<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of report (Date of earliest event reported) March 26, 1999
-----------------
Star Gas Partners, L.P.
----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-98490 06-1437793
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2187 Atlantic Street, Stamford, CT 06902
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 328-7300
------------------------------------------------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
Item 1. Change in Control of Registrant
None.
Item 2. Acquisition or Disposition of Assets
On March 26, 1999, Star Gas Partners, L.P. acquired Petroleum Heat and Power
Co. Inc in a four part transaction. Each part of the transaction closed at
the same time. The four principal parts of the transaction are described below.
Acquisition of Petro
On October 22, 1998, Petro, Star Gas Partners, Star Gas Propane L.P. (a
99%-owned subsidiary of Star Gas Partners) and a wholly-owned subsidiary of Star
Gas Propane, executed a merger agreement. The parties entered into an amended
and restated merger agreement on February 3, 1999 to reflect changes in the
transaction. Under the merger agreement, upon the completion of the transaction
on March 26, 1999, the subsidiary was merged with and into Petro, with Petro
surviving the merger as a wholly-owned indirect subsidiary of Star Gas Propane.
As a result of the merger:
. each outstanding share of Petro Class A common stock, par value $0.10
per share, and Petro Class C common stock, par value $0.10 per share,
other than shares that have been exchanged in the Exchange, was
converted into 0.11758 senior subordinated units;
. each outstanding share of Petro junior convertible preferred stock was
converted into 0.13064 common units; and
. each outstanding share of Petro Series C exchangeable preferred stock
due 2009 was converted into the right to receive $10.69 in cash per
share plus accrued and unpaid dividends except for an aggregate of
505,000 shares of Series C preferred stock that were converted into an
aggregate of 400,531 common units.
There are 11,228 shares of Petro Class B common stock, par value $0.10 per
share, representing less than 0.01% of the issued and outstanding shares of
Petro common stock, which remained outstanding following the completion of the
transaction.
The "exchange" occured immediately prior to the merger and was comprised of
the following elements.
(a) Holders of Petro common stock, consisting of Irik P. Sevin, Audrey L.
Sevin, Hanseatic Corp. and Hanseatic Americas Inc., who are referred to as
the "LLC Owners," formed Star Gas LLC, to which they contributed a portion
of their shares of Petro common stock in exchange for all of the limited
liability company interests in Star Gas LLC. Star Gas LLC contributed those
shares to Star Gas Partners in exchange for general partner units. In
addition, the LLC Owners contributed their remaining shares of Petro common
stock to Star Gas Partners in exchange for junior subordinated units.
(b) Other Petro common stockholders who are affiliates of Petro contributed
shares of Petro common stock to Star Gas Partners in exchange for Star Gas
Partners senior subordinated units.
Financings and Refinancings
An integral element of the transaction was the refinancing of Petro's
outstanding debt and preferred stock to substantially reduce Petro's ongoing
borrowing costs. This refinancing was accomplished through several related
transactions, which closed at the same time as the closing of the transaction.
To accomplish this refinancing, Star Gas Partners offered and sold to the
public 8.7 million common units in the equity offering, the net proceeds of
which were approximately $116.1 million. Petro offered and sold, in a private
placement, $90.0 million of senior secured notes, the net proceeds of which were
approximately $87.7 million. Star Gas Partners and Petro Holdings guaranteed the
notes.
All of the net proceeds of the equity offering, together with the $87.7
million of estimated net proceeds from the debt offering and $5.4 million of
Petro's cash were used:
. to redeem $79.5 million of Petro's 12 1/4% Senior Subordinated
Debentures due 2005, $46.1 million of Petro's 10 1/8% Senior
Subordinated Notes due 2003, $68.3 million of Petro's 9 3/8% Senior
Subordinated Debentures due 2006 and the $7.4 million of Petro's 12 7/8%
preferred stock;
<PAGE>
. to repurchase Petro's 1989 preferred stock; and
. to pay for a portion of the expenses of the transaction.
In lieu of a portion of the cash purchase price that would otherwise be due to
the holders of the Petro 12 7/8% preferred stock, Star Gas Partners may in the
future issue an additional 175,000 senior subordinated units.
New General Partner
Since Star Gas Corporation is a wholly-owned subsidiary of Petro and was
acquired as Star Gas Partners' subsidiary in the transaction, it was no longer
able to serve as Star Gas Partners' general partner. Star Gas Partners' new
general partner is Star Gas LLC, which is owned by the LLC Owners. Star Gas
LLC's business activities are limited to those related to being our general
partner. Star Gas LLC does not have a significant net worth except for its
interest in Star Gas Partners.
Amendment of Partnership Agreement
In order to complete the transaction, Star Gas Partners needed to amend its
partnership agreement and Star Gas Propane's partnership agreement in effect
before the transaction. The amendment, among other matters, increased the
minimum quarterly distribution from $0.55 to $0.575 per unit.
Outstanding Star Gas Partners Units
The following table sets forth the approximate number of units outstanding
before and after completion of the transaction. The 325,729 general partner
interests/units represent 324,100 general partner units in Star Gas Partners
and the 0.01% general partner interest in Star Gas Propane. This 0.01% is
deemed to be in unit form solely for purposes of this table.
<TABLE>
<CAPTION>
Before Transaction After Transaction
-------------------- ---------------------
Number Percentage Number Percentage
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Common Units
Existing common units............ 3,858,999 60.5% 3,858,999 23.7%
Issued to Petro junior preferred
stockholders.................... -- -- 102,848 0.6
Issued in this offering and
related refinancings............ -- -- 9,120,547 56.0
--------- ----- ---------- -----
Subtotal....................... 3,858,999 60.5 13,082,394 80.3
Subordinated Units
Existing subordinated units...... 2,396,078 37.5 -- --
Senior subordinated units........ -- -- 2,481,742 15.3
Junior subordinated units........ -- -- 396,558 2.4
--------- ----- ---------- -----
Subtotal....................... 2,396,078 37.5 2,878,300 17.7
General Partner Interests/Units.... 127,655 2.0 325,729 2.0
--------- ----- ---------- -----
Total.......................... 6,382,732 100.0% 16,286,423 100.0%
========= ===== ========== =====
</TABLE>
Relationship of the Parties.
