<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-12
BLUE RHINO CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
<PAGE> 2
LOGO
BLUE RHINO CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 19, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of
Stockholders (together with any adjournment thereof, the "Annual Meeting") of
Blue Rhino Corporation (the "Company") which will be held on Tuesday, December
19, 2000 at the Village Conference Center, 6205 Ramada Drive, Clemmons, North
Carolina, at 10:30 a.m.
At the Annual Meeting, stockholders will be asked to consider and vote
upon the following matters:
1. Election of two Class C Directors to hold office until the
Annual Meeting of Stockholders for the fiscal year ending July
31, 2003;
2. Authorization of amendments to the Company's 1998 Stock
Incentive Plan to increase the number of shares of Common
Stock reserved and available for distribution from 1,200,000
to 2,200,000 and to provide that no participant may be granted
options for more than 300,000 shares during any 12-month
period;
3. Authorization of an amendment to the Company's Amended and
Restated Stock Option Plan for Non-Employee Directors to
increase the number of shares of Common Stock reserved and
available for distribution from 100,000 to 400,000;
4. Ratification of the appointment of Ernst & Young LLP as the
Company's independent accountants for the fiscal year ending
July 31, 2001; and
5. Any other business that may properly come before the Annual
Meeting.
In addition, the holders of the Company's Series A Convertible
Preferred Stock will be asked to consider and vote to elect one Class C Director
to hold office until the Annual Meeting of Stockholders for the fiscal year
ending July 31, 2003.
Only stockholders of record at the close of business on the record date
of October 31, 2000 are entitled to vote their shares at the Annual Meeting. A
list of stockholders entitled to vote will be available for inspection during
regular business hours at the executive offices of the Company at 104 Cambridge
Plaza Drive, Winston-Salem, North Carolina 27104 for ten days prior to the
Annual Meeting.
<PAGE> 3
A proxy card is enclosed for the convenience of those stockholders who
do not plan to attend the Annual Meeting in person but desire to have their
shares voted. If you do not plan to attend the Annual Meeting, please complete
and return the proxy card in the envelope provided for that purpose. If you
return your card and later decide to attend the Annual Meeting in person or for
any other reason desire to revoke your proxy, you may do so at any time before
your proxy is voted.
By Order of the Board of Directors
/s/ Billy D. Prim
Billy D. Prim
Chairman of the Board, President
and Chief Executive Officer
Winston-Salem, North Carolina
November 16, 2000
<PAGE> 4
BLUE RHINO CORPORATION
104 CAMBRIDGE PLAZA DRIVE
WINSTON-SALEM, NORTH CAROLINA 27104
PROXY STATEMENT FOR
2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 19, 2000
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Blue Rhino Corporation (the "Company" or
"Blue Rhino") for use at the Company's Annual Meeting of Stockholders for the
fiscal year ended July 31, 2000, and any adjournment thereof (the "Annual
Meeting") to be held on December 19, 2000 at the Village Conference Center, 6205
Ramada Drive, Clemmons, North Carolina, at 10:30 a.m. This proxy statement and
the accompanying materials are being mailed to the Company's stockholders
beginning on or about November 16, 2000.
GENERAL
CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 shares
of common stock, par value $0.001 per share ("Common Stock"), and 20,000,000
shares of preferred stock, par value $0.001 per share ("Preferred Stock"), of
which 3,133,333 have been designated Series A Convertible Preferred Stock
("Series A Preferred Stock"). (The Common Stock and the Preferred Stock are also
referred to collectively in these proxy materials as the "capital stock"). As of
October 31, 2000, there were 9,226,497 shares of Common Stock outstanding and
2,850,000 shares of Series A Preferred Stock outstanding.
STOCKHOLDERS ENTITLED TO VOTE
Only stockholders of record at the close of business on the record date
of October 31, 2000 are entitled to vote their shares at the Annual Meeting.
Each outstanding share of Common Stock and each outstanding share of Series A
Preferred Stock is entitled to one vote, except that only the holders of the
Series A Preferred Stock will vote on the proposal to elect the Preferred Stock
Director (as defined below). See "Proposal 1 - Election of Directors," below.
VOTING
Holders of a majority of the outstanding shares of Common Stock and
Series A Preferred Stock (considered together as a single voting group) present
in person or represented by proxy and entitled to vote at the Annual Meeting
will constitute a quorum to conduct business. Assuming the existing of a quorum
at the Annual Meeting, the vote required to approve each proposal is set forth
below:
<TABLE>
<S> <C> <C>
o Proposal 1, "Election of Directors" A plurality of the votes cast by the holders
of shares of Common Stock and Series A
Preferred Stock, considered together as a
single voting group;
o Election of the Preferred Stock Director Affirmative vote of holders of a majority of
the outstanding shares of Series A Preferred
Stock;
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
o Proposals 2, 3 and 4 and all other matters Affirmative vote of holders of a majority of
to come before the Annual Meeting shares of Common Stock and Series A
Preferred Stock, considered together as a
single voting group, present in person or
represented by proxy and entitled to vote at
the Annual Meeting.
</TABLE>
Because abstentions with respect to any matter are treated as shares
present in person or represented by proxy and entitled to vote for the purposes
of determining whether that matter has been approved by the stockholders,
abstentions will have the same effect as negative votes for Proposals 2, 3 and 4
in this proxy statement (as well as in the election of the Preferred Stock
Director). Non-votes by banks, brokerage houses, custodians, nominees and other
fiduciaries and shares as to which proxy authority has been withheld with
respect to any matter will be counted for the purpose of determining whether a
quorum is present but will not be included for purposes of determining whether
stockholder approval of that matter has been obtained.
PROXIES
If a stockholder properly completes and returns the accompanying proxy
card, the shares represented by the proxy will be voted as the stockholder
directs. IF THE PROXY CARD IS RETURNED BUT NO INSTRUCTIONS ARE GIVEN BY THE
STOCKHOLDER, THE SHARES WILL BE VOTED BY THE PROXIES NAMED HEREIN FOR THE
ELECTION OF THE CLASS C DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS AND FOR
PROPOSALS 2, 3 AND 4.
A stockholder may revoke a proxy at any time before it is voted by
filing a signed notice of revocation with the Secretary of the Company or by
returning a properly completed proxy card bearing a later date. In addition, a
stockholder may revoke a proxy by attending the Annual Meeting and voting in
person.
SOLICITATION OF PROXIES
The Company intends to request that banks, brokerage houses,
custodians, nominees and other fiduciaries forward copies of these proxy
materials to those persons for whom they hold shares. In addition to
solicitation by mail, certain officers and employees of the Company may solicit
proxies in person or by telephone. Such officers and employees will not receive
any specific compensation for such services. The cost of preparing, assembling,
mailing and soliciting proxies and other miscellaneous expenses related thereto
will be borne by the Company.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Second Amended and Restated Certificate of Incorporation,
as amended (the "Charter"), provides that the Board of Directors of the Company
shall consist of not less than three or more than nine members, and the Board
has set the number of members at nine. The nine directors are divided into Class
A, Class B and Class C, with each class comprised of three directors to serve a
three-year staggered term. Three Class C Directors will be elected at the Annual
Meeting to serve until the annual stockholders meeting for the fiscal year
ending July 31, 2003 or until such time as their successors are elected and
qualified. Under the terms of the Charter, one of the Class C directors is
elected solely by the holders of the Series A Preferred Stock (the "Preferred
Stock Director").
2
<PAGE> 6
Pursuant to an Amended and Restated Stockholders Agreement dated
October 25, 2000, each holder of Series A Preferred Stock has agreed to vote all
voting securities of the Company over which such holder has voting control and
to take all other action within such holder's control to cause one designee of
Cahill, Warnock Strategic Partners Fund II A, L.P. (for as long as Cahill,
Warnock Fund II A or its affiliate holds a majority of the outstanding shares of
Series A Preferred Stock) to be elected to the Board of Directors. See
"Beneficial Ownership of Directors, Executive Officers and Certain Beneficial
Owners," below. Cahill, Warnock Fund II A has selected David L. Warnock as its
designee as the Class C Director.
Each nominee has consented to being named in this proxy statement and
to serve if elected. If any nominee should become unable to serve as a director
prior to the Annual Meeting, the persons authorized by your proxy will vote for
the election of a substitute nominee recommended by the Board of Directors in
place of that nominee or to reduce the number of persons to be elected by the
number of persons unable to serve (subject to the requirement that each class be
as nearly equal in number as possible).
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
HOLDERS OF COMMON STOCK VOTE FOR THE ELECTION OF MESSRS. DEVICK AND CASTANEDA,
AND THAT THE HOLDERS OF THE SERIES A PREFERRED STOCK VOTE FOR THE ELECTION OF
MESSRS. DEVICK, CASTANEDA AND WARNOCK. PROXIES WILL BE VOTED FOR THE NOMINEES
NOMINATED BY THE BOARD OF DIRECTORS UNLESS INSTRUCTIONS ARE GIVEN TO THE
CONTRARY.
INFORMATION CONCERNING NOMINEES FOR ELECTION
Certain information as to each of the three nominees for election as a
Class C Director is set forth in the table below. The information appearing
below and certain information regarding beneficial ownership of securities by
such nominees contained in this proxy statement has been furnished to the
Company by the nominees.
NOMINEE AGE BIOGRAPHICAL INFORMATION
------- --- ------------------------
Steven D. Devick 48 Mr. Devick has served as one of the Company's
directors since May 1994. Mr. Devick is a co-founder
of Platinum Entertainment, Inc. and served as its
chairman of the board and chief executive officer
from January 1992 until June 2000. Mr. Devick is also
the founder of DDE, Inc., a management company, and
has served as its chairman of the board and chief
executive officer since 1988.
