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) December 20, 1995
Petroleum Heat and Power Co., Inc.
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(Exact name of registrant as specified in its charter)
Minnesota 2-88526 06-1183025
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2187 Atlantic Street, Stamford, CT 06902
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 325-5400
---------
Not Applicable
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(Former name or former address, if changed since last report.)
<PAGE>
Item 2. Acquisition or Disposition of Assets
------------------------------------
On December 20, 1995, Petroleum Heat and Power Co.,
Inc., a Minnesota corporation ("Petro") conveyed all of its
propane assets and related liabilities to its wholly-owned
subsidiary, Star Gas Corporation, a Delaware corporation ("Star
Gas" or the "General Partner").
Concurrently therewith, the General Partner issued
$85.0 million in first mortgage notes (the "First Mortgage
Notes") to certain institutional investors. The First Mortgage
Notes bear interest at the rate of 8.04% per annum, mature in
2009 and require semiannual prepayments, without premium, of the
principal thereof commencing in 2001.
The General Partner and its subsidiaries then conveyed
substantially all of their assets (other than $83.7 million in
cash from the proceeds of the First Mortgage Notes and certain
non-operating assets) to Star Gas Propane, L.P., a Delaware
limited partnership (the "Operating Partnership") (the "Star Gas
Conveyance") in exchange for general and limited partner
interests in the Operating Partnership and the assumption by the
Operating Partnership of substantially all of the liabilities of
the General Partner (excluding certain income tax liabilities and
certain other long-term obligations of the General Partner that
were assumed by Petro), including the First Mortgage Notes and
approximately $51.0 million in outstanding indebtedness of the
General Partner to Petro (the "Intercompany Debt").
The Intercompany Debt has a weighted average interest
rate of 10.4%. Of the $83.7 million in cash retained by the
General Partner, $35.0 million was paid to Petro in satisfaction
of certain additional indebtedness, $8.6 million was paid in
redemption of certain preferred stock of the General Partner held
by Petro, $12.0 million was loaned to Petro (at an annual rate of
11.0%) and $6.0 million has been retained to be available to fund
the General Partner's Additional Capital Contribution Obligation
(as defined below). The remaining $22.1 million was paid as
dividends to Petro (of which $4.9 million was previously declared
and payable).
Immediately after the Star Gas Conveyance, the General
Partner and its subsidiaries conveyed their respective limited
partner interests in the Operating Partnership to Star Gas
Partners, L.P., a Delaware limited partnership (the
"Partnership") in exchange for an aggregate of 2,396,078
Subordinated Units of limited partner interest in the
Partnership. The General Partner owns an aggregate 2% combined
general partner interest in the Partnership and the Operating
Partnership and (together with its subsidiaries) a 47.0% limited
partner interest in the Partnership (approximately 43.6% if an
underwriters' over-allotment option is exercised in full).
Concurrently with the closing of the Star Gas
Conveyance, the Partnership completed an initial public offering
(the "Offering") of 2,600,000 common units (the "Common Units")
of limited partner interest at an initial public offering price
of $22.00 per unit.
The Partnership contributed the net proceeds from the
sale of the Common Units (which was approximately $51.0 million)
to the Operating Partnership, which used such proceeds to repay
to Petro all of the Intercompany Debt assumed by the Operating
Partnership in the Star Gas Conveyance.
2
<PAGE>
In order that the Partnership will commence operations
with net working capital of $6.2 million, the amount of the
Intercompany Debt will be adjusted upwards or downwards to the
extent that the net working capital of Star Gas and its
subsidiaries exceeds or is less than $6.2 million as of December
20, 1995.
In connection with the Offering, the General Partner
agreed, subject to certain limitations, to make up to $6.0
million of additional capital contributions (the "Additional
Capital Contributions Obligation") to the Partnership to enhance
the ability of the Partnership to make the minimum quarterly
distributions on the Common Units. Such funds were obtained by
the General Partner from the proceeds of the First Mortgage
Notes.
The assets which were conveyed to the Operating
Partnership in connection with the Star Gas Conveyance
constituted approximately 41.4% of Petro's consolidated assets
and produced 17.8% of Petro's consolidated revenues as of and for
the nine months ended September 30, 1995.
Item 7. Financial Statements and Exhibits
(a) Not Applicable
(b) See the Pro Forma Financial Information attached
hereto as Appendix A
(c) (i) Conveyance and Contribution
Agreement between Petro and Star Gas
(ii) Conveyance and Contribution
Agreement among Star Gas, its subsidiaries,
the Partnership and the Operating
Partnership.
Item 8. Changes in fiscal year
----------------------
None
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
PETROLEUM HEAT AND POWER CO., INC.
(Registrant)
By: Irik P. Sevin
---------------------------------
Name: Irik P. Sevin
Title: President, Chairman of the
Board, Chief Financial and
Accounting Officer and Director
4
<PAGE>
<TABLE><CAPTION>
Appendix A
Petroleum Heat and Power Co., Inc. and Subsidiaries
Pro Forma Condensed Balance Sheet (Unaudited)
September 30, 1995
(In thousands)
Pro Forma
Petroleum Petroleum
Heat and Pro Heat and
Power Forma Power
ASSETS Co., Inc. Adjustments Co., Inc.
------------- ------------- -------------
<S> <C> <C> <C>
Current assets:
Cash $ 16,240 $ 77,687 (A) $ 71,684
(727)(B)
51,046 (C)
(72,562)(D)
Restricted cash - 6,000 (A) 6,000
Accounts receivable 50,996 (6,436)(B) 44,560
Inventories 22,720 (6,154)(B) 16,566
Other current assets 11,983 (949)(B) 11,034
------------- ------------- -------------
Total current assets 101,939 47,905 149,844
------------- ------------- -------------
Property, plant and equipment - net 128,226 (98,687)(B) 29,539
Intangibles - net 142,898 1,313 (A) 98,808
(43,753)(B)
(1,650)(D)
Other assets 2,028 - 2,028
Investment in Star Gas Partnership - 62,954 (B) 11,908
(51,046)(C)
------------- ------------- -------------
$ 375,091 $ (82,964) $ 292,127
------------- ------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of preferred stock and
long-term debt $ 7,287 $ - $ 7,287
Accounts payable 10,484 (2,824)(B) 7,660
Customer credit balances 34,132 (3,305)(B) 30,827
Unearned service contract revenue 13,978 - 13,978
Accrued expenses 28,317 (2,303)(B) 26,014
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Total current liabilities 94,198 (8,432) 85,766
------------- ------------- -------------
Long-term debt and notes payable 77,252 85,000 (A) 53,252
(85,000)(B)
(24,000)(D)
Supplemental benefits payable and other liabilities 1,966 (320)(B) 1,646
Pension plan obligation 9,010 - 9,010
Subordinated notes payable 285,200 (43,750)(D) 241,450
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Total liabilities 467,626 (76,502) 391,124
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Cumulative redeemable exchangeable preferred stock 12,500 - 12,500
Common stock redeemable at option of stockholder 1,280 - 1,280
Note receivable from stockholder (1,280) - (1,280)
Stockholders' equity (deficiency) (105,035) (6,462)(D) (111,497)
------------- ------------- -------------
$ 375,091 $ (82,964) $ 292,127
------------- ------------- -------------
</TABLE>
P - 1
SEE NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS.
<PAGE>
<TABLE><CAPTION>
Petroleum Heat and Power Co., Inc. and Subsidiaries
Pro Forma Condensed Statement of Operations (Unaudited)
for the Year-Ended December 31, 1994
(In thousands, except per share amounts)
Pro Forma
Petroleum Petroleum
Heat and (E) Pro Heat and
Power Star Gas Forma Power
Co., Inc. Conveyance Adjustments Co., Inc.
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 546,677 $ (18,520) $ - $ 528,157
Cost of sales 362,981 (8,305) 354,676
--------- ---------- ----------- ---------
Gross profit 183,696 (10,215) - 173,481
Operating expenses 128,310 (6,042) 122,268
Amortization of customer lists and
deferred charges 25,925 (877) 25,048
Depreciation and amortization of
plant and equipment 6,469 (1,230) 5,239
Provision for supplemental benefits 373 - 373
--------- ---------- ----------- ---------
Operating income 22,619 (2,066) - 20,553
Interest expense-net (23,766) 634 (10,451)(F) (22,765)
10,818 (G)
Other income (expense) 110 - 110
Income (loss) before income taxes,
--------- ---------- ----------- ---------
equity interest and extraordinary item (1,037) (1,432) 367 (2,102)
Income taxes 600 (150) 450
Income (loss) before equity interest
--------- ---------- ----------- ---------
and extraordinary item (1,637) (1,282) 367 (2,552)
Share of income (loss) of the Partnership (1,973) - 282 (H) (1,691)
--------- ---------- ----------- ---------
Income (loss) before extraordinary item $ (3,610) $ (1,282) $ 649 $ (4,243)
--------- ---------- ----------- ---------
Income (loss) before extraordinary item per common share:
Class A Common Stock $ -0.34 $ -0.37
Class B Common Stock 1.10 1.10
Class C Common Stock -0.34 -0.37
Cash dividends declared per Common Stock:
Class A Common Stock $ 0.55 $ 0.55
Class B Common Stock 1.10 1.10
Class C Common Stock 0.55 0.55
Weighted average number of common shares:
Class A Common Stock 19,195 19,195
Class B Common Stock 152 152
Class C Common Stock 2,550 2,550
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS.
