SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
HERITAGE PROPANE PARTNERS, L.P.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
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[LOGO FOR HERITAGE PROPANE PARTNERS, L.P.]
8801 SOUTH YALE AVENUE, SUITE 310
TULSA, OKLAHOMA 74137
, 2001
To our common unitholders:
You are cordially invited to attend a special meeting of the common
unitholders of Heritage Propane Partners, L.P. to be held at Bank of Oklahoma
Tower, 7 West 2nd Street, 9th Floor, Tulsa, Oklahoma 74137 on , 2002,
at local time. The Board of Directors of Heritage Holdings, Inc., our
general partner, has called the special meeting. At this important meeting, you
will be asked to consider and vote upon the following matters:
1. A proposal to approve (a) a change in the terms of our class B
subordinated units to provide that each class B subordinated
unit is convertible into one of our common units and (b) the
issuance of additional common units upon such conversion (the
"Listing Proposal"). Upon approval of this proposal, all
1,382,514 outstanding class B subordinated units will
automatically convert into 1,382,514 common units.
2. A proposal to amend our partnership agreement to make the
current owner of our general partner, U.S. Propane, L.P., our
new general partner in place of Heritage Holdings (the
"Amendment Proposal").
The board of directors of our general partner unanimously recommends
that the common unitholders approve both proposals.
We are submitting these proposals to you as a result of a series of
transactions in August 2000 in which U.S. Propane acquired Heritage Holdings and
sold its propane operations to our partnership. These transactions made us the
fourth largest retail marketer of propane in the United States.
At the closing of the transactions with U.S. Propane, the former
stockholders of Heritage Holdings contributed approximately $50 million to our
partnership in exchange for a total of 2,544,328 units, consisting of 1,161,814
common units and 1,382,514 class B subordinated units. These 1,382,514 class B
subordinated units represent an 8.75% limited partner interest in our
partnership. We chose to issue some of the units as class B subordinated units
because to issue 2,544,328 common units would have required a common unitholder
vote under the rules of the New York Stock Exchange and delayed completion of
the transactions with U.S. Propane to the possible detriment of our partnership.
We wanted to be able to integrate the operations of U.S. Propane with ours and
secure propane supply before the heating season began in order to derive the
full benefit of the combined operations during the winter. Closing when we did
enabled us to accomplish this integration successfully as evidenced by the
record earnings and EBITDA reported for the fiscal year ended August 31, 2001.
For example, we were able to achieve eleven blend-ins of multiple districts in
the same city and commit for propane supply at a price which turned out to be
significantly lower than the subsequent winter prices. Over the past five
quarters, we have been able to increase our annualized distribution by $.25 per
unit, to $2.50, largely due to this successful combination. The time required to
obtain a common unitholder vote before closing would have meant that we could
not have completed the transactions in that time frame. Therefore, certain
former stockholders of Heritage Holdings, who are also members of management,
agreed to take class B subordinated units in lieu of common units, provided we
would ask our common unitholders to approve the conversion of those class B
subordinated units into common units at a later date. We are now asking you to
approve this conversion.
We are also asking you to approve an amendment to our partnership
agreement to allow U.S. Propane to hold our 2% general partner interest and
incentive distribution rights directly, rather than through Heritage Holdings.
As part of the transactions with U.S. Propane we agreed to request approval for
this amendment. The change in our general partner will have no adverse impact on
our distributions to our common unitholders or the common unit price. Your
current board of directors and senior management will continue to manage our
partnership and there is no adverse effect to you of this amendment.
Your vote is important. Even if you plan to attend the special meeting,
I urge you to mark, sign and date the enclosed proxy card and return it
promptly. You will retain the option to revoke it at any time before the vote,
or to vote your common units personally if you attend the special meeting. For
the Listing Proposal to be approved, it must have the support of a majority of
the common units voted at the special meeting. For the Amendment Proposal to be
approved, it must have the support of the majority of the votes entitled to be
voted by the common unitholders and a majority of the votes entitled to be voted
by the class B subordinated unitholders, each voting as a separate class. The
class B subordinated unitholders have already unanimously approved the Amendment
Proposal.
I urge you to review carefully the attached proxy statement, which
contains a detailed description of the proposals to be voted upon at the special
meeting.
Sincerely,
H. Michael Krimbill
President and Chief Executive Officer
Heritage Holdings, Inc.
HERITAGE PROPANE PARTNERS, L.P.
8801 SOUTH YALE AVENUE, SUITE 310
TULSA, OKLAHOMA 74137
NOTICE OF SPECIAL MEETING OF COMMON UNITHOLDERS
TO BE HELD ON , 2002
To our common unitholders:
A special meeting of our common unitholders will be held at Bank of
Oklahoma Tower, 7 West 2nd Street, 9th Floor, Tulsa, Oklahoma 74137 on
, 2002, at local time for the following purposes:
1. To consider and vote upon a proposal to (a) approve a change
in the terms of our class B subordinated units to provide that
each class B subordinated unit is convertible into one of our
common units and (b) the issuance of additional common units
upon such conversion.
2. To consider and vote upon a proposal to amend our partnership
agreement to make U.S. Propane, L.P., the current owner of our
general partner, Heritage Holdings, Inc., our new general
partner in place of Heritage Holdings, Inc.
We have set the close of business on , 2001 as the record date
for determining which common unitholders are entitled to receive notice of and
to vote at the special meeting. A list of common unitholders entitled to vote is
on file at our principal offices, 8801 South Yale Avenue, Suite 310, Tulsa,
Oklahoma 74137, and will be available for inspection by any common unitholder
during the meeting.
YOUR VOTE IS IMPORTANT. If you cannot attend the special meeting, you
may vote by mailing the proxy card in the enclosed postage-prepaid envelope. Any
common unitholder attending the meeting may vote in person, even though he or
she already has returned a proxy card.
BY ORDER OF THE BOARD OF DIRECTORS
OF HERITAGE HOLDINGS, INC.
Larry J. Dagley
Vice President, Chief Financial Officer,
Treasurer and Secretary
Heritage Holdings, Inc., as General
Partner
Tulsa, Oklahoma
, 2001
TABLE OF CONTENTS
QUESTIONS AND ANSWERS.............................................................................................1
HERITAGE PROPANE PARTNERS, L.P....................................................................................3
THE TRANSACTION WITH U.S. PROPANE.................................................................................4
OUR STRUCTURE AND OWNERSHIP.......................................................................................6
OWNERSHIP STRUCTURE CHART PRIOR TO CONVERSION OF CLASS B SUBORDINATED UNITS AND CHANGE OF GENERAL PARTNER.........7
OWNERSHIP STRUCTURE CHART AFTER CONVERSION OF CLASS B SUBORDINATED UNITS AND CHANGE OF GENERAL PARTNER............8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT....................................................9
PRICE RANGE OF COMMON UNITS AND DISTRIBUTIONS....................................................................11
DESCRIPTION OF UNITS.............................................................................................12
THE LISTING PROPOSAL.............................................................................................16
THE AMENDMENT PROPOSAL...........................................................................................18
BOARD RECOMMENDATION.............................................................................................19
THE SPECIAL MEETING..............................................................................................19
FORWARD-LOOKING STATEMENTS.......................................................................................22
WHERE YOU CAN FIND MORE INFORMATION ABOUT US.....................................................................22
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................................................................23
ANNEX A AMENDMENT NO. 3 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF HERITAGE PROPANE PARTNERS, L.P.
ANNEX B AMENDMENT NO. 2 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF HERITAGE OPERATING, L.P.
i
HERITAGE PROPANE PARTNERS, L.P.
8801 SOUTH YALE AVENUE, SUITE 310
TULSA, OKLAHOMA 74137
PROXY STATEMENT
SPECIAL MEETING OF COMMON UNITHOLDERS
, 2002
This proxy statement contains information related to the special
meeting of common unitholders of Heritage Propane Partners, L.P. ("Heritage")
and any postponements or adjournments thereof. This proxy statement and the
accompanying form of proxy is first being mailed to the common unitholders of
Heritage on or about , 2001.
QUESTIONS AND ANSWERS
The following is qualified in its entirety by the more detailed
information contained in or incorporated by reference in this proxy statement.
Common unitholders are urged to read carefully this proxy statement in its
entirety. FOR ADDITIONAL COPIES OF THIS PROXY STATEMENT OR PROXY CARDS OR IF YOU
HAVE ANY QUESTIONS ABOUT THE SPECIAL MEETING, CONTACT INNISFREE M&A INCORPORATED
AT 1-888-750-5834 OR 501 Madison Avenue, 20th Floor, New York, New York 10022.
Q: WHO IS SOLICITING MY PROXY?
A: Heritage Holdings, Inc. ("Heritage Holdings"), our general partner, is
sending you this proxy statement in connection with its solicitation of
proxies for use at our special meeting of common unitholders. Certain
directors, officers and employees of Heritage Holdings and Innisfree
M&A Incorporated (a proxy solicitor) may also solicit proxies on our
behalf by mail, phone, fax or in person.
Q: WHEN AND WHERE IS THE SPECIAL MEETING?
A: The special meeting will be held on , 2002, at local
time at Bank of Oklahoma Tower, 7 West 2nd Street, 9th Floor, Tulsa,
Oklahoma 74137.
Q: WHAT IS THE PURPOSE OF THE SPECIAL MEETING?
