PETROLEUM HEAT & POWER CO INC, DEF 14A, 1997-04-24

PETROLEUM HEAT & POWER CO INC
DEF 14A, 1997-04-24
MISCELLANEOUS RETAIL

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SCHEDULE 14A

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

PETROLEUM HEAT AND POWER CO., INC.
(Name of Registrant as Specified in Its Charter)

ALAN SHAPIRO, ESQ., PHILLIPS NIZER BENJAMIN KRIM & BALLON LLP
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:
______________________________________________________________________________

2) Aggregate number of securities to which transaction applies:
______________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-111:
______________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
______________________________________________________________________________

1 Set forth the amount on which the filing fee is calculated and state how it
was determined.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

1) Amount Previously Paid: ____________________________________________________
2) Form, Schedule or Registration Statement
No.:___________________________________
3) Filing Party:_______________________________________________________________
4) Date Filed:________________________________________________________________

<PAGE>
[LOGO]

April 29, 1997

Dear Shareholder:

You are invited to attend the 1997 Annual Meeting to be held at 10:00 a.m.,
DST, on June 5, 1997 at Chase Manhattan Bank, Conference Room A, 11th Floor, 270
Park Avenue, New York, New York.

The Annual Meeting will begin with a report on Company operations, followed
by discussion and voting on the matters set forth in the accompanying Notice of
Annual Meeting and Proxy Statement and on other matters properly brought before
the meeting.

Whether or not you plan to attend, you can be sure your shares are
represented at the meeting by promptly completing, signing, dating and returning
your proxy form in the enclosed envelope.

Cordially,

[LOGO]

Irik P. Sevin
Chairman of the Board

EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND RETURN
YOUR PROXY FORM
<PAGE>
PETROLEUM HEAT AND POWER CO., INC.
NOTICE OF 1997 ANNUAL MEETING
OF SHAREHOLDERS
-------------------------------------------------------

10:00 A.M., JUNE 5, 1997
CHASE MANHATTAN BANK
CONFERENCE ROOM A, 11TH FLOOR
270 PARK AVENUE
NEW YORK, NEW YORK

-------------------------------------------------------

April 29, 1997

To the Shareholders:

Petroleum Heat and Power Co., Inc.'s 1997 Annual Meeting of Shareholders
will be held at Chase Manhattan Bank, Conference Room A, 11th Floor, 270 Park
Avenue, New York, New York, on Thursday, June 5, 1997, at 10:00 a.m., DST.
Following a report on Petro's business operations, the Shareholders will vote on
the following matters:

1. Electing Directors for the ensuing year;

2. A proposal to amend Article III of the Company's Restated and Amended
Articles of Incorporation (the "Articles") to increase the authorized (i)
Class A Common Stock from 40 million to 60 million shares and (ii) preferred
stock from five million to 10 million shares;

3. A proposal to amend Article III of the Articles so as to conform the voting
rights, rights upon a Change of Ownership and definition of "Change of
Ownership" of the Company's 1989 Cumulative Redeemable Preferred Stock to
the corresponding terms of the Company's 12-7/8% Exchangeable Preferred
Stock due 2009;

4. Approving the appointment of Independent Auditors for 1997; and

5. Consideration of any other matter which may properly come before the
meeting.

Shareholders of record at the close of business on April 25, 1997 will be
entitled to vote at the meeting and any adjournments.

By Order of the Board of
Directors

[LOGO]

Audrey L. Sevin
Secretary
<PAGE>
PROXY STATEMENT

PETROLEUM HEAT AND POWER CO., INC.

This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Petroleum Heat and Power Co.,
Inc. for the 1997 Annual Meeting of Shareholders. This Proxy Statement and a
proxy form are scheduled to be mailed to Shareholders beginning on April 29,
1997.

You can ensure that your shares are voted at the meeting by completing,
signing, dating and returning the enclosed proxy form in the envelope provided.
Sending in a signed proxy will not affect your right to attend the meeting and
vote. A Shareholder who gives a proxy may revoke it at any time before it is
exercised by voting in person at the Annual Meeting, by submitting another proxy
bearing a later date or by notifying the Inspectors of Election in writing of
such revocation.

PROPOSAL NO. 1

ELECTION OF DIRECTORS

At the 1997 Annual Meeting, eight directors are to be elected to hold office
until the 1998 Annual Meeting and until their successors have been elected and
have qualified. The nominees, listed below with brief biographies, are all now
Petro directors. The Board is not aware of any reason why any nominee may be
unable to serve as a director. If any nominee is unable to serve, the shares
represented by all valid proxies will be voted for the election of such other
person as the Board may recommend.

RECOMMENDATION OF THE BOARD OF DIRECTORS CONCERNING THE ELECTION OF DIRECTORS

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR PAUL BIDDELMAN,
PHILLIP EAN COHEN, THOMAS J. EDELMAN, RICHARD O'CONNELL, STEPHEN RUSSELL, AUDREY
L. SEVIN, IRIK P. SEVIN AND WOLFGANG TRABER TO HOLD OFFICE UNTIL THE 1998 ANNUAL
MEETING OF SHAREHOLDERS AND UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED.
PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS
SPECIFY IN THEIR PROXIES CONTRARY CHOICES.

INFORMATION RELATING TO NOMINEES FOR DIRECTORSHIPS

PAUL BIDDELMAN, 51, has been a director of the Company since October 1994.
Mr. Biddelman has been a principal of Hanseatic Corporation, a private
investment corporation, since 1992. Mr. Biddelman joined Hanseatic from Clements
Taee Biddelman Incorporated, a merchant banking firm which he co-founded in
1991. From 1982 through 1991, he was a Managing Director in Corporate Finance at
Drexel Burnham Lambert Incorporated. Mr. Biddelman also worked in corporate
finance at Kuhn, Loeb & Co. from 1975 to 1979, and at Oppenheimer & Co. from
1979 to 1982. Mr. Biddelman is a director of Star Gas Corporation ("Star Gas"),
Celadon Group, Inc., Electronic Retailing Systems International, Inc.,
Insituform Technologies, Inc. and Premier Parks, Inc.

PHILLIP EAN COHEN, 49, has been a director of Petro, Inc., a wholly-owned
subsidiary of the Company, since January 1979 and of the Company since its
organization in October 1983. Since 1985, Mr. Cohen has been Chairman of Morgan
Schiff & Co., Inc., an investment banking firm.

THOMAS J. EDELMAN, 46, has been a director of Petro, Inc. since January
1979 and of the Company since its organization in October 1983. Mr. Edelman is
the President and a director of Snyder Oil Corporation, an independent oil
company based in Fort Worth, Texas. Prior to 1981, he was a Vice President of
The First Boston Corporation. From 1975 through 1980, Mr. Edelman was with
Lehman Brothers Kuhn Loeb Incorporated. Mr. Edelman also serves as the Chairman
of Lomak Petroleum, Inc. and as a director of Star Gas.

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RICHARD O'CONNELL, 50, has been a director of Petro, Inc. since January
1979 and of the Company since its organization in October 1983. Mr. O'Connell is
a private investor.

STEPHEN RUSSELL, 56, has been a director of the Company since July 1996. He
has been Chairman of the Board and Chief Executive Officer of Celadon Group
Inc., an international transportation company, since its inception in July 1986.
Mr. Russell has been a member of the Board of Advisors of the Johnson Graduate
School of Management, Cornell University since 1983.

AUDREY L. SEVIN, 71, has been a director and Secretary of Petro, Inc. since
January 1979 and of the Company since its organization in October 1983. Mrs.
Sevin was a director, executive officer and principal shareholder of A.W. Fuel
Co., Inc. from 1952 until its purchase by the Company in May 1981. Mrs. Sevin is
a director and Secretary of Star Gas. Mrs. Sevin is a graduate of New York
University (B.S.).

IRIK P. SEVIN, 49, has been a director of Petro, Inc. since January 1979
and of the Company since its organization in October 1983. Mr. Sevin has been
President of Petro, Inc. since November 1979. Mr. Sevin has been Chief Executive
Officer and Chairman of the Board of the Company since January 1993 and was
President of the Company from 1983 until January 1997. Mr. Sevin was an
associate in the investment banking division of Kuhn Loeb & Co. and then Lehman
Brothers Kuhn Loeb Incorporated from February 1975 to December 1978. Mr. Sevin
is Chairman of the Board of Star Gas. Mr. Sevin is a graduate of the Cornell
University School of Industrial and Labor Relations (B.S.), New York University
School of Law (J.D.) and the Columbia University School of Business
Administration (M.B.A.).

WOLFGANG TRABER, 53, has been a director of Petro, Inc. since January 1979
and of the Company since its organization in October of 1983. Mr. Traber is
Chairman of the Board of Hanseatic Corporation. Mr. Traber is a director of Star
Gas, Deltec Asset Management Corporation, Blue Ridge Real Estate Company,
Hellespont Tankers Ltd. and M.M. Warburg & Co.

Audrey Sevin is the mother of Irik P. Sevin. There are no other familial
relationships between any of the directors and executive officers.

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OWNERSHIP OF EQUITY SECURITIES IN THE COMPANY

The table below sets forth as of March 15, 1997 the number of shares
beneficially owned by each director and each of the five most highly compensated
executive officers of the Company, each beneficial owner of, or institutional
investment manager exercising investment discretion with respect to, 5% or more
of the outstanding shares of capital stock, and all directors and officers as a
group, and the respective percentage ownership of the outstanding Class A Common
Stock and Class C Common Stock held by each such holder and group:

<TABLE>
<CAPTION>
NUMBER OF SHARES(1) PERCENT OF TOTAL
---------------------- ------------------- PERCENT OF TOTAL
NAME CLASS A CLASS C CLASS A CLASS C VOTING POWER(2)
- --------------------------------------------- ---------- ------- ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
Wolfgang Traber (3).......................... 1,652,203(4) 606,472(5) 7.14% 23.35 (5)% 15.71%
Paul Biddelman (3)........................... 1,654,589(4) 597,434(5) 7.15 23.00 (5) 15.53
Hubertus Langen (6).......................... 710,221 606,472(5) 3.07 23.35 (5) 13.79
Audrey L. Sevin (7).......................... 1,888,624 477,716 8.16 18.39 13.57
Richard O'Connell (8)........................ 990,846 302,461 4.28 11.64 8.17
Irik P. Sevin (7)(9)......................... 1,167,847 272,020 4.96 10.20 7.74
Schneider Capital Management (10)............ 3,378,000 -- 14.59 -- 6.88
Wellington Management Company (11)........... 3,041,517 -- 13.14 -- 6.19
Barcel Corporation (12)...................... 695,151 151,231 3.00 5.82 4.49
Thomas J. Edelman (7)........................ 593,049(13) 129,019 2.56 4.97 3.83
Phillip Ean Cohen (7)........................ 672,262 113,423 2.90 4.37 3.68
First Reserve Corporation (14)............... 1,612,598 -- 6.75 -- 3.23
George Leibowitz (7)(15)..................... 35,000 -- (16) -- (16)
Joseph P. Cavanaugh (7)(17).................. 25,860 -- (16) -- (16)
Thomas M. Isola (7)(15)...................... 20,000 -- (16) -- (16)
C. Justin McCarthy (7)....................... -- -- (16) -- (16)
All officers and directors as a group
(18 persons) (18).......................... 7,073,080 1,901,111 29.93% 71.26% 51.84%
</TABLE>

