Management Holder wishes to dispose of such Management
Securities (the "Offered Management Securities"), stating the price at and
other material terms upon which such Selling Management Holder wishes to
dispose of such Management Securities and offering to sell such Management
Securities, in whole or in part (the "Management Securities Offer"), first
to the Corporation, and then to the Holders of Series A Preferred
Securities, pursuant to this Section, at the price and on the other
material terms described in the Management Securities Offer Notice.
(b) The Corporation may accept the Management Securities Offer in
whole or indicate a desire to accept the Management Securities Offer in part by
giving written
-3-
<PAGE>
notice thereof to the Selling Management Holder within fifteen (15) days
of the Management Securities Offer Date.
(c) In the event the Corporation does not accept the Management
Securities Offer in its entirety as provided in subsection (b) of this
Section, the Corporation will promptly notify in writing the Holders of the
Series A Preferred Securities, and such Holders may elect to purchase, pro
rata according to the number of Common Shares that would be held on an as-
converted basis by each such Holder that wishes to purchase such
securities, or in such other proportions as such Holders may agree upon,
the Offered Management Securities with respect to which the Management
Securities Offer has not then been accepted by the Corporation, by giving
written notice to the Corporation and the Selling Management Holder within
thirty (30) days of the Management Securities Offer Date. For example,
assuming (for the purpose of this example only) (i) a Management
Stockholder desires to dispose of 100 Management Securities, (ii) the
Corporation purchases 10 of such Management Securities pursuant to
paragraph (b) of this Section 3, (iii) Platinum is deemed to hold 40 of the
100 Common Shares that would be held (or deemed to be held) by each Holder
of Series A Preferred Securities and (iv) all Holders of Series A Preferred
Securities wish to purchase such Management Securities, then Platinum would
be entitled to purchase 36 of the remaining 90 Management Securities
pursuant to this Section 3 and the other Holders of Series A Preferred
Securities would be entitled to purchase 54 Management Securities pro rata.
Similarly, assuming (for the purpose of this example only) (i) a Management
Stockholder desires as above to dispose of 100 Management Securities, (ii)
the Corporation purchases as above 10 of said Management Securities
pursuant to paragraph (b) of this Section 3, (iii) the Holders of 50 of the
100 Common Shares that would be held (or deemed to be held) by the Holders
of Series A Preferred Securities wish to purchase such Management
Securities, and (iv) Platinum holds 10 of such 50 Common Shares, then
Platinum would be entitled to purchase 18 of the remaining 90 Management
Securities hereunder and the other Holders of Series A Preferred Securities
who wish to purchase such Management Securities would be entitled to
purchase 72 Management Securities pro rata.
(d) In the event that the Management Securities Offer has not been
accepted in its entirety by the Corporation, or the other Holders of the
Series A Preferred Securities, or both in accordance with this Section, the
Selling Management Holder may dispose of all, and the Corporation and the
other Holders of the Series A Preferred Securities shall not be entitled to
purchase any of the Offered Management Securities, subject to the
provisions of Section 4, to one or more purchasers who each agree in
writing to be bound by the terms of this Agreement as a Management
Stockholder and a Holder of Management Securities, on substantially the
same terms stated in the Management Securities Offer Notice at any time up
to one hundred (100) days after the Management Securities Offer Date.
Thereafter, the provisions of this Section will again apply.