A: At the special meeting, our common unitholders will act upon the
following two proposals:
o A proposal to approve (a) a change in the terms of our class B
subordinated units to provide that each class B subordinated
unit is convertible into one of our common units and (b) the
issuance of additional common units upon such conversion (the
"Listing Proposal"). Upon approval of this proposal, all
1,382,514 outstanding class B subordinated units will
automatically convert into 1,382,514 common units.
o A proposal to amend our partnership agreement to make the
current owner of our general partner, U.S. Propane, L.P.
("U.S. Propane"), our new general partner in place of Heritage
Holdings (the "Amendment Proposal").
Q: WHO IS ENTITLED TO VOTE AT THE SPECIAL MEETING?
A: All common unitholders who owned our common units at the close of
business on the record date, , 2001, are entitled to
receive notice of the special meeting and to vote the common units that
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they held on the record date at the special meeting, or any
postponements or adjournments of the special meeting.
Q: HOW DO I VOTE?
A: Just mail your completed, signed and dated proxy card in the enclosed
postage-paid return envelope as soon as possible so that your common
units may be represented at the special meeting. You may also attend
the special meeting and vote your common units in person. Even if you
plan to attend the special meeting, your plans may change, so it is a
good idea to complete, sign and return your proxy card in advance of
the special meeting.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: To change your vote after you have submitted your proxy card, send in a
later-dated, signed proxy card to us or attend the special meeting and
vote in person. You may also revoke your proxy by sending in a notice
of revocation to us at the address set forth in the notice. Please note
that attendance at the special meeting will not by itself revoke a
previously granted proxy.
Q: IF MY COMMON UNITS ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY
BROKER VOTE MY COMMON UNITS FOR ME?
A: Your broker will not vote your common units unless you provide
instructions on how to vote. You should instruct your broker how to
vote your common units upon receipt of your broker's request for voting
instructions. Without your instructions, your common units will not be
voted.
Q: WHAT IS THE RECOMMENDATION OF THE BOARD OF DIRECTORS OF HERITAGE
HOLDINGS?
A: The Board of Directors of Heritage Holdings recommends that you vote
FOR the Listing Proposal and FOR the Amendment Proposal.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSALS?
A: The Listing Proposal requires the approval of a majority of the common
units voted at the special meeting, provided that the total votes cast
on the Listing Proposal represent a majority of the common units
entitled to vote. The Amendment Proposal requires the approval of a
majority of common units entitled to vote and outstanding as of the
record date and a majority of the class B subordinated units entitled
to vote and outstanding as of the record date, each voting as a
separate class. A properly executed proxy submitted without
instructions how to vote will be voted (except to the extent that the
authority to vote has been withheld) FOR the Listing Proposal and FOR
the Amendment Proposal. A properly executed proxy marked "ABSTAIN" with
respect to any matter will not be voted, although it will be counted
for purposes of determining whether there is a quorum. Accordingly, an
abstention, or the failure to vote at all, will have the effect of a
vote against the Amendment Proposal. Neither the Listing Proposal nor
the Amendment Proposal is conditioned on the approval of any other
proposal.
Our general partner, U.S. Propane and the former stockholders of our
general partner collectively hold 4,105,977, 372,392 and 1,337,426 of
our common units, constituting an aggregate of 40.8% of our outstanding
common units. They have all stated their intention to vote all of their
common units in favor of the Listing Proposal and the Amendment
Proposal. The approval of these proposals by our general partner, U.S.
Propane and the former stockholders of our general partner is not
sufficient to approve these proposals. Thus, we encourage you to take
part in the decision process by voting by proxy or at the special
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meeting. The class B subordinated unitholders have already unanimously
approved the Amendment Proposal and are not required to approve the
Listing Proposal.
Q: WHAT HAPPENS IF THE LISTING PROPOSAL IS APPROVED?
A: Each outstanding class B subordinated unit will automatically convert
into one common unit upon approval of the proposal and those new common
units will be listed on the New York Stock Exchange.
Q: WHAT HAPPENS IF THE LISTING PROPOSAL IS NOT APPROVED?
A: The class B subordinated units are currently entitled to receive the
minimum quarterly distribution of $0.50 per quarter only after the
minimum quarterly distribution has been paid on the common units. The
class B subordinated units and the common units share in any
distributions over $0.50 per quarter. If the Listing Proposal is not
approved by March 15, 2002, the class B subordinated units will be
entitled to receive 115% of the amount of distributions paid to the
common units, with the common units retaining their priority over the
class B subordinated units with respect to the minimum quarterly
distribution of $0.50 per common unit and any arrearages thereon. This
increased distribution on the class B subordinated units will reduce
the amount of cash available to be distributed to the common
unitholders after the minimum quarterly distribution has been paid. At
the current distribution level, this amount is approximately $520,000
per year. The class B subordinated units will not convert into common
units unless the conversion is approved by the common unitholders or
there is a change in the rules of the New York Stock Exchange allowing
such conversion without the approval of the common unitholders.
Q: WHAT HAPPENS IF THE AMENDMENT PROPOSAL IS APPROVED?
A: U.S. Propane will become our general partner and the owner of the
incentive distribution rights. This will not affect our distributions
to our common unitholders or the common unit price. Your current board
of directors and senior management will continue to manage our
partnership.
Q: WHAT HAPPENS IF THE AMENDMENT PROPOSAL IS NOT APPROVED?
A: Heritage Holdings will remain our general partner and the owner of the
incentive distribution rights and will continue to be owned by U.S.
Propane.
HERITAGE PROPANE PARTNERS, L.P.
WHO WE ARE
We are the fourth largest retail marketer of propane in the United
States, delivering approximately 400 million gallons a year to approximately
600,000 customers from over 275 customer service locations in 28 states. Our
operations extend from coast to coast, with concentrations in the western, upper
midwestern, northeastern and southeastern regions of the United States. We are a
publicly traded Delaware limited partnership formed in conjunction with our
initial public offering in June of 1996. Since the inception of our business in
1989, we have completed 84 acquisitions for an aggregate purchase price of
approximately $554 million, including the transfer by U.S. Propane, L.P. of its
propane operations to us for $181.4 million, plus working capital, in August
2000. The U.S. Propane transaction combined five of the nation's 50 largest
retail propane operations.
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OUR BUSINESS STRATEGY
Our goal is to increase unitholder distributions by being a low-cost,
growth oriented retail propane distribution company. Our principal strategies
for achieving this goal are:
o Maintaining decentralized operations in order to foster an
entrepreneurial corporate culture by:
o Retaining billing, collection and pricing
responsibilities at the local and regional levels
o Aggressively managing operating and overhead costs
o Rewarding our employees for achieving financial
targets at the local level
o Completing selective, accretive acquisitions with a focus on
companies that:
o Are located in geographical regions with
higher-than-average population growth
o Provide a high percentage of sales to residential
customers
o Have a strong reputation for quality customer service
o Own a high percentage of the propane tanks used by
their customers
o Maintaining our strong financial position to support ongoing
operations and fund our future growth
THE TRANSACTION WITH U.S. PROPANE
In August 2000, TECO Energy, Inc., Atmos Energy Corporation, Piedmont
Natural Gas Company, Inc. and AGL Resources Inc. contributed each company's
propane operations, Peoples Gas Company ("Peoples Gas"), United Cities Propane
Gas, Inc., Piedmont Propane Company ("Piedmont"), and AGL Propane, Inc.,
respectively, to U.S. Propane in exchange for equity interests in U.S. Propane.
The merger was accounted for as an acquisition using the purchase method of
accounting with Peoples Gas being the accounting acquirer.
In August 2000, U.S. Propane acquired all of the outstanding common
stock of Heritage Holdings, Heritage's general partner, for $120 million. By
virtue of Heritage Holdings' general partner and limited partner interests in
Heritage, U.S. Propane gained control of Heritage. Simultaneously, U.S. Propane
sold its propane operations, consisting of its interest in four separate limited
liability companies, AGL Propane, L.L.C., Peoples Gas Company, L.L.C., United
Cities Propane Gas, L.L.C. and Retail Propane Company, L.L.C. (former Piedmont
operations) to Heritage for $181.4 million plus working capital. The $181.4
million was payable $139.5 million in cash, $31.8 million of assumed debt, the
issuance of 372,392 common units of Heritage valued at $7.3 million and a
1.0101% limited partnership interest in Heritage Operating, L.P. valued at $2.7
million. The purchase price and the issuance price for the common units were
approved by an independent committee of the board of directors of Heritage
Holdings. The issuance price for the common units was $19.73125 per unit under a
formula based on the average closing price of the common units on the New York
Stock Exchange for the twenty (20) day period beginning ten (10) days prior to
the public announcement of the transaction on June 15, 2000.
Concurrent with the acquisition, Heritage borrowed $180 million from
several institutional investors and sold 1,161,814 common units and 1,382,514
class B subordinated units in a private placement to the former stockholders of
Heritage Holdings based on the issuance price for the common units of $19.73125
per share resulting in net proceeds of $50.2 million. The total of these
proceeds was utilized to finance the transaction and retire a portion of
existing debt. We chose to issue some of the units as class B subordinated units
because to issue 2,544,328 common units would have required a common unitholder
vote under the rules of the New York Stock
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Exchange and delayed completion of the transactions with U.S. Propane to the
possible detriment of our partnership. See "The Listing Proposal." For a
description of the class B subordinated units, please read "Description of Units
- Class B Subordinated Units." We collectively refer to the acquisition by U.S.
