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)
[X] Definitive Proxy Statement by Rule 14a-6(e)(2)
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-12
BLUE RHINO CORPORATION
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(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:
- -------------------------------------------------------------------------------
LOGO
BLUE RHINO CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 18, 2001
Dear Stockholder:
You are cordially invited to attend the 2001 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
18, 2001 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 A Directors to hold office until the
Annual Meeting of Stockholders for the fiscal year ending July
31, 2004;
2. Authorization of amendment to the Company's 1998 Stock
Incentive Plan to increase the number of shares of Common
Stock reserved and available for distribution from 2,200,000
to 3,200,000;
3. Ratification of the appointment of Ernst & Young LLP as the
Company's independent accountants for the fiscal year ending
July 31, 2002; and
4. Any other business that may properly come before the Annual
Meeting.
Only stockholders of record at the close of business on the record date
of October 31, 2001 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 10 days prior to the Annual
Meeting.
Your vote is important. 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 30, 2001
BLUE RHINO CORPORATION
104 CAMBRIDGE PLAZA DRIVE
WINSTON-SALEM, NORTH CAROLINA 27104
PROXY STATEMENT FOR
2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 18, 2001
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, 2001, and any adjournment thereof (the "Annual
Meeting"), to be held on December 18, 2001 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 30, 2001.
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, 2001, there were 9,299,654 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, 2001 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.
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 existence of a quorum
at the Annual Meeting, the vote required to approve each proposal is set forth
below:
- - 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;
- - Proposals 2 and 3 and any other Affirmative vote of holders of a
matters to come before the Annual majority of shares of Common Stock
Meeting 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.
Abstentions and non-votes by banks, brokerage houses, custodians,
nominees and other fiduciaries ("broker non-votes") will be counted for the
purpose of determining whether a quorum is present, but broker non-votes will
not be included for purposes of determining whether stockholder approval of a
matter has been obtained. 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 and 3 in this proxy statement.
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 PROPERLY SIGNED AND 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 A DIRECTORS NOMINATED BY THE BOARD OF
DIRECTORS AND FOR PROPOSALS 2 and 3.
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 members nor 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. Two Class A Directors will be elected at the
Annual Meeting, each of whom will be elected to serve until the annual
stockholders meeting for the fiscal year ending July 31, 2004 and his successor
is elected and qualified, or until his earlier resignation or removal. There is
currently one vacancy in the Class A Directors, caused by Mr. Duchossois'
decision not to stand for re-election. A replacement has not yet been found to
fill the vacancy. Assuming the election of the remaining nominees for Class A
Director named in the proxy statement, there will be one vacancy that the Board
intends to fill, pursuant to Blue Rhino's Charter and bylaws, following
identification of a qualified nominee.
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 Charter requirement that each
class be as nearly equal in number as possible). Proxies may not be voted for a
greater number of persons than the number of nominees named in the proxy
statement.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF
COMMON STOCK AND PREFERRED STOCK VOTE FOR THE ELECTION OF MESSRS. PRIM AND
FILIPOWSKI. PROXIES WILL BE VOTED FOR THE NOMINEES NOMINATED BY THE BOARD OF
DIRECTORS UNLESS INSTRUCTIONS ARE GIVEN TO THE CONTRARY.
2
INFORMATION CONCERNING NOMINEES FOR ELECTION
Certain information as to each of the two nominees for election as a
Class A Director is set forth 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
- ------- --- ------------------------
Billy D. Prim 45 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 51 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, 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 its sale to Computer
Associates, Inc. in March 1999.
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.
CONTINUING CLASS B DIRECTORS TO SERVE UNTIL ANNUAL MEETING FOR THE FISCAL YEAR
ENDING JULY 31, 2002
DIRECTOR AGE BIOGRAPHICAL INFORMATION
- -------- --- ------------------------
Richard A. Brenner 38 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 51 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 46 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. Mr. Muehlstein also serves as a
director of SpinCycle, Inc.
3
CONTINUING CLASS C DIRECTORS TO SERVE UNTIL ANNUAL MEETING FOR THE FISCAL YEAR
ENDING JULY 31, 2003
DIRECTOR AGE BIOGRAPHICAL INFORMATION
- -------- --- ------------------------
Steven D. Devick 49 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 37 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 43 Mr. Warnock has served as the Company's Preferred
Stock Director (as defined below) 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
Services, Inc., Environmental Safeguards, Inc.,
Concorde Career Colleges, Inc., Touchstone Applied
Science Technologies, Inc. and ELLIS.
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
Camden Partners Strategic Fund II-A, L.P. (formerly known as Cahill, Warnock
Strategic Partners Fund II A, L.P.) (for as long as Camden Partners Strategic
Fund II-A, L.P. or its affiliate holds a majority of the outstanding shares of
Series A Preferred Stock) to be elected to the Board of Directors (the
"Preferred Stock Director"). See "Beneficial Ownership of Directors, Executive
Officers and Certain Beneficial Owners," below. David L. Warnock, a Class C
Director, currently serves as the Preferred Stock Director. Messrs. Prim and
Filipowski are brothers-in-law.
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 the nomination
is submitted in accordance with applicable procedures. See "Stockholder
Proposals," below.
The Executive Committee, consisting of Messrs. Brenner, 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
4
director stock incentive plans. The Audit Committee, consisting of Messrs.
Brenner, Lunn, Warnock 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 five meetings during fiscal 2001. The
Executive Committee held no meetings, the Compensation Committee held two
meetings, and the Audit Committee held five meetings during fiscal 2001. 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 2001.
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.
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
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 accountants 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, 2001 for filing with the Commission.
Respectfully submitted by the Audit Committee of the Board of
Directors:
AUDIT COMMITTEE
David Warnock
Robert J. Lunn
Richard A. Brenner
John H. Muehlstein
5
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. The Company has reserved 400,000 shares of Common Stock
for issuance under the Director Option Plan. The Company's seven non-employee
directors are eligible to participate in the plan. Directors currently receive
no cash compensation for their service on the Board of Directors or on Board
committees. The Director Option Plan was amended and restated effective October
31, 2001 in order to further its purposes of attracting and retaining persons of
exceptional ability to serve on the Board. As amended effective October 2001,
the Director Option Plan provides that each director will receive an option to
purchase 12,000 shares of Common Stock on the first business 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, 3,000 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. As also amended effective
October 2001, the Director Option Plan provides that each non-employee director
serving on the Executive Committee, Compensation Committee and/or Audit
Committee shall receive an option grant for 1,000 shares for each respective
committee meeting attended.
The exercise price for options granted under the plan is equal to 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, and
each option is exercisable for a period of 10 years from the grant date (unless
terminated earlier due to termination of service). 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 or the Board may administer the Director Option Plan. In the event of
a stock dividend, stock split, recapitalization or other similar event, the
outstanding options and the number of shares reserved for issuance shall be
automatically adjusted.
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
- ----------------- --- ------------------------
Richard E. Belmont 41 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
the Chairman of the Barbecue Industry
Association of America.
Jerald D. Shadley 54 Mr. Shadley has served as the Chief
Operating Officer of QuickShip, Inc., a
wholly-owned subsidiary of the Company,
since December 2000, and served as the
Company's Vice President of Sales from
August 1998 until December 2000. 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.
6
Brent Boydston 32 Mr. Boydston has served as the Company's
Vice President of Sales since January 2001.
Mr. Boydston joined Blue Rhino in February
2000 as a director of sales. From May 1994
until April 1997, he was an assistant buyer
for Sears, Roebuck and Company, and from
April 1997 until February 2000, he was
senior national account manager of Ryobi
Outdoor Products, Inc., a manufacturer and
distributor of hand-held lawn and garden
products.
Bob Travatello 38 Mr. Travatello has served as the Company's
Vice President and Chief Information Officer
since January 2001. From October 1996 until
October 1999, he served as the Company's
Director of Management Information Systems,
and from October 1999 until January 2001, he
served as the Company's Senior Director of
Management Information Systems.