4. Take-Along.
(a) After satisfying the requirements of Section 3 a Management
Stockholder (the "Disposing Management Stockholder") may sell or transfer
Management Securities
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<PAGE>
in a transaction other than a Qualified Public Offering only to a
transferee who purchases such Management Securities as part of a
transaction in which a pro rata portion (as hereinafter defined) of the
aggregate number of Securities being purchased by such transferee is being
purchased from each Holder of Series A Preferred Securities who chooses to
participate in such transaction. For purposes of the preceding sentence,
"pro rata portion" means, with respect to any Holder of Series A Preferred
Securities, the proportion equal to (a) the number of Common Shares held
(or deemed held) by such Holder of Series A Preferred Securities divided by
(b) the sum of (1) the number of Common Shares held (or deemed held) by all
Holders of Series A Preferred Securities who choose to participate in such
transaction and (2) the number of Common Shares held (or deemed held) by
the Disposing Management Stockholder. Before a Disposing Management
Stockholder accepts any offer for the sale of any Management Securities for
which this Section is to apply, such Disposing Management Stockholder shall
give written notice (the "Take-along Notice") to the Corporation (which
shall, within five (5) days of the date of receipt of such notice (the
"Take-along Notice Date"), send or deliver a copy of the Take-along Notice
to each Holder of Series A Preferred Securities), stating the material
terms of the offer. If a Holder of Series A Preferred Securities wishes to
participate in such sale, such Holder of Series A Preferred Securities will
give the Corporation and the Disposing Management Stockholder notice to
such effect within twenty (20) days of the Take-along Notice Date. For
example, assuming (for the purpose of this example only) (i) a Management
Stockholder who holds (or is deemed to hold) 60 Common Shares wishes to
dispose of 30 of such Common Shares, (ii) Platinum holds 40 of the 100
Common Shares held (or deemed held) by the Holders of participating Series
A Preferred Securities, (iii) the other participating Holders of Series A
Preferred Securities hold 60 of such 100 Common Shares, (iv), then Platinum
would be entitled to sell 7.5 Common Shares hereunder, the participating
Holders of Series A Preferred Securities would be entitled to sell 11.25
Common Shares hereunder, and the Management Stockholder would be entitled
to sell 11.25 Common Shares hereunder.
(b) In connection with any sale under this Section 4 in which Holders
of Series A Preferred Securities elect to participate, the total
consideration for any such transaction shall be allocated among the shares
being sold by the Disposing Management Stockholder and the Series A
Preferred Shares being sold such that an amount equal to the Liquidation
Value of the Series A Preferred Shares (as defined in the Corporation's
Certificate of Incorporation as in effect on the date hereof) being sold
shall first be paid with respect to such Series A Preferred Shares and any
remaining consideration shall be paid ratably for the Management Securities
being sold and the number of shares of Common Stock into which the Series A
Preferred Shares being sold are then convertible.
5. Permitted Transfers. Any Holder of Management Securities may transfer
such Management Securities without complying with Section 3 or Section 4, to
Permitted Transferees who consent in a writing delivered to the Corporation to
be bound by the terms of this Agreement as Management Stockholders. With respect
to any Holder of Management Securities, "Permitted Transferee" means the
Corporation, any other Management Stockholder, the spouse or lineal descendants
of such Holder, any trust for the benefit of such Holder or the benefit of the
spouse or lineal descendants of such Holder, any corporation or partnership in
which such Holder, the spouse and the lineal descendants of such Holder are the
direct and beneficial owners
-5-
<PAGE>
of all of the equity interests (provided such Holder, spouse and lineal
descendants agree in writing to remain the direct and beneficial owners of all
such equity interests), and the personal representative of such Holder upon such
Holder's death for purposes of administration of such Holder's estate or upon
such Holder's incompetency for purposes of the protection and management of the
assets of such Holder.
6. Pledges. No Holder of Management Securities will pledge or otherwise
grant a security interest in any Management Securities.
7. Confidentiality. Each Holder agrees to at all times hold in confidence
and keep secret and inviolate all of the Corporation's confidential information,
including, without limitation, all unpublished matters relating to the business,
property, accounts, books, records, customers and contracts of the Corporation
which such Holder may or hereafter come to know; provided, however, that any
Holder may disclose any such information which has otherwise entered the public
domain or as to which such Holder has obtained knowledge from sources other than
the Corporation or the executive officers or directors of the Corporation
(provided that such source is not bound by a confidentiality agreement with the
Corporation) or which it is required to disclose to any governmental authority
by law or subpoena or judicial process or in connection with a registered public
offering under the Securities Act or a sale to the public pursuant to Rule 144
promulgated by the Commission under the Securities Act or in a private sale
which is permitted or not prohibited hereunder; provided further, however, that
Platinum may disclose summary financial information and descriptive information
pertaining to the Corporation to its limited partners in its routine reports.