Star Gas Partners' former general partner, Star Gas Corporation, is a wholly-
owned subsidiary of Petro. Petro also owned an aggregate 40.5% equity interest
in Star Gas Partners. Moreover, all of the directors of Petro were also
directors of Star Gas Corporation. As a result, Petro controlled Star Gas
Partners.
In order to protect the interests of the Star Gas Partners common unitholders,
the Star Gas Corporation board appointed a special committee consisting of the
two directors who were not also directors of Petro to negotiate the transaction
on behalf of the Star Gas Partners common unitholders. Independent legal counsel
represented the special committee in the negotiations.
<PAGE>
Item 3. Bankruptcy or Receivership
None.
Item 4. Change in Registrant's Certifying Accountant
None.
Item 5. Other Events
Item 6. Registration of Registrant's Directors
None.
Item 7. Financial Statements and Exhibits
(a) Financial Statement of Business Acquired
The following document is incorporated by reference to the
registrants Form 8-K filed with the Securities and Exchange
Commission on February 18, 1999:
Petroleum Heat and Power Co., Inc. audited consolidated financial
statements as of December 31, 1997 and 1998 and for each of the
years in the three-year period ended December 31, 1998
(b) Pro Forma Financial Information
The following document is incorporated by reference to the
registrants Form S-3 filed with the Securities and Exchange
Commission on April 5, 1999 (No. 333-75701) and is attached hereto
as Exhibit 99.1
Star Gas Partners, L.P. and Subsidiaries, condensed consolidated
pro forma financial information which gives effect to the
acquisition of Petro by Star Gas Partners.
(c) Exhibits
99.1 - Pro forma financial statements
99.2 - Amendment dated March 25, 1999 to the Amended and
Restated Agreement and Plan of Merger dated as of February
3, 1999 attached hereto as Exhibit 99.2.
<PAGE>
Item 8. Changes in Fiscal Year
None.
Item 9. Sales of Equity Securities Pursuant to Regulation S.
None.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the date
indicated:
Signature Title Date
--------- ----- ----
/s/ Irik P. Sevin Chairman of the Board and
- -----------------
Irik P. Sevin Chief Executive Officer April 12, 1999
Star Gas LLC
(Principal Executive,
Financial and
Accounting Officer)
<PAGE>
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
information gives effect to the acquisition of Petro by Star Gas Partners, the
transaction, including the equity offering, the debt offering and the
application of the net proceeds from these offerings. The information presented
is derived from, should be read in conjunction with, and is qualified in its
entirety by, reference to the historical financial statements, and related
notes, appearing elsewhere and incorporated by reference in this prospectus.
The unaudited pro forma condensed consolidated balance sheet was prepared as
if the transaction had occurred on December 31, 1998. The unaudited pro forma
condensed consolidated statement of operations for the twelve months ended
September 30, 1998 was prepared as if the transaction had occurred on October
1, 1997. The unaudited pro forma condensed consolidated statement of operations
for the three months ended December 31, 1998 was prepared as if the transaction
had occurred on October 1, 1998.
The pro forma adjustments are based upon currently available information and
certain estimates and assumptions described below, and therefore, the actual
adjustments may differ from the unaudited pro forma adjustments. However,
management believes that the assumptions provide a reasonable basis for
representing the significant effects of the transaction as contemplated and
that the unaudited pro forma adjustments give appropriate effect to those
assumptions and are properly applied in the unaudited pro forma condensed
consolidated financial information. The unaudited pro forma condensed
consolidated balance sheet and statement of operations are not necessarily
indicative of the financial position or results of operations of Star Gas
Partners if the transaction had actually occurred on the dates indicated above.
Likewise, the unaudited pro forma condensed consolidated financial information
is not necessarily indicative of future financial combined position or future
results of combined operations of Star Gas Partners.
<PAGE>
Star Gas Partners, L.P. and Subsidiaries
Pro Forma Condensed Consolidated Balance Sheet (unaudited)
December 31, 1998
(In thousands)
<TABLE>
<CAPTION>
Star Gas
Star Gas Partners, L.P.
Partners Pro Forma Pro Forma The Adjusted
L.P. Petro Adjustments Combined Offerings Pro Forma
-------- --------- ----------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash.................. $ 5,831 $ 2,004 $ 7,835 $ 87,678 (g) $ 14,266
--------- -------- --------
116,129 (h)
(209,176)(o)
11,800 (o)
Restricted cash....... 4,900 4,900 (4,900)(o)
Accounts receivable... 9,153 56,845 65,998 65,998
Inventories........... 9,898 17,534 27,432 27,432
Prepaid expenses and
other current
assets............... 632 7,023 7,655 7,655
-------- --------- -------- --------- --------
Total current
assets.............. 25,514 88,306 113,820 1,531 115,351
-------- --------- -------- --------- --------
Cash collateral
account.............. 6,900 6,900 (6,900)(o)
Property and
equipment, net....... 109,475 28,124 $ 11,985 (f) 149,584 149,584
Intangible and other
assets, net.......... 50,414 76,201 243,957 (f) 370,572 2,322 (g) 372,894
-------- --------- -------- -------- --------- --------
Total assets......... $185,403 $ 199,531 $255,942 $640,876 $ (3,047) $637,829
======== ========= ======== ======== ========= ========
LIABILITIES AND
PARTNERS' CAPITAL
Current liabilities:
Current debt and
preferred stock...... $ 1,384 $ 12,188 $ 13,572 $ (9,726)(o) $ 3,846
Bank credit facility
borrowings........... 10,720 -- 10,720 10,720
Accounts payable...... 3,608 10,129 13,737 13,737
Unearned service
contract revenue..... 15,430 15,430 15,430
Accrued expenses and
income taxes......... 2,500 31,652 $ 4,600 (d) 42,479 (3,727)(o) 38,752
3,727 (e)
Accrued interest and
dividends............ 2,390 -- 648 (a) 3,038 3,038
Customer credit
balances............. 4,684 27,884 32,568 32,568
-------- --------- -------- -------- --------- --------
Total current
liabilities......... 25,286 97,283 8,975 131,544 (13,453) 118,091
-------- --------- -------- -------- --------- --------
Long-term debt........ 103,616 278,731 (6,499)(b) 375,848 90,000 (g) 277,555
(188,293)(o)
Deferred income
taxes................ -- 40,000 (d) 40,000 40,000
Other long-term
liabilities.......... 53 10,764 (3,500)(d) 7,317 7,317
Redeemable and
exchangeable
preferred stock...... 28,578 (15,750)(b) 12,828 (7,430)(o) --
Partners' capital (5,398)(p)
Common unitholders.... 57,347 1,459 (c) 58,806 116,129 (h) 180,333
5,398 (p)
Subordinated
unitholders.......... (962) 45,509 (f) 13,266 13,266
(31,281)(f)
General partner....... 63 4,347 (f) 1,267 1,267
(3,143)(f)
Petro's stockholders'
deficiency........... (215,825) (648)(a)
22,249 (b)
(1,459)(c)
(41,100)(d)
(3,727)(e)
240,510 (f)
-------- --------- -------- -------- --------- --------
Total partners'
capital.............. 56,448 (215,825) 232,716 73,339 121,527 194,866
-------- --------- -------- -------- --------- --------
Total liabilities and
partners' capital.... $185,403 $ 199,531 $255,942 $640,876 $ (3,047) $637,829
======== ========= ======== ======== ========= ========
</TABLE>
<PAGE>
Star Gas Partners, L.P. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations
(unaudited)
Twelve Months Ended September 30, 1998
(In thousands, except per unit data)
<TABLE>
<CAPTION>
Star Gas
Star Gas Combined Partners, L.P.