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(1) For purposes of this table, a person or group is deemed to have "beneficial
ownership" of any shares which such person has the right to acquire within
60 days after March 15, 1997. For purposes of calculating the percentage of
outstanding shares held by each person named above, any shares which such
person has the right to acquire within 60 days after March 15, 1997 are
deemed to be outstanding, but not for the purpose of calculating the
percentage ownership of any other person.
(2) Total voting power means the total voting power of all shares of Class A
Common Stock and Class C Common Stock. This column reflects the percentage
of total voting power represented by all shares of Class A Common Stock and
Class C Common Stock held by the named persons.
(3) The address of such person is 450 Park Avenue, New York, NY 10022.
(4) Includes 1,652,203 shares held by Hanseatic Americas LDC, a Bahamian
limited duration company in which the sole managing member is Hansabel
Partners, LLC, a Delaware limited liability company in which the sole
managing member is Hanseatic Corporation, a New York corporation
("Hanseatic"). Messrs. Traber and Biddelman are executive officers of
Hanseatic and Mr. Traber holds in excess of a majority of the shares of
capital stock of Hanseatic.
(5) Includes 298,717 shares owned by each of Hanseatic and Tortosa
Vermogensverwaltungsgesellschaft mbH ("Tortosa"), a German corporation owned
and controlled by Mr. Langen, and as to which Hanseatic and Tortosa each
hold shared voting power.
(6) The address of such person is Heinrich-Vogl-Strasse 17, 81479, Munich,
Germany.
(7) The address of such person is c/o the Company at P.O. Box 1457, Stamford,
CT 06904.
(8) The address of such person is 31 rue de Bellechasse, 75007, Paris, France.
Excludes 30,000 shares of Class A Common Stock held by Cadmus, S.A., of
which Mr. O'Connell is a director and a 33-1/3% shareholder, as to which
shares Mr. O'Connell disclaims beneficial ownership.
(9) Includes options to purchase 381,518 shares of Class A Common Stock and
70,379 shares of Class C Common Stock.
(10) The address of such person is 460 E. Swedesford Road, Suite 1080, Wayne,
Pennsylvania 19087-1801.
(11) The address of such person is 75 State Street, Boston, Massachusetts 02109.
Wellington Management Company ("WMC"), in its capacity as investment
adviser, may be deemed the beneficial owner of such shares, which are held
of record by clients of WMC.
(12) The address of such person is c/o Trust Dept., Lloyds Bank International,
King & George Streets, Nassau, Bahamas.
(13) Includes 76,000 shares of Class A Common Stock owned by Mr. Edelman's wife
and trusts for the benefit of his minor children.
(14) The address of such person is 475 Steamboat Road, Greenwich, CT 06830.
First Reserve Corporation is the managing general partner of four limited
partnerships, which beneficially own an aggregate of 880,125 shares of Class
A Common Stock and options to purchase an additional 732,473 shares of Class
A Common Stock.
(15) Represents options to purchase shares of Class A Common Stock.
(16) Indicates less than 1%.
(17) Includes options to purchase 25,000 shares of Class A Common Stock.
(18) Includes 2,503 shares of Class A Common Stock and options to purchase
22,500 shares of Class A Common Stock respectively held by five officers who
are not among the five most highly compensated executive officers of the
Company.

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Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than 10% of the
Company's Common Stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. The Company believes that during the
fiscal year ended December 31, 1996, its officers, directors and holders of more
than 10% of the Company's Common Stock complied with all Section 16(a) filing
requirements.

Based upon the Shareholders' Agreement (defined below), all or some of the
beneficial owners listed above may be deemed a "group" within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

Messrs. Paul Biddelman, Phillip Ean Cohen, Thomas J. Edelman, Richard
O'Connell, Irik P. Sevin, Wolfgang Traber and Mrs. Audrey L. Sevin are directors
of the Company, and Messrs. Irik P. Sevin, Joseph Cavanaugh, Tom Isola, George
Leibowitz, C. Justin McCarthy and Mrs. Audrey Sevin are officers of the Company.

SHAREHOLDERS' AGREEMENT

Certain Shareholders of the Company have entered into a Shareholders'
Agreement (the "Shareholders' Agreement") which provides that they will vote
their shares to elect as directors of the Company up to five persons designated
by a group consisting of Irik P. Sevin, Audrey L. Sevin, Thomas J. Edelman,
Phillip Ean Cohen and Margot Gordon (the "Sevin Group") and three persons
designated by certain other Shareholders party to the agreement (the "Traber
Group"). Each group may designate its directors by action of the holders of a
majority of the Common Stock held by that group. The by-laws of the Company
provide for the election of not less than six and not more than 20 directors.
The Board of Directors has fixed the number of directors at eight. Of the
present directors, Irik P. Sevin, Audrey L. Sevin, Thomas J. Edelman, Phillip
Ean Cohen and Paul Biddelman have been designated by the Sevin Group and
Wolfgang Traber and Richard O'Connell have been designated by the Traber Group.
All such obligations to vote for directors shall lapse if Irik P. Sevin and/or
Audrey L. Sevin no longer own, directly or indirectly, and/or have sole voting
power over at least 51% of the shares of Class C Common Stock held by all
members of the Sevin Group.

The Shareholders' Agreement provides that the consideration per share which
may be received by a holder of Class C Common Stock upon a sale of shares of
Class C Common Stock may not exceed the average of the last reported sales
prices per share of the Class A Common Stock for the 90 trading days preceding
the date of such sale as reported on the Nasdaq National Market, and that any
premium above such consideration will inure to the benefit of the Company. In
addition, the Shareholders' Agreement provides that such provisions may not be
modified without the consent of the holders of 80% of the issued and outstanding
shares of Class A Common Stock. The Restated Articles of Incorporation of the
Company provide that any transfer of a share of Class C Common Stock (i) to any
person who is not a signatory to the Shareholders' Agreement or (ii) to any
person after the date on which the Shareholders' Agreement is for any reason no
longer in effect will automatically result in the conversion of such share into
a share of Class A Common Stock.

The Shareholders' Agreement (and the Company's Restated and Amended Articles
of Incorporation) provides that certain actions may not be taken without the
affirmative vote of a super-majority of 80% of the entire Board of Directors
(irrespective of vacancies) including at least one director who has been
designated by the Traber Group. These matters include (i) engaging in any
business other than the fuel oil distribution business, (ii) the merger or
consolidation of the Company with a non-subsidiary corporation, (iii) investment
of Company funds other than in specified securities, (iv) the sale, lease,
transfer or other disposition of a significant portion of the Company's assets
in any fiscal year other than the sale of petroleum products in the ordinary
course of business and those investments described in clause (iii) above, (v)
the liquidation, dissolution or winding up of the business of the Company, (vi)
payment of any compensation to directors, (vii) the incurrence of more than a
specified level of long-term debt, (viii) any issuance or repurchase of
securities or any right or option to purchase Common Stock or any

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<PAGE>
security convertible into capital stock, except in connection with the Company's
dividend policy and (ix) the making of, or any commitment for, any capital
expenditures or purchase of assets at more than specified levels. Action by
Shareholders on matters involving the sale of all or substantially all the
Company's assets, the Company's merger or consolidation (except the merger of a
subsidiary into the Company), the liquidation or dissolution of the Company, or
any amendment to the articles of incorporation does not require a super-majority
vote of the directors; however, the parties to the Shareholders' Agreement have
agreed to vote all of their Class C Common Stock against any proposal for such
items unless approved by a vote of at least 85% of the Class C Common Stock.

MEETINGS AND COMPENSATION OF DIRECTORS

During fiscal 1996, the Board of Directors met four times. All Directors
attended each meeting, except that Richard O'Connell did not attend the meeting
held on July 31, 1996. The Company pays each of its directors other than Irik P.
Sevin an annual fee of $24,000. Directors are elected annually and serve until
the next annual meeting of Shareholders or until their successors are elected
and qualified. The Shareholders' Agreement governs matters relating to the
nomination of and voting for directors by the Shareholders who are party
thereto. Though the Company does not pay any other direct or indirect
compensation to directors in their capacity as such, it has entered into certain
transactions with certain of the directors. See "Certain Transactions."

COMMITTEES OF THE BOARD OF DIRECTORS

The Company's Board of Directors has an Audit Committee and a Compensation
Committee. The members of each committee are appointed by the Board of Directors
for a term beginning after the first regular meeting of the Board of Directors
following the Annual Meeting of Shareholders and until their respective
successors are elected.

AUDIT COMMITTEE. The duties of the Audit Committee are to (i) recommend to
the full Board the auditing firm to be selected each year as the Company's
independent auditors, (ii) consult with the persons so chosen to be the
independent auditors with regard to the plan of audit, (iii) review, in
consultation with the independent auditors, their report of audit, or proposed
report of audit, and the accompanying management letter, if any, (iv) consult
with the independent auditors (periodically, as appropriate, out of the presence
of management) with regard to the adequacy of the internal accounting and
control procedures, (v) review the Company's financial condition and results of
operations with management and the independent auditors and (vi) review any
non-audit services and special engagements to be performed by the independent
auditors and consider the effect of such performance on the auditors'
independence.

The members of the Audit Committee are Phillip Ean Cohen and Paul Biddelman.
Members of the Audit Committee may not be employees of the Company. The Audit
Committee met in January 1997 and March 1997. Mr. Cohen did not attend either
meeting.

COMPENSATION COMMITTEE. The duties of the Compensation Committee are (i) to
determine the annual salary, bonus and other benefits, direct and indirect, of
any and all named executive officers (as defined under Regulation S-K
promulgated by the Securities and Exchange Commission), (ii) prepare an annual
Report of the Compensation Committee for inclusion in the Company's Proxy
Statement in accordance with the requirements of Schedule 14A of the Securities
Exchange Act of 1934, as amended, (iii) to review and recommend to the full
Board any and all matters related to benefit plans covering the foregoing
officers and any other employees in the event such matters are appropriate for
stockholder approval, and (iv) to administer the Company's 1994 Stock Option
Plan as the Option Committee thereunder.

The members of the Compensation Committee are Wolfgang Traber and Richard
O'Connell. The Compensation Committee met in March 1997. Both members of the
Compensation Committee were present at the meeting. See "Report of the
Compensation Committee of the Board of Directors."

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<PAGE>
CERTAIN TRANSACTIONS

Set forth below is information concerning certain transactions between the
Company and its Chairman and Chief Executive Officer and its other directors and
affiliates.

SEVIN NOTE

In October 1986, Irik P. Sevin purchased 161,313 shares of Class A Common
Stock and 40,328 shares of Class C Common Stock (after giving retroactive effect
to the exchange of Class C Common Stock for Class A Common Stock in July 1992)
of the Company for $1,280,000 (the fair market value of such shares established
by the Pricing Committee pursuant to the Shareholders' Agreement). Mr. Sevin
paid for such shares by issuing a note (the "Sevin Note") to the Company in the
amount of the purchase price. Mr. Sevin has agreed not to sell or otherwise
transfer to a third party any of such shares until the Sevin Note is paid in
full. The Sevin Note was amended annually to defer the payment of interest and
to increase the amount of principal by the amount of interest deferred each
year. As of December 31, 1995, the principal amount due on the Sevin Note would
have been $1,751,468. In December 1995, Mr. Sevin agreed to pay the principal
amount thereof in five equal annual installments of $328,012 together with
interest at the LIBOR rate in effect for each month plus 0.75%. Payment may be
made in cash or shares of Class A Common Stock valued at the greater of $6.3479
per share or the Current Market Price thereof (as defined). Mr. Sevin paid the
first two installments in December 1995 and December 1996 by delivering 59,078
and 61,251 shares, respectively, to the Company for cancellation, thereby
reducing the balance due under the Sevin Note to $984,032. In connection with
the agreement to repay the Sevin Note, certain rights of Mr. Sevin to cause the
Company to repurchase such shares at $6.3479 per share, and to grant him an
option to purchase a like number of shares upon any such repurchase, were
terminated.

REAL ESTATE TRANSACTIONS

On November 6, 1985, the Company sold its Westbury, New York facility to a
limited partnership consisting of Thomas J. Edelman, Phillip Ean Cohen, Wolfgang
Traber, Richard O'Connell and two individuals who are shareholders of the
Company, as limited partners, and two corporate general partners owned by Irik
P. Sevin and Audrey L. Sevin, respectively. The purchase price of $660,000 was
the property's independently appraised fair market value, and was equal to the
base price the Company paid for the property in June 1984. The partnership
leases the facility to the Company pursuant to a net lease with a base rent of
$75,000 plus taxes and subject to escalation, based upon an independent fair
market rental evaluation. The lease expires on October 31, 2000.