Propane of all of the stock of Heritage Holdings, the sale of U.S. Propane's
propane operations to our partnership and the purchase of common units and class
B subordinated units by the former stockholders of Heritage Holdings as the
"Transaction."
We entered into the Transaction because we believed it would provide:
o a stream of strong, high-quality cash flow which would be
accretive to distributable cash flow per common unit and which
would enable us to increase our quarterly distribution;
o additional critical mass in high-growth areas of the
southeastern United States enhancing the potential for
internal growth, operating flexibility and additional
economies of scale;
o the ability to reduce indebtedness and improve financial
ratios required by our lenders;
o enhanced opportunities for supply, marketing and risk
management; and
o a stronger general partner owned by four large utilities who
are all "A" rated by the public credit rating agencies.
Since the closing of the Transaction, we have combined eleven blend-ins
of multiple districts in the same city and have been able to increase our
annualized distribution by $.25 per unit, to $2.50, in large part due to this
successful combination.
Heritage and U.S. Propane commenced negotiations concerning a possible
transaction in early 2000. On April 17, 2000, the board of directors of Heritage
Holdings appointed a special committee of independent directors to evaluate,
negotiate and make a recommendation regarding the Transaction. The special
committee retained Lehman Brothers Inc. ("Lehman Brothers") as its financial
advisor and Baker Botts L.L.P. as its legal advisor in connection with its
evaluation of the Transaction.
Between April 25, 2000 and June 15, 2000, the special committee held 11
meetings to review the business of U.S. Propane and to consider various aspects
of the Transaction. The special committee reviewed the transaction documents,
received legal and financial advice, and actively negotiated the terms of
Transaction, including the purchase price for the units received by U.S. Propane
and purchased by the former stockholders of Heritage Holdings and the terms of
the class B subordinated units, including the step-up in the amount of the
distribution if the Listing Proposal is defeated in order to compensate the
holders for the reduced liquidity of the class B subordinated units.
On June 15, 2000, after the Transaction was fully negotiated, Lehman
Brothers delivered an opinion, subject to the assumptions and limitations
contained therein, to the special committee that the Transaction was fair, from
a financial point of view, to Heritage. This opinion was prepared at the
request, and solely for the information, of the special committee and does not
constitute a recommendation to any holder of common units as to how such holder
should vote at the special meeting. The special committee did not place any
limitations upon Lehman Brothers with respect to the procedures followed or
factors considered in rendering its opinion.
Upon receiving Lehman Brothers' opinion and after extensive discussion
and upon the advice of its advisors, the special committee unanimously found the
Transaction to be fair to, and in the best interests of, Heritage and
recommended that the board of directors approve the Transaction. Immediately
following this meeting of the special committee, the board of directors held a
special meeting at which it unanimously approved the Transaction and recommended
that the common unitholders approve the Transaction at a special meeting to be
called for that purpose.
5
The independent directors were paid a total of $20,000, plus
reimbursement of certain expenses, for their service on the special committee.
In addition, the independent directors waived the vesting of certain units which
would have vested as a result of the Transaction.
OUR STRUCTURE AND OWNERSHIP
Our general partner is Heritage Holdings, Inc., which is a wholly owned
subsidiary of U.S. Propane. U.S. Propane is a joint venture among the following
four publicly traded southeastern utilities:
o TECO Energy, Inc. is a diversified, energy-related holding
company. One of TECO Energy's subsidiaries is Florida's
largest natural gas distributor, serving more than 260,000
customers. Its other businesses include an electric utility
that serves over 550,000 customers and an independent power
company that builds, owns and operates electric generation
facilities in the United States and Central America.
o AGL Resources Inc. is a regional energy holding company
engaged in natural gas distribution, wholesale and retail
energy services and building telecommunications
infrastructure. AGL Resources' principal subsidiary is the
second largest pure natural gas distributor in the United
States, serving more than 1.5 million customers in Georgia and
portions of Tennessee and Virginia.
o Piedmont Natural Gas Company, Inc. is an energy and services
company primarily engaged in the transportation, distribution
and sale of natural gas. Piedmont Natural Gas Company is the
second largest natural gas distributor in the Southeast,
serving more than 690,000 customers in North Carolina, South
Carolina and Tennessee.
o Atmos Energy Corporation, which owns United Cities Propane
Gas, Inc., is an energy and services company primarily engaged
in natural gas distribution and nonregulated energy management
and gas marketing services. Atmos Energy is the fifth largest
pure natural gas distributor in the United States, serving
approximately 1.4 million customers in 11 states.
Heritage Operating, L.P., our operating subsidiary, and its
subsidiaries account for substantially all of our consolidated assets, sales and
operating earnings. Both we and Heritage Operating were formed in April, 1996 as
Delaware limited partnerships as part of an initial public offering in that
year. We and U.S. Propane, the sole owner of our general partner, are the only
limited partners of Heritage Operating with a combined 98.9899% limited partner
interest.
Our general partner, Heritage Holdings, performs all of our management
functions. Heritage Holdings holds a 1% general partner interest in us and also
owns a 1.0101% general partner interest in Heritage Operating. Our board of
directors, management and key supervisory employees own an approximate 14.5%
limited partner interest in us, which we believe helps align their interests
with those of our public unitholders.
The following charts depict our organization and ownership (i) prior to
any conversion of class B subordinated units pursuant to the Listing Proposal
and the change in our general partner pursuant to the Amendment Proposal and
(ii) after giving effect to the conversion of our class B subordinated units
pursuant to the Listing Proposal and the change in our general partner pursuant
to the Amendment Proposal. The percentages in the organization chart represent
the approximate ownership interest in our partnership and our operating
partnership individually and not on a combined basis, unlike the other
presentations in this proxy statement.
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OWNERSHIP STRUCTURE CHART
PRIOR TO CONVERSION OF CLASS B SUBORDINATED UNITS
AND CHANGE OF GENERAL PARTNER
[FLOW CHART]
7
OWNERSHIP STRUCTURE CHART
AFTER CONVERSION OF CLASS B SUBORDINATED UNITS
AND CHANGE OF GENERAL PARTNER
[FLOW CHART]
8
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(1) The members of U.S. Propane L.L.C. and their membership interests
are as follows:
o TECO Propane Ventures, LLC............................. 37.98%
o AGL Energy Corporation................................. 22.36%
o Piedmont Propane Company............................... 20.69%
o United Cities Propane Gas, Inc......................... 18.97%
------
100.00%
(2) Includes common units held by our board of directors, management
and key supervisory employees which, with the Class B subordinated units they
hold, represent an approximate 14.5% limited partner interest in our
partnership.
(3) All of the Class B subordinated units are held by members of our
board of directors or management.
(4) Does not include (i) Heritage Bi-State, L.L.C., of which Heritage
holds a 1% interest and Heritage Operating holds a 99% interest, or (ii)
Bi-State Propane, of which Heritage Bi-State, L.L.C. is a 50% owner.
Heritage Holdings does not and U.S. Propane will not receive any
management fee or other compensation in connection with its management of the
two partnerships. Heritage Holdings and its affiliates performing services for
us are reimbursed at cost for all expenses incurred on our behalf, including the
costs of compensation allocable to us, and all other expenses necessary or
appropriate to the conduct of our business, and allocable thereto.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership by certain beneficial owners, all directors and named
executive officers of our general partner, each of the named executive officers
and all directors and executive officers of our general partner as a group, of
the common units and class B subordinated units of Heritage. The information is
presented both as of November 30, 2001 and pro forma for the issuance of
1,382,514 common units upon conversion of the class B subordinated units and of
162,913 additional common units in connection with the Amendment Proposal. Our
general partner knows of no other person beneficially owning more than 5% of our
common units.
9
Pro Forma
--------------------------
Percent
Name and Address of Beneficially Percent of Beneficially of
Title of Class Beneficial Owner(1) Owned(2) Class Owned(2) Class
-------------- ------------------- ------------ ---------- ------------ ---------
Common Units James E. Bertelsmeyer(3) 153,351 1.08% 1,110,297 7.02%
H. Michael Krimbill(3) 111,500 * 322,059 2.04%
R. C. Mills(3) 103,000 * 327,509 2.07%
Larry J. Dagley 6,000 * 6,000 *
Bradley K. Atkinson 13,600 * 13,600 *
Bill W. Byrne 77,657 * 77,657 *
J. Charles Sawyer 68,157 * 68,157 *
Stephen L. Cropper 5,000 * 5,000 *
J. Patrick Reddy -- * -- *
Royston K. Eustace -- * -- *
William N. Cantrell -- * -- *
Ware F. Schiefer -- * -- *
David J. Dzuricky -- * -- *
Clayton H. Preble -- * -- *
J.D. Woodward -- * -- *
Richard T. O'Brien -- * -- *
All Directors and Executive
Officers as a group (19
persons) 616,755 4.32% 1,999,369 12.65%
Heritage Holdings(4) 4,105,977 28.79% 4,426,916 28.01%
U.S. Propane (4) 372,392 2.61% 214,366 1.36
Class B
Subordinated Units James E. Bertelsmeyer 946,946 68.49% -- --
H. Michael Krimbill 211,059 15.27% -- --
R. C. Mills 224,509 16.24% -- --
----------
* Less than one percent (1%)
(1) The address for Heritage Holdings and Mr. Krimbill is 8801 S. Yale,
Suite 310, Tulsa, Oklahoma 74317. The address for U.S. Propane is 702
N. Franklin Street, Tampa, Florida 33602. The address for Mr.
Bertelsmeyer and Mr. Mills is 5000 Sawgrass Village Circle, Suite 4,
Ponte Vedra Beach, Florida 32082.
