SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. __________________________________ SCHEDULE 13E-3 Amendment No. 4 RULE 13E-3 TRANSACTION STATEMENT (Pursuant to Section 13(e) of the Securities Exchange Act of 1934 and Rule 13e-3 ((S)240.13e-3) thereunder) Petroleum Heat and Power Co., Inc. (Name of Issuer) Petroleum Heat and Power Co., Inc. Star Gas Partners, L.P. Star Gas Corporation (Name(s) of Person(s) Filing Statement) ----------------------------------------- Class A Common Stock, par value $.10 per share (Title of Class of Securities) ----------------------------------------- 716600 309 (Cusip Number of Class of Securities) ----------------------------------------- Joseph P. Cavanaugh Irik P. Sevin President Chairman of the Board and Star Gas Corporation Chief Executive Officer 2187 Atlantic Street Petroleum Heat and Power Co., Inc. P.O. Box 120011 2187 Atlantic Street Stamford, Connecticut 06912-0011 Stamford, Connecticut 06902 (Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications on Behalf of Person(s) Filing Statement) ------------------------------------------------------------ With Copies To: Michael Rosenwasser, Esq. Alan Shapiro, Esq. R. Joel Swanson, Esq. Andrews & Kurth, L.L.P. Phillips Nizer Benjamin Baker & Botts, L.L.P. 805 Third Avenue Krim & Ballon LLP One Shell Plaza New York, NY 10022 666 Fifth Avenue 910 Louisiana (212) 850-2800 New York, NY 10103-0084 Houston, TX 77002-4995 (212) 977-9700 (713) 229-1300
This statement is filed in connection with (check the appropriate box): a. [X] The filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities Exchange Act of 1934. b. [X] The filing of a registration statement under the Securities Act of 1933. c. [_] A tender offer. d. [_] None of the above. Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: [X] Calculation of Filing Fee - ------------------------------------------------------------------------------ Transaction Valuation* Amount of Filing Fee - ------------------------------------------------------------------------------ $26,148,106.30 $5,230 * Calculated by multiplying $0.9844, by 26,562,481, the sum of the number of shares of Common Stock to be converted in the Transaction. [X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: $9,825 Form or Registration No.: Registration Statement on Form S-4; SEC File No. 333-66005 Filing Party: Star Gas Partners, L.P. Date Filed: October 22, 1998
INTRODUCTION This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule 13E- 3") is being filed by (1) Petroleum Heat and Power Co., Inc, a Minnesota corporation (the "Issuer"); (2) Star Gas Partners, L.P., a Delaware limited partnership and an indirect subsidiary of the Issuer (the "Partnership"); and (3) Star Gas Corporation, a Delaware corporation and a wholly-owned subsidiary of the Issuer ("Star Gas") and the general partner of the Partnership, pursuant to Section 13(e) of the Securities Exchange Act of 1934, as amended, and Rule 13e-3 thereunder, in connection with a transaction (the "Transaction") consisting of (a) the merger of a wholly-owned indirect subsidiary of the Partnership ("Mergeco"), with and into the Issuer (the "Merger"), with the Issuer surviving the Merger as an indirect wholly-owned subsidiary of the Partnership, and the conversion of each outstanding share of Class A and Class C common stock, par value $.10 per share of the Issuer, (the "Common Stock"), into senior subordinated units of limited partner interest ("Senior Subordinated Units") of the Partnership, upon the terms and subject to the conditions set forth in a certain Amended and Restated Agreement and Plan of Merger dated as of February 3, 1999 (the "Merger Agreement") among the Issuer, the Partnership and Mergeco, et al., a copy of which is filed as Exhibit (c)(1) hereto; and (b) the exchange (the "Exchange") (1) by certain holders of shares of Common Stock of the Issuer that are affiliates of the Issuer (the "LLC Owners") with (A) Star Gas LLC, a Delaware limited liability company, of a portion of the Common Stock (the "LLC Shares") held by the LLC Owners for 100% of the limited liability company interests in Star Gas LLC (which in turn will exchange the LLC Shares with the Partnership for General Partner Units) and (B) with the Partnership, of their remaining shares of Common Stock held by the LLC Owners, for junior subordinated units of limited partner interest ("Junior Subordinated Units") of the Partnership, and (2) by certain other holders of Common Stock, that are affiliates of the Issuer with the Partnership, of their Common Stock for Senior Subordinated Units, upon the terms and subject to the conditions set forth in a certain exchange agreement dated October 17, 1998, as amended (the "Exchange Agreement") among the Issuer, the Partnership, the LLC Owners and the other affiliated holders of Common Stock referred to above, a copy of which is filed as Exhibit (c) (2) hereto. The following Cross Reference Sheet, prepared pursuant to General Instruction F to Schedule 13E-3, shows the location in the joint proxy statement and prospectus of the Partnership (the "Proxy Statement"), included in the registration statement on Form S-4 (the "S-4") filed by the Partnership with the Securities and Exchange Commission on the date hereof, of the information required to be included in this Schedule 13E-3. The information set forth in the S-4, including all exhibits thereto and the Annual Report on Form 10-K of the Issuer for its fiscal year ended December 31, 1997 (the "Petro 10-K"), the Proxy Statement of the Issuer for its 1998 annual meeting of shareholders (the "Petro Annual Meeting Proxy Statement") and the Annual Report on Form 10-K of the Partnership for its fiscal year ended September 30, 1998 (the "Partnership 10-K") are hereby expressly incorporated herein by reference as set forth in the Cross Reference Sheet and the responses in this Schedule 13E-3, and such responses are qualified in their entirety by reference to the information contained in the Proxy Statement, the 2
annexes thereto, the Petro 10-K, the Petro Annual Meeting Proxy Statement and the Partnership 10-K which are incorporated by reference in and/or accompany the Proxy Statement. The information contained in this Schedule 13E-3 concerning the Issuer, including, without limitation, the information concerning the background of the Transaction, the deliberations of the Issuer's Board of Directors in connection with the Transaction, the opinion of the Issuer's financial advisor and the Issuer's capital structure and historical financial statements of the Issuer, was supplied by the Issuer. The Partnership and Star Gas take no responsibility for the accuracy or completeness of such information. The information contained in this Schedule 13E-3 concerning the Partnership, including, without limitation, the information concerning the background of the Transaction, the opinion of the financial advisor to the special committee (the "Special Committee") of the board of directors of Star Gas, the Partnership's capital structure and historical financial statements of the Partnership, was supplied by Star Gas, on behalf of the Partnership. Petro takes no responsibility for the accuracy or completeness of such information. 3
CROSS REFERENCE SHEET Item in Where Located in Schedule 13E-3 Proxy Statement - -------------- ---------------- Item 1(a)............................. Cover Page, "Summary - Parties - Petro" and "Parties - Petro" Item 1(b)............................. Cover Page, "Proxy Solicitations - The Petro Special Meeting - Petro Record Date," "Proxy Solicitations - The Petro Special Meeting - Voting Rights; Vote Required" and "Proxy Solicitations - The Petro Special Meeting - Voting Rights of Holders of Petro Preferred Stock" Items 1(c) and (d).................... "Comparative Security Price and Distribution Information - Petro Capital Stock - Class A Common Stock," "Comparison of Securities - Distributions and Dividends" and "Incorporation of Certain Documents by Reference" Item 1(e)............................. * Item 1(f)............................. * Items 2(a) - (d) and (g).............. Cover Page, "Summary - Parties," "Parties," "Management of Star Gas Partners After the Transaction - Officers and Employees of Star Gas Propane and Petro," "Beneficial Ownership of Principal Unitholders and Management" and "Incorporation of Certain Documents by Reference" Items 2(e) and (f).................... * Items 3(a) and (b).................... "Summary - The Transaction," "Summary - The Transaction - The Merger," "The Transaction - Description of the Transaction," "The Transaction - 4
Description of the Merger and the Exchange," "Special Factors - Background of the Transaction," "Management of Star Gas Partners After the Transaction" and "Incorporation of Certain Documents by Reference" Item 4(a) and (b)..................... Cover Page, "Summary - The Transaction," "Summary - The Transaction - The Merger," "The Transaction - Description of the Transaction," "The Transaction - Description of the Merger and the Exchange" and "The Transaction - Description of the Merger Agreement" Items 5(a) - (g)...................... "Summary - The Transaction," "Summary - The Transaction - The Merger," "Summary - The Transaction - Star Gas Partners Current Organization," "Summary - Transaction - Star Gas Partners Organization Immediately Following Transaction," "The Transaction - Description of the Transaction," "The Transaction - Description of the Merger and the Exchange" "The Transaction - Related Financing and Refinancing Transactions," "The Transaction - Description of the Merger Agreement," "Management of Star Gas Partners After the Transaction - General Partner," and "Management of Star Gas Partners After the Transaction - Board of Directors of Star Gas LLC" Item 6(a)............................. "Summary - The Transaction - Raising the Money to Pay Down Petro's Debt and Redeem Petro's Preferred Stock," "Summary - Financial Information - Estimated Sources and Uses of Funds of the Equity Offering and Debt Offering" "The Transaction - Related Financing and Refinancing Transactions" and "Description of Indebtedness - New Indebtedness - Petro Notes" Item 6(b)............................. "Summary - Financial Information - Estimated Sources and Uses of Funds of the Equity Offering and Debt Offering," "Proxy Solicitations - The Star Gas Partners Unitholders Meeting - Cost of Solicitation of Proxies," "Proxy Solicitation - The Petro Special Meeting - Cost of Solicitation of Proxies," "Special Factors - Opinion of A.G. Edwards - Terms of A.G. Edwards' Engagement," "Special Factors - Opinion of Dain Rauscher Wessels - Dain Rauscher Wessels' Engagement Agreement" and "The Transaction - Description of the Merger Agreement - Expenses" Item 6(c)............................. "Summary - The Transaction - Raising the Money to Pay Down Petro's Debt and Redeem Petro's Preferred Stock" 5
Transaction - Related Financing and Refinancing Transactions" and "Description of Indebtedness - New Indebtedness - Petro Notes" Item 6(d)........................... * Item 7(a)........................... "Summary - Special Factors - Potential Advantages to Petro's Common Stockholders," "Summary - Special Factors - Recommendations of Petro Board of Directors and Opinion of Dain Rauscher Wessels," "Summary - Description of Star Gas Partners Units After Amendment of the Partnership Agreement" "Special Factors - Background of the Transaction," "Special Factors - Reasons for the Transaction that the Petro Board Considered; Recommendation of the Petro Board," "Cash Available for Distribution" and "Description of the Star Gas Partners Units" Items 7(b) and (c).................. "Summary - The Transaction" and "The Transaction - Background of the Transaction" Item 7(d)........................... "Summary - Parties - Relationship of the Parties," "Summary - The Transaction - Star Gas Partners Current Organization," "Summary - The Transaction - Star Gas Partners Organization Immediately Following Transaction," "Summary-Special Factors - Potential Advantages to Petro's Common Stockholders," "Summary - Special Factors - Potential Disadvantages and Risks to Petro's Common Stockholders," "Summary - Financial Information -Summary Selected Unaudited Pro Forma Condensed Consolidated Financial Information," "Risk Factors - Risks to Petro Common Stockholders," "Risk Factors - Tax Risks to Petro Common Stockholders," "Risk Factors - Risks to Star Gas Partners Common Unitholders -Conflicts of Interest Were Present in Negotiating and Structuring the Transaction," "Risk Factors - Risks to Petro Common Stockholders - Conflicts Were Present in Structuring and Negotiating the Transaction," "Special Factors - Reasons for the Transaction that the Petro Board Considered; Recommendation of the Petro Board," 6
"Management of Star Gas Partners After the Transaction," "The Amended and Restated Partnership Agreement," "Cash Distribution Policy," "Cash Available for Distribution," "Description of the Units," "Comparison of Securities" and "Federal Income Tax Considerations" Items 8(a) - (e)...................... Cover Page, "Summary - Special Factors - Recommendations of Petro Board of Directors and Opinion of Dain Rauscher Wessels," "Risk Factors - Risks to Star Gas Partners Common Unitholders - Conflicts of Interest Were Present in Negotiating and Structuring Negotiating Transaction," "Risk Factors - Risks to Petro Common Stockholders - Conflicts Were Present in Structuring and Negotiating the Transaction," "Proxy Solicitations - The Petro Special Meeting -Petro Board Recommendation," "Proxy Solicitations - The Petro Special Meeting -Voting Rights; Vote Required," "Special Factors -Background of the Transaction," "Special Factors - Reasons for the Transaction that the Petro Board Considered; Recommendation of the Petro Board" and "Special Factors - Opinion of Dain Rauscher Wessels" Item 8(f)............................. * Items 9(a) - (c)...................... "Summary - Special Factors - Recommendation of Petro Board of Directors and Opinion of Dain Rauscher Wessels," "Special Factors - Background of the Transaction - Petro Retains Dain Rauscher Wessels to Provide a Fairness Opinion to Petro's Public Common Stockholders" and "Special Factors - Opinion of Dain Rauscher Wessels" Items 10(a)........................... "Proxy Solicitations - The Petro Special Meeting - Voting Rights; Vote Required" Item 10(b)............................ * Item 11............................... "Summary - Parties - Relationship of the Parties," "Summary - The Transaction," 7
"Summary - The Transaction - The Merger," "Summary - The Transaction - Raising the Money to Pay Down Petro's Debt and Redeem Petro's Preferred Stock," "The Transaction -Description of the Transaction," "The Transaction - Description of the Merger and the Exchange," "The Transaction -Related Financing and Refinancing Transactions," "Risk Factors - Risks to Star Gas Partners Common Unitholders -Conflicts of Interest Were Present in Negotiating and Structuring the Transaction," "Risk Factors - Risks to Petro Common Stockholders - Conflicts Were Present in Structuring and Negotiating the Transaction," and "Description of Indebtedness - New Indebtedness - Petro Notes" Items 12(a) and (b)................... "Summary - Special Factors - Recommendation of Petro Board of Directors and Opinion of Dain Rauscher Wessels," "Proxy Solicitations - The Petro Special Meeting - Petro Board Recommendation," "Proxy Solicitations - The Petro Special Meeting - Voting Rights; Vote Required" and "Special Factors -Reasons for the Transaction that the Petro Board Considered; Recommendation of the Petro Board" Item 13(a)............................ "Proxy Solicitations - The Petro Special Meeting - Dissenters' Rights," "Dissenters' Rights," and Annex F to the Proxy Statement Item 13(b)............................ * Item 13(c)............................ * Item 14(a) and (b).................... "Summary - Financial Information - Summary Selected Historical Financial and Operating Data of Petro," "Summary - Financial Information - Summary Selected Unaudited Pro Forma Condensed Consolidated Financial Information," "Comparative Security Price and Distribution Information - Comparative Per Share/Per Unit Information (Unaudited)," "Unaudited Pro Forma Condensed Consolidated Financial Information" and "Incorporation of Certain Documents by Reference" Item 14(b)............................ * Item 15(a)............................ "Summary - The Transaction," "Summary - The Transaction - 8
Raising the Money to Pay Down Petro's Debt and Redeem Petro's Preferred Stock," "Summary - Financial Information- Estimated Sources and Uses of Funds of the Equity Offering and Debt Offering," "Proxy Solicitations - The Star Gas Partners Unitholders Meeting - Cost of Solicitation of Proxies," "Proxy Solicitations - The Petro Special Meeting - Cost of Solicitation of Proxies," "The Transaction - Related Financing and Refinancing Transactions - Equity Offering and Debt Offering" "The Transaction - Description of the Merger Agreement - Expenses" and "Description of Indebtedness - New Indebtedness - Petro Notes" Item 15(b)............................ "Proxy Solicitations - The Star Gas Partners Unitholders Meeting - Cost of Solicitation of Proxies," "Proxy Solicitations - The Petro Special Meeting - Cost of Solicitation of Proxies," "Special Factors - Opinion of A.G. Edwards - Terms of A.G. Edwards' Engagement" and "Special Factors - Opinion of Dain Rauscher Wessels - Dain Rauscher Wessels' Engagement Agreement" Item 16............................... The Proxy Statement in its entirety Item 17............................... * - -------------------- * The Item is located in the Schedule 13E-3 only. 9
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION. (a) The relevant information set forth in the Proxy Statement on the cover page thereof and under "Summary - Parties - Petro" and "Parties - Petro" is incorporated herein by reference. (b) The information set forth in the Proxy Statement on the cover page thereof and under "Proxy Solicitations - The Petro Special Meeting - Petro Record Date," "Proxy Solicitations - The Petro Special Meeting - Voting Rights; Vote Required" and "Proxy Solicitations - The Petro Special Meeting - Voting Rights of Holders of Petro Preferred Stock" is incorporated herein by reference. (c) and (d) The relevant information set forth in the Proxy Statement under "Comparative Security Price and Distribution Information - Petro Capital Stock - Class A Common Stock," "Comparison of Securities - Distributions and Dividends" and "Incorporation of Certain Documents by Reference" is incorporated herein by reference. The information set forth in Item 5, Part II of the Petro 10-K under the heading "Market for Registrant's Common Equity and Related Stockholder Matters" is incorporated herein by reference. (e) On December 22, 1997, the Partnership offered, in an underwritten public offering registered under the Securities Act, 832,727 of its common units representing limited partner interests (the "Common Units"), at an offering price to the public of $21.25 per Common Unit. 809,000 of such Common Units were offered by the Partnership and 23,727 of such Common Units were offered by Star Gas as the selling unitholder. The Partnership received net proceeds of $16,244,720 for 809,000 Common Units sold by the Partnership, and Star Gas received net proceeds of $2,966.358 for 87,000 Common Units sold by Star Gas (including 62,273 Common Units sold by Star Gas pursuant to the over-allotment option to purchase an additional 124,000 Common Units granted to the underwriters, which was exercised in part on January 7, 1998). (f) Not Applicable. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d) and (g) This Statement is being filed by the Issuer, the Partnership and Star Gas. The information set forth on the cover page thereof and under "Summary - Parties," "Parties," - "Management of Star Gas Partners After the Transaction - Officers and Employees of Star Gas Propane and Petro" and "Beneficial Ownership of Principal Unitholders and Management" and information appearing under Item 10 of the Petro 10-K and under "Election of Directors" and "Executive Officers" in the Petro Annual Meeting Proxy Statement and information appearing under Item 10 of the Partnership 10-K, which information is incorporated by reference in the Proxy Statement under "Incorporation of Certain Documents by Reference" and is incorporated herein by reference. 10
(e) and (f) During the last five years, none of (i) the Issuer, the Partnership or Star Gas or, (ii) to the best knowledge of the Issuer, the Partnership and Star Gas, any person who is a director or executive officer of the Issuer, the Partnership or Star Gas has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. The Partnership and the Operating Partnership do not have any officers, directors or employees. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS. (a) and (b) The relevant information set forth in the Proxy Statement under "Summary - The Transaction," "Summary - The Transaction - The Merger," "The Transaction - Description of the Transaction," "The Transaction - Description of the Merger and the Exchange," "Special Factors - Background of the Transaction" and "Management of Star Gas Partners After the Transaction" and information appearing under Item 13 of the Petro 10-K and under "Election of Directors - Certain Transactions" in the Petro Annual Meeting Proxy Statement and information appearing in Note 16 (Related Party Transactions) to the Consolidated Financial Statements of the Partnership and its subsidiary included in the Partnership 10-K, which information is incorporated by reference in the Proxy Statement under "Incorporation of Certain Documents" and is incorporated herein by reference. ITEM 4. TERMS OF THE TRANSACTION. (a) and (b) The information set forth in the Proxy Statement on the cover page thereof and under "Summary - The Transaction," " Summary - The Transaction - The Merger," "The Transaction - Description of the Transaction," "The Transaction - Description of the Merger and the Exchange" and "The Transaction - Description of the Merger Agreement" is incorporated herein by reference. ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE. (a)-(g) The information set forth in the Proxy Statement under "Summary - The Transaction," "Summary - The Transaction - The Merger," "Summary - The Transaction - Star Gas Partners Current Organization," "Summary - Transaction - Star Gas Partners Organization Immediately Following Transaction," "The Transaction - Description of the Transaction," "The Transaction - Description of the Merger and the Exchange" "The Transaction - Related Financing and Refinancing Transactions," "The Transaction - Description of the Merger Agreement," "Management of Star Gas Partners After the Transaction - General Partner," and "Management of Star Gas Partners After the Transaction - Board of Directors of Star Gas LLC" is incorporated herein by reference. 11
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION. (a) The information set forth in the Proxy Statement under "Summary -The Transaction - Raising the Money to Pay Down Petro's Debt and Redeem Petro's Preferred Stock," "Summary - Financial Information - Estimated Sources and Uses of Funds of the Equity Offering and Debt Offering," "The Transaction - Related Financing and Refinancing Transactions" and "Description of Indebtedness - New Indebtedness - Petro Notes" is incorporated herein by reference. (b) The information set forth in the Proxy Statement under "Summary - Financial Information - Estimated Sources and Uses of Funds of the Equity Offering and Debt Offering," "Proxy Solicitations - The Star Gas Partners Unitholders Meeting -Cost of Solicitation of Proxies," "Proxy Solicitations - The Petro Special Meeting -Cost of Solicitation of Proxies," "Special Factors - Opinion of A.G. Edwards -Terms of A.G. Edwards' Engagement," "Special Factors - Opinion of Dain Rauscher Wessels - Dain Rauscher Wessels' Engagement Agreement" and "The Transaction -Description of the Merger Agreement - Expenses" is incorporated herein by reference. (c) The information set forth in the Proxy Statement under "Summary - Transaction - Raising the Money to Pay Down Petro's Debt and Redeem Petro's Preferred Stock," "The Transaction - Related Financing and Refinancing Transactions" and "Description of Indebtedness - New Indebtedness - Petro Notes" is incorporated herein by reference. (d) Not applicable. ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS. (a) The information set forth in the Proxy Statement under "Summary - Special Factors - Potential Advantages to Petro's Common Stockholders," "Summary -Special Factors - Recommendations of Petro Board of Directors and Opinion of Dain Rauscher Wessels," "Summary - Description of Star Gas Partners Units After Amendment of the Partnership Agreement," "Special Factors - Background of the Transaction," "Special Factors - Reasons for the Transaction that the Petro Board Considered; Recommendation of the Petro Board," "Cash Available for Distribution" and "Description of the Star Gas Partners Units" is incorporated herein by reference. (b) and (c) The information set forth in the Proxy Statement under "Summary - The Transaction" and "Special Factors - Background of the Transaction" is incorporated herein by reference. (d) The information set forth in the Proxy Statement "Summary - Parties - Relationship of the Parties," "Summary - The Transaction - Star Gas Partners Current Organization" "Summary - The Transaction - Star Gas Partners Organization Immediately Following Transaction," "Summary - Special Factors - Potential Advantages to Petro's Common Stockholders," "Summary - Special Factors - Potential Disadvantages and Risks to Petro's Common Stockholders," "Summary -Financial Information -Summary Selected Unaudited Pro Forma Condensed Consolidated Financial Information," "Risk Factors - Risks to Petro Common Stockholders," "Risk Factors -Tax Risks to Petro Common Stockholders," "Risk Factors - Risks to Star Gas Partners Common Unitholders -Conflicts of Interest Were Present in Negotiating and Structuring the Transaction," "Risk Factors - Risks to Petro Common Stockholders - Conflicts Were Present in Structuring and Negotiating the Transaction," 12
"Special Factors - Reasons for the Transaction that the Petro Board Considered; Recommendation of the Petro Board," "Management of Star Gas Partners After the Transaction," "The Amended and Restated Partnership Agreement," "Cash Distribution Policy," "Cash Available for Distribution," "Description of the Units," "Comparison of Securities" "Federal Income Tax Considerations" and "Description of Indebtedness - Transaction Indebtedness" is incorporated herein by reference. ITEM 8. FAIRNESS OF THE TRANSACTION. (a) - (e) The information set forth in the Proxy Statement on the cover page thereof and under "Summary - Parties - Relationship of the Parties," "Summary - Special Factors - Recommendation of Petro Board of Directors and Opinion of Dain Rauscher Wessels," "Risk Factors - Risks to Star Gas Partners Common Unitholders - Conflicts of Interest Were Present in Negotiating and Structuring the Transaction," "Risk Factors - Risks to Petro Common Stockholders - Conflicts Were Present in Structuring and Negotiating the Transaction," "Proxy Solicitations - The Petro Special Meeting - Petro Board Recommendation," "Proxy Solicitations - The Petro Special Meeting - Voting Rights; Vote Required" "Special Factors - Background of the Transaction," "Special Factors - Reason for the Transaction that the Petro Board Considered; Recommendations of the Petro Board," and "Special Factors - Opinion of Dain Rauscher Wessels" is incorporated herein by reference. (f) Not applicable. ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS. (a) - (c) The information set forth in the Proxy Statement under "Summary - Special Factors - Recommendation of Petro Board of Directors and Opinion of Dain Rauscher Wessels," "Special Factors - Background of the Transaction - Petro Retains Dain Rauscher Wessels to Provide a Fairness Opinion to Petro's Public Common Stockholders" and "Special Factors - Opinion of Dain Rauscher Wessels" is incorporated herein by reference. The opinion of Dain Rauscher Wessels is attached to the Proxy Statement as Annex E. ITEM 10. INTEREST IN SECURITIES OF THE ISSUER. (a) The information set forth in the Proxy Statement under "Proxy Solicitations - The Petro Special Meeting - Voting Rights; Vote Required" and the information set forth in the Petro Annual Meeting Proxy Statement under "Ownership of Equity Securities" is incorporated herein by reference. (b) Not applicable. 13
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S SECURITIES PROXY STATEMENT - SUMMARY - THE TRANSACTION. The information set forth in the Proxy Statement under "Summary - Parties - Relationship of the Parties," "Summary - The Transaction," "Summary - The Transaction - The Merger," "Summary - The Transaction - Raising the Money to Pay Down Petro's Debt and Redeem Petro's Preferred Stock," "The Transaction - Description of the Transaction," "The Transaction - Description of the Merger and the Exchange," "The Transaction - Related Financing and Refinancing Transactions," "Risk Factors - Risks to Star Gas Partners Common Unitholders - Conflicts of Interest Were Present in Negotiating and Structuring the Transaction," "Risk Factors - Risks to Petro Common Stockholders - Conflicts Were Present in Structuring and Negotiating the Transaction," "Description of Indebtedness - New Indebtedness - Petro Notes" is incorporated herein by reference. ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO THE TRANSACTION. (a) and (b) The information set forth in the Proxy Statement under "Summary - Special Factors - Recommendation of Petro Board of Directors and Opinion of Dain Rauscher Wessels," "Proxy Solicitations - The Petro Special Meeting - Petro Board Recommendation," "Proxy Solicitations - The Petro Special Meeting - Voting Rights; Vote Required" and "Special Factors - Reasons for the Transaction that the Petro Board Considered; Recommendation of the Petro Board" is incorporated herein by reference. ITEM 13. OTHER PROVISIONS OF THE TRANSACTION. (a) The information set forth in the Proxy Statement under "Proxy Solicitations - The Petro Special Meeting - Dissenters' Rights," "Dissenters' Rights," and Annex F to the Proxy Statement is incorporated herein by reference. (b) Not applicable. (c) Not applicable. ITEM 14. FINANCIAL INFORMATION. (a) The information set forth in the Proxy Statement under " Summary - Financial Information - Summary Selected Historical Financial and Operating Data of Petro," "Summary - Financial Information - Summary Selected Unaudited Pro Forma Condensed Consolidated Financial Information," "Comparative Security Price and Distribution Information - Comparative Per Share/Per Unit Information (Unaudited)" and "Unaudited Pro Forma Condensed Consolidated Financial Information" is incorporated herein by reference. The consolidated financial statements of Petro and its subsidiaries included in the Petro 10 - K have been incorporated by reference in the Proxy Statement under "Incorporation of Certain Documents by Reference" are incorporated herein by reference. 14
(b) Not applicable. ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED. (a) The relevant information set forth under "Summary - The Transaction," "Summary - The Transaction - Raising the Money to Pay Down Petro's Debt and Redeem Petro's Preferred Stock," "Summary - Financial Information - Estimated Sources and Uses of Funds of the Equity Offering and Debt Offering," "Proxy Solicitations - The Star Gas Partners Unitholders Meeting - Cost of Solicitation of Proxies," "Proxy Solicitations - The Petro Special Meeting - Cost of Solicitation of Proxies," "The Transaction - Related Financing and Refinancing Transactions - Equity Offering and Debt Offering" "The Transaction - Description of the Merger Agreement - Expenses" and "Description of Indebtedness - New Indebtedness - Petro Notes" is incorporated herein by reference. (b) The relevant information set forth under "Proxy Solicitations - The Star Gas Partners Unitholders Meeting - Cost of Solicitation of Proxies," " Proxy Solicitations - The Petro Special Meeting - Cost of Solicitation of Proxies," "Special Factors -Opinion of A.G. Edwards - Terms of A.G. Edwards' Engagement" and "Special Factors - Opinion of Dain Rauscher Wessels - Dain Rauscher Wessels' Engagement Agreement" is incorporated herein by reference. ITEM 16. ADDITIONAL INFORMATION. The information set forth in the Proxy Statement, a copy of which is filed as Exhibit (d)(l) hereto, is incorporated herein by reference. 15
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS. (a) Not Applicable. (b)(1) Opinion of Dain, Rauscher Wessels, dated October 22, 1998 (attached as Annex E to the Proxy Statement).** (b)(2) Dain Rauscher Wessels' Presentation to the Issuer's Board of Directors.* (b)(3) PaineWebber Incorporated's Presentations to the Issuer's Board of Directors.**** (b)(4) Opinion of A. G. Edwards, dated October 16, 1998 (attached as Annex D to the Proxy Statement).** (b)(5) A. G. Edwards' Preliminary Report to Star Gas' Special Committee dated April 28, 1998.**** (b)(6) A. G. Edwards' Appendices to Preliminary Report to Star Gas' Special Committee dated April 28, 1998.**** (b)(7) A. G. Edwards' Preliminary Status Report to the Partnership's Board of Directors draft dated May 4, 1998.**** (b)(8) A. G. Edwards' Round II Appendices to Preliminary Report to the Special Committee-Analyses Performed at $2.00 per share dated May 4, 1998.**** (b)(9) A. G. Edwards' Round II Appendices to Preliminary Report to the Special Committee-Analyses Performed at $2.50 per share dated May 4, 1998.**** (b)(10) A. G. Edwards' Preliminary Status Report to the Partnership's Board of Directors dated May 7, 1998.**** (b)(11) A. G. Edwards' Proposal to Star Gas' Special Committee draft dated May 20, 1998.**** (b)(12) A. G. Edwards' Round III Update to Preliminary Report to Star Gas' Special Committee dated May 21, 1998.**** (b)(13) A. G. Edwards' Round III Appendices to Preliminary Report to Star Gas' Special Committee-Analyses Performed at $2.50 per share plus issuances of DPUs dated May 21, 1998.**** (b)(14) A. G. Edwards' Revised Proposal to Star Gas' Special Committee draft dated May 26, 1998.**** (b)(15) A. G. Edwards' Revised Proposal to Star Gas' Special Committee draft dated July 28, 1998.**** (b)(16) A. G. Edwards' Fairness Opinion Presentation to Star Gas' Special Committee dated October 16, 1998.**** (b)(17) A. G. Edwards' Appendix I to Fairness Opinion Presentation to Star Gas' Special Committee dated October 16, 1998.**** (b)(18) A. G. Edwards' Appendix II to Fairness Opinion Presentation to Star Gas' Special Committee dated October 16, 1998.**** (b)(19) A. G. Edwards' Fairness Opinion Presentation to Star Gas' Special Committee dated February 10, 1999. * (b)(20) A. G. Edwards' Appendix I to Fairness Opinion Presentation to Star Gas' Special Committee dated February 10, 1999. * (b)(21) A. G. Edwards' Appendix II to Fairness Opinion Presentation to Star Gas' Special Committee dated February 10, 1999. * (c)(1) Agreement and Plan of Merger dated October 22, 1998, among Issuer, the Partnership, the Operating Partnership, and Mergeco and the Company (attached as Annex A to the Proxy Statement).** (c)(2) Exchange Agreement dated October 22, 1998 among the Partnership and certain affiliated Common Stockholders of Petro (attached as Annex B to the Proxy Statement).** (d)(l) Preliminary Proxy Statement/Prospectus dated January 21, 1999.** (d)(2) Form of Letter of Transmittal to holders of Petro Common Stock.** (d)(3) Form of Notice of Special Meeting.** (d)(4) Press Release issued by Parent on August 14, 1998.**** (e) Section 302A-471 and 302A-473 of the Minnesota Business Corporation Act (attached as Annex F to the Proxy Statement).*** (f) Not applicable. - - - - - - - - * Filed herewith. ** Incorporated by reference to the Registration Statement on Form S-4 filed by the Issuer with the Securities and Exchange Commission on October 22, 1998. *** Filed on October 22, 1998. **** Filed on December 23, 1998. 16
SIGNATURES After due inquiry and to the best of my knowledge and belief, each of the undersigned hereby certifies that the information set forth in this statement is true, complete and correct. February 10, 1999 PETROLEUM HEAT AND POWER CO., INC. By: /s/ Irik P. Sevin ------------------------------------ Name: Irik P. Sevin Title: Chairman of the Board and Chief Executive Officer STAR GAS PARTNERS, L.P. By: Star Gas Corporation ------------------------------------ its General Partner By: /s/ Joseph P. Cavanaugh ------------------------------------ Name: Joseph P. Cavanaugh Title: President STAR GAS CORPORATION By: /s/ Joseph P. Cavanaugh ------------------------------------ Name: Joseph P. Cavanaugh Title: President 17
EXHIBIT INDEX EXHIBIT NO. DESCRIPTION (a) Not Applicable. (b)(1) Opinion of Dain, Rauscher Wessels, dated October 22, 1998 (attached as Annex E to the Proxy Statement).** (b)(2) Dain, Rauscher Wessels' Presentation to the Issuer's Board of Directors.* (b)(3) Paine Webber Incorporated's Presentations to the Issuer's Board of Directors.**** (b)(4) Opinion of A.G. Edwards, dated October 16, 1998 (attached as Annex D to the Proxy Statement).** (b)(5) A.G. Edwards' Preliminary Report to Star Gas' Special Committee dated April 28, 1998.**** (b)(6) A. G. Edwards' Appendices to Preliminary Report to Star Gas' Special Committee dated April 28, 1998.**** (b)(7) A. G. Edwards' Preliminary Status Report to the Partnership's Board of Directors draft dated May 4, 1998.**** (b)(8) A. G. Edwards' Round II Appendices to Preliminary Report to the Special Committee-Analyses Performed at $2.00 per share dated May 4, 1998.**** (b)(9) A. G. Edwards' Round II Appendices to Preliminary Report to the Special Committee-Analyses Performed at $2.50 per share dated May 4, 1998.**** (b)(10) A. G. Edwards' Preliminary Status Report to the Partnership's Board of Directors dated May 7, 1998.**** (b)(11) A. G. Edwards' Proposal to Star Gas' Special Committee draft dated May 20, 1998.**** (b)(12) A. G. Edwards' Round III Update to Preliminary Report to Star Gas' Special Committee dated May 21, 1998.**** (b)(13) A. G. Edwards' Round III Appendices to Preliminary Report to Star Gas' Special Committee-Analyses Performed at $2.50 per share plus issuances of DPUs dated May 21, 1998.**** (b)(14) A. G. Edwards' Revised Proposal to Star Gas' Special Committee draft dated May 26, 1998.**** (b)(15) A. G. Edwards' Revised Proposal to Star Gas' Special Committee draft dated July 28, 1998.**** (b)(16) A. G. Edwards' Fairness Opinion Presentation to Star Gas' Special Committee dated October 16, 1998.**** (b)(17) A. G. Edwards' Appendix I to Fairness Opinion Presentation to Star Gas' Special Committee dated October 16, 1998.**** (b)(18) A. G. Edwards' Appendix II to Fairness Opinion Presentation to Star Gas' Special Committee dated October 16, 1998.**** (b)(19) A.G. Edwards' Fairness Opinion Presentation to Star Gas' Special Committee dated February 10, 1999 .* (b)(20) A.G. Edwards' Appendix I to Fairness Opinion Presentation to Star Gas' Special Committee dated February 10, 1999.* (b)(21) A.G. Edwards' Appendix II to Fairness Opinion Presentation to Star Gas' Special Committee dated February 10, 1999.* (c)(1) Agreement and Plan of Merger dated October 22, 1998, among Issuer, the Partnership, the Operating Partnership, and Mergeco and the Company (attached as Annex A to the Proxy Statement).** (c)(2) Exchange Agreement dated October 22, 1998 among the Partnership and certain affiliated Common Stockholders of Petro (attached as Annex B to the Proxy Statement).** (d)(l) Preliminary Proxy Statement/Prospectus dated January 21, 1999.** (d)(2) Form of Letter of Transmittal to holders of Petro Common Stock.** (d)(3) Form of Notice of Special Meeting.** (d)(4) Press Release issued by Parent on August 14, 1998.**** (e) Section 302A-471 and 302A-473 of the Minnesota Business Corporation Act (attached as Annex F to the Proxy Statement).*** (f) Not applicable. - ----------------- * Filed herewith. ** Incorporated by reference to the Registration Statement on Form S-4 filed by the Issuer with the Securities and Exchange Commission on October 22, 1998. *** Filed on October 22, 1998. **** Filed on December 23, 1998. 19
[LOGO] PETRO(TM) Project Intense Heat ================================================================================ Transaction Summary - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 1
[LOGO] PETRO(TM) Transaction Summary Summary of Proposed Terms PROJECT INTENSE HEAT Summary of Proposed Terms (In thousands, except as otherwise indicated) Pro Forma Star Units Historical -------------------------------------------------- Petro Common Sr Sub Jr Sub GP Petro Shareholders (A only) Common Units Units Units Units - ------------------------------------------- ---------- ---------- ---------- ---------- ---------- Class A 10,178 -- 1,197 -- -- Petro Shareholders (excluding A only) - ------------------------------------------- Class A (to receive Sr Sub Units) 11,011 -- 1,295 -- -- Class A & C (to receive Jr Sub Units) 5,262 -- -- 430 323 Class B 11 -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total Petro Shareholders (excluding A only) 16,285 -- 1,295 430 323 ---------- ---------- ---------- ---------- ---------- Total Petro Shareholders 26,463 -- 2,491 430 323 ========== ========== ========== ========== ========== Existing Star Public Unitholders -- 3,859 -- -- -- New Star Units - ------------------------------------------- Debt and Preferred Stock Exchange -- 103 -- -- -- Public Offering -- 8,947 -- -- -- ---------- ---------- ---------- ---------- Pro Forma Star Units Outstanding -- 12,909 2,491 430 323 ========== ========== ========== ========== ========== General Assumptions - ------------------------------------------- Exchange Ratio (Star Unit / Petro Share) -- -- 0.11758 0.14318 0.14318 Star Historical MQD $2.200 Star Pro Forma MQD $2.300 GP Interest 2.0% Pro Forma Star Units -------------------------------------------------- GP Total DPUs Total Units Fully-Diluted Incentive Petro Shareholders (A only) Units (Sr Sub) (incl. DPUs) Ownership Distributions - ------------------------------------------- ---------- ---------- ---------- --------- ------------- Class A 1,197 335 1,532 9.0% 36.9% Petro Shareholders (excluding A only) - ------------------------------------------- Class A (to receive Sr Sub Units) 1,295 363 1,657 9.7% 39.9% Class A & C (to receive Jr Sub Units) 753 211 965 5.7% 23.2% Class B -- -- -- -- -- ---------- ---------- ---------- --------- ------------- Total Petro Shareholders (excluding A only) 2,048 574 2,622 15.4% 63.1% ---------- ---------- ---------- --------- ------------- Total Petro Shareholders 3,245 909 4,154 24.3% 100.0% ========== ========== ========== ========= ============= Existing Star Public Unitholders 3,859 -- 3,859 22.6% -- New Star Units Debt and Preferred Stock Exchange 103 -- 103 0.6% -- Public Offering 8,947 -- 8,947 52.4% -- ---------- ---------- ---------- --------- ------------- Pro Forma Star Units Outstanding 16,154 909 17,063 100.0% 100.0% ========== ========== ========== ========= ============= General Assumptions - ------------------------------------------- Exchange Ratio (Star Unit / Petro Share) -- -- -- -- -- Star Historical MQD Star Pro Forma MQD GP Interest DPU Distribution Pro rata distribution of Sr Sub Units based upon Petro pro forma ownership of total Star Units issued to Petro. Up to 303,000 DPUs can be earned each year if Petro provides $0.50 per Unit accretion to Star, up to a maximum of 909,000 DPUs. GP Incentive Distributions Pro rata distribution based upon Petro pro forma ownership of total Star Units issued to Petro. Petro Debt & Preferred Exchange Petro will issue to holders of certain Petro debt and preferred stock 3.37 shares of Petro Junior Convertible Preferred Stock for each $1,000 in principal or liquidation value. Each share of Petro Junior Convertible Preferred Stock will be exchangeable into 0.13 Star Common Units. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 2
[LOGO] PETRO(TM) Project Intense Heat ================================================================================ Pro Forma Analysis - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 3
[LOGO] PETRO(TM) Pro Forma Analysis Petro Summary Historical Financial Data ================================================================================ PETROLEUM HEAT AND POWER CO., INC. Summary Historical Financial Data (In thousands, except as otherwise indicated) At or For the Year Ended December 31, --------------------------------------------------- INCOME STATEMENT DATA 1993 1994 1995 1996 - ---------------------------------------------------- --------- --------- --------- --------- Net Sales $ 538,526 $ 546,677 $ 609,507 $ 608,161 Gross Profit (after direct delivery expense) 141,815 150,701 185,048 147,671 EBITDA (excluding SGU Distributions) (1) 48,436 55,387 56,753 42,070 EBITDA (including SGU Distributions) (1) 48,436 55,387 56,753 46,383 EBIT 13,772 22,992 17,710 12,125 Net Income (Loss) before Extraordinary Items (7,564) (3,611) (22,043) (21,901) Net Income (Loss) (8,431) (4,265) (23,479) (28,315) Net Income (Loss) to Common (11,798) (7,776) (26,742) (30,704) Cash Flow (Loss) to Common 25,971 28,905 16,028 8,764 Less: Maintenance Capex (2) 3,000 3,000 3,000 3,000 Free Cash Flow (Loss) 22,971 25,905 13,028 5,764 PER SHARE DATA - ---------------------------------------------------- Earnings (Loss) per Share before Extraordinary Items ($0.50) ($0.33) ($1.00) ($0.95) Earnings (Loss) per Share ($0.54) ($0.36) ($1.06) ($1.20) Cash Flow (Loss) per Share $1.19 $1.32 $0.63 $0.34 Free Cash Flow (Loss) per Share $1.06 $1.18 $0.51 $0.23 Dividends Paid per Share $0.53 $0.55 $0.60 $0.60 Weighted Average Shares Outstanding 21,755 21,897 25,324 25,593 BALANCE SHEET DATA - ---------------------------------------------------- Working Capital (Deficit) $ 16,694 $ 28,345 $ 65,408 $ 18,093 Total Assets 256,589 397,174 357,241 275,025 Total Debt (including short-term) 213,344 315,562 341,430 316,384 Preferred Stock (including current maturities) 25,000 20,834 16,667 12,500 Total Stockholders' Equity (Deficiency) (61,964) (66,176) (100,903) (145,733) Total Capitalization 176,380 270,220 257,194 183,151 FINANCIAL RATIO DATA - ---------------------------------------------------- Interest Expense $ 22,156 $ 25,282 $ 41,084 $ 34,669 EBITDA to Interest Expense EBITDA (including SGU Distributions) to Interest Expense 2.2 x 2.2 x 1.4 x 1.3 x Total Debt to EBITDA 4.4 x 5.7 x 6.0 x 7.5 x Total Debt to EBITDA (including SGU Distributions) 4.4 x 5.7 x 6.0 x 6.8 x Total Debt to Total Capitalization 121.0% 116.8% 132.8% 172.7% Total Debt & Preferred to Total Capitalization 135.1% 124.5% 139.2% 179.6% At or For the Year Ended December 31, 1997 ----------------------------------------------------------------- INCOME STATEMENT DATA Q1 Q2 Q3 Q4 Total - ---------------------------------------------------- --------- --------- --------- --------- --------- Net Sales $ 248,095 $ 87,972 $ 50,788 $ 161,286 $ 548,141 Gross Profit (after direct delivery expense) 72,443 17,793 4,161 43,990 138,387 EBITDA (excluding SGU Distributions) (1) 47,147 (6,945) (20,908) 16,716 36,010 EBITDA (including SGU Distributions) (1) 48,524 (5,568) (19,532) 18,093 41,517 EBIT 39,796 (14,380) (28,362) 9,210 6,264 Net Income (Loss) before Extraordinary Items 33,388 (27,454) (40,316) 11,483 (22,899) Net Income (Loss) 33,388 (27,454) (40,316) 11,483 (22,899) Net Income (Loss) to Common 32,492 (28,375) (42,177) 10,517 (27,543) Cash Flow (Loss) to Common 39,328 (17,035) (30,400) 7,000 (1,107) Less: Maintenance Capex (2) 750 750 750 750 3,000 Free Cash Flow (Loss) 38,578 (17,785) (31,150) 6,250 (4,107) PER SHARE DATA - ---------------------------------------------------- Earnings (Loss) per Share before Extraordinary Items $1.26 ($1.09) ($1.61) $0.40 ($1.06) Earnings (Loss) per Share $1.26 ($1.09) ($1.61) $0.40 ($1.06) Cash Flow (Loss) per Share $1.53 ($0.66) ($1.16) $0.27 ($0.04) Free Cash Flow (Loss) per Share $1.50 ($0.69) ($1.19) $0.24 ($0.16) Dividends Paid per Share $0.08 $0.08 $0.08 $0.08 $0.30 Weighted Average Shares Outstanding 25,759 25,935 26,147 26,359 26,050 BALANCE SHEET DATA - ---------------------------------------------------- Working Capital (Deficit) $ 78,544 $ 54,179 $ 5,414 $ 12,436 $ 12,436 Total Assets 296,338 259,761 223,918 247,846 247,846 Total Debt (including short-term) 297,888 291,654 291,472 294,348 294,348 Preferred Stock (including current maturities) 42,500 42,500 38,334 36,656 36,656 Total Stockholders' Equity (Deficiency) (116,158) (145,848) (189,361) (177,033) (177,033) Total Capitalization 224,230 188,306 140,445 153,971 153,971 FINANCIAL RATIO DATA - ---------------------------------------------------- Interest Expense $ 8,805 $ 8,344 $ 8,432 $ 8,232 $ 33,813 EBITDA to Interest Expense 2.2 x 2.2 x EBITDA (including SGU Distributions) to Interest Expense -- -- -- -- 1.2 x Total Debt to EBITDA -- -- -- -- 8.2 x Total Debt to EBITDA (including SGU Distributions) -- -- -- -- 7.1 x Total Debt to Total Capitalization 132.8% 154.9% 207.5% 191.2% 191.2% Total Debt & Preferred to Total Capitalization 151.8% 177.5% 234.8% 215.0% 215.0% LTM Fiscal 1998 Ended ------------------------------------- Sept. 30, INCOME STATEMENT DATA Q1 Q2 Q3 1998 - ---------------------------------------------------- --------- --------- --------- --------- Net Sales $ 183,139 $ 66,227 $ 42,113 $ 452,765 Gross Profit (after direct delivery expense) 63,483 14,081 4,997 126,551 EBITDA (excluding SGU Distributions) (1) 40,733 (6,355) (16,165) 34,929 EBITDA (including SGU Distributions) (1) 42,154 (4,934) (14,744) 40,569 EBIT 33,318 (13,432) (23,113) 5,983 Net Income (Loss) before Extraordinary Items 26,978 (22,974) (34,215) (18,728) Net Income (Loss) 26,978 (22,974) (34,215) (18,728) Net Income (Loss) to Common 25,415 (23,939) (35,777) (23,784) Cash Flow (Loss) to Common 32,165 (12,857) (24,504) 1,804 Less: Maintenance Capex (2) 750 750 750 3,000 Free Cash Flow (Loss) 31,415 (13,607) (25,254) (1,196) PER SHARE DATA - ---------------------------------------------------- Earnings (Loss) per Share before Extraordinary Items $0.96 ($0.90) ($1.35) ($0.90) Earnings (Loss) per Share $0.96 ($0.90) ($1.35) ($0.90) Cash Flow (Loss) per Share $1.21 ($0.48) ($0.92) $0.07 Free Cash Flow (Loss) per Share $1.18 ($0.51) ($0.95) ($0.05) Dividends Paid per Share $0.00 $0.00 $0.00 0.08 Weighted Average Shares Outstanding 26,564 26,571 26,574 26,517 BALANCE SHEET DATA - ---------------------------------------------------- Working Capital (Deficit) $ 40,653 $ 23,139 ($7,479) ($7,479) Total Assets 248,777 229,120 198,678 198,678 Total Debt (including short-term) 287,010 286,978 286,885 286,885 Preferred Stock (including current maturities) 36,819 36,854 32,722 32,722 Total Stockholders' Equity (Deficiency) (151,137) (175,066) (209,618) (209,618) Total Capitalization 172,692 148,766 109,989 109,989 FINANCIAL RATIO DATA - ---------------------------------------------------- Interest Expense $ 8,275 $ 8,210 $ 8,320 $ 33,037 EBITDA to Interest Expense -- -- -- 1.1 x EBITDA (including SGU Distributions) to Interest Expense -- -- -- 1.2 x Total Debt to EBITDA -- -- -- 8.2 x Total Debt to EBITDA (including SGU Distributions) -- -- -- 7.1 x Total Debt to Total Capitalization 166.2% 192.9% 260.8% 260.8% Total Debt & Preferred to Total Capitalization 187.5% 217.7% 290.6% 290.6% - ---------------- (1) EBITDA excludes non-recurring expenses. (2) Petro provided estimate for maintenance capital expenditures. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 4
[LOGO] PETRO(TM) Pro Forma Analysis Star Gas Summary Historical Financial Data ================================================================================ STAR GAS PARTNERS, L.P. Summary Historical Financial Data (In thousands, except as otherwise indicated) At or For the Year Ended September 30, 1997 --------------------------------------------------- INCOME STATEMENT DATA 1993 1994 1995 1996 - ---------------------------------------------------- --------- --------- --------- --------- Sales $143,216 $128,040 $104,550 $119,634 Gross Profit (after delivery and branch expense) 23,103 27,957 19,668 26,327 EBITDA EBIT 19,437 21,946 13,541 19,870 Net Income (Loss) (30,313) 8,907 3,468 10,062 Limited Partners' Interest in Net Income (Loss) (47,049) (1,404) (6,169) 2,593 Cash Flow (Loss) Maintenance Capex 4,271 11,966 5,626 13,083 Distributable Cash Flow (Loss) 4,688 5,419 7,988 5,332 (417) 6,547 (2,362) 7,751 PER UNIT DATA Net Income (Loss) per Unit Cash Flow (Loss) per Unit Distributable Cash Flow (Loss) per Unit Cash Distributions per Unit $1.17(1) Weighted Avg. Limited Partner Units Outstanding BALANCE SHEET DATA Working Capital (Deficit) $ 1,976 ($486) $ 7,546 Total Assets 147,608 155,393 156,913 Total Debt (including short-term) 74,929 2,137 87,350 Cumulative Redeemable Preferred Stock 8,264 8,625 Total Partners' Capital 44,328 44,305 61,398 Total Capitalization 127,521 55,067 148,748 FINANCIAL RATIO DATA Interest Expense $16,479 $10,497 $8,549 $7,124 EBITDA to Interest Expense 1.2 x 2.1 x 1.6 x 2.8 x Total Debt to EBITDA 3.4 x 0.2 x 4.4 x Total Debt to Total Capitalization 58.8% 3.9% 58.7% At or For the Year Ended September 30, 1997 ----------------------------------------------------------------- INCOME STATEMENT DATA Q1 Q2 Q3 Q4 Total - ---------------------------------------------------- --------- --------- --------- --------- --------- Sales $50,876 $46,442 $20,078 $17,763 $135,159 Gross Profit (after delivery and branch expense) 12,001 12,019 1,744 757 26,521 EBITDA EBIT 10,402 9,725 253 (677) 19,703 Net Income (Loss) 7,816 7,095 (2,400) (3,213) 9,298 Limited Partners' Interest in Net Income (Loss) 5,892 5,325 (4,143) (5,062) 2,012 Cash Flow (Loss) 5,774 5,218 (4,060) (4,960) 1,972 Maintenance Capex 8,650 8,049 (1,245) (2,430) 13,024 Distributable Cash Flow (Loss) 2,517 1,271 666 825 5,279 6,133 6,778 (1,911) (3,255) 7,745 PER UNIT DATA Net Income (Loss) per Unit $1.10 $0.99 ($0.77) ($0.94) $0.37 Cash Flow (Loss) per Unit $1.61 $1.50 ($0.23) ($0.45) $2.42 Distributable Cash Flow (Loss) per Unit $1.14 $1.26 ($0.36) ($0.61) $1.44 Cash Distributions per Unit $0.55 $0.55 $0.55 $0.55 $2.20 Weighted Avg. Limited Partner Units Outstanding 5,271 5,271 5,271 5,271 5,271 BALANCE SHEET DATA Working Capital (Deficit) $ 12,428 $ 14,583 $ 9,684 $ 3,319 $ 3,319 Total Assets 168,485 158,678 153,767 147,469 147,469 Total Debt (including short-term) 91,850 85,000 85,000 85,000 85,000 Cumulative Redeemable Preferred Stock -- -- -- -- -- Total Partners' Capital 64,332 66,699 59,598 51,578 51,578 Total Capitalization 156,182 151,699 144,598 136,578 136,578 FINANCIAL RATIO DATA Interest Expense $1,848 $1,771 $1,671 $1,676 $6,966 EBITDA to Interest Expense -- -- -- -- 2.8 x Total Debt to EBITDA -- -- -- -- 4.3 x Total Debt to Total Capitalization 58.8% 56.0% 58.8% 62.2% 62.2% AT OR FOR THE YEAR ENDED SEPTEMBER 30, 1999 ------------------------------------------------------------- INCOME STATEMENT DATA Q1 Q2 Q3 Q4 1998 - ---------------------------------------------------- --------- --------- --------- --------- --------- Sales $41,844 $37,884 $16,243 $15,714 $111,685 Gross Profit (after delivery and branch expense) 10,041 12,736 1,187 1,007 24,971 EBITDA 8,672 11,287 (415) (638) 18,906 EBIT 5,847 8,381 (3,328) (3,632) 7,268 Net Income (Loss) 3,707 6,363 (5,235) (5,790) (955) Limited Partners' Interest in Net Income (Loss) 3,633 6,236 (5,130) (5,675) (936) Cash Flow (Loss) 6,690 9,421 (2,179) (2,739) 11,193 Maintenance Capex 2,085 943 797 1,190 5,015 Distributable Cash Flow (Loss) 4,605 8,478 (2,976) (3,929) 6,178 PER UNIT DATA - ---------------------------------------------------- Net Income (Loss) per Unit $0.66 $1.00 ($0.82) ($0.91) ($0.16) Cash Flow (Loss) per Unit $1.20 $1.48 ($0.34) ($0.43) $1.82 Distributable Cash Flow (Loss) per Unit $0.82 $1.33 ($0.47) ($0.62) $1.00 Cash Distributions per Unit $0.55 $0.55 $0.55 $0.55 $2.20 Weighted Avg. Limited Partner Units Outstanding 5,474 6,228 6,228 6,210 6,035 BALANCE SHEET DATA - ---------------------------------------------------- Working Capital (Deficit) $ 10,475 $ 14,841 $ 4,242 $ 35 $ 35 Total Assets 179,451 178,308 173,265 179,607 179,607 Total Debt (including short-term) 96,000 96,000 96,950 109,770 109,770 Cumulative Redeemable Preferred Stock -- -- -- -- -- Total Partners' Capital 71,883 74,751 66,020 57,347 57,347 Total Capitalization 167,883 170,751 162,970 167,117 167,117 FINANCIAL RATIO DATA - ---------------------------------------------------- Interest Expense $2,086 $1,875 $1,873 $2,093 $7,927 EBITDA to Interest Expense -- -- -- -- 2.4 x Total Debt to EBITDA -- -- -- -- 5.8 x Total Debt to Total Capitalization 57.2% 56.2% 59.5% 65.7% 65.7% - --------------- Note: Financial data prior to December 20, 1995 reflects operations of the Predecessor Company. (1) Includes two quarters of distributions and a pro rata distribution of $0.0725 per Unit for the period December 20, 1995 to December 31, 1995. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 5
[LOGO] Petro(TM) Pro Forma Analysis Pro Forma Unit Coverage Analysis ================================================================================ PROJECT INTENSE HEAT Pro Forma Unit Coverage Analysis (In thousands, except as otherwise indicated) Projected for the Year Ending September 30, --------------------------------------------------------------------------- 15 Year Weather Case ---------------------------------------------------------------- Estimated Normalized Estimated Normalized Pro Forma EBITDA 1998E 1998E 1999E 1999E 2000E 2001E 2002E - --------------------------------------------- --------- ---------- --------- ---------- --------- --------- --------- Star $18,906 $22,316 $20,093 $22,674 $23,749 $25,182 $26,615 Petro 30,612 44,749 43,613 45,013 47,551 50,924 54,081 Synergies 500 500 500 500 500 500 500 --------- ---------- --------- ---------- --------- --------- --------- Pro Forma EBITDA $50,018 $67,565 $64,206 $68,187 $71,800 $76,606 $81,196 Distributable Cash Flow - --------------------------------------------- Pro Forma EBITDA $50,018 $67,565 $64,206 $68,187 $71,800 $76,606 $81,196 Interest Expense (23,465) (24,036) (24,139) (24,139) (24,869) (26,226) (27,588) Maintenance Capex (6,125) (6,110) (6,194) (6,194) (6,313) (6,434) (6,558) Other (525) (525) (525) (525) (525) (525) (525) --------- ---------- --------- ---------- --------- --------- --------- Distributable Cash Flow $19,903 $36,894 $33,348 $37,329 $40,093 $43,421 $46,525 Weighted Average Units Outstanding - --------------------------------------------- Common Units 12,909 12,909 13,319 13,319 14,044 14,646 15,202 Senior Subordinated Units (incl. DPUs) 2,491 2,491 2,491 2,491 2,491 2,491 2,491 Junior Subordinated & General Partner Units 753 753 753 753 753 753 753 --------- ---------- --------- ---------- --------- --------- --------- Total Weighted Average Units Outstanding 16,154 16,154 16,564 16,564 17,289 17,891 18,447 Distributable Cash Flow per Unit - --------------------------------------------- Common Units $1.54 $2.86 $2.50 $2.80 $2.85 $2.96 $3.06 Senior Subordinated Units (incl. DPUs) $1.29 $2.40 $2.11 $2.36 $2.42 $2.53 $2.63 Junior Subordinated & General Partner Units $1.23 $2.28 $2.01 $2.25 $2.32 $2.43 $2.52 --------- ---------- --------- ---------- --------- --------- --------- Total Units Outstanding $1.23 $2.28 $2.01 $2.25 $2.32 $2.43 $2.52 Distributions per Unit - --------------------------------------------- MQD per Unit $2.30 $2.30 $2.30 $2.30 $2.30 $2.30 $2.30 Indicated Distribution per Unit $2.30 $2.30 $2.30 $2.30 $2.32 $2.40 $2.40 MQD Coverage per Unit - --------------------------------------------- Common Units 0.67 x 1.24 x 1.09 x 1.22 x 1.24 x 1.29 x 1.33 x Common and Senior Subordinated Units (incl. DPUs) 0.56 x 1.04 x 0.92 x 1.03 x 1.05 x 1.10 x 1.14 x --------- ---------- --------- ---------- --------- --------- --------- Total Units 0.54 x 0.99 x 0.88 x 0.98 x 1.01 x 1.06 x 1.10 x Indicated Distribution Coverage per Unit - --------------------------------------------- Common Units 0.67 x 1.24 x 1.09 x 1.22 x 1.23 x 1.24 x 1.28 x Common and Senior Subordinated Units (incl. DPUs) 0.56 x 1.04 x 0.92 x 1.03 x 1.05 x 1.06 x 1.10 x --------- ---------- --------- ---------- --------- --------- --------- Total Units 0.54 x 0.99 x 0.88 x 0.98 x 1.00 x 1.01 x 1.05 x Projected for the Year Ending September 30, -------------------------------------------------------------------------- 30 Year Weather Case --------------------------------------------------------------- Estimated Normalized Estimated Normalized Pro Forma EBITDA 1998E 1998E 1999E 1999E 2000E 2001E 2002E - --------------------------------------------- --------- ---------- --------- ---------- --------- --------- -------- Star $18,906 $23,722 $20,734 $24,106 $25,260 $26,797 $28,335 Petro 30,612 46,900 44,298 47,215 50,369 54,883 59,097 Synergies 500 500 500 500 500 500 500 --------- ---------- --------- ---------- --------- --------- -------- Pro Forma EBITDA $50,018 $71,122 $65,532 $71,821 $76,129 $82,180 $87,932 Distributable Cash Flow - --------------------------------------------- Pro Forma EBITDA $50,018 $71,122 $65,532 $71,821 $76,129 $82,180 $87,932 Interest Expense (23,465) (24,036) (24,672) (24,672) (26,122) (27,845) (29,557) Maintenance Capex (6,125) (6,110) (6,273) (6,273) (6,393) (6,516) (6,641) Other (525) (525) (525) (525) (625) (675) (725) --------- ---------- --------- ---------- --------- --------- -------- Distributable Cash Flow $19,903 $40,451 $34,062 $40,351 $42,989 $47,144 $51,009 Weighted Average Units Outstanding - --------------------------------------------- Common Units 12,909 12,909 12,951 12,951 13,270 13,816 14,366 Senior Subordinated Units (incl. DPUs) 2,491 2,491 2,491 2,491 2,794 3,097 3,400 Junior Subordinated & General Partner Units 753 753 753 753 753 753 753 --------- ---------- --------- ---------- --------- --------- -------- Total Weighted Average Units Outstanding 16,154 16,154 16,196 16,196 16,818 17,667 18,520 Distributable Cash Flow per Unit - --------------------------------------------- Common Units $1.54 $3.13 $2.63 $3.12 $3.24 $3.41 $3.55 Senior Subordinated Units (incl. DPUs) $1.29 $2.63 $2.21 $2.61 $2.68 $2.79 $2.87 Junior Subordinated & General Partner Units $1.23 $2.50 $2.10 $2.49 $2.56 $2.67 $2.75 --------- ---------- --------- ---------- --------- --------- -------- Total Units Outstanding $1.23 $2.50 $2.10 $2.49 $2.56 $2.67 $2.75 Distributions per Unit - --------------------------------------------- MQD per Unit $2.30 $2.30 $2.30 $2.30 $2.30 $2.30 $2.30 Indicated Distribution per Unit $2.30 $2.30 $2.30 $2.30 $2.50 $2.63 $2.70 MQD Coverage per Unit - --------------------------------------------- Common Units 0.67 x 1.36 x 1.14 x 1.35 x 1.41 x 1.48 x 1.54 x Common and Senior Subordinated Units (incl. DPUs) 0.56 x 1.14 x 0.96 x 1.14 x 1.16 x 1.21 x 1.25 x --------- ---------- --------- ---------- --------- --------- -------- Total Units 0.54 x 1.09 x 0.91 x 1.08 x 1.11 x 1.16 x 1.20 x Indicated Distribution Coverage per Unit - --------------------------------------------- Common Units 0.67 x 1.36 x 1.14 x 1.35 x 1.30 x 1.30 x 1.32 x Common and Senior Subordinated Units (incl. DPUs) 0.56 x 1.14 x 0.96 x 1.14 x 1.07 x 1.06 x 1.06 x --------- ---------- --------- ---------- --------- --------- -------- Total Units 0.54 x 1.09 x 0.91 x 1.08 x 1.02 x 1.01 x 1.02 x - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 6
[LOGO] Petro(TM) Pro Forma Analysis Pro Forma Credit Analysis ================================================================================ PROJECT INTENSE HEAT Pro Forma Credit Analysis (In thousands, except as otherwise indicated) Projected for the Year Ending September 30, -------------------------------------------------------------------------- 15 Year Weather Case ------------------------------------------------------------- Estimated Estimated Normalized Pro Forma EBITDA 1998E 1999E 1999E 2000E 2001E 2002E - --------------------------------- --------- --------- ---------- --------- --------- --------- Star $18,906 $20,093 $22,674 $23,749 $25,182 $26,615 Petro 30,612 43,613 45,013 47,551 50,924 54,081 Synergies 500 500 500 500 500 500 --------- --------- ---------- --------- --------- --------- Pro Forma EBITDA $50,018 $64,206 $68,187 $71,800 $76,606 $81,196 Distributable Cash Flow - --------------------------------- Pro Forma EBITDA $50,018 $64,206 $68,187 $71,800 $76,606 $81,196 Interest Expense (23,465) (24,139) (24,139) (24,869) (26,226) (27,588) Maintenance Capex (6,125) (6,194) (6,194) (6,313) (6,434) (6,558) Other (525) (525) (525) (525) (525) (525) --------- --------- ---------- --------- --------- --------- Distributable Cash Flow $19,903 $33,348 $37,329 $40,093 $43,421 $46,525 Fixed Charges - --------------------------------- Interest Expense 23,465 24,139 24,139 24,869 26,226 27,588 Lease and Rental Expense 5,281 4,829 4,829 4,165 3,724 3,639 --------- --------- ---------- --------- --------- --------- Total Fixed Charges 28,746 28,968 28,968 29,034 29,950 31,227 Pro Forma Balance Sheet Data Working Capital 536 536 536 536 536 536 Total Assets 376,801 366,642 366,642 373,104 378,524 381,099 Total Debt 283,851 284,002 284,002 302,775 321,996 340,358 Total Partners' Capital (Deficit) (8,229) (19,372) (19,372) (36,520) (56,754) (78,686) --------- --------- ---------- --------- --------- --------- Total Capitalization 275,622 264,630 264,630 266,255 265,242 261,672 Pro Forma Credit Analysis - --------------------------------- Interest Coverage Ratio (1) 2.13 x 2.66 x 2.82 x 2.89 x 2.92 x 2.94 x Fixed Charge Coverage Ratio (2) 1.74 x 2.22 x 2.35 x 2.47 x 2.56 x 2.60 x Total Debt to Total Capitalization 103.0% 107.3% 107.3% 113.7% 121.4% 130.1% Total Debt to EBITDA 5.67 x 4.42 x 4.17 x 4.22 x 4.20 x 4.19 x Total Debt to Distributable Cash Flow 14.26 x 8.52 x 7.61 x 7.55 x 7.42 x 7.32 x Projected for the Year Ending September 30, ------------------------------------------------------------------------- 30 Year Weather Case ------------------------------------------------------------ Estimated Estimated Normalized Pro Forma EBITDA 1998E 1999E 1999E 2000E 2001E 2002E - --------------------------------- --------- --------- ---------- --------- --------- --------- Star $18,906 $20,734 $24,106 $25,260 $26,797 $28,335 Petro 30,612 44,298 47,215 50,369 54,883 59,097 Synergies 500 500 500 500 500 500 --------- --------- ---------- --------- --------- --------- Pro Forma EBITDA $50,018 $65,532 $71,821 $76,129 $82,180 $87,932 Distributable Cash Flow - --------------------------------- Pro Forma EBITDA 50,018 65,532 71,821 76,129 82,180 87,932 Interest Expense (23,465) (24,672) (24,672) (26,122) (27,845) (29,557) Maintenance Capex (6,125) (6,273) (6,273) (6,393) (6,516) (6,641) Other (525) (525) (525) (625) (675) (725) --------- --------- ---------- --------- --------- --------- Distributable Cash Flow 19,903 34,062 40,351 42,989 47,144 51,009 Fixed Charges - --------------------------------- Interest Expense 23,465 24,672 24,672 26,122 27,845 29,557 Lease and Rental Expense 5,281 4,829 4,829 4,165 3,724 3,639 --------- --------- ---------- --------- --------- --------- Total Fixed Charges 28,746 29,501 29,501 30,287 31,569 33,196 Pro Forma Balance Sheet Data - --------------------------------- Working Capital 536 536 536 536 536 536 Total Assets 376,801 366,777 366,777 378,583 389,218 396,254 Total Debt 283,851 298,719 298,719 322,620 346,822 369,831 Total Partners' Capital (Deficit) (8,229) (34,010) (34,010) (51,584) (72,845) (96,135) Total Capitalization 275,622 264,709 264,709 271,036 273,977 273,696 Pro Forma Credit Analysis - --------------------------------- Interest Coverage Ratio (1) 2.13 x 2.66 x 2.91 x 2.91 x 2.95 x 2.97 x Fixed Charge Coverage Ratio (2) 1.74 x 2.22 x 2.43 x 2.51 x 2.60 x 2.65 x Total Debt to Total Capitalization 103.0% 112.8% 112.8% 119.0% 126.6% 135.1% Total Debt to EBITDA 5.67 x 4.56 x 4.16 x 4.24 x 4.22 x 4.21 x Total Debt to Distributable Cash Flow 14.26 x 8.77 x 7.40 x 7.50 x 7.36 x 7.25 x - --------------- (1)Interest coverage ratio is EBITDA divided by interest expense. (2)Fixed charge coverage ratio is EBITDA divided by total fixed charges. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 7
[LOGO] PETRO(TM) Project Intense Heat ================================================================================ Unit Reference Value Analysis ================================================================================ - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 8
[LOGO] PETRO(TM) Unit Reference Value Analysis Unit Reference Value Analysis Summary ================================================================================ PROJECT INTENSE HEAT Unit Reference Value Analysis Summary Dain 15 Year 30 Year Rauscher Downside Weather Weather Wessels Indicated Reference Values per Star Unit Case Case Case Case - ----------------------------------------------------------- -------- -------- -------- --------- Common Unit $19.57 $23.63 $27.49 $21.03 Senior Subordinated Unit $15.22 $18.75 $28.67 $16.56 Junior Subordinated / General Partner Unit $11.09 $13.49 $21.16 $12.02 Exchange Ratio (Star Unit / Petro Share) - ----------------------------------------------------------- Senior Subordinated Unit 0.11758 0.11758 0.11758 0.11758 Junior Subordinated / General Partner Unit 0.14318 0.14318 0.14318 0.14318 Implied Reference Value per Petro Share Senior Subordinated Unit - ----------------------------------------------------------- -------------------------------------------- Implied Reference Value (excluding DPUs and GP Incentives) $1.79 $2.20 $2.74 $1.95 DPUs and GP Incentives Value -- 0.00 0.63 0.00 -------- -------- -------- --------- Total Implied Reference Value $1.79 $2.20 $3.37 $1.95 ======== ======== ======== ========= Implied Reference Value per Petro Share Junior Subordinated/ General Partner Unit - ----------------------------------------------------------- -------------------------------------------- Implied Reference Value (excluding DPUs and GP Incentives) $1.59 $1.93 $2.43 $1.72 DPUs and GP Incentives Value -- 0.00 0.60 0.00 -------- -------- -------- --------- Total Implied Reference Value $1.59 $1.93 $3.03 $1.72 ======== ======== ======== ========= - -------------------------------------------------------------------------------- Sain Rauscher Wessels Page 9
[LOGO] PETRO(TM) Unit Reference Value Analysis Unit Reference Value Analysis Discount Rate Assumptions ================================================================================ PROJECT INTENSE HEAT Unit Reference Value Analysis Discount Rate Assumptions 15 Year Downside Case Weather Case -------------------------- ---------------------- Discount Bps Spread Discount Bps Spread Rate to Common Rate to Common -------- ---------- -------- ---------- Common Unit 12.00% (1) -- 10.25% -- Senior Subordinated Unit - --------------------------------------------------- Senior Subordinated Unit Distributions 14.50% 250 bps 12.25% 200 bps Deferred Participation Units (DPUs) -- -- 14.25% 400 bps GP Incentive Distributions -- -- 14.75% 450 bps Junior Subordinated / General Partner Unit - --------------------------------------------------- Junior Subordinated Unit Distributions 15.50% 350 bps 13.25% 300 bps Deferred Participation Units (DPUs) -- -- 14.25% 400 bps GP Incentive Distributions -- -- 14.75% 450 bps Dain Rauscher Weather Case Wessels Case -------------------------- ---------------------- Discount Bps Spread Discount Bps Spread Rate to Common Rate to Common ---------- ---------- -------- ---------- Common Unit 9.75% -- 11.50% -- Senior Subordinated Unit - --------------------------------------------------- Senior Subordinated Unit Distributions 11.00% 125 bps 13.75% 225 bps Deferred Participation Units (DPUs) 13.75% 400 bps 15.50% 400 bps GP Incentive Distributions 14.25% 450 bps 16.00% 450 bps Junior Subordinated / General Partner Unit - --------------------------------------------------- Junior Subordinated Unit Distributions 11.75% 200 bps 14.75% 325 bps Deferred Participation Units (DPUs) 13.75% 400 bps 15.50% 400 bps GP Incentive Distributions 14.25% 450 bps 16.00% 450 bps - --------------- (1) Common Unit discount rate is derived by using the midpoint discount rate between the appropriate discount rates required to calculate a net present value equal to the 1/22/99 closing price of $19.00 using flat $2.20 and $2.30 distributions representing Star stand alone and Star pro forma, respectively. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 10
[LOGO] PETRO(TM) Unit Reference Value Analysis Projected Indicated Distribution per Unit and Cash Distributions per Unit Class PROJECT INTENSE HEAT Projected Indicated Distribution per Unit and Cash Distributions per Unit Class (In thousands, except as otherwise indicated) Projected for the Year Ending September 30, ------------------------------------------------ 15 Year Weather Case ------------------------------------------------ Distributable Cash Flow 1999E 2000E 2001E 2002E - ---------------------------------------------- ------- ------- ------- ------- Distributable Cash Flow $37,329 $40,093 $43,421 $46,525 Indicated Distribution per Unit $2.30 $2.32 $2.40 $2.40 Cash Distributions - ---------------------------------------------- Distributions to Unitholders $38,097 $40,110 $42,937 $44,273 GP Incentive Distributions 0 0 0 0 ------- ------- ------- ------- Total Cash Distributions $38,097 $40,110 $42,937 $44,273 ======= ======= ======= ======= Weighted Average Units Outstanding - ---------------------------------------------- Common Units 13,319 14,044 14,646 15,202 Senior Subordinated Units (incl. DPUs) 2,491 2,491 2,491 2,491 Junior Subordinated Units 430 430 430 430 General Partner Units 323 323 323 323 ------- ------- ------- ------- Total Units Outstanding 16,564 17,289 17,891 18,447 Splits ------------------- Annual Unit- GP GP Incentive Distribution Targets Target holders Incentives - -------------------------------------------- ------ ------- ---------- Minimum Quarterly Distribution $2.30 100.00% 0.00% First Target Distribution $2.42 100.00% 0.00% Second Target Distribution $2.84 86.70% 13.30% Third Target Distribution $3.70 76.50% 23.50% Thereafter -- 51.00% 49.00% Cash Distributions prior to First Target - ---------------------------------------------- Cash Distributed to Unitholders 38,097 40,110 42,937 44,273 Allocation to Common Units 30,634 32,582 35,149 36,485 Allocation to Senior Subordinated Units 5,730 5,780 5,980 5,980 Allocation to Junior Subordinated Units 990 999 1,033 1,033 Allocation to General Partner Units 743 750 775 775 GP Incentive DistributionsTotal Cash Distributed 38,097 40,110 42,937 44,273 Cash Distributions First to Second Target - ---------------------------------------------- Cash Distributed to Unitholders 0 0 0 0 Allocation to Common Units 0 0 0 0 Allocation to Senior Subordinated Units 0 0 0 0 Allocation to Junior Subordinated Units 0 0 0 0 Allocation to General Partner Units 0 0 0 0 GP Incentive Distributions 0 0 0 0 Total Cash Distributed 0 0 0 0 Cash Distributions Second to Third Target - ---------------------------------------------- Cash Distributed to Unitholders $0 $0 $0 $0 Allocation to Common Units 0 0 0 0 Allocation to Senior Subordinated Units 0 0 0 0 Allocation to Junior Subordinated Units 0 0 0 0 Allocation to General Partner Units 0 0 0 0 GP Incentive Distributions 0 0 0 0 Total Cash Distributed 0 0 0 0 Cash Distributions Third to Thereafter Target - ---------------------------------------------- Cash Distributed to Unitholders $0 $0 $0 $0 Allocation to Common Units 0 0 0 0 Allocation to Senior Subordinated Units 0 0 0 0 Allocation to Junior Subordinated Units 0 0 0 0 Allocation to General Partner Units 0 0 0 0 GP Incentive Distributions 0 0 0 0 Total Cash Distributed 0 0 0 0 Projected for the Year Ending September 30, --------------------------------------------------------- 30 Year Weather Case --------------------------------------------------------- Distributable Cash Flow 1999E 2000E 2001E 2002E - ---------------------------------------------- ------- ------- ------- ------- Distributable Cash Flow $40,351 $42,989 $47,144 $51,009 Indicated Distribution per Unit $2.30 $2.50 $2.63 $2.70 Cash Distributions - ---------------------------------------------- Distributions to Unitholders $37,251 $42,044 $46,465 $50,004 GP Incentive Distributions 0 217 580 807 ------- ------- ------- ------- Total Cash Distributions $37,251 $42,261 $47,045 $50,810 ======= ======= ======= ======= Weighted Average Units Outstanding - ---------------------------------------------- Common Units 12,951 13,270 13,816 14,366 Senior Subordinated Units (incl. DPUs) 2,491 2,794 3,097 3,400 Junior Subordinated Units 430 430 430 430 General Partner Units 323 323 323 323 ------- ------- ------- ------- Total Units Outstanding 16,196 16,818 17,667 18,520 GP Incentive Distribution Targets - --------------------------------------------- Minimum Quarterly Distribution First Target Distribution Second Target Distribution Third Target Distribution Thereafter Cash Distributions prior to First Target - ---------------------------------------------- Cash Distributed to Unitholders 37,251 40,632 42,684 44,744 Allocation to Common Units 29,788 32,060 33,380 34,708 Allocation to Senior Subordinated Units 5,730 6,752 7,484 8,216 Allocation to Junior Subordinated Units 990 1,040 1,040 1,040 Allocation to General Partner Units 743 781 781 781 GP Incentive Distributions Total Cash Distributed 37,251 40,632 42,684 44,744 Cash Distributions First to Second Target - ---------------------------------------------- Cash Distributed to Unitholders 0 1,413 3,781 5,260 Allocation to Common Units 0 1,115 2,957 4,080 Allocation to Senior Subordinated Units 0 235 663 966 Allocation to Junior Subordinated Units 0 36 92 122 Allocation to General Partner Units 0 27 69 92 GP Incentive Distributions 0 217 580 807 Total Cash Distributed 0 1,629 4,361 6,066 Cash Distributions Second to Third Target - ---------------------------------------------- Cash Distributed to Unitholders $0 $0 $0 $0 Allocation to Common Units 0 0 0 0 Allocation to Senior Subordinated Units 0 0 0 0 Allocation to Junior Subordinated Units 0 0 0 0 Allocation to General Partner Units 0 0 0 0 GP Incentive Distributions 0 0 0 0 Total Cash Distributed 0 0 0 0 Cash Distributions Third to Thereafter Target - ---------------------------------------------- Cash Distributed to Unitholders $0 $0 $0 $0 Allocation to Common Units 0 0 0 0 Allocation to Senior Subordinated Units 0 0 0 0 Allocation to Junior Subordinated Units 0 0 0 0 Allocation to General Partner Units 0 0 0 0 GP Incentive Distributions 0 0 0 0 Total Cash Distributed 0 0 0 0 - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 11
[LOGO APPEARS HERE] Unit Reference Value Analysis Projected Indicated Distribution per Unit and Cash Distributions per Unit Class ==================================================================================================================================== - ------------------------------------------------------------------------------------------------------------------------------------ PROJECT INTENSE HEAT Projected Indicated Distribution per Unit and Cash Distributions per Unit Class (In thousands, except as otherwise indicated) Projected for the Year Ending September 30, -------------------------------------------------------------------------------- 15 Year Weather Case 30 Year Weather Case ---------------------------------------- --------------------------------------- Common Unit Cash Distributions 1999E 2000E 2001E 2002E 1999E 2000E 2001E 2002E - ----------------------------------------------- --------- --------- --------- --------- --------- --------- --------- --------- Cash Distributions prior to First Target $30,634 $32,582 $35,149 $36,485 $29,788 $32,060 $33,380 $34,708 Cash Distributions First to Second Target 0 0 0 0 0 1,115 2,957 4,080 Cash Distributions Second to Third Target 0 0 0 0 0 0 0 0 Cash Distributions Third to Thereafter Target 0 0 0 0 0 0 0 0 --------- --------- --------- --------- --------- --------- --------- --------- Total Cash Distributions $30,634 $32,582 $35,149 $36,485 $29,788 $33,174 $36,337 $38,788 Total Cash Distributions per Unit $2.300 $2.320 $2.400 $2.400 $2.300 $2.500 $2.630 $2.700 Weighted Average Units Outstanding 13,319 14,044 14,646 15,202 12,951 13,270 13,816 14,366 Senior Subordinated Unit Cash Distributions - ----------------------------------------------- Cash Distributions prior to First Target $5,730 $5,780 $5,980 $5,980 $5,730 $6,752 $7,484 $8,216 Cash Distributions First to Second Target 0 0 0 0 0 235 663 966 Cash Distributions Second to Third Target 0 0 0 0 0 0 0 0 Cash Distributions Third to Thereafter Target 0 0 0 0 0 0 0 0 --------- --------- --------- --------- --------- --------- --------- --------- Total Cash Distributions $5,730 $5,780 $5,980 $5,980 $5,730 $6,986 $8,146 $9,181 Total Cash Distributions per Unit $2.300 $2.320 $2.400 $2.400 $2.300 $2.500 $2.630 $2.700 Weighted Average Units Outstanding 2,491 2,491 2,491 2,491 2,491 2,794 3,097 3,400 Junior Subordinated Unit Cash Distributions - ----------------------------------------------- Cash Distributions prior to First Target $990 $999 $1,033 $1,033 $990 $1,040 $1,040 $1,040 Cash Distributions First to Second Target 0 0 0 0 0 36 92 122 Cash Distributions Second to Third Target 0 0 0 0 0 0 0 0 Cash Distributions Third to Thereafter Target 0 0 0 0 0 0 0 0 --------- --------- --------- --------- --------- --------- --------- --------- Total Cash Distributions $990 $999 $1,033 $1,033 $990 $1,076 $1,132 $1,162 Total Cash Distributions per Unit $2.300 $2.320 $2.400 $2.400 $2.300 $2.500 $2.630 $2.700 Weighted Average Units Outstanding 430 430 430 430 430 430 430 430 General Partner Unit Cash Distributions - ----------------------------------------------- Cash Distributions prior to First Target $743 $750 $775 $775 $743 $781 $781 $781 Cash Distributions First to Second Target 0 0 0 0 0 27 69 92 Cash Distributions Second to Third Target 0 0 0 0 0 0 0 0 Cash Distributions Third to Thereafter Target 0 0 0 0 0 0 0 0 --------- --------- --------- --------- --------- --------- --------- --------- Total Cash Distributions $743 $750 $775 $775 $743 $808 $850 $872 Total Cash Distributions per Unit $2.300 $2.320 $2.400 $2.400 $2.300 $2.500 $2.630 $2.700 Weighted Average Units Outstanding 323 323 323 323 323 323 323 323 GP Incentive Distributions - ----------------------------------------------- Cash Distributions prior to First Target -- -- -- -- -- -- -- -- Cash Distributions First to Second Target $0 $0 $0 $0 $0 $217 $580 $807 Cash Distributions Second to Third Target 0 0 0 0 0 0 0 0 Cash Distributions Third to Thereafter Target 0 0 0 0 0 0 0 0 --------- --------- --------- --------- --------- --------- --------- --------- Total Cash Distributions $0 $0 $0 $0 $0 $217 $580 $807 Total Cash Distributions per Unit (Sr, Jr & GP) $0.000 $0.000 $0.000 $0.000 $0.000 $0.061 $0.151 $0.194 Weighted Average Units Outstanding (Sr, Jr & GP) 3,245 3,245 3,245 3,245 3,245 3,548 3,851 4,154 - ------------------------------------------------------------------------------------------------------------------------------------ ==================================================================================================================================== Dain Rauscher Wessels Page 12