On November 4, 1985, the Company purchased its Astoria, Queens facility from
Phillips Petroleum Company ("Phillips") for $1,500,000 pursuant to a public
bidding process initiated by Phillips. On December 31, 1985, the Company sold
this facility for the same price to a limited partnership consisting of Thomas
J. Edelman, Phillip Ean Cohen, Richard O'Connell, Wolfgang Traber and various
other shareholders of the Company, as limited partners, and two corporate
general partners owned by Irik P. Sevin and Audrey L. Sevin, respectively.
Simultaneously with such purchase, the limited partnership leased the Astoria
facility back to the Company on substantially the same terms and conditions as
contained in the Company's previous lease with Phillips. The partnership leases
the facility to the Company pursuant to a net lease which provides for a base
rent of $250,000 plus taxes and subject to escalation, based upon an independent
fair market rental evaluation. The lease expires on December 31, 2000.

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STAR GAS TRANSACTIONS

In December 1993, the Company purchased a 29.5% equity interest in Star Gas
Corporation ("Star Gas") for $16.0 million and acquired options to purchase the
remaining equity interest. In December 1994, the Company completed the
acquisition of Star Gas for approximately $25.9 million by exercising its right
to purchase the remaining outstanding common equity of Star Gas through the
payment of $3.8 million in cash and the issuance of 2.5 million shares of the
Company's Class A Common Stock. In November 1995, Star Gas Partners, L.P., a
Delaware limited partnership ("Star Gas Partners"), and Star Gas organized Star
Gas Propane, L.P., a Delaware limited partnership (the "Operating Partnership").
Star Gas is the general partner of both Star Gas Partners and the Operating
Partnership. In December 1995, the Company transferred substantially all of its
propane assets and liabilities to Star Gas, which then transferred substantially
all of its assets and liabilities to the Operating Partnership in exchange for
general and limited partner interests. In December 1995, Star Gas Partners
completed its initial public offering of approximately 2.9 million common units
of limited partner interests at a price of $22 per unit and, concurrently, Star
Gas issued approximately $85.0 million in first mortgage notes to certain
institutional investors.

As a result of the foregoing transactions, Star Gas received a 46.5% equity
interest in Star Gas Partners and the Company received net proceeds of $134.7
million, of which $72.6 million was used to repay $67.8 million in principal
amount of long-term debt and $6.0 million was reserved to guarantee Star Gas
Partners' minimum quarterly distribution. The Company expects to receive $5.5
million annually in distributions upon payment by Star Gas Partners of its
minimum quarterly distribution.

Star Gas Partners and Star Gas will have extensive ongoing relationships
with the Company and its affiliates. Affiliates of Star Gas, including the
Company, will perform certain administrative services for the Partnership on
behalf of Star Gas. Such affiliates will not receive a fee for such services,
but will be reimbursed for all direct and indirect expenses incurred in
connection therewith.

Paul Biddelman, Thomas Edelman, Audrey L. Sevin, Irik P. Sevin and Wolfgang
Traber are directors of both the Company and of Star Gas.

INDEMNIFICATION AGREEMENTS WITH DIRECTORS

In March 1996 the Company entered into Indemnification Agreements with each
of its directors. The Agreements generally provide that the Company will
indemnify the directors against certain liabilities arising out of legal actions
brought or threatened against them for their conduct on behalf of the Company to
the fullest extent permitted by applicable law. The Agreements contain
provisions implementing the director's rights thereunder with respect to, among
other things: (i) indemnification of expenses to a party who is wholly or partly
successful, (ii) indemnification of expenses of a witness, (iii) advancement of
expenses, (iv) procedure for determination of entitlement to indemnification,
(v) certain presumptions, (vi) remedies of an indemnitee, (vii) subrogation,
(viii) establishment of a trust and the funding thereof by the Company, upon the
indemnitee's request, in the event of Change in Control or Potential Change in
Control (as defined therein), and (ix) contribution in the event indemnification
may be unavailable.

REVIEW OF TRANSACTIONS BETWEEN THE COMPANY AND ITS AFFILIATES

The Company's Board of Directors reviews, at least once each year, the terms
of all material transactions and arrangements between the Company and its
affiliates.

7
<PAGE>
EXECUTIVE OFFICERS

Set forth below is certain information concerning the executive officers of
the Company, which officers serve at the discretion of the Board of Directors:

IRIK P. SEVIN, 49, has been a director of Petro, Inc., a wholly-owned
subsidiary of the Company, since January 1979 and of the Company since its
organization in October 1983. Mr. Sevin has been President of Petro, Inc. since
November 1979. Mr. Sevin has been Chief Executive Officer and Chairman of the
Board of the Company since January 1993 and was President of the Company from
1983 until January 1997. Mr. Sevin was an associate in the investment banking
division of Kuhn Loeb & Co. and then Lehman Brothers Kuhn Loeb Incorporated from
February 1975 to December 1978. Mr. Sevin is Chairman of the Board of Star Gas.
Mr. Sevin is a graduate of the Cornell University School of Industrial and Labor
Relations (B.S.), New York University School of Law (J.D.) and the Columbia
University School of Business Administration (M.B.A.).

THOMAS M. ISOLA, 53, has been President of the Company since January 1997
and Chief Operating Officer of the Company since August 1994. Prior to joining
Petro and beginning in 1988, Mr. Isola served as President and Chief Executive
Officer of three manufacturing companies owned by Butler Capital Corporation of
New York. From 1972 to 1988, he was with Avery International, Inc. (now Avery-
Dennison) in a variety of marketing and operations roles before becoming Vice
President-General Manager of two Avery companies. Mr. Isola received B.A. and
M.B.A. degrees from Stanford University in 1965 and 1968, respectively. He
served as a First Lieutenant in the U.S. Army from 1969 to 1971.

C. JUSTIN MCCARTHY, 52, has been Senior Vice President--Operations of Petro,
Inc. since January 1979 and of the Company since its organization in October
1983. Prior to joining the Company, Mr. McCarthy was General Manager of the New
York City operations for Whaleco Fuel Oil Company from 1976 to 1979 and was
General Manager of the Long Island Division of Meenan Oil Co., Inc. from 1973 to
1976. Mr. McCarthy is a graduate of Boston College (B.B.A.) and the New York
University Graduate School of Business Administration (M.B.A.).

JOSEPH P. CAVANAUGH, 59, has been Senior Vice President--Safety and
Compliance of the Company since January 1993. From October 1985 to January 1993,
Mr. Cavanaugh was a Vice President of the Company. Mr. Cavanaugh was Controller
of Petro, Inc. from 1973 to 1985 and of the Company from its organization in
1983 until 1994. Mr. Cavanaugh is a graduate of Iona College (B.B.A.) and Pace
University (M.S. in Taxation).

8
<PAGE>
ALLEN T. LEVENSON, 34, has been Vice President--Marketing of the Company
since September 1996. From 1995 to 1996, Mr. Levenson was Corporate Vice
President of marketing and from 1993 to 1995 Vice President of Marketing,
Non-Foods Division, of The Great Atlantic & Pacific Tea Company. From 1989 to
1993, he held various positions with McKinsey & Company, Inc. in its Consumer
Marketing Practice. Mr. Levenson is a graduate of the Wharton School, University
of Pennsylvania (M.B.A.).

GEORGE LEIBOWITZ, 60, has been Senior Vice President--Finance and Corporate
Development of the Company since November 1992. From 1985 to 1992, Mr. Leibowitz
was the Chief Financial Officer of Slomin's Inc., a retail heating oil dealer.
From 1984 to 1985, Mr. Leibowitz was the President of Lawrence Energy Corp., a
consulting and oil trading company. From 1971 to 1984, Mr. Leibowitz was Vice
President--Finance and Treasurer of Meenan Oil Co., Inc. Mr. Leibowitz is a
Certified Public Accountant and a graduate of Columbia University (B.A.) and the
Wharton Graduate Division, University of Pennsylvania (M.B.A.).

VINCENT DE PALMA, 40, has been Vice President and General Manager--Long
Island Region of the Company since March 1997. Prior thereto he was a divisional
vice president and General Manager of the Long Island Region since April 1996.
Prior to joining Petro, Mr. De Palma was a Principal with McKinsey & Company,
Inc., which he joined in 1984. From 1979 until 1982, Mr. De Palma held various
engineering positions with Exxon, USA. Mr. De Palma is a graduate of the Wharton
School, University of Pennsylvania (M.B.A.) and Lafayette College (B.S.).

JAMES J. BOTTIGLIERI, 41, has been Controller of the Company since 1994. He
was Assistant Controller of the Company from 1985 to 1994 and was elected Vice
President in December 1992. From 1978 to 1984, Mr. Bottiglieri was employed by a
predecessor firm of KPMG Peat Marwick LLP, a public accounting firm. Mr.
Bottiglieri graduated from Pace University with a degree in Business
Administration in 1978 and has been a Certified Public Accountant since 1980.

MATTHEW J. RYAN, 40, has been Vice President--Supply of the Company since
December 1992. He was Manager of Supply and Distribution of the Company from
1990 to 1992 and has been employed by the Company since 1987. From 1974 to 1987,
Mr. Ryan was employed by Whaleco Fuel Corp., a subsidiary of the Company which
was acquired in 1987. Mr. Ryan graduated from St. Francis College with a degree
in Accounting in 1983 (B.S.).

ANGELO CATANIA, 47, has been Vice President--Acquisitions of the Company
since March 1996. From 1990 to 1996 he was the Company's Regional Operations
Manager and Co-Director of Acquisitions. From 1984 to 1990 he was Chief
Financial Officer and Vice President--Operations of Acme Oil Co., Inc., a retail
heating oil dealer. From 1974 to 1984, Mr. Catania was Corporate Controller and
Assistant Secretary of Meenan Oil Co., Inc., a retail heating oil dealer. Mr.
Catania is a graduate of St. Francis College (B.S.) and St. Johns University
(M.B.A.).

PETER B. TERENZIO, JR., 40, joined the Company in June 1995 as Vice
President--Human Resources. Prior to joining the Company, Mr. Terenzio spent one
year as the Vice President--Human Resources for Linens 'N Things and 11 years in
various operational and human resources positions for Filene's Basement,
including Senior Vice President, Human Resources and Distribution from 1990 to
1994. Mr. Terenzio served four years as a United States Army Officer. Mr.
Terenzio is a graduate of Lehigh University (B.A.).

Audrey L. Sevin is the mother of Irik P. Sevin. There are no other familial
relationships between any of the directors and executive officers.

9
<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth the cash compensation paid by the Company and
its subsidiaries for services during fiscal 1994, 1995 and 1996 to each of the
Company's five most highly compensated executive officers:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
OTHER
NAME AND ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- ---------------------------------------- --------- ---------- ---------- ------------- ----------- -------------

Irik P. Sevin........................... 1996 $ 350,000 $ 339,000 $ -- -- $ --
Chairman and Chief Executive Officer 1995 350,000 443,000 -- -- --
1994 350,000 800,000(1) 152,000(1) -- --

Thomas M. Isola......................... 1996 285,000 164,833 -- -- --
President and Chief Operating Officer 1995 285,000 123,000 25,452(2) -- --
1994 104,000 59,000 17,451(2) 50,000(3) --

C. Justin McCarthy...................... 1996 230,000 89,597 -- 35,000(4) 13,391(5)
Senior Vice President 1995 225,000 26,000 -- -- 13,391(5)
Operations 1994 200,000 125,000 -- -- 13,391(5)

Joseph P. Cavanaugh..................... 1996 230,000 10,000 -- 25,000(3) 13,391(5)
Senior Vice President Compliance and 1995 226,000 10,000 -- -- 13,391(5)
Administration 1994 226,000 15,000 -- -- 13,391(5)

George Leibowitz........................ 1996 225,000 -- -- -- --
Senior Vice President Finance and 1995 225,000 25,000 -- -- --
Corporate Development 1994 225,000 -- -- -- --
</TABLE>

- ------------------------

(1) Mr. Sevin was entitled to a $952,000 bonus for 1994 pursuant to the Senior
Executive Compensation Plan. Mr. Sevin elected to receive $800,000 in cash
and, in lieu of the additional $152,000 cash compensation due him, to have
the Company pay a premium of $81,000 for an insurance policy to be owned by
a trust for the benefit of certain beneficiaries designated by Mr. Sevin,
and to reimburse him for approximately $71,000 in related tax liability.

