Collateral Agreement

EXHIBIT 10.3


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COLLATERAL AGREEMENT


dated as of November 20, 2002


by and among


BLUE RHINO CORPORATION,
and certain of its Subsidiaries
as Grantors,


in favor of


BANK OF AMERICA, N.A.,
as Administrative Agent


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TABLE OF CONTENTS


ARTICLE I. DEFINED TERMS.........................................................................................1
1.01 Terms Defined in the Uniform Commercial Code....................................................1
1.02 Defined Terms...................................................................................1
1.03 Other Definitional Provisions...................................................................5


ARTICLE II. SECURITY INTEREST....................................................................................5
2.01 Grant of Security Interest......................................................................5
2.02 Grantors Remain Liable..........................................................................6


ARTICLE III. REPRESENTATIONS AND WARRANTIES......................................................................6
3.01 Existence; Qualification and Power; Compliance with Laws........................................6
3.02 Authorization of Agreement; No Conflict.........................................................7
3.03 Governmental Authorization; Other Consents......................................................7
3.04 Binding Effect..................................................................................7
3.05 Perfected First Priority Liens..................................................................8
3.06 Title, No Other Liens...........................................................................8
3.07 State of Organization; Location of Inventory, Equipment and Fixtures; other
Information.....................................................................................8
3.08 Accounts........................................................................................9
3.09 Chattel Paper...................................................................................9
3.10 3.10 Commercial Tort Claims.....................................................................9
3.11 Deposit Accounts................................................................................9
3.12 Intellectual Property...........................................................................9
3.13 Inventory.......................................................................................9
3.14 Investment Property; Partnership/LLC Interests.................................................10
3.15 Farm Products..................................................................................10


ARTICLE IV. COVENANTS...........................................................................................10
4.01 Maintenance of Perfected Security Interest; Further Information................................10
4.02 Maintenance of Insurance.......................................................................10
4.03 Changes in Locations; Changes in Name or Structure.............................................11
4.04 Required Notifications.........................................................................11
4.05 4.05 Delivery Covenants........................................................................12
4.06 Control Covenants..............................................................................12
4.07 Filing Covenants...............................................................................13
4.08 Accounts.......................................................................................13
4.09 Intellectual Property..........................................................................14
4.10 Investment Property; Partnership/LLC Interests.................................................14
4.11 Equipment......................................................................................14
4.12 Vehicles.......................................................................................14
4.13 Further Assurances.............................................................................14


ARTICLE V. REMEDIAL PROVISIONS..................................................................................14
5.01 General Remedies...............................................................................14
5.02 Specific Remedies..............................................................................14
5.03 Registration Rights............................................................................14


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5.04 Application of Proceeds........................................................................14
5.05 Waiver, Deficiency.............................................................................14


ARTICLE VI. THE ADMINISTRATIVE AGENT............................................................................14
6.01 Administrative Agent's Appointment as Attorney-In-Fact.........................................14
6.02 Duty of Administrative Agent...................................................................14
6.03 Authority of Administrative Agent..............................................................14


ARTICLE VII. MISCELLANEOUS......................................................................................14
7.01 Amendments in Writing..........................................................................14
7.02 Notices........................................................................................14
7.03 No Waiver by Course of Conduct, Cumulative Remedies............................................14
7.04 Enforcement Expenses, Indemnification..........................................................14
7.05 Governing Law; Consent to Jurisdiction.........................................................14
7.06 Waiver of Jury Trial...........................................................................14
7.07 Successors and Assigns.........................................................................14
7.08 Set-Off........................................................................................14
7.09 Counterparts...................................................................................14
7.10 Severability...................................................................................14
7.11 Section Heading................................................................................14
7.12 Integration....................................................................................14
7.13 Acknowledgements...............................................................................14
7.14 Additional Grantors............................................................................14
7.15 Releases.......................................................................................14


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EXHIBITS:


Exhibit A Form of Perfection Certificate


SCHEDULES:


Schedule 3.07 Jurisdiction of Organization; Taxpayer Identification Number;
Registered Organization Number; Mailing Address; Chief
Executive Office and other Locations Schedule 3.10 Commercial Tort Claims Schedule 3.09 Chattel Paper Schedule 3.11 Deposit Accounts Schedule 3.12 Intellectual Property Schedule 3.14 Investment Property and Partnership/LLC Interests


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COLLATERAL AGREEMENT


THIS COLLATERAL AGREEMENT (this "Agreement"), dated as of November 20, 2002, by and among BLUE RHINO CORPORATION, a Delaware corporation (the "Borrower"), certain of its Subsidiaries as identified on the signature pages hereto and any Additional Grantor (as defined below) who may become party to this Agreement (such Subsidiaries and Additional Grantors, collectively, with the Borrower, the "Grantors"), in favor of BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, the "Administrative Agent") for the ratable benefit of the banks and other financial institutions (the "Lenders") from time to time parties to the Credit Agreement, dated as of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), by and among the Borrower, the Lenders, and the Administrative Agent.