Mark Castaneda 36 Mr. Castaneda has served as the Company's Chief
Financial Officer since November 1997, Secretary
since February 1998 and as a director since September
1998. 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, as a director of
planning and controller of Skelgas Propane, Inc. from
May 1991 to July 1995, and as a certified public
accountant with Deloitte & Touche LLP from November
1988 to July 1990.
David Warnock 42 Mr. Warnock has served as the Company's Preferred
Stock Director since September 7, 2000. Mr. Warnock
is a founding member and managing partner of Cahill
Warnock & Company, LLC, a private investment
management firm established in 1995. Prior to
founding Cahill Warnock, Mr. Warnock spent 12 years
at T. Rowe Price Associates in a variety of
investment management positions. Mr. Warnock also
serves as a director of Children's Comprehensive
3
<PAGE> 7
Services, Inc., Environmental Safeguards, Inc.,
Concorde Career Colleges, Inc. and Touchstone Applied
Science Technologies, Inc.
INFORMATION CONCERNING CONTINUING DIRECTORS
Certain information as to each director who will continue in office is
set forth below. The information appearing below and certain information
regarding beneficial ownership of securities by such directors contained in this
proxy statement has been furnished to the Company by the directors. Messrs. Prim
and Filipowski are brothers-in-law.
CONTINUING CLASS B DIRECTORS TO SERVE UNTIL ANNUAL MEETING FOR THE FISCAL YEAR
ENDED JULY 31, 2002
DIRECTOR AGE BIOGRAPHICAL INFORMATION
-------- --- ------------------------
Richard A. Brenner 37 Mr. Brenner has served as a director since August
1998. Mr. Brenner has been the president of Amarr
Company, a manufacturer and distributor of garage
doors, since July 1993.
Robert J. Lunn 50 Mr. Lunn has served as one of the Company's directors
since December 1999. Mr. Lunn is the founder,
managing partner and chief investment officer of Lunn
Partners LLC, a private investment banking firm
established in 1996. Prior to establishing Lunn
Partners, Mr. Lunn was a managing director, member of
the operating committee and head of the financial
services division at Lehman Brothers Holdings Inc.
Mr. Lunn also serves as a director of Shaw
Industries, Inc.
John H. Muehlstein 45 Mr. Muehlstein has served as one of the Company's
directors since September 1995. Since 1986, Mr.
Muehlstein has been a partner of the law firm of
Pedersen & Houpt, P.C., a provider of legal services
to Blue Rhino. Mr. Muehlstein also serves as a
director of SpinCycle, Inc.
CONTINUING CLASS A DIRECTORS TO SERVE UNTIL ANNUAL MEETING FOR THE FISCAL YEAR
ENDED JULY 31, 2001
DIRECTOR AGE BIOGRAPHICAL INFORMATION
-------- --- ------------------------
Billy D. Prim 44 Mr. Prim co-founded Blue Rhino Corporation in March
1994 and has served as its Chief Executive Officer
and Chairman since its incorporation and as its
President since January 1996. Mr. Prim also serves as
president and chief executive officer and is a 51%
stockholder of American Oil and Gas, Inc., a North
Carolina-based holding company. Until April 1995,
American Oil and Gas, Inc. was a distributor of
propane gas, home heating oil, diesel fuel and
kerosene. Mr. Prim also serves as a director of
Southern Community Bank & Trust.
Andrew J. Filipowski 50 Mr. Filipowski co-founded Blue Rhino Corporation in
March 1994 and has served as its Vice Chairman since
May 1994. Mr. Filipowski is the founder and chairman
of divine interVentures, Inc. (formerly Platinum
Venture Partners, Inc.), a holding company with
interests in information technology, venture capital,
software and software services and media-related
enterprises. Mr. Filipowski was a co-founder of
Platinum Technology International, Inc. and served as
its chairman of the board, president and chief
executive officer from its formation in April 1987
until
4
<PAGE> 8
its sale to Computer Associates, Inc. in March 1999.
Mr. Filipowski also serves as a director of Bluestone
Software, Inc. and eShare Technologies.
Craig J. Duchossois 56 Mr. 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 previously served as its
president from 1986 to 1995. Mr. Duchossois also
serves as a director of Bissell, Inc. and LaSalle
Bank, N.A.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has standing Executive, Compensation and Audit
Committees. The Board does not have a nominating committee, and the Board
performs the functions that such committee would otherwise perform. Stockholders
may nominate candidates for election to the Board, provided that written notice
of intent to make such nomination is submitted in accordance with applicable
procedures. See "Stockholder Proposals," below.
The Executive Committee, consisting of Messrs. Duchossois, Filipowski
and Prim, makes recommendations to the Board of Directors concerning matters of
strategic planning and operational management of the Company and has the power,
subject to certain statutory limitations, to address matters on behalf of the
Board of Directors which require attention between meetings of the Board of
Directors. The Compensation Committee, consisting of Messrs. Brenner and Devick,
establishes the salary and incentive compensation for the Company's Chief
Executive Officer and, based on recommendations from the Chief Executive
Officer, for each of the Company's other executive officers and key employees.
The Compensation Committee also administers the Company's employee and director
stock incentive plans. The Audit Committee, consisting of Messrs. Brenner, Lunn,
Devick and Muehlstein, makes recommendations to the Board of Directors
concerning the Company's independent accountants, reviews the results and scope
of the audit and other accounting-related services, and reviews and evaluates
the Company's internal control functions.
MEETINGS
The Board of Directors held six meetings during fiscal 2000. The
Executive Committee held one meeting and the Compensation and Audit Committees
each held three meetings in fiscal 2000. All members of the Board of Directors
attended at least 75% of the aggregate of all of the meetings of the Board of
Directors and of each committee on which such member served during fiscal 2000.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is comprised of four
directors who are considered independent under applicable National Association
of Securities Dealers rules. The Committee operates under a written charter
adopted by the Board in May 2000. A copy of the Audit Committee charter is
attached to this proxy statement as Appendix A.
As noted above, the primary purpose of the Audit Committee is to
oversee the Company's financial reporting process on behalf of the Board and
report the results of their activities to the Board. The Audit Committee
annually reviews and recommends to the Board the selection of the Company's
independent accountants, subject to stockholder ratification.
Management is responsible for preparing the Company's financial
statements. The independent accountants are responsible for performing an
independent audit of the Company's audited financial statements in accordance
with generally accepted auditing standards and to issue a report thereon. The
5
<PAGE> 9
Committee's responsibility is to monitor and oversee these processes.
In this context, the Committee has reviewed and discussed the audited
financial statements with management and the independent accountants. The
Committee also has discussed with the independent accountants the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
The Company's independent accountants also provided to the Committee
the written disclosures and letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the
Committee discussed with the independent accountant's that firm's independence.
Based on the above discussions and review with management and the
independent accountants, the Committee recommended to the Board of Directors
that the audited financial statements be included in the Company's Annual Report
on Form 10-K for the year ended July 31, 2000 for filing with the Commission.
Respectfully submitted by the Audit Committee of the Board of
Directors:
AUDIT COMMITTEE
Steven D. Devick
Robert J. Lunn
Richard A. Brenner
John H. Muehlstein
6
<PAGE> 10
DIRECTOR COMPENSATION
In order to enhance its ability to attract, retain and motivate
qualified non-employee directors, the Company adopted the Amended and Restated
Stock Option Plan for Non-Employee Directors (the "Director Option Plan")
effective May 18, 1998. Directors currently receive no cash compensation for
their service on the Board of Directors, although they are reimbursed for
reasonable expenses incurred in connection with the performance of their duties
as directors. The Company's seven non-employee directors are entitled to
participate in the Director Option Plan. The Company has reserved 100,000 shares
of Common Stock for issuance under the plan, although that number is proposed to
be increased. See Proposal 3, below. The plan provides that each director will
receive an option to purchase 4,000 shares of Common Stock on the day after each
annual meeting of stockholders. For each meeting fewer than four that the
director attends between the date the option is granted and the date of the next
annual meeting of the stockholders, 1,000 of the shares of Common Stock subject
to the option shall be forfeited; provided, that, if a director fails to attend
at least two Board meetings during such period, all of the shares of Common
Stock subject to the option shall be forfeited. The exercise price for options
granted under the plan is the fair market value per share of the Common Stock on
the grant date. These options vest ratably on each of the first three
anniversaries of the grant date.
Options granted under the Director Option Plan are nonqualified and
thus are not "incentive stock options," as that term is defined in Section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code"). The
Compensation Committee of the Board of Directors administers the Director Option
Plan and has the power to adjust the number of shares of Common Stock subject to
option grants in case of stock dividends, stock splits, recapitalizations and
other similar events. Each option granted under the Director Option Plan is
exercisable for a period not to exceed 10 years from the date of grant and
lapses 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 director only by such
director.
INFORMATION CONCERNING EXECUTIVE OFFICERS
Certain information as to executive officers of the Company not
identified above is set forth below. Executive officers are appointed by and
serve at the pleasure of the Board. The information appearing below and certain
information regarding beneficial ownership of securities by such executive
officers contained in this proxy statement has been furnished to the Company by
the executive officers.
EXECUTIVE OFFICER AGE BIOGRAPHICAL INFORMATION
----------------- ---- ------------------------
Kay B. Martin 47 Ms. Martin has served as the Company's Vice
President and Chief Information Officer
since March 1997. Prior to joining the
Company, Ms. Martin served as the director
of information resources for R.J. Reynolds
Tobacco Company from March 1988 to March
1997.
Richard E. Belmont 40 Mr. Belmont has served as the Company's Vice
President of Marketing since August 1998 and
served as the Company's Vice President of
Sales and Marketing from March 1995 to
August 1998. Prior to joining the Company,
Mr. Belmont was a product planning manager
and a product manager with the Char-Broil
Division of W.C. Bradley Co. from January
1991 to March 1995. Mr. Belmont is currently
a director of the Barbecue Industry
Association of America.