(2) Amounts represent reimbursements by the Company for moving expenses incurred
by Mr. Isola in connection with his relocation to Stamford, Connecticut at
the Company's request.

(3) The options are exercisable to purchase shares of Class A Common Stock of
the Company.

(4) The options are exercisable to purchase shares of Class A Common Stock of
the Company between March 21 and September 21, 2001.

(5) Other compensation consists of amounts paid in lieu of contributions under
the Company's 401(k) plan in which such persons do not participate.

10
<PAGE>
The following table presents the value of unexercised options held by the
named executives at December 31, 1996:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF
OPTIONS AT DECEMBER 31, 1996 IN THE MONEY OPTIONS AT
NAME EXERCISABLE (E)/UNEXERCISABLE (U) DECEMBER 31, 1996(1)
- ---------------------------------------------------- --------------------------------- -------------------------------
<S> <C> <C> <C> <C>

Irik P. Sevin.......................................
Class A........................................... 381,518(E) /104,759(U) $476,653(E) /$238,327(U)
Class C........................................... 70,379(E) /26,190(U) $35,670(E) /$17,835(U)

George Leibowitz....................................
Class A........................................... 35,000(E) /15,000(U)

Thomas M. Isola.....................................
Class A........................................... 20,000(E) /30,000(U)

C. Justin McCarthy..................................
Class A........................................... 0(E) /35,000(U)

Joseph P. Cavanaugh.................................
Class A........................................... 25,000(E) /0(U)
</TABLE>

- ------------------------

(1) Values are calculated by deducting the exercise price from the fair market
value of the stock at December 31, 1996.

OPTIONS GRANTED IN LAST FISCAL YEAR

The following table sets forth certain information concerning options
granted during 1996 to the named executives:

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS MARKET APPRECIATION
GRANTED TO EXERCISE PRICE ON FOR OPTION TERM
OPTIONS EMPLOYEES PRICE THE DATE EXPIRATION ---------------------
NAME GRANTED (#) IN 1996 ($ SHARE) OF GRANT DATE 5% 10%
- ---------------------------------- ------------- ----------- ----------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>

C. Justin McCarthy................ 35,000(1) 26.42% $ 7.25 $ 7.25 9/21/01 $ 70,105 $ 154,910

Joseph P. Cavanaugh............... 25,000(2) 18.87% $ 7.25 $ 7.25 3/21/01 $ 50,075 $ 110,650
</TABLE>

- ------------------------

(1) The options were issued in March 1996 and are exercisable between March 21
and September 21, 2001.

(2) All of such options are immediately exercisable.

11
<PAGE>
PENSION PLANS

The Company maintained various retirement plans for substantially all
non-union employees. The executive officers of the Company were eligible to
participate in a qualified defined benefit pension plan (the "Pension Plan")
which the Company maintained for its non-union employees until December 31,
1996, at which time the benefits covered under the plans were frozen.

The Pension Plan covered non-union employees who completed one year of
service. The Pension Plan generally provided to each participant who retires at
age 65 an annual benefit equal to 1.25% of the participant's average annual
compensation (defined as the average of such participant's highest five
consecutive years earnings out of the prior 10 years before retirement)
multiplied by the number of such participant's benefit years of service. A
participant who has attained age 55 and has completed five years of service may
retire early and receive an actuarial reduced benefit.

For the purposes of the Pension Plan, the following are the benefit years of
service through December 31, 1996 and the covered compensation for the calendar
year ended December 31, 1996 for each individual named in the preceding
compensation table:

<TABLE>
<CAPTION>
BENEFIT COVERED
NAME YEARS COMPENSATION
- ---------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Irik P. Sevin......................................................... 18 $ 150,000
Thomas M. Isola....................................................... 2 150,000
C. Justin McCarthy.................................................... 18 150,000
Joseph P. Cavanaugh................................................... 27 150,000
George Leibowitz...................................................... 4 150,000
</TABLE>

The following table shows estimated annual benefits which are not offset by
Social Security or any other reductions, payable in the form of a straight life
annuity under the Pension Plan to participants in the specified covered
compensation and benefit years of service classifications who retire having
reached their normal retirement dates.

PENSION PLAN TABLE

<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------------
REMUNERATION 10 15 20 25 30 35
- ------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 12,500 $ 18,750 $ 25,000 $ 31,250 $ 37,500 $ 43,750
200,000* 25,000 37,500 50,000 62,500 75,000 87,500
300,000* 37,500 56,250 75,000 93,750 112,500 131,250**
400,000* 50,000 75,000 100,000 125,000** 150,000** 175,000**
500,000* 62,500 93,750 125,000** 156,250** 187,500** 218,750**
600,000* 75,000 112,500 150,000** 187,500** 225,000** 262,500**
700,000* 87,500 131,250** 175,000** 218,750** 262,500** 306,250**
800,000* 100,000 150,000** 200,000** 250,000** 300,000** 350,000**
900,000* 112,500 168,750** 225,000** 281,250** 337,500** 393,750**
1,000,000* 125,000** 187,500** 250,000** 312,500** 375,000** 437,500**
1,100,000* 137,500** 206,250** 275,000** 343,750** 412,500** 481,250**
1,200,000* 150,000** 225,000** 300,000** 375,000** 450,000** 525,000**
1,300,000* 162,500** 243,750** 325,000** 406,250** 487,500** 568,750**
1,400,000* 175,000** 262,500** 350,000** 437,500** 525,000** 612,500**
1,500,000* 187,500** 281,250** 375,000** 468,750** 562,500** 656,250**
</TABLE>

- ------------------------
* Exceeds Maximum Covered Compensation considered under the Plan of $150,000.
** Exceeds Maximum Benefit Payable under the Plan of $120,000.

The Company also maintained a non-qualified supplemental retirement plan
(the "Supplemental Retirement Plan") which benefitted 17 employees and retirees,
including Irik P. Sevin, C. Justin McCarthy, Joseph P. Cavanaugh, George
Leibowitz and Thomas M. Isola.

Effective December 31, 1996, the Company froze the benefits provided by the
Pension Plan and the Supplemental Retirement Plan. Under the Pension Plan, as
frozen, the projected normal retirement pension benefits of Messrs. Sevin,
McCarthy, Cavanaugh, Leibowitz and Isola are $5,150, $3,265, $4,974,

12
<PAGE>
$638 and $365 per month, respectively. Under the Supplemental Retirement Plan,
as frozen, Mr. Sevin's normal retirement benefit would not increase, Mr.
McCarthy's normal retirement benefit would be increased by $1,764 per month, Mr.
Cavanaugh's normal retirement benefit would be increased by $2,789 per month,
Mr. Leibowitz's normal retirement benefit would be increased by $507 per month,
and Mr. Isola's normal retirement benefit would be increased by $306 per month.
Effective December 31, 1996, the Company adopted a defined contribution
retirement savings plan, in which the Company's executive officers are eligible
to participate.

REPORT OF COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

The Compensation Committee is composed of two directors who are not
executive officers of the Company. Effective March 1996, the authority of the
Compensation Committee was expanded to include the determination of compensation
for all executive officers named in the "Summary Compensation Table" above, in
addition to its prior authority regarding the Chief Executive Officer, and to
administer the Company's 1994 Stock Option Plan (the "Option Plan") and make
recommendations with respect to certain other employee benefit plans, functions
which previously were exercised by the full Board of Directors.

The Compensation Committee's executive compensation philosophy is to assure
competitive levels of compensation, integrate management's pay with the
achievement of the Company's annual and long-term performance goals, reward
above-average corporate performance, recognize individual initiative and
achievement, and assist the Company in attracting and retaining qualified
management. This philosophy is intended to apply to all Company management.
Management compensation is intended to be set at levels that the Compensation
Committee believes is consistent with others in the Company's industry, with
senior management's compensation packages being weighted more heavily toward
programs contingent upon the Company's level of performance.

The current executive compensation structure consists of base salary and
annual incentive bonuses. In addition, since 1994 the Company has maintained the
Option Plan, under which, among others, key employees (including executive
officers) may be granted options to acquire stock in the Company. The Company
assesses compensation levels in comparison with those of competitors in the
retail fuel oil industry. Since no competitor is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended, or otherwise
publishes information concerning executive compensation, the Company largely
derives its information from companies acquired in its acquisition program. In
evaluating this information, the Committee took into account the fact that such
companies are generally substantially smaller than the Company with mature
businesses that evidence little or no growth.

With respect to the Chief Executive Officer (who also serves as Chief
Financial Officer), the Compensation Committee also considers compensation due
to Mr. Sevin's substantial expertise in and contribution to the Company in the
fields of acquisitions and corporate finance. Under Mr. Sevin's leadership, the
Company has successfully maintained an active acquisition program. To finance
this expansion, Mr. Sevin, in his capacity as Chief Financial Officer, has been
instrumental in the Company's successful completion of five public and three
private debt offerings, two private and four public equity offerings, the
completion of the initial public offering of Star Gas Partners, L.P., a limited
partnership whose general partner is Star Gas Corporation, a wholly-owned
subsidiary of the Company, and the financings and other transactions completed
in connection therewith.

Consistent with its philosophy, the Compensation Committee has heretofore
established the base salary of the Chief Executive Officer at $350,000, which
level has been maintained for several years. At the Company's 1994 Annual
Meeting, the shareholders approved the Senior Executive Compensation Plan which
provided that, commencing with fiscal 1994, the Company's Chief Executive
Officer was to receive an annual cash incentive bonus equal to his bonus for
fiscal 1993, subject to increase or decrease, as the case may be, in direct
proportion to any increase or decrease in Adjusted NIDA per share (as defined)
in the bonus year as compared to 1993. Pursuant to the Senior Executive
Compensation Plan, and based on

13
<PAGE>
the decline in 1996 Adjusted NIDA, Mr. Sevin's bonus in 1996 was $339,000 as
compared to $443,000 in 1995.

The Compensation Committee is also responsible for reviewing the operation
of the Senior Executive Compensation Plan so as to form the basis for any
recommendations regarding amendments to such plan. In April 1995, at the
recommendation of the Compensation Committee, the Board of Directors amended the
Senior Executive Compensation Plan to provide that, to the extent that Mr. Sevin
was entitled to receive a bonus in excess of $800,000 ("Excess Amount") based on
an increase in Adjusted NIDA per share, the Excess Amount would be currently
paid to Mr. Sevin in cash only to the extent of the percentage increase, if any,
in the Company's Average Stock Price (as defined) for the bonus year over the
Average Stock Price for the preceding year multiplied by $800,000. Any part of
the Excess Amount which Mr. Sevin was not entitled to receive in cash would be
paid to him as non-cash compensation in the form of, at his election, pension
benefits, insurance premiums, stock options, restricted stock, or cash
compensation deferred until the termination of his employment.

In reviewing the operation of the Senior Executive Compensation Plan, the
Compensation Committee considers the Company's financial performance on both a
short-term and long-term basis, and other factors which reflect the performance
of the Chief Executive Officer, including steps taken to position the Company
for future growth, the accomplishment of specific tasks, and the introduction
and implementation of programs and policies which are believed to promote long
term stability and growth. It also takes into account that the Company's growth
in the past has been directly tied to the success of its acquisition program and
that its future growth will depend on its ability to identify and successfully
consummate acquisitions. The Compensation Committee believes that Mr. Sevin has
been, and will continue to be, the single key person in the conceptualization
and implementation of this acquisition program, having successfully completed
177 acquisitions from 1979 through 1996, including 13 acquisitions in 1996. The
Compensation Commitee believes that it is in the Company's best interest to
compensate Mr. Sevin at a level which recognizes his continued importance. At a
meeting of the Compensation Committee in April 1997, the Committee determined
that, although the Senior Executive Compensation Plan had historically been
appropriate in the Company's circumstances, the Company's current situation
suggested that alternative compensation arrangements for the Chief Executive
Officer were in order, and that the Committee would continue to evaluate
alternatives applicable to 1997.