Pursuant to the Credit Agreement, the Lenders have agreed to make Credit Extensions to the Borrower upon the terms and subject to the conditions set forth therein.


It is a condition precedent to the obligation of the Lenders to make their respective Credit Extensions to the Borrower under the Credit Agreement that the Grantors shall have executed and delivered this Agreement to the Administrative Agent, for the ratable benefit of itself and the Lenders.


To induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective Credit Extensions to the Borrowers thereunder, each Grantor hereby agrees with the Administrative Agent, for the ratable benefit of itself and the Lenders, as follows:


ARTICLE I.
DEFINED TERMS


1.01 TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE.


(a) The following terms when used in this Agreement shall have the meanings assigned to them in the UCC (as defined in Section 1.02 below) as in effect from time to time: "Account", "Account Debtor", "Authenticate", "Certificated Security", "Chattel Paper"; "Commercial Tort Claim", "Deposit Account", "Documents", "Electronic Chattel Paper", "Equipment", "Fixture", "General Intangible", "Instrument", "Inventory", "Investment Property", "Issuer", "Letter of Credit Rights", "Proceeds", "Record", "Securities Entitlement", "Securities Intermediary", "Security Account", "Supporting Obligation", "Tangible Chattel Paper", and "Uncertificated Security".


(b) Terms defined in the UCC and not otherwise defined herein or in the Credit Agreement shall have the meaning assigned in the UCC as in effect from time to time.


1.02 DEFINED TERMS. The following terms when used in this Agreement shall have the meanings assigned to them below:


"Additional Grantor" means each Subsidiary of the Borrower which hereafter becomes a Grantor pursuant to Section 7.14 hereof and Section 7.15 of the Credit Agreement.


"Agreement" means this Collateral Agreement, as amended, restated, supplemented or otherwise modified from time to time.


"Applicable Insolvency Laws" means all Laws governing bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors, dissolution, insolvency, fraudulent transfers or conveyances or other similar laws (including, without limitation, 11 U.S.C. Sections 547, 548 and 550 and other "avoidance" provisions of Title 11 of the United States Code).


"Assignment of Claims Act" means the Assignment of Claims Act of 1940 (41 U.S.C. Section 15, 31 U.S.C. Section 3737, and 31 U.S.C. Section 3727), including all amendments thereto and regulations promulgated thereunder.


"Collateral" shall have the meaning assigned thereto in Section 2.01.


"Collateral Account" means any collateral account established by the Administrative Agent as provided in Section 5.02.


"Control" means the manner in which "control" is achieved under the UCC with respect, with respect to any Collateral for which the UCC specifies a method of achieving "control".


"Controlled Depository" shall have the meaning assigned thereto in Section 4.06.


"Copyrights" means collectively, all of the following of any Grantor: (a) all copyrights, rights and interests in copyrights, works protectable by copyright, copyright registrations and copyright applications anywhere in the world, including, without limitation, those listed on Schedule 3.12 hereto, (b) all reissues, extensions, continuations (in whole or in part) and renewals of any of the foregoing, (c) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing or with respect to any of the foregoing, including, without limitation, damages or payments for past or future infringements of any of the foregoing, (d) the right to sue for past, present and future infringements of any of the foregoing and (e) all rights corresponding to any of the foregoing throughout the world.


"Copyright Licenses" means any written agreement naming any Grantor as licensor or licensee, including, without limitation, those listed in Schedule 3.12, granting any right under any Copyright, including, without limitation, the grant of rights to manufacture, distribute, exploit and sell materials derived from any Copyright.


"Effective Endorsement and Assignment" means, with respect to any specific type of Collateral, all such endorsements, assignments and other instruments of transfer reasonable requested by the Administrative Agent with respect to the Security Interest granted in such Collateral, and in each case, in form and substance satisfactory to the Administrative Agent.