Mac McQuilkin 54 Mr. McQuilkin has served as President and
Chief Executive Officer of Uniflame
Corporation, a wholly-owned subsidiary of
the Company, since April 2000, and served as
president and chief executive officer of its
predecessor, Uniflame, Inc., import and
design companies, from 1990 until April
2000.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation paid by the Company for the fiscal years ended July 31, 2001, 2000
and 1999 to the Company's Chief Executive Officer and four other most highly
compensated executive officers at the end of fiscal 2001 (collectively, the
"Named Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION ALL OTHER
ANNUAL COMPENSATION AWARDS COMPENSATION
------------------- ------------ ------------
NAME AND PRINCIPAL OTHER ANNUAL SHARES UNDERLYING
POSITION YEAR SALARY ($) BONUS COMPENSATION ($) OPTIONS #
- ------------------ ---- ---------- --------- --------------- ------------------
Billy D. Prim 2001 $381,641 $49,950 (1) $ -- 200,000 $115,351 (2)
President and 2000 371,163 -- -- 90,000 93,163
Chief Executive Officer 1999 288,923 -- -- 60,000 --
Mark Castaneda 2001 $161,731 $49,950 (1) $ -- 135,000 $ 4,852 (4)
Secretary and Chief 2000 163,192 -- 77,459 (3) 70,000 2,900
Financial Officer 1999 138,359 -- -- 36,796 --
Richard E. Belmont 2001 $130,203 $49,950 (1) $ -- 85,000 $ 2,286 (4)
Vice President of 2000 124,563 -- -- 35,000 2,593
Marketing 1999 118,322 -- -- 24,000 --
Mac McQuilkin 2001 $260,012 $10,950 (1) $ -- 70,800 $ 5,250 (4)
President and Chief 2000 10,012 -- -- -- --
Executive Officer 1999 -- -- -- -- --
Uniflame Corporation
7
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------- ------------------
NAME AND PRINCIPAL OTHER ANNUAL SHARES UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
-------- ---- --------- -------- --------------- ------------------ ---------------
Jerald D. Shadley 2001 $151,914 $ -- $ -- 90,000 $ 4,563 (4)
Chief Operating Officer 2000 143,931 -- -- 45,000 1,200
QuickShip, Inc. 1999 132,247 -- 40,000 (5) 24,000 --
- -------
(1) Reflects incentive bonuses earned by the respective Named Officers in
fiscal 2001. See "Compensation Committee Report," below.
(2) Includes supplemental retirement amounts of $110,043 and $90,000 for
fiscal 2001 and 2000, respectively, accrued for Mr. Prim under his
employment agreement with the Company, and Company contributions of
$5,308 and $3,163, respectively under the Blue Rhino Corporation and
Subsidiaries 401(k) Plan (the "401(k) plan"). See "Employment and
Severance Agreements," below.
(3) Represents $50,000 for reimbursement of relocation expenses and $27,459
in tax reimbursements paid to Mr. Castaneda in fiscal 2000 for expenses
incurred in 1997 and 1998 and previously deferred.
(4) Represents Company contributions under the Company's 401(k) plan during
fiscal 2001 for each of these Named Officers.
(5) Represents reimbursement of relocation expenses.
OPTION GRANTS
The following table sets forth information regarding grants of stock
options to the Named Officers pursuant to the 1998 Stock Incentive Plan during
fiscal 2001.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF ANNUAL RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR SHARE($/SH) DATE 5% 10%
-----------------------------------------------------------------------------------------------
Billy D. Prim 200,000 18.00% $ 2.25 12/28/10 $ 283,003 $ 717,184
Mark Castaneda 135,000 12.15% $ 2.25 12/28/10 $ 191,027 $ 484,099
Richard E. Belmont 85,000 7.65% $ 2.25 12/28/10 $ 120,276 $ 304,803
Malcolm McQuilkin 7,200 0.6482% $ 3.75 11/01/10 $ 16,980 $ 43,032
60,000 5.4011% 2.25 12/28/10 84,901 215,155
3,600 0.3241% 2.31 03/02/11 5,237 13,271
Jerald D. Shadley 90,000 8.10% $ 2.25 12/28/10 $ 127,351 $ 322,733
- -------
(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
8
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.
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 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES HELD AT JULY 31, 2001(#) AT JULY 31, 2001($)(1)
ACQUIRED ON VALUE ------------------------------- -------------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Billy D. Prim -- -- 136,181 318,000
$ 0 $412,200
Mark Castaneda -- -- 54,280 220,077
$ 0 278,235
Richard E. Belmont -- -- 49,122 135,000
$ 0 175,185
Malcolm McQuilkin -- -- 11,200 101,200 -- 134,892
Jerald D. Shadley -- -- 33,000 146,000 -- 185,490
- --------
(1) Calculated by determining the difference between the market value of
$4.31 per share for the Common Stock underlying the options at July 31,
2001 and the exercise prices of each Named Officer's options.
EMPLOYMENT AND SEVERANCE AGREEMENTS
Mr. Prim is employed as the Company's Chairman, President and Chief
Executive Officer under an employment agreement with the Company. The agreement
has a rolling five-year term beginning as of January 1, 1999 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.
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
9
salary, with annual cost of living adjustments, for five years following the
termination date. In addition, for the 10 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 provide
Mr. Prim and his dependents with health care coverage until the earlier of his
death or the month in which the last retirement benefit payment is made.
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.
Mr. Malcolm McQuilkin is employed as the President and Chief Executive
Officer of Uniflame Corporation ("Uniflame"), a wholly-owned subsidiary of the
Company, under an employment agreement with the Company. The agreement has a
three-year term beginning as of April 1, 2000. The agreement provides for a
minimum base salary of $30,000 per year during the term of the agreement, with
cost of living adjustments. In addition, the agreement provides that Mr.
McQuilkin is entitled (i) to receive incentive bonuses at the discretion of the
Board of Directors and (ii) to participate, on the same terms as other
non-union, executive employees of the Company, in any medical, dental or other
health plan, 401(k) plan, stock option plan, employee stock purchase plan and/or
life insurance plan that the Company may adopt or maintain for such employees.
Upon termination of Mr. McQuilkin's employment for cause, as defined in
the agreement, Mr. McQuilkin is entitled to receive his base salary accrued and
unpaid through the date of his termination. Upon termination of Mr. McQuilkin's
employment without cause, Mr. McQuilkin is entitled to continue to receive his
base salary for a period of one year following the date of his termination.
For one year following the termination of his employment, Mr. McQuilkin
is subject to a non-competition and non-solicitation agreement. Failure to
comply with these provisions may result in the imposition of legal and equitable
remedies against Mr. McQuilkin. In addition, Mr. McQuilkin is subject to certain
confidentiality provisions described in the agreement for a period of one year
following the date of his termination.
Mr. Jerald D. Shadley is employed as the Chief Operating Officer of
Quickship, Inc. ("Quickship"), a wholly-owned subsidiary of the Company. On June
1, 2001, the Company, Quickship and Mr. Shadley entered into a special severance
pay agreement, pursuant to which the Company agreed to provide certain severance
benefits in addition to those provided by the employee benefit plans of
Quickship. Although the agreement does not provide for a finite term, the
triggering events described below must occur on or before November 30, 2002 for
Mr. Shadley to receive a benefit under the agreement.
Upon termination of Mr. Shadley's employment pursuant to an event which
constitutes a compensation continuance termination event, Mr. Shadley is
entitled to continue to receive his base salary during the compensation
continuance period. As defined in the agreement, "compensation continuance
termination event" means (i) the termination of Mr. Shadley's employment by Mr.
Shadley within the six-month period next following the occurrence of a "good
reason event," as defined in the agreement, or (ii) the termination of Mr.
Shadley's employment by Mr. Shadley or Quickship within the six-month period
next following a "change in control" of Quickship, as defined in the agreement.
The "compensation continuance period" is the period commencing on the
termination date and ending on the last day of the calendar month in which the
first anniversary of the termination date occurs.
During the compensation continuance period, Mr. Shadley is required to
provide consulting and advisory services to the Company with respect to business
matters within his competence, knowledge and experience. If Mr. Shadley provides
such consulting and advisory services to the Company, the termination of his
nonqualified stock options will be delayed. However, in the event that Mr.
Shadley fails or refuses to provide advisory and consulting services to the
Company during the compensation continuance period, all rights to payments of
his base salary for the compensation continuance period will be terminated.
10
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
2001, 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:
- attracting and retaining talented executives and employees
critical to the long-term success of the Company by offering
compensation packages competitive with those provided by other
publicly-held high growth companies;
- aligning the interests of the Company's management with the
interests of the Company's stockholders by developing
compensation programs that link compensation directly to
increases in stockholder value; and
- 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, cash bonus opportunities and stock option incentives. During
fiscal 2001, the compensation of the executive officers of the Company was
comprised of base salary, cash bonus awards granted under the Company's
Executive Incentive Plan and discretionary stock options granted under the
Company's 1998 Stock Incentive Plan.
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 2001, 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 components of the Company's incentive compensation program are its
Executive Incentive Plan and 1998 Stock Incentive Plan. The Executive Incentive
Plan, which was established in fiscal 2001, provides for the award of cash
bonuses and performance-based stock option grants if specified performance
criteria are met. The Compensation Committee has discretion to determine whether
and to what degree awards have been earned and whether earned awards will be
payable in cash and/or stock options. The Executive Incentive Plan is designed
as a "pay for performance" incentive plan intended to encourage senior
management to strive for operational excellence and to increase shareholder
value through attainment of specified performance targets. For fiscal 2001,
payment of performance cash awards was contingent on attaining specified
quarterly and annual Earnings Before Interest, Taxes,
11
Depreciation and Amortization (EBITDA) objectives. In fiscal 2001, these EBITDA
performance objectives were met and cash bonuses were paid to certain executive
officers, including certain of the Named Officers as described above in the
Summary Compensation Table. The Executive Incentive Plan also provides for the
grant of performance-based options (awarded under the 1998 Stock Incentive Plan)
in the Compensation Committee's discretion. These performance-based options,
which have an option price equal to fair market value at the time of grant and
vest three years after grant, are intended to serve as an additional incentive
to participants to improve the Company's performance. No performance-based
options were granted in fiscal 2001.
