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Exhibit 4.10
BLUE RHINO CORPORATION
CERTIFICATE OF DESIGNATION, RIGHTS AND PREFERENCES\
OF SERIES A CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151 of the
General Corporation Law of
the State of Delaware
I, Billy D. Prim, President of Blue Rhino Corporation, a Delaware
corporation (the "COMPANY"), pursuant to the provisions of Section 151 of the
General Corporation Law of the State of Delaware, do hereby make this
Certificate of Designation and do hereby state and certify that pursuant to the
authority expressly vested in the Company's Board of Directors by the Company's
Second Amended and Restated Certificate of Incorporation, as amended, the Board
of Directors duly adopted the following resolutions:
RESOLVED, that, pursuant to Article FOURTH of the Company's Second
Amended and Restated Certificate of Incorporation, as amended (the "RESTATED
CERTIFICATE"), which Restated Certificate authorizes 20,000,000 shares of
Preferred Stock, $0.001 par value per share ("PREFERRED STOCK"), the Board of
Directors (the "BOARD") hereby designates 2,000,000 shares of Preferred Stock as
Series A Convertible Preferred Stock ("SERIES A PREFERRED") and hereby fixes the
designation and preferences and relative, participating, optional and other
special rights, qualifications, limitations and restrictions of the Series A
Preferred as set forth below:
1. Dividends.
(a) The holders of the then outstanding shares of Series A
Preferred shall be entitled to receive, when, as and if declared by the Board
out of any funds legally available therefor, and in preference to the holders of
shares of any other class or series of capital stock of the Company ("JUNIOR
STOCK"), cumulative dividends (the "SERIES A DIVIDEND") at the annual rate per
share (and no more) of: (i) 5% of the Conversion Price (as defined in Section
4(b)) as of the Original Issue Date or the most recent anniversary of the
Original Issue Date, whichever is later, for the period beginning on September
7, 2000 (the "ORIGINAL ISSUE DATE") and ending on the third anniversary of the
Original Issue Date; (ii) 12% of the Conversion Price (as defined in Section
4(b)) as of the third anniversary of the Original Issue Date, for the period
beginning immediately following the third anniversary of the Original Issue Date
and ending on the fourth anniversary of the Original Issue Date; and (iii) 15%
of the Conversion Price (as defined in Section 4(b)) as of the most recent
anniversary of the Original Issue Date, for all periods after the fourth
anniversary of the Original Issue Date; in each case subject to equitable
adjustment for stock splits, stock dividends, reverse stock splits and other
similar corporate reorganizations or reclassifications that result in any change
in the number of outstanding shares of Series A Preferred; provided, that the
dividend rate per share attributable to the portion of any period in which the
Company is not fulfilling (or has not fulfilled) its obligations set forth in
Section 2(a) of its Registration Rights Agreement dated September 7, 2000 to (A)
cause the Initial Registration Statement (as defined therein) to be declared
effective under the Securities Act of 1933, as amended, on or before the first
anniversary of the Original Issue Date, (B) cause the Initial Registration
Statement to cover all of the Company's common stock, par value $0.001 ("COMMON
STOCK"), issuable upon conversion of the Series A Preferred and (C) permit the
holders of Series A Preferred to sell shares of Common Stock at any time during
the Effectiveness Period, except when sales are restricted by the Company's
insider trading policies approved by the Board, shall be 15% of the Conversion
Price (as defined in Section 4(b)) as of the most recent anniversary of the
Original Issue Date . The Series A Dividend shall accrue from the Original Issue
Date and shall be payable or accruable quarterly in arrears on the 20th day of
December, March, June and September of each year (each, an "ACCRUAL DATE"),
commencing December 20, 2000; provided, that the accrued but unpaid Series A
Dividend, if any, may be declared and paid at any time, whether or not on an
Accrual Date. The Series A
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Dividend shall be fully cumulative and shall accrue (whether or not declared),
without interest, from the previous Accrual Date, except that the first
quarterly dividend shall accrue from the Original Issue Date.
(b) At the election of the Company, the Series A Dividend may
be paid in cash, in shares of Common Stock or in a combination of cash and
shares of Common Stock; provided, that no fractional share of Common Stock shall
be issued in payment of any portion of the Series A Dividend. If the Company
elects to pay all or any portion of the Series A Dividend in shares of Common
Stock, such shares shall be valued based on the Average Closing Price as of the
date on which the Board authorizes issuance of such shares. "AVERAGE CLOSING
PRICE" shall mean, as of any particular date:
(i) if the Common Stock is then traded on a
securities exchange or the NASDAQ National Market, the average of the
closing prices of the Common Stock on such securities exchange over the
thirty trading days ending three (3) business days prior to such date,
as reported in The Wall Street Journal - Eastern Edition listing for
each such day (corrected for obvious typographical errors);
(ii) if the Common Stock is then traded
over-the-counter, the average of the closing bid or sale prices
(whichever are applicable) over the thirty trading days ending three
(3) business days prior to such date as reported in The Wall Street
Journal - Eastern Edition listing for each such day (corrected for
obvious typographical errors); and
(iii) if there is no active public market for the
Common Stock, the value shall be the fair market value thereof, as
determined in good faith by the Board.
