SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 3, 2000
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Blue Rhino Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-24287 56-1870472
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(State of or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
104 Cambridge Plaza Drive, Winston-Salem, North Carolina 27104
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (336) 659-6900
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Not Applicable
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(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
UNIFLAME, INC. ACQUISITION
On April 4, 2000, the Company completed the acquisition of substantially all of
assets from Uniflame, Inc. ("Uniflame"), an import and design company based in
Zion, Illinois dealing in barbecue grills, garden art and fireplace accessories.
The acquired assets include inventories, accounts receivable, various trademarks
and copyrights, a patent and 100% of the stock of Uni-Asia, Ltd., a Seychelles
corporation engaged in exports to Asia. The effective date of the acquisition
was March 31, 2000. The purchase price consisted of approximately $4.6 million
in cash, 478,716 shares of the Company's common stock (calculated based on the
average closing price for the common stock for the 10 days ended March 31, 2000
and representing approximately 59% of the consideration paid at closing) and a
deferred purchase price of a maximum of $2.25 million. The deferred purchase
price is payable on a quarterly basis over a three-year period and is based on a
targeted EBITDA for the Uniflame lines operated by the Company, which target
increases each year. The deferred purchase price is payable in the amount of
$187,500 per calendar quarter ending June 30, September 30, December 31 and
March 31. In the event the target EBITDA for a given year is not met, the amount
of the deferred purchase price paid in the fourth quarter of such year is
reduced by the shortfall from the target EBITDA. In the event the target EBITDA
is not met in any given year, the amount that the deferred purchase price is
reduced will be paid if the actual EBITDA for future years exceed such year's
target EBITDA, but only to the extent of the percentage increase from the target
EBITDA. With respect to the accounts receivable and accounts payable assumed by
the Company, if by September 30, 2000 the Company does not collect 100% of the
accounts receivable or is obligated to pay more than the accounts payable as
shown on the books of Uniflame as of March 31, 2000, the Company may deduct such
amounts from the next installment of the deferred purchase price. The purchase
price and manner of payment were negotiated between the Company and Uniflame at
arms-length, and no formula or other fixed or identifiable principles were used
in establishing these terms other than the share calculation method described
above.
Uniflame and its shareholders, Mac. R. McQuilkin and James E. Harris, agreed not
to compete with the Company with respect to the business operated by Uniflame
for a period of five years after the effective date. The Company has agreed to
take steps to provide for the resale without restriction of the shares of common
stock issued in the Uniflame acquisition. In the event the Company is unable to
deliver the common stock pursuant to the preceding sentence, the persons
receiving common stock pursuant to the Uniflame acquisition shall have demand
registration rights pursuant to a registration rights agreement dated as of
March 31, 2000.
In connection with the Uniflame acquisition, the Company entered into employment
agreements
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with Michael Fasel and Martin Bossler and certain other former Uniflame
employees. Mr. Fasel has been named an Executive Vice President of the Company.
Mr. Fasel's employment agreement has a three year term and provides an annual
base salary of $235,000. Mr. Fasel is responsible for the Uniflame line of
business as operated by the Company. Mr. Bossler has been named Senior Vice
President - R&D of the Company. Mr. Bossler's employment agreement also has a
three year term, and provides for an annual base salary of $187,000. Mr. Bossler
is responsible for all aspects of product design and factory management
connected with the Uniflame line of business operated by the Company. Any
bonuses paid to Messrs. Fasel and Bossler will be determined in the sole
discretion of the board of directors of the Company on recommendation of the
president of the Company. The Company may terminate Messrs. Fasel or Bossler for
cause or without cause at any time, provided that if Messrs. Fasel or Bossler
are terminated without cause, they shall continue to receive their base salary
for one year from the date their employment is terminated. Messrs. Fasel and
Bossler, as well as the other employees who entered into employment agreements
with the Company, have each agreed not to compete against the Company within the
United States for a period of one year after termination of employment with the
Company.
The Company drew on its credit facility with Bank of America to provide the cash
portion of the purchase price for this acquisition. See Item 5, below.
The description of this transaction contained in this Item 2 is qualified in its
entirety by reference to the documents relating thereto filed as exhibits to
this Report.
INTERNATIONAL PROPANE PRODUCTS ACQUISITION
On April 3, 2000, the Company completed the acquisition of substantially all of
assets relating to patio heaters developed by, manufactured for and marketed by
International Propane Products, LLC ("IPP"), a wholesale and design company
based in Elgin, Illinois owned by Michael A. Waters. IPP's primary products are
several models of propane patio heaters that have been distributed in North
America exclusively by the Company. The acquired assets include all of the
assets relating to or necessary for the manufacture or sale of patio heaters,
inventories, molds, dies and all intellectual property relating to the patio
heaters developed by Mr. Waters, which include patent applications relating to
the patio heaters (the "Intellectual Property"). The effective date of the IPP
Acquisition was March 31, 2000. The purchase price included approximately $2.9
million in cash, of which approximately $1.7 million was credited to the Company
for prepaid patio heater inventory, resulting in a net cash paid at closing of
approximately $1.2 million, 83,572 shares of the Company's common stock
(calculated based on the average closing price for the common stock for the five
days ended March 31, 2000 and representing approximately 48% of the
consideration paid at closing) and a deferred purchase price equal to 1% of net
sales from patio heaters. The deferred purchase price is payable on a quarterly
basis for a term equal to the lesser of (a) the life of the patent that may be
issued with respect to the Intellectual Property, but in any event not less than
five years, or (b) the period ending on the last day of the first one year
period during which the Company does not make, use or sell the patio heaters.