[LOGO APPEARS HERE] Unit Reference Value Analysis Cumulative Incremental DPU per Unit Calculation ==================================================================================================================================== - ------------------------------------------------------------------------------------------------------------------------------------ PROJECT INTENSE HEAT Cumulative Incremental DPU per Unit Calculation (In thousands, except as otherwise indicated) Projected for the Year Ending September 30, -------------------------------------------------------------------------------- 15 Year Weather Case 30 Year Weather Case ---------------------------------------- --------------------------------------- Units to Receive DPUs 1999E 2000E 2001E 2002E 1999E 2000E 2001E 2002E - ----------------------------------------------- --------- --------- --------- --------- --------- --------- --------- --------- Senior Subordinated Units (includes DPUs) 2,491 2,491 2,491 2,491 2,491 2,794 3,097 3,400 Junior Subordinated Units 430 430 430 430 430 430 430 430 General Partner Units 323 323 323 323 323 323 323 323 --------- --------- --------- --------- --------- --------- --------- --------- Total Units 3,245 3,245 3,245 3,245 3,245 3,548 3,851 4,154 Cumulative Incremental DPU per Unit - ----------------------------------------------- DPUs Distributed 0 0 0 0 0 303 303 303 DPU per Outstanding Unit 0.000 0.000 0.000 0.000 0.000 0.093 0.085 0.079 - ------------------------------------------------------------------------------------------------------------------------------------ Cumulative Incremental DPU per Unit 0.000 0.000 0.000 0.000 0.000 0.093 0.187 0.280 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ ==================================================================================================================================== Dain Rauscher Wessels Page 13
[LOGO APPEARS HERE] Unit Reference Value Analysis Unit Reference Value Analysis (Downside Case) ================================================================================================================================== - ---------------------------------------------------------------------------------------------------------------------------------- PROJECT INTENSE HEAT Unit Reference Value Analysis (Downside Case) Downside Case -------------------------------------------------------------------------------- Projected for the Year Ending September 30, Terminal Total Liquidity Adjusted ---------------------------------------- Discount Common Unit (1) 1999E 2000E 2001E 2002E Value (3) NPV (4) NPV - ----------------------------------------------- --------- --------- --------- --------- --------- -------- --------- --------- Cash Distributions $2.30 $2.30 $2.30 $2.30 $19.17 Period 0.50 1.50 2.50 3.50 4.00 - ---------------------------------------------------------------------------------------------------------------------------------- NPV @ 12.00% $2.17 $1.94 $1.73 $1.55 $12.18 $19.57 -- $19.57 - ---------------------------------------------------------------------------------------------------------------------------------- Senior Subordinated Unit (2) - ----------------------------------------------- Cash Distributions $1.15 $2.30 $2.30 $2.30 $15.86 Period 0.75 1.50 2.50 3.50 4.00 - ---------------------------------------------------------------------------------------------------------------------------------- NPV @ 14.50% (250 bps spread to Common) $1.04 $1.88 $1.64 $1.43 $9.23 $15.22 -- $15.22 - ---------------------------------------------------------------------------------------------------------------------------------- Junior Subordinated / General Partner Unit (2) - ----------------------------------------------- Cash Distributions $1.15 $2.30 $2.30 $2.30 $14.84 Period 0.75 1.50 2.50 3.50 4.00 - ---------------------------------------------------------------------------------------------------------------------------------- NPV @ 15.50% (350 bps spread to Common) $1.03 $1.85 $1.60 $1.39 $8.34 $14.22 22.0% $11.09 - ---------------------------------------------------------------------------------------------------------------------------------- - ------------------ (1) Common Unit discount rate is derived by using the midpoint discount rate between the appropriate discount rates required to calculate a net present value equal to the 1/22/99 closing price of $19.00 using flat $2.20 and $2.30 distributions representing Star stand alone and Star pro forma, respectively. (2) Senior Subordinated and Junior Subordinated / General Partner Units are assumed to receive no distributions for the third and fourth fiscal quarters of 1999E. (3) Terminal value is calculated as a perpetuity by dividing 2002E distribution by the discount rate. (4) The Junior Subordinated and General Partner Unit discount is determined by using a 25% liquidity discount for both Units and a 10% control premium for a General Partner Unit. The weighted average based upon pro forma Unit ownership is a discount of 22%. - -------------------------------------------------------------------------------- ================================================================================ Dain Rauscher Wessels Page 14
[LOGO APPEARS HERE] Unit Reference Value Analysis Common Unit Reference Value Analysis (15 Year Weather Case) ============================================================================================================== - -------------------------------------------------------------------------------------------------------------- PROJECT INTENSE HEAT Common Unit Reference Value Analysis (15 Year Weather Case) 15 Year Weather Case ----------------------------------------------------------- Projected for the Year Ending September 30, Terminal Total ---------------------------------------- Common Unit (1) 1999E 2000E 2001E 2002E Value (2) NPV - ----------------------------------------------- --------- --------- --------- --------- --------- -------- Cash Distributions $2.30 $2.32 $2.40 $2.40 $23.41 Period 0.50 1.50 2.50 3.50 4.00 - -------------------------------------------------------------------------------------------------------------- NPV @ 10.25% $2.19 $2.00 $1.88 $1.71 $15.85 $23.63 - -------------------------------------------------------------------------------------------------------------- - --------------- (1) Common Unit discount rate is a Dain Rauscher Wessels assumed yield based upon growth rate in distributions in the 15 year weather case. (2) Terminal value is calculated as a perpetuity by dividing 2002E distribution by the discount rate. - -------------------------------------------------------------------------------- ================================================================================ Dain Rauscher Wessels Page 15
[LOGO APPEARS HERE] Unit Reference Value Analysis Senior Subordinated Unit Reference Value Analysis (15 Year Weather Case) ============================================================================================================== - -------------------------------------------------------------------------------------------------------------- PROJECT INTENSE HEAT Senior Subordinated Unit Reference Value Analysis (15 Year Weather Case) 15 Year Weather Case ----------------------------------------------------------- Projected for the Year Ending September 30, Terminal Total ---------------------------------------- Senior Subordinated Unit Distributions (1) 1999E 2000E 2001E 2002E Value (2) NPV - ----------------------------------------------- --------- --------- --------- --------- --------- --------- Cash Distributions $1.15 $2.32 $2.40 $2.40 $19.59 Period 0.75 1.50 2.50 3.50 4.00 NPV @ 12.25% (200 bps spread to Common) $1.05 $1.95 $1.80 $1.60 $12.34 $18.75 Deferred Participation Unit (DPU) - ----------------------------------------------- Cumulative Incremental DPU per Unit 0.000 0.000 0.000 0.000 Cash Distributions per Fractional Unit $0.00 $0.00 $0.00 $0.00 $0.00 Period 0.50 1.50 2.50 3.50 4.00 NPV @ 14.25% (400 bps spread to Common) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 GP Incentive Distributions - ----------------------------------------------- Cash Distributions $0.00 $0.00 $0.00 $0.00 $0.00 Period 0.50 1.50 2.50 3.50 4.00 NPV @ 14.75% (450 bps spread to Common) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 - -------------------------------------------------------------------------------------------------------------- Total Net Present Value per Unit $1.05 $1.95 $1.80 $1.60 $12.34 $18.75 - -------------------------------------------------------------------------------------------------------------- - -------------------- (1) Senior Subordinated Units are assumed to receive no distributions for the third and fourth fiscal quarters of 1999E. (2) Terminal value is calculated as a perpetuity by dividing 2002E distribution by the discount rate. - -------------------------------------------------------------------------------- ================================================================================ Dain Rauscher Wessels Page 16
[LOGO APPEARS HERE] Unit Reference Value Analysis Junior Subordinated / General Partner Unit Reference Value Analysis (15 Year Weather Case) ================================================================================================================================== - ---------------------------------------------------------------------------------------------------------------------------------- PROJECT INTENSE HEAT Junior Subordinated / General Partner Unit Reference Value Analysis (15 Year Weather Case) 15 Year Weather Case -------------------------------------------------------------------------------- Projected for the Year Ending September 30, Terminal Total Liquidity Adjusted ---------------------------------------- Discount Junior Subordinated / GP Unit Distributions (1) 1999E 2000E 2001E 2002E Value (2) NPV (3) NPV - ----------------------------------------------- --------- --------- --------- --------- --------- --------- --------- --------- Cash Distributions $1.15 $2.32 $2.40 $2.40 $18.11 Period 0.75 1.50 2.50 3.50 4.00 NPV @ 13.25% (300 bps spread to Common) $1.05 $1.92 $1.76 $1.55 $11.01 $17.29 22% $13.49 Deferred Participation Unit (DPU) - ----------------------------------------------- Cumulative Incremental DPU per Unit 0.000 0.000 0.000 0.000 Cash Distributions per Fractional Unit $0.00 $0.00 $0.00 $0.00 $0.00 Period 0.50 1.50 2.50 3.50 4.00 NPV @ 14.25% (400 bps spread to Common) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 22% $0.00 GP Incentive Distributions - ----------------------------------------------- Cash Distributions $0.00 $0.00 $0.00 $0.00 $0.00 Period 0.50 1.50 2.50 3.50 4.00 NPV @ 14.75% (450 bps spread to Common) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 22% $0.00 - ---------------------------------------------------------------------------------------------------------------------------------- Total Net Present Value per Unit $1.05 $1.92 $1.76 $1.55 $11.01 $17.29 22% $13.49 - ---------------------------------------------------------------------------------------------------------------------------------- - ------------------ (1) Junior / General Partner Subordinated Units are assumed to receive no distributions for the third and fourth fiscal quarters of 1999E. (2) Terminal value is calculated as a perpetuity by dividing 2002E distribution by the discount rate. (3) The Junior Subordinated and General Partner Unit discount is determined by using a 25% liquidity discount for both Units and a 10% control premium for a General Partner Unit. The weighted average based upon pro forma Unit ownership is a discount of 22%. - -------------------------------------------------------------------------------- ================================================================================ Dain Rauscher Wessels Page 17
[LOGO APPEARS HERE] Unit Reference Value Analysis Common Unit Reference Value Analysis (30 Year Weather Case) ================================================================================================================================== - ---------------------------------------------------------------------------------------------------------------------------------- PROJECT INTENSE HEAT Common Unit Reference Value Analysis (30 Year Weather Case) 30 Year Weather Case ----------------------------------------------------------- Projected for the Year Ending September 30, Terminal Total ---------------------------------------- Common Unit (1) 1999E 2000E 2001E 2002E Value (2) NPV - ----------------------------------------------- --------- --------- --------- --------- --------- --------- Cash Distributions $2.30 $2.50 $2.63 $2.70 $27.69 Period 0.50 1.50 2.50 3.50 4.00 - -------------------------------------------------------------------------------------------------------------- NPV @ 9.75% $2.20 $2.17 $2.08 $1.95 $19.09 $27.49 - -------------------------------------------------------------------------------------------------------------- (1) Common Unit discount rate is a Dain Rauscher Wessels assumed yield based upon the growth rate in distributions in the 30 year weather case. (2) Terminal value is calculated as a perpetuity by dividing 2002E distribution by the discount rate. - -------------------------------------------------------------------------------- ================================================================================ Dain Rauscher Wessels Page 18
[LOGO APPEARS HERE] Unit Reference Value Analysis Senior Subordinated Unit Reference Value Analysis (30 Year Weather Case) ============================================================================================================== - -------------------------------------------------------------------------------------------------------------- PROJECT INTENSE HEAT Senior Subordinated Unit Reference Value Analysis (30 Year Weather Case) 30 Year Weather Case ----------------------------------------------------------- Projected for the Year Ending September 30, Terminal Total ---------------------------------------- Senior Subordinated Unit Distributions (1) 1999E 2000E 2001E 2002E Value (2) NPV - ----------------------------------------------- --------- --------- --------- --------- --------- --------- Cash Distributions $1.15 $2.50 $2.63 $2.70 $24.55 Period 0.75 1.50 2.50 3.50 4.00 NPV @ 11.00% (125 bps spread to Common) $1.06 $2.14 $2.03 $1.87 $16.17 $23.27 Deferred Participation Unit (DPU) - ----------------------------------------------- Cumulative Incremental DPU per Unit 0.000 0.093 0.187 0.280 Cash Distributions per Fractional Unit $0.00 $0.23 $0.49 $0.76 $5.50 Period 0.50 1.50 2.50 3.50 4.00 NPV @ 13.75% (400 bps spread to Common) $0.00 $0.19 $0.36 $0.48 $3.29 $4.32 GP Incentive Distributions - ----------------------------------------------- Cash Distributions $0.00 $0.06 $0.15 $0.19 $1.36 Period 0.50 1.50 2.50 3.50 4.00 NPV @ 14.25% (450 bps spread to Common) $0.00 $0.05 $0.11 $0.12 $0.80 $1.08 - -------------------------------------------------------------------------------------------------------------- Total Net Present Value per Unit $1.06 $2.38 $2.49 $2.48 $20.25 $28.67 - -------------------------------------------------------------------------------------------------------------- - -------------------- (1) Senior Subordinated Units are assumed to receive no distributions for the third and fourth fiscal quarters of 1999E. (2) Terminal value is calculated as a perpetuity by dividing 2002E distribution by the discount rate. - -------------------------------------------------------------------------------- ================================================================================ Dain Rauscher Wessels Page 19
[LOGO APPEARS HERE] Unit Reference Value Analysis Junior Subordinated / General Partner Unit Reference Value Analysis (30 Year Weather Case) ================================================================================================================================== - ---------------------------------------------------------------------------------------------------------------------------------- PROJECT INTENSE HEAT Junior Subordinated / General Partner Unit Reference Value Analysis (30 Year Weather Case) 30 Year Weather Case -------------------------------------------------------------------------------- Projected for the Year Ending September 30, Terminal Total Liquidity Adjusted ---------------------------------------- Discount Junior Subordinated / GP Unit Distributions (1) 1999E 2000E 2001E 2002E Value (2) NPV (3) NPV - ----------------------------------------------- --------- --------- --------- --------- --------- --------- --------- --------- Cash Distributions $1.15 $2.50 $2.63 $2.70 $22.98 Period 0.75 1.50 2.50 3.50 4.00 NPV @ 11.75% (200 bps spread to Common) $1.06 $2.12 $1.99 $1.83 $14.73 $21.73 22% $16.95 Deferred Participation Unit (DPU) - ----------------------------------------------- Cumulative Incremental DPU per Unit 0.000 0.093 0.187 0.280 Cash Distributions per Fractional Unit $0.00 $0.23 $0.49 $0.76 $5.50 Period 0.50 1.50 2.50 3.50 4.00 NPV @ 13.75% (400 bps spread to Common) $0.00 $0.19 $0.36 $0.48 $3.29 $4.32 22% $3.37 GP Incentive Distributions - ----------------------------------------------- Cash Distributions $0.00 $0.06 $0.15 $0.19 $1.36 Period 0.50 1.50 2.50 3.50 4.00 NPV @ 14.25% (450 bps spread to Common) $0.00 $0.05 $0.11 $0.12 $0.80 $1.08 22% $0.84 - ---------------------------------------------------------------------------------------------------------------------------------- Total Net Present Value per Unit $1.06 $2.36 $2.46 $2.43 $18.82 $27.13 22% $21.16 - ---------------------------------------------------------------------------------------------------------------------------------- - --------------------- (1) Junior / General Partner Subordinated Units are assumed to receive no distributions for the third and fourth fiscal quarters of 1999E. (2) Terminal value is calculated as a perpetuity by dividing 2002E distribution by the discount rate. (3) The Junior Subordinated and General Partner Unit discount is determined by using a 25% liquidity discount for both Units and a 10% control premium for a General Partner Unit. The weighted average based upon pro forma Unit ownership is a discount of 22%. - -------------------------------------------------------------------------------- ================================================================================ Dain Rauscher Wessels Page 20
[LOGO APPEARS HERE] Unit Reference Value Analysis Common Unit Reference Value Analysis (Dain Rauscher Wessels Case) ============================================================================================================== - -------------------------------------------------------------------------------------------------------------- PROJECT INTENSE HEAT Common Unit Reference Value Analysis (Dain Rauscher Wessels Case) Dain Rauscher Wessels Case ----------------------------------------------------------- Projected for the Year Ending September 30, Terminal Total ---------------------------------------- Common Unit (1) 1999E 2000E 2001E 2002E Value (2) NPV - ----------------------------------------------- --------- --------- --------- --------- --------- --------- Cash Distributions $2.30 $2.30 $2.30 $2.40 $20.87 Period 0.50 1.50 2.50 3.50 4.00 - -------------------------------------------------------------------------------------------------------------- NPV @ 11.50% $2.18 $1.95 $1.75 $1.64 $13.50 $21.03 - -------------------------------------------------------------------------------------------------------------- - -------------------- Note: Dain Rauscher Wessels Case assumes distributions of $2.30, $2.30, $2.30 and $2.40 for the years ending 1999E, 2000E, 2001E and 2002E, respectively. (1) Common Unit discount rate is a Dain Rauscher Wessels assumed yield based upon the growth rate in distributions in the Dain Rauscher Wessels case. (2) Terminal value is calculated as a perpetuity by dividing 2002E distribution by the discount rate. - -------------------------------------------------------------------------------- ================================================================================ Dain Rauscher Wessels Page 21
[LOGO APPEARS HERE] Unit Reference Value Analysis Senior Subordinated Unit Reference Value Analysis (Dain Rauscher Wessels Case) ============================================================================================================== - -------------------------------------------------------------------------------------------------------------- PROJECT INTENSE HEAT Senior Subordinated Unit Reference Value Analysis (Dain Rauscher Wessels Case) Dain Rauscher Wessels Case ----------------------------------------------------------- Projected for the Year Ending September 30, Terminal Total ---------------------------------------- Senior Subordinated Unit Distributions (1) 1999E 2000E 2001E 2002E Value (2) NPV - ----------------------------------------------- --------- --------- --------- --------- --------- --------- Cash Distributions $1.15 $2.30 $2.30 $2.40 $17.45 Period 0.75 1.50 2.50 3.50 4.00 NPV @ 13.75% (225 bps spread to Common) $1.04 $1.90 $1.67 $1.53 $10.43 $16.56 Deferred Participation Unit (DPU) - ----------------------------------------------- Cumulative Incremental DPU per Unit 0.000 0.000 0.000 0.000 Cash Distributions per Fractional Unit $0.00 $0.00 $0.00 $0.00 $0.00 Period 0.50 1.50 2.50 3.50 4.00 NPV @ 15.50% (400 bps spread to Common) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 GP Incentive Distributions - ----------------------------------------------- Cash Distributions $0.00 $0.00 $0.00 $0.00 $0.00 Period 0.50 1.50 2.50 3.50 4.00 NPV @ 16.00% (450 bps spread to Common) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 - -------------------------------------------------------------------------------------------------------------- Total Net Present Value per Unit $1.04 $1.90 $1.67 $1.53 $10.43 $16.56 - -------------------------------------------------------------------------------------------------------------- - ---------------------- Note: Dain Rauscher Wessels Case assumes distributions of $2.30, $2.30, $2.30 and $2.40 for the years ending 1999E, 2000E, 2001E and 2002E, respectively. (1) Senior Subordinated Units are assumed to receive no distributions for the third and fourth fiscal quarters of 1999E. (2) Terminal value is calculated as a perpetuity by dividing 2002E distribution by the discount rate. - -------------------------------------------------------------------------------- ================================================================================ Dain Rauscher Wessels Page 22
[LOGO APPEARS HERE] Unit Reference Value Analysis Junior Subordinated / General Partner Unit Reference Value Analysis (Dain Rauscher Wessels Case) ================================================================================================================================== - ---------------------------------------------------------------------------------------------------------------------------------- PROJECT INTENSE HEAT Junior Subordinated / General Partner Unit Reference Value Analysis (Dain Rauscher Wessels Case) Dain Rauscher Wessels Case -------------------------------------------------------------------------------- Projected for the Year Ending September 30, Terminal Total Liquidity Adjusted ---------------------------------------- Junior Subordinated / GP Unit Distributions (1) 1999E 2000E 2001E 2002E Value (2) NPV Discount (3) NPV - ----------------------------------------------- --------- --------- --------- --------- --------- --------- ----------- --------- Cash Distributions $1.15 $2.30 $2.30 $2.40 $16.27 Period 0.75 1.50 2.50 3.50 4.00 NPV @ 14.75% (325 bps spread to Common) $1.04 $1.87 $1.63 $1.48 $9.38 $15.41 22% $12.02 Deferred Participation Unit (DPU) - ----------------------------------------------- Cumulative Incremental DPU per Unit 0.000 0.000 0.000 0.000 Cash Distributions per Fractional Unit $0.00 $0.00 $0.00 $0.00 $0.00 Period 0.50 1.50 2.50 3.50 4.00 NPV @ 15.50% (400 bps spread to Common) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 22% $0.00 GP Incentive Distributions - ----------------------------------------------- Cash Distributions $0.00 $0.00 $0.00 $0.00 $0.00 Period 0.50 1.50 2.50 3.50 4.00 NPV @ 16.00% (450 bps spread to Common) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 22% $0.00 - ------------------------------------------------------------------------------------------------------------------------------------ Total Net Present Value per Unit $1.04 $1.87 $1.63 $1.48 $9.38 $15.41 22% $12.02 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------- Note: Dain Rauscher Wessels Case assumes distributions of $2.30, $2.30, $2.30 and $2.40 for the years ending 1999E, 2000E, 2001E and 2002E, respectively. (1) Junior / General Partner Subordinated Units are assumed to receive no distributions for the third and fourth fiscal quarters of 1999E. (2) Terminal value is calculated as a perpetuity by dividing 2002E distribution by the discount rate. (3) The Junior Subordinated and General Partner Unit discount is determined by using a 25% liquidity discount for both Units and a 10% control premium for a General Partner Unit. The weighted average based upon pro forma Unit ownership is a discount of 22%. - -------------------------------------------------------------------------------- ================================================================================ Dain Rauscher Wessels Page 23
[LOGO APPEARS HERE] Project Intense Heat ================================================================================ Historical and Pro Forma MVE and MVC Comparison ================================================================================ Dain Rauscher Wessels Page 24
[LOGO OF PETRO APPEARS HERE] Historical and Pro Forma MVE and MVC Comparison Petro Historical and Pro Forma Adjusted MVE and MVC Summary ================================================================================ PROJECT INTENSE HEAT Petro Historical and Pro Forma Adjusted Market Value of Equity and Market Value of Capitalization Summary (In thousands, except as otherwise indicated) Pro Forma Adjusted Market Value of Equity and Historical Market Value of Capitalization ------------------------------------------------ MVE & Common Sr Sub Jr Sub / GP Total Percent Market Value of Equity MVC Units Units Units Units Change - ------------------------------------------------------ ---------- --------- -------- -------- -------- ------- Shares / Units Outstanding 26,463 --- 2,491 753 3,245 Valuation per Share / Unit (1) $ 1.000 $21.026 $16.561 $12.017 Market Value of Equity $26,463 --- $41,262 $ 9,054 $50,316 90.1% Principal Amount of Debt at 9/30/98 (pre-transaction) - ----------------------------------------------------- 11.96% Senior Notes 60,000 60,000 14.10% Senior Notes 3,100 3,100 14.10% Subordinated Notes 3,100 3,100 10.13% Subordinated & Senior Subordinated Notes 50,000 50,000 9.38% Subordinated & Senior Subordinated Notes 75,000 75,000 12.25% Subordinated & Senior Subordinated Notes 81,250 81,250 8.00% Acq. & Other Notes 14,435 14,435 8.25% Existing Credit Facility 0 0 ---------- -------- Total Principal Amount of Debt $286,885 $286,885 ---------- -------- Liquidation Value of Preferred Stock at 9/30/98 (2) - ---------------------------------------------------- 14.33% Preferred Stock $ 4,167 $ 4,167 12.88% Preferred Stock 30,000 27,600 ---------- -------- Total Liquidation Value of Preferred Stock $34,167 $31,767 Debt and Preferred Stock Exchange (Common Units Issued) - ------------------------------------------------------- Common Units Issued in Exchange --- 103 Dain Rauscher Wessels Reference Value per Unit --- $21.026 Total Value of Units Issued --- $2,161 2,161 Market Value of Capitalization - ------------------------------ Total Value of Equity, Debt & Preferred $347,515 $371,129 Less: Excess Cash (pre-transaction) (10,111) (10,111) ---------- -------- Market Value of Capitalization $337,404 $361,018 7.0% ========== ======== (1) Petro historical value per share is the closing market price on 1/22/99 and the Star pro forma value per Unit is based on the Unit Reference Value Analysis (Dain Rauscher Wessels Case), [See Unit Reference Value Analysis Summary on page 9]. (2) Petro value for Preferred Stock is liquidation value at September 30, 1998, except pro forma value for the 12.88% Preferred, which is 92% of liquidation value. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 25
[LOGO OF PETRO APPEARS HERE] Historical and Pro Forma MVE and MVC Comparison Petro Historical and Pro Forma Adjusted MVE and MVC Summary ================================================================================ PROJECT INTENSE HEAT Star Historical and Pro Forma Adjusted Market Value of Equity and Market Value of Capitalization Summary (In thousands, except as otherwise indicated) Historical Market Value of Equity and Market Value of Capitalization ---------------------------------------------- Common Sub Implied Total Market Value of Equity Units Units GP Units Units - ------------------------ ------- -------- -------- -------- Units Outstanding 3,859 2,396 128 6,383 Valuation per Unit (1) $19.000 $9.500 $16.150 Market Value of Equity $73,321 $22,763 $2,062 $98,145 Market Value of Capitalization - ------------------------------ Market Value of Equity $98,145 Total Debt (2) 109,770 Less: Excess Cash (2) (35) -------- Market Value of Capitalization $207,880 ======== Pro Forma Adjusted Market Value of Equity and Market Value of Capitalization ------------------------------------------------ Common Sr Sub Jr Sub / GP Total Percent Market Value of Equity Units Units Units Units Change - ------------------------ --------- -------- -------- -------- ------- Units Outstanding 12,909 2,491 753 16,154 Valuation per Unit (1) $21.026 $16.561 $12.017 Market Value of Equity $271,425 $41,262 $9,054 $321,742 227.8% Market Value of Capitalization - ------------------------------ Market Value of Equity $321,742 Total Debt (2) 283,851 Less: Excess Cash (2) (536) -------- Market Value of Capitalization $605,057 191.1% ======== (1) Star historical value per Common Unit is the closing market price on 1/22/99 and the Star value per Subordinated Unit is the value of a Common Unit less a 25% liquidity discount and a 25% subordination discount. The value of an implied General Partner Unit is the value of a Common Unit less a 25% liquidity discount plus a 10% control premium. The value of each pro forma Star Unit is based on the Unit Reference Value Analysis (Dain Rauscher Wessels Case). (2) Total debt and excess cash for historical is based on the Star September 30, 1998 balance sheet and for pro forma is based on the Star September 30, 1998 pro forma balance sheet. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 26
[LOGO OF PETRO APPEARS HERE] Project Intense Heat ================================================================================ Discounted Cash Flow Analysis - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 27
[LOGO OF PETRO APPEARS HERE] Discounted Cash Flow Analysis Petro Stand-Alone Free Cash Flow Projections (Unlevered) ================================================================================ PETROLEUM HEAT AND POWER CO., INC. Stand-Alone Free Cash Flow Projections (Unlevered) (In thousands, except as otherwise indicated) Projected for the Year Ending December 31, Projected for the Year Ending December 31, --------------------------------------------- ---------------------------------------------- Estimated 15 Year Weather Case Estimated 30 Year Weather Case ----------------------------------- ------------------------------------ 1998E 1999E 2000E 2001E 2002E 1998E 1999E 2000E 2001E 2002E ------- ------- ------- ------- ------- ------- ------- ------- ------- -------- Volume (gallons) 324,667 369,707 356,249 343,852 332,333 324,667 380,161 366,323 353,575 341,730 Sales $408,019 $490,828 $477,965 $466,187 $455,287 $408,019 $504,120 $490,912 $478,817 $467,624 Cost of Sales 265,526 328,642 318,786 309,754 301,400 265,526 337,106 326,993 317,724 309,151 ------- ------- ------- ------- ------- ------- ------- ------- ------- -------- Gross Profit 142,493 162,186 159,179 156,433 153,887 142,493 167,014 163,919 161,093 158,473 Operating Expenses 111,881 118,794 117,410 116,196 115,118 111,881 121,466 120,052 118,810 117,707 ------- ------- ------- ------- ------- ------- ------- ------- ------- -------- Heating Oil EBITDA 30,612 43,392 41,769 40,237 38,769 30,612 45,548 43,867 42,283 40,766 MLP Distribution 4,367 400 2,772 3,013 3,300 4,367 400 4,586 5,129 5,575 ------- ------- ------- ------- ------- ------- ------- ------- ------- -------- Total EBITDA 34,979 43,792 44,541 43,250 42,069 34,979 45,948 48,453 47,412 46,341 Depreciation and Amortization 27,941 23,500 19,500 15,500 11,500 27,941 23,500 19,500 15,500 11,500 ------- ------- ------- ------- ------- ------- ------- ------- ------- -------- Pretax Income 7,038 20,292 25,041 27,750 30,569 7,038 22,448 28,953 31,912 34,841 Income Tax Expense 400 500 500 500 500 400 500 500 500 500 ------- ------- ------- ------- ------- ------- ------- ------- ------- -------- Net Income 6,638 19,792 24,541 27,250 30,069 6,638 21,948 28,453 31,412 34,341 Plus: Depreciation and Amortization 27,941 23,500 19,500 15,500 11,500 27,941 23,500 19,500 15,500 11,500 ------- ------- ------- ------- ------- ------- ------- ------- ------- -------- Cash Flow $34,579 $43,292 $44,041 $42,750 $41,569 $34,579 $45,448 $47,953 $46,912 $45,841 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======== Less: Maintenance Capex (2,886) (3,000) (3,000) (3,000) (3,000) (2,886) (3,000) (3,000) (3,000) (3,000) ------- ------- ------- ------- ------- ------- ------- ------- ------- -------- Free Cash Flow $31,693 $40,292 $41,041 $39,750 $38,569 $31,693 $42,448 $44,953 $43,912 $42,841 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======== - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 28
[LOGO OF PETRO APPEARS HERE] Discounted Cash Flow Analysis Leveraged Weighted Average Cost of Capital Calculation ================================================================================ PETROLEUM HEAT AND POWER CO., INC. Leveraged Weighted Average Cost of Capital Calculation Risk Free Rate -------- 1 Year treasury bill yield (1/22/99) Risk Free Rate (Rf) 4.41% -------- Expected Return on Equity Market 1 Year treasury bill yield (1/22/99) Rf 4.41% Historical spread between equity returns and 1-year treasury bill yield (Ibbotson Associates) S 7.00% -------- Expected Return on Equity Market (Rm) = Rf+S 11.41% -------- Cost of Debt Long-term debt interest rate (Petro estimate) Ir 13.00% Corporate tax rate t 35.00% -------- Cost of Debt (Cd) = Ir*(1-t) 8.45% -------- Unleveraged Beta -------- Unleveraged beta (Dain Rauscher Wessels estimate) Unleveraged Beta (Ub) 1.25 -------- Leveraged Beta Target long-term debt / total capitalization Td 60.00% Target long-term equity / total capitalization Te 40.00% Debt / equity ratio De 150.00% -------- Leveraged Beta (B) = Ub*[1+t)*De] 2.47 -------- Unleveraged Cost of Equity Risk free rate Rf 4.41% Expected return on equity market Rm 11.41% Unleveraged beta Ub 1.25 -------- Unleveraged Cost of Equity = Rf+Ub(Rm-Rf) 13.16% -------- Leveraged Cost of Equity Risk free rate Rf 4.41% Expected return on equity market Rm 11.41% Leveraged beta B 2.47 -------- Leveraged Cost of Equity (Ceu) = Rf+B(Rm-Rf) 21.69% -------- Leveraged Weighted Average Cost of Capital Target long-term debt / total capitalization Td 60.00% Target long-term equity / total capitalization Te 40.00% Leveraged cost of equity Ceu 21.69% Cost of debt Cd 8.45% -------- Leveraged Weighted Average Cost of Capital (WACC) = (Td*(d)+(Te*Ceu) 13.74% -------- - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 29
[LOGO OF PETRO APPEARS HERE] Discounted Cash Flow Analysis Petro Stand-Alone Discounted Cash Flow Analysis (15 Year Weather Case) ================================================================================ PETROLEUM HEAT AND POWER CO., INC. Stand-Alone Discounted Cash Flow Analysis (15 Year Weather Case) (In thousands, except as otherwise indicated) Less: Total Terminal Debt & Pref. Total Projected for the Year Ending December 31, Value Total Plus: Total Equity ---------------------------------------------- @ 7.0 x Enterprise Working Equity Value per 1999E 2000E 2001E 2002E EBITDA Value Capital (1) Value Share (2) ------- -------- ------- ------- -------- --------- ----------- -------- --------- Unlevered Free Cash Flow $40,292 $41,041 $39,750 $38,569 $294,483 Period 0.50 1.50 2.50 3.50 4.00 Discounted Cash Flow @ 12.0% $38,072 $34,625 $29,943 $25,940 $187,149 $315,730 ($310,941) $4,789 $0.18 @ 13.0% $37,904 $34,166 $29,285 $25,146 $180,612 $307,112 ($310,941) ($3,829) ($0.14) - ----------------------------------------------------------------------------------------------------------------------------------- @ 14.0% $37,737 $33,718 $28,647 $24,382 $174,358 $298,841 ($310,941) ($12,100) ($0.46) - ----------------------------------------------------------------------------------------------------------------------------------- @ 15.0% $37,572 $33,279 $28,028 $23,648 $168,372 $290,899 ($310,941) ($20,042) ($0.76) @ 16.0% $37,410 $32,850 $27,428 $22,942 $162,640 $283,270 ($310,941) ($27,671) ($1.05) - ----------------- (1) Total debt, preferred stock and working capital at September 30, 1998. (2) Per share numbers are based upon shares outstanding of 26,463. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 30
[LOGO OF PETRO APPEARS HERE] Discounted Cash Flow Analysis Petro Stand-Alone Discounted Cash Flow Analysis (30 Year Weather Case) ================================================================================ PETROLEUM HEAT AND POWER CO., INC. Stand-Alone Discounted Cash Flow Analysis (30 Year Weather Case) (In thousands, except as otherwise indicated) Less: Total Terminal Debt & Pref. Total Projected for the Year Ending December 31, Value Total Plus: Total Equity ---------------------------------------------- @ 7.0 x Enterprise Working Equity Value per 1999E 2000E 2001E 2002E EBITDA Value Capital (1) Value Share (2) ------- -------- ------- ------- -------- --------- ----------- -------- --------- Unlevered Free Cash Flow $42,448 $44,953 $43,912 $42,841 $324,387 Period 0.50 1.50 2.50 3.50 4.00 Discounted Cash Flow - -------------------- @ 12.0% $40,110 $37,926 $33,078 $28,814 $206,154 $346,080 ($310,941) $35,139 $1.33 @ 13.0% $39,932 $37,423 $32,351 $27,931 $198,953 $336,589 ($310,941) $25,648 $0.97 - ----------------------------------------------------------------------------------------------------------------------------------- @ 14.0% $39,756 $36,932 $31,646 $27,083 $192,063 $327,480 ($310,941) $16,539 $0.62 - ----------------------------------------------------------------------------------------------------------------------------------- @ 15.0% $39,583 $36,451 $30,963 $26,267 $185,469 $318,734 ($310,941) $7,793 $0.29 @ 16.0% $39,412 $35,981 $30,300 $25,483 $179,156 $310,332 ($310,941) ($609) ($0.02) - -------------------- (1) Total debt, preferred stock and working capital at September 30, 1998. (2) Per share numbers are based upon shares outstanding of 26,463. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 31
[LOGO OF PETRO APPEARS HERE] Discounted Cash Flow Analysis Stand-Alone Discounted Cash Flow Analysis Matrix =============================================================================== PETROLEUM HEAT AND POWER CO., INC. Stand-Alone Discounted Cash Flow Analysis Matrix (In thousands, except as otherwise indicated) Terminal Value Multiples (EBITDA) ---------------------------------------------------------------------------- 15 Year Weather Case 30 Year Weather Case ------------------------------------------ -------------------------- Discounted Cash Flow 6.0 x 7.0 x 8.0 x 6.0 x 7.0 x 8.0 x - -------------------- ----------- --------- ------- -------- --------- ------- @ 12.0% ($0.83) $0.18 $1.19 $0.21 $1.33 $2.44 @ 13.0% ($1.12) ($0.14) $0.83 ($0.10) $0.97 $2.04 @ 14.0% ($1.40) ($0.46) $0.48 ($0.41) $0.62 $1.66 @ 15.0% ($1.67) ($0.76) $0.15 ($0.71) $0.29 $1.30 @ 16.0% ($1.92) ($1.05) ($0.17) ($0.99) ($0.02) $0.94 - ----------------- Note: Per share numbers are based upon shares outstanding of 26,463. - ------------------------------------------------------------------------------- Dain Rauscher Wessels Page 32
[LOGO OF PETRO APPEARS HERE] Project Intense Heat =============================================================================== Relative Contribution Analysis - ------------------------------------------------------------------------------- Dain Rauscher Wessels Page 33
[LOGO OF PETRO APPEARS HERE] Relative Contribution Analysis (Not Adjusted for Pro Forma Unit Class Value Difference) =============================================================================== PROJECT INTENSE HEAT Relative Contribution Analysis (Not Adjusted for Pro Forma Unit Class Value Difference) (In thousands, except as otherwise indicated) Projected for the Year Ending September 30, ------------------------------------------ 15 Year Weather --------------------------- Normalized Estimated Normalized Star Stand-Alone Distributable Cash Flow 1998E 1999E 1999E - ---------------------------------------- -------- --------- ---------- EBITDA $22,316 $20,093 $22,674 Interest Expense (8,497) (8,515) (8,515) Maintenance Capex (2,610) (2,553) (2,553) Other (25) (25) (25) -------- --------- ---------- Distributable Cash Flow $11,184 $ 9,000 $11,581 Distribution to Star Common - ---------------------------------------- Cash Distribution to Star Common Units $ 8,490 $ 8,490 $ 8,490 Distribution per Common Unit $ 2.20 $ 2.20 $ 2.20 Weighted Avg. Star Common Units Outstanding 3,859 3,859 3,859 Distribution to Star Sub Units (Petro) - ---------------------------------------- Cash Distribution to Star Sub Units $ 2,694 $510 $ 3,091 Weighted Avg. Star Sub Units Outstanding 2,396 2,396 2,396 Cash Distribution per Star Sub Unit $ 1.12 $ 0.21 $ 1.29 Petro Distributable Cash Flow - ---------------------------------------- EBITDA $44,749 $43,613 $45,013 Pro Forma Synergies 500 500 500 Preferred Dividends (5,026) (4,432) (4,432) Interest Expense (30,732) (30,470) (30,470) Maintenance Capex (2,886) (3,000) (3,000) Taxes (400) (500) (500) -------- --------- ---------- Distributable Cash Flow $ 6,205 $5,711 $7,111 Cash Distribution to Star Sub Units 2,694 510 3,091 -------- --------- ---------- Total Distributable Cash Flow $ 8,899 $ 6,221 $10,202 ======== ========== ========== Star Pro Forma Units Outstanding - ---------------------------------------- Star 3,859 3,859 3,859 Petro 3,245 3,245 3,245 -------- --------- ---------- Total Units 7,104 7,104 7,104 Star Relative Contribution - ---------------------------------------- Distributable Cash Flow Contribution 48.8% 57.7% 45.4% Percent of Pro Forma Units Received 54.3% 54.3% 54.3% Petro Relative Contribution - ---------------------------------------- Distributable Cash Flow Contribution 51.2% 42.3% 54.6% Percent of Pro Forma Units Received 45.7% 45.7% 45.7% - ------------------------------------------------------------------------------- Dain Rauscher Wessels Page 34
[LOGO OF PETRO APPEARS HERE] Relative Contribution Analysis (Adjusted for Pro Forma Unit Class Value Difference) =============================================================================== PROJECT INTENSE HEAT Relative Contribution Analysis (Adjusted for Pro Forma Unit Class Value Difference) (In thousands, except as otherwise indicated) Projected for the Year Ending September 30, ------------------------------------------------ 15 Year Weather -------------------------------- Normalized Estimated Normalized Star Stand-Alone Distributable Cash Flow 1998E 1999E 1999E - ----------------------------------------------------------- ---------- ------------- --------------- EBITDA $22,316 $20,093 $22,674 Interest Expense ($8,497) (8,515) (8,515) Maintenance Capex ($2,610) (2,553) (2,553) Other (25) (25) (25) --------- -------- -------- Distributable Cash Flow $11,184 $9,000 $11,581 Distribution to Star Common - ----------------------------------------------------------- Cash Distribution to Star Common Units $8,490 $8,490 $8,490 Distribution per Common Unit $2.20 $2.20 $2.20 Weighted Avg. Star Common Units Outstanding 3,859 3,859 3,859 Distribution to Star Sub Units (Petro) - ----------------------------------------------------------- Cash Distribution to Star Sub Units $2,694 $510 $3,091 Weighted Avg. Star Sub Units Outstanding 2,396 2,396 2,396 Cash Distribution per Star Sub Unit $1.12 $0.21 $1.29 Petro Distributable Cash Flow - ----------------------------------------------------------- EBITDA $44,749 $43,613 $45,013 Pro Forma Synergies 500 500 500 Preferred Dividends (5,026) (4,432) (4,432) Interest Expense (30,732) (30,470) (30,470) Maintenance Capex (2,886) (3,000) (3,000) Taxes (400) (500) (500) --------- -------- -------- Distributable Cash Flow $6,205 $5,711 $7,111 Cash Distribution to Star Sub Units $2,694 $ 510 $3,091 --------- -------- -------- Total Distributable Cash Flow $8,899 $6,221 $10,202 ========= ======== ======== Pro Forma Unit Class Value Adjustment - ----------------------------------------------------------- Pro Forma Senior Subordinated Units 2,491 2,491 2,491 Senior Subordinated / Common Unit Value Ratio (1) 0.79 0.79 0.79 Adjusted Senior Subordinated Units 1,962 1,962 1,962 Pro Forma Junior Subordinated & GP Units 753 753 753 Junior Subordinated & GP / Common Unit Value Ratio (1) 0.57 0.57 0.57 Adjusted Junior Subordinated & GP Units 431 431 431 Total Star Units Received by Petro (Value Adjusted) 2,393 2,393 2,393 Star Pro Forma Units Outstanding - ----------------------------------------------------------- Star 3,859 3,859 3,859 Petro (Adjusted) 2,393 2,393 2,393 --------- -------- -------- Total Units 6,252 6,252 6,252 Star Relative Contribution - ----------------------------------------------------------- Distributable Cash Flow Contribution 48.8% 57.7% 45.4% Percent of Pro Forma Units Received 61.7% 61.7% 61.7% Petro Relative Contribution - ----------------------------------------------------------- Distributable Cash Flow Contribution 51.2% 42.3% 54.6% Percent of Pro Forma Units Received 38.3% 38.3% 38.3% - ---------------- (1) Value ratio is based on the Dain Rauscher Wessels Case. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 35
[LOGO OF PETRO APPEARS HERE] Project Intense Heat ================================================================================ Net Asset Value Analysis - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 36
[LOGO OF PETRO APPEARS HERE] Net Asset Value Analysis Home Heating Oil Business Valuation ================================================================================ PETROLEUM HEAT AND POWER CO., INC. Home Heating Oil Business Valuation (In thousands, except as otherwise indicated) Method 1 Method 2 - ----------------------------------------- ------------------------------------------- Petro 1998E Normalized EBITDA (1) $44,749 Petro 1998E Normalized Gallons 384,390 Mean EBITDA Multiple 4.2 x Mean Acquisition Cost per Gallon $0.84 Total Enterprise Value $187,946 Total Enterprise Value $322,888 Petro Size Premium 10.0% Petro Size Premium 10.0% Total Adjusted Enterprise Value $206,740 Total Adjusted Enterprise Value $355,176 Methodology Petro Methodology Petro Acquisitions Acquisitions 1996-1997 1996-1997 Ten Largest Ten Largest Method 3 - ------------------------------------------------------------- Petro 1998E Forecasted Customers 335,000 Mean Acquisition Cost per Customer $1,194 Total Enterprise Value $399,990 Petro Size Premium 10.0% Total Adjusted Enterprise Value $439,989 Methodology Petro Acquisitions 1996-1997 Ten Largest Method 4 Method 5 - ----------------------------------------- ------------------------------------------- Petro 1998E Normalized EBITDA (1) $44,749 Petro LTM 12/31/98 EBITDA (1) $30,612 Mean EBITDA Multiple 6.1 x Mean EBITDA Multiple 11.0 x Total Enterprise Value 272,969 Total Enterprise Value $336,732 Petro Size Premium 10.0% Total Adjusted Enterprise Value $300,266 Methodology Star Gas Methodology Selected Energy Acquisitions Marketing & 1994-1998 Distribution M&A Analysis Method 6 - ------------------------------------------------------------- Petro LTM 12/31/98 EBITDA (1) $30,612 Consolidator Growth Rate Factor 66.3 Petro EBITDA CAGR (2) 6.3% Implied EBITDA Multiple 4.2 x Total Enterprise Value $127,863 Methodology Selected Industry Consolidators - -------------------------- (1) Excludes Star Gas distributions. (2) Petro EBITDA compound annual growth rate (CAGR)from 1999E to 2002E, assuming 15 year weather and $15.0 million of acquisitions in 1999E and $25.0 million per year thereafter. - ------------------------------------------------------------------------------- Dain Rauscher Wessels Page 37
[LOGO OF PETRO APPEARS HERE] Net Asset Value Analysis Net Asset Value Summary =============================================================================== PETROLEUM HEAT AND POWER CO., INC. Net Asset Value Summary (In thousands, except as otherwise indicated) Home Heating Oil Business Method 1 Method 2 Method 3 Method 4 - ---------------------------------------------------- ---------- ----------- ---------- ----------- Total Enterprise Value (See Previous Page) $206,740 $355,176 $439,989 $300,266 Investment in Star - ---------------------------------------------------- Total Subordinated Units 2,396 2,396 2,396 2,396 Implied GP Units 128 128 128 128 Total Implied Units 2,524 2,524 2,524 2,524 Current Common Unit Price 01/22/99 $19.000 $19.000 $19.000 $19.000 Subordinated Unit Discount 50% 50% 50% 50% Implied GP Unit Discount 15% 15% 15% 15% Value per Subordinated Unit $9.50 $9.50 $9.50 $9.50 Value per Implied GP Unit $16.15 $16.15 $16.15 $16.15 Total Value of Investment in Star $24,824 $24,824 $24,824 $24,824 GROSS ASSET VALUE $231,565 $380,001 $464,813 $325,090 Principal Amount of Debt at 9/30/98 - ---------------------------------------------------- 11.96% Senior Notes $60,000 $60,000 $60,000 $60,000 14.10% Senior Notes 3,100 3,100 3,100 3,100 14.10% Subordinated Notes 3,100 3,100 3,100 3,100 10.13% Subordinated & Senior Subordinated Notes 50,000 50,000 50,000 50,000 9.38% Subordinated & Senior Subordinated Notes 75,000 75,000 75,000 75,000 12.25% Subordinated & Senior Subordinated Notes 81,250 81,250 81,250 81,250 8.00% Acq. & Other Notes 14,435 14,435 14,435 14,435 8.25% Existing Credit Facility 0 0 0 0 ---------- ----------- ---------- ------- Total Principal Amount of Debt $286,885 $286,885 $286,885 $286,885 Liquidation Value of Preferred Stock at 9/30/98 - ---------------------------------------------------- 14.33% Preferred Stock $4,167 $4,167 $4,167 $4,167 12.88% Preferred Stock 30,000 30,000 30,000 30,000 ---------- ----------- ---------- ------- Total Liquidation Value of Preferred Stock $34,167 $34,167 $34,167 $34,167 Prepayment Penalties & Other Liabilities - ---------------------------------------------------- Prepayment Penalties on Outstanding Debt (1) $22,951 $22,951 $22,951 $22,951 Other Long-Term Liabilities 10,686 10,686 10,686 10,686 Working Capital & Cash Escrow Adjustment (10,111) (10,111) (10,111) (10,111) Liquidation Transaction Costs 5,000 5,000 5,000 5,000 ---------- ----------- ---------- ------- Total Prepayment Penalties & Other Liabilities $28,526 $28,526 $28,526 $28,526 ---------- ----------- ---------- ------- NET ASSET VALUE (2) $0 $30,423 $115,236 $0 ========== =========== ========== ======= NET ASSET VALUE PER SHARE $0.00 $1.15 $4.35 $0.00 ========== =========== ========== ======= TOTAL SHARES OUTSTANDING 26,463 26,463 26,463 26,463 Home Heating Oil Business Method 5 Method 6 Mean Median - ---------------------------------------------------- ------------- ------------ -------- ---------- Total Enterprise Value (See Previous Page) $336,732 $127,863 Investment in Star - ---------------------------------------------------- Total Subordinated Units 2,396 2,396 Implied GP Units 128 128 Total Implied Units 2,524 2,524 Current Common Unit Price 01/22/99 $19.000 $19.000 Subordinated Unit Discount 50% 50% Implied GP Unit Discount 15% 15% Value per Subordinated Unit $9.50 $9.50 Value per Implied GP Unit $16.15 $16.15 Total Value of Investment in Star $24,824 $24,824 GROSS ASSET VALUE $361,556 $152,688 Principal Amount of Debt at 9/30/98 - ---------------------------------------------------- 11.96% Senior Notes $60,000 $60,000 14.10% Senior Notes 3,100 3,100 14.10% Subordinated Notes 3,100 3,100 10.13% Subordinated & Senior Subordinated Notes 50,000 50,000 9.38% Subordinated & Senior Subordinated Notes 75,000 75,000 12.25% Subordinated & Senior Subordinated Notes 81,250 81,250 8.00% Acq. & Other Notes 14,435 14,435 8.25% Existing Credit Facility 0 0 --------- -------- Total Principal Amount of Debt $286,885 $286,885 Liquidation Value of Preferred Stock at 9/30/98 - ---------------------------------------------------- 14.33% Preferred Stock $4,167 $4,167 12.88% Preferred Stock 30,000 30,000 --------- -------- Total Liquidation Value of Preferred Stock $34,167 $34,167 Prepayment Penalties & Other Liabilities - ---------------------------------------------------- Prepayment Penalties on Outstanding Debt (1) $22,951 $22,951 Other Long-Term Liabilities 10,686 10,686 Working Capital & Cash Escrow Adjustment (10,111) (10,111) Liquidation Transaction Costs 5,000 5,000 --------- -------- Total Prepayment Penalties & Other Liabilities $28,526 $28,526 --------- -------- NET ASSET VALUE (2) $11,979 $0 ========= ======== ------ ------ NET ASSET VALUE PER SHARE $0.45 $0.00 $0.99 $0.23 ========= ======= ------ ------ TOTAL SHARES OUTSTANDING 26,463 26,463 Excluding Method 3 ------------------ $0.32 $0.00 (1) Assumes all debt is prepaid at 108% of par. (2) Due to a common stockholders' limited liability, the lowest net asset value possible is zero. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 38
[LOGO OF PETRO APPEARS HERE] Project Intense Heat ================================================================================ Comparable Company Trading Analysis Energy and Fuel Marketing and Distribution Companies Getty Petroleum Marketing Inc. Streicher Mobile Fueling, Inc. Meteor Industries, Inc. TransMontaigne Inc. Midcoast Energy Resources, Inc. World Fuel Services Corporation - ------------------------------------------------------------------------------- Dain Rauscher Wessels Page 39
[LOGO OF PETRO APPEARS HERE] Energy and Fuel Marketing and Distribution Companies Market Value of Equity to Latest Twelve Months Net Income from Operations ========================================================================================= [BAR GRAPH APPEARS HERE] Trans- Midcoast Meteor World Getty Streicher Mean Petroleum Montaigne Energy industries Fuel Petroleum Mobile Heat and Resources Services Marketing Fueling Power Co. - ---------------------------------------------------------------------------------------- 29.3x 14.1x 10.8x 8.7x NM NM 15.7x NM - ---------------------------------------------------------------------------------------- - ----------------------- Note: Market data as of 1/22/99. Source: Factset Data Systems and publicly available information. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 40
[LOGO OF PETRO APPEARS HERE] Energy and Fuel Marketing and Distribution Companies Market Value of Equity to Latest Twelve Months Net Income from Operations ======================================================================================== [BAR GRAPH APPEARS HERE] Trans- Midcoast Meteor World Getty Streicher Mean Petroleum Montaigne Energy industries Fuel Petroleum Mobile Heat and Resources Services Marketing Fueling Power Co. (1) - ---------------------------------------------------------------------------------------- 12.1x 10.0x 6.4x 6.4x 3.8x NM 7.7x 14.7x - ---------------------------------------------------------------------------------------- ___________________ Note: Market data as of 1/22/99. Source: Factset Data Systems and publicly available information. (1) Petro latest twelve months cash flow from operations includes Star Gas distributions. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 41
[LOGO OF PETRO APPEARS HERE] Energy and Fuel Marketing and Distribution Companies Market Value of Equity to Tangible Book Value of Equity ======================================================================================== [BAR GRAPH APPEARS HERE] Trans- Midcoast Streicher Meteor World Getty Mean Petroleum Montaigne Energy Mobile industries Fuel Petroleum Heat and Resources Fueling Services Marketing Power Co. (1) - ---------------------------------------------------------------------------------------- 2.1x 1.9x 1.9x 1.6x 1.6x 0.7X 1.6x NM - ---------------------------------------------------------------------------------------- - ----------------------- Note: Market data as of 1/22/99. Source: Factset Data Systems and publicly available information. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 42
[LOGO OF PETRO APPEARS HERE] Energy and Fuel Marketing and Distribution Companies Market Value of Capitalization to Latest Twelve Months Revenues =============================================================================== [THE FOLLOWING IS REPRESENTED BY A BAR GRAPH] Midcoast Streicher Meteor Trans- World Getty Mean Petroleum Energy Mobile Industries Montaigne Fuel Petroleum Heat and Resources Fueling Services Marketing Power Co. 0.9x 0.4x 0.2x 0.2x 0.2x 0.1x 0.3x 0.7x ___________________________ Note: Market data as of 1/22/99. Source: Factset Data Systems and publicly available information. =============================================================================== Dain Rauscher Wessels Page 43
[LOGO OF PETRO APPEARS HERE] Energy and Fuel Marketing and Distribution Companies Market Value of Capitalization to Latest Twelve Months EBITDA ================================================================================================ [BAR GRAPH APPEARS HERE] Streicher Midcoast Trans- Meteor World Getty Mean Petroleum Mobile Energy Montaigne industries Fuel Petroleum Heat and Fueling Resources Services Marketing Power Co. (1) - ------------------------------------------------------------------------------------------------- 23.9x 12.9x 11.4x 5.7x 5.1x 3.8x 10.5x 8.3x - ------------------------------------------------------------------------------------------------- Note: Market data as of 1/22/99. Source: Factset Data Systems and publicly available information. (1) Petro latest twelve months EBITDA includes Star Gas distributions and excludes non-recurring expenses. - ------------------------------------------------------------------------------- Dain Rauscher Wessels Page 44
[LOGO OF PETRO APPEARS HERE] Energy and Fuel Marketing and Distribution Companies Market Value of Capitalization to Latest Twelve Months EBIT ======================================================================================== [BAR GRAPH APPEARS HERE] Trans- Midcoast Meteor World Getty Streicher Mean Petroleum Montaigne Energy industries Fuel Petroleum Mobile Heat and Resources Services Marketing Fueling Power Co. (1) - ---------------------------------------------------------------------------------------- 15.9x 15.8x 7.9x 5.7x NM NM 11.3x NM - ---------------------------------------------------------------------------------------- _______________________ Note: Market data as of 1/22/99. Source: Factset Data Systems and publicly available information. - ------------------------------------------------------------------------------- Dain Rauscher Wessels Page 45
[LOGO OF PETRO APPEARS HERE] Project Intense Heat ================================================================================ Comparable Company Trading Analysis Propane Master Limited Partnerships Amerigas Partners, L.P. Heritage Propane Partners, L.P. Cornerstone Propane Partners, L.P. Suburban Propane Partners, L.P. Ferrellgas Partners, L.P. - ------------------------------------------------------------------------------- Dain Rauscher Wessels Page 46
[LOGO OF PETRO APPEARS HERE] Propane Master Limited Partnerships Percentage of 52 Week High Common Unit Price =============================================================================== [BAR GRAPH APPEARS HERE] Suburban Heritage Amerigas Ferrellgas Cornerstone Mean Star Gas Star Gas Propane Propane Partners Partners Propane Partners Partners Partners Partners Partners (current) (1 day prior) (1) - ---------------------------------------------------------------------------------------- 96.9% 94.4% 90.7% 86.8% 78.1% 89.4% 76.8% 85.1% - ---------------------------------------------------------------------------------------- Note: Market data as of 1/22/99. Source: Factset Data Systems. (1) Percentage of 52 week high one day prior to announcement of merger on August 13, 1998. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 47
[LOGO OF PETRO APPEARS HERE] Propane Master Limited Partnerships Current Yield ================================================================================================== [BAR GRAPH APPEARS HERE] Cornerstone Suburban Ferrellgas Amerigas Heritage Mean Star Gas Star Gas Propane Propane Partners Partners Propane Partners Partners Partners Partners Partners ($2.20 ($2.30 per Unit) per Unit) - --------------------------------------------------------------------------------------------------- 11.8% 10.3% 10.1% 9.0% 8.9% 10.0% 11.6% 12.1% - --------------------------------------------------------------------------------------------------- Note: Market data as of 1/22/99. Source: Factset Data Systems and publicly available information. - ------------------------------------------------------------------------------- Dain Rauscher Wessels Page 48
[LOGO OF PETRO APPEARS HERE] Propane Master Limited Partnerships Historical Yields ============================================================================== [LINE GRAPH APPEARS HERE] Source: Factset Data Systems and publicly available information. - ------------------------------------------------------------------------------ Dain Rauscher Wessels Page 49
[LOGO OF PETRO APPEARS HERE] Propane Master Limited Partnerships Historical Yields vs. 10-Year Treasury ============================================================================== [LINE GRAPH APPEARS HERE] Source: Factset Data Systems and publicly available information. (1) Peer group includes Amerigas Partners, Cornerstone Propane Partners, Ferrellgas Partners, Heritage Propane Partners and Suburban Propane Partners. - ------------------------------------------------------------------------------ Dain Rauscher Wessels Page 50
[LOGO OF PETRO APPEARS HERE] Propane Master Limited Partnerships Yield Spread to Treasury ============================================================================== [LINE GRAPH APPEARS HERE] Source: Factset Data Systems and publicly available information. (1) Peer group includes Amerigas Partners, Cornerstone Propane Partners, Ferrellgas Partners, Heritage Propane Partners and Suburban Propane Partners. - ------------------------------------------------------------------------------ Dain Rauscher Wessels Page 51
[LOGO OF PETRO APPEARS HERE] Propane Master Limited Partnerships Adjusted Market Value of Capitalization (1) ============================================================================== In Millions [BAR GRAPH APPEARS HERE] Amerigas Ferrellgas Suburban Cornerstone Heritage Mean Star Gas Star Gas Partners Partners Propane Propane Propane Partners Partners Partners Partners Partners Historical Pro Forma (2) (2) - --------------------------------------------------------------------------------- $1,593 $1,108 $907 $508 $370 $897 $208 $605 - --------------------------------------------------------------------------------- - --------------------------- Note: Market data as of 1/22/99. Source: Factset Data Systems, publicly available information and Petroleum Heat and Power Co., Inc. (1) Adjusted Market Value of Capitalization (MVC) is defined as adjusted market value of equity (common units multiplied by current common unit price, plus subordinated units multiplied by current common unit price less a 25% liquidity discount and a 10% subordination discount, plus implied GP units multiplied by current common unit price less a 25% liquidity discount plus a 10% control premium) plus book value of total debt, less cash and equivalents in excess of a 1.0 working capital ratio. (2) Adjusted MVC for Star Gas historical is calculated based upon the definition above, less an additional 15% subordination discount on subordinated units. The adjusted MVC for Star Gas pro forma is based upon the Unit Reference Value Analysis (Dain Rauscher Wessels Case), [See Unit Reference Value Analysis on page 9]. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 52
[LOGO APPEARS HERE] Propane Master Limited Partnerships Adjusted Market Value of Capitalization(1) to Latest Twelve Months EBITDA ============================================================================== [BAR GRAPH APPEARS HERE] Cornerstone Ferrellgas Amerigas Heritage Suburban Mean Star Gas Propane Partners Partners Propane Propane Partners Partners Partners Partners Historical (2) - -------------------------------------------------------------------------------- 11.0x 11.0x 10.6x 9.8x 9.0x 10.3x 11.0x - -------------------------------------------------------------------------------- Note: Market data as of 1/22/99. Source: Factset Data Systems and publicly available information. (1) Adjusted Market Value of Capitalization (MVC) is defined as adjusted market value of equity (common units multiplied by current common unit price, plus subordinated units multiplied by current common unit price less a 25% liquidity discount and a 10% subordination discount, plus implied GP units multiplied by current common unit price less a 25% liquidity discount plus a 10% control premium) plus book value of total debt, less cash and equivalents in excess of a 1.0 working capital ratio. (2) Adjusted MVC for Star Gas historical is calculated based upon the definition above, less an additional 15% subordination discount on subordinated units. - ------------------------------------------------------------------------------ Dain Rauscher Wessels Page 53
[LOGO OF PETRO APPEARS HERE] Propane Master Limited Partnerships Adjusted Market Value of Equity(1) to Latest Twelve Months Cash Flow from Operations ============================================================================== Amerigas Cornerstone Ferrellgas Heritage Suburban Mean Star Gas Partners Propane Partners Propane Propane Partners Partners Partners Partners Historical (2) - ------------------------------------------------------------------------------ 10.7x 9.5x 8.9x 7.5x 7.2x 8.7x 8.8x - ------------------------------------------------------------------------------ Note: Market data as of 1/22/99. Source: Factset Data Systems and publicly available information. (1) Adjusted Market Value of Equity (MVE) is defined common units multiplied by current common unit price, plus subordinated units multiplied by current common unit price less a 25% liquidity discount and a 10% subordination discount, plus implied GP units multiplied by current common unit price less a 25% liquidity discount plus a 10% control premium. (2) Adjusted MVE for Star Gas historical is calculated based upon the definition above, less an additional 15% subordination discount on subordinated units. - ------------------------------------------------------------------------------ Dain Rauscher Wessels Page 54
[LOGO OF PETRO APPEARS HERE] Propane Master Limited Partnerships Total Debt to Adjusted Market Value of Capitalization (1) ============================================================================== [BAR CHART APPEARS HERE] Suburban Ferrellgas Heritage Cornerstone Amerigas Mean Star Gas Star Gas Propane Partners Propane Propane Partners Partners Partners Partners Partners Partners Historical Pro Forma (2) (2) - ---------------------------------------------------------------------------------- 55.5% 53.6% 53.6% 51.8% 45.1% 51.9% 52.8% 46.9% - ---------------------------------------------------------------------------------- Note: Market data as of 1/22/99. Source: Factset Data Systems, publicly available information and Petroleum Heat and Power Co., Inc. (1) Adjusted Market Value of Capitalization (MVC) is defined as adjusted market value of equity (common units multiplied by current common unit price, plus subordinated units multiplied by current common unit price less a 25% liquidity discount and a 10% subordination discount, plus implied GP units multiplied by current common unit price less a 25% liquidity discount plus a 10% control premium) plus book value of total debt, less cash and equivalents in excess of a 1.0 working capital ratio. (2) Adjusted MVC for Star Gas historical is calculated based upon the definition above, less an additional 15% subordination discount on subordinated units. The adjusted MVC for Star Gas pro forma is based upon the Unit Reference Value Analysis (Dain Rauscher Wessels Case), [See Unit Reference Value Analysis on page 9]. - ------------------------------------------------------------------------------- Dain Rauscher Wessels Page 55
[LOGO OF PETRO APPEARS HERE] Propane Master Limited Partnerships Total Debt to Total Book Capitalization ============================================================================== [BAR CHART APPEARS HERE] Ferrellgas Heritage Suburban Amerigas Cornerstone Mean Star Gas Star Gas Partners Propane Propane Partners Propane Partners Partners Partners Partners Partners Historical Pro Forma (1) - ------------------------------------------------------------------------------------ 109.2% 89.2% 86.8% 70.6% 49.9% 81.1% 65.7% 103.0% - ------------------------------------------------------------------------------------ - ------------- Source: Publicly available information and Petroleum Heat and Power Co., Inc. (1) Pro forma total debt to total book capitalization for Star Gas is estimated at September 30, 1998. - ------------------------------------------------------------------------------- Dain Rauscher Wessels Page 56
[LOGO OF PETRO APPEARS HERE] Propane Master Limited Partnerships Latest Twelve Months EBITDA to Interest Expense (Interest Coverage) ==================================================================================== [BAR CHART APPEARS HERE] Suburban Heritage Cornerstone Amerigas Ferrellgas Mean Star Gas Star Gas Propane Propane Propane Partners Partners Partners Partners Partners Partners Partners Historical Pro Forma (1) - ------------------------------------------------------------------------------------- 2.7x 2.5x 2.4x 2.3x 2.1x 2.4x 2.4x 2.1x - ------------------------------------------------------------------------------------- - ------------------ Source: Publicly available information and Petroleum Heat and Power Co., Inc. (1) Pro forma EBITDA to interest expense for Star Gas is estimated for the year ended September 30, 1998. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 57
[LOGO OF PETRO APPEARS HERE] Propane Master Limited Partnerships Total Debt to Latest Twelve Months EBITDA =================================================================================== [BAR CHART APPEARS HERE] Ferrellgas Cornerstone Heritage Suburban Amerigas Mean Star Gas Star Gas Partners Propane Propane Propane Partners Partners Partners Partners Partners Partners Historical Pro Forma (1) - ------------------------------------------------------------------------------------- 5.9x 5.7x 5.3x 5.0x 4.8x 5.3x 5.8x 5.7x - ------------------------------------------------------------------------------------- - --------------------- Source: Publicly available information and Petroleum Heat and Power Co., Inc. (1) Pro forma total debt to EBITDA for Star Gas is estimated at and for the year ended September 30, 1998. - ------------------------------------------------------------------------------- Dain Rauscher Wessels Page 58
[LOGO OF PETRO APPEARS HERE] Propane Master Limited Partnerships Latest Twelve Months Profitability Margins ========================================================================================= [BAR CHART APPEARS HERE] Amerigas Heritage Suburban Ferrellgas Cornerstone Mean Star Gas Partners Propane Propane Partners Propane Partners Partners Partners Partners - ------------------------------------------------------------------------------------------ Gross Profit 36.3% 23.8% 20.7% 20.0% 7.7% 21.7% 22.4% EBITDA 16.4% 20.7% 15.1% 15.6% 5.9% 14.8% 16.9% EBIT 9.5% 12.9% 9.4% 8.7% 3.5% 8.8% 6.5% - ------------------------------------------------------------------------------------------ - -------------------------- Source: Publicly available information. - ------------------------------------------------------------------------------- Dain Rauscher Wessels Page 59
[LOGO OF PETRO APPEARS HERE] Propane Master Limited Partnerships Latest Twelve Months Retail Gallons ========================================================================================= [BAR CHART APPEARS HERE] Millions of Gallons Amerigas Ferrellgas Suburban Cornerstone Heritage Mean Star Gas Star Gas Partners Partners Propane Propane Propane Partners Partners Partners Partners Partners Historical Pro Forma - ------------------------------------------------------------------------------------------ 785.0 650.2 530.0 233.1 149.5 496.6 98.9 453.0 [Home Heating Oil Increment (354.1 million gallons)] - ------------------------------------------------------------------------------------------ - ------------------- Source: Publicly available information. - ------------------------------------------------------------------------------- Dain Rauscher Wessels Page 60
[LOGO OF PETRO APPEARS] Propane Master Limited Partnerships Latest Twelve Months Sales Percentage by Customer Type ========================================================================================= [BAR CHART APPEARS HERE] Residential - ------------------------------------------------------------------------------------------ Cornerstone Ferrellgas Heritage Amerigas Suburban Mean Star Gas Propane Partners Propane Partners Propane Partners Partners Partners Partners - ------------------------------------------------------------------------------------------ 57.0% 56.0% 55.0% 40.5% 37.7% 49.3% 54.0% - ------------------------------------------------------------------------------------------ Commercial / Industrial - ------------------------------------------------------------------------------------------ Suburban Amerigas Ferrellgas Heritage Cornerstone Mean Star Gas Propane Partners Partners Propane Propane Partners Partners Partners Partners - ------------------------------------------------------------------------------------------ 39.7% 36.7% 31.0% 26.0% 23.0% 31.3% 19.0% - ------------------------------------------------------------------------------------------ Agricultural - ------------------------------------------------------------------------------------------ Ferrellgas Cornerstone Amerigas Suburban Heritage Mean Star Gas Partners Propane Partners Propane Propane Partners Partners Partners Partners - ------------------------------------------------------------------------------------------ 13.0% 11.0% 8.9% 6.6% N/A 9.9% 19.0% - ------------------------------------------------------------------------------------------ Other - ------------------------------------------------------------------------------------------ Heritage Suburban Amerigas Cornerstone Ferrellgas Mean Star Gas Propane Propane Partners Propane Partners Partners Partners Partners Partners - ------------------------------------------------------------------------------------------ 19.0% 15.9% 13.9% 9.0% N/A 14.5% 8.0% - ------------------------------------------------------------------------------------------ - ------------------------- Source: Publicly available information. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 61
[LOGO OF PETRO APPEARS HERE] Propane Master Limited Partnerships Latest Twelve Months Operating Results per Retail Gallon ========================================================================================= [BAR CHART APPEARS HERE] Amerigas Heritage Cornerstone Suburban Ferrellgas Mean Star Gas Partners Propane Propane Propane Partners Partners Partners Partners Partners - ------------------------------------------------------------------------------------------ Gross Profit $0.42 $0.29 $0.26 $0.26 $0.20 $0.29 $0.25 EBITDA $0.19 $0.25 $0.20 $0.19 $0.15 $0.20 $0.19 SG&A $0.23 $0.04 $0.06 $0.07 $0.03 $0.09 $0.06 - ------------------------------------------------------------------------------------------ _______________________ Source: Publicly available information. - -------------------------------------------------------------------------------- Dain Rauscher Wessels Page 62
[LOGO OF PETRO APPEARS HERE] Propane Master Limited Partnerships Latest Twelve Months Operating Results per Branch ========================================================================================= [BAR CHART APPEARS HERE] Cornerstone Suburban Amerigas Heritage Ferrellgas Mean Star Gas Propane Propane Partners Propane Partners Partners Partners Partners Partners - ------------------------------------------------------------------------------------------ Revenue $2,797 $1,963 $1,524 $1,244 $746 $1,655 $931 Gross Profit $215 $406 $553 $296 $150 $324 $208 EBITDA $165 $297 $251 $258 $116 $217 $158 - ------------------------------------------------------------------------------------------ _______________________ Source: Publicly available information. - ------------------------------------------------------------------------------- Dain Rauscher Wessels Page 63
[LOGO OF PETRO APPEARS HERE] Project Intense Heat ============================================================================== Comparable Transactions Analysis - ------------------------------------------------------------------------------ Dain Rauscher Wessels Page 64
Comparable Transactions Analysis [LOGO OF PETRO APPEARS HERE] Selected Energy Marketing & Distribution Merger & Acquisition Transactions (1994 - Present) PROJECT INTENSE HEAT Selected Energy Marketing & Distribution Merger & Acquisition Transactions (1994 - Present) Transaction Transaction Enterprise Enterprise Value / ------------------ Date Value (1) LTM LTM Effective Acquiror Name Target Name ($ mil.) EBITDA EBIT - -------- ----------------------------------- --------------------------------------- --------- ------- ------- 05/31/94 Valero Energy Corporation Valero Natural Gas Partners, L.P. $865.6 14.6 x 21.4 x 07/01/94 Associated Natural Gas Corporation Grand Valley Gas Company 53.8 7.3 x 10.9 x 07/13/94 K N Energy, Inc. American Oil and Gas Company 410.9 10.9 x 20.5 x 12/15/94 Panhandle Eastern Corp. Associated Natural Gas Corporation 750.7 9.6 x 15.2 x 03/14/95 Natural Gas Clearinghouse Trident NGL Holding, Inc. 719.3 9.8 x 18.2 x 05/15/95 LG&E Energy Corporation Hadson Corporation 143.0 11.9 x NM 08/05/97 El Paso Natural Gas Company Eastex Energy, Inc. 35.6 NM NM 04/15/97 PacifiCorp Holdings, Inc. TPC Corporation 388.7 13.4 x 23.3 x 11/18/97 Enron Corp. Enron Global Power & Pipelines L.L.C. 829.1 14.3 x 14.3 x 03/06/98 Kinder Morgan Energy Partners, L.P. Santa Fe Pacific Pipeline Partners, L.P. 1464.9 10.9 x 13.0 x 10/16/98 CMS Energy Corporation Continental Natural Gas, Inc. 150.4 NM NM Pending ONEOK, Inc. Southwest Gas Corporation 1764.3 7.4 x 11.8 x -------------------------------------------------------------------------- Mean $631.3 11.0 x 16.5 x Median 565.1 10.9 x 15.2 x High 1764.3 14.6 x 23.3 x Low 35.6 7.3 x 10.9 x -------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Pending Star Gas Partners, L.P. Petroleum Heat and Power Co., Inc. (2) $361.00 10.3 x NM - ---------------------------------------------------------------------------------------------------------------------------- Transaction Transaction Equity Value / Equity -------------------------- Value LTM Net Tangible Date Effective Acquiror Name Target Name ($ mil.) Income Book Value - -------- ----------------------------------- --------------------------------------- --------- -------- --------------- 05/31/94 Valero Energy Corporation Valero Natural Gas Partners, L.P. $230.4 55.3 x 4.3 x 07/01/94 Associated Natural Gas Corporation Grand Valley Gas Company 56.7 26.5 x 3.5 x 07/13/94 K N Energy, Inc. American Oil and Gas Company 302.1 54.8 x 1.6 x 12/15/94 Panhandle Eastern Corp. Associated Natural Gas Corporation 577.5 19.5 x 2.8 x 03/14/95 Natural Gas Clearinghouse Trident NGL Holding, Inc. 333.7 50.3 x 1.4 x 05/15/95 LG&E Energy Corporation Hadson Corporation 143.0 NM NM 08/05/97 El Paso Natural Gas Company Eastex Energy, Inc. 34.2 NM 2.2 x 04/15/97 PacifiCorp Holdings, Inc. TPC Corporation 241.4 47.9 x 2.5 x 11/18/97 Enron Corp. Enron Global Power & Pipelines L.L.C. 865.3 15.4 x 2.5 x 03/06/98 Kinder Morgan Energy Partners, L.P. Santa Fe Pacific Pipeline Partners, L.P. 1163.1 21.3 x 4.3 x 10/16/98 CMS Energy Corporation Continental Natural Gas, Inc. 63.2 NM 1.5 x Pending ONEOK, Inc. Southwest Gas Corporation 864.0 18.9 x 1.9 x -------------------------------------------------------------------------- Mean $406.2 34.4 x 2.6 x Median 271.8 26.5 x 2.5 x High 1163.1 55.3 x 4.3 x Low 34.2 15.4 x 1.4 x -------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Pending Star Gas Partners, L.P. Petroleum Heat and Power Co., Inc. (2) $50.3 NM NM - ---------------------------------------------------------------------------------------------------------------------------- ____________________ Source: Securities Data Company, publicly available information and Petroleum Heat and Power Co., Inc. (1) Transaction enterprise value is defined as common equity purchase price plus total debt and preferred stock, less cash and equivalents, excluding fees and expenses. The stock is valued using the closing price on the effective date of the transaction. (2) Petro market value of capitalization and market value of equity are based on the Unit Reference Value Analysis (Dain Rauscher Wessels Case), [See Unit Reference Value Analysis Summary on page 9]. LTM EBITDA includes Star Gas distributions and excludes non-recurring expenses. =============================================================================== Dain Rauscher Wessels Page 65