(2) Beneficial ownership for the purposes of the foregoing table is defined
by Rule 13d-3 under the Securities Exchange Act of 1934. Under that
rule, a person is generally considered to be the beneficial owner of a
security if he has or shares the power to vote or direct the voting
thereof ("Voting Power") or to dispose or direct the disposition
thereof ("Investment Power") or has the right to acquire either of
those powers within sixty (60) days.
(3) Each of Messrs. Bertelsmeyer, Mills and Krimbill shares Voting and
Investment Power on a portion of their respective units with his
spouse.
(4) U.S. Propane owns 100% of the common stock of Heritage Holdings and may
be deemed to beneficially own the common units owned by Heritage
Holdings. AGL Propane Services, Inc., United Cities Propane Gas, Inc.,
TECO Propane Ventures, LLC and Piedmont Propane Company own a 22.36%,
18.97%, 37.97% and 20.69%, respectively, limited partner partnership
interest in U.S. Propane. U.S. Propane, L.L.C. is the
10
general partner of U.S. Propane with a .01% general partner interest.
The members of U.S. Propane L.L.C. and their respective membership
interest is as follows:
AGL Energy Corporation 22.36%
United Cities Propane Gas, Inc. 18.97%
TECO Propane Ventures, LLC 37.98%
Piedmont Propane Company 20.69%
PRICE RANGE OF COMMON UNITS AND DISTRIBUTIONS
As of November 30, 2001 there were 14,262,066 common units outstanding,
held by approximately 260 holders of record, including common units held in
street name. The common units are traded on the New York Stock Exchange under
the symbol "HPG." We also have 1,382,514 class B subordinated units outstanding,
all of which are held by Messrs. Bertelsmeyer, Krimbill and Mills. There is no
established public trading market for our class B subordinated units.
The following table sets forth, for the periods indicated, the high and
low sales prices for the common units, as reported on the New York Stock
Exchange Composite Transactions Tape, and quarterly distributions on the common
units. Distributions are shown in the quarter with respect to which they were
payable. For each quarter, an identical cash distribution was paid on all
outstanding subordinated units and, beginning with the fourth quarter of fiscal
2000, all outstanding class B subordinated units, as applicable. The last
reported sales price of common units on the New York Stock Exchange on November
30, 2001 was $28.20 per common unit.
CASH
PRICE RANGE DISTRIBUTIONS
------------------- PER COMMON
HIGH LOW UNIT
-------- -------- -------------
1999 FISCAL YEAR
First Quarter Ended November 30, 1998 ............ $ 23.750 $ 20.813 $ 0.5125
Second Quarter Ended February 28, 1999 ........... 24.000 20.875 0.5625
Third Quarter Ended May 31, 1999 ................. 23.375 21.500 0.5625
Fourth Quarter Ended August 31, 1999 ............. 23.375 21.875 0.5625
2000 FISCAL YEAR
First Quarter Ended November 30, 1999 ............ $ 23.000 $ 18.688 $ 0.5625
Second Quarter Ended February 29, 2000 ........... 19.500 16.750 0.5625
Third Quarter Ended May 31, 2000 ................. 19.125 16.500 0.5625
Fourth Quarter Ended August 31, 2000 ............. 21.250 18.563 0.5750
2001 FISCAL YEAR
First Quarter Ended November 30, 2000 ............ $ 23.875 $ 20.500 $ 0.5875
Second Quarter Ended February 28, 2001 ........... 24.900 20.125 0.6000
Third Quarter Ended May 31, 2001 ................. 31.000 23.950 0.6125
Fourth Quarter Ended August 31, 2001 ............. 31.000 25.250 0.6250
2002 FISCAL YEAR
First Quarter (through November 30, 2001) ........ $ 28.99 $ 24.65 $ --
11
DESCRIPTION OF UNITS
UNITS
Common units, class B subordinated units and class C units represent
limited partner interests in Heritage that entitle the holders thereof to the
rights and privileges specified in our partnership agreement. As of November 30,
2001, there were issued and outstanding 14,262,066 common units and 1,382,514
class B subordinated units representing, with the 1.0101% limited partner
interest in the operating partnership held by U.S. Propane, an aggregate
98.9899% limited partner interest in Heritage. Except as described below, the
common units and class B subordinated units generally participate pro rata in
Heritage's income, gains, losses, deductions, credits and distributions. There
are also 1,000,000 class C units outstanding that are entitled only to
participate in incentive distributions we may make that are attributable to
amounts received by us in connection with specified litigation.
Prior to July 6, 2001, we also had subordinated units representing
limited partner interests that were issued and outstanding, all of which
converted to common units as described below under "- Subordinated Units." Prior
to converting into common units, and except as described below, the subordinated
units generally participated pro rata with the common units and the class B
subordinated units in our income, gains, losses, deductions, credits and
distributions.
No person is entitled to preemptive rights in respect of issuances of
securities by us, except that Heritage Holdings, our general partner, is
required to purchase sufficient partnership securities to maintain its general
partner equity interest in us.
COMMON UNITS
The common units are registered under the Securities Exchange Act of
1934 and are listed for trading on the New York Stock Exchange. Each holder of a
common unit is entitled to one vote per unit on all matters presented to the
limited partners for a vote. However, if at any time any person or group (other
than our general partner and its affiliates) owns beneficially 20% or more of
all common units, any common units owned by that person or group may not be
voted on any matter and are not considered to be outstanding when sending
notices of a meeting of unitholders (unless otherwise required by law),
calculating required votes, determining the presence of a quorum or for other
similar purposes under our partnership agreement. The common units are entitled
to distributions of available cash as described below under "- Distributions."
As a result of the end of the subordination period, the common unitholders no
longer have the right to approve any issuance of common units or units senior to
the common units.
SUBORDINATED UNITS
All of the subordinated units were held by Heritage Holdings, a wholly
owned subsidiary of U.S. Propane. The subordinated units were a separate class
of our limited partner interests, and the rights of holders of subordinated
units to participate in distributions to partners differed from, and were
subordinated to, the rights of the holders of common units.
Under our partnership agreement, 925,736 subordinated units converted
into common units as of July 7, 1999, 925,736 subordinated units converted into
common units as of July 5, 2000 and the remaining 1,851,471 subordinated units
converted into common units as of July 6, 2001. The conversions of the
subordinated units occurred and the subordination period ended because we met
specified cash performance and distribution requirements during successive
four-quarter periods commencing with our initial public offering in June of
1996. The common units issued upon conversion of the subordinated units, the new
common units share equally with other common units in distributions of available
cash and vote as a class with other common units.
12
CLASS B SUBORDINATED UNITS
The class B subordinated units represent a portion of the limited
partner interests issued to certain former stockholders of Heritage Holdings,
who are also members of management, in connection with the transaction with U.S.
Propane. The class B subordinated units have the same voting rights as
subordinated units outstanding before the end of the subordination period. Each
class B subordinated unit is entitled to one vote on each matter with respect to
which the class B subordinated units are entitled to vote.
In connection with the transaction with U.S. Propane and because the
class B subordinated units are not convertible into common units except by
approval of the common unitholders or a change in the rules of the New York
Stock Exchange, we agreed to submit to a vote or consent of our common
unitholders a proposal to change the terms of the class B subordinated units to
provide that each class B subordinated unit is convertible into one common unit.
The rights of holders of class B subordinated units to participate in
distributions to partners differ from, and are subordinated to, the rights of
holders of common units. Please read "- Distributions" below. If the common
unitholders approve the conversion of the class B subordinated units into common
units, or if at any time the rules of the New York Stock Exchange or staff
interpretations of such rules are changed, or facts and circumstances arise so
that no vote or consent of the unitholders is required as a condition to the
listing of any common units that may be issued upon such conversion, each class
B subordinated unit will automatically convert into one common unit. But if the
common unitholders do not approve the conversion by March 15, 2002, the terms of
the class B subordinated units will automatically be changed to provide that the
amount allocated or distributed to each class B subordinated unit will equal
115% of the amount allocated or distributed to each common unit, except that the
common units will have priority over the class B subordinated units with respect
to the minimum quarterly distribution of $0.50 per common unit and any
arrearages on the minimum quarterly distribution.
The class B subordinated units have rights upon dissolution and
liquidation of our partnership, including the right to share in any liquidating
distributions, that are based on 100% (115% if the Listing Proposal is not
approved) of the rights of the common units. Accordingly, the amount of any
liquidating distribution to each class B subordinated unit will equal 100% (115%
if the Listing Proposal is not approved) of the amount of such distribution to
each common unit, except that the rights of the class B subordinated units will
have the same order of priority relative to the rights of the common units as
subordinated units outstanding before the end of the subordination period.