8. Board of Directors.
(a) Each of the Holders agrees to take all action necessary including,
without limitation, the voting of its shares of stock of the Corporation,
the execution of written consents, the calling of special meetings, the
removal of directors, the filling of vacancies on the Board of Directors,
the waiving of notice and the attending of meetings, so as to cause (i) the
number of members of the Board of Directors to be nine and (ii) the Board
of Directors of the Corporation to be at all times comprised of the
following persons:
(A) the Chief Executive Officer of the Corporation, who is Billy
Prim as of the date hereof;
(B) the President of the Corporation, who is Jeremiah Callahan
as of the date hereof;
(C) the Vice Chairman of the Corporation, who is Andrew
Filipowski as of the date hereof;
(D) the Chief Financial Officer of the Corporation, who is S. H.
Fogleman, III, as of the date hereof (in the event that any two or more
of the offices in clauses (A), (B), (C) and (D) of this Section 8(a)
are filled by one person or are vacant, then such other senior
executive officer(s) of the Corporation as the Holders of Common Shares
may designate);
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<PAGE>
(E) four persons designated by the Holders of Series A Preferred
Securities, which four persons shall include two persons designated by
Platinum; and
(F) one person, who is not an employee or officer of the
Corporation or any of its Subsidiaries and who has significant
relevant industry experience, designated by a majority of the other
members of the Board of Directors.
(b) Notwithstanding the provisions of paragraph (a) of this Section,
the Holders of Series A Preferred Securities shall possess all of the
rights provided for in the Certificate of Incorporation of the Corporation,
as in effect on the date hereof, upon the occurrence of an Event of
Noncompliance (as defined therein) and the exercise of such rights shall
not violate the provisions of this Section.
(c) The Corporation shall hold quarterly meetings of the Board of
Directors.
9. Observation Rights. So long as Platinum or its nominee is a Holder of
Series A Preferred Securities:
(a) Platinum shall have the right to select, at any time and from
time to time, one representative (the "Representative") to attend and
observe each meeting of the Board of Directors and any other strategic
planning or similar type meeting of the Board of Directors or trade shows
or other similar events relating to the business of the Corporation and the
Corporation shall pay or cause to be paid on behalf of the Corporation the
reasonable out-of-pocket travel expenses incurred by such Representative in
connection with his or her attendance at such meetings or events;
(b) The Corporation shall give Platinum (i) at least 15 days' advance
notice of each regular meeting of the Board of Directors and such advance
notice as is reasonable under the circumstances to enable the
Representative to attend each special or emergency meeting of the Board of
Directors, (ii) on or prior to the date of each meeting of the Board of
Directors, all information given to the directors of the Corporation at or
in connection with such meeting, and (iii) as soon as available but in any
event not later than 45 days after each meeting of the Board of Directors,
copies of the minutes of such meeting. In the event that the Board of
Directors shall act by unanimous written consent in lieu of a meeting, the
Corporation shall give Platinum and the Representative a copy of such
written consent at least five business days prior to the earlier of the
adoption or effective date thereof, together with all information given to
the directors of the Corporation in connection with such action; provided,
however, that in the event immediate action is required to address an
emergency situation, the Corporation shall be in compliance with this
sentence if the Corporation shall send Platinum and the Representative a
copy of such written consent and information by telecopier at the same time
as such consent and information is sent to the members of the Board of
Directors for their review and signature.
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<PAGE>
(c) The Corporation shall comply with all provisions of its by-laws
relating to meetings of the Board of Directors, including, without
limitation, those relating to notice and to the time and date of meetings
and action by written consent; and
(d) The Representative shall have the right (but not the obligation)
to consult with and advise the management of the Corporation at any time or from
time to time, by telephone or in person, on such matters relating to the
operation of the Corporation as the Representative shall deem appropriate
(including, without limitation, matters regarding capital expenditures,
acquisitions and management compensation).
10. Compensation Committee. The Board of Directors and the Corporation
will maintain a "Compensation Committee" which will be comprised of one director
designated by Platinum and two directors designated by the Holders of Common
Shares (the "Compensation Committee"). The Compensation Committee shall be
responsible for and have authority to establish the compensation of the
executive officers of the Corporation with the approval of the committee member
who is designated by Platinum.
11. Board Reimbursements. The Corporation shall reimburse all Persons
serving as directors of the Corporation for their reasonable out-of-pocket
expenses in connection with attending meetings of the Board of Directors and all
committees thereof and all reasonable expenses otherwise incurred in fulfilling
their duties as directors.