Partners, Propane Propane Pro Forma Pro Forma The Adjusted
L.P. Acquisitions(i) Operations Petro(j) Adjustments Combined Offerings Pro Forma
--------- --------------- ---------- -------- ----------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales.................. $111,685 $4,386 $116,071 $452,765 $(2,681)(k) $566,155 $566,155
Costs and expenses:
Cost of sales........ 49,498 1,972 51,470 299,987 (1,985)(k) 349,472 349,472
Operating expenses... 43,281 1,090 44,371 117,849 (669)(k) 161,551 161,551
Restructuring
charges............. 2,085 2,085 2,085
Transaction
expenses............ 1,029 1,029 1,029
Corporate identity
expenses............ 1,100 1,100 1,100
Provision for
supplemental
benefits 409 409 409
Depreciation and
amortization........ 11,462 548 12,010 27,514 (87)(k) 35,431 35,431
(4,006)(l)
Net gain (loss) on
sales of assets..... (271) (271) 11,507 (11,284)(k) (48) -- (48)
-------- ------ -------- -------- ------- -------- -------- --------
Operating income....... 7,173 776 7,949 14,299 (7,218) 15,030 15,030
Interest (income) expense,
net................... 7,927 427 8,354 30,803 39,157 $(16,279)(q) 22,878
Amortization of debt
issuance costs........ 176 -- 176 1,432 -- 1,608 (1,160)(n) 448
-------- ------ -------- -------- ------- -------- -------- --------
Income (loss) before
income taxes.......... (930) 349 (581) (17,936) (7,218) (25,735) 17,439 (8,296)
Income tax expense..... 25 25 475 500 500
--------
Income before equity
interest in Star Gas
Corporation........... (18,411)
Share of income (loss)
of Star Gas
Corporation........... (317) 317 (m) --
-------- ------ -------- -------- ------- -------- -------- --------
Net income (loss)...... $ (955) $ 349 $ (606) $(18,728) $(6,901) $(26,235) $ 17,439 $ (8,796)
======== ====== ======== ======== ======= ======== ======== ========
General partner's
interest in net income
(loss)................ $ (19) $ (176)
======== ========
Limited partners'
interest in net income
(loss)................ $ (936) $ (8,620)
======== ========
Basic and diluted net
income (loss) per
limited partner unit.. $ (0.16) $ (0.54)(r)
======== ========
Weighted average number
of limited partner
units outstanding..... 6,035 220 6,255 103 (c) 6,840 8,720 (h) 15,961 (r)
(2,396)(f) 401 (p)
396 (f)
2,482 (f)
</TABLE>
<PAGE>
Star Gas Partners, L.P. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations
(unaudited)
Three Months Ended December 31, 1998
(In thousands, except per unit data)
<TABLE>
<CAPTION>
Star Gas
Star Gas Partners, L.P.
Partners, Pro Forma Pro Forma The Adjusted
L.P. Petro(j) Adjustments Combined Offerings Pro Forma
--------- -------- ----------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Sales................... $30,237 $116,540 $146,777 $146,777
Costs and expenses:
Cost of sales......... 11,978 74,018 85,996 85,996
Operating expenses.... 11,724 30,123 41,847 41,847
Transaction expenses.. -- 3,794 3,794 3,794
Provision for
supplemental
benefits............. 90 90 90
Depreciation and
amortization......... 3,008 6,166 $ (311)(l) 8,863 8,863
Net gain (loss) on
sales of assets...... (4) (15) (19) (19)
------- -------- ------- -------- ------- --------
Operating income 3,523 2,334 311 6,168 6,168
Interest expense, net... 2,178 7,820 9,998 $(3,904)(q) 6,094
Amortization of debt
issuance costs......... 45 335 380 (268)(n) 112
------- -------- ------- -------- ------- --------
Income (loss) before
income taxes........... 1,300 (5,821) 311 (4,210) 4,172 (38)
------- -------- ------- -------- ------- --------
Income tax expense...... 6 75 81 81
--------
Income before equity
interest in Star Gas
Corporation............ (5,896)
Share of income (loss)
of Star Gas
Corporation............ 770 (770)(m)
------- -------- ------- -------- ------- --------
Net income (loss)....... $ 1,294 $ (5,126) $ (459) $ (4,291) $ 4,172 $ (119)
======= ======== ======= ======== ======= ========
General partner's
interest in net income
(loss)................. $ 26 $ (2)
======= ========
Limited partners'
interest in net income
(loss)................. $ 1,268 $ (117)
======= ========
Basic and diluted net
income (loss) per
limited partner unit... $ 0.20 $ (0.01)
======= ========
Weighted average number
of limited partner
units outstanding...... 6,255 103 (c) 6,840 8,720 (h) 15,961
(2,396)(f) 401 (p)
396 (f)
2,482 (f)
</TABLE>
<PAGE>
Star Gas Partners, L.P. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Information
The following pro forma adjustments give effect to:
(1) the offering of 809,000 common units by Star Gas Partners on
December 16, 1997;
(2) the acquisition of Petro;
(3) the debt offering; and
(4) this offering, as if each transaction had taken place on December
31, 1998, in the case of the pro forma condensed consolidated
balance sheet, or as of October 1, 1997, in the case of the pro
forma condensed consolidated statement of operations for the twelve
months ended September 30, 1998, or as of October 1, 1998, in the
case of the pro forma condensed consolidated statement of
operations for the three months ended December 31, 1998.