P - 2
<PAGE>
<TABLE><CAPTION>
Petroleum Heat and Power Co., Inc. and Subsidiaries
Pro Forma Condensed Statement of Operations (Unaudited)
for the Nine Months Ended September 30, 1995
(In thousands, except per share amounts)
Pro Forma
Petroleum Petroleum
Heat and (E) Pro Heat and
Power Star Gas Forma Power
Co., Inc. Conveyance Adjustments Co., Inc.
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 404,917 $ (71,892) $ - $ 333,025
Cost of sales 256,342 (33,341) 223,001
------------- ------------- ------------- -------------
Gross profit 148,575 (38,551) - 110,024
Operating expenses 118,638 (29,993) 88,645
Amortization of customer lists and
Deferred charges 20,198 (2,446) 17,752
Depreciation and amortization of
plant and equipment 9,003 (4,719) 4,284
Provision for supplemental benefits 1,039 - 1,039
------------- ------------- ------------- -------------
Operating income (loss) (303) (1,393) - (1,696)
Interest expense-net (28,451) 966 (1,161)(F) (20,532)
8,114 (G)
Other income (expense) 743 - 743
Income (loss) before income taxes,
------------- ------------- ------------- -------------
equity interest and extraordinary item (28,011) (427) 6,953 (21,485)
Income taxes 300 (100) 200
Income (loss) before equity interest
------------- ------------- ------------- -------------
and extraordinary item (28,311) (327) 6,953 (21,685)
Share of income (loss) of the Partnership - - (3,320)(H) (3,320)
------------- ------------- ------------- -------------
Income (loss) before extraordinary item $ (28,311) $ (327) $ 3,633 $ (25,005)
------------- ------------- ------------- -------------
Income (loss) before extraordinary item per common share:
Class A Common Stock $ (1.25) $ (1.11)
Class B Common Stock - -
Class C Common Stock (1.25) (1.11)
Cash dividends declared per Common Stock:
Class A Common Stock $ 0.45 $ 0.45
Class B Common Stock - -
Class C Common Stock 0.45 0.45
Weighted average number of common shares:
Class A Common Stock 22,656 22,656
Class B Common Stock 16 16
Class C Common Stock 2,598 2,598
</TABLE>
SEE NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS.
P - 3
<PAGE>
Petroleum Heat and Power Co., Inc. and Subsidiaries
Notes to Pro Forma Condensed Financial Statements
(In thousands)
The Pro Forma Statement of Operations for the year ended December 31, 1994
is derived from the Company's audited consolidated financial statements for
the year ended December 31, 1994. The Pro Forma Balance Sheet and
Statement of Operations as of and for the nine months ended September 30,
1995 are derived from the unaudited financial statements of the Company at
and for the nine months ended September 30, 1995, which include all
adjustments (consisting of only normal recurring adjustments) that, in the
opinion of management, are necessary for a fair presentation of such data.
The pro forma adjustments are based upon currently available information
and certain estimates and assumptions, and therefore the actual results may
differ from the pro forma results. The Pro Forma Financial Statements do
not purport to represent what the Company's financial position or results
of operations would have been if the events described therein had occurred
on September 30, 1995 in the case of the Pro Forma Balance Sheet, or as of
January 1, 1994, in the case of the Pro Forma Statements of Operations for
the year-ended December 31, 1994 and for the nine months ended September
30, 1995, nor are they intended to project the Company's financial position
or results of operations for any future period. However, management
believes that the assumptions provide a reasonable basis for presenting the
significant effects of the transaction and that the pro forma adjustments
give appropriate effect to those assumptions as if they occurred on
September 30, 1995, in the case of the Pro Forma Balance Sheet, or as of
January 1, 1994 in the case of the Pro Forma Statements of Operations for
the year-ended December 31, 1994 and the nine months ended September 30,
1995 and are properly applied in the pro forma financial information. The
Pro Forma Financial Statements should be read in conjunction with the
Consolidated Financial Statements, and the Notes thereto, which were filed
as part of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 and Quarterly Report on Form 10-Q for the nine
months ended September 30, 1994 and 1995.
(A) Reflects the $85,000 First Mortgage Notes issued by the General
Partner, net of $1,313 of issuance costs.
(B) Reflects the Star Gas Conveyance including the $85,000 First Mortgage
Notes assumed by the Operating Partnership, in exchange for general and
limited partner interests in the Operating Partnership.
(C) Reflects the net proceeds from the 2,600 Common Units issued by the
Partnership, the contribution of these net proceeds to the Operating
Partnership, and the use of such proceeds to repay Petro the $51,046
Intercompany Debt assumed by the Operating Partnership during the Star
Gas Conveyance.
(D) Reflects Petro's use of the proceeds to repay $24,000 of long term
debt and to repay $43,750 of 12 1/4% subordinated debentures at an 11%
premium. In addition, Petro will incur an extraordinary loss on the
repurchase of the subordinated debentures of $6,462 representing the
premium paid of $4,812 and the write-off of $1,650 of deferred financing
costs associated with such debt.
P-4
<PAGE>
(E) Reflects the actual results of the Petro and Star Gas propane
operations which were conveyed to the Partnership.
(F) Reflects increased interest applicable to the Star Gas acquisition, as
a result of the purchase of $65,350 of Star Gas debt and $19,966 of Star
Gas preferred stock from a portion of the proceeds of Petro's $125,000
12 1/4% Subordinated Debenture offering in February 1995.
(G) Represents the pro forma adjustments to reflect decreased interest
expense as a result of (i) the repayment of $43,750 of subordinated
debentures, (ii) the repayment of $24,000 of notes payable, and (iii) the
remaining unapplied proceeds of $62,171 which were assumed to be invested
in Treasury Notes at an assumed rate of 5.5%.
(H) Adjustment to reflect Petro's share of the net loss of the Partnership
based upon its 49% ownership percentage using the equity method of
accounting.
P-5
EXHIBIT 7(c)(1)
CONVEYANCE AND CONTRIBUTION AGREEMENT
This Conveyance and Contribution Agreement dated as of December
20, 1995 (this "Agreement"), is entered into by and among PETROLEUM HEAT
AND POWER CO., INC., a Minnesota corporation ("Petro"), and STAR GAS
CORPORATION, a Delaware corporation ("Star Gas").
RECITALS
WHEREAS, Star Gas has advised Petro of its intention (i) to
organize Star Gas Partners L.P. (the "MLP") in which it will own an
approximately 1% general partner interest and together with the MLP to
organize Star Gas Propane L.P. (the "Operating Partnership") and in connec
tion therewith to transfer substantially all of its operating assets and
liabilities, including approximately $50.4 million of indebtedness owed by
Star Gas to Petro plus additional indebtedness in an amount equal to the
excess, if any, of the consolidated net working capital of Star Gas and its
subsidiaries at the Effective Time in excess of $6.2 million ("Intercompany
Debt"), to the Operating Partnership in exchange for a general partnership
interest and certain limited partnership interests, (ii) to transfer its
limited partnership interest in the Operating Partnership to the MLP in
exchange for a general partnership interest and subordinated limited
partner interests which will represent an aggregate approximately 47%
limited partner interest (without giving effect to the underwriter's
overallotment option) and a 1% general partner interest, (iii) to incur
senior secured indebtedness of $85 million to be assumed by the Operating
Partnership and (iv) to cause the MLP to make a public offering of common
limited partnership units which will represent an aggregate approximately
51.0% limited partnership interest in the MLP; and
WHEREAS, as a result of the foregoing transactions, Petro will
realize a substantial benefit in the form of (i) repayment of the
Intercompany Debt by the Operating Partnership, (ii) a dividend in the
amount of approximately $21.5 million by Star Gas (to be increased to the
extent the Intercompany Debt exceeds $50.4 million), (iii) repayment by
Star Gas of $35.6 million intercompany indebtedness (to be reduced in the
same amount as the dividend may be increased), (iv) redemption by Star Gas
of certain preferred stock held by Petro of $8.6 million and (v) a loan of
approximately $12 million from Star Gas. In addition, Petro will have an
approximately 49% economic interest in the MLP by reason of its 100%
ownership of Star Gas.