The grant of discretionary options under the Company's 1998 Stock
Incentive Plan serves as an additional method by which the Company seeks to
motivate eligible participants to meet and surpass performance goals and to
award participants for continued service to the Company. The 1998 Stock
Incentive Plan is proposed to be amended. See "Proposal 2 -- Approval of
Amendment to 1998 Stock Incentive Plan," below. Stock options granted under the
1998 Stock Incentive Plan 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.
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 generally vest 20% on each anniversary of the grant
date and thus vest in full five years after the grant date (subject to
forfeiture due to termination of employment or service). 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 positions and
levels of responsibility within the Company, the Named Officers were granted
discretionary options for a total of 580,800 shares of Common Stock in fiscal
2001. See "Option Grants," above. 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.
Other Employee Benefit Plans
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. The
Company also matches an employee's 401(k) contributions in the amount of $.50 of
every $1.00 contributed up to 6% of an employee's salary. The Company also
maintains the Employee Stock Purchase Plan. The purpose of the plan is to
provide eligible employees with an opportunity to purchase shares of the Common
Stock through payroll deductions at a discount from market price equal to the
lesser of 85% of the fair market value of the Common Stock on the offering
commencement date or on the exercise date. Purchases are made quarterly 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 and the terms of his
employment agreement. See "Employment and Severance Agreements," above. Mr.
Prim's salary for fiscal 2001 was $381,641, which represented a 3% increase over
his fiscal year 2000 salary, as compared to a company-wide average salary
increase of 5% over the same period. In establishing Mr. Prim's salary for
fiscal 2001, the Compensation Considered Mr. Prim's leadership and his role in
managing the overall growth of the Company, particularly revenue growth (which
increased approximately 30% in fiscal 2000 compared to fiscal 1999). The
Compensation Committee also considered Mr. Prim's anticipated role in securing
additional capital for the Company during fiscal 2001, during which time the
Company raised approximately $25,000,000 through the issuance of preferred stock
and subordinated debt. The Compensation Committee believes that Mr. Prim's
compensation is in the mid-range compared to salaries of other chief executive
officers of other companies in the consumer product and propane industries. Cash
incentive awards granted to Mr. Prim under the Executive Incentive Plan for
fiscal 2001 were based on attainment of the same performance targets applicable
to other executive officer participants in the plan. Pursuant to the
Compensation
12
Committee's recommendations, Mr. Prim was granted options for 200,000 shares of
Common Stock in fiscal 2001 based on the same criteria applicable to other
executive officer participants in the Company's 1998 Stock Incentive Plan.
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 receives 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.
Respectfully submitted by the Compensation Committee of the Board of
Directors:
COMPENSATION COMMITTEE
Richard A. Brenner
Steven D. Devick
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 publicly traded, through July 31, 2001 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 comprised our peer group index in past proxy
statements: Central Garden and Pet Company, Glacier Water Services, Inc., U.S.A.
Floral Products, Inc. and NUCO2, Inc. Because U.S.A. Floral Products, Inc. is no
longer publicly traded, the Company's current peer group index tracks the
performance of Central Garden and Pet Company, Glacier Water Services, Inc. and
NUCO2, Inc. The graph assumes $100 was invested on May 19, 1998 in the Company's
Common Stock and in the stock represented by the two indexes, and that all
dividends paid, if any, were reinvested. The performance of the Company's Common
Stock reflected in the following graph is not necessarily indicative of future
performance.
[STOCK PERFORMANCE GRAPH]
5/19/1998 7/31/1998 7/31/1999 7/31/2000 7/31/2001
--------- --------- --------- --------- ---------
Blue Rhino 100 123 74 63 33
4 Peer Companies 100 80 49 37 40
NASDAQ 100 101 143 204 110
13
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,
2001 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.
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
- ----------------- ----------------- -------- ------------------ ---------
Andrew J. Filipowski (2) 2,059,214 21.6% 41,667 1.5%
508 Stonegate Lane
Winston-Salem, NC 27104
Billy D. Prim (3) 1,495,625 15.7% 8,333 *
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
Craig J. Duchossois (4) 751,926 7.9% -- --
845 Larch Avenue
Elmhurst, IL 60126
14
COMMON STOCK PREFERRED STOCK
------------------------------ ---------------------------
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF
BENEFICIAL PERCENT BENEFICIAL PERCENT
NAME AND ADDRESS OWNERSHIP(1) OF CLASS OWNERSHIP(1) OF CLASS
- ---------------- ------------ -------- ------------ --------
Richard A. Brenner (5) 38,970 * -- --
464 Sheffield Drive
Winston-Salem, NC 27104
Mark Castaneda (6) 99,231 1.1% -- --
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
John H. Muehlstein (7) 19,782 * -- --
161 North Clark Street, Suite 3100
Chicago, IL 60601
Steven D. Devick (8) 357,993 3.8% -- --
1901 Midwest Club Parkway
Oak Brook, IL 60523
David L. Warnock (9) -- -- -- --
1 South Street
Baltimore, MD 21202
Robert J. Lunn (10) 74,525 * -- --
209 South LaSalle Street
Chicago, IL 60604
Jerald R. Shadley (11) 66,134 * -- --
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
Mac McQuilkin(12) 365,973 3.9% -- --
1817 North Kenosa Drive
Zion, Illinois 60099
Richard E. Belmont (13) 69,122 * -- --
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
Directors and executive officers as a group 5,398,495 52.4% 50,000 1.8%
(13 individuals)
Camden Partners Strategic II, LLC (formerly known
as Cahill, Warnock Strategic Partners II, 1,500,000 13.9% 1,500,000 52.6%
LLC) (14)
1 South Street
Baltimore, MD 21202
Richard Kiphart 166,667 1.8% 166,667 5.8%
222 West Adams Street
Chicago, IL 60606
Gold Merchant Banc, Inc. 1,000,000 9.7% 1,000,000 35.1%
11301 Nall Avenue
Leawood, Kansas 66211
15
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
- ----------------- ----------------- -------- ------------------ ---------
RS Investment Management Co. LLC (15) 864,800 9.3% -- --
338 Market Street
Suite 1700
San Francisco, CA 94111-5312
- -------
* 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, 2001 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 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 41,667 shares of Common Stock issuable upon the conversion of
41,667 shares of Series A Convertible Preferred Stock, 1,209,659 shares
of Common Stock owned by Mr. Filipowski, 34,905 shares issuable upon the
exercise of vested options held by Mr. Filipowski, 170,269 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 8,333 shares of Common Stock issuable upon the conversion of
8,333 shares of Series A Convertible Preferred Stock, 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, 184,181 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 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, 170,269 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, 19,782 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.
16
(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 12,001 shares issuable upon the exercise of vested options.
(6) Includes 11,120 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 87,639 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 4,745 shares of Common Stock issuable upon the exercise of a
warrant issued in September 1999, 19,782 shares issuable upon the
exercise of vested options held by Mr. Devick and 333,466 shares owned
beneficially by PVP.
(9) See footnote 14, below.
(10) Includes 12,898 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 in September 1999 held by Lunn Partners Small Cap Value Equity
Fund, L.P., and 4,001 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 2,409 shares of Common Stock owned by Mr. Shadley, 54,000
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 335,573 shares of Common Stock owned by Mr. McQuilkin and
30,400 shares of Common Stock issuable upon the exercise of vested
options held by Mr. McQuilkin.
(13) Represents the number of shares issuable upon the exercise of vested
options.
(14) Includes 1,373,520 shares of Common Stock issuable upon the
conversion of 1,373,520 shares of Series A Convertible Preferred Stock
owned by Camden Partners Strategic Fund II-A, L.P. and 81,480 shares
of Common Stock issuable upon the conversion of 81,480 shares of
Series A Convertible Preferred Stock owned by Camden Partners
Strategic Fund II-B, L.P., for which Camden Partners Strategic II, LLC
serves as general partner. Also includes 45,000 shares of Common Stock
issuable upon the conversion of 45,000 shares of Series A Convertible
Preferred Stock owned by Strategic Associates, L.P., which is an
affiliate of Camden Partners Strategic II, LLC. David L. Warnock, a
managing member of Camden Partners Strategic II, LLC, a general
partner of Cahill, Warnock Strategic Partners, L.P. (the general
partner of Strategic Associates, L.P.) and the Preferred Stock
Director, disclaims beneficial ownership of the shares held by Camden
Partners Strategic Fund II-A, L.P. and Camden Partners Strategic Fund
II-B, L.P. and Strategic Associates, L.P.