The pro forma adjustments are based upon currently available information,
estimates and assumptions and a preliminary determination and allocation of the
total purchase price for Petro and therefore the actual results may differ from
the pro forma results. However, management believes that the assumptions
provide a reasonable basis for presenting the significant effects of the
transactions as contemplated, and that the pro forma adjustments give
appropriate effect to those assumptions and are properly applied in the pro
forma financial information.
Transaction Related Adjustments
(a) Reflects the accrued dividends payable on Petro's 1989 preferred stock
and 12 7/8% preferred stock.
(b) Reflects the negotiated discount of approximately $15.8 million to redeem
Petro's 12 7/8% preferred stock, the negotiated discount of approximately $9.4
million to refinance Petro's public debt and the negotiated premium to
refinance Petro's private debt of approximately $2.9 million.
(c) Reflects the issue of 0.8 million shares of junior preferred stock of
Petro, which was converted into 0.1 million common units upon completion of the
transaction at an assumed value of $14.1875 per unit. The junior preferred
stock was issued to the holders of Petro's 9 3/8% subordinated debentures, 10
1/8% subordinated notes, and 12% subordinated debentures, and 12 7/8% preferred
stock as consideration for consenting to the early redemption of those
securities.
The Transaction (Merger and Exchange)
(d) Represents:
(1) the estimated amount of current federal and state taxes to be
incurred of $4.6 million;
(2) the estimated amount of deferred federal and state income taxes to
be recognized of $40.0 million; and
(3) the elimination of the tax liability associated with the Pearl Gas
conveyance of $3.5 million.
(e) Reflects the estimated additional amount of $3.7 million to be recorded
by Petro for legal, professional and advisory fees incurred by Petro and Star
Gas Partners in the transaction. Total estimated expenses are $8.5 million. As
of September 30, 1998 Petro has recorded $1.1 million in transaction expenses.
For the three months December 31, 1998, Petro has recorded $3.8 million in
transaction expenses.
(f) Represents the exchange of 26.2 million shares of Petro's Class A common
stock and Class C common stock valued at $49.9 million for 2.5 million Star Gas
Partners senior subordinated units valued at $40.2 million, 0.4 million Star
Gas Partners junior subordinated units valued at $5.3 million and 0.3 million
general partner units valued at $4.4 million. The 2.4 million Star Gas Partners
subordinated units outstanding prior to the transaction will be contributed to
Star Gas Partners by Petro. The value assigned to Petro's Class A
<PAGE>
common stock is $45.0 million or $1.91 per share and the value assigned to
Petro's Class C common stock is $4.9 million or $1.91 per share. The method
used to determine the fair market value of Petro's Class A and Class C common
stock was based on an implied unit analysis. The method used to determine the
fair market value of Star Gas Partners' senior subordinated units, junior
subordinated units and general partner units was based on an implied unit
analysis. See page 68 of the joint proxy statement and prospectus of Star Gas
Partners, L.P. and Petroleum Heat and Power Co., Inc. dated February 10, 1999
for a description of the implied unit analysis method.
The table below summarizes the preliminary allocation by Star Gas Partners of
the excess of purchase price over book value related to the acquisition of
Petro. The allocation of the purchase price is based on the results of a
preliminary appraisal of property, plant and equipment, customer lists and the
December 31, 1998 recorded values for tangible assets and liabilities. The
closing date of the transaction was March 26, 1999. This purchase price
allocation will be updated for changes in current assets and liabilities based
on Petro's operating results from January 1, 1999 to March 26, 1999. From
January 1, 1999 to the closing date, it is expected that Petro will generate
net income and positive cash flows and that working capital will increase. As a
result, the amount of goodwill to be recorded on the closing date will
decrease. Subject to Petro's operating results which could be impacted by
weather, among other factors, it is estimated that the increase in working
capital for Petro from January 1, 1999 to the closing date will range between
$35 million to $40 million.
<TABLE>
<S> <C>
The preliminary allocation is as follows: (In thousands)
Consideration given for the exchange of Petro shares........... $ 49,856
Transaction expenses (1)....................................... 8,547
-------------
Total consideration........................................ 58,403
-------------
Fair market value of Petro's assets and liabilities as of
December 31, 1998:
Current assets............................................... (93,126)
Cash collateral account...................................... (6,900)
Property, plant and equipment (2)............................ (40,109)
Value of Petro's investment in Star Gas...................... (34,424)
Current liabilities.......................................... 97,283
Accrued income taxes......................................... 4,600
Accrued preferred dividends.................................. 648
Long-term debt............................................... 272,232
Deferred income taxes........................................ 40,000
Other liabilities............................................ 7,264
Preferred stock.............................................. 12,828
Junior preferred stock....................................... 1,459
-------------
Subtotal................................................... 261,755
-------------
Total value assigned to intangibles and other assets........... 320,158
Carrying amount of intangibles and other assets................ (76,201)
-------------
Allocation of excess purchase price to intangibles............. $ 243,957
=============
Consisting of:
Customer lists............................................... $ 95,000
Goodwill..................................................... 224,193
Other assets................................................. 965
-------------
Total intangibles and other assets......................... $ 320,158
=============
</TABLE>
- --------
(1) Transaction expenses include legal, accounting, investment advisory and
asset appraisal costs.
(2) Includes fair market value adjustment of $12.0 million.