[LOGO OF PETRO APPEARS HERE] Comparable Transactions Analysis Petro Acquisitions Summary PROJECT INTENSE HEAT Petro Acquisitions Summary (Dollar and gallon amounts in thousands, except per gallon and per customer amounts) Target LTM EBITDA Mean Mean Total Total ----------------- Total Acquisition Total Acquisition Companies Acquisition Mean Gallons Cost Customers Cost Petro 1996 - 1997 Acquisitions Acquired Costs EBITDA Multiple Acquired per Gallon Acquired per Customer - ----------------------------------- ---------- ------------ ------- -------- ---------- ------------ --------- ------------- Ten Largest 10 $33,465 $7,848 4.2 x 40,446 $0.84 31,358 $1,194 Excluding Ten Largest 14 8,629 2,064 4.1 x 13,730 0.55 14,224 630 Petroleum Heat and Power Co., Inc. - ----------------------------------------------------------------------------------------------------------------------------------- Normalized 1998E EBITDA $336,194(1) $44,749(2) 7.5 x 384,390 $0.87 335,000 $1,004 Estimated 1998E EBITDA 336,194(1) 30,612(2) 11.0 x - ----------------------------------------------------------------------------------------------------------------------------------- _____________________ Source: Petroleum Heat and Power Co., Inc. (1) Acquisition cost is based on the Pro Forma Market Value of Capitalization Analysis (Dain Rauscher Wessels Case), [See Petro Historical and Pro Forma Adjusted MVE and MVC Summary on page 25] less Petro's investment in Star. The value of Petro's investment in Star is the most recent closing market price of a Star Common Unit less a structural subordination discount of 48% multiplied by Petro's total implied Star units. (2) EBITDA excludes Star Gas distributions and non-recurring expenses. ================================================================================ Dain Rauscher Wessels Page 66
[LOGO OF PETRO APPEARS HERE] Comparable Transactions Analysis 1996 - 1997 Petro Acquisitions (Ten Largest) PROJECT INTENSE HEAT 1996 - 1997 Petro Acquisitions (Ten Largest) (Dollar and gallon amounts in thousands, except per gallon and per customer amounts) Total Target LTM EBITDA Total Acquisition Total Acquisition Acquisition (Pro Forma Petro Ownership) Gallons Cost Customers Cost --------------------------- Date Company Acquired Costs EBITDA Multiple Acquired per Gallon Acquired per Customer - ---- -------------------- ----------- --------- --------- -------- ---------- ---------- ------------ 02/01/96 Seaman $ 7,134 $ 1,552 4.6 x 7,522 $ 0.95 7,806 $ 914 01/11/96 Garrison 5,242 1,154 4.5 x 5,925 0.88 6,575 797 01/19/96 Cibro 4,368 1,087 4.0 x 6,200 0.70 2,426 1,800 10/18/96 Bergen 3,202 718 4.5 x 5,501 0.58 1,593 2,010 04/14/97 Mugullian Fuel 2,802 638 4.4 x 3,000 0.93 2,570 1,090 04/01/96 McDowell 2,723 669 4.1 x 2,675 1.02 2,305 1,182 08/29/97 Oil Burner Utility 2,633 603 4.4 x 3,500 0.75 1,590 1,656 09/10/97 Romary 2,252 545 4.1 x 2,348 0.96 2,210 1,019 09/29/97 T.W. Perry 1,619 439 3.7 x 2,118 0.76 2,461 658 06/26/97 Bellorno 1,489 443 3.4 x 1,657 0.90 1,822 817 ---------------------------------------------------------------------------------------------------------------------- Total $ 33,465 $ 7,848 --- 40,446 --- 31,358 --- Mean 3,346 785 4.2 x 4,045 $ 0.84 3,136 $ 1,194 Weighted Average --- --- 4.3 x --- 0.83 --- 1,067 Median 2,763 654 4.2 x 3,250 0.89 2,366 1,055 High 7,134 1,552 4.6 x 7,522 1.02 7,806 2,010 Low 1,489 439 3.4 x 1,657 0.58 1,590 658 ---------------------------------------------------------------------------------------------------------------------- ________________ Source: Petroleum Heat and Power Co., Inc. =============================================================================== Dain Rauscher Wessels Page 67
[LOGO OF PETRO APPEARS HERE] Comparable Transactions Analysis 1996 - 1997 Petro Acquisitions (Excluding Ten Largest) PROJECT INTENSE HEAT 1996 - 1997 Petro Acquisitions (Excluding Ten Largest) (Dollar and gallon amounts in thousands, except per gallon and per customer amounts) Total Target LTM EBITDA Total Acquisition Total Acquisition Acquisition (Pro Forma Petro Ownership) Gallons Cost Customers Cost -------------------------- Date Company Acquired Costs EBITDA Multiple Acquired per Gallon Acquired per Customer - ---- ------------------- ----------- --------- ----------- -------- ----------- --------- ------------- 11/24/97 Shreve $1,457 $300 4.9 x 2,425 $0.60 2,782 $524 09/11/96 Flynn 1,038 232 4.5 x 1,316 0.79 1,070 970 12/18/97 Genovese 1,011 281 3.6 x -- -- 1,054 959 10/31/96 Hy-Test 813 177 4.6 x 1,468 0.55 1,269 641 01/15/97 Oils Inc. 748 188 4.0 x 1,189 0.63 826 905 10/01/97 Millbrook 527 112 4.7 x 908 0.58 900 586 07/10/97 Good 521 117 4.5 x 1,200 0.43 1,559 334 12/26/96 Sherman 493 103 4.8 x 564 0.87 475 1,037 12/30/96 Grasso 423 116 3.6 x 1,118 0.38 1,080 392 05/14/97 Alderfer Heating 401 111 3.6 x 787 0.51 740 542 12/27/96 Matco 368 97 3.8 x 988 0.37 722 510 12/18/96 Dexter Bros. 332 99 3.4 x 786 0.42 700 474 09/24/96 Farren 264 69 3.8 x 481 0.55 520 507 10/18/96 Highstown 233 62 3.8 x 500 0.47 527 443 --------------------------------------------------------------------------------------------------------------------- Total $8,629 $2,064 --- 13,730 --- 14,224 --- Mean 616 147 4.1 x 1,056 $0.55 1,016 $630 Weighted Average --- --- 4.2 x --- 0.63 --- 607 Median 507 114 3.9 x 988 0.55 863 533 High 1,457 300 4.9 x 2,425 0.87 2,782 1,037 Low 233 62 3.4 x 481 0.37 475 334 --------------------------------------------------------------------------------------------------------------------- ___________________ Source: Petroleum Heat and Power Co., Inc. ================================================================================ Dain Rauscher Wessels Page 68
[LOGO OF PETRO APPEARS HERE] Comparable Transactions Analysis 1994 - 1998 Star Gas Partners Acquisitions =============================================================================== PROJECT INTENSE HEAT 1994 - 1998 Star Gas Partners Acquisitions (Dollar amounts in thousands) Total Target LTM EBITDA Acquisition ---------------------------- Date Company Acquired Costs EBITDA Multiple - ---- ----------------------------------------- ----------- ------ -------- 06/15/94 Loveland $700 $127 5.5 x 11/24/94 Baystate 1,450 209 6.9 x 09/12/95 Debolt 950 151 6.3 x 03/22/96 Bob White L.P. Gas / Mitchell Bottle Gas 1,500 263 5.7 x 07/22/96 Fuzzy Moore 850 147 5.8 x 10/22/97 Pearl Gas Co. 24,127 3,288 7.3 x 02/20/98 Tri-County Gas 550 108 5.1 x 05/28/98 Knowles LP Gas 3,000 426 7.0 x 05/28/98 Tioga Petroleum 1,200 257 4.7 x 07/30/98 Lowe Bros & Dad, Inc. 3,750 602 6.2 x 08/11/98 Myers Appliance 1,200 191 6.3 x ----------------------------------------------------------------------------------------------------------------- Total $39,277 $5,769 --- Mean 3,571 524 6.1 x Weighted Average --- --- 6.8 x Median 1,200 209 6.2 x High 24,127 3,288 7.3 x Low 550 108 4.7 x ----------------------------------------------------------------------------------------------------------------- Petroleum Heat and Power Co., Inc. ----------------------------------------------------------------------------------------------------------------- Normalized 1998E EBITDA $336,194 (1) $44,749 (2) 7.5 x Estimated 1998E EBITDA 336,194 (1) 30,612 (2) 11.0 x ----------------------------------------------------------------------------------------------------------------- ___________________ Source: Star Gas Partners, L.P. and Petroleum Heat and Power Co., Inc. (1) Acquisition cost is based on the Pro Forma Market Value of Capitalization Analysis (Dain Rauscher Wessels Case), [See Petro Historical and Pro Forma Adjusted MVE and MVC Summary on page 25] less Petro's investment in Star. The value of Petro's investment in Star is the most recent closing market price of a Star Common Unit less a structural subordination discount of 48% multiplied by Petro's total implied Star units. (2) EBITDA excludes Star Gas distributions and non-recurring expenses. =============================================================================== Dain Rauscher Wessels Page 69
[LOGO OF PETRO APPEARS HERE] Project Intense Heat =============================================================================== Merger Premiums Analysis =============================================================================== Dain Rauscher Wessels Page 70
Merger Premiums Analysis [LOGO OF PETRO APPEARS HERE] Selected Energy Industry Merger & Acquisition Transactions (1994 - Present, Stock-for-Stock, $100 - $500.00 million) PROJECT INTENSE HEAT Selected Energy Industry Merger & Acquisition Transactions (1994 - Present, Stock-for-Stock, $100 - $500 million) Transaction Transaction Premium / Discount to: Enterprise Equity ------------------------ Date Value (1) Value per 1 day 1 week 4 weeks Announced Acquiror Name Target Name ($ mil.) Share prior prior prior - --------- ---------------------------------- -------------------------------- ---------- ----------- ----- ------ ------- 03/24/94 K N Energy, Inc. American Oil and Gas Company $366.8 11.05 4.0% 4.0% 5.2% 05/23/94 Dresser Industries, Inc. Wheatley TXT Corp. 204.6 14.70 25.1% 25.1% 32.1% 06/02/94 J Ray McDermott S.A. Offshore Pipelines, Inc. 354.4 21.88 14.4% 23.3% 35.7% 06/13/94 Noble Drilling Corporation Chiles Offshore Drilling Company 200.2 5.25 5.0% 2.4% 23.5% 09/20/94 Parker & Parsley Petroleum Company Tide West Oil Company 141.0 14.24 -0.1% 21.2% 16.2% 05/03/95 Barrett Resources Corporation Plains Petroleum Company 299.6 30.23 34.3% 38.2% 39.0% 11/20/95 Tidewater, Inc. Hornbeck Offshore Services, Inc. 291.5 21.67 40.9% 40.9% 46.9% 01/25/96 ENSCO International Incorporated Dual Drilling (Mosvold Shipping) 325.2 14.22 8.9% 13.2% 23.7% 04/17/97 Baker Hughes Incorporated Drilex International, Inc. 133.6 17.58 31.4% 37.9% 59.8% 06/10/97 Halliburton Company NUMAR Corporation 328.9 39.62 91.0% 99.4% 95.7% 06/20/97 Forcenergy Inc. Convest Energy Corporation 101.5 9.44 11.1% 11.1% 18.9% 07/07/97 Meridian Resource Corporation Cairn Energy USA, Inc. 233.6 13.30 22.3% 29.0% 26.7% 11/13/97 Chesapeake Energy Corporation Hugoton Energy Corporation 377.0 13.33 7.7% 11.0% 26.9% 05/12/98 Lomak Petroleum, Inc. Domain Energy Corporation 224.6 14.50 65.7% 69.3% 21.5% 08/03/98 CMS Energy Corporation Continental Natural Gas, Inc. 172.3 10.00 8.8% 35.6% 42.9% ------------------------------------------------------------------------------------ Mean $250.3 24.7% 30.8% 34.3% Median 233.6 14.4% 25.1% 26.9% High 377.0 91.0% 99.4% 95.7% Low 101.5 -0.1% 2.4% 5.2% ----------------------------------------------------------------------------------- 08/14/98 Star Gas Partners, L.P. Petroleum Heat and Power Co., Inc. (Senior Subordinated Unit / Implied Reference Value per Petro Share) (2) ------------------------------------------------------------------------------------ Prior to Announcement $1.95 3.9% 11.3% 7.4% Current (3) $1.95 94.7% 94.7% 94.7% ------------------------------------------------------------------------------------ ________________________ Source: Securities Data Company, publicly available information and Petroleum Heat and Power Co., Inc. (1) Transaction Enterprise Value is defined as common equity purchase price plus total debt and preferred stock, less cash and equivalents, excluding fees and expenses. The stock is valued using the closing price on the last full trading day prior to announcement. (2) The Senior Subordinated Unit Implied Reference Value per Petro share is based on the Unit Reference Value Analysis (Dain) Rauscher Wessels Case), [See Unit Reference Value Analysis Summary on page 9]. (3) Based on the closing price of $1.00 on January 22, 1999. ================================================================================ Dain Rauscher Wessels Page 71
[LOGO OF PETRO APPEARS HERE] Merger Premiums Analysis Selected Recent All Industries Merger & Acquisition Transactions (1998 - Present, Stock-for-Stock, $100 - $500 million) PROJECT INTENSE HEAT Selected Recent All Industries Merger & Acquisition Transactions (1998 - Present, Stock-for-Stock, $100 - $500 million) Transaction Transaction Enterprise Equity Premium / Discount to: ------------------------- Date Value Value per 1 day 1 week 4 weeks Announced Acquiror Name Target Name ($ mil.) Share prior prior prior - --------- -------------------------------- ------------------------------- -------- ---------- ----- ------ ------- 01/01/98 ConAgra Inc GoodMark Foods Inc $230.6 $28.58 54.5% 75.9% 69.4% 01/14/98 Suiza Foods Corp Continental Can Co Inc 334.4 40.65 45.8% 74.4% 71.2% 01/20/98 World Access Inc NACT Telecommunications (GST) 144.6 17.50 12.0% 12.5% 16.7% 01/26/98 USA Waste Services Inc TransAmerican Waste Industries 156.7 2.18 51.4% 36.6% 78.6% 02/02/98 BMC Software Inc BGS Systems Inc 288.5 45.00 23.3% 32.4% 42.9% 02/02/98 Romac International Inc Source Services Corp 431.1 31.93 51.1% 56.7% 50.2% 02/04/98 Primus Telecommunications TresCom International Inc 142.6 10.80 25.2% 30.9% 51.5% 02/13/98 Regions Financial Corp First Community Banking Svcs 137.7 48.05 29.9% 37.3% 52.5% 02/18/98 United Bankshares Inc, WV Fed One Bancorp, Wheeling, WV 407.2 36.47 8.9% 22.1% 10.5% 02/18/98 Tarragon Realty Investors National Income Realty Trust 246.1 19.82 22.9% 17.9% 20.1% 02/19/98 PLATINUM Technology Inc Mastering Inc 180.5 12.50 31.6% 25.0% 33.3% 02/23/98 Network Associates Inc Trusted Information Systems 255.5 20.19 59.9% 84.6% 92.3% 02/24/98 Baxter International Inc Somatogen Inc 175.5 9.00 35.8% 39.8% 92.0% 03/02/98 Unitrode Corp Benchmarq Microelectronics Inc 145.1 18.81 15.8% 14.0% 67.2% 03/02/98 Siebel Systems Inc Scopus Technology Inc 455.9 22.39 58.5% 93.6% 100.1% 03/02/98 Huhtamaki Oy (Ahlgrens) Sealright Co Inc 200.7 11.00 -2.2% -1.1% -5.4% 03/03/98 Hubco Inc, Mahwah, New Jersey Community Financial Hldg, NJ 144.8 25.28 1.1% 2.7% 16.2% 03/06/98 USB Holding Co Inc Tappan Zee Financial Inc 127.9 16.80 -11.6% -10.1% -11.6% 03/16/98 PLATINUM Technology Inc Logic Works Inc 190.3 15.32 13.0% 36.2% 57.1% 03/19/98 JeffBanks Inc, Philadelphia, PA Regent Bancshares Corp, PA 213.4 14.85 6.1% 6.1% 6.1% 03/25/98 Fidelity National Financial Matrix Capital Corp 496.9 27.95 45.2% 64.4% 74.7% 03/26/98 Aviation Sales Whitehall Corp 139.9 22.57 2.6% -2.9% 9.1% 03/27/98 Dover Downs Entertainment Inc Grand Prix Assoc Of Long Beach 115.0 18.31 11.8% 22.1% 21.6% 03/31/98 Omnicare Inc IBAH Inc 153.8 5.75 12.2% 61.4% 58.6% 04/06/98 Applied Power Inc Zero Corp 301.0 33.63 16.5% 18.0% 33.2% 04/09/98 Complete Business Solutions Claremont Technology Group Inc 278.5 27.00 21.3% 77.0% 118.2% 04/14/98 Anchor Financial Corp ComSouth Bankshares Inc 229.0 33.00 9.3% 17.9% 20.0% 04/15/98 Giant Industries Inc Holly Corp 318.8 27.43 3.0% 2.5% -1.2% 04/16/98 Phoenix Technologies Ltd Award Software International 101.8 16.08 12.8% 21.3% 53.1% 04/23/98 Ambanc Holding Co, Amsterdam, NY AFSALA Bancorp Inc, NY 161.3 21.00 1.2% 2.4% 1.2% 04/27/98 Bright Horizons Holdings Inc CorporateFamily Solutions Inc 114.3 23.69 -21.4% -22.3% -7.5% 05/11/98 Fairchild Corp Banner Aerospace Inc 482.5 12.10 1.4% 0.3% 2.4% 05/12/98 Lomak Petroleum, Inc. Domain Energy Corporation 224.6 14.50 65.7% 69.3% 21.5% 05/19/98 Quantum Corp ATL Products Inc (Odetics) 353.1 29.00 8.4% 19.0% 45.0% 05/29/98 Valley National Bancorp, NJ Wayne Bancorp Inc, Wayne, NJ 401.4 34.38 40.3% 43.2% 49.5% 06/02/98 State Financial Services Corp Home Bancorp of Elgin, Elgin, IL 395.2 19.05 11.3% 11.3% 8.9% 06/04/98 PMC Commercial Trust Supertel Hospitality Inc 113.4 12.15 -6.5% -5.6% -4.7% 06/04/98 World Access Inc Telco Systems Inc 183.4 17.00 77.8% 65.9% 63.9% 06/12/98 Davel Communications Group Inc PhoneTel Technologies Inc 226.3 3.08 64.3% 69.9% 208.0% 06/22/98 Reptron Electronics All American Semiconductor Inc 103.7 2.72 13.9% 32.0% 61.3% 06/22/98 Learning Co Inc Broderbund Software Inc 287.2 20.00 21.2% 16.4% 19.0% 06/24/98 Mylan Laboratories Inc Penederm Inc 190.5 21.89 39.0% 39.5% 88.3% 06/25/98 German American Bancorp, IN 1st Bancorp, Vincennes, Indiana 166.0 50.94 65.7% 69.3% 21.5% 06/29/98 Philadelphia Suburban Corp Consumers Water Co 466.6 30.46 25.6% 33.1% 42.5% 07/01/98 Metzler Group Inc Lecg Inc 272.6 21.98 46.5% 49.0% 41.8% 07/02/98 Union Planters Corp, Memphis, TN First Mutual Bancorp, Illinois 375.8 18.50 5.7% 4.2% 9.6% 07/06/98 Davel Communications Group Inc Peoples Telephone Co Inc 209.6 5.86 87.5% 80.3% 118.0% 07/09/98 Zebra Technologies Corp Eltron International Inc 282.2 36.00 25.8% 34.6% 57.4% 07/13/98 Medtronic Inc AVECOR Cardiovascular Inc 107.8 13.00 31.6% 76.3% 114.4% 07/23/98 HBO & Co IMNET Systems Inc 245.9 25.29 55.6% 59.3% 62.5% 07/23/98 Digital Microwave Corp Innova Corp 116.4 6.83 16.2% 36.5% 30.0% 08/02/98 Cohoes Savings Bank, NY SFS Bancorp Inc, Schenectady, NY 196.9 35.00 75.0% 60.9% 66.7% 08/03/98 CMS Energy Corporation Continental Natural Gas, Inc. 172.3 10.00 8.8% 35.6% 42.9% 08/10/98 BB&T Corp, Winston-Salem, NC Scott & Stringfellow Financial 143.5 34.44 19.8% 28.7% 35.0% 08/17/98 MAF Bancorp, Clarendon Hills, IL Westco Bancorp Inc, IL 318.5 30.86 14.3% 8.3% 6.4% =============================================================================== Dain Rauscher Wessels Page 72
[LOGO OF PETRO APPEARS HERE] MERGER PREMIUMS ANALYSIS Selected Recent All Industries Merger & Acquisition Transactions (1998 - Present, Stock-for-Stock, $100 - $500 million) PROJECT INTENSE HEAT Selected Recent All Industries Merger & Acquisition Transactions (1998 - Present, Stock-for-Stock, $100 - $500 million) Transaction Transaction Enterprise Equity Premium / Discount to: ----------------------- Date Value Value per 1 day 1 week 4 weeks Announced Acquiror Name Target Name ($ mil.) Share prior prior prior - --------- ----------------------------------- ------------------------------ ---------- --------- ----- ------ ------- 08/17/98 MAF Bancorp, Clarendon Hills, IL Westco Bancorp Inc, IL $318.5 $30.86 14.3% 8.3% 6.4% 09/02/98 Sanmina Corp Altron Inc 189.5 12.39 16.6% 6.5% 7.7% 09/02/98 USWeb Corp CKS Group Inc 317.3 21.66 53.3% 30.3% 23.7% 09/02/98 Rent-Way Inc Home Choice Holdings Inc 289.7 13.60 7.2% 4.1% 7.7% 09/04/98 F&M Bancorp, Frederick, MD Monocacy Bancshares Inc 315.0 45.93 43.5% 39.2% 43.5% 09/14/98 Qwest Commun Int Inc Icon CMT Corp 184.2 12.00 65.5% 60.0% -4.0% 09/17/98 Commerce Bancorp, New Jersey Prestige Financial Corp 339.2 16.25 25.0% 47.7% 31.3% 09/22/98 Transcontinental Realty Inv Continental Mtg & Equity Trust 292.2 15.50 -3.1% -6.1% -3.1% 09/22/98 United National Bancorp, NJ Raritan Bancorp 439.8 38.43 16.5% 52.2% 31.7% 09/28/98 Fifth Third Bancorp, OH Enterprise Federal Bancorp, OH 293.6 43.59 51.6% 49.7% 74.4% 09/28/98 Fidelity Financial of Ohio Inc Glenway Financial Corp. 265.8 19.88 -8.6% -0.6% -0.6% 10/07/98 Western Bancorp, California PNB Financial Group 299.0 29.63 7.7% -1.3% -0.4% 10/14/98 First Finan Corp, Providence, RI Mayflower Co-Operative Bank 118.8 22.10 10.5% 26.3% 2.8% 10/19/98 Sunrise Assisted Living Inc Karrington Health Inc 176.8 11.88 31.1% 26.7% 98.0% 10/21/98 Southwest Bancorporation, TX Fort Bend Holding, Rosenberg, TX 344.4 21.75 14.5% 14.5% 7.4% 10/25/98 Watson Pharmaceuticals Inc TheraTech Inc 291.9 13.91 42.7% 68.6% 50.4% 10/27/98 Wachovia Corp, Winston-Salem, NC Interstate/Johnson Lane Inc 280.5 32.00 -5.9% 12.3% 5.8% 10/28/98 Lumonics Inc General Scanning Inc 105.4 7.66 49.5% 80.3% 39.3% 10/29/98 Eclipsys Corp Transition Systems Inc 219.5 13.58 57.5% 49.9% 72.5% 11/02/98 ServiceMaster Co LandCARE USA Inc 244.4 11.00 37.5% 35.4% 79.6% 11/09/98 MGM Grand Inc (Tracinda Corp) Primadonna Resorts Inc 492.1 9.28 3.1% 32.6% 86.8% 11/10/98 American Express Co Rockford Industries Inc 108.3 11.88 9.2% 28.4% 137.6% 11/11/98 Carolina Power & Light Co North Carolina Natural Gas 433.4 35.00 48.1% 41.1% 47.8% 11/11/98 Webster Finl Corp, Waterbury, CT Village Bancorp Inc 248.1 23.50 11.9% 17.5% 16.8% 11/16/98 American Tower Corp Omniamerica Inc 384.3 20.90 19.4% 12.2% -0.3% 11/19/98 American Retirement Corp Assisted Living Concepts Inc 409.8 14.66 10.7% 10.1% 18.5% 12/03/98 Fairchild Corp Banner Aerospace Inc 333.9 11.00 25.7% 41.9% 40.8% 12/03/98 Automatic Data Processing Inc Vincam Group Inc 287.7 18.18 24.3% 26.4% 39.2% 12/04/98 Lakeland Bancorp Inc, NJ High Point Financial Corp 282.9 18.60 37.8% 35.3% 39.1% 12/09/98 Cadence Design Systems Inc Quickturn Design Systems Inc 264.9 15.00 23.1% 33.3% 36.4% 12/10/98 BT Financial Corp, Johnstown, PA First Philson Financial Corp 257.6 46.26 39.7% 45.1% 46.3% 12/15/98 Quintiles Transnational Corp Pharmaceutical Marketing Svcs 251.1 15.40 29.7% 28.3% 43.3% 12/17/98 Sky Financial Group Inc Wood Bancorp, Bowling Green, OH 186.9 20.57 29.6% 44.4% 51.0% 12/18/98 Valley National Bancorp, NJ Ramapo Financial Corp 380.3 12.33 51.7% 64.3% 76.1% 01/05/99 Anchor Bancorp Wisconsin Inc FCB Financial Corp, Neenah, WI 442.3 44.15 57.7% 63.5% 50.9% 01/06/99 Marriott International Inc ExecuStay Corp 129.9 13.00 -4.1% -0.5% 2.0% 01/11/99 Metamor Worldwide Inc SPR Inc 319.8 22.80 28.0% 29.1% 26.7% 01/19/99 Newport News Shipbuilding Inc Avondale Industries Inc 468.1 35.50 32.1% 32.1% 24.6% 01/19/99 Dura Automotive Systems (Onex) Excel Industries Inc 495.5 26.18 25.4% 41.0% 55.1% ------------------------------------------------------------------------------ Mean $261.20 26.5% 33.2% 41.7% Median 253.3 23.2% 32.2% 39.2% High 496.9 87.5% 93.6% 208.0% Low 101.8 -21.4% -22.3% -11.6% ------------------------------------------------------------------------------ 08/14/98 Star Gas Partners, L.P. Petroleum Heat and Power Co., Inc. (Senior Subordinated Unit / Implied Reference Value per Petro Share) (2) -------------------------------------------------------------------------------- Prior to Announcement $1.95 3.9% 11.3% 7.4% Current (3) $1.95 94.7% 94.7% 94.7% ------------------------------------------------------------------------------- ___________________________ Source: Securities Data Company, publicly available information and Petroleum Heat and Power Co., Inc. (1) Transaction Enterprise Value is defined as common equity purchase price plus total debt and preferred stock, less cash and equivalents, excluding fees and expenses. The stock is valued using the closing price on the last full trading day prior to announcement. (2) The Senior Subordinated Unit Implied Reference Value per Petro share is based on the Unit Reference Value Analysis (Dain Rauscher Wessels Case), [See Unit Reference Value Analysis Summary on page 9]. (3) Based on the closing price of $1.00 on January 22, 1999. =============================================================================== Dain Rauscher Wessels Page 73
[LOGO OF PETRO APPEARS HERE] Project Intense Heat =============================================================================== Price and Volume Data =============================================================================== Dain Rauscher Wessels Page 74
[LOGO OF PETRO APPEARS HERE] Price and Volume Data First Trading Day of Class A Common Shares (July 29, 1992) - Present Petro Weekly Stock Price / Volume ================================================================================ [LINE GRAPH APPEARS HERE] _______________ Source: Factset Data Systems and publicly available information. ================================================================================ Dain Rauscher Wessels Page 75
[LOGO OF PETRO APPEARS HERE] Price and Volume Data IPO (December 14, 1995) - Present Star Gas Daily Unit Price / Volume =============================================================================== ============================================================= X ============================================================= =============================================================================== Dain Rauscher Wessels Page 76
[LOGO OF PETRO APPEARS HERE] Price and Volume Data 1997 - Present Relative Price Performance =============================================================================== ============================================================= X ============================================================= =============================================================================== Dain Rauscher Wessels Page 77
[LOGO OF PETRO APPEARS HERE] Price and Volume Data Relative Price Performance Since Announcement of Merger (August 14, 1998) =============================================================================== [LINE GRAPH APPEARS HERE] ____________________ Source: Factset Data Systems. (1) Energy & Fuel Marketing & Distribution peer group includes Getty Petroleum Marketing, Meteor Industries, Midcoast Energy Resources, Streicher Mobile Fueling, TransMontaigne and World Fuel Services Corporation. (2) Propane MLP peer group includes Amerigas Partners, Cornerstone Propane Partners, Ferrellgas Partners, Heritage Propane Partners and Suburban Propane Partners. =============================================================================== Dain Rauscher Wessels Page 78
[LOGO OF PETRO APPEARS HERE] Price and Volume Data 1997 - Present Total Return/1/ =============================================================================== ============================================================= X ============================================================= =============================================================================== Dain Rauscher Wessels Page 79
[LOGO OF PETRO APPEARS HERE] Price and Volume Data 1997 - Present Total Return/1/ =============================================================================== ============================================================= X ============================================================= =============================================================================== Dain Rauscher Wessels Page 80
[LOGO OF PETRO APPEARS HERE] Price and Volume Data Commodity Price Performance Since Announcement of Merger (August 14, 1998) =============================================================================== ============================================================= X ============================================================= =============================================================================== Dain Rauscher Wessels Page 81
EXHIBIT (b)(19) FAIRNESS OPINION PRESENTATION TO THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF STAR GAS CORPORATION CONFIDENTIAL A.G. EDWARDS & SONS, INC. INVESTMENT BANKING February 10, 1999
TABLE OF CONTENTS Section ------- Introduction........................................................... I Review of Events to Date............................................... II Summary of the Transaction............................................. III Summary Observations and Conclusions................................... IV Appendices are separately bound: Appendix I Analyses Performed Under 30-Year Weather Scenario Appendix II Analyses Performed Under 15-Year Weather Scenario
INTRODUCTION TRANSACTION PROPOSAL [_] During 1997, Star Gas Partners Corporation (the "General Partner") and Petroleum Heat and Power Co., Inc. ("Petro") discussed the idea of a possible acquisition of Petro by Star Gas Partners, L.P. ("Star Gas" or the "Partnership"). The overall transaction (the "Transaction") consists of the following four principal parts: - The acquisition of Petro by the Partnership; - A public offering of equity by the Partnership and a private offering of debt by Petro and the redemption of certain debt and preferred stock of Petro (the "Financings"); - The withdrawal of Star Gas Corporation as the general partner of the Partnership and Star Gas Propane, L.P. (the "Operating Partnership"), and the election of Star Gas LLC as the new general partner; and - Amending the Agreement of Limited Partnership of the Partnership and the Operating Partnership in order to consummate the Transaction. A.G. Edwards' Engagement [_] By letter engagement, dated March 23, 1998, A.G. Edwards & Sons, Inc. ("A.G. Edwards") was engaged by the Special Committee (the "Special Committee") of the Board of Directors of the General Partner (the "Board") to act as its financial advisor with respect to the Transaction and to issue the Special Committee an opinion as to the fairness, from a financial point of view, to the public common unitholders of Star (the "Public Common Unitholders"), of the Transaction (the "Fairness Opinion"). [_] The preparation of a fairness opinion is not susceptible to partial analyses or summary. In rendering its Fairness Opinion, A.G. Edwards applied its judgment to a variety of complex analyses and assumptions. A.G. Edwards may have given various analyses more or less weight than other analyses, and may have deemed various assumptions more or less probable than other assumptions. The assumptions made and the judgments applied by A.G. Edwards in rendering its opinion are not readily susceptible to description beyond that set forth in the written text of the Fairness Opinion itself. Page 1
INTRODUCTION (continued) As part of its engagement, A.G. Edwards' activities included, but were not limited to, the following: [_] A review of the Form S-4 Registration Statement and exhibits thereto, including the Amended and Restated Agreement and Plan of Merger, the Exchange Agreement, the Amended and Restated Agreement of Limited Partnership and the Conveyance and Contribution Agreements. [_] A review of certain publicly-available Partnership and Petro historical audited financial statements and certain unaudited interim financial statements. [_] A review of certain financial analyses and forecasts of the Partnership prepared by and reviewed with management of the General Partner and the views of management of the General Partner regarding the Partnership's past and current business operations, results thereof, financial condition and future prospects, including the impact of the Transaction, as well as information relating to the retail propane distribution industry and the potential strategic, financial and operational benefits and challenges anticipated from the Transaction; [_] A review of certain financial analyses and forecasts of Petro prepared by and reviewed with management of Petro and the views of management of Petro regarding Petro's past and current business operations, results thereof, financial condition and future prospects, including the impact of the Transaction, as well as information relating to the retail home heating oil distribution industry and the potential strategic, financial and operational benefits and challenges anticipated from the Transaction; [_] A review of the pro forma impact of the Transaction on the Partnership and Petro; [_] A review of the publicly reported historical price and trading activity for the Partnership's Common Units and Petro's Class A Common Stock, including a comparison of certain financial and stock market information for the Partnership with similar publicly available information for certain other companies, the securities of which are publicly traded; Page 2
INTRODUCTION (continued) [_] A review of the current market environment generally, and the retail propane distribution environment and the retail home heating oil distribution environment in particular; [_] A review of information relating to the financial terms of certain transactions, including selected mergers and acquisition transactions; [_] Conversations with PaineWebber regarding the nature and extent of development of the terms of the Transaction; and [_] A review of such other information, financial studies, analyses and investigations, and financial, economic and market criteria that A.G. Edwards considered relevant. NATURE OF INFORMATION REVIEWED AND PRESENTED [_] In rendering its Fairness Opinion, A.G. Edwards has relied upon and assumed, without independent verification, the completion of the Financings and the Transaction in accordance with the Amended and Restated Agreement and Plan of Merger, and the accuracy and completeness of all financial and other information, publicly available, furnished to, or otherwise discussed with A.G. Edwards for the purposes of the Fairness Opinion. With respect to financial projections and other information provided to or otherwise discussed with A.G. Edwards, A.G. Edwards assumed and was advised by the management of the General Partner and Petro, respectively, that such projections and other information were reasonably prepared on a basis that reflects the best currently available estimates and judgments of the management of the General Partner and Petro, respectively. A.G. Edwards reviewed numerous sets of projections for Petro and analyzed what it believed were certain of the major assumptions embedded within Petro's projections. A.G. Edwards used two sets of projections for Petro to perform its analyses. A.G. Edwards used a set of projections based on 30-year weather and a set of projections based on 15-year weather. The Special Committee did not, however, engage A.G. Edwards to, and therefore A.G. Edwards did not verify the accuracy or completeness of any such information. A.G. Edwards has relied upon the assurances of the management of the General Partner and Petro that the respective managements are not aware of any facts that would make such information inaccurate or misleading. Page 3
INTRODUCTION (continued) [_] In performing its analyses, A.G. Edwards made numerous assumptions with respect to the retail propane distribution industry and the retail home heating oil distribution industry, and general business and economic conditions which are beyond the control of the Partnership and Petro. The analyses performed by A.G. Edwards are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. Such analyses were prepared sole as part of A.G. Edwards' analysis of the fairness, from a financial point of view, to the Public Common Unitholders of the Transaction. [_] This presentation is for the private use of the Special Committee and may not be distributed to any other parties without A.G. Edwards' written permission. THE ANALYSES PRESENTED HEREIN RELATE TO THE FAIRNESS OPINION TO BE ISSUED BY A.G. EDWARDS, BUT DO NOT COMPRISE THE FAIRNESS OPINION. [_] A.G. Edwards' Fairness Opinion, in any event, is limited to the fairness, from a financial point of view, to the Public Common Unitholders of the Transaction. The Fairness Opinion does not constitute a recommendation to any Public Common Unitholders as to how to vote with respect to the Transaction. The Fairness Opinion does not represent tax or legal advice. The summary description of the analysis described herein, is qualified in its entirety by reference to the full text of the Fairness Opinion. [_] The Fairness Opinion is necessarily based upon financial and other conditions and circumstances existing and disclosed to it as of February 10, 1999 (except market data, which was as of February 3, 1999.) ASSUMPTIONS [_] In rendering it Fairness Opinion, A.G. Edwards has assumed that the Transaction will be consummated on the terms contained in the Form S-4 Registration Statement and exhibits thereto, including the Amended and Restated Agreement and the Plan of Merger, the Exchange Agreement, the Amended and Restated Agreement of Limited Partnership and the Conveyance and Contribution Agreements, without any waiver of any material terms or conditions by the Partnership or Petro. The assumption that the Financings are consummated in accordance with the closing conditions of the Amended and Restated Agreement and Plan of Merger is a material assumption. A.G. Edwards has also assumed that the withdrawal of Star Gas Corporation as the general partner and the election of Star Gas LLC as the new general partner will have no financial impact on the public Common Unitholders. Page 4
REVIEW OF EVENTS TO DATE February 11, 1998 [_] A. G. Edwards presented its qualifications to the Special Committee and its legal counsel, Baker & Botts. March 23, 1998 [_] Special Committee engaged A. G. Edwards. March 23, 1998 [_] A. G. Edwards met with members of the Partnership's management and Petro's management and submitted a preliminary data request list. [_] A. G. Edwards began due diligence review with management and other representatives of the Partnership and of Petro. March 30, 1998 [_] A. G. Edwards received data related to its preliminary data request list. April 28, 1998 [_] Special Committee and A. G. Edwards met to discuss the Transaction. May 4, 1998 [_] A. G. Edwards submitted a preliminary status report (the "Preliminary Status Report") to the Special Committee. May 7, 1998 [_] Special Committee and A. G. Edwards met with Petro's management and PaineWebber to discuss the Transaction and the Preliminary Status Report. May 8, 1998 [_] A. G. Edwards continued onsite diligence at Petro. May 19, 1998 [_] A. G. Edwards met with PaineWebber and Petro's management to discuss the Transaction. May 20, 1998 [_] Special Committee, Baker & Botts and A. G. Edwards held a conference call to discuss the Transaction. May 26, 1998 [_] A. G. Edwards, submitted a revised proposal (the "Preliminary Draft Proposal") to the Special Committee, which was subsequently forwarded to Petro at the Committee's request. Page 5
REVIEW OF EVENTS TO DATE (continued) JULY 28, 1998 [_] A.G.Edwards submitted another revised proposal (the "Revised Proposal") on the behalf of the Special Committee to the Board, the Petro Board and PaineWebber. AUGUST 11, 1998 [_] The Special Committee approved the Revised Proposal. AUGUST 13, 1998 [_] The Petro Board approved the Revised Proposal. AUGUST 14, 1998 [_] The Partnership and Petro announced the agreement in principle. AUGUST AND SEPTEMBER [_] The Special Committee, with assistance from Baker & Botts and A.G. Edwards, negotiated the terms of a definitive Agreement and Plan of Merger and Exchange Agreement with Petro, Andrews & Kurth and PaineWebber. OCTOBER 16, 1998 [_] Special Committee meeting to review documents and consider and act upon the legal agreements necessary to implement the Transaction. - The Committee had the opportunity to review, with Baker & Botts and A.G. Edwards, the following: [_] Draft dated October 13, 1998 of the Form S-4 Registration Statement [_] Draft dated October 8, 1998 of the Agreement and Plan of Merger [_] Draft dated October 6, 1998 of the Amended and Restated Agreement of Limited Partnership [_] Draft dated October 7, 1998 of the Exchange Agreement [_] Draft dated October 9, 1998 of the Conveyance and Contribution Agreements [_] A.G. Edwards delivered its Fairness Opinion dated October 16, 1998. Page 6
REVIEW OF EVENTS OF DATE (continued) OCTOBER 22, 1998 [_] The Partnership files the Form S-4 Registration Statement DECEMBER 3, 1998 [_] The Partnership files the Form S-3 Registration Statement DECEMBER 22, 1998 [_] The Partnership files Amendment No. 1 to the Form S-4 Registration Statement to incorporate responses to the SEC's initial comment letter JANUARY 13, 1999 [_] The Special Committee, represented by William Nicoletti, and A.G. Edwards met with Petro and PaineWebber at Petro's request. Petro proposed a change to the merger agreement such that the amount of equity raised in the Refinancing Transaction would be increased from $140 million to $170 million and the amount of debt raised in the Refinancing Transaction would be decreased from $120 million to $90 million (the "Investment Grade Change"). JANUARY 18, 1999 [_] The Special Committee and A.G. Edwards held a conference call to discuss the Investment Grade Change. The Special Committee rejected the change and suggested that it would only consider the change if it included a reduction in the purchase price. JANUARY 21, 1999 [_] The Partnership files Amendment No. 2 to Form S-4 Registration Statement to incorporate responses to the SEC's second comment letter JANUARY 25, 1999 [_] The Special Committee, A.G. Edwards, Petro and PaineWebber received a letter from Thomas Edelman outlining a proposal that included the Investment Grade Change in return for, among other things, a 10% reduction in the conversion ratio. The proposal also included a modest increase in the Cost of Capital Test, but only if Petro was successful in obtaining a purchase price discount from its preferred or other senior security holders. Page 7
REVIEW OF EVENTS TO DATE (continued) JANUARY 26, 1999 [_] The Special Committee, Baker & Botts and A.G. Edwards held a conference call to discuss the Edelman proposal. The Special Committee agreed, with certain modifications, to approve the Edelman proposal subject to a re-evaluation of, among others, the Cost of Capital Trust; the 1999 Distribution Test for the Senior Subordinated, Junior Subordinated and GP units; the DPU test; and the working capital test. FEBRUARY 4, 1999 [_] The Partnership files Amendment No. 3 to the Form S-4 Registration Statement both to incorporate the SEC's third comment letter and to reflect the proposed changes to the merger agreement. FEBRUARY 10, 1999 [_] Special Committee meeting to review documents and consider and act upon the legal agreements necessary to implement the Transaction. - The Committee had the opportunity to review, with Baker & Botts and A.G. Edwards, the following: [_] Draft dated February 4, 1999 of the Form S-4 Registration Statement [_] Draft dated February 3, 1999 of the Amended and Restated Agreement and Plan of Merger [_] Draft dated February 3, 1999 of the Amended and Restated Agreement of Limited Partnership [_] Draft dated February 3, 1999 of the Exchange Agreement [_] Draft dated October 22, 1998 of the Conveyance and Contribution Agreements Page 8
SUMMARY OF THE TRANSACTION PRO FORMA STAR GAS UNITS OUTSTANDING (IN THOUSANDS EXCEPT PER SHARE AND PER UNIT) [_] There are currently 6,383 Star Gas units outstanding comprised of 3,859 common units, 2,396 subordinated units and 128 implied general partner ("GP") units. The subordinated units and GP units are currently assets of Petro. [_] There are currently 26,463 shares of Petro common stock outstanding held by public shareholders and "affiliates." The public holds 14,327 Class A shares, 11 Class B shares and 291 Class C shares. The "affiliates" hold 11,834 shares which include 9,528 Class A shares and 2,306 Class C shares. [_] Each shareholder of Petro will receive a certain number of units in Star Gas such that the implied consideration paid for each Petro share averages $1.91 based on A.G. Edwards' estimates of the value of the units being offered to Petro as consideration. [_] All of the publicly held 14,327 Class A shares and 291 Class C shares, and a portion of the "affiliate" held Class A shares (5,243) and Class C shares (1,328) will receive .11758 units of newly created senior subordinated units for each share (1,719 units to the public and 773 units to the "affiliates", 2,492 units in total) with an attached Contingent Unit ("CU"). See the following page for a discussion of the Contingent Units. A.G. Edwards estimates an implied value for these units of $16.22/unit. The remaining "affiliates" of Petro not receiving senior subordinated units, who hold a total of 5,262 shares, will receive .14318 units for a total of 753 junior subordinated and GP units, both of which will also include attached CUs. A.G. Edwards estimates an implied value for these units of $13.35/unit. [_] The 2,396 subordinated units and 128 GP units currently owned by Petro will effectively be retired in the Transaction Page 9
SUMMARY OF THE TRANSACTION PRO FORMA STAR GAS UNITS OUTSTANDING (IN THOUSANDS) (continued) DESCRIPTION OF CONTINGENT UNITS [_] During the five year period, beginning with the first full four quarters following the Merger, the senior subordinated units, junior subordinated units and general partner interests will have the right to receive up to 909,000 senior subordinated units upon Petro meeting a "Contingent Unit Test." Each time the Contingent Unit Test is met (but not more frequently than once every four quarter period), the senior subordinated units, junior subordinated units and general partner interests will receive an aggregate of 303,000 senior subordinated units, subject to a maximum of 909,000 senior subordinated units. The Contingent Unit Test will be met during any four quarter period when distributable cash flow per unit attributable to Petro exceeds $2.90. Page 10
SUMMARY OF THE TRANSACTION ALLOCATION OF CURRENT PETRO SHARES OUTSTANDING (IN THOUSANDS) -------------------------------------------------------------------------- Class A Class C Total --------- --------- -------- Groups Receiving Senior Sub --------------------------- Public 14,327 291 14,618 Affiliates 5,243 1,328 6,572 --------- --------- -------- Total Receiving Senior Sub 19,570 1,619 21,190 Groups Receiving Junior Sub and GP ---------------------------------- Affiliates 4,284 978 5,262 --------- --------- -------- Sub Total 23,855 2,598 26,452 ========= ========= Class B 11 -------- Total Shares including Class B 26,463 ======== Page 11
SUMMARY OF THE TRANSACTION PRO FORMA STAR GAS UNITS OUTSTANDING PRE-FINANCING ASSUMPTIONS (IN THOUSANDS) -------------------------------------------------------------------------------- Issued to Petro -------------------- Type of Units Current Public Affiliates Retired Pro Forma ----------------------- -------- ------ ---------- ------- --------- Common 3,859 - - - 3,859 Senior Subordinated - 1,719 773 - 2,492 Subordinated 2,396 - - (2,396) - Junior Subordinated & New General Partner - - 753 - 753 Old General Partner 128 - - (128) - -------- --------- 6,383 7,104 Page 12
SUMMARY OF THE TRANSACTION EQUITY PURCHASE PRICE CALCULATION IMPLIED EQUITY VALUE OF PETRO'S ASSETS (UNITS IN THOUSANDS, $ IN THOUSANDS, EXCEPT PER UNIT AMOUNTS) -------------------------------------------------------------------------------------------------- Value of Securities Event Issued to and Retired from Petro ------------------------------------------------------- --------------------------------- Issuance of Senior Subordinated Units to Public Petro Shareholders 1,719 x $16.22 ---------------------------- $27,879 Issuance of Senior Subordinated Units to Affiliate Petro Shareholders 773 x $16.22 ---------------------------- $12,540 Issuance of Junior Subordinated & General Partner Units to Affiliate Petro Shareholders 753 x $13.35 ---------------------------- $10,059 ---------- PURCHASE PRICE OF PETRO'S EQUITY $50,478 -------------------------------------------------------------------------------------------------- Divided by 26,452 shares of Petro's Common Stock = $1.91 per share (Excludes 11 Class B Shares) -------------------------------------------------------------------------------------------------- Retire Subordinated Units held by Petro (2,396) x $13.35 ---------------------------- ($31,988) Retire Old General Partner Units held by Petro (128) x $19.08 (a) ---------------------------- ($2,435) ---------- EQUITY VALUE OF PETRO'S HEATING OIL ASSETS $16,054 ___________________ (a) Star 20-day average common unit price through 2/3/99. Page 13
SUMMARY OBSERVATIONS AND CONCLUSIONS POTENTIAL STRUCTURAL AND QUALITATIVE ADVANTAGES AND DISADVANTAGES TO THE PUBLIC COMMON UNITHOLDERS. [_] Potential advantages to Public Common Unitholders - Increase in the MQD to $2.30 - Priority in payment of MQD and arrearages over Senior Subordinated, Junior Subordinated and G.P. unitholders during subordination period - Distributions on Senior Subordinated, Junior Subordinated and G.P. units limited to amount of distributable cash generated during subordination period - Conversion of Contingent Units based on actual results versus adjusted for normal weather - Earliest date on which the subordination period would end extended to October 2002 - Potentially a greater number of acquisition growth opportunities in the retail home heating oil distribution industry than in the retail propane distribution industry and at historically lower acquisition multiples - Increase in market capitalization with potential for more liquidity - Diversifies geographic customer base [_] Potential disadvantage to Public Common Unitholders - Petro is several times the Partnership's size, thus changing the nature of the Partnership's business - Petro's history of operational and financial difficulties - Increases seasonality and weather risk - Taxable income will increase at a greater rate - No assurance that Petro can continue improvements (reduce attrition and improve profit margins) while making attractive acquisitions - Potential dilution in the event the Partnership pro forma for the Transaction fails to meet its projections Page 14
SUMMARY OF OBSERVATIONS AND CONCLUSIONS (continued) Implied Unit Value Analysis [_] A. G. Edwards calculated a range of values for the Senior Subordinated, Junior Subordinated and General Partner units, based on a required rate of return, trading yield, and discount to the common units. (See Appendix D - "Implied Unit Value Analysis") --------------------------------------------------------------------------- ESTIMATED UNIT PRICES SUMMARY SENIOR SUBORDINATED UNITS ------------------------------------------------------------------ Range -------------- Required rate of return (a) 20.0% - 30.0% $12.96 - 16.72 Trading yield (b) 12.5% - 14.5% $15.86 - 18.40 Discount to common units (c) 10.0% - 20.0% $15.26 - 17.17 Range $12.96 - 18.40 Adjusted Range (d) $15.26 - 17.17 -------------- Assumed value (e) $16.22 -------------- JUNIOR SUBORDINATED AND GP UNITS ------------------------------------------------------------------ Range -------------- Required rate of return (a) 35.0% - 45.0% $ 9.19 - 11.50 Trading yield (b) 15.0% - 17.0% $13.53 - 15.33 Discount to common units (c) 25.0% - 35.0% $12.40 - 14.31 Range $ 9.19 - 15.33 Adjusted Range (d) $12.40 - 14.31 -------------- Assumed value (f) $13.35 -------------- (a) Represents required rate of return during subordination period, which is assumed to continue through the end of fiscal 2002. Thereafter, the rate of return is assumed to equal that of the common units, for a blended required rate of return of 13.0% to 16.5% for the Senior sub and 18.4% to 22.6% for the Junior sub and GP units. (b) Based on a $2.30 annualized MQD. (c) Based on a discount to the common unit's average closing price for the last 20 trading days as of 2/3/99 of $19.08. (d) Represents the middle values of both the range of highs and lows. (e) Implied required rate of return, trading yield and discount to common at a unit price of $16.22 are 21.1% during subordination (13.3% blended), 14.2%, and 15.0%, respectively. (f) Implied required rate of return, trading yield and discount to common at a unit price of $13.35 are 28.8% during subordination (16.0% blended), 17.2%, and 30.0%, respectively. Page 15
SUMMARY OBSERVATIONS AND CONCLUSIONS (continued) PRO FORMA MERGER ANALYSIS [_] A.G. Edwards analyzed the impact of the Transaction on the Partnership's distributable cash flow per unit, the related accretion, common unit coverage and total unit coverage on a pro forma basis. (See Appendix E - "Pro Forma Merger Analysis") ----------------------------------------------------------------------------------------------------- 15-YEAR WEATHER 30-YEAR WEATHER ---------------------------- -------------------------------- STAR GAS STAR GAS STAND-ALONE PRO FORMA STAND-ALONE PRO FORMA -------------- ------------ --------------- -------------- DCF PER UNIT 1998 Actual $1.30 $1.44 $1.30 $1.44 1999 Adjusted for Actual (a) 1.41 1.96 1.51 2.07 2000 Projected 1.77 2.14 2.02 2.39 ACCRETION / DILUTION 1998 Actual $0.13 $0.13 1999 Adjusted for Actual (a) 0.56 0.56 2000 Projected 0.37 0.37 COMMON UNIT COVERAGE 1998 Actual 0.98x 0.78x 0.98x 0.78x 1999 Adjusted for Actual (a) 1.04 1.06 1.13 1.12 2000 Projected 1.27 1.14 1.49 1.29 TOTAL UNIT COVERAGE 1998 Actual 0.59x 0.62x 0.59x 0.62x 1999 Adjusted for Actual (a) 0.64 0.85 0.68 0.90 2000 Projected 0.80 0.93 0.92 1.04 ------------------------------------------------------- (a) Adjusted to include actual results through January 21, 1999. Page 16
SUMMARY OF OBSERVATIONS AND CONCLUSIONS (continued) MERGER PREMIUMS TO MARKET VALUE ANALYSIS [_] A.G. Edwards analyzed the premium of the consideration to be received by Petro Common Stockholders and compared the premium to Petro's current and historical prices. These premiums were compared to premiums paid in acquisitions of majority or remaining interests announced and completed between January 1, 1996 and February 3, 1999 where the target's share price one week prior to the announcement date was either (i) equal to or less than $5, (ii) greater than $5 and less than $10, or (iii) equal to or greater than $10. (See Appendix F - "Merger Premiums to Market Value Analysis") [_] Premiums were calculated one day, one week, four weeks, three months and one year prior to the announcement of the agreement in principle for each merger. - ------------------------------------------------------------------------------------------------------------------------------------ COMPARISON OF PREMIUMS PAID - ------------------------------------------------------------------------------------------------------------------------------------ Petro at Mean of Transactions Mean of Transactions Mean of Transactions Premium to stock price prior to announcement $1.91 per Unit Equal to or Greater Than $5 Equal to or of the transaction on August 14th: Offer Price Less Than $5 and Less Than $10 Greater Than $10 - ------------------------------------------------------------------------------------------------------------------------------------ One day prior: 1.9% 57.8% 34.3% 28.4% One week prior: 9.1% 68.5% 43.2% 32.9% Four weeks prior: -7.4% 71.1% 50.1% 39.4% Three months prior: 19.8% 71.8% 63.6% 54.7% One year prior: -36.3% 51.9% 51.3% 72.1% -------------------------------------------------------------------------------------------- Maximum 19.8% 71.8% 63.6% 72.1% Minimum -36.3% 51.9% 34.3% 28.4% -------------------------------------------------------------------------------------------- [_] The premium to Petro's current stock price ($1.00 as of February 3, 1999) was 91.0%. Page 17
SUMMARY OF OBSERVATIONS AND CONCLUSIONS (continued) RELATIVE CONTRIBUTION ANALYSIS [_] A.G. Edwards analyzed the relative pro forma contribution of both Star Gas and Petro to the ownership of capital in the pro forma entity based on Star Gas' and Petro's historical results from operations and their respective projections. (See Appendix G - "Relative Contribution Analysis") GROSS PROFIT ---------------------------------------------- 15-Year Weather 30-Year Weather --------------------- ----------------------- Star Gas Petro Star Gas Petro ---------- --------- ----------- ---------- 1996........................ 24.3% 75.7% 24.3% 75.7% 1997........................ 29.4% 70.6% 29.4% 70.6% 1998........................ 28.9% 71.1% 28.9% 71.1% 1999 Adjusted for Actual.... 29.1% 70.9% 28.9% 71.1% 2000 Project................ 29.7% 70.3% 29.5% 70.5% EBITDA ---------------------------------------------- 15-Year Weather 30-Year Weather --------------------- ----------------------- Star Gas Petro Star Gas Petro ---------- --------- ----------- ---------- 1996........................ 31.3% 68.7% 31.3% 68.7% 1997........................ 39.8% 60.2% 39.8% 60.2% 1998........................ 35.1% 64.9% 35.1% 64.9% 1999 Adjusted for Actual.... 32.0% 68.0% 32.2% 67.8% 2000 Project................ 34.1% 65.9% 34.4% 65.6% Page 18
SUMMARY OF OBSERVATIONS AND CONCLUSIONS (continued) [_] For its gross profit and EBITDA contributions, Star Gas is expected to receive approximately 34.8% of the pro forma implied firm value. IMPLIED FIRM VALUE [PIE CHART APPEARS HERE] Page 19
SUMMARY OF OBSERVATION AND CONCLUSIONS (continued) DISCOUNTED CASH FLOW ANALYSIS [_] A.G. Edwards performed discounted cash flow analyses for Petro, Star Gas and Star Gas Pro Forma. For Petro, A.G. Edwards used projected tax-adjusted operating cash flows for 1999 through 2002, terminal values calculated on 2002 operating cash flow, and discount rates based on the related weighted average cost of capital. For Star Gas and Star Gas Pro Forma, A.G. Edwards used projected DCF for 1999 through 2002, terminal values calculated on 2002 DCF and discount rates based on the related cost of equity. (See Appendix H -"Discounted Cash Flow Analysis") =========================================================================================================================== PETRO STAND ALONE ---------------------------------------------------------- ------------------------------------------------------------ 15 YEAR TERMINAL VALUE OPERATING CASH FLOW MULTIPLE 30 YEAR TERMINAL VALUE OPERATING CASH FLOW MULTIPLE ------------------------------------------------ --------------------------------------------------- 8.0x 8.5x 9.0x 9.5x 10.0x 8.0x 8.5x 9.0x 9.5x 10.0x --------------------------------------------------------------------------------------------------------------------------- WACC WACC 13.4% ($40,163) ($30,848) ($21,534) ($12,219) ($2,904) 13.4% ($25,454) ($15,542) ($5,630) $ 4,282 $ 14,194 13.6% (41,742) (32,500) (23,259) (14,017) (4,775) 13.6% (27,131) (17,297) (7,463) 2,372 12,206 13.9% (43,307) (34,137) (24,967) (15,797) (6,628) 13.9% (28,793) (19,036) (9,278) 479 10,237 --------------------------------------------------------------------------------------------------------------------------- STAR GAS STAND ALONE ------------------------------------------------------------ --------------------------------------------------------- 15 YEAR TERMINAL VALUE DCF MULTIPLE 30 YEAR TERMINAL VALUE DCF MULTIPLE --------------------------------------------------- ------------------------------------------------- 8.5x 9.0x 9.5x 10.0x 10.5x 8.0x 8.5x 9.0x 9.5x 10.0x --------------------------------------------------------------------------------------------------------------------------- Cost of Cost of Equity Equity 9.5% $77,230 $80,338 $83,447 $86,555 $89,664 9.5% $79,410 $82,745 $86,080 $89,415 $92,749 9.9% 76,359 79,427 82,495 85,563 88,631 9.9% 78,519 81,811 85,102 88,394 91,685 10.3% 75,502 78,530 81,559 84,587 87,616 10.3% 77,642 80,891 84,140 87,389 90,638 --------------------------------------------------------------------------------------------------------------------------- STAR GAS PRO FORMA ------------------------------------------------------------ -------------------------------------------------------- 15 YEAR TERMINAL VALUE DCF MULTIPLE 30 YEAR TERMINAL VALUE DCF MULTIPLE --------------------------------------------------- --------------------------------------------------- 8.5x 9.0X 9.5x 10.0x 10.5x 8.0x 8.5x 9.0x 9.5x 10.0x --------------------------------------------------------------------------------------------------------------------------- Cost of Cost of Equity Equity 9.5% $92,737 $96,408 $100,079 $103,750 $107,421 9.5% $94,817 $98,730 $102,642 $106,555 $110,467 9.9% 91,701 95,324 98,948 102,571 106,194 9.9% 93,764 97,626 101,488 105,349 109,211 10.3% 90,682 94,258 97,834 101,411 104,987 10.3% 92,728 96,539 100,351 104,163 107,974 ---------------------------------------------------------------------------------------------------------------------------- Page 20
SUMMARY OF OBSERVATIONS AND CONCLUSIONS (continued) COMPARABLE TRANSACTIONS ANALYSIS [_] A.G. Edwards noted that public disclosure regarding transactions in the retail home heating oil distribution industry was extremely limited. [_] A.G. Edwards analyzed the financial terms related to divestitures by Petro of certain of its retail home heating oil branches and compared them to the implied multiples of the aggregate purchase price of Petro's heating oil assets. [_] Petro has sold three branches for an average EBITDA multiple of 9.0x. ----------------------- [_] A.G. Edwards calculated the purchase price of Petro's heating oil assets and calculated multiples based on Petro's EBITDAs (See Appendix I - "Comparable Transaction Analysis") ----------------------------------------------------------------------------- Purchase Price of Heating Oil Assets --------------------------------------------- Equity purchase price of heating oil assets including SIRs $ 16,054 Cost of Debt to be Redeemed ($206,250 + $2,844 premium) 209,094 Cost of Debt to be Assumed 80,501 Cost of Preferred stock at Redemption Value 31,767 Consent Fees 1,961 Transaction Fees 19,139 -------- Aggregate purchase price of heating oil assets $358,516 -------- MULTIPLES - ------------------------------------------------------------------------------------------------------------------------------------ Notes -------------------------------------------- 15 - YEAR 30 - YEAR -------------------- ------------------ Actual 4 quarters ended 9/30/98 EBITDA (a) 34,929 10.3x 34,929 10.3x As a multiple of aggregate transaction value Adjusted for actual 1999 EBITDA (a) 43,475 8.2x 44,415 8.1x As a multiple of aggregate transaction value Projected 2000 EBITDA (a) 45,978 7.8x 48,195 7.4x As a multiple of aggregate transaction value __________________________________ (a) Calculated as gross profit minus SG&A expense and direct delivery expense. Page 21
SUMMARY OF OBSERVATION AND CONCLUSIONS (continued) PUBLIC PARTNERSHIP ANALYSIS [_] A.G. Edwards compared certain financial and market information of Star Gas on a historical and pro forma basis to that of certain public propane master limited partnerships which A.G. Edwards deemed relevant for the purposes of this analysis. A.G. Edwards reviewed the trading multiples of a total of five master limited partnerships. (See Appendix J - "Public Partnership Analysis") [_] The selected propane master limited partnerships are as follows: - AmeriGas Partners, L.P. - Heritage Propane Partners, L.P. - Cornerstone Propane Partners, L.P. - Suburban Propane Partners, L.P. - Ferrellgas Partners, L.P. [_] No partnership used in the analysis is identical to Star Gas. - ------------------------------------------------------------------------------------------------------------------------------------ PUBLIC COMPARABLE PARTNERSHIPS (a) - ------------------------------------------------------------------------------------------------------------------------------------ STAR PRO FORMA STAR PUBLIC PARTNERSHIP PUBLIC PARTNERSHIP -------------------------- -------------------------- 15 - Year 30 - Year 15 - Year 30 - Year MEDIANS RANGES - ------------------------------------------------------------------------------------------------------------------------------------ Yield 12.2% 12.2% 12.7% 12.7% 10.4% 8.6% to 12.3% Market capitalization/LTM EBITDA 11.9x 11.9x 10.3x 10.3x 11.5x 9.1x to 13.2x Market capitalization/1999E EBITDA 11.0x 10.7x 8.7x 8.4x 9.8x 8.6x to 11.3x Equity Market Cap/LTM DCF 13.8x 13.8x 12.6x 12.6x 13.2x 9.6x to 15.5x Equity Market Cap/1999E DCF (c) 12.5x 11.9x 8.9x 8.5x 10.5x 9.9x to 12.2x - ------------------------------------------------------------------------------------------------------------------------------------ (a) Public comparable partnerships include: APU, CNO, FGP, HPG and SPH. (b) Market capitalization/adjusted for actual 1999 EBITDA for Star and Pro Forma Star. (c) Equity market cap/adjusted for actual 1999 EBITDA for Star and Pro Forma Star. Page 22
EXHIBIT (b)(20) Appendix I to FAIRNESS OPINION PRESENTATION TO THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF STAR GAS CORPORATION Analyses performed under 30-year weather scenario CONFIDENTIAL A.G. EDWARDS & SONS, INC. INVESTMENT BANKING February 10,1999
TABLE OF CONTENTS Section ------- Overview of Petroleum Heat and Power Co., Inc......................... A Overview of Star Gas Partners, L.P.................................... B Summary of the Transaction............................................ C Implied Unit Value Analysis........................................... D Pro Forma Merger Analysis............................................. E Merger Premiums to Market Value Analysis.............................. F Relative Contribution Analysis........................................ G Discounted Cash Flow Analysis......................................... H Comparable Transactions Analysis...................................... I Public Partnership Analysis........................................... J Pro Forma Model....................................................... K
OVERVIEW OF PETROLEUM HEAT AND POWER CO., INC. ("PETRO") SELECTED FINANCIAL DATA ($ IN THOUSANDS) ------------------------------------------------------------------------------------------------------------------------------- HISTORICAL YEARS ENDED DECEMBER 31, ------------------------------------------------------------------------------------ 1993 % 1994(a) % 1995(a) % 1996 ------------------------------------------------------------------------------------------------------------------------------- Net sales $538,526 100.0% $546,677 100.0% $609,507 100.0% $608,161 Cost of sales 366,810 68.1% 362,981 66.4% 387,825 63.6% 427,388 ---------------------- -------------------- -------------------- --------------- Gross profit 171,717 31.9% 183,696 33.6% 221,682 36.4% 180,773 SG&A expenses 93,379 17.3% 95,314 17.4% 128,295 21.0% 105,601 Direct delivery expense 29,902 5.6% 32,995 6.0% 36,634 6.0% 33,102 Restructuring charges - - - 1,150 Star transaction expenses - - - - Corporate identity expenses - - - 2,659 Pension curtailment expense - - - 557 Amortization of customer lists 23,183 4.3% 19,748 3.6% 20,527 3.4% 18,611 Depreciation of plant and equipment 5,933 1.1% 6,469 1.2% 12,374 2.0% 6,574 Amortization of deferred charges 5,548 1.0% 6,177 1.1% 6,142 1.0% 4,760 Provision for supplemental benefits 264 0.0% 373 0.1% 1,407 0.2% 873 ---------------------- -------------------- -------------------- --------------- Operating income (loss) 13,509 2.5% 22,619 4.1% 16,303 2.7% 6,886 Interest expense, net (20,508) -3.8% (23,766) -4.3% (38,792) -6.4% (32,412) Other income (expense) (165) 0.0% 109 0.0% 218 0.0% 1,842 ---------------------- -------------------- -------------------- --------------- Loss before income taxes, equity interest and extraordinary item (7,164) -1.3% (1,038) -0.2% (22,271) -3.7% (23,684) Income taxes 400 0.1% 600 0.1% 500 0.1% 500 ---------------------- -------------------- -------------------- --------------- Loss before equity interest and extraordinary item (7,564) -1.4% (1,638) -0.3% (22,771) -3.7% (24,184) Share of income (loss) of Gas - 0.0% (1,973) -0.4% 728 0.1% 2,283 ---------------------- -------------------- -------------------- --------------- Extraordinary item-loss on early extinguishment of debt (867) -0.2% (655) -0.1% (1,436) -0.2% (6,414) ---------------------- -------------------- -------------------- --------------- Net loss (8,431) -1.6% (4,266) -0.8% (23,479) -3.9% (28,315) Preferred stock dividends (3,367) -0.6% (3,510) -0.6% (3,263) -0.5% (2,389) ---------------------- -------------------- -------------------- --------------- Net loss to common ($11,798) -2.2% ($7,776) -1.4% ($26,742) -4.4% ($30,704) ====================== ==================== ==================== =============== Net loss per share ($0.55) ($0.36) ($1.06) ($1.02) ============ ============ =========== =============== Weighted average shares outstanding (b) 21,538 21,745 25,309 25,581 EBITDA (c) $48,437 9.0% $55,387 10.1% $56,753 9.3% $42,070 Adjusted net loss to common (10,931) -2.0%(d) (7,121) -1.3%(e) (25,306) -4.2%(f) (22,583) Adjusted net loss per share ($0.51) ($0.33) ($1.00) ($0.88) ============ =========== =========== =============== Acquisition capital expenditures $15,399 $26,411 $26,438 $28,493 Maintenance capital expenditures (i) 3,000 3,000 3,000 3,000 EBITDA/total assets 18.9% 13.9% 15.9% 15.3% Distributable cash flow 24,528 28,020 14,461 6,158 -------------------------------------------------------------------------------------------------------------- HISTORICAL YEARS ENDED DECEMBER 31, ------------------------------------------------------------------ % 1997 % 1998 % -------------------------------------------------------------------------------------------------------------- Net sales 100.0% $548,141 100.0% $408,019 100.0% Cost of sales 70.3% 379,748 69.3% 265,526 65.1% ----------- ------------------------- ------------------------ Gross profit 29.7% 168,393 30.7% 142,493 34.9% SG&A expenses 17.4% 102,377 18.7% 87,268 21.4% Direct delivery expense 5.4% 30,006 5.5% 24,613 6.0% Restructuring charges 0.2% 2,850 0.5% 535 0.1% Star transaction expenses - 4,823 1.2% Corporate identity expenses 0.4% 4,136 0.8% 152 0.0% Pension curtailment expense 0.1% 654 0.1% - 0.0% Amortization of customer lists 3.1% 17,903 3.3% 17,117 4.2% Depreciation of plant and equipment 1.1% 7,204 1.3% 6,969 1.7% Amortization of deferred charges 0.8% 4,639 0.8% 2,451 0.6% Provision for supplemental benefits 0.1% 565 0.1% 358 0.1% ----------- ------------------------- ------------------------ Operating income (loss) 1.1% (1,941) -0.4% (1,793) -0.4% Interest expense, net -5.3% (31,668) -5.8% (30,732) -7.5% Other income (expense) 0.3% 11,445 2.1% 1,292 -0.3% ----------- ------------------------- ------------------------ Loss before income taxes, equity interest and extraordinary item -3.9% (22,164) -4.0% (33,817) -8.3% Income taxes 0.1% 500 0.1% 400 0.1% ----------- ------------------------- ------------------------ Loss before equity interest and extraordinary item -4.0% (22,664) -4.1% (34,217) -8.4% Share of income (loss) of Gas 0.4% (235) 0.0% (1,120) -0.3% ----------- ------------------------- ------------------------ Extraordinary item-loss on early extinguishment of debt -1.1% - ----------- ------------------------- ------------------------ Net loss -4.7% (22,899) -4.2% (35,337) -8.7% Preferred stock dividends -0.4% (4,644) -0.8% (4,814) -1.2% ----------- ------------------------- ------------------------ Net loss to common -5.0% ($27,543) -5.0% ($40,151) -9.8% =========== ========================= ======================== Net loss per share ($1.06) ($1.52) ============ ============ Weighted average shares outstanding (b) 26,039 26,463 EBITDA (c) 6.9% $36,010 6.6% $30,612 Adjusted net loss to common -3.7%(g) (35,439) -6.5%(h) (39,616) Adjusted net loss per share ($1.36) ($1.50) ============ ============ Acquisition capital expenditures $16,252 $0 Maintenance capital expenditures (i) 3,000 3,000 EBITDA/total assets 14.5% 15.3% Distributable cash flow 842 (3,520) --------------------------------------------------------------------------- (a) Star Gas operations consolidated into Petro. (b) Weighted shares do not include Class B shares. (c) Calculated as gross profit minus SG&A expense and direct delivery expense. (d) Excludes $867 for early extinguishment of debt. (e) Excludes $655 for early extinguishment of debt. (f) Excludes $1,436 for early extinguishment of debt. (g) Excludes $6,414 for early extinguishment of debt. (h) Excludes $11,400 gain on sale of TLC. (i) Management's estimates. Page A-1
OVERVIEW OF PETRO EBITDA RECONCILIATION: 1997(a) ($ IN THOUSANDS) ============================================================================= PETRO ----- 1997 Actual EBITDA $36,010 NORMALIZING ADJUSTMENTS: Weather was 3.8% warmer than 30-year normal 3.8% of 1997 budgeted retail gallons 13,482 gallons Gross profit margin $0.4545 Delivery and garage cost savings ($0.0814) ------- Net impact per gallon $0.3731 $ impact 5,030 Insurance reserve 2,000 ------- 1997 Normalized EBITDA $43,040 ======= _____________________________________________________________________________ (a) Management's assumptions. Page A-2
OVERVIEW OF PETRO EBITDA RECONCILIATION: 1997-1998(a) ($ IN THOUSANDS) ========================================================================================================== PETRO ------- 1997 Normalized EBITDA $43,040 Volume Adjustments for 1998 Sale of TLC Division in 1997 (16,926) gallons Attrition in 1998 (4.1%) (17,375) 1997 Acquisitions 9,828 -------- (24,473) gallons @ $0.1700/gallon (b) (4,159) Gross Profit Margin Increase $0.006 per gallon on 395,086 gallons (c) 2,371 Inflation (3,662) Operating Cost Reductions (d) 5,850 Non-Budgeted Operating Expense Eliminations (e) 3,460 ------- Normalized 1998 EBITDA Budget $46,900 ======= ______________________________________________________________________________________________________________ (a) Management's assumptions. (b) Represents the average gross profit per gallon ($4700 per gallon) offset by $.30 per gallon reduction in operating expenses. (c) Actual gross profit margin increase achieved in first quarter of 1998 was $5.9 million (156 million gallons @ $0.037/gallon). (d) Represents already accomplished reductions as of 12/31/97 in branch, regional and corporate expenses in excess of normal indexing related to volume reductions as well as 1% productivity improvements. (e) Represent specific operating expense eliminations that have already been accomplished. Page A-3
OVERVIEW OF PETRO EBITDA RECONCILIATION: NON-BUDGETED OPERATING EXPENSE ELIMINATIONS ($ IN THOUSANDS) BASE EXPENSE ------- Exton PA Facility Rent $ 500 Corporate Staff Reductions - Salary & Benefits Alex Tyshovnytsky 310 Allen Levenson 279 Joe Massoud 310 Total Staff Reductions 900 Wage Freeze - Non-Union 1,373 Wage Freeze - Union 687 ------- Total $3,460 Page A-4
OVERVIEW OF PETRO EBITDA RECONCILIATION: 1998(a) ($ IN THOUSANDS) - ---------------------------------------------------------------------------------------------------- PETRO ----- Normalized 1998 EBITDA Budget $46,900 Weather was 18.2% warmer than 30-year normal (17.7% volume variance) 17.7% of 1998 budgeted retail gallons 70,096 gallons Gross profit margin $0.4761 Delivery and garage cost savings ($0.1046) --------- Net impact per gallon $0.3715 $ impact (26,041) Margin Improvement ($0.0288/gallon) 9,385 Additional Non-Budgeted Operating Expense Eliminations 368 --- Actual 1998 EBITDA $30,612 ======= - -------------------------------------------------------------------------------- (a) Management's assumptions. Page A-5
OVERVIEW OF PETRO EBITDA RECONCILIATION: 1998-1999(a) ($ IN THOUSANDS) =========================================================================================================== PETRO ----- Normalized 1998 EBITDA Budget $46,900 Attrition (3.8%) and Inflation (3.0%) partially offset by $0.01 Margin Increase in 1999 (1,352) Acquisition Growth $15,000 of acquisitions at 4.75x multiple using half-year convention (b) 1,579 Actual results through January 21, 1999 (2,712) ----- 1999 Adjusted for Actual $44,415 ======== ___________________________________________________________________________________________________________ (a) Management's assumptions. (b) A.G. Edwards' assumptions. Page A-6
OVERVIEW OF PETRO EBITDA SUMMARY ($ IN THOUSANDS) ================================================================== PETRO ----- 1997 Actual $36,010 1997 Normalized $43,040 Normalized 1998 Budget $46,900 Actual LTM through 9/30/98 $34,929 Actual 1998 $30,612 1999 Adjusted for Actual $44,415 ------------------------------------------------------------------ Page A-7
OVERVIEW OF PETRO EBITDA PROJECTIONS ($ IN THOUSANDS) -------------------------------------------------------------------------------------------- PROJECTED -------------------------------------------- ACTUAL ACTUAL NORMALIZED ADJUSTED FOR LTM 9/98 1998 1998 ACTUAL 1999 2000 2001 2002 --------------------------------------------------------------------------------- EBITDA $34,929 $30,612 $46,900 $44,415 $48,195 $50,649 $52,834 -------------------------------------------------------------------------------------------- MAJOR ASSUMPTIONS FOR 1999-2002 ------------------------------- [_] 30 Year Weather [_] Flat Attrition. [_] $15 million in 1999 and $30 million in 2000 to 2002 of acquisitions at 4.75x EBITDA multiple using half-year convention. [_] Increase in gross profit margin of $0.01 in 1999 and $0.005 annually in 2000 to 2002. Page A-8
OVERVIEW OF PETRO ATTRITION ANALYSIS - ------------------------------------------------------------------------------------------------------------------------------------ Average Accounts Absolute Account Losses Loss Rate Gains Net Attrition Rate ---------------------------- ----------------------------- ---------------- ----------------- -------------------- Base Business, Base Business, Base Year Total excl. Acquisitions Total excl. Acquisitions Total Base Accounts % Total Business - ----- ------- ------------------ ------- ------------------ -------- ----- ----------- ----- -------- ---------- 1993 391,454 352,576 70,127 56,459 17.9% 16.0% 47,090 12.0% -5.9% -4.0% 1994 386,235 354,786 57,442 46,386 14.9% 13.1% 35.380 9.2% -5.7% -3.9% 1995 381,842 344,342 59,550 46,366 15.6% 13.5% 34,516 9.0% -6.6% -4.5% 1996 386,398 354,471 60,084 48,860 15.5% 13.8% 39,192 10.1% -5.4% -3.7% 1997 366,421 342,738 60,407 52,581 16.5% 15.3% 39,561 10.8% -5.8% -4.5% - ------------------------------------------------------------------------------------------------------------------------------------ Mean 382,470 349,783 61,522 50,130 16.1% 14.3% 39,148 10.2% -5.9% -4.1% ==================================================================================================================================== 1998 338,314 318,893 49,968 46,485 14.8% 14.6% 38,699 11.4% -3.3% -2.7% Page A-9
OVERVIEW OF PETRO ACQUISITION HISTORY ($ IN THOUSANDS) --------------------------------------------------------------------------------------------------------------------- Date EBITDA Acquired Cost per Acquired Company Purchase Price EBITDA Multiple Gallonage Gallon -------- ------- -------------- ------ -------- --------- ------ 1/26/93 Houck Service $ 663.9 $ 245.0 2.7x 807.2 $ 0.823 1/28/93 Harris and Gans 1,607.9 475.0 3.4x 2,599.6 0.619 5/28/93 Goodrich 2,397.7 672.0 3.6x 4,156.0 0.577 6/4/93 Warren 2,965.0 712.0 4.2x 14,448.3 0.205 6/23/93 Savin 1,655.4 403.0 4.1x 2,769.0 0.598 6/25/93 Baylis and Baylis 989.3 251.0 3.9x 1,224.7 0.808 7/28/93 Agway 1,660.6 315.0 5.3x 2,708.5 0.613 9/28/93 Garden State 1,015.2 312.0 3.3x 1,408.0 0.721 9/29/93 Essex 866.3 234.0 3.7x 2,649.4 0.327 --------- -------- ----- -------- ------- 1993 Totals $ 13,821 $ 3,619 3.8x 32,771 $ 0.422 ========= ======== ===== ======== ======= 1/7/94 Petrilla Oil $ 189.5 $ 53.4 3.5x 329.0 $ 0.576 3/8/94 Rettig 1,813.0 466.0 3.9x 4,930.0 0.368 6/30/94 Deblois Oil 15,374.6 2,909.0 5.3x 19,869.0 0.774 7/26/94 Herbert Fuel 5,133.0 882.0 5.8x 6,103.0 0.841 7/28/94 Trico Fuel 3,126.3 930.0 3.4x 4,091.0 0.764 9/1/94 Sickley 1,261.4 355.0 3.6x 1,702.0 0.741 9/13/94 Sinkler 4,880.0 948.0 5.1x 7,433.0 0.657 12/1/94 Ryan 2,954.3 528.0 5.6x 4,804.0 0.615 12/2/94 Fowler 182.8 37.4 4.9x 354.0 0.516 --------- -------- ----- -------- ------- 1994 Totals $ 34,915 $ 7,109 4.9x 49,615 $ 0.704 ========= ======== ===== ======== ======= 3/30/95 Reliable Oil $ 6,065.6 $1,183.0 5.1x 10,102.2 $ 0.600 5/24/95 Rosetta (Waldman) 3,413.2 684.0 5.0x 5,153.6 0.662 5/24/95 Rosetta (Price) 789.4 153.0 5.2x 1,309.5 0.603 7/27/95 Slocum 643.8 198.0 3.3x 742.6 0.867 8/23/95 Contex 1,856.8 448.0 4.1x 2,503.2 0.742 8/31/95 Rackliffe 546.2 139.0 3.9x 904.0 0.604 9/1/95 A-One 5,184.2 1,164.0 4.5x 5,900.0 0.879 9/11/95 Reading Merchants 4,260.0 656.0 6.5x 3,613.0 1.179 10/25/95 Franklin Fuel 293.5 76.0 3.9x 445.0 0.660 11/17/95 Home Fuel 2,158.9 430.0 5.0x 6,072.3 0.356 12/19/95 Texaco 3,854.8 1,071.0 3.6x 5,845.1 0.659 --------- -------- ----- -------- ------- 1995 Totals $ 29,066 $ 6,202 4.7x 42,590 $ 0.682 ========= ======== ===== ======== ======= Page A-10
OVERVIEW OF PETRO ACQUISITION HISTORY ($ IN THOUSANDS) (continued) ========================================================================================= DATE EBITDA ACQUIRED COST PER ACQUIRED COMPANY PURCHASE PRICE EBITDA MULTIPLE GALLONAGE GALLON -------- ------- -------------- ------ -------- --------- ------ 1/11/96 Garrison $5,242.5 $1,154.0 4.5x 6,017.0 $0.871 1/19/96 Cibro 4,367.6 1,087.0 4.0x 6,200.0 0.704 2/1/96 Seaman 7,133.7 1,552.0 4.6x 7,522.0 0.948 4/1/96 McDowell 2,723.5 669.0 4.1x 2,675.0 1.018 9/11/96 Flynn 1,038.0 232.0 4.5x 1,316.0 0.789 9/24/96 Farren 263.6 69.0 3.8x 481.0 0.548 10/18/96 Bergen 3,202.5 718.0 4.5x 5,933.0 0.540 10/18/96 Hightstown 233.5 62.0 3.8x 500.0 0.467 10/31/96 Hy-Test 813.4 177.0 4.6x 1,468.0 0.554 12/18/96 Dexter 331.9 99.0 3.4x 796.0 0.417 12/26/96 Sherman 492.5 103.0 4.8x 564.0 0.873 12/27/96 Malco 369.2 97.0 3.8x 988.0 0.374 12/30/96 Grasso 422.9 116.0 3.6x 1,212.0 0.349 -------- -------- -------- -------- -------- 1996 TOTALS $ 26,635 $ 6,135 4.3x 35,672 $0.747 ======== ======== ======== ======== ======== 1/15/97 Oils Inc $ 747.6 $ 188.0 4.0x 1,189.0 0.629 4/14/97 Mugullian Fuel 2,801.9 638.0 4.4x 3,000.0 0.934 5/14/97 Alderfer Heating 401.1 111.0 3.6x 787.0 0.510 6/26/97 Bellomo 1,488.8 443.0 3.4x 1,657.0 0.898 7/10/97 Good 521.4 117.0 4.5x 1,200.0 0.434 8/29/97 Oil Burner 2,633.1 603.0 4.4x 3,500.0 0.752 9/10/97 Romary 2,252.5 545.0 4.1x 2,348.0 0.959 9/29/97 T. W. Perry 1,619.3 439.0 3.7x 2,118.0 0.765 10/1/97 MillBrook 527.5 112.0 4.7x 908.0 0.581 11/24/97 Shreve 1,457.0 300.0 4.9x 2,425.0 0.601 12/18/97 Genovese 1,010.8 281.0 3.6x 1,522.0 0.664 -------- -------- -------- -------- -------- 1997 TOTALS $ 15,461 $ 3,777 4.1x 20,654 0.749 ======== ======== ======== ======== ======== 5 YEAR TOTALS $119,898 $ 26,842 4.5X $181,302 0.661 ======== ======== ======== ======== ======== Page A-11
A.G. Edwards noted that public disclosure regarding transactions in the retail home heating oil distribution industry was extremely limited. A.G. Edwards analyzed the financial terms related to the divestitures by Petro of certain of its retail home heating oil branches. OVERVIEW OF PETRO DIVESTITURE HISTORY ($ IN THOUSANDS) ================================================================================================================================== DATE EBITDA ACQUIRED COST PER DIVESTED BRANCH PURCHASER PURCHASE PRICE EBITDA MULTIPLE GALLONAGE GALLON - -------- ------ --------- -------------- ------ -------- --------- ------ 3/30/95 New Hampshire Bellemore Heating Oil, Inc. $1,477 $150 9.8x 6,060 $0.244 6/28/96 Punderson Ultramar Energy, Inc. $4,073 $443 9.2x 6,900 $0.590 11/4/97 TLC Heating Oil Partners, L.P. $16,100 $2,005 8.0x 23,000 $0.700 -------- MEAN: 9.0x -------- Page A-12