(15) Derived from information furnished to the Company by RS Investment
Management Co. LLC, RS Investment Management, L.P. and RS Value Group
LLC. The Schedule 13G indicates that RS Investment Management Co. LLC,
RS Investment Management, L.P. and RS Value Group LLC share voting and
dispositive power over the 864,800 shares.
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 50% and 50%, respectively.
17
Pursuant to the terms of the lease, the Company pays annual rent of $233,112,
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. The Company expects to renew the lease under terms
substantially similar to the terms of the current lease.
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, a Named Officer and
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.
On September 7, 2000, the Company completed a private placement of
$10,300,000 in Preferred Stock at a purchase price of $6.00 per share. Mr. Prim
and Mr. Filipowski invested $50,000 and $250,000, respectively, in the private
placement and received 8,333 and 41,667 shares of Preferred Stock, respectively.
Their purchases of Preferred Stock were made on the same terms and conditions as
the terms and conditions for the other purchasers of Preferred Stock.
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. Mr. Kiphart beneficially owns more than 5% of the Preferred
Stock. Subsequent to the private placement, in October 2000, the Company
acquired QuickShip, Inc. The Company has paid William Blair approximately
$640,000, plus a warrant 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
law firm of Pedersen & Houpt, P.C. During fiscal 2001, the Company paid Pederson
& Houpt approximately $173,000 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, 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 AMENDMENT TO 1998 STOCK INCENTIVE PLAN
The Board of Directors, subject to approval of the Company's
stockholders, has approved an amendment to the 1998 Stock Incentive Plan to
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 (subject to
adjustment in the event of stock splits or other similar events described
below). If the amendment is approved, 3,200,000 shares of Common Stock will be
reserved and available for distribution under the 1998 Stock Incentive Plan.
Except as discussed herein, approval of this amendment will not alter or amend
the other provisions of the plan.
The discussion that follows summarizes the proposed amendment 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: Mark Castaneda,
Secretary, Blue Rhino Corporation, 104 Cambridge Plaza Drive, Winston-Salem,
North Carolina 27104.
18
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 2,200,000 shares of Common Stock may be issued under the plan, although that
number is proposed to be increased to 3,200,000 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. The 1998 Stock
Incentive Plan also provides 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 (subject to adjustments in the event of stock splits
or other similar events). Approximately 100 employees and officers 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. Stock options granted under the
1998 Stock Incentive Plan entitle 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, 2001, the closing price of
the Common Stock on the Nasdaq National Market was $4.52 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.
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 the date of grant. 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 10
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 participant or to
the Company.
As noted above, options granted under the 1998 Stock Incentive Plan are
nonqualified options and thus are not intended to be "incentive stock options,"
as that term is defined in Section 422(b) of the
19
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 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).
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).
The 1998 Stock Incentive Plan is designed to meet the stockholder
approval and other requirements of Code Section 162(m) so as to enable the
Company to fully deduct compensation paid pursuant to the Plan to the extent
possible to do so.
PROPOSED AMENDMENT TO THE 1998 STOCK INCENTIVE PLAN
As noted above, the Board of Directors has approved an amendment to the
1998 Stock Incentive Plan, subject to stockholder approval, which would increase
the number of shares available for issuance under the Plan by 1,000,000 shares
to a total of 3,200,000 shares (subject to adjustment for stock splits and
similar events as described above). Except as discussed herein, approval of this
amendment will not alter or amend other provisions of the 1998 Stock Incentive
Plan.
Currently, the 1998 Stock Incentive Plan authorizes 2,200,000 shares of
Common Stock for issuance upon the exercise of options granted under the plan.
As of October 31, 2001, options to purchase 2,006,124 shares of Common Stock
were outstanding under the 1998 Stock Incentive Plan. Because only 193,876
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 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 2001.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR
THE AMENDMENT TO THE 1998 STOCK INCENTIVE PLAN TO INCREASE THE AUTHORIZED SHARES
UNDER THE PLAN. PROXIES WILL BE VOTED FOR THE AMENDMENT TO THE 1998 STOCK
INCENTIVE PLAN UNLESS A VOTE AGAINST THIS PROPOSAL OR ABSTENTION IS SPECIFICALLY
INDICATED.
20
PROPOSAL 3
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, 2002. 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, 2001, 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 2002.
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, 2002. PROXIES WILL BE VOTED FOR RATIFICATION OF THE
APPOINTMENT UNLESS A VOTE AGAINST THIS PROPOSAL OR ABSTENTION IS SPECIFICALLY
INDICATED.
AUDIT FEES
The aggregate audit fees billed the Company during fiscal 2001 by Ernst
& Young LLP were $124,500. The aggregate amount billed by Ernst & Young LLP for
all other fees during fiscal 2001 for other services was $425,000, including
$248,500 for audit-related services and $176,500 for non-audit services.
Audit-related services generally include fees for business acquisitions,
accounting consultations and SEC registration statements. Ernst & Young did not
perform any financial information systems design and implementation services for
the Company during fiscal 2001.
The Audit Committee has considered the compatibility of the non-audit
services performed by and fees paid to Ernst & Young LLP in fiscal 2001 and
determined that such services and fees were compatible with the independence of
the auditors. During fiscal year 2001, Ernst & Young LLP did not utilize any
leased personnel in connection with the audit.
STOCKHOLDER PROPOSALS
Under regulations of the Commission, any stockholder desiring to make a
proposal to be acted upon at the 2002 annual meeting of stockholders must
present the proposal to the Company at its principal office in Winston-Salem,
North Carolina by August 3, 2002, 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
21
in the matter. The chairman of the meeting may refuse to allow any business that
is not raised in accordance with these procedures to be considered at the
meeting. 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 for an annual Form 5 report filed by Richard
Brenner, which was filed one day late.
ADDITIONAL INFORMATION
UPON WRITTEN REQUEST BY A STOCKHOLDER OF RECORD ON OCTOBER 31, 2001,
THE COMPANY WILL PROVIDE WITHOUT CHARGE AN ADDITIONAL COPY OF ITS ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED JULY 31, 2001. REQUESTS SHOULD BE DIRECTED TO
MARK CASTANEDA, 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 30, 2001
22
Blue Rhino Corporation
1998 STOCK INCENTIVE PLAN
ARTICLE I
ESTABLISHMENT
The Blue Rhino Corporation Stock Incentive Plan ("Plan") is hereby
established by Blue Rhino Corporation ("Company"). The purpose of the Plan is to
encourage key employees, officers, consultants and advisors of the Company and
its Affiliates to acquire a proprietary interest in the Company and to generate
an increased incentive to contribute to the Company's future success and
prosperity.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms are defined as set forth
below:
"AFFILIATE" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated association or other
entity (other than the Company) that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Company including, without limitation, any member of an affiliated group of
which the Company is a common parent corporation as provided in Section 1504 of
the Code.
"AGREEMENT" or "OPTION AGREEMENT" means, individually or collectively,
any agreement entered into pursuant to the Plan pursuant to which a Stock Option
is granted to a Participant.
"BOARD OF DIRECTORS" or "BOARD" means the Board of Directors of the
Company.
"CAUSE" means, for purposes of whether and when a Participant has
incurred a Termination for Cause, any act or omission which permits the Company
to terminate the written agreement or arrangement between the Participant and
the Company or an Affiliate for Cause as defined in such agreement or
arrangement, or if there is no such agreement or arrangement or the agreement or
arrangement does not define the term "cause", then Cause means, unless otherwise
defined in the Option Agreement with respect to the corresponding Stock Option,
(a) any act or failure to act deemed to constitute cause under the Company's
established practices, policies or guidelines applicable to the Participant or
(b) the Participant's act or act of omission which constitutes gross misconduct
with respect to the Company or an Affiliate in any material respect, including,
without limitation, an act or act of omission of a criminal nature, the result
of which is detrimental to the interests of the Company or an Affiliate, or
conduct or the omission of conduct which constitutes a material breach of
Participant's duty of loyalty to the Company or an Affiliate.
"CODE" or "INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended, final Treasury Regulations thereunder and any subsequent
Internal Revenue Code.
"COMMISSION" means the Securities and Exchange Commission or any
successor agency.
"COMMITTEE" means the Compensation Committee of the Board, or such
other committee of the Board appointed by the Board of Directors to administer
the Plan, as further described in the Plan.
"COMMON STOCK" means the shares of the Common Stock, $0.001 par value,
of the Company whether presently or hereafter issued, and any other stock or
security resulting from adjustment thereof as described hereinafter or the
common stock of any successor to the Company which is designated for the purpose
of the Plan.