Joseph T. Culp 43 Mr. Culp has served as the Company's 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
7
<PAGE> 11
1994 to November 1995, and a regional
manager for Suburban Propane Partners, L.P.
from January 1981 to February 1994.
Jerald D. Shadley 53 Mr. Shadley has served as the Company's Vice
President of Sales since August 1998. Prior
to joining the Company, Mr. Shadley served
as vice president of sales and marketing for
McCulloch Corp., a consumer products
company, from January 1996 to May 1998. Mr.
Shadley was also executive vice president,
sales and marketing from July 1994 to
January 1996 and vice president, sales and
marketing from April 1991 to July 1994 for
Homelite, Inc.
Thomas W. Ferrell 48 Mr. Ferrell has served as the Company's Vice
President of Products since November 1998.
Mr. Ferrell previously served as manager of
Rhino Services, L.L.C., a wholly owned
subsidiary of the Company, from March 1997
to November 1998. Prior to joining the
Company, Mr. Ferrell served as president of
Total Operations Management, Inc., a
management consulting company, from November
1993 to March 1997.
David Slone 53 Mr. Slone has served as the Company's Vice
President of Technology and Standards since
August 1999. Mr. Slone served as the
Company's Director of Distributor Services
from August 1997 to August 1999, Director of
Distribution from January 1997 to August
1997, Plant Manager and Director of Safety
and Training from January 1995 to January
1997, and Training Manager from August 1994
to January 1995.
Mac McQuilkin 59 Mr. McQuilkin has served as President and
Chief Executive Officer of Uniflame
Corporation and its predecessor, Uniflame,
Inc., import and design companies, since
1990.
8
<PAGE> 12
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation paid by the Company for the fiscal years ended July 31, 2000, 1999
and 1998 to the Company's Chief Executive Officer and four other most highly
compensated executive officers at the end of fiscal 2000 (collectively, the
"Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM ALL OTHER
COMPENSATION COMPENSATION
ANNUAL COMPENSATION AWARDS ($)
------------------- ----------------- ------------
Other Annual Shares Underlying
Name and Principal Position Year Salary ($) Compensation ($) Options (#)
--------------------------- ---- ---------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Billy D. Prim 2000 $ 371,163 -- 90,000 $ 93,163 (1)
President and 1999 288,923 -- 60,000 --
Chief Executive Officer 1998 218,538 -- 43,312 --
Mark Castaneda 2000 163,192 $ 77,459 (2) 70,000 2,900 (3)
Secretary and Chief Financial 1999 138,359 -- 36,796 --
Officer 1998 78,846 -- 32,561 --
Richard E. Belmont 2000 124,563 -- 35,000 2,593 (4)
Vice President of Marketing 1999 118,322 -- 24,000 --
1998 112,708 -- 26,890 --
Joseph T. Culp 2000 121,135 -- 35,000 566 (5)
Vice President of Partner 1999 115,174 -- 24,000 --
Development 1998 109,710 -- 26,890 --
Jerald D. Shadley 2000 143,931 -- 45,000 1,200 (7)
Vice President of Sales 1999 132,247 40,000 (6) 24,000 --
1998 -- -- -- --
</TABLE>
-------
(1) Includes a supplemental retirement amount of $90,000 accrued for Mr. Prim
under his employment agreement with the Company and Company contributions
of $3,163 under the Blue Rhino Corporation and Subsidiaries 401(k) Plan
(the "401(k) plan").
(2) Represents $50,000 for reimbursement of relocation expenses and $27,459 in
tax reimbursements paid to Mr. Castaneda in fiscal 2000 for expenses
incurred in 1997 and 1998 and previously deferred.
(3) Represents Company contributions under the Company's 401(k) plan.
9
<PAGE> 13
(4) Represents Company contributions under the Company's 401(k) plan.
(5) Represents Company contributions under the Company's 401(k) plan.
(6) Represents reimbursement for relocation expenses.
(7) Represents Company contributions under the Company's 401(k) plan.
OPTION GRANTS
The following table sets forth information regarding grants of stock
options to the Named Officers pursuant to the 1998 Stock Incentive Plan during
fiscal 2000.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF ANNUAL RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR SHARE($/SH) DATE 5% 10%
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Billy D. Prim 40,000 6.49% $ 6.50 10/18/09 $ 163,513 $ 414,373
50,000 8.11% 8.06 07/03/10 253,539 642,517
Mark Castaneda 30,000 4.87% 6.50 10/18/09 122,634 310,780
40,000 6.49% 8.06 07/03/10 202,831 514,014
Richard E. Belmont 15,000 2.43% 6.50 10/18/09 61,317 155,390
20,000 3.25% 8.06 07/03/10 101,416 257,007
Joseph T. Culp 15,000 2.43% 6.50 10/18/09 61,317 155,390
20,000 3.25% 8.06 07/03/10 101,416 257,007
Jerald D. Shadley 15,000 2.43% 6.50 10/18/09 61,317 155,390
30,000 4.87% 8.06 07/03/10 152,123 385,510
</TABLE>
-------
(1) These options have a term of 10 years, are nonqualified stock options
and have an exercise price equal to the fair market value of the Common
Stock on the date of grant. Options generally vest 20% on each
anniversary of the grant date until fully vested (i.e., five years from
the grant date) and are exercisable upon vesting. Options may be
transferable to certain family members and affiliated entities.
(2) The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Securities and Exchange
Commission (the "Commission") and do not represent the Company's
estimate or projection of future Common Stock prices.
10
<PAGE> 14
The following table sets forth information with respect to unexercised stock
options granted under the Company's stock incentive plans as of the end of
fiscal 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES HELD AT JULY 31, 2000(#) AT JULY 31, 2000($)(1)
ACQUIRED ON VALUE ------------------------------- -------------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Billy D. Prim -- -- 100,181 154,000 $79,718 $68,100
Mark Castaneda -- -- 28,921 110,436 11,435 51,230
Richard E. Belmont -- -- 33,122 66,000 45,815 25,615
Joseph T. Culp -- -- 18,000 66,000 -- 25,615
Jerald D. Shadley -- -- 16,000 73,000 -- 26,235
</TABLE>
--------
(1) Calculated by determining the difference between the market value of $8.125
per share for the Common Stock underlying the options at July 31, 2000 and
the exercise prices of each Named Officer's options.
OTHER COMPENSATION ARRANGEMENTS
On May 31, 1999, the Company entered into an employment agreement with
Mr. Prim, the Company's Chairman, President and Chief Executive Officer. The
agreement has a rolling five-year term beginning as of January 1, 1999. Upon 90
days' notice by either the Company or Mr. Prim, the term will thereafter
continue for five years after the notice period. The agreement provides for a
minimum base salary of $350,000 during the term of the agreement, with cost of
living adjustments. In addition, the agreement provides that Mr. Prim is
entitled to (i) receive bonuses at the discretion of the Board of Directors,
(ii) participate in the Company's Executive Incentive Plan, the Company's 1998
Stock Incentive Plan, and any other bonus or incentive plans of the Company in
which other senior executives of the Company are entitled to participate and
(iii) receive split dollar life insurance benefits, club memberships and an
automobile during the term. Mr. Prim's base salary for calendar 2000 is
$376,650.
Upon termination of Mr. Prim's employment for any reason, he is
entitled to receive his then current base salary through the last day of the
calendar month in which the termination date occurs. In addition, upon (i) Mr.
Prim's termination of his employment with the Company because of "good reason,"
as defined in the agreement, (ii) Mr. Prim's election to terminate his
employment relationship with the Company (or any successor) within 12 months of
a "change in control," as defined in the agreement, (iii) the exercise by the
Company of the 90-day termination notice provision described in the agreement,
or (iv) the Company's termination of Mr. Prim's employment with the Company as a
result of his "disability," as defined in the agreement, he (or his spouse in
the event of his death) is entitled to receive his base salary, with annual cost
of living adjustments, for five years following the termination date. In
addition, for
11
<PAGE> 15
the ten years following the five-year base salary period, Mr. Prim is entitled
to receive monthly retirement benefit payments equal to 70% of his base salary
during the last year of the five-year period. Following these termination
events, the Company is required to use its best efforts to provide Mr. Prim and
his dependents with coverage under the Company's health care plans until the
earlier of his death or the month in which the last retirement benefit payment
is made. Such health care coverage shall be at no cost to Mr. Prim, unless the
premiums exceed the then highest premium payable by an employee of the Company.
For two years following the termination of his employment, Mr. Prim is
subject to a non-competition and non-solicitation agreement. Failure to comply
with these provisions may result in cessation of any post-termination payments
to or benefits for Mr. Prim.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for the development of the
Company's executive compensation policies and the administration of those
policies. The Compensation Committee evaluates the performance of management and
establishes the salary and incentive compensation for the Company's Chief
Executive Officer and, based on recommendations from the Chief Executive
Officer, for each of the Company's other executive officers and key employees.
In establishing the compensation of individual executive officers for fiscal
2000, the Compensation Committee considered published compensation surveys, the
amount of compensation paid to executive officers at comparable companies in the
consumer product and propane industries, market conditions, the recommendations
of management and the attainment of certain performance goals.
Executive Compensation Policy
The Company's general compensation policy is that total compensation
should vary with the performance of the Company and the individual based on the
attainment of certain service and financial and non-financial objectives. The
Compensation Committee's objectives include:
o attracting and retaining talented executives and employees
critical to the long-term success of the Company by offering
compensation packages competitive with those provided by other
publicly-held high growth companies;
o aligning the interests of the Company's management with the
interests of the Company's stockholders by developing
compensation programs that link compensation directly to
increases in stockholder value; and
o maintaining an appropriate balance between base salary and
performance-based compensation, with a higher proportion of
compensation being performance-based as an officer's or key
employee's level of responsibility increases.