During the year ended December 31, 1996, the Chief Executive Officer
recommended the compensation for the other executive officers of the Company,
subject to review and approval by the Compensation Committee. In establishing
compensation for other executive officers, the Chief Executive Officer takes
into account their individual importance to the Company, the relative importance
to the Company of their area of responsibility (including where applicable the
contribution of areas managed by them to EBITDA and NIDA), and their individual
performance. In the case of Messrs. Leibowitz and McCarthy, the Company's Senior
Vice President-Finance and Corporate Development and Senior Vice President-
Operations, respectively, compensation arrangements were subject to the
provisions of their respective employment contracts.

In 1995 the Company implemented an Executive Incentive Compensation Program
("EICP"), pursuant to which bonuses of participating officers and employees are
calculated. Thomas M. Isola, the Company's President and Chief Operating
Officer, in consultation with the Chief Executive Officer and authorization by
the Compensation Committee, administers the operation of the EICP. The object of
the EICP is to determine the bonus compensation of participating officers and
employees based on a combination of the Company's performance and individual
performance in as objective a manner as possible pursuant to a formula stated in
the EICP. The formula for determining bonus compensation is adjusted for all
participants to take into account whether the Company's actual EBITDA
performance is better or worse than budgeted, and takes into account up to 15
individually-weighted targets set for each participant at the beginning of each
plan year.

14
<PAGE>
During the year ended December 31, 1996, options to acquire an aggregate of
132,500 shares of Class A Common Stock in the Company were granted to eight
officers by the Compensation Commitee. No options were granted to the Chief
Executive Officer.

The Omnibus Budget Reconciliation Act of 1993 (the "Act") generally imposes
a limit of $1 million on the amount that a publicly held corporation may deduct
in any year for the compensation paid or accrued with respect to the chief
executive officer and the four other most highly compensated officers of the
Company, but contains an exception for performance-based compensation that
satisfies certain conditions. While the Committee cannot predict with certainty
how the Company's compensation might be affected, the Committee intends to try
to preserve the tax deductibility of all executive compensation while
maintaining the Company's compensation philosophy as described in this report.
For example, in order to meet the requirements of deductibility, the Company, at
its 1994 annual meeting of stockholders, submitted for approval the Senior
Executive Compensation Plan, which may be amended by the Board of Directors,
except as to terms required by the Act to be approved by the stockholders. In
making compensation decisions the Committee will consider the net cost of
compensation to the Company and whether it is practicable and consistent with
other compensation objectives to qualify the Company's compensation under the
applicable exemption of the Act.

For purposes of the foregoing discussion, "NIDA" is defined as consolidated
net income (loss) before extraordinary items, plus depreciation and
amortization, non-cash charges relating to the grant of stock options to
executives of the Company, non-cash charges associated with key employees'
deferred compensation plans, and other non-cash charges of a similar nature, if
any, less accrued preferred stock dividends, excluding net income (loss) derived
from investments accounted for by the equity method, plus any cash dividends
received by the Company from these investments.

Wolfgang Traber
Richard O'Connell

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. Wolfgang Traber and Richard O'Connell, both of whom are directors of
the Company, served as the members of the Compensation Committee during 1996.
Messrs. Traber and O'Connell have participated in certain real estate
transactions with the Company and other related parties. See "Certain
Transactions."

EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS

AGREEMENT WITH THOMAS M. ISOLA

In July 1994, the Company entered into an employment agreement with Mr.
Isola which provides for Mr. Isola to serve as the Company's Chief Operating
Officer. The agreement continues for an indefinite period of time, but is
terminable by either Mr. Isola or the Company. Upon Mr. Isola's appointment to
the additional office of President in 1997, the agreement was amended to provide
for a base salary of $330,000 and participation in the Company's incentive plan
at the rate of 60% of base salary subject to discretionary increases. Mr. Isola
participates in all medical, dental, disability and life insurance programs
afforded to all of the Company's senior executives and in the Company's pension
and investment plans. In August 1994, Mr. Isola was granted options to purchase
50,000 shares of Class A Common Stock at market value. If Mr. Isola's employment
terminates for any reason other than cause within the first three years of
employment, he will receive a severance payment of $285,000.

AGREEMENT WITH GEORGE LEIBOWITZ

In November 1992, the Company entered into an employment agreement with Mr.
Leibowitz. The agreement, as amended, had an indefinite term, and was terminable
by either party on 30 days' notice. During the term of this agreement, Mr.
Leibowitz received a base salary of $200,000, subject to discretionary increases
and bonuses. Simultaneously with the execution of such employment agreement,

15
<PAGE>
the Company issued to Mr. Leibowitz an option to purchase 25,000 shares of the
Company's Class A Common Stock at $11 per share. On June 30, 1993, the Company
issued Mr. Leibowitz an identical option to purchase 25,000 shares of Class A
Common Stock at $11 per share. 20% percent of the options become exercisable on
each of the first five anniversary dates of the date of each grant. The Company
has entered into a new employment agreement with Mr. Leibowitz, effective April
1, 1997, which terminates the prior employment agreement and provides (i) for an
indefinite period of no less than one year of 1/2 time employment at an annual
salary of $112,750 and (ii) payment of $18,750 per month for a period of 36
months.

AGREEMENT WITH JUSTIN MCCARTHY

In July 1995, the Company entered into an agreement with Justin McCarthy
which provides that if his employment is terminated before August 1, 1996 for
any reason he will receive a severance payment of $350,000. If he is employed by
the Company on August 1, 1996: (i) the Company will make 36 monthly payments
aggregating $350,000 in addition to salary and bonus otherwise payable, and
during such period, he will continue to receive certain benefits (or their cash
equivalent) regardless whether he is employed by the Company, and (ii)
commencing on such date (or such later date as his employment is terminated), he
will receive monthly payments of $25,000 until such payments equal the balance
in his Supplemental Retirement Account (the "Account"), which shall equal
$175,000, $410,000, $645,000 and $1,000,000 if he is employed on August 1, 1996,
1997, 1998 and 1999, respectively; provided, that if he is employed until August
1, 1999 and his aggregate salary and bonuses for the prior three years exceed $1
million, the Account will be increased by the amount of such excess. Such
payments shall continue for so long as he is recovering payments from the
Account. Beginning August 1, 1996, for so long as he is employed, the Account
will accrue 5% per annum simple interest. If a change in control (as defined)
occurs after such monthly payments have commenced, the remaining balance of the
Account will become payable promptly. If his employment is terminated prior to
August 1, 1999 for any of the following reasons, he will receive a single
payment of $1 million in addition to the payments described in clause (i) but in
lieu of payments described in clause (ii) above: death, permanent disability,
termination of employment for any reason within six months after a change in
control or termination by the Company without cause (as defined). In
consideration of the foregoing, he will not compete against the Company for the
longer of two years after termination or the number of months he receives
supplemental retirement payments.

16
<PAGE>
STOCK PERFORMANCE GRAPH
CLASS A COMMON STOCK

The graph below sets forth the cumulative total shareholder return (assuming
a $100 investment and reinvestment of dividends) to the Company's Class A common
shareholders (23,054,529 shares outstanding at December 31, 1996) from July 29,
1992 (the date Class A Common Stock became a public security) to December 31,
1996 as well as an overall stock market return (S&P 500 Index) and the Company's
peer group return (S&P Utilities Index). The $100 investment in the Class A
Common Stock has been assumed on July 29, 1992. The Class A stock price
performance shown on the graph below is not necessarily indicative of future
price performance.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
7-29-92 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Petroleum Heat and Power Co.,
Inc. $100 $98 $86 $97 $91 $78
S&P 500 Index $100 $104 $115 $116 $160 $197
S&P Utilities Index $100 $102 $117 $108 $153 $157
</TABLE>

17
<PAGE>
PROPOSAL NO. 2
AMENDMENT TO THE COMPANY'S RESTATED AND AMENDED ARTICLES OF
INCORPORATION TO INCREASE AUTHORIZED CLASS A COMMON STOCK
AND AUTHORIZED PREFERRED STOCK

The Company is currently authorized to issue 40 million shares of its Class
A Common Stock, par value $.10 per share, of which (i) 23,149,769 shares were
issued and outstanding and held of record by approximately 241 stockholders as
of March 15, 1997, and (ii) approximately 2,086,000 shares are reserved for
issuance under the Company's Dividend Reinvestment Plan and for the exercise of
outstanding options, warrants and conversion of outstanding notes. In addition,
the Company is currently authorized to issue 125,000 shares of Cumulative
Redeemable Exchangeable Preferred Stock (the "1989 Preferred Stock"), and
5,000,000 million shares of Preferred Stock, par value $.10, of which 2,000,000
shares of 12 7/8% Exchangeable Preferred Stock due 2009 (the "Exchangeable
Preferred Stock") have been authorized and 1,200,000 million shares of
Exchangeable Preferred Stock were outstanding and held of record by one holder
as of March 15, 1997.

The Board of Directors has determined that it would be advisable and in the
best interest of the Company to increase the number of authorized shares of
Class A Common Stock from 40 million shares to 60 million shares in order to
provide the Company with an adequate supply of authorized but unissued shares of
Class A Common Stock for general corporate needs, including without limitation
possible stock dividends, employee incentive and benefit plans, consummation of
acquisitions or obtaining additional financing at times when the Board, in its
discretion, deems it advantageous to do so.

The Board of Directors has also determined that it would be advisable and in
the best interest of the Company to increase the number of authorized shares of
Preferred Stock from five million to 10 million and to authorize the Company to
issue, from time to time, as determined by the Board of Directors, up to 10
million shares of Preferred Stock, $.10 par value per share ("Preferred Stock")
in order to provide the Company with an adequate supply of authorized but
unissued shares of Preferred Stock for general corporate needs, including
without limitation, issuance as part or all of the consideration required to be
paid by the Company in the acquisition of other business or properties, or
issuance in public or private sales for cash as a means of obtaining additional
capital for use in the Company's business and operations.

Accordingly, the Board of Directors has approved an amendment to the
Company's Restated and Amended Articles of Incorporation (the "Articles") that
would authorize an increase (i) in the Company's Class A Common Stock from 40
million shares to 60 million shares and (ii) and increase in the authorized
Preferred Stock from five million to 10 million shares. If the amendment is
approved by the stockholders, the Articles will be amended to reflect the
increase. While the Board of Directors is seeking such approval from the
stockholders at this time, it has no present agreement, commitment, plan or
intent to issue any of the additional shares of Class A Common Stock or
Preferred Stock provided for in this Proposal.

All shares of Class A Common Stock are equal to each other with respect to
voting, liquidation, dividend and other rights. Owners of shares of Class A
Common Stock are entitled to one vote for each share they own at any
stockholders' meeting. Holders of shares of Class A Common Stock are entitled to
receive such dividends as may be declared by the Board of Directors out of funds
legally available therefor, and upon liquidation are entitled to participate pro
rata in a distribution of assets available for such distribution to
stockholders. There are no conversion, pre-emptive or other subscription rights
or privileges with respect to any shares of Class A Common Stock. The Class A
Common Stock of the Company does not have cumulative voting rights, which means
that the holders of shares representing more than 50% of the voting power
represented by all shares of the Company's Common Stock (including the Class C
Common Stock, which is entitled to 10 votes per share) in an election of
directors may elect all of the directors if they choose to do so. In such event,
the holders of the remaining shares aggregating less than 50% of the voting
power would not be able to elect any directors. The additional authorized shares
of Class A Common Stock resulting from the Proposal would, when issued, have the
same rights as the issued and outstanding existing shares of Class A Common
Stock. Stockholders of the Company do not have preemptive rights nor will they
as a result of the Proposal.