The fair market value for property plant and equipment, excluding real estate,
was established using the cost approach method. The market approach was used in
valuing the real estate. The value assigned to customer
<PAGE>
lists was derived using a discounted cash flow analysis. The cash flows
attributable to the customer lists were discounted back at an equity risk
adjusted cost of capital to the net present value. Any excess was attributable
to goodwill.
The Debt Offering and The Equity Offering
(g) Reflects the net proceeds to Petro of approximately $87.7 million from
the $90.0 million debt offering, net of underwriting discounts and commissions
estimated to be $1.4 million and offering expenses of approximately $0.9
million. These costs are being amortized over the term of the related debt
which is 8.5 years.
(h) Reflects the net proceeds to Star Gas Partners of approximately $116.1
million from the issuance and sale of 8.7 million common units in the equity
offering at an offering price of $14.1875 per common unit, net of underwriting
discounts and commissions of approximately $6.2 million and offering expenses
of approximately $1.4 million.
The Propane Acquisitions
(i) Represents the results of certain propane distributors acquired by Star
Gas Partners in fiscal 1998 from October 1, 1997 to their dates of acquisition.
Results of these distributors from the dates of acquisition to September 30,
1998 are included in Star Gas Partners' twelve months ended September 30, 1998
results adjusted for:
(1) cost savings of $0.3 million, primarily executive compensation and
legal expenses relating to selling shareholders;
(2) additional depreciation and amortization of $0.5 million; and
(3) additional interest expense of $0.4 million.
There were no propane acquisitions completed in the three months ended December
31, 1998.
The Transaction (Acquisition of Petro)
(j) Represents the results of operations of Petro for the twelve months ended
September 30, 1998 or the three months ended December 31, 1998. Estimated
expenses of $8.5 million to be incurred by Petro as a direct result of its
acquisition by Star Gas Partners will be included in Petro's actual statement
of operations. For the twelve months ended September 30, 1998, Petro has
recorded $1.1 million of these expenses. For the three months ended December
31, 1998, Petro has recorded $3.8 million of these expenses.
(k) Adjustment to reflect the disposition of Petro's Hartford, Connecticut
operations in November 1997. Petro received cash proceeds of $15.6 million and
recorded a gain of $11.3 million. The carrying value of these assets at the
time of sale was $4.3 million.
(l) Adjustment to depreciation and amortization expense attributable to the
acquisition of Petro.
<PAGE>
Star Gas Partners believes that the amortization periods assigned to the
assets below are appropriate. However, if the final amortization periods
assigned to the tangible and intangible assets were of shorter duration, the
amount of depreciation and amortization would increase and reduce net income.
For the twelve months ended September 30, 1998, the following table summarizes
the effect on depreciation and amortization of the acquisition of Petro.
<TABLE>
<CAPTION>
Net Book Value Amount per
Petro's Financials Amount per Appraisal Difference
--------------------------------------- --------------------------------------- ------------
Property and equipment, net Asset(1) Life Depreciation(2) Asset(1) Life Depreciation(2) Depreciation
- --------------------------- -------- -------------- --------------- -------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Land................ $ 2,092 $ -- $ 3,300 $ -- $ --
Buildings........... 4,788 20-45 years 419 4,300 30 years 143 (276)
Fleet............... 5,908 5 to 7 years 2,866 12,800 6 years 2,135 (731)
Leasehold........... 4,270 term of leases 562 5,900 term of leases 457 (105)
Computer, furniture
and fixtures....... 7,377 5 to 7 years 2,491 9,700 5 to 7 years 1,661 (830)
Service & other
equipment.......... 3,689 5 to 13 years 692 4,109 5 to 13 years 557 (135)
------- ------- -------- ------- -------
Total property and
equipment.......... $28,124 $ 7,030 $ 40,109 $ 4,953 $(2,077)
======= ======= ======== ======= =======
<CAPTION>
Intangible and other assets, net Asset(1) Life Amortization(2) Asset(1) Life Amortization(2) Amortization
- -------------------------------- -------- -------------- --------------- -------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Customer list....... $52,596 6.5 years $17,364 $ 95,000 10 years $ 9,500 $(7,864)
Goodwill............ 9,013 25 years 1,129 224,193 25 years 8,968 7,839
Covenants not to
compete............ 2,855 5 to 7 years 1,904 -- -- (1,904)
Other assets........ 965 -- 965 -- --
------- ------- -------- ------- -------
Total intangible and
other assets....... $65,429 $20,397 $320,158 $18,468 $(1,929)
======= ------- ======== ------- -------
Totals.............. $27,427 $23,421 $(4,006)
======= ======= =======
</TABLE>
- -------
(1) As of December 31, 1998.
(2) For the twelve months ended September 30, 1998.
Petro's property, plant and equipment is being depreciated using a historical
cost which is approximately $80 million. The fair market value of these assets
is $40.1 million. When depreciation expense is calculated based on the fair
market value, this expense is $2.1 million lower than historical depreciation.
Pro forma depreciation is less than historical depreciation due to decline in
the asset base being depreciated and an extension of the useful lives of those
assets. The remaining lives assigned to property, plant and equipment were
determined by an independent appraisal firm. All property, plant and equipment
is depreciated using the straight-line method.
Pro forma customer list amortization is less than historical amortization due
to a longer life and a lower amortization asset. The original cost used to
amortize historical customer list was approximately $120 million. The longer
life represents Petro's improved retention rate as well as the retention of
customers obtained through internal marketing, which have a higher retention
rate than for customers acquired through acquisition. Petro's previous
acquisitions represented the acquisition of customers. The acquisition of Petro
by Star Gas Partners is an acquisition of an on-going business. The appraisal
assigned a greater allocation to goodwill than what was previously allocated by
Petro in their purchase of a 188 relatively small fuel oil dealers. This
resulted in approximately $7.8 million of additional amortization, largely
offsetting the $7.9 million of less customer list amortization. Restrictive
covenants were not assigned a value under the pro forma intangibles due to the
minimal amount of the asset value expected at closing. Intangibles are
amortized on a straight-line basis.
<PAGE>
For the three months ended December 31, 1998, the following table summarizes
the effect on depreciation and amortization of the acquisition of Petro.