The Company's principal compensation components for executive officers
are base salary, stock incentives awarded under the 1998 Stock Incentive Plan
and additional incentive opportunities under the Company's Executive Incentive
Plan payable in the form of cash or stock options. During fiscal 2000, the
compensation of executive officers of the Company was comprised of base salary
and options granted under the Company's 1998 Stock Incentive Plan. In addition,
all employees of the Company who have been employed for six months or more are
eligible to participate in the Company's 401(k) plan beginning on the first day
of the first fiscal quarter following the completion of six months of service.
Subject to limitations imposed by the Code, participants in the 401(k) plan may
contribute up to 15% of their total base compensation to the plan. In 1999, the
Company also initiated a match to an employee's 401(k) contributions in the
amount of $.50 of every $1.00 contributed up to 6% of an employee's salary.
12
<PAGE> 16
Base Salary
The Company's policy is to pay base salaries that are generally
competitive with the median base salaries paid by comparable companies in the
consumer product and propane industries. The Compensation Committee determines a
base salary for each executive officer based upon individual performance, level
of responsibility, experience and competitive factors. The Compensation
Committee did not commission any formal surveys of executive officer
compensation at comparable companies during fiscal 2000, but relied on published
surveys for indications of salary trends generally and at growth companies in
particular. The Compensation Committee used all of these factors in recommending
base salary levels, but did not assign specific weight to any particular factor.
Incentive Plans
The grant of options under the Company's 1998 Stock Incentive Plan is
the primary method by which the Compensation Committee motivates executive
officers to meet and surpass performance goals and awards employees for
continued service to the Company. Stock options are intended to focus executive
officers on managing the Company from the perspective of owners with an equity
interest and to link their long-term compensation directly with increases in
stockholder value.
The Company awards both discretionary option grants and
performance-based option grants under the 1998 Stock Incentive Plan.
Discretionary options granted under the 1998 Stock Incentive Plan are based on
attainment of service and performance objectives established by the Compensation
Committee. These options vest 20% on each anniversary of the grant date and,
thus, do not fully vest until five years after the grant date. In addition,
because the exercise price of options granted under the 1998 Stock Incentive
Plan may not be less than the market value of the Common Stock on the grant
date, recipients of option grants receive no compensation unless the price per
share of Common Stock increases after the grant date. Based upon their position
and level of responsibility within the Company, the Named Officers were granted
discretionary options for a total of 275,000 shares of Common Stock in fiscal
2000. Certain executive officers also have outstanding options granted under the
Company's 1994 Stock Incentive Plan, although the Company no longer grants
options under that plan.
The Executive Incentive Plan, which is designed to promote the growth
and management of the Company's business, serves as an additional incentive
opportunity for senior management. For fiscal 2000, the grant of performance
awards was contingent upon attaining specified quarterly and annual earnings per
share objectives in which individual targets were compared to quarterly net
income (pre-tax) results. If the performance goals are met under the plan,
awards are payable in the form of quarterly cash awards or the grant of options
under the 1998 Stock Incentive Plan as determined in the Compensation
Committee's discretion. These performance-based options, which also have an
option price equal to fair market value at the time of grant, vest one year plus
one day after the date of grant and are intended to serve as an additional
incentive to participants to improve the Company's performance. In fiscal 2000,
the performance targets were not met and no cash awards or performance-based
options were granted under the plan.
Compensation of Chief Executive Officer
The Compensation Committee determines the compensation of Mr. Prim, the
Company's President and Chief Executive Officer, based on the same criteria
applicable to the Company's other executive officers. In April 1998, the
Compensation Committee approved an employment agreement between the Company and
Mr. Prim, which was entered into on May 31, 1999, effective as of January 1,
1999. See "Other Compensation Arrangements," above. The Compensation Committee
believes Mr. Prim's current base salary of $376,650 is in line with the median
salaries of other chief executive officers in the consumer product and propane
industries.
13
<PAGE> 17
Pursuant to the Committee's recommendations, Mr. Prim was granted
options for 90,000 shares of Common Stock in fiscal 2000. Mr. Prim's leadership
was essential to the Company's successful expansion of retail locations and the
attainment of certain internal revenue and performance targets. The Compensation
Committee also considered important Mr. Prim's role in identifying and
negotiating the Company's three significant acquisitions during fiscal 2000, his
oversight of the integration of the acquired businesses into the Company's
operations and his success in securing additional capital for the Company.
Section 162(m)
Under Section 162(m) of the Code, federal income tax deductions of
publicly traded companies may be limited to the extent total compensation for
certain executive officers exceeds $1,000,000 in any one year. Currently, none
of the Company's executive officers receive annual compensation in excess of
$1,000,000. However, if an executive officer were to receive compensation in
excess of $1,000,000, the Compensation Committee expects to structure such
compensation to meet the requirements of Section 162(m) and preserve the
Company's federal income tax deduction to the extent practicable to do so. See
Proposal 2, below.
Respectfully submitted by the Compensation Committee of the Board of
Directors:
COMPENSATION COMMITTEE
Richard A. Brenner
Steven D. Devick
14
<PAGE> 18
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2000, Messrs. Brenner and Devick served on the
Compensation Committee of the Board of Directors. In September 1999, each of
Messrs. Brenner and Devick participated in the Company's private placement of
Common Stock, each investing $100,000 for 13,559 units. Each unit consisted of
one share of Common Stock and one warrant to purchase 0.35 shares of Common
Stock. The price per unit was $7.375, which was the closing price of our Common
Stock on September 3, 1999, the final trading day prior to the consummation of
the offering. The warrants may be exercised at a price equal to $8.48 per share
at any time prior to September 7, 2004. Such purchases were made on the same
terms and conditions as purchases by other investors in the private placement.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return on the
Company's Common Stock for the period May 19, 1998, the first date on which the
Common Stock was traded, through July 31, 2000 with (i) the cumulative total
return of the Nasdaq Composite Index for The Nasdaq Stock Market for the same
period and (ii) the cumulative total return of an index of peer group companies
for the same period. The following emerging consumer product and consumer
service companies have been included in the peer group index: Central Garden and
Pet Company, Glacier Water Services, Inc., U.S.A. Floral Products, Inc. and
NUCO2, Inc. Service Experts, Inc., included in the peer group index used for the
fiscal year ended July 31, 1999, has been omitted because it has since been
acquired. The graph assumes $100 was invested on May 19, 1998 in the Company's
Common Stock and in the stock represented by the two indexes, and that all
dividends paid, if any, were reinvested. The stock price performance of the
Company's Common Stock reflected in the following graph is not necessarily
indicative of future performance.
[STOCK PERFORMANCE GRAPH OMITTED]
<TABLE>
<CAPTION>
---------------------------------------------------------------
5/19/1998 7/31/1998 7/31/1999 7/31/2000
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Blue Rhino 100 123 74 63
---------------------------------------------------------------
4 Peer Companies 100 79 44 30
---------------------------------------------------------------
NASDAQ 100 101 143 204
---------------------------------------------------------------
</TABLE>
15
<PAGE> 19
BENEFICIAL OWNERSHIP OF DIRECTORS,
EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock and Preferred Stock as of October 31,
2000 by (i) each person known by the Company to own beneficially more than 5% of
either the Common Stock or the Preferred Stock, (ii) each director of the
Company, (iii) each director nominee, (iv) each Named Officer and (v) all
executive officers and directors as a group.
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
--------------------------------- ------------------------------
AMOUNT AND NATURE AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF BENEFICIAL PERCENT
NAME AND ADDRESS OWNERSHIP (1) OF CLASS OWNERSHIP (1) OF CLASS
---------------- ----------------- -------- ----------------- --------
<S> <C> <C> <C> <C>
Andrew J. Filipowski (2) 1,924,615 18.7% 41,667 1.5%
508 Stonegate Lane
Winston-Salem, NC 27104
Billy D. Prim (3) 1,413,182 13.7% 8,333 *
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
Craig J. Duchossois (4) 658,994 6.4% -- --
845 Larch Avenue
Elmhurst, IL 60126
Richard A. Brenner (5) 33,637 * -- --
464 Sheffield Drive
Winston-Salem, NC 27104
Mark Castaneda (6) 39,366 * -- --
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
John H. Muehlstein (7) 13,116 * -- --
161 North Clark Street, Suite 3100
Chicago, IL 60601
Steven D. Devick (8) 359,552 3.5% -- --
1901 Midwest Club Parkway
Oak Brook, IL 60523
David Warnock (9) -- -- -- --
1 South Street
Baltimore, MD 21202
Robert J. Lunn (10) 92,858 * -- --
209 South LaSalle Street
Chicago, IL 60604
</TABLE>
16
<PAGE> 20
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
--------------------------------- ------------------------------
AMOUNT AND NATURE AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF BENEFICIAL PERCENT
NAME AND ADDRESS OWNERSHIP (1) OF CLASS OWNERSHIP (1) OF CLASS
---------------- ----------------- -------- ----------------- --------
<S> <C> <C> <C> <C>
Jerald R. Shadley (11) 29,317 * -- --
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
Joseph T. Culp (12) 36,257 * -- --
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
Richard E. Belmont (13) 36,122 * -- --
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
Directors and executive officers as a group 5,024,976 48.8% 50,000 1.8%
(16 individuals)
SAFECO Corporation (14) 662,700 6.4% -- --
4333 Brooklyn Avenue N
Seattle, WA 98185
Bank of America Corporation (15) 502,000 4.9% -- --
100 North Tryon Street
Charlotte, NC 28255
Cahill, Warnock Strategic Partners II, LLC (16) -- -- 1,500,000 52.6%
1 South Street
Baltimore, MD 21202
Richard Kiphart -- -- 166,667 5.8%
222 West Adams Street
Chicago, IL 60606
Gold Banc Corporation, Inc. -- -- 1,000,000 35.1%
11301 Nall Avenue
Leawood, Kansas 66211
</TABLE>
-------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and is based upon filings made by such persons with the
Commission and upon information provided to the Company. In computing the
number of shares beneficially owned by a person and the percentage
ownership of that person, shares of Common Stock or Preferred Stock
subject to options or warrants held by that person that are currently
exercisable or exercisable within 60 days of October 31, 2000 are deemed
outstanding. These shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of any other person.