"COMPANY" means Blue Rhino Corporation, a Delaware corporation, and
includes any successor or assignee corporation or corporations into which the
Company may be merged, changed or consolidated; any corporation for whose
securities the securities of the Company are exchanged; and any assignee of or
successor to substantially all of the assets of the Company.
"DISABILITY" means a mental or physical illness that entitles the
Participant to receive benefits under the long term disability plan of the
Company or an Affiliate, or if the Participant is not covered by such a plan or
the Participant is not an employee of the Company or an Affiliate, a mental or
physical illness that renders a Participant totally and permanently incapable of
performing the Participant's duties for the Company or an Affiliate.
Notwithstanding the foregoing, a Disability will not qualify under this Plan if
it is the result of (i) a willfully self-inflicted injury or willfully
self-induced sickness; or (ii) an injury or disease contracted, suffered, or
incurred, while participating in a criminal offense. The determination of
Disability will be made by the Committee. The determination of Disability for
purposes of this Plan will not be construed to be an admission of disability for
any other purpose.
"EFFECTIVE DATE" means May 18, 1998.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"FAIR MARKET VALUE" means the value determined on the basis of the good
faith determination of the Committee, without regard to whether the Common Stock
is restricted or represents a minority interest, pursuant to the applicable
method described below:
(a) if the Common Stock is listed on a national securities
exchange or quoted on the Nasdaq National Market ("NASDAQ"), the closing price
of the Common Stock on the relevant date, as reported by the principal national
exchange on which such shares are traded (in the case of an exchange) or by the
NASDAQ, as the case may be;
2
(b) if the Common Stock is not listed on a national securities
exchange or quoted on the NASDAQ, but is actively traded in the over-the-counter
market, the average of the closing bid and asked prices for the Common Stock on
the relevant date, or the most recent preceding date for which such quotations
are reported; and
(c) if, on the relevant date, the Common Stock is not publicly
traded or reported as described in (a) or (b), the value determined in good
faith by the Committee.
"GRANT DATE" means the date that as of which a Stock Option is granted
pursuant to the Plan.
"NON-EMPLOYEE DIRECTORS" has the meaning set forth in Rule 16b-3, or
any successor definition adopted by the Commission, provided the person is also
an "outside director" under Section 162(m) of the Code.
"NON-QUALIFIED STOCK OPTION" means an Option to purchase Common Stock
in the Company granted under the Plan other than an incentive stock option
within the meaning of Section 422 of the Code.
"OPTION PERIOD" means the period during which the Option will be
exercisable in accordance with the Option Agreement and Article VI.
"OPTION PRICE" means the price at which the Common Stock may be
purchased under an Option as provided in Section 6.3.
"PARTICIPANT" means a person who satisfies the eligibility conditions
of Article V and to whom a Stock Option has been granted by the Committee under
the Plan, and if a Representative is appointed for a Participant, then the term
"PARTICIPANT" means such appointed Representative, successor Representative, or
spouse as the case may be. The term also includes a trust for the benefit of the
Participant, the Participant's parents, spouse or descendants, or a custodian
under a uniform gifts to minors act or similar statute for the benefit of the
Participant's descendants, to the extent permitted by the Committee and not
inconsistent with the Rule 16b-3.
"PLAN" means the Blue Rhino Corporation 1998 Stock Incentive Plan, as
herein set forth and as may be amended from time to time.
"REPRESENTATIVE" means (a) the person or entity acting as the executor
or administrator of a Participant's estate pursuant to the last will and
testament of a Participant or pursuant to the laws of the jurisdiction in which
the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; or (c) the person or entity which is the
beneficiary of the Participant upon or following the Participant's death.
"RETIREMENT" means the Participant's Termination after attaining either
the normal retirement age or the early retirement age as defined in the
principal (as determined by the Committee) tax-qualified plan of the Company or
an Affiliate, if the Participant is covered by such plan, and if the Participant
is not covered by
3
such a plan, then age 65, or age 55 with the accrual of 10 years of service.
"RULE 16B-3" means Rule 16b-3, as promulgated under the Exchange Act,
as amended from time to time, or any successor thereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"STOCK OPTION" means a Non-Qualified Stock Option granted under this
Plan.
"TERMINATION" means the occurrence of any act or event, whether
pursuant to an employment agreement, consulting agreement, advisory agreement or
otherwise, that actually or effectively causes or results in the person's
ceasing, for whatever reason, to be an officer, employee, consultant or advisor
of the Company or of any Affiliate, or to be an officer, employee, consultant or
advisor of any entity that provides services to the Company or an Affiliate,
including, without limitation, death, Disability, dismissal, removal,
resignation, severance at the election of the Participant, Retirement, or
severance as a result of the discontinuance, liquidation, sale or transfer by
the Company or its Affiliates of all businesses owned or operated by the Company
or its Affiliates. With respect to any person who is not an employee of the
Company or an Affiliate, the Option Agreement will establish what act or event
will constitute a Termination for purposes of the Plan. A Termination will occur
for an employee who is employed by an Affiliate if the Affiliate ceases to be an
Affiliate and the Participant does not immediately thereafter become an employee
of the Company or an Affiliate. A Participant who is an employee on the Grant
Date will not be deemed to have incurred a Termination if, within thirty (30)
days after such individual ceases to be an employee, he or she becomes a
consultant or advisor to the Company. Similarly, a Participant who is a
consultant or advisor on the Grant Date shall not be deemed to have incurred a
Termination if, within thirty (30) days after such individual ceases to be a
consultant or advisor, he or she becomes an employee of the Company.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. The Plan will be
administered by the Committee. After the Company has an effective registration
statement under the Securities Act for the Common Stock, the Committee, except
as provided herein, will be comprised of such number of Non-Employee Directors
(and no other persons) as is required for application of Section 162(m) of the
Code and Rule 16b-3. In the absence of appointment of the Committee or a
successor committee of the Board, the entire Board of Directors will constitute
the Committee. A majority of the Committee will constitute a quorum at any
meeting thereof (including
4
telephone conference) and the acts of a majority of the members present, or acts
approved in writing by a majority of the entire Committee without a meeting,
will be the acts of the Committee for purposes of this Plan. The Committee may
authorize any one or more of its members or an officer of the Company to execute
and deliver documents on behalf of the Committee. A member of the Committee will
not exercise any discretion respecting himself or herself under the Plan. The
Board will have the authority to remove, replace or fill any vacancy of any
member of the Committee upon notice to the Committee and the affected member.
Any member of the Committee may resign upon notice to the Board. The Committee
may allocate among one or more of its members, or may delegate to one or more of
its agents, such duties and responsibilities as it determines.
Among other things, the Committee will have the authority, subject to
the terms of the Plan:
(a) to select those persons to whom Stock Options may be granted
from time to time;
(b) to determine the number of shares of Common Stock to be
covered by each Stock Option granted hereunder; provided, however, that the
number of shares of Common Stock which can be awarded in any calendar year to
any Participant shall not exceed twenty percent (20%) of the number of shares of
Common Stock reserved and available for issuance under this Plan as of the Grant
Date, and further provided that the Committee may limit the aggregate number of
shares granted to consultants and advisors if required in order to make the
registration statement described in Section 4.5 effective or cause the
registration statement to remain effective;
(c) to determine the terms and conditions of any Stock Option
granted hereunder (including, without limitation, the Option Price, the Option
Period, any exercise restriction or limitation and any exercise acceleration,
forfeiture or waiver regarding any Stock Option and the shares of Common Stock
relating thereto); provided, however, that no Stock Option may be exercised
earlier than one (1) year from the Grant Date;
(d) to adjust the terms and conditions, at any time or from time
to time, of any Stock Option, subject to the limitations of Section 8.1;
(e) to determine to what extent and under what circumstances
Common Stock and other amounts payable with respect to the exercise of a Stock
Option will be deferred;
(f) to provide for the forms of Option Agreement to be utilized in
connection with the Plan;
(g) to determine whether a Participant has a Disability or a
Retirement;
(h) to determine what securities law requirements are applicable
to the Plan, Stock Options, and the issuance of shares of Common Stock and to
require of a Participant that appropriate action be taken with respect to such
requirements;
5
(i) to cancel, with the consent of the Participant or as otherwise
provided in the Plan or an Option Agreement, outstanding Stock Options;
(j) to require as a condition of the exercise of a Stock Option or
the issuance or transfer of a certificate of Common Stock, the withholding from
a Participant of the amount of any federal, state or local taxes as may be
necessary in order for the Company or any other employer to obtain a deduction
or as may be otherwise required by law;
(k) to determine whether and with what effect a Participant has
incurred a Termination;
(l) to determine the restrictions or limitations on the transfer
of Common Stock;
(m) to determine under what circumstances a Stock Option may be
transferred during the Participant's lifetime and to impose restrictions on such
transfers;
(n) to determine whether a Stock Option is to be adjusted,
modified or purchased, or is to become fully exercisable, under the Plan or the
terms of an Option Agreement;
(o) to determine the permissible methods of Stock Option exercise
and payment, including cashless exercise arrangements;
(p) to adopt, amend and rescind such rules and regulations as, in
its opinion, may be advisable in the administration of the Plan and to amend or
modify any Option Agreement accordingly; and
(q) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
The Committee will have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it may,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Stock Option issued under the Plan (and any Option Agreement) and
to otherwise supervise the administration of the Plan. The Committee's policies
and procedures may differ with respect to Stock Options granted at different
times.