CLASS C UNITS
In conjunction with the transaction with U.S. Propane and the change of
control of our general partner, we issued 1,000,000 newly created class C units
to Heritage Holdings in conversion of that portion of its incentive distribution
rights that entitled it to receive any distribution made by us attributable to
the net amount received by us in connection with the settlement, judgment, award
or other final nonappealable resolution of specified litigation filed by us
prior to the Transaction, which we refer to as the "litigation." The class C
units have a zero initial capital account balance and were distributed by
Heritage Holdings to its former stockholders in connection with the transaction
with U.S. Propane. Thus, U.S. Propane will not receive any distributions made
with respect to the litigation.
All decisions of Heritage Holdings relating to the litigation will be
determined by a special litigation committee consisting of one or more
independent directors of Heritage Holdings. As soon as practicable after the
time, if any, that we receive the final cash payment as a result of the
resolution of the litigation, the special litigation committee will determine
the aggregate net amount of such proceeds distributable by us by deducting from
the amounts received all costs and expenses incurred by us and our affiliates in
connection with the litigation and such cash reserves as are necessary or
appropriate to provide for operating expenditures. Until the special litigation
committee decides to distribute the distributable proceeds, none of the
distributable proceeds will be deemed to be available cash under our partnership
agreement. Please read "- Distributions" below for a discussion of available
cash. When the special litigation committee decides to distribute the
distributable proceeds, the amount of the
13
distribution will be deemed to be available cash and will be distributed as
described below under "- Distributions," provided that, the amount of
distributable proceeds that would be distributed to holders of incentive
distribution rights will instead be distributed to the holders of the class C
units, pro rata. We cannot predict whether Heritage will receive any cash
payments as a result of the litigation and, if so, when such distributions might
be received.
Each holder of class C units receiving a distribution of cash in any
taxable year of our partnership will be allocated items of gross income with
respect to such taxable year in an amount equal to the cash distributed to the
holder. The holders of class C units will not be allocated any other items of
income, gain, loss, deduction or credit. The class C units do not have any
rights to share in any of our assets or distributions upon dissolution and
liquidation of our partnership, except to the extent that any such distributions
consist of proceeds from the litigation to which the class C unitholders would
have otherwise been entitled. The class C units do not have the privilege of
conversion into any other unit and do not have any voting rights except to the
extent provided by law, in which case the class C units will be entitled to one
vote.
The amount of cash distributions to which the incentive distribution
rights are entitled was not increased by the creation of the class C units;
rather, the class C units are a mechanism for dividing the incentive
distribution rights between Heritage Holdings and its former stockholders.
DISTRIBUTIONS
General. Our partnership agreement requires us to distribute all of our
"available cash" to our unitholders and our general partner within 45 days
following the end of each fiscal quarter. The term "available cash" generally
means, with respect to any fiscal quarter of our partnership, all of our cash on
hand at the end of each quarter, plus working capital borrowings after the end
of the quarter, less reserves established by our general partner in its sole
discretion to provide for the proper conduct of our business, to comply with
applicable law or agreements, or to provide funds for future distributions to
partners.
Current Distribution Policy. The subordination period ended as a result
of the conversion into common units of all remaining outstanding subordinated
units (but not class B subordinated units) as described above. Beginning with
our fiscal quarter ended August 31, 2001, we distribute available cash,
excluding any available cash to be distributed to our class C unitholders, as
follows:
First, 97% to the holders of common units, pro rata, 1% to
U.S. Propane in respect of its limited partner interest in the
operating partnership and 2% to the general partner, until the holders
of common units have received $0.50 per common unit for such quarter
and any prior quarter in which they failed to receive $0.50 per common
unit;
Second, 97% to the holders of class B subordinated units, pro
rata, 1% to U.S. Propane in respect of its limited partner interest in
the operating partnership and 2% to the general partner, until the
holders of Class B subordinated units have received $0.50 per unit for
such quarter;
Third, 97% to all common unitholders and class B subordinated
unitholders, pro rata, 1% to U.S. Propane in respect of its limited
partner interest in the operating partnership and 2% to the general
partner, until all common unitholders have received at least $0.55 per
unit for such quarter;
Fourth, 84% to all common unitholders and class B subordinated
unitholders, pro rata, 1% to U.S. Propane in respect of its limited
partner interest in the operating partnership, 13% to the holders of
incentive distribution rights, pro rata, and 2% to the general partner,
until all common unitholders have received at least $0.635 per unit for
such quarter;
Fifth, 74% to all common unitholders and class B subordinated
unitholders, pro rata, 1% to U.S. Propane in respect of its limited
partner interest in the operating partnership, 23% to the holders of
14
incentive distribution rights, pro rata, and 2% to the general partner,
until all common unitholders have received at least $0.825 per unit for
such quarter; and
Sixth, thereafter 49% to all common unitholders and class B
subordinated unitholders, pro rata, 1% to U.S. Propane in respect of
its limited partner interest in the operating partnership, 48% to the
holders of incentive distribution rights, pro rata, and 2% to the
general partner.
If the Listing Proposal and the Amendment Proposal are Not Approved. If
the common unitholders have not approved the conversion of class B subordinated
units into common units by March 15, 2002, then the amount distributed to each
class B subordinated unit pursuant to the second through sixth clauses above
will be equal to 115% of the amount distributed to each common unit pursuant to
each such clause. Accordingly, if the Listing Proposal and the Amendment
Proposal are not approved and the class B subordinated units remain outstanding,
we will distribute available cash from our operations, excluding any available
cash to be distributed to our class C units, as follows:
First, 97% to the holders of common units, pro rata, 1% to
U.S. Propane in respect of its limited partner interest in the
operating partnership and 2% to the general partner, until the holders
of common units have received $0.50 per common unit for such quarter
and any prior quarter in which they failed to receive $0.50 per common
unit;
Second, 97% to the holders of class B subordinated units, pro
rata, 1% to U.S. Propane in respect of its limited partner interest in
the operating partnership and 2% to the general partner, until the
holders of class B subordinated units have each received at least
$0.575 per class B subordinated unit for such quarter;
Third, 97% to all common unitholders and class B subordinated
unitholders, pro rata, with the class B subordinated unitholders
receiving an amount equal to 115% of the amount allocated to the common
unitholders, 1% to U.S. Propane in respect of its limited partner
interest in the operating partnership and 2% to the general partner,
until all common unitholders have received at least $0.55 per unit for
such quarter;
Fourth, 84% to all common unitholders and class B subordinated
unitholders, pro rata, with the class B subordinated unitholders
receiving an amount equal to 115% of the amount allocated to the
subordinated unitholders, 1% to U.S. Propane in respect of its limited
partner interest in the operating partnership, 13% to the holders of
incentive distribution rights, pro rata, and 2% to the general partner,
until all common unitholders have received at least $0.635 per unit for
such quarter;
Fifth, 74% to all common unitholders and class B subordinated
unitholders, pro rata, with the class B subordinated unitholders
receiving an amount equal to 115% of the amount allocated to the
subordinated unitholders, 1% to U.S. Propane in respect of its limited
partner interest in the operating partnership, 23% to the holders of
incentive distribution rights, pro rata, and 2% to the general partner,
until all common unitholders have received at least $0.825 per unit for
such quarter; and
Sixth, thereafter 49% to all common unitholders and class B
subordinated unitholders, pro rata, with the class B subordinated
unitholders receiving an amount equal to 115% of the amount allocated
to the subordinated unitholders, 1% to U.S. Propane in respect of its
limited partner interest in the operating partnership, 48% to the
holders of incentive distribution rights, pro rata, and 2% to the
general partner.
If the Listing Proposal and the Amendment Proposal are Approved. If the
Listing Proposal is approved, each class B subordinated unit will be converted
into one common unit and will then participate pro rata with the other common
units in distributions of available cash. Assuming that the Listing Proposal is
approved or the class B subordinated units are converted to common units by a
later common unitholder vote or pursuant to a change in the rules of the New
York Stock Exchange and assuming that the Amendment Proposal is approved, we
will distribute available cash from our operations, excluding any available cash
to be distributed to our class C units, as follows:
15
First, 98% to all unitholders, pro rata, and 2% to the general
partner, until all unitholders have received $0.50 per unit for such
quarter;
Second, 98% to all unitholders, pro rata, and 2% to the
general partner, until all unitholders have received $0.55 per unit for
such quarter;
Third, 85% to all unitholders, pro rata, 13% to the holders of
incentive distribution rights, pro rata, and 2% to the general partner,
until all unitholders have received $0.635 per unit for such quarter;
Fourth, 75% to all unitholders, pro rata, 23% to the holders
of incentive distribution rights, pro rata, and 2% to the general
partner, until all unitholders have received $0.825 per unit for such
quarter; and
Fifth, thereafter 50% to all unitholders, pro rata, 48% to the
holders of incentive distribution rights, pro rata, and 2% to the
general partner.
RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS
The 1,161,814 common units and the 1,382,514 class B subordinated units
issued to the former stockholders of our general partner are subject to certain
restrictions on transfer. On November 8, 2000, 473,473 of these class B
subordinated units and 624,212 of these common units became transferable and on
August 10, 2001 an additional 266,715 of the class B subordinated units and
165,700 of the common units became transferable. An additional 266,715 of the
class B subordinated units and 165,700 of the common units become transferable
on August 10, 2002, and 375,611 of the class B subordinated units and 206,202 of
the common units become transferable on August 10, 2003. The restrictions on
transfer are also subject to certain exceptions contained in the employment
agreements of certain of the former stockholders and our management.
We agreed to grant the former stockholders of Heritage Holdings certain
registration rights with respect to the class B subordinated units and common
units which they purchased in connection with the transactions with U.S.