Except as indicated
17
<PAGE> 21
in the footnotes to this table and as provided pursuant to applicable
community property laws, the stockholders named in the table have sole
voting and investment power with respect to the shares set forth
opposite each stockholder's name.
(2) Includes 1,209,659 shares of common stock owned by Mr. Filipowski, 28,239
shares issuable upon the exercise of vested options held by Mr.
Filipowski, 84,003 shares issuable upon the exercise of vested warrants
held by Mr. Filipowski, 38,000 held by A.G.F. 1999 Declaration of Trust
of which Mr. Filipowski serves as the trustee, 216,127 shares of common
stock owned by American Oil and Gas, of which Mr. Filipowski owns 44% of
the issued and outstanding shares, 333,466 shares of common stock owned
by Platinum Venture Partners I, L.P. ("PVP"), the general partner of
which is divine interVentures, Inc. (formerly Platinum Venture Partners,
Inc.), of which Mr. Filipowski owns 22.5% of the shares and serves as a
director, 1,890 shares of common stock beneficially owned by Jennifer R.
Filipowski, 1,890 shares of common stock beneficially owned by Mr.
Filipowski as trustee on behalf of the Andrew E. Filipowski Trust, 1,890
shares of common stock beneficially owned by Veronica Filipowski as
trustee on behalf of the Alexandra Filipowski Trust, 1,890 shares of
common stock beneficially owned by Veronica Filipowski as trustee on
behalf of the James Meadows Trust and 7,561 shares of common stock
beneficially owned by Veronica Filipowski.
(3) Includes 1,030,076 shares of common stock held by Mr. Prim, 47,457 shares
issuable upon the exercise of a warrant issued in September 1999, 108,181
shares of common stock issuable upon the exercise of vested options held
by Mr. Prim, 216,127 shares of common stock owned by American Oil and
Gas, of which Mr. Prim owns 56% of the issued and outstanding shares and
has voting and investment control, 7,561 shares of common stock
beneficially owned by Debbie W. Prim, 1,890 shares of common stock
beneficially owned by Debbie W. Prim as trustee on behalf of Sarcanda
Westmoreland and 1,890 shares of common stock beneficially owned by
Debbie W. Prim as trustee on behalf of Anthony G. Westmoreland.
(4) Includes 482,147 shares of common stock beneficially owned by the Craig
J. Duchossois Revocable Trust, 84,003 shares issuable upon the exercise
of warrants held by the Craig J. Duchossois Revocable Trust, 2,500 shares
of common stock beneficially owned by R. Bruce Duchossois over which
Craig J. Duchossois has voting and investment control, 13,116 shares of
common stock issuable upon the exercise of vested options held by Mr.
Duchossois, and 77,228 shares of common stock beneficially owned by the
Kimberly Family Discretionary Trust over which Mr. Duchossois has voting
and investment control.
(5) Includes 22,224 shares of common stock owned by Mr. Brenner, 4,745 shares
issuable upon the exercise of a warrant issued in September 1999 and
6,668 shares issuable upon the exercise of vested options.
(6) Includes 3,614 shares of common stock owned by Mr. Castaneda, 472 shares
of Common Stock issuable upon the exercise of a warrant issued in
September 1999 and 35,280 shares of Common Stock issuable upon the
exercise of vested options held by Mr. Castaneda.
(7) Represents the number of shares issuable upon the exercise of vested
options.
(8) Includes 13,559 shares of common stock held by Mr. Devick, 4,745 shares
of Common Stock issuable upon the exercise of a warrant issued in
September 1999, 7,782 shares issuable upon the exercise of vested options
held by Mr. Devick and 333,466 shares owned beneficially by PVP.
(9) See footnote 16, below.
(10) Includes 33,898 shares of common stock and 11,864 shares issuable upon
the exercise of a warrant issued in September 1999 held by Lunn Partners
Multiple Opportunities Portfolio, L.P., 33,898 shares of common stock and
11,864 shares issuable upon the exercise of a warrant issued
18
<PAGE> 22
in September 1999 held by Lunn Partners Small Cap Value Equity Fund,
L.P., and 1334 shares issuable upon the exercise of vested options held
by Mr. Lunn. Lunn Partners is the general partner of Lunn Partners
Multiple Opportunities Portfolio, L.P. and Lunn Partners Small Cap
Value Equity Fund, L.P. Mr. Lunn is the managing partner of Lunn
Partners.
(11) Includes 592 shares of common stock owned by Mr. Shadley, 19,000 shares
of common stock issuable upon the exercise of vested options held by Mr.
Shadley, 8,500 shares held jointly by Jerald and Sidney Shadley and 1,225
shares issuable upon the exercise of a warrant issued in September 1999
held jointly by Jerald and Sidney Shadley.
(12) Includes 15,122 shares of Common Stock owned by Mr. Culp and 21,000
shares of Common Stock issuable upon the exercise of vested options
held by Mr. Culp.
(13) Represents the number of shares issuable upon the exercise of vested
options.
(14) SAFECO Corporation and its wholly owned subsidiary SAFECO Asset
Management Company have shared voting power and investment discretion
with respect to an aggregate of 662,700 shares of common stock. SAFECO
Asset Management Company is an investment adviser which holds the shares
on behalf of two of its investment company clients: SAFECO Growth
Opportunities Fund, a series of SAFECO Common Stock Trust, which holds
527,400 shares of common stock, and SAFECO RST Growth Opportunities
Portfolio, a series of the SAFECO Resource Series Trust, which holds
135,300 shares of common stock.
(15) Derived from a Schedule 13G dated February 1, 2000 and jointly furnished
to the Company by Bank of America Corporation, NB Holdings Corporation,
Bank of America, N.A. and Trade Street Investment Associates, Inc. The
Schedule 13G indicates that Bank of America Corporation and NB Holdings
Corporation have shared voting and dispositive power over all 502,000 of
these shares, Bank of America, N.A. has shared voting and dispositive
power over 448,800 of these shares and sole voting and dispositive power
over 53,200 of these shares, and Trade Street Investment Associates, Inc.
has sole voting and dispositive power over 448,800 of these shares.
(16) Includes 1,413,000 shares of Series A Convertible Preferred Stock owned
by Cahill, Warnock Strategic Partners Fund II A, L.P. and 87,000 shares
of Series A Convertible Preferred Stock owned by Cahill, Warnock
Strategic Partners Fund II B, L.P., for which Cahill, Warnock Strategic
Partners II, LLC serves as general partner. David L. Warnock, a partner
of Cahill, Warnock Strategic Partners II, LLC and the Preferred Stock
Director, disclaims beneficial ownership of the shares held by Cahill,
Warnock Strategic Partners Fund II A, L.P. and Cahill, Warnock Strategic
Partners Fund II B, L.P.
CERTAIN TRANSACTIONS
Since March 1994, the Company has leased its offices in Winston-Salem,
North Carolina from Rhino Real Estate, L.L.C., an entity in which Mr. Filipowski
and Mr. Prim own 65% and 30%, respectively. Pursuant to the terms of the lease,
the Company pays annual rent of $213,000, plus its allocable share of all taxes,
utilities and maintenance. The lease terminates on December 31, 2001 and
includes an option to renew for an additional three-year term.
In April 2000, in conjunction with its acquisition of Uniflame, Inc.,
the Company assumed Uniflame's lease of an office/warehouse facility located in
Zion, Illinois from H & M Enterprises, L.L.C. Mac McQuilkin, the president of
Uniflame Corporation, a wholly owned subsidiary of the Company, is a member of H
& M Enterprises. Pursuant to the terms of the lease, the Company pays annual
rent of approximately $300,000, plus its allocable share of all taxes, utilities
and maintenance. The lease terminates on March 31, 2005.
19
<PAGE> 23
Since March 1997, Platinum Propane and its subsidiaries have acted as
the Company's distributors for North Carolina, South Carolina, Georgia, Florida,
parts of Virginia and Tennessee, and the Los Angeles, California and Chicago,
Illinois territories. Until August 1999, Messrs. Prim and Filipowski owned
approximately 40% of the membership interests in Platinum Propane, a holding
company for five of the Company's distributorships. In August 1999, the Company
paid $873,000 to Platinum Propane. Also in August 1999, Messrs. Prim and
Filipowski sold their interests in Platinum Propane to a third party and no
longer have any beneficial interest in Platinum Propane or its affiliated
distributorships.
The Company also entered into distribution agreements in February 1998
with Caribou Propane and Javelina Propane to service its Pacific Northwest and
Phoenix markets, respectively, and in May 1998 with Raven Propane to service its
Philadelphia/New Jersey markets. Until August 1999, Messrs. Prim and Filipowski
owned 45% of the membership interests in Ark Holdings, the holding company for
Caribou Propane, Javelina Propane and Raven Propane. In August 1999, the Company
paid $241,000 to Ark. Also in August 1999, Messrs. Prim and Filipowski sold
their interests in Ark and its affiliated distributorships to a third party and
no longer have any beneficial interests in Ark or the distributorships.
In September 1999, the Company completed a private placement of Common
Stock raising an aggregate of $7.2 million in new capital. Among the
participants in the private placement were the following directors and executive
officers: Messrs. Prim, Duchossois, Filipowski, Castaneda, Devick, Brenner and
Shadley, who purchased 135,593, 135,593, 135,593, 1,350, 13,559, 13,559 and
3,500 units, respectively, or an aggregate of 438,747 units out of the 981,119
units sold. The units sold consisted of one share of Common Stock and one
warrant to purchase 0.35 shares of Common Stock. The price per unit was $7.375,
which was the closing price of our Common Stock on September 3, 1999, the final
trading day prior to the consummation of the offering. The warrants may be
exercised at a price equal to $8.48 per share at any time prior to September 7,
2004. The purchases by the directors and executive officers were on the same
terms and conditions as those applicable to other investors. In addition, Lunn
Partners, LLC, of which Mr. Lunn, one of the Class B directors, is a principal,
received a placement fee in the amount of $120,000 in connection with the
purchase of these units by persons other than officers and directors of the
Company.