(c) Each holder of then outstanding shares of each Series A
Preferred shall be entitled to share ratably with the holders of Common Stock in
all dividends or other non-liquidating distributions declared and paid on the
Common Stock, other than those payable solely in shares of Common Stock (which
shall have the effects described in Section 4(f)), on the basis that such holder
held, on the record date for such dividend or distribution, the number of shares
of Common Stock into which such holder's shares would have been convertible on
such date upon exercise of the Conversion Rights described in Section 4.
2. Liquidation.
(a) Series A Liquidation Preference.
(i) In the event of any liquidation, dissolution or
winding up of the affairs of the Company, whether voluntary or
involuntary (a "GENERAL LIQUIDATION EVENT"), after payment or provision
for payment of the debts and other liabilities and obligations of the
Company as required by law, the holders of each share of Series A
Preferred then outstanding shall be entitled to be paid out of the net
assets of the Company available for distribution to its stockholders,
before any payment or declaration and setting apart for payment of any
amount shall be made in respect of Junior Stock, an amount equal to
$6.00 per share of Series A Preferred, plus the accrued but unpaid
Series A Dividend, if any, to and including the date full payment is
tendered to the holders of the Series A Preferred with respect to such
General Liquidation Event (the "SERIES A LIQUIDATION PREFERENCE"). If
the Company shall at any time or from time to time effect a subdivision
of the outstanding Series A Preferred (or declare and pay a dividend
thereon payable in additional shares of Series A Preferred), the Series
A Liquidation Preference then in effect immediately before that
subdivision (or dividend) shall be proportionately decreased;
conversely, if the Company shall at any time or from time to time
reduce the outstanding shares of Series A Preferred by combination or
reverse stock split, the Series A Liquidation Preference then in effect
immediately before the combination shall be proportionately increased.
Any such adjustment pursuant to the preceding sentence shall become
effective at the close of business on the date the subdivision or
combination becomes effective or the dividend is paid. If upon the
occurrence of a General Liquidation Event, the
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assets and funds to be distributed among the holders of Series A
Preferred shall be insufficient to permit the payment to such holders
of the full Series A Liquidation Preference, then such assets and funds
of the Company legally available for distribution shall be distributed
ratably among the holders of Series A Preferred based upon the number
of shares of Series A Preferred then held by them.
(ii) Unless the holders of a majority of then
outstanding shares of Series A Preferred otherwise elect, a Fundamental
Transaction (as defined in Section 2(a)(iii)) shall be treated as a
General Liquidation Event with respect to the Series A Preferred. In
such event, the holders of Series A Preferred shall have the right to
receive payment of the Series A Liquidation Preference in lieu of
receiving the consideration and other securities and property provided
for under Section 4(i).
(iii) "FUNDAMENTAL TRANSACTION" shall mean the
consummation of: (A) a share exchange, consolidation or merger of the
Company with or into any other corporation or other entity or any other
corporate reorganization in which the Company is not the surviving
entity (unless the stockholders of the Company immediately prior to
such share exchange, consolidation, merger or reorganization own or
control in excess of fifty percent (50%) of the general voting power of
either the surviving entity or an entity that owns or controls in
excess of fifty percent (50%) of the general voting power of the
surviving entity); or (B) a sale of all or substantially all of the
assets of the Company (unless the stockholders of the Company
immediately prior to such sale own or control in excess of fifty
percent (50%) of the general voting power of either the purchasing
party or parties or an entity that owns or controls in excess of fifty
percent (50%) of the general voting power of the purchasing party or
parties). The determination of "general voting power" shall be based on
the aggregate number of votes that are attributable to outstanding
securities entitled to vote in the election of directors, general
partners, managers or persons performing analogous functions to
directors of the entity in question, without regard to contractual
arrangements that establish a management structure or that vest the
right to designate directors in certain parties.
(b) Distribution of Remaining Liquidation Proceeds. After
payment in full of the Series A Liquidation Preference, the remaining net assets
of the Company shall next be distributed ratably per share to the holders of
Common Stock. Except as expressly set forth in Section 2(a)(i), holders of
Series A Preferred shall not be entitled to any distribution in the event of a
General Liquidation Event.