<TABLE>
<CAPTION>
Net Book Value Amount per
Petro's Financials Amount per Appraisal Difference
--------------------------------------- --------------------------------------- ------------
Property and equipment, net Asset(1) Life Depreciation(2) Asset(1) Life Depreciation(2) Depreciation
- --------------------------- -------- -------------- --------------- -------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Land................ $ 2,092 $ -- $ 3,300 $ -- $ --
Buildings........... 4,788 20-45 years 76 4,300 30 years 36 (40)
Fleet............... 5,908 5 to 7 years 676 12,800 6 years 534 (142)
Leasehold........... 4,270 term of leases 148 5,900 term of leases 114 (34)
Computer, furniture
and fixtures....... 7,377 5 to 7 years 655 9,700 5 to 7 years 415 (240)
Service & other
equipment.......... 3,689 5 to 13 years 219 4,109 5 to 13 years 139 (80)
------- ------ -------- ------ -------
Total property and
equipment.......... $28,124 $1,774 $ 40,109 $1,238 $ (536)
======= ====== ======== ====== =======
<CAPTION>
Intangible and other assets, net Asset(1) Life Amortization(2) Asset(1) Life Amortization(2) Amortization
- -------------------------------- -------- -------------- --------------- -------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Customer list....... $52,596 6.5 years $3,703 $ 95,000 10 years $2,375 $(1,328)
Goodwill............ 9,013 25 years 248 224,193 25 years 2,242 1,994
Covenants not to
compete............ 2,855 5 to 7 years 441 -- -- (441)
Other assets........ 965 -- 965 -- --
------- ------ -------- ------ -------
Total intangible and
other assets....... $65,429 $4,392 $320,158 $4,617 $ 225
======= ------ ======== ------ -------
Totals.............. $6,166 $5,855 $ (311)
====== ====== =======
</TABLE>
- -------
(1) As of December 31, 1998.
(2) For the three months ended December 31, 1998.
(m) Reflects the elimination of Petro's equity interest in Star Gas Partners.
The Offerings
(n) Reflects the net adjustment for the twelve months ended September 30,
1998 to amortization of debt issuance costs of $1.2 million attributable to the
debt offering and the acquisition of Petro. Amortization of debt issuance costs
is decreased by $1.4 million relating to the repayment of Petro debt and is
increased by $0.3 million relating to the 7.92% notes. For the three months
ended December 31, 1998, amortization of debt issuance costs is decreased by
$0.3 million relating to the repayment of Petro debt and is increased by $0.1
million relating to the 7.92% notes.
(o) Reflects the use of the net proceeds from the equity offering and, the
debt offering to repay $79.5 million of Petro's 12 1/4% Senior Subordinated
Debentures due 2005 to repay $46.1 million of Petro's 10 1/8% Senior
Subordinated Notes due 2003, to repay $68.3 million of Petro's 9 3/8% Senior
Subordinated Debentures due 2006, to retire $7.4 million of Petro's 12 7/8%
Exchangeable Preferred Stock, to retire $4.2 million of Petro's 14.33%
Exchangeable Preferred Stock and to pay $3.7 million of transaction expenses.
As of December 31, 1998 Petro had paid $4.9 million in transaction expenses. As
a result of the transaction, both Petro's current and long-term restricted cash
balances become available for general business purposes. In addition, Petro has
entered into private debt agreements with the private noteholders of:
(i) its outstanding senior notes in the aggregate principal amount
of $60 million; and
(ii) its Petro private debt in the aggregate principal amount of
$4.1 million (after payment of the January 1999 installment).
Under the private debt agreements at the effective time of the transaction:
(i) the holders of the senior notes exchanged those notes for $62.7
million aggregate principal amount of new 9% notes; and
<PAGE>
(ii) the holders of the 14.1% notes exchanged those notes for
$4.2 million aggregate principal amount of 10 1/4% notes.
The new private notes have been guaranteed by Star Gas
Partners and Petro Holdings.
(p) Reflects the exchange of $5.4 million of Petro's 12 7/8% exchangeable
preferred stock for 0.4 million common units in lieu of cash.
(q) Reflects the net reduction to interest expense of $16.3 million for
the twelve months ended September 30, 1998. This amount reflects $7.1 million
of additional interest expense annually on the $90.0 million in principal
amount of the notes at an interest rate of 7.92%. This amount also reflects an
annual reduction in interest expense of $21.9 million due to the repayment of
$203.2 million of Petro public debt, excluding negotiated discounts, with the
proceeds of this offering and the debt offering and a reduction in the interest
rate attributable to the private debt agreements described above. In addition
interest expense is reduced by $0.3 million, as $5.4 million of Petro's cash is
used to finance the transaction.
The following table summarizes the effect on interest expense of the
transaction for the twelve months ended September 30, 1998:
<TABLE>
<CAPTION>
Interest Interest
Amount Rate Expense
------- -------- --------
<S> <C> <C> <C>
Debt Repaid or Modified
Petro 12 1/4% senior subordinated debentures(1).... $80,155 12.25% $ 9,819
Petro 10 1/8% senior subordinated notes............ 48,739 10.125% 4,934
Petro 9 3/8% senior subordinated debentures........ 74,334 9.375% 6,968
Petro 11.96% notes(2).............................. 60,000 11.96% 7,176
Petro 14.10% notes(2).............................. 6,884 14.10% 971
Lower letter of credit fees on acquisition notes... 191
-------
Total reductions to interest expense............. $30,059
<CAPTION>
Interest
Amount Rate
------- --------
<S> <C> <C> <C>
New Debt Issued and Cash Balance Reduction
Petro 7.92% notes.................................. $90,000 7.92% $(7,128)
Petro 9.0% senior notes(2)......................... 62,697 9.0% (5,643)
Petro 10.25% senior and subordinated notes(2)...... 7,064 10.25% (724)
Lower invested cash balances....................... 5,369 5.31% (285)
-------
Net reduction to interest expense.................. $16,279
=======
</TABLE>
- --------
(1) Excludes prepayment premium of $2.8 million.
(2) Notes exchanged under the private debt agreement.