In September 2000, the Company completed a private placement of $10.3
million in Preferred Stock at a purchase price of $6.00 per share. Mr. Prim and
Mr. Filipowski invested $50,000 and $250,000 in the private placement,
respectively, and received 8,333 and 41,667 shares of Preferred Stock,
respectively. Their purchases of the Preferred Stock were made on the same terms
and conditions as the terms and conditions of the other Preferred Stock
investors.
Richard Kiphart, Principal and Manager, Corporate Finance of William
Blair & Company, L.L.C. ("William Blair"), invested $1,000,000 in the private
placement described in the preceding paragraph and received 166,667 shares of
Preferred Stock. Subsequent to the private placement, in October 2000, the
Company acquired QuickShip, Inc., a Delaware corporation. The Company has
committed to pay William Blair approximately $640,000, plus a warrant initially
to purchase 16,667 shares of Common Stock with an exercise price of $6.00 per
share, for investment banking services provided to the Company in connection
with the private placement and the QuickShip acquisition.
Mr. Muehlstein, a director of the Company, is also a principal in the
firm of Pedersen & Houpt, a Professional Corporation. The Company paid
approximately $459,000 during fiscal 2000 to Pedersen & Houpt for legal services
provided 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,
20
<PAGE> 24
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.
PROPOSAL 2
APPROVAL OF AMENDMENTS TO 1998 STOCK INCENTIVE PLAN
The Board of Directors, subject to approval of the Company's
stockholders, has approved amendments to the 1998 Stock Incentive Plan to (i)
increase the number of shares of Common Stock reserved for issuance upon the
exercise of options granted under the plan by 1,000,000 shares and (ii) provide
that, to the extent required by Section 162(m) of the Code, no participant may
be granted options for more than 300,000 shares during any 12-month period (in
each case, subject to adjustment in the event of stock splits or other similar
events described below). If these amendments are approved, 2,200,000 shares of
Common Stock will be reserved and available for distribution under the 1998
Stock Incentive Plan. Except as discussed herein, approval of these amendments
will not alter or amend the other provisions or requirements of the plan.
The discussion that follows summarizes the proposed amendments to the
1998 Stock Incentive Plan and describes the material terms of the current plan.
The summary is subject, in all respects, to the terms of the plan. The Company
will provide promptly, upon request and without a charge, a copy of the full
text of the 1998 Stock Incentive Plan to each person to whom a copy of this
proxy statement is delivered. Requests should be directed to: Mr. Mark
Castaneda, Secretary, Blue Rhino Corporation, 104 Cambridge Plaza Drive,
Winston-Salem, North Carolina 27104.
DESCRIPTION OF THE 1998 STOCK INCENTIVE PLAN
The purpose of the 1998 Stock Incentive Plan is to encourage key
employees, officers, consultants and advisors of the Company to acquire a
proprietary interest in the Company and to generate an increased incentive to
contribute to the Company's future success and prosperity. Currently, a maximum
of 1,200,000 shares of Common Stock may be issued under the plan, although that
number is proposed to be increased to 2,200,000 shares.
The Compensation Committee of the Board of Directors (or such
other committee as appointed by the Board of Directors) is the administrator for
the 1998 Stock Incentive Plan and has the power to select officers, employees,
consultants and advisors for participation in the plan ("participants"),
determine the number of shares of Common Stock subject to each option grant and
the terms of exercise for each option granted under the plan. Currently, the
terms of the 1998 Stock Incentive Plan provide that no participant may be
granted options in any calendar year for more than 20% of the number of shares
of Common Stock available for issuance under the plan as of the date of the
grant, although this restriction is proposed to be replaced with a new provision
limiting annual participant awards to options for no more than 300,000 shares.
See "Proposed Amendments to the 1998 Stock Incentive Plan," below. Approximately
125 persons currently are eligible to participate in the 1998 Stock Incentive
Plan. No options have been granted to consultants or advisors under the 1998
Stock Incentive Plan.
All options granted under the 1998 Stock Incentive Plan are
nonqualified stock options, and thus are not "incentive stock options," as that
term is defined in Section 422(b) of the Code. A stock option entitles the
participant to purchase shares of Common Stock from the Company at an exercise
price not less than the fair market value of the Common Stock on the grant date.
On October 31, 2000, the closing price of the Common Stock on the Nasdaq
National Market was $3.875 per share. The exercise price may be paid in cash or
such other form of payment as the Company may accept. If approved by the
Compensation Committee, the exercise price may be paid with shares of Common
Stock.
21
<PAGE> 25
The Compensation Committee is authorized to determine when options
granted pursuant to the 1998 Stock Incentive Plan will vest and be exercisable,
although options generally may not be exercisable less than one year or more
than ten years after it is granted. The number of shares of Common Stock
reserved for issuance under the plan and subject to option grants and other
option terms will be adjusted in the event of stock dividends, stock splits,
recapitalizations and other similar events. The Compensation Committee may, in
its sole discretion, permit options to be transferred during the participant's
lifetime, subject to such conditions and limitations as the Compensation
Committee deems reasonable and proper.
In the event of a merger, consolidation, sale of all or substantially
all of the assets of the Company, or liquidation of the Company, the Board of
Directors (or the board of directors of a corporation assuming the obligations
of the Company) may, in its discretion, take one or more of several actions
under the 1998 Stock Incentive Plan with respect to outstanding options,
including providing that all outstanding options will become exercisable in full
or providing that all outstanding options will be assumed or substituted by the
succeeding corporation on terms the Board of Directors determines to be
appropriate.
No awards may be made under the 1998 Stock Incentive Plan after ten
years following the date of the adoption of the plan, which was November 18,
1998. The Board of Directors may terminate the 1998 Stock Incentive Plan sooner
without further action by the stockholders. The Board of Directors may also
amend the 1998 Stock Incentive Plan, subject to certain restrictions.
FEDERAL INCOME TAX CONSEQUENCES
The following summary briefly describes the principal federal income
tax consequences of awards under the 1998 Stock Incentive Plan. The summary is
not intended to cover all tax consequences that may apply to a particular
Participant or to the Company.
As noted above, options granted under the 1998 Stock Incentive Plan are
not "incentive stock options," as that term is defined in Section 422(b) of the
Code. Participants granted options under the 1998 Stock Incentive Plan will not
be subject to federal income tax at the time of grant, and the Company will not
be entitled to a tax deduction by reason of such grant. Upon exercise of an
option, the difference between the exercise price and the fair market value of
the stock on the date of exercise will be taxable as ordinary income to the
participant in the year in which the exercise occurs. The Company will be
entitled to a corresponding deduction, to the extent permitted by under Section
162(m) of the Code, at the same time a participant recognizes income and in an
amount equal to the amount of ordinary income recognized by the participant
(provided the Company satisfies applicable federal income tax reporting
requirements).
As described above, the Company is generally entitled to an income tax
deduction for any compensation income taxed to participants in the 1998 Stock
Incentive Plan. Under Section 162(m) of the Code, however, unless compensation
meets the stockholder approval and other requirements of an exception provided
in Code Section 162(m) for performance-based compensation, the Company would not
be entitled to a deduction for compensation paid to certain covered executives
to the extent his or her compensation exceeds $1,000,000. As proposed to be
amended, the 1998 Stock Incentive Plan is designed to meet the stockholder
approval and other requirements of Code Section 162(m).
The participant's basis in the shares of Common Stock acquired upon
exercise of an option will equal the option price plus the amount of income
taxable at the time of exercise. Upon a subsequent sale of the shares of Common
Stock by the participant, the participant will recognize short-term or long-term
capital gain or loss (depending on the applicable holding period).
22
<PAGE> 26
PROPOSED AMENDMENTS TO THE 1998 STOCK INCENTIVE PLAN
As noted above, the Board of Directors has adopted certain amendments
to the 1998 Stock Incentive Plan, subject to stockholder approval. These
amendments would increase the number of shares available for issuance under the
Plan by 1,000,000 shares and provide that, to the extent required by Section
162(m) of the Code, no participant may be granted options during any 12-month
period for more than 300,000 shares (in each case, subject to adjustment as
described above). Except as discussed herein, approval of these amendments will
not alter or amend other provisions of the 1998 Stock Incentive Plan.
Currently, the 1998 Stock Incentive Plan authorized 1,200,000 shares of
Common Stock for issuance upon the exercise of options granted under the plan.
As of October 31, 2000, options to purchase 1,069,609 shares of Common Stock
were outstanding under the 1998 Stock Incentive Plan. Because only 130,391
shares remain available under the 1998 Stock Incentive Plan, the Board of
Directors believes the proposed increase in the number of shares of Common Stock
available under the plan is necessary to enable the Company to continue to
attract and retain qualified employees, officers, consultants and advisors in an
increasingly competitive market and to continue to provide an incentive for
excellent performance by participants.
The 1998 Stock Incentive Plan is also proposed to be amended (subject
to stockholder approval) to impose an annual participant award limitation in
order to comply with Section 162(m) of the Code. Section 162(m) limits the
deductibility of compensation paid to the chief executive officer and the four
most highly compensated executive officers (other than the chief executive
officer) of a public company in excess of $1,000,000 unless certain conditions
are met. In particular, Section 162(m) of the Code and related regulations
require that the stockholders approve the maximum award limitation (or the
formula used to determine such limitation) applicable to participants during a
specified period.
