Subscription Agreement - Dated June 15, 2000

EXHIBIT 10.18


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COMMON UNITS
REPRESENTING COMMON LIMITED PARTNER INTERESTS
AND
CLASS B SUBORDINATED UNITS
REPRESENTING CLASS B SUBORDINATED LIMITED PARTNER INTERESTS


HERITAGE PROPANE PARTNERS, L.P.


SUBSCRIPTION AGREEMENT


JUNE 15, 2000


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TABLE OF CONTENTS


ARTICLE 1 DEFINITIONS.............................................................................................1


1.1 Certain Defined Terms...............................................................................1
1.2 Certain Additional Defined Terms....................................................................1
1.3 Construction........................................................................................2


ARTICLE 2 CLOSING.................................................................................................2


2.1 Purchase and Sale of Units..........................................................................3
2.2 Delivery and Payment of Cash Purchase Price.........................................................3


ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE HERITAGE GP STOCKHOLDERS..........................................3


3.1 Private Placement Exemption.........................................................................3
3.2 SEC Reports.........................................................................................4
3.3 Investment Risk.....................................................................................4
3.4 Adequate Net Worth..................................................................................4
3.5 Investment Intent...................................................................................4
3.6 Restrictions on Transferability.....................................................................5
3.7 No SEC Review.......................................................................................5
3.8 Deliveries..........................................................................................5


ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF HERITAGE MLP..........................................................5


ARTICLE 5 AGREEMENTS OF THE PARTIES...............................................................................6


5.1 Costs and Expenses of Heritage MLP..................................................................6
5.2 Use of Proceeds.....................................................................................6
5.3 Preparation of Proxy................................................................................6
5.4 Vote of Common Units................................................................................6
5.5 Actions by Parties..................................................................................6


ARTICLE 6 CONDITIONS TO OBLIGATIONS OF THE PARTIES................................................................7


6.1 Conditions to Closing of the Heritage GP Stockholders...............................................7
6.2 Conditions to Closing of Heritage MLP...............................................................8


ARTICLE 7 INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS............................................................8


7.1 Indemnification Obligations of the Heritage GP Stockholders.........................................8
7.2 Indemnification Obligations of Heritage MLP.........................................................9
7.3 Indemnification Procedures.........................................................................10
7.4 Survival...........................................................................................11
7.5 No Special or Consequential Damages................................................................11


ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER......................................................................12


8.1 Termination........................................................................................12
8.2 Effect of Termination..............................................................................12
8.3 Amendment..........................................................................................13
8.4 Waiver.............................................................................................13


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ARTICLE 9 MISCELLANEOUS..........................................................................................13


9.1 Notices............................................................................................13
9.2 Entire Agreement...................................................................................13
9.3 Binding Effect; Assignment; No Third Party Benefit.................................................14
9.4 Severability.......................................................................................14
9.5 Governing Law......................................................................................14
9.6 Jurisdiction.......................................................................................14
9.7 Further Assurances.................................................................................14
9.8 Descriptive Headings...............................................................................14
9.9 Counterparts.......................................................................................15
9.10 Dispute Resolution.................................................................................15


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EXHIBITS Exhibit 1.1 - Definitions Exhibit 6.1(d) - Registration Rights Agreement Exhibit 6.1(e) - Amendment No. 1 Exhibit 9.10 - Dispute Resolutions


ANNEXES


Annex I - Units Purchased Annex II - Form of Legend on Units Annex III - Form of Certificate for Units Annex IV - Application for Issuance of Units Annex V - Investment Suitability Form for Heritage GP Stockholder


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SUBSCRIPTION AGREEMENT


This Subscription Agreement (this "Agreement"), dated as of June 15, 2000, is entered into by and among the following:


1. Heritage Propane Partners, L.P., a Delaware limited partnership
("Heritage MLP"); and


2. James E. Bertelsmeyer and Donna C. Bertelsmeyer, as Tenants by the
Entireties; H. Michael Krimbill; R. C. Mills; G. A. Darr; The Beth
Elise Bertelsmeyer Snapp Trust; The Amy Rene Bertelsmeyer Trust; The
John D. Capps Trust; J. Charles Sawyer; Bill W. Byrne; Robert K.
Blackman; Byron Jay Cook; Blaine L. Cronn; Mark A. Darr; Larry J.
Lindsey; Ray S. Parsons; Charles B. Pass; Kermit V. Jacobsen; Thomas H.
Rose; C. H. Timberlake, III; Curtis L. Weishahn; William V. Cody; James
C. Hamilton, II; and Jack McKeehan (collectively, the "Heritage GP
Stockholders").