OVERVIEW OF PETRO MARGIN ANALYSIS (Volume in gallons; gallons and $ in thousands, except margins) ============================================================================================================ FISCAL YEARS ENDED DECEMBER 31, ------------------------------------------------------------------------- 1993 1994 1995 1996 1997 1998 --------- --------- ---------- ---------- ---------- ---------- RETAIL (a) Volume 355,347 360,207 343,759 375,121 338,478 269,405 Margin $ 0.4883 $ 0.5030 $ 0.5027 $ 0.4993 $ 0.5196 $ 0.5542 --------- --------- ---------- ---------- ---------- ---------- Gross profit $173,501 $181,202 $ 172,811 $ 187,290 $ 175,867 $ 149,311 COMMERCIAL Volume 81,515 79,514 75,476 81,020 71,813 55,262 Margin $ 0.2301 $ 0.2416 $ 0.2458 $ 0.2471 $ 0.2452 $ 0.2642 --------- --------- ---------- ---------- ---------- ---------- Gross profit $ 18,755 $ 19,214 $ 18,554 $ 20,018 $ 17,607 $ 14,602 PROPANE Volume 6,625 7,435 5,538 - - - Margin $ 0.5352 $ 0.5730 $ 0.5805 $ 0.0000 $ 0.0000 $ 0.0000 --------- --------- ---------- ---------- ---------- ---------- Gross profit $ 3,546 $ 4,260 $ 3,215 - - - OTHER PETROLEUM PRODUCTS Volume 36,406 35,709 31,228 32,026 29,855 29,790 Margin $ 0.1424 $ 0.1417 $ 0.1481 $ 0.1401 $ 0.1424 $ 0.1380 --------- --------- ---------- ---------- ---------- ---------- Gross profit $ 5,183 $ 5,061 $ 4,624 $ 4,487 $ 4,251 $ 4,112 TOTAL PETROLEUM PRODUCTS Volume 479,893 482,865 456,001 488,167 440,146 354,457 Margin $ 0.4188 $ 0.4344 $ 0.4368 $ 0.4339 $ 0.4492 $ 0.4740 --------- --------- ---------- ---------- ---------- ---------- Gross profit $200,985 $209,737 $ 199,204 $ 211,795 $ 197,725 $ 168,025 --------- --------- ---------- ---------- ---------- ---------- DISCOUNTS $ 1,294 $ 1,200 $ 944 $ 1,084 $ 802 $ 572 --------- --------- ---------- ---------- ---------- ---------- Net service loss ($34,243) ($37,941) ($33,822) ($37,386) ($35,184) ($30,963) Net installation income 3,681 4,944 4,364 5,280 5,050 4,859 --------- --------- ---------- ---------- ---------- ---------- Gross profit (loss) ($30,562) ($32,997) ($29,458) ($32,106) ($30,134) ($26,104) --------- --------- ---------- ---------- ---------- ---------- Gas gross profit - $ 5,756 $ 50,992 - - Total gross profit $171,717 $183,696 $ 221,682 $ 180,773 $ 168,393 $ 142,493 ========= ========= ========== ========== ========== ========== ____________________________________________________________________ (a) Includes protected price volumes Page A-13
OVERVIEW OF PETRO DISCOUNTED CASH FLOW ANALYSIS WEIGHTED AVERAGE COST OF CAPITAL DERIVATION ($ IN MILLIONS) - -------------------------------------------------------------------------------- TOTAL IMPLIED TOTAL TOTAL MARKET UNIT TOTAL MARKET DEBT/ DEBT AS % UN- LEVERED VAL. DEBT PRICE AT UNITS VALUE OF TOTAL OF TOTAL LEVERED COMPARABLE COMPANY BETA (A) (BK = MKT) (2/3/99) OUT. (MIL) EQUITY EQUITY CAPITAL BETA - ------------------------------------------------------------------------------------------------------------------------------------ AmeriGas Partners, L.P. 0.44 $719.0 $23,625 41.9 $1,009.8 71.2% 41.6% 0.257 Cornerstone Propane Partners, L.P. 0.55 263.1 17,500 19.9 355.6 74.0% 42.5% 0.316 Ferrellgas Partners, L.P. 0.47 594.3 18,688 31.3 596.8 99.6% 49.9% 0.235 Heritage Propane Partners, L.P. 0.48 198.3 23,750 8.6 207.9 95.4% 48.8% 0.246 National Propane Partners, L.P. 0.76 139.2 5,063 11.2 58.0 239.8% 70.6% 0.224 Star Gas Partners, L.P. 0.51 115.7 18,063 6.3 115.3 100.4% 50.1% 0.255 Suburban Propane Partners, L.P. 0.44 428.2 19,188 28.7 562.4 76.1% 43.2% 0.250 ---------------------------------------------------- Petro's capitalization - at market Total debt (b) $309.3 92.1% Comparable group's average unlevered beta: 0.25 Common equity 26.7 7.9% ------ ------ Petro's debt - to - common equity ratio: 1160.3% Petro's debt as a percent of total capital (b): 92.1% $335.9 100.0% ---------------------------------------------------- Comparable group's beta relevered for Petro's capital structure: 3.209 ===== DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: MARKET RISK PREMIUM RANGE (E) - ----------------------------------------------- ------------------------------------- 11.3% 12.3% 13.3% ------------------------------------- Petro's theoretical levered beta (d): 3.209 Assumed % of common equity in Petro's capital structure: 7.9% Risk - free rate of return (c): 4.8% Petro's cost of common equity range (at various market risk premiums): 41.1% 44.3% 47.5% ===== ===== ===== Petro's assumed tax rate: 0.0% Assumed % of debt in capital structure (b): 92.1% Petro's estimated cost of debt (f): 11.0% Petro's estimated after - tax cost of debt: 11.0% 11.0% 11.0% 11.0% ------------------------------------- Petro's weighted average cost of capital range (g): 13.4% 13.6% 13.9% ------------------------------------- ___________________________ (a) Source: Bloomberg, 143 week (maximum weekly time period allowed, or the number of weeks available, which may be less than 143) adjusted beta relative to the S&P 500 index. (b) Includes preferred stock. (c) Ten - year Treasury rate on February 3, 1999. (d) Bloomberg's reported beta for Petro is .70. (e) Ibbotson Associates 1998. Total returns for small company stocks of 17.7% minus the risk-free rate. (f) Based on Petro's current debt structure. (g) Calculation based upon use of the Capital Asset Pricing Model (CAPM). Page A-14
OVERVIEW OF PETRO SUMMARY OF CAPITAL STRUCTURE ($ IN THOUSANDS) ================================================================================================================================ 12/31/98 2/3/99 BOOK VALUE COUPON MARKET PRICE MARKET VALUE -------------- -------------- ----------------- ---------------- DEBT: Credit Agreement Working Capital facility $ 0 7.75% NA $ 0 Acquisition facility 0 7.75% NA 0 Notes payable Notes payable for fuel oil dealer purchasers, etc. 14,301 8.0%-10.0% NA 14,301 11.85%, 12.17%, 12.18% Senior Notes 60,000 10.90% NA 60,000 14.1% Subordinated and Senior 6,200 14.10% NA 6,200 10.125% Subordinated 50,000 10.13% 92.38% 46,188 9.375% Subordinated Debentures 75,000 9.38% 92.38% 69,281 12.25% Subordinated Debentures 81,250 12.25% 97.38% 79,117 TOTAL DEBT $ 286,751 $ 275,087 EFFECTIVE COST OF DEBT 10.7% PREFERRED STOCK: Redeemable preferred stock $ 4,167 14.34% NA 4,167 12.875% Exchangeable preferred stock 30,000 12.88% NA 30,000 TOTAL PREFERRED STOCK $ 34,167 $ 34,167 EFFECTIVE COST OF PREFERRED STOCK 1.31% TOTAL DEBT AND PREFERRED STOCK $ 320,918 $ 309,254 EFFECTIVE COST OF DEBT AND PREFERRED STOCK 11.0% Page A-15
OVERVIEW OF PETRO SUMMARY OF CAPITAL STRUCTURE ($ IN THOUSANDS EXCEPT PER SHARE) (continued) ================================================================================ 12/31/98 2/3/99 SHARES OUT. MARKET PRICE MARKET VALUE ------------- -------------- -------------- EQUITY: Common stock Class A 23,854,751 $1.000 $ 23,855 Class B 11,228 17.776 (a) 200 Class C 2,597,519 NA (b) 2,598 TOTAL EQUITY $ 26,652 EFFECTIVE COST OF EQUITY 44.3% TOTAL CAPITALIZATION $335,906 WACC 13.6% Less: Cash 13,804 NET CAPITALIZATION $322,102 (a) Market price is calculated as: $17.50+$0.2763 (b) Market price is assumed to equal that of the Class A shares, since the Class C shares do not trade. Page A-16
OVERVIEW OF PETRO Price and Volume 12/15/95 - 12/31/97 [GRAPH APPEARS HERE] Page A-17
OVERVIEW OF PETRO Price and Volume 1/1/98 - 2/3/99 [GRAPH APPEARS HERE] Page A-18
Overview of Petro Class A Common Stock Trading History - Volume Distribution 1995-1999 (a) - ---------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- 1995 1996 1997 --------------------------- -------------------------- --------------------------- Price Per Share Volume % Volume % Volume % - ---------------------- --------------------------- -------------------------- --------------------------- Greater Than $9.400 9.200 9.400 600 100.00% 9.000 9.200 0 99.99% 8.800 9.000 49,200 99.99% 8.600 8.800 6,800 99.41% 8.400 8.600 67,500 99.33% 8.200 8.400 289,100 98.54% 8.000 8.200 161,500 95.13% 1,600 100.00% 7.800 8.000 873,500 93.22% 47,400 99.96% 7.600 7.800 245,800 82.92% 236,200 98.87% 7.400 7.600 193,300 80.02% 185,000 93.44% 7.200 7.400 1,154,800 77.74% 822,300 89.19% 7.000 7.200 5,190,500 64.12% 1,507,100 70.28% 6.800 7.000 246,000 2.90% 815,700 35.63% 6.600 6.800 498,500 16.88% 6.400 6.600 129,300 5.42% 417,300 100.00% 6.200 6.400 37,600 2.45% 526,900 96.34% 6.000 6.200 44,100 1.58% 417,700 91.72% 5.800 6.000 24,700 0.57% 110,200 88.06% 5.600 5.800 868,000 87.09% 5.400 5.600 143,300 79.48% 5.200 5.400 92,600 78.22% 5.000 5.200 940,500 77.41% 4.800 5.000 142,200 69.16% 4.600 4.800 20,200 67.92% 4.400 4.600 13,900 67.74% 4.200 4.400 - 67.62% 4.000 4.200 - 67.62% 3.800 4.000 117,100 67.62% 3.600 3.800 370,600 66.59% 3.400 3.600 250,900 63.34% 3.200 3.400 1,236,200 61.14% 3.000 3.200 1,652,500 50.30% 2.800 3.000 2,785,300 35.81% 2.600 2.800 788,500 11.39% 2.400 2.600 430,100 4.47% 2.200 2.400 79,800 0.70% 2.000 2.200 Implied Offer Price and Pre-Announcement Price - ---------------------- 1.800 2.000 1.600 1.800 1.400 1.600 1.200 1.400 Market Price - ---------------------- 1.000 1.200 0.800 1.000 0.600 0.800 Less Than $0.600 --------- --------- ---------- Total Stock for Period 8,478,600 4,349,500 11,403,800 Cumulative % of Total Traded 25.01% 12.83% 33.63% % Traded of Current Stock Out (b) 35.54% 18.23% 47.81% % Traded of Current Float (c) 82.01% 42.07% 110.30% Wtd. Average Stock Price $7.31 $7.07 $3.90 1998 1999(a) 1995-1999(a) --------------------------- ---------------------- --------------------- Price Per Share Volume % Volume % Volume % - ---------------------- --------------------------- ---------------------- --------------------- Greater Than $9.400 9.200 9.400 600 100.00% 9.000 9.200 - 100.00% 8.800 9.000 49,200 100.00% 8.600 8.800 6,800 99.85% 8.400 8.600 67,500 99.83% 8.200 8.400 289,100 99.63% 8.000 8.200 163,100 98.78% 7.800 8.000 920,900 98.30% 7.600 7.800 482,000 95.58% 7.400 7.600 378,300 94.16% 7.200 7.400 1,977,100 93.05% 7.000 7.200 6,697,600 87.22% 6.800 7.000 1,061,700 67.46% 6.600 6.800 498,500 64.33% 6.400 6.600 546,600 62.86% 6.200 6.400 564,500 61.25% 6.000 6.200 461,800 59.59% 5.800 6.000 134,900 58.22% 5.600 5.800 868,000 57.83% 5.400 5.600 143,300 55.27% 5.200 5.400 92,600 54.84% 5.000 5.200 940,500 54.57% 4.800 5.000 142,200 51.80% 4.600 4.800 20,200 51.38% 4.400 4.600 13,900 51.32% 4.200 4.400 - 51.28% 4.000 4.200 - 51.28% 3.800 4.000 117,100 51.28% 3.600 3.800 370,600 50.93% 3.400 3.600 250,900 49.84% 3.200 3.400 1,236,200 49.10% 3.000 3.200 1,652,500 45.45% 2.800 3.000 130,000 100.00% 2,915,300 40.58% 2.600 2.800 249,100 98.66% 1,037,600 31.98% 2.400 2.600 270,800 96.08% 700,900 28.92% 2.200 2.400 964,300 93.28% 1,044,100 26.85% 2.000 2.200 345,000 83.32% 345,000 23.77% - ----------------------- Implied Offer Price and Pre-Announcement Price - ----------------------- 1.800 2.000 1,789,900 79.25% 1,789,900 22.76% - ------------------------------------------------------------------------------------------------------------------------------ 1.600 1.800 1,097,300 61.25% 1,097,300 17.48% 1.400 1.600 1,863,200 49.91% 1,863,200 14.24% 1.200 1.400 130,500 30.65% 130,500 8.75% - ------------------------ Market Price - ------------------------ 1.000 1.200 1,612,600 29.30% 879,800 100.03% 1,612,600 8.36% - ------------------------------------------------------------------------------------------------------------------------------ 0.800 1.000 946,900 12.63% 576,000 45.93% 946,900 3.61% 0.600 0.800 275,500 2.85% 171,400 10.53% 275,500 0.81% Less Than $0.600 --------- --------- ---------- Total Stock for Period 9,675,100 1,627,200 33,907,000 Cumulative % of Total Traded 28.53% 4.80% 100.00% % Traded of Current Stock Out (b) 40.56% 6.82% 142.14% % Traded of Current Float (c) 93.58% 15.74% 327.95% Wtd. Average Stock Price $1.62 $0.99 $4.51 - ----------------------------- (a) Through February 3, 1999 (b) Based on 23,854,751 Class A shares outstanding (c) Based on 10,338,925 Class A shares held by institutional and retail public holders
Overview of Petro Shareholder Analysis (a) - ------------------------------------------------------------------------------------------------------------------------------ Class A % of Total Institutions (b) Shrs. Held % of Total Voting Power Directors and Officers (c) - ------------------------------------------------------------------------------------------------------------------------------- Dimensional Fund Adv 639,700 2.7% 1.3% Audrey L. Sevin CNA Financial Group 360,900 1.5% 0.7% Ink P. Sevin Barclays Bark plc 340,573 1.4% 0.7% Phillip Ean Cohen Deltec Asset Mgmt 228,528 1.0% 0.5% Thomas J. Edelman Northern Trust 216,622 0.9% 0.4% Vincent De Palma Vanguard Group 215,500 0.9% 0.4% Hanseatic Corporation (d) (e) Bear, Stearns & Co 151,700 0.6% 0.3% Tortosa (d) Mellon Bank 119,904 0.5% 0.2% Hubertus Langen (d) Prudential Insurance 48,200 0.2% 0.1% Wolfgang Traber (c) IBM Retirement Funds 16,300 0.1% 0.0% Paul Biddelman (e) World Asset Management 10,000 0.0% 0.0% Total Directors & Officers Holdings DLJ Corp 4,000 0.0% 0.0% Legg Mason 2,000 0.0% 0.0% --------- -------- -------- All Institutions (c) 2,353,927 9.9% 4.7% - -------------------------------------------------------------------------------------------------------------------------- Class A Class C Total % of Total Title Shrs. Held % of Total Shrs. Held % of Total Voting Power Voting Power - ---------------------------------------- ----------- ----------- ----------- ----------- ------------ ------------- Director and Secretary of Petro and Star 1,876,863 7.9% 477,716 18.4% 6,654,023 13.4% Chairman, CEO and Director of Petro 630,227 2.6% 201,641 7.8% 2,646,637 5.3% Director of Petro 679,262 2.8% 113,423 4.4% 1,813,492 3.6% Director of Petro and Star 653,312 2.7% 129,019 5.0% 1,943,502 3.9% VP and GM of New York Region 5,000 0.0% - 0.0% 5,000 0.0% 1,777,279 7.5% 298,717 11.5% 4,764,449 9.6% - 0.0% 298,717 11.5% 2,987,170 6.0% 731,473 3.1% 9,038 0.3% 821,853 1.6% Director of Petro and Star - 0.0% - 0.0% - 0.0% Director of Petro and Star 2,386 0.0% - 0.0% 2,386 0.0% --------- --------- --------- -------- ---------- --------- 6,355,802 26.6% 1,528,271 58.8% 21,638,512 43.4% Class A Class C Total % of Total 5% Beneficial Owners and Affiliates Shrs. Held % of Total Shrs. Held % of Total Voting Power Voting Power ------------------------------------ ------------------------------------------------------------------------------- Frank Russell Company (f) 2,611,000 10.9% - 0.0% 2,611,000 5.2% Schneider Capital 1,372,000 5.8% - 0.0% 1,372,000 2.8% Richard O'Connell 1,128,745 4.7% 302,461 11.6% 4,153,355 8.3% Brentwood Corp 681,873 2.9% 120,985 4.7% 1,891,723 3.8% Barcel Corporation 605,151 2.5% 151,231 5.8% 2,117,461 4.2% Gabes S.A. 597,617 2.5% 124,314 4.8% 1,840,757 3.7% United Capital Corp 90,000 0.4% - 0.0% 90,000 0.2% Minneford Corp 73,638 0.3% 12,000 0.5% 193,638 0.4% Fernando Montero - 0.0% 35,287 1.4% 352,870 0.7% M.M. Warburg & Co - 0.0% 31,308 1.2% 318,080 0.6% ---------- --------- --------- -------- ---------- --------- Total 5% Beneficial Holdings 7,160,024 30.0% 778,086 30.0% 14,940,884 30.0% - --------------------------------------------------------------------------------------------------------------------------- Summary ------- % of % of Total % of Total Class A Total Class C Total Voting Power Voting Power ------- --------- --------- -------- ------------ ------------ Insider Holdings Directors and Officers as a Group 6,355,802 26.6% 1,528,271 58.8% 21,638,512 43.4% 5% Beneficial Owners and Affiliates 7,160,024 30.0% 778,086 30.0% 14,940,884 30.0% ---------- --------- --------- -------- ---------- --------- 13,515,826 56.7% 2,306,357 88.8% 36,579,396 73.4% Public Holdings Institutional Holdings 2,353,927 9.9% 2,353,927 4.7% Retail 7,984,998(g) 33.5% 291,162 11.2% 10,896,618 21.9% ---------- --------- --------- -------- ---------- --------- 10,338,925 43.3% 291.162 11.2% 13,250,545 26.6% Total 23,854,751 100.0% 2,597,519 100.0% 49,829,941 100.0% - ---------------------------------------------------------------------------------------------------------------------------- - --------------------- (a) Based on shares outstanding, most recently available data as of 2/04/99 and does not include options to purchase and Class B shares (b) Source: Bloomberg and Petro's Proxy (c) Does not include 5% beneficial ownership institutions (d) Hanseatic Corporation holds shared voting power in Tortosa. Tortosa owned and controlled by Mr. Largen (e) Mr. Traber and Mr. Biddelman are executive officers of Hanseatic Corporation. (f) Frank Russell Company shares beneficial ownership of 1,943,835 Class A with Schneider Capital (g) AGE has 410,788 Class A shares in its system
WHILE PETRO HAD DECENT COVERAGE IN 1996, IT HAS NOT HAD MUCH SUPPORT IN RECENT MONTHS. OVERVIEW OF PETRO RESEARCH COVERAGE RESEARCH COVERAGE DATE PUBLISHED ESTIMATES UPDATED - ----------------- -------------- ----------------- Published Research Reports Freeman Securities* 8/17/98 -- KDP Investment Advisors* 8/1/98 -- SAMCO Capital Markets* 8/1/98 -- Bear Stearns 9/5/96 10/18/96 DLJ 8/2/96 -- Paine Webber 7/16/96 11/11/97 Additional Research Jefferies - Hold EARNINGS ESTIMATES NUMBER OF ESTIMATES MEAN 1998 MEAN 1999 ------------------ ------------------- --------- --------- IBES 1 ($1.25) NA Nelson 1 ($1.25) NA __________________________ * Fixed Income research. Page A-21
OVERVIEW OF STAR GAS PARTNERS, L.P.("STAR GAS") SELECTED FINANCIAL DATA ($ IN THOUSANDS) - ------------------------------------------------------------------------------------------------------------------------ HISTORICAL YEARS ENDED SEPTEMBER 30, -------------------------------------------------------------------------------- 1996 % 1997 % 1997(A) % 1998 % - ------------------------------------------------------------------------------------------------------------------------ Sales $119,634 100.0% $135,159 100.0% $149,766 100.0% $111,685 100.0% % Growth 17.0% 13.0% 25.2% -25.4% Cost of sales 58,557 48.9% 72,211 53.4% 80,370 53.7% 49,498 44.3% ----------------- ----------------- ----------------- ----------------- Gross profit 61,077 51.1% 62,948 46.6% 69,396 46.3% 62,187 55.7% Operating expenses 41,207 34.4% 43,245 32.0%(c) 46,408 31.0% 43,281 38.8% Net (loss) on sales of assets (260) -0.2% (295) -0.2% (265) -0.2% (271) -0.2% Depreciation and amortization 9,808 8.2% 10,405 7.7% 11,495 7.7% 11,638 10.4% ----------------- ----------------- ----------------- ----------------- Operation income 9,802 8.2% 9,003 6.7% 11,228 7.5% 6,997 6.3% Interest expense, net 7,124 6.0% 6,966 5.2% 7,766 5.2% 7,927 7.1% ----------------- ----------------- ----------------- ----------------- Income (loss) before income taxes 2,678 2.2% 2,037 1.5% 3,462 2.3% (930) -0.8% Income taxes 85 0.1% 25 0.0% 25 0.0% 25 0.0% General Partners' interest - 0.0% 40 0.0% 69 0.0% (19) 0.0% ----------------- ----------------- ----------------- ----------------- Net income $ 2,593 2.2% $ 1,972 1.5% $ 3,368 2.2% $ (936) -0.8% ================= ================= ================= ================= Net income per limited partner unit $ 0.49 $ 0.37 $ 0.54 $ (0.16) ======== ======== ======== ========= Weighted average L.P. units outstanding 5,271 5,271 6,228 6,035 EBITDA (d) $ 19,870 16.6% $ 19,703 14.6% $ 22,988 15.3% $ 18,906 16.9% Capital expenditures $ 5,332 $ 5,279 $ 5,579 $ 15,100 Maintenance capital expenditures 2,300 3,100 3,400 2,625 Distributable cash flow 10,361 9,612 11,797 8,329 Distributable cash flow per unit $ 1.97 $ 1.82 $ 1.89 $ 1.38 Common distribution coverage 1.8x 1.5x 1.4x 1.0x Total distribution coverage 0.9x 0.8x 0.8x 0.6x ________________________ (a) Proforma for December 16, 1997 common unit offering and the acquisition of Pearl Gas Co. (b) Growth over 1996 (c) Includes $350 in special project expenses. (d) Excludes loss from sale of assets. Page B-1
OVERVIEW OF STAR GAS EBITDA RECONCILIATION: 1997(a) ($ in thousands) ================================================================================ STAR GAS -------- 1997 Actual EBITDA $19,703 (b) NORMALIZING ADJUSTMENTS. Weather Residential - 1,125 gallons @ 0.7106 margin 799 Commercial - 277 gallons @ 0.4459 margin 124 Margin Residential - 50,832 gallons @ (0.7106 - 0.6995) (564) Commercial - 19,864 gallons @ (0.4454 - 0.4348) (220) Wholesale - 38,404 gallons @ (0.0975 - 0.0675) (1,152) Compensation (56) Elimination of strategic expense 902 (c) Pearl Gas EBITDA 3,012 Pearl Gas acquisition adjustments 273 (d) ------- 1997 Normalized EBITDA $22,821 ======= - -------------------------------------------------------------------------------- (a) Management's assumptions. (b) Not pro forma for Pearl Gas acquisition. (c) Certain expenses including the exploration of strategic alternatives by Morgan Stanley. (d) Certain cost savings, primarily salary and benefit expenses of certain selling shareholders. Page B-2
OVERVIEW OF STAR GAS EBITDA RECONCILIATION: 1998 - 1999 (a) ($ in thousands) ==================================================================== STAR GAS -------- Normalized 1998 EBITDA Budget $ 22,135 Weather 12.8% warmer than normal (3,229) ------ Actual 1998 EBITDA $ 18,906 ====== Normalized 1998 EBITDA Budget $ 22,135 Acquisition Growth 1998 acquisitions 1,585 $5 million of acquisitions at 6.5x multiple completed on 4/1/99 using half-year convention 385 Actual results through January 21, 1999 (2,986) ------ 1999 EBITDA Projected $ 21,119 ====== -------------------------------------------------------------------- (a) Management's assumptions. Page B-3
OVERVIEW OF STAR GAS EBITDA PROJECTIONS ($ IN THOUSANDS) ==================================================================================================================================== PROJECTED ------------------------------------------------------------------------- ACTUAL NORMALIZED ADJUSTED FOR 1998 1998 ACTUAL 1999 2000 2001 2002 ----------------------------------------------------------------------------------------------------------- EBITDA $ 18,906 $ 22,135 $ 21,119 $ 25,260 $ 26,797 $ 28,335 ---------------------------------------------------------------------------------------------------------------------------------- MAJOR ASSUMPTIONS FOR 1999 - 2002 --------------------------------- [_] 30 Year Weather [_] No growth in base business. [_] $5 million in 1999 and $10 million in 2000 to 2002 of acquisitions at 6.5x EBITDA multiple using half-year convention. [_] No increase in gross profit margin. Page B-4
OVERVIEW OF STAR GAS ACQUISITION HISTORY ($ in thousands) ----------------------------------------------------------------------------------------------------------------------- DATE EBITDA ACQUIRED COST PER ACQUIRED COMPANY PURCHASE PRICE EBITDA MULTIPLE GALLONAGE GALLON -------- ------- -------------- ------ -------- --------- -------- 6/15/94 Loveland $ 700 $ 127 5.5x 433 $1.616 11/24/94 Baystate $ 1,450 $ 209 6.9x 769 $1.886 9/12/95 Debolt $ 950 $ 151 6.3x 852 $1.115 3/22/96 Bob White L.P. Gas/ Mitchell Bottle Gas $ 1,500 $ 263 5.7x 898 $1.671 7/22/96 Fuzzy Moore $ 850 $ 147 5.8x 454 $1.871 10/22/97 Pearl Gas Co. $ 24,126 $ 3,288 7.3x 14,000 $1.723 2/20/98 Tri-County Gas $ 550 $ 108 5.1x 320 $1.720 5/28/98 Knowles LP Gas $ 3,000 $ 426 7.0x 1,021 $2.939 5/28/98 Tioga Petroleum $ 1,200 $ 257 4.7x 688 $1.795 7/30/98 Lowe Bros & Dad $ 3,750 $ 602 6.2x 1,965 $1.908 8/11/98 Myers Propane $ 1,200 $ 191 6.3x 572 $2.099 ----------- ---------- ---------- ---------- ---------- 4 YEAR TOTALS $ 39,276 $ 5,769 6.8x 21,952 $1.789 =========== ========== ========== ========== ========== Page B-5
OVERVIEW OF STAR GAS MARGIN ANALYSIS (VOLUME IN GALLONS, GALLONS AND $ IN THOUSANDS, EXCEPT MARGINS) ------------------------------------------------------------------------------------------------------------------------ FISCAL YEARS ENDED SEPTEMBER 30, ------------------------------------------------------------------------------------------ 1993 1994 1995 1996 1997 1998 ----------- ------------ ------------ ----------- ----------- ----------- RESIDENTIAL Volume 44,590 48,430 45,235 54,336 49,707 53,720 Margin $ 0.6902 $ 0.6861 $ 0.6677 $ 0.6592 $ 0.7106 $ 0.6742 ----------- ------------ ------------ ----------- ----------- ----------- Gross profit $ 30,777 $ 33,228 $ 30,203 $ 35,818 $ 35,322 $ 36,219 COMMERCIAL Volume 17,617 19,875 18,831 21,194 19,587 18,901 Margin $ 0.4614 $ 0.4611 $ 0.4271 $ 0.4202 $ 0.4459 $ 0.4465 ----------- ------------ ------------ ----------- ----------- ----------- Gross profit $ 8,129 $ 9,164 $ 8,043 $ 8,906 $ 8,734 $ 8,440 AGRICULTURE Volume 23,291 16,053 15,080 12,567 17,338 18,437 Margin $ 0.2349 $ 0.2630 $ 0.2357 $ 0.2556 $ 0.2694 $ 0.2654 ----------- ------------ ------------ ----------- ----------- ----------- Gross profit $ 5,471 $ 4,222 $ 3,554 $ 3,212 $ 4,671 $ 4,893 MOTOR FUEL & OTHER Volume 7,581 8,060 8,056 8,197 8,024 7,812 Margin $ 0.4922 $ 0.5359 $ 0.5271 $ 0.5215 $ 0.5765 $ 0.6390 ----------- ------------ ------------ ----------- ----------- ----------- Gross profit $ 3,731 $ 4,319 $ 4,246 $ 4,275 $ 4,626 $ 4,992 WHOLESALE Volume 51,493 45,318 38,941 39,025 38,404 25,981 Margin $ 0.0619 $ 0.0680 $ 0.0568 $ 0.0704 $ 0.0975 $ 0.0639 ----------- ------------ ------------ ----------- ----------- ----------- Gross profit $ 3,189 $ 3,082 $ 2,212 $ 2,747 $ 3,743 $ 1,661 TOTAL PROPANE Volume 144,572 137,736 126,143 135,319 133,060 124,851 Margin $ 0.3548 $ 0.3922 $ 0.3826 $ 0.4061 $ 0.4291 $ 0.4502 ----------- ------------ ------------ ----------- ----------- ----------- Total propane gross profit $ 51,297 $ 54,015 $ 48,258 $ 54,958 $ 57,096 $ 56,205 APPLIANCES/OTHER Revenue $ 9,237 $ 9,454 $ 7,536 $ 8,269 $ 8,043 $ 8,571 Cost 3,232 3,187 1,935 2,150 2,191 2,589 ----------- ------------ ------------ ----------- ----------- ----------- Gross profit $ 6,005 $ 6,267 $ 5,601 $ 6,119 $ 5,852 $ 5,982 TOTAL GROSS PROFIT $ 57,302 $ 60,282 $ 53,859 $ 61,077 $ 62,948 $ 62,187 =========== ============ ============ =========== =========== =========== Page B-6
OVERVIEW OF STAR GAS DISCOUNTED CASH FLOW ANALYSIS WEIGHTED AVERAGE COST OF CAPITAL DERIVATION ($ IN MILLIONS) - -------------------------------------------------------------------------------- TOTAL IMPLIED TOTAL TOTAL MARKET UNIT TOTAL MARKET DEBT/ DEBT AS % UN- LEVERED VAL. DEBT PRICE AT UNITS VALUE OF TOTAL OF TOTAL LEVERED COMPARABLE COMPANY BETA (A) (BK = MKT) (2/3/99) OUT. (MIL) EQUITY EQUITY CAPITAL BETA - ------------------------------------------------------------------------------------------------------------------------------------ AmeriGas Partners, L.P. 0.44 $719.0 $23.625 41.9 $1,009.8 71.2% 41.6% 0.257 Cornerstone Propane Partners, L.P. 0.55 263.1 17.500 19.9 355.6 74.0% 42.5% 0.316 Ferrellgas Partners, L.P. 0.47 594.3 18.688 31.3 596.8 99.6% 49.9% 0.235 Heritage Propane Partners, L.P. 0.48 198.3 23.750 8.6 207.9 95.4% 48.8% 0.246 National Propane Partners, L.P. 0.76 139.2 5.063 11.2 58.0 239.8% 70.6% 0.224 Star Gas Partners, L.P. 0.51 115.7 18.063 6.3 115.3 100.4% 50.1% 0.255 Suburban Propane Partners, L.P. 0.44 428.2 19.188 28.7 562.4 76.1% 43.2% 0.250 ---------------------------------------------------- Star's capitalization - at market (b) Total debt $115.7 50.1% Comparable group's average unlevered beta: 0.25 Common equity 115.3 49.9% ------ ------ Star's debt - to - equity ratio (b): 100.4% $231.0 100.0% ---------------------------------------------------- Star's debt as a percent of total capital (b): 50.1% Comparable group's beta relevered for Star's capital structure: 0.409 ===== DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: MARKET RISK PREMIUM RANGE (D) - ----------------------------------------------- ------------------------------------- 11.3% 12.3% 13.3% ------------------------------------- Star's theoretical levered beta: 0.409 Assumed % of equity in Star's capital structure (b): 49.9% Risk - free rate of return (c): 4.8% Star's cost of equity range (at various market risk premiums): 9.5% 9.9% 10.3% ===== ===== ===== Star's assumed tax rate: 39.6% Assumed % of debt in capital structure (b): 50.1% Star's estimated cost of debt (e): 7.8% Star's estimated after - tax cost of debt: 4.7% 4.7% 4.7% 4.7% ------------------------------------- Star's weighted average cost of capital range (f): 7.1% 7.3% 7.5% ------------------------------------- ___________________________ (a) Source: Bloomberg, 143 week (maximum weekly time period allowed, or the number of weeks available, which may be less than 143) adjusted beta relative to the S&P 500 index. (b) Market value of debt is assumed to equal book value. (c) Ten - year Treasury rate on February 3, 1999. (d) Ibbotson Associates 1998. Total returns for small company stocks of 17.7% minus the risk-free rate. (e) Based on Star current debt structure. (f) Calculation based upon use of the Capital Asset Pricing Model (CAPM). Page B-7
OVERVIEW OF STAR GAS SUMMARY OF CAPITAL STRUCTURE ($ IN THOUSANDS) =========================================================================================================== 12/31/98 2/3/99 BOOK VALUE COUPON MARKET PRICE MARKET VALUE ---------- ------ ------------ ------------- DEBT: Credit Agreement Working Capital facility $ 10,720 7.25% Not applicable $ 10,720 Acquisition facility 9,000 7.25% Not applicable 9,000 Notes payable 8.04% First Mortgage Notes 85,000 8.04% NA 85,000 7.17% First Mortgage Notes 11,000 7.17% NA 11,000 TOTAL DEBT $115,720 EFFECTIVE COST OF DEBT 7.8% AFTER-TAX COST OF DEBT 4.7% 12/31/98 2/3/99 SHARES OUT. MARKET PRICE MARKET VALUE ----------- ------------ ------------- EQUITY: Common units 3,858,999 $ 18.063 $ 69,703 Subordinated units 2,396,078 NA (a) 43,279 General Partner 2,306 (b) TOTAL EQUITY $115,288 EFFECTIVE COST OF EQUITY 9.9% TOTAL CAPITALIZATION $231,008 WACC 7.3% Less: Cash $ 5,831 NET CAPITALIZATION $225,177 (a) Market price assumed to equal common units. (b) Implied 2% general partner interest. Page B-8
OVERVIEW OF STAR GAS [GRAPH APPEARS HERE] Page B - 9
OVERVIEW OF STAR GAS [GRAPH APPEARS HERE] Page B - 10
OVERVIEW OF STAR GAS COMMON UNIT TRADING HISTORY - VOLUME DISTRIBUTION 1995 - 1999(a) ================================================================================================================ DEC. 15-31 1995 1996 1997 ------------------ -------------------- -------------------- PRICE PER UNIT VOLUME % VOLUME % VOLUME % ---------------------- ------------------ -------------------- -------------------- GREATER THAN $24.800 24.400 24.600 32,400 100.00% 24.200 24.400 55,300 99.34% 26,000 100.00% 24.000 24.200 27,200 98.20% 25,800 99.24% 23.800 24.000 436,500 97.65% 38,400 98.49% 23.600 23.800 119,200 88.71% 3,000 97.37% 23.400 23.600 79,500 86.27% 56,900 97.28% 23.200 23.400 105,000 84.64% 194,500 95.62% 23.000 23.200 396,900 82.49% 148,000 89.94% 22.800 23.000 229,200 74.36% 102,100 85.62% 22.600 22.800 96,100 69.67% 184,500 82.64% 22.400 22.600 273,800 67.70% 145,500 77.26% 22.200 22.400 33,400 100.00% 430,500 62.09% 128,000 73.01% 22.000 22.200 762,000 95.80% 510,900 53.28% 217,500 69.27% 21.800 22.000 400,400 42.82% 411,600 62.92% PRE-ANNOUNCEMENT PRICE 21.600 21.800 422,600 34.62% 302,200 50.91% 21.400 21.600 259,400 25.96% 290,200 42.09% 21.200 21.400 214,300 20.65% 372,800 33.62% 21.000 21.200 388,000 16.25% 499,100 22.74% 20.800 21.000 110,900 8.32% 108,000 8.17% 20.600 20.800 137,500 6.05% 34,300 5.01% 20.400 20.600 41,900 3.23% 16,000 4.01% 20.200 20.400 62,800 2.38% 46,500 3.55% 20.000 20.200 53,200 1.09% 22,000 2.19% 19.800 20.000 24,400 1.55% 19.600 19.800 28,600 0.83% 19.400 19.600 19.200 19.400 19.000 19.200 18.800 19.000 18.600 18.800 18.400 18.600 18.200 18.400 MARKET PRICE 18.000 18.200 17.800 18.000 17.600 17.800 17.400 17.600 17.200 17.400 17.000 17.200 16.800 17.000 16.600 16.800 16.400 16.600 16.200 16.400 16.000 16.200 15.800 16.000 15.600 15.800 15.400 15.600 15.200 15.400 15.000 15.200 14.800 15.000 14.600 14.800 14.400 14.600 LESS THAN $14.400 -------- ---------- ---------- Total Units for Period 795,400 4,883,500 3,425,900 Cumulative % of Total Traded 6.24% 38.33% 26.89% % Traded of Current Units Out. (b) 20.61% 126.55% 88.78% Wtd. Average Unit Price $ 22.11 $ 22.25 $ 21.89 ===================================================================================================================== 1998 1999(A) 1995-1999(A) -------------------- ------------------- ---------------------- PRICE PER UNIT VOLUME % VOLUME % VOLUME % ---------------------- -------------------- ------------------- ---------------------- GREATER THAN $24.800 24.400 24.600 32,400 100.00% 24.200 24.400 75,500 100.00% 156,800 99.75% 24.000 24.200 - 97.92% 53,000 98.51% 23.800 24.000 - 97.92% 474,900 98.10% 23.600 23.800 131,200 97.92% 253,400 94.37% 23.400 23.600 85,600 94.31% 222,000 92.38% 23.200 23.400 173,700 91.95% 473,200 90.64% 23.000 23.200 51,400 87.18% 596,300 86.93% 22.800 23.000 36,200 85.77% 367,500 82.25% 22.600 22.800 42,700 84.77% 323,300 79.36% 22.400 22.600 192,300 83.69% 611,600 76.82% 22.200 22.400 710,900 78.31% 1,302,800 72.02% 22.000 22.200 256,500 58.75% 1,746,900 61.80% 21.800 22.000 395,800 51.70% 1,207,800 48.09% PRE-ANNOUNCEMENT PRICE 21.600 21.800 243,600 40.81% 968,400 38.61% 21.400 21.600 184,500 34.11% 734,100 31.00% 21.200 21.400 115,000 29.04% 702,100 25.34% 21.000 21.200 178,000 25.87% 1,065,100 19.73% 20.800 21.000 77,300 20.98% 296,200 11.37% 20.600 20.800 69,100 18.85% 240,900 9.05% 20.400 20.600 37,500 16.95% 95,400 7.16% 20.200 20.400 44,000 15.92% 153,300 6.41% 20.000 20.200 14,300 14.71% 89,500 5.20% 19.800 20.000 21,500 14.31% 45,900 4.50% 19.600 19.800 14,900 13.72% 3,500 100.00% 43,500 4.14% 19.400 19.600 - 13.31% 54,800 98.93% - 3.80% 19.200 19.400 16,400 13.31% 14,500 82.13% 16,400 3.80% 19.000 19.200 12,900 12.85% 28,100 77.68% 12,900 3.67% 18.800 19.000 25,200 12.51% 66,400 71.52% 25,200 3.57% 18.600 18.800 33,200 11.81% 43,300 51.16% 33,200 3.37% 18.400 18.600 9,200 10.90% 25,300 37.89% 9,200 3.11% 18.200 18.400 16,900 10.65% - 30.13% 16,900 3.04% MARKET PRICE 18.000 18.200 40,900 10.18% 4,800 30.13% 40,900 2.91% 17.800 18.000 11,900 9.06% - 28.66% 11,900 2.58% 17.600 17.800 10,100 8.73% - 28.66% 10,100 2.49% 17.400 17.600 28,100 8.45% - 28.66% 28,100 2.41% 17.200 17.400 13,500 7.68% 24,000 28.66% 13,500 2.19% 17.000 17.200 14,700 7.31% - 21.31% 14,700 2.09% 16.800 17.000 - 6.90% - 21.31% - 1.97% 16.600 16.800 12,400 6.90% - 21.31% 12,400 1.97% 16.400 16.600 - 6.56% 18,800 21.31% - 1.87% 16.200 16.400 - 6.56% - 15.54% - 1.87% 16.000 16.200 - 6.56% - 15.54% - 1.87% 15.800 16.000 27,500 6.56% - 15.54% 27,500 1.87% 15.600 15.800 37,400 5.81% - 15.54% 37,400 1.66% 15.400 15.600 53,800 4.78% - 15.54% 53,800 1.36% 15.200 15.400 - 3.30% - 15.54% - 0.94% 15.000 15.200 - 3.30% - 15.54% - 0.94% 14.800 15.000 41,000 3.30% - 15.54% 41,000 0.94% 14.600 14.800 - 2.17% - 15.54% - 0.62% 14.400 14.600 78,900 2.17% 50,708 15.54% 78,900 0.62% LESS THAN $14.400 ---------- -------- ----------- Total Units for Period 3,635,500 326,200 12,740,300 Cumulative % of Total Traded 28.54% 2.56% 100.00% % Traded of Current Units Out. (b) 94.21% 8.45% 330.15% Wtd. Average Unit Price $ 21.39 $ 18.03 $ 21.90 ____________________________ (a) Through February 3, 1999. (b) Based on 3,858,999 common units outstanding. Page B-11
OVERVIEW OF STAR GAS SHAREHOLDER ANALYSIS (a) - ------------------------------------------------------------------- COMMON INSTITUTIONS (B) UNITS HELD % OF TOTAL - ------------------- ---------- ---------- Bear, Stearns & Co. 52,900 1.4% Graver Bokhof 27,150 0.7% DLJ Corp. 24,950 0.6% Paine Webber Group 14,670 0.4% Advest Group, Inc. 12,015 0.3% The Vanguard Group 9,800 0.3% CIBC Oppenheimer 3,500 0.1% Weiss Peck & Greer 900 0.0% Legg Mason Wood Walker 500 0.0% U.S. Trust Co. NY 500 0.0% Cullen/Frost Bankers 300 0.0% ---------- ---------- ALL INSTITUTIONS 147,185 3.8% - ----------------------------------------------------------------------------------------------------------------------------------- COMMON SUBORDINATED DIRECTORS AND OFFICERS TITLE UNITS HELD % OF TOTAL UNITS HELD % OF TOTAL - ---------------------- -------------------------------- ---------- ---------- ------------ ---------- Wolfgang Traber Star Director and Petro Director 10,400 0.3% - 0.0% Richard F. Ambury V.P. of Finance 525 0.0% - 0.0% ---------- ---------- ------------ ---------- TOTAL DIRECTORS & OFFICERS HOLDINGS 10,925 0.3% - 0.0% COMMON SUBORDINATED GENERAL PARTNER UNITS HELD % OF TOTAL UNITS HELD % OF TOTAL - --------------------------- ---------- ---------- ------------ ---------- Petro 60,727 1.6% 2,396,078 100.0% - ------------------------------------------------------------------------------------------------------------------------------------ SUMMARY - ------- COMMON SUBORDINATED INSIDER HOLDINGS UNITS % OF TOTAL UNITS % OF TOTAL ---------- ---------- ------------ ---------- Directors and Officers as a Group 10,925 0.3% - 0.0% General Partner 60,727 1.6% 2,396,078 100.0% ---------- ---------- ------------ ---------- 71,652 1.9% 2,396,078 100.0% PUBLIC HOLDINGS INSTITUTIONAL 144,035 3.7% RETAIL 3,643,312 (c) 94.4% ---------- ---------- 3,787,347 98.1% TOTAL UNITS OUTSTANDING 3,858,999 100.0% 2,396,078 100.0% - --------------------------------------------------------------------------------------------------------------------------------- _____________________ (a) Based on units outstanding and most recently available data as of 2/04/99. (b) Source: Bloomberg. Page B-12
STAR GAS HAS ONGOING RESEARCH COVERAGE BY TWO FIRMS. OVERVIEW OF STAR GAS RESEARCH COVERAGE RESEARCH COVERAGE DATE PUBLISHED ESTIMATES UPDATED ----------------- -------------- ----------------- Published Research Reports A.G. Edwards - Buy 1/5/98 2/5/99 PaineWebber - Buy 12/30/97 1/6/99 Lehman 2/7/96 11/4/96 EARNINGS ESTIMATES NUMBER OF ESTIMATES MEAN 1998 MEAN 1999 ------------------ ------------------- --------- --------- IBES 2 NA $0.48 Nelson 2 ($0.14) $0.65 Zacks 2 ($0.19) $0.48 Page B-13
SUMMARY OF THE TRANSACTION PRO FORMA STAR GAS UNITS OUTSTANDING (IN THOUSANDS EXCEPT PER SHARE AND PER UNIT) [_] There are currently 6,383 Star Gas units outstanding comprised of 3,859 common units, 2,396 subordinated units and 128 implied general partner ("GP") units. The subordinated units and GP units are currently assets of Petro. [_] There are currently 26,463 shares of Petro common stock outstanding held by public shareholders and "affiliates." The public holds 14,327 Class A shares, 11 Class B shares and 291 Class C shares. The "affiliates" hold 11,834 shares which include 9,528 Class A shares and 2,306 Class C shares. [_] Each shareholder of Petro will receive a certain number of units in Star Gas such that the implied consideration paid for each Petro share averages $1.91 based on A.G. Edwards' estimates of the value of the units being offered to Petro as consideration. [_] All of the publicly held 14,327 Class A shares and 291 Class C shares, and a portion of the "affiliate" held Class A shares (5,243) and Class C shares (1,328) will receive .11758 units of newly created senior subordinated units for each share (1,719 units to the public and 773 units to the "affiliates", 2,492 units in total) with an attached Contingent Unit ("CU"). See the following page for a discussion of the Contingent Units. A.G. Edwards estimates an implied value for these units of $16.22/unit (see page D-3). The remaining "affiliates" of Petro not receiving senior subordinated units, who hold a total of 5,262 shares, will receive .14318 units for a total of 753 junior subordinated and GP units, both of which will also include attached CUs. A.G. Edwards estimates an implied value for these units $13.55/unit (see page D-6). [_] The 2,396 subordinated units and 128 GP units currently owned by Petro will effectively be retired in the Transaction. Page C-1
SUMMARY OF THE TRANSACTION PRO FORMA STAR GAS UNITS OUTSTANDING (IN THOUSANDS) (continued) Description of Contingent Units [_] During the five year period, beginning with the first full four quarters following the Merger, the senior subordinated units, junior subordinated units and general partner interests will have the right to receive up to 909,000 senior subordinated units upon Petro meeting a "Contingent Unit Test." Each time the Contingent Unit Test is met (but not more frequently than once every four quarter period), the senior subordinated units, junior subordinated units and general partner interests will receive an aggregate of 303,000 senior subordinated units, subject to a maximum of 909,000 senior subordinated units. The Contingent Unit Test will be met during any four quarter period when distributable cash flow per unit attributable to Petro exceeds $2.90. Page C-2
SUMMARY OF THE TRANSACTION ALLOCATION OF CURRENT PETRO SHARES OUTSTANDING (IN THOUSANDS) ========================================================================== Class A Class C Total ------- -------- ------- Groups Receiving Senior Sub --------------------------- Public 14,327 291 14,618 Affiliates 5,243 1,328 6,572 ------ ----- ------ Total Receiving Senior Sub 19,570 1,619 21,190 Groups Receiving Junior Sub and GP ---------------------------------- Affiliates 4,284 978 5,262 ------ ----- ------ Sub Total 23,855 2,598 26,452 ====== ===== Class B 11 ------ Total Shares including Class B 26,463 ====== Page C-3
SUMMARY OF THE TRANSACTION PRO FORMA STAR GAS UNITS OUTSTANDING PRE-FINANCING ASSUMPTIONS (IN THOUSANDS) --------------------------------------------------------------------------- Issued to Petro ---------------------- Type of Units Current Public Affiliates Retired Pro Forma -------------------------- --------- -------- ------------ --------- ----------- Common 3,859 - - - 3,859 Senior Subordinated - 1,719 773 - 2,492 Subordinated 2,396 - - (2,396) - Junior Subordinated & New General Partner - - 753 - 753 Old General Partner 128 - - (128) - --------- ----------- 6,383 7,104 Page C-4
SUMMARY OF THE TRANSACTION EQUITY PURCHASE PRICE CALCULATION IMPLIED EQUITY VALUE OF PETRO'S ASSETS ($ AND UNITS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS) ----------------------------------------------------------------------------------------------------------- Value of Securities Event Issued to and Retired from Petro ------------------------------------------------------------- ----------------------------------------- Issuance of Senior Subordinated Units to Public Petro Shareholders 1,719 x $16.22 ---------------------------------- $27,879 Issuance of Senior Subordinated Units to Affiliate Petro Shareholders 773 x $16.22 ---------------------------------- $12,540 Issuance of Junior Subordinated & General Partner Units to Affiliate Petro Shareholders 753 x $13.35 ---------------------------------- $10,059 ----------- PURCHASE PRICE OF PETRO'S EQUITY $50,478 ----------------------------------------------------------------------------------------------------------- Dividend by 26,452 shares of Petro's Common stock = $1.91 per share (Excludes 11 Class B Shares) ----------------------------------------------------------------------------------------------------------- Retire Subordinated Units held by Petro (2,396) x $13.35 ---------------------------------- ($31,988) Retire Old General Partner Units held by Petro (128) x $19.08 (a) ---------------------------------- ($2,435) ----------- EQUITY VALUE OF PETRO'S HEATING OIL ASSETS $16,054 _______________________________ (a) Star 20-day average common unit price through 2/3/99. Page C-5
SUMMARY OF THE TRANSACTION PRO FORMA CAPITAL STRUCTURE 12/31/98 ($ IN THOUSANDS) ---------------------------------------------- PRO FORMA STAR GAS PETRO ADJUSTMENTS STAR GAS -------- ------- ----------- --------- DEBT: 8.04% First Mortgage Notes $ 85,000 - - $ 85,000 7.25% WC Revolver 10,720 - - 10,720 7.25% Acquisition Facility 9,000 - - 9,000 7.17% First Mortgage Notes 11,000 - - 11,000 10.90% Senior Notes - $ 60,000 - 60,000 14.10% Senior Notes - 3,100 - 3,100 14.10% Subordinated Notes - 3,100 - 3,100 10.13% Sub Notes & Sr Notes - 50,000 ($ 50,000) - 9.38% Sub Notes & Sr Notes - 75,000 (75,000) - 12.25% Sub Notes & Sr Notes - 81,250 (81,250) - 8.00% Existing Acq Notes Payable - 14,301 - 14,301 7.5% New Debt - - 90,000 90,000 -------- -------- ----------- --------- TOTAL DEBT $115,720 $286,751 ($116,250) $286,221 WEIGHTED AVERAGE COST OF DEBT 8.5% PREFERRED STOCK: 14.33% Preferred Stock $ 0 $ 4,167 ($ 4,167) $ 0 12.88% Preferred Stock - 30,000 (30,000) - -------- ------- ----------- --------- - $34,167 ($34,167) - ESTIMATED EQUITY VALUE: PRO FORMA ESTIMATED ESTIMATED UNITS OUT UNIT PRICE MARKET VALUE --------- ---------- ------------ Common 12,873 (a) $18.06 (b) $232,510 Senior Subordinated 2,492 16.22 40,412 Junior Subordinated and GP 753 13.35 10,059 ------- --------- 16,118 $282,981 TOTAL CAPITALIZATION: $569,202 Less: Cash and Cash Collateral 19,635 --------- NET CAPITALIZATION $549,567 (a) Comprised of 3,859 currently outstanding units, 8,911 units to be issued in a common unit offering to close concurrent with the Merger, and 103 units issued as a consent fee in the Refinancing Transaction. (b) Current price of Star Gas (2/3/99): $18.063 Page C-6
DISCOUNTED CASH FLOW ANALYSIS STAR GAS- PRO FROMA PRO FORMA WEIGHTED AVERAGE COST OF CAPITAL DERIVATION ($ IN MILLIONS) - -------------------------------------------------------------------------------- TOTAL IMPLIED TOTAL TOTAL MARKET UNIT TOTAL MARKET DEBT/ DEBT AS % UN- LEVERED VAL. DEBT PRICE AT UNITS VALUE OF TOTAL OF TOTAL LEVERED COMPARABLE COMPANY BETA (A) (BK = MKT) (2/3/99) OUT. (MIL) EQUITY EQUITY CAPITAL BETA - ------------------------------------------------------------------------------------------------------------------------------------ AmeriGas Partners, L.P. 0.44 $719.0 $23.625 41.9 $1,009.8 71.2% 41.6% 0.257 Cornerstone Propane Partners, L.P. 0.55 263.1 17.500 19.9 355.6 74.0% 42.5% 0.316 Ferrellgas Partners, L.P. 0.47 594.3 18.688 31.3 596.8 99.6% 49.9% 0.235 Heritage Propane Partners, L.P. 0.48 198.3 23.750 8.6 207.9 95.4% 48.8% 0.246 National Propane Partners, L.P. 0.76 139.2 5.063 11.2 58.0 239.8% 70.6% 0.224 Star Gas Partners, L.P. 0.51 115.7 18.063 6.3 115.3 100.4% 50.1% 0.255 Suburban Propane Partners, L.P. 0.44 428.2 19.188 28.7 562.4 76.1% 43.2% 0.250 ---------------------------------------------------- Pro forma capitalization - at market (b) Comparable group's average unlevered beta: 0.25 Total debt $286.2 50.3% Pro forma debt - to - equity ratio (b): 101.1% Total equity 283.0 49.7% ------ ------ Pro forma debt as a percent of total capital (b): 50.3% $569.2 100.0% ---------------------------------------------------- Comparable group's beta relevered for Pro forma capital structure: 0.410 ===== DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: MARKET RISK PREMIUM RANGE (D) - ----------------------------------------------- ------------------------------------- 11.3% 12.3% 13.3% ------------------------------------- Pro forma theoretical levered beta: 0.410 Assumed % of common equity in Pro forma capital structure (b): 49.7% Risk - free rate of return (c): 4.8% Pro forma cost of common range (at various market risk premiums): 9.5% 9.9% 10.3% ===== ===== ===== Pro forma assumed tax rate: 39.6% Assumed % of debt in capital structure (b): 50.3% Pro forma estimated cost of debt (e): 8.5% Pro forma estimated after - tax cost of debt: 5.1% 5.1% 5.1% 5.1% ------------------------------------- Pro forma weighted average cost of capital range (f): 7.3% 7.5% 7.7% ------------------------------------- ___________________________ (a) Source: Bloomberg, 143 week (maximum weekly time period allowed, or the number of weeks available, which may be less than 143) adjusted beta relative to the S&P 500 index. (b) Market value of debt is assumed to equal book value. See page C-6 for equity calculation. (c) Ten - year Treasury rate on February 3, 1999. (d) Ibbotson Associates 1998. Total returns the small company stocks of 17.7% minus the risk-free rate. (e) Based on Pro forma debt structure. (f) Calculation based upon use of the Capital Asset Pricing Model (CAPM). Page C-7
IMPLIED UNIT VALUE ANALYSIS COMMON UNITS [_] A.G. Edwards calculated a range of values for the Senior Subordinated, Junior Subordinated and General Partner units, based on a required rate of return, trading yield, and discount to the common units. 1999 2000 2001 2002 THEREAFTER ---- ---- ---- ---- ---------- COMMON UNIT Indicated Distribution $ 1.15 $2.30 $2.30 $2.30 $2.30 Cost of Equity (a) 9.5% 9.5% 9.5% 9.5% 9.5% ------ NPV of future distributions $24.31 ------ 1999 2000 2001 2002 THEREAFTER ---- ---- ---- ---- ---------- COMMON UNIT Indicated Distribution $ 1.15 $2.30 $2.30 $2.30 $2.30 Cost of Equity (a) 9.9% 9.9% 9.9% 9.9% 9.9% ------ NPV of future distributions $23.30 ------ 1999 2000 2001 2002 THEREAFTER ---- ---- ---- ---- ---------- COMMON UNIT Indicated Distribution $ 1.15 $2.30 $2.30 $2.30 $2.30 Cost of Equity (a) 10.3% 10.3% 10.3% 10.3% 10.3% ------ NPV of future distributions $22.38 ------ ----------------------------------------------------------------- ------------------------------------ AVERAGE PRICE OVER LAST 20 TRADING DAYS ENDED 2/3/99: $19.08 CURRENT PRICE (2/3/99): $18.06 AVERAGE YIELD (B): 12.1% CURRENT YIELD (B): 12.7% ----------------------------------------------------------------- ------------------------------------ (a) Per Cost of Capital analysis on page D-2. (b) Assumes a $2.30 distribution. [_] Certain analysis included in this presentation, including the calculations of the implied value of the senior subordinated, junior subordinated and GP units, require an estimate of the future price of the common units at Closing. To serve as a proxy for this future price, A.G. Edwards used the average common unit closing price for the last 20 trading days ended February 3, 1999. Such price is 14.7% to 21.5% lower than the common units' implied unit value per the above analysis, and 5.6% greater than the common units' most recent closing price on February 3, 1999. Page D-1
IMPLIED UNIT VALUE ANALYSIS THEORETICAL PRO FORMA COST OF EQUITY FOR COMMON UNITS ($ IN MILLIONS) ==================================================================================================================================== TOTAL IMPLIED TOTAL TOTAL MARKET UNIT TOTAL MARKET DEBT/ DEBT AS % UN- LEVERED VAL. DEBT PRICE AT UNITS VALUE OF TOTAL OF TOTAL LEVERED COMPARABLE COMPANY BETA (A) (BK = MKT) (2/3/99) OUT. (MIL) EQUITY EQUITY CAPITAL BETA - ------------------------------------------------------------------------------------------------------------------------------------ AmeriGas Partners, L.P. 0.44 $719.0 $23.625 41.9 $1,009.8 71.2% 41.6% 0.257 Cornerstone Propane Partners, L.P. 0.55 263.1 17.500 19.9 355.6 74.0% 42.5% 0.316 Ferrellgas Partners, L.P. 0.47 594.3 18.688 31.3 596.8 99.6% 49.9% 0.235 Heritage Propane Partners, L.P. 0.48 198.3 23.750 8.6 207.9 95.4% 48.8% 0.246 National Propane Partners, L.P. 0.76 139.2 5.063 11.2 58.0 239.8% 70.6% 0.224 Star Gas Partners, L.P. 0.51 115.7 18.063 6.3 115.3 100.4% 50.1% 0.255 Suburban Propane Partners, L.P. 0.44 428.2 19.188 28.7 562.4 76.1% 43.2% 0.250 ---------------------------------------------------- Pro forma capitalization - at market (b) Comparable group's average unlevered beta: 0.25 Total debt $286.2 50.3% Pro forma debt - to - equity ratio (b): 100.1% Total equity 283.0 49.7% ------ ------ Pro forma debt as a percent of total capital (b): 50.3% $569.2 100.0% ---------------------------------------------------- Comparable group's beta relevered for Pro forma capital structure: 0.410 ===== DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: MARKET RISK PREMIUM RANGE (D) - ----------------------------------------------- ------------------------------------- 11.3% 12.3% 13.3% ------------------------------------- Pro forma theoretical levered beta: 0.410 Assumed % of equity in Pro forma capital structure (b): 49.7% Risk - free rate of return (c): 4.8% Pro forma cost of common range (at various market risk premiums): 9.5% 9.9% 10.3% ===== ===== ===== Pro forma assumed tax rate: 39.6% Assumed % of debt in capital structure (b): 50.3% Pro forma estimated cost of debt (e): 8.5% Pro forma estimated after - tax cost of debt: 5.1% 5.1% 5.1% 5.1% ------------------------------------- Pro forma weighted average cost of capital range (f): 7.3% 7.5% 7.7% ------------------------------------- ___________________________ (a) Source: Bloomberg, 143 week (maximum weekly time period allowed, or the number of weeks available, which may be less than 143) adjusted beta relative to the S&P 500 index. (b) Market value of debt is assumed to equal book value. See page C-6 for equity calculation. (c) Ten - year Treasury rate on February 3, 1999. (d) Ibbotson Associates 1998. Total returns for the small company stocks of 17.7% minus the risk-free rate. (e) Based on Pro forma debt structure. (f) Calculation based upon use of the Capital Asset Pricing Model (CAPM). Page D-2
IMPLIED UNIT VALUE ANALYSIS SENIOR SUBORDINATED UNITS REQUIRED RATE OF RETURN - ------------------------------------------------------------------------------------------------------------------------- 1999 2000 2001 2002 Thereafter(a) -------- -------- -------- -------- ------------- SENIOR SUBORDINATED UNIT (WITHOUT CU) Indicated Distribution $ 0.00 $ 2.30 $ 2.30 $ 2.30 $ 2.30 Cost of Equity 20.0% 20.0% 20.0% 20.0% 9.9% -------- NPV of future distributions $ 16.72 -------- CONTINGENT UNIT Indicated Distribution (b) $ 0 $ 0 $ 0 $ 0 $ 0 Cost of Equity 20.0% 20.0% 20.0% 20.0% 9.9% -------- NPV of future distributions $ 0 -------- - -------------------------------------------------------------------- UNIT VALUE OF SENIOR SUBORDINATED UNIT WITH ATTACHED CU $ 16.72 (Each Unit has claim to 1/3,245 of the Contingent Unit.) - -------------------------------------------------------------------- 1999 2000 2001 2002 Thereafter(a) -------- -------- -------- -------- ------------- SENIOR SUBORDINATED UNIT (WITHOUT CU) Indicated Distribution $ 0.00 $ 2.30 $ 2.30 $ 2.30 $ 2.30 Cost of Equity 30.0% 30.0% 30.0% 30.0% 9.9% -------- NPV of future distributions $ 12.96 -------- CONTINGENT UNIT Indicated Distribution (b) $ 0 $ 0 $ 0 $ 0 $ 0 Cost of Equity 30.0% 30.0% 30.0% 30.0% 9.9% -------- NPV of future distributions $ 0 -------- - -------------------------------------------------------------------- UNIT VALUE OF SENIOR SUBORDINATED UNIT WITH ATTACHED CU $ 12.96 (Each Unit has claim to 1/3,245 of the Contingent Unit.) - -------------------------------------------------------------------- (a) Distributions made after 2002 are discounted at the cost of equity for the Common Units, estimated at 9.9% due to the end of the Subordination Period. (b) Assumes that the Contingent Units Test is not met. Page D-3
IMPLIED UNIT VALUE ANALYSIS THEORETICAL PRO FORMA COST OF EQUITY FOR SENIOR SUBORDINATED UNITS ($ IN MILLIONS) ============================================================================================================================== Total Implied Total Total Market Unit Total Market Debt/ Debt as % Un- Levered Val. Debt Price at Units Value of Total of Total levered Comparable Company Beta (a) (Bk = Mkt) (2/3/99) Out. (Mil) Equity Equity Capital Beta - ----------------------------------------------------------------------------------------------------------------------------- AmeriGas Partners, L.P. 0.44 $719.0 $23.625 41.9 $1,009.8 71.2% 41.6% 0.257 Cornerstone Propane Partners, L.P. 0.55 263.1 17.500 19.9 355.6 74.0% 42.5% 0.316 Ferrellgas Partners, L.P. 0.47 594.3 18.688 31.3 596.8 99.6% 49.9% 0.235 Heritage Propane Properties, L.P. 0.48 198.3 23.750 8.6 207.9 95.4% 48.8% 0.246 National Propane Partners, L.P. 0.76 139.2 5.063 11.2 58.0 239.8% 70.6% 0.224 Star Gas Partners, L.P. 0.51 115.7 18.063 6.3 115.3 100.4% 50.1% 0.255 Suburban Propane Partners, L.P. 0.44 428.2 19.188 28.7 562.4 76.1% 43.2% 0.250 ----------------------------------------------------------- Pro forma capitalization - at market(b) Comparable group's average unlevered beta 0.25 Total debt $518.7 91.1% Pro forma adjusted debt-to-subordinated equity ratio(b) 1027.8% Total equity 50.5 8.9% ------ ------ Pro forma adjusted debt as a percent of total capital(b): 91.1% $569.2 100.0% ---------------------------------------------------------- Comparable group's beta relevered for Pro forma capital structure(b): 1,835 ====== DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: Market Risk Premium Range(d) - ----------------------------------------------- ------------------------------- 11.3% 12.3% 13.3% ------------------------------- Pro forma theoretical levered beta: 1.835 Assumed % of subordinated equity in Pro forma capital structure(b): 8.9% Risk-free rate of return(c): 4.8% Pro forma cost of equity range (at various market risk premiums): 25.6% 27.4% 29.2% ===== ===== ===== ------------------------------- __________________________ (a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the number of weeks available, which may be less than 143) adjusted beta relative to the S&P 500 index. (b) Market value of debt is assumed to equal book value; for purposes of this calculation only, debt includes the market value of pro forma common units; equity includes only the value of senior subordinated, junior subordinated units, and GP units. (c) Ten-year Treasury rate on February 3, 1999. (d) Ibbotson Associates 1998. Total returns for small company stocks of 17.7% minus the risk-free rate. Page D-4
IMPLIED UNIT VALUE ANALYSIS JUNIOR SUBORDINATED AND GP UNITS --------------------------------------------------------------------------- Range ------------ Required rate of return (a) 35.0%-45.0% $ 9.19-11.50 Trading yield (b) 15.0%-17.0% $13.53-15.33 Discount to common units (c) 25.0%-35.0% $12.40-14.31 Range $ 9.19-15.33 Adjusted Range (d) $12.40-14.31 ------------ Assumed value (e) $ 13.35 ------------ (a) Represents required rate of return during subordination period, which is assumed to continue through the end of fiscal 2002. Thereafter, the rate of return is assumed to equal that of the common units, for a blended required rate of return of 18.4% to 22.6%. Cost per unit calculations provided on page D-7. (b) Based on a $2.30 annualized MQD. (c) Based on a discount to the common unit's average closing price for the last 20 trading days as of 2/3/99 of $19.08, as referenced on page D-1. (d) Represents the middle values of both the range of highs and lows. (e) Implied required rate of return, trading yield and discount to common at a unit price of $13.35 are 28.8% during subordination (16.0% blended), 17.2%, and 30.0%, respectively. Page D-5
IMPLIED UNIT VALUE ANALYSIS JUNIOR SUBORDINATED AND GP UNITS Required Rate of Return ======================================================================================================================== 1999 2000 2001 2002 Thereafter (a) ---- ---- ---- ---- -------------- JUNIOR SUBORDINATED AND GP UNITS Indicated Distribution $ 0.00 $2.30 $2.30 $2.30 $2.30 Cost of Equity 35.0% 35.0% 35.0% 35.0% 9.9% ------ NPV of future distributions $11.50 ------ CONTINGENT UNIT Indicated Distribution (b) $ 0 $ 0 $ 0 $ 0 $ 0 Cost of Equity (c) 25.0% 25.0% 25.0% 25.0% 9.9% ------ NPV of future distributions $ 0 ------ ------------------------------------------------------------------------ UNIT VALUE OF JUNIOR SUBORDINATED AND GP UNIT WITH ATTACHED CU $11.50 (Each Unit has claim to 1/3,245 of the Contingent Unit.) ------------------------------------------------------------------------ 1999 2000 2001 2002 Thereafter (a) ---- ---- ---- ---- -------------- JUNIOR SUBORDINATED AND GP UNITS Indicated Distribution $ 0.00 $2.30 $2.30 $2.30 $2.30 Cost of Equity 45.0% 45.0% 45.0% 45.0% 9.9% ----- NPV of future distributions $ 9.19 ----- CONTINGENT UNIT Indicated Distribution (b) $ 0 $ 0 $ 0 $ 0 $ 0 Cost of Equity (c) 25.0% 25.0% 25.0% 25.0% 9.9% ----- NPV of future distributions $ 0 ----- ------------------------------------------------------------------------ UNIT VALUE OF JUNIOR SUBORDINATED AND GP UNIT WITH ATTACHED CU $ 9.19 (Each Unit has claim to 1/3,245 of the Contingent Unit.) ------------------------------------------------------------------------ (a) Distributions made after 2002 are discounted at the cost of equity for the Common Units, estimated at 9.9% due to the end of the Subordination Period. (b) Assumes that the Contingent Units Test is not met. (c) Utilized senior subordinated discount rate as CUs convert to senior subordinated units. Page D-6
IMPLIED UNIT VALUE ANALYSIS THEORETICAL PRO FORMA COST OF EQUITY FOR JUNIOR SUBORDINATED AND GP UNITS ($ IN MILLIONS) ============================================================================================================================== Total Implied Total Total Market Unit Total Market Debt/ Debt as % Un- Levered Val. Debt Price at Units Value of Total of Total levered Comparable Company Beta (a) (Bk = Mkt) (2/3/99) Out. (Mil) Equity Equity Capital Beta - ----------------------------------------------------------------------------------------------------------------------------- AmeriGas Partners, L.P. 0.44 $719.0 $23.625 41.9 $1,009.8 71.2% 41.6% 0.257 Cornerstone Propane Partners, L.P. 0.55 263.1 17.500 19.9 355.6 74.0% 42.5% 0.316 Ferrellgas Partners, L.P. 0.47 594.3 18.688 31.3 596.8 99.6% 49.9% 0.235 Heritage Propane Properties, L.P. 0.48 198.3 23.750 8.6 207.9 95.4% 48.8% 0.246 National Propane Partners, L.P. 0.76 139.2 5.063 11.2 58.0 239.8% 70.6% 0.224 Star Gas Partners, L.P. 0.51 115.7 18.063 6.3 115.3 100.4% 50.1% 0.255 Suburban Propane Partners, L.P. 0.44 428.2 19.188 28.7 562.4 76.1% 43.2% 0.250 ----------------------------------------------------------- Pro forma capitalization - at market(b) Comparable group's average unlevered beta: 0.25 Total debt $559.1 98.2% Pro forma adjusted debt-to-junior subordinated equity Total equity 10.1 1.8% ratio(b): 5558.7% ------ ------ Pro forma adjusted debt as a percent of total capital(b): 98.2% $569.2 100.0% ---------------------------------------------------------- Comparable group's beta relevered for Pro forma capital structure: 8.803 ====== DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: Market Risk Premium Range(d) - ----------------------------------------------- ------------------------------- 11.3% 12.3% 13.3% ------------------------------- Pro forma theoretical levered beta: 8.803 Assumed % of junior subordinated equity in Pro forma capital structure(b): 1.8% Risk-free rate of return(c): 4.8% Pro forma cost of equity range (at various market risk premiums): 104.3% 113.1% 121.9% ====== ====== ====== ------------------------------- __________________________ (a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the number of weeks available, which may be less than 143) adjusted beta relative to the S&P 500 index. (b) Market value of debt is assumed to equal book value; for purposes of this calculation only, debt includes the market value of common and senior subordinated units; equity only includes the value of junior subordinated, and GP units. (c) Ten-year Treasury rate on February 3, 1999. (d) Ibbotson Associates 1998. Total returns for small company stocks of 17.7% minus the risk-free rate. Page D-7
PRO FORMA MERGER ANALYSIS [_] A.G. Edwards analyzed the impact of the Transaction on the Partnership's distributable cash flow per unit, the related accretion, common unit coverage and total unit coverage on a pro forma basis. ---------------------------------------------------------------- STAR GAS STAR GAS STAND-ALONE PRO FORMA ------------ ---------- DCF PER UNIT 1998 Actual $ 1.30 $ 1.44 1999 Adjusted for Actual (a) 1.51 2.07 2000 Projected 2.02 2.39 ACCRETION/DILUTION 1998 Actual $ 0.13 1999 Adjusted for Actual (a) 0.56 2000 Projected 0.37 COMMON UNIT COVERAGE 1998 Actual 0.98x 0.78x 1999 Adjusted for Actual (a) 1.13 1.12 2000 Projected 1.49 1.29 TOTAL UNIT COVERAGE 1998 Actual 0.59x 0.62x 1999 Adjusted for Actual (a) 0.68 0.90 2000 Projected 0.92 1.04 ---------------------------------------------------------------- (a) Adjusted to include actual results through January 21, 1999. Page E-1
MERGER PREMIUMS TO MARKET VALUE ANALYSIS [_] A.G. Edwards analyzed the premium of the consideration to be received by Petro Common Shareholders and compared the premium to Petro's current and historical prices. These premiums were compared to premiums paid in acquisitions of majority or remaining interests announced and completed between January 1, 1996 and February 3, 1999 where the target's share price one week prior to the announcement date was either (i) equal to or less than $5, (ii) greater than $5 and less than $10, or (iii) equal to or greater than $10. [_] Premiums were calculated one day, one week, four weeks, three months and one year prior to the announcement of the agreement in principle for each merger. ================================================================================================================================ COMPARISON OF PREMIUMS PAID -------------------------------------------------------------------------------------------------------------------------------- PETRO AT MEAN OF TRANSACTIONS MEAN OF TRANSACTIONS $1.91 PER UNIT EQUAL TO OR GREATER THAN $5 PREMIUM TO STOCK PRICE PRIOR TO ANNOUNCEMENT ON AUGUST 14TH: OFFER PRICE LESS THAN $5 AND LESS THAN $10 ------------------------------------------------------------------------------------------------------------------------------ One day prior: 1.9% 57.8% 34.3% One week prior: 9.1% 68.5% 43.2% Four weeks prior: -7.4% 71.1% 50.1% Three months prior: 19.8% 71.8% 63.6% One year prior: -36.3% 51.9% 51.3% ------------------------------------------------------------------------------- Maximum 19.8% 71.8% 63.6% Minimum -36.3% 51.9% 34.3% =============================================================================== =================================================================================== COMPARISON OF PREMIUMS PAID ----------------------------------------------------------------------------------- MEAN OF TRANSACTIONS EQUAL TO OR PREMIUM TO STOCK PRICE PRIOR TO ANNOUNCEMENT ON AUGUST 14TH: GREATER THAN $10 --------------------------------------------------------------------------------- One day prior: 28.4% One week prior: 32.9% Four weeks prior: 39.4% Three months prior: 54.7% One year prior: 72.1% ---------------------------------- Maximum 72.1% Minimum 28.4% ================================== [_] The premium to Petro's current stock price ($1.00 as of February 3, 1999) was 91.0% Page F-1
MERGER PREMIUMS TO MARKET VALUE ANALYSIS MERGERS WITH TARGET PRICE EQUAL TO OR LESS THAN $5 PER SHARE ANNOUNCED AND COMPLETED 1/1/96 - 2/3/99 ================================================================================ Date Date Announced Effective Target Name Target Business Description Acquirer Name _____________________________________________________________________________________________________________________________ 01/10/96 06/26/96 American Resource Corp Gold mining company REA Gold Corp 01/18/96 08/23/96 AMSERV Healthcare Inc Pvd temp nursing employment Star Multi Care Services Inc 01/23/96 05/09/96 Portage Industries Corp Mnfr extruded plastic sheets Spartech Corp 02/05/96 09/30/96 Customedix Corp Mnfr dental, medical products CUS Acquisition Inc 02/13/96 07/12/96 Medical Innovations Inc Pvd home health care services Horizon/CMS Healthcare Corp 02/15/96 04/29/96 LDI Corp Computer equip leasing svcs NationsBank Corp, Charlotte, NC 02/28/96 07/11/96 Salton/Maxim Houswares Inc Mnfr electric housewares, fares Windmere Corp 03/13/96 09/27/96 DeSolo Inc Mnfr paints and detergents Keystone Consolidated Inds Inc 04/16/96 05/31/96 CIS Technologies Inc Manufacture computers National Data Corp 04/22/96 06/04/96 Cornerstone Natural Gas Co Natural gas distribution svcs El Paso Field Svcs (El Paso) 05/03/96 03/17/98 Homeowners Group Inc Real estate insurance agency Cross Country Group Inc 05/06/96 09/03/96 Transcisco Industries Inc Mnfr service railroad equip Trinity Industries Inc 05/07/96 09/03/96 NMR of America Inc Pvd medical equip leasing svcs Medical Resources Inc 05/13/96 08/30/96 MDT Corp Mnfr sterility assurance equip Getinge Industries AB 05/15/96 09/10/96 Carlisle Plastics Inc Mnfr whl plastic prods, resins Tyco International Ltd 06/03/96 01/09/97 Bio-Dental Technologies Corp Provide dental research svcs Zila Inc 06/10/96 07/22/96 SysteMed Inc Pvd medical services Merck-Medco Managed Care Inc 06/11/96 09/03/96 Computer Identics Corp Manufacture bar code scanners Robotic Vision Systems Inc 06/17/96 10/07/96 Scanforms Inc Mnfr business forms Big Flower Press Holdings Inc 06/21/96 08/23/96 Computer Petroleum Corp Information retrieval svcs United Communications Group 06/24/96 12/05/96 MEM Co Inc Manufacture toiletries Renaissance Cosmetics Inc 07/31/96 11/13/96 Calgene Inc Own and operate greenhouse Monsarto Co 08/13/96 02/27/97 LaTex Resources Inc Oil and gas expl prodn Alliance Resources PLC 09/10/96 01/03/97 GreenStone Industries Inc Manufacture stationery Louisiana-Pacific Corp 09/11/96 03/04/97 Cherrpower Inc Insulation, asbestos abatement American Eco Corp 09/16/96 12/06/97 Proler International Corp Whl scrap metals & metals Schnitzer Steel Industries Inc 09/26/96 01/24/97 General Physics Corp Provide training services National Patent Development 10/02/96 12/27/96 Software Publishing Corp Develop software Allegro New Media 10/03/96 11/12/97 Pittencrieff Communications Pvd radio telephorne commun svcs Nextel Communications Inc 10/04/96 12/31/96 Pet Food Warehouse Inc Own, op pet food stores Petco Animal Supplies Inc 10/30/96 12/20/96 Pacific Rehab & Sports Med Own, op rehab hospital Horizon/CMS Healthcare Corp 11/05/96 03/14/97 Panatech Research & Development Manufacture semiconductors Harbour Group Ltd 11/25/96 02/28/97 American Studios Inc Pvd photography services PCA International Inc 12/06/96 03/18/97 MaxServ Inc (Sears Roebuck) Pvd technical info support svc Sears Roebuck & Co 12/09/96 02/28/97 Houston Biotechnology Inc Mnfr monoclonal antibodies Medarex Inc 12/18/96 09/29/97 Aircoa Hotel Partners LP Real estate agency Regal Hotel Management Inc 01/24/97 07/02/97 INCSTAR Corp (Sonin Biomedical) Mnfr diagnostic substances American Standard Inc 01/28/97 05/21/97 Calgene Inc (Monsarto Co) Own and operate greenhouse Monsarto Co 01/30/97 08/12/97 AST Research Inc Mnfr computers, dvlp software Samsung Electronics Co Ltd 02/07/97 08/01/97 MS Financial (MS Diversified) Pvd financial credit services Search Financial Services Inc 02/11/97 07/31/97 Serv-Tech Inc Maintenance and cleaning svcs Philip Environmental Inc 03/04/97 06/27/97 Audio King Corp Own, op consumer eledn stores Ultimate Electronics Inc 04/15/97 06/30/97 Kurzweil Applied Intelligence Electronic computing equip Lernout & Hauspie Speech 04/30/97 07/25/97 Arden Industrial Products Inc Whl fasteners Park-Ohio Industries Inc Premium ------------------------------------------------------------ Value of Enterprise 1 Day 1 Week 4 Week 3 Months 1 Year Date Acquirer Transaction Value Prior to Prior to Prior to Prior to Announced Business Description ($ mil) ($ mil) Annc. Date Annc. Date Annc. Date Annc. Date Annc. Date - -------------------------------------------------------------------------------------------------------------------------------- 01/10/96 Gold mining company 77.5 76.353 30.77 23.50 27.03 01/18/96 Pvd home health care services 9.2 7.895 14.56 27.29 20.59 -4.67 20.42 01/23/96 Manufacture plastic products 15.8 17.540 46.67 78.98 78.98 134.67 193.33 02/05/96 Investment company 3.6 15.103 22.58 26.67 5.56 19.00 -18.98 02/13/96 Pvd nursing care services 30.3 41.725 13.85 18.40 5.71 5.71 37.67 02/15/96 Bank hldg corpvd finl svcs 28.1 288.893 31.20 21.48 49.09 26.15 5.81 02/28/96 Mnfr personal care appliances 21.1 53.442 -0.19 12.84 3.81 1.65 -9.05 03/13/96 Manufacture steel wire 36.1 40.529 65.41 53.00 80.00 118.57 53.00 04/16/96 Pvd info, transaction svcs 99.3 112.471 50.50 30.16 30.16 -5.57 33.78 04/22/96 Own, op oil and gas pipelines 96.6 97.614 28.00 29.73 100.00 134.15 182.35 05/03/96 Pvd homeowner memberships svcs 11.4 14.968 22.07 26.77 93.88 135.43 17.71 05/06/96 Mnfr transp equip, parts 44.7 51.126 15.56 36.84 28.40 57.58 271.43 05/07/96 Own, op diagnostic imaging ctrs 40.4 57.369 41.43 86.79 90.39 98.08 37.56 05/13/96 Mnfr sterilizing equipment 70.3 69.457 12.82 22.22 4.76 15.79 -6.38 05/15/96 Mnfr fire protection systems 122.4 273.282 38.20 38.20 41.83 73.94 31.51 06/03/96 Mnfr, whl pharmaceuticals 40.3 48.477 64.99 43.28 109.42 194.49 65.09 06/10/96 Health insurance company 64.8 60.646 -4.00 4.35 9.09 -23.81 -56.36 06/11/96 Mnfr 2-D, 3-D vision-based sys 42.0 40.881 63.11 54.53 54.53 72.71 19.84 06/17/96 Pvd advertising, marketing svcs 27.5 15.661 61.40 61.40 58.62 70.37 130.00 06/21/96 Publish newsletters 12.0 11.548 28.33 46.67 71.11 105.33 208.00 06/24/96 Investor group 38.2 29.577 13.21 81.82 90.48 93.55 114.29 07/31/96 Mnfr agro cherris, manmade fibers 50.0 584.080 64.10 80.28 39.13 31.96 14.29 08/13/96 Oilo and gas exploration, prodn 27.1 44.759 181.14 202.77 181.14 228.00 107.16 09/10/96 Mnfr lumber plywood, pulp 29.2 40.823 33.33 52.73 58.49 42.37 50.00 09/11/96 Pvd engineering services 50.0 36.189 48.06 48.06 45.88 50.30 65.33 09/16/96 Manufacture steel products 42.5 68.146 132.26 125.00 148.28 33.33 9.09 09/26/96 Mnfr contact lenses 26.1 70.360 16.57 31.61 36.00 23.64 45.71 10/02/96 Pvd software services 25.2 8.786 14.86 10.90 60.80 -88.09 10/03/96 Pvd cellular telephone svcs 116.3 159.860 8.95 14.40 30.74 -13.08 29.14 10/04/96 Own and operate pet stores 60.7 55.986 22.93 26.00 48.24 48.24 57.50 10/30/96 Pvd nursing care services 72.7 75.706 67.74 62.50 48.57 60.00 6.12 11/05/96 Mnfr steel cutting tools 29.2 26.218 55.56 55.56 51.35 11/25/96 Pvd photo processing services 66.3 67.650 50.48 110.53 166.67 -65.28 -73.33 12/06/96 Department stores finl svcs 46.0 87.263 19.23 67.57 55.00 67.57 129.63 12/09/96 Manufacture pharmaceuticals 8.6 8.700 52.00 62.13 52.00 -93.01 -92.05 12/18/96 Own, op hotels 5.9 166.329 1233.33 1233.33 1233.33 1354.55 1042.86 01/24/97 Transportation, building prod 106.3 102.865 42.93 53.21 68.53 01/28/97 Mnfr agro cherris, manmade fibers 242.6 567.548 62.03 60.00 60.00 60.00 42.22 01/30/97 Mnfr consumer electronics 495.8 558.108 16.76 8.00 20.00 23.43 -31.43 02/07/97 Pvd business credit services 17.2 102.602 20.00 46.67 10.00 1.54 -70.67 02/11/97 Provide waste management svcs 73.4 54.956 32.00 60.00 88.57 129.57 12.34 03/04/97 Own, op radio, TV, eledn stores 6.0 12.363 60.00 68.00 68.00 68.00 -18.05 04/15/97 Mnfr speech tech products 51.3 50.582 83.83 69.69 66.49 84.00 63.65 04/30/97 Mnfr forged and mechined parts 42.0 44.995 41.18 50.00 37.14 20.00 26.32
MERGER PREMIUMS TO MARKET VALUE ANALYSIS MERGERS WITH TARGET PRICE EQUAL TO OR LESS THAN $5 PER SHARE ANNOUNCED AND COMPLETED 1/1/96 - 2/3/99 (CONTINUED) ================================================================================ DATE DATE ANNOUNCED EFFECTIVE TARGET NAME TARGET BUSINESS DESCRIPTION ACQUIROR NAME - ------------------------------------------------------------------------------------------------------------------------------------ 05/01/97 08/01/97 Cryenco Sciences Inc Mnfr liquid gas storage tanks Chart Industries Inc 05/08/97 09/10/97 Imex Medical Systems Inc Mnfr fetal diagnostic instr Nicolet Biomedical Inc 06/16/97 09/30/97 Frederick's of Hollywood, Inc. Women's clothing stores Investor Group 06/24/97 07/25/97 Jillians Entertainment Corp Own, op billiards clubs JW Childs Equity Partners LP 07/22/97 12/16/97 Box Worldwide Inc Pvd interactive TV svcs TCI Music (Tele-Communications) 07/23/97 12/02/97 Rudy's Restaurant Group Own and operate restaurants Berahana Inc 08/01/97 09/26/97 Community Care of America Inc Own, op nursing homes Integrated Health Services Inc 08/07/97 12/02/97 Magnetic Technologies Corp Manufacture copiers printers SPS Technologies Inc 08/14/97 12/31/97 Allied Capital Advisers Inc Investment advisory svcs Allied Capital Lending Corp 09/02/97 12/03/97 Ground Round Restaurants Own and operate restaurants CRR Holdings LLC 09/04/97 12/30/97 Cinergi Pictures Entertainment Pvd motion picture prodn svcs Investor Group 09/26/97 09/26/97 Laclede Steel Co Own, operate steel works Birmingham Steel Corp 10/10/97 01/07/98 Puro Water Group Inc Whl bottled water United States Filter Corp 10/13/97 03/19/98 Integrated Brands Inc Produce ice cream Yogan Fruz World-Wide Inc 11/03/97 02/25/98 Individual Inc Pvd on-line info retrieval svc Desktop Data Inc 11/04/97 01/12/98 Computer Vision Corp Mnfr computers, peripherals Parametric Technology Corp 11/12/97 03/03/98 PureTec Corp Manufacture plastic products Teloni-Plex Inc 11/24/97 01/07/98 General Host Corp Own, op specialty retail stores Cypress Group LLC 12/02/97 03/17/98 Staodyn Inc Mnfr electromedical equipment Rehabilicare Inc 12/12/97 02/13/98 Impact Systems Inc Paper prodn control systems Voith Sulzer Paper Technology 12/12/97 09/10/98 Timber Lodge Steakhouse Inc Own, op restaurants Santa Barbara Restaurant Group 12/15/97 02/24/98 MetroGolf Inc Own, op golf centers Family Golf Centers Inc 12/22/97 05/20/98 Artistic Greetings Inc Mnfr personalized stationery MDC Communications Corp 12/23/97 03/20/98 American Paging Inc Pvd wireless messaging svcs Telephone and Data Systems Inc 12/23/97 01/27/98 Hi-Lo Automotive Inc Own, op auto parts stores O'Reilly Automotive Inc 01/13/98 07/31/98 Bird Corp Manufacture building products CertainTeed Corp 01/16/98 02/26/98 Opthalmic Imaging Systems Inc Mnfr, design, market imaging sys Premier Laser Systems 01/26/98 05/06/98 TransAmerican Waste Industries Pvd waste management services USA Waste Services Inc 02/09/98 06/18/98 American Waste Services Provide waste management svcs USA Waste Services Inc 02/19/98 10/15/98 Casino Magic Corp Own, operate casinos Hollywood Park Inc 02/23/98 06/26/98 CorrpScript Inc Pvd pharmaceutical mgnt svcs Omnicare Inc 03/02/98 04/30/98 First Alert Inc Mnfr fire and burglar alarms Sunbeam Corp 03/31/98 06/29/98 IBAH Inc Mnfr pharmaceutical products Omnicare Inc 04/09/98 07/29/98 Spec's Music Inc Record and video retail stores Camelot Music Holdings 04/10/98 06/26/98 Dataflex Corp Whl microcomputer equipment CompuCom SystemsInc(Safeguard) 04/22/98 06/29/98 Accel Graphics Inc Mnfr graphics accelerators Evans & Sutherland Computer 04/23/98 07/31/98 Morrison Restaurants Inc Own, operate eating places Piccadilly Cafeterias Inc 05/05/98 09/25/98 Allied Digital Technologies Co Mnfr multi media software prod Investor Group 05/07/98 07/31/98 Innovative Tech Systems Inc Dvlp facilities mgnt software Peregine Systems Inc 05/11/98 07/14/98 Micronics Computers Inc Mnfr system boards Diamond Multimedia Systems Inc 05/12/98 08/24/98 Virus Research Institute Inc Mnfr biological products T Cell Sciences Inc 05/19/98 11/16/98 GTI Corp (Telemetrix PLC) Mnfr electronic components Technitrol Inc 05/20/98 09/15/98 InnoServ Technologies Pvd med equip repair svcs GE Medical Systems 05/22/98 07/22/98 Pete's Brewing Co Produce beer Carrbrinus Co 05/29/98 08/17/98 Arch Petroluem Inc Oil, gas mining Pogo Producing Co 06/02/98 10/08/98 RF Power Products Mnfr, whl RF power delivery sys Advanced Energy Industries VALUE OF ENTERPRISE PREMIUM ----------------------------------------------------------- DATE ACQUIROR TRANSACTION VALUE 1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR ANNOUNCE BUSINESS DESCRIPTION ($ MIL) ($MIL) TO ANNC. DATE TO ANNC. DATE TO ANNC. DATE - ------------------------------------------------------------------------------------------------------------------------------------ 05/01/97 Mnfr process control instmnts 19.2 27.904 69.23 76.00 72.55 05/08/97 Investment company 9.3 10.238 7.90 2.76 2.76 06/16/97 Investor group 69.4 57.007 48.85 44.47 25.95 06/24/97 Investment company 4.7 7.007 14.29 77.78 45.46 07/22/97 Pvd communications services 36.1 36.101 20.00 54.84 152.63 07/23/97 Own and operate restaurants 18.8 18.936 50.94 70.21 72.04 08/01/97 Pvd specialty healthcare svcs 94.0 89.996 23.08 18.52 88.24 08/07/97 Mnfr industrial fasteners 16.8 15.984 25.00 25.00 33.33 08/14/97 Closed-end mgnt investment co 49.5 44.111 10.41 4.68 10.41 09/02/97 Investment company 17.5 56.945 10.00 10.00 -5.71 09/04/97 Investor group 16.3 59.794 26.90 24.75 56.60 09/26/97 Manufacture steel, steel prod 15.0 131.767 106.45 106.45 106.45 10/10/97 Mnfr water treatment equip 25.7 30.186 33.95 47.69 44.00 10/13/97 Produce frozen yogurt 46.8 51.274 69.94 106.35 167.50 11/03/97 Pvd info retrieval svcs 86.8 79.390 0.92 14.93 -7.02 11/04/97 Develop, wholesale software 250.3 460.128 28.31 69.92 18.63 11/12/97 Mnfr plastic 324.6 281.484 28.74 34.94 31.77 11/24/97 Investment bank 326.2 278.128 60.00 62.96 79.59 12/02/97 Mnfr electromedical equip 22.5 22.867 47.38 47.38 89.49 12/12/97 Provide paper tech dvlp svcs 28.6 28.467 57.14 49.15 44.26 12/12/97 Own, op fast food restaurant 30.4 30.925 74.13 74.13 81.19 12/15/97 Own and operate golf courses 6.6 18.428 20.00 20.00 -11.11 12/22/97 Provide marketing services 33.6 35.618 28.45 47.10 52.00 12/23/97 Pvd telecommunications svcs 9.1 217.941 17.65 33.33 29.03 12/23/97 Own, op auto supply stores 42.5 89.680 -14.07 12.26 24.29 01/13/98 Mnfr asbestos, fiberglass prods 39.2 27.821 25.71 18.92 29.41 01/16/98 Mnfr, whl laser sys, alarms 1.3 7.006 16.67 27.27 40.00 01/26/98 Pvd waste disposal services 142.3 156.717 51.42 36.57 78.59 02/09/98 Pvd waste disposal services 122.1 106.919 100.00 156.00 166.67 02/19/98 Own, op garning company 344.8 308.423 34.52 32.07 32.07 02/23/98 Whl, retail pharmaceuticals 68.4 68.415 26.56 67.24 52.70 03/02/98 Mnfr, whl household appliances 129.2 171.213 68.00 90.91 110.00 03/31/98 Whl, retail pharmaceuticals 154.3 153.807 12.20 61.40 58.62 04/09/98 Own, op chain record stores 26.8 25.276 30.37 65.00 65.00 04/10/98 Manufacture computer equipment 25.2 46.850 8.43 9.33 23.77 04/22/98 Mnfr computer graphics system 55.9 41.933 13.58 22.67 21.05 04/23/98 Own and operate cafeterias 46.2 5.412 45.46 73.91 81.82 05/05/98 Investor group 69.2 110.009 14.29 14.29 37.93 05/07/98 Dulp service desk software 75.7 72.285 8.04 10.88 25.78 05/11/98 Manufacture multimedia systems 31.7 12.967 37.54 15.29 50.77 05/12/98 Mnfr vaccines, related products 62.6 60.225 91.64 75.67 81.72 05/19/98 Mnfr electronic components 33.7 36.727 1.22 34.05 -2.75 05/20/98 Mnfr diagnostic imaging equip 13.1 11.596 30.77 32.04 42.66 05/22/98 Produce, wholesale beer 69.4 51.299 6.25 39.73 41.67 05/29/98 Oil and gas exploration, prodn 114.0 100.081 0.13 5.47 -3.53 06/02/98 Mnfr power delivery systems 60.8 173.871 251.61 354.17 431.71 DATE 3 MONTHS PRIOR 1 YEAR PRIOR ANNOUNCE TO ANNC. DATE TO ANNC. DATE - ---------------------------------------------------------------------------- 05/01/97 41.94 -26.67 05/08/97 -30.32 -32.50 06/16/97 93.75 85.07 06/24/97 220.00 166.67 07/22/97 231.03 41.18 07/23/97 60.00 5.26 08/01/97 08/07/97 42.85 33.33 08/14/97 8.97 -28.00 09/02/97 14.78 -34.00 09/04/97 236.00 26.00 09/26/97 113.33 88.24 10/10/97 44.00 10/13/97 501.33 381.07 11/03/97 47.71 -6.00 11/04/97 14.33 -55.09 11/12/97 143.48 69.70 11/24/97 51.72 77.69 12/02/97 100.45 152.95 12/12/97 69.23 109.52 12/12/97 94.32 139.43 12/15/97 -25.00 -75.51 12/22/97 47.10 21.60 12/23/97 17.65 -47.37 12/23/97 17.97 74.00 01/13/98 37.50 -8.33 01/16/98 75.00 -63.16 01/26/98 55.02 70.15 02/09/98 -79.08 -56.76 02/19/98 72.95 -19.29 02/23/98 80.10 -57.69 03/02/98 03/31/98 53.33 -9.80 04/09/98 340.00 230.00 04/10/98 21.48 49.09 04/22/98 62.83 -38.67 04/23/98 77.78 8.11 05/05/98 86.05 158.06 05/07/98 62.15 301.52 05/11/98 30.67 -16.60 05/12/98 46.44 9.83 05/19/98 -34.74 -53.21 05/20/98 21.43 130.51 05/22/98 45.83 6.33 05/29/98 4.00 -17.67 06/02/98 Page F - 3