12. Right of First Refusal.
(a) Each Holder of Series A Preferred Securities shall have the right
of first refusal to purchase his, her or its proportionate number, or any
lesser number, of any New Securities for which the Corporation has received
a bona fide offer from a prospective purchaser and which the Corporation
proposes to sell and issue to such purchaser. Each Holder of Series A
Preferred Securities shall have rights of over-allotment such that, if any
Holder of Series A Preferred Securities fails to exercise his, her or its
rights hereunder to purchase his, her or its proportionate number of New
Securities, the Holders of Series A Preferred Securities may purchase the
non-purchasing Holder's portion on a pro rata basis within ten days from
the date on which they receive written notice that such non-purchasing
Holder has failed to exercise his, her or its right hereunder to purchase
his, her or its proportionate number. For purposes of this Section, a
Holder's "proportionate number" means the product obtained by multiplying
the number of New Securities proposed to be sold and issued by a fraction,
the numerator of which will be the number of Common Shares owned (or deemed
owned) by such Holder of Series A Preferred Securities and the denominator
of which will be the total number of Common Shares owned (or deemed owned)
by all Holders of Series A Preferred Securities. For purposes of this
Section, "pro rata" among the Holders of Series A Preferred Securities
means in proportion to the number of Common Shares owned (or deemed owned)
by such Holders of Series A Preferred Securities.
(b) In the event the Corporation receives a bona fide offer for the
purchase of New Securities from a prospective purchaser and the Corporation
proposes to sell and issue such New Securities, the Corporation will submit
to each Holder of Series A
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<PAGE>
Preferred Securities written notice identifying the prospective purchaser
and describing the New Securities and the price and terms upon which the
Corporation would issue and sell the same, and setting forth the total
number of New Securities to be issued and sold and such Holder's
proportionate number. Each such Holder of Series A Preferred Securities
will have fifteen (15) days from the date of receipt of any notice to agree
to purchase his, her or its proportionate number or any lesser number of
such New Securities, for the price and upon the terms specified in the
notice by giving written notice to the Corporation and stating therein the
quantity of New Securities to be purchased. If two or more types of New
Securities are to be issued or New Securities are to be issued together
with other types of securities, including, without limitation, debt
securities, in a single transaction or related transactions, the rights to
purchase New Securities granted to Holders of Series A Preferred Securities
under this Section must be exercised to purchase all types of New
Securities and such other securities in the same proportion as such New
Securities and other securities are to be issued by the Corporation.
(c) In the event the Holders of Series A Preferred Securities fail to
exercise the right of first refusal within said 15-day period and after the
expiration of the 10-day period for the exercise of over-allotment rights
pursuant to subsection (a) above, with respect to all the New Securities,
the Corporation will have 90 days thereafter to sell or enter into a
binding and unconditional agreement (pursuant to which the sale of New
Securities covered thereby will be, and is, consummated within 90 days from
the date of said agreement) to sell the New Securities as to which such
Holders' right was not exercised, to the prospective purchaser identified
in, and at the price and upon the terms specified in, the Corporation's
notice. In the event the Corporation has not sold such New Securities
within said 90-day period (or sold and issued such new Securities in
accordance with the foregoing within 90 days from the date of said
agreement), the Corporation will not thereafter issue or sell any New
Securities to a prospective purchaser without first offering such New
Securities to the Holders of Series A Preferred Securities in the manner
provided above.
13. Execution. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered will be deemed an
original, and such counterparts together will constitute one instrument.
14. Subsequent Management Stockholders.
(a) The Corporation will not issue or sell any Securities to any
employee or officer of the Corporation who, after giving effect to such
issuance or sale, owns, directly or indirectly, one percent (1%) or more of
the outstanding Securities of the Corporation (on a fully diluted basis),
unless such employee or officer agrees in writing to be bound by the terms
of this Agreement as a Management Stockholder and a Holder of Management
Securities. Upon the delivery to the Corporation of such written consent,
such officer or employee shall be bound by and entitled to the benefits of
this Agreement in such capacity.