Any determination made by the Committee pursuant to the provisions of
the Plan will be made in its sole discretion, and in the case of any
determination relating to a Stock Option, may be made at the time of the grant
of the Stock Option or, unless in contravention of any express term of the Plan
or an Option Agreement, at any time thereafter. All decisions made by the
Committee pursuant to the provisions of the Plan will be final and binding on
all persons, including the Company and Participants. No determination will be
subject to de novo review if challenged in court.
6
ARTICLE IV
STOCK SUBJECT TO PLAN
4.1 Number of Shares. Subject to the adjustment under Section 4.6,
the total number of shares of Common Stock reserved and available for
distribution pursuant to Stock Options under the Plan will be 300,000 shares of
Common Stock authorized for issuance on the Effective Date. Such shares may
consist, in whole or in part, of authorized and unissued shares or treasury
shares.
4.2 Release of Shares. If any shares of Common Stock that have
been optioned cease to be subject to a Stock Option, if any shares of Common
Stock that are subject to any Stock Option are forfeited or if any Stock Option
otherwise terminates without issuance of shares of Common Stock being made to
the Participant, such shares, in the discretion of the Committee, may again be
available for distribution in connection with Stock Options under the Plan.
4.3 Restrictions on Shares. Shares of Common Stock issued upon
exercise of a Stock Option will be subject to the terms and conditions specified
herein and to such other terms, conditions and restrictions as the Committee in
its discretion may determine or provide in the Option Agreement. The Company
will not be required to issue or deliver any certificates for shares of Common
Stock, cash or other property prior to (i) the listing of such shares on any
stock exchange (or other public market) on which the Common Stock may then be
listed (or regularly traded), (ii) the completion of any registration or
qualification of such shares under federal or state law, or any ruling or
regulation of any government body which the Committee determines to be necessary
or advisable, and (iii) the satisfaction of any applicable withholding
obligation in order for the Company or an Affiliate to obtain a deduction with
respect to the exercise of a Stock Option. The Company may cause any certificate
for any share of Common Stock to be delivered to be properly marked with a
legend or other notation reflecting the limitations on transfer of such Common
Stock as provided in this Plan or as the Committee may otherwise require. The
Committee may require any person exercising a Stock Option to make such
representations and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the shares of Common Stock in
compliance with applicable law or otherwise. Fractional shares will not be
delivered, but will be rounded to the next lower whole number of shares.
4.4 Stockholder Rights. No person will have any rights of a
stockholder as to shares of Common Stock subject to a Stock Option until, after
proper exercise of the Stock Option or other action required, such shares have
been recorded on the Company's official stockholder records as having been
issued or transferred. Upon exercise of the Stock Option or any portion thereof,
the Company will have thirty (30) days in which to issue the shares, and the
Participant will not be treated as a stockholder for any purpose whatsoever
prior to such issuance. No adjustment will be made for cash dividends or other
rights for which the record date is prior to the date such shares are recorded
as issued or transferred in the Company's official stockholder records, except
as provided herein or in an Option Agreement.
7
4.5 Registration of Common Stock Under This Plan. The Company will
register under the Securities Act the Common Stock delivered or deliverable
pursuant to Stock Options on Commission Form S-8 if and when available to the
Company for this purpose (or any successor or alternate form that is
substantially similar to that form to the extent available to effect such
registration), in accordance with the rules and regulations, and any amendments
to such rules and regulations, governing such forms, as soon as the Committee,
in its sole discretion, deems such registration appropriate. The Company will
use its best efforts to cause the registration statement to become effective and
will file such supplements and amendments to the registration statement as may
be necessary to keep the registration statement in effect until the earliest of
(a) one year following the expiration of the Option Period of the last Option
outstanding, (b) the date the Company is no longer a reporting company under the
Exchange Act and (c) the date all Participants have disposed of all shares
delivered pursuant to any Stock Option.
4.6 Anti-Dilution. In the event of any Company stock dividend,
stock split, combination or exchange of shares, recapitalization or other change
in the capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale by
the Company of all or a substantial portion of its assets (measured on either a
stand-alone or consolidated basis), reorganization, rights offering, a partial
or complete liquidation, or any other corporate transaction or event involving
the Company and having an effect similar to any of the foregoing, then the
Committee will adjust or substitute, as the case may be, the number of shares of
Common Stock available for Stock Options under the Plan, the number of shares of
Common Stock covered by outstanding Stock Options, the exercise price per share
of outstanding Stock Options, and any other characteristics or terms of the
Stock Options as the Committee deems necessary or appropriate to reflect
equitably the effects of such changes to the Participants; provided, however,
that any fractional shares resulting from such adjustment will be eliminated by
rounding to the next lower whole number of shares with appropriate payment for
such fractional share as will reasonably be determined by the Committee.
In the event of a consolidation or merger or sale of all or
substantially all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for securities, cash or other property of any other
corporation or business entity (the "Acquisition"), or in the event of a
liquidation of the Company, the Board or the board of directors of any
corporation assuming the obligations of the Company may, in its discretion, take
any one or more of the following actions as to outstanding Stock Options: (i)
provide that such Stock Options shall be assumed, or substantially equivalent
Stock Options shall be substituted, by the acquiring or succeeding corporation
(or an affiliate thereof) on such terms as the Board determines to be
appropriate, (ii) upon written notice to Participants, provide that all
unexercised vested Stock Options will terminate immediately prior to the
consummation of such transaction unless exercised by the Participant within a
specified period following the date of such notice, (iii) in the event of an
Acquisition under the terms of which holders of the Common Stock of the Company
will receive upon consummation thereof a cash payment for each share surrendered
in the Acquisition (the "Acquisition Price"), make or provide for a cash payment
to Participants equal to the difference between (A) the Acquisition Price times
the number of shares of Common Stock subject to
8
outstanding Stock Options (to the extent then exercisable at prices not in
excess of the Acquisition Price) and (B) the aggregate exercise price of all
such outstanding Stock Options in exchange for the termination of such Stock
Options, and (iv) provide that all or any outstanding Stock Options shall become
exercisable or realizable in full prior to the effective date of such
Acquisition.
ARTICLE V
ELIGIBILITY
5.1 Eligibility. Except as herein provided, the persons who will
be eligible to participate in the Plan and be granted Stock Options will be
those persons who are officers, employees, consultants or advisors of the
Company or any Affiliate, who are in a position, in the opinion of the
Committee, to make contributions to the growth, management, protection and
success of the Company and its Affiliates. Distributors of the Company and
directors of the Company and its affiliates who are not employees of the Company
or its affiliates are not eligible to participate in this Plan. Notwithstanding
the foregoing, a consultant or advisor shall not be eligible to receive a grant
of Stock Options under this Plan with respect to providing services directly or
indirectly which promote or maintain a market for the Company's or any
Affiliate's securities. Of those persons described in the preceding sentence,
the Committee may, from time to time, select persons to be granted Stock Options
and determine the terms and conditions with respect thereto. In making any such
selection and in determining the form of the Stock Option, the Committee may
give consideration to the functions and responsibilities of the person's
contributions to the Company and its Affiliates, the value of the individual's
service to the Company and its Affiliates and such other factors deemed relevant
by the Committee. The Committee may designate in writing any person who is not
eligible to participate in the Plan if such person would otherwise be eligible
to participate in the Plan.
ARTICLE VI
GRANT OF STOCK OPTIONS
6.1 General. The Committee will have authority to grant Options
under the Plan at any time or from time to time. Stock Options granted under
this Plan shall be Non-Qualified Stock Options. An Option will entitle the
Participant to receive shares of Common Stock upon exercise of such Option,
subject to the Participant's satisfaction in full of any conditions,
restrictions or limitations imposed in accordance with the Plan or an Option
Agreement (the terms and provisions of which may differ from other Option
Agreements) including without limitation, payment of the Option Price.
6.2 Grant and Exercise. The grant of a Stock Option will occur as
of the date the Committee determines. Each Option granted under this Plan will
be evidenced by an Option Agreement, in a form approved by the Committee, which
will embody the terms and conditions of such Option and which will be subject to
the express terms and conditions set forth in the
9
Plan. Such Option Agreement will become effective upon execution by the
Participant. No Stock Options shall be granted under this Plan after the tenth
anniversary of the Effective Date of this Plan.