RECITALS


1. Each of the Heritage GP Stockholders has agreed to purchase Common
Units or Class B subordinated limited partner interests ("Class B
Subordinated Units" and, together with the Common Units to be issued
under this Agreement, the "Units") of Heritage MLP at a cash purchase
price (the "Cash Purchase Price") set forth opposite such GP
Stockholder's name in Annex I hereto on the terms and subject to the
conditions set forth in this Subscription Agreement;


2. Heritage MLP and each of the Heritage GP Stockholders have executed and
delivered this Agreement to acknowledge each such Person's obligation
to purchase or sell the Units; and


3. Heritage Holdings, Inc., a Delaware Corporation ("Heritage GP") is the
sole general partner of Heritage MLP.


AGREEMENT


The Parties hereby agree as follows:


ARTICLE 1
DEFINITIONS


1.1 CERTAIN DEFINED TERMS. As used in this Agreement, each capitalized term used herein but not defined has the meaning given to it in the Contribution Agreement.


1.2 CERTAIN ADDITIONAL DEFINED TERMS. In addition to such terms as are defined in Section 1.1, the following terms are used in this Agreement as defined in the Articles or Sections set forth opposite such terms:


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Defined Term Article or Section Reference
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Agreement Preamble
Amendment No. 1 6.1(e)
Average Price Annex I, Part 2
Cash Purchase Price Recitals
Class B Subordinated Units Recitals
Closing Article 2
Closing Date Article 2
Contribution Agreement 2.2
Conversion 5.3
Heritage GP Recitals
Heritage GP Stockholders Preamble
Heritage MLP Preamble
Heritage OLP 2.2(a)
indemnified Party 7.3(a)
indemnifying Party 7.3(a)
Losses 7.1
Registration Rights Agreement 6.1(d)
SEC 3.2
SEC Reports 3.2
Securities Act 3.1
Stock Purchase Agreement 2.2(a)
Third Party Action 7.3(a)
Unitholders 5.3
Units Recitals


1.3 CONSTRUCTION. Unless the context requires otherwise: (a) the gender (or lack of gender) of all words used in this Agreement includes the masculine, feminine, and neuter; (b) the term "include" or "includes" means "includes, without limitation," and "including" means "including, without limitation"; (c) references to Articles and Sections refer to Articles and Sections of this Agreement; (d) references to Annexes, Exhibits and Schedules refer to the Annexes, Exhibits and Schedules attached to this Agreement, which are made a part hereof for all purposes; (e) references to Laws refer to such Laws as they may be amended from time to time, and references to particular provisions of a Law include any corresponding provisions of any succeeding Law; and (f) references to money refer to legal currency of the United States of America.


ARTICLE 2
CLOSING


The Closing of the transactions contemplated by Article 2 (the "Closing") will take place at the offices of Andrews & Kurth L.L.P., Houston, Texas and will be effective as of 12:01 a.m., Houston, Texas Time, on the closing date under the Contribution Agreement, or at such other time or place or on such other date as the Parties agree in writing (the "Closing Date"). Except for purposes of Section 2.1, all Closing transactions will be deemed to have occurred simultaneously.


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2.1 PURCHASE AND SALE OF UNITS.


(a) On the basis of the representations, warranties and agreements of Heritage MLP herein contained and for other good and valuable consideration the sufficiency of which is hereby acknowledged, subject to all the terms and conditions of this Agreement, Heritage MLP agrees to issue and sell to each of the Heritage GP Stockholders, and each of such Heritage GP Stockholders, severally and not jointly, agrees to purchase from Heritage MLP, for a Cash Purchase Price set forth opposite the name of such Heritage GP Stockholder in Part 1 of Annex I, such number of Units as determined in accordance with Part 2 of Annex I, and such type of Units as determined in accordance with Part 3 of Annex I.


(b) The certificates for Units to be issued to the Heritage GP Stockholders shall bear a legend substantially in the form attached hereto as Annex II(B).


(c) The certificate for the Class B Subordinated Units shall be substantially in the form attached hereto as Annex III. The certificate for the Common Units shall be the certificate adopted and currently used for Common Units by Heritage MLP.


2.2 DELIVERY AND PAYMENT OF CASH PURCHASE PRICE.


(a) Delivery of the Units sold to each of the Heritage GP Stockholders purchasing Units at the Closing shall be made to the addresses specified under such Heritage GP Stockholder's name on Annex I or at such other address as a Heritage GP Stockholder may specify to Heritage MLP not later than 48 hours preceding the Closing. The Closing shall occur promptly after all of the conditions to closing specified in (i) the Contribution Agreement of even date herewith, among U.S. Propane, LP., Heritage Operating, L.P., a Delaware limited partnership ("Heritage OLP") and Heritage MLP (the "Contribution Agreement") and (ii) the Stock Purchase Agreement of even date herewith, among U.S. Propane, L.P., each of the Heritage GP Stockholders and FHS Investments, L.L.C., a Nevada limited liability company (the "Stock Purchase Agreement"), have been satisfied or waived.