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<PAGE>
15. Legend. The Corporation will stamp or imprint each certificate or
other instrument representing Securities, throughout the term of this Agreement,
with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
PROVISIONS, INCLUDING, AMONG OTHERS, RESTRICTIONS ON VOTING AND
TRANSFER, SET FORTH IN A CERTAIN SHAREHOLDERS' AGREEMENT DATED AS OF
DECEMBER 1, 1994, A COPY OF WHICH IS AVAILABLE AT THE PRINCIPAL OFFICE
OF BLUE RHINO CORPORATION."
16. Remedies. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages will not be an adequate remedy for any breach of the
provisions of this Agreement and that an party may in its sole discretion apply
to any court of law or equity of competent jurisdiction for specific performance
or injunctive relief (without the necessity of posting a bond) in order to
enforce or prevent any violations of the provisions of this Agreement.
17. Notices. Any notices desired, required or permitted to be given
hereunder shall be delivered personally or mailed, certified or registered mail,
return receipt requested, or delivered by overnight courier service, to the
following addresses, or such other addresses as shall be given by notice
delivered hereunder, and shall be deemed to have been given upon delivery, if
delivered personally, five days after mailing, if mailed, or one business day
after delivery to the overnight courier service, if delivered by overnight
courier service:
If to the Corporation, to:
Blue Rhino Corporation
104 Cambridge Park
Winston-Salem, North Carolina 27104
Attention: Billy Prim, Chief Executive Officer
with a copy to:
House Law Firm
P.O. Drawer 26015
Winston-Salem, North Carolina 27114-6015
Attention: Don R. House, Esq.
If to the Holders of Management Securities; to the addresses set forth on
the stock record books of the Corporation.
If to the Holders of Series A Preferred Securities, to the addresses set
forth on the stock record books of the Corporation.
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With a copy to:
Katten Muchin & Zavis
525 W. Monroe Street, Suite 1600
Chicago, Illinois 60661
Attention: Matthew S. Brown, Esq.
18. Amendments and Waivers. The provisions of this Agreement may be
amended upon the written agreement of the Corporation, the Holder or
Holders of two-thirds of the Series A Preferred Securities and the Holder
or Holders of a majority of the Management Securities. Any waiver, permit,
consent or approval of any kind or character on the part of any Holders of
any provision or condition of this Agreement must be made in writing and
shall be effective only to the extent specifically set forth in writing.
19. Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure
to the benefit of the respective successors and assigns of the parties
hereto, and each transferee of all or any portion of the Securities held by
the parties hereto, whether so expressed or not.
20. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
21. Governing Law. All questions concerning the construction,
validity and interpretation of, and the performance of the obligations
imposed by, this Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware applicable to contracts made and
wholly to be performed in that state.
22. Termination of this Agreement. Except as otherwise provided
herein, this Agreement shall terminate upon the earlier of (a) the date on
which less then 10% of the Series A Preferred Securities at any time issued
shall remain outstanding or (b) the closing of a Qualified Public Offering.
23. References to Sections; Headings. References to Sections shall
be references to Sections in this Agreement, unless otherwise indicated.
Section headings are for reference only and shall not be given meaning in
interpreting this Agreement.
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This Shareholders' Agreement was executed as of the date first set forth
above.
Signature
CORPORATION:
BLUE RHINO CORPORATION
By: /s/ BILLY PRIM
------------------
Billy Prim, Chief Executive Officer
INVESTORS:
PLATINUM VENTURE PARTNERS I, L.P.
By: PLATINUM VENTURE PARTNERS, INC.
By: /s/ MICHAEL SANTER
----------------------
Michael Santer, Vice President
/s/ ANDREW J. FILIPOWSKI
-------------------------
Andrew J. Filipowski
/s/ CRAIG J. DUCHOSSOIS
-----------------------
Craig J. Duchossois
/s/ BOBBY SLATE
---------------
Bobby Slate
/s/ JAMES R. HARDIN
-------------------
James R. Hardin
/s/ ROBERT F. STEEL & JENNIFER STEEL
------------------------------------
Robert F. Steel & Jennifer Steel JTWROS
/s/ THOMAS E. GLEITSMAN
-----------------------
Thomas E. Gleitsman
/s/ TOM AUSTIN
--------------
Tom Austin
/s/ RAY MAYNARD
---------------
Ray Maynard
/s/ ROBERT L. JACOBS
--------------------
Robert L. Jacobs
/s/ FRANK MURNANE, SR.