(c) Valuation of Securities. If the assets to be distributed
pursuant to this Section 2 consist of securities, such securities shall be
valued at their fair market value, determined as follows:
(i) if traded (and then tradable) on a securities
exchange or the NASDAQ National Market, the value shall be
deemed to be the average of the closing prices of the
securities on such exchange over the thirty (30) trading day
period ending three (3) business days prior to the date of the
Liquidation Notice (as defined in Section 2(d));
(ii) if traded (and then tradable) over-the-counter,
the value shall be deemed to be the average of the closing bid
or sale prices (whichever are applicable) over the thirty (30)
trading day period ending three (3) days prior to the date of
the Liquidation Notice; and
(iii) if there is no active public market (or if not
then tradable in a public market), the value shall be the fair
market value thereof, as determined in good faith by a
majority of the Board.
(iv) In the event that the holders of a majority of
the outstanding shares of Series A Preferred (a "DISPUTING
PARTY") give prompt written notice to the Company that they
dispute the determination of the Board made pursuant to
Section 2(c)(iii), each of the Company and the
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Disputing Party shall select an investment banking firm or
other expert of recognized standing, and the two firms or
other experts so selected shall select a third firm or expert
who shall determine conclusively the fair market value (in the
case of Section 2(c)(iii). The cost of such firms or experts
shall be divided equally between the Disputing Party (jointly
and severally), on the one hand, and the Company, on the other
hand.
(d) Notice. Written notice (the "LIQUIDATION NOTICE") of any
General Liquidation Event, which states the payment date, the place where said
payments shall be made and the date on which Conversion Rights (as defined in
Section 4) terminate as to such shares (which shall be not less than five (5)
days after the date of such Liquidation Notice), or of the expected effective
date for a Fundamental Transaction, shall be given by first class mail, postage
prepaid, or by telecopy or facsimile, not less than ten (10) days prior to the
payment date stated therein (or, in the case of a Fundamental Transaction, the
expected effective date thereof), to holders of record of Series A Preferred,
such Liquidation Notice to be addressed to each such holder at its address as
shown on the records of the Company.
3. Voting Rights.
(a) General. Except as otherwise required by law, the holders
of each share of Series A Preferred shall be entitled to: (i) notice of any
stockholders' meeting in accordance with the bylaws of the Company; (ii) vote on
all matters upon which holders of Common Stock have the right to vote and (iii)
a number of votes on such matters equal to the largest number of full shares of
Common Stock into which such shares of Series A Preferred could be converted
pursuant to Section 4 on the record date for determination of stockholders
entitled to vote on such matters or, if no such record date is established, on
the date such vote is taken or a written consent is effective; provided, that
for this purpose only, the Series A Preferred shall be deemed convertible as of
the Original Issue Date and not, as set forth in Section 4(a), after the first
anniversary of the Original Issue Date. Except to the extent class or series
voting is otherwise required by law or the Restated Certificate, the holders of
shares of Series A Preferred and Common Stock shall vote together as a single
voting group on all matters and not as separate voting groups.
(b) Class C Director. The Board shall consist of no more than
nine (9) members. Notwithstanding Section 3(a), for so long as shares of Series
A Preferred remain outstanding, the holders of a majority of the outstanding
shares of Series A Preferred, voting as a separate class, shall be entitled to
elect one (1) director to the Board, which director shall be a Class C Director,
at each meeting of the Company's stockholders for the election of Class C
Directors.
4. Conversion.
The holders of the Series A Preferred shall have the following
conversion rights (the "CONVERSION RIGHTS"):
(a) Right to Convert. Each share of Series A Preferred shall
be convertible, at the option of the holder thereof at any time after the first
anniversary of the Original Issue Date and prior to the mandatory conversion as
set forth in Section 4(c), at the office of the Company or any transfer agent
for the Series A Preferred or Common Stock, into fully paid and nonassessable
shares of Common Stock, at the Conversion Price (as defined in Section 4(b))
therefor in effect at the time of conversion.
(b) Conversion Price. Shares of Series A Preferred shall be
convertible into the number of shares of Common Stock equal to $6.00 (the
"ORIGINAL ISSUE PRICE") divided by the Conversion Price per share in effect at
the time of conversion for each share of Series A Preferred being converted. The
"CONVERSION PRICE" per share for the Series A Preferred as of the Original Issue
Date shall be $6.00; provided, that, in the event that the Company's
consolidated EBITDA for the fiscal year ending July 31, 2001 is less than
$11,800,000, the Conversion
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Price as of the Original Issue Date shall be deemed to have been the greatest
of: (i) $4.50; (ii) book value per share of the Common Stock as of the Original
Issue Date as determined in good faith by the Company or (iii) the closing bid
price per share of the Common Stock on the NASDAQ National Market on the
Original Issue Date, and any adjustments to the Conversion Price made pursuant
hereto between the Original Issue Date and the date on which such determination
of EBITDA is made shall be re-evaluated and, if applicable, re-adjusted. The
Conversion Price shall be subject to adjustment from time to time as provided
herein.