WHEREAS, Petro has been engaged in the retail sale of propane in
and around Stamford, CT, Hartford, CT. and Springfield, MA (collectively
the "Propane Business").
NOW, THEREFORE, in consideration of their mutual undertakings and
agreements hereunder, Petro and Star Gas agree as follows:
<PAGE>
ARTICLE I.
Definitions
-----------
The following capitalized terms shall have the meanings given
below.
"Assets" means all of the assets owned, leased or held by Petro
------
relating to the Propane Business, as of the Effective Time of every kind,
character and description, whether tangible or intangible, whether accrued
or contingent, and wherever located, but specifically excluding any real
estate or interest in real estate, including, without limitation, all of
the assets necessary to operate the Propane Business as currently being
operated by Petro and all right, title and interest of Petro in and to the
following assets:
1. copies of all of the books, records, papers and instruments of Propane
Business of whatever nature and wherever located, including, without
limitation, accounting and financial records, documentation related to
the Assets, customer correspondence/ sales records, credit reports, and
other data relating to the Business;
2. propane inventory and other inventories and supplies of any kind;
3. storage tanks and containers, storage facilities, propane cylinders,
office furniture, furnishings, computers and equipment of any kind;
4. any and all monies, rents, revenues, accounts receivable or other
proceeds receivable or owing to Petro from customers, vendors, tenants,
subtenants or others relating to the Propane Business;
5. all deposits, prepayments and prepaid expenses of customers of the
Propane Business;
6. all unbilled receivables of customers of the Propane Business;
7. all motor vehicles, trailers, tanks, railroad tank cars, distribution
centers and related equipment, whether owned or leased;
8. every contract, agreement, arrangement, grant, gift, trust or other
arrangement or understanding of any kind;
9. every right to sell or distribute any product or service;
10. all rights under all covenants and warranties pertaining to the
Assets, express or implied, to the extent transferable, that have
heretofore been made by any predecessors in title of Petro or by any
third party manufacturers, suppliers and contractors;
11. any and all rights, claims and causes of action that Petro may have
under insurance policies or otherwise against any person or property,
whether known or unknown, accrued or contingent, and whether or not
reflected on the books and records of Petro as of the Effective Time, and
such rights, claims or causes of action representing reimbursement or
recovery of amounts actually paid by the Operating Partnership after the
Effective Time;
12. all trade names, trademarks, service marks, logos, marks and symbols
of any kind, together with all goodwill associated therewith;
<PAGE>
13. all know-how, every trade secret, every customer list and all other
confidential information of every kind;
14. every customer relationship, employee relationship, supplier
relationship and other relationship of any kind;
15. the Propane Business as conducted prior to the Effective Time by
Petro;
16. every other proprietary right of any kind;
17. all governmental licenses, permits and authorizations of every kind;
and
18. the capital stock of any other corporation;
excluding, however, any of such assets that constitute Excluded Assets.
"Assumed Liabilities" means all liabilities of Petro to customers
-------------------
of the Propane Business relating to the operation of the Propane Business,
as of the Effective Time, of every kind, character and description, whether
known or unknown, accrued or contingent, and whether or not reflected on
the books and records of Petro as of the Effective Time; excluding, however
any of such liabilities that constitute Excluded Liabilities.
"Effective Time" means 9:00 a.m., Eastern Standard Time on
--------------
December 20, 1995.
"Excluded Assets" means those assets of Petro described on
---------------
Schedule 1 hereto.
- --------
"Excluded Liabilities" means those liabilities of Petro other
--------------------
than Assumed Liabilities.
"Laws" means any and all laws, statutes, ordinances, rules or
----
regulations promulgated by a governmental authority, orders of a
governmental authority, judicial decisions, decisions of arbitrators or
determinations of any governmental authority or court.
ARTICLE II.
Contribution to Star Gas
------------------------
Contribution. Petro hereby grants, contributes, bargains,
------------
sells, conveys, assigns, transfers, sets over and delivers to Star Gas, its
successors and assigns, for their own use forever, all of its right, title
and interest in and to the Assets in exchange for (a) the benefits
described in the recitals hereto, (b) the assumption of certain liabilities
by Star Gas as provided in Article IV, and (c) other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and Star Gas hereby accepts the Assets as a contribution to
its capital.
TO HAVE AND TO HOLD the Assets unto Star Gas, its successors and
assigns, together with all and singular the rights and appurtenances
thereto in any way belonging, subject, however, to the terms and conditions
stated in this Agreement, forever.
<PAGE>
ARTICLE III.
Assumption of Liabilities by Star Gas
-------------------------------------
In connection with the contribution and transfer of the Assets to
Star Gas, Star Gas hereby assumes and agrees to duly and timely pay,
perform and discharge the Assumed Liabilities to the full extent that Petro
has been heretofore or would have been in the future, were it not for the
execution and delivery of this Agreement, obligated to pay, perform and
discharge the Assumed Liabilities; provided, however, that said assumption
and agreement to duly and timely pay, perform and discharge the Assumed
Liabilities shall not increase the obligation of Star Gas with respect to
the Assumed Liabilities beyond that of Petro, waive any valid defense that
was available to Petro with respect to the Assumed Liabilities or enlarge
any rights or remedies of any third party under any of the Assumed
Liabilities.
ARTICLE IV.
Indemnification; Assumption
---------------------------
Indemnification With Respect to Excluded Liabilities. Petro
----------------------------------------------------
shall indemnify, defend and hold harmless Star Gas its officers and
directors, and their respective successors and assigns and lenders from and
against any and all claims, demands, costs, liabilities (including, without
limitation, liabilities arising by way of active or passive negligence) and
expenses (including, without limitation, reasonable attorneys' fees) of
every kind, character and description, whether known or unknown,
contingent, and whether or not reflected on the books and records of Petro
arising from or relating to the Excluded Liabilities, from all long-term
and contingent liabilities of Star Gas and from any failure by Petro to
comply with any applicable bulk sales law of any jurisdiction in connection
with the transactions hereunder or in connection with the transfer of
assets to the Operating Partnership and Stellar Propane Service Corp.
Indemnification With Respect to Assumed Liabilities. Star Gas
---------------------------------------------------
shall indemnify, defend and hold harmless Petro its officers and directors
and their respective successors and assigns from and against any and all
claims, demands, costs, liabilities (including, without limitation,
liabilities arising by way of active or passive negligence) and expenses
(including, without limitation, court costs and reasonable attorneys' fees)
of every kind, character and description, whether known or unknown, accrued
or contingent, and whether or not reflected on the books and records of
Petro as of the Effective Time, arising from or relating to the Assumed
Liabilities.
Assumption of Certain Liabilities. Petro hereby assumes all
---------------------------------
liability of Star Gas with respect to all Excluded Liabilities set forth on
Schedule 2 to a Conveyance and Contribution of even date between Star Gas,
Star Gas Propane L.P. and others.
ARTICLE V.
Title Matters
-------------
Encumbrances. The contribution of Assets made under Section 2.1
------------
is made expressly subject to (a) all recorded and unrecorded liens,
encumbrances, agreements, defects, restrictions, adverse claims and all
Laws, in each case to the extent the same are valid, enforceable and affect
the Assets, including, without limitation, all matters that a current
survey or visual inspection of the Assets would reflect and (b) the Assumed
Liabilities.
<PAGE>
Disclaimer of Warranties: Subrogation.
-------------------------------------
PETRO IS CONVEYING THE ASSETS "AS IS" WITHOUT REPRESENTATION OR
WARRANTY, WHETHER EXPRESS, IMPLIED OR STATUTORY (ALL OF WHICH PETRO HEREBY
DISCLAIMS), AS TO (i) TITLE, (ii) FITNESS FOR ANY PARTICULAR PURPOSE OR
MERCHANTABILITY OR DESIGN OR QUALITY OR (iii) ANY OTHER MATTER WHATSOEVER.
THE PROVISIONS OF THIS SECTION 5.2 HAVE BEEN NEGOTIATED BY STAR GAS AND
PETRO AFTER DUE CONSIDERATION AND ARE INTENDED TO BE A COMPLETE EXCLUSION
AND NEGATION OF ANY REPRESENTATIONS OR WARRANTIES OF PETRO, WHETHER
EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE ASSETS AND THE BUSINESS
THAT MAY ARISE PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT OR OTHERWISE,
EXCEPT AS EXPRESSLY SET FORTH HEREIN.