"Exempted Deposit Account" means any operating Deposit Account created in the ordinary course of business; provided that (a) no more than $50,000 in the aggregate is deposited in all such Deposit Accounts at any time and (b) the applicable Grantor provides written notice to the Administrative Agent within thirty (30) days of the creation of any such Deposit Account.


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"Exempted Short Term Investment" means, any Investment permitted pursuant to Section 8.02(a) of the Credit Agreement; provided that (a) such Investment matures within seven (7) days and (b) the aggregate amount of all such Investments outstanding at any time does not exceed $100,000.


"Government Contract" means a contract between any Grantor and an agency, department or instrumentality of the United States or any state, municipal or local Governmental Authority located in the United States.


"Guarantors" means the collective reference to each Person executing a Guaranty Agreement.


"Guaranty Agreement" shall have the meaning assigned thereto in the Credit Agreement.


"Intellectual Property" means collectively, all of the following of any Grantor: (a) all systems software, applications software and internet rights, including, without limitation, screen displays and formats, internet domain names, web sites (including web links), program structures, sequence and organization, all documentation for such software, including, without limitation, user manuals, flowcharts, programmer's notes, functional specifications, and operations manuals, all formulas, processes, ideas and know-how embodied in any of the foregoing, and all program materials, flowcharts, notes and outlines created in connection with any of the foregoing, whether or not patentable or, copyrightable, (b) concepts, discoveries, improvements and ideas, (c) any useful information relating to the items described in clause (a) or (b), including know-how, technology, engineering drawings, reports, design information, trade secrets, practices, laboratory notebooks, specifications, test procedures, maintenance manuals, research, development, manufacturing, marketing, merchandising, selling, purchasing and accounting, (d) Patents and Patent Licenses, Copyrights and Copyright Licenses, Trademarks and Trademark Licenses, and (e) other licenses to use any of the items described in the foregoing clauses (a), (b), (c) and (d) or any other similar items of such Grantor necessary for the conduct of its business.


"Obligations" means with respect to the Borrower, the meaning assigned thereto in the Credit Agreement and with respect to each Guarantor, the obligations of such Guarantor under the Guaranty Agreement executed by such Guarantor.


"Partnership/LLC Interests" means, with respect to any Grantor, the entire partnership, membership interest or limited liability company interest, as applicable, of such Grantor in each partnership, limited partnership or limited liability company owned thereby, including, without limitation, such Grantor's capital account, its interest as a partner or member, as applicable, in the net cash flow, net profit and net loss, and items of income, gain, loss, deduction and credit of any such partnership, limited partnership or limited liability company, as applicable, such Grantor's interest in all distributions made or to be made by any such partnership, limited partnership or limited liability company, as applicable, to such Grantor and all of the other economic rights, titles and interests of such Grantor as a partner or member, as applicable, of any such partnership, limited partnership or limited liability company, as applicable, whether set forth in the partnership agreement or membership agreement, as applicable, of such partnership,


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limited partnership or, limited liability company, as applicable, by separate agreement or otherwise.


"Patents" means collectively, all of the following of any Grantor: (a) all patents, rights and interests in patents, patentable inventions and patent applications anywhere in the world, including, without limitation, those listed on Schedule 3.12 hereto, (b) all reissues, extensions, continuations (in whole or in part) and renewals of any of the foregoing, (c) all income, royalties, damages or payments now or hereafter due and/or payable under any of the foregoing or with respect to any of the foregoing, including, without limitation, damages or payments for past or future infringements of any of the foregoing, (d) the right to sue for past, present and future infringements of any of the foregoing and (e) all rights corresponding to any of the foregoing throughout the world.


"Patent License" means all agreements now or hereafter in existence, whether written or oral, providing for the grant by or to any Grantor of any right to manufacture, use or sell any invention covered in whole or in part by a Patent, including, without limitation, any of the foregoing referred to in Schedule 3.12 hereto.


"Perfection Certificate" means the perfection certificate dated as of even date herewith, substantially in the form of Exhibit A attached hereto, and otherwise in form and substance satisfactory to the Administrative Agent, and duly certified by an officer, partner or member, as applicable, of each Grantor.


"Permitted Liens" shall have the meaning assigned thereto in the Credit Agreement.


"Securities Act" means the Securities Act of 1933, including all amendments thereto and regulations promulgated thereunder.


"Security Interests" means the security interests granted pursuant to Article II, as well as all other security interests created or assigned as additional security for the Obligations pursuant to the provisions of the Credit Agreement.