<PAGE>
The following table summarizes the effect on interest expense of the
transaction for the three months ended December 31, 1998:
<TABLE>
<CAPTION>
Interest Interest
Amount Rate Expense
------- -------- --------
<S> <C> <C> <C>
Debt Repaid or Modified
Petro 12 1/4% senior subordinated debentures(1).... $80,155 12.25% $ 2,455
Petro 10 1/8% senior subordinated notes............ 48,739 10.125% 1,234
Petro 9 3/8% senior subordinated debentures........ 74,334 9.375% 1,742
Petro 10.90% notes(2).............................. 60,000 10.90% 1,635
Petro 14.10% notes(2).............................. 6,200 14.10% 219
Lower letter of credit fees on acquisition notes... 48
-------
Total reductions to interest expense............. $ 7,333
<CAPTION>
Interest
Amount Rate
------- --------
<S> <C> <C> <C>
New Debt Issued and Cash Balance Reduction
Petro 7.92% notes.................................. $90,000 7.92% $(1,783)
Petro 9.0% senior notes(2)......................... 62,697 9.0% (1,412)
Petro 10.25% senior and subordinated notes(2)...... 6,380 10.25% (163)
Lower invested cash balances....................... 5,369 5.31% (71)
-------
Net reduction to interest expense.................. $ 3,904
=======
</TABLE>
- --------
(1) Excludes prepayment premium of $2.8 million.
(2) Notes exchanged under the private debt agreement.
(r) The partnership agreement provides that for each non-overlapping four
quarter period that occurs after the first anniversary of the transaction, but
before the fifth anniversary of the transaction, in which the dollar amount of
Petro Adjusted Operating Surplus per Petro Unit equals or exceeds $2.90. Star
Gas Partners will issue 303,000 senior subordinated units, pro rata, or 303,000
Class B common units, pro rata, if such issuance occurs after the end of the
subordination period. These additional senior subordinated units will be issued
to the current holders of the senior subordinated units, junior subordinated
units and the general partner units. Star Gas Partners may not issue more than
an aggregate of 909,000 senior subordinated units or Class B common units under
this provision. In addition, Star Gas Partners has agreed to issue to the
holders of Petro's 12 7/8% exchangeable preferred stock 175,000 senior
subordinated units contingent upon Star Gas Partners earning $2.40 per unit in
distributable cash flow over four consecutive quarters during this period
commencing on January 1, 2000 and ending on December 31, 2002. The issuance of
these senior subordinated units will not generate any additional proceeds to
Star Gas Partners. When these units are issued, an additional amount of
goodwill will be recorded. Assuming 303,000 senior subordinated units are
issued, the amount of goodwill to be recorded will be $4.9 million. As a
result, annual amortization expense would increase by $0.2 million and would
decrease net income per limited partner unit by $0.01 per unit. If these senior
subordinated units are issued and they are converted into Class B common units,
the Class A common units would be diluted in terms of available cash to be used
for payment of the quarterly distributions.
<PAGE>
Exhibit 99.2
AMENDMENT dated March 25, 1999 to the Amended and Restated Agreement
and Plan of Merger dated as of February 3, 1999, ("Agreement and Plan of
Merger") by and among PETROLEUM HEAT AND POWER CO., INC., a Minnesota
corporation ("Petro"), STAR GAS PARTNERS, L.P., a Delaware limited partnership
("Star Partners"), STAR GAS PROPANE, L.P., a Delaware limited partnership ("Star
Propane"), and PETRO/MERGCO, INC., a Minnesota corporation ("Mergco") and an
indirect, wholly owned subsidiary of Star Partners.
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, the parties hereto have entered into the Amended and Restated
Agreement and Plan of Merger; and
WHEREAS, Section 9.2 of the Amended and Restated Agreement and Plan of
Merger provides that it may be amended by an agreement in writing between the
parties approved by their respective Boards of Directors (and in the case of
Star Partners, by the Special Committee); and
WHEREAS, the Board of Directors of each of the parties to the
Agreement and Plan of Merger and the Special Committee has approved the
amendments to the Amended and Restated Agreement and Plan of Merger as set forth
below.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein and intending to be
legally bound hereby the parties agree as follows:
1. Article I entitled "Certain Definitions" is hereby amended as follows:
(a) The definition of "Restructuring Transactions" is hereby deleted
in its entirety and the following inserted in lieu thereof:
"Restructuring Transactions" shall mean the following, collectively:
1. the sale of certain assets (the "Transferred Assets") by Petro or
Subsidiaries of Petro to Star Propane in exchange for a note (the
"Bridge Note"), as contemplated by the Petro Conveyance Agreement;
2. the sale by the General Partner to Petro of its general partner
interests in Star Partners and Star Propane and its 2,396,078 Old
Subordinated Units and its 60,727 Common Units in exchange for a note
in principal amount of equivalent value;
3. the assignment by Petro to Star Partners of all of its general partner
interest in Star Propane (other than a portion of such interest with a
value of $1,000), all of its general partner interest in Star Partners
(other than a portion of such interest with a value of $1,000) and its
2,396,078 Old Subordinated Units in exchange for 102,848 newly issued
Common Units, 1,706,246 newly issued Senior Subordinated Units and a
promissory note in an amount equal to the excess of the value of the
Old Subordinated Units and general partner interests assigned to Star
Partners over the value of the Common Units and Senior Subordinated
Units issued in exchange therefor;
4. the contribution by certain Petro Insiders of 2,274,961 shares of
Class A and Class C Common Stock (the "Insider Stock") to a newly
formed Delaware limited liability company ("Star Gas LLC") in exchange
for all the member
<PAGE>
interests in Star Gas LLC as contemplated in the Exchange Agreement,
the formation certificate and operating agreement to be subject in
form and substance to the approval of the Special Committee;
5. the contribution by Star Gas LLC of 11,370 shares of Class A and Class
C Common Stock to Star Propane in exchange for a .01% general partner
interest in Star Propane as contemplated by the Star LLC Conveyance
Agreement;
6. the contribution by Star Gas LLC of 2,263,591 shares of Class A and
Class C Common Stock to Star Partners, in exchange for a 1.99% general
partner interest, in Star Partners (represented by 324,101 General
Partner Units, subject to adjustment as provided below) as
contemplated by the Star LLC Conveyance Agreement;
7. the contribution by certain Petro Insiders to Star Partners of
3,035,152 shares of Class A and Class C Common Stock in exchange for
434,573 Junior Subordinated Units and 6,630,793 shares of Class A and
Class C Common Stock in exchange for 779,645 Senior Subordinated
Units, as contemplated in the Exchange Agreement;
8. the contribution by Star Partners of the Petro Common Stock owned by
it to Star Propane;
9. the contribution by Star Propane to Parentco of the Transferred
Assets, the stock of Petro and the stock of Stellar Propane Corp. in
exchange for all the capital stock of Parentco and the assumption by
Parentco of $85 million of Star Propane's 8.04% First Mortgage Notes
and $11 million of Star Propane's 7.17% First Mortgage Notes;
10. the contribution by Parentco of the Petro Common Stock and the
Transferred Assets owned by it to Newco free of any liability with
respect to the outstanding First Mortgage Notes of Star Partners; and
11. the contribution by Newco of the Petro Common Stock owned by it to
Mergeco.