Propane. We also agreed to pay the expenses of such registration (excluding
discounts and commissions and fees of underwriters and similar securities
industry professionals relating to the distribution of such registered units).
Upon the written request of James E. Bertelsmeyer, at any time after November 8,
2000 and prior to August 10, 2005, we have agreed to register up to one-half of
the common units and class B subordinated units acquired by Mr. Bertelsmeyer in
connection with the transaction with U.S. Propane, provided that no class B
subordinated units owned by Mr. Bertelsmeyer may be registered at his request
until Mr. Bertelsmeyer has requested that all of the common units that he
received in connection with the transaction with U.S. Propane be registered.
THE LISTING PROPOSAL
BACKGROUND
At the closing of the transactions with U.S. Propane, the former
stockholders of Heritage Holdings contributed approximately $50 million to our
partnership in exchange for a total of 2,544,328 units, consisting of 1,161,814
common units and 1,382,514 class B subordinated units. These 1,382,514 class B
subordinated units represent an 8.75% limited partner interest in our
partnership. We chose to issue some of the units as class B subordinated units
because to issue 2,544,328 common units would have required a common unitholder
vote under the rules of the New York Stock Exchange and delayed completion of
the transactions with U.S. Propane to the possible detriment of our partnership.
We wanted to be able to integrate the operations of U.S. Propane with ours and
secure propane supply before the heating season began in order to derive the
full benefit of the combined operations during the winter. Closing when we did
enabled us to accomplish this integration successfully as evidenced by the
record earnings and EBITDA reported for the fiscal year ended August 31, 2001.
For example, we were able to achieve eleven blend-ins of multiple districts in
the same city and commit for propane supply at a price which turned out to be
significantly lower than the subsequent winter prices. Over the past five
quarters, we have been able to increase our annualized distribution by $.25 per
unit, to $2.50, largely due to this successful
16
combination. The time required to obtain a common unitholder vote would have
meant that we could not have completed the transactions in that time frame.
Therefore, certain former stockholders of Heritage Holdings, who are also
members of management agreed to take class B subordinated units in lieu of
common units, provided we would ask our common unitholders to approve the
conversion of those class B subordinated units into common units at a later
date. We are now asking you to approve this conversion.
ADVANTAGES OF THE LISTING PROPOSAL
The general partner believes that the Listing Proposal is in the best
interests of Heritage and our common unitholders and should be approved for the
following reasons:
o The holders of the class B subordinated units, Messrs.
Bertelsmeyer, Krimbill and Mills, could have insisted upon
receiving common units in the Transaction, which would have
required a unitholder vote and delayed consummation of the
Transaction. Furthermore, they could have made the entire
Transaction conditioned upon such approval. In the interest of
benefiting Heritage by completing the Transaction before the
winter heating season began, Messrs. Bertelsmeyer, Krimbill
and Mills agreed to forego taking common units at that time
and to subject their receipt of common units to a vote at a
later time. This proved to be a very advantageous concession
for Heritage. As a result of the eleven blend-ins completed,
propane supply secured and more favorable winter weather,
Heritage is reporting record earnings and EBITDA. This has
translated to increased distributions to our common
unitholders. Heritage has increased the distribution five
times since closing the Transaction, representing an
annualized increase of $.25 per unit to $2.50.
o Messrs. Bertelsmeyer, Krimbill and Mills paid the same amount
of money for each of their class B subordinated units as all
other parties to the Transaction paid for their common units.
Therefore, they will not receive any purchase price advantage
by conversion to common units as compared to the parties
purchasing common units at the closing of the Transaction.
Furthermore, these class B subordinated units did not
automatically convert into common units at the end of the
subordination period like subordinated units and can only be
converted upon the approval of the common unitholders or a
change in the rules of the New York Stock Exchange.
o The special committee of independent directors of Heritage
Holdings, after extensive evaluation, negotiation and
deliberation and after receiving Lehman Brothers' fairness
opinion, found the Transaction to be fair to, and in the best
interests of, Heritage. This approval covered the terms of the
class B subordinated units, including the step-up in the
amount of the distribution to Messrs. Bertelsmeyer, Krimbill
and Mills if the Listing Proposal is defeated and the
provision in the partnership agreement seeking a vote of the
common unitholders to approve conversion.
o If the common unitholders fail to approve Listing Proposal,
the terms of the class B subordinated units will automatically
be changed to provide that the amount allocated or distributed
to each class B subordinated unit will equal 115% of the
amount allocated or distributed to each common unit, except
that the common units will have priority over the class B
subordinated units with respect to the minimum quarterly
distribution of $0.50 per common unit and any arrearages
thereon. The purpose of the step-up in the amount of the
distribution is to compensate the holders for the liquidity
discount of continuing to hold class B subordinated units, for
which there is no market. This step-up will reduce the amount
of cash available to be distributed to the common unitholders
after the minimum quarterly distribution has been paid. Based
upon the level of our current quarterly distribution, the
amount of this reduction would be approximately $520,000. This
"penalty" will continue to grow if the common unit
distribution is increased in the future.
17
DISADVANTAGES OF THE LISTING PROPOSAL
o The common units will lose their priority over the class B
subordinated units in receiving distributions. We do not
expect this to affect the amount of cash we distribute to the
common units as we have been distributing, and expect to
continue distributing, cash significantly in excess of the
minimum quarterly distribution on all common units and class B
subordinated units.
o Because the number of common units will increase, the voting
power of each common unit you own will be decreased somewhat.
However, common unitholders have limited voting rights on
matters affecting our business and have no right to elect our
general partner or its directors on an annual or other basis.
THE AMENDMENT PROPOSAL
THE AMENDMENT
The Amendment Proposal, which will amend our partnership agreement and
the partnership agreement of our operating partnership, if approved, will
accomplish the following:
o U.S. Propane will become the general partner of Heritage and
the owner of the incentive distribution rights (other than the
class C units) in place of Heritage Holdings upon conversion
of 158,026 of its common units;
o U.S. Propane will become the general partner of Heritage
Operating upon the conversion of its 1.0101% limited partner
interest in Heritage Operating into a 1.0101% general partner
interest;
o Heritage Holdings will receive 158,026 common units upon
conversion of its general partner interest in Heritage and the
incentive distribution rights;
o Heritage Holdings will contribute its 1.0101% general partner
interest in Heritage Operating to Heritage in exchange for
162,913 newly issued common units; and
o Heritage's limited partner interest in Heritage Operating will
increase by 1.0101% from 97.9798% to 98.9899%.
A copy of (i) the proposed Amendment No. 3 to Amended and Restated
Agreement of Limited Partnership of Heritage is attached to this proxy statement
as Annex A and (ii) the proposed Amendment No. 2 to Amended and Restated
Agreement of Limited Partnership of Heritage Operating is attached to this proxy
statement as Annex B.
EFFECT OF APPROVAL OF THE AMENDMENT PROPOSAL
The Amendment Proposal, if adopted, will have the following principal
effects:
o U.S. Propane will become our general partner and the owner of
the incentive distribution rights. This structure will benefit
our common unitholders by providing further incentives for
U.S. Propane to manage our business in a manner that will
continue to increase distributions to our common unitholders
and will allow for a more direct and efficient ownership
structure of our partnership.
o The common unitholders' claim on the cash flow of our
partnership will be unchanged. Although the total number of
common units will increase by 162,913 as a result of the
Transaction, any
18
dilutive effect to the public of this issuance will be offset
by the increase in Heritage's limited partner interest in
Heritage Operating, L.P. by 1.0101% from 97.9798% to 98.9899%.
o There will be no change in the ultimate ownership of the
general partner interest, as U.S. Propane indirectly owns the
general partner now.
o Your current board of directors and senior management will
continue to manage our partnership.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS OF HERITAGE HOLDINGS BELIEVES THAT BOTH
PROPOSALS ARE IN THE BEST INTERESTS OF OUR COMMON UNITHOLDERS AND UNANIMOUSLY
RECOMMENDS A VOTE "FOR" THE LISTING PROPOSAL AND "FOR" THE AMENDMENT PROPOSAL. A
SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS OF OUR GENERAL PARTNER FOUND THE
TRANSACTIONS WITH U.S. PROPANE TO BE FAIR TO, AND IN THE BEST INTERESTS OF,
HERITAGE.
THE SPECIAL MEETING
TIME AND PLACE
The special meeting will be held on , 2002, beginning at
local time at Bank of Oklahoma Tower, 7 West 2nd Street, 9th Floor,
Tulsa, Oklahoma 74137.
PURPOSE
At the special meeting, our common unitholders will act upon the
following two proposals:
o A proposal to approve (a) a change in the terms of our class B
subordinated units to provide that each class B subordinated
unit is convertible into one of our common units and (b) the
issuance of additional common units upon such conversion. Upon
approval of this proposal, all 1,382,514 outstanding class B
subordinated units will automatically convert into 1,382,514
common units.
o A proposal to amend our partnership agreement to make the
current owner of our general partner, U.S. Propane, our new
general partner in place of Heritage Holdings.
RECORD DATE
Our general partner has fixed the close of business on ,
2001 as the record date for the determination of holders of common units
entitled to notice of, and to vote at, the special meeting or any postponements
or adjournments thereof. Only holders of record of common units at the close of
business on the record date are entitled to notice of, and to vote at, the
special meeting. A complete list of such common unitholders will be available
for inspection in the offices of Heritage Propane Partners, L.P., 8801 South
Yale Avenue, Suite 310, Tulsa Oklahoma 74137, during normal business hours upon
written demand by any holder of our common units.