The contribution of Assets made under Section 2.1 is made with
full rights of substitution and subrogation of Star Gas, and all persons
claiming by, through and under Star Gas, to the extent assignable, in and
to all covenants and warranties by the predecessors-in-title of Petro, and
with full subrogation of all rights accruing under applicable statutes of
limitation and all rights of action of warranty against all former owners
of the Assets other than predecessors in title.
Star Gas and Petro agree that the disclaimers contained in
this Section 6. 2 are "conspicuous" disclaimers. To the extent permitted by
applicable law, any covenants implied by statute or law by the use of the
words "grant," "convey," "bargain," "sell," "assign," "transfer,"
"deliver,"or "set over" or any of them or any other words used in this
Agreement are hereby expressly disclaimed, waived and negated.
ARTICLE VI.
Further Assurances
------------------
Petro Assurances. From time to time after the date hereof, and
----------------
without any further consideration, Petro shall execute, acknowledge and
deliver all such additional deeds, assignments, bills of sale, conveyances,
instruments, notices, releases, acquittances and other documents, and will
do all such other acts and things, all in accordance with applicable law,
as may be necessary or appropriate more fully to assure Star Gas and its
successors and assigns all of the properties, rights, titles, interests,
estates, remedies, powers and privileges by this Agreement granted to Star
Gas or intended so to be and (ii) more fully and effectively to carry out
the purposes and intent of this Agreement.
Star Gas Assurances. From time to time after the date hereof,
-------------------
and without any further consideration, Star Gas shall execute, acknowledge
and deliver all such additional instruments, notices and other documents,
and will do all such other acts and things, all in accordance with
applicable law, as may be necessary or appropriate more fully and
effectively to carry out the purposes and intent of this Agreement.
<PAGE>
ARTICLE VII.
Power of Attorney
-----------------
Petro hereby constitutes and appoints Star Gas and its successors
and assigns the true and lawful attorney-in-fact of Petro with full power
of substitution for it and in its name, place and stead or otherwise on
behalf of Petro and its successors and assigns, and for the benefit of Star
Gas and its successors and assigns, to demand and receive from time to time
the Assets and to execute in the name of Petro and its successors and
assigns instruments of conveyance, instruments of further assurance and to
give receipts and releases in respect of the same, and from time to time to
institute and prosecute in the name of Petro or Star Gas for the benefit of
Star Gas as may be appropriate, any and all proceedings at law, in equity
or otherwise which Star Gas and its successors and assigns may deem proper
in order to collect, assert or enforce any claims, rights or titles of any
kind in and to the Assets, and to defend and compromise any and all
actions, suits or proceedings in respect of any of the Assets and to do any
and all such acts and things in furtherance of this Agreement as Petro and
its successors or assigns shall deem advisable. Petro hereby declares that
the appointment hereby made and the powers hereby granted are coupled with
an interest and are and shall be irrevocable and perpetual and shall not be
terminated by any act of the Star Gas or its successors or assigns or by
operation of law.
ARTICLE VIII.
Certain Properties
------------------
Petro and Star Gas presently share facilities at Westfield,
Massachusetts, Stamford, Connecticut and East Hartford, Connecticut. Petro
agrees that so long as such facilities are available to Petro, Petro will
make such facilities available to Star Gas on substantially the same basis
as currently available to Star Gas at an equitable cost to be agreed upon.
ARTICLE IX.
Miscellaneous
-------------
Effective Time. The contribution of the Assets to Star Gas shall
--------------
be effective for all purposes as of the Effective Time.
Consents; Restriction on Assignment. If there are prohibitions
-----------------------------------
against or conditions to the conveyance of one or more portions of the
Assets without the prior written consent of third parties, including,
without limitation, governmental agencies (other than consents of a
ministerial nature which are normally granted in the ordinary course of
business), which if not satisfied would result in a breach of such
prohibitions or conditions or would give an outside party the right to
terminate Star Gas' rights with respect to such portion of the Assets
(herein called a "Restriction"),then any provision contained in this
Agreement to the contrary notwithstanding, the transfer of title to or
interest in each such portion of the Assets (herein called the
"Restriction-Asset") pursuant to this Agreement shall not become effective
unless and until such Restriction is satisfied, waived or no longer
applies. When and if such a Restriction is so satisfied, waived or no
longer applies, to the extent permitted by applicable law and any
applicable contractual provisions, the assignment of the Restriction-Asset
subject thereto shall become effective automatically as of the Effective
Time, without further action on the part of Star Gas. Star Gas and Petro
agree to use their best efforts to obtain satisfaction of any Restriction
on a timely basis. The description of any portion of the Assets as a
"Restriction-Asset" shall not be construed as an admission that any
Restriction exists with respect to the transfer of such portion of the
Assets. In the event that any Restriction-Asset exists,
<PAGE>
Petro agrees to hold such Restriction Asset in trust for the exclusive benefit
of Star Gas and to otherwise use its best efforts to provide Star Gas with the
benefits thereof, and Petro will enter into other agreements, or take such other
action as it deems necessary, in order to help ensure that Star Gas has the
assets and concomitant rights necessary to enable it to operate the Assets
contributed to Star Gas in all material respects as described in the
Prospectus contained in and made a part of the Registration Statement on
Form S-1 File No. 33-9840 filed by the MLP.
Costs. Petro shall pay all sales, use and similar taxes arising
-----
out of the contributions, conveyances and deliveries to be made hereunder
and shall pay all documentary, filing, recording, transfer, deed and
conveyance taxes and fees required in connection therewith. In addition,
Petro shall be responsible for all costs, liabilities and expenses
(including, without limitation, court costs and attorneys' fees) incurred
in connection with the satisfaction or waiver of any Restriction pursuant
to Section 8.2.
Headings; References; Interpretation. All Article and Section
------------------------------------
headings in this Agreement are for convenience only and shall not be deemed
to control or affect the meaning or construction of any of the provisions
hereof.
Successors and Assigns. The Agreement shall be binding upon and
----------------------
inure to the benefit of the parties signatory hereto and their respective
successors and assigns.
No Third Party Rights. The provisions of this Agreement are
---------------------
intended to bind the parties signatory hereto as to each other and are not
intended to and do not create rights in any other person or confer upon any
other person any benefits, rights or remedies and no person is or is
intended to be a third party beneficiary of any of the provisions of this
Agreement.
Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which together shall constitute one agreement binding
on the parties hereto.
Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York applicable
to contracts made and to be performed wholly within such state without
giving effect to conflict of law principles thereof, except to the extent
that it is mandatory that the law of some other jurisdiction. wherein the
Assets are located, shall apply.
Severability. If any of the provisions of this Agreement are
------------
held by any court of competent jurisdiction to contravene, or to be invalid
under, the laws of any political body having jurisdiction over the subject
matter hereof, such contravention or invalidity shall not invalidate the
entire Agreement. Instead, this Agreement shall be construed as if it did
not contain the particular provision or provisions held to be invalid, and
an equitable adjustment shall be made and necessary provision added so as
to give effect to the intention of the parties as expressed in this
Agreement at the time of execution of this Agreement.
Deed; Bill of Sale; Assignment. To the extent permitted under
------------------------------
applicable law, this Agreement shall also constitute a "deed," "bill of
sale" or "assignment" of the Assets.
Amendment or Modification. This Agreement may be amended or
-------------------------
modified from time to time only by the written agreement of all the parties
hereto and other persons whose consent may be necessary pursuant to other
agreements.
Integration. This Agreement supersedes all previous
-----------
understandings or agreements between the parties. whether oral or written,
with respect to its subject matter. This document is an integrated
agreement which contains the entire understanding of the parties. No
understanding, representation, promise or agreement, whether oral or
written, is
<PAGE>
intended to be or shall be included in or form part of this Agreement unless it
is contained in a written amendment hereto executed by the parties hereto after
the date of this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
PETROLEUM HEAT AND POWER CO., INC STAR GAS CORPORATION
By: By:
-------------------------- ------------------------
George Leibowitz Name: David Eastin
Senior Vice President Title: Vice President
<PAGE>
Schedule l
----------
EXCLUDED ASSETS
1. All rights to all tax refunds attributable to operations of the
Propane Business prior to the Effective Time, and all rights to all
income benefits attributable to expenses paid and incurred by the
Petro relating to the Propane Business prior to the Effective Time but
not deductible until after the Effective Time.
2. The corporate seal, certificate or articles of incorporation, minute
books, stock books, books of account or other records having to do
with the corporate organization of Petro and any Petro Subsidiary.
3. Furniture, fixtures and equipment located at Petro offices serving the
Propane Business.
4. All assets of Petro, including the premises at which the Propane
Business is being conducted, not related solely to the Propane
Business.