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<PAGE>
Authorized shares of Class A Common Stock in excess of those shares
outstanding (including, if authorized, the additional Class A Common Stock
provided for in the Proposal) will remain available for general corporate
purposes, may be privately placed and could be used to make a change in control
of the Company more difficult. Under certain circumstances, the Board of
Directors could create impediments to, or frustrate, persons seeking to effect a
takeover or transfer in control of the Company by causing such shares to be
issued to a holder or holders who might side with the Board of Directors in
opposing a takeover bid that the Board of Directors has determined is not in the
best interests of the Company and its stockholders, but in which unaffiliated
stockholders may wish to participate. In this connection the Board of Directors
could issue authorized shares of Class A Common Stock to a holder or holders
which, when voted together with the shares held by members of the Board of
Directors and the executive officers and their families, could prevent the
stockholder vote required by the Company's Articles to effect certain matters.
Furthermore, the existence of such shares might have the effect of discouraging
any attempt by a person, through the acquisition of a substantial number of
shares of Class A Common Stock, to acquire control of the Company, since the
issuance of such shares should dilute the Company's book value per share and the
Class A Common Stock ownership of such person. One of the effects of the
Proposal, if approved, might be to make a tender offer more difficult to
accomplish. This may be beneficial to management in a hostile tender offer, thus
having an adverse effect on stockholders who may want to participate in such
tender offer.

If the Proposal is approved, the additional authorized Class A Common Stock
as well as the currently authorized but unissued Class A Common Stock would be
available for issuance in the future for such corporate purposes as the Board of
Directors deems advisable from time to time without the delay and expense
incident to obtaining shareholder approval, unless such action is required by
applicable law or by the rules of the National Association of Securities
Dealers, Inc. or of any stock exchange upon which the Company's shares may then
be listed. It should be noted that, subject to the limitations discussed above,
all of the types of Board action with respect to the issuance of additional
shares of Class A Common Stock that are described in the preceding paragraphs
can currently be taken and that the power of the Board of Directors to take such
actions would not be enhanced by the Proposal, although the Proposal would
increase the number of shares of Class A Common Stock that are available to be
issued for the taking of such action.

If the Proposal is approved, the Board of Directors would also be empowered,
without the necessity of further action or authorization by the Company's
stockholders (unless such action or authorization is required in a specific case
by applicable laws or regulations or stock exchange rules), to authorize the
issuance of 5,000,000 shares of Preferred Stock in addition to the 3,800,000
shares of authorized but currently unissued shares of Preferred Stock from time
to time in one or more series or classes, and to fix by resolution the
designations, preferences, limitations and relative rights of each such series
or class. Each new series or class of Preferred Stock would, as determined by
the Board of Directors at the time of issuance, rank, with respect to dividends
and redemption and liquidation rights, senior to the Company's Common Stock.

It is not possible to state the precise effects of the authorization of the
additional shares of Preferred Stock upon the rights of the holders of the
Company's Common Stock until the Board of Directors determines the respective
preferences, limitations and relative rights of the holders of each new class or
series of the Preferred Stock. Such effects might, however, include: (a)
reduction of the amount otherwise available for payment of dividends on Common
Stock, to the extent dividends are payable on any issued Preferred Stock, (b)
restrictions on dividends on the Common Stock; (c) dilution of the voting power
of the Common Stock to the extent that the additional Preferred Stock had voting
rights; (d) conversion of the additional Preferred Stock into Common Stock at
such prices as the Board determines, which could include issuance at below the
fair market value or original issue price of the Common Stock; and (e) the
holders of Common Stock not being entitled to share in the Company's assets upon
liquidation until satisfaction of any liquidation preference granted to holders
of the Preferred Stock.

19
<PAGE>
Although the Board of Directors would authorize the issuance of additional
Preferred Stock based on its judgment as to the best interests of the Company
and its stockholders, the issuance of authorized Preferred Stock could have the
effect of diluting the voting power and book value per share of the outstanding
Common Stock. In addition, the Preferred Stock could, in certain instances,
render more difficult or discourage a merger, tender offer or proxy contest and
thus potentially have an "anti-takeover" effect, especially if new Preferred
Stock was issued in response to a potential takeover. In addition, issuances of
authorized Preferred Stock can be implemented, and have been implemented by some
companies in recent years, with voting or conversion privileges intended to make
acquisition of the Company more difficult or more costly. Such an issuance could
deter the types of transactions which may be proposed or could discourage or
limit the stockholders' participation in certain types of transactions that
might be proposed (such as a tender offer), whether or not such transactions
were favored by the majority of the stockholders, and could enhance the ability
of officers and directors to retain their positions.

The affirmative vote of the holders of a majority of the voting power of the
shares voted on this Proposal is required for approval of this Proposal
(Proposal No. 2 on the Proxy Card).

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL (I) TO INCREASE
THE AUTHORIZED CLASS A COMMON STOCK FROM 40 MILLION TO 60 MILLION AND (II) TO
INCREASE THE AUTHORIZED PREFERRED STOCK FROM FIVE MILLION TO 10 MILLION SHARES.

PROPOSAL NO. 3

AMENDMENT TO THE COMPANY'S RESTATED AND AMENDED ARTICLES OF
INCORPORATION TO CONFORM THE VOTING RIGHTS AND RIGHTS ON A
CHANGE OF CONTROL OF THE 1989 PREFERRED STOCK TO
THE CORRESPONDING RIGHTS OF THE EXCHANGEABLE PREFERRED STOCK

In February 1997, the Company completed a private offering under Rule 144A
of the Securities Act of 1933, as amended, pursuant to which the Company issued
and sold $30 million of Exchangeable Preferred Stock. Simultaneously with the
closing of the private offering, the Company entered into agreements with the
holders of its 2002 Notes (as defined below) and the 1989 Preferred Stock
pursuant to which, among other things, the holders of the 1989 Preferred Stock
agreed to certain covenant modifications that permitted the Company to issue the
Preferred Stock. In particular, pursuant to the Third Amendment and Restatement
of Purchase Agreements dated as of February 1, 1997 between the Company and the
holders of the 1989 Preferred Stock, the Company is required to submit to and
recommend for approval by the shareholders an amendment to the Articles pursuant
to which the terms relating to voting rights and rights upon a Change of
Ownership (as defined in the Articles) currently provided in the Articles with
regard to the 1989 Preferred Stock will be conformed to the corresponding terms
applicable to the Exchangeable Preferred Stock and the definition of Change of
Ownership set forth in the Articles will be conformed to the definition of
Change of Ownership (as defined below) provided in the Certificate of
Designation for the Exchangeable Preferred Stock.

SUMMARY OF RELEVANT TERMS OF 1989 PREFERRED STOCK AS CURRENTLY IN EFFECT

The terms relating to rights upon a Change of Ownership and voting rights
currently provided in the Articles for the 1989 Preferred Stock are summarized
below.

CHANGE OF OWNERSHIP. In the event of a Change of Ownership, the Articles
currently provide that each holder of 1989 Preferred Stock will have the right
to cause the Company to redeem its shares of 1989 Preferred Stock out of funds
legally available therefor, if any, at a price of $100 per share (equal to the
liquidation preference thereof), plus all accrued and unpaid cumulative
dividends thereon (whether or not declared), and that if the redemption price is
not paid on the date specified therefor, the redemption price will bear interest
at the dividend rate on the shares of 1989 Preferred Stock being redeemed plus
2%.

20
<PAGE>
Within 30 days after any Change of Ownership, the Company is required to mail a
notice to each holder describing the Change of Ownership and stating the terms
of the prepayment.

The Articles currently define "Change of Ownership" to mean: (1) any issue,
sale or other disposition of shares of Class A Common Stock of the Company which
results in the number of shares of the Class A Common Stock beneficially owned
by the Sevin Group being less than 18.56% of the issued and outstanding shares
of Class A Common Stock, other than (i) in connection with the initial public
offering of the Class A Common Stock, (ii) a sale or disposition of shares of
Class A Common Stock to one or more members of the Traber Group, and (iii) a
disposition of shares of Class A Common Stock to a testamentary trust, all
beneficiaries of which are members of the immediate family or a member of the
Sevin Group and all trustees of which are members of the Sevin Group and, under
the terms of the trust, have the power to vote such shares on all matters as to
which the holders of such shares have the power to vote, so long as, giving
effect to any of the events referred to in the foregoing clauses (i), (ii) and
(iii), the Sevin Group and the Traber Group together have beneficial ownership
(or, in the case of an event referred to in the foregoing clause (iii), voting
control) of a sufficient number of shares of the capital stock of the Company to
entitle them to elect and they do elect, at least the smallest number of
directors that is necessary to constitute a majority of the Company's Board of
Directors; or (2) any event which results in the number of directors of the
Company's Board of Directors who are designated by the Sevin Group constituting
less than a majority of the Board of Directors.

VOTING RIGHTS. Except as described in this paragraph, or as required by
Minnesota law, no holder of 1989 Preferred Stock is entitled to vote any shares
of 1989 Preferred Stock at any meeting of shareholders of the Company.
Notwithstanding the foregoing: (i) if any vote by the holders of 1989 Preferred
Stock acting as a class is taken pursuant to the Articles, every holder of 1989
Preferred Stock is entitled to one vote per share; and (ii) the Company may not,
without the affirmative vote or written consent of the holders of 66 2/3% of the
1989 Preferred Stock at the time outstanding (each share being entitled to one
vote per share): (a) authorize, issue or increase the number of shares of any
class of stock ranking, either as to payment of dividends or distribution of
assets, prior to or on a parity with the 1989 Preferred Stock, (b) change
adversely the preferences or limitations, special rights or powers of the 1989
Preferred Stock contained in the Articles or (c) sell any additional shares of
1989 Preferred Stock; PROVIDED, that neither the consent of, nor any adjustment
of the voting rights of, holders of shares of the 1989 Preferred Stock is
required (1) for an increase in the number of shares of common stock or any
other class of stock authorized or issued, (2) for stock splits of the 1989
Preferred Stock or such other class of stock or (3) for stock dividends on any
class of stock payable solely in such other class of stock, and so long as the
1989 Preferred Stock is similarly adjusted, none of the foregoing actions will
be deemed to affect adversely the powers, preferences or special rights of the
1989 Preferred Stock.

SUMMARY OF RELEVANT TERMS OF 1989 PREFERRED STOCK AS PROPOSED TO BE AMENDED

The terms relating to rights upon a Change of Control and voting rights of
the 1989 Preferred Stock as proposed to be amended are described below. The
proposed amendments would substantially conform such terms as currently in
effect for the 1989 Preferred Stock to the corresponding terms of the
Exchangeable Preferred Stock. The proposed amendment would be adopted if the
Proposal is approved by the shareholders. Capitalized terms not defined below
have the meanings given in the proposed Certificate of Designation (the
"Certificate of Designation") effecting the proposed amendments described below.

CHANGE OF OWNERSHIP Upon the occurrence of a Change of Ownership, the
Company will be required to make an offer (a "Change of Ownership Offer") to
each holder of 1989 Preferred Stock to redeem all or any part of such holder's
1989 Preferred Stock at an offer price equal to 101% of the Liquidation
Preference thereof (i.e., $101 per share), plus an amount in cash equal to all
accumulated and unpaid dividends, if any, to the date of redemption. Within 30
days after a Change of Ownership, the Company will mail a notice to each holder
(a "Change of Ownership Notice") stating (i) that a Change of Ownership has
occurred and that such holder has the right to require the Company to redeem
such holder's 1989 Preferred Stock at a redemption price in cash equal to the
Change of Ownership Redemption Price, (ii) the circumstances and relevant facts
regarding such Change of Ownership (including information with

21
<PAGE>
respect to pro forma historical income, cash flow and capitalization after
giving effect to such Change of Ownership), (iii) the redemption date (the
"Change of Ownership Redemption Date") (which shall be no earlier than 30 days
nor later than 60 days from the date such notice is mailed) and (iv) the
instructions, determined by the Company consistent with the Articles, that a
holder must follow in order to have its 1989 Preferred Stock redeemed.