The number of General Partner Units and the number of Junior
Subordinated Units and the number of shares of Petro Common Stock to
be transferred for each shall be changed, if necessary, so that the
number of General Partners Units (including the .01% general partner
interest in Star Propane) to be outstanding following the Merger and
the Equity Offering will be equal to 2% of the total partnership units
outstanding and the total number of General Partner Units and Junior
Subordinated Units will equal 760,302.
(b) "Petro Insiders" is hereby deleted in its entirety and the
following is inserted in lieu thereof:
"Petro Insiders" shall mean Irik P. Sevin, Audrey L. Sevin, Phillip
Ean Cohen, Thomas J. Edelman, Richard O'Connell, Brentwood Corp.,
Gabes S.A., Minneford Corp., Fernando Montero, M.M. Warburg & Co.,
Hanseatic Corp., Hanseatic Americas LDC, Barcel Corp., Hubertus
Langen, Tortosa GmbH and United Capital Corp.
(c) "Working Capital" is hereby amended by adding the following
sentence at the end:
"Notwithstanding the foregoing, Petro's Working Capital as of February
28, 1999 shall be deemed to be increased by $1,932,981 in excess of
the amount of its actual Working Capital on such date as calculated
pursuant to the preceding sentence."
<PAGE>
2. Article III entitled "Merger Consideration; Exchange Provisions"
is hereby amended by adding the following subparagraph as subparagraph 3.1 (g):
"(g) Each share of Private Preferred Stock, outstanding
immediately prior to the Effective Time, shall be unchanged and shall
remain outstanding with the same relative rights, preferences and
privileges which it had immediately prior to the Effective Time and
will be redeemed at Closing pursuant to the 1989 Preferred Stock
Conditions."
3. Article VI entitled "Covenants" is hereby amended by adding the
following Section as Section 6.17:
"6.17 Contingent Issuance of Additional Senior Subordinated units.
-----------------------------------------------------------
(a) Star Gas agrees in connection with the satisfaction of the Public
Debt Conditions, the Private Debt Conditions and any agreement by the
Public Preferred Stock to receive less than the amount provided in
Section 3.1(e) hereof in the Merger, in the event that the over-
allotment option in the Equity Offering shall not exceed 1,090,002
Common Units, then under the circumstances listed below it will agree
to issue to such holders of Public Preferred Stock and holders of the
debt described in the Public Debt Conditions and the private Debt
Conditions as Petro shall designate as an inducement for a reduction
in the redemption (or conversion) price of such securities, the right
to receive up to the additional number of Senior Subordinated Units
set forth below, but only if the condition set forth in Section
6.17(b) is satisfied and the Closing is consummated:
<TABLE>
<CAPTION>
============================================================================
Maximum Number of
Public Offering Price Contingent Senior
Per Common Unit Subordinated Units
- --------------- ------------------
- ----------------------------------------------------------------------------
<S> <C>
- ----------------------------------------------------------------------------
More than $16 1/2 0
- ----------------------------------------------------------------------------
$16 1/2 4,000
- ----------------------------------------------------------------------------
$16 7/16 22,000
- ----------------------------------------------------------------------------
$16 3/8 40,000
- ----------------------------------------------------------------------------
$16 5/16 59,000
- ----------------------------------------------------------------------------
$16 1/4 77,000
- ----------------------------------------------------------------------------
$16 3/16 95,000
- ----------------------------------------------------------------------------
$16 1/8 114,000
- ----------------------------------------------------------------------------
$16 1/16 132,000
- ----------------------------------------------------------------------------
$16 151,000
- ----------------------------------------------------------------------------
$15 15/16 169,000
- ----------------------------------------------------------------------------
$15 7/8 or less 175,000
============================================================================
</TABLE>
(b) The contingent Senior Subordinated Units described in
Section 6.17(a) shall be issued to the persons entitled thereto only in the
event that Star Partners shall have Adjusted Operating Surplus (as defined in
the Partnership Agreement) of $2.40 or more per outstanding unit for at least
one consecutive four calendar quarter period during the period beginning on
January 1, 2000 and ending December 31, 2002.
<PAGE>
(c) If contingent Senior Subordinated Units are issued, Star
Partners will enter into a registration rights agreement with the holders
containing customary terms agreeing to file a registration statement and keep it
generally effective until the holders are free to sell under Rule 144.
4. Article IX, Sections 9.2, 9.3, 9.4, 9.7 and 9.9 of the Plan and
Agreement of Merger are incorporated herein by reference.
5. Except as expressly set forth herein, this Agreement is not
intended to amend or modify the Agreement and Plan of Merger in any respect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
PETROLEUM HEAT AND POWER CO., INC.
By:______________________________
Name: William G. Powers, Jr.
Title: President
STAR GAS PARTNERS, L.P.
By: Star Gas Corporation
By:______________________________
Name: Joseph P. Cavanaugh
Title: President
STAR GAS PROPANE, LP
By: Star Gas Corporation
By:______________________________
Name: Joseph P. Cavanaugh
Title: President
PETRO/MERGCO, INC.
By:______________________________
Name: William G. Powers, Jr.
Title: President