6.3 Terms and Conditions. Stock Options will be subject to such
terms and conditions as will be determined by the Committee, including the
following:
(a) Option Period. The Option Period of each Stock Option
will be fixed by the Committee; provided that no Stock Option will be
exercisable more than 10 years after the Grant Date.
(b) Option Price. The Option Price per share of the
Common Stock purchasable under an Option will not be less than the Fair
Market Value per share on the Grant Date.
(c) Exercisability. Stock Options will vest and be
exercisable at such time or times and subject to such terms and
conditions as will be determined by the Committee. If the Committee
provides that any Stock Option is exercisable only in installments, the
Committee may at any time waive such installment exercise provisions,
in whole or in part. In addition, the Committee may at any time
accelerate the exercisability of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this
Article VI, a Participant may exercise vested Stock Options, in whole
or in part, at any time during the Option Period by the Participant's
giving written notice of exercise on a form provided by the Committee
(if available) to the Company specifying the number of shares of Common
Stock subject to the Stock Option to be purchased. Such notice will be
accompanied by payment in full of the purchase price by cash or check
or such other form of payment as the Company may accept. If approved by
the Committee, payment in full or in part may also be made (i) by
delivering Common Stock already owned by the Participant having a total
Fair Market Value on the date of such delivery equal to the Option
Price; (ii) by authorizing the Company to retain shares of Common Stock
which would otherwise be issuable upon exercise of the Option having a
total Fair Market Value on the date of delivery equal to the Option
Price; (iii) by the delivery of cash by a broker-dealer to whom the
Participant has submitted a notice of exercise (in accordance with Part
220, Chapter II, Title 12 of the Code of Federal Regulations, so-called
"cashless" exercise); or (iv) by any combination of the foregoing. No
shares of Common Stock will be issued until full payment therefor has
been made.
(e) Transferability of Options. The Committee, in its
sole discretion, may permit Stock Options to be transferred during the
Participant's lifetime, subject to such conditions and limitations as
the Committee deems reasonable and proper, including transfers pursuant
to a domestic relations order which would be a "qualified domestic
relations order" as defined in Section 414(p) of the Code.
10
6.4 Termination by Reason of Death. Unless otherwise provided in
an Option Agreement or determined by the Committee, if a Participant incurs a
Termination due to death, any unexpired and unexercised Stock Option held by
such Participant will thereafter be fully exercisable for a period of 90 days
following the date of the appointment of a Representative (or such other period
or no period as the Committee may specify) or until the expiration of the Option
Period, whichever period is the shorter.
6.5 Termination by Reason of Disability. Unless otherwise provided
in an Option Agreement or determined by the Committee, if a Participant incurs a
Termination due to a Disability, any unexpired and unexercised Stock Option held
by such Participant will thereafter be fully exercisable by the Participant for
the period of ninety (90) days (or such other period or no period as the
Committee may specify) immediately following the date of such Termination or
until the expiration of the Option Period, whichever period is shorter, and the
Participant's death at any time following such Termination due to Disability
will not affect the foregoing.
6.6 Other Termination. Unless otherwise provided in an Option
Agreement or determined by the Committee, if a Participant incurs a Termination
due to Retirement, or the Termination is involuntary on the part of the
Participant (but is not due to death or Disability or with Cause), any Stock
Option held by such Participant will thereupon terminate, except that such Stock
Option, to the extent then exercisable, may be exercised for the lesser of (a)
the 90-day period commencing with the date of such Termination, or (b) until the
expiration of the Option Period. If the Participant incurs a Termination which
is either (a) voluntary on the part of the Participant (and is not due to
Retirement) or (b) with Cause, the Option will terminate immediately. The death
or Disability of a Participant after a Termination otherwise provided herein
will not extend the time permitted to exercise an Option.
6.7 Cashing Out of Option. Unless otherwise provided in the Option
Agreement, on receipt of written notice of exercise, the Committee may elect to
cash out all or part of the portion of any Stock Option to be exercised by
paying the Participant an amount, in cash or Common Stock, equal to the excess
of the Fair Market Value of the Common Stock that is subject to the Option over
the Option Price times the number of shares of Common Stock subject to the
Option on the effective date of such cash out.
ARTICLE VII
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE PLAN
7.1 Transfer of Shares. Subject to the restriction in any Option
Agreement or any other transfer restriction contained in any agreement between a
Participant and the Company, a Participant may at any time make a transfer of
shares of Common Stock received pursuant to the exercise of a Stock Option. Any
transfer of shares received pursuant to the exercise of a Stock Option will not
be permitted or valid unless and until the transferee agrees to be bound by the
provisions of the Plan, and any provision respecting Common Stock under the
Option Agreement.
11
7.2 Limited Transfer During Offering. If there is an effective
registration statement under the Securities Act pursuant to which shares of
Common Stock are offered for sale in an underwritten offering, a Participant may
not, during the period requested by the underwriters managing the registered
public offering, effect any public sale or distribution of shares received
directly or indirectly pursuant to an exercise of a Stock Option.
ARTICLE VIII
MISCELLANEOUS
8.1 Amendments and Termination . The Board may amend, alter, or
discontinue the Plan at any time, but no amendment, alteration or
discontinuation may be made which would impair the rights of a Participant under
a Stock Option theretofore granted without the Participant's consent except such
an amendment made to cause the Plan to qualify for an exemption provided by the
Exchange Act, registration provisions of the Securities Act, or the rules
promulgated thereunder. In addition, no such amendment may be made without the
approval of the Company's stockholders to the extent such approval is required
by law or agreement.
The Committee may amend the terms of any Stock Option theretofore
granted, prospectively or retroactively, but no such amendment may impair the
rights of any Participant without the Participant's consent, except such an
amendment made to cause the Plan or Stock Option to qualify for the exemption
provided by Rule 16b-3. The Committee may also substitute new Stock Options for
previously granted Stock Options, including previously granted Stock Options
having higher Option Prices but no such substitution may be made which would
impair the rights of the Participant under such Stock Options theretofore
granted without the Participant's consent.
Subject to the above provisions, the Board will have authority to amend
the Plan to take into account changes in law and tax, accounting and securities
rules, as well as other developments, and to grant Stock Options which qualify
for beneficial treatment under such rules without stockholder approval.
8.2 General Provisions.
(a) Representation. The Committee may require each person
purchasing or receiving shares pursuant to a Stock Option to represent
to and agree with the Company in writing that such person is acquiring
the shares without a view to the distribution thereof. The certificates
for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer.
(b) No Additional Obligation. Nothing in the Plan will
prevent the Company or an Affiliate from adopting other or additional
compensation arrangements for its employees.
12
(c) Withholding. No later than the date as of which an
amount first becomes includable in the gross income of the Participant
for income tax purposes with respect to any Stock Option, the
Participant will pay to the Company (or other entity identified by the
Committee), or make arrangements satisfactory to the Company or other
entity identified by the Committee regarding the payment of, any
Federal, state, local or foreign taxes of any kind required by law to
be withheld with respect to such Stock Option or exercise thereof.
Unless otherwise determined by the Committee, withholding obligations
may be settled with Common Stock, including Common Stock that is part
of the Stock Option that gives rise to the withholding requirement,
provided that any applicable requirements under Section 16 of the
Exchange Act are satisfied. The obligations of the Company under the
Plan, will be conditional on such payment or arrangements, and the
Company and its Affiliates will, to the extent permitted by law, have
the right to deduct any such taxes from any payment otherwise due to
the Participant.
(d) Representation. The Committee will establish such
procedures as it deems appropriate for a Participant to designate a
Representative to whom any amounts payable in the event of the
Participant's death are to be paid.
(e) Controlling Law. The Plan and all Stock Options made
and actions taken thereunder will be governed by and construed in
accordance with the laws of the State of Delaware (other than its law
respecting choice of law) except to the extent the General Corporation
Law of the State of Delaware would be mandatorily applicable. The Plan
will be construed to comply with all applicable law and to avoid
liability to the Company, an Affiliate or a Participant, including,
without limitation, liability under Section 16(b) of the Exchange Act.
(f) Offset. Any amounts owed to the Company or an
Affiliate by the Participant of whatever nature may be offset by the
Company from the value of any shares of Common Stock, cash or other
thing of value under this Plan or an Option Agreement to be transferred
to the Participant, and no shares of Common Stock or other thing of
value under this Plan or an Option Agreement will be transferred unless
and until all disputes between the Company and the Participant have
been fully and finally resolved and the Participant has waived all
claims to such against the Company or an Affiliate.