If, at the time of a Change of Ownership, the Company is prohibited by the
terms of any Indebtedness from purchasing shares of 1989 Preferred Stock that
may be tendered by holders pursuant to a Change of Ownership Offer, then prior
to the mailing of the Company's notice to holders but in any event within 30
days following any Change of Ownership, the Company must (i) repay in full such
Indebtedness or (ii) obtain the requisite consent under such Indebtedness to
permit the purchase of the 1989 Preferred Stock. On the Change of Ownership
Redemption Date, the Company must redeem all shares of the 1989 Preferred Stock
properly tendered pursuant to the Change of Ownership Offer from funds legally
available therefor. In the event the redemption price is not fully paid on the
Change of Ownership Redemption Date, the redemption price will earn interest
from the date fixed for redemption at a rate per annum equal to the per annum
dividend rate on the 1989 Preferred Stock throughout such period PLUS 2%, until
the unpaid redemption price (including all such interest) is paid in full. No
redemption may be authorized or made unless prior thereto full unpaid cumulative
dividends has been paid in cash or a sum set apart for such payment on the 1989
Preferred Stock and all Parity Securities.

The following terms are defined as follows in the Certificate of
Designation:

"Change of Ownership" means: (a) any issue, sale or other disposition of
shares of common stock of the Company which results in the number of shares of
the common stock beneficially owned by the Sevin Group being less than 15% of
the issued and outstanding shares of common stock (other than the Permitted
Common Stock), other than (i) the issuance, in connection with an underwritten
public offering pursuant to a registration statement filed with the Securities
and Exchange Commission (a "Public offering"), of additional common stock
ranking equally with Class A Common Stock as to payment of dividends and as to
the distribution of assets upon any voluntary or involuntary liquidation or
dissolution of the Company ("Permitted Common Stock") or the issuance of any
Permitted Common Stock upon conversion of any convertible preferred stock issued
pursuant to a public offering, (ii) a sale or disposition of shares of common
stock to one or more members of the Traber Group and (iii) a disposition of
shares of common stock to a testamentary trust, all beneficiaries of which are
members of the immediate family of a member of the Sevin Group and all trustees
of which are members of Sevin Group and, under the terms of the trust, have the
power to vote such shares on all matters as to which the holders of such shares
have the power to vote, so long as, giving effect to any of the events referred
to in the foregoing clauses (i), (ii) and (iii), the Sevin Group and the Traber
Group together have beneficial ownership (or, in the case of an event referred
to in the foregoing clause (iii), voting control) of a sufficient number of
shares of the capital stock of the Company to entitle them to elect, and they do
elect, at least the smallest number of directors that is necessary to constitute
a majority of the Company's Board of Directors; (b) any event which results in
the number of directors of the Company's Board of Directors who are designated
by the Sevin Group constituting less than a majority of the Board; or (c) any of
the following events: (i) the holders of any of the Public Debentures have the
right to require the Company to purchase any such Public Debentures pursuant to
Section 4.08 of any of the Public Indentures, (ii) any holder of 2002 Notes
exercises its right to declare any such notes to be due and payable pursuant to
Section 2.1 of the separate Note Agreements, dated as of February 1, 1997,
relating thereto (the "1997 Note Agreements"), (iii) any holder of 2001 Notes
exercises its right to declare any such notes to be due and payable pursuant to
Section 5.2(A) of the Sixth Amendment and Restatement of Note Agreement, dated
as of February 1, 1997, relating thereto (the "Amendment and Restatement"), (iv)
the Company is required to make an offer to each holder of the Exchangeable
Preferred Stock to redeem all or any part of such holder's Exchangeable
Preferred Stock pursuant to paragraph 5(a) of the Certificate of Designation, or
(v) any holder of 2002 Notes, 2001 Notes, Exchangeable Preferred Stock or Public
Debentures shall have received any consideration (whether in the form of cash, a
change in the rate of interest or dividends relating to such notes, debentures
or preferred stock, a change in any other provision of the terms of such notes,
debentures or preferred stock, or

22
<PAGE>
otherwise) to amend, modify, waive or otherwise give up its right to declare any
such notes, debentures or preferred stock to be due and payable upon a "Change
of Ownership," as defined in the 1997 Note Agreements or the Amendment and
Restatement, or a "Change of Control" as defined in the Public Indentures and
the Certificate of Designation, as the case may be; PROVIDED, that an amendment
to or waiver or other modification of paragraph 5(a) of the Certificate of
Designation, Section 2.1 of the 1997 Note Agreements, or Section 5.2(A) of the
Amendment and Restatement will not, in the absence of any consideration,
constitute a Change of Ownership.

"Public Debentures" means, collectively, the Company's 12 1/4% Subordinated
Debentures due 2005, 10 1/8% Subordinated Notes due 2003 and 9 3/8% Subordinated
Debentures due 2006.

"Public Indentures" means, collectively, the Indenture dated as of February
9, 1995, the Indenture dated as of April 1, 1993 and the Indenture dated as of
February 3, 1994, each between the Company and Chemical Bank (now The Chase
Manhattan Bank), as Trustee thereunder.

"Certificate of Designation" means the Certificate of Designation adopted by
the Board of Directors of the Company on February 12, 1997, creating the
Exchangeable Preferred Stock and setting forth the relative rights and
preferences thereof.

"Exchangeable Preferred Stock" means the Company's 12 7/8% Exchangeable
Preferred Stock due 2009.

"Liquidation Preference" means $100 with respect to each share of 1989
Preferred Stock.

"Parity Securities" means the Exchangeable Preferred Stock and any other
class of capital stock or series of preferred stock issued by the Company, the
terms of which expressly provide that such class or series will rank on a parity
with the 1989 Preferred Stock as to dividends and distributions upon the
liquidation, winding-up and dissolution of the Company.

"Sevin Group" means the Estate of Malvin P. Sevin and trusts created
thereunder, Audrey L. Sevin, Irik P. Sevin, Thomas J. Edelman, Margot Gordon and
Phillip Ean Cohen and any trust over which such persons have sole voting power.

"Traber Group" means (i) all the holders of Class C Common Stock of the
Company, as listed on Schedule II annexed to the Third Amendment and Restatement
of Purchase Agreements dated as of February 1, 1997 between the Company and the
holders of the 1989 Preferred Stock named therein, who are not members of the
Sevin Group, (ii) any person who is, or concurrently with the transfer of shares
to such person becomes, a party to the shareholders agreement among the holders
of Class C Common Stock of the Company dated November 25, 1986, as amended and
restated through February 18, 1997, and (iii) any trust over which persons
described in clause (i) or (ii) have sole voting powers.

"2001 Notes" means, collectively, the $6,250,000 original aggregate
principal amount 14.10% Subordinated Notes of the Company due January 15, 2001
outstanding under the Sixth Amendment and Restatement of Note Agreement dated as
of February 1, 1997 between the Company and the Purchasers named therein.

"2002 Notes" means the $60,000,000 aggregate principal amount Senior Notes
of the Company due October 1, 2002 issued or to be issued under the separate
Note Agreements, each dated as of February 1, 1997 between the Company and the
respective Purchasers named therein.

VOTING RIGHTS Except as described in paragraphs (i) and (ii) below, or as
required by Minnesota or any other applicable law, the holders of the 1989
Preferred Stock will not be entitled to any voting rights with respect to the
1989 Preferred Stock. On all matters upon which holders of the 1989 Preferred
Stock are entitled to vote, or give their consent, each holder will be entitled
to one vote per share of the 1989 Preferred Stock held by such holder. Under
Minnesota law, holders of Preferred Stock will be entitled to vote as a class on
any proposed amendment to the Articles, whether or not entitled to vote thereon
by the Articles, if the amendment would increase or decrease the par value of
the shares of such class, or alter or change the powers, preferences or special
rights of the shares or such class so as to affect them adversely.

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<PAGE>
(i) The Company may not (1) without the affirmative vote or written consent
of the holders of at least 66 2/3% of the then outstanding 1989 Preferred Stock
(A) amend, modify or supplement the Articles or any agreement or understanding,
or enter into any agreement or understanding, the effect of which would be to
adversely affect the rights, preferences, privileges or powers of, or
limitations on, the 1989 Preferred Stock contained in the Articles, (B) issue
any additional shares of 1989 Preferred Stock, Parity Securities or Senior
Securities or (C) consolidate with or merge with or into, or convey, transfer or
lease all or substantially all its assets to, any person unless: (I) the
resulting, surviving or transferee person (if not the Company) is organized and
existing under the laws of the United States of America or any State thereof or
the District of Columbia; (II) the 1989 Preferred Stock is converted into or
exchanged for and becomes shares of such successor, transferee or resulting
corporation, having in respect of such successor, transferee or resulting
corporation the same powers, preferences and relative, participating, optional
or other special rights thereof that the 1989 Preferred Stock had immediately
prior to such transaction; (III) immediately after giving effect to such
transaction (and treating any Indebtedness which becomes an obligation of the
resulting, surviving or transferee person or any Subsidiary as a result of such
transaction as having been issued by such person or such Subsidiary at the time
of such transaction) no Voting Rights Triggering Event has occurred and is
continuing; and (IV) immediately after giving effect to such transaction, the
resulting, surviving or transferee person would be able to issue an additional
$1.00 of Funded Debt pursuant to paragraph 10(b) (captioned "Limitation on
Funded Debt and Preferred Stock") of the Certificate of Designation or (2)
without the affirmative vote or written consent of the holders of at least
66 2/3% of the then outstanding 1989 Preferred Stock, amend the Change of
Ownership provisions (including the related definitions) in Article III(1)(c) of
the Certificate of Designation. (ii) (A) If and whenever (I) dividends on the
1989 Preferred Stock are in arrears and have not been fully paid or declared and
a sum sufficient for the payment thereof has not been set aside for two
semi-annual dividend periods (whether consecutive or not) on all shares of the
1989 Preferred Stock at the time outstanding, or (II) any mandatory redemption
payment required to be made pursuant to Article III(1)(b) of the Certificate of
Designation have not been made on the date specified for such redemption or
(III) the Company fails to make an offer to redeem all outstanding shares of
1989 Preferred Stock following a Change of Ownership pursuant to Article
III(1)(c) of the Certificate of Designation or (IV) a Voting Rights Triggering
Event occurs, then and in each such event (each of the events described in
clauses (ii)(A)(I) through (iii)(A)(IV) being referred to as a "Voting Rights
Triggering Event"), the number of directors constituting the Board will, without
further action, be increased by two and the holders of the 1989 Preferred Stock
will have, in addition to the other voting rights described herein, the
exclusive right (but not the obligation) voting separately as a class, to elect
two directors of the Company to fill such newly created directorships, the
remaining directors to be elected by the other class or classes of stock
entitled to vote therefor, at each meeting of stockholders held for the purpose
of electing directors.

(B) Whenever such voting right has vested, it may be exercised initially
either at a special meeting of the holders of the 1989 Preferred Stock, called
as described below, by written consent or at any annual meeting of stockholders
held for the purpose of electing directors, and thereafter at such annual
meeting or by the written consent of the holders of the 1989 Preferred Stock
pursuant to Minnesota law.

(C) At any time when such voting rights have vested, and if it has not
already been initially exercised, the Company is obligated, upon the written
request of any holder of record of the 1989 Preferred Stock then outstanding,
addressed to the Secretary of the Company, to call a special meeting of the
holders of the 1989 Preferred Stock and of any other class or classes of stock
having voting power with respect thereto for the purpose of electing directors.
The meeting must be held at the earliest practicable date upon the notice
required for annual meetings of stockholders at the place for holding such
annual meetings or, if none, at a place designated by the Secretary of the
Company; PROVIDED, that the Secretary is not required to call any such special
meeting in the case of any request therefor received less than 90 days prior to
the date fixed for any annual meeting of stockholders of the Company, and if in
such case such special meeting is not called, the holders of 1989 Preferred
Stock will be entitled to exercise the special voting rights described in this
paragraph (ii)(C) at such annual meeting; PROVIDED, FURTHER, that nothing in the
Certificate of Designation will be deemed to prohibit the holders of 1989
Preferred Stock from exercising their special voting rights by written consent
at any time, including without limitation, during the 90-day period

24
<PAGE>
immediately preceding any annual meeting of stockholders of the Company, with
the election of such director by the holders of the 1989 Preferred Stock being
effective as of the date of such written consent. If such meeting has not been
called by the proper officers of the Company within 10 days after the personal
service of written request upon the Secretary of the Company, or within 10 days
after mailing the same within the United States, by registered mail, addressed
to the Secretary of the Company at its principal office (such mailing to be
evidenced by the registry receipt issued by the postal authorities), then the
record holders of 10% or more of the shares of the 1989 Preferred Stock then
outstanding may designate
in writing a holder of the 1989 Preferred Stock to call such meeting at the
expense of the Company, and such meeting may be called by such person so
designated upon the notice required for annual meetings of stockholders and
shall be held at the same place as is elsewhere described in this subparagraph
(ii)(C). Any holder of the 1989 Preferred Stock will have access to the stock
books of the Company for the purposes of causing a meeting of stockholders to be
called as described in this subparagraph.