The Company has agreed to pay a minimum deferred purchase price which may be as
much as $530,000 under certain circumstances.
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The purchase price and manner of payment were negotiated between the Company and
IPP at arms-length, and no formula or other fixed or identifiable principles
were used in establishing these terms other than the share calculation method
described above.
IPP and Mr. Waters have each agreed not to compete with the Company with respect
to the manufacture and sale of patio heaters for a period of five years after
the effective date. The Company has granted Mr. Waters a license permitting him
to use the Intellectual Property upon the earlier of (a) the Company failing to
make the minimum deferred purchase price payments or (b) the end of the deferred
payment term. Under the license agreement, Mr. Waters would be obligated to pay
a licensing fee to the Company in the amount of 1% of net sales from patio
heaters. The Company has agreed to take steps to provide for the resale without
restriction of the shares of common stock issued in this acquisition.
The Company drew on its credit facility with Bank of America to provide the cash
portion of the purchase price for this acquisition. See Item 5, below.
The description of this transaction contained in this Item 2 is qualified in its
entirety by reference to the documents relating thereto filed as exhibits to
this Report.
Item 5. Other Items.
BANK OF AMERICA CREDIT FACILITY
In connection with the Uniflame and IPP transactions, the Company negotiated a
$5.0 million increase in the principal amount of its credit facility with Bank
of America, to $30.0 million (the "Credit Facility"). The Credit Facility will
be used to finance working capital, acquisitions and capital expenditures, and
to support the issuance of documentary and standby letters of credit. The Credit
Facility, which expires on August 31, 2001, bears interest at a maximum rate of
LIBOR plus 2.25% and is collateralized by a lien on substantially all of the
Company's assets. The Credit Facility also requires the Company to meet certain
covenants, including maintaining a minimum net worth, debt coverage and cash
flow coverage ratios. The amendment to the Credit Facility also provides the
Company with waivers in connection with the Uniflame and IPP transactions of the
Company's obligations under the deferred purchase price payments and tangible
net worth requirements. The Company paid $10,000 in fees related to the
amendment to the Credit Facility.
The description of this transaction contained in this Item 5 is qualified in its
entirety by reference
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to the documents relating thereto filed as exhibits to this Report.
CONVERTIBLE NOTE AND WARRANT PRIVATE PLACEMENT
In connection with the amendment to the Credit Facility, the Company entered
into amendments to the convertible notes (the "Convertible Notes") issued to
certain institutional investors (the "Investors") on September 23, 1999. The
Convertible Notes were amended to make them subordinate to the Credit Facility.
Pursuant to the Convertible Notes, as amended, the Company has the right to
redeem the Convertible Notes or require the Convertible Notes to be converted on
or before August 31, 2000. The Convertible Notes, as amended, contain
restrictions on the Investors with respect to conversion and hedging activities,
which expire August 31, 2000.
The description of this transaction contained in this Item 5 is qualified in
its entirety by reference to the documents relating thereto filed as exhibits to
this Report.
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Item 7. Exhibits.
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4.1 Registration Rights Agreement among the Company and the shareholders
and certain employees of Uniflame dated March 31, 2000.
10.1 Asset Purchase Agreement by and among the Company, Uniflame, Mac R.
McQuilkin and James E. Harris dated as of March 31, 2000.
10.2 Employment Agreement by and between the Company and Michael Fasel
dated April 1, 2000.
10.3 Employment Agreement by and between the Company and Martin Bossler
dated April 1, 2000.
10.4 Asset Purchase Agreement by and among the Company, IPP and Waters
dated as of March 31, 2000.
10.5 Indemnification Agreement by and among the Company, IPP and Waters
dated as of March 31, 2000.
10.6 License Agreement by and among the Company, IPP and Waters dated as
of March 31, 2000.
10.7 Amendment to Amended and Restated Loan Amendment by and between the
Company and Bank of America dated April 3, 2000.
10.8 Agreement to Amend the Convertible Notes by and among Blue Rhino
Corporation, HFTP Investment L.L.C. and Leonardo, L.P. dated of April 3, 2000.
10.9 Form of Amendment #1 to Convertible Notes, dated as of March 31,
issued to purchasers of the Company's Convertible Notes, dated September 23,
1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLUE RHINO CORPORATION
(Registrant)
By: /s/ Mark Castaneda
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Secretary and Chief Financial Officer
DATED: April 18, 2000
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