The 1998 Stock Incentive Plan currently provides that the Compensation
Committee may not grant options to any participant during any calendar year for
more than 20% of the shares remaining available for issuance. Under the terms of
the amendments to the 1998 Stock Incentive Plan, the provision would be deleted
and replaced with the restriction that no participant may be granted options for
more than 300,000 shares during any 12-month period. The purpose of these
amendments are to ensure compliance with the Section 162(m) requirements by
imposing a fixed award limit (rather than variable limit based on the number of
shares remaining available under the plan) and to afford the Company more
flexibility in establishing the terms of option grants. The Company has no
present intention of granting options to any single individual at or near the
proposed annual limitation, but desires to preserve the flexibility to do so in
appropriate circumstances.
The amount of compensation that will be paid pursuant to the grant of
options under the 1998 Stock Incentive Plan in the current fiscal year is not
yet determinable due to vesting and other requirements. See "Executive
Compensation -- Option Grants in Last Fiscal Year," above, for information
regarding the grant of options under the 1998 Stock Incentive Plan to the Named
Officers during fiscal 2000.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR
THE AMENDMENTS TO THE 1998 STOCK INCENTIVE PLAN. PROXIES WILL BE VOTED FOR THE
AMENDMENTS TO THE 1998 STOCK INCENTIVE PLAN UNLESS A VOTE AGAINST THIS PROPOSAL
OR ABSTENTION IS SPECIFICALLY INDICATED.
23
<PAGE> 27
PROPOSAL 3
APPROVAL OF AMENDMENT TO DIRECTOR OPTION PLAN
The Board of Directors, subject to approval of the Company's
stockholders, has approved an amendment to the Director Option Plan to better
meet the ongoing needs of the Company by increasing the number of shares of
Common Stock reserved for issuance upon the exercise of options granted under
the Director Option Plan by 300,000 shares (subject to adjustment as provided
below). If this amendment is approved, 400,000 shares of Common Stock will be
reserved and available for distribution under the Director Option Plan. Except
as provided below, approval of this amendment will not alter or amend other
provisions or requirements of the Director Option Plan.
The discussion that follows summarizes the proposed amendment to the
Director Option Plan and describes the material terms of the current plan. The
summary is subject, in all respects, to the terms of the plan. The Company will
provide promptly, upon request and without a charge, a copy of the full text of
the Director Option Plan to each person to whom a copy of this proxy statement
is delivered. Requests should be directed to: Mr. Mark Castaneda, Secretary,
Blue Rhino Corporation, 104 Cambridge Plaza Drive, Winston-Salem, North Carolina
27104.
DESCRIPTION OF THE DIRECTOR OPTION PLAN
The purpose of the Director Option Plan is to attract and retain
persons of exceptional ability to serve as members of the Board of Directors of
the Company, and to align the interests of the Company's non-employee directors
with those of the stockholders in enhancing the value of the Common Stock.
Directors currently receive no cash compensation for their service on the Board
of Directors, although they are reimbursed for reasonable expenses incurred in
connection with the performance of their duties as directors. Directors of the
Company who are not employees or officers of the Company are eligible to
participate in the Director Option Plan. Currently, the Company's seven
non-employee directors are entitled to participate in the Director Option Plan
(the "Directors").
The Compensation Committee of the Board of Directors (or such other
committee as appointed by the Board of Directors) administers the Director
Option Plan. The plan provides that each Director will receive on an annual
basis on the day after the annual meeting of the stockholders of the Company
options to purchase 4,000 shares of Common Stock. These options are subject to
forfeiture in the event a Director fails to attend four Board meetings between
the date the options are granted and the date of the next annual meeting of the
stockholders in the amount of options for 1,000 shares for each meeting less
than four that the Director fails to attend. In addition, in the event the
Director fails to attend at least two Board meetings between the date the
options are granted and the date of the next annual shareholders meeting, the
Director shall forfeit all the options granted on the previous grant date. The
number of shares of Common Stock reserved under the plan and subject to option
grants and other option terms will be automatically adjusted in case of stock
dividends, stock splits, recapitalizations and other similar events.
Each option granted under the plan entitles the Director to purchase
shares of Common Stock from the Company at the exercise price. The exercise
price of options granted under the plan may not be less than the fair market
value of the Common Stock on the grant date, as determined by the Compensation
Committee in accordance with the terms of the plan. The exercise price may be
paid in cash or, if approved by the Compensation Committee, payment in part or
in full may be made with shares of Common Stock. As of October 31, 2000, there
were options to purchase 80,000 shares with a weighted average exercise price of
$18.04 per share outstanding under the plan and options for 18,671 shares are
vested and exercisable. On October 31, 2000, the fair market value of the Common
Stock was $3.875 per share.
24
<PAGE> 28
Each option granted under the Director Option Plan generally vests at
the rate of one-third per year commencing on the first anniversary of the grant
date, and each option granted under the plan is exercisable for a period not to
exceed ten years from the date of grant and will lapse upon expiration of such
period. In addition, upon a change in control of the Company (as defined in the
Director Option Plan), all outstanding options will become fully vested and, in
certain circumstances, may be repurchased by the Company.
Options generally 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 Director only by the Director. However,
options may be transferred to family members and related entities if so provided
in the option agreement evidencing the grant of the option.
No options may be granted under the Director Option Plan after December
30, 2008. The Board of Directors may terminate the Director Option Plan sooner
without further action by the stockholders. The Board of Directors may also
amend the plan, subject to certain restrictions.
FEDERAL INCOME TAX CONSEQUENCES
The following summary briefly describes the principal federal income
tax consequences of awards under the Director Option Plan. The summary is not
intended to cover all tax consequences that may apply to a particular Director
or to the Company.
Options granted under the Director Option Plan are not "incentive stock
options," as that term is defined in Section 422(b) of the Code. Directors
granted options under the Director Option Plan will not be subject to federal
income tax at the time of grant, and the Company will not be entitled to a tax
deduction by reason of such grant. Upon exercise of an option, the difference
between the exercise price and the fair market value of the stock on the date of
exercise will be taxable as ordinary income to the Director in the year in which
the exercise occurs. The Company will be entitled to a corresponding deduction
at the same time a Director recognizes income and in an amount equal to the
amount of ordinary income recognized by the Director.
The Director's basis in the shares of Common Stock acquired upon
exercise of an option will equal the option price plus the amount of income
taxable at the time of exercise. Upon a subsequent sale of the shares of Common
Stock by the Director, the Director will recognize short-term or long-term
capital gain or loss (depending on the applicable holding period).
PROPOSED AMENDMENT TO THE DIRECTOR OPTION PLAN
Currently, the Director Option Plan has 100,000 shares of Common Stock
available for issuance upon the exercise of options granted under the plan. As
noted above, as of October 31, 2000, options to purchase 80,000 shares of Common
Stock were outstanding under the Director Option Plan. Because only 20,000
shares remain available under the Director Option Plan, the Board of Directors
believes that an increase in the number of shares of Common Stock available
under the plan is necessary to provide the Company with a sufficient number of
shares of Common Stock to compensate Directors for their services to the
Company. The number of shares of Common Stock subject to options granted
annually to Directors under the terms of the plan is not proposed to be
adjusted, and the proposal to increase the number of shares of Common Stock
available under the plan will not affect the annual option grants, other than to
extend the period during which shares of Common Stock will be available for
awards.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR
THE AMENDMENT TO THE DIRECTOR OPTION PLAN. PROXIES WILL BE VOTED FOR THE
AMENDMENT TO THE DIRECTOR OPTION PLAN UNLESS A VOTE AGAINST THIS PROPOSAL OR
ABSTENTION IS SPECIFICALLY INDICATED.
25
<PAGE> 29
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Audit Committee has recommended and the Board of Directors has
approved the engagement of Ernst & Young LLP as the independent accountants of
the Company for the fiscal year ending July 31, 2001. Ernst & Young, independent
certified public accountants, has reviewed the financial statements of the
Company since the fiscal quarter ended January 31, 1999 and audited the
Company's financial statements for the fiscal years ended July 31, 2000 and
1999. A representative of Ernst & Young is expected to be present at the Annual
Meeting and will have the opportunity to make a statement if he or she chooses
to do so. The representative also is expected to be available to respond to
appropriate questions from stockholders.
Although stockholder approval of the engagement is not required by law,
the Board of Directors desires to solicit such approval. If the appointment of
Ernst & Young is not approved by a majority of the shares represented at the
Annual Meeting, the Board of Directors will consider the appointment of other
independent accountants for fiscal 2001.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR
THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS FOR THE FISCAL
YEAR ENDING JULY 31, 2001. PROXIES WILL BE VOTED FOR RATIFICATION OF THE
APPOINTMENT UNLESS A VOTE AGAINST THIS PROPOSAL OR ABSTENTION IS SPECIFICALLY
INDICATED.
STOCKHOLDER PROPOSALS
Under regulations of the Commission, any stockholder desiring to make a
proposal to be acted upon at the 2001 annual meeting of stockholders must
present such proposal to the Company at its principal office in Winston-Salem,
North Carolina by July 19, 2001 for the proposal to be considered for inclusion
in the Company's proxy statement.
Only business properly brought before an annual meeting may be subject
to action at the meeting. In addition to any other applicable requirements, for
business to be properly brought before the annual meeting by a stockholder (even
if the proposal is not to be included in the Company's proxy statement), the
Company's bylaws provide that the stockholder must give timely notice in writing
to the Secretary of the Company at least 90 calendar days in advance of the
anniversary date of the release of the Company's proxy statement for the
previous year's annual meeting. As to each matter, the notice must contain (i)
the name and address of the stockholder who intends to raise the matter; (ii)
the business desired to be raised at the meeting and the reasons for considering
such business; (iii) a representation that the stockholder is a holder of record
of stock of the Company entitled to vote with respect to the matter and that he
intends to appear in person or by proxy at the meeting to raise the matter; (iv)
the stockholder's total beneficial ownership of the Company's voting stock; and
(v) the stockholder's interest in the matter. The chairman of the meeting may
refuse to consider any business that is not raised in accordance with these
procedures. A proxy may confer discretionary authority to vote on any matter at
an annual meeting if the Company does not receive proper notice of the matter
within the timeframe described above.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
officers and persons beneficially owning more than 10% of the Company's
outstanding Common Stock to file periodic reports of stock ownership and stock
transactions with the Commission. Based solely on a review of copies of these
reports furnished to the Company, the Company believes all of these reports were
filled in a timely manner except as follows: Messrs. Prim and Filipowski each
failed to timely report one transaction in August 1999 involving the disposition
of 1,285 shares of Common Stock indirectly owned by each of
26
<PAGE> 30
them. In September 1999, Mr. Devick failed to timely report one transaction
involving the acquisition of 13,559 shares of Common Stock.