For purposes hereof, "EBITDA" shall mean: the Company's Net Income less
the sum of (i) interest expense, (ii) provision for income taxes, (iii)
depreciation and amortization and (iv) nonrecurring expenses, in each case for
the Company's fiscal year ending July 31, 2001, all as shown on the Company's
audited consolidated Statement of Operations for the year ending July 31, 2001.
(c) Mandatory Conversion. At the option of the Company upon at
least fifteen (15) days written notice (the "NOTICE") to the holders of Series A
Preferred given at any time after the second anniversary of the Original Issue
Date, each then outstanding share of Series A Preferred shall be converted
automatically as of the effective date set forth in the Notice (the "MANDATORY
CONVERSION DATE"), without any action on the part of the holder thereof, into a
number of shares of Common Stock determined as provided in Section 4(b)
("MANDATORY CONVERSION"); provided that: (i) the Common Stock is then traded on
a national securities exchange or the NASDAQ National Market; (ii) the average
of the closing prices of the Common Stock on such national securities exchange
over the ten (10) trading days ending three (3) business days prior to the date
that the Notice is deemed given as provided in Section 4(n), as reported in The
Wall Street Journal - Eastern Edition listing for each such day (corrected for
obvious typographical errors), is at least equal to 160% of the then effective
Conversion Price; and (iii) the Company shall have no obligation to issue and
deliver to any such holder of Series A Preferred on such date a certificate for
the number of shares of Common Stock to which such holder shall be entitled
until such time as such holder has surrendered its certificate or certificates
for its Series A Preferred, duly endorsed, at the office of the Company or any
transfer agent for the Common Stock or the holder notifies the Company that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection therewith. All rights with respect to shares of Series A
Preferred outstanding as of the Mandatory Conversion Date shall forthwith
terminate, except only the right of the holders of such shares to receive Common
Stock upon surrender of their certificates for the Series A Preferred and their
rights with respect to the accrued but unpaid Series A Dividend, if any.
(d) Mechanics of Conversion; Unpaid Dividends. Before any
holder of Series A Preferred shall be entitled to convert the same into shares
of Common Stock, such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Company or of any transfer agent
for the Series A Preferred or Common Stock and shall give written notice by
mail, postage prepaid, to the Company at such office that such holder elects to
convert the same and shall state therein the number of shares of Series A
Preferred being converted and the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. Thereupon the Company
shall promptly issue and deliver at such office to such holder of Series A
Preferred or to the nominee or nominees of such holder a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled.
Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Series A Preferred to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date. Upon conversion of such shares of Series A Preferred,
the accrued but unpaid Series A Dividend, if any, shall be paid in cash or in
shares of Common Stock as provided in Section 1(b).
(e) Adjustment for Stock Splits and Combinations. If the
Company shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the
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Conversion Price then in effect immediately before that subdivision shall be
proportionately decreased; conversely, if the Company shall at any time or from
time to time after the Original Issue Date reduce the outstanding shares of
Common Stock by combination or otherwise, the Conversion Price then in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this Section 4(e) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the
event the Company at any time or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Conversion
Price then in effect shall be decreased as of the time of such issuance or, in
the event such a record date shall have been fixed, as of the close of business
on such record date, by multiplying the Conversion Price then in effect by a
fraction:
(1) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such record date,
and
(2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such
record date, plus the number of shares of Common Stock issuable in
payment of such dividend or distribution; provided, however, if such
record date shall have been fixed and such dividend is not fully paid
or if such distribution is not fully made on the date fixed therefor,
the Conversion Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Conversion Price shall
be adjusted pursuant to this Section 4(f) as of the time of actual
payment of such dividends or distributions.
(g) Adjustments for Other Dividends and Distributions. In the
event the Company at any time or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Company other than shares of Common Stock, then and in each
such event provision shall be made so that the holders of Series A Preferred
shall receive upon conversion thereof, in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of the Company that
they would have received had their Series A Preferred been converted into Common
Stock on the date of such event and had thereafter, during the period from the
date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period giving application
to all adjustments called for during such period under this Section 4 with
respect to the rights of the holders of the Series A Preferred.
(h) Adjustment for Reclassification, Exchange or Substitution.
If the Common Stock issuable upon the conversion of the Series A Preferred shall
be changed into the same or a different number of shares of any class or classes
of stock, whether by capital reorganization, reclassification or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for above, or a reorganization, merger, consolidation or sale of assets provided
for elsewhere in this Section 4), then and in each such event the holders of
each share of Series A Preferred shall have the right thereafter to convert such
share into the kind and amounts of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other change,
by holders of the number of shares of Common Stock into which such shares of
Series A Preferred might have been converted immediately prior to such
reorganization, reclassification or change, all subject to further adjustment as
provided herein.