<PAGE>
Schedule 2
----------
EXCLUDED LIABILITIES
1. Any environmental clean-up or compliance obligation of Petro and the
Star Gas Companies arising out of or relating to acts or omissions of
Petro and the Star Gas Companies or any third party prior to the
Effective Time.
2. Any liability arising out of or relating to the maintenance or
termination of any pension plan or other similar or dissimilar
employee benefit plan by Petro and the Star Gas Companies or any
affiliate of any of them before or after the Effective Time.
3. All liabilities of Petro not related to the Propane business.
EXHIBIT 7(c)(ii)
CONVEYANCE AND CONTRIBUTION AGREEMENT
This Conveyance and Contribution Agreement dated as of December
20, 1995 (this "Agreement"), is entered into by and among STAR GAS
PARTNERS, L.P., a Delaware limited partnership (the "Master Partnership"),
STAR GAS PROPANE, L.P., a Delaware limited partnership (the "Operating
Partnership"), STELLAR PROPANE SERVICE CORP. ("Stellar Service"), STAR GAS
CORPORATION, a Delaware corporation ("Star Gas"), SILGAS INC., an Indiana
corporation and SILGAS OF ILLINOIS INC., an Illinois corporation (Silgas
Inc. and Silgas of Illinois Inc. are referred to herein collectively as the
"Star Gas Subsidiaries") (Star Gas and the Star Gas Subsidiaries are
referred to herein collectively as the "Star Gas Companies").
RECITALS
WHEREAS, Star Gas, a Delaware corporation (the "General
Partner"), as the general partner, and William G. Powers, Jr., as the
organizational limited partner, have heretofore formed the Master
Partnership pursuant to the Delaware Revised Uniform Limited Partnership
Act (the "Delaware Act") and have entered into the Agreement of Limited
Partnership of the Master Partnership (the "Master Partnership Agreement")
pursuant to which the Master Partnership shall serve as the sole limited
partner of the Operating Partnership; and
WHEREAS, the General Partner and the Master Partnership have
heretofore formed the Operating Partnership pursuant to the Delaware Act
and have entered into the Agreement of Limited Partnership of the Operating
Partnership (the "Operating Partnership Agreement") and the Operating
Partnership has heretofore formed Stellar Service, for the purpose of
acquiring, owning and operating the business and assets of the Star Gas
Companies, including the Propane Business (as defined in a Conveyance and
Contribution Agreement of even date between Star Gas and Petroleum Heat and
Power Co., Inc.), (the "Business"); and
WHEREAS, the Operating Partnership has heretofore formed Stellar
Service for the purpose of acquiring, owning and operating the business and
assets of the Star Gas Companies, including the Propane Business, relating
to the Service Assets (the "Service Business"); and
WHEREAS, pursuant to a separate Conveyance and Contribution
Agreement dated as of the date hereof, Petroleum Heat and Power Co., Inc.
("Petro") is transferring its propane assets to the General Partner and the
General Partner is assuming the propane business-related liabilities of
Petro (the "Petro Conveyance"); and
WHEREAS, the Star Gas Companies have agreed to contribute to the
Operating Partnership all of their assets, including the assets transferred
to the General Partner by Petro as described in the immediately preceding
paragraph (the "Star Gas Conveyance"), as capital contributions thereto,
(except those assets specifically excluded hereby) in exchange for limited
partner interests in the Operating Partnership, the assumption of all of
their liabilities (except those specifically excluded hereby) by the
Operating Partnership and other good and valuable consideration; and
WHEREAS, at the direction of the Operating Partnership, the Star
Gas Companies have agreed to convey directly to Stellar Service their
assets consisting of appliances, parts, inventories and related supplies in
the State of New York, New Jersey, Connecticut, Maine, Massachusetts, Rhode
Island and Pennsylvania ("Service Assets"); and
<PAGE>
WHEREAS, pursuant to the Master Partnership Agreement, the
General Partner has agreed to contribute to the Master Partnership, as a
capital contribution thereto, all of its limited partner interest in the
Operating Partnership and has agreed to make additional contributions to
the Master Partnership as set forth in Section 4.2 of the Master
Partnership Agreement in exchange for 2,220,444 Subordinated Units and
other good and valuable consideration; and
WHEREAS, Silgas Inc. desires to contribute to the Master
Partnership, as a capital contribution thereto, all of its limited partner
interest in the Operating Partnership in exchange for 175,633 Subordinated
Units and other good and valuable consideration; and
WHEREAS, Silgas of Illinois Inc. desires to contribute to the
Master Partnership, as a capital contribution thereto, all of its limited
partner interest in the Operating Partnership in exchange for one
Subordinated Unit and other good and valuable consideration; and
WHEREAS, after the contributions to the Master Partnership by the
General Partner, Silgas Inc. and Silgas of Illinois Inc. of limited partner
interests in the Operating Partnership, the Master Partnership will hold a
98.9899% limited partner interest in the Operating Partnership.
NOW, THEREFORE, in consideration of their mutual undertakings and
agreements hereunder, the Master Partnership, the Operating Partnership,
Stellar Service and the Star Gas Companies undertake and agree as follows:
ARTICLE I.
Definitions
-----------
The following capitalized terms shall have the meanings given
below.
"Assets" means all of the assets owned, leased or held by the
------
Star Gas Companies, as of the Effective Time (including the assets of the
Propane Business which may be acquired simultaneously with the Effective
Time, but excluding the Service Assets) of every kind, character and
description, whether tangible or intangible, whether real, personal or
mixed, whether accrued or contingent, and wherever located, including,
without limitation, all of the assets necessary to operate the Business as
currently being operated by the Star Gas Companies and all right, title and
interest of the Star Gas Companies in and to the following assets:
(a) copies of all of the books, records, papers and
instruments of the Star Gas Companies, of whatever nature
and wherever located, including, without limitation,
accounting and financial records, documentation related to
the Assets, customer correspondence/ sales records, credit
reports, and other data relating to the Business;
(b) propane inventory and other inventories and
supplies of any kind;
(c) storage tanks and containers, storage facilities,
propane cylinders, office furniture, furnishings, computers
and equipment of any kind;
(d) all real property wherever located, together with
all buildings, structures, improvements, equipment,
appurtenances and fixtures of every kind or nature located
thereon;
<PAGE>
(e) all rights in real property or personal property
arising under leases, easements or other contracts or
arrangements including, without limitation, leasehold
properties, all rights-of-way, servitudes, surface rights,
interests in land, licenses and grants, and all amendments
to each thereof, together with all prescriptive rights and
all franchises, privileges, grants and consents in favor of
the Star Gas Companies, or their predecessors-in-title, in,
on, over, under or adjacent to lands, roads, highways,
railroads, rivers, canals, ditches, drains, bridges, state
and national parks, forests, reservations and wilderness
areas, public grounds or structures, or elsewhere, and all
rights incident thereto, rights under condemnation
judgments, judgments on declaration of taking, and permits
and grants for the installation, maintenance, repair,
removal and operation of above and below ground tanks,
storage containers and pipelines;
(f) all motor vehicles, trailers, tanks, railroad tank
cars, distribution centers and related equipment, whether
owned or leased;
(g) every contract, agreement, arrangement, grant,
gift, trust or other arrangement or understanding of any
kind;
(h) every right to sell or distribute any product or
service;
(i) any and all monies, rents, revenues, accounts
receivable or other proceeds receivable or owing to the Star
Gas Companies;
(j) all deposits, prepayments and prepaid expenses;
(k) all unbilled receivables;
(l) all rights under all covenants and warranties
pertaining to the Assets, express or implied, to the extent
transferable, that have heretofore been made by any
predecessors in title of the Star Gas Companies or by any
third party manufacturers, suppliers and contractors;
(m) any and all rights, claims and causes of action
that the Star Gas Companies may have under insurance
policies or otherwise against any person or property,
whether known or unknown, accrued or contingent, and whether
or not reflected on the books and records of the Star Gas
Companies as of the Effective Time, and such rights, claims
or causes of action representing reimbursement or recovery
of amounts actually paid by the Operating Partnership after
the Effective Time;
(n) all trade names, trademarks, service marks, logos,
marks and symbols of any kind, together with all goodwill
associated therewith;
(o) all know-how, every trade secret, every customer
list and all other confidential information of every kind;
(p) every customer relationship, employee
relationship, supplier relationship and other relationship
of any kind;
(q) every business conducted prior to the Effective
Time by the Star Gas Companies;
<PAGE>
(r) every other proprietary right of any kind;
(s) all governmental licenses, permits and
authorizations of every kind; and
(t) the capital stock of any other corporation;
excluding, however, any of such assets that constitute Excluded Assets.