----------------------
Frank Murnane, Sr.
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/s/ FRANK MURNANE, JR.
----------------------
Frank Murnane, Jr.
GABRIEL, INC.
By: /s/ JIMMY LIAUTAUD
----------------------
Jimmy Liautaud, Director
/s/ JAMES ALAN BOOE
-------------------
James Alan Booe
/s/ JOE WALLACE
---------------
Joe Wallace
/s/ LENNARD CARLSON
-------------------
Lennard Carlson
/s/ RICHARD CARLSON
-------------------
Richard Carlson
/s/ BAXTER KIGER
----------------
Baxter Kiger
/s/ PETER VITULLI
-----------------
Peter Vitulli
/s/ BARRY SYLVESTER
-------------------
Barry Sylvester
/s/ JAMES BARZYK
----------------
James Barzyk
/s/ ALEXANDER DANZBERGER
------------------------
Alexander Danzberger
COLE TAYLOR BANK CUSTODIAN FBO
ARTHUR FRIGO IRA #8417
By: /s/ NORMA E. COLON
----------------------
Norma E. Colon, Trust Officer, IRA
HUIZENGA CAPITAL MANAGEMENT
By: /s/ PETER H. HUIZENGA
-------------------------
Peter H. Huizenga, Sole Proprietor
PETER H. HUIZENGA TESTAMENTARY TRUST
By: /s/ PETER H. HUIZENGA
-------------------------
Peter H. Huizenga, Trustee
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/s/ BILLY PRIM
--------------
Billy Prim
KIMBERLY FAMILY DISCRETIONARY TRUST
By: /s/ CRAIG J. DUCHOSSOIS
---------------------------
Craig J. Duchossois, Trustee
/s/ EDWARD A. FORTINO & DAYLE
-----------------------------
DUCHOSSOIS-FORTINO
------------------
Edward A. Fortino & Dayle Duchossois-Fortino
JTWROS
MANAGEMENT STOCKHOLDERS:
/s/ BILLY PRIM
--------------
Billy D. Prim
/s/ ANDREW J. FILIPOWSKI
------------------------
Andrew J. Filipowski
/s/ DEBBIE W. PRIM
------------------
Debbie W. Prim
/s/ MAYO M. MCCORMICK
---------------------
Mayo M. McCormick
/s/ JEANNIE CANNON
------------------
Jeannie Cannon
/s/ LUANNE HOLDEN
-----------------
Luanne Holden
/s/ CHRIS HOLDEN
----------------
Chris Holden
DEBBIE W. PRIM, TRUSTEE FOR SARKANDA
U. WESTMORELAND
By: /s/ DEBBIE W. PRIM
----------------------
Debbie W. Prim, Trustee
DEBBIE W. PRIM, TRUSTEE FOR ANTHONY
G. WESTMORELAND
By: /s/ DEBBIE W. PRIM
----------------------
Debbie W. Prim, Trustee
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<PAGE>
/s/ VERONICA CHAMPNEY
---------------------
Veronica Champney
/s/ JENNIFER R. FILIPOWSKI
--------------------------
Jennifer R. Filipowski
ANDREW J. FILIPOWSKI, TRUSTEE FOR
ANDREW E. FILIPOWSKI
By: /s/ ANDREW J. FILIPOWSKI
-----------------------------
Andrew J. Filipowski, Trustee
VERONICA CHAMPNEY, TRUSTEE FOR
ALEXANDRIA FILIPOWSKI
By: /s/ VERONICA CHAMPNEY
--------------------------
Veronica Champney, Trustee
VERONICA CHAMPNEY, TRUSTEE FOR
JAMES MEADOWS
By: /s/ VERONICA CHAMPNEY
--------------------------
Veronica Champney, Trustee
ANGELL FAMILY LIMITED PARTNERSHIP
By: ANGELL FAMILY COMPANY
By: /s/ DON G. ANGELL
----------------------
Don G. Angell, President
/s/ TOM AUSTIN
--------------
Tom Austin
/s/ JEREMIAH CALLAHAN
---------------------
Jeremiah Callahan
/s/ CRAIG ERBLAND
-----------------
Craig Erbland
/s/ S.H. FOGELMAN, III
----------------------
S.H. Fogleman, III
/s/ JIM MIZELLE
---------------
Jim Mizelle
/s/ DOUG MELE
-------------
Doug Mele
/s/ STEVE RASH
--------------
Steve Rash
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/s/ BAXTER KIGER
----------------
Baxter Kiger
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Schedule 1
Investors
---------
Plantinum Venture Partners I, L.P.