HOLDERS ENTITLED TO VOTE
All unitholders who owned our common units at the close of business on
the record date, , 2001, are entitled to receive notice of the
special meeting and to vote the common units that they held on the record date
at the special meeting, or any postponements or adjournments of the special
meeting; provided that, any person or group (other than our general partner and
its affiliates) that owns beneficially 20% or more of all our common units may
not vote on any matter and common units held by such holders are not considered
to be outstanding.
19
Each common unitholder is entitled to one vote for each common unit
owned on all matters to be considered. On , 2001,
common units were issued and outstanding.
VOTE REQUIRED
The Listing Proposal requires the approval of a majority of the common
units cast at the special meeting, provided that the total votes cast on the
Listing Proposal represent a majority of the common units entitled to vote. The
Amendment Proposal requires the approval of a majority of common units entitled
to vote and outstanding as of the record date and a majority of class B
subordinated units entitled to vote and outstanding as of the record date, each
voting as a separate class. A properly executed proxy submitted without
instructions how to vote will be voted (except to the extent that the authority
to vote has been withheld) FOR the Listing Proposal and FOR the Amendment
Proposal. A properly executed proxy marked "ABSTAIN" with respect to any matter
will not be voted. Accordingly, an abstention, or the failure to vote at all,
will have the effect of a vote against the Amendment Proposal. Therefore, your
vote is important and we urge you to vote. Neither the Listing Proposal nor the
Amendment Proposal is conditioned on the approval of any other proposal.
Our general partner, U.S. Propane and the former stockholders of our
general partner hold 4,105,977, 372,392 and 1,337,426 of our common units,
respectively, or an aggregate of 40.8% of our outstanding common units. U.S.
Propane and the former stockholders of our general partner have agreed to vote
their combined 1,534,206 common units received in the transactions with U.S.
Propane in proportion to the votes cast on the Listing Proposal by other holders
and our general partner has stated its intention to vote all of its common units
in favor of the Listing Proposal. The former stockholders have also stated their
intention to vote all of their remaining 175,612 common units in favor of the
Listing Proposal. These parties have also stated their intention to vote all of
their common units in favor of the Amendment Proposal. The approval of these
proposals by our general partner, U.S. Propane and the former stockholders of
our general partner is not sufficient to approve these proposals. Thus, we
encourage you to take part in the decision process by voting by proxy or at the
special meeting. The class B subordinated unitholders have already unanimously
approved the Amendment Proposal and are not required to approve the Listing
Proposal.
Under New York Stock Exchange rules, brokers who hold common units in
street name for customers have the authority to vote on certain "routine"
proposals when they have not received instructions from beneficial owners.
However, absent specific instructions from the beneficial owner of such common
units, brokers may elect to not vote such common units with respect to the
approval and adoption of a proposal, known as "broker non-votes." Since an
affirmative vote of holders of a majority of the common units is required to
approve the Amendment Proposal, a broker non-vote will have the effect of a vote
against the Amendment Proposal. Assuming that the votes cast on the Listing
Proposal constitute a majority of the votes entitled to be cast, a broker
non-vote will not have any effect on the Listing Proposal since its approval
requires the support of only a majority of the votes cast.
QUORUM
If a majority of our outstanding common units on the record date is
present in person or by proxy at the special meeting, that majority will
constitute a quorum and will permit us to conduct the proposed business at the
special meeting. Your common units will be counted as present at the special
meeting if you:
o are present and vote in person at the meeting; or
o have properly submitted a proxy card.
Proxies received but marked as abstentions and broker non-votes will be
included in the number of common units considered to be present at the special
meeting.
20
REVOCATION OF PROXIES
Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with the Secretary of Heritage
Holdings either a notice of revocation or a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if you attend the
special meeting in person and so request. Please note that attendance at the
special meeting will not by itself revoke a previously granted proxy.
SOLICITATION
The expense of preparing, printing and mailing this proxy statement and
the proxies solicited hereby will be borne by our partnership. In addition to
the use of the mails, proxies may be solicited by employees of the general
partner, without additional remuneration, in person or by telephone, telegraph
or facsimile transmission. We will also request brokerage firms, banks,
nominees, custodians and fiduciaries to forward proxy materials to the
beneficial owners of our common units as of the record date and will provide
reimbursement for the cost of forwarding the proxy materials in accordance with
customary practice. We have retained Innisfree M&A Incorporated to aid in the
solicitation of proxies. We will pay to third parties a total of approximately
$15,000, plus out of pocket expenses, for all of these services. Your
cooperation in promptly signing and returning the enclosed proxy card will help
to avoid additional expense.
ADJOURNMENT
The special meeting may be adjourned to another date and/or place for
any proper purposes (including, without limitation, for the purpose of
soliciting additional proxies).
NO UNITHOLDER PROPOSALS
Your common units do not entitle you to make proposals at the special
meeting. Under our partnership agreement, only our general partner can make a
proposal at the meeting. Our partnership agreement establishes a procedure for
calling meetings whereby limited partners owning 20% or more of the outstanding
units of the class for which a meeting is proposed may call a meeting. In any
case, limited partners are not allowed to vote on matters that would cause the
limited partners to be deemed to be taking part in the management and control of
the business and affairs of the partnership. Doing so would jeopardize the
limited partners' limited liability under the Delaware Act or the law of any
other state in which we are qualified to do business.
DISSENTER'S RIGHTS
We were formed under the laws of the State of Delaware. Under those
laws, dissenters' rights are not available to our common unitholders with
respect to the matters to be voted on at the special meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT
INFORMATION. THIS PROXY STATEMENT IS DATED , 2001. YOU SHOULD ASSUME
THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF THAT
DATE ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
THIS PROXY STATEMENT INCORPORATES BY REFERENCE CERTAIN DOCUMENTS
CONCERNING HERITAGE PROPANE PARTNERS, L.P. THAT ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. HERITAGE PROPANE PARTNERS, L.P. UNDERTAKES TO PROVIDE COPIES
OF SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS
ARE SPECIFICALLY INCORPORATED BY REFERENCE), WITHOUT CHARGE AND BY FIRST CLASS
MAIL OR OTHER EQUALLY PROMPT MEANS WITHIN ONE BUSINESS DAY OF RECEIPT OF SUCH
REQUEST, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF COMMON UNITS, TO WHOM
21
THIS PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO HERITAGE
PROPANE PARTNERS, L.P., 8801 SOUTH YALE AVENUE, SUITE 310, TULSA, OKLAHOMA
74137, ATTENTION: LARRY J. DAGLEY, (918) 492-7272. IN ORDER TO ENSURE DELIVERY
OF DOCUMENTS PRIOR TO THE SPECIAL MEETING, REQUESTS SHOULD BE RECEIVED BY
, 2002.
FORWARD-LOOKING STATEMENTS
This proxy statement contains statements that constitute "forward
looking statements" within the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act. In general, any statement other than
a statement of historical fact is a forward looking statement. These statements
appear in a number of places in this proxy statement and include statements
regarding our plans, beliefs, estimates, projections and expectations. Actual
results may differ materially from those anticipated or projected by
forward-looking statements. Any differences could result from a variety of
factors, including, among others:
o changes in general economic conditions in the United States as
well as changes in general economic conditions and currencies
in foreign countries;
o weather conditions that vary significantly from historically
normal conditions;
o our success in hedging our positions;
o the general level of petroleum product demand, and the
availability of propane supplies;
o energy prices generally and specifically, the price of propane
to the consumer compared to the price of alternative and
competing fuels;
o competition from other propane distributors and alternate
fuels;
o the availability and cost of capital;
o changes in laws and regulations to which we are subject,
including tax, environmental and employment regulations;
o our ability to generate available cash for distribution to
unitholders;
o the costs and effects of legal and administrative proceedings
against us or which may be brought against us;
o our ability to sustain historical levels of internal growth;
and
o our ability to continue to locate and acquire other propane
companies at purchase prices that are accretive to our
financial results.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and special reports and other information
with the Securities and Exchange Commission. You may read and copy any of these
documents at the Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. (Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the public reference room.) You may
also read and copy any of these documents at either of the following Regional
Offices of the Commission: New York Regional Office, 233 Broadway, New York, New
York 10279 and Chicago Regional Office, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of the material may be
obtained by mail at prescribed rates from the Public Reference
22
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Our common units are listed on the New York Stock
Exchange. Reports and other information concerning us may be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005. Our filings also are available to the public at the Commission's web site
at http://www.sec.gov. You may also request a copy of our filings by contacting
our Secretary, c/o Heritage Propane Partners, L.P., 8801 South Yale Avenue,
Suite 310, Tulsa, Oklahoma 74137.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Heritage Propane Partners, L.P. with
the Securities and Exchange Commission pursuant to the Exchange Act are
incorporated herein by reference:
(a) Annual Report on Form 10-K for the fiscal year ended August
31, 2001; and
(b) The description of the common units in our registration
statement on Form 8-A (File No. 1-11727) filed pursuant to the
Securities Exchange Act of 1934 on May 14, 1996 and any
amendments or reports filed to update the description.