MERGER PREMIUMS TO MARKET VALUE ANALYSIS MERGERS WITH TARGET PRICE EQUAL TO OR LESS THAN $5 PER SHARE ANNOUNCED AND COMPLETED 1/1/96 - 2/3/99 (continued) =================================================================================================================================== Date Date Announced Effective Target Name Target Business Description Acquiror Name - ----------------------------------------------------------------------------------------------------------------------------------- 07/06/98 12/23/98 Peoples Telephone Co Inc Own op public pay telephones Davel Communications Group Inc 07/07/98 09/21/98 Republic Engineered Steels Mnfr cold-finished steel prods Investor Group 07/09/98 10/09/98 American Materials & Techs Mnfr advanced composities Cytec Industries 07/14/98 12/08/98 Consep Inc Manufacture pesticides Verdant Brands Inc 07/14/98 09/18/98 DEP Corp Manufacture personal care prod Henkel KGaA 07/20/98 10/01/98 US SerVis Inc Dvp, design, whl software HBO & Co 07/23/98 10/08/98 Innova Corp Mnfr millimeter wave radios Digital Microwave Corp 07/29/98 09/11/98 E-Z Serve Group Whl and retail gasoline EBC Texas Acquisition Corp 08/19/98 12/16/98 Peerless Group Inc Develop computer software Jack Henry & Associates Inc 08/26/98 01/12/99 Lion Brewery Inc Produce beer Malt Acquiring Inc 09/21/98 10/30/98 Gamma Biologicals Inc Mnfr blood transfusion prod Immucor Inc 09/23/98 11/13/98 Golden Eagle Group Inc Pvd transp logistics svcs USFreightways Corp 09/23/98 12/17/98 J&L Speciality Steel Inc Mnfr steel, steel products Usinor SA 10/07/98 12/31/98 Red Brick Systems Inc Develop software Informix Corp 10/12/98 12/11/98 Consilium Inc Develop software Applied Materials Inc 10/13/98 12/31/98 DataWorks Corp Dvlp computer integrated sys Platinum Software Corp 10/22/98 12/08/98 Lab Specialists of America Inc Provide laboratory testing svc Kroll-O'Gara Co 11/02/98 12/30/98 Intl Manufacturing Svcs Inc Pvd electn manufacturing svcs Celestica Inc(Onex Corp) 11/12/98 01/18/99 Hills Stores Co Own, op dept stores, shoe stores Ames Department Stores Inc 12/03/98 01/22/99 Microdyne Corp Mnfr, whl telemetry products L-3 Communications Holdings 12/29/98 12/29/98 Crowley Milner & Co Own, op department stores Value City Department Stores Value of Enterprise Premium ----------------------------------------------- Date Acquiror Transaction Value 1 Day Prior 1 Week Prior 4 Weeks Prior Announced Business Description ($mil) ($mil) to Annc. Date to Annc. Date to Annc. Date - ---------------------------------------------------------------------------------------------------------------------- 07/06/98 Pvd pay telephone common svcs 114.5 209.603 87.52 80.31 118.05 07/07/98 Investor group 417.8 409.392 56.76 68.12 45.00 07/09/98 Manufacture chemicals 34.8 35.050 100.00 100.00 81.13 07/14/98 Mnfr, wholesale fertilizers 12.4 18.480 -7.20 10.84 5.01 07/14/98 Mnfr, whl chemicals, detergents 89.7 90.606 31.25 95.35 78.72 07/20/98 Dvlp healthcare software 60.7 42.528 151.62 85.98 151.62 07/23/98 Mnfr telecommunications prod 115.7 116.449 16.17 36.50 30.00 07/29/98 Investment firm 43.2 107.882 37.14 20.00 20.00 08/19/98 Develop computer software 37.0 35.447 50.97 59.14 47.20 08/26/98 Investor group 18.3 14.413 13.94 27.46 21.29 09/21/98 Mnfr blood reagent products 25.6 25.310 87.83 127.37 23.43 09/23/98 Provide trucking services 30.2 35.062 223.64 184.80 223.64 09/23/98 Manufacture, wholesale steel 115.0 526.238 100.00 112.50 37.84 10/07/98 Dvlp management software 33.6 26.470 15.82 22.64 12.69 10/12/98 Mnfr wafer fabrication systems 45.2 41.319 145.71 145.71 145.71 10/13/98 Develop modular software 96.5 74.994 23.72 54.20 23.72 10/22/98 Pvd security prod svcs 38.5 35.716 57.65 90.37 57.65 11/02/98 Mnfr memory prod power sys 173.2 163.891 42.93 172.56 83.13 11/12/98 Operate department stores 23.1 644.965 14.29 9.09 -11.11 12/03/98 Mnfr communications sys 90.0 73.077 15.94 60.00 44.14 12/29/98 Own, op variety stores 0.3 78.243 390.48 296.15 194.29 ----------------------------------------------------------- Mean: 57.8% 68.5% 71.1% =========================================================== ------------------------------ Date 3 Months Prior 1 Year Prior Announced to Annc. Date to Annc. Date - -------------------------------------------- 07/06/98 -72.74 -57.77 07/07/98 87.10 427.27 07/09/98 104.26 35.21 07/14/98 -20.00 -56.52 07/14/98 75,00 236.00 07/20/98 289.09 256.67 07/23/98 -59.82 07/29/98 20.00 -20.00 08/19/98 41.88 13.23 08/26/98 19.37 48.91 09/21/98 09/23/98 137.33 109.41 09/23/98 9.76 -48.70 10/07/98 -39.48 -64.61 10/12/98 76.41 -4.44 10/13/98 -48.35 -64.77 10/22/98 48.47 24.64 11/02/98 43.02 -32.60 11/12/98 -53.85 -59.32 12/03/98 66.67 -27.27 12/29/98 243.47 49.33 --------------------------- 71.8% 51.9% =========================== - -------------------------------------------------------------------------------- Source: Securities Data Company, Inc; Three-month and one-year premiums calculated using security prices from FactSet Research Systems, Inc. Commercial banks and other similar financial institutions were excluded for the purpose of this analysis. Page F-4
MERGER PREMIUMS TO MARKET VALUE ANALYSIS MERGERS WITH TARGET PRICE BETWEEN $5 AND $10 PER SHARE Announced and Completed 1/1/96 - 2/3/99 ==================================================================================================================================== Date Date Acquiror Announced Effective Target Name Target Business Description Business Description - ------------------------------------------------------------------------------------------------------------------------------------ 01/03/96 08/28/96 International Jensen Inc Mnfr radios and televisions Recoton Corp 01/08/96 05/31/96 Medalist Industries Inc Mnfr screws, bolts Illinois Tool Works Inc 01/11/96 07/30/96 Golf Enterprises Inc Own, op golf course, club, shop National Golf Properties Inc 01/16/96 02/26/96 KBL Healthcare Acq Corp Healthcare venture capital co Multicare Cos Inc 01/16/96 04/10/96 Orthopedic Technology Inc Manufacture surgical supplies Deputy Inc (Corange Ltd) 01/24/96 03/29/96 TGV Software Inc Develop software Cisco Systems Inc 01/29/96 04/08/96 Varitronic Systems Inc Mnfr typewriters WH Brady Co 02/08/96 07/31/96 Citizens Security Group Inc Insurance holding company Meridian Insurance Group 03/04/96 06/27/96 Storage Properties Inc Own and operate warehouses Public Storage Inc 03/13/96 04/18/96 CAPCO Automotive Products Corp Mnfr automobile parts Eaton Corp 04/03/96 06/17/96 E&B Maine Inc Ret, whl marine accessories West Marine Inc 04/15/96 11/22/96 Multi-Market Radio Inc Own, op radio broadcasting stns SFX Broadcasting Inc 04/22/96 07/18/96 Duplex Products Inc Manufacture business forms Reynolds & Reynolds Co 04/22/96 08/07/96 Ideon Group Inc Operate ret mail order house CUC International Inc 04/25/96 10/01/96 Sterling Chemicals Inc Mnfr commodity chemicals Investor Group 04/29/96 09/09/96 Crocker Realty Trust Inc REIT Highwoods Properties Inc 05/16/96 08/20/96 Professional Sports Care Mngmt. Own, op physical therapy clinic HealthSouth Corp 05/20/96 08/29/96 Financing for Science Intl Inc Pvd business credit services Finova Group Inc 05/22/96 08/02/96 Network Express Inc Mnfr telecommunication equip Cabletron Systems Inc 05/24/96 09/04/96 Clinton Gas Systems Inc Oil and gas exploration, prod JointEnergy Dvlp Investments 06/10/96 08/23/96 Bailey Corp Manufacture rubber products Vernco Acquisition Corp 06/14/96 09/13/96 Bugaboo Creek Steak House Inc Own, op restaurants Longhom Steaks Inc 06/21/96 09/26/96 Applied Bioscience Intl (IMS) Provide medical testing svcs Pharmaceutical Product Dvlp 07/10/96 09/25/96 Brooktree Corp Manufacture semiconductors Rockwell International Corp 07/03/96 09/05/97 Golden Poultry Co Inc Produce, wholesale poultry GoldKist Inc 07/11/96 10/11/96 Fay's Inc Own and operate drug stores Thrift Drug Inc (JC Penney Co) 07/12/96 10/10/96 ADCO Technologies Inc Mnfr adhesives and sealants Astor Chemicals 07/12/96 10/23/96 Supercuts Inc Operate barber shops Regis Corporation 07/19/96 08/30/96 FluoroScan Imaging Systems Mnfr, whl x-ray imaging device Hologic Designs 08/02/96 11/07/96 Colonial Data Technologies Manufacture telecommun equip US Order Inc 08/26/96 12/20/96 Home Shopping Network (Liberty) Own, op TV Broadcasting statn Silver King Communication Inc 09/09/96 09/23/96 Crocker Realty Trust Inc REIT Highwoods Properties Inc 09/10/96 12/05/96 Acquitron Medical Inc Manufacture apnea monitors Nellcor Puritan-Bernett 09/11/96 12/02/96 ReadiCare Inc Own and operate HMO's HealthSouth Corp 09/16/96 11/07/97 Centerior Energy Corp Electric utility holding co Ohio Edison Co 09/24/96 01/02/97 Datalogix International Develop business software Oracle Corp 10/01/96 04/25/97 Cosmetic Center Inc Operate cosmetic stores Prestige Fragrance & Cosmetics 10/10/96 02/21/97 Knogo North America Inc Mnfr search, navigation equip Video Sentry Corp 10/10/96 11/27/96 WCI Steel (Renco Group Inc) Manufacture steel Renco Group Inc 10/17/96 02/27/97 Triad Systems Corp Develop turnkey computer sys Investor Group 11/06/96 03/07/97 Midland Financial Group Inc Fire, marine , casualty ins co Progressive Corp 11/06/96 12/11/96 Union Switch & Signal Inc Manufacture railroad equip Ansaldo Transport SpA 11/11/96 03/17/97 AHI Healthcare Systems Inc Pvd physician contracting svcs FPA Medical Management Inc 11/13/96 12/1?/96 Edmark Corp Develop Educational Software IBM Corp 11/18/96 03/27/97 Tyco Toys Inc Manufacture and wholesale toys Mattel Inc ==================================================================================================================================== Value of Enterprise Premium ------------------------------------------------------------------- Acquiror Transaction Value 1 Day Prior 1 Week Prior 4 Weeks Prior Business Description ($mil) ($mil) to Annc. Date to Annc. Date to Annc. Date - ------------------------------------------------------------------------------------------------------------------------------------ Mnfr audio, video equipment 109.1 109.595 29.41 57.14 49.15 Mnfr indl fasteners, tools 55.4 91.567 127.20 136.67 110.37 Real estate investment trust 82.9 141.614 37.14 45.46 45.46 Own, op nursing care facilities 126.9 126.755 25.11 43.42 58.92 Mnfr orthopedic devices 45.2 44.871 26.45 43.89 49.03 Mnfr inter-networking systems 92.4 71.540 41.55 70.63 73.00 Mnfr indl labeling machines 42.5 43.333 79.49 79.49 62.79 Insurance holding company 22.6 26.703 88.68 108.33 117.39 Real estate investment trust 22.8 1293.505 10.94 16.44 15.29 Manufacture automotive parts 128.9 140.935 66.67 72.41 78.57 Own, op boat dealerships 30.6 49.597 4.67 20.00 7.14 Own, op radio bakstg stations 104.0 89.166 11.11 29.87 19.05 Pvd comm phy sys & bus forms svcs 90.1 85.540 1.05 28.86 36.71 Provide discount club svcs 381.8 382.225 38.46 54.29 36.17 Investor group 798.4 791.162 29.73 47.69 47.69 Real Estate investment trust 537.5 531.940 10.20 11.60 13.03 Own, op outpatient surgery ctr 64.8 54.952 13.74 29.05 34.21 Pvd Financial services 39.2 193.919 4.49 6.67 12.53 Mnfr, whl, install LAN, WAN 118.4 112.039 -10.64 19.97 39.01 Investment firm 38.4 52.887 3.85 14.89 31.71 Investment holding company 47.8 106.359 5.46 6.06 11.11 Own and operate steakhouses 48.5 55.641 9.19 16.02 10.82 Pvd co?? phy research svcs 491.5 483.418 75.34 82.86 77.78 Mnfr aircraft, defense systems 261.8 273.377 42.86 64.38 16.51 Produce, wholesale poultry 521 209.708 52.00 50.00 39.02 Own and operate drug stores 277.9 352.368 27.50 61.91 61.91 Mnfr specialty chemicals 53.8 54.141 28.13 51.85 57.69 Operate hairstyling salons 175.1 174.379 55.29 53.04 60.00 Mnfr and whl X-ray systems 59.1 53.882 116.00 109.35 70.10 Pvd equip rental, leasing svcs 186.5 176.021 20.00 33.33 -6.80 Operate television stations 1216.9 1069.458 38.95 62.46 62.46 Real estate investment trust 76.1 557.561 18.80 20.30 21.85 Mnfr elect?patient monitors 56.6 56.176 18.06 21.53 40.07 Own, op outpatient surgery dr 73.9 70.736 66.79 55.42 55.42 Electric utility 1612.6 6202.925 42.82 40.52 42.82 Develop database software 80.0 63.045 28.00 42.22 56.10 Own and op retail stores 32.8 30.680 17.39 45.33 103.47 Provide electrical services 48.8 45.572 -3.38 13.31 7.45 Mnfr steel products 56.5 437.182 17.65 29.03 77.78 Investor group 193.1 225.973 68.18 60.87 89.74 Insurance holding company 47.2 72.692 30.91 24.14 Mnfr train and transp equip 27.1 135.632 3.57 3.57 Pvd health care mgmt services 117.0 103.179 10.90 34.00 23.69 Mnfr computers, office equip 123.8 81.322 35.52 63.16 31.92 Mnfr, whl games, toys 737.4 1073.147 73.69 80.12 94.53 ==================================================================================================================================== ----------------------------------- Acquiror 3 Months Prior 1 Year Prior Business Description to Annc Date to Annc Date - ------------------------------------------------------------------------------------------------------------------------------------ Mnfr audio, video equipment 46.67 12.82 Mnfr indl fasteners, tools -43.20 -43.20 Real estate investment trust -7.69 6.67 Own, op nursing care facilities Mnfr orthopedic devices Mnfr inter-networking systems 73.00 Mnfr indl labeling machines 94.44 89.19 Insurance holding company 25.00 25.00 Real estate investment trust -58.88 -50.59 Manufacture automotive parts 24.22 -13.04 Own, op boat dealerships 100.00 3.45 Own, op radio bakstg stations 28.21 56.25 Pvd comm phy sys & bus forms svcs 48.84 41.18 Provide discount club svcs 38.46 -22.30 Investor group 29.73 -7.69 Real estate investment trust 24.17 Own, op outpatient surgery ctr 620.95 -36.92 Pvd financial services 17.70 108.98 Mnfr, whl, install LAN, WAN 119.00 -20.36 Investment firm 12.50 80.00 Investment holding company 55.56 68.67 Own and operate steakhouses -60.93 -30.62 Pvd comm phy research svcs 77.78 204.76 Mnfr aircraft, defense systems 71.43 -13.04 Produce, wholesale poultry 29.55 142.55 Own and operate drug stores 82.14 72.88 Mnfr specialty chemicals 368.57 105.00 Operate hairstyling salons 99.25 50.86 Mnfr and whl X-ray systems 134.62 131.63 Pvd equip rental, leasing svcs -45.86 13.68 Operate television stations -6.55 27.23 Real estate investment trust 5.02 58.40 Mnfr elect?patient monitors 23.34 22.43 Own, op outpatient surgery dr 66.83 120.65 Electric utility 50.21 2.49 Develop database software 14.29 -55.24 Own and op retail stores 64.97 -3.11 Provide electrical services Mnfr steel products 90.48 105.13 Investor group 72.09 68.18 Insurance holding company -2.70 -5.26 Mnfr train and transp equip -6.45 9.43 Pvd health care mgmt services 34.00 -34.37 Mnfr computers, office equip 5.08 -61.73 Mnfr, whl games, toys -33.82 -26.30
MERGER PREMIUMS TO MARKET VALUE ANALYSIS MERGERS WITH TARGET PRICE BETWEEN $5 AND $10 PER SHARE ANNOUNCED AND COMPLETED 1/1/96 - 2/3/99 (continued) ================================================================================ DATE DATE ANNOUNCED EFFECTIVE TARGET NAME TARGET BUSINESS DESCRIPTION ACQUIROR NAME - ----------------------------------------------------------------------------------------------------------------------------------- 12/10/96 04/01/97 Softdesk Inc Develop, wholesale CAD software Autodesk Inc 12/23/96 05/09/97 Star Sight Telecast Inc Pvd cable programming svcs Gemstar International Group 12/26/96 04/16/97 Royce Laboratories Inc Mnfr pharmaeceuticals products Watson Pharmaceuticals Inc. 01/17/97 04/24/97 American Recreation Centers Own, op bowling, rec centers AMF Bowling Centers(AMF Group) 01/27/97 07/24/97 Cardiometrics Inc Mnfr surgical, medical equip EndoSonics Group 02/11/97 05/29/97 Fractal Design Corp Develop graphics software MetaTools Inc 02/11/97 03/24/97 Innotech Inc Mnfr electro-medical prods Johnson & Johnson 02/18/97 07/01/98 Contour Medical(Retirement) Mnfr surgical supplies Sun Healthcare Group Inc 02/18/97 07/01/98 Retirement Care Associates Inc Own, operate nursing homes Sun Healthcare Group Inc 03/06/97 07/31/97 Allwaste Inc Pvd asbestos treatment svcs Philip Environmental Inc 03/06/97 08/13/97 Crop Growers Corp Insurance agency Fireman's Fund Insurance Co 03/11/97 04/15/97 TPC Corp Pvd gas transmission svcs PacifiCorp Holdings Inc 03/21/97 06/12/97 CrossComm Corp Mnfr computer networking equip Olicom A/S 03/27/97 03/27/97 Strober Organization Inc Wholesale building materials Hamilton Acquisition LLC 03/31/97 06/03/97 Peak Technologies Group Inc Whl integrated systems Moore Corp Ltd 04/10/97 06/13/97 ERO Inc Manufacture toys Hedstrom Corp(Hedstrom Hldgs) 04/10/97 06/26/97 Microcom Inc Mnfr data comm products Compaq Computer Corp 04/18/97 07/10/97 LIVE Entertainment Inc Whl, retail recorded music Investor Group 05/30/97 07/09/97 Integrated Living Communities Pvd nursing, personal care svcs Whitehall Street Real Estate 05/30/97 10/16/97 National Picture and Frame Co Mnfr picture, mirror frames Colonnade Capital LLC 06/03/97 09/08/97 Physician Corp of America Own and operate HMO's Humana Inc 06/05/97 07/14/97 DIGEX Inc Develop Internet software Intermedia Communications Inc 06/20/97 10/23/97 Conwest Energy Corp Oil and gas exploration prodn Forcenergy Inc 07/02/97 10/28/97 Calnetics Corp Manufacture plastic products Summa Industries Inc 07/03/97 09/26/97 Krystal Co Own, op fast food restaurants Port Royal Holdings Inc 07/10/97 11/18/97 Airways Corp Passenger airline AirTran Holdings Inc 07/14/97 10/28/97 Katz Media Group Advertising agency Investor Group 07/24/97 10/28/97 Astrotech International Corp Pvd storage tank maintenance ITEQ Inc 07/25/97 12/01/97 Homegate Hospitality Inc Own and operate hotels Prime Hospitality Corp 07/25/97 08/28/97 Imo Industries Inc Mnfr industrial controls, pumps Constellation Capital Partners 07/31/97 09/29/97 Interactive Group Inc Dvlp, whl comp integrated sys DataWorks Corp 08/04/97 12/31/97 Belmont Homes Inc Mnfr prefabricated houses Cavalier Homes Inc 08/04/97 11/19/97 Gynecare Inc Pvd biotech prod dvlp services Johnson & Johnson 08/14/97 12/18/97 Technology Service Group Inc Mnfr cellular telephone Eloote 08/25/97 10/03/97 BioWhittaker Inc Mnfr, whl medical testing prods Cambrex Corp 08/25/97 01/23/98 PerSeptive Biosystems Inc Mnfr chromatography equipment Perkin-Elmer Corp 09/17/97 12/12/97 Designer Holdings(New Rio LLC) Dvlp, mkt designer sportswear Warraco Group 09/23/97 01/22/98 El Chico Restaurant Inc Own and operate restaurants Investor Group 09/26/97 02/03/98 Sagebrush Inc Own and operate eating places WSMP Inc 09/26/97 04/28/98 Skyline Chili Inc Operate, franchise restaurants Investor Group 09/29/97 11/26/97 CompuRAD Inc Pvd healthcare software Lumisys Inc 10/01/97 12/05/97 Alpine Lace Brands Inc Whl dairy products, cheese Land O'Lakes Inc 10/15/97 11/21/97 Thompson PBE Inc Whl automotive paint, supplies FinishMaster Inc(Lacey Distn) 10/20/97 01/29/98 Cruise America Inc Own, op trailer dealership Budget Group Inc 11/07/97 05/28/98 Medicus Systems Corp Develop, whl medical software QuadraMed Corp 11/17/97 03/10/98 Shared Technologies Fairchild Mnfr telecommunications equip Intermedia Communications Inc 11/17/97 03/02/98 Visigenic Software Inc Dvlp database access software Borland International Inc 11/21/97 01/20/98 New Jersey Steeel(Von Roll) Mnfr steel reinforcing bars Co-Steel Inc VALUE OF ENTERPRISE PREMIUM ------------------------------------------------- DATE ACQUIROR TRANSACTION VALUE 1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR ANNOUNCED BUSINESS DESCRIPTION ($ MIL) ($ MIL) TO ANNC. DATE TO ANNC. DATE TO ANNC. DATE - ---------------------------------------------------------------------------------------------------------------------------- 12/10/96 Design drafting software 91.7 98.442 60.00 66.76 146.67 12/23/96 Mnfr simplified VCR programmer 273.1 266.569 17.86 20.84 44.28 12/26/96 Mnfr pharmacuetical products 84.2 81.639 0.57 22.91 18.52 01/17/97 Own, op bowling centers 70.7 63.830 15.25 33.33 70.00 01/27/97 Mnfr image processing equip 56.8 37.872 18.28 13.81 47.12 02/11/97 Develop software 140.2 136.069 44.97 40.44 0.99 02/11/97 Mnfr medical equip and prods 135.6 116.561 54.93 64.18 54.93 02/18/97 Pvd long-term healthcare svcs 55.2 72.823 21.43 47.83 58.14 02/18/97 Pvd long-term healthcare svcs 305.9 292.435 19.44 14.67 21.13 03/06/97 Provide waste management svcs 506.7 534.883 48.22 63.35 95.22 03/06/97 Insurance company 82.1 89.061 20.59 15.49 41.38 03/11/97 Pvd telephone commun services 408.5 398.392 52.17 65.05 55.48 03/21/97 Mnfr communications equipment 84.6 77.829 74.32 70.17 70.17 03/27/97 Investment company 33.4 30.937 3.23 2.13 03/31/97 Mnfr manifold business forms 169.8 192.090 108.70 97.26 65.52 04/10/97 Manufacture games and toys 203.6 201.739 12.50 16.88 30.44 04/10/97 Manufacture personal computers 267.6 273.087 54.76 91.18 35.42 04/18/97 Investor group 53.1 98.981 6.67 6.67 50.00 05/30/97 Real estate development firm 79.7 78.553 26.90 21.05 50.82 05/30/97 Private equity firm 60.3 67.073 31.51 28.00 28.00 06/03/97 Own and operate HMOs 405.1 260.352 12.00 12.00 23.08 06/05/97 Pvd telecommunications svcs 171.6 166.838 19.54 35.95 31.65 06/20/97 Oil, gas exploration and prodn 102.0 101.521 11.06 11.06 18.93 07/02/97 Mnfr plastic conveyor parts 23.4 26.363 30.67 33.64 25.11 07/03/97 Investment company 145.4 145.677 132.00 169.77 176.19 07/10/97 Passenger airline 63.7 75.936 26.74 29.76 32.93 07/14/97 Investor group 371.9 362.128 44.26 69.23 93.41 07/24/97 Prvds treatment for liqds, gas 116.7 147.176 45.70 63.40 78.41 07/25/97 Own, operate, franchise hotels 133.2 123.069 30.25 33.77 28.56 07/25/97 Investment company 117.3 430.169 18.74 20.00 22.61 07/31/97 Dvlp computer integrated sys 55.0 59.004 54.40 44.75 71.56 08/04/97 Manufacture mobile homes 74.0 68.986 -17.90 0.65 9.47 08/04/97 Mnfr medical equip and prods 70.5 65.680 -2.82 1.66 37.67 08/14/97 Mnfr public common products 32.9 35.485 -4.55 7.14 41.89 08/25/97 Mnfr speciality chemicals 130.5 130.017 17.77 38.87 47.68 08/25/97 Mnfr analytical instruments 288.1 339.306 16.80 24.88 50.42 08/17/97 Mnfr women's intimate apparel 353.6 290.492 17.28 50.36 58.49 09/23/97 Investor group 49.2 58.650 64.52 75.86 104.00 08/26/97 Produce prepared sandwiches 39.4 41.395 15.87 13.38 21.20 09/26/97 Investor group 22.9 26.661 1.89 5.88 09/29/97 Mnfr medical imaging equipment 25.0 23.321 1.32 3.43 1.32 10/01/97 Produce butter, milk and meats 48.4 59.309 15.87 48.98 46.00 10/15/97 Whl automotive paint, coatings 69.3 116.683 25.49 33.33 42.22 10/20/97 Pvd passenger car rental svcs 59.3 144.263 17.95 13.70 39.87 11/07/97 Pvd info sys for healthcare 23.3 46.930 36.36 39.54 25.00 11/17/97 Pvd telecommunications svcs 503.6 585.377 66.67 106.90 163.74 11/17/97 Develop software 148.4 130.467 92.00 64.00 92.00 11/21/97 Mnfr steel and steel products 173.5 176.789 162.86 170.59 166.67 DATE 3 MONTHS PRIOR 1 YEAR PRIOR ANNOUNCE TO ANNC. DATE TO ANNC. DATE - ----------------------------------------------------------------------------------- 12/10/96 111.43 -32.73 12/23/96 16.22 94.60 12/26/96 30.95 -36.21 01/17/97 58.14 33.33 01/27/97 02/11/97 -6.82 -18.25 02/11/97 400.00 -50.95 02/18/97 02/18/97 91.11 3.79 03/06/97 122.44 128.80 03/06/97 57.69 -2.38 03/11/97 652.84 946.63 03/21/97 70.10 -9.57 03/27/97 4.35 37.14 03/31/97 50.00 -1.37 04/10/97 47.54 73.08 04/10/97 35.42 -43.48 04/18/97 05/30/97 73.58 05/30/97 22.29 18.52 06/03/97 65.93 -45.63 06/05/97 20.93 06/20/97 84.20 89.99 07/02/97 20.00 -13.53 07/03/97 167.77 182.93 07/10/97 -7.66 -39.47 07/14/97 255.93 120.00 07/24/97 96.49 149.83 07/25/97 83.26 07/25/97 116.92 44.62 07/31/97 137.54 131.60 08/04/97 2.30 -42.22 08/04/97 37.67 73.89 08/14/97 23.48 -34.40 08/25/97 8.19 63.23 08/25/97 92.78 68.27 08/17/97 7.32 -51.65 09/23/97 39.73 54.55 08/26/97 09/26/97 8.00 18.68 09/29/97 3.50 -4.46 10/01/97 60.53 43.22 10/15/97 45.45 10.34 10/20/97 36.28 64.67 11/07/97 -96.00 11/17/97 11/17/97 19.27 -41.25 11/21/97 148.65 411.11 Page F - 6
Merger Premiums to Market Value Analysis Mergers with Target Price Between $5 and $10 per Share Announced and Completed 1/1/96--2/3/99 (continued) ================================================================================================================================== Date Date Announced Effective Target Name Target Business Description - ---------------------------------------------------------------------------------------------------------------------------------- 11/24/97 02/03/98 Communication Central Inc. Pvd telecommunications svcs 12/19/97 06/03/98 Eclipse Telecommunications Inc Pvd radiotelecommunication svc 12/29/97 03/17/98 Heartstream,Inc Mnfr defibrilators 01/06/98 03/02/98 DBA Systems, Inc Dvlp digital imaging systems 01/14/98 05/02/98 Meridian Point Realty Trust Real estate investment trust 01/15/98 06/11/98 OHM Corp Operates hazardous waste sites 01/16/98 02/25/98 Checkmate Electronics Inc Mgfr, whl payment systems 01/21/98 05/15/98 BKC Semiconductors, Inc Mfg semiconductor devices 01/22/98 09/29/98 BT Office Products Int'l Inc Whl office stationery supplies 01/28/98 03/05/98 Sun Coast Industries Inc Mnfr plastic products 01/29/98 06/05/98 Monroe Inc Mnfr., whl concrete, sand, gravel 01/29/98 05/21/98 ProSource Inc (Onex Corp) Wholesale groceries 02/04/98 06/09/98 TresCom International Inc Pvd communications svcs 02/10/98 06/30/98 Ryan Beck & Co., Livingston, NJ Securities brokerage firm 02/17/98 08/17/98 Bell Sports Corp Mnfr bicycle equip., accessories 02/24/98 05/04/98 Somstogen Inc Dvlp human blood substitutes 02/25/98 09/30/98 FAC Realty Trust Inc REIT, own, op, shopping centers 03/02/98 04/30/98 Signature Brands USA Inc Mnfr, whl consumer housewares 03/05/98 05/20/98 Intelligent Electronics Inc Whl, ret computer systems 03/06/98 04/30/98 Proxima Corp Mnfr PC liq crys display prods 03/10/98 06/19/98 Concorn Inc Manufacture radio filters 03/16/98 07/10/98 International Murex Tech Corp Mnfr in-vitro test systems 04/03/98 07/21/98 Bertucci's Inc Own and operate restaurants 04/15/98 05/29/98 Simulation Sciences Inc Dvlp simulation software 04/28/98 07/20/98 Hein-Werner Corp Mnfr automotive service equip 04/29/98 09/25/98 Group 1 Software Inc Develop software 05/04/98 06/10/98 Farah Inc Mnfr, ret family apparel 05/07/98 06/30/98 InTone Systems International Pvd systems integration svcs 05/29/98 10/20/98 Emerging Communications Inc Pvd local telephone svcs 05/29/98 08/06/98 Mid-America Realty Investments Real estate investment trust 06/01/98 08/28/98 PST Vans Inc Trucking company 06/11/98 07/02/98 Imo Industries Inc Mnfr industrial controls, pumps 07/14/98 10/26/98 New West Eyeworks Inc Own, op eyeglass stores 07/24/98 12/23/98 Information Storage Devices Mnfr voice recorded circuits 07/28/98 09/10/98 CyberMedia Inc Dvlp, whl support software prod 08/03/98 10/16/98 Continental Natural Gas Inc Gas utility 08/12/98 12/15/98 Walshire Assurance Insurance company 08/26/98 01/08/99 Toastmaster Inc Mnfr electric consumer appl 09/14/98 09/14/98 Ion CMT Corp Pvd Internet svcs, products 10/01/98 01/07/99 Richey Electronics Inc Whl electronic components 10/29/98 12/31/98 Transition Systems Inc Develop healthcare software 11/02/98 12/10/98 AquaPenn Spring Water Co Inc Produce, whl spring water 11/10/98 12/22/98 Intensive Healthcare Corp Pvd acute, long-term care svcs 11/10/98 12/16/98 Steel of West Virginia Inc Manufacture steel products ================================================================================================================================== Date Date Announced Effective Target Name Acquiror Name - ---------------------------------------------------------------------------------------------------------------------------------- 11/24/97 02/03/98 Communication Central Inc. Davel Communication Group Inc 12/19/97 06/03/98 Eclipse Telecommunications Inc IXC Communications, Inc 12/29/97 03/17/98 Heartstream,Inc Hewlett Packard Co 01/06/98 03/02/98 DBA Systems, Inc Titan Corp 01/14/98 05/02/98 Meridian Point Realty Trust EastGroup Properties 01/15/98 06/11/98 OHM Corp Internatinal Technology Corp 01/16/98 02/25/98 Checkmate Electronics Inc Internatinal Verified Inc 01/21/98 05/15/98 BKC Semiconductors, Inc Microsemi Corp 01/22/98 09/29/98 BT Office Products Int'l Inc Buhmann NV 01/28/98 03/05/98 Sun Coast Industries Inc Kerr Group Inc 01/29/98 06/05/98 Monroe Inc US Aggregates Inc 01/29/98 05/21/98 ProSource Inc (Onex Corp) AmeriServe Food Distn Inc 02/04/98 06/09/98 TresCom International Inc Primus Telecommunications 02/10/98 06/30/98 Ryan Beck & Co., Livingston, NJ BankAtlantic Bancorp, Florida 02/17/98 08/17/98 Bell Sports Corp HB Acquisition Corp 02/24/98 05/04/98 Somstogen Inc Baxter International Inc 02/25/98 09/30/98 FAC Realty Trust Inc Prometheus Southeast Retail 03/02/98 04/30/98 Signature Brands USA Inc Sunbeam Corp 03/05/98 05/20/98 Intelligent Electronics Inc Xerox Corp 03/06/98 04/30/98 Proxima Corp ASK AS 03/10/98 06/19/98 Concorn Inc Communications Instruments Inc 03/16/98 07/10/98 International Murex Tech Corp Abbott Laboratories 04/03/98 07/21/98 Bertucci's Inc NE Restaurant Co Inc 04/15/98 05/29/98 Simulation Sciences Inc Siebe PLC 04/28/98 07/20/98 Hein-Werner Corp Snap-On Inc 04/29/98 09/25/98 Group 1 Software Inc COMNET Corp 05/04/98 06/10/98 Farah Inc Tropical Sportswear Intl Corp 05/07/98 06/30/98 InTone Systems International Anis Corp 05/29/98 10/20/98 Emerging Communications Inc Innovative Communication Co 05/29/98 08/06/98 Mid-America Realty Investments Bradley Real Estate Inc 06/01/98 08/28/98 PST Vans Inc US Xpress Enterprises Inc 06/11/98 07/02/98 Imo Industries Inc Constellation Capital Partners 07/14/98 10/26/98 New West Eyeworks Inc National Vision Associates Ltd 07/24/98 12/23/98 Information Storage Devices Windbond Electronic Corp 07/28/98 09/10/98 CyberMedia Inc Network Associates Inc 08/03/98 10/16/98 Continental Natural Gas Inc CMS Energy Corp 08/12/98 12/15/98 Walshire Assurance Kingsway Financial Services 08/26/98 01/08/99 Toastmaster Inc Salton/Maxim Houswares Inc 09/14/98 09/14/98 Ion CMT Corp Qwest Commun Int Inc 10/01/98 01/07/99 Richey Electronics Inc Arrow Electronics Inc 10/29/98 12/31/98 Transition Systems Inc Eclipsys Corp 11/02/98 12/10/98 AquaPenn Spring Water Co Inc Danone Group 11/10/98 12/22/98 Intensive Healthcare Corp Select Medical Corp 11/10/98 12/16/98 Steel of West Virginia Inc Roanoke Electric Steel ================================================================================================================================== Date Date Acquiror Announced Effective Target Name Business Description - ---------------------------------------------------------------------------------------------------------------------------------- 11/24/97 02/03/98 Communication Central Inc. Pvd pay telephone commun svcs 12/19/97 06/03/98 Eclipse Telecommunications Inc Pvd long distance svcs 12/29/97 03/17/98 Heartstream,Inc Mnfr computer testing equip 01/06/98 03/02/98 DBA Systems, Inc Pvd Computer sys design svcs 01/14/98 05/02/98 Meridian Point Realty Trust Real Estate investment trust 01/15/98 06/11/98 OHM Corp Pollution control engineering 01/16/98 02/25/98 Checkmate Electronics Inc Mnfr, whl electric payment sys 01/21/98 05/15/98 BKC Semiconductors, Inc Mnfr semi-conductor products 01/22/98 09/29/98 BT Office Products Int'l Inc Mnfr folding paperboard boxes 01/28/98 03/05/98 Sun Coast Industries Inc Mnfr plastic packaging prods 01/29/98 06/05/98 Monroe Inc Manufacture building products 01/29/98 05/21/98 ProSource Inc (Onex Corp) Wholesale food products 02/04/98 06/09/98 TresCom International Inc Pvd telecommunications svcs 02/10/98 06/30/98 Ryan Beck & Co., Livingston, NJ Savings and loan 02/17/98 08/17/98 Bell Sports Corp Investment firm 02/24/98 05/04/98 Somstogen Inc Mnfr health care products 02/25/98 09/30/98 FAC Realty Trust Inc Real estate investment trust 03/02/98 04/30/98 Signature Brands USA Inc Mnfr, whl household appliances 03/05/98 05/20/98 Intelligent Electronics Inc Mnfr business machine, fin co 03/06/98 04/30/98 Proxima Corp Mnfr liquid crystal displays 03/10/98 06/19/98 Concorn Inc Mnfr, whl relay systems 03/16/98 07/10/98 International Murex Tech Corp Mnfr pharmeceuticals, med equip 04/03/98 07/21/98 Bertucci's Inc Own, operate restaurants 04/15/98 05/29/98 Simulation Sciences Inc Mnfr appliance controls 04/28/98 07/20/98 Hein-Werner Corp Manufacture tools 04/29/98 09/25/98 Group 1 Software Inc Pvd dat processing svcs 05/04/98 06/10/98 Farah Inc Mnfr, whl mens sportswear 05/07/98 06/30/98 InTone Systems International Pvd computer related services 05/29/98 10/20/98 Emerging Communications Inc Investment company 05/29/98 08/06/98 Mid-America Realty Investments Real estate investment trust 06/01/98 08/28/98 PST Vans Inc Trucking company 06/11/98 07/02/98 Imo Industries Inc Investment company 07/14/98 10/26/98 New West Eyeworks Inc Own, op optical goods stores 07/24/98 12/23/98 Information Storage Devices Mnfr electronic equipment 07/28/98 09/10/98 CyberMedia Inc Develop network software 08/03/98 10/16/98 Continental Natural Gas Inc Electric and gas utility 08/12/98 12/15/98 Walshire Assurance Pvd non-standard auto ins svcs 08/26/98 01/08/99 Toastmaster Inc Mnfr electric housewares, fans 09/14/98 09/14/98 Ion CMT Corp Pvd telephone commun svcs 10/01/98 01/07/99 Richey Electronics Inc Whl electronic components 10/29/98 12/31/98 Transition Systems Inc Pvd data processing svcs 11/02/98 12/10/98 AquaPenn Spring Water Co Inc Produce, whl milk, cookies, jams 11/10/98 12/22/98 Intensive Healthcare Corp Own, op acute hospitals 11/10/98 12/16/98 Steel of West Virginia Inc Mnfr steel bar products ================================================================================================================================== Premium Value of Enterprise --------------------------------- Date Date Transaction Value 1 Day Prior 1 Week Prior Announced Effective Target Name ($ mil) ($ mil) to Annc. Date to Annc. Date - ---------------------------------------------------------------------------------------------------------------------------------- 11/24/97 02/03/98 Communication Central Inc. 102.4 133.097 30.23 25.37 12/19/97 06/03/98 Eclipse Telecommunications Inc 122.2 122.055 18.02 19.92 12/29/97 03/17/98 Heartstream,Inc 130.6 110.930 -6.71 18.17 01/06/98 03/02/98 DBA Systems, Inc 37.9 28.993 38.40 44.29 01/14/98 05/02/98 Meridian Point Realty Trust 51.7 41.121 38.78 65.85 01/15/98 06/11/98 OHM Corp 326.8 343.050 24.21 45.08 01/16/98 02/25/98 Checkmate Electronics Inc 47.2 46.947 4.83 9.37 01/21/98 05/15/98 BKC Semiconductors, Inc 13.3 15.905 66.73 59.48 01/22/98 09/29/98 BT Office Products Int'l Inc 138.1 689.726 32.53 78.86 01/28/98 03/05/98 Sun Coast Industries Inc 45.5 63.493 56.36 62.26 01/29/98 06/05/98 Monroe Inc 50.3 60.903 5.07 10.46 01/29/98 05/21/98 ProSource Inc (Onex Corp) 343.3 293.910 126.42 106.90 02/04/98 06/09/98 TresCom International Inc 134.7 142.626 25.17 30.86 02/10/98 06/30/98 Ryan Beck & Co., Livingston, NJ 35.9 37.324 23.21 21.29 02/17/98 08/17/98 Bell Sports Corp 165.7 228.365 13.89 13.10 02/24/98 05/04/98 Somstogen Inc 232.9 175.471 35.85 39.81 02/25/98 09/30/98 FAC Realty Trust Inc 100.0 348.946 7.04 21.60 03/02/98 04/30/98 Signature Brands USA Inc 81.7 246.680 57.14 60.98 03/05/98 05/20/98 Intelligent Electronics Inc 342.4 298.936 5.74 19.22 03/06/98 04/30/98 Proxima Corp 82.9 70.022 31.34 25.71 03/10/98 06/19/98 Concorn Inc 51.7 44.470 33.33 31.65 03/16/98 07/10/98 International Murex Tech Corp 232.7 236.760 21.64 38.21 04/03/98 07/21/98 Bertucci's Inc 96.5 104.175 35.48 35.48 04/15/98 05/29/98 Simulation Sciences Inc 146.5 99.747 24.03 16.79 04/28/98 07/20/98 Hein-Werner Corp 37.5 32.296 52.73 65.25 04/29/98 09/25/98 Group 1 Software Inc 11.8 61.592 71.60 61.51 05/04/98 06/10/98 Farah Inc 93.6 144.521 33.33 44.00 05/07/98 06/30/98 InTone Systems International 44.9 39.672 18.80 14.97 05/29/98 10/20/98 Emerging Communications Inc 112.3 243.057 46.43 42.61 05/29/98 08/06/98 Mid-America Realty Investments 153.2 148.756 5.00 6.33 06/01/98 08/28/98 PST Vans Inc 83.9 85.603 32.80 35.82 06/11/98 07/02/98 Imo Industries Inc 9.1 np -1.05 4.44 07/14/98 10/26/98 New West Eyeworks Inc 76.7 81.111 23.81 33.33 07/24/98 12/23/98 Information Storage Devices 66.3 68.384 46.34 36.36 07/28/98 09/10/98 CyberMedia Inc 130.1 108.150 25.62 38.18 08/03/98 10/16/98 Continental Natural Gas Inc 154.2 172.276 8.81 35.59 08/12/98 12/15/98 Walshire Assurance 43.1 42.346 10.00 53.49 08/26/98 01/08/99 Toastmaster Inc 101.2 93.699 3.70 21.74 09/14/98 09/14/98 Ion CMT Corp 202.9 184.188 65.52 60.00 10/01/98 01/07/99 Richey Electronics Inc 101.8 183.792 52.73 68.00 10/29/98 12/31/98 Transition Systems Inc 284.7 219.529 57.50 49.89 11/02/98 12/10/98 AquaPenn Spring Water Co Inc 110.3 110.450 34.19 100.00 11/10/98 12/22/98 Intensive Healthcare Corp 115.2 111.767 54.00 64.42 11/10/98 12/16/98 Steel of West Virginia Inc 116.8 116.113 75.51 100.00 Mean: 34.3% 43.2% ================================================================================================================================== Premium ---------------------------------------------------------------- Date Date 4 Weeks Prior 3 Months Prior 1 Year Prior Announced Effective Target Name to Annc. Date to Annc. Date to Annc. Date - ---------------------------------------------------------------------------------------------------------------------------------- 11/24/97 02/03/98 Communication Central Inc. 12.00 918.18 630.43 12/19/97 06/03/98 Eclipse Telecommunications Inc 14.39 -7.10 16.13 12/29/97 03/17/98 Heartstream,Inc -8.64 10.80 -13.10 01/06/98 03/02/98 DBA Systems, Inc 25.58 5.59 57.77 01/14/98 05/02/98 Meridian Point Realty Trust 88.89 01/15/98 06/11/98 OHM Corp 36.77 31.36 01/16/98 02/25/98 Checkmate Electronics Inc 37.52 10.22 -29.86 01/21/98 05/15/98 BKC Semiconductors, Inc 66.73 -58.79 -33.31 01/22/98 09/29/98 BT Office Products Int'l Inc 78.86 30.18 44.74 01/28/98 03/05/98 Sun Coast Industries Inc 84.95 115.00 244.00 01/29/98 06/05/98 Monroe Inc 6.37 -3.19 74.06 01/29/98 05/21/98 ProSource Inc (Onex Corp) 100.00 02/04/98 06/09/98 TresCom International Inc 51.52 332.00 415.82 02/10/98 06/30/98 Ryan Beck & Co., Livingston, NJ 25.20 38.57 104.21 02/17/98 08/17/98 Bell Sports Corp 8.61 15.49 90.70 02/24/98 05/04/98 Somstogen Inc 92.00 58.24 -31.43 02/25/98 09/30/98 FAC Realty Trust Inc 29.92 31.03 46.15 03/02/98 04/30/98 Signature Brands USA Inc 106.25 73.68 103.08 03/05/98 05/20/98 Intelligent Electronics Inc 34.37 44.76 125.19 03/06/98 04/30/98 Proxima Corp 23.94 58.56 44.26 03/10/98 06/19/98 Concorn Inc 36.84 36.84 62.50 03/16/98 07/10/98 International Murex Tech Corp 50.73 -97.44 -96.56 04/03/98 07/21/98 Bertucci's Inc 35.48 58.49 86.67 04/15/98 05/29/98 Simulation Sciences Inc 11.11 -26.61 6.67 04/28/98 07/20/98 Hein-Werner Corp 80.00 83.27 96.00 04/29/98 09/25/98 Group 1 Software Inc 71.60 71.63 66.42 05/04/98 06/10/98 Farah Inc 39.81 60.00 -10.00 05/07/98 06/30/98 InTone Systems International 28.43 05/29/98 10/20/98 Emerging Communications Inc 54.72 34.43 05/29/98 08/06/98 Mid-America Realty Investments 2.44 1.20 9.09 06/01/98 08/28/98 PST Vans Inc 10.67 24.50 159.83 06/11/98 07/02/98 Imo Industries Inc 2.55 07/14/98 10/26/98 New West Eyeworks Inc 30.00 14.29 62.50 07/24/98 12/23/98 Information Storage Devices 44.58 27.66 -38.78 07/28/98 09/10/98 CyberMedia Inc 117.14 8.57 -34.48 08/03/98 10/16/98 Continental Natural Gas Inc 46.79 6.67 -11.60 08/12/98 12/15/98 Walshire Assurance 22.22 8.20 -18.52 08/26/98 01/08/99 Toastmaster Inc 36.59 13.13 100.00 09/14/98 09/14/98 Ion CMT Corp -4.00 -25.97 10/01/98 01/07/99 Richey Electronics Inc 127.03 33.33 4.35 10/29/98 12/31/98 Transition Systems Inc 72.50 37.52 -31.24 11/02/98 12/10/98 AquaPenn Spring Water Co Inc 160.00 101.94 11/10/98 12/22/98 Intensive Healthcare Corp 92.50 75.09 20.38 11/10/98 12/16/98 Steel of West Virginia Inc 79.17 38.71 2.38 Mean: 50.1% 63.6% 51.3% - ------------------------------------------------------------------------------- Source: Securites Data Company, Inc. Three-month and one-year premiums calculated using security prices from FactSet Research Systems, Inc. Commercial banks and other similar financial institutions were excluded for the purpose of this analysis. Page F-7
Merger Premiums to Market Value Analysis Mergers with Target Price Equal to or Greater than $10 per Share Announced and Completed 1/1/96--2/3/99 ================================================================================================================================== Date Date Announced Effective Target Name Target Business Description - ---------------------------------------------------------------------------------------------------------------------------------- 01/05/96 07/01/96 Safety Fund Corp Closed-end investment fund 01/08/96 04/30/96 Local Corp Mnfr defense electronics 01/08/96 03/04/96 US Delivery Systems Inc Pvd courier services 01/09/96 04/30/96 Technslysis Corp Develop software 01/18/96 07/02/96 Covita Corp Manufacture medical equipment 01/22/96 04/11/96 Premier Industrial Corp Whl electronic parts and equip 01/24/96 08/08/96 National Lodging Corp Own and operate casinos 01/25/96 06/12/96 Dual Drilling (Mosrold Shippg) Oil and gas drilling 01/30/96 05/31/96 Daig Corporation Mnfr pacemakers 01/31/96 03/04/96 Tivoli Systems Inc Dvlp systems mgmt software 02/01/96 04/12/96 Health Wise of America Inc Own and operate HMO 02/05/96 04/30/96 DiMark Inc Pvd database marketing svcs 02/07/96 05/07/96 Pyxis Corp Provide med equip leasing svcs 02/12/96 05/01/96 Duracraft Corp Mnfr electric housewares 02/13/96 09/18/96 Citicasters(American Finl Grp) Own, op TV, radio stations 02/14/96 03/20/96 Helene Curtis Industries Inc Mnfr perfumes, cosmetics 02/15/96 05/14/96 Andros Inc Mnfr infrared gas analyzers 02/16/96 05/30/96 Circle K Corp Operate convenience stores 02/16/96 06/13/96 Fortum Group Inc Own, operate nursing homes 02/20/96 07/24/96 Davidson & Associates Inc Develop educational software 02/20/96 07/24/96 Sierra On-Line Inc Develop software for games 02/23/96 07/01/96 Cray Research Inc Manufacture supercomputers 02/26/96 09/16/96 Sterile Concepts Inc. Mnfr sterilized surgical trays 02/26/96 06/18/96 Tide West Oil Co Oil and gas exploration, prodn 02/27/96 05/24/96 Brandon Systems Corp Personnel agency, consulting 02/29/96 07/10/96 Big O Tires Inc Own, operate tire stores 03/04/96 04/08/96 Guardsman Products Inc Mnfr coatings, cleaning prod 03/07/96 07/03/96 Acme-Cleveland Corp Mnfr metal cutting tools 03/11/96 08/02/96 Life Partners Group Inc Life insurance holding company 03/18/96 07/01/96 Athena Neurosciences Inc Manufacture pharmaceuticals 03/18/96 08/30/96 Microtek Medical Inc Mnfr whl surgical supplier 03/25/96 07/01/96 InStant Inc Mnfr surgical instrumentation 03/26/96 08/09/96 DeBartolo Realty Corp Real estate investment trust 03/28/96 08/01/96 Stop & Shop Cos Own, op supermarkets 03/29/96 04/26/96 Great American Mgmt & Invt Inc Invt advice and financial svcs 03/29/96 07/08/96 Hayes Wheels International Inc Mnfr motor vehicle parts 03/29/96 08/07/96 MediSense Inc Mnfr blood monitoring systems 03/29/96 09/03/96 Regional Acceptance Corp Pvd consumer financing svcs 04/01/96 04/01/97 Pacific Telesis Group Pvd telecommun svcs,hldg co 04/01/96 07/19/96 US Healthcare Inc Own and operate HMO's 04/02/96 08/15/96 Teledyne Inc Manufacture aviation products 04/08/96 08/16/96 Cellular Communications Inc Operate cellular telephone sys 04/10/96 10/15/96 Waterhouse Investor Services Discount brokerage holding co 04/17/96 07/31/96 Tucker Drilling Co Inc Oil & gas contract drilling 04/22/96 07/10/96 StrataCom Inc Manufacture telecommun equip 04/22/96 06/03/96 Westcott Communications Inc Pvd motion picture prodc svcs 04/29/96 03/27/97 Paul Revere Corp(Textron Inc) Individual disability ins co ================================================================================================================================== Date Date Announced Effective Target Name Acquiror Name - ---------------------------------------------------------------------------------------------------------------------------------- 01/05/96 07/01/96 Safety Fund Corp CFX Corp, Keene, New Hampshire 01/08/96 04/30/96 Local Corp Lockheed Martin Corp 01/08/96 03/04/96 US Delivery Systems Inc Corporate Express Inc 01/09/96 04/30/96 Technslysis Corp CompuWare Corp 01/18/96 07/02/96 Covita Corp Pfizer Inc 01/22/96 04/11/96 Premier Industrial Corp Parnell Electronics PLC 01/24/96 08/08/96 National Lodging Corp Chartwell Leisure Associates 01/25/96 06/12/96 Dual Drilling (Mosrold Shippg) ENSCO International Inc 01/30/96 05/31/96 Daig Corporation St Jude Medical Inc 01/31/96 03/04/96 Tivoli Systems Inc IBM Corp 02/01/96 04/12/96 Health Wise of America Inc United HealthCare Corp 02/05/96 04/30/96 DiMark Inc Harte-Hanks Inc 02/07/96 05/07/96 Pyxis Corp Cardinal Health Inc 02/12/96 05/01/96 Duracraft Corp Honeywell Inc 02/13/96 09/18/96 Citicasters(American Finl Grp) Jacor Communications Inc 02/14/96 03/20/96 Helene Curtis Industries Inc Unilever NV 02/15/96 05/14/96 Andros Inc Genstar Capital Partners II LP 02/16/96 05/30/96 Circle K Corp Tosco Corp 02/16/96 06/13/96 Fortum Group Inc Marriott International Inc 02/20/96 07/24/96 Davidson & Associates Inc CUC International Inc 02/20/96 07/24/96 Sierra On-Line Inc CUC International Inc 02/23/96 07/01/96 Cray Research Inc Silicon Graphics Inc 02/26/96 09/16/96 Sterile Concepts Inc. Mexcom Medical Inc 02/26/96 06/18/96 Tide West Oil Co HS Resources Inc 02/27/96 05/24/96 Brandon Systems Corp Interim Services Inc 02/29/96 07/10/96 Big O Tires Inc TBC Corp 03/04/96 04/08/96 Guardsman Products Inc Lilly Industries Inc 03/07/96 07/03/96 Acme-Cleveland Corp Danaher Corp 03/11/96 08/02/96 Life Partners Group Inc Conseco Inc 03/18/96 07/01/96 Athena Neurosciences Inc Elan Corp PLC 03/18/96 08/30/96 Microtek Medical Inc Isolyser Co Inc 03/25/96 07/01/96 InStant Inc Medronic Inc 03/26/96 08/09/96 DeBartolo Realty Corp Simon Property Group Inc 03/28/96 08/01/96 Stop & Shop Cos Konindijike Ahold NV 03/29/96 04/26/96 Great American Mgmt & Invt Inc Equity Holdings, Chicago, IL 03/29/96 07/08/96 Hayes Wheels International Inc Motor Wheel Corp 03/29/96 08/07/96 MediSense Inc Abbott Laboratories 03/29/96 09/03/96 Regional Acceptance Corp Southern Natl, Winston-Salem, NC 04/01/96 04/01/97 Pacific Telesis Group SBC Communications Inc 04/01/96 07/19/96 US Healthcare Inc Aetna Life & Casualty Co 04/02/96 08/15/96 Teledyne Inc Allegheny Ludlum Corp 04/08/96 08/16/96 Cellular Communications Inc AirTouch Communications 04/10/96 10/15/96 Waterhouse Investor Services Toronto-Dominion Bank 04/17/96 07/31/96 Tucker Drilling Co Inc Patterson Energy Inc 04/22/96 07/10/96 StrataCom Inc Cisco Systems Inc 04/22/96 06/03/96 Westcott Communications Inc K-III Communications Corp 04/29/96 03/27/97 Paul Revere Corp(Textron Inc) Provident Cos ================================================================================================================================== Date Date Acquiror Announced Effective Target Name Business Description - ---------------------------------------------------------------------------------------------------------------------------------- 01/05/96 07/01/96 Safety Fund Corp Savings and loan 01/08/96 04/30/96 Local Corp Mnfr aerospace systems, prod 01/08/96 03/04/96 US Delivery Systems Inc Retail office supplies 01/09/96 04/30/96 Technslysis Corp Dvlp, whl software systems 01/18/96 07/02/96 Covita Corp Manufacture pharmaceuticals 01/22/96 04/11/96 Premier Industrial Corp Mnfr, whl electronic components 01/24/96 08/08/96 National Lodging Corp Own and operate hotels 01/25/96 06/12/96 Dual Drilling (Mosrold Shippg) Pvd oil, gas drilling svcs 01/30/96 05/31/96 Daig Corporation Mnfr heart valves, x-ray equip 01/31/96 03/04/96 Tivoli Systems Inc Mnfr computers, office equip 02/01/96 04/12/96 Health Wise of America Inc Own and operate HMOs 02/05/96 04/30/96 DiMark Inc Pvd direct marketing services 02/07/96 05/07/96 Pyxis Corp Whl pharmaceutical products 02/12/96 05/01/96 Duracraft Corp Mnfr automation, control sys 02/13/96 09/18/96 Citicasters(American Finl Grp) Own, op radio bdcstg stations 02/14/96 03/20/96 Helene Curtis Industries Inc Produce foods; holding company 02/15/96 05/14/96 Andros Inc Investment firm 02/16/96 05/30/96 Circle K Corp Petroleum refining 02/16/96 06/13/96 Fortum Group Inc Own, op hotels, restaurants 02/20/96 07/24/96 Davidson & Associates Inc Provide discount club svcs 02/20/96 07/24/96 Sierra On-Line Inc Provide discount club svcs 02/23/96 07/01/96 Cray Research Inc Manufacture computer systems 02/26/96 09/16/96 Sterile Concepts Inc. Mnfr surgical instruments 02/26/96 06/18/96 Tide West Oil Co Oil and gas exploration, prodn 02/27/96 05/24/96 Brandon Systems Corp Pvd human resource solutions 02/29/96 07/10/96 Big O Tires Inc Whl tires, automobile parts 03/04/96 04/08/96 Guardsman Products Inc Mnfr industrial finishings 03/07/96 07/03/96 Acme-Cleveland Corp Mnfr tools, control equipment 03/11/96 08/02/96 Life Partners Group Inc Insurance holding company 03/18/96 07/01/96 Athena Neurosciences Inc Mnfr drug delivery systems 03/18/96 08/30/96 Microtek Medical Inc Mnfr surgical supplies 03/25/96 07/01/96 InStant Inc Mnfr medical technology prods 03/26/96 08/09/96 DeBartolo Realty Corp Real estate investment trust 03/28/96 08/01/96 Stop & Shop Cos Own, operate supermarkets 03/29/96 04/26/96 Great American Mgmt & Invt Inc Investment firm 03/29/96 07/08/96 Hayes Wheels International Inc Manufacture automotive parts 03/29/96 08/07/96 MediSense Inc Mnfr pharmaceuticals, med equip 03/29/96 09/03/96 Regional Acceptance Corp Bank holding company 04/01/96 04/01/97 Pacific Telesis Group Provide telecommun services 04/01/96 07/19/96 US Healthcare Inc Insurance company 04/02/96 08/15/96 Teledyne Inc Mnfr specialty materials, metal 04/08/96 08/16/96 Cellular Communications Inc Pvd telecommunications svcs 04/10/96 10/15/96 Waterhouse Investor Services Bank holding company 04/17/96 07/31/96 Tucker Drilling Co Inc Pvd contract drilling services 04/22/96 07/10/96 StrataCom Inc Mnfr inter-networking systems 04/22/96 06/03/96 Westcott Communications Inc Publishing company 04/29/96 03/27/97 Paul Revere Corp(Textron Inc) Pvd accident, health insurance ================================================================================================================================== Premium Value of Enterprise --------------------------------- Date Date Transaction Value 1 Day Prior 1 Week Prior Announced Effective Target Name ($ mil) ($ mil) to Annc. Date to Annc. Date - ---------------------------------------------------------------------------------------------------------------------------------- 01/05/96 07/01/96 Safety Fund Corp 28.3 206.254 3.53 10.06 01/08/96 04/30/96 Local Corp 8762.4 8322.778 4.83 7.42 01/08/96 03/04/96 US Delivery Systems Inc 428.7 456.041 9.57 8.62 01/09/96 04/30/96 Technslysis Corp 32.6 28.793 12.00 16.67 01/18/96 07/02/96 Covita Corp 78.5 78.525 -2.38 2.50 01/22/96 04/11/96 Premier Industrial Corp 2722.7 2720.926 37.17 35.75 01/24/96 08/08/96 National Lodging Corp 57.0 21.745 34.12 26.67 01/25/96 06/12/96 Dual Drilling (Mosrold Shippg) 224.7 325.221 8.86 13.19 01/30/96 05/31/96 Daig Corporation 441.3 419.982 20.17 22.72 01/31/96 03/04/96 Tivoli Systems Inc 709.8 688.025 25.83 25.00 02/01/96 04/12/96 Health Wise of America Inc 271.1 268.539 8.35 9.07 02/05/96 04/30/96 DiMark Inc 151.8 145.080 1.70 1.70 02/07/96 05/07/96 Pyxis Corp 907.3 870.021 53.27 60.93 02/12/96 05/01/96 Duracraft Corp 286.7 295.828 58.18 50.00 02/13/96 09/18/96 Citicasters(American Finl Grp) 767.6 746.538 9.26 15.69 02/14/96 03/20/96 Helene Curtis Industries Inc 737.4 882.125 18.64 30.23 02/15/96 05/14/96 Andros Inc 92.6 61.211 16.13 24.14 02/16/96 05/30/96 Circle K Corp 983.0 951.573 45.85 42.47 02/16/96 06/13/96 Fortum Group Inc 622.3 598.837 4.00 8.33 02/20/96 07/24/96 Davidson & Associates Inc 1145.0 1141.542 72.30 87.50 02/20/96 07/24/96 Sierra On-Line Inc 911.0 964.417 69.33 71.70 02/23/96 07/01/96 Cray Research Inc 770.0 776.916 18.81 21.21 02/26/96 09/16/96 Sterile Concepts Inc. 140.2 145.644 53.85 60.00 02/26/96 06/18/96 Tide West Oil Co 201.3 199.612 44.64 44.64 02/27/96 05/24/96 Brandon Systems Corp 165.2 162.698 32.21 39.41 02/29/96 07/10/96 Big O Tires Inc 56.6 69.316 5.60 7.32 03/04/96 04/08/96 Guardsman Products Inc 227.8 247.933 32.37 32.37 03/07/96 07/03/96 Acme-Cleveland Corp 204.4 193.807 50.00 55.84 03/11/96 08/02/96 Life Partners Group Inc 838.8 721.523 35.48 34.40 03/18/96 07/01/96 Athena Neurosciences Inc 601.3 477.778 20.66 16.80 03/18/96 08/30/96 Microtek Medical Inc 108.6 104.862 37.50 40.63 03/25/96 07/01/96 InStant Inc 233.7 204.707 1.03 9.14 03/26/96 08/09/96 DeBartolo Realty Corp 2962.1 2782.114 11.59 16.57 03/28/96 08/01/96 Stop & Shop Cos 2870.8 3029.714 25.23 27.01 03/29/96 04/26/96 Great American Mgmt & Invt Inc 63.3 746.409 2.56 4.17 03/29/96 07/08/96 Hayes Wheels International Inc 563.8 695.070 29.29 33.33 03/29/96 08/07/96 MediSense Inc 821.6 797.412 48.76 42.76 03/29/96 09/03/96 Regional Acceptance Corp 160.7 261.856 9.33 6.60 04/01/96 04/01/97 Pacific Telesis Group 16490.0 22421.022 38.70 36.24 04/01/96 07/19/96 US Healthcare Inc 8939.0 7793.337 24.25 21.28 04/02/96 08/15/96 Teledyne Inc 2097.5 2442.365 113.55 115.12 04/08/96 08/16/96 Cellular Communications Inc 1657.4 2910.441 7.45 7.84 04/10/96 10/15/96 Waterhouse Investor Services 526.0 551.243 15.15 19.69 04/17/96 07/31/96 Tucker Drilling Co Inc 23.3 15.863 4.68 7.13 04/22/96 07/10/96 StrataCom Inc 4933.5 4738.078 48.39 59.72 04/22/96 06/03/96 Westcott Communications Inc 438.9 421.637 43.33 57.80 04/29/96 03/27/97 Paul Revere Corp(Textron Inc) 1177.1 1213.109 7.22 5.58 ================================================================================================================================== Premium ---------------------------------------------------------------- Date Date 4 Weeks Prior 3 Months Prior 1 Year Prior Announced Effective Target Name to Annc. Date to Annc. Date to Annc. Date - ------------------------------------------------------------------------------------------------------------------------------------ 01/05/96 07/01/96 Safety Fund Corp 01/08/96 04/30/96 Local Corp 8.19 01/08/96 03/04/96 US Delivery Systems Inc 32.63 30.57 123.01 01/09/96 04/30/96 Technslysis Corp 16.67 9.80 30.23 01/18/96 07/02/96 Covita Corp -2.38 24.24 148.48 01/22/96 04/11/96 Premier Industrial Corp 34.37 18.63 65.64 01/24/96 08/08/96 National Lodging Corp 46.15 42.50 01/25/96 06/12/96 Dual Drilling (Mosrold Shippg) 23.66 51.68 72.36 01/30/96 05/31/96 Daig Corporation 26.77 01/31/96 03/04/96 Tivoli Systems Inc 41.79 49.31 02/01/96 04/12/96 Health Wise of America Inc 18.63 32.13 15.26 02/05/96 04/30/96 DiMark Inc 0.84 16.50 33.93 02/07/96 05/07/96 Pyxis Corp 66.48 67.93 10.35 02/12/96 05/01/96 Duracraft Corp 68.12 82.20 16.78 02/13/96 09/18/96 Citicasters(American Finl Grp) 28.26 349.52 337.04 02/14/96 03/20/96 Helene Curtis Industries Inc 71.78 02/15/96 05/14/96 Andros Inc 35.85 12.50 4.35 02/16/96 05/30/96 Circle K Corp 68.82 548.63 830.11 02/16/96 06/13/96 Fortum Group Inc 44.44 02/20/96 07/24/96 Davidson & Associates Inc 67.76 30.12 129.77 02/20/96 07/24/96 Sierra On-Line Inc 50.38 65.51 160.60 02/23/96 07/01/96 Cray Research Inc 20.60 34.83 83.21 02/26/96 09/16/96 Sterile Concepts Inc. 55.34 02/26/96 06/18/96 Tide West Oil Co 51.52 02/27/96 05/24/96 Brandon Systems Corp 29.77 554.88 758.54 02/29/96 07/10/96 Big O Tires Inc 12.82 23.36 22.22 03/04/96 04/08/96 Guardsman Products Inc 57.27 03/07/96 07/03/96 Acme-Cleveland Corp 56.86 03/11/96 08/02/96 Life Partners Group Inc 55.56 69.70 -1.75 03/18/96 07/01/96 Athena Neurosciences Inc 40.39 73.81 220.88 03/18/96 08/30/96 Microtek Medical Inc 43.90 129.19 201.85 03/25/96 07/01/96 InStant Inc 5.87 228.93 03/26/96 08/09/96 DeBartolo Realty Corp 25.54 23.17 15.54 03/28/96 08/01/96 Stop & Shop Cos 45.65 03/29/96 04/26/96 Great American Mgmt & Invt Inc 3.63 2.04 41.34 03/29/96 07/08/96 Hayes Wheels International Inc 43.02 24.88 62.03 03/29/96 08/07/96 MediSense Inc 39.00 42.29 123.60 03/29/96 09/03/96 Regional Acceptance Corp 25.41 9.33 6.60 04/01/96 04/01/97 Pacific Telesis Group 33.88 14.04 27.24 04/01/96 07/19/96 US Healthcare Inc 18.75 23.91 28.81 04/02/96 08/15/96 Teledyne Inc 108.97 35.44 39.31 04/08/96 08/16/96 Cellular Communications Inc 6.28 94.69 87.23 04/10/96 10/15/96 Waterhouse Investor Services 65.22 04/17/96 07/31/96 Tucker Drilling Co Inc 10.05 34.13 71.68 04/22/96 07/10/96 StrataCom Inc 79.69 57.00 192.99 04/22/96 06/03/96 Westcott Communications Inc 56.36 37.05 45.15 04/29/96 03/27/97 Paul Revere Corp(Textron Inc) 8.50 Page F-8
MERGER PREMIUMS TO MARKET VALUE ANALYSIS MERGER WITH TARGET PRICE EQUAL TO OR GREATER THAN $10 PER SHARE ANNOUNCED AND COMPLETED 1/1/96 - 2/3/99 (continued) ================================================================================ Date Date Announced Effective Target Name Target Business Description Acquiror Name - -------------------------------------------------------------------------------------------------------------------------------- 04/30/96 08/12/96 UUNet Technologies Inc Internet service provider MFS Communications Co Inc. 05/01/96 06/28/96 Quartum Health Resources Inc Provide home health care svcs Olsten Corp 05/01/96 08/21/96 Uniroyal Chemical Co Mnfr pesticides, rubber chere Cromption & Knowles Corp 05/07/96 07/03/96 Guaranty National Corp Insurance company Orion Capital Corp 05/07/96 08/14/96 Kahler Realty Corp Real estate investment trust Tiger Real Estate Fund LP 05/10/96 08/22/96 Cycare Systems Inc Provide accounting services HBO & Co 05/10/96 12/11/96 Transnational Re Corp Property reinsurance company PXRE Corp 05/13/96 08/15/96 MICOM Communications Corp Mnfr communications equipment Northern Telecom Ltd(BCE Inc) 05/14/96 09/05/96 Caremark International Inc Pvd home health care services MedPartners/Mullikin Inc 05/15/96 08/23/96 Davis Water & Waste Industries Water distn and treatment prod United States Filter Corp 05/16/96 11/15/96 A+ Network Inc Pvd paging services Metrocall Inc 05/20/96 07/23/96 AmenData Technologies Inc Whl computer, peripherals General Electric Capital Svcs 05/20/96 12/30/96 Continental Waste Industries Pvd waste disposal services Republic Industries Inc 05/20/96 10/31/96 Sterling Healthcare Group Inc Own, op doctors' offices FPA Medical Management Inc 05/24/96 07/02/96 Masland Corp Mnfr motor vehicle parts Lear Corp 05/27/96 02/16/97 SyStemix Inc(Novartis AG) Mnfr, dvlp cellular processes Novartis AG 05/31/96 12/19/96 Addington Resources Inc Bituminous coal mining Republic Industries Inc 05/31/96 08/30/96 Image Industries Inc Pvd plastic recyling svcs Maxim Group Inc 06/03/96 08/05/96 Hedel Broadcasting Corp Own, op radio bdcstg stations Clear Channel Communications 06/03/96 09/30/96 Univar Corp Whl chemicals, pesticides Pakhoed Holding NV 06/04/96 09/20/96 HomeTown Buffet Inc Own and operate restaurants Buffets Inc 06/06/96 10/01/96 AT&T Capital Corp(AT&T Corp) Pvd leasing, financing services Investor Group 06/06/96 12/18/96 Bally Entertainment Corp Own, op casino hotels Hilton Hotels Corp 06/06/96 07/09/96 FinishMaster Inc(Maxco Inc) Whl automotive paint, coatings Lacy Distribution Inc(LDI Ltd) 06/10/96 08/23/96 Orbit Semiconductor Inc Manufacture seimiconductors DII Group Inc 06/11/96 07/23/96 Community Health Systems Inc Own and operate hospitals Forstmann Little & Co 06/14/96 08/23/96 Brenco Inc Ball and roller bearings Varten Corp 06/17/96 11/19/96 Perril DataComm Networks Inc Mnfr data communications equip Bay Networks Inc 06/18/96 09/30/96 Builders Warehouse Assn Inc Pvd LAN design services Osicom Technologies Inc 06/20/96 12/31/96 Infinity Broadcasting Corp Own, op radio broadcasting strs Westinghouse Electric Corp 06/20/96 09/16/96 Public Storage Properties X Pvd warehousing storage svcs Public Storage Inc 06/20/96 09/16/96 Public Storage Properties XII Rent storage space Public Storage Inc 06/24/96 09/03/96 Sanifill Inc Provide waste management svcs USA Waste Services Inc 06/28/96 10/02/96 National Re Corp Fire, casualty insurance co General Re Corp 06/28/96 09/27/96 Salem Corp Whl industrial mach and equip Investor Group 07/01/96 10/04/96 Landmark Graphics Corp Dvlp CAE sys for geoscientists Halliburton Co 07/01/96 03/25/97 Renaissance Commun Corp Own and operate TV stations Tribune Co 07/02/96 08/08/96 Ambar Inc Pvd oil and gas field services Beacon Group Energy Investment 07/17/96 01/22/97 New World Commun GP(Ma(co) Operate television stations News Corp Ltd 07/19/96 07/01/97 Portland General Corp Electric utility holding co Enron Corp 07/19/96 08/27/97 Rexore Corp Mnfr petrochemical products Huntsman Corp 07/22/96 10/03/96 Global Natural Resources Inc Oil and gas exploration prodn Seagull Energy Corp 07/22/96 10/25/96 Telebil Corp Mnfr data transmission equip Cisco Systems Inc 07/22/96 07/29/97 United Cities Gas Co Gas utility Atinos Energy Corp 07/23/96 02/19/97 Osbom Communications Corp Own, op radio and TV stations Capstar Broadcasting Partners 07/24/96 10/11/96 PCI Services Inc Pvd product packaging services Cardinal Health Inc 08/02/96 11/29/96 First Colony Corp Insurance holding company General Electric Capital Corp 08/05/96 04/07/97 EZ Communications Inc Own, operate radio stations American Radio Systems Corp Premium ------------------------------------------------------------------------- Value of Enterprise Date Date Acquiror Transaction Value 1 Day Prior 1 Week Prior 4 Weeks Prior Announced Effective Business Description ($ mil) ($ mil) to Annc. Date To Annc. Date To Annc. Date - --------------------------------------------------------------------------------------------------------------------------------- 04/30/96 08/12/96 Pvd telephone communs svcs 2060.9 2037.023 27.59 39.91 125.91 05/01/96 08/28/96 Pvd temporary personel svcs 270.2 301.169 23.65 29.32 60.18 05/01/96 08/21/96 Mnfr chemicals, dyes, flavors 1463.4 1326.163 27.66 44.58 55.84 05/07/96 07/03/96 Insurance company, holding co 85.1 361.073 15.63 15.63 22.31 05/07/96 08/14/96 Real estate investment trust 222.7 212.811 9.68 13.33 9.68 05/10/96 08/22/96 Dvlp healthcare software 277.1 252.048 6.33 8.99 61.02 05/10/96 12/11/96 Reinsurance company 133.1 165.348 12.47 16.52 8.70 05/13/96 08/15/96 Mnfr telecommunications equip 138.3 144.308 -14.29 9.09 58.35 05/14/96 09/05/96 Pvd management health svcs 2707.8 3139.099 9.95 16.00 18.17 05/15/96 08/23/96 Mnfr water treatment equip 100.8 109.499 36.18 59.03 62.30 05/15/96 11/15/96 Pvd local paging services 345.4 342.749 36.13 40.67 63.88 05/20/96 07/23/96 Pvd financing services 454.8 734.654 4.07 25.49 47.13 05/20/96 12/30/96 Provide waste disposal svcs 354.4 360.348 66.73 62.18 82.04 05/20/96 10/31/96 Pvd health care mgmt services 157.5 172.338 -3.07 3.67 13.09 05/24/96 07/??/96 Mnfr automobile seats 413.5 444.870 6.12 18.18 30.00 05/27/96 02/16/97 Manufacture pharmaceuticals 107.6 401.596 4.70 69.57 59.18 05/31/96 12/19/96 Provide waste disposal svcs 317.8 358.730 24.88 43.93 50.30 05/31/96 08/30/96 Own, op floor covering fran 105.1 152.440 17.00 15.84 23.16 06/03/96 08/05/96 Own, op TV, radio station 315.3 370.095 2.22 4.55 2.22 06/03/96 09/30/96 Pvd freight transp services 331.8 605.298 57.17 54.06 58.78 06/04/96 09/20/96 Own and operate restaurants 174.0 195.943 -3.27 7.38 2.67 06/06/96 10/01/96 Investor group 2128.6 9188.700 37.41 38.46 42.29 06/06/96 12/18/96 Own, operate hotels 3138.1 3108.891 59.03 74.81 72.18 06/06/96 07/09/96 Whl industrial machinery equip 62.6 111.128 30.42 27.76 42.27 06/10/96 08/23/96 Mnfr electronic components 118.3 105.053 37.78 36.10 57.18 06/11/96 07/23/96 Investment company 1080.0 1267.498 20.23 19.89 18.86 06/14/96 08/23/96 Mnfr customtubular products 161.4 164.889 30.96 30.30 20.56 06/14/96 11/19/96 Mnfr, whl data networking prods 117.6 124.136 7.50 2.99 6.17 06/18/96 09/30/96 Mnfr communications equipment 69.3 73.342 9.67 15.95 35.32 06/20/96 12/31/96 Mnfr elec defense electri equip 4737.8 4153.297 12.76 10.82 15.27 06/20/96 09/16/96 Real estate investment trust 50.2 39.475 13.85 13.08 10.83 06/20/96 09/16/96 Real estate investment trust 55.2 37.663 14.56 14.56 15.30 06/24/96 09/03/96 Pvd waste disposal services 1236.9 1604.447 -1.02 3.86 1.63 06/28/96 10/02/96 Insurance holding company 904.6 1110.321 45.21 65.63 60.61 06/28/96 09/27/96 Investor group 46.6 31.813 21.96 23.46 11.73 07/01/96 10/04/96 Mnfr oil field machinery 586.7 531.762 65.51 77.00 68.80 07/01/96 03/25/97 Publish newspaper, cable TV sys 1094.4 1118.676 11.63 19.01 20.50 07/02/96 08/08/96 Investment firm 66.6 81.363 24.14 17.07 50.00 07/17/96 01/22/97 Publish newspapers, magazines 2173.0 4241.936 67.66 71.63 60.15 07/19/96 07/01/97 Own, operate gas pipelines 2901.7 2982.291 23.13 21.54 19.48 07/19/96 08/27/97 Mnfr petrochemicals 606.8 494.486 75.34 60.00 56.10 07/22/96 10/03/96 Own, op gas pipelines 525.6 526.491 11.23 13.04 13.04 07/22/96 10/25/96 Mnfr inter-networking systems 196.3 196.203 22.76 22.76 4.71 07/22/96 07/29/97 Natural gas distribution svcs 496.5 508.192 52.21 64.29 69.67 07/23/96 02/19/97 Own, operate radio stations 89.9 110.806 28.13 50.00 38.20 07/24/96 10/11/96 Whl pharmaceutical products 208.0 209.588 44.00 42.89 23.84 08/02/96 11/29/96 Pvd consumer financing svcs 1799.2 2011.939 37.71 32.66 39.04 08/05/96 04/07/97 Own, op radio bdcstg station 687.3 623.194 45.54 56.36 89.20 - -------------------------------------------------------- Date Date 3 Months Prior 1 Year Prior Announced Effective to Annc. Date to Annc. Date - -------------------------------------------------------- 04/30/96 08/12/96 58.86 05/01/96 08/28/96 54.90 9.27 05/01/96 08/21/96 64.38 25.00 05/07/96 07/03/96 26.50 12.98 05/07/96 08/14/96 46.24 88.89 05/10/96 08/22/96 79.49 101.69 05/10/96 12/11/96 0.81 22.75 05/13/96 08/15/96 57.38 74.55 05/14/96 09/05/96 25.81 81.93 05/15/96 08/23/96 111.57 207.74 05/15/96 11/15/96 72.24 53.45 05/20/96 07/23/96 62.03 109.84 05/20/96 12/30/96 117.56 223.19 05/20/96 10/31/96 05/24/96 07/??/96 77.78 84.07 05/27/96 02/16/97 39.29 59.18 05/31/96 12/19/96 69.84 58.73 05/31/96 08/30/96 06/03/96 08/05/96 162.86 253.85 06/03/96 09/30/96 80.93 55.60 06/04/96 09/20/96 25.85 20.66 06/06/96 10/01/96 06/06/96 12/18/96 81.78 175.95 06/06/96 07/09/96 42.27 9.82 06/10/96 08/23/96 69.09 -22.50 06/11/96 07/23/96 22.35 49.64 06/14/96 08/23/96 34.42 30.67 06/14/96 11/19/96 06/18/96 09/30/96 37.08 370.00 06/20/96 12/31/96 06/20/96 09/16/96 5.26 20.40 06/20/96 09/16/96 15.30 27.66 06/24/96 09/03/96 26.37 55.38 06/28/96 10/02/96 57.04 60.61 06/28/96 09/27/96 30.72 -11.50 07/01/96 10/04/96 93.09 24.94 07/01/96 03/25/97 423.64 150.43 07/02/96 08/08/96 73.49 311.43 07/17/96 01/22/97 49.06 28.53 07/19/96 07/01/97 23.68 58.43 07/19/96 08/27/97 19.63 16.36 07/22/96 10/03/96 17.83 73.80 07/22/96 10/25/96 101.51 196.67 07/22/96 07/29/97 56.85 69.70 07/23/96 02/19/97 44.75 108.54 07/24/96 10/11/96 16.10 158.00 08/02/96 11/29/96 41.07 45.33 08/05/96 04/07/97 142.56 162.78 Page F-9
Merger Premiums to Market Value Analysis Mergers with Target Price Equal to or Greater than $10 per Share Announced and Completed 1/1/96-2/3/99 (continued) ==================================================================================================================================== Date Date Announced Effective Target Name Target Business Description Acquiror Name - ------------------------------------------------------------------------------------------------------------------------------------ 08/05/96 02/14/97 FHP International Corp Own and operate HMOs PacifCare Health Systems Inc. 08/07/96 10/03/96 Douglas & Lorrason Co Wholesale motor vehicles Magna International Inc 08/08/96 09/17/96 Roto-Rooter Inc (Chemed Corp) Provide plumbing services, prod Chemed Corp 08/09/96 08/06/97 NorAmEnergy Corp Oil and gas exploration, prodn Houston Industries Inc 08/12/96 03/02/98 Atlantic Energy (Conoco) Public utility holding co Delmarva Power & Light 08/14/96 11/25/96 American Re Corp Property, casualty insurance co Muenchener Ruedeversicherungs 08/14/96 11/07/96 Payco American Corp Credit collection services OSI Holdings Corp 08/14/96 10/24/96 Redman Industries Inc Manufacture mobile homes Champion Enterprises Inc 08/15/96 09/26/96 Orchard Supply Hardware Stores Own, op home improvement ctrs Sears Roebuck & Co 08/19/96 09/20/96 CasTech Aluminum Group Inc Mnfr aluminum sheets Commonwealth Aluminum Corp 08/19/96 12/16/96 Griffin Gaming & Equipment Own, op gaming facilities Sun International Hotels Ltd 08/22/96 10/29/96 Meta Software Inc Develop software Avanti Corp 08/26/96 12/17/96 American Travellers Corp Insurance company Conseco Inc 08/26/96 12/31/96 Bankers Life Holdings (Conseco) Life ins co; holding company Conseco Inc 08/26/96 03/04/97 Capitol American Financial Pvd accident, life ins svcs Conseco Inc 08/26/96 11/14/96 Career Horizons Inc Pvd temporary personnel svcs AccuStaff Inc 08/26/96 12/31/96 MFS Communications Co Inc Pvd telephone communs svcs WorldCom Inc 08/26/96 01/09/97 Spreckels Industries Inc Produce sugar, mfr indust prod Columbus McKinnon Corp 08/29/96 11/08/96 Red Lions Hotels (Red Lion Inn) Own, op hotels Doubletree Corp 09/02/96 03/06/97 Arcadian Corp Mnfr phospatic fertilizers Potash Corp of Saskatchewan 09/09/96 12/23/96 Big B Inc (Revco DS Inc) Drug, grocery retail stores Revco DS Inc 09/12/96 12/31/96 Duracell International Inc Manufacture alkaline batteries Gillette Co 09/23/96 12/04/96 Diamond Shamrock Inc Mnfr, wholesale petroleum Ultramer Corp 09/24/96 12/09/96 GMS Inc Develop software HBO & Co 09/26/96 02/28/97 Providence Journal Co Own, op TV broadcasting stns AH Belo Corp 09/26/96 12/23/96 Transport Holdings Insurance holding company Conseco Inc 09/30/96 09/27/97 Belden & Blake Corp Oil and gas exploration, prodn Texas Pacific Group Inc 10/01/96 12/31/96 South West Property Trust Inc Real estate investment trust United Dominion Realty Tr Inc 10/02/96 02/03/97 Baby Superstore Inc Own, op children's wear stores Toys R' Us Inc 10/03/96 02/07/97 TSX Corporation Mnfr communications equipment ANTEC Corp 10/03/96 02/13/97 Kinder-Care Learning Centers Operate day care centers Kohlberg Kravis Roberts & Co 10/03/96 12/31/96 LXE (Electromagnetic Sciences) Mnfr microwave components Electromagnetic Sciences Inc 10/07/96 12/11/96 Augst Inc Mnfr electr, hardware prods Thomas & Betts Corp 10/07/96 12/02/96 Cheyenne Software Inc Develop computer software Computer Associates Intl Inc 10/08/96 11/22/96 Super Food Services Inc Wholesale food products Nash Finch Co 10/10/96 01/31/97 Gelman Sciences Inc Mnfr medical filter devices Pall Corp 10/14/96 06/26/98 Pacific Enterprises Inc Natural gas utility Envos Corp (Sempra Energy) 10/14/96 12/12/96 Thrifty Payless Holdings Inc Own, op drug store chain Rite Aid Corp 10/15/96 06/03/97 Conrail Inc Own, op freight railroad lines Investor Group 10/15/96 12/23/96 FlightSafety International Mnfr flight simulators Berkshire Hathaway Inc 10/17/96 01/30/97 O'nds HealthCorp Own, operate hospitals Tenet Healthcare Corp 10/21/96 03/31/97 Detroit & Canada Tunnel Corp Pvd tunnel operation services Investor Group 10/23/96 04/16/97 Syratech Corp Manufacture silver flatware Thomas H. Lee Equity Fund III 10/28/96 05/07/97 Cooper & Chyan Technology Inc Develop software Cadence Design Systems Inc 10/28/96 01/15/97 Loctite Corp Mnfr adhesives & sealants Henkel KGaA 10/29/96 05/29/97 Wireless Cable of Atlanta Pvd wireless cable communs svc BellSouth Corp Premium ------------------------------------------------------------------- 1 Day 1 Week 4 Weeks 3 Months 1 Year Value of Enterprise Prior Prior Prior Prior Prior Acquiror Transaction Value to Annc. to Annc. to Annc. to Annc. to Annc. Business Description ($ mil) ($ mil) Date Date Date Date Date - ------------------------------------------------------------------------------------------------------------------------------------ Own and operate HMO's 2000.1 2,161,889 19.37 27.37 19.10 24.96 41.20 Mnfr auto parts, accessories 134.6 213,954 39.33 90.77 103.28 125.45 121.43 Mnfr chems janitorial equip 93.6 220,326 12.33 12.33 11.19 20.15 25.19 Electric utility holding co 3648.8 3,750,590 35.72 46.52 41.69 48.23 143.32 Electric and gas utility 951.1 2,155,874 5.34 3.83 3.09 5.34 -0.47 Provide reinsurance services 3967.8 3,830,429 26.21 41.69 44.04 49.86 79.93 Investment holding firm 161.9 154,646 19.15 17.90 60.00 64.71 77.78 Mnfr single-family houses 341.9 391,852 6.29 11.71 26.39 21.73 102.26 Department stores, fnl svcs 423.7 412,744 17.65 25.56 28.44 8.95 137.29 Manufacture aluminum prods 328.7 322,740 37.82 57.69 45.13 41.38 3.14 Own, operate hotels 309.6 345,195 88.88 88.88 69.28 52.07 52.07 Develop software 139.3 136,900 18.00 0.48 1.48 -27.49 Insurance holding company 868.3 968,714 30.09 37.35 81.17 61.36 230.54 Insurance holding company 120.8 1,534,747 14.94 10.50 11.73 25.79 31.58 Insurance holding company 715.5 695,104 50.84 51.60 56.31 53.14 65.76 Provide staffing services 1010.3 835,758 34.40 33.88 63.98 147.63 145.64 Pvd telecommunication svcs 13595.7 14,885,504 58.82 59.96 86.96 66.27 142.14 Mnfr industrial chains, hoists 259.4 248,369 23.87 24.68 29.73 45.45 178.26 Own, operate hotel mgt co 1174.1 1,129,012 28.60 33.55 31.38 Manufacture potash 1723.3 1,424,486 24.66 20.99 26.96 30.18 36.21 Own, operate drug stores 335.4 401.153 36.63 66.27 58.62 68.29 10.40 Mnfr shaving razors and blades 7231.9 7,764,776 19.84 29.75 30.11 33.80 37.31 Mnfr refined petroleum prods 860.9 1,807,572 -3.90 1.11 5.71 0.68 15.70 Dvlp healthcare software 242.6 235,095 56.35 57.50 86.26 125.52 64.80 Newspapers, radio, TV stations 1429.6 1,617,143 58.38 64.43 65.49 109.89 Insurance holding company 299.9 242,623 25.80 35.27 32.18 41.52 Investment holding company 405.7 404,194 32.52 27.81 31.71 21.35 42.11 Real estate investment trust 547.8 526,405 9.31 9.31 13.39 12.37 18.98 Own, op retail toy stores 382.2 501,916 17.99 21.82 25.07 43.21 -46.86 Mnfr commun network products 254.3 214,629 10.00 18.63 26.04 -22.41 3.16 Leverage buyout firm 571.0 510,009 17.83 18.75 26.67 22.58 34.51 Mnfr microwave components 14.8 81,560 22.09 14.13 19.32 23.58 28.10 Mnfr electronic connectors 570.1 611,782 32.83 30.49 45.94 54.06 49.89 Develop applications software 1247.6 1,199,601 32.61 34.81 30.48 Wholesale groceries 164.2 262,843 37.78 36.26 29.17 51.22 26.53 Mnfr filters, separations equip 297.7 292,223 80.47 57.91 49.42 65.43 58.81 Electric and gas utility 2870.0 4,159,400 7.43 8.72 11.87 Own, operate drug stores 2394.0 2,367,729 26.91 28.65 37.18 62.23 Investor group 10435.9 12,532,430 61.97 60.28 60.28 74.24 61.40 Property, casualty insurance co 1518.1 1,555,157 13.96 10.80 10.80 Own, op hospitals 3123.4 2,875,478 9.61 19.48 16.56 40.56 57.21 Investor group 36.5 33,327 64.89 74.19 54.29 64.89 110.73 Pvd fund mgmt svcs 304.4 335,621 21.19 28.00 29.29 31.28 62.03 Develop CAD software 474.8 452,041 2.54 1.73 31.84 63.54 Mnfr, whl chemicals, detergents 1289.1 2,118,282 31.89 36.70 34.81 41.86 33.33 Pvd telecommunication svcs 44.7 37,948 89.88 80.83 80.83 20.57 83.04
MERGER PREMIUMS TO MARKET VALUE ANALYSIS MERGERS WITH TARGET PRICE EQUAL TO OR GREATER THAN $10 PER SHARE ANNOUNCED AND COMPLETED 1/1/96-2/3/99 (continued) ================================================================================ DATE DATE ACQUIROR ANNOUNCED EFFECTIVE TARGET NAME TARGET BUSINESS DESCRIPTION ACQUIROR NAME BUSINESS DESCRIPTION - ----------------------------------------------------------------------------------------------------------------------------------- 10/30/96 04/08/97 Vons Cos Inc Own and operate supermarkets Safeway Inc Own, op grocery store 10/31/96 07/01/97 California Jockey Club/Bay Own, op horse racing tracks Patriot American Hospitality Real estate investment trust 10/31/96 12/18/96 Kash N' Karry Food Stores Own and operate supermarkets Food Lion Inc. Own and operate super- Inc markets 11/04/96 02/27/97 Eckend Corp Operate retail drug stores JC Penney Co Department stores 11/11/96 04/30/97 PHH Corp Pvd auto, truck leasing svcs HFS Inc Own, op hotel franchises 11/12/96 06/12/97 Leslie's Poolmart Own, op swimming pool stores Investor Group Investor group 11/12/96 02/27/97 SQA Inc Whl software Rational Software Corp Dvlp component-based software 11/13/96 01/20/97 Medex Inc Mnfr drug infusion products FCY Inc Mnfr engineered polymer prods 11/18/96 01/02/97 Sudbury Inc Mnfr automotive parts Internet Corp Ductile, gray iron cast- ings 11/25/96 01/09/97 Opal Inc Mnfr special industry equip Applied Materials Inc Mnfr wafer fabrication systems 11/25/96 06/18/97 PanEnergy Corp Oil and gas exploration Duke Power Co Electric utility prodn 11/26/96 12/30/96 Amor All Products Mnfr cleaners and waves Clorox Co Manufacture household (McKesson) bleach 11/27/96 03/27/97 Central Tractor Farm & Own, op tractor hardware JW Childs Equity Partners Investment company Country stores LP 11/27/96 12/27/96 Central Tractor Farm & Own, op tractor hardware JW Childs Equity Partners Investment company Country stores LP 11/27/96 01/16/97 Milgray Electronics Inc Whl electric equip Bell Industries Inc Mnfr electronic computer prods 11/27/96 03/19/97 Owen Healthcare Inc Wholesale pharmaceuticals Cardinal Health Inc Whl pharmaceutical prod- ucts 11/29/96 04/30/97 Chicago Dock and Canal Real estate investment trust CityFront Center LLC Real estate investment Trust trust 11/29/96 01/06/97 ElectroStar Inc Mnfr printed circuit boards Tyco International Ltd Mnfr fire protection systems 12/02/96 01/30/97 Eastbay Inc Own, operate mail order bus Venator Group Inc Own, op variety stores 12/02/96 03/03/97 Health Images Inc Provide magnetic imaging svcs HealthSouth Corp Own, op outpatient surgery ctr 12/05/96 02/26/97 Barefoot Inc Provide lawn care services ServiceMaster LP Pvd mgnt svcs 12/05/96 03/27/97 Cavco Industries Inc Mnfr mobile homes Centex Corp Construct bldgs, RE dvlp firm 12/05/96 04/11/97 Public Storage Properties Real estate investment Public Storage Inc Real estate investment XIV trust trust 12/05/96 04/11/97 Public Storage Properties Real estate investment Public Storage Inc Real estate investment XV trust trust 12/05/96 05/05/97 Santa Fe Pacific Gold Gold mining co Newmont Mining Corp Gold, coal mining oil, Corp gas expl 12/05/96 01/10/97 Zycon Corp Mnfr printed circuit Hadco Corp Mnfr computer circuit boards boards 12/11/96 02/21/97 Alexander & Alexander Pvd insurance brokerage svcs Aon Corp Insurance holding Services company 12/16/96 01/27/97 Eljer Industries Inc Manufacture plumbing fixtures Zum Industries Inc Mnfr environmental equipment 12/16/96 04/16/97 Paragon Group Inc Real estate investment trust Camden Property Trust Real estate investment trust 12/16/96 05/30/97 Pioneer Financial Life, health, accident ins Conseco Inc Insurance holding Services svcs company 12/16/96 01/27/97 Tylan General Inc Mnfr gas measure equipment Millipore Corp Mnfr analytical prod- ucts 12/17/96 08/01/97 McDonnell Douglas Mnfr aerospace, defense Boeing Co Mnfr aircraft, aero- Corp equip space equip 12/19/96 03/25/97 IWC Resources Corp Water utility holding NIPSCO Industries Inc Electric, gas utility company hldg co 12/30/96 05/29/98 LILCO Electric utility Brooklyn Union Gas Co Gas utility 01/07/97 02/25/97 American Medical Provide ambulance services Medi/Trans Inc (Laidlaw Pvd ambulance svcs Response Inc Inc) 01/07/97 02/10/97 Bonray Drilling Corp On-shore oil and gas DLB Oil & Gas Inc Oil and gas exploration drilling prodn 01/13/97 04/25/97 OpenVision Technologies Mnfr software, pvd pro- Veritas Software Corp Dvlp bus applications Inc gramming software 01/13/97 09/02/97 Zurich Reinsurance Centre Insurance agency Zurich Versicherungs GmbH Insurance holding com- pany 01/14/97 04/01/97 Oxford Resources Corp Pvd passenger car leasing Barnett Banks, Jacksonville, Commerical bank svcs FL 01/14/97 04/30/97 Tencor Instruments Inc Mnfr test instruments KLA Instruments Corp Mnfr measuring devices 01/15/97 08/06/97 Value Health Inc Provide health plan services Columbia/HCA Healthcare Corp Own, operate hospitals 01/16/97 02/28/97 Epic Design Technology Develop CAD software Synopsys Inc Develop automation Inc software 01/16/97 05/30/97 Wellsford Residential Real estate investment Equity Residential Pptys Real estate investment Ppty trust Trust trust 01/17/97 06/17/97 Avenco Corp Fire, marine, casaulty ins HCC Insurance Holdings Inc Provide insurance co services 01/17/97 04/11/97 Studio Plus Hotels Inc Own, operate hotels, motels Extended Stay America Inc Own, op hotels 01/20/97 06/27/97 First USA Inc Pvd credit card svcs BANC ONE Corp, Columbus, Ohio Bank holding company VALUE OF ENTERPRISES PREMIUM ---------------------------------------------------------------------------- DATE DATE TRANSACTION VALUE 1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR 3 MONTHS PRIOR 1 YEAR PRIOR ANNOUNCED EFFECTIVE ($ MIL) ($MIL) TO ANNC. DATE TO ANNC. DATE TO ANNC. DATE TO ANNC. DATE TO ANNC DATE - -------------------------------------------------------------------------------------------------------------------------------- 10/30/96 04/08/97 2251.6 3092.969 26.80 21.52 25.71 32.96 115.49 10/31/96 07/01/97 199.7 185.790 87.23 88.57 103.08 268.67 300.61 10/31/96 12/18/96 347.1 342.271 9.47 33.33 6.67 -7.96 13.66 11/04/96 02/27/97 3298.5 3216.527 21.21 28.44 29.63 56.42 67.66 11/11/96 04/30/97 1809.5 6273.958 60.98 65.00 69.23 83.33 120.00 11/12/96 06/12/97 112.8 124.193 26.09 31.82 31.82 13.73 5.45 11/12/96 02/27/97 315.8 273.700 39.44 28.23 39.44 73.06 11/13/96 01/20/97 150.6 147.438 54.10 57.98 66.74 106.59 123.81 11/18/96 01/02/97 155.4 145.122 19.05 25.00 9.89 14.94 53.85 11/25/96 01/09/97 189.6 146.567 52.58 64.44 105.56 23.33 270.00 11/25/96 06/18/97 7666.8 9955.409 18.34 22.70 30.29 48.15 80.18 11/26/96 12/30/96 410.1 355.099 9.09 13.97 13.97 27.27 4.60 11/27/96 03/27/97 56.7 172.740 17.53 17.53 18.75 42.50 67.65 11/27/96 12/27/96 81.0 166.959 15.46 15.46 16.67 40.00 64.71 11/27/96 01/16/97 100.0 135.176 8.40 16.99 20.57 11/27/96 03/19/97 544.1 481.667 64.89 100.86 87.25 11/29/96 04/30/97 177.9 176.494 22.32 22.70 22.70 68.07 150.00 11/29/96 01/06/97 111.0 119.210 7.69 27.27 16.67 40.00 12/02/96 01/30/97 146.0 142.812 26.32 28.00 23.08 12/02/96 03/03/97 263.7 259.674 7.39 27.85 34.24 57.93 116.52 12/05/96 02/26/97 230.9 246.105 25.49 28.00 42.22 60.00 31.96 12/05/96 03/27/97 76.2 104.851 13.23 20.23 30.49 39.87 130.11 12/05/96 04/11/97 82.4 56.913 29.19 30.82 31.65 32.48 49.64 12/05/96 04/11/97 79.1 54.218 29.19 28.40 32.48 34.19 46.48 12/05/96 05/05/97 2505.5 2862.135 59.75 66.77 63.18 45.92 50.26 12/05/96 01/10/97 211.7 240.896 12.50 46.94 94.60 105.71 39.81 12/11/96 02/21/97 1227.4 1131.321 6.06 8.53 9.38 8.53 -16.67 12/16/96 01/27/97 175.6 254.314 77.78 84.62 90.10 140.00 146.15 12/16/96 04/16/97 624.8 619.148 9.71 12.25 14.00 19.61 7.29 12/16/96 05/30/97 564.0 531.203 47.37 50.34 63.50 12/16/96 01/27/97 147.7 150.717 39.13 26.73 26.73 16.36 13.27 12/17/96 08/01/97 13359.0 15830.056 0.62 22.71 20.08 22.41 41.33 12/19/96 03/25/97 290.6 418.564 31.96 39.13 45.46 64.10 64.10 12/30/97 05/29/98 4725.5 8325.506 32.28 33.14 28.96 49.66 56.52 01/07/97 02/25/97 1011.1 1179.050 21.21 23.08 36.75 01/07/97 02/10/97 12.7 13.609 11.11 11.11 30.44 105.13 179.07 01/13/97 04/25/97 365.7 355.210 43.67 46.46 50.86 46.49 01/13/97 09/03/97 319.0 932.988 17.07 18.52 11.63 18.03 20.50 01/14/97 04/01/97 561.0 2075.950 10.03 23.53 28.05 52.37 76.86 01/14/97 04/30/97 1343.6 1268.039 33.06 42.22 70.21 113.33 109.15 01/15/97 08/06/97 1132.3 1007.303 1.24 0.61 17.14 -22.64 01/16/97 02/28/97 455.4 435.639 -0.60 8.52 23.63 30.09 23.01 01/16/97 05/30/97 995.5 792.153 7.58 9.21 9.77 01/17/97 06/17/97 246.8 295.317 47.74 55.78 89.26 80.35 86.21 01/17/97 04/11/97 295.9 261.224 54.96 51.12 37.48 28.79 40.68 01/20/97 06/27/97 7304.3 7972.547 43.16 53.05 50.85 80.64 126.89 Page F-11