"Assumed Liabilities" means all liabilities of the Star Gas
-------------------
Companies arising from or relating to the Assets and the Service Assets or
the Business or otherwise, as of the Effective Time, of every kind,
character and description, whether known or unknown, accrued or contingent,
and whether or not reflected on the books and records of the Star Gas
Companies as of the Effective Time; excluding, however any of such
liabilities that constitute Excluded Liabilities.
"Common Units" has the meaning assigned to such term in the
------------
Master Partnership Agreement.
"Deeds" means all deeds and acts of sale, from any of the Star
-----
Gas Companies to the Operating Partnership conveying the Star Gas
Companies' respective fee owned tracts or parcels of land listed on Exhibit
B hereto and more particularly described in Exhibit A attached to such
Deeds.
"Effective Time" means immediately after the Petro Conveyance.
--------------
"Excluded Assets" means those assets of the Star Gas Companies
---------------
described on Schedule 1 hereto.
"Excluded Liabilities" means those liabilities of the Star Gas
--------------------
Companies described on Schedule 2 hereto.
"First Mortgage Notes" means the $85 million of First Mortgage
--------------------
Notes to be issued by the Operating Partnership in exchange for the $85
million of First Mortgage Notes issued by Star Gas (the "Initial Notes") in
each case pursuant to the Note Purchase Agreements described in the
Registration Statement.
"Laws" means any and all laws, statutes, ordinances, rules or
----
regulations promulgated by a governmental authority, orders of a
governmental authority, judicial decisions, decisions of arbitrators or
determinations of any governmental authority or court.
"Registration Statement" means a registration on Form S-1 and
----------------------
filed by the Master Limited Partnership with the Securities and Exchange
Commission relating to a public offering of Common Units.
"Service Assets" means those assets of the Star Gas Companies
--------------
described on Schedule 3 hereto.
"Subordinated Units " has the meaning assigned to such term in
------------------
the Master Partnership Agreement.
<PAGE>
ARTICLE II.
Contribution to the Operating Partnership and Stellar Service
-------------------------------------------------------------
Contribution. The Star Gas Companies hereby grant, contribute,
------------
bargain, sell, convey, assign, transfer, set over and deliver to the
Operating Partnership, or, with respect to the Service Assets to Stellar
Service, as the case may be and their respective successors and assigns,
for their own use forever, all of their right, title and interest in and to
the Assets in exchange for (a) the consideration stated in Section 2.2, (b)
the assumption of substantially all their liabilities by the Operating
Partnership as provided in Article IV, and (c) other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and the Operating Partnership hereby accepts the Assets as a
contribution to the capital of the Operating Partnership and Stellar
Service hereby accepts the Service Assets as a contribution to the capital
of Stellar Service; provided, however, that the Star Gas Companies shall
convey directly to Stellar Service those Assets set forth in Schedule 3.
In addition, within 30 days after the Effective Time, the General
Partner shall contribute to the Operating Partnership for no additional
consideration an amount equal to the excess, if any, of $6.2 million over
the net working capital of the Operating Partnership at the Effective Time.
TO HAVE AND TO HOLD the Assets unto the Operating Partnership and
the Service Assets unto Stellar Service, their successors and assigns,
together with all and singular the rights and appurtenances thereto in any
way belonging, subject, however, to the terms and conditions stated in this
Agreement, forever.
Consideration for Contribution. In consideration for the
------------------------------
contribution of the Assets to the Operating Partnership and for the
contribution of the Service Assets to Stellar Service, the Operating
Partnership hereby (a) issues, grants, contributes, bargains, sells,
conveys, transfers, sets over and delivers to the Star Gas Companies
limited partner interests in the Operating Partnership (the "Limited
Partner Interest") which interests, collectively, shall be contributed,
transferred, conveyed, assigned and delivered by the Star Gas Companies to
the Master Partnership as provided in Article III of this Agreement, and
which, together with the limited partner interest previously held by the
Master Partnership and the limited partner interest being contributed to
the Master Partnership by the General Partner pursuant to this Agreement
will represent a 98.9899% limited partner interest in the Operating
Partnership, and (b) assumes substantially all of the liabilities of the
Star Gas Companies other than Excluded Liabilities, as more particularly
provided in Article IV.
Form of Conveyance. To further evidence the conveyance of the
------------------
Assets that constitute the real property listed on Exhibit B, the Star Gas
---------
Companies have executed and delivered to the Operating Partnership Deeds
and certain other assignments of leases and conveyances, all of which are
subject to this Agreement. To further evidence the conveyance of certain
of the Assets that constitute the personal property, such as contracts and
other agreements, the Star Gas Companies have executed and delivered to the
Operating Partnership certain other assignments and instruments of
transfer, all of which are subject to this Agreement.
ARTICLE III.
Contribution to the Master Partnership
--------------------------------------
The General Partner, Silgas Inc., and Silgas of Illinois Inc.
each hereby grants, contributes, bargains, sells, conveys, assigns,
transfers, sets over and delivers to the Master Partnership, its successors
and assigns, for its and their own use forever all their right, title in
and to all limited partnership interests it owns in the Operating
Partnership in exchange
<PAGE>
for 2,220,444, 175,633 and one Subordinated Units, respectively, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged; and the Master Partnership hereby accepts the Limited Partner
Interest as a contribution to the capital of the Master Partnership.
TO HAVE AND TO HOLD such limited partner interests unto the
Master Partnership, its successors and assigns, together with all and
singular the rights and appurtenances thereto in any way belonging,
subject, however, to the terms and conditions stated in this Agreement,
forever.
ARTICLE IV.
Assumption of Liabilities
by the Operating Partnership
----------------------------
In connection with the contribution and transfer of the Assets to
the Operating Partnership, the Operating Partnership hereby assumes and
agrees to duly and timely pay, perform and discharge the Assumed
Liabilities relating to the business transferred to it to the full extent
that the Star Gas Companies have been heretofore or would have been in the
future, were it not for the execution and delivery of this Agreement,
obligated to pay, perform and discharge the Assumed Liabilities;
provided,however, that said assumption and agreement to duly and timely
pay, perform and discharge the Assumed Liabilities shall not increase the
obligation of the Operating Partnership with respect to the Assumed
Liabilities beyond that of the Star Gas Companies, waive any valid defense
that was available to the Star Gas Companies with respect to the Assumed
Liabilities or enlarge any rights or remedies of any third party under any
of the Assumed Liabilities.
<PAGE>
ARTICLE V.
Indemnification
---------------
Indemnification With Respect to Excluded Liabilities. The Star
----------------------------------------------------
Gas Companies shall indemnify, defend and hold harmless the Operating
Partnership, Stellar Service, the Master Partnership, their respective
officers and directors and their respective successors and assigns and
lenders from and against any and all claims, demands, costs, liabilities
(including, without limitation, liabilities arising by way of active or
passive negligence) and expenses (including, without limitation, court
costs and reasonable attorneys' fees) of every kind, character and
description, whether known or unknown, accrued or contingent, and whether
or not reflected on the books and records of the Star Gas Companies as of
the Effective Time, arising from or relating to the Excluded Liabilities.
Indemnification With Respect to Assumed Liabilities. The
---------------------------------------------------
Operating Partnership shall indemnify, defend and hold harmless the Star
Gas Companies, their respective officers and directors and their
successors and assigns from and against any and all claims, demands, costs,
liabilities (including, without limitation, liabilities arising by way of
active or passive negligence) and expenses (including, without limitation,
court costs and reasonable attorneys' fees) of every kind, character and
description, whether known or unknown, accrued or contingent, and whether
or not reflected on the books and records of the Star Gas Companies as of
the Effective Time, arising from or relating to the Assumed Liabilities.
ARTICLE VI.
Title Matters
-------------
Encumbrances. The contribution of Assets and Service Assets made
------------
under Section 2.1 is made expressly subject to (a) all recorded and
unrecorded liens, encumbrances, agreements, defects, restrictions, adverse
claims and all Laws, in each case to the extent the same are valid,
enforceable and affect the Assets, including, without limitation, all
matters that a current survey or visual inspection of the Assets would
reflect, (b) the Assumed Liabilities, and (c) all matters contained in the
Deeds and the other assignment of leases, conveyances, assignments and
instruments of transfer referenced in Section 2.3.
Disclaimer of Warranties: Subrogation.