All documents filed by Heritage Propane Partners, L.P. pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this proxy statement and prior to the date of the special meeting shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this proxy statement to the extent
that a statement contained herein or in any other subsequently filed document
that also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
proxy statement.
23
ANNEX A
AMENDMENT NO. 3
TO
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
HERITAGE PROPANE PARTNERS, L.P.
This Amendment (this "Amendment") to the Amended and Restated Agreement
of Limited Partnership of Heritage Propane Partners, L.P., a Delaware limited
partnership (the "Partnership"), dated as of June 27, 1996, as amended as of
August 9, 2000 and as of January 5, 2001 (as so amended, the "Partnership
Agreement"), is entered into effective as of _____________ by Heritage Holdings,
Inc., a Delaware corporation ("HHI"), as the general partner of the Partnership,
on behalf of itself and the Limited Partners of the Partnership, and U.S.
Propane, L.P., a Delaware limited partnership ("U.S. Propane"), as the successor
general partner of the Partnership. Capitalized terms used but not defined
herein are used as defined in the Partnership Agreement.
RECITALS
WHEREAS, this Amendment has been approved by the requisite vote of the
Partners of the Partnership;
NOW, THEREFORE, the Partnership Agreement is hereby amended as follows:
SECTION 1. CONVERSION TRANSACTIONS. The following transactions shall
occur immediately after execution hereof:
1. 158,026 of the Common Units owned by U.S. Propane will be converted
into a 1% General Partner Partnership Interest in the Partnership and into the
Incentive Distribution Rights (less those Incentive Distribution Rights
previously converted into Class C Units) and U.S. Propane will be admitted as a
successor General Partner of the Partnership.
2. The 1% General Partner Partnership Interest in the Partnership and
the Incentive Distribution Rights owned by HHI (which do not include those
Incentive Distribution Rights previously converted into Class C Units) will be
converted into 158,026 Common Units and HHI will withdraw as a general partner
of the Partnership.
3. HHI will contribute its 1.0101% General Partner Partnership Interest
in the Operating Partnership to the Partnership in exchange for 162,913 Common
Units.
SECTION 2. INAPPLICABILITY OF SECTION 11.3. The provisions of Section
11.3 (other than the last sentence of Section 11.3(a)) shall not be applicable
to the withdrawal of HHI as a general partner of the Partnership and the
Operating Partnership and the only amounts due to HHI for its Combined Interest
shall be as set forth in this Amendment, Amendment No. 1 and Amendment No. 2 to
the Amended and Restated Agreement of Limited Partnership of the Operating
Partnership.
SECTION 3. ASSUMPTION OF GENERAL PARTNER RIGHTS AND DUTIES. U.S.
Propane hereby agrees to assume the rights and duties of the General Partner
under the Partnership Agreement.
SECTION 4. RATIFICATION OF PARTNERSHIP AGREEMENT. Except as expressly
modified and amended herein, all of the terms and conditions of the Partnership
Agreement shall remain in full force and effect.
SECTION 5. GOVERNING LAW. This Amendment shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
SECTION 6. COUNTERPARTS. This Amendment may be executed in
counterparts, all of which together shall constitute an agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart.
A-1
IN WITNESS WHEREOF, this Amendment has been executed as of the date
first written above.
GENERAL PARTNER:
Heritage Holdings, Inc.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
LIMITED PARTNERS:
All Limited Partners now and
hereafter admitted as limited
partners of the Partnership,
pursuant to Powers of Attorney now
and hereafter executed in favor of,
and granted and delivered to, the
General Partner.
By: Heritage Holdings, Inc., General
Partner, as attorney-in-fact for all
Limited Partners pursuant to the
Powers of Attorney granted pursuant
to Section 2.6 of the Partnership
Agreement.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
SUCCESSOR GENERAL PARTNER:
U.S. Propane, L.P.
By: U.S. Propane, L.L.C.
its general partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
A-2
ANNEX B
AMENDMENT NO. 2
TO
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
HERITAGE OPERATING, L.P.
This Amendment No. 2 (this "Amendment") to the Amended and Restated
Agreement of Limited Partnership of Heritage Operating, L.P., a Delaware limited
partnership (the "Partnership"), dated as of June 27, 1996 and amended as of
August 10, 2000 (as so amended, the "Partnership Agreement"), is entered into
effective as of by Heritage Holdings, Inc., a Delaware corporation
("HHI"), as the general partner of the Partnership, Heritage Propane Partners,
L.P., a Delaware limited partnership (the "MLP"), as a limited partner of the
Partnership, and U.S. Propane, L.P., a Delaware limited partnership ("U.S.
Propane"), as a limited partner and the successor general partner of the
Partnership. Capitalized terms used but not defined herein are used as defined
in the Partnership Agreement.
RECITALS
WHEREAS, this Amendment has been approved by the requisite vote of the
Partners of the Partnership and the MLP;
NOW, THEREFORE, the Partnership Agreement is hereby amended as follows:
SECTION 1. CONVERSION TRANSACTIONS. The following transactions shall
occur immediately after execution hereof:
1. The 1.0101% Limited Partner Partnership Interest in the Partnership
owned by U.S. Propane will be converted into a 1.0101% General Partner
Partnership Interest in the Partnership and U.S. Propane will be admitted as a
successor General Partner of the Partnership.
2. Upon the contribution by HHI of its 1.0101% General Partner
Partnership Interest in the Partnership to the MLP in exchange for 162,913
Common Units, the MLP will be admitted as a successor General Partner of the
Partnership and HHI will withdraw as a General Partner of the Partnership.
3. The 1.0101% General Partner Partnership Interest in the Partnership
owned by the MLP will be converted into a 1.0101% Limited Partner Partnership
Interest in the Partnership and the MLP will withdraw as a General Partner of
the Partnership.
SECTION 2. INAPPLICABILITY OF SECTION 11.3. The provisions of Section
11.3 (other than Section 11.3(b)) shall not be applicable to the withdrawal of
HHI as a general partner of the Partnership and the only amounts due to HHI for
its Partnership Interest shall be as set forth in this Amendment and Amendment
No. 3 to the Amended and Restated Agreement of Limited Partnership of the MLP.
SECTION 3. ASSUMPTION OF GENERAL PARTNER RIGHTS AND DUTIES. U.S.
Propane hereby agrees to assume the rights and duties of the General Partner
under the Partnership Agreement.
SECTION 4. RATIFICATION OF PARTNERSHIP AGREEMENT. Except as expressly
modified and amended herein, all of the terms and conditions of the Partnership
Agreement shall remain in full force and effect.
SECTION 5. GOVERNING LAW. This Amendment shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
SECTION 6. COUNTERPARTS. This Amendment may be executed in
counterparts, all of which together shall constitute an agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart.
B-1
IN WITNESS WHEREOF, this Amendment has been executed as of the date
first written above.
GENERAL PARTNER:
Heritage Holdings, Inc.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
LIMITED PARTNERS:
Heritage Propane Partners, L.P.
By: Heritage Holdings, Inc.,
its general partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
U.S. Propane, L.P.
By: U.S. Propane, L.L.C.,
its general partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
U.S. PROPANE, L.P.
By: U.S. Propane, L.L.C.,
its general partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
B-2
PROXY
HERITAGE PROPANE PARTNERS, L.P.
SPECIAL MEETING - , 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
HERITAGE HOLDINGS, INC.
The undersigned, whose signature appears on the reverse, hereby
appoints H. Michael Krimbill and Larry J. Dagley or each of them, proxies with
full power of substitution for and in the name of the undersigned to vote all
the common units of Heritage Propane Partners, L.P. which the undersigned would
be entitled to vote if personally present at the special meeting to be held on
, 2002, and at any and all adjournments thereof, on all matters that
may properly come before the special meeting.
Your common units will be voted as directed on this card. IF THIS CARD
IS SIGNED AND NO DIRECTION IS GIVEN FOR ANY ITEM, IT WILL BE VOTED IN FAVOR OF
BOTH ITEMS.
Please sign and date this card on the reverse, tear off at the
perforation, and mail promptly in the enclosed postage-paid envelope.
If you have any comments or a change of address, mark the appropriate
box on the reverse side and use the following space:
YOUR VOTE IS IMPORTANT. BY RETURNING YOUR PROXY PROMPTLY, YOU CAN AVOID
THE INCONVENIENCE OF RECEIVING FOLLOW-UP MAILINGS AND HELP HERITAGE PROPANE
PARTNERS, L.P. AVOID ADDITIONAL EXPENSES.
(Continued and to be signed on reverse side)
SEE REVERSE SIDE
DETACH HERE
[X]
PLEASE MARK VOTES
AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS OF HERITAGE HOLDINGS, INC., OUR GENERAL PARTNER,
UNANIMOUSLY RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. A proposal to (a) approve a change in the terms of our class B
subordinated units to provide that each class B subordinated
unit is convertible into one of our common units and (b) the
issuance of additional common units upon such conversion.
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
2. A proposal to amend our partnership agreement to make the
current owner of our general partner, U.S. Propane, L.P., our
new general partner in place of Heritage Holdings, Inc.
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
MARK HERE FOR COMMENTS OR ADDRESS CHANGE
AND NOTE ON REVERSE SIDE [ ]
NOTE: Your signature should conform with
your name as printed above. Please sign
exactly as your name appears hereon.
Joint owners should each sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such.
Signature: Date:
------------------------ -----------
Signature: Date:
------------------------ -----------