8.3 Rights with Respect to Continuance of Employment. Nothing in
this Plan will be deemed to alter the relationship between the Company or an
Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing in this Plan will be construed to
constitute a contract of employment or engagement between the Company or an
Affiliate and a Participant. The Company or an Affiliate and each of the
Participants continue to have the right to terminate the employment or service
relationship at any time for any reason, except as provided in a written
contract. The Company or an Affiliate will have no obligation to retain the
Participant in its employ or service as a result of this Plan. There will be no
inference as to the length of employment or service hereby, and the Company or
an Affiliate reserves the same rights to
13
terminate the Participant's employment or service engagement as it existed prior
to the individual becoming a Participant in this Plan.
8.4 Stock Options in Substitution for Stock Options Granted by
Other Corporations. Stock Options may be granted under the Plan from time to
time in substitution for Stock Options held by employees, or service providers
of other corporations who are about to become officers, employees, consultants
or advisors of the Company or an Affiliate as the result of a merger or
consolidation of the employing corporation with the Company or an Affiliate, or
the acquisition by the Company or an Affiliate of the assets of the employing
corporation, or the acquisition by the Company or Affiliate of the stock of the
employing corporation, as the result of which it becomes an Affiliate. The terms
and conditions of the Stock Options so granted may vary from the terms and
conditions set forth in this Plan at the time of such grant as the majority of
the members of the Committee may deem appropriate to conform, in whole or in
part, to the provisions of the Stock Options in substitution for which they are
granted.
8.5 Delay. If at the time a Participant incurs a Termination
(other than due to Cause) or if at the time of a Change in Control, the
Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under the Plan or an Option Agreement
to the extent necessary to avoid the imposition of liability will be suspended
and delayed during the period the Participant would be subject to such
liability, but not more than six months and one day and not to exceed the Option
Period as provided in the Option Agreement. The Company will have the right to
suspend or delay any time period described in the Plan or an Option Agreement if
the Committee determines that the action may constitute a violation of any law
or result in liability under any law to the Company, an Affiliate or a
stockholder of the Company until such time as the action required or permitted
will not constitute a violation of law or result in liability to the Company, an
Affiliate or a stockholder of the Company. The Committee will have the
discretion to suspend the application of the provisions of the Plan required
solely to comply with Rule 16b-3 if the Committee determines that Rule 16b-3
does not apply to the Plan.
8.6 Headings. The headings in this Plan are for reference purposes
only and will not affect the meaning or interpretation of this Plan.
8.7 Severability. If any provision of this Plan is for any reason
held to be invalid or unenforceable, such invalidity or unenforceability will
not affect any other provision of this Plan, and this Plan will be construed as
if such invalid or unenforceable provision were omitted.
8.8 Successors and Assigns. This Plan will inure to the benefit of
and be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
will be binding upon the Participant's heirs, legal representatives and
successors.
Adopted by the Board of Directors on November 18, 1998.
Approved by the written consent of the Shareholders of the Company in April,
1998.
14
2000 DECLARATION OF AMENDMENT TO
BLUE RHINO CORPORATION
1998 STOCK INCENTIVE PLAN
THIS 2000 DECLARATION OF AMENDMENT, is made this 19th day of December,
2000, by BLUE RHINO CORPORATION (the "Corporation"), to the Corporation's 1998
Stock Incentive Plan (the "1998 Plan").
RECITALS:
WHEREAS, the Corporation has adopted, and the stockholders have
approved, the 1998 Plan; and
WHEREAS, pursuant to Section 8.1 of the 1998 Plan, the Board of
Directors has authority to amend the 1998 Plan, subject to stockholder approval
in certain circumstances; and
WHEREAS, the Board of Directors of the Corporation has deemed it
advisable to amend Section 4.1 of the 1998 Plan to increase the number of shares
authorized for issuance under the 1998 Plan from 1,200,000 shares to 2,200,000
shares and to impose an annual participant award limitation in accordance with
the requirements of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), subject to the approval of the stockholders of the
Corporation of such amendments; and
WHEREAS, the Corporation desires to evidence such amendments by this
Declaration of Amendment;
NOW, THEREFORE, IT IS DECLARED that, effective as of December 19, 2000,
the 1998 Plan shall be and hereby is amended as follows (subject to stockholder
approval of such amendments):
1. Amendment to Section 4.1. Section 4.1 ("Number of Shares") of
the 1998 Plan is hereby amended by deleting the first sentence of Section 4.1
and inserting the following in lieu thereof:
"4.1 Number of Shares. Subject to the
adjustment under Section 4.6, the total number of
shares of Common Stock reserved and available for
distribution pursuant to Stock Options under the Plan
will be 2,200,000 shares of Common Stock." In
addition, to the extent required pursuant to Section
162(m) of the Code, no participant may be granted
options for more than 300,000 shares of Common Stock
(or the equivalent value thereof based on the fair
market value of the Common Stock at the time of
grant) during any 12-month period, subject to
adjustment as provided in Section 4.6. "
2. Amendment to Section 3.1(b) ("Committee Structure and
Authority). Section 3.1(b) of the 1998 Plan is hereby amended by deleting the
following, with the remainder of Section 3.1(b) to remain unchanged:
"provided, however, that the number of shares of
Common Stock which can be awarded in any calendar
year to any Participant shall not exceed twenty
percent (20%) of the number of shares of Common Stock
reserved and available for issuance under this Plan
as of the Grant Date; "
3. Continued Effect. Except as set forth herein, the 1998 Plan
shall remain in full force and effect.
IN WITNESS WHEREOF, this Declaration of Amendment is executed on behalf
of Blue Rhino Corporation as of the day and year first above written.
BLUE RHINO CORPORATION
By: /s/ Billy D. Prim
-------------------------------------------
Billy D. Prim, President and
Chief Executive Officer
ATTEST:
/s/ Mark Castaneda
- ----------------------------------
Mark Castaneda, Secretary
[Corporate Seal]
2001 DECLARATION OF AMENDMENT TO
BLUE RHINO CORPORATION
1998 STOCK INCENTIVE PLAN
THIS 2001 DECLARATION OF AMENDMENT, is made this 30th day of August,
2001, by BLUE RHINO CORPORATION (the "Corporation"), to the Corporation's 1998
Stock Incentive Plan (the "1998 Plan").
RECITALS:
WHEREAS, the Corporation has adopted, and the stockholders have
approved, the 1998 Plan; and
WHEREAS, pursuant to Section 8.1 of the 1998 Plan, the Board of
Directors has authority to amend the 1998 Plan, subject to stockholder approval
in certain circumstances; and
WHEREAS, the Board of Directors of the Corporation has deemed it
advisable to amend Section 4.1 of the 1998 Plan to increase the number of shares
authorized for issuance under the 1998 Plan from 2,200,000 shares to 3,200,000
shares, subject to the approval of the stockholders of the Corporation of such
amendments; and
WHEREAS, the Corporation desires to evidence such amendments by this
Declaration of Amendment;
NOW, THEREFORE, IT IS DECLARED that, effective as of December 18, 2001,
the 1998 Plan shall be and hereby is amended as follows (subject to stockholder
approval of such amendment):
1. Amendment to Section 4.1. Section 4.1 ("Number of Shares") of
the 1998 Plan is hereby amended by deleting the first sentence of Section 4.1
and inserting the following in lieu thereof:
"4.1 Number of Shares. Subject to the
adjustment under Section 4.6, the total number of
shares of Common Stock reserved and available for
distribution pursuant to Stock Options under the Plan
will be 3,200,000 shares of Common Stock. In
addition, to the extent required pursuant to Section
162(m) of the Code, no participant may be granted
options for more than 300,000 shares of Common Stock
(or the equivalent value thereof based on the fair
market value of the Common Stock at the time of
grant) during any 12-month period, subject to
adjustment as provided in Section 4.6."
2. Continued Effect. Except as set forth herein, the 1998 Plan
shall remain in full force and effect.
IN WITNESS WHEREOF, this Declaration of Amendment is executed on behalf
of Blue Rhino Corporation as of the day and year first above written.
BLUE RHINO CORPORATION
By: /s/ Billy D. Prim
-----------------------------------------
Billy D. Prim, President and
Chief Executive Officer
ATTEST:
/s/ Mark Castaneda
- --------------------------
Mark Castaneda, Secretary
[Corporate Seal]
PROXY
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 and/or Series A Convertible Preferred Stock of the Corporation held on
record by the undersigned on October 31, 2001, at the Annual Meeting of
Stockholders to be held on December 18, 2001 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
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: Billy D. Prim and Andrew J. Filipowski
(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 AMENDMENT TO THE 1998 STOCK INCENTIVE PLAN:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING JULY 31,
2002:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THIS PROXY, IF PROPERLY SIGNED AND RETURNED, WILL BE VOTED AS DIRECTED, BUT IF
NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR
DIRECTOR NAMED HEREIN AND FOR PROPOSALS 2 AND 3. 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: , 2001
--------------------------------------------------------------------
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.