-------------------------------------
(a) THE STAR GAS COMPANIES ARE CONVEYING THE ASSETS "AS IS "
WITHOUT REPRESENTATION OR WARRANTY, WHETHER EXPRESS, IMPLIED OR STATUTORY
(ALL OF WHICH THE STAR GAS COMPANIES HEREBY DISCLAIM), AS TO (i) TITLE,
(ii) FITNESS FOR ANY PARTICULAR PURPOSE OR MERCHANTABILITY OR DESIGN OR
QUALITY OR (iii) ANY OTHER MATTER WHATSOEVER. THE PROVISIONS OF THIS
SECTION 6.2 HAVE BEEN NEGOTIATED BY THE OPERATING PARTNERSHIP, THE MASTER
PARTNERSHIP, STELLAR SERVICE AND THE STAR GAS COMPANIES AFTER DUE
CONSIDERATION AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF
ANY REPRESENTATIONS OR WARRANTIES OF THE STAR GAS COMPANIES, WHETHER
EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE SERVICE ASSETS, THE
ASSETS, THE SERVICE BUSINESS AND THE BUSINESS THAT MAY ARISE PURSUANT TO
ANY LAW NOW OR HEREAFTER IN EFFECT OR OTHERWISE, EXCEPT AS EXPRESSLY SET
FORTH HEREIN.
(b) The contribution of Assets made under Section 2.1 is made
with full rights of substitution and subrogation of the Operating
Partnership and Stellar Service, as applicable, and all persons claiming
by, through and under
<PAGE>
the Operating Partnership or Stellar Service, to the extent assignable, in and
to all covenants and warranties by the predecessors-in-title of the Star Gas
Companies, and with full subrogation of all rights accruing under applicable
statutes of limitation and all rights of action of warranty against all former
owners of the Assets other than predecessors in title.
(c) The Star Gas Companies, Stellar Service and the Operating
Partnership agree that the disclaimers contained in this Section 6. 2 are
"conspicuous" disclaimers. To the extent permitted by applicable law, any
covenants implied by statute or law by the use of the words "grant,"
"convey," "bargain," "sell," "assign," "transfer," "deliver,"or "set over"
or any of them or any other words used in this Agreement are hereby
expressly disclaimed, waived and negated.
ARTICLE VII.
Further Assurances
------------------
The Star Gas Companies Assurances. From time to time after the
---------------------------------
date hereof, and without any further consideration, the Star Gas Companies
shall execute, acknowledge and deliver all such additional deeds,
assignments, bills of sale conveyances, instruments, notices, releases,
acquittances and other documents, and will do all such other acts and
things, all in accordance with applicable law, as may be necessary or
appropriate (i) more fully to assure the Operating Partnership, Stellar
Service and their respective successors and assigns all of the properties,
rights, titles, interests, estates, remedies, powers and privileges by this
Agreement granted to the Operating Partnership and Stellar Service or
intended so to be, (ii) more fully and effectively to vest in the Master
Partnership and its successors and assigns beneficial and record title to
the Limited Partner Interest hereby contributed and assigned to the Master
Partnership or intended so to be and to put the Master Partnership in
actual possession and control of the Limited Partner Interest and (iii)
more fully and effectively to carry out the purposes and intent of this
Agreement.
Operating Partnership, Stellar Service and Master Partnership
-------------------------------------------------------------
Assurances. From time to time after the date hereof, and without any
- ----------
further consideration, the Operating Partnership, the Master Partnership
and Stellar Service shall execute, acknowledge and deliver all such
additional instruments, notices and other documents, and will do all such
other acts and things, all in accordance with applicable law, as may be
necessary or appropriate more fully and effectively to carry out the
purposes and intent of this Agreement.
<PAGE>
ARTICLE VIII.
Power of Attorney
-----------------
The Star Gas Companies hereby constitute and appoint the
Operating Partnership, Stellar Service and their respective successors and
assigns the true and lawful attorney-in-fact of the Star Gas Companies with
full power of substitution for them and in their name, place and stead or
otherwise on behalf of the Star Gas Companies and their successors and
assigns, and for the benefit of the Operating Partnership and Stellar
Service, their respective successors and assigns, to demand and receive
from time to time the Assets and the Service Assets and to execute in the
name of the Star Gas Companies and their successors and assigns instruments
of conveyance, instruments of further assurance and to give receipts and
releases in respect of the same, and from time to time to institute and
prosecute in the name of the Operating Partnership or, Stellar Service or
the Star Gas Companies for the benefit of the Operating Partnership or
Stellar Service, as may be appropriate, any and all proceedings at law, in
equity or otherwise which the Operating Partnership and Stellar Service and
their respective successors and assigns may deem proper in order to
collect, assert or enforce any claims, rights or titles of any kind in and
to the Assets and the Service Assets, and to defend and compromise any and
all actions, suits or proceedings in respect of any of the Assets and the
Service Assets and to do any and all such acts and things in furtherance of
this Agreement as the Operating Partnership and Stellar Service and their
respective successors or assigns shall deem advisable. The Star Gas
Companies hereby declare that the appointment hereby made and the powers
hereby granted are coupled with an interest and are and shall be
irrevocable and perpetual and shall not be terminated by any act of any of
the Star Gas Companies, Star Gas or their successors or assigns or by
operation of law.
ARTICLE IX.
Miscellaneous
-------------
Order of Completion of Transactions; Effective Time.
---------------------------------------------------
(a) The Petro conveyance shall be completed. Then the Initial
Notes shall be issued by Star Gas, then the transactions described in
Article II of this Agreement shall be completed and thereafter the
transactions provided for in Article III of this Agreement shall be
completed.
(b) The contribution of the Assets and the Service Assets to the
Operating Partnership and to Stellar Service, respectively, shall be
effective for all purposes as of the Effective Time.
Consents; Restriction on Assignment. If there are prohibitions
-----------------------------------
against or conditions to the conveyance of one or more portions of the
Assets or the Service Assets without the prior written consent of third
parties, including, without limitation, governmental agencies (other than
consents of a ministerial nature which are normally granted in the ordinary
course of business), which if not satisfied would result in a breach of
such prohibitions or conditions or would give an outside party the right to
terminate the rights of the Operating Partnership or Stellar Service with
respect to such portion of the Assets or the Service Assets (herein called
the "Restriction"), then any provision contained in this Agreement to the
contrary notwithstanding, the transfer of title to or interest in each such
portion of the Assets or the Service Assets (herein called the
"Restriction-Asset") pursuant to this Agreement shall not become effective
unless and until such Restriction is satisfied, waived or no longer
applies. When and if such a Restriction is so satisfied, waived or no
longer applies, to the extent permitted by applicable law and any
applicable contractual provisions, the assignment of the Restriction-Asset
subject thereto shall become effective automatically as of the Effective
Time, without further action on the part of the Operating Partnership,
Stellar Service or the Star Gas Companies. The Star Gas Companies, Stellar
Service and the
<PAGE>
Operating Partnership agree to use their best efforts to obtain satisfaction of
any Restriction on a timely basis. The description of any portion of the Assets
or the Service Assets as a "Restriction-Asset" shall not be construed as an
admission that any Restriction exists with respect to the transfer of such
portion of the Assets or the Service Assets. In the event that any Restriction
Asset exists, the Star Gas Companies agree to hold such Restriction Asset in
trust for the exclusive benefit of the Operating Partnership and Stellar
Service, as applicable, and to otherwise use its best efforts to provide the
Operating Partnership and Stellar Service, as applicable, with the benefits
thereof, and the Star Gas Companies will enter into other agreements, or take
such other action as it deems necessary, in order to help ensure that the
Operating Partnership and Stellar Service, as applicable, has the assets and
concomitant rights necessary to enable it to operate the Assets contributed
to the Operating Partnership or the Service Assets contributed to Stellar
Service, as applicable in all material respects as described in the
Prospectus contained in and made a part of the Registration Statement.
Costs. The Operating Partnership and Stellar Service shall pay
-----
all sales, use and similar taxes arising out of the contributions,
conveyances and deliveries to be made to it hereunder and shall pay all
documentary, filing, recording, transfer, deed and conveyance taxes and
fees required in connection therewith. In addition, the Operating
Partnership and Stellar Service shall each be responsible for all costs,
liabilities and expenses (including, without limitation, court costs and
attorneys' fees) incurred in connection with the satisfaction or waiver of
any Restriction applicable to it pursuant to Section 9.2.
Headings; References; Interpretation. All Article and Section
------------------------------------
headings in this Agreement are for convenience only and shall not be deemed
to control or affect the meaning or construction of any of the provisions
hereof.
Successors and Assigns. The Agreement shall be binding upon and
----------------------
inure to the benefit of the parties signatory hereto and their respective
successors and assigns.
No Third Party Rights. The provisions of this Agreement are
---------------------
intended to bind the parties signatory hereto as to each other. Such
provisions shall also be for the benefit of lenders to the Operating
Partnership at and after giving effect to all transactions occurring at,
the Effective Time (including bank lenders with outstanding commitments at
such time) and are not intended to and do not create rights in any other
person or confer upon any other person any benefits, rights or remedies and
no person is or is intended to be a third party beneficiary of any of the
provisions of this Agreement.
Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which together shall constitute one agreement binding
on the parties hereto.
Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York applicable
to contracts made and to be performed wholly within such state without
giving effect to conflict of law principles thereof, except to the extent
that it is mandatory that the law of some other jurisdiction. wherein the
Assets or the Service Assets are located, shall apply.
Severability. If any of the provisions of this Agreement are
------------
held by any court of competent jurisdiction to contravene, or to be invalid
under, the laws of any political body having jurisdiction over the subject
matter hereof, such contravention or invalidity shall not invalidate the
entire Agreement. Instead, this Agreement shall be construed as if it did
not contain the particular provision or provisions held to be invalid, and
an equitable adjustment shall be made and necessary provision added so as
to give effect to the intention of the parties as expressed in this
Agreement at the time of execution of this Agreement.
Deed; Bill of Sale; Assignment. To the extent required by or
------------------------------
permitted under applicable law, this Agreement shall also constitute a
"deed," "bill of sale" or "assignment" of the Assets and the Service
Assets.
<PAGE>
Amendment or Modification. This Agreement may be amended or
-------------------------
modified from time to time only by the written agreement of all the parties
hereto and such other parties whose consent may be required pursuant to
other agreements.
Integration. This Agreement supersedes all previous
-----------
understandings or agreements between the parties. whether oral or written,
with respect to its subject matter. This document is an integrated
agreement which contains the entire understanding of the parties. No
understanding, representation, promise or agreement, whether oral or
written, is intended to be or shall be included in or form part of this
Agreement unless it is contained in a written amendment hereto executed by
the parties hereto after the date of this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
STAR GAS PARTNERS, LP STAR GAS CORPORATION
by STAR GAS CORPORATION,
its General Partner
By: By:
------------------------- -------------------------
Name: David Eastin Name: David Eastin
Title: Vice President Title: Vice President
STAR GAS PROPANE, L.P. SILGAS INC.
by STAR GAS CORPORATION,
its General Partner
By: By:
------------------------- -------------------------
Name: David Eastin Name: David Eastin
Title: Vice President Title: Vice President
STELLAR PROPANE SERVICE CORP. SILGAS OF ILLINOIS, INC.
By: By:
------------------------- -------------------------
Name: David Eastin Name: David Eastin
Title: Vice President Title: Vice President
<PAGE>
Schedule l
----------
EXCLUDED ASSETS
1. All rights to all tax refunds attributable to operations of the Star
Gas Companies prior to the Effective Time, and all rights to all
income tax benefits attributable to expenses paid and incurred by the
Star Gas Companies prior to the Effective Time but not deductible
until after the Effective Time.
2. The corporate seal, certificate or articles of incorporation, minute
books, stock books, books of account or other records having to do
with the corporate organization of the Star Gas Companies.
3. $250,000 escrow account established with respect to the purchase price
for real estate to be transferred to the purchaser on a post-closing
basis with respect to sale of the Southeast Division.
4. $702,000 accounts receivable from former customers of the Southeast
division which accounts receivable were not sold to the purchaser of
the Southeast Division and which are fully reserved against on Star
Gas' books.
5. Real estate at:
<TABLE>
<S> <C> <C> <C>
678 Main Street 513 South Athol Road 759 West Broadway Highway 337 (31-7)
Clinton, MA Athol, MA Gardner, MA Corydon Ind.
Rt. 12 33-35 Railroad Ave. Lincoln Ave. Extension 646 Altamont Blvd. (4-5)
Swanzey, NH Winchendon, MA Winchendon, MA Frackville, PA
281 Hubberdston Rd. 3465 Union Avenue School Street
Princeton, MA Pensauken, NJ Rt. 12
Winchendon, MA
</TABLE>
6. $85,000 truck deposit related to sale of Highway Trucking.
7. $203,000 note receivable relating to the sale of property in TX.
8. $40,000 escrow receivable relating to the anticipated sale of Rt. 12,
Swanzey, NH.
9. Approximately $83,900,000 in cash from the sale of the First Mortgage
Notes by the General Partner.
<PAGE>
Schedule 2
----------
EXCLUDED LIABILITIES
1. Federal, state and local income tax liabilities attributable to the
operations of the Star Gas Companies prior to the Effective Time,
including any such income tax liabilities that may result from the
consummation of the transactions contemplated by this Agreement.
2. Any indebtedness of the Star Gas Companies to Petro Inc. other than
notes aggregating approximately $51.0 million, copies of which have
been filed as Exhibits to the Registration Statement plus additional
indebtedness in an amount equal to the excess, if any, of the
consolidated net working capital of the Star Gas Companies over $6.2
million as of the Closing.
3. Any environmental cleanup or compliance obligations of the Star Gas
Companies arising out of or relating to acts or omissions of Petro and
the Star Gas Companies or any third party prior to the Effective Time.
4. Any liability arising out of or relating to the maintenance or
termination of any pension plan or other similar or dissimilar
employee benefit plan by the Star Gas Companies, Petro or any
affiliate of any of them, whether before or after the Effective Time.
5. $2.1 million of long term debt and restrictive covenant payments due
to principals of businesses previously purchased by Star Gas.
<PAGE>
Schedule 3
----------
ASSETS TO BE TRANSFERRED TO STELLAR SERVICE
Appliances, parts and related supplies located in the states of NY,
CT, RI, MA, ME, PA and NJ.
<PAGE>
EXHIBIT B
NORTHEAST
BRANCH LOCATION
2-1 Maple Shade, NJ
2-2 Maple Shade, NJ
3 Tuckahoe, NJ
4-1 Hazelton, PA
4-2 Hazelton, PA
4-3 Hazelton, PA
6 Wind Gap, PA
8-1 Davisville, RI
8-2 Davisville, RI
8-3 N/A
8-4 West Warwick, RI
8-5 Cumberland, RI
9-1 Poughkeepsie, NY
9-2 Poughkeepsie, NY
12-1 Rochdale, MA
12-2 Rochdale, MA
12-3 Rochdale, MA
12-4 N/A
12-5 Milburg, MA
12-14 Rochdale, MA
13-1 Swansea, MA
14-1 Belchertown, MA
17-1 Windham, ME
17-3 Windham, ME
17-4 Windham, ME
18-1 Fairfield, ME
18-2 Fairfield, ME
18-3 N/A
19-2 Fryeburg, ME
<PAGE>
MIDWEST
005 Rural Natural, OH
016 Jeffersonville, IN
22-1 Wilhoyte, KY
22-2 Wilhoyte, KY
23-1 Charlestown, IN
23-2 Seymour, IN
23-3 Seymour, IN
23-4 Seymour, IN
23-5 Seymour, IN
23-6 Seymour, IN
23-7 Seymour, IN
26-1 Silgas Glencoe, KY
28-2 Williamstown, KY
30-2 Shelbyville, KY
31-1 New Salisbury, IN
31-2 Laconia, IN
31-3 Marengo, IN
31-4 Salem, IN
31-6 Pekin, IN
33-1 Seymour, IN
33-2
33-3 Seymour, IN
33-4 Seymour, IN
33-5 Seymour, IN
079 North Webster, IN
80-1 Remington, IN
80-2 Remington, IN
81-1 Warren,IN
<PAGE>
BRANCH LOCATION
82 Winamac, IN
83 Decatur, IN
85-1 Portland, IN
85-2 Portland, IN
86 Waterloo, IN
87 Columbia City, IN
88-1 Rural Loveland, OH
89 Versailles, IN
90-1 Linton, IN
90-3 Linton, IN
92-3 Madison, IN
92-4 Madison, IN
93-1 Greencastle, IN
93-2 Greencastle, IN
94 Sulphur Springs, IN
95 Richmond, IN
96 College Corner, IN
97 Hillsdale, MI
98 Waverly, OH
99 Ironton, OH
100 Lynchburg, OH
101-1 Mt. Orab, OH
101-2 Mt. Orab, OH
102-1 Ripley, OH
102-2 Ripley, OH
103 Lewisburg, OH
104 West Union, OH
106-1 Macon, OH
107-1 Deshler, OH
<PAGE>
BRANCH LOCATION
107-2 N/A
108 Defiance, OH
109 Akron, IN
111 Sabina, OH
112-1 North Manchester, IN
112-2 North Manchester, IN
113-1 Bluffton, IN
114 Lancaster, OH
115 Hebron, OH
116 Batesville, IN
118-1 North Star, OH
-1
118-1 North Star, OH
-2
119 Fort Recovery, OH