ADDITIONAL INFORMATION
UPON WRITTEN REQUEST BY A STOCKHOLDER OF RECORD ON OCTOBER 31, 2000,
THE COMPANY WILL PROVIDE WITHOUT CHARGE AN ADDITIONAL COPY OF ITS ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED JULY 31, 2000. REQUESTS SHOULD BE DIRECTED TO
MARK CASTANEDA, THE SECRETARY OF THE COMPANY, AT 104 CAMBRIDGE PLAZA DRIVE,
WINSTON-SALEM, NORTH CAROLINA 27104.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors knows of
no other business to come before the Annual Meeting for consideration by the
Company's stockholders. If any other business properly comes before the meeting,
the persons named as proxies in the accompanying proxy card will vote the shares
represented by the proxy in accordance with their best judgment.
By Order of the Board of Directors
/s/ Mark Castaneda
Mark Castaneda
Secretary
Winston-Salem, North Carolina
November 16, 2000
27
<PAGE> 31
APPENDIX A
AUDIT COMMITTEE CHARTER
OF
BLUE RHINO CORPORATION
Organization
This charter governs the operations of the Audit Committee of the Board of
Directors of Blue Rhino Corporation ("Blue Rhino" or the "Company"). The Audit
Committee shall review and reassess this charter at least annually and obtain
the approval of the Board of Directors of the charter and any material
modifications thereto. The Audit Committee shall be appointed by the Board of
Directors and shall comprise at least three directors, each of whom are
independent by the definitions of the National Association of Securities Dealers
and the Securities and Exchange Commission. Members of the Audit Committee shall
be considered independent if they have no relationship that may interfere with
the exercise of their independence from management and the Company. All Audit
Committee members shall be financially literate, or shall become financially
literate within a reasonable period of time after appointment to the committee,
and at least one member shall have accounting or related financial management
expertise.
Statement of Policy
The Audit Committee shall provide assistance to the Board of Directors in
fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the internal audit function (if
applicable), the annual independent audit of the Company's financial statements,
and the legal compliance and ethics programs as established by management and
the Board of Directors. In so doing, it is the responsibility of the Audit
Committee to maintain free and open communication between the committee, the
independent auditors, the internal auditors and management of the Company. In
discharging its oversight role, the Audit Committee is empowered to investigate
any matter brought to its attention with full access to all books, records,
facilities, and personnel of the Company and the power to retain outside
counsel, or other experts for this purpose.
Responsibilities and Processes
The primary responsibility of the Audit Committee is to oversee the Company's
financial reporting process on behalf of the Board of Directors and report the
results of their activities. Management is responsible for preparing the
Company's financial statements, and the independent auditors are responsible for
auditing those financial statements. In carrying out its responsibilities, the
Audit Committee believes its policies and procedures should remain flexible in
order to best react to changing conditions and circumstances. The Audit
Committee should take the appropriate actions to set the overall corporate
"tone" for quality financial reporting, sound business risk practices, and
ethical behavior.
A-1
<PAGE> 32
AUDIT COMMITTEE CHARTER
OF
BLUE RHINO CORPORATION
(CONTINUED)
The following shall be the principal recurring processes of the Audit Committee
in carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the Audit Committee may supplement them as
appropriate.
The Audit Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately accountable to
the Board of Directors and the Audit Committee, as representatives of the
Company's shareholders. The Audit Committee shall have the authority and
responsibility to evaluate and, where appropriate, to recommend to the Board
replacing the independent auditors. The Audit Committee shall discuss with the
auditors their independence from management and the Company and the matters
included in the written disclosures required by the Independence Standards
Board. Annually, the Audit Committee shall review and recommend to the Board of
Directors the selection of the Company's independent auditors, subject to
shareholders' approval.
The Audit Committee shall discuss with the independent auditors the overall
scope and plans for the audits, including the adequacy of staffing. Also, the
Audit Committee shall discuss with management and the independent auditors the
adequacy and effectiveness of the accounting and financial controls, including
the Company's system to monitor and manage business risk, and legal and ethical
compliance programs. Further, the Audit Committee shall meet separately with the
independent auditors, with and without management present, to discuss the
results of their examinations.
The Audit Committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the Company's
Quarterly Report on Form 10-Q. Also, the Audit Committee shall discuss the
results of the quarterly review and any other matters required to be
communicated to the committee by the independent auditors under generally
accepted. auditing standards. The chair of the Audit Committee may represent the
entire committee for the purposes of this review.
The Audit Committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report on Form
10-K (or the annual report to shareholders if distributed prior to the filing of
Form 10-K), including their judgment about the quality, not just acceptability,
of accounting principles, the reasonableness of significant judgments, and the
clarity of the disclosures in the financial statements. Also, the Audit
Committee shall discuss the results of the annual audit and any other matters
required to be communicated to the Audit Committee by the independent auditors
under generally accepted auditing standards.
A-2
<PAGE> 33
PROXY
COMMON STOCK
BLUE RHINO CORPORATION
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned stockholder of Blue Rhino Corporation (the "Corporation") hereby
appoints Billy Prim and Mark Castaneda, or either of them, with full power to
act alone, the true and lawful attorneys-in-fact ("Proxies") of the undersigned,
with full power of substitution and revocation, and hereby authorizes him or
them to represent and to vote, as designated below, all the shares of Common
Stock of the Corporation held on record by the undersigned on October 31, 2000,
at the Annual Meeting of Stockholders to be held on December 19, 2000 or any
adjournment thereof.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
(Continued and to be signed on reverse side.)
FOLD AND DETACH HERE
<PAGE> 34
BLUE RHINO CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY [X].
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE FOLLOWING PROPOSALS:
1. ELECTION OF DIRECTORS Nominees: Steven D. Devick and Mark Castaneda
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE FOLLOWING SPACE.)
--------------------------------------------------------------------------------
FOR ALL NOMINEES LISTED WITHHOLD
(EXCEPT AS MARKED TO AUTHORITY TO VOTE
THE CONTRARY ABOVE) FOR ALL NOMINEES
[_] [_]
2. PROPOSAL TO APPROVE THE AMENDMENTS TO THE 1998 STOCK INCENTIVE PLAN:
FOR AGAINST ABSTAIN
[_] [_] [_]
3. PROPOSAL TO APPROVE THE AMENDMENT TO THE NON-EMPLOYEE DIRECTOR STOCK OPTION
PLAN:
FOR AGAINST ABSTAIN
[_] [_] [_]
4. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING JULY 31, 2001:
FOR AGAINST ABSTAIN
[_] [_] [_]
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS
PROXY IN THEIR BEST JUDGMENT. At the present time, the Board of Directors knows
of no other business to be presented at the meeting.
Dated: , 2000
-------------------------------------------------------------------
Signature
----------------------------------------------------------------
Signature if held jointly
------------------------------------------------
Please sign exactly as your name appears above. If shares are held jointly, each
holder should sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation, please sign in
full corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 35
PROXY
SERIES A CONVERTIBLE
PREFERRED STOCK
BLUE RHINO CORPORATION
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned stockholder of Blue Rhino Corporation (the "Corporation") hereby
appoints Billy Prim and Mark Castaneda, or either of them, with full power to
act alone, the true and lawful attorneys-in-fact ("Proxies") of the undersigned,
with full power of substitution and revocation, and hereby authorizes him or
them to represent and to vote, as designated below, all the shares of Series A
Convertible Preferred Stock of Blue Rhino Corporation held on record by the
undersigned on October 31, 2000, at the Annual Meeting of Stockholders to be
held on December 19, 2000 or any adjournment thereof.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
(Continued and to be signed on reverse side.)
FOLD AND DETACH HERE
<PAGE> 36
BLUE RHINO CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY [X].
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE FOLLOWING PROPOSALS:
1. ELECTION OF DIRECTORS Nominees: Steven D. Devick, Mark Castaneda, David L.
Warnock
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE FOLLOWING SPACE.)
--------------------------------------------------------------------------------
FOR ALL NOMINEES LISTED WITHHOLD
(EXCEPT AS MARKED TO AUTHORITY TO VOTE
THE CONTRARY ABOVE) FOR ALL NOMINEES
[_] [_]
2. PROPOSAL TO APPROVE THE AMENDMENTS TO THE 1998 STOCK INCENTIVE PLAN:
FOR AGAINST ABSTAIN
[_] [_] [_]
3. PROPOSAL TO APPROVE THE AMENDMENT TO THE NON-EMPLOYEE DIRECTOR STOCK OPTION
PLAN:
FOR AGAINST ABSTAIN
[_] [_] [_]
4. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING JULY 31, 2001:
FOR AGAINST ABSTAIN
[_] [_] [_]
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS
PROXY IN THEIR BEST JUDGMENT. At the present time, the Board of Directors knows
of no other business to be presented at the meeting.
Dated: , 2000
--------------------------------------------------------------------
Signature
-----------------------------------------------------------------
Signature if held jointly
-------------------------------------------------
Please sign exactly as your name appears above. If shares are held jointly, each
holder should sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation, please sign in
full corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