MERGER PREMIUMS TO MARKET VALUE ANALYSIS MERGERS WITH TARGET PRICE EQUAL TO OR GREATER THAN $10 PER SHARE Announced and Completed 1/1/96 - 2/3/99 (continued) ================================================================================ DATE DATE ANNOUNCED EFFECTIVE TARGET NAME TARGET BUSINESS DESCRIPTION ACQUIROR NAME - ---------------------------------------------------------------------------------------------------------------------------- 01/20/97 04/08/97 Target Therapeutic Inc Mnfr, whl mini-surgical devices Boston Scientific Corp 01/21/97 06/26/97 InPhyNet Medical Management Pvd physician management svcs MedPartners Inc 01/21/97 07/09/97 Mafco Consolidated Grp (Mafco) Mnfr cosmetics, beauty products Mafco Holdings Inc 01/22/97 03/05/97 Norand Corp Mnfr electronic info systems Western Atlas Inc 01/23/97 05/19/97 Amphenol Corp Manufactures connectors Kohlberg Kravis Roberts & Co 01/23/97 06/02/98 ESELCO Inc Electric utility Wisconsin Energy Corp 01/27/97 03/07/97 Measures Corp Mnfr process control systems Honeywell Inc 01/27/97 06/30/97 Revco DS Inc Own, operate drug stores CVS Corp 02/03/97 03/10/97 Kysor Industrial Corp Manfr vehicle components Scotsman Industries Inc 02/05/97 05/31/97 Morgan Stanley Group Inc Investment bank Dean Witter Discover & Co 02/10/97 03/31/97 TheraTx Inc Own, op nursing care facilities Vencor Inc 02/11/97 06/13/97 AMISYS Managed Care Systems Pvd integrated systems svcs HBO & Co 02/13/97 05/20/97 Reflectone Inc Manufacture flight simulators British Aerospace Holdings 02/13/97 06/17/97 USLIFE Corp Life insurance company American General Corp 02/14/97 10/29/97 Horizon/CMS Healthcare Corp Pvd nursing care services HealthSouth Corp 02/14/97 09/17/97 UNC Inc Mnfr aircraft components Greenwich Air Services Inc 02/14/97 06/25/97 Winthrop Resources Corp Provide computer leasing svcs TCF Finl Corp Minneapolis, MN 02/18/97 06/27/97 Destec Energy Inc Electric utility NGC Corp 02/20/97 12/09/97 NHP Inc (Apartment Investment) Own, op apartment buildings Apartment Investment & Mgmt Co 02/24/97 07/01/97 Security-Connecticut Corp Insurance holding company ReliaStar Financial Corp, MN 02/25/97 08/05/98 Fina Inc Mnfr petroleum refined prods Petrofina SA 02/26/97 07/02/97 Petrolite Corp Mnfr fuel additives, waxes Baker Hughes Inc 02/26/97 06/12/97 US Robotics Corp Mnfr common products, systems 3 Com Corp 02/27/97 06/13/97 Production Operators Corp Provide oil an gas field svcs Camco International Inc 02/28/97 08/01/97 Healthsource Inc Own and operate HMO's CIGNA Corp 03/03/97 05/30/97 BHC Financial Inc Provide date processing svcs Flsav Inc 03/07/97 08/01/97 Micro Bio-Medics Inc Whl, mnfr medical group Herry Schein Inc 03/10/97 09/02/97 Greenwich Air Services Inc Manufacture aircraft engines General Electric Co 03/14/97 06/26/97 Enterprise Systems Inc Develop hospital mgmt software HBO & Co 03/17/97 08/20/97 Heritage Media Corp Own, op radio and TV stations News Corp Ltd 03/19/97 07/11/97 American List Corp Pvd mail advertising svcs Synder Communications Inc 03/20/97 06/17/97 Falcon Building Products Inc Manufacture air compressors InvestCorp 03/24/97 04/28/97 MDL Information Systems Pvd scientific info svcs Elsevier Science 03/24/97 08/05/97 OnTrak Systems Inc Mnfrs semiconductor cap equip Lam Research Corp 03/25/97 05/07/97 Foodbrands America Inc Produce sausages, prepared meat IBP Inc (Occidental Petroleum) 03/25/97 07/10/97 Phamis Inc Pvd integrated systems design IDX Systems Corp 03/26/97 09/03/97 Argyle Television Inc Own, op television stations Hearst Broadcasting Group 03/31/97 06/30/97 Cascade Communications Corp Mnfr frame relays Ascend Communications Inc 04/07/97 09/02/97 Alek Brown Inc Securities brokerage firm Bankers Trust New York Corp 04/07/97 07/30/97 Pure Atria Corp Dvlp custom computer programs Rational Software Corp 04/08/97 06/12/97 Premiere Radio Networks Inc Own, op radio bdcstg stations Jacor Communications Inc 04/09/97 06/24/97 Public Storage Properties XVI Real estate investment trust Public Storage Inc 04/09/97 06/24/97 Public Storage Ppties XVIII Real estate investment trust Public Storage Inc 04/09/97 06/24/97 Public Storage Properties XIX Real estate investment trust Public Storage Inc 04/09/97 05/13/97 Stan Corp Mnfr, whl automotive parts Tomkins PLC ======================================================================================================================== VALUE OF ENTERPRISE PREMIUM ---------------------------------------------- DATE ACQUIROR TRANSACTION VALUE 1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR ANNOUNCED BUSINESS DESCRIPTION ($ mil) ($ mil) TO ANNC. DATE TO ANNC. DATE TO ANNC. DATE - -------------------------------------------------------------------------------------------------------------------- 01/20/97 Manufacture catheters 1218.3 1183.387 63.65 65.86 93.68 01/21/97 Pvd medical services to HMO's 369.7 364.333 -0.80 12.84 25.38 01/21/97 Mnfr toilet preparations 116.8 980.318 23.50 23.50 27.62 01/22/97 Pvd oil, gas exploration svcs 320.8 316.140 72.90 87.41 94.20 01/23/97 Leverage buyout firm 1390.4 1385.987 12.43 16.85 26.06 01/23/97 Electric, gas utility, hldg co 74.3 95.651 50.85 49.58 69.52 01/27/97 Mnfr automation, control sys 597.0 587.362 44.33 42.13 45.83 01/27/97 Own and operate drug stores 3911.7 3969.974 7.57 11.47 17.69 02/03/97 Mnfr refrigeration equipment 359.2 385.364 16.22 17.01 24.64 02/05/97 Securities brokerage firm 10573.0 51167.742 11.08 12.80 13.81 02/10/97 Provide healthcare services 378.2 539.628 30.29 35.45 59.07 02/11/97 Dvlp healthcare software 170.6 146.516 38.58 44.26 43.09 02/13/97 Whl aircraft, aircraft equip 41.1 98.003 20.00 18.52 25.49 02/13/97 Insurance holding company 2374.4 2353.339 20.95 22.80 43.25 02/14/97 Own, op outpatient surgery ctr 1651.3 1612.877 27.65 40.04 36.08 02/14/97 Manufacture aircraft engines 442.7 752.153 37.93 41.18 36.36 02/14/97 Savings and loan 334.7 350.727 7.65 20.00 23.03 02/18/97 Wholesale natural gas products 1222.4 1235.070 82.32 80.42 63.40 02/20/97 Real estate investment trust 114.5 370.576 28.26 25.21 16.86 02/24/97 Insurance company 545.4 503.520 43.65 45.10 36.38 02/25/97 Produce whl petroleum 257.0 2427.107 19.70 18.52 21.52 02/26/97 Mnfr oil, gas field machinery 710.9 709.813 62.67 83.46 78.10 02/26/97 Pvd network computer svcs 6510.7 6596.645 11.38 13.22 0.37 02/27/97 Mnfr oil, gas field equipment 609.6 616.802 22.90 13.02 15.93 02/28/97 Insurance company 1652.7 1545.420 28.89 32.82 64.15 03/03/97 Pvd finl data processing svcs 220.6 247.837 67.50 60.00 82.31 03/07/97 Whl med supplies 136.1 113.124 12.19 12.19 10.44 03/10/97 Electrical, construction prod 519.2 789.392 21.57 33.33 34.78 03/14/97 Dvlp healthcare software 275.2 254.539 15.29 13.75 30.00 03/17/97 Publish newspapers, magazines 1351.8 1348.407 69.07 72.63 69.01 03/19/97 Pvd outsources marketing svcs 117.1 117.721 17.32 28.05 8.81 03/20/97 Investor group 584.5 496.471 43.43 49.47 52.69 03/24/97 Publish scientific journals 310.7 299.206 85.51 43.82 54.22 03/24/97 Mnfr equip to mnfr semiconduct 217.9 200.189 -0.85 2.96 13.92 03/25/97 Produce beef and prok products 657.5 634.736 47.40 50.97 61.38 03/25/97 Mnfr health care info systems 142.8 140.394 18.93 23.00 26.47 03/26/97 Own, op radio stations 322.2 487.367 15.22 16.48 14.60 03/31/97 Mnfr wide area network equip 3529.3 3445.088 28.28 46.70 21.08 04/07/97 Bank holding company 2077.4 2055.265 65.00 50.04 17.70 04/07/97 Dvlp component-based software 958.4 949.495 18.54 23.31 23.77 04/08/97 Own, op radio bdcstg stations 208.9 155.812 17.37 19.23 19.23 04/09/97 Real estate investment trust 84.2 82.136 6.01 5.32 2.62 04/09/97 Real estate investment trust 78.6 82.657 4.97 7.12 2.90 04/09/97 Real estate investment trust 67.9 66.650 4.89 3.25 3.25 04/09/97 Mnfr, whl plumbing fixtures 574.0 593.708 29.32 48.28 49.57 ---------------------------------- DATE 3 MONTHS PRIOR 1 YEAR PRIOR ANNOUNCED TO ANNC. DATE TO ANNC. DATE - ---------------------------------------------- 01/20/97 76.90 50.39 01/21/97 43.30 8.77 01/21/97 36.04 69.62 01/22/97 74.03 150.47 01/23/97 31.65 16.85 01/23/97 01/27/97 37.25 18.14 01/27/97 40.73 50.79 02/03/97 48.28 79.17 02/05/97 02/10/97 73.16 50.33 02/11/97 62.96 8.64 02/13/97 28.00 33.33 02/13/97 68.33 57.20 02/14/97 -32.28 -0.66 02/14/97 66.67 96.72 02/14/97 02/19/97 37.46 73.20 02/20/97 16.00 12.69 02/24/97 57.86 105.22 02/25/97 25.33 23.39 02/26/97 38.64 128.04 02/26/97 -6.80 16.35 02/27/97 25.65 79.22 02/28/97 150.96 107.14 03/03/97 112.70 92.81 03/07/97 3.94 14.93 03/10/97 30.53 -16.78 03/14/97 51.67 16.88 03/17/97 45.13 21.03 03/19/97 -0.47 27.27 03/20/97 24.56 97.22 03/24/97 79.02 50.59 03/24/97 62.24 81.49 03/25/97 71.74 36.64 03/25/97 95.22 30.14 03/26/97 8.16 22.54 03/31/97 -33.97 -18.89 04/07/97 04/07/97 -23.49 -40.10 04/08/97 32.96 36.58 04/09/97 2.62 17.71 04/09/97 -0.38 15.00 04/09/97 -2.82 16.96 04/09/97 40.98 79.17 Page F-12
MERGER PREMIUMS TO MARKET VALUE ANALYSIS MERGERS WITH TARGET PRICE EQUAL TO OR GREATER THAN $10 PER SHARE ANNOUNCED AND COMPLETED 1/1/96 - 2/3/99 (Continued) =============================================================================================================================== DATE DATE ANNOUNCED EFFECTIVE TARGET NAME TARGET BUSINESS DESCRIPTION ACQUIROR NAME - ------------------------------------------------------------------------------------------------------------------------------- 04/09/97 07/21/97 Tambrands Inc Mnfr feminine hygiene products Procter & Gamble 04/14/97 11/12/97 APL Ltd Shipping ,trucking company Neptune Orient Lines Ltd 04/14/97 09/03/97 United Waste Systems Inc Provide waste management svcs USA Waste Services Inc 04/14/97 01/05/98 Wyndham Hotel Corp Own and operate hotels Patriot Amer Hosp/Wyndham Intl 04/16/97 01/30/98 Steck-Vaughn Publishing Corp Publish books, magazines Harcourt General Inc 04/17/97 07/14/97 Drilex International Inc Pvd prod, svcs used in drilling Baker Hughes Inc 04/19/97 04/21/97 Vitalink Pharmacy Services Inc Pvd health and allied svcs Manor Care Inc 04/21/97 05/28/97 Goulds Pumps Inc Mnfr centrifugal pumps ITT Industries Inc 04/21/97 06/10/97 National Education Corp Vocational training services Harcourt General Inc 04/22/97 09/04/97 International Family Ent Inc Provide cable television svcs Fox Kids Worldwide Inc 04/23/97 06/25/97 VenFone Inc Electronic funds transfer mach Hewlett-Packard Co 04/30/97 06/03/97 GKN Sister Metals Inc(GKN PLC) Mnfr automotive, metal parts GKN PLC 05/01/97 07/30/97 David White Inc Mnfr, whl surveying instruments ???? Partners 05/05/97 08/13/97 Fort Howard Corp Mnfr sanitary tissue products James River Corp of Virginia 05/05/97 08/01/97 Logicon Inc Pvd computer svcs to military Northrop Grumman Corp 05/05/97 08/19/97 Riser Foods Inc Own, op grocery stores Grant Eagle Inc 05/05/97 06/13/97 Vivra Inc Provide home health care svcs Incentive AB 05/06/97 08/15/97 BBN Corp Mnfr computer integrated sys GTE Corp 05/06/97 07/22/97 BWIP Inc Mnfr fluid transfer equip Durco International Inc 05/06/97 01/05/98 Physicians Health Services Inc Own and operate HMO's Foundation Health Systems Inc 05/06/97 07/25/97 Varsity Spirit Pvd cheerleading training svcs Riddell Sports Inc 05/07/97 06/03/98 Reliable Life Insurance Co Insurance company Unitrin Inc 05/07/97 08/26/97 Transitional Hospitals Corp Own, op psychiatric hospitals Vencor Inc 05/08/97 11/04/97 Living Centers of America Inc Pvd long-term health care svcs Apollo Management LP 05/12/97 10/16/97 Dynamics Corp of America Mnfr electrical appliances CTS Corp 05/12/97 09/09/97 Smith's Food & Drug Centers Own and operate supermarkets Fred Meyer Inc 05/13/97 08/26/97 Autumn Software Inc Dvlp sales, mktg info software BAAN Co NV 05/13/97 08/28/97 Inbrand Corp Mnfr incontinence products Tyco International Ltd 05/14/97 11/18/97 Erron Global Power & Pipelines Pvd gas transmission svcs Erron Corp 05/20/97 09/02/97 Keystone International Inc Mnfr indl flow control prod Tyco International Ltd 05/21/97 08/14/97 Howell Industries Inc Mnfr automotive parts Oxford Automotive Inc 05/21/97 05/04/98 KU Energy Corp Electric utility holding co LG&E Energy Corp 05/22/97 07/31/97 Biopsys Medical Inc Mnfr surgical, medical instr Johnson & Johnson 05/22/97 07/09/98 Chaparral Steel Co(Texas Ind) Mnfr primary steel products Texas Industries Inc 05/22/97 11/20/97 Mail Boxes Elc Pvd franchised postal services US Office Products Co 05/23/97 10/06/97 Palmer Wireless Inc Pvd telephone services Price Communications Corp 05/27/97 08/08/97 Alamco Inc Oil & gas exploration, prod Columbia Natural Resources Inc 05/27/97 12/18/97 HFS Inc Own, op hotel franchises CUC International Inc 05/28/97 02/10/98 CommNet Cellular Inc Cellular telephone services Blackstone Capital Partners 05/29/97 07/03/97 Fibreboard Corp Mnfr fibreboard, paperboard Owens Corning 06/02/97 07/15/97 Acordia Inc (Anthem Inc) Pvd insurance brokerage svcs Anthem Inc 06/03/97 01/15/98 Faulding Inc (FH Faulding & Co) Mnfr pharmaceuticals FH Faulding & Co Ltd 06/04/97 07/28/97 Mexico Inc Develop educational software Electronic Arts Inc 06/06/97 10/14/97 Telco Communications Group Inc Pvd switch-based telecom svcs Excel Communications Inc 06/09/97 10/01/97 American States Financial Corp Fire and marine insurace co SAFECO Corp 06/09/97 09/12/97 Amrion Inc Own, op food stores Whole Foods Market Inc 06/09/97 07/15/97 Prime Service Inc Pvd const equip rental svcs Atlas Copco North America Inc VALUE OF ENTERPRISE PREMIUMS ------------------------------------------------ DATE ACQUIROR BUSINESS TRANSACTION VALUE 1 DAY PRIOR 1 WEEK PRIOR 4 WEEKS PRIOR ANNOUNCED DESCRIPTION ($ MIL) ($MIL) TO ANNC. DATE TO ANNC. DATE TO ANNC DATE - ------------------------------------------------------------------------------------------------------------------------------ 04/09/97 Mnfr household prod, oil, coffee 2003.9 1978.686 8.40 14.94 14.94 04/14/97 Pvd deep sea oil transp svcs 878.5 1482.218 55.81 65.43 42.55 04/14/97 Pvd waste disposal services 1682.2 1899.629 0.71 1.05 -1.25 04/14/97 Real estate investment trust 773.1 731.676 48.02 44.52 48.93 04/16/97 Own, op movie theatres, stores 40.3 221.362 21.65 32.58 24.21 04/17/97 Mnfr oil, gas field machinery 120.1 133.636 31.44 37.88 59.82 04/19/97 Own, op nursing homes, hotels 30.0 278.457 14.29 8.11 -4.19 04/21/97 Mnfr brakes and chassis sys 922.1 913.487 61.75 57.45 60.87 04/21/97 Own, op movie theatres, stores 776.1 874.090 22.63 54.13 40.00 04/22/97 Pvd motion picture prodn svcs 1862.9 1903.499 94.44 95.80 107.41 04/23/97 Mnfr computers, testing equip 1245.1 1142.303 67.64 50.19 43.77 04/30/97 Mnfr whl auto parts, metals 469.7 523.098 37.04 38.32 32.74 05/01/97 Investment company 5.9 7.472 11.63 14.29 18.52 05/05/97 Mnfr paper, paper-related prods 5682.6 5734.855 16.31 27.92 43.30 05/05/97 Aircraft, aerospace products 1027.5 949.943 75.68 84.23 102.65 05/05/97 Whl retail grocery prods 468.5 415.188 11.63 29.23 29.79 05/05/97 Mnfr medical instr, ind equip 1660.5 1768.293 26.09 41.77 35.70 05/06/97 Pvd telecommunications svcs 713.8 678.339 26.09 32.57 64.54 05/06/97 Mnfr machinery, metal castings 530.7 537.884 -5.48 14.15 18.72 05/06/97 Own, op HMO's, holding company 268.2 231.409 23.50 26.97 51.68 05/06/97 Manufacture football equipment 91.0 89.635 30.35 28.14 23.93 05/07/97 Insurance company 261.1 145.966 51.11 51.11 52.06 05/07/97 Provide healthcare services 628.0 592.638 60.00 60.00 86.51 05/08/97 Investment management services 1048.2 1126.820 17.82 22.73 41.49 05/12/97 Mnfr electronic components 244.6 255.742 91.27 94.17 112.70 05/12/97 Own, operate department stores 2018.0 2074.866 9.93 16.48 26.99 05/13/97 Develop software 259.9 218.697 32.99 40.38 55.84 05/13/97 Mnfr fire protection systems 322.8 367.434 69.98 78.34 107.22 05/14/97 Own, operate gas pipelines 428.0 866.482 11.83 13.70 19.74 05/20/97 Mnfr fire protection systems 1361.5 1426.756 84.19 85.31 102.49 05/21/97 Mnfr engineered metal prods 23.0 19.054 28.70 30.40 32.14 05/21/97 Electric utility 1539.4 2112.892 34.01 31.84 35.69 05/22/97 Mnfr medical equip and prods 303.5 293.863 6.99 6.99 22.44 05/22/97 Mnfr cement, steel products 72.8 519.310 20.39 25.25 29.17 05/22/97 Whl retail office supplies 354.8 324.214 39.20 40.99 38.31 05/23/97 Own, op TV and radio stations 870.4 865.524 45.08 55.56 64.71 05/27/97 Operate natural gas pipeline 102.8 94.428 7.69 11.50 16.67 05/27/97 Provide discount club svcs 11342.9 11759.191 5.93 2.99 5.23 05/28/97 Investment bank 631.2 745.352 21.78 28.64 39.81 05/29/97 Mnfr glass fiber products 631.2 478.004 15.79 22.22 49.66 06/02/97 Insurance company 193.2 633.961 12.68 11.50 25.98 06/03/97 Mnfr whl drugs, toiletries 77.3 206.005 25.58 22.73 46.96 06/04/97 Develop wholesale software 127.5 116.945 2.27 2.27 40.63 06/06/97 Pvd telephone commun svcs 1046.5 1017.645 32.91 23.77 26.44 06/09/97 Provide Insurance services 3127.1 3110.922 45.74 48.62 57.32 06/09/97 Own, op natural foods stores 152.6 152.212 8.12 19.22 47.04 06/09/97 Mnfr compressors, machinery 1112.0 1110.539 28.64 29.95 31.28 PREMIUM ----------------------------------- DATE 3 MONTHS PRIOR 1 YEAR PRIOR ANNOUNCED TO ANNC. DATE TO ANNC. DATE - ----------------------------------------------------- 04/09/97 04/14/97 40.31 43.32 04/14/97 13.95 53.09 04/14/97 29.23 04/16/97 27.57 55.26 04/17/97 33.44 04/19/97 17.53 -8.05 04/21/97 51.02 68.18 04/21/97 48.67 54.13 04/22/97 15.94 61.38 04/23/97 34.67 24.69 04/30/97 05/01/97 52.38 -4.00 05/05/97 33.18 92.95 05/05/97 102.66 134.48 05/05/97 28.24 115.38 05/05/97 18.24 23.90 05/06/97 26.09 5.45 05/06/97 11.58 -10.60 05/06/97 46.75 8.65 05/06/97 26.00 26.00 05/07/97 05/07/97 82.86 68.42 05/08/97 36.71 9.46 05/12/97 107.55 156.32 05/12/97 62.85 63.23 05/13/97 9.19 05/13/97 -38.18 -81.87 05/14/97 12.30 38.08 05/20/97 92.30 73.73 05/21/97 -21.90 26.50 05/21/97 32.93 38.59 05/22/97 -6.61 17.23 05/22/97 29.17 5.08 05/22/97 226.21 05/23/97 27.27 -15.15 05/27/97 11.50 44.83 05/27/97 -12.17 -3.97 05/28/97 605.88 449.62 05/29/97 65.41 120.00 06/02/97 207.69 317.39 06/03/97 56.52 111.76 06/04/97 18.42 -50.55 06/06/97 61.32 06/09/97 41.89 104.35 06/09/97 43.69 52.37 06/09/97 60.00 Page F-13
Merger Premiums to Market Value Analysis Mergers with Target Price Equal to or Greater than $10 per Share Announced and Completed 1/1/96-2/3/99 (continued) ================================================================================ Date Date Announced Effective Target Name Target Business Description Acquiror Name - ------------------------------------------------------------------------------------------------------------------------------------ 06/10/97 09/30/97 Numar Corp Mnfr imaging logging equip Halliburton Co 06/11/97 10/31/97 Pacific Greystone Corp Pvd general contracting svcs Lennar Corp 06/12/97 10/01/97 Giddings & Lewis Inc Mnfr automated machine tools Thyssen AG 06/13/97 03/26/97 Bally's Grand Inc Own and operate casino hotels Hilton Hotels Corp 06/16/97 08/29/97 Core Industries Inc Manufacture electronic equip United Dominion Industries Ltd 06/16/97 10/10/97 Multicare Cos Inc Own, op nursing care facilities Genesis Eldercare 06/17/97 07/24/97 McFarland Energy Inc Oil and gas exploration, prodn Monterey Resources Inc 06/17/97 07/25/97 Seda Specialty Packaging Corp Mnfr specialty packaging prods CCL Industries Inc 06/19/97 08/15/97 Advanced Logic Research Inc Mnfr microcomputer systems Gateway 2000 Inc 06/20/97 03/30/98 Wheelabrator Technologies Inc Mnfr laboratory, medical equip Waste Management Inc 06/23/97 10/17/97 Integon Corp Insurance holding company General Motors Acceptance(GM) 06/23/97 08/29/97 Tandem Computers Inc Mnfr computers, network systems Compaq Computer Corp 06/24/97 10/14/97 American Exploration Co Oil and gas exploration, prodn Louis Dreyfus Natural Gas 06/24/97 09/29/97 SMT Heath Services Inc Operate outpatient facilities Three Rivers Holding Corp 06/26/97 11/26/97 Rhone-Poulenc Rorer Inc Manufacture pharmaceuticals Rhone-Poulenc SA 06/30/97 10/09/97 Fusion Systems Corp Mnfr curing sys, semiconductors Eaton Corp 06/30/97 12/23/97 Rykoff-Sexton Inc Wholesale grocery products JP Foodservice Inc 07/02/97 09/23/97 American Filtrona Corp Mnfr bonded fiber Bunzl PLC 07/03/97 08/05/97 Duty Free International Inc Own, op duty free shops BAA PLC 07/03/97 08/06/97 Wyle Electronics Whl high tech electronic prods Raab Karcher AG(VEBA AG) 07/07/97 11/06/97 Caim Energy USA Inc Oil and gas exploration, prodn Meridian Resource Corp 07/07/97 10/21/97 RoTech Medical Corp Pvd home health care svcs Integrated Health Services Inc 07/08/97 10/24/97 Equitable of Iowa Cos Life insurance company ING Groep NV 07/09/97 09/23/97 Control Data Systems Inc Mnfr computers, peripherals CDSI Holding Corp 07/09/97 12/23/97 Seaman Furniture Co Own, op ret furniture stores Investor Group 07/10/97 11/18/97 Kinetic Concepts Inc Mnfr medical treatment tables Investor Group 07/10/97 12/31/97 Reading & Bates Corp Pvd oil, gas drilling services Falcon Drilling Co 07/10/97 09/29/98 Upper Peninsula Energy Corp Electric utility Wisconsin Public Services Corp 07/15/97 10/02/97 DHTechnology Inc Mnfr, whl computer printers Axiohm SA 07/15/97 10/28/97 Intl Imaging Materials Mnfr thermal transfer ribbons Paxar Corp 07/15/97 09/04/97 Ply-Gem Industries Inc Manufacture wood products Nortek Inc 07/17/97 10/22/97 Louisana Land & Exploration Oil and gas exploration, prodn Burlington Resources Inc 07/17/97 09/29/97 Octel Communications Corp Mnfr voice processing systems Lucent Technbologies Inc 07/23/97 12/18/97 Alliance Imaging Inc Pvd diagnostic imaging svcs Newport Investment LLC 07/24/97 09/15/97 Nellcor Puritan-Bennett Mnfr electn patient monitors Mallinckrodt Inc 07/28/97 02/02/98 Chips and Technologies Inc Design, whl integrated circuit Intel Corp 07/28/97 11/17/97 Cyrix Corp Manf PC units, microprocessors National Semiconductor Corp 07/28/97 12/22/97 Freeport-McMoRan Inc Own, op chem, fertilizer mines IMC Global Inc 07/28/97 10/08/97 Regency Health Services Inc Pvd nursing services Sun Healthcare Group Inc 07/30/97 09/18/97 Amdahl Corp Develop computer sys, software Fujitsu Ltd 07/30/97 02/02/98 Plasti-Line Inc Mnfr illuminated outdoor signs PL Holdings Corp 07/31/97 09/24/97 Bucyrus International Inc Mnfr surface mining machinery American Industrial Partners 07/31/97 10/03/97 Delaware Otsego Corp Own and operate railroad Investor Group 07/31/97 10/23/97 Sterling House Corp Own, op nursing homes Alternative Living Services 08/04/97 10/24/97 Columbus Realty Trust Real estate investment trust Post Properties Inc 08/04/97 12/23/97 Perkins Family Restaurant LP Own, op franchised restaurants Restaurant Co Premium Value of Enterprise -------------------------------------------------------------------------- Acquiror Transaction Value 1 Day Prior 1 Weeks Prior 4 Weeks Prior 3 Months Prior 1 Year Prior Business Description ($ mil) ($mil) to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date - ------------------------------------------------------------------------------------------------------------------------------------ Mnfr oil field machinery 341.6 336.537 90.94 99.35 95.65 115.62 126.40 Construct residential bldgs 459.3 452.054 75.27 83.30 98.45 110.67 Manufacture malleable iron 703.0 712.155 10.53 9.80 0.60 46.09 24.44 Own, operate hotels 42.6 667.805 27.88 29.85 31.06 66.14 32.70 Mnfr structural metal 275.2 317.269 26.58 37.93 49.25 60.00 76.99 Own, op geriatric facilities 1249.1 1316.493 9.27 13.71 34.94 55.56 38.27 Oil and gas exploration, prodn 111.2 103.585 11.58 41.33 44.78 57.87 89.04 Mnfr, pvd specialty packaging 182.6 192.184 31.82 36.47 52.63 68.12 40.61 Mnfr personal computers 206.8 148.059 29.17 30.53 34.78 67.57 87.88 Pvd chemical waste mgmt svcs 869.7 3191.550 26.92 28.16 30.69 15.79 4.76 Provide business finance svcs 517.1 668.022 173.68 92.59 74.79 73.33 30.00 Manufacture personal computers 2780.4 2873.860 49.33 51.86 51.86 99.11 113.33 Oil and gas exploration, prodn 275.5 305.834 12.99 15.03 21.60 41.87 28.97 Investment company 75.6 83.095 4.44 2.17 8.05 44.62 43.69 Mnfr chemicals and cosmetics 4831.6 16358.071 22.11 22.79 29.33 29.12 44.51 Manufacture automotive parts 308.6 278.551 11.43 9.86 24.30 50.00 57.58 Wholesale groceries 1435.9 1172.904 24.40 26.00 27.65 38.50 69.81 Whl, mnfr paper, constr material 183.5 137.243 8.82 2.24 3.38 3.38 53.79 Own, op airports, airfields 674.6 751.305 39.13 50.00 Wholesale petroleum products 633.0 751.326 16.79 38.41 35.14 49.25 52.67 Oil and gas exploration, prodn 233.6 279.718 22.30 28.97 26.67 13.19 -5.84 Pvd specialty healthcare svcs 918.9 828.274 19.79 12.70 22.22 15.95 25.61 Insurance company 2626.4 2586.784 18.52 20.35 21.70 38.78 86.30 Investment holding company 273.9 176.779 29.08 30.65 35.00 31.71 28.57 Investor group 45.6 130.115 21.46 25.25 21.46 27.64 43.14 Investor group 776.7 814.201 6.94 7.69 9.22 32.76 24.19 Pvd contract drilling svcs 2587.0 2680.955 16.55 14.52 30.47 69.09 53.19 Electric and gas utility 73.2 120.398 33.18 29.67 35.00 Mnfr, whl computer printers 169.5 167.604 57.48 56.25 57.48 45.99 6.38 Mnfr label systems 244.4 267.857 67.35 60.18 64.89 69.88 32.69 Mnfr AC, building, wood prods 476.3 388.572 20.00 16.42 19.08 48.57 30.00 Oil and gas exploration, prodn 2954.3 2911.544 20.76 25.47 39.98 48.08 17.72 Mnfr telecom equip, software 1824.4 1772.960 15.89 37.40 41.31 87.88 54.04 Investment company 114.2 205.494 7.32 3.53 14.29 44.26 134.67 Mnfr diagnostic products 1858.4 1833.054 36.12 43.40 57.24 67.65 26.67 Mnfr, whl micorprocessors 422.9 391.346 25.00 32.08 68.68 115.38 77.22 Mnfr semiconductors, circuits 566.4 623.211 30.31 29.54 29.54 34.66 97.79 Mnfr phosphate fertilizers 790.7 1233.537 14.35 13.55 5.20 5.21 -16.77 Pvd long-term healthcare svcs 587.9 570.892 34.35 50.43 43.09 107.06 104.65 Mnfr semiconductors, computers 924.8 1563.050 4.97 22.47 25.57 49.13 Investor group formed by mgmt 30.7 61.995 36.47 36.47 30.34 65.71 84.13 Pvd fund mgmt & fin adv svcs 193.3 262.147 33.33 46.94 71.43 94.59 108.70 Investor group 53.4 62.540 15.03 17.33 32.33 160.28 Pvd residential care svcs 170.0 151.786 30.36 29.47 40.46 88.44 48.69 Real estate investment trust 600.0 565.318 4.23 4.23 4.51 191.08 247.75 Own, operate restaurants 76.3 215.006 28.74 26.55 31.77 5.66 17.89
Merger Premiums to Market Value Analysis Mergers with Target Price Equal to or Greater than $10 per Share Announced and Completed 1/1/96 - 2/3/99 (continued) Date Date Announced Effective Target Name Target Business Description Acquiror Name - ----------------------------------------------------------------------------------------------------------------------------------- 08/04/97 11/12/97 Sullivan Dental Products Wholesale dental products Henry Schein Inc. 08/08/97 12/22/97 Titan Holdings Inc. Auto property, casualty ins co USF&G Corp 08/11/97 12/19/97 Amscan Holdings Inc. Whl paper, plastic party goods Confetti Acquisition Inc 08/11/97 09/30/97 National Sanitary Supply Co. Sanitary maintenance supplies Unisource Worldwide Inc 08/11/97 12/22/97 Vacation Break USA Inc. Real estate development firm Fairfield Communities Inc 08/12/97 09/17/97 Isomedix Inc. Pvd contract sterilization svcs Steris Corp 08/12/97 03/03/98 LIN Television Corp. Own, op TV bdcstg stations Hicks Muse Tate & Furst Inc. 08/14/97 12/31/97 Allied Capital Commercial Corp Real estate investment trusts Allied Capital Lending Corp 08/14/97 12/31/97 Allied Capital Corp Pvd bus, personal fin svcs Allied Capital Lending Corp 08/14/97 12/29/97 Tueday Morning Corp. Own, operate giftware stores Madison Dearborn Partners 08/14/97 12/05/97 Uniforce Services Inc. Pvd temporary personnel svcs Comforce Corp 08/18/97 11/04/97 Monterey Resources Inc. Oil and gas exploration, prodn Texaco Inc. 08/21/97 01/14/98 Boston Technology Inc. Mnfr voice processing systems Comverse Technology Inc. 08/25/97 10/21/97 ACC Consumer Finance Corp Pvd auto financing services Household International Inc 08/25/97 12/17/97 Mosinee Paper Corp Manufacture paper Wausau Paper Mills 08/26/97 12/22/97 Savannah Foods & Industries Produce sugar, sugar by-prod Imperial Holly Corp 08/28/97 12/23/97 Evans Withycombe Residential Real estate investment trust Equity Residential Pptys Trust 08/28/97 02/25/98 Value Property Trust Real estate investment trust Wellsford Real Properties Inc. 08/28/97 10/10/97 Versa Technologies Inc. Mnfr rubber components, molds Applied Power Inc. 08/29/97 12/29/97 Rexel Inc. Whl electrical components Rexel SA (Pinault-Printemps) 09/03/97 12/30/97 Zytec Corp Mnfr electrical power supplies Computer Products Inc. 09/04/97 01/09/98 Hudson Foods Inc. Produce poultry products Tyson Foods Inc. 09/05/97 11/26/97 Medic Computer Systems Inc Pvd mgmt info sys design services Misys PLC 09/08/97 02/02/98 CompuServe Inc (H&R Block) Internet service provider WorldCom Inc. 09/08/97 12/31/97 Fuqua Enterprises Inc. Manufacture tanned leather Graham-Field Health Products 09/10/97 11/28/97 Data Documents Inc Manufacture tabulating cards Corporate Express Inc. 09/10/97 12/02/97 Tinsley Laboratories Inc. Mnfr optical instr, lenses Silicon Valley Group Inc. 09/11/97 12/22/97 Fieldcrest Cannon Inc. Mnfr broadwoven fabrics Pillowtex Corp 09/12/97 12/09/97 Unison Software Inc. Develop network mgmt software Tivoli Systems Inc (IBM Corp) 09/12/97 01/16/98 WHG Resorts & Casino Inc. Own, op resorts and casino Patriot Amer Hosp/Wyndham Intl 09/12/97 02/25/98 Western National Corp. Insurance holding co American General Corp 09/15/97 12/19/97 Beacon Properties Corp Real estate investment trust Equity Office Properties Trust 09/16/97 11/04/97 All American Communications Pvd motion picture video svc Pearson PLC 09/16/97 02/02/98 Quick & Reilly Group Inc Securities brokerage firm Fleet Financial Group, Inc. M.A. 09/18/97 12/16/97 Guaranty National Corp Insurance company Orion Capital Corp 09/18/97 12/22/97 USLD Communications Corp Pvd long distance commun svcs LCI International Inc. 09/19/97 01/16/98 Sterling Electronics Corp Whl electronic components Marshall Industries 09/21/97 12/16/97 Computer Data Systems Inc. Design computer program data Affiliated Computer Services 09/22/97 12/05/97 Washington National Corp Insurance company Conseco Inc 09/23/97 01/12/98 Tejas Gas Corp Own, op natural gas lines Shell Oil (Royal Dutch Petro) 09/24/97 11/24/97 Allergan Ligand Retinoid Manufacture pharmaceuticals Ligand Pharmaceuticals Inc. 09/24/97 12/12/97 Garne Financial Corp Pvd fund access svcs Travelers Express Co (Viad) 09/24/97 11/28/97 Salomon Inc. Investment bank, fin advisory Travelers Group Inc. 09/25/97 02/19/98 Talley Industries Inc. Mnfr guided missiles, space veh Carpenter Technology Corp 09/29/97 12/22/97 Graphic Industries Inc. Pvd financial printing svcs Wallace Computer Services Inc. 09/29/97 12/23/97 HPR Inc. Pvd computer programming svcs HBO & Co 09/29/97 12/01/97 Morningstar Group Inc. Produce dairy products Suiza Foods Corp Premium Value of Enterprice______________________________________________________________________ Acquir or Transaction Value 1 Day Prior 1 Wk. Prior 4 Wk. Prior 3 Mnths Prior 1 Yr. Prior Business Description ($mil) ($mil) to annc. Date to annc. Date to annc. Date to annc. Date to annc. Date - --------------------------------------------------------------------------------------------------------------------------------- Whl med supplies 312.8 314.554 28.85 40.71 66.20 79.19 186.70 Insurance holding company 278.1 277.428 15.99 19.06 24.85 30.26 57.29 Investment company 334.9 390.418 36.08 37.50 46.67 23.36 Wholsale printing paper 155.9 149.309 -6.67 20.00 47.37 Construct vacation resorts 178.1 239.938 41.57 39.09 95.75 147.75 80.18 Mnfr sterile processing sys 139.8 136.201 5.81 15.49 13.89 38.98 47.75 Leverage buyout firm 1960.6 1988.597 15.85 18.75 18.01 Closed-end mgnt investment co 381.3 621.239 7.49 7.77 10.64 8.90 18.18 Closed-end mgnt investment co 130.0 210.640 7.83 7.83 9.10 23.12 19.93 Investors 298.6 337.358 22.70 25.79 11.11 28.21 197.03 Pvd help supply services 140.7 133.715 37.56 37.56 52.62 101.50 48.23 Oil and gas exploration prodn 1435.3 1320.885 39.42 39.42 54.13 30.23 Mnfr telecommunications equip 873.9 906.337 -0.32 16.22 10.37 15.71 103.42 Provide financial services 186.9 219.825 35.82 34.75 29.64 96.69 125.16 Manufacture, wholesale paper 446.3 512.461 15.62 15.91 5.64 11.73 52.89 Produce sugar 582.9 609.908 8.36 14.89 17.39 31.71 65.31 Real estate investment trust 932.4 1068.033 14.16 21.39 18.88 22.88 21.40 Real estate investment trust 186.6 163.549 24.99 20.90 18.68 25.59 32.00 Mnfr tools, equip, consumables 141.9 140.649 36.81 33.11 31.33 72.84 72.84 Whl radios, televisions 302.0 647.890 19.21 26.32 21.62 23.29 62.16 Design, mnfr electronic prod 412.3 428.022 45.35 48.22 71.17 140.86 355.68 Poultry, meat processing 648.4 1021.868 23.49 31.63 28.64 25.81 51.64 Manufacture computers 915.8 882.601 7.69 12.00 25.00 89.19 17.15 Pvd telecommunications svcs 1185.9 1052.173 1.39 2.92 8.36 16.36 1.39 Mnfr medical supply, healthcare 231.0 229.950 42.32 52.82 78.75 81.87 57.24 Retail office supplies 159.4 212.192 10.91 14.87 26.13 26.12 53.14 Mnfr semiconductor equip 40.5 40.888 96.36 96.36 96.36 132.53 301.64 Mnfr, whl home textile products 768.2 787.170 1.49 8.58 31.72 76.62 86.30 Dvlp systems mgmt software 183.0 180.262 9.09 25.00 22.45 100.00 4.65 Real estate investment trust 266.0 169.936 35.08 72.35 78.50 117.30 Insurance holding company 1215.0 2340.921 9.58 7.43 14.41 13.62 68.88 Real estate investment trust 4039.4 3358.846 28.39 30.62 30.85 45.80 69.44 Publish newspapers, periodicals 500.2 498.587 12.71 41.67 37.84 100.00 175.68 Bank holding company 1525.5 1440.082 18.23 33.10 69.63 60.91 103.58 Insurance company, holding co 117.2 647.411 10.77 23.87 27.72 44.00 125.00 Pvd telecommunications svcs 402.8 407.074 18.86 34.13 40.10 120.92 Whl electronics components 217.6 208.733 16.26 30.23 57.01 48.67 55.56 Pvd data processing services 383.7 389.575 42.54 47.63 73.68 665.48 0.00 Insurance holding company 424.0 433.679 2.70 4.11 12.24 17.70 10.37 Oil and gas exploration prodn 2165.6 2203.964 24.09 22.39 33.70 50.23 75.71 Manufacture diagnostic tests 71.4 39.701 13.03 11.59 7.83 Pvd money order insuance svcs 50.6 42.633 4.88 4.88 4.88 11.69 10.26 Insurance company 8852.1 141077.448 21.43 24.09 34.60 44.76 77.50 Mnfr zirconium steel products 309.4 264.393 6.67 10.98 34.27 34.27 54.84 Mnfr manifolds business forms 424.5 418.753 8.75 19.18 34.88 65.71 155.88 Dvlp healthcare software 389.6 376.008 22.92 24.54 32.38 30.54 57.08 Produce milk, related prod 972.0 932.575 14.62 11.48 53.46
Merger Premiums to Market Value Anaysis Mergers with Target Price Equal to or Greater than $10 per Share Announced and Completed 1/2/96 - 2/3/99 (continued) - ------------------------------------------------------------------------------------------------------------------------------------ Date Date Annouced Effective Target Name Target Business Description Acquiror Name - ------------------------------------------------------------------------------------------------------------------------------------ 09/30/97 11/26/97 Arbor Health Care Co Own and operate nursing homes AHC Acquitison Corp 10/01/97 01/29/98 Brooks Fiber Properties Inc Pvd communication installation Worldcom Inc 10/01/97 09/14/98 MCI Communications Corp Pvd telecommunication services Worldcom Inc 10/02/97 04/30/98 Kapson Senior Quarters Corp Provide residential care svcs Prometheus Senior Quarters 10/03/97 12/29/97 Natl Health Enhancement Sys Develop healthcare software HBO & Co 10/06/97 01/28/98 Caliber System Inc Trucking holding company FDX Corp 10/06/97 12/19/97 EndoVascular Technologies Inc Mnfr surgical instruments Guidant Corp 10/06/97 03/20/98 Orion Network Systems Inc Pvd Communications svcs Loral Space & Communications 10/08/97 04/07/98 Associates First Capital Corp Pvd finance, leasing services Shareholders 10/09/97 12/23/97 Melamine Chemicals Inc Manufacture melamine crystal Borden Chemical Inc (Borden) 10/10/97 11/19/97 Greenfield Industries Inc Mnfr steel cutting tools Kennametal Inc 10/13/97 01/22/98 Netcom On-Line Communication Internet service provider ICG Communications Inc 10/13/97 12/01/97 Network General Corp Pvd computer sys design svcs McAfee Assoicates Inc 10/15/97 12/04/97 Viewlogic Systems Inc Dvlp automation software Synopsys Inc 10/16/97 02/12/98 Omni Insurance Group Inc Insurance company Hartford Financial Services 10/17/97 12/29/97 Computational Systems Inc Manufacture measuring devices Emerson Electric Co 10/17/97 11/19/97 Exide Electronics Group Inc Manfuacture power supplies BTR PLC 10/17/97 01/02/98 Infinity Financial Technology Dvlp finanical software SunGard Data Systems Inc 10/20/07 02/24/98 ITT Corp Own and operate hotels Starwood Hotels & Resorts 10/20/97 03/06/98 Santa Fe Pacific Pipeline Operate petroleum pipelines Kinder Morgan Energy Partners 10/20/97 06/24/98 Ticketmaster Group Own, operate ticket agencies HSN Inc 10/21/97 01/07/98 International Dairy Queen Inc Whl dairy desserts,hamburgers Berkshire Hathaway Inc 10/23/97 12/19/97 Premenos Technology Corp Develop EDI software Harbinger Corp 10/23/97 04/02/98 Universal Outdoor Holdings Inc Pvd outdoor advertising svcs Clear Channel Communications 10/29/97 01/30/98 Carson Pirie Scott & Co Own, op department stores Proffitt's Inc 10/31/97 03/12/98 ILC Technology Inc Mnfr high intensity lamps BEC Group Inc 10/31/97 02/27/98 Xpedite Systems Inc Pvd enchanced fax services Premiere Technologies Inc 11/03/97 03/24/98 Oregon Metallurgical Corp Mnfr whl titanium Allegheny Teledyne Inc 11/03/97 01/09/98 Sequana Therapeutics Mnfr diagnostic substances Arris Phamaceuticals Corp 11/04/97 05/20/98 Safety-Kleen Corp (Laidlaw) Pvd vehicular cleaning svcs Laidlaw Environmental Services 11/05/97 01/16/98 Mac Frugal's Bargains Whl net general merchandise Consolidated Stores Corp 11/07/97 03/10/98 Quality Food Centers Inc Own and operate supermarkets Fred Meyer Inc 11/11/97 02/11/98 Healthdyne Technologies Inc Mnfr specialized med devices Respironics Inc 11/13/97 03/25/98 Chartwell Leisure Inc Own, op hotels and motels Investor Group 11/13/97 03/11/98 Hugoton Energy Corp Oil and gas exploration prodn Chesapeake Energy Corp 11/17/97 02/26/98 Granite Financial Inc Pvd Business credit services Fidelity National Financial 11/19/97 02/27/98 Amati Communications Corp Mnfr data communications equip Texas Instruments Inc 11/19/97 04/01/98 Renal Treatment Centers Inc Own, op kidney dialysis centers Total Renal Care Holdings Inc 11/19/97 08/12/98 Telemundo Group Inc Own, op Spanish TV stations Investor Group 11/21/97 01/28/98 BDM International Inc Pvd comp infotechnology svcs TRW Inc 11/24/97 03/30/98 MAPCO Inc Gas utility; petro refining Williams Cos Inc 11/26/97 04/23/98 ACC Corp Pvd telecommunications svcs Teleport Communications Group 11/26/97 02/25/98 Universal Hospital Services Pvd med equip rental services Investor Group 11/29/97 12/30/97 Defecta-Shield Corp Mnfr truck accessories Lund International Holdings 12/01/97 02/19/98 Raptor Systems Inc Develop security mgmt software AXENT Technologies Inc 12/02/97 06/02/98 Interstate Hotels Co Own,op hotels and motels Patriot Amer Hosp/Wyndham Intl Premium Acqurior Value of Enterprise ----------------------------------------------------------------------------- Business Decription Transaction Value 1 Day Prior 1 Week Prior 4 Weeks Prior 3 Months Prior 1 Year Prior ($mil) ($mil) to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date - ------------------------------------------------------------------------------------------------------------------------------------ Investment holding company 424.2 419.333 15.39 19.60 26.76 39.53 92.51 Pvd telecommunications svcs 2532.6 3112.888 35.71 58.40 83.65 93.47 121.34 Pvd telecommunications svcs 41906.9 43588.512 65.17 63.55 58.10 20.35 96.15 Pvd nursing care services 247.4 231.852 -0.86 9.43 1.75 34.88 45.00 Dvlp healthcare software 97.8 96.522 16.69 41.48 121.93 85.57 76.88 Provide express delivery svcs 2471.4 2681.170 13.90 19.72 42.57 68.28 284.73 Mnfr cardiovascular equipment 187.8 190.460 22.14 22.14 73.91 87.13 56.86 Manufacture satellite equip 425.6 1265.081 20.16 27.94 32.62 68.16 91.91 Investor group 26624.6 75189.213 32.67 36.32 31.24 178.01 292.96 Mnfr formaldehyde, resins 119.7 87.782 70.83 72.63 70.83 46.43 177.97 Mnfr metal working tools 957.0 1062.171 19.69 26.67 44.08 34.22 35.71 Pvd telecommunications svcs 269.4 214.024 49.75 70.94 78.52 64.73 51.00 Develop network software 1142.5 1113.339 19.65 25.27 42.72 Develop automation software 530.9 492.986 24.44 25.14 29.48 82.11 215.49 Provide insurance services 184.7 184.724 78.87 75.78 130.91 154.00 252.78 Mnfr appliance components 158.6 160.451 45.08 48.25 62.47 101.02 91.29 Mnfr plastic, rubber indl prods 583.2 590.907 125.24 133.17 149.46 30.34 146.81 Provide data processing svcs 358.0 347.757 19.00 17.93 17.40 -0.09 Real estate investement trust 13748.2 13534.835 94.29 98.25 95.40 34.12 98.83 Operate natural gas pipelines 1473.0 1352.149 31.82 33.24 38.56 34.27 51.64 Operate television stations 413.2 845.297 32.00 28.43 56.32 68.51 Property casualty insurance co 596.9 558.693 11.92 9.09 9.37 8.54 35.00 Dvle electn commerce software 234.7 211.132 55.20 49.12 27.82 117.26 8.63 Own,op TV,radio bdcstg station 1627.8 1729.528 2.32 5.17 20.46 21.75 29.65 Own and operate dept stores 867.7 992.381 38.83 39.30 31.80 56.87 109.29 Mnfr,whl eyeglass lenses, frame 130.8 135.550 108.72 107.62 108.72 128.19 125.56 Pvd computer telphony svcs 496.4 384.674 69.02 73.02 68.05 73.02 78.29 Mnfr specialty materials, metal 557.2 566.798 45.50 61.66 40.62 35.05 9.12 Manfacture synthetic drugs 169.4 169.973 44.00 47.27 23.43 82.54 6.23 Pvd waste removal svcs 1804.0 2054.954 26.16 38.06 47.32 General merchandise ret stores 994.1 1040.900 2.92 18.49 23.46 33.31 62.78 Own,operate department stores 1703.4 1671.766 13.86 23.43 27.96 42.28 49.76 Mnfr, whl respiratory prod 341.9 344.155 44.36 40.15 44.36 44.36 166.67 Investor group 240.8 272.750 11.29 4.55 11.29 12.20 25.45 Oil and gas exploration prodn 377.0 377.461 7.68 11.04 26.91 12.25 52.34 Title insurance company 132.4 151.926 89.79 89.79 87.61 87.59 155.00 Mnfr semiconductors,computers 459.8 463.297 31.69 44.14 13.48 26.48 13.58 Pvd kidney diaysis sevices 1362.6 1457.031 8.63 17.04 26.87 16.63 64.55 Investor group 521.4 710.483 19.66 29.07 24.96 30.76 47.72 Elect equip, credit reporting 888.0 923.006 31.11 43.47 38.01 13.46 19.19 Gas utility 2634.1 3405.648 21.05 35.99 43.66 985.88 Pvd telecommunications services 906.8 930.227 14.94 19.05 84.33 71.67 65.29 Investor group 133.0 122.732 29.17 29.17 25.25 26.53 67.57 Mnfr automobile parts 89.8 87.260 33.33 33.33 77.78 70.67 82.86 Develop software 253.7 225.830 5.40 20.73 16.49 22.40 -24.55 Real estate investment trust 2055.9 2095.266 2.56 8.70 20.39 30.15 45.63
Merger Premiums to Market Value Analysis Mergers with Target Price Equal to or Greater than $1 Announced and Completed 1/1/96 - 2/3/99 (continued) ==================================================================================================================================== Date Date Announced Effective Target Name Target Business Description Acquiror Name - ------------------------------------------------------------------------------------------------------------------------------------ 12/11/97 01/20/98 TriMas Corp Mnfr specialty closures, caps MascoTech Inc 12/12/97 05/29/98 Lukens Inc Mnfr steel plates Bethlehem Steel Corp 12/15/97 03/27/98 Gulf South Medical Supply Inc Wholesale medical supplies Physician Sales & Service Inc 12/15/97 05/01/98 Piper Jaffray Cos Investment bank, holding co US Bancorp, Minneapolis, MN 12/15/97 03/02/98 Sano Corp Mnfr pharmaceuticals Elan Corp PLC 12/16/97 05/08/98 Ambassador Apartments Inc Real estate investment trust Apartment Investment & Mgmt Co 12/16/97 01/30/98 Spine-Tech Inc Mnfr spiral implants SulzerMedica (Gebrueder Sulzer) 12/17/97 04/08/98 Oasis Residential Inc Real estate investment trust Camden Property Trust 12/17/97 01/23/98 Suburban Ostomy Supply Co Inc Whl medical and hospital equip InvaCare Corporation 12/19/97 03/30/98 ASR Investments Corp Real estate investment trust United Dominion Realty Tr Inc 12/19/97 06/17/98 Chemi-Trol Chemical Co Mnfr steel pressure tanks Harsco Corp 12/19/97 04/20/98 Continental Homes Holding Construct, design homes DR Horton Inc 12/19/97 05/01/98 IPC Information Systems Inc Mnfr telecommunications equip Cable Systems International 12/19/97 01/20/98 Showboat Inc Own, operate hotel casinos Harrah's Entertainment 12/19/97 01/27/98 Software Artistry Inc Develop help-desk software Tivoli Systems Inc (IBM Corp) 12/19/97 02/03/98 Symetrics Industries Inc Mnfr communications equip Tel-Save Holdings Inc 12/22/97 05/21/98 Dynatech Corp Mnfr test, analysis products Investor Group 12/22/97 09/30/98 Essex County Gas Gas utility Eastern Enterprises 12/23/97 04/01/98 Union Corp Pvd adjustment collection svcs Outsourcing Solutions Inc 01/01/98 07/31/98 GoodMark Foods Inc Produce meat snacks ConAgra Inc 01/05/98 07/17/98 La Quinta Inns Inc Own, op motor inns Meditrust Acquisition Co 01/05/98 10/26/98 Southern New England Telecomm Provide telecommun services SBC Communications Inc 01/06/98 04/01/98 Schult Homes Corp Manufacture mobile homes Oakwood Homes Corp 01/08/98 01/30/98 Rayonier Timberlands LP Own, op timber tracts Rayonier Inc 01/08/98 07/23/98 Teleport Communications Group Pvd telecommunication services AT&T Corp 01/09/98 09/30/98 Wandel & Goltermann Tech Inc Mnfr network equipment Wandel & Goltermann Management 01/12/98 02/19/98 Computer Language Research Inc Dvlp tax processing software Research Institute of America 01/14/98 06/01/98 Continental Can Co Inc Mnfr metal plastic cans Suiza Foods Corp 01/14/98 06/19/98 Price REIT Inc Real estate investment trust Kimco Realty Corp 01/19/98 04/24/98 USF&G Corp Insurance holding company St Paul Companies Inc 01/20/98 10/05/98 Buttrey Food and Drug Stores Own, op supermarkets, drug store Albertson's Inc 01/20/98 04/16/98 NACT Telecommunications(GST) Pvd telephone commun svcs World Access Inc 01/20/98 05/27/98 Regal Cinemas Inc Pvd movie exhibition services Investor Group 01/21/98 05/22/98 Thermadyne Holdings Corp Mnfr welding equip, indl mach DLJ Merchant Bkg Partners II 01/23/98 04/13/98 Handy & Harman Mnfr, whl metal wire, cable WHX Corp 01/26/98 06/11/98 Digital Equipment Corp Mnfr computers, equip Compaq Computer Corp 01/27/98 03/03/98 State of the Art Inc Develop financial software Sage Group PLC 02/02/98 03/27/98 BGS Systems Inc Develop utilities software BMC Software Inc 02/02/98 03/31/98 Pacific Scientific Co Manufacture electric motors Danaher Corp 02/02/98 04/20/98 Source Services Corp Provide help supply services Romac International Inc 02/04/98 03/20/98 Industrial Acoustics Inc Mnfr noise reducing products IAC Holdings Corp 02/09/98 03/31/98 Arbor Drugs Inc Own, operate drug stores CVS Corp 02/09/98 06/15/98 Culligan Water Technologies Mnfr, whl purification products United States Filter Corp 02/09/98 04/16/98 Summit Care Corp Provide nursing services Fountain View(Heritage) 02/10/98 06/04/98 Illinois Central Corp Railroad transportation svcs Canadian National Railway Co 02/11/98 06/10/98 MTL Inc Pvd tank truck carrier svcs Sombrero Acquisition Co 02/11/98 05/20/98 Waverly Inc Publish books, periodicals Wolters Kluwer NV 02/16/98 08/04/98 Coherent Communications Sys Mnfr voice enhancement prods Tellabs Inc Premimum Value of Enterprise __________________________________________________________________________ Acquiror Transaction Value 1 Day prior 1 Wk. Prior 4 Wks Prior 3 Mths Prior 1 Year Prior Business Description ($ mil) ($ mil) to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date - ---------------------------------------------------------------------------------------------------------------------------------- Mnfr motor vehicle components 911.7 1384.002 12.65 9.96 18.97 13.58 42.27 Manufacture steel products 700.2 751.934 92.00 94.33 69.61 48.61 64.38 Wholesale medical equipment 678.9 629.501 38.50 21.97 16.04 49.07 36.44 Bank holding company 767.8 991.438 25.21 24.17 54.01 44.66 132.81 Mnfr drug delivery systems 396.8 395.981 52.71 42.64 95.13 71.32 105.08 Real estate investment trust 663.0 620.978 4.44 5.42 5.42 -13.30 4.10 Mnfr medical implants 621.1 618.513 14.29 52.94 55.81 16.20 121.28 Real estate investment trust 395.2 825.507 9.47 10.72 7.95 -2.60 12.32 Mnfr surgical, medical supplies 130.8 128.543 8.05 13.25 13.25 22.08 2.17 Real estate investment trust 277.0 264.202 4.38 1.09 2.56 -5.16 3.76 Mnfr scaffolding, pipes 46.1 55.830 61.40 61.40 64.29 75.24 113.95 Construct residential bldgs 590.2 569.494 26.28 27.64 35.97 61.02 114.69 Mnfr telecommun equip 201.7 252.027 14.29 31.25 14.29 100.00 182.35 Own, op hotel casinos 1147.6 987.484 66.78 62.91 50.46 67.35 Dvlp systems mgmt software 201.9 190.512 61.98 57.43 67.52 237.93 Pvd telecommunications svcs 25.0 31.514 36.36 172.73 114.29 110.53 Investor group 762.9 783.400 29.93 37.16 29.93 -42.38 -41.41 Gas utility holding company 79.2 117.581 26.56 55.46 61.17 74.73 97.44 Pvd outsourcing svcs 193.0 202.637 14.55 13.51 23.53 29.90 41.57 Produce meats, eggs, cooking oil 217.8 230.600 54.49 75.88 69.36 68.12 73.21 Real estate investment trust 2907.5 3040.501 28.40 35.95 35.95 47.00 41.50 Provide telecommun services 5828.3 5806.816 32.65 35.72 42.90 51.99 70.43 Mnfr, ret factory-built homes 101.4 104.041 1.12 10.43 19.21 25.00 15.51 Manufacture logs, timber 65.8 482.257 11.23 25.30 17.51 -13.33 Own, op telecommunications sys 11187.7 11030.733 -2.45 1.72 16.96 20.38 76.12 Investment management svcs 34.2 72.500 23.50 21.14 31.13 57.04 -42.44 Publish tax law information 325.4 320.430 60.71 62.16 69.81 1025.00 767.47 Produce milk, related prod 330.5 334.437 45.83 74.37 71.16 72.98 198.35 Real estate investment trust 870.6 804.794 13.48 14.33 18.21 17.50 26.42 Insurance holding company 3782.2 3382.590 18.19 22.47 14.51 17.52 18.55 Supermarkets, department stores 139.2 175.706 44.19 44.19 47.62 39.33 89.31 Pvd telecommunication services 53.1 144.629 12.00 12.45 16.67 20.69 Investor group 1462.7 1408.724 14.29 10.71 34.78 19.23 29.17 Merchant banking firm 790.0 742.650 19.48 21.05 18.46 15.72 30.19 Mnfr steel and steel prods 625.1 613.196 8.67 14.63 1.62 30.56 118.60 Manufacture personal computers 9123.7 8620.004 32.06 50.25 62.45 25.65 61.07 Dvlp, whl accounting software 245.2 244.444 33.33 35.39 35.39 38.58 57.14 Develop software 306.9 288.511 23.29 32.35 42.86 37.93 57.89 Mnfr tools, control equipment 417.5 484.560 20.40 21.91 28.72 96.75 122.02 Pvd specialty staffing svcs 454.4 431.094 51.12 56.69 50.24 59.65 140.98 Investment company 25.9 48.961 4.76 10.00 10.00 2.33 Own and operate drug stores 1423.2 957.178 1.86 14.12 18.13 30.81 82.45 Mnfr water treatment equip 1474.3 1927.567 57.49 62.89 27.35 43.47 56.96 Own, op healthcare facilities 275.1 276.923 14.29 31.25 37.71 27.27 97.65 Pvd railroad services 2931.0 2996.582 10.64 20.00 18.86 8.71 17.74 Investment company 250.1 250.358 37.93 38.53 56.10 46.79 79.78 Publish newspapers, books 375.6 390.052 42.47 50.73 50.73 -3.11 77.27 Mnfr voice, data transport sys 664.3 514.177 30.36 43.23 81.37 40.24 104.76
Merger Premiums to Market Value Analysis Mergers with Target Price Equal to or Greater than $10 per Share Announced and Completed 1/1/96 - 2/3/99 (continued) ==================================================================================================================================== Date Date Announced Effective Target Name Target Business Description Acquiror Name - ------------------------------------------------------------------------------------------------------------------------------------ 02/17/98 05/27/98 Devan Group Inc Pvd graphic arts services Applied Graphics Technologies 02/17/98 06/11/98 Zum Industries Inc Mnfr environmental equipment US Industries Inc 02/18/98 11/25/98 National Income Realty Trust Real estate investment trust Tarragon Realty Investors 02/18/98 06/27/98 Republic Automotive Parts Inc Mnfr, whl automotive parts Keystone Automotive Inds Inc 02/19/98 08/07/98 Enex Resources Corp Oil and gas traders Middle Bay Oil Company Inc 02/19/98 04/21/98 Mastering Inc Provide computer training services PLATINUM Technology Inc 02/23/98 06/30/98 Money Store Inc Provide mtg svcs loans First Union Corp. Charlotte, NC 02/23/98 04/28/98 Trusted Information Systems Develop security software Network Associates Inc 02/24/98 04/06/98 Wonderware Corp Dvlp process control software Siebe PLC 02/26/98 09/30/98 Dresser Industries Inc Mnfr oil & gas field machinery Halliburton Co 03/02/98 08/03/98 Benchmarq Microelectronic Inc Mnfr microprocessors Unitrode Corp 03/02/98 08/17/98 Deep Tech International Oil and gass exploration prodn El Paso Natural Gas Co 03/02/98 05/19/98 Scopus Technology Inc Dvlp Client/server software Siebel Systems Inc 03/03/98 05/27/98 EVI Weatherford Inc Provide oil field services EVI Inc 03/05/98 05/20/98 XLConnect Solutions Inc Pvd integrated sys design svc Zerox Corp 03/06/98 07/31/98 Alumax Inc Mnfr aluminum products Alcoa 03/06/98 09/11/98 United Dental Care Inc Pvd dental svcs to subscribers Protective Life Corp 03/09/98 06/05/98 LCI International Inc Pvd telecommunications svcs Qwest Communications Corp 03/09/98 06/25/98 Pri Cellular Corp Pvd cellular telephone svcs American Cellular Corp 03/10/98 06/05/98 Portec Inc Mnfr railroad track components J Richard Industries Inc 03/11/98 07/16/98 Waste Management Inc Pvd chemical waste mgmt svcs USA Waste Services Inc 03/12/98 04/20/98 Metromail Corp Pvd direct-mail advg svcs Great Universal Stores PLC 03/13/98 07/31/98 MedCath Inc Pvd cardiology related svcs Investor Group 03/16/98 08/03/98 American General Hospitality Real estate investment trust CapStar Hotel Co 03/16/98 05/28/98 Logic Works Inc Develop client/server software PLATINUM Technology Inc 03/16/98 10/30/98 Norwood Promotional Products Mnfr hats, promotional prods FPK LLC 03/16/98 07/01/98 360 Communications Co Pvd telecommunication svcs ALLTEL Corp 03/17/98 07/31/98 BET Holdings Inc Own and operate TV stations Investor Group 03/17/98 05/27/98 ForeFront Group Inc Develop software CBT Group PLC 03/18/98 06/30/98 Medusa Corp Manufacture cement Southdown Inc 03/24/98 08/17/98 Insilco Corp Mnfr auto, elec, & electn parts DLJ Merchant Bkg Partners II 03/24/98 06/24/98 Walsh International Inc Provide programming svcs Cognizant Corp 03/27/98 07/01/98 Grand Prix Assoc Of Long Beach Own, op motorsport facilities Dover Downs Entertainment Inc 03/27/98 07/15/98 Intl Specialty Prods Mnfr specialty chemicals ISP Holdings Inc 03/30/98 05/11/98 Children's Discovery Centers Operte child care centers Knowledge Beginnings Inc 04/02/98 06/30/98 Security Capital Atlantic Inc Real estate investment trust Security Capital Pacific Trust 04/06/98 07/10/98 MoneyGram Payment Systems Inc Pvd money wire transfer svce Viad Corp 04/06/98 07/31/98 Zero Corp Manufacture metal encasements Applied Power Inc 04/07/98 06/30/98 Beneficial Corp Pvd consumer financing svcs Household International Inc 04/07/98 06/30/98 Green Tree Financial Corp Pvd consumer, coml finance svcs Conseco Inc 04/08/98 05/19/98 Blessings Corp Mnfr plastic film products Huntsman Packaging Corp 04/09/98 07/27/98 Claremont Technology Group Inc Pvd comp integrated sys svc Complete Business Solutions 04/09/98 05/15/98 Dart Group Corp Own, operate auto part stores Richfood Holdings Inc 04/13/98 07/31/98 Mariner Health Group Inc Provide sub-acute care svcs Paragon Health Network Inc 04/15/98 08/11/98 Harborside Healthcare Corp Pvd long-term med services Investcorp 04/16/98 09/28/98 Award Software International Develop software Phoenix Techologies Ltd 04/20/98 09/15/98 Atria Communities Inc Provide residential care svcs Kapson Senior Quarters Corp 04/20/98 01/04/99 Corrections Corp of America Own, op correctional facilities CCA Prison Realty Trust Premium Value of Enterprise --------------------------------------------------------------------------- Acquiror Transaction Value 1 Day Prior 1 Week Prior 4 Weeks Prior 3 Months Prior 1 Year Prior Business Description ($mil) ($mil) to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date - ------------------------------------------------------------------------------------------------------------------------------------ Pvd digital prepress services 474.4 25.318 29.19 32.03 37.91 52.10 108.07 Mfnr consumer building prods 790.8 699.542 19.53 22.00 36.05 28.17 80.82 Operate real estate agencies 77.0 246.069 22.92 17.89 20.12 18.33 67.71 Whl auto parts and supplies 62.8 85.900 33.03 33.33 28.57 20.00 9.09 Oil and gas explorations, prodn 17.3 np 21.21 30.44 37.93 30.43 46.34 Develop integrated software 198.7 180.540 31.58 25.00 33.33 36.99 -1.96 Commercial bank holding co 2215.2 3631.373 37.26 28.50 87.43 34.20 25.81 Develop network software 322.1 255.453 59.92 84.59 92.29 119.76 25.21 Mnfr appliance controls 362.7 343.256 50.00 59.34 79.44 32.41 125.88 Mnfr oil field machinery 7783.2 8429.126 13.73 15.03 18.32 17.73 43.09 Mnfr semiconductors, capacitors 150.6 145.097 15.77 14.02 67.22 4.86 5.97 Oil and gas exploration, prodn 375.4 526.645 8.74 9.80 15.46 30.23 138.30 Dvlp sales automation software 490.7 455.875 58.51 93.64 100.13 84.66 2.35 Mnfr oil field products 2670.7 2826.429 39.85 59.59 41.33 6.18 74.50 Mnfr business machine, fin co 93.0 353.571 -11.11 15.11 22.14 19.40 180.70 Manufacture aluminum products 3944.2 3698.414 35.08 33.26 36.25 52.85 30.83 Insurance company holding co 180.4 174.664 20.49 49.18 57.43 51.34 -30.69 Pvd telephone commun svcs 4401.4 4808.210 22.18 24.21 54.84 55.20 133.33 Pvd cellular commun services 1385.2 1070.547 7.69 16.67 16.06 23.76 58.87 Investment firm 76.5 79.772 8.48 13.78 10.35 13.27 43.82 Pvd waste disposal services 13313.6 19980.864 12.62 15.78 15.78 5.07 -12.03 Own, op mail order house 837.9 830.340 32.69 28.37 30.19 77.49 117.32 Investor group 227.8 354.054 15.15 10.95 34.51 26.67 26.67 Own, operate hotels 1211.8 979.193 56.60 58.43 52.01 37.49 27.67 Develop integrated software 212.9 190.349 12.96 36.18 57.13 70.22 131.25 Investment company 107.8 164.262 19.14 19.14 23.58 38.00 40.34 Pvd telecommunication svcs 5948.6 6021.367 15.41 30.39 49.84 68.97 84.49 Investor group 462.3 768.073 53.66 58.49 58.24 17.76 109.13 Dvlp educational software 147.5 127.126 17.27 29.36 48.50 81.91 258.63 Mnfr cement, limestone mining 1052.5 1084.117 17.16 24.29 35.28 53.29 60.58 Merchant banking firm 425.3 446.509 4.65 11.11 12.85 Pvd information services 176.8 179.217 36.84 53.33 59.10 105.29 Own, op race track, casinos 91.0 114.964 11.81 22.06 21.55 31.37 42.21 Mnfr industrial chemicals 324.5 2125.805 4.29 1.74 14.51 22.18 43.14 Own, operate child care centers 89.1 98.063 20.99 16.67 25.64 28.95 139.02 Real estate investment trust 1681.4 1747.998 14.88 14.88 14.20 12.56 10.31 Provide food catering services 293.6 243.166 11.49 15.67 42.36 61.40 87.57 Mnfr tools, equip, consumables 431.6 300.987 16.46 17.99 33.18 24.56 84.27 Provide financial services 8703.8 21243.125 82.38 82.10 86.06 Insurance holding company 7358.8 8536.398 82.51 86.12 94.23 110.14 60.39 Prod printed, laminated films 269.7 244.612 18.73 18.31 34.94 41.77 118.18 Pvd computer programming svcs 282.5 278.527 21.35 77.05 118.18 60.00 21.35 Wholesale groceries 193.3 445.522 14.29 11.89 19.40 46.79 71.81 Own, op nursing care facilities 622.3 1216.454 6.04 10.88 28.98 27.42 139.39 Investment firm 263.2 280.422 18.34 22.70 5.82 35.59 117.39 Develop systems software 129.5 101.809 12.83 21.34 53.12 96.40 44.54 Provide residential care svcs 238.9 501.892 2.53 7.29 -0.31 16.13 82.02 Real estate investment trust 3274.2 3321.115 4.80 0.13 1.58
MERGER PREMIUMS TO MARKET VALUE ANALYSIS MERGERS WITH TARGET EQUAL TO OR GREATER THAN $10 PER SHARE ANNOUNCED AND COMPLETED 1/1/96 - 2/3/99 (CONTINUED) ================================================================================ Date Date Announced Effective Target Name Target Business Description Acquiror Name - ----------------------------------------------------------------------------------------------------------------------------------- 04/06/98 07/10/98 MoneyGram Payment Systems Inc Pvd money wire transfer svcs Viad Corp 04/06/98 07/31/98 Zero Corp Manufacture metal encasements Applied Power Inc 04/07/98 06/30/98 Beneficial Corp Pvd consumer financing svcs Household International Inc 04/07/98 06/30/98 Green Tree Financial Corp Pvd consumer coml finance svcs Conseco Inc 04/08/98 05/19/98 Blessings Corp Mnfr plastic film products Huntsman Packaging Corp 04/09/98 07/27/98 Claremont Technology Group Inc Pvd comp integrated sys svc Complete Business Solutions 04/09/98 05/15/98 Dart Group Corp Own, operate auto part stores Richfood Holdings Inc 04/13/98 07/31/98 Mariner Health Group Inc Provide sub-acute care svcs Paragon Health Network Inc 04/15/98 08/11/98 Harborside Healthcare Corp Pvd long-term med services Investcorp 04/16/98 09/28/98 Award Software International Develop software Phoenix Technologies Ltd 04/20/98 09/15/98 Atria Communities Inc Provide residential care svcs Kapson Senior Quarters Corp 04/20/98 01/04/98 Corrections Corp of America Own, op correctional facilities CCA Prison Realty Trust 04/21/98 08/25/98 PCA International Inc Pvd photo processing services Investor Group 04/21/98 06/24/98 Tracor Inc Mnfr defense electronics General Electric Co PLC 04/27/98 07/09/98 Fluke Corp Mnfr electronic test equipment Danaher Corp 04/27/98 08/30/98 Vitalink Pharmacy Services Inc Pvd health and allied svcs Genesis Health Ventures Inc 04/27/98 06/01/98 Yurie Systems Inc Mnfr communications equip Lucent Technologies Inc 04/29/98 08/14/98 Neurex Corp Mnfr, whl biopharmaceuticals Elan Corp PLC 04/30/98 11/02/98 Mycogen Corp (Dow AgroSciences) Provide crop services Dow AgroSciences(Dow Chemical) 05/04/98 07/09/98 Echlin Inc Mnfr, whl automotive parts Dana Corp 05/04/98 06/29/98 Union Texas Petroleum Holdings Oil and gas exploration, prodn ARCO 05/06/98 09/06/98 Mountbalten Inc Surety insurance company Fidelity & Deposit Co of MD 05/06/98 07/22/98 National Surgery Centers Inc Own and operate hospitals HealthSouth Corp 05/07/98 11/12/98 Chrysler Corp Manufacture automobiles Daimler-Benz AG 05/08/98 06/15/98 Authentic Speciality Foods Inc Whl, mnfr Mexican foods Agrobios(Desc SA de CV) 05/11/98 12/07/98 DeKalb Genetics Corp Operate agricultural labs Monsanto Co 05/11/98 11/18/98 Stone Container Corp Mnfr containerboard paper prod Jefferson Smurfit Corp 05/13/98 06/26/98 Sage Laboratories Inc Mnfr electronics components Filtronic Comtek PLC 05/14/98 09/25/98 New Plan Realty Trust Real estate investment trust Excel Realty Trust Inc 05/18/98 08/19/98 Mercantile Stores Co Inc Own, op department stores Dillards Inc 05/18/98 08/07/98 RP Scherer Corp Mnfr soft gelatin capsules Cardinal Health Inc 05/18/98 08/26/98 Viking Office Products Inc Whl, retail office products Office Depot Inc 05/19/98 09/28/98 ATL Products Inc(Odetics) Mnfr computer storage devices Quantum Corp 05/19/98 10/28/98 Giant Food Inc Own, op supermarkets Koninklijke Ahold NV 05/19/98 11/16/98 QuesTech Inc Sys engineering, tech services CACI International Inc 05/20/98 10/22/98 National Gas & Oil Co Gas utility, gas expl and prod Licking Rural Electrification 05/25/98 10/01/98 US Surgical Corp Manufacture surgical staples Tyco International Ltd 05/26/98 08/24/98 Hyperion Software Corp Dvlp software Arbor Software Corp 05/27/98 09/17/98 May & Speh Inc Pvd computer-based direct mktg Acxiom Corp 05/28/98 07/07/98 Donnelley Enterprise Solutions Pvd info management services Bowne & Co Inc 06/04/98 11/13/98 Allied Life Financial Corp Insurance co holding co Nationwide Mutual Insurance Co 06/04/98 11/03/98 Cable Michigan Inc Pvd cable TV svcs Avalon Cable 06/04/98 09/08/98 DSC Communications Corp Dvlp, mnfr digital telecom sys Alcatel Alsthorn CGE 06/04/98 07/20/98 Pollo Tropical Inc Own and operate restaurants Carrols Corp 06/04/98 11/30/98 Telco Systems Inc Mnfr telecommunications prods World Access Inc Value of Enterprise Premium ------------------------------------------------- Date Acquiror Transaction Value 1 Day Prior 1 Week Prior 4 Weeks Prior Announced Business Description ($ mil) ($ mil) to Annc. Date to Annc. Date to Annc. Date - ---------------------------------------------------------------------------------------------------------------------------- 04/06/98 Provide food catering services 293.6 243.166 11.49 15.67 42.36 04/06/98 Mnfr tools, equip, consumables 431.6 300.987 16.46 17.99 33.18 04/07/98 Provide financial services 8703.8 21243.125 82.38 82.10 86.06 04/07/98 Insurance holding company 7358.8 8536.398 82.51 86.12 94.23 04/08/98 Prod printed, laminated films 269.7 244.612 18.73 18.31 34.94 04/09/98 Pvd computer programming svcs 282.5 278.527 21.35 77.05 118.18 04/09/98 Wholesale groceries 193.3 445.522 14.29 11.89 19.40 04/13/98 Own, op nursing care facilities 622.3 1216.454 6.04 10.88 28.98 04/15/98 Investment firm 263.2 280.422 18.34 22.70 5.82 04/16/98 Develop systems software 129.5 101.809 12.83 21.34 53.12 04/20/98 Provide residential care svcs 238.9 501.892 2.53 7.29 -0.31 04/20/98 Real estate investment trust 3274.2 3321.115 4.80 0.13 1.58 04/21/98 Investor group 232.5 270.001 23.26 17.78 20.46 04/21/98 Mnfr radios and televisions 1323.5 1359.782 9.97 16.79 25.00 04/27/98 Mnfr tools, control equipment 718.9 657.508 61.73 61.29 57.90 04/27/98 Own, op geriatric facilities 678.4 677.472 13.57 12.15 6.51 04/27/98 Mnfr telecom equip, software 1044.1 1034.861 11.11 17.40 49.73 04/28/98 Mnfr drug delivery systems 824.5 778.466 65.56 46.75 41.40 04/30/98 Manufacture insecticides 355.2 1052.306 41.77 40.00 52.38 05/04/98 Mnfr motor vehicle products 4124.8 4345.068 41.48 42.86 52.78 05/04/98 Oil and gas exploration prodn 2741.4 3376.306 41.46 46.84 36.47 05/06/98 Surety insurance co 43.4 41.431 2.46 6.18 4.29 05/06/98 Own, op outpatient surgery ctr 703.1 634.647 17.56 16.00 29.08 05/07/98 Mnfr, whl automobiles & trucks 40466.5 49376.995 48.84 54.25 45.73 05/09/98 Mnfr, whl foods products 141.9 148.080 6.25 13.33 37.37 05/11/98 Mnfr agro chems, manmade fibers 2262.7 3275.717 201.89 199.63 255.56 05/11/98 Manufacture paperboard prod 2229.6 6705.091 44.32 46.27 59.96 05/13/98 Mnfr mobile telephone devices 20.2 16.273 37.26 34.62 35.92 05/14/98 Real estate investment trust 1715.3 2270.329 13.43 15.44 14.29 05/18/98 Own, op department stores 2943.1 3022.020 9.12 9.59 15.42 05/19/98 Whl pharmaceutical products 2541.6 2503.864 17.47 23.34 30.06 05/19/98 Own, op stationery stores 3082.2 3033.551 43.86 42.38 44.24 05/19/98 Manufacture disk drives 304.0 353.056 8.41 18.97 45.00 05/19/98 Own, operate supermarkets 2633.5 2792.066 14.10 12.60 14.29 05/19/98 Pvd computer engineering svcs 43.8 40.114 25.03 42.20 52.67 05/20/98 Electric utility 93.0 116.721 6.67 18.18 26.06 05/25/98 Mnfr fire protection systems 3394.2 3969.778 7.91 25.73 39.73 05/26/98 Dvlp software 837.3 751.400 4.97 3.78 -3.57 05/27/98 Provide on-line database svcs 502.5 533.176 2.65 12.58 20.35 05/29/98 Pvd printing svcs 105.2 114.540 60.77 61.54 83.61 06/04/98 Insurance company 89.9 165.263 4.35 13.74 26.32 06/04/98 Pvd cable TV services 291.2 415.924 14.89 14.89 23.19 06/04/98 Mnfr telephone commun equip 4685.3 5084.934 21.64 111.91 98.67 06/04/98 Own and operate restaurants 94.6 93.282 10.00 7.32 18.12 06/04/98 Pvd telecommunication services 194.5 183.393 77.78 65.85 63.86 ------------------------------- Date 3 Months Prior 1 Year Prior Announced to Annc. Date to Annc. Date - ---------------------------------------------- 04/06/98 61.40 87.57 04/06/98 24.56 84.27 04/07/98 04/07/98 110.14 60.39 04/08/98 41.77 118.18 04/09/98 60.00 21.35 04/09/98 46.79 71.81 04/13/98 27.42 139.39 04/15/98 35.59 117.39 04/16/98 96.40 44.54 04/20/98 16.13 82.02 04/20/98 04/21/98 19.10 80.43 04/21/98 33.89 100.00 04/27/98 64.84 64.38 04/27/98 6.51 23.29 04/27/98 62.55 268.42 04/28/98 88.20 197.27 04/30/98 35.76 54.48 05/04/98 49.41 67.94 05/04/98 49.68 53.64 05/06/98 24.26 66.86 05/06/98 37.17 66.68 05/07/98 15.29 68.36 05/09/98 20.35 05/11/98 201.89 212.20 05/11/98 64.87 88.84 05/13/98 38.61 29.63 05/14/98 11.49 29.55 05/18/98 19.40 56.48 05/19/98 51.76 83.76 05/19/98 49.74 107.16 05/19/98 101.74 197.44 05/19/98 20.70 30.30 05/19/98 205.35 137.77 05/20/98 18.18 58.33 05/25/98 51.62 35.01 05/26/98 -1.79 114.87 05/27/98 34.23 58.64 05/29/98 118.18 102.41 06/04/98 40.35 77.12 06/04/98 65.31 06/04/98 105.08 46.71 06/04/98 37.50 66.04 06/04/98 67.90 58.14 Page F - 19
MERGER PREMIUMS TO MARKET VALUE ANALYSIS MERGERS WITH TARGET PRICE EQUAL TO OR GREATER THAN $10 PER SHARE ANNOUNCED AND COMPLETED 1/1/96-2/3/99 (continued) ==================================================================================================================================== Date Date Announced Effective Target Name Target Business Description Acquiror Name - ------------------------------------------------------------------------------------------------------------------------------------ 06/08/98 10/15/98 CapStone Capital Corp Real estate investment trust Healthcare Realty Trust Inc 06/10/98 08/18/98 Ceanic Corp Pvd sub sea services products Stolt Comex Seaway SA 06/10/98 09/25/98 Manor Care Inc Own, op nursing homes, hotels Health Care and Retirement 06/10/98 07/31/98 Plenum Publishing Corp Publish technical journals Wolters Kluwer NV 06/12/98 10/26/98 McDonald & Co Investment Inc Investment bank KeyCorp, Cleveland Ohio 06/12/98 07/21/98 Triangle Pacific Corp Mnfr,whl wood cabinets Armstrong World Industries Inc 06/15/98 08/31/98 Bay Networks Inc Mnfr,whl data networking prods Northern Telecom Ltd(BOE Inc) 06/16/98 08/31/98 Personnel Management Inc Employment agency Linsalata Capital Partners 06/17/98 09/24/98 Intersolv Inc Develop software products Micro Focus Group PLC 06/17/98 09/08/98 Nimbus CD International Inc Mnfr compact discs Carlton Communications PLC 06/18/98 07/28/98 ARCO Chemical Co(ARCO) Mnfr,whl intermediate chems Lyondell Petrochemical Co 06/18/98 09/24/98 PMT Services Inc Pvd credit card services NOVA Corp 06/19/98 08/31/98 Carnco International Inc Mnfr oil, gas field equipment Schlumberger Technology Corp 06/19/98 12/21/98 General Re Corp Insurance holding company Berkshire Hathaway Inc 06/22/98 08/31/98 Broderbund Software Inc Dvlp,whl educational software Learning Co Inc 06/22/98 12/15/98 Special Devices Inc Manufacture surgical implants JF Lehman & Co 06/24/98 10/05/98 Penederm Inc Mnfr pharmaceutical products Mylan Laboratories Inc 06/25/98 09/22/98 Dawson Production Services Inc Oil and gas exploration,prodn Key Energy Group Inc 06/29/98 12/31/98 Grand Casinos Inc Own and operate casinos Hilton Hotels Corp 06/29/98 09/30/98 Physio-Control International Mnfr,whl cardiac defibrillator Medtronic Inc 06/30/98 09/30/98 Summit Holding Southeast Inc Pvd management services Liberty Mutual Group 07/01/98 08/20/98 Leog Inc Provide management services Metzlar Group Inc 07/02/98 01/08/98 Centennial Cellular Corp Pvd wireless telecommun svcs Investor Group 07/03/98 09/18/98 Saks Holdings(Investcorp BK) Own and operate dept stores Proffit's Inc 07/08/98 10/20/98 Merry Land & Investment Co Inc Real estate investment trust Equity Residential Pptys Trust 07/09/98 10/28/98 Eltron International Inc Mnfr computer printers Zebra Technologies Corp 07/17/98 09/02/98 DeCrane Aircraft Holdings Inc Mnfr avionics Components DLJ Merchant Banking Inc 07/20/98 10/06/98 General Signal Corp Mnfr electric control equip SPX Corp 07/21/98 11/05/98 Depuy Inc(Corange Ltd) Mnfr orthopedic devices Johnson & Johnson 07/23/98 10/30/98 IMNET Systems Inc Develop imaging software HBO & Co 07/27/98 11/30/98 Life Re Corp Reinsurance company Swiss Reinsurance Co 07/29/98 10/02/98 ATL Ultrasound Inc Mnfr medical imaging products Philips Electronics Nv 07/30/98 10/15/98 BetzDearbom Inc Mnfr,whl water treatment chems Hercules Inc 08/03/98 11/17/98 Freeport-McMcRan Sulphur Inc Reinsurance company McMcRan Oil & Gas Co 08/03/98 01/04/98 Priority Healthcare Corp Mnfr medical imaging products Shareholders 08/03/98 10/20/98 Stratus Computer Inc Mnfr,whl water treatment chems Ascend Communications Inc 08/03/98 09/02/98 Zeigler Coal Holding Co Coal mining holding company AEI Resources Inc 08/06/98 01/19/98 Equity Corp International Pvd healthcare services Service Corp International 08/10/98 10/15/98 American Disposal Services Inc Pvd waste disposal services Allied Waste Industries Inc 08/10/98 12/07/98 Cliffs Drilling Co Pvd oil well drilling services R&B Falcon Corp 08/10/98 09/21/98 Molecular Dynamics Inc Mnfr,whl laboratory equipment Amersham Pharmecia Biotech Ltd 08/10/98 01/04/98 Rio Hotel & Casino Inc Own,operate casino hotel Harrah's Entertainment 08/11/98 12/31/98 Amoco Corp Oil and gas exploration prodn British Petroleum Co PLC(BP) 08/13/98 12/03/98 Clearview Cinema Group Inc Own and operate movie theaters Cablevision Systems Corp 08/17/98 12/31/98 Eastern Environmental Services Pvd waste collection svcs Waste Management Inc 08/17/98 12/31/98 Westoo Bancorp Inc, IL Federal savings institution MAF Bancorp, Claredon Hill,IL 08/24/98 01/06/98 General Microwave Corp Mnfr microwave test equipment Herley Industries Inc 08/27/98 10/13/98 Berg Electronics Corp Mnfr electronic connectors Framastone Connectors Intl 09/02/98 12/01/98 Altron Inc Mnfr,mid circuit board prods Sanmina Corp ==================================================================================================================================== Value of Enterprise Premium ----------------------------------------------------- Date Acquiror Transaction Value 1 Day Prior 1 Week Prior 4 Weeks Prior Announced Business Description ($ mil) ($mil) to Annc. Data to Annc. Data to Annc. Data - ---------------------------------------------------------------------------------------------------------------------------------- 06/08/98 Real estate investment trust 971.4 883.641 5.09 4.52 0.97 06/10/98 Pvd oil/gas contracting svcs 222.8 247.207 29.56 34.45 06/10/98 Own,operate nursing homes 2474.4 2986.162 21.77 25.31 17.97 06/10/98 Publish newspapers, books 258.0 206.772 6.52 6.72 10.73 06/12/98 Bank holding company 577.4 629.492 0.68 2.74 7.36 06/12/98 Mnfr interior furnishings 1124.3 1124.592 26.14 26.50 24.02 06/15/98 Mnfr telecommunications equip 9268.6 9008.959 34.97 18.49 44.88 06/16/98 Investment firm 34.9 37.497 25.49 23.08 23.08 06/17/98 Manufacture lenses, computers 532.0 511.381 56.16 41.05 52.09 06/17/98 Pvd motion picture prodn svcs 264.9 282.573 6.98 5.75 10.84 06/18/98 Mnfr petrochems, polyolefins 5645.7 6512.535 14.22 12.27 3.36 06/18/98 Pvd information retreival svcs 1266.6 1238.701 21.98 35.54 31.98 06/19/98 Develop software 3376.3 3307.250 32.57 39.88 19.50 06/19/98 Property,casualty insurance co 22337.9 24441.855 23.59 23.00 25.05 06/22/98 Dvlp consumer software 424.3 287.222 21.21 16.36 18.96 06/22/98 Investment bank 277.8 279.281 -2.51 1.87 06/24/98 Mnfr,whl pharmaceuticals 193.1 190.480 38.97 39.52 88.28 06/25/98 Pvd oil well services 348.8 320.273 40.70 50.54 66.67 06/29/98 Own and operate hotels 811.1 1329.551 6.40 8.32 7.16 06/29/98 Mnfr medical technology prods 529.1 543.038 19.57 31.74 31.34 06/30/98 Insurance agency 233.4 224.557 28.16 26.32 28.16 07/01/98 Pvd business consulting svcs 294.4 272.583 46.50 48.98 41.77 07/02/98 Investor group 1509.7 1285.381 66.83 69.39 64.36 07/03/98 Own and operate dept stores 3282.3 3381.202 34.46 39.02 40.85 07/08/98 Real estate investment trust 1986.4 2228.726 11.94 15.16 14.50 07/09/98 Mnfr bar code printing sys 287.7 282.221 25.76 34.58 57.38 07/17/98 Merchant banking firm 181.5 273.183 30.50 28.67 33.82 07/20/98 Mnfr engine components, tools 2318.7 2309.407 19.60 22.66 19.40 07/21/98 Mnfr medical equip and prods 3487.5 3740.302 11.11 19.40 22.27 07/23/98 Dvlp healthcare software 261.5 245.860 55.63 59.30 62.50 07/27/98 Insurance co,insurance agency 1794.7 1914.551 6.74 12.09 19.50 07/29/98 Mnfr home entertainment prod 786.4 755.494 20.06 12.22 9.78 07/30/98 Mnfr industrial chemicals 3090.3 3147.067 100.70 94.60 73.49 08/03/98 Oil and gas exploration, prodn 124.2 96.891 14.94 6.38 4.17 08/03/98 Investor group 437.9 533.065 99.42 101.77 127.15 08/03/98 Mnfr wide area network equip 969.7 637.103 19.11 53.34 33.41 08/03/98 Coal mining holding company 848.3 850.267 32.81 30.77 20.57 08/06/98 Own,operate funeral homes 738.3 982.106 22.03 30.12 18.03 08/10/98 Provide waste collection svcs 1066.6 1116.686 16.25 14.94 4.27 08/10/98 Pvd contract drilling svcs 452.1 638.457 39.04 41.22 17.01 08/10/98 Mnfr,whl biotechnology prods 222.2 235.322 36.67 47.75 100.00 08/10/98 Own,op hotel casinos 821.9 804.616 6.62 14.59 13.78 08/11/98 Integrated oil and gas company 48174.1 54767.922 22.40 25.27 22.03 08/13/98 Own,op cable TV systems 57.8 117.343 10.23 10.21 7.78 08/17/98 Pvd waste disposal services 1276.2 1214.831 5.47 3.85 -1.81 08/17/98 Savings and loans 82.1 318.458 14.31 8.30 6.43 08/24/98 Mnfr microwave components 23.5 20.921 69.41 77.78 84.62 08/27/98 Mnfr electrical connectors 1877.0 1786.017 62.32 71.25 76.10 09/02/98 Mnfr printed circuit boards 195.3 189.467 16.57 6.54 7.70 ============================================================ ------------------------------------- Date 3 Months Prior 1 Year Prior Announced to Annc. Data to Annc. Data - ------------------------------------------------------ 06/08/98 -0.07 2.85 06/10/98 52.38 79.78 06/10/98 4.47 21.29 06/10/98 77.60 101.37 06/12/98 5.79 58.68 06/12/98 06/15/98 59.21 61.74 06/16/98 21.90 66.23 06/17/98 24.91 161.01 06/17/98 12.20 8.24 06/18/98 18.92 23.20 06/18/98 53.65 57.25 06/19/98 36.41 51.78 06/19/98 22.29 47.53 06/22/98 -16.23 -19.60 06/22/98 7.94 128.57 06/24/98 75.12 76.89 06/25/98 38.61 29.63 06/29/98 10.30 24.43 06/29/98 57.14 86.44 06/30/98 36.08 94.12 07/01/98 69.08 07/02/98 388.24 07/03/98 -12.07 39.55 07/08/98 12.59 11.02 07/09/98 43.28 20.50 07/17/98 31.90 33.33 07/20/98 0.28 -13.46 07/21/98 18.64 34.62 07/23/98 65.84 -13.17 07/27/98 33.57 84.02 07/29/98 4.39 26.65 07/30/98 34.11 13.05 08/03/98 -7.41 08/03/98 125.68 08/03/98 -23.77 -37.59 08/03/98 17.65 -21.30 08/06/98 11.05 14.29 08/10/98 10.77 55.69 08/10/98 -45.78 -46.87 08/10/98 69.07 -6.82 08/10/98 -13.19 18.41 08/11/98 15.05 4.77 08/13/98 17.58 08/17/98 33.00 68.75 08/17/98 3.30 16.45 08/24/98 08/27/98 69.70 69.44 09/02/98 23.90 -41.00 Page F - 20
MERGER PREMIUMS TO MARKET VALUE ANALYSIS MERGERS WITH TARGET PRICE EQUAL TO OR GREATER THAN $10 PER SHARE Announced and Completed 1/1/96 - 2/3/99 (continued) =================================================================================================================================== DATE DATE ANNOUNCED EFFECTIVE TARGET NAME TARGET BUSINESS DESCRIPTION ACQUIROR NAME - ----------------------------------------------------------------------------------------------------------------------------------- 09/02/98 12/17/98 CKS Group Inc Pvd integrated marketing svcs USWeb Corp 09/02/98 12/10/98 Home Choice Holdings Inc Pvd equip rental svcs Rent-Way Inc 09/02/98 12/21/98 USCS International Inc Pvd customer mgmt. software, svc DST Systems Inc 09/09/98 12/18/98 Integrated Systems Consulting Provide consulting services First Consulting Group Inc 09/18/98 11/20/98 Marquette Medical Systems Inc Mnfr electromedical apparatus GE Medical Systems 09/28/98 12/10/98 Access Health Inc Pvd information retrieval svcs HBO & Co 09/29/98 10/07/98 Newmont Gold Co Gold mining Newmont Mining Corp 10/08/98 11/24/98 Necklermedia Corp Publishing company Penton Media Inc 10/13/98 11/20/98 Dominick's Supermarkets Inc Own and operate supermarkets Safeway Inc 10/16/98 12/15/98 BRC Holdings Inc Develop health care software Affiliated Computer Services 10/18/98 01/12/99 HBO & Co Dvlp healthcare software McKesson Corp 10/21/98 11/30/98 Capital Factors Holdings Inc Pvd short-term bus credit svcs Union Planters Bk Nat Assoc 10/27/98 12/14/98 Citizens Corp (Hanover Ins Co) Auto workers corp insurance co Allmerica Financial Corp 11/02/98 01/27/98 Sofanor Danek Group Inc Mnfr, whl spinal, cranial device Medronic Inc 11/09/98 12/22/98 Global Motorsport Group Inc Wholesale motorcycle parts Storington Partners Inc 11/16/98 01/06/98 CelMet Co (Vulcan Materials Co) Mnfr, whl aggregates, concrete Vulcan Materials Co 11/30/98 01/28/99 Arterial Vascular Engineering Manufacture stent systems Medronic Inc 12/15/98 01/21/99 Petersen Companies Inc Publish magazines EMAPPLC VALUE OF ENTERPRISE ------------------------------- DATE DATE ACQUIROR TRANSACTION VALUE 1 DAY PRIOR 1 WEEK PRIOR ANNOUNCED EFFECTIVE BUSINESS DESCRIPTION ($MIL) ($MIL) TO ANNC. DATE TO ANNC. DATE - ---------------------------------------------------------------------------------------------------------------------- 09/02/98 12/17/98 Pvd internet-related solutions 337.8 317.280 53.32 30.26 09/02/98 12/10/98 Pvd equipment rental services 294.4 289.713 7.19 4.12 09/02/98 12/21/98 Develop software 877.8 875.238 43.61 35.00 09/09/98 12/18/98 Pvd mgmt. consulting services 209.1 376.772 125.63 119.59 09/18/98 11/20/98 Mnfr diagnoctic imaging equip 897.3 974.054 95.92 103.34 09/28/98 12/10/98 Dvlp healthcare software 1118.3 1071.544 39.20 44.40 09/29/98 10/07/98 Gold, coal mining, oil, gas expl 264.8 4235.407 -5.16 20.81 10/08/98 11/24/98 Publish bus, trade magazines 273.7 259.730 43.65 52.63 10/13/98 11/20/98 Own, op grocery stores 1854.5 1858.840 18.43 20.99 10/16/98 12/15/98 Pvd data processing services 137.2 259.954 17.15 16.92 10/18/98 01/12/99 Whl pharmaceuticals 14319.7 13780.511 11.00 30.28 10/21/98 11/30/98 Pvd commercial banking svsc 22.2 739.913 4.48 8.95 10/27/98 12/14/98 Pvd insurance services 212.4 1109.654 20.64 17.18 11/02/98 01/27/98 Mnfr medical technology prods 3603.2 3589.919 15.28 29.09 11/09/98 12/22/98 Investment firm 109.0 157.616 13.46 33.76 11/16/98 01/06/98 Mnfr construction materials 886.6 887.041 14.02 16.71 11/30/98 01/28/99 Mnfr medical technology prods 3735.7 3598.987 71.76 74.80 12/15/98 01/21/99 Publish newspapers, periodicals 1494.8 1431.042 8.58 43.92 ------------------------------------------ MEAN: 28.4% 32.9% ------------------------------------------ PREMIUM ------------------------------------------------- DATE DATE 4 WEEKS PRIOR 3 MONTHS PRIOR 1 YEAR PRIOR ANNOUNCED EFFECTIVE TO ANNC. DATE TO ANNC. DATE TO ANNC.DATE - --------------------------------------------------------------------------------- 09/02/98 12/17/98 23.75 14.00 -35.10 09/02/98 12/10/98 7.72 -22.84 -14.33 09/02/98 12/21/98 59.93 73.78 105.49 09/09/98 12/18/98 90.16 77.38 92.17 09/18/98 11/20/98 83.50 77.43 73.35 09/28/98 12/10/98 81.72 70.59 29.85 09/29/98 10/07/98 62.37 4.35 -44.55 10/08/98 11/24/98 39.76 17.17 28.18 10/13/98 11/20/98 16.67 0.77 40.50 10/16/98 12/15/98 15.15 1.33 0.16 10/18/98 01/12/99 15.14 -350 56.47 10/21/98 11/30/98 2.94 1.45 -3.45 10/27/98 12/14/98 20.91 11.53 11/02/98 01/27/98 39.15 38.54 14.16 11/09/98 12/22/98 31.09 16.42 39.29 11/16/98 01/06/98 32.98 11/30/98 01/28/99 74.80 57.48 100.85 12/15/98 01/21/99 39.85 15.50 71.07 ------------------------------------------------- 39.4% 54.7% 72.1% ------------------------------------------------- - -------------------------------------------------------------------------------- Source Securities Data Company, Inc. Three-month and one-year premiums calculated using security prices from FactSet Research Systems, Inc. Commercial banks and other similar financial institutions were excluded for the purpose of this analysis Page F - 21