(i) Reorganization or Fundamental Transaction. If at any time
or from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of shares
provided for elsewhere in this Section 4) or a Fundamental Transaction (as
defined in Section
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2(a)(iii)) that the holders of at least a majority of the outstanding shares of
Series A Preferred have elected not to treat as a General Liquidation Event
under Section 2(a)(ii), then, as a part of such reorganization or Fundamental
Transaction, provision shall be made so that the holders of the Series A
Preferred shall thereafter be entitled to receive upon conversion thereof the
number of shares of stock or other securities or property of the Company, or of
the successor entity resulting from such Fundamental Transaction, to which a
holder of that number of shares of Common Stock deliverable upon conversion of
the Series A Preferred would have been entitled on such capital reorganization
or Fundamental Transaction. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section 4 with respect to the
rights of the holders of the Series A Preferred after the reorganization or
Fundamental Transaction to the end that the provisions of this Section 4
(including adjustment of the Conversion Price then in effect and the number of
shares of Common Stock into which each share of Series A Preferred is
convertible) shall be applicable after such reorganization or Fundamental
Transaction as nearly equivalent as may be practicable.
(j) Sale of Shares Below Conversion Price.
(i) If at any time or from time to time after the
Original Issue Date, the Company shall issue or sell Additional Shares
of Common Stock (as defined in Section 4(j)(v)), other than as a
dividend as provided in Section 4(f), and other than upon a subdivision
or combination of shares of Common Stock as provided in Section 4(e),
for a consideration per share less than the then effective Conversion
Price, then and in each case the Conversion Price shall be reduced to
the price per share at which such Additional Shares of Common Stock are
issued (the "ISSUANCE PRICE"), provided that in no event shall the
Company issue or sell Additional Shares of Common Stock for a
consideration per share less than the then effective Conversion Price
without (x) prior shareholder approval of both the issuance or sale of
such Additional Shares of Common Stock and the resulting increase in
the number of shares of Common Stock issuable upon conversion of the
Series A Preferred at the Issuance Price or (y) the prior written
consent of the holders of a majority of the outstanding shares of
Series A Preferred, in which case upon issuance or sale of such
Additional Shares of Common Stock, the Conversion Price shall be
reduced not to the Issuance Price, but instead to the greatest of (A)
the price per share at which such Additional Shares of Common Stock are
issued; (B) book value per share of the Common Stock as of the Original
Issue Date as determined in good faith by the Company or (C) the
closing bid price per share of the Common Stock on the NASDAQ National
Market on the Original Issue Date.
(ii) For the purpose of making the adjustments
provided in Section 4(j)(i), the consideration received by the Company
for any issue or sale of securities shall:
(A) to the extent it consists of cash, be
computed at the net amount of cash received by the Company
after deduction of any underwriting or similar commissions,
concessions or compensation paid or allowed by the Company in
connection with such issue or sale;
(B) to the extent it consists of services or
property other than cash, be computed at the fair value of
such services or property as determined in good faith by the
Board; and
(C) if Additional Shares of Common Stock,
Convertible Securities (as hereinafter defined), or rights or
options to purchase either Additional Shares of Common Stock
or Convertible Securities are issued or sold together with
other stock or securities or other assets of the Company for a
consideration that covers both, be computed as the portion of
the consideration so received that may be reasonably
determined in good faith by the Board to be allocable to such
Additional Shares of Common Stock, Convertible Securities or
rights or options.
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(iii) For the purpose of the adjustment provided in
Section 4(j)(i), if at any time or from time to time, the Company shall
issue any rights or options for the purchase of, or stock or other
securities convertible into, Additional Shares of Common Stock (such
convertible stock or securities being hereinafter referred to as
"CONVERTIBLE SECURITIES"), then, in each case, if the Effective Price
(as hereinafter defined) of such rights, options or Convertible
Securities shall be less than then existing Conversion Price, the
Company shall be deemed to have issued at the time of the issuance of
such rights, options or Convertible Securities the maximum number of
Additional Shares of Common Stock issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such
shares an amount equal to the total amount of the consideration, if
any, received by the Company for the issuance of such rights, options
or Convertible Securities, plus, in the case of such options or rights,
the minimum amounts of consideration, if any, payable to the Company
upon exercise or conversion of such options or rights. For purposes of
the foregoing, "EFFECTIVE PRICE" shall mean the quotient determined by
dividing the total of all such consideration by such maximum number of
Additional Shares of Common Stock. No further adjustment of the
existing Conversion Price adjusted upon the issuance of such rights,
options or Convertible Securities shall be made as a result of the
actual issuance of Additional Shares of Common Stock on the exercise of
any such rights or options or the conversion of any such Convertible
Securities.