Andrew J. Filipowski
Craig Duchossois
Bobby Slate
James R. Hardin
Robert F. Steel & Jennifer Steel JTWROS
Thomas E. Gleitsman
Tom Austin
Ray Maynard
Robert L. Jacobs
Frank Murnane, Sr.
Frank Murnane, Jr.
Gabriel, Inc. (c/o Jimmy Liautaud)
James Alan Booe
Joe Wallace
Lennard Carlson
Richard Carlson
Baxter Kiger
Peter Vitulli
Barry Sylvester
James Barzyk
Alexander Danzberger
Cole Taylor Bank Custodian FBO Arthur Frigo IRA #8417
Huizenga Capital Management
Peter H. Huizenga Testamentary Trust
Billy Prim
Kimberly Family Discretionary Trust (c/o Craig Duchossois)
Edward A. Fortino & Dayle Duchossois-Fortino JTWROS
<PAGE>
Schedule 2
Management Stockholders
Billy D. Prim
Andrew J. Filipowski
Debbie W. Prim
Mayo M. McCormick
Jeannie Cannon
Luanne Holden
Chris Holden
Debbie W. Prim, Trustee for Sarkanda U. Westmoreland
Debbie W. Prim, Trustee for Anthony G. Westmoreland
Veronica Champney
Jennifer R. Filipowski
Andrew J. Filipowski, Trustee for Andrew E. Filipowski
Veronica Champney, Trustee for Alexandria Filipowski
Veronica Champney, Trustee for James Meadows
Angell Family Limited Partnership (c/o Don G. Angell)
Tom Austin
Jeremiah Callahan
Craig Erbland
S.H. Fogleman, III
Jim Mizelle
Doug Mele
Steve Rash
Baxter Kiger
<PAGE>
EXHIBIT 10.17
FIRST AMENDMENT TO BLUE RHINO CORPORATION
SHAREHOLDERS' AGREEMENT
--------------------------------
THIS FIRST AMENDMENT is dated as of October 11, 1995 by BLUE RHINO
CORPORATION, a Delaware corporation (the "Corporation") and the persons listed
on Schedule 1 attached hereto are consenting and agreeing to this Second
Amendment under separate consents ("Consenting Investors").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Corporation, Investors and the Management Stockholders have
heretofore entered into a Shareholders' Agreement dated as of December 1, 1994;
WHEREAS, pursuant to Section 12 of the Shareholders' Agreement the Series A
Preferred Stockholders have a right to first refusal to purchase any securities
offered by the Corporation;
WHEREAS, to induce the Additional Investors to purchase units consisting of
a 10.5% Senior Discount Note and Warrant to purchase the Corporation's Common
Stock (the "Units") pursuant to a Unit Purchase Agreement between the
Corporation and the Additional Investors of even date herewith (the "Unit
Purchase Agreement") the Corporation deems it desirable to amend the
Shareholders' Agreement to delete Section 12;
WHEREAS, pursuant to Section 18 of the Shareholders' Agreement, the
Corporation may amend the Shareholders' Agreement with the consent of the Holder
or Holders of two-thirds of the Corporation's issued an outstanding Series A
Preferred Securities;
WHEREAS, the Consenting Investors, holding in excess of two-thirds of the
total outstanding Series A Preferred Shares have consented to this First
Amendment in writing.
AGREEMENTS
----------
In consideration of the promises and the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties agree as follows:
1. The Shareholders' Agreement is amended as provided herein.
<PAGE>
2. Section 12 concerning rights of first refusal is hereby deleted from
the Shareholders' Agreement.
3. The First Amendment is subject to receipt of the consent of the
Consenting Investors listed on Schedule 1 attached hereto.
The undersigned has executed this First Amendment to Shareholders'
Agreement in the date first set forth above.