RELATIVE CONTRIBUTION ANALYSIS (a) ($ IN THOUSANDS) [_] A.G. Edwards analyzed the relative pro forma contribution of both Star Gas and Petro to the ownership of capital in the pro forma entity based on Star Gas' and Petro's historical results from operations and their respective projections. [CHART APPEARS HERE] Star Gas' Average Gross Profit Contribution 96-98 27.5% 99-00 29.2% 96-00 28.2% [CHART APPEARS HERE] Star Gas' Average EBITDA Contribution 96-98 35.4% 99-00 33.3% 96-00 34.6% ________________ (a) For purposes of its analysis, A.G. Edwards converted Petro's historical December 31st fiscal year-end to a September 30th fiscal year-end for comparison purposes. Other measures of relative contribution analysis are non-meaningful. (b) Includes only heating oil EBITDA for Petro. Page G-1
RELATIVE CONTRIBUTION ANALYSIS ($ IN THOUSANDS) (continued) For Star Gas' contribution of approximately 28.2% of the combined entity's gross profit and 34.6% of the combined entity's EBITDA, it will receive approximately 34.8% of the implied firm value. IMPLIED FIRM VALUE [PIE CHART APPEARS HERE] Page G-2
DISCOUNTED CASH FLOW ANALYSIS [_] A.G. Edwards performed discounted cash flow analyses for Petro, Star Gas and Star Gas Pro Forma. For Petro, A.G. Edwards used projected tax-adjusted operating cash flows for 1999 through 2002, terminal values calculated on 2002 operating cash flow and discount rates based on the related weighted average cost of capital. For Star Gas and Star Gas Pro Forma, A.G. Edwards used projected DCF for 1999 through 2002, terminal values calculated on 2002 DCF and discount rates based on the related cost of equity. Assumptions: [_] Weighted average cost of capital ("WACC") - Petro Stand Alone of 13.4% to 13.9% (calculated WACC of 13.6%) [_] Cost of equity - Star Gas Stand Alone of 9.5% to 10.3% (calculated cost of equity of 9.9%) - Star Gas Pro Forma of 9.5% to 10.3% (calculated cost of equity of 9.9%) [_] Terminal value operating cash flow multiple - Petro Stand Alone of 8.0x to 10.0x (calculated 2000 operating cash flow multiple of 8.6x) [_] Terminal value DCF multiple - Star Gas Stand Alone and Star Gas Pro Forma of 8.0x to 10.0x (calculated 2000 DCF multiple of 8.7x) Page H-1
DISCOUNTED CASH FLOW ANALYSIS (continued) PETRO STAND ALONE - --------------------------------------------------------------- 30 YEAR TERMINAL VALUE OPERATING CASH FLOW MULTIPLE ----------------------------------------------------- 8.0x 8.5x 9.0x 9.5x 10.0x - --------------------------------------------------------------- WACC 13.4% ($25,454) ($15,542) ($5,630) $4,282 $14,194 13.6% (27,131) (17,297) (7,463) 2,372 12,206 13.9% (28,793) (19,036) (9,278) 479 10,237 - --------------------------------------------------------------- STAR GAS STAND ALONE - --------------------------------------------------------------- 30 YEAR TERMINAL VALUE DCF MULTIPLE ----------------------------------------------------- 8.0x 8.5x 9.0x 9.5x 10.0x - --------------------------------------------------------------- Cost of Equity 9.5% $79,410 $82,745 $86,080 $89,415 $92,749 9.9% 78,519 81,811 85,102 88,394 91,685 10.3% 77,642 80,891 84,140 87,389 90,638 - --------------------------------------------------------------- STAR GAS PRO FORMA - --------------------------------------------------------------- 30 YEAR TERMINAL VALUE DCF MULTIPLE ----------------------------------------------------- 8.0x 8.5x 9.0x 9.5x 10.0x - --------------------------------------------------------------- Cost of Equity 9.5% $94,817 $98,730 $102,642 $106,555 $110,467 9.9% 93,764 97,626 101,488 105,349 109,211 10.3% 92,728 96,539 100,351 104,163 107,974 - --------------------------------------------------------------- Page H-2
DISCOUNTED CASH FLOW ANALYSIS PETRO - STAND ALONE Excluding Distributions from Star Gas ($ IN THOUSANDS) - -------------------------------------------------------------------------------- ADJUSTED FOR ACTUAL CASH FLOW SUMMARY (a): 1999 2000 2001 2002 TERMINAL - ----------------- ------------ ---------- ---------- ----------- ------------ EBITDA $42,836 $42,036 $38,747 $35,639 Taxes (500) (500) (500) (500) Maintenance capital expenditures (3,641) (3,714) (3,788) (3,864) Working capital increases (b) (500) (500) (500) (500) ---------- ---------- ---------- ---------- Net operating cash flow (free cash flow) 38,195 37,322 33,959 30,775 -------------- WEIGHTED AVERAGE COST OF CAPITAL (c) 13.6% -------------- -------------- TERMINAL OPERATING CASH FLOW MULTIPLE (d) 8.6X -------------- Discount factor (e) 0.9380 0.8254 0.7263 0.6391 0.6391 Terminal value (f) $264,665 -------------- PRESENT VALUE $280,120 $35,829 $30,806 $24,665 $19,669 $169,151 -------------- ---------- ---------- ---------- ---------- ----------- Current net debt and preferred stock (g) ($295,450) -------------- ============== NET PRESENT VALUE OF HEATING OIL EQUITY ($ 15,330) ============== - -------------------------------------------------------------------------------- (a) Based on management projections assuming no acquisitions. (b) A.G. Edwards' estimate. (c) Based on comparable companies' WACC (d) Petro's current firm value of $322.1 million/$37.3 million 30-year 2000 net operating cash flow = 8.6x (e) Discounted back to mid-year 1999. (f) Terminal value calculated using operating cash flow multiple. (g) Net of $13.8 million of cash. Market value of debt used. Page H-3
DISCOUNTED CASH FLOW ANALYSIS STAR GAS - STAND ALONE ($ IN THOUSANDS) - -------------------------------------------------------------------------------- ADJUSTED FOR ACTUAL DISTRIBUTABLE CASH FLOW SUMMARY (a): 1999 2000 2001 2002 TERMINAL - ------------------------------- ------------ ---------- ---------- ----------- ------------ EBITDA 21,119 25,260 26,797 28,335 Interest expense (8,798) (9,359) (9,878) (10,398) Maintenance capital expenditures (2,632) (2,679) (2,728) (2,777) Cash taxes (25) (25) (25) (25) ---------- ---------- ---------- ---------- Distributable cash flow 9,664 13,197 14,166 15,135 -------------- COST OF EQUITY (b) 9.9% -------------- -------------- TERMINAL DCF MULTIPLE (c) 8.7x -------------- Discount factor (d) 0.9540 0.8684 0.7904 0.7194 0.7194 Terminal value (e) $131,675 -------------- PRESENT VALUE OF EQUITY $137,492 $ 9,220 $11,460 $11,197 $ 10,888 $ 94,727 -------------- ---------- ---------- ---------- ---------- ----------- Common units/Total units (f) 60.5% ============== EQUITY VALUE TO COMMON UNITS (g) $ 83,127 ============== - -------------------------------------------------------------------------------- (a) Based on management projections. (b) Based on cost of equity calculation per WACC analysis. (c) Star's current equity market value of $115.3 million/$13.2 million 30-year 2000 DCF = 8.7x. (d) Discounted back to mid-year 1999. (e) Terminal value calculated using DCF multiple. (f) Total units include common, subordinated and GP units. (g) Current market value of common units is 3,858 units * $18.06 unit per = $69,685. Page H-4
DISCOUNTED CASH FLOW ANALYSIS STAR GAS-PRO FORMA ($ IN THOUSANDS) - --------------------------------------------------------------------------------------------------------------------------------- ADJUSTED FOR ACTUAL DISTRIBUTABLE CASH FLOW SUMMARY (a): 1999 2000 2001 2002 TERMINAL - ------------------------------- ------------ --------- --------- --------- ---------- EBITDA 66,034 73,955 77,946 81,669 Interest expense (25,068) (26,410) (28,325) (29,444) Maintenance capital expenditures (6,273) (6,393) (6,516) (6,641) Cash taxes (525) (625) (675) (725) ------------ --------- --------- --------- Distributable cash flow 34,168 40,527 42,430 44,859 ----------- COST OF EQUITY (b) 9.9% ----------- ----------- TERMINAL DCF MULTIPLE (c) 8.7x ----------- Discount factor (d) 0.9540 0.8682 0.7901 0.7191 0.7191 Terminal value (e) $390,273 ----------- PRESENT VALUE $414,196 $32,596 $35,185 $33,525 $32,257 $280,634 ----------- ------------ --------- --------- --------- ---------- Original common units/Total units (f) 23.9% ----------- EQUITY VALUE TO COMMON UNITS (g) $ 99,171 ----------- - -------------------------------------------------------------------------------- (a) Based on management projections. See Appendix K for model. (b) Based on cost of equity calculation per WACC analysis. (c) Star's current equity market value of $115.3 million/$13.2 million 30-year 2000 DCF=8.7x (d) Discounted back to mid-year 1999. (e) Terminal value calculated using DCF multiple. (f) Total units include common, newly issued common, senior subordinated, subordinated and GP units. (g) Current market value of common units is 3,858 units *$18.06 unit price = $69,685. Page H-5
DISCOUNTED CASH FLOW ANALYSIS PETRO - STAND ALONE Weighted Average Cost of Capital Derivation ($ in millions) =================================================================================================================================== Total Implied Total Total Market Unit Total Market Debt/ Debt as % Un- Levered Val. Debt Price at Units Value of Total of Total levered Comparable Company Beta(a) (Bk=Mkt) (2/3/99) Out.(Mil) Equity Equity Capital Beta - ---------------------------------------------------------------------------------------------------------------------------------- AmeriGas Partners, L.P. 0.44 $ 719.0 $ 23.625 41.9 $1,009.8 71.2% 41.6% 0.257 Cornerstone Propane Partners, L.P. 0.55 263.1 17.500 19.9 355.6 74.0% 42.5% 0.316 Ferrellgas Partners, L.P. 0.47 594.3 18.688 31.3 596.8 99.6% 49.9% 0.235 Heritage Propane Partners, L.P. 0.48 198.3 23.750 8.6 207.9 95.4% 48.8% 0.246 National Propane Partners, L.P. 0.76 139.2 5.063 11.2 58.0 239.8% 70.6% 0.224 Star Gas Partners, L.P. 0.51 115.7 18.063 6.3 115.3 100.4% 50.1% 0.255 Suburban Propane Partners, L.P. 0.44 428.2 19.188 28.7 562.4 76.1% 43.2% 0.250 ---------------------------------------------------- Petro's capitalization - at market Comparable group's average unlevered beta: 0.25 Total debt (b) $309.3 92.1% Petro's debt - to - common equity ratio: 1160.3% Common equity 26.7 7.9% ------ ----- Petro's debt as a percent of total capital (b): 92.1% $335.9 100.0% ---------------------------------------------------- Comparable group's beta relevered for Petro's capital structure: 3.209 ===== DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: MARKET RISK PREMIUM RANGE (e) - ----------------------------------------------- ------------------------------- 11.3% 12.3% 13.3% ------------------------------- Petro's theoretical levered beta (d): 3.209 Assumed % of common equity in Petro's capital structure: 7.9% Risk - free rate of return (c): 4.8% Petro's cost of common equity range (at various market risk premiums): 41.1% 44.3% 47.5% ===== ===== ===== Petro's assumed tax rate: 0.0% Assumed % of debt in capital structure (b): 92.1% Petro's estimated cost of debt (f): 11.0% Petro's estimated after - tax cost of debt: 11.0% 11.0% 11.0% 11.0% ------------------------------- Petro's weighted average cost of capital range (g): 13.4% 13.6% 13.9% ------------------------------- ________________ (a) Source: Bloomberg. 143 weeks (maximum weekly time period allowed, or the number of weeks available, which may be less than 143) adjusted beta relative to the S&P 500 index (b) Includes preferred stock. (c) Ten - year Treasury rate on February 3, 1999. (d) Bloomberg's reported beta for Petro is .70. (e) Ibbotson Associates 1998. Total returns for small company stocks of 17.7% minus the risk-free rate. (f) Based on Petro's current debt structure. (g) Calculation based upon use of the Capital Asset Pricing Model (CAPM). Page H-6
DISCOUNTED CASH FLOW ANALYSIS STAR GAS - STAND ALONE Weighted Average Cost of Capital Derivation ($ in millions) - -------------------------------------------------------------------------------- Total Implied Total Total Market Unit Total Market Debt/ Debt as % Un- Levered Val. Debt Price at Units Value of Total of Total levered COMPARABLE COMPANY Beta(a) (Bk=Mkt) (2/3/99) Out. (Mil) Equity Equity Capital Beta - ------------------------------------------------------------------------------------------------------------------------------------ AmeriGas Partners, L.P. 0.44 $719.0 $23.625 41.9 $1,009.8 71.2% 41.6% 0.257 Cornerstone Propane Partners, L.P. 0.55 263.1 17.500 19.9 355.6 74.0% 42.5% 0.316 Ferrellgas Partners, L.P. 0.47 594.3 18.688 31.3 596.8 99.6% 49.9% 0.235 Heritage Propane Partners, L.P. 0.48 198.3 23.750 8.6 207.9 95.4% 48.8% 0.246 National Propane Partners, L.P. 0.76 139.2 5.063 11.2 58.0 239.8% 70.6% 0.224 Star Gas Partners, L.P. 0.51 115.7 18.063 6.3 115.3 100.4% 50.1% 0.255 Suburban Propane Partners, L.P. 0.44 428.2 19.188 28.7 562.4 76.1% 43.2% 0.250 ----------------------------------------------------- Star's capitalization - at market(b) Comparable group's average unlevered beta: 0.5 Total debt $115.7 50.1% Star's debt - to - equity ratio (b): 100.4% Common equity 115.3 49.9% Star's debt as a percent of total capital (b): 50.1% ------ ----- Comparable group's beta relevered for Star's capital structure: 0.409 $231.0 100.0% ----------------------------------------------------- DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: Market Risk Premium Range (d) - ----------------------------------------------- ------------------------------- 11.3% 12.3% 13.3% ------------------------------- Star's theoretical levered beta: 0.409 Assumed % of equity in Star's capital structure (b): 49.9% Risk-free rate of return (d): 4.8% Star's cost of equity range (at various market risk premiums): 9.5% 9.9% 10.3% ==== ==== ===== Star's assumed tax rate: 39.6% Assumed % of debt in capital structure (b): 50.1% Star's estimated cost of debt (e): 7.8% Star's estimated after-tax cost of debt: 4.7% 4.7% 4.7% 4.7% ------------------------------- Star's weighted average cost of capital range (f): 7.1% 7.3% 7.5% ------------------------------- _______________________________________ (a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the number of weeks available, which may be less than 143) adjusted beta relative to the S&P 500 index. (b) Market value of debt is assumed to equal book value. (c) Ten - year Treasury rate on February 3, 1999. (d) Ibbotson Associates 1998. Total returns for small company stocks of 17.7% minus the risk-free rate. (e) Based on Star current debt structure. (f) Calculation based upon use of the Capital Asset Pricing Model (CAPM). Page H-7
DISCOUNTED CASH FLOW ANALYSIS STAR GAS-PRO FORMA PRO FORMA WEIGHTED AVERAGE COST OF CAPITAL DERIVATION ($ IN MILLIONS) - -------------------------------------------------------------------------------- TOTAL IMPLIED TOTAL TOTAL MARKET UNIT TOTAL MARKET DEBT/ DEBT AS % UN- LEVERED VAL. DEBT PRICE AT UNITS VALUE OF TOTAL OF TOTAL LEVERED COMPARABLE COMPANY BETA (A) (BK = MKT) (2/3/99) OUT.(MIL) EQUITY EQUITY CAPITAL BETA - ------------------------------------------------------------------------------------------------------------------------------------ AmeriGas Partners, L.P. 0.44 $719.0 $23.625 41.9 $1,009.8 71.2% 41.6% 0.257 Cornerstone Propane Partners, L.P. 0.55 263.1 17.500 19.9 355.6 74.0% 42.5% 0.316 Ferrellgas Partners, L.P. 0.47 594.3 18.688 31.3 596.8 99.6% 49.9% 0.235 Heritage Propane Partners, L.P. 0.48 198.3 23.750 8.6 207.9 95.4% 48.8% 0.246 National Propane Partners, L.P. 0.76 139.2 5.063 11.2 58.0 239.8% 70.6% 0.224 Star Gas Partners, L.P. 0.51 115.7 18.063 6.3 115.3 100.4% 50.1% 0.255 Suburban Propane Partners, L.P. 0.44 428.2 19.188 28.7 562.4 76.1% 43.2% 0.250 ---------------------------------------------------- Pro forma capitalization - at market (b) Comparable group's average unlevered beta: 0.25 Total debt $286.2 50.3% Pro forma debt - to - equity ratio (b): 101.1% Total equity 283.0 49.7% ------ ------ Pro forma debt as a percent of total capital (b): 50.3% $569.2 100.0% ---------------------------------------------------- Comparable group's beta relevered for Pro forma capital structure: 0.410 ===== DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: MARKET RISK PREMIUM RANGE (D) - ---------------------------------------------- -------------------------------- 11.3% 12.3% 13.3% -------------------------------- Pro forma theoretical levered beta: 0.410 Assumed % of equity in Pro forma capital structure (b): 49.7% Risk - free rate of return (c): 4.8% Pro forma cost of common range (at various market risk premiums): 9.5% 9.9% 10.3% ===== ===== ===== Pro forma assumed tax rate: 39.6% Assumed % of debt in capital structure (b): 50.3% Pro forma estimated cost of debt (e): 8.5% Pro forma estimated after - tax cost of debt: 5.1% 5.1% 5.1% 5.1% -------------------------------- Pro forma weighted average cost of capital range (f): 7.3% 7.5% 7.7% -------------------------------- ________________ (a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the number of weeks available, which may be less than 143) adjusted beta relative to the S&P 500 index. (b) Market value of debt is assumed to equal book value. See page C-6 for equity calculation. (c) Ten - year Treasury rate on February 3, 1999. (d) Ibbotson Associates 1998. Total returns for small company stocks of 17.7% minus the risk-free rate. (e) Based on Pro forma debt structure. (f) Calculation based upon use of the Capital Asset Pricing Model (CAPM). Page H - 8
COMPARABLE TRANSACTIONS ANALYSIS FIRM VALUATION [_] A.G. Edwards noted that public disclosure regarding transactions in the retail home heating oil distribution industry was extremely limited. [_] A.G. Edwards analyzed the financial terms related to divestitures by Petro of certain of its retail home heating oil branches and compared them to the implied multiples of the aggregate purchase price of Petro's heating oil assets. [_] Petro has sold three branches for an average EBITDA multiple of 9.0x. [_] A.G. Edwards calculated the purchase price of Petro's heating oil assets and calculated multiples based on Petro's EBITDAs. - -------------------------------------------------------------------------------- PURCHASE PRICE OF HEATING OIL ASSETS - ------------------------------------ Equity purchase price of heating oil assets including CUs (see page C-5) $ 16,054 Cost of Debt to be Redeemed ($206,250 + $2,844 premium) 209,094 Cost of Debt to be Assumed 80,501 Cost of Preferred stock at Redemption Value 31,767 Consent Fees 1,961 Transaction Fees 19,139 --------- Aggregate purchase price of heating oil assets $ 358,516 ========= MULTIPLES - --------------------------------- -------------------- MULTIPLES Notes -------------------- --------------------------------------------- Actual 4 quarter ended 9/30/98 EBITDA (a) 34,929 10.3 x As a multiple of aggregate transaction value. Adjusted for actual 1999 EBITDA (a) 44,415 8.1 x As a multiple of aggregate transaction value. Projected 2000 EBITDA (a) 48,195 7.4 x As a multiple of aggregate transaction value. ________________________________ (a) Calculated as gross profit minus SG&A expense and direct delivery expense. Page I-1
PUBLIC PARTNERSHIP ANALYSIS [_] A.G. Edwards compared certain financial and market information of Star Gas on a historical and pro forma basis to that of certain public propane master limited partnerships which A.G. Edwards deemed relevant for the purposes of this analysis. In addition to Star Gas, A.G. Edwards reviewed the trading multiples from a total of five master limited partnerships. [_] The selected propane master limited partnerships are as follows: - AmeriGas Partners, L.P. - Heritage Propane Partners, L.P. - Cornerstone Propane Partners, L.P. - Suburban Propane Partners, L.P. - Ferrellgas Partners, L.P. [_] No partnership used in the analysis is identical to Star Gas. ----------------------------------------------------------------------------------------------------------------------------- PUBLIC COMPARABLE PARTNERSHIPS (a) ----------------------------------------------------------------------------------------------------------------------------- PUBLIC PUBLIC PRO FORMA PARTNERSHIP PARTNERSHIP STAR STAR MEDIANS RANGES ----------------------------------------------------------------------------------------------------------------------------- Distribution yield 12.2% 12.7% 10.4% 8.6% to 12.3% Market capitalization/LTM EBITDA 11.9x 10.3x 11.5x 9.1x to 13.2x Market capitalization/1999E EBITDA 10.7x (b) 8.4x (b) 9.8x 8.6x to 11.3x Equity Market Cap/LTM DCF 13.8x 12.6x 13.2x 9.6x to 15.5x Equity Market Cap/1999E DCF 11.9x (c) 8.5x (c) 10.5x 9.9x to 12.2x LTM common unit coverage 1.0x 0.8x 1.5x 0.8x to 1.9x 1999E common unit coverage 1.1x (d) 1.1x (d) 2.0x 0.9x to 2.2x LTM total unit coverage 0.6x 0.6x 0.8x 0.5x to 1.1x 1999E total unit coverage 0.7x (d) 0.9x (d) 1.1x 0.6x to 1.1x ----------------------------------------------------------------------------------------------------------------------------- (a) Public comparable partnerships include APU, CNO, FGP, HPG and SPH. (b) Market capitalization/adjusted for actual 1999 EBITDA (c) Equity market cap/adjusted for actual 1999 EBITDA. (d) Adjusted for actual 1999. Page J-1
PUBLIC PARTNERSHIP ANALYSIS ($ IN MILLIONS, EXCEPT PER UNIT DATA) ==================================================================================================================================== Closing Implied Implied Common Price on Market Value Firm Distribution Units/ Company Ticker (2/3/99) of Equity Value per Unit Yield Total Units(a) - ------------------------------------------------------------------------------------------------------------------------------------ Star Gas Partners, L.P. SGU $18.063 $ 115.3 $ 225.2 $2.20 12.2% 60.5% AmeriGas Partners, L.P. APU 23.625 1,009.8 1,724.0 2.20 9.3% 51.7% Cornerstone Propane Partners, L.P. (c) (d) CNO 17.500 355.6 610.4 2.16 12.3% 65.5% Ferrellgas Partners, L.P. (d) (e) FGP 18.688 596.8 1,185.7 2.00 10.7% 46.0% Heritage Propane Partners, L.P. (d) HPG 23.750 207.9 403.8 2.05 8.6% 55.7% Suburban Propane Partners, L.P. (f) SPH 19.188 562.4 930.8 2.00 10.4% 73.6% - ------------------------------------------------------------------------------------------------------------------------------------ Mean 10.3% 58.5% Median 10.4% 55.7% ==================================================================================================================================== Pro Forma $18.063 $291.1 $ 557.7 (g) $2.30 12.7% 79.9% ==================================================================================================================================== LTM Common LTM Total FY99E FY99E Common FY99E Total Unit Coverage Unit Coverage DCF/unit Unit Coverage Unit Coverage - -------------------------------------------------------------------------------------------------------------------------------- Star Gas Partners, L.P. 1.0x (b) 0.6x (b) $1.51 1.1x 0.7x AmeriGas Partners, L.P. 1.5x 0.8x 2.35 2.0x 1.1x Cornerstone Propane Partners, L.P. (c) (d) 0.8x 0.5x 1.36 0.9x 0.6x Ferrellgas Partners, L.P. (d) (e) 1.5x 0.7x 2.14 2.2x 1.1x Heritage Propane Partners, L.P. (d) 1.9x 1.1x 2.35 2.0x 1.1x Suburban Propane Partners, L.P. (f) 1.3x 1.0x 2.08 1.2x 1.0x - -------------------------------------------------------------------------------------------------------------------------------- Mean 1.4x 0.8x 1.7x 1.0x Median 1.5x 0.8x 2.0x 1.1x ================================================================================================================================ Pro Forma 0.8x (b) 0.6x (b) 2.07 1.1x 0.9x _____________________________________ 1999 estimates per A.G. Edwards' research (not adjusted for actual 1999 results), except for Star and Pro Forma. Implied Firm Value equals, for comparative purposes, common, subordinated and GP units, multiplied by the market price of common units plus debt, less cash. (a) Calculated as (common units/((common + subordinated units)/0.98). (b) For Star and Pro forma only, LTM figures are 1998 actuals. (c) Financial figures not pro forma for acquisition of Propane Continental Inc. (d) Maintenance capital expenditures assumed to be 8% of EBITDA due to lack of disclosure. (e) Financial figures exclude ESOP charge of $0.9 million. (f) Financial figures exclude $5.1 million gain from sale of minority interest and $1.8 million loss from impairment of assets. (g) $291.1 in equity plus $286.2 pro forma debt, less $19.6 cash and cash collateral. Page J-2
PUBLIC PARTNERSHIP ANALYSIS ($ IN MILLIONS, EXCEPT PER UNIT DATA) (continued) ============================================================================================================================= TOTAL LTM FIRM VALUE/ FIRM VALUE/ EQUITY EQUITY DEBT/ EBITDA/ LTM 1999E MARKET CAP/ MARKET CAP/ FIRM VALUE INT. EXP. EBITDA EBITDA LTM DCF 1999E DCF ---------------------------------------------------------------------------------------- STAR GAS PARTNERS, L.P. 51.4% 2.4X (a) 11.9X (a) 10.7X 13.8X (a) 11.9X AmeriGas Partners, L.P. 41.7% 2.3x 11.5x 9.8x 13.7x 10.6x Cornerstone Propane Partners, L.P. 43.1% 2.4x 13.2x 11.3x 15.5x 12.2x Ferrellgas Partners, L.P. 50.1% 2.1x 11.8x 9.5x 13.2x 9.9x Heritage Propane Partners L.P. 49.1% 2.5x 10.7x 10.3x 10.6x 10.2x Suburban Propane Partners, L.P. 46.0% 3.3x 9.1x 8.6x 9.6x 10.5x - ----------------------------------------------------------------------------------------------------------------------------- MEAN 46.0% 2.5x 11.3x 9.9x 12.5x 10.7x MEDIAN 46.0% 2.4x 11.5x 9.8x 13.2x 10.5x ============================================================================================================================= PRO FORMA 51.3% 2.2X (a) 10.3X (a) 8.4X 12.6X (a) 8.5X ______________________________________ EBITDA is defined as net income (loss) before extraordinary items plus interest, income taxes, depreciation and amortization, impairment expense, and other non-recurring and non-operating items. (a) For Star and Pro forma only, LTM figures are 1998 actuals. Page J-3
PUBLIC PARTNERSHIP ANALYSIS COMPARABLE PARTNERSHIPS AND TARGET PRICE PERFORMANCE 1/1/98 - 2/3/99 [GRAPH APPEARS HERE] 8/14/98* - 2/3/99 [GRAPH APPEARS HERE] *Date of transaction announcement. Page J-4
PUBLIC PARTNERSHIP DESCRIPTIONS AMERIGAS PARTNERS, L.P. AmeriGas Partners operates the largest retail propane distribution business in the U.S., serving approximately 968,000 residential, commercial, industrial, agricultural, and motor-fuel customers in 45 states. AmeriGas Partners also sells propane-related supplies and equipment, including home appliances. The company owns or leases a fleet of about 385 transport trucks, 680 railroad tank cars, and 2,300 bobtail and rack trucks. It also owns or leases propane-storage facilities in Arizona and Rhode Island. AmeriGas Propane, a wholly owned subsidiary of UGI Corp., owns 58% of AmeriGas Partners. [APU GRAPH APPEARS HERE] CORNERSTONE PROPANE PARTNERS, L.P. Cornerstone Propane Partners, L.P. distributes propane for residential, commercial, industrial, agricultural and other retail uses; markets and distributes propane and natural gas liquids; services propane heating systems and appliances; and sells propane-related supplies, appliances and other equipment. It is the fifth largest retail marketer of propane in the U.S. in terms of volume. The partnership's operations are concentrated in the east coast, south-central and west coast regions of the U.S. [CNO GRAPH APPEARS HERE] Page J-5
PUBLIC PARTNERSHIP DESCRIPTIONS (continued) FERRELLGAS PARTNERS, L.P. Ferrellgas is the second largest U.S. distributor of propane serving more than 800,000 residential and commercial customers. The company also engages in propane/natural gas trading, wholesale propane marketing, and chemical feedstock marketing. It markets its products primarily in the Midwest, the Great Lakes area, and the Southeast. With a delivery fleet of approximately 4,000 vehicles, Ferrellgas sells almost 700 million gallons of fuel annually to its retail customers, which represents about 8% of all retail propane bought in the U.S. The company has acquired more than 100 companies in 11 years. [FGP GRAPH APPEARS HERE] HERITAGE PROPANE PARTNERS, L.P. Heritage Propane Partners distributes propane to more than 220,000 residential, commercial, industrial, and agricultural customers. The propane is used primarily for heating, drying, cooking, as fuel for engines, as a cutting gas for mining operations, and for curing tobacco. The company's retail operations distribute propane to customers in 23 states in the western, southeastern, and northeastern U.S. The company also distributes wholesale propane and sells, installs, and repairs propane- related equipment. Heritage has acquired 40 retail propane operations since 1989, bringing annual propane sales to over 125 million gallons. [HPG GRAPH APPEARS HERE] Page J-6
PUBLIC PARTNERSHIP DESCRIPTIONS (continued) SUBURBAN PROPANE PARTNERS, L.P. Suburban Propane Partners markets and distributes propane to residential, commercial, industrial and agricultural customers through a retail distribution network consisting of 352 district locations in 41 states. The company, the third largest retail marketer of propane in the U.S., serves over 730,000 active customers primarily located in the east and west coast regions of the country. Suburban Propane also sells, installs and services equipment related to its propane distribution business, including heating and cooking appliances and, at some locations, propane fuel systems. [SPH GRAPH APPEARS HERE] Page J-7
- -------------------------------------------------------------------------------- TRANSACTION SUMMARY AND ASSUMPTIONS (in thousand except per share and per unit data) - --------------------------------------------------------------------------------------------------------------------------- SUMMARY CASH FLOW AND COVERAGE ANALYSIS - --------------------------------------------------------------------------------------------------------------------------- ($ on per Unit basis) PROJECTED ---------------------------------------------------------------------------------- ACTUAL NORMALIZED ADJ. FOR ACTUAL 1998 1998 1999 2000 2001 2002 ---------- ------------ ------------------- --------- -------- -------- STAR STAND ALONE EBITDA $ 18,906 $ 22,135 $ 21,119 $ 25,260 $ 26,797 $ 28,335 Interest Expense (7,927) (7,667) (8,798) (9,359) (9,878) (10,398) Mainterance CapEx (2,625) (2,610) (2,632) (2,679) (2,728) (2,777) Other (25) (25) (25) (25) (25) (25) -------- ---------- ---------- --------- -------- -------- Distributable Cash Flow $ 8,329 $ 11,833 $ 9,664 $ 13,197 $ 14,166 $ 15,135 ======== ========== ========== ========= ======== ======== DCF per Common Unit $ 2.16 $ 3.07 $ 2.48 $ 3.28 $ 3.37 $ 3.46 DCF / Common Unit MQD 0.98 x 1.39 x 1.13 x 1.49 x 1.53 x 1.57 x DCF per Total Unit $ 1.30 $ 1.85 $ 1.51 $ 2.02 $ 2.10 $ 2.19 DCF / Total MQD 0.59 x 0.84 x 0.68 x 0.92 x 0.96 x 1.00 x Indicated Distribution per Common Unit $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 STAR PRO FORMA EBITDA ------ Star $ 18,906 $ 22,135 $ 21,119 $ 25,260 $ 26,797 $ 28,335 Petro 34,929 46,900 44,415 48,195 50,649 52,834 Synergies 500 500 500 500 500 500 -------- ---------- ---------- --------- -------- -------- Total 54,335 69,535 66,034 73,955 77,946 81,669 -------- ---------- ---------- --------- -------- -------- Interest Expense (24,530) (24,396) (25,068) (26,410) (28,325) (29,444) Maintenance CapEx (6,125) (6,125) (6,273) (6,393) (6,516) (6,641) Other (525) (525) (525) (625) (675) (725) -------- ---------- ---------- --------- -------- -------- Distributable Cash Flow 23,155 38,489 34,168 40,527 42,429 44,859 ======== ========== ========== ========= ======== ======== DCF per Common Unit $ 1.80 $ 2.99 $ 2.57 $ 2.96 $ 2.98 $ 2.94 DCF per Sr. Sub & Common Unit $ 1.51 $ 2.51 $ 2.17 $ 2.50 $ 2.54 $ 2.53 DCF per Total Unit $ 1.44 $ 2.39 $ 2.07 $ 2.39 $ 2.43 $ 2.43 Indicated Distribution per Common Unit $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 - --------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ ACCRETION/DILUTION - ------------------------------------------------------------------------------------------------------------------------------------ DCF per Unit - Star Stand Alone $ 1.30 $ 1.85 $ 1.51 $ 2.02 $ 2.10 $ 2.19 DCF per Unit - Pro Forma $ 1.44 $ 2.39 $ 2.07 $ 2.39 $ 2.43 $ 2.43 - ------------------------------------------------------------------------------------------------------------------------------------ Accretive ($/Unit) $ 0.13 $ 0.53 $ 0.56 $ 0.37 $ 0.33 $ 0.23 Accretive (%) 10.1% 28.8% 37.2% 18.6% 15.5% 10.7% - ------------------------------------------------------------------------------------------------------------------------------------ PRO FORMA HEATING OIL DCF PER UNIT $ 2.42 $ 2.63 $ 2.63 $ 2.57 DPUS ISSUED AS SR SUB UNITS AT BEG OF YEAR - - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ PRO FORMA CREDIT ANALYSIS - ------------------------------------------------------------------------------------------------------------------------------------ EBITDA/Interest 2.22 x 2.85 x 2.63 x 2.80 x 2.75 x 2.77 x LT Debt/EBITDA 5.07 3.96 4.15 4.21 4.20 4.19 LT Debt/EBITDA (Pro Forma for Full-Year Acquisitions) 4.91 3.83 4.03 4.00 4.00 4.00 # of Units Issued to Meet Debt Covenant - - 814 47 991 1,035 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ PRO FORMA COVERAGE RATIOS - ------------------------------------------------------------------------------------------------------------------------------------ MOD Coverage ------------ Common Unit 0.78 x 1.30 x 1.12 x 1.29 x 1.30 x 1.28 x Senior Subordinated Unit 0.66 1.09 0.94 1.09 1.10 1.10 Total Unit 0.62 1.04 0.90 1.04 1.06 1.06 Indicated Distribution Coverage - ------------------------------- Common Unit 0.78 x 1.30 x 1.12 x 1.29 x 1.30 x 1.28 x Senior Subordinated Unit 0.66 1.09 0.94 1.09 1.10 1.10 Total Unit 0.62 1.04 0.90 1.04 1.06 1.06 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ CURRENT MODEL ASSUMPTIONS - ------------------------------------------------------------------------------------------------------------------------------------ SCENARIO VERSION: 30-yr; $15/$30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att. Petro Acqs/yr $ 15,000 1999 $ 30,000 2000 on Star Acqs/yr $ 5,000 1999 $ 10,000 2000 on G.P. INTEREST SUBORDINATE - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ EQUITY RESTRUCTURING - ------------------------------------------------------------------------------------------------------------------------------------ PETRO ------------------------------------------------------------ PUBLIC INSIDERS -------------- --------------- Securities Offered Sr Sub Sub & GP Security Offered per Share 0.11758 0.14318 Total Shares 14,618 11,834 Insiders to Receive Sr. Sub 6,572 (6,572) Shares to Be Converted 21,190 5,262 Units Offered 2,491 753 DPUs Offered 909 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ SOURCES AND USES OF FUNDS - ------------------------------------------------------------------------------------------------------------------------------------ SOURCES: USES: Excess Cash on Hand $ 0 Repay Debt Principal $ 206,250 New Star Debt 90,000 Redeem Preferred 31,767 New MLP Equity 170,000 Premium on Redemption/ New MLP E Equity - Exchange/Defeasance 2,844 Equity for Consent Fees 1,961 Consent Fees 1,961 Cash Balance 0 Transaction Fees 19,139 --------- ---------- $ 261,960 $ 261,960 ========= ========== - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ FINANCING SUMMARY - ------------------------------------------------------------------------------------------------------------------------------------ AMOUNT RATE UNIT PRICE ---------- -------- ----------------- New Common Raised $ 170,000 $ 19.08 (a) New Debt Raised 90,000 7.50% (a) Last 20 Days Average Stock Price @ 2/3 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ UNITS OUTSTANDING - ------------------------------------------------------------------------------------------------------------------------------------ CURRENT PRO FORMA --------------------------- -------------------------- UNITS % UNITS % --------- ------- --------- ------- Existing Common 3,858.999 60.5% 3,858.999 23.9% New Common 0 0.0% 9,013.547 55.9% New Common for Acquisitions 0 0.0% 0.000 0.0% Common to Petro Shareholders 0 0.0% 0.000 0.0% Sr Sub (Petro S/H's) 0 0.0% 2,491.500 15.5% Existing Sub 2,396.078 37.5% 431.126 2.7% Implied GP 127.655 2.0% 322.350 2.0% ---------- ------- ----------- ------- Total Units 6,382.732 100.00% 16,117.523 100.00% ========== ======= =========== ======= - ------------------------------------------------------------------------------------------------------------------------------------ 1 of 19
================================================================================ TRANSACTION SUMMARY AND ASSUMPTIONS (IN THOUSANDS EXCEPT PER SHARE AND PER UNIT DATA) OPERATING ASSUMPTIONS - ------------------------------------------------------------------------------------------------------------------ PETRO STAR STAR NORMAL ---------- ---------- ---------------- Normalized Maintenance CapEx $ 3,500 $ 2,625 $ 2,610 Maintenance CapEx Life 15 yrs 15 yrs Growth CapEx Life 12.6 yrs 15 yrs Deferred Tax Percent 0.0% Required Cash at Beginning for Initial Distribution 8,865 Minimum Star Stand Alone Cash Balance $ 1,115 Minimum Star Pro Forma Cash Balance $ 14,882 Consolidation Savings $ 500 Annual Bank Fees $ 943 $ 0 Last 20 Days Average Stock Price @ 2/3 $ 1.01 $ 19.08 2000+ Annual Transaction/Deal Expenses $ 225 $ 450 Debt/EBITDA Bank Covenant Ratio 4.0x Issue Equity to Meet Bank Debt Covenants (Y/N)? yes DEBT RESTRUCTURING - ------------------------------------------------------------------------------------------------------------ PROJECTED 12/31/97 PRIVATES: % TENDERED PRINCIPAL STRATEGY PRICE ---------- --------- ------------- ----- 11.96% Sr Notes 100.0% 60,000 Exchange 105.2% 14.10% Sr Notes 100.0% 3,100 Exchange 105.2% 14.10% Sub Notes 100.0% 3,100 Exchange 105.2% 14.33% Pfd Stock 100.0% 4,167 Neg. Tender 100.0% PUBLICS: 10.13% Sub Notes & Sr Notes 100.0% 50,000 Neg. Tender 100.0% 9.38% Sub Notes & Sr Notes 100.0% 75,000 Tender 100.0% 12.25% Sub Notes & Sr Notes 100.0% 81,250 Tender 103.5% 12.88% Pfd Stock 100.0% 30,000 Tender 92.0% NEW SECURITY ASSUMPTIONS - --------------------------------------------------------------------- NEW MLP EQUITY - -------------- Gross Proceeds $ 170.00 Common Units for Consent Fee 1,961 Common Units to Enron - -------- Total New Equity Value $171.960 Common Units to Public 9,014 units NEW STAR DEBT ------------- Gross Proceeds 90,000 Gross Spread % 5.0% Gross Spread % 1.25% Gross Spread $ $ 8,500 Gross Spread $ $1,125 Offering Price/Share (current market price) $ 19.08 Coupon 7.50% ACQUISITION ASSUMPTIONS - ------------------------------------------------------------------------------------------------------------------------------ PETRO MULTIPLE 1998 1999 2000 2001 2002 - ----- ------------- ----------- ----------- ------------ ------------ ----------- Amount 4.75x $ 0 $ 15,000 $ 30,000 $ 30,000 $ 30,000 Timing End Mid Mid Mid Mid % EBITDA 0.0% 50.0% 50.0% 50.0% 50.0% Amount 4.75x $ 0 Timing Beg % EBITDA in Initial Year 100.0% Units Issued at Common $ 22.00 Sr. Sub $ 18.52 STAR STAND-ALONE - ---------------- Weather 30 Year Amount 6.50x $ 9,000 $ 5,000 $ 10,000 $ 10,000 $ 10,000 Timing End Mid Mid Mid Mid % EBITDA in Initial Year 0.0% 50.0% 50.0% 50.0% 50.0% Amount Financed with Equity $ 0 $ 1,363 $ 4,504 $ 3,940 $ 3,316 New Units @: 0 62 205 179 151 Units Issued at Price of: $ 22.00 $ 22.00 $ 22.00 $ 22.00 $ 22.00 Amount 6.50x $ 0 Timing Beg % EBITDA in Initial Year 100.0% EXCHANGE ASSUMPTIONS - ----------------------------------------------------------------------------------------------------------------------------- EXISTING GETS NEW UNITS OF: ------------------------------------------------------------------ SHAREHOLDERS OF: SHARES COMMON SR.SUB JNR. SUB G.P. DPUs(1) - --------------------------------------------------------- ---------- ---------- ------------- --------- ------------ Public Class A Shareholders 14,618.087 0 1,718.795 0.000 0.000 481.478 Insider Class B Shares 11.228 0 0.000 0.000 0.000 Insider Class C Shareholders 0.000 Class A & C Shares to Receive Jr Sub & GP 5,262.443 0 0.000 431.126 322.350 211.068 Class A Shares to Receive Sr Sub 6,571.740 0 772.705 0.000 0.000 216.454 ------------- ---------- ----------- ------------- --------- ------------ 26,463.498 0 2,491.500 431.126 322.350 909.000 E Sr. Sub 0.000 0.000 ----------- ------------ Total 2,491.500 909.000 =========== ============ (1) Includes 2.0% G.P. Interest. TRANSACTION COSTS SUMMARY --------------------------------------------------------------------- New MLP Equity $ 8,500 New Star Debt 1,125 Fairness Opinion 1,275 Financial Advisory 1,500 Exchange Fees on Public Petro Debt/Preferred 1,375 Legal Fees 4,200 Printing 1,500 Accounting Fees 200 Other: ------ Environmental 0 Rating Agencies 60 Roadshow 200 Asset Appraisal 100 Solicitation expenses 100 Other Bank Fees 150 Other 225 -------- Transaction Costs Capped at $ 20,510 ======== $ 19,139 HEATING OIL DPU TRIGGER - ----------------------- DCF/Unit % Convert $2.90 33.3% CONSENT FEE CALCULATION - --------------------------------------- % of Petro Stock 3.3% New Petro Shares 874 Exchange Ratio 8.50x ----------- New Common Units 102.773 Common Unit Price $ 19.08 ----------- Implied Value $ 1,961 =========== 2 of 19
=========================================================================================================================== SUMMARY DISTRIBUTIONS (in thousands except per share and per unit data) Projected ---------------------------------------------------- UNITHOLDER CLASS (1) 1998 1999 2000 2001 2002 ------------ ---------- ------------ ---------- ----------- COMMON UNITHOLDERS MQD $ 30,544 $ 31,534 $ 32,727 $ 35,057 Incentive Distributions - - - - ---------- ------------ ---------- ----------- Total $ 30,544 31,534 $ 32,727 $ 35,057 E CAPITAL Existing Sr. Sub Units - - - - Number of DPUs Issued as Sr Sub Units - - - - New Sr. Sub Units - - - - ---------- ------------ ---------- ----------- Total Sr. Sub Units - - - - Existing Common - - - - New Common - - - - ---------- ------------ ---------- ----------- Total Common - - - - Common MQD - - - - Common Incentive Distributions - - - - Sr. Sub MQD - - - - Sr. Sub Incentive Distributions - - - - ---------- ------------ ---------- ----------- Total Distributions - - - - SENIOR SUBORDINATED UNITHOLDERS (1) Number of DPUs Issued as Sr Sub Units - - - - Base MQD $ 0 $ 5,730 $ 5,730 $ 5,730 Incremental MQD from DPUs Issued as Sr. Sub Units Incentive Distributions - - - - Incremental Incentive Distributions from DPUs - - - - Issued as Sr. Sub Units - - - - ---------- ------------ ---------- ----------- Total $ 0 $ 5,730 $ 5,730 $ 5,730 SUBORDINATED UNITHOLDERS (1) Number of DPUs Issued as Sr Sub Units - - - - Base MQD $ 0 $ 992 $ 992 992 Incremental MQD from DPUs Issued as Sr. Sub Units - - - - Incentive Distributions - - - - Incremental Incentive Distributions from DPUs Issued as Sr. Sub Units - - - - ---------- ------------ ---------- ----------- Total $ 0 $ 992 $ 992 992 GENERAL PARTNER Number of DPUs Issued as Sr Sub Units - - - - Base MQD $ 0 $ 741 $ 741 $ 741 Incremental MQD from DPUs Issued as Sr. Sub Units - - - - Incentive Distributions - - - - Incremental Incentive Distributions from DPUs Issued as Sr. Sub Units - - - - ---------- ------------ ---------- ----------- Total $ 0 $ 741 $ 741 $ 741 UNITHOLDER CLASS TOTAL Common Unitholders $ 30,554 $ 31,534 $ 32,727 $ 35,057 Senior Subordinated Unitholders - 5,730 5,730 5,730 Subordinated Unitholders - 992 992 992 General Partner - 741 741 741 ---------- ------------ ---------- ----------- Total $ 30,544 $ 38,997 $ 40,191 $ 42,520 DISTRIBUTIONS TO DPUs CONVERTED TO SENIOR SUBORDINATED UNITS MQD $ 0 $ 0 $ 0 $ 0 Incentive Distributions - - - ---------- ------------ ---------- ----------- Total - - - - - - - - ____________________ (1) Reflects distributions for respective Unitholder class. All DPUs are issued as Senior Subordinated Units but are distributed pro rata to all Petro shareholders. Consequently, the Subordinated Unitholder class includes DPUs which have been issued as Senior Subordinated Units. 3 of 19
- -------------------------------------------------------------------------------- TRANSACTION SUMMARY AND ASSUMPTIONS (in thousands except per share and per unit data) RECAPITALIZATION ASSUMPTIONS - -------------------------------------------------------------------------------- (D)EFEASE (T)ENDER (R)EDEEM PRINCIPAL LOCKUP (E)XCHANGE AS OF MATURITY PERIOD COUPON/ SINKING FUND PAYMENT ----------------- --------------------------- PETRO INSTRUMENTS: PREMISES (N)OTHING 9/30/98 M/D YR DIVIDEND PAYMENT YEAR START - ---------------------- ------------------------ ----------- -------- -------- ----------- ----------- ------------- 11.96% Sr Notes e $ 60,000 v 1-Oct 0 11.960% $ 0 0 14.10% Sr Notes e 3,100 v 15-Jan 2001 14.100% - 1997 14.10% Sub Notes e 3,100 v 15-Jan 2001 14.100% - 1997 10.13% Sub Notes & Sr Notes 0.0% t 50,000 v 1-Apr 2003 10.130% - 9.38% Sub Notes & Sr Notes 0.0% t 75,000 v 1-Feb 2006 9.375% - 12.25% Sub Notes & Sr Notes 0.0% t 81,250 v 1-Feb 2005 12.250% - 8.00% Acq. & Other Notes Pay n 14,508 v 0 8.000% - 0 8.25% Existing Credit Facility n 0 v 1998 8.250% - 0.00% Other Notes n 0 v NA NA 0.000% 0 NA ----------- $ 286,958 PFRD STOCK: - ----------- 14.33% Pfd Stock t 4,167 v 1-Aug 1999 14.330% 4,167 1997 12.88% Pfd Stock 0.0% t 30,000 v 15-Feb 2009 12.875% 0 0.00% n 0 0.000% ----------- $ 34,167 ----------- Total Petro $ 321,125 ----------- STAR INSTRUMENTS: - ---------------------- 8.04% 1st Mortgage Notes 0.07 n 85,000 v NA NA 8.040% - 0 7.25% WC Revolver 0.00 n 4,785 NA NA 7.250% - NA 7.25% Acquisition Facility 0.01 n 9,000 v NA NA 7.250% - NA 7.50% New Debt n 90,000 v NA NA 7.500% 0 NA 7.17% Pearl Notes 0.01 n 11,000 NA NA 7.170% 0 NA ----------- 8.21% $ 188,785 ----------- Total Combined $ 509,910 =========== % Red./ Red/Exchg Defeasance Red/Exchg/Defease Exchanged ---------------------- PETRO INSTRUMENTS: Exchanged Price Price Value Premium Int Rate Security Type - ---------------------- ----------- ----------- ------------ --------- ---------- ---------- ------------- 11.96% Sr Notes 100.0% 105.2% $ 60,000 $ 0 10.9% Sr Notes 14.10% Sr Notes 100.0% 105.2% 3,100 - 14.10% Sr Notes 14.10% Sub Notes 100.0% 105.2% 3,100 - 14.10% Sub Notes 10.13% Sub Notes & Sr Notes 100.0% 100.0% 106.2% 50,000 - Sub Notes & Sr Notes 9.38% Sub Notes & Sr Notes 100.0% 100.0% 108.2% 75,000 - Sub Notes & Sr Notes 12.25% Sub Notes & Sr Notes 100.0% 103.5% 116.2% 84,094 2,844 Sub Notes & Sr Notes 8.00% Acq. & Other Notes Pay 0.0% 100.0% - - Acq. & Other Notes Pay 8.25% Existing Credit Facility 0.0% 100.0% - - Existing Credit Facility 0.00% Other Notes 0.0% 0.0% - - 11.0% Other Notes ---------- $ 2,844 PFRD STOCK: - ----------- 14.33% Pfd Stock 100.0% 100.0% 4,167 - Pfd Stock 12.88% Pfd Stock 100.0% 92.0% 27,600 - Pfd Stock 0.00% - - ---------- $ 0 ---------- Total Petro $ 2,844 ---------- STAR INSTRUMENTS: - ---------------------- 8.04% 1st Mortgage Notes 0.0% 0.0% - - 1st Mortgage Notes 7.25% WC Revolver 0.0% 0.0% - - WC Revolver 7.25% Acquisition Facility 0.0% 0.0% - - Acquisition Facility 7.50% New Debt 0.0% 0.0% - - New Debt 7.17% Pearl Notes 0.0% 0.0% - - Pearl Notes ---------- $ 0 ---------- Total Combined $ 2,844 ---------- 2,843.75 STAR STAND ALONE DISTRIBUTION ASSUMPTIONS - -------------------------------------------------------------------------- Distribution -------------- Minimum Quarterly Distribution $2.20 First Target Distribution $2.42 Second Target Distribution $2.84 Third Target Distribution $3.70 Thereafter NM Target Distribution Level $2.20 Annual Distribution Increase $0.00 ---------- Standard Distribution Structure ("S") or Target ("T") t ---------- - -------------------------------------------------------------------------- STAR PRO FORMA DISTRIBUTION ASSUMPTIONS - -------------------------------------------------------------------- Distribution ------------ Minimum Quarterly Distribution $2.30 First Target Distribution $2.42 Second Target Distribution $2.84 Third Target Distribution $3.70 Thereafter NM ------------------------------------------------------------------ 1998 1999 2000 2001 2001 Thereafter ------------ ------------ ------------ ------------ ------------ Annual Indicated Distribution Increase $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Target Indicated Distribution Level $2.30 $2.30 $2.30 $2.30 $2.30 ------------ Standard Distribution Structure ("S") or Target ("T") t ------------ - ------------------------------------------------------------------------------------------------------------------------------------ 4 of 19
================================================================================ PRO FORMA OPENING BALANCE SHEET (in thousands except per share and per unit data) OPENING BALANCE SHEET STAR GAS PETRO PRO FORMA -------- --------- MERGER STAR GAS -------- --------- 9/30/98 9/30/98 ADJUSTMENT 9/30/98 -------- --------- ------------ ----------- ASSETS: ------------ Cash $ 1,115 $ 13,767 $ 0 $ 14,882 ------------ Other Current Assets 16,832 64,045 - 80,877 TOTAL CURRENT ASSETS -------- --------- ------------ ----------- 17,947 77,812 - 95,759 PP&E and Intangibles, Net 161,660 107,957 - 269,617 Investments in Unconsolidated Affiliates - 113 (113) - Other Assets - 12,796 - 12,796 -------- --------- ------------ ----------- Total Assets 179,607 198,678 (113) 378,172 ======== ========= =========== LIABILITIES: Current Liabilities 12,450 78,003 - 90,453 8.25% Existing Credit Facility 4,770 - - 4,770 Long Term Debt 105,000 286,885 (116,250) 275,635 Total Preferred Stock - 34,167 (34,167) - Other Liabilities 40 10,686 - 10,726 -------- --------- ------------ ----------- Total Liabilities 122,260 409,741 (150,417) 381,584 Common Shareholder's /Partner's Equity 57,347 (211,063) 150,304 (3,412) -------- --------- ------------ ----------- Total Liabilities and Equity $179,607 $198,678 ($113) $378,172 ======== ========= =========== check - - - PRO FORMA % NET MERGER STAR GAS PRO FORMA CAPITAL STRUCTURE STAR GAS PETRO TENDERED ADJUSTMENT 9/30/98 -------- --------- ---------- ------------ ----------- -------- --------- 9/30/98 9/30/98 -------- --------- DEBT 8.04% 1st Mortgage Notes $ 85,000 $ 0 $ 0 $ 85,000 7.25% WC Revolver 4,770 - - 4,770 7.25% Aquisition Facility 9,000 - - 9,000 7.17% Pearl Notes 11,000 - - 11,000 11.96% Sr Notes - 60,000 100.0% (60,000) - 14.10% Sr Notes - 3,100 100.0% (3,100) - 14.10% Sub Notes - 3,100 100.0% (3,100) - 10.13% Sub Notes & Sr Notes - 50,000 100.0% (50,000) - 9.38% Sub Notes & Sr Notes - 75,000 100.0% (75,000) - 12.25% Sub Notes & Sr Notes - 81,250 100.0% (81,250) - 0.00% Other Notes - 0 - - 8.00% Acq. & Other Notes Pay - 14,435 - 14,435 8.25% Existing Credit Facility - 0 - - 10.90% Exchanged Debt - - 60,000 60,000 14.10% Exchanged Debt 6,200 6,200 7.50% New Debt - - 90,000 90,000 -------- ---------- ------------ ----------- TOTAL L.T. DEBT 109,770 286,885 (116,250) 280,405 -------- ---------- ----------- PREFERRED STOCK: 14.33% Pfd Stock - 4,167 (4,167) - 12.88% Pfd Stock - 30,000 (30,000) - -------- ---------- ------------ ----------- TOTAL PREFERRED - 34,167 (34,167) - -------- ---------- ----------- COMMON EQUITY 57,347 (211,063) 150,304 (3,412) -------- ---------- ----------- TOTAL CAPITAL $167,117 $109,989 $276,993 ======== ========== =========== 5 of 19
================================================================================ (in thousands except per share and per unit data) STAR GAS STAND ALONE INCOME STATEMENT Actual Normalized Projected ------------------------------------------------- 1998 1998 1999 2000 2001 2002 ---------- ---------- ---------- ----------- ---------- ----------- EBITDA $ 18,906 $ 22,135 $ 21,119 $ 25,260 $ 26,797 $ 28,335 Depreciation and Amortization 11,638 12,079 12,218 13,066 13,944 14,652 ---------- ---------- ---------- ----------- ---------- ----------- EBIT 7,268 10,056 8,901 12,194 12,853 13,683 Interest Expense (7,927) (7,667) (8,798) (9,359) (9,878) (10,398) Interest Income - - - - - - Other Income - - - - - - ---------- ---------- ---------- ----------- ---------- ----------- Income Before Taxes (659) 2,389 103 2,835 2,975 3,285 Current Income Taxes (25) (25) (25) (25) (25) (25) Deferred Income Taxes - - - - - - ---------- ---------- ---------- ----------- ---------- ----------- Net Income Available to Common ($684) $ 2,364 $ 78 $ 2,810 $ 2,950 $ 3,260 ========== ========== ========== =========== ========== =========== STAR GAS STAND ALONE UNITS OUTSTANDING Common Units Beginning Balance 3,859 3,859 3,859 3,920 4,120 4,296 Issuance 0 0 61 201 176 148 Buyback 0 0 0 0 0 0 ---------- ---------- ---------- ----------- ---------- ----------- Ending Balance 3,859 3,859 3,920 4,120 4,296 4,444 ---------- ---------- ---------- ----------- ---------- ----------- Average Common Units Outstanding 3,859 3,859 3,889 4,020 4,208 4,370 Subordinated Units Beginning Balance 2,396 2,396 2,396 2,396 2,396 2,396 Issuance 0 0 0 0 0 0 Buyback 0 0 0 0 0 0 ---------- ---------- ---------- ----------- ---------- ----------- Ending Balance 2,396 2,396 2,396 2,396 2,396 2,396 ---------- ---------- ---------- ----------- ---------- ----------- Average Subordinated Unites Outstanding 2,396 2,396 2,396 2,396 2,396 2,396 GP Implied Units Beginning Balance 128 128 128 129 133 137 Issuance 0 0 1 4 4 3 Buyback 0 0 0 0 0 0 ---------- ---------- ---------- ----------- ---------- ----------- Ending Balance 128 128 129 133 137 140 ---------- ---------- ---------- ----------- ---------- ----------- Ending Implied GP Units Outstanding 128 128 128 131 135 138 Total Units 6,383 6,383 6,445 6,649 6,829 6,979 ========== ========== ========== =========== ========== =========== Average Units Outstanding 6,383 6,383 6,414 6,547 6,739 6,904 ========== ========== ========== =========== ========== =========== 6 of 19
================================================================================ (in thousand except per share and per unit date) Actual Projected -------------------------------------------- STAR GAS STAND ALONE BALANCE SHEET 1998 1999 2000 2001 2002 --------- --------- --------- --------- --------- ASSETS: Cash $ 1,115 $ 1,115 $ 1,115 $ 1,115 $ 1,115 Other Current Assets 16,832 18,289 21,016 22,028 23,041 --------- --------- --------- --------- --------- Total Current Assets 17,947 19,404 22,131 23,143 24,156 PP&E and Intangibles, Net 161,660 157,299 157,362 156,596 155,171 Other Assets - - - - - --------- --------- --------- --------- --------- Total Assets 179,607 176,703 179,493 179,739 179,327 ========= ========= ========= ========= ========= LIABILITIES: Current Liabilities - Excluding Working Capital Borrowing 12,450 13,907 16,634 17,646 18,659 Total Debt 109,770 118,079 125,231 132,401 139,589 Other Liabilities 40 40 40 40 40 --------- --------- --------- --------- --------- Total Liabilities 122,260 132,026 141,905 150,087 158,288 Partner's Equity 57,347 44,677 37,588 29,652 21,039 --------- --------- --------- --------- --------- Total Liabilities and Equity $ 179,607 $ 176,703 $ 179,493 $ 179,739 $ 179,327 ========= ========= ========= ========= ========= Check - - - - 0 STAR GAS STAND ALONE CASH FLOW STATEMENT Net Income $ 78 $ 2,810 $ 2,950 $ 3,260 Depreciation and Amortization 12,218 13,066 13,944 14,652 Deferred Taxes - - - - Other Income - - - - Other Assets/Liabilities - - - - Change in Working Capital 0 0 - - --------- --------- --------- --------- Cash From Operations 12,296 15,876 16,894 17,912 --------- --------- --------- --------- Maintenance CapEx (2,632) (2,679) (2,728) (2,777) Internal Growth CapEx - - - - External Growth CapEx (5,000) (10,000) (10,000) (10,000) --------- --------- --------- --------- Cash from Investments (7,632) (12,679) (12,728) (12,777) --------- --------- --------- --------- Acquisition Borrowing 3,637 5,496 6,060 6,684 Remaining Distributions to Repay Debt 0 0 (0) 0 Amortization of Mortgage Notes - - - - Borrowing to Repay Existing Debt - - - - Borrowing for Changes in WC (0) (0) - - Borrowing to Pay Full MQD 4,447 1,206 660 54 Change in Equity 1,363 4,504 3,940 3,316 Transaction/Deal Expenses (225) (450) (450) (450) Distributions (14,110) (14,404) (14,826) (15,189) --------- --------- --------- --------- Cash from Financing (4,889) (3,647) (4,616) (5,585) --------- --------- --------- --------- Net Cash Flow (225) (450) (450) (450) Initial Cash Balance 1,115 1,115 1,115 1,115 --------- --------- --------- --------- Cash Available for Paydown on WC Revolver and Acq. Facility 890 665 665 665 Minimum Cash Balance 1,115 1,115 1,115 1,115 Borrowing/(Paydown) on WC Revolver and Acq. Facility 225 450 450 450 --------- --------- --------- --------- Net Change in Cash - - - - --------- --------- --------- --------- Ending Cash Balance $ 1,115 $ 1,115 $ 1,115 $ 1,115 ========= ========= ========= ========= 7 of 19
================================================================================================================================ (in thousands except per share and per unit data) Actual Normalized Projected ---------------------------------------- 1998 1998 1999 2000 2001 2002 -------- ---------- -------- -------- -------- -------- STAR GAS STAND ALONE EBITDA CALCULATION (See Tab 3: Cases) - ----------------------------------------------------------------------------------------------------------------------------- Year 1 Year 2 Year 3 Year 4 Year 5 EBITDA Growth Rate 17.1% -4.6% 19.6% 6.1% 5.7% - ----------------------------------------------------------------------------------------------------------------------------- BASE EBITDA: Timing ------ End 1998 Mid 1999 Mid 2000 Mid 2001 Mid 2002 Mid 2003 Mid 2004 Mid 2005 -------- ---------- -------- -------- -------- -------- TOTAL EBITDA $ 18,906 $ 22,135 $ 21,119 $ 25,260 $ 26,797 $ 28,335 ======== ========== ======== ======== ======== ======== PRO FORMA FULL-YEAR EBITDA FOR DEBT CONVANENT ANALYSIS 18,906 22,135 21,504 26,030 27,567 29,105 STAR GAS STAND ALONE DEPRECIATION CALCULATION EXISTING DEPRECIATION $ 11,638 $ 12,079 $ 12,079 $ 12,079 $ 12,079 $ 12,079 1998 Normal 2,610 MAINTENANCE CAPEX: 1998 2,625 $ 0 $ 0 $ 175 $ 175 $ 175 $ 175 Annual Growth: 1.8% 1999 2,632 88 175 175 175 2000 2,679 89 179 179 2001 2,728 91 182 2002 2,777 93 INTERNAL GROWTH CAPEX: 1998 0 - - - - - - Annual Growth: 0.0% 1999 0 - - - - 2000 0 - 0 0 2001 0 - 0 2002 0 - 2003 0 2004 0 2005 0 EXTERNAL GROWTH CAPEX: 1998 9,000 - - 600 600 600 600 Annual Growth: 0.0% 1999 5,000 167 333 333 333 2000 10,000 333 667 667 2001 10,000 333 667 2002 10,000 333 2003 10,000 2004 10,000 2005 10,000 -------- ---------- -------- -------- -------- -------- TOTAL DEPRECIATION $ 11,638 $ 12,079 $ 12,218 $ 13,066 $ 13,944 $ 14,652 ======== ========== ======== ======== ======== ======== 8 0f 19
================================================================================ STAR GAS STAND ALONE DEBT SCHEDULE (in thousands except per share and per unit data) Actual Normalized Projected ------------------------------------------- 1998 1998 1999 2000 2001 2002 ---------- ------------ ---------- ---------- ---------- ---------- 8.04% 1st Mortgage Notes Beginning Balance $ 85,000 $ 85,000 $ 85,000 $ 85,000 $ 85,000 $ 85,000 Borrowing 0 0 0 0 0 0 Amortization 0 0 0 0 0 0 -------- -------- -------- -------- -------- -------- Ending Balance 85,000 85,000 85,000 85,000 85,000 85,000 Interest Payment 8.04% 6,834 6,834 6,834 6,834 6,834 6,834 Make-Whole Payment 0 0 0 0 0 0 7.17% Pearl Notes Beginning Balance $ 0 $ 0 $ 11,000 $ 11,000 $ 11,000 $ 11,000 Borrowing 11,000 11,000 0 0 0 0 Amortization 0 0 0 0 0 0 -------- -------- -------- -------- -------- -------- Ending Balance 11,000 11,000 11,000 11,000 11,000 11,000 Interest Payment 7.17% 613 613 789 789 789 789 % of year Pearl Notes Outstanding 77.7% 77.7% 0 0 0 0 7.25% WC Revolver Beginning Balance - - $4,770 $ 4,770 $ 4,770 $ 4,770 Borrowing for Change in WC - - (0) (0) - - Borrowing/(Payment) 4,770 4,770 0 0 0 0 -------- -------- -------- -------- -------- -------- Ending Balance 4,770 4,770 4,770 4,770 4,770 4,770 Effective Avg WC Balance 6,621 3,034 3,062 3,062 3,062 3,062 Interest Payment 7.25% 480 220 222 222 222 222 7.25% Acquisition Facility Beginning Balance - - $ 9,000 $ 17,309 $ 24,461 $ 31,631 External Acquisitions 9,000 9,000 3,637 5,496 6,060 6,684 External Acquisitions at Beginning of 1999 - - - - - - Internal Acquisitions - - - - - - Borrowing to Pay Full MQD - - 4,447 1,206 660 54 Borrowings to Repay Existing Debt - - - - - - Borrowings/(Payment) - - 225 450 450 450 Remaining Distributions to Repay Debt - - 0 0 (0) 0 -------- -------- -------- -------- -------- -------- Ending Balance 9,000 9,000 17,309 24,461 31,631 38,819 Interest Balance 7.25% 0 0 954 1,514 2,033 2,554 TOTAL DEBT Beginning Balance $ 85,000 $ 85,000 $109,770 $118,079 $125,231 $132,401 Amortization of Mortgage Notes - - - - - - Borrowing for Pearl Notes 11,000 11,000 - - - - Borrowing for Changes in WC - - (0) (0) - - Borrowing to Pay Full MQD - - 4,447 1,206 660 54 Acquisition Borrowing 9,000 9,000 3,637 5,496 6,060 6,684 Borrowing to Repay Existing Debt - - - - - - Remaining Distribution to Repay Debt - - 0 0 (0) 0 Borrowing/(Payment) on WC Revolver and Acq. Facility 4,770 4,770 225 450 450 450 -------- -------- -------- -------- -------- -------- Ending Balance $109,770 $109,770 $118,079 $125,231 $132,401 $139,589 ======== ======== ======== ======== ======== ======== Interest Expense Interest Expense $ 7,927 $ 7,667 $ 8,798 $ 9,359 $ 9,878 $ 10,398 Bank Fee - - - - - - -------- -------- -------- -------- -------- -------- Total Interest Payment $ 7,927 $ 7,667 $ 8,798 $ 9,359 $ 9,878 $ 10,398 ======== ======== ======== ======== ======== ======== 9 of 19
================================================================================ STAR GAS STAND ALONE SCHEDULE OF ACTUAL DISTRIBUTIONS (in thousands except per share and per unit data) ACTUAL NORMALIZED PROJECTED ------------------------------------------------------- ASSUMES REVISED TARGET DISTRIBUTION STRUCTURE 1998 1998 1999 2000 2001 2002 --------- ---------- ----------- ------------ ------------ ------------ DISTRIBUTABLE CASH - ------------------ Cash from Operations $10,954 $14,443 $12,296 $15,876 $16,894 $17,912 Maintenance CapEx (2,625) (2,610) (2,632) (2,679) (2,728) (2,777) Other 0 0 0 0 0 0 --------- ---------- ----------- ------------ ------------ ------------ Total MLP Distributable Cash Flow 8,329 11,833 9,664 13,197 14,166 15,135 Distributable Cash Flow /Unit $ 1.30 $ 1.85 $ 1.51 $ 2.02 $ 2.10 $ 2.19 AVERAGE UNITS FOR CALCULATING ANNUAL DISTRIBUTIONS 2 2 2 2 - -------------------------------------------------- Common Units 3,859 3,859 3,889 4,020 4,208 4,370 Subordinated Units 2,396 2,396 2,396 2,396 2,396 2,396 General Partner Interest Unit Equivalent 128 128 128 131 135 138 --------- ---------- ----------- ------------ ------------ ------------ Total Units Outstanding 6,383 6,383 6,414 6,547 6,739 6,904 DISTRIBUTION LEVELS - ------------------- MQD $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 First Target $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 Second Target $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 Third Target $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 Indicated Cash Distribution $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 DISTRIBUTION OF MQD - ------------------- Cash Available 8,329 11,833 9,664 13,197 14,166 15,135 Cash Borrowed to pay Full MQD 5,713 2,209 4,447 1,206 660 54 Allocation to: Common Units 8,490 8,490 8,557 8,844 9,258 9,613 Subordinated Units 5,271 5,271 5,271 5,271 5,271 5,271 General Partner Interest 281 281 282 288 297 304 FIRST TARGET DISTRIBUTION - ------------------------- Cash Available 0 0 0 0 0 0 Cash Required for Target Distribution 0 0 0 0 0 0 Cash Required for Indicated Distribution 0 0 0 0 0 0 Actual Cash Distributed 0 0 0 0 0 0 Allocation to: Common Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 SECOND TARGET DISTRIBUTION - -------------------------- Cash Available: 0 0 0 0 0 0 Cash Required for Target Distribution 0 0 0 0 0 0 Cash Required for Indicated Distribution 0 0 0 0 0 0 Actual Cash Distributed 0 0 0 0 0 0 Allocation to: Common Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Incentive Distribution 0 0 0 0 0 0 THIRD TARGET DISTRIBUTION - ------------------------- Cash Available 0 0 0 0 0 0 Cash Required for Target Distribution 0 0 0 0 0 0 Cash Required for Indicated Distribution 0 0 0 0 0 0 Actual Cash Distributed 0 0 0 0 0 0 Allocation to: Common Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Incentive Distribution 0 0 0 0 0 0 10 of 19
================================================================================ STAR GAS STAND ALONE SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D) (in thousands except per share and per unit data) Actual Normalized Projected -------------------------------------- 1998 1998 1999 2000 2001 2002 -------- ------------ -------- -------- -------- -------- Remaining Distribution - ---------------------- Cash Available 0 0 0 0 0 0 Allocation to: Common Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Incentive Distribution 0 0 0 0 0 0 Repay Indebtedness (0) 0 (0) (0) 0 (0) Total Distributions - ------------------- Common Units 8,490 8,490 8,557 8,844 9,258 9,613 Subordinated Units 5,271 5,271 5,271 5,271 5,271 5,271 General Partner Interest 281 281 282 288 297 304 Incentive Distribution 0 0 0 0 0 0 Total Distributions ------- ------- ------- ------- ------- ------- $14,042 $14,042 $14,110 $14,404 $14,826 $15,189 ======= ======= ======= ======= ======= ======= Total Distributions Per Unit - ---------------------------- Common Unit $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 Subordinated Unit 2.20 2.20 2.20 2.20 2.20 2.20 GP Unit 2.20 2.20 2.20 2.20 2.20 2.20 11 of 19
- -------------------------------------------------------------------------------- (in thousands except per share and per unit data) Actual Normalized Projected -------------------------------------------- 1998 1998 1999 2000 2001 2002 ---------- ---------- ---------- ---------- ---------- ----------- PETRO EBITDA CALCULATION - ------------------------------------------------------------------------------------------------------------------------------------ Year 1 Year 2 Year 3 Year 4 Year 5 EBITDA GROWTH RATE - ------------------------------------------------------------------------------------------------------------------------------------ BASE EBITDA: Timing ------ ACQUISITIONS: End 1998 $ 0 Mid 1999 15,000 Mid 2000 30,000 Mid 2001 30,000 Mid 2002 30,000 Mid 2003 30,000 Mid 2004 30,000 Mid 2005 30,000 ---------- ---------- ---------- ---------- ---------- ----------- TOTAL EBITDA $ 34,929 $ 46,900 $ 44,415 $ 48,195 $ 50,649 $ 52,834 ========== ========== ========== ========== ========== =========== PRO FORMA FULL-YEAR EBITDA FOR DEBT COVENENT ANALYSIS 34,929 46,900 45,994 51,353 53,807 55,992 PETRO DEPRECIATION CALCULATION EXISTING DEPRECIATION $ 28,946 $ 24,018 $ 24,018 $ 24,018 $ 24,018 $ 24,018 MAINTENANCE CAPEX: 1998 $ 3,500 - - 233 233 233 233 Annual Growth: 2.0% 1999 3,641 121 243 243 243 2000 3,714 124 248 248 2001 3,788 126 253 2002 3,864 129 2003 3,941 2004 4,020 2005 4,100 INTERNAL GROWTH CAPEX: 1998 $ 0 - - - - - - Annual Growth: 0.0% 1999 0 - - - - 2000 0 - - - 2001 0 - 2002 0 2003 0 2004 0 2005 0 EXTERNAL GROWTH CAPEX: 1998 $ 0 - - 0 0 0 0 Annual Growth: 0.0% 1999 15,000 595 1,190 1,190 1,190 2000 30,000 1,190 2,381 2,381 2001 30,000 1,190 2,381 2002 30,000 1,190 2003 30,000 2004 30,000 2005 30,000 ---------- ---------- ---------- ---------- ---------- ----------- TOTAL DEPRECIATION: 28,946 24,018 24,968 26,999 29,630 32,266 ========== ========== ========== ========== ========== ===========
================================================================================ (in thousands except per share and per unit data) STAR PRO FORMA INCOME STATEMENT ACTUAL NORMALIZED PROJECTED --------------------------------------------------- 1998 1998 1999 2000 2001 -------- ------------ ----------- -------------- ---------------- Combined EBITDA $ 53,835 $ 69,035 $ 65,534 $ 73,455 $ 77,446 Consolidated Savings 500 500 500 500 500 -------- ---------- ---------- ------------ ----------- Pro Forma EBITDA 54,335 69,535 66,034 73,955 77,946 Depreciation and Amortization 40,584 36,097 37,186 40,065 43,574 -------- ---------- ---------- ------------ ----------- EBIT 13,751 33,438 28,848 33,890 34,372 Interest Expense (24,530) (24,396) (25,068) (26,410) (28,325) Interest Income - - - - - Other Income - - - - - EBT (10,779) 9,042 3,780 7,480 6,047 -------- ---------- ---------- ------------ ----------- Current Income Taxes (525) (525) (525) (625) (675) Deferred Income Taxes - - - - - -------- ---------- ---------- ------------ ----------- Net Income Available to Common ($11,304) $ 8,517 $ 3,255 $ 6,855 $ 5,372 ======== ========== ========== ============ =========== Pro Forma Full-Year EBITDA for Debt Covenant Analysis 54,335 69,535 67,998 77,883 81,874 STAR PRO FORMA UNITS OUTSTANDING Common Units Beginning Balance 12,873 12,873 13,687 13,734 Issuance - - - - Issued to meet Debt Covenant Ratio - 814 47 991 Issued to E - - - - Buyback - - - - -------- ---------- ---------- ------------ ----------- Ending Balance 12,873 12,873 13,687 13,734 14,725 -------- ---------- ---------- ------------ ----------- Average Common Units Outstanding 12,873 12,873 13,280 13,710 14,229 Deferred Participation Units Beginning Balance - - 909 909 909 DPUs Issued at Beginning of Year - - - - - -------- ---------- ---------- ------------ ----------- Ending Balance - - 909 909 909 SR Subordinated Units Beginning Balance - Sr Sub Units 2,491 2,491 2,491 2,491 DPUs Issued - - - - Sr Sub Issuance - - - - Sr. Sub to E - - - - Sr Sub Converted to G.P. Interest - - - - -------- ---------- ---------- ------------ ----------- Ending Balance 2,491 2,491 2,491 2,491 2,491 -------- ---------- ---------- ------------ ----------- Average Sr Subordinated Units Outstanding 2,491 2,491 2,491 2,491 2,491 Subordinated Units Beginning Balance 431 431 431 431 Issuance - - - - Buyback - - - - -------- ---------- ---------- ------------ ----------- Ending Balance 431 431 431 431 431 -------- ---------- ---------- ------------ ----------- Average Subordinated Units Outstanding 431 431 431 431 431 GP Implied Units Beginning Balance 322 322 322 322 Issued in conjuction with DPUs - - - - Issued to Meet Debt Covenant Ratio - - - - Issued to conjuction with E Equity - - - - Buyback - - - - -------- ---------- ---------- ------------ ----------- 322 322 322 322 322 -------- ---------- ---------- ------------ ----------- Average Implied GP Units Outstanding 322 322 322 322 322 Total Units Outstanding 16,118 16,118 16,932 16,979 17,970 -------- ---------- ---------- ------------ ----------- Average Total Units Outstanding 16,118 16,118 16,525 16,955 17,474 ======== ========== ========== ============ =========== Pro Forma Heating Oil Units Used for DPU Issue Calculation 10,111 10,408 10,735 2002 -------- Combined EBITDA $ 81,169 Consolidated Savings 500 -------- Pro Forma EBITDA 81,669 Depreciation and Amortization 46,918 -------- EBIT 34,751 Interest Expense (29,444) Interest Income - Other Income - EBT 5,307 -------- Current Income Taxes (725) Deferred Income Taxes - -------- Net Income Available to Common $ 4,582 ======== Pro Forma Full-Year EBITDA for Debt Covenant Analysis 85,597 STAR PRO FORMA UNITS OUTSTANDING Common Units - Beginning Balance 14,725 Issuance - Issued to meet Debt Covenant Ratio 1,035 Issued to E - Buyback - -------- Ending Balance 15,760 -------- Average Common Units Outstanding 15,242 Deferred Participation Units Beginning Balance 909 DPUs Issued at Beginning of Year - -------- Ending Balance 909 SR Subordinated Units Beginning Balance - Sr Sub Units 2,491 DPUs Issued - Sr Sub Issuance - Sr. Sub to E - Sr Sub Converted to G.P. Interest - -------- Ending Balance 2,491 -------- Average Sr Subordinated Units Outstanding 2,491 Subordinated Units Beginning Balance 431 Issuance - Buyback - -------- Ending Balance 431 -------- Average Subordinated Units Outstanding 431 GP Implied Units Beginning Balance 322 Issued in conjuction with DPUs - Issued to Meet Debt Covenant Ratio - Issued to conjuction with E Equity - Buyback - -------- 322 -------- Average Implied GP Units Outstanding 322 Total Units Outstanding 19,005 -------- Average Total Units Outstanding 18,487 ======== Pro Forma Heating Oil Units Used for DPU Issue Calculation 11,583 13 of 19
==================================================================================================================================== (in thousands except per share and per unit date) ACTUAL PROJECTED -------------------------------------------------- STAR PRO FORMA BALANCE SHEET 1998 1999 2000 2001 2002 ------ ------ ------ ------ ------ ASSETS: Cash $ 14,882 $ 14,882 $ 14,882 $ 14,882 $ 14,882 Other Current Assets 80,877 76,323 86,627 91,818 96,661 -------- -------- -------- -------- -------- Total Current Assets 95,759 91,205 101,509 106,700 111,543 PP&E and Intangibles, Net 269,617 258,704 265,032 267,974 267,697 Other Assets 12,796 12,796 12,796 12,796 12,796 -------- -------- -------- -------- -------- Total Assets 378,172 362,705 379,337 387,471 392,037 ======== ======== ======== ======== ======== LIABILITIES: Current Liabilities 90,453 85,899 96,203 101,394 106,237 8.25% Existing Credit Facility 4,770 4,770 4,770 4,770 4,770 Total LT Debt 275,653 274,092 311,532 327,496 342,388 Other Liabilities 10,726 10,726 10,726 10,726 10,726 -------- -------- -------- -------- -------- Total Liabilities 381,584 375,487 423,231 444,386 464,121 Preferred Stock - - - - - Common Shareholder's Equity (3,412) (12,782) (43,894) (56,916) (72,085) -------- -------- -------- -------- -------- Total Liabilities and Equity $378,172 $362,705 $379,337 $387,471 $392,037 ======== ======== ======== ======== ======== Check - - - - - STAR PRO FORMA CASH FLOW STATEMENT Net Income $ 3,225 $ 6,855 $ 5,372 $ 4,582 Depreciation and Amortization 37,186 40,065 43,574 46,918 Deferred Taxes - - - - Other Assets/Liab - - - - Change in Non-Cash Working Capital - - - - -------- -------- -------- -------- Cash from Operations 40,441 46,920 48,946 51,500 Maintenance CapEx (6,273) (6,393) (6,516) (6,641) Internal Growth CapEx - - - - External Growth CapEx (20,000) (40,000) (40,000) (40,000) -------- -------- -------- -------- Cash from Investments (26,273) (46,393) (46,516) (46,641) Acquisition Borrowing 20,000 40,000 40,000 40,000 Remaining Distributions to Repay Debt (3,624) (1,530) (2,239) (2,339) Amortization of Existing Debt (8,154) (8,141) (60) (60) Borrowing to Repay Existing Debt 6,054 8,141 60 60 Borrowing for Change in WC - - - - Change in Common Equity & GP Interest 17,919 1,030 21,797 22,769 Repayment of Preferred Stock - - - - Distributions (30,544) (38,997) (40,191) (42,520) -------- -------- -------- -------- Cash from Financing 1,651 503 19,368 17,909 Net Cash Flow 15,819 1,030 21,797 22,769 Initial Cash Balance 14,882 14,882 14,882 14,882 -------- -------- -------- -------- Cash Available for Paydown on WC Revolver and Acq. Facility 30,701 15,912 36,679 37,651 Minimum Cash Balance 14,882 14,882 14,882 14,882 Borrowing/(Paydown) on WC Revolver and Acq. Facility (15,819) (1,030) (21,797) (22,769) -------- -------- -------- -------- Ending Cash Balance 14,882 14,882 14,882 14,882 Net Change in Cash $ 0 $ 0 $ 0 $ 0 ======== ======== ======== ========
==================================================================================================================================== (in thousands except per share and per until data) ACTUAL NORMALIZED PROJECTED ------------------------------------------- STAR PRO FORMA DEBT SCHEDULE 1998 1998 1999 2000 2001 2002 ------- ---------- ------- ------ ------ ------- 8.04% 1st Mortgage Notes Beginning Balance $85,000 $85,000 85,000 $85,000 $85,000 $85,000 Borrowing - - - - - - Amortizaton - - - - - - ------- ------- ------- ------- ------- ------- Ending Balance 85,000 85,000 85,000 85,000 85,000 85,000 Interest Payment 8.04% 6,834 6,834 6,834 6,834 6,834 6,834 7.17% Pearl Notes Beginning Balance 11,000 11,000 11,000 11,000 11,000 11,000 Borrowing - - - - - - Amortizaton - - - - - - ------- ------- ------- ------- ------- ------- Ending Balance 11,000 11,000 11,000 11,000 11,000 11,000 Interest Payment 7.17% 613 613 789 789 789 789 % of year Pearl Notes Outstanding 77.7% 77.7% 10.13% Sub Notes & Sr Notes Beginning Balance 50,000 50,000 - - - - Borrowing - - - - - - Amortizaton (50,000) (50,000) - - - - ------- ------- ------- ------- ------- ------- Ending Balance - - - - - - Interest Payment 10.13% - - - - - - 9.38% Sub Notes & Sr Notes Beginning Balance 75,000 75,000 - - - - Borrowing - - - - - - Amortizaton (75,000) (75,000) - - - - ------- ------- ------- ------- ------- ------- Ending Balance - - - - - - Interest Payment 9.38% - - - - - - 12.25% Sub Notes & Sr Notes Beginning Balance 81,250 81,250 - - - - Borrowing - - - - - - Amortizaton (81,250) (81,250) - - - - ------- ------- ------- ------- ------- ------- Ending Balance - - - - - - Interest Payment 12.25% - - - - - - 7.50% New Debt Beginning Balance - - 90,000 96,054 104,195 104,225 Borrowing 90,000 90,000 6,054 8,141 60 60 Amortizaton - - - - - - ------- ------- ------- ------- ------- ------- Ending Balance 90,000 90,000 96,054 104,195 104,255 104,315 Interest Payment 7.50% 6,750 6,750 6,977 7,509 7,817 7,821 Exchange of 11.96% Senior Notes Beginning Balance - - 60,000 60,000 60,000 60,000 Borrowing 60,000 60,000 - - - - Amortizaton - - - - - - ------- ------- ------- ------- ------- ------- Ending Balance 60,000 60,000 60,000 60,000 60,000 60,000 Interest Payment 10.90% 6,540 6,540 6,540 6,540 6,540 6,540 8.00% Acq. & Other Notes Pay Beginning Balance 16,507 16,507 14,435 8,381 240 180 Borrowing - - - - - - Amortizaton (2,072) (2,072) (6,054) (8,141) (60) (60) ------ ------- ------- ------- ------ ------- Ending Balance 14,435 14,435 8,381 240 180 120 Interest Payment 8.00% 1,238 1,238 913 345 17 12 15 of 19
- -------------------------------------------------------------------------------- (in thousands except per share and per unit data) STAR PRO FORMA DEBT SCHEDULE (CONT'D) Actual Normalized Projected ------------------------------------------ 1998 1998 1999 2000 2001 2002 ---------- ------------ ---------- -------- ------- -------- Exchange of 14.10% Senior Notes Beginning Balance - - 6,200 4,100 4,100 4,100 Borrowing 6,200 6,200 - - - - Amortization - - (2,100) - - - -------- -------- -------- ------- ------- ------- Ending Balance 6,200 6,200 4,100 4,100 4,100 4,100 Interest Payment 14.10% 874 874 578 578 578 578 7.25% WC Revolver Beginning Balance - - 4,770 4,770 4,770 4,770 Borrowing for Change in WC - - - - - - Borrowing to Pay Full MQD - - - - - - Borrowing/(Payment) 4,770 4,770 - - - - -------- -------- -------- ------- ------- ------- Ending Balance 4,770 4,770 4,770 4,770 4,770 4,770 Effective Avg WC Balance 10,179 9,044 11,338 11,338 11,338 11,338 Interest Payment 7.25% 738 656 822 822 822 822 7.25% Acquisition Facility Beginning Balance - - 9,000 9,557 46,997 62,961 External Acquisitions 9,000 9,000 20,000 40,000 40,000 40,000 External Acquisitions at Beginning of 1999 - - - - - - Internal Growth CapEx - - - - - - Payment - - (15,819) (1,030) (21,797) (22,769) Remaining Distributions to Repay Debt - (1,419) (3,624) (1,530) (2,239) (2,339) -------- -------- -------- ------- ------- ------- Ending Balance 9,000 7,581 9,557 46,997 62,961 77,853 Interest Payment 7.25% $ 0 ($51) $ 673 $ 2,050 $ 3,986 $ 5,105 Total Pro Forma Debt Beginning Balance $318,757 $318,757 $280,405 $278,862 $316,302 $332,266 Amortization of Existing Debt (208,322) (208,322) (8,154) (8,141) (60) (60) Exchange of Notes 66,200 66,200 - - - - Borrowing for Changes in WC - - - - - - Acquisition Borrowing 9,000 9,000 20,000 40,000 40,000 40,000 Borrowing to Pay Full MQD - - - - - - Borrowing to Repay Existing Debt 90,000 90,000 6,054 8,141 60 60 Remaining Distributions to Repay Debt - (1,419) (3,624) (1,530) (2,239) (2,339) Borrowing/(Payment) on WC Revolver and Acq. Facility 4,770 4,770 (15,819) (1,030) (21,797) (22,769) -------- -------- -------- ------- ------- ------- Ending Balance 280,405 278,986 278,862 316,302 332,266 347,158 Preferred Stock Beginning Balance 34,167 34,167 - - - - Repayment (34,167) (34,167) - - - - -------- -------- -------- ------- ------- ------- Ending Balance - - - - - - Dividend Payment 14.33% - - - - - - Interest Expense/Dividends 23,587 23,453 24,125 25,467 27,382 28,501 Chase Fees 943 943 943 943 943 943 -------- -------- -------- ------- ------- ------- Total Interest Payment/Dividends $ 24,530 $ 24,396 $ 25,068 $ 26,410 $ 28,325 $ 29,444 ======== ======== ======== ======= ======= ======= 16 of 19