(D) At any meeting held for the purpose of electing directors at which the
holders of the 1989 Preferred Stock have the right to elect directors as
described herein, the presence in person or by proxy of the holders of 50% of
the then outstanding shares of the 1989 Preferred Stock will be required and be
sufficient to constitute a quorum of such class for the election of directors by
such class. At any such meeting or adjournment thereof (I) the absence of a
quorum of the holders of the 1989 Preferred Stock will not prevent the election
of directors other than those to be elected by the holders of stock of such
class and the absence of a quorum or quorums of the holders of capital stock
entitled to elect such other directors will not prevent the election of
directors to be elected by the holders of the 1989 Preferred Stock and (II) in
the absence of a quorum of the holders of any class of stock entitled to vote
for the election of directors, a majority of the holders present in person or by
proxy of such class will have the power to adjourn the meeting for the election
of directors which the holders of such class are entitled to elect, from time to
time, without notice other than announcement at the meeting, until a quorum is
present.

(E) The rights of the holders of outstanding shares of the 1989 Preferred
Stock described in this subparagraph (ii) may be exercised only until (a) all
dividends in arrears on the 1989 Preferred Stock, if any, have been paid in full
or declared and funds sufficient therefor set aside and the Company has paid in
full or declared and set aside funds sufficient for the next following
semi-annual dividend payment date, following the payment of any arrearage, (b)
all mandatory redemption payments, if any, with respect to the 1989 Preferred
Stock required pursuant to Article III(1)(b) of the Certificate of Designation
has been made, (c) the Company has not failed to make an offer to redeem all
outstanding shares of 1989 Preferred Stock following a Change of Ownership
pursuant to Article III(1)(c) of the Certificate of Designation and (d) no
Voting Rights Triggering Event has occurred and is continuing; and thereafter
such rights will cease, subject to the vesting of such rights in the future as
described above.

SUMMARY OF MATERIAL AMENDMENTS TO TERMS OF 1989 PREFERRED STOCK

If this Proposal is approved, subject to the forgoing summary, the material
amendments to the rights of the holders of the 1989 Preferred Stock would be as
follows: (i) a Change of Ownership would be triggered upon the occurrence of
certain events that are not currently included in the definition of Change of
Ownership, (ii) upon a Change of Ownership the redemption premium payable by the
Company to the holders would increase to 101% of the liquidation preference per
share instead of 100% and (iii) the holders of the 1989 Preferred Stock would
have the right to elect two directors to the Company's Board upon the occurrence
of a Voting Rights Triggering Event.

The affirmative vote of the holders of a majority of the voting power of the
shares voted on this Proposal at the meeting is required for approval of this
Proposal (Proposal 3 on the Proxy Card).

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR A PROPOSAL TO AMEND THE
ARTICLES TO CONFORM THE VOTING RIGHTS AND RIGHTS ON A CHANGE OF OWNERSHIP OF THE
1989 PREFERRED STOCK TO THE CORRESPONDING RIGHTS OF THE EXCHANGEABLE PREFERRED
STOCK.

25
<PAGE>
PROPOSAL NO. 4

APPOINTMENT OF INDEPENDENT AUDITORS

KPMG Peat Marwick LLP have been recommended by the Audit Committee of the
Board for reappointment as the Independent Auditors for the Company. KPMG Peat
Marwick LLP were the auditors for the Company for the year ended December 31,
1996. KPMG Peat Marwick LLP is a member of the SEC Practice Section of the
American Institute of Certified Public Accountants. Subject to Shareholder
approval, the Board of Directors has appointed KPMG Peat Marwick LLP as the
Company's Independent Auditors for the year 1997.

Representatives of KPMG Peat Marwick LLP are expected to attend the 1997
Annual Meeting. They will have an opportunity to make a statement if they desire
to do so and will be available to respond to Shareholder questions.

The following proposal will be presented to the meeting:

"Resolved that the appointment by the Board of Directors of the Firm of KPMG
Peat Marwick LLP, Stamford Square, 3001 Summer Street, Stamford, CT 06905, as
Independent Auditors for the year 1997 is hereby approved."

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.

OTHER MATTERS

VOTE REQUIRED FOR APPROVAL

Under the rules of the Securities and Exchange Commission, boxes and a
designated blank space are provided on the proxy card for stockholders to mark
if they wish to vote in favor of or withhold authority to vote for one or more
of the Company's nominees for director or to vote "for," "against" or "abstain"
with respect to Proposals 2, 3 and 4. Minnesota law and the Company's by-laws
require the presence of a quorum for the annual meeting, defined as the presence
of shareholders entitled to cast at least a majority of the votes that all
stockholders are entitled to cast on a particular matter to be acted upon at the
meeting. Votes withheld from director nominees and abstentions will be counted
in determining whether a quorum has been reached. Broker non-votes are not
counted for quorum purposes. A broker non-vote is the failure of a broker to
vote shares which are held of record by the broker on behalf of a client on a
particular matter for lack of instructions from the client when such
instructions are required by applicable rules and regulations.

Assuming a quorum has been reached, a determination must be made as to the
results of the vote on each matter submitted for shareholder approval. Director
nominees must receive a plurality of the votes cast at the meeting, which means
that a broker non-vote or a vote withheld from a particular nominee or nominees
will not affect the outcome of the meeting. Proposals 2, 3 and 4 must be
approved by a majority of the voting power of the shares voted on this matter.
Abstentions and broker non-votes are not counted in determining the number of
votes cast in connection with Proposals 2, 3 and 4.

ALL SHARES REPRESENTED BY DULY EXECUTED PROXIES WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES NAMED ABOVE AS DIRECTORS UNLESS AUTHORITY TO VOTE FOR
THE PROPOSED SLATE OF DIRECTORS OR ANY INDIVIDUAL DIRECTOR HAS BEEN WITHHELD. If
for any unforeseen reason any of such nominees should not be available as a
candidate for director, the proxies will be voted in accordance with the
authority conferred in the proxy for such other candidate or candidates as may
be nominated by the Board of Directors.

WITH RESPECT TO PROPOSALS NOS. 2, 3 AND 4, ALL SUCH SHARES WILL BE VOTED FOR
OR AGAINST, OR NOT VOTED, AS SPECIFIED ON EACH PROXY. IF NO CHOICE IS INDICATED,
A PROXY WILL BE VOTED FOR SUCH PROPOSAL.

26
<PAGE>
VOTING SECURITIES

Shareholders of record at the close of business on April 25, 1997 (the
"Record Date"), will be eligible to vote at the meeting. The voting securities
of the Company consist of its Class A Common Stock, $.10 par value, and Class C
Common Stock, $.10 par value, of which 23,320,867 and 2,597,519 shares were
outstanding on the Record Date, respectively. Each share of Class A Common Stock
outstanding on the Record Date will be entitled to one vote and each share of
Class C Common Stock outstanding on the record date will be entitled to 10
votes.

Individual votes of Shareholders are kept private, except as appropriate to
meet legal requirements. Access to proxies and other individual Shareholder
voting records is limited to the Independent Inspectors of Election and certain
employees of the Company who must acknowledge in writing their responsibility to
comply with this policy of confidentiality.

SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING

From time to time the Shareholders of the Company may wish to submit
proposals which they believe should be voted upon by the Shareholders. The
Commission has adopted regulations which govern the inclusion of such proposals
in the Company's annual proxy materials. All such proposals must be submitted to
the Secretary of the Company no later than December 26, 1997 in order to be
considered for inclusion in the Company's 1998 proxy materials.

MATTERS NOT DETERMINED AT THE TIME OF SOLICITATION

The Board is not aware of any matters to come before the meeting other than
Proposals Nos. 1, 2, 3 and 4 described above. If any other matter should come
before the meeting, then the persons named in the enclosed form of proxy will
have discretionary authority to vote all proxies with respect thereto in
accordance with their judgment.

AUDREY L. SEVIN
Secretary

Stamford, CT
April 29, 1997

THE ANNUAL REPORT TO SHAREHOLDERS OF THE COMPANY FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1996 WHICH INCLUDES FINANCIAL STATEMENTS HAS BEEN MAILED TO
SHAREHOLDERS. THE ANNUAL REPORT DOES NOT FORM PART OF THE MATERIAL FOR THE
SOLICITATION OF PROXIES.

<PAGE>

PROXY

PETROLEUM HEAT AND POWER CO., INC.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Irik P. Sevin and Audrey L. Sevin, and each of
them, each with full power to act without the other, and with full power of
substitution, the attorneys and proxies of the undersigned and hereby
authorizes them to represent and to vote, all the shares of Class A Common
Stock and Class C Common Stock of Petroleum Heat and Power Co., Inc. that the
undersigned would be entitled to vote, if personally present, at the Annual
Meeting of Shareholders to be held on June 5, 1997 or any adjournment
thereof, upon such business as may properly come before the meeting,
including the items set forth on the reverse side.

NOMINEES: Paul Biddelman, Phillip Ean Cohen, Thomas J. Edelman,
Richard O'Connell, Stephen Russell, Audrey L. Sevin, Irik P. Sevin
and Wolfgang Traber.

(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)

SEE REVERSE
SIDE

<PAGE>

<S> <C> <C> <C>
PLEASE MARK YOUR
A /X/ VOTES AS IN THIS EXAMPLE USING
DARK INK ONLY.

FOR ALL NOMINEES WITHHOLD AUTHORITY THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES AND EACH
(SEE OTHER SIDE) TO VOTE FOR ALL OF THE PROPOSALS LISTED BELOW
(EXCEPT AS MARKED TO NOMINEES
THE CONTRARY BELOW) (SEE OTHER SIDE) FOR AGAINST ABSTAIN
/ / / / 2. Approval of a proposed amendment to the
1. ELECTION OF Company's Articles of Incorporation / / / / / /
DIRECTORS. (the "Articles") to increase the
(See Reverse Side) authorized (i) Class A Common Stock from
40 million to 60 million shares and (ii)
preferred stock from 5 million to 10
million shares.

3. Approval of a proposed amendment to the / / / / / /
INSTRUCTIONS: To withhold authority to vote for Articles conforming the voting rights,
any individual nominee, write that nominee's name rights upon a Change of Ownership and
in the space provided below: definition of "Change of Ownership" of
the Company's 1989 Cumulative Redeemable
Preferred Stock to the corresponding terms
of the Company's 12-7/8% Exchangeable
Preferred Stock due 2009.

- ------------------------------------------------- 4. Approval of appointment of KPMG Peat / / / / / /
Marwick LLP as the Independent Auditors
of the Corporation.

5. In their discretion, the Proxies are / / / / / /
authorized to vote upon such other
business as may properly come before
the meeting.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5.

(PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.)

_________________________________________Date______________1997_______________________________________Date_____________1997
SIGNATURE SIGNATURE IF HELD JOINTLY
Please sign exactly as name appears on the certificate or certificates representing shares to be voted by this proxy, as shown on
the label above. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If a
corporation, please sign full corporate name by president or other authorized officer. If a partnership, please sign in
partnership name by authorized person(s).
</TABLE>