"Subsidiary Issuer" means any Issuer of Investment Property or any Partnership/LLC Interests, which such Issuer is a direct or indirect Subsidiary of the Borrower.


"Trademarks" means collectively, all of the following of any Grantor: (a) all trademarks, rights and interests in trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos, other business identifiers, prints and labels on which any of the foregoing have appeared or appear, all registrations and recordings thereof, and all applications in connection therewith anywhere in the world, including, without limitation, those, listed on Schedule 3.12 hereto, (b) all reissues, extensions, continuations (in whole or in part) and renewals of any of the foregoing, (c) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing or with respect to any of the foregoing, including, without limitation, damages or payments for past or future infringements of any of the foregoing, (d) the right to sue for past, present and future infringements of any of the foregoing and (e) all rights corresponding to any of the foregoing throughout the world.


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"Trademark License" means any agreement now or hereafter in existence, whether written or oral, providing for the grant by or to any Grantor of any right to use any Trademark, including, without limitation, any of the foregoing referred to in Schedule 3.12.


"UCC" means the Uniform Commercial Code as in effect in the State of North Carolina, as amended or modified from time to time.


"Vehicles" means all cars, trucks, trailers, construction and earth moving equipment and other vehicles covered by a certificate of title under the laws of any state and all tires all other appurtenances to any of the foregoing.


1.03 OTHER DEFINITIONAL PROVISIONS. Terms defined in the Credit Agreement and not otherwise defined herein shall have the meaning assigned thereto in the Credit Agreement. The words "hereof," "herein", "hereto" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Schedule references are to this Agreement unless otherwise specified. The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor's Collateral or the relevant part thereof.


ARTICLE II.
SECURITY INTEREST


2.01 GRANT OF SECURITY INTEREST. Each Grantor hereby grants, pledges and collaterally assigns to the Administrative Agent, for the ratable benefit of itself and the Lenders, a security interest in, all of such Grantor's right, title and interest in the following property now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest, and wherever located or deemed located (collectively, the "Collateral"), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations:


(a) all Accounts;


(b) all Chattel Paper;


(c) all Commercial Tort Claims identified on Schedule 3.10;


(d) all Deposit Accounts;


(e) all Documents;


(f) all Equipment;


(g) all Fixtures;


(h) all General Intangibles;


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(i) all Instruments;


(j) all Intellectual Property;


(k) all Inventory;


(l) all Investment Property;


(m) all Letter of Credit Rights;


(n) all Vehicles;


(o) all other personal property not otherwise described above;


(p) all books and records pertaining to the Collateral; and


(q) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and Supporting Obligations (as now or hereafter defined in the UCC) given by any Person with respect to any of the foregoing.


provided that any Security Interest on any capital stock or other ownership interests issued by any Foreign Subsidiary shall be limited to 65% of all issued and outstanding shares of all classes of capital stock or other ownership interests of such Foreign Subsidiary.


2.02 GRANTORS REMAIN LIABLE. Anything herein to the contrary notwithstanding: (a) each Grantor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by Administrative Agent of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral, (c) neither the Administrative Agent nor any Lender shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement, nor shall the Administrative Agent or any Lender be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder, and (d) neither the Administrative Agent nor any Lender shall have any liability in contract or tort for any Grantor's acts or omissions.


ARTICLE III.
REPRESENTATIONS AND WARRANTIES


To induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective Credit Extensions to the Borrower thereunder, each Grantor hereby represents and warrants to the Administrative Agent and each Lender that:


3.01 EXISTENCE; QUALIFICATION AND POWER; COMPLIANCE WITH LAWS. Each Grantor (a) is a corporation, partnership or limited liability company duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses,


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authorizations, consents and approvals to (i) own its assets and carry on its business as now being conducted and hereafter proposed to be conducted except where the absence of any such license, authorization, consent or approval would not reasonably be expected to have a Material Adverse Effect and (ii) execute, deliver and perform its obligations under this Agreement, (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license except where the failure to so qualify, be licensed or be in good standing, would not reasonably be expected to have a Material Adverse Effect, and (d) is in compliance with all Laws except where the failure to so comply would not reasonably be expected to have a Material Adverse Effect.


3.02 AUTHORIZATION OF AGREEMENT; NO CONFLICT. The execution, delivery and performance by each Grantor of this Agreement have been dul ...