If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire
without having been exercised, the existing Conversion Price adjusted
upon the issuance of such rights, options or Convertible Securities
shall be readjusted to the Conversion Price that would have been in
effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares
of Common Stock, if any, actually issued or sold upon the exercise of
such rights or options, or upon the conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received
by the Company for the granting of all such rights or options, whether
or not exercised, or the consideration received for issuing or selling
the Convertible Securities actually converted plus the consideration,
if any, actually received by the Company on the conversion of such
Convertible Securities.
(iv) For the purpose of the adjustment provided for
in Section 4(j)(i), if at any time or from time to time, the Company
shall issue any rights or options for the purchase of Convertible
Securities, then in each such case, if the Effective Price thereof is
less than then existing Conversion Price, the Company shall be deemed
to have issued at the time of the issuance of such rights or options
the maximum number of Additional Shares of Common Stock issuable upon
conversion of the total amount of Convertible Securities covered by
such rights or options and to have received as consideration for the
issuance of such Additional Shares of Common Stock an amount equal to
the amount of consideration, if any, received by the Company for the
issuance of such rights or options, plus the minimum amounts of
consideration, if any, payable to the Company upon the conversion of
such Convertible Securities. For the purposes of the foregoing,
"Effective Price" shall mean the quotient determined by dividing the
total amount of such consideration by such maximum number of Additional
Shares of Common Stock. No further adjustment of the Conversion Price
adjusted upon the issuance of such rights or options shall be made as a
result of the actual issuance of the Convertible Securities upon the
exercise of such rights or options or upon the actual issuance of
Additional Shares of Common Stock upon the conversion of such
Convertible Securities.
The provisions of Section 4(j)(iii) for the
readjustment of the Conversion Price upon the expiration of rights or
options or the rights of conversion of Convertible Securities shall
apply mutatis mutandis to the rights, options and Convertible
Securities referred to in this Section 4(j)(iv).
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(v) Definition. The term "Additional Shares of Common
Stock" as used herein shall mean all shares of Common Stock issued or
deemed issued by the Company after the Original Issue Date, whether or
not subsequently reacquired or retired by the Company, other than: (A)
pursuant to a stock split, stock dividend or reclassification or
similar organic change involving the Company's capital stock; (B) upon
conversion of the Series A Preferred; (C) to Thomas E. Brandtonies or
to Gold Bank, or upon exercise of the warrant granted to Thomas E.
Brandtonies, in connection with the Company's acquisition of shares of
the capital stock of QuickShip, Inc.; (D) pursuant to the exercise of
options or warrants approved by the Board; (E) as an inducement to
lenders of the Company to advance sums or otherwise to make financial
accommodations, or as compensation to lenders for advancing sums or
otherwise making financial accommodations, to the Company or one or
more of its subsidiaries, to the extent such issuance is approved by
the Board; (F) as compensation to vendors or lessors of the Company in
connection with, or as an inducement to vendors or lessors of the
Company to enter into, agreements with the Company and not as part of
an offering of the Company's securities, to the extent such issuance is
approved by the Board; (G) to employees, officers, directors,
distributors, consultants or other persons performing services for or
on behalf of the Company, in each case to the extent issued solely in
its status as such and not as part of an offering of the Company's
securities, pursuant to any stock option plan, stock purchase plan,
management incentive plan, consulting agreement or other contract or
arrangement approved by the Board (collectively, "PLANS"); and (H) in
consideration of the acquisition by the Company of the assets, capital
stock or other equity interests of, or in connection with a joint
venture with, another entity, to the extent such issuance is approved
by the Board; provided, that such issuance (after giving effect
thereto), when aggregated with all other issuances contemplated by this
clause (H), does not constitute a number of shares (as equitably
adjusted in the event of a stock split, stock dividend, combination or
other similar recapitalization) greater than 20% of the number of
shares of Common Stock outstanding (determined on a fully diluted,
as-converted basis) as of the Original Issue Date (after giving effect
to the issuance of Series A Preferred).
(k) Accountants' Certificate of Adjustment. In each case of an
adjustment or readjustment of the Conversion Price for the number of shares of
Common Stock or other securities issuable upon conversion of the Series A
Preferred, at the request of any holder of Series A Preferred, the Company, at
its expense, shall cause independent certified public accountants of recognized
standing selected by the Company (who may be the independent certified public
accountants then auditing the books of the Company) to compute such adjustment
or readjustment in accordance herewith and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder of the Series A Preferred at
the holder's address as shown in the Company's books. The certificate shall set
forth such adjustment or readjustment, showing in reasonable detail the facts
upon which such adjustment or readjustment is based.