BLUE RHINO CORPORATION
By_/s/ Billy Prim___________________
Billy Prim, Chief Executive
Officer
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<PAGE>
SCHEDULE 1
Consenting Investors
--------------------
Plantinum Venture Partners, I, L.P.
Andrew J. Filipowski
Craig Duchossois
Bobby Slate
James R. Hardin
Robert F. Steel & Jennifer Steel JTWROS
Thomas E. Gleitsman
Tom Austin
Ray Maynard
Robert L. Jacobs
Frank Murnane, Sr.
Frank Murnane, Jr.
Gabriel, Inc. (c/o Jimmy Liautaud)
James Alan Booe
Joe Wallace
Lennard Carlson
Richard Carlson
Baxter Kiger
Peter Vitulli
Barry Sylvester
James Barzyk
Alexander Danzberger
Cole Taylor Bank Custodian FBO Arthur Frigo IRA #8417
Huizenga Capital Management
Peter H. Huizenga Testamentary Trust
Billy Prim
Kimberly Family Discretionary Trust (c/o Craig Duchossois)
Edward A. Fortino & Dayle Duchossois-Fortino JTWROS
- 3 -
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF
BLUE RHINO CORPORATION
Subsidiary State of Incorporation
- ---------- ----------------------
Rhino Services, L.L.C. Delaware
<PAGE>
EXHIBIT 23.1
Consent of Pedersen & Houpt, P.C.
Pedersen & Houpt, P.C. hereby consents to all references made to it in the
Registration Statement on Form S-1 of Blue Rhino Corporation, as filed with the
Securities and Exchange Commission on March 10, 1998.
/s/ Pedersen & Houpt, P.C.
--------------------------
Pedersen & Houpt, P.C.
Pedersen & Houpt, P.C.
Chicago, Illinois
March 10, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDNT ACCOUNTANTS
To the Board of Directors and Shareholders of
Blue Rhino Corporation
We consent to the inclusion in this registration statement of Form S-1
(Registration No. 333- ) of our reports dated September 5, 1997, except for
Note 7, for which the date is December 18, 1997, on our audits of the
consolidated financial statements of Blue Rhino Corporation. We also consent to
the reference of our firm under the captions "Experts" and "Selected
Consolidated Financial Date".
/s/ Coopers & Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Greensboro, North Carolina
March 10, 1998
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the reference in the Registration Statement of Blue Rhino
Corporation on Form S-1 of our audit of the financial statements of Blue Rhino
Corporation as of July 31, 1994, and for the initial period beginning March 24,
1994 and ending July 31, 1994, in the section "Selected Consolidated Financial
Data" and to the reference to us under the heading "Experts" in the Prospectus,
which is a part of this Registration statement.
/s/ The Daniel Professional Group, Inc.
- ---------------------------------------
The Daniel Professional Group, Inc.
March 9, 1998
Winston-Salem, North Carolina
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Billy D. Prim, as his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
to act, without the other, for him or her and in his or her name, place and
stead, in any and all capacities, to sign any or all amendments (including post-
effective amendments) to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or any of them, or
their substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement, has been signed below by the following persons in
the capacities indicated on March 6, 1998.
<TABLE>
<CAPTION>
Signature Title
- ---------------------------------------------- ----------------------------------------------
<S> <C>
/s/ Billy D. Prim President and Chairman of the Board
- ---------------------------------------------- (Principal Executive Officer)
Billy D. Prim
/s/ Mark Casteneda Secretary and Chief Financial Officer
- ---------------------------------------------- (Principal Financial and Accounting Officer)
Mark Casteneda
/s/ Andrew J. Filipowski Vice Chairman of the Board
- ----------------------------------------------
Andrew J. Filipowski
/s/ Craig J. Duchossois Director
- ----------------------------------------------
Craig J. Duchossois
/s/ Steven D. Devick Director
- ----------------------------------------------
Steven D. Devick
/s/ S.H. Fogleman III Director
- ----------------------------------------------
S.H. Fogleman III
/s/ James P. Liautaud Director
- ----------------------------------------------
James P. Liautaud
/s/ John H. Muehlstein Director
- ----------------------------------------------
John H. Muehlstein
/s/ Robert S. Steel Director
- ----------------------------------------------
Robert S. Steel
</TABLE>