- -------------------------------------------------------------------------------- (IN THOUSANDS EXCEPT PER SHARE AND PER UNIT DATA) STAR PRO FORMA DISTRIBUTION SCHEDULE OF ACTUAL DISTRIBUTIONS Actual Normalized Projected ---------------------------------------- 1998 1998 1999 2000 2001 2002 ----------- ------------ --------- -------- -------- -------- Distributable Cash - ------------------ Cash from Operations (excel chg in WC) 29,280 44,614 $40,441 $46,920 $48,946 $51,500 Maintenance CapEx (6,125) (6,125) (6,273) (6,393) (6,516) (6,641) Other - - - - - - -------- ------ ------- ------- ------- ------ 23,155 38,489 34,168 40,527 42,429 44,859 Total MLP Distributable Cash Flow Distributable Cash Flow/Unit $ 1.44 $ 2.39 $ 2.07 $ 2.39 $ 2.43 $ 2.43 Distributable Cash Flow/Unit Pro Forma for DPU Conversion Average Units for Calculating Annual Distributions - -------------------------------------------------- Common Units 12,873 12,873 13,280 13,710 14,229 15,242 SR Subordinated Units 2,491 2,491 2,491 2,491 2,491 2,491 Subordinated Units 431 431 431 431 431 431 General Partner Interest Unit Equivalent 322 322 322 322 322 322 -------- ------ ------- ------- ------- ------ Total Units Outstanding 16,118 16,118 16,525 16,955 17,474 18,487 Distribution Levels $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 - ------------------- MQD $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 First Target $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 Second Target $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 Third Target $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 Indicated Cash Distribution $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 Distribution of MQD - ------------------- Cash Available 23,155 38,489 34,168 40,527 42,429 44,859 Allocation to: Common Units 23,155 29,607 30,544 31,534 32,727 35,057 SR Subordinated Units 0 5,730 0 5,730 5,730 5,730 Subordinated Units 0 992 0 992 992 992 General Partner Interest 0 741 0 741 741 741 First Target Distribution - ------------------------- Cash Available 0 1,419 3,624 1,530 2,239 2,339 Cash Required for Target Distribution 0 1,934 1,984 2,037 2,100 2,224 Cash Required for Indicated Distribution 0 0 0 0 0 0 Actual Cash Distributed 0 0 0 0 0 0 Allocation to: Common Units 0 0 0 0 0 0 SR Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Total Distributions to: Common Units 0 0 0 0 0 0 Sr. Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 17 of 19
================================================================================ (in thousands except per share and per unit data) STAR GAS PRO FORMA SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D) Actual Normalized Projected -------------------------------------- 1998 1998 1999 2000 2001 2002 -------- ------------ -------- -------- -------- -------- Second Target Distribution - -------------------------- Cash Available 0 0 0 0 0 0 Cash Required for Target Distribution 0 0 0 0 0 0 Cash Required for Indicated Distribution 0 0 0 0 0 0 Actual Cash Distributed 0 0 0 0 0 0 Allocation to: Common Units 0 0 0 0 0 0 SR. Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Incentive Right 0 0 0 0 0 0 Incentive Right to GP Interest 0 0 0 0 0 0 Incentive Right to Sub Units 0 0 0 0 0 0 Incentive Right to Sr. Sub Units 0 0 0 0 0 0 Total Distributions to: Common Units 0 0 0 0 0 0 Sr. Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Third Target Distribution - ------------------------- Cash Available 0 0 0 0 0 0 Cash Required for Target Distribution 0 0 0 0 0 0 Cash Required for Indicated Distribution 0 0 0 0 0 0 Actual Cash Distributed 0 0 0 0 0 0 Allocation to: Common Units 0 0 0 0 0 0 Sr. Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Incentive Right 0 0 0 0 0 0 Incentive Right to GP Interest 0 0 0 0 0 0 Incentive Right to Sub Units 0 0 0 0 0 0 Incentive Right to Sr. Sub Units 0 0 0 0 0 0 Total Distributions to: Common Units 0 0 0 0 0 0 Sr. Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Remaining Distribution - ---------------------- Cash Available 0 0 0 0 0 0 Cash Required for Indicated Distribution 0 0 0 0 0 0 Actual Cash Distributed 0 0 0 0 0 0 Allocation to: Common Units 0 0 0 0 0 0 Sr. Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Incentive Right 0 0 0 0 0 0 Incentive Right to GP Interest 0 0 0 0 0 0 Incentive Right to Sub Units 0 0 0 0 0 0 Incentive Right to Sr. Sub Units 0 0 0 0 0 0 Repay Indebtedness 0 1,419 3,624 1,530 2,239 2,339 Total Distributions to: Common Units 0 0 0 0 0 0 Sr. Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 18 of 19
================================================================================ STAR GAS PRO FORMA SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D) (in thousands except per share and per unit data) Actual Normalized --------------------------------------- 1998 1998 1999 2000 2001 2002 ------- ------- -------- ------ ------ ------ TOTAL DISTRIBUTIONS - ------------------- Common Units $23,155 $29,607 $30,544 $31,534 $32,727 $35,057 SR Subordinated Units 0 5,730 0 5,730 5,730 5,730 Subordinated Units 0 992 0 992 992 992 General Partner Interest 0 741 0 741 741 741 ------- ------- ------- ------- ------- ------- Total Distributions $23,155 $37,070 $30,544 $38,997 $40,191 $42,520 ======= ======= ======= ======= ======= ======= 14,042 14,042 14,110 14,404 14,826 15,189 Total Distributions Per Unit - ----------------------------- Common Units $1.80 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 SR Subordinated Units 0.00 2.30 0.00 2.30 2.30 2.30 Subordinated & GP Units 0.00 2.30 0.00 2.30 2.30 2.30 19 of 19
EXHIBIT (b)(21) Appendix II to FAIRNESS OPINION PRESENTATION TO THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF STAR GAS CORPORATION Analyses performed under 15-year weather scenario Changed Pages Only CONFIDENTIAL A.G.EDWARDS & SONS, INC. INVESTMENT BANKING February 10, 1999
TABLE OF CONTENTS Please note: Appendix II follows the same page numbering format as Appendix I and contains only those pages that changed as a result of performing the analyses under the 15-year weather scenario. Appendix II should be read in conjunction with Appendix I. Section ------- Overview of Petroleum Heat and Power Co., Inc......................... A Overview of Star Gas Partners, L.P.................................... B Pro Forma Merger Analysis............................................. E Relative Contribution Analysis........................................ G Discounted Cash Flow Analysis......................................... H Comparable Transactions Analysis...................................... I Public Partnership Analysis........................................... J Pro Forma Model....................................................... K
OVERVIEW OF PETRO EBITDA PROJECTIONS ($ in thousands) - ------------------------------------------------------------------------------------------- PROJECTED ---------------------------------------------- ACTUAL ACTUAL NORMALIZED ADJUSTED FOR LTM 9/98 1998 1998 ACTUAL 1999 2000 2001 2002 --------------------------------------------------------------------------------- EBITDA $34,929 $30,612 $44,749 $43,475 $45,978 $48,375 $50,509 - ------------------------------------------------------------------------------------------- MAJOR ASSUMPTIONS FOR 1999 - 2002 - --------------------------------- [_] 15 Year Weather [_] Flat Attrition. [_] $15 million in 1999 and $30 million in 2000 to 2002 of acquisitions at 4.75x EBITDA multiple using half-year convention. [_] Increase in gross profit margin of $0.01 in 1999 and $0.005 in 2000 to 2002. Page A-8
OVERVIEW OF STAR GAS EBITDA PROJECTIONS ($ in thousands) - ------------------------------------------------------------------------------ PROJECTED ------------------------------------------- ACTUAL NORMALIZED ADJUSTED FOR 1998 1998 ACTUAL 1999 2000 2001 2002 -------------------------------------------------------------------- EBITDA $18,906 $20,731 $20,415 $23,749 $25,182 $26,615 - ------------------------------------------------------------------------------ MAJOR ASSUMPTIONS FOR 1999 - 2002 - --------------------------------- [_] 15 Year Weather [_] No growth in base business. [_] $5 million in 1999 and $10 million in 2000 to 2002 of acquisitions at 6.5x EBITDA multiple using half-year convention. [_] No increase in gross profit margin. Page B-4
PRO FORMA MERGER ANALYSIS [_] A.G. Edwards analyzed the impact of the Transaction on the Partnership's distributable cash flow per unit, the related accretion, common unit coverage and total unit coverage on a pro forma basis. ----------------------------------------------------------------- STAR GAS STAR GAS STAND-ALONE PRO FORMA ----------- --------- DCF PER UNIT 1998 Actual $1.30 $1.44 1999 Adjusted for Actual (a) 1.41 1.96 2000 Projected 1.77 2.14 ACCRETION/DILUTION 1998 Actual $0.13 1999 Adjusted for Actual (a) 0.56 2000 Projected 0.37 COMMON UNIT COVERAGE 1998 Actual 0.98x 0.78x 1999 Adjusted for Actual (a) 1.04 1.06 2000 Projected 1.27 1.14 TOTAL UNIT COVERAGE 1998 Actual 0.59x 0.62x 1999 Adjusted for Actual (a) 0.64 0.85 2000 Projected 0.80 0.93 ----------------------------------------------------------------- (a) Adjusted to include actual results through January 21, 1999. Page E-1
RELATIVE CONTRIBUTION ANALYSIS (a) ($ IN THOUSANDS) [_] A.G.Edwards analyzed the relative pro forma contribution of both Star Gas and Petro to the ownership of capital in the pro forma entity based on Star Gas' and Petro's historical results from operations and their respective projections. STAR GAS' AVERAGE GROSS PROFIT GROSS PROFIT CONTRIBUTION [GRAPH APPEARS HERE] 96-98 27.5% 99-00 29.2% 96-00 28.2% EBITDA (B) STAR GAS' AVERAGE EBITDA CONTRIBUTION [GRAPH APPEARS HERE] 96-98 35.4% 99-00 33.1% 96-00 34.5% - ----------------------------------------- (a) For purposes of its analysis, A.G. Edwards converted Petro's historical December 31st fiscal year-end to a September 30th fiscal year-end for comparison purposes. Other measures of relative contribution analysis are non-meaningful. (b) Includes only heating oil EBITDA for Petro. Page G-1
RELATIVE CONTRIBUTION ANALYSIS ($ IN THOUSANDS) (continued) For Star Gas' contribution of approximately 28.2% of the combined entity's gross profit and 34.5% of the combined entity's EBITDA, it will receive approximately 34.8% of the implied firm value. IMPLIED FIRM VALUE [PIE CHART APPEARS HERE] Page G - 2
DISCOUNTED CASH FLOW ANALYSIS [_] A. G. Edwards performed discounted cash flow analyses for Petro, Star Gas and Star Gas Pro Forma. For Petro, A. G. Edwards used projected tax- adjusted operating cash flows for 1999 through 2002, terminal values calculated on 2002 operating cash flow, and discount rates based on the related weighted average cost of capital. For Star Gas and Star Gas Pro Forma, A. G. Edwards used projected DCF for 1999 through 2002, terminal values calculated on 2002 DCF and discount rates based on the related cost of equity. Assumptions: [_] Weighted average cost of capital ("WACC") - Petro Stand Alone of 13.4% to 13.9% (calculated WACC of 13.6%) [_] Cost of Equity - Star Gas Stand Alone of 9.5% to 10.3% (calculated cost of equity of 9.9%) - Star Gas Pro Forma of 9.5% to 10.3% (calculated cost of equity of 9.9%) [_] Terminal value operating cash flow multiple - Petro Stand Alone of 8.0x to 10.0x (calculated 2000 operating cash flow multiple of 9.1x) [_] Terminal value DCF multiple - Star Gas Stand Alone and Star Gas Pro Forma of 8.5x to 10.5x (calculated 2000 DCF multiple of 9.5x) Page H - 1
DISCOUNTED CASH FLOW ANALYSIS (continued) PETRO STAND ALONE - ------------------------------------------------------------ TERMINAL VALUE OPERATING CASH FLOW MULTIPLE 15 YEAR ------------------------------------------------ WACC 8.0x 8.5x 9.0x 9.5x 10.0x - ------------------------------------------------------------ 13.4% ($40,163) ($30,848) ($21,534) (12,219) (2,904) 13.6% (41,742) (32,500) (23,259) (14,017) (4,775) 13.9% (43,307) (343,137) (24,967) (15,797) (6,628) - ------------------------------------------------------------ STAR GAS STAND ALONE - -------------------------------------------------------------- TERMINAL VALUE DCF MULTIPLE 15 YEAR ------------------------------------------- COST OF EQUITY 8.5x 9.0x 9.5x 10.0x 10.5x - -------------------------------------------------------------- 9.5% $77,230 $80,338 $83,447 $86,555 $89,664 9.9% 76,359 79,427 82,495 85,563 88,631 10.3% 75,502 78,530 81,559 84,587 87,616 - -------------------------------------------------------------- STAR GAS PRO FORMA - ------------------------------------------------------------------ TERMINAL VALUE DCF MULTIPLE 15 YEAR ----------------------------------------------- COST OF EQUITY 8.5x 9.0x 9.5x 10.0x 10.5x - ------------------------------------------------------------------ 9.5% $92,737 $96,408 $100,079 $103,750 $107,421 9.9% 91,701 95,324 98,948 102,571 106,194 10.3% 90,682 94,258 97,834 101,411 104,987 - ------------------------------------------------------------------ Page H-2
DISCOUNTED CASH FLOW ANALYSIS PETRO - STAND ALONE EXCLUDING DISTRIBUTIONS FROM STAR GAS ($ IN THOUSANDS) - ------------------------------------------------------------------------------------------------------------------------------------ ADJUSTED FOR ACTUAL CASH FLOW SUMMARY (a): 1999 2000 2001 2002 TERMINAL - ----------------- ------------ ------------ ------------ ------------ ------------ EBITDA $41,939 $39,988 $36,799 $33,785 Taxes (500) (500) (500) (500) Maintenance capital expenditures (3,641) (3,714) (3,788) (3,864) Working capital increases (b) (500) (500) (500) (500) ------------ ------------ ------------ ------------ Net Operating cash flow (free cash flow) 37,298 35,274 32,011 28,921 --------- WEIGHTED AVERAGE COST OF CAPITAL (c) 13.6% --------- --------- TERMINAL OPERATING CASH FLOW MULTIPLE (d) 9.1x --------- Discount factor (e) 0.9380 0.8254 0.7263 0.6391 0.6391 Terminal value (f) $263,181 --------- PRESENT VALUE $274,040 $34,987 $29,116 $23,250 $18,484 $168,202 --------- ------------ ------------ ------------ ------------ ------------ Current net debt and preferred stock (g) ($295,450) --------- --------- NET PRESENT VALUE OF HEATING OIL EQUITY ($21,410) --------- - ------------------------------------------------------------------------------------------------------------------------------------ (a) Based on management projections. (b) A. G. Edwards' estimate. (c) Based on comparable companies WACC. (d) Petro's current firm value of $322.1 million/$35.3 million 15-year weather 2000 net operating cash flow=9.1x. (e) Discounted back to mid-year 1999. (f) Terminal value calculated using operating cash flow multiple. (g) Net of $13.8 million of cash. Market value of debt used. Page H - 3
DISCOUNTED CASH FLOW ANALYSIS STAR GAS - STAND ALONE ($ IN THOUSANDS) - ------------------------------------------------------------------------------------------------------------------------------------ ADJUSTED FOR ACTUAL DISTRIBUTABLE CASH FLOW SUMMARY (a): 1999 2000 2001 2002 TERMINAL - ------------------------------- ------------ ------------ ------------ ------------ ------------ EBITDA 20,415 23,749 25,182 26,615 Interest expense (8,600) (8,885) (9,307) (9,788) Maintenance capital expenditures (2,553) (2,599) (2,646) (2,694) Cash taxes (25) (25) (25) (25) ------------ ------------ ------------ ------------ Distributable cash flow 9,237 12,240 13,204 14,108 ----------- COST OF EQUITY (b) 9.9% ----------- ----------- TERMINAL DCF MULTIPLE (c) 9.5x ----------- Discount factor (d) 0.9540 0.8684 0.7904 0.7194 0.7194 Terminal value (e) $134,026 ----------- PRESENT VALUE $136,446 $8,812 $10,629 $10,436 $10,149 $ 96,419 ----------- ------------ ------------ ------------ ------------ ------------ Common units/Total units (f) 60.5% ----------- =========== EQUITY VALUE TO COMMON UNITS (g) $ 82,495 =========== - ------------------------------------------------------------------------------------------------------------------------------------ (a) Based on management projections. (b) Based on cost of equity calculation per WACC analysis. (c) Star's current equity market value of $115.3 million/$12.2 million 15-year weather 2000 DCF=9.5x. (d) Discounted back to mid-year 1999. (e) Terminal value calculated using DCF multiple. (f) Total units include common, subordinated and GP units. (g) Current market value of common units is 3,858 units * $18.06 unit price=$69,685. Page H - 4
DISCOUNTED CASH FLOW ANALYSIS STAR GAS - PRO FORMA ($ IN THOUSANDS) - ------------------------------------------------------------------------------------------------------------------------------------ ADJUSTED FOR ACTUAL DISTRIBUTABLE CASH FLOW SUMMARY (a): 1999 2000 2001 2002 TERMINAL - ------------------------------- ------------ ------------ ------------ ------------ ------------ EBITDA 64,390 70,227 74,057 77,624 Interest expense (24,819) (25,600) (27,180) (28,252) Maintenance capital expenditures (6,194) (6,313) (6,434) (6,558) Cash taxes (525) (625) (675) (725) ------------ ------------ ------------ ------------ Distributable cash flow 32,852 37,689 39,768 42,089 --------- COST OF EQUITY (b) 9.9% --------- --------- TERMINAL DCF MULTIPLE (c) 9.5x --------- Discount factor (d) 0.9540 0.8682 0.7901 0.7191 0.7191 Terminal value (e) $399,846 --------- PRESENT VALUE $413,265 $31,340 $32,721 $31,422 $30,265 $287,517 --------- ------------ ------------ ------------ ------------ ------------ Original Common units/Total units (f) 23.9% --------- --------- EQUITY VALUE TO COMMON UNITS (g) $98,948 --------- - ------------------------------------------------------------------------------------------------------------------------------------ (a) Based on management projections. See Appendix K for model. (b) Based on cost of equity calculation per WACC analysis. (c) Star's current firm value of $115.3 million/$12.2 million 15-year weather 2000 DCF=9.5x. (d) Discounted back to mid-year 1999. (e) Terminal value calculated using DCF multiple. (f) Total units include common, newly issued common, senior subordinated, subordinated and GP units. (g) Current market value of common units is 3,858 units * $18.06 unit price=$69,685. Page H - 5
COMPARABLE TRANSACTIONS ANALYSIS FIRM VALUATION [_] A.G. Edwards noted that public disclosure regarding transactions in the retail home heating oil distribution industry was extremely limited. [_] A.G. Edwards analyzed the financial terms related to divestitures by Petro of its retail home heating oil branches and compared them to the implied multiples of the aggregate purchase price of Petro's heating oil assets. [_] Petro has sold three branches for an average EBITDA multiple of 9.0x. [_] A.G. Edwards calculated the purchase price of Petro's heating oil assets and calculated multiples based on Petro's EBITDAs. ------------------------------------------------------------------------ PURCHASE PRICE OF HEATING OIL ASSETS ---------------------------------------- Equity purchase price of heating oil assets including CUs $ 16,054 Cost of Debt to be Redeemed ($206,250 + $2,844 premium) 209,094 Cost of Debt to be Assumed 80,501 Cost of Preferred stock at Redemption Value 31,767 Consent Fees 1,961 Transaction Fees 19,139 --------- Aggregate purchase price of heating oil assets $ 358,516 ========= MULTIPLES ------------------------- --------------- MULTIPLES NOTES --------------- ------------------------------------------------ Actual 4 quarters ended 9/30/98 EBITDA (a) 34,929 10.3 x As a multiple of aggregate transaction value. Adjusted for actual 1999 EBITDA (a) 43,475 8.2 x As a multiple of aggregate transaction value. Projected 2000 EBITDA (a) 45,978 7.8 x As a multiple of aggregate transaction value. --------------- ______________________ (a) Calculated as gross profit minus SG&A expense and direct delivery expense. Page I-1
PUBLIC PARTNERSHIP ANALYSIS [_] A.G. Edwards compared certain financial and market information of Star Gas on a historical and pro forma basis to that of certain public propane master limited partnerships which A.G. Edwards deemed relevant for the purposes of this analysis. A.G. Edwards reviewed the trading multiples from a total of five master limited partnerships. [_] The selected propane master limited partnerships are as follows: - AmeriGas Partners, L.P. - Heritage Propane Partners, L.P. - Cornerstone Propane Partners, L.P. - Suburban Propane Partners, L.P. - Ferrellgas Partners, L.P. [_] No partnership used in the analysis is identical to Star Gas. PUBLIC COMPARABLE PARTNERSHIPS (a) --------------------------------------------------------------------------------------------------- PUBLIC PUBLIC PRO FORMA PARTNERSHIP PARTNERSHIP STAR STAR MEDIANS RANGES --------------------------------------------------------------------------------------------------- Distribution yield 12.2% 12.7% 10.4% 8.6% to 12.3% Market capitalization/LTM EBITDA 11.9x 10.3x 11.5x 9.1x to 13.2x Market capitalization/1999E EBITDA 11.0x (b) 8.7x (b) 9.8x 8.6x to 11.3x Equity Market Cap/LTM DCF 13.8x 12.6x 13.2x 9.6x to 15.5x Equity Market Cap/1999E DCF 12.5x (c) 8.9x (c) 10.5x 9.9x to 12.2x LTM common unit coverage 1.0x 0.8x 1.5x 0.8x to 1.9x 1999E common unit coverage 1.0x (d) 1.1x (d) 2.0x 0.9x to 2.2x LTM total unit coverage 0.6x 0.6x 0.8x 0.5x to 1.1x 1999E total unit coverage 0.6x (d) 0.9x (d) 1.1x 0.6x to 1.1x --------------------------------------------------------------------------------------------------- (a) Public comparable partnerships include: APU, CNO, FGP, HPG and SPH. (b) Market capitalization/adjusted for actual 1999 EBITDA. (c) Equity market cap/adjusted for actual 1999 EBITDA. (d) Adjusted for actual 1999. Page J-1
PUBLIC PARTNERSHIP ANALYSIS ($ IN MILLIONS, EXCEPT PER UNIT DATA) ==================================================================================================================================== Closing Implied Implied Common Price on Market Value Firm Distribution Units/ Company Ticker (2/3/99) of Equity Value per Unit Yield Total Units(a) - ------------------------------------------------------------------------------------------------------------------------------------ Star Gas Partners, L.P. SGU $18.063 $ 115.3 $ 225.2 $2.20 12.2% 60.5% AmeriGas Partners, L.P. APU 23.625 1,009.8 1,724.0 2.20 9.3% 51.7% Cornerstone Propane Partners, L.P. (c) (d) CNO 17.500 355.6 610.4 2.16 12.3% 65.5% Ferrellgas Partners, L.P. (d) (e) FGP 18.688 596.8 1,185.7 2.00 10.7% 46.0% Heritage Propane Partners, L.P. (d) HPG 23.750 207.9 403.8 2.05 8.6% 55.7% Suburban Propane Partners, L.P. (f) SPH 19.188 562.4 930.8 2.00 10.4% 73.6% - ------------------------------------------------------------------------------------------------------------------------------------ Mean 10.3% 58.5% Median 10.4% 55.7% ==================================================================================================================================== Pro Forma $18.063 $291.1 $ 557.7 (g) $2.30 12.7% 79.9% ================================================================================================================================ LTM Common LTM Total FY99E FY99E Common FY99E Total Unit Coverage Unit Coverage DCF/unit Unit Coverage Unit Coverage - -------------------------------------------------------------------------------------------------------------------------------- Star Gas Partners, L.P. 1.0x (b) 0.6x (b) $1.41 1.0x 0.6x AmeriGas Partners, L.P. 1.5x 0.8x 2.35 2.0x 1.1x Cornerstone Propane Partners, L.P. (c) (d) 0.8x 0.5x 1.36 0.9x 0.6x Ferrellgas Partners, L.P. (d) (e) 1.5x 0.7x 2.14 2.2x 1.1x Heritage Propane Partners, L.P. (d) 1.9x 1.1x 2.35 2.0x 1.1x Suburban Propane Partners, L.P. (f) 1.3x 1.0x 2.08 1.2x 1.0x - -------------------------------------------------------------------------------------------------------------------------------- Mean 1.4x 0.8x 1.7x 1.0x Median 1.5x 0.8x 2.0x 1.1x ================================================================================================================================ Pro Forma 0.8x (b) 0.6x (b) 1.96 1.1x 0.9x _____________________________________ 1999 estimates per A.G. Edwards' research (not adjusted for actual 1999 results), except for Star and Pro Forma. Implied Firm Value equals, for comparative purposes, common, subordinated and GP units, multiplied by the market price of common units plus debt, less cash. (a) Calculated as (common units/ ((common + subordinated units)/0.98). (b) For Star and Pro forma only, LTM figures are 1998 actuals. (c) Financial figures not pro forma for acqusition of Propane Continental Inc. (d) Maintenance capital expenditures assumed to be 8% of EBITDA due to lack of disclosure. (e) Financial figures exclude ESOP charge of $0.9 million. (f) Financial figures exclude $5.1 million gain from sale of minority interest and $1.8 million loss from impairment of assets. (g) $291.1 in equity plus $286.2 pro forma debt, less $19.6 in cash and cash collateral. Page J-2
PUBLIC PARTNERSHIP ANALYSIS ($ IN MILLIONS, EXCEPT PER UNIT DATA) (continued) - ------------------------------------------------------------------------------------------------------------------------------- TOTAL LTM FIRM VALUE/ FIRM VALUE/ EQUITY EQUITY DEBT/ EBITDA/ LTM 1999E MARKET CAP/ MARKET CAP/ FIRM VALUE INT. EXP. EBITDA EBITDA LTM DCF 1999E DCF --------------------------------------------------------------------------------------- STAR GAS PARTNERS, L.P. 51.4% 2.4x (a) 11.9x (a) 11.0x 13.8x (a) 12.5x AmeriGas Partners, L.P. 41.7% 2.3x 11.5x 9.8x 13.7x 10.6x Cornerstone Propane Partners, L.P. 43.1% 2.4x 13.2x 11.3x 15.5x 12.2x Ferrellgas Partners, L.P. 50.1% 2.1x 11.8x 9.5x 13.2x 9.9x Heritage Propane Partners, L.P. 49.1% 2.5x 10.7x 10.3x 10.6x 10.2x Suburban Propane Partners, L.P. 46.0% 3.3x 9.1x 8.6x 9.6x 10.5x - ------------------------------------------------------------------------------------------------------------------------------- MEAN 46.0% 2.5x 11.3x 9.9x 12.5x 10.7x MEDIAN 46.0% 2.4x 11.5x 9.8x 13.2x 10.5x - ------------------------------------------------------------------------------------------------------------------------------- PRO FORMA 51.3% 2.2x (a) 10.3x (a) 8.7x 12.6x (a) 8.9x __________________________________ EBITDA is defined as net income (loss) before extraordinary items plus interest, income taxes, depreciation and amortization, impairment expense, and other non-recurring and non-operating items. (a) For Star and Pro forma only, LTM figures are 1998 actuals. Page J - 3
TRANSACTION SUMMARY AND ASSUMPTIONS (in thousands except per share and per unit data) - --------------------------------------------------------------------------------------------------------------------------------- SUMMARY CASH FLOW AND COVERAGE ANALYSIS - --------------------------------------------------------------------------------------------------------------------------------- ($ on per Unit basis) PROJECTED ---------------------------------------------------- ACTUAL NORMALIZED ADJ. FOR ACTUAL 1998 1998 1999 2000 2001 2002 -------- ---------- ----------- --------- -------- --------- STAR STAND ALONE EBITDA $ 18,906 $ 20,731 $ 20,415 $ 23,749 $ 25,182 $ 26,615 Interest Expense (7,927) (7,667) (8,600) (8,885) (9,307) (9,788) Maintenance CapEx (2,625) (2,610) (2,553) (2,599) (2,646) (2,694) Other (25) (25) (25) (25) (25) (25) -------- ---------- ---------- --------- -------- --------- Distributable Cash Flow $ 8,329 $ 10,429 $ 9,237 $ 12,240 $ 13,204 $ 14,108 ======== ========== ========== ========= ======== ========= DCF per Common Unit $ 2.16 $ 2.70 $ 2.29 $ 2.79 $ 2.80 $ 2.82 DCF/Common Unit MQD 0.98 x 1.23 x 1.04 x 1.27 x 1.27 x 1.28 X DCF per Total Unit $ 1.30 $ 1.63 $ 1.41 $ 1.77 $ 1.82 $ 1.87 DCF/Total MQD 0.59 x 0.74 x 0.64 x 0.80 x 0.83 x 0.85 x Indicated Distribution per Common Unit $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 STAR PRO FORMA EBITDA ------ Star $ 18,906 $ 20,731 $ 20,415 $ 23,749 $ 25,182 $ 26,615 Petro 34,929 40,749 43,475 45,978 48,375 50,509 Synergies 500 500 500 500 500 500 -------- ---------- ---------- --------- -------- --------- Total 54,335 65,980 64,390 70,227 74,057 77,624 -------- ---------- ---------- --------- -------- --------- Interest Expense (24,530) (24,448) (24,819) (25,600) (27,180) (28,252) Maintenance CapEx (6,125) (6,125) (6,194) (6,313) (6,434) (6,558) Other (525) (525) (525) (625) (675) (725) -------- ---------- ---------- --------- -------- --------- Distributable Cash Flow 23,155 34,882 32,852 37,689 39,768 42,089 ======== ========== ========== ========= ======== ========= DCF per Common Unit $ 1.80 $ 2.71 $ 2.44 $ 2.63 $ 2.63 $ 2.58 DCF per Sr. Sub & Common Unit $ 1.51 $ 2.27 $ 2.06 $ 2.24 $ 2.25 $ 2.24 DCF per Total Unit $ 1.44 $ 2.16 $ 1.96 $ 2.14 $ 2.16 $ 2.15 Indicated Distribution per Common Unit $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Accretion/Dilution - --------------------------------------------------------------------------------------------------------------------------------- DCF per Unit - Star Stand Alone $ 1.30 $ 1.63 $ 1.41 $ 1.77 $ 1.82 $ 1.87 DCF per Unit - Pro Forma $ 1.44 $ 2.16 $ 1.96 $ 2.14 $ 2.16 $ 2.15 - --------------------------------------------------------------------------------------------------------------------------------- Accretive ($/Unit) $ 0.13 $ 0.53 $ 0.56 $ 0.37 $ 0.34 $ 0.29 Accretive (%) 10.1% 32.5% 39.4% 21.2% 18.9% 15.3% - --------------------------------------------------------------------------------------------------------------------------------- Pro Forma Heating Oil DCF per Unit $ 2.32 $ 2.39 $ 2.39 $ 2.33 DPUs Issued as Sr Sub Units at Beg of Year - - - - - - - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Pro Forma Credit Analysis - --------------------------------------------------------------------------------------------------------------------------------- EBITDA/Interest 2.22 x 2.70 x 2.25 x 2.74 x 2.72 x 2.75 x LT Debt/EBITDA 5.07 4.18 4.15 4.22 4.20 4.20 LT Debt/EBITDA (Pro Forma for Full-Year Acquisitions) 4.91 4.04 4.03 4.00 4.00 4.00 # of Units Issued to Meet Debt Covenant - - 1,207 508 1,122 1,170 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Pro Forma Coverage Ratios - --------------------------------------------------------------------------------------------------------------------------------- MQD Coverage ------------ Common Unit 0.78 x 1.18 x 1.06 x 1.14 x 1.14 x 1.12 x Senior Subordinated Unit 0.66 0.99 0.89 0.97 0.98 0.97 Total Unit 0.62 0.94 0.85 0.93 0.94 0.94 Indicated Distribution Coverage ------------------------------- Common Unit 0.78 x 1.18 x 1.06 x 1.14 x 1.14 x 1.12 x Senior Subordinated Unit 0.66 0.99 0.89 0.97 0.98 0.97 Total Unit 0.62 0.94 0.85 0.93 0.94 0.94 - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- CURRENT MODEL ASSUMPTIONS - ---------------------------------------------------------------------------------------------------- Scenario Version: 15-yr; $15/$30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att. Petro Acqs/yr $15,000 1999 $30,000 2000 on Star Acqs/yr $ 5,000 1999 $10,000 2000 on G.P. Interest Subordinate - ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- EQUITY RESTRUCTURING - ---------------------------------------------------------------------------------------------------- Petro ----------------------------------------- Public Insiders ------------- -------------- Securities Offered Sr Sub Sub & GP Security Offered per Share 0.11758 0.14318 Total Shares 14,618 11,834 Insiders to Receive Sr. Sub 6,572 (6,572) Shares to Be Converted 21,190 5,262 Units Offered 2,491 753 DPUs Offered 909 - ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- SOURCES AND USES OF FUNDS - ---------------------------------------------------------------------------------------------------- Sources: Uses: Excess Cash on Hand $ 0 Repay Debt Principal $206,250 New Star Debt 90,000 Redeem Preferred 31,767 New MLP Equity 170,000 Premium on Redemption/ New MLP E Equity - Exchange/Defeasance 2,844 Equity for Consent Fees 1,961 Consent Fees 1,961 Cash Balance 0 Transaction Fees 19,139 --------- --------- $ 261,960 $261,960 ========= ========= - ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- FINANCING SUMMARY - ---------------------------------------------------------------------------------------------------- Amount Rate Unit Price --------- ---------- ------------ New Common Raised $170,000 $19.08 (a) New Debt Raised 90,000 7.50% (a) Last 20 Days Average Stock Price @ 2/3 - ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- UNITS OUTSTANDING - ---------------------------------------------------------------------------------------------------- Current Pro Forma --------------------------- ------------------------ Units % Units % ---------- --------- ---------- --------- Existing Common 3,858.999 60.5% 3,858.999 23.9% New Common 0 0.0% 9,013.547 55.9% New Common for Acquisitions 0 0.0% 0.000 0.0% Common to Petro Shareholders 0 0.0% 0.000 0.0% Sr Sub (Petro S/H's) 0 0.0% 2,491.500 15.5% Existing Sub 2,396.078 37.5% 431.126 2.7% Implied GP 127.655 2.0% 322.350 2.0% ---------- --------- ---------- --------- Total Units 6,392.732 100.0% 16,117.523 100.0% ========== ========= ========== ========= - ---------------------------------------------------------------------------------------------------- Page 1 of 19
================================================================================ TRANSACTION SUMMARY AND ASSUMPTIONS (in thousands except per share and per unit data) OPERATING ASSUMPTIONS - ------------------------------------------------------------------------------------ Petro Star Star Normal ----------- ----------- --------------- Normalized Maintenance CapEx $ 3,500 $ 2,625 $2,610 Maintenance CapEx Life 15 yrs 15 yrs Growth CapEx Life 12.6 yrs 15 yrs Required Cash at Beginning for Initial Distribution 8,865 Minimum Star Stand Alone Cash Balance $ 1,115 Minimum Star Pro Forma Cash Balance $ 14,882 Consolidation Savings $ 500 Annual Bank Fees $ 943 $ 0 Last 20 Days Average Stock Price @ 2/3 $ 1.01 $ 19.08 2000+ Annual Transaction/Deal Expenses $ 225 $ 450 Debt/EBITDA Bank Covenant Ratio 4.0x Issue Equity to Meet Bank Debt Covenants (Y/N)? yes DEBT RESTRUCTURING - ------------------------------------------------------------------------------------------------------------ Projected 12/31/97 Privates: % Tendered Principal Strategy Price ---------- ----------- ---------- ------- 11.96% Sr Notes 100.0% 60,000 Exchange 105.2% 14.10% Sr Notes 100.0% 3,100 Exchange 105.2% 14.10% Sub Notes 100.0% 3,100 Exchange 105.2% 14.33% Pfd Stock 100.0% 4,167 Neg. Tender 100.0% Publics: 10.13% Sub Notes & Sr Notes 100.0% 50,000 Neg. Tender 100.0% 9.38% Sub Notes & Sr Notes 100.0% 75,000 Tender 100.0% 12.25% Sub Notes & Sr Notes 100.0% 81,250 Tender 103.5% 12.88% Pfd Stock 100.0% 30,000 Tender 92.0% NEW SECURITY ASSUMPTIONS - ----------------------------------------------- New MLP Equity - -------------- Gross Proceeds $170,000 Common Units for Consent Fee 1,961 Common Units to Enron - -------- Total New Equity Value $171,960 Common Units to Public 9,014 units New Star Debt ------------- Gross Proceeds 90,000 Gross Spread % 5.0% Gross Spread % 1.25% Gross Spread $ $8,500 Gross Spread $ $1,125 Offering Price Share (current market price) $19.08 Coupon 7.50% ACQUISITION ASSUMPTIONS - -------------------------------------------------------------------------------------------------------- Petro Multiple 1998 1999 2000 2001 2002 - ----- ---------- --------- -------- -------- -------- -------- Amount 4.75 x $ 0 $15,000 $30,000 $30,000 $30,000 Timing End Mid Mid Mid Mid % EBITDA 0.0% 50.0% 50.0% 50.0% 50.0% Amount 4.75 x $ 0 Timing Beg % EBITDA in Initial Year 100.0% Units Issued at: Common $22.00 Sr. Sub. $18.52 Star Stand-Alone - ---------------- Weather 30 Year Amount 6.50 x $9,000 $ 5,000 $ 10,000 $ 10,000 $ 10,000 Timing End Mid Mid Mid Mid % EBITA in Initial Year 0.0% 50.0% 50.0% 50.0% 50.0% Amount Financed with Equity $ 0 $ 7,572 $ 8,417 $ 6,585 $ 6,300 New Units @: 0 344 383 299 286 Units Issued at Price of: $22.00 $ 22.00 $ 22.00 $ 22.00 $ 22.00 Amount 6.50 x $ 0 Timing Beg % EBITDA in Initial Year 100.0% EXCHANGE ASSUMPTIONS - ------------------------------------------------------------------------------------------------------------------------ Existing Gets New Units of: ------------------------------------------------------- Shareholders of: Shares Common Sr Sub Jnr Sub G.P. DPUs(1) - ----------------------------------------------------------- ---------- --------- ----------- -------- -------- Public Class A Shareholders 14,618.087 0.000 1,718.795 0.000 0.000 481.478 Insider Class B Shares 11.228 0.000 0.000 0.000 0.000 Insider Class C Shareholders 0.000 Class A & C Shares to Receive Jr Sub & GP 5,262.443 0.000 0.000 431.126 322.350 211.068 Class A Shares to Receive Sr Sub 6,571.740 0.000 772.705 0.000 0.000 216.454 ----------- ---------- --------- ----------- -------- -------- 26,463.498 0.000 2,491.500 431.126 322.350 909.000 E Sr. Sub 0.000 0.000 --------- -------- Total 2,491.500 909.000 ========= ======== (1) Includes 2.0% G.P. Interest TRANSACTION COSTS SUMMARY ------------------------------------------------- New MLP Equity $ 8,500 Heating Oil DPU Trigger ------------------------ New Star Debt 1,125 DCF/Unit % Convert Fairness Opinion 1,275 $2.90 33.3% Financial Advisory 1,500 Exchange Fees on Public Petro Debt/Preferred 1,375 Legal Fees 4,200 Printing 1,500 Accounting Fees 200 Consent Fee Calculation ------------------------------------------------- Other: ----- Environmental 0 % of Petro Stock 3.3% Rating Agencies 60 New Petro Shares 874 Roadshow 200 Exchange Ratio 8.50x ----------- Asset Appraisal 100 New Common Units 102.773 Solicitation expenses 100 Common Unit Price $ 19.08 ----------- Other Bank Fees 150 Implied Value $ 1,961 =========== Other 225 ------- $20,510 ======= Transaction Costs Capped at $19,139
=========================================================================================================================== SUMMARY DISTRIBUTIONS (in thousands except per share and per unit data) Projected -------------------------------------------------- 1998 1999 2000 2001 2002 --------- ----------- ---------- ---------- ----------- UNITHOLDER CLASS (1) COMMON UNITHOLDERS MQD $ 30,994 $ 32,967 $ 34,841 $ 37,477 Incentive Distributions - - - - ----------- ---------- ---------- ----------- Total $ 30,994 $ 32,967 $ 34,841 $ 37,477 E CAPITAL Existing Sr. Sub Units - - - - Number of DPUs Issued as Sr Sub Units - - - - New Sr. Sub Units - - - - ----------- ---------- ---------- ----------- Total Sr. Sub Units - - - - Existing Common - - - - New Common - - - - ----------- ---------- ---------- ----------- Total Common - - - - Common MQD - - - - Common Incentive Distributions - - - - Sr. Sub MQD - - - - Sr. Sub Incentive Distributions - - - - ----------- ---------- ---------- ----------- Total Distributions - - - - SENIOR SUBORDINATED UNITHOLDERS(1) Number of DPUs Issued as Sr Sub Units - - - - Base MQD $ 0 $ 4,722 $ 4,927 $ 4,613 Incremental MQD from DPUs Issued as Sr. Sub Units - - - - Incentive Distributions - - - - Incremental Incentive Distributions from DPUs Issued as Sr. Sub Units - - - - ----------- ---------- ---------- ----------- Total $ 0 $ 4,722 $ 4,927 $ 4,613 SUBORDINATED UNITHOLDERS(1) Number of DPUs Issued as Sr Sub Units - - - - Base MQD $ 0 $ 0 $ 0 $ 0 Incremental MQD from DPUs Issued as Sr. Sub Units - - - - Incentive Distributions - - - - Incremental Incentive Distributions from DPUs Issued as Sr. Sub Units - - - - ----------- ---------- ---------- ----------- Total $ 0 $ 0 $ 0 $ 0 GENERAL PARTNER Number of DPUs Issued as Sr Sub Units - - - - Base MQD $ 0 $ 0 $ 0 $ 0 Incremental MQD from DPUs Issued as Sr. Sub Units - - - - Incentive Distributions - - - - Incremental Incentive Distributions from DPUs Issued as Sr. Sub Units - - - - ----------- ---------- ---------- ----------- Total $ 0 $ 0 $ 0 $ 0 UNITHOLDER CLASS TOTAL Common Unitholders $ 30,994 $ 32,967 $ 34,841 $ 37,477 Senior Subordinated Unitholders - 4,722 4,927 4,613 Subordinated Unitholders - - - - General Partner - - - - ----------- ---------- ---------- ----------- Total $ 30,994 $ 37,689 $ 39,768 $ 42,089 DISTRIBUTIONS TO DPUs CONVERTED TO SENIOR Subordinated Units MQD $ 0 $ 0 $ 0 $ 0 Incentive Distributions - - - - ----------- ---------- ---------- ----------- Total - - - - check - - - - ______________________________ (1) Reflects distributions for respective Unitholder class. All DPUs are issued as Senior Subordinated Units but are distributed pro rata to all Petro shareholders. Consequently, the Subordinated Unitholder class includes DPUs which have been issued as Senior Subordinated Units. 3 of 19
- -------------------------------------------------------------------------------- TRANSACTION SUMMARY AND ASSUMPTIONS (in thousands except per share and per unit data) RECAPITALIZATION ASSUMPTIONS - -------------------------------------------------------------------------------- (D)EFEASE (T)ENDER (R)EDEEM PRINCIPAL MATURITY PERIOD SINKING FUND PAYMENT LOCKUP (E)XCHANGE AS OF ------------------- COUPON/ -------------------- PETRO INSTRUMENTS: PREMIUM (N)OTHING 9/30/98 M/D YR DIVIDEND PAYMENT YEAR START - ------------------------- --------------------- ----------- --------- -------- ------------ --------- ---------- 11.96% Sr Notes e $ 60,000 v 1-Oct 0 11.960% $ 0 0 14.10% Sr Notes e 3,100 v 15-Jan 2001 14.100% - 1997 14.10% Sub Notes e 3,100 v 15-Jan 2001 14.100% - 1997 10.13% Sub Notes & Sr Notes 0.00% t 50,000 v 1-Apr 2003 10.130% - 9.38% Sub Notes & Sr Notes 0.00% t 75,000 v 1-Feb 2006 9.375% - 12.25% Sub Notes & Sr Notes 0.00% t 81,250 v 1-Feb 2005 12.250% - 8.00% Acq. & Other Notes Pay n 14,508 v 0 8.000% - 0 8.25% Existing Credit Facility n 0 v 1998 8.250% - 0.00% Other Notes n 0 v NA NA 0.000% 0 NA ---------- $286,958 PFRD STOCK: - ---------- 14.33% Pfd Stock t 4,167 v 1-Aug 1999 14.330% 4,167 1997 12.88% Pfd Stock 0.0% t 30,000 v 15-Feb 2009 12.875% 0.00% n 0 0.000% ---------- $ 34,167 ---------- Total Petro $321,125 ---------- STAR INSTRUMENTS: - ------------------------- 8.04% 1st Mortgage Notes 0.07 n 85,000 v NA NA 8.040% - 0 7.25% WC Revolver 0.00 n 4,785 NA NA 7.250% - NA 7.25% Acquisition Facility 0.01 n 9,000 v NA NA 7.250% - NA 7.50% New Debt n 90,000 v NA NA 7.500% 0 NA 7.17% Pearl Notes 0.01 n 11,000 NA NA 7.170% 0 NA ---------- 8.21% $188,785 ---------- Total Combined $509,910 ========== % RED./ RED-EXCHG DEFEASANCE RED/EXCHG/DEFEASE EXCHANGED PETRO INSTRUMENTS: EXCHANGED PRICE PRICE VALUE PREMIUM INT RATE SECURITY TYPE - ------------------------- ---------- ----------- ----------- ------- ---------- ---------- -------------- 11.96% Sr Notes 100.0% 105.2% $ 60,000 $ 0 10.9% Sr Notes 14.10% Sr Notes 100.0% 105.2% 3,100 - 14.10% Sr Notes 14.10% Sub Notes 100.0% 105.2% 3,100 - 14.10% Sub Notes 10.13% Sub Notes & Sr Notes 100.0% 100.0% 106.2% 50,000 - Sub Notes & Sr Notes 9.38% Sub Notes & Sr Notes 100.0% 100.0% 108.2% 75,000 - Sub Notes & Sr Notes 12.25% Sub Notes & Sr Notes 100.0% 103.5% 116.2% 84,094 2,844 Sub Notes & Sr Notes 8.00% Acq. & Other Notes Pay 0.0% 100.0% - - Acq. & Other Notes Pay 8.25% Existing Credit Facility 0.0% 100.0% - - Existing Credit Facility 0.00% Other Notes 0.0% 0.0% - - 11.0% Other Notes --------- 2,844 Pfrd Stock: - ---------- 14.33% Pfd Stock 100.0% 100.0% 4,167 - Pfd Stock 12.88% Pfd Stock 100.0% 92.0% 27,600 - Pfd Stock 0.00% - - --------- Total Petro $ 0 --------- $2,844 Star Instruments - ------------------------- 8.04% 1st Mortgage Notes 0.0% 0.0% - - 1st Mortgage Notes 7.25% WC Revolver 0.0% 0.0% - - WC Revolver 7.25% Acquisition Facility 0.0% 0.0% - - Acquisition Facility 7.50% New Debt 0.0% 0.0% - - New Debt 7.17% Pearl Notes 0.0% 0.0% - - Pearl Notes ---------- $ 0 ---------- $2,844 ---------- 2,843.75 STAR STAND ALONE DISTRIBUTION ASSUMPTIONS STAR PRO FORMA DISTRIBUTION ASSUMPTIONS - ------------------------------------------------------------------------------ ------------------------------------------------- Distribution Distribution ------------------ ------------------- Minimum Quarterly Distribution $2.20 Minimum Quarterly Distribution $2.30 First Target Distribution $2.42 First Target Distribution $2.42 Second Target Distribution $2.84 Second Target Distribution $2.84 Third Target Distribution $3.70 Third Target Distribution $3.70 Thereafter NM Thereafter NM 1998 ----------- Target Distribution Level $2.20 Annual Indicated Distribution Annual Distribution Increase $0.00 Increase $0.00 Target Indicated Distribution -------------------- Level $2.30 Standard Distribution Structure ("S") or Target ("T") t -------------------- Standard Distribution Structure ("S) or Target - ------------------------------------------------------------------------------ ("T") - --------------------------------------------------------------------------------------------------------------------- 1999 2000 2001 2002 Thereafter ---- ---- ---- ---- Annual Indicated Distribution Increase $0.00 $0.00 $0.00 $0.00 $0.00 Target Indicated Distribution Level $2.30 $2.30 $2.30 $2.30 --------- Standard Distribution Structure ("S) or Target ("T") t ---------- - --------------------------------------------------------------------------------------------------------------------- 4 of 19
PRO FORMA OPENING BALANCE SHEET (in thousands except per share and per unit data) OPENING BALANCE SHEET STAR GAS PETRO PRO FORMA ------------ ------------ MERGER STAR GAS ------------ ------------ 9/30/98 9/30/98 ADJUSTMENTS 9/30/98 ------------ ------------ ----------- ----------- Assets: ----------- Cash $ 1,115 $ 13,767 $ 0 $ 14,882 ----------- Other Current Assets 16,832 64,045 - 80,877 ------------ ------------ ----------- ----------- Total Current Assets 17,947 77,812 - 95,759 PP&E and Intangibles, Net 161,660 107,957 - 269,617 Investments in Unconsolidated Affiliates - 113 (113) - Other Assets - 12,796 - 12,796 ------------ ------------ ----------- ----------- Total Assets 179,607 198,678 (113) 378,172 ============ ============ =========== Liabilities: Current Liabilities 12,450 78,003 - 90,453 8.25% Existing Credit Facility 4,770 - - 4,770 Long Term Debt 105,000 286,885 (116,250) 275,635 Total Preferred Stock - 34,167 (34,167) - Other Liabilities 40 10,686 - 10,726 ------------ ------------ ----------- ----------- Total Liabilities 122,260 409,741 (150,417) 381,584 Common Shareholder's/Partner's Equity 57,347 (211,063) 150,304 (3,412) ------------ ------------ ----------- ----------- Total Liabilities and Equity $179,607 $ 198,678 ($113) $ 378,172 ============ ============ =========== check - - - PRO FORMA CAPITAL STRUCTURE STAR GAS PETRO PRO FORMA ------------ ------------ % NOT MERGER STAR GAS ------------ ------------ 9/30/98 9/30/98 TENDERED ADJUSTMENTS 9/30/98 ------------ ------------ ------------ ----------- ----------- Debt: 8.04% 1st Mortgage Notes $ 85,000 $ 0 $ 0 $ 85,000 7.25% WC Revolver 4,770 - - 4,770 7.25% Acquisition Facility 9,000 - - 9,000 7.17% Pearl Notes 11,000 - - 11,000 11.96% Sr Notes - 60,000 100.0% (60,000) - 14.10% Sr Notes - 3,100 100.0% (3,100) - 14.10% Sub Notes - 3,100 100.0% (3,100) - 10.13% Sub Notes & Sr Notes - 50,000 100.0% (50,000) - 9.38% Sub Notes & Sr Notes - 75,000 100.0% (75,000) - 12.25% Sub Notes & Sr Notes - 81,250 100.0% (81,250) - 0.00% Other Notes - 0 - - 8.00% Acq. & Other Notes Pay - 14,435 - 14,435 8.25% Existing Credit Facility - 0 - - 10.90% Exchanged Debt - - 60,000 60,000 14.10% Exchanged Debt 6,200 6,200 7.50% New Debt - - 90,000 90,000 ------------ ------------ ----------- ----------- Total L.T. Debt 109,770 286,885 (116,250) 280,405 ------------ ------------ ----------- Preferred Stock: 14.33% Pfd Stock - 4,167 (4,167) - 12.88% Pfd Stock - 30,000 (30,000) - ------------ ------------ ----------- ----------- Total Preferred - 34,167 (34,167) - ------------ ------------ ----------- Common Equity 57,347 (211,063) 150,304 (3,412) ------------ ------------ ----------- Total Capital $167,117 $ 109,989 $ 276,993 ============ ============ =========== 5 of 19
================================================================================ (in thousands except per share and per unit data) STAR GAS STAND ALONE INCOME STATEMENT ACTUAL NORMALIZED PROJECT ---------------------------------------------------- 1998 1998 1999 2000 2001 2002 ----------- ----------- ----------- ---------- ---------- ----------- EBITDA $ 18,906 $ 20,731 $ 20,415 $ 23,749 $ 25,182 $ 26,615 Depreciation and Amortization 11,638 12,079 12,218 12,886 13,411 13,852 ---------- ---------- --------- --------- ---------- ---------- EBIT 7,268 8,652 8,197 10,863 11,771 12,763 Interest Expense (7,927) (7,667) (8,600) (8,885) (9,307) (9,788) Interest Income - - - - - - Other Income - - - - - - ---------- ---------- --------- --------- ---------- ---------- Income Before Taxes (659) 985 (403) 1,978 2,464 2,975 Current Income Taxes (25) (25) (25) (25) (25) (25) Deferred Income Taxes - - - - - - ---------- ---------- --------- --------- ---------- ---------- Net Income Available to Common $ (684) $ 960 $ (428) $ 1,953 $ 2,439 $ 2,950 ========== ========== ========= ========= ========== ========== STAR GAS STAND ALONE UNITS OUTSTANDING Common Units Beginning Balance 3,859 3,859 3,859 4,196 4,571 4,865 Issuance 0 0 337 375 293 281 Buyback 0 0 0 0 0 0 ---------- ---------- --------- --------- ---------- ---------- Ending Balance 3,859 3,859 4,196 4,571 4,865 5,145 ---------- ---------- --------- --------- ---------- ---------- Average Common Units Outstanding 3,859 3,859 4,028 4,384 4,718 5,005 Subordinated Units Beginning Balance 2,396 2,396 2,396 2,396 2,396 2,396 Issuance 0 0 0 0 0 0 Buyback 0 0 0 0 0 0 ---------- ---------- --------- --------- ---------- ---------- Ending Balance 2,396 2,396 2,396 2,396 2,396 2,396 ---------- ---------- --------- --------- ---------- ---------- Average Subordinated Units Outstanding 2,396 2,396 2,396 2,396 2,396 2,396 GP Implied Units Beginning Balance 128 128 128 135 142 148 Issuance 0 0 7 8 6 6 Buyback 0 0 0 0 0 0 ---------- ---------- --------- --------- ---------- ---------- Ending Balance 128 128 135 142 148 154 ---------- ---------- --------- --------- ---------- ---------- Average Implied GP Units Outstanding 128 128 131 138 145 151 Total Units 6,383 6,383 6,727 7,110 7,409 7,695 ========== ========== ========= ========= ========== ========== Average Units Outstanding 6,383 6,383 6,555 6,918 7,259 7,552 ========== ========== ========= ========= ========== ========== 6 of 19
================================================================================================================================ (in thousands except per share and per unit data) Actual Projected ---------------------------------------- STAR GAS STAND ALONE BALANCE SHEET 1998 1999 2000 2001 2002 -------- -------- -------- -------- -------- ASSETS: Cash $ 1,115 $ 1,115 $ 1,115 $ 1,115 $ 1,115 Other Current Assets 16,832 17,826 20,021 20,965 21,909 -------- -------- -------- -------- -------- Total Current Assets 17,947 18,941 21,136 22,080 23,024 PP&E and Intangibles, Net 161,660 157,220 157,383 157,068 156,360 Other Assets - - - - - -------- -------- -------- -------- -------- Total Assets 179,607 176,161 178,519 179,148 179,384 ======== ======== ======== ======== ======== LIABILITIES: Current Liabilities - Excluding Working Capital Borrowing 12,450 13,444 15,639 16,583 17,527 Total Debt 109,770 112,607 117,619 124,250 130,907 Other Liabilities 40 40 40 40 40 -------- -------- -------- -------- -------- Total Liabilities 122,260 126,090 133,298 140,873 148,473 Partner's Equity 57,347 50,070 45,221 38,275 30,910 -------- -------- -------- -------- -------- Total Liabilities and Equity $179,607 $176,161 $178,519 $179,148 $179,384 ======== ======== ======== ======== ======== Check - - - - 0 STAR GAS STAND ALONE CASH FLOW STATEMENT Net income ($428) $1,953 $2,439 $2,950 Depreciation and Amortization 12,218 12,886 13,411 13,852 Deferred Taxes - - - - Other Income - - - - Other Assets/Liabilities - - - - Change in Working Capital 0 - 0 - -------- -------- -------- -------- Cash from Operations 11,790 14,839 15,850 16,802 -------- -------- -------- -------- Maintenance CapEx (2,553) (2,599) (2,646) (2,694) Internal Growth CapEx - - - - External Growth CapEx (5,000) (10,000) (10,000) (10,000) -------- -------- -------- -------- Cash from Investments (7,553) (12,599) (12,646) (12,694) -------- -------- -------- -------- Acquisition Borrowing (2,572) 1,583 3,415 3,700 Remaining Distributions to Repay Debt (0) 0 (0) (0) Amortization of Mortgage Notes - - - - Borrowing to Repay Existing Debt - - - - Borrowings for Changes in WC (0) - (0) - Borrowing to Pay Full MQD 5,184 2,980 2,766 2,507 Change in Equity 7,572 8,417 6,585 6,300 Transaction/Deal Expenses (225) (450) (450) (450) Distributions (14,421) (15,220) (15,970) (16,614) -------- -------- -------- -------- Cash from Financing (4,462) (2,690) (3,654) (4,558) -------- -------- -------- -------- Net Cash Flow (225) (450) (450) (450) Initial Cash Balance 1,115 1,115 1,115 1,115 -------- -------- -------- -------- Cash Available for Paydown on WC Revolver and Acq. Facility 890 665 665 665 Minimum Cash Balance 1,115 1,115 1,115 1,115 Borrowing/(Paydown) on WC Revolver and Acq. Facility 225 450 450 450 -------- -------- -------- -------- Net Change in Cash - - - - -------- -------- -------- -------- Ending Cash Balance $1,115 $1,115 $1,115 $1,115 ======== ======== ======== ======== 7 of 19
================================================================================ (in thousands except per share and per unit data) Actual Normalized Projected ---------------------------------------- 1998 1998 1999 2000 2001 2002 -------- ---------- --------- --------- ------- ---------- STAR GAS STAND ALONE EBITDA CALCULATION (See Tab 3: Cases) - ------------------------------------------------------------------------------------------------------------------------------------ Year 1 Year 2 Year 3 Year 4 Year 5 EBITDA GROWTH RATE 9.7% -1.5% 16.3% 6.0% 5.7% - ------------------------------------------------------------------------------------------------------------------------------------ BASE EBITDA: Timing ------ End 1998 Mid 1999 Mid 2000 Mid 2001 Mid 2002 Mid 2003 Mid 2004 Mid 2005 -------- -------- -------- -------- -------- -------- TOTAL EBITDA $18,906 $20,731 $20,415 $23,749 $25,182 $26,615 ======== ======== ======== ======== ======== ======== PRO FROMA FULL-YEAR EBITDA FOR DEBT COVENENT ANALYSIS 18,906 20,731 20,772 24,463 25,896 27,329 STAR GAS STAND ALONE DEPRECIATION CALCULATION EXISTING DEPRECIATION $11,638 $12,079 $12,079 $12,079 $12,079 $12,079 1998 Normal 2,610 MAINTENANCE CAPEX: 1998 2,625 $ 0 $ 0 $ 175 $ 175 $ 175 $ 175 Annual Growth: 1.8% 1999 2,553 85 170 170 170 2000 2,599 87 173 173 2001 2,646 88 176 2002 2,694 90 INTERNAL GROWTH CAPEX: 1998 0 - - - - - - Annual Growth: 0.0% 1999 0 - - - - 2000 0 - - 0 2001 0 - 2002 0 2003 0 2004 0 2005 0 EXTERNAL GROWTH CAPEX: 1998 9,000 - - 600 600 600 600 Annual Growth: 0.0% 1999 5,000 167 333 333 333 2000 10,000 333 667 667 2001 10,000 333 667 2002 10,000 333 2003 10,000 2004 10,000 2005 10,000 -------- -------- -------- -------- -------- -------- TOTAL DEPRECIATION $11,638 $12,079 $12,218 $12,886 $13,411 $13,852 ======== ======== ======== ======== ======== ======== 8 of 19
STAR GAS STAND ALONE DEBT SCHEDULE (in thousands except per share and per unit data) [CAPTION] Actual Normalized Projected ---------------------- 1998 1998 1999 2000 ---------- ---------- ---------- ---------- 8.04% 1st Mortgage Notes Beginning Balance $85,000 $85,000 $85,000 $85,000 Borrowing 0 0 0 0 Amortization 0 0 0 0 ---------- ---------- ---------- ---------- Ending Balance $85,000 $85,000 $85,000 $85,000 Interest Payment 8.04% 6,834 6.834 6,834 6,834 Make-Whole Payment 0 0 0 0 7.17% Pearl Notes Beginning Balance $0 $0 $11,000 $11,000 Borrowing 11,000 11,000 0 0 Amortization 0 0 0 0 ---------- ---------- ---------- ---------- Ending Balance $11,000 $11,000 $11,000 $11,000 Interest Payment 7.17% 613 613 789 789 % of year Pearl Notes Outstanding 77.7% 77.7% 0 0 7.25% WC Revolver Beginning Balance - - $4,770 $4,770 Borrowing for Change in WC - - (0) - Borrowing/(Payment) 4.770 4,770 0 0 ---------- ---------- ---------- ---------- Ending Balance 4,770 4,770 4,770 4,770 Effective Avg WC Balance 6,621 3,034 3,062 3,062 Interest Payment 7.25% 480 220 222 222 7.25% Acquisition Facility Beginning Balance - - $9,000 $11,837 External Acquisitions 9,000 9,000 (2,572) 1,583 External Acquisitions at Beginning of 1999 - - - - Internal Acquisitions - - - - Borrowing to Pay Full MQD - - 5,184 2,980 Borrowings to Repay Existing Debt - - - - Borrowings/(Payment) - - 225 450 Remaining Distributions to Repay Debt - - (0) 0 ---------- ---------- ---------- ---------- Ending Balance 9,000 9,000 11,837 16,849 Interest Payment 7.25% 0 0 755 1,040 TOTAL DEBT Beginning Balance $85,000 $85,000 $109,770 $112,607 Amortization of Mortgage Notes - - - - Borrowing for Pearl Notes 11,000 11,000 - - Borrowing for Changes in WC - - (0) - Borrowing to Pay Full MQD - - 5,184 2,980 Acquisition Borrowing 9,000 9,000 (2,572) 1,583 Borrowing to Repay Existing Debt - - - - Remaining Distributions to Repay Debt - - (0) 0 Borrowing/(Payment) in WC Revolver and Acq. Facility 4,770 4,770 225 450 ---------- ---------- ---------- ---------- Ending Balance $109,770 $109,770 $112,607 $117,619 ========== ========== ========== ========== INTEREST EXPENSE Interest Expense $7,927 $7,667 $8,600 $8,885 Bank Fee - - - - ---------- ---------- ---------- ---------- Total Interest Payment $7,927 $7,667 $8,600 $8,885 ========== ========== ========== ========== Projected ---------------------- 2001 2002 ---------- ---------- 8.04% 1st Mortgage Notes Beginning Balance $85,000 $85,000 Borrowing 0 0 Amortization 0 0 ---------- ---------- Ending Balance 85,000 85,000 Interest Payment 8.04% 6,834 6,834 Make-Whole Payment 0 0 7.17% Pearl Notes Beginning Balance $11,000 $11,000 Borrowing 0 0 Amortization 0 0 ---------- ---------- Ending Balance 11,000 11,000 Interest Payment 7.17% 789 789 % of year Pearl Notes Outstanding 0 0 7.25% WC Revolver Beginning Balance $4,770 $4,770 Borrowing for Change in WC (0) - Borrowing/(Payment) 0 0 ---------- ---------- Ending Balance 4,770 4,770 Effective Avg WC Balance 3,062 3,062 Interest Payment 7.25% 222 222 7.25% Acquisition Facility Beginning Balance $16,849 $23,480 External Acquisitions 3,415 3,700 External Acquisitions at Beginning of 1999 - - Internal Acquisitions - - Borrowing to Pay Full MQD 2,766 2,507 Borrowings to Repay Existing Debt - - Borrowings/(Payment) 450 450 Remaining Distributions to Repay Debt (0) (0) ---------- ---------- Ending Balance 23,480 30,137 Interest Payment 7.25% 1,462 1,944 Total Debt Beginning Balance $117,619 $124,250 Amortization of Mortgage Notes - - Borrowing for Pearl Notes - - Borrowing for Changes in WC (0) - Borrowing to Pay Full MQD 2,766 2,507 Acquisition Borrowing 3,415 3,700 Borrowing to Repay Existing Debt - - Remaining Distributions to Repay Debt (0) (0) Borrowing/(Payment) in WC Revolver and Acq. Facility 450 450 ---------- ---------- Ending Balance $124,250 $130,907 ========== ========== Interest Expense Interest Expense $9,307 $9,788 Bank Fee - - ---------- ---------- Total Interest Payment $9,307 $9,788 ========== ========== 9 of 19
- -------------------------------------------------------------------------------- STAR GAS STAND ALONE SCHEDULE OF ACTUAL DISTRIBUTIONS (in thousands except per share and per unit data) Actual Normalized Projected ----------------------------------------- Assumes Revised Target Distributions Structure 1998 1998 1999 2000 2001 2002 ---------- ------------ --------- --------- --------- -------- Distributable Cash - ------------------ Cash from Operations $10,954 $13,039 $11,790 $14,839 $15,850 $16,802 Maintenance CapEx (2,625) (2,610) (2,553) (2,599) (2,646) (2,694) Other 0 0 0 0 0 0 -------- ------- ------- ------- ------- ------- Total MLP Distributable Cash Flow 8,329 10,429 9,237 12,240 13,204 14,108 Distributable Cash Flow/Unit $ 1.30 $ 1.63 $ 1.41 $ 1.77 $ 1.82 $ 1.87 Average Units for Calculating Annual Distributions - -------------------------------------------------- Common Units 3,859 3,859 4,028 4,384 4,718 5,005 Subordinated Units 2,396 2,396 2,396 2,396 2,396 2,396 General Partner Interest Unit Equivalent 128 128 131 138 145 151 -------- ------- ------- ------- ------- ------- Total Units Outstanding 6,383 6,383 6,555 6,918 7,259 7,552 Distribution Levels - ------------------- MQD $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 First Target $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 Second Target $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 Third Target $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 Indicated Cash Distribution $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 Distribution of MQD - ------------------- Cash Available 8,329 10,429 9,237 12,240 13,204 14,108 Cash Borrowed to Pay Full MQD 5,713 3,613 5,184 2,980 2,766 2,507 Allocation to: Common Units 8,490 8,490 8,861 9,644 10,379 11,011 Subordinated Units 5,271 5,271 5,271 5,271 5,271 5,271 General Partner Interest 281 281 288 304 319 332 First Target Distribution - ------------------------- Cash Available 0 0 0 0 0 0 Cash Required for Target Distribution 0 0 0 0 0 0 Cash Required for Indicated Distribution 0 0 0 0 0 0 Actual Cash Distributed 0 0 0 0 0 0 Allocation to: Common Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Second Target Distribution - -------------------------- Cash Available 0 0 0 0 0 0 Cash Required for Target Distribution 0 0 0 0 0 0 Cash Required for Indicated Distribution 0 0 0 0 0 0 Actual Cash Distributed 0 0 0 0 0 0 Allocation to: Common Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Incentive Distribution 0 0 0 0 0 0 Third Target Distribution - ------------------------- Cash Available 0 0 0 0 0 0 Cash Required for Target Distribution 0 0 0 0 0 0 Cash Required for Indicated Distribution 0 0 0 0 0 0 Actual Cash Distributed 0 0 0 0 0 0 Allocation to: Common Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Incentive Distribution 0 0 0 0 0 0
- -------------------------------------------------------------------------------- STAR GAS STAND ALONE SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D) (in thousands except per share and per unit date) Actual Normalized Project ----------------------------------------- 1998 1998 1999 2000 2001 2002 --------- ------------ --------- -------- --------- --------- Remaining Distribution - ---------------------- Cash Available 0 0 0 0 0 0 Allocation to: Common Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Incentive Distribution 0 0 0 0 0 0 Repay Indebtedness (0) 0 0 (0) 0 0 Total Distributions - ------------------- Common Units 8,490 8,490 8,861 9,644 10,379 11,011 Subordinated Units 5,271 5,271 5,271 5,271 5,271 5,271 General Partner Interest 281 281 288 304 319 332 Incentive Distribution 0 0 0 0 0 0 -------- -------- -------- -------- ------- -------- Total Distributions $14,042 $14,042 $14,421 $15,220 $15,970 $16,614 ======== ======== ======== ======== ======= ======== Total Distributions Per Unit - ---------------------------- Common Unit $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 Subordinated Unit 2.20 2.20 2.20 2.20 2.20 2.20 GP Unit 2.20 2.20 2.20 2.20 2.20 2.20 11 of 19
================================================================================ (in thousands except per share and per units data) PROJECTED ACTUAL NORMALIZED ----------------------------------------- 1998 1998 1999 2000 2001 2002 ------ ---------- -------- ------ ------ ------------ PETRO EBITDA CALCULATION - ------------------------------------------------------------------------------------------------------------------------------------ YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 EBITDA GROWTH RATE - ------------------------------------------------------------------------------------------------------------------------------------ Timing BASE EBITDA: ------ Acquisitions: End 1998 $0 Mid 1999 15,000 Mid 2000 30,000 Mid 2001 30,000 Mid 2002 30,000 Mid 2003 30,000 Mid 2004 30,000 Mid 2005 30,000 ------- ------- ------- ------- ------- ------- TOTAL EBITDA $34,929 $44,749 $43,475 $45,978 $48,375 $50,509 ======= ======= ======= ======= ======= ======= Pro Forma Full-Year EBITDA for Debt Covenent Analysis 34,929 44,749 45,011 49,049 $51,446 53,580 PETRO DEPRECIATION CALCULATION Existing Depreciation $28,946 $24,018 $24,018 $24,018 $24,018 $24,018 Maintenance CapEx: 1998 $ 3,500 - - 233 233 233 233 Annual Growth: 2.0% 1999 3,641 121 243 243 243 2000 3,714 124 248 248 2001 3,788 126 253 2002 3,864 129 2003 3,941 2004 4,020 2005 4,100 Internal Growth CapEx: 1998 $ 0 - - - - - - Annual Growth: 0.0% 1999 0 - - - - 2000 0 - - - 2001 0 - - 2002 0 - 2003 0 2004 0 2005 0 External Growth CapEx: 1998 $ 0 - - 0 0 0 0 Annual Growth: 0.0% 1999 15,000 595 1,190 1,190 1,190 2000 30,000 1,190 2,381 2,381 2001 30,000 1,190 2,381 2002 30,000 1,190 2003 30,000 2004 30,000 2005 30,000 ------- ------- ------- ------- ------- ------- Total Depreciation: 28,946 24,018 24,968 26,999 29,630 32,266 ======= ======= ======= ======= ======= ======= 12 of 19
________________________________________________________________________________ (in thousands except per share and per unit data) STAR PRO FORMA INCOME STATEMENT ACTUAL NORMALIZED PROJECTED --------------------------------------------------- 1998 1998 1999 2000 2001 2002 ------------ ------------ ------------ ------------ ------------ ------------ Combined EBITDA $ 53,835 $ 65,480 $ 63,890 $ 69,727 $ 73,557 $ 77,124 Consolidated Savings 500 500 500 500 500 500 ------------ ------------ ------------ ------------ ------------ ------------ Pro Forma EBITDA 54,335 65,980 64,390 70,227 74,057 77,624 Depreciation and Amortization 40,584 36,097 37,186 39,885 43,041 46,118 ------------ ------------ ------------ ------------ ------------ ------------ EBIT 13,751 29,883 27,204 30,342 31,016 31,506 Interest Expense (24,530) (24,448) (24,819) (25,600) (27,180) (28,252) Interest Income - - - - - - Other Income - - - - - - EBT (10,779) 5,435 2,385 4,742 3,837 3,254 ------------ ------------ ------------ ------------ ------------ ------------ Current Income Taxes (525) (525) (525) (625) (675) (725) Deferred Income Taxes - - - - - - ------------ ------------ ------------ ------------ ------------ ------------ Net Income Available to Common ($11,304)$ 4,910 $ 1,860 $ 4,117 $ 3,162 $ 2,529 ============ ============ ============ ============ ============ ============ Pro Forma Full-Year EBITDA for Debt Covenant Analysis 54,335 65,980 66,283 74,012 77,842 81,409 STAR PRO FORMA UNITS OUTSTANDING Common Units - - Beginning Balance 12,873 12,873 14,079 14,588 15,709 Issuance - - - - - Issued to Meet Debt Covenant Ratio - 1,207 508 1,122 1,170 Issued to E - - - - - Buyback - - - - - ------------ ------------ ------------ ------------ ------------ ------------ Ending Balance 12,873 12,873 14,079 14,588 15,709 16,879 ------------ ------------ ------------ ------------ ------------ ------------ Average Common Units Outstanding 12,873 12,873 13,476 14,333 15,148 16,294 Deferred Participation Units - Beginning Balance - - 909 909 909 909 DPUs Issued at Beginning of Year - - - - - - ------------ ------------ ------------ ------------ ------------ ------------ Ending Balance - - 909 909 909 909 SR Subordinated Units Beginning Balance - Sr Sub Units 2,491 2,491 2,491 2,491 2,491 DPUs Issued - - - - - Sr Sub Issuance - - - - - Sr. Sub to E - - - - - Sr Sub Converted to G.P. Interest - - - - - ------------ ------------ ------------ ------------ ------------ ------------ Ending Balance 2,491 2,491 2,491 2,491 2,491 2,491 ------------ ------------ ------------ ------------ ------------ ------------ Average Sr Subordinated Units Outstanding 2,491 2,491 2,491 2,491 2,491 2,491 Subordinated Units Beginning Balance 431 431 431 431 431 Issuance - - - - - Buyback - - - - - ------------ ------------ ------------ ------------ ------------ ------------ Ending Balance 431 431 431 431 431 431 ------------ ------------ ------------ ------------ ------------ ------------ Average Subordinated Units Outstanding 431 431 431 431 431 431 GP Implied Units Beginning Balance 322 322 322 322 322 Issued in conjunction with DPUs - - - - - Issued to Meet Debt Covenant Ratio - - - - - Issued in conjunction with E Equity - - - - - Buyback - - - - - ------------ ------------ ------------ ------------ ------------ ------------ 322 322 322 322 322 322 ------------ ------------ ------------ ------------ ------------ ------------ Average Implied GP Units Outstanding 322 322 322 322 322 322 Total Units Outstanding 16,118 16,118 17,324 17,833 18,954 20,124 ------------ ------------ ------------ ------------ ------------ ------------ Average Total Units Outstanding 16,118 16,118 16,721 17,578 18,393 19,539 ============ ============ ============ ============ ============ ============ Pro Forma Heating Oil Units used for DPU Issue Calculation 10,166 10,660 11,134 11,987 13 of 19
================================================================================ (in thousands except per share and per unit data) Actual Projected ------------------------------------------------- STAR PRO FORMA BALANCE SHEET 1998 1999 2000 2001 2002 ---------- ---------- ---------- ---------- ---------- ASSETS: Cash $ 14,882 $ 14,882 $ 14,882 $ 14,882 $ 14,882 Other Current Assets 80,877 78,697 86,699 91,950 96,840 ---------- ---------- ---------- ---------- ---------- Total Current Assets 95,759 93,579 101,581 106,832 111,722 PP&E and Intangibles, Net 269,617 258,625 265,053 268,446 268,886 Other Assets 12,796 12,796 12,796 12,796 12,796 ---------- ---------- ---------- ---------- ---------- Total Assets 378,172 365,000 379,430 388,074 393,404 ========== ========== ========== ========== ========== LIABILITIES: Current Liabilities 90,453 88,273 96,275 101,526 106,416 8.25% Existing Credit Facility 4,770 4,770 4,770 4,770 4,770 Total LT Debt 275,635 267,232 296,048 311,368 325,636 Other Liabilities 10,726 10,726 10,726 10,726 10,726 ---------- ---------- ---------- ---------- ---------- Total Liabilities 381,584 371,001 407,819 428,390 447,548 Preferred Stock - - - - - Common Shareholder's Equity (3,412) (6,001) (28,389) (40,316) (54,144) ---------- ---------- ---------- ---------- ---------- Total Liabilities and Equity $ 378,172 $ 365,000 $ 379,430 $ 388,074 $ 393,404 ========== ========== ========== ========== ========== Check - - - (0) (0) STAR PRO FORMA CASH FLOW STATEMENT Net Income $ 1,860 $ 4,117 $ 3,162 $ 2,529 Depreciation and Amortization 37,186 39,885 43,041 46,118 Deferred Taxes - - - - Other Assets/Liab - - - - Change in Non-Cash Working Capital - - - - ---------- ---------- ---------- ---------- Cash from Operations 39,046 44,002 46,202 48,647 Maintenance CapEx (6,194) (6,313) (6,434) (6,558) Internal Growth CapEx - - - - External Growth CapEx (20,000) (40,000) (40,000) (40,000) ---------- ---------- ---------- ---------- Cash from Investments (26,194) (46,313) (46,434) (46,558) Acquisition Borrowing 20,000 40,000 40,000 40,000 Remaining Distributions to Repay Debt (1,857) - - - Amortization of Existing Debt (8,154) (8,141) (60) (60) Borrowing to Repay Existing Debt 6,054 8,141 60 60 Borrowing for Changes in WC - - - - Change in Common Equity & GP Interest 26,546 11,184 24,680 25,732 Repayment of Preferred Stock - - - - Distributions (30,994) (37,689) (39,768) (42,089) ---------- ---------- ---------- ---------- Cash from Financing 11,594 13,495 24,912 23,643 Net Cash Flow 24,446 11,184 24,680 25,732 Initial Cash Balance 14,882 14,882 14,882 14,882 ---------- ---------- ---------- ---------- Cash Available for Paydown on WC Revolver and Acq. Facility 39,328 26,066 39,562 40,614 Minimum Cash Balance 14,882 14,882 14,882 14,882 Borrowing/(Paydown) on WC Revolver and Acq. Facility (24,446) (11,184) (24,680) (25,732) ---------- ---------- ---------- ---------- Ending Cash Balance 14,882 14,882 14,882 14,882 Net Change in Cash $ 0 $ 0 $ 0 $ 0 ========== ========== ========== ========== 14 of 19
- -------------------------------------------------------------------------------- (in thousands except per share and per unit data) Actual Normalized Projected ---------------------------------------------- STAR PRO FORMA DEBT SCHEDULE 1998 1998 1999 2000 2001 2002 ---------- ---------- ---------- ---------- ---------- ---------- 8.04% 1st Mortgage Notes Beginning Balance $85,000 $85,000 85,000 $85,000 $85,000 $85,000 Borrowing - - - - - - Amortization - - - - - - ---------- ---------- ---------- ---------- ---------- ---------- Ending balance 85,000 85,000 85,000 85,000 85,000 85,000 Interest Payment 8.04% 6,834 6,834 6,834 6,834 6,834 6,834 7.17% Pearl Notes Beginning Balance 11,000 11,000 11,000 11,000 11,000 11,000 Borrowing - - - - - - Amortization - - - - - - ---------- ---------- ---------- ---------- ---------- ---------- Ending balance 11,000 11,000 11,000 11,000 11,000 11,000 Interest Payment 7.17% 613 613 789 789 789 789 % of year Pearl Notes Outstanding 77.7% 77.7% 10.13% Sub Notes & Sr Notes Beginning Balance 50,000 50,000 - - - - Borrowing - - - - - - Amortization (50,000) (50,000) - - - - ---------- ---------- ---------- ---------- ---------- ---------- Ending balance - - - - - - Interest Payment 10.13% - - - - - - 9.38% Sub Notes & Sr Notes Beginning Balance 75,000 75,000 - - - - Borrowing - - - - - - Amortization (75,000) (75,000) - - - - ---------- ---------- ---------- ---------- ---------- ---------- Ending balance - - - - - - Interest Payment 9.38% - - - - - - 12.25% Sub Notes & Sr Notes Beginning Balance 81,250 81,250 - - - - Borrowing - - - - - - Amortization (81,250) (81,250) - - - - ---------- ---------- ---------- ---------- ---------- ---------- Ending balance - - - - - - Interest Payment 12.25% - - - - - - 7.50% New Debt Beginning Balance - - 90,000 96,054 104,195 104,255 Borrowing 90,000 90,000 6,054 8,141 60 60 Amortization - - - - - - ---------- ---------- ---------- ---------- ---------- ---------- Ending balance 90,000 90,000 96,054 104,195 104,255 104,315 Interest Payment 7.50% 6,750 6,750 6,977 7,509 7,817 7,821 Exchange of 11.96% Senior Notes Beginning Balance - - 60,000 60,000 60,000 60,000 Borrowing 60,000 60,000 - - - - Amortization - - - - - - ---------- ---------- ---------- ---------- ---------- ---------- Ending balance 60,000 60,000 60,000 60,000 60,000 60,000 Interest Payment 10.90% 6,540 6,540 6,540 6,540 6,540 6,540 8.00% Acq. & Other Notes Pay Beginning Balance 16,507 16,507 14,435 8,381 240 180 Borrowing - - - - - - Amortization (2,072) (2,072) (6,054) (8,141) (60) (60) ---------- ---------- ---------- ---------- ---------- ---------- Ending balance 14,435 14,435 8,381 240 180 120 Interest Payment 8.00% 1,238 1,238 913 345 17 12 15 of 19
==================================================================================================================================== (in thousands except per share and per unit data) STAR PRO FORMA DEBT SCHEDULE (CONT'D) ACTUAL NORMALIZED PROJECTED ---------------------------------------------- 1998 1998 1999 2000 2001 2002 ---------- ---------- ---------- ---------- ---------- ---------- Exchange of 14.10% Senior Notes Beginning Balance - - 6,200 4,100 4,100 4,100 Borrowing 6,200 6,200 - - - - Amortization - - (2,100) - - - ---------- ---------- ---------- ---------- ---------- ---------- Ending Balance 6,200 6,200 4,100 4,100 4,100 4,100 Interest Payment 14.10% 874 874 578 578 578 578 7.25% WC Revolver Beginning Balance - - 4,770 4,770 4,770 4,770 Borrowing for Change in WC - - - - - - Borrowing to Pay Full MQD - - - - - - Borrowing/(Payment) 4,770 4,770 - - - - ---------- ---------- ---------- ---------- ---------- ---------- Ending Balance 4,770 4,770 4,770 4,770 4,770 4,770 Effective Avg WC Balance 10,179 9,044 11,338 11,338 11,338 11,338 Interest Payment 7.25% 738 656 822 822 822 822 7.25% Acquisition Facility Beginning Balance - - 9,000 2,697 31,513 46,833 External Acquisitions 9,000 9,000 20,000 40,000 40,000 40,000 External Acquisitions at Beginning of 1999 - - - - - - Internal Growth CapEx - - - - - - Payment - - (24,446) (11,184) (24,680) (25,732) Remaining Distributions to Repay Debt - - (1,857) - - - ---------- ---------- ---------- ---------- ---------- ---------- Ending Balance 9,000 9,000 2,697 31,513 46,833 61,101 Interest Payment 7.25% $ 0 $ 0 $ 424 $ 1,240 $ 2,840 $ 3,913 TOTAL PRO FROMA DEBT Beginning Balance $ 318,757 $ 318,757 $280,405 $272,002 $300,818 $316,138 Amortization of Existing Debt (208,322) (208,322) (8,154) (8,141) (60) (60) Exchange of Notes 66,200 66,200 - - - - Borrowing for Changes in WC - - - - - - Acquisition Borrowing 9,000 9,000 20,000 40,000 40,000 40,000 Borrowing to Pay Full MQD - - - - - - Borrowing to Repay Existing Debt 90,000 90,000 6,054 8,141 60 60 Remaining Distributions to Repay Debt - - (1,857) - - - Borrowing/(Payment) on WC Revolver and Acq. Facility 4,770 4,770 (24,446) (11,184) (24,680) (25,732) ---------- ---------- ---------- ---------- ---------- ---------- Ending Balance 280,405 280,405 272,002 300,818 316,138 330,406 PREFERRED STOCK Beginning Balance 34,167 34,167 - - - - Repayment (34,167) (34,167) - - - - ---------- ---------- ---------- ---------- ---------- ---------- Ending Balance - - - - - - Dividend Payment 14.33% - - - - - - Interest Expense/Dividends 23,587 23,505 23,876 24,657 26,237 27,309 Chase Fees 943 943 943 943 943 943 ---------- ---------- ---------- ---------- ---------- ---------- Total Interest Payment/Dividends $ 24,530 $ 24,448 $ 24,819 $ 25,600 $ 27,180 $ 28,252 ========== ========== ========== ========== ========== ========== 16 of 19
================================================================================================================================ (In Thousands Except Per Share And Per Unit Data) STAR PRO FORMA DISTRIBUTION SCHEDULE OF ACTUAL DISTRIBUTIONS Actual Normalized Projected ---------------------------------------- 1998 1998 1999 2000 2001 2002 -------- ---------- -------- -------- -------- -------- Distributable Cash - ------------------ Cash from Operations (excl chg in WC) 29,280 41,007 $39,046 $44,002 $46,202 $48,647 Maintenance CapEx (6,125) (6,125) (6,194) (6,313) (6,434) (6,558) Other - - - - - - -------- ---------- -------- -------- -------- -------- Total MLP Distributable Cash Flow 23,155 34,882 32,852 37,689 39,768 42,089 Distributable Cash Flow / Unit $ 1.44 $ 2.16 $ 1.96 $ 2.14 $ 2.16 $ 2.15 Distributable Cash Flow / Unit Pro Forma for DPU Conversion Average Units for Calculating Annual Distributions - -------------------------------------------------- Common Units 12,873 12,873 13,476 14,333 15,148 16,294 SR Subordinated Units 2,491 2,491 2,491 2,491 2,491 2,491 Subordinated Units 431 431 431 431 431 431 General Partner Interest Unit Equivalent 322 322 322 322 322 322 -------- ---------- -------- -------- -------- -------- Total Units Outstanding 16,118 16,118 16,721 17,578 18,393 19,539 Distribution Levels $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 - ------------------- MQD $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 First Target $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 Second Target $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 Third Target $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 Indicated Cash Distribution $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 Distribution of MQD - ------------------- Cash Available 23,155 34,882 32,852 37,689 39,768 42,089 Allocation to: Common Units 23,155 29,607 30,994 32,967 34,841 37,477 SR Subordinated Units 0 5,276 0 4,722 4,927 4,613 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 First Target Distribution - ------------------------- Cash Available 0 0 1,857 0 0 0 Cash Required for Target Distribution 0 0 2,008 0 0 0 Cash Required for Indicated Distribution 0 0 0 0 0 0 Actual Cash Distributed 0 0 0 0 0 0 Allocation to: Common Units 0 0 0 0 0 0 SR Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Total Distributors to: Common Units 0 0 0 0 0 0 Sr. Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 17 of 19
================================================================================================================================ (in thousands except per share and per unit data) STAR PRO FORMA SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D) Actual Normalized Projected ---------------------------------------- 1998 1998 1999 2000 2001 2002 -------- ---------- -------- -------- -------- -------- Second Target Distribution - -------------------------- Cash Available 0 0 0 0 0 0 Cash Required for Target Distribution 0 0 0 0 0 0 Cash Required for Indicated Distribution 0 0 0 0 0 0 Actual Cash Distributed 0 0 0 0 0 0 Allocation to: Common Units 0 0 0 0 0 0 Sr. Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Incentive Right 0 0 0 0 0 0 Incentive Right to GP Interest 0 0 0 0 0 0 Incentive Right to Sub Units 0 0 0 0 0 0 Incentive Right to Sr. Sub Units 0 0 0 0 0 0 Total Distributions to: Common Units 0 0 0 0 0 0 Sr. Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Third Target Distribution - ------------------------- Cash Available: Cash Required for Target Distribution 0 0 0 0 0 0 Cash Required for Indicated Distribution 0 0 0 0 0 0 Actual Cash Distributed 0 0 0 0 0 0 Allocation to: Common Units Sr. Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Incentive Right 0 0 0 0 0 0 Incentive Right to GP Interest 0 0 0 0 0 0 Incentive Right to Sub Units 0 0 0 0 0 0 Incentive Right to Sr. Sub Units 0 0 0 0 0 0 Total Distributions to: Common Units 0 0 0 0 0 0 Sr. Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Remaining Distribution - ---------------------- Cash Available 0 0 0 0 0 0 Cash Required for Indicated Distribution 0 0 0 0 0 0 Actual Cash Distributed 0 0 0 0 0 0 Allocation to: Common Units 0 0 0 0 0 0 Sr. Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 Incentive Right Incentive Right to GP Interest 0 0 0 0 0 0 Incentive Right to Sub Units 0 0 0 0 0 0 Incentive Right to Sr. Sub Units 0 0 0 0 0 0 Repay Indebtedness 0 0 1,857 0 0 0 Total Distributions to: Common Units 0 0 0 0 0 0 Sr. Subordinated Units 0 0 0 0 0 0 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 18 of 19
================================================================================ STAR GAS PRO FORMA SCHEDULE OF ACTUAL DISTRIBUTION (CONT'D) (in thousands except per share and per unit data) ACTUAL NORMALIZED PROJECTED ---------------------------------------------------------- 1998 1998 1999 2000 2001 2002 ---------- ------------ ------------- ----------- ----------- ----------- Total Distributions - ------------------- Common Units $ 23,155 $ 29,607 $ 30,994 $ 32,967 $ 34,841 $ 37,477 Sr. Subordinated Units 0 5,276 0 4,722 4,927 4,613 Subordinated Units 0 0 0 0 0 0 General Partner Interest 0 0 0 0 0 0 ---------- ---------- ---------- ---------- ---------- ---------- Total Distributions $ 23,155 $ 34,882 $ 30,994 $ 37,689 $ 39,768 $ 42,089 ========== ========== ========== ========== ========== ========== 14,042 14,042 14,421 15,220 15,970 16,614 Total Distributions Per Unit - ---------------------------- Common Units $ 1.80 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 Sr. Subordinated Units 0.00 2.12 0.00 1.90 1.98 1.85 Subordinated & GP Units 0.00 0.00 0.00 0.00 0.00 0.00 19 of 19