(l) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of shares of Series A Preferred. In lieu of any
fractional shares to which the holder would otherwise be entitled, the Company
shall pay cash equal to the product of such fraction multiplied by the fair
market value of one share of Common Stock on the date of conversion, as
determined in good faith by the Board. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Series A Preferred the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(m) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred, such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred. As a condition precedent to the
taking of any action which would cause an adjustment to the Conversion Price,
the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued
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shares of Common Stock to such number of shares as shall be sufficient in order
that it may validly and legally issue the shares of its Common Stock issuable
based upon such adjusted Conversion Price.
(n) Notices. Any notice required by the provisions of this
Section 4 to be given to the holder of shares of the Series A Preferred shall be
deemed given when personally delivered to such holder or on the business day
after the same has been deposited in the United States mail, certified or
registered mail, return receipt requested, postage prepaid, and addressed to
each holder of record at its address appearing on the books of the Company.
(o) Payment of Taxes. The Company will pay all taxes and other
governmental charges (other than taxes measured by the revenue or income of the
holders of the Series A Preferred) that may be imposed in respect of the issue
or delivery of shares of Common Stock upon conversion of shares of the Series A
Preferred.
5. Protective Provisions. From the Original Issue Date until
such time as no shares of Series A Preferred remain outstanding, the Company
shall not, directly or indirectly, take any of the following actions without
first obtaining the affirmative vote or the written consent of the holders of a
majority of the then outstanding shares of Series A Preferred:
(a) create, authorize, designate, reclassify, issue or sell
any class or series of capital stock of the Company, or rights, options,
warrants or other securities convertible into or exchangeable for any capital
stock of the Company, or any "phantom" equity or stock appreciation rights, that
rank as to payment of dividends or distribution of assets upon liquidation
senior to or pari passu with the Series A Preferred;
(b) amend, repeal, alter or modify the terms, rights,
preferences or privileges of the shares of the Series A Preferred;
(c) increase or decrease the authorized number of shares of
Series A Preferred or Common Stock;
(d) amend or waive any provision of the Restated Certificate
or the bylaws of the Company if such amendment would adversely affect the rights
of the holders of Series A Preferred; or
(e) declare or pay any dividend with respect to Junior Stock,
or make any payment on account of, or set apart for payment money for a sinking
or other similar fund for, the repurchase, redemption or other retirement of any
shares of Common Stock or any warrants, rights or options exercisable for or
convertible into shares of Common Stock, or make any distribution in respect of
shares of Common Stock, either directly or indirectly, and whether in cash,
obligations or shares of the Company or other property (other than distributions
or dividends in Common Stock to the holders of Common Stock), except, in each
case: (i) pursuant to equity incentive agreements or arrangements with service
providers upon termination of their services to the Company; or (ii) pursuant to
agreements entered into to evidence grants or awards or other compensation under
any Plan.
6. Preemptive Rights.
(a) The holders of outstanding shares of Series A Preferred
(the "PREEMPTIVE HOLDERS") shall have the preemptive rights described in this
Section 6 with regard to all issuances by the Company after the Original Issue
Date of shares of Common Stock or warrants, options or other rights to purchase
shares of Common Stock or any securities convertible into or exchangeable for
shares of Common Stock (collectively, the "NEW SECURITIES"); provided, however,
that New Securities do not include:
(i) securities issued in connection with a stock
split, stock dividend or reclassification or similar organic change
involving the Company's capital stock;
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(ii) Common Stock issued upon the conversion of
Series A Preferred (as adjusted for all subsequent stock dividends,
subdivisions and combinations, the "CONVERSION SHARES");
(iii) securities issued upon conversion of any other
security so long as such other security was itself either a New
Security or was outstanding as of the Original Issue Date;
(iv) securities issued upon the exercise of any
warrant, option or other right to purchase securities so long as such
warrant, option or other right was itself either a New Security, is
excluded from the definition of New Security pursuant to Section
6(a)(v) or was outstanding as of the Original Issue Date;
(v) warrants, options or other rights to purchase
securities or securities convertible into or exchangeable for
securities issued pursuant to any Plan to employees, officers,
directors, distributors, consultants or other persons performing
services for or on behalf of the Company, in each case to the extent
issued solely in its status as such and not as part of an offering of
the Company's securities;
(vi) securities issued to Thomas E. Brandtonies or to
Gold Bank, or upon exercise of the warrant granted to Thomas E.
Brandtonies, in connection with the Company's acquisition of shares of
the capital stock of QuickShip, Inc.;
(vii) securities issued as an inducement to lenders
of the Company to advance sums or otherwise to make financial
accommodations, or to compensate lenders for advancing sums or
otherwise making financial accommodations, to the Company or one or
more of its subsidiaries, to the extent such issuance is approved by
the Board;
(viii) securities issued as compensation to vendors
or lessors of the Company in connection with, or as an inducement to
vendors or lessors of the Company to enter into, agreements with the
Company and not as part of an offering of the Company's securities, to
the extent such issuance is approved by the Board; and
(ix) securities issued in consideration of the
acquisition by the Company of the assets, capital stock or other equity
interests of, or in connection with a joint venture with, another
entity, to the extent such issuance is approved by the Board; provided,
that such issuance (after giving effect thereto), when aggregated with
all other issuances contemplated by this clause (ix), does not
constitute a number of shares of Common Stock (on a fully diluted,
as-converted basis and as equitably adjusted in the event of a stock
split, stock dividend or other similar recapitalization) greater than
20% of the number of shares of Common Stock outstanding (determined on
a fully diluted, as-converted basis) as of the Original Issue Date
(after giving effect to the issuance of Series A Preferred).
(b) In the event that the Company proposes to offer to sell
any New Securities, the Company shall first give to each of the Preemptive
Holders written notice stating such intention. The written notice shall contain
a full, accurate and complete description of the price and terms of such
proposed sale, and shall contain an unconditional offer to sell a Pro Rata Share
(as defined in Section 6(d)) of such New Securities to such Preemptive Holder on
the same terms and conditions as set forth in the notice. Each Preemptive Holder
shall have 20 days from the date such written notice is given to elect to
purchase all or a portion of such Preemptive Holder's Pro Rata share of the New
Securities, by giving written notice to the Company of such election and the
quantity of New Securities such Preemptive Holder will purchase. In addition,
each Preemptive Holder may elect to purchase more than its Pro Rata Share (an
"EXCESS ELECTION") and, to the extent one or more of the other Preemptive
Holders does not elect to purchase its full Pro Rata Share (the "UNALLOCATED
SHARE"), each Preemptive Holder so electing may
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purchase such portion of the Unallocated Share equal to the percentage that its
Excess Election is of the aggregate amount of Excess Elections of all Preemptive
Holders.
(c) In the event that any Preemptive Holder elects to purchase
any of the New Securities within the election period described in Section 6(b),
the consideration for such purchases shall be paid to the Company and a
certificate or other instrument evidencing the New Securities shall be delivered
to the electing Preemptive Holder concurrently with the closing of the sale of
New Securities to the third party purchaser(s) thereof, subject in all cases to
the execution and delivery by the Company and the Preemptive Holder of a
purchase agreement or subscription agreement relating to such New Securities and
all other documents in form and substance substantially similar, to the extent
applicable, to those executed and delivered by the Company and the third party
purchaser(s). The Company shall provide notice of such date to the purchasing
Preemptive Holders at least three (3) days prior thereto.
(d) As used in this Section 6, the "PRO RATA SHARE" of the New
Securities that a Preemptive Holder will be offered an opportunity to purchase
is a fraction of the total New Securities proposed to be issued, the numerator
of which is the number of Conversion Shares and other shares of Common Stock
then owned by such Preemptive Holder plus the number of Conversion Shares and
other shares of Common Stock that could be obtained by conversion on such date
of all Series A Preferred held by such Preemptive Holder or by exercise of any
option, warrant or similar right, and the denominator of which is the number of
shares of Common Stock outstanding on such date on a fully diluted basis
(assuming conversion of all of the outstanding Series A Preferred and the
exercise of all outstanding options, warrants or similar rights).
(e) During the 90-day period following the expiration of the
20-day election period described in Section 6(b), the Company may issue the New
Securities that Preemptive Holders have not purchased pursuant to this Section
6, but only on terms and conditions and at a price no more favorable to the
purchasers thereof than was specified in the Company's notice to the Preemptive
Holders.
(f) All rights accorded to any Preemptive Holder under this
Section 6 may be waived or modified, either generally or in the case of any
particular issuance of New Securities, and either prospectively or
retroactively, if those Preemptive Holders who hold, in the aggregate, a
majority of the shares of Common Stock held by all Preemptive Holders (computed
on a fully diluted basis assuming the exercise of all options, warrants and
similar rights and the conversion and exchange of all securities convertible
into or exchangeable for Common Stock) execute and deliver to the Company a
written instrument to that effect.
7. No Reissuance of Series A Preferred.
No share or shares of Series A Preferred acquired by the
Company by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares shall be canceled, retired and eliminated from the
shares which the Company shall be authorized to issue.
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IN WITNESS WHEREOF, Blue Rhino Corporation caused this
Certificate to be signed by its President and attested by its Secretary on this
_____ day of September, 2000.
BLUE RHINO CORPORATION
By:
---------------------------
Billy D. Prim
CEO and President
ATTEST:
-----------------------------
Mark Castaneda
Secretary
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