(b) The cost of original issue tax stamps, if any, in connection with the issuance and delivery of the Units by Heritage MLP to the respective Heritage GP Stockholders shall be borne by Heritage MLP. Heritage MLP will pay and hold each of the Heritage GP Stockholders harmless for any and all liabilities with respect to or resulting from any failure or delay in paying federal and state stamp and other transfer taxes, if any, which may be payable or determined to be payable in connection with the original issuance or sale of the Units to the Heritage GP Stockholders.


ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE HERITAGE GP STOCKHOLDERS


For the purposes of this Agreement, each of the Heritage GP Stockholders, severally and not jointly, hereby represents and warrants to Heritage MLP as follows:


3.1 PRIVATE PLACEMENT EXEMPTION. Such Heritage GP Stockholder hereby acknowledges its understanding that the offering and sale of the Units will not be registered under the Securities


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Act of 1933, as amended (the "Securities Act"), and will not be registered or qualified under the securities laws of any state, and is intended by Heritage MLP to qualify as an offering not involving a public offering within the meaning of Section 4(2) of the Securities Act and Regulation D promulgated thereunder and, therefore, to be exempt from the registration provisions of the Securities Act. The offering and sale of Units to the Heritage GP Stockholders is a private offering made only to certain qualified persons. Accordingly, the offering of the Units is being made pursuant to certain conditions, which, if satisfied, should qualify the offering for the private placement exemption provided by Regulation D. These conditions relate to limitations on the manner of offering, the nature of the offerees, the state of residence of investors, access to or furnishing information about the issuer, limitations on the number of purchasers and limitations on the subsequent disposition of the securities acquired. In connection therewith, each of the Heritage GP Stockholders hereby represents to Heritage MLP that the undersigned is an "accredited investor" as such term is defined in Regulation D promulgated under the Securities Act.


3.2 SEC REPORTS. Such Heritage GP Stockholder represents that (a) it and its purchaser representative (if any) has received copies (or copies have been made available to such Person(s)) of Heritage MLP's annual report on Form 10-K for the year ended August 31, 1999 and quarterly reports on Form 10-Q filed by Heritage MLP with the Securities and Exchange Commission (the "SEC") since August 31, 1999 (the "SEC Reports"); (b) Heritage MLP has made available to the Heritage GP Stockholder and its purchaser representative (if any) the opportunity to ask questions, receive answers and to obtain any information that the Heritage GP Stockholder and its purchaser representative (if any) believed was or might be material to an evaluation of the merits and risks of an investment in the Units or necessary to verify the accuracy of information previously furnished by Heritage MLP; and (c) the Heritage GP Stockholder and its purchaser representative (if any) together have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of an investment in the Units.


3.3 INVESTMENT RISK. Such Heritage GP Stockholder recognizes that an investment in the Units is a speculative investment involving a high degree of risk.


3.4 ADEQUATE NET WORTH. Such Heritage GP Stockholder has adequate net worth and means of providing for the Heritage GP Stockholder's current needs and possible personal contingencies, and the Heritage GP Stockholder has no need, and anticipates no need in the foreseeable future, to sell the Units which the Heritage GP Stockholder proposes to purchase. The Heritage GP Stockholder is able to bear the economic risks of this investment and, consequently, without limiting the generality of the foregoing, the Heritage GP Stockholder is able to hold such Heritage GP Stockholder's Units for an indefinite period of time and has a sufficient net worth to sustain a loss of such Heritage GP Stockholder's entire investment in such Units if such loss should occur.


3.5 INVESTMENT INTENT. The Units that may be acquired by the Heritage GP Stockholder will be acquired for the account of the Heritage GP Stockholder for investment only and not for the benefit of any other person or with a view toward resale or redistribution in a manner that could require registration under the Securities Act, and the Heritage GP Stockholder does not now have any reason to anticipate any change in the Heritage GP Stockholder's circumstances or other


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particular occasion or event that would cause the Heritage GP Stockholder to sell such Heritage GP Stockholder's Units.


3.6 RESTRICTIONS ON TRANSFERABILITY. Such Heritage GP Stockholder acknowledges that substantial restrictions will be imposed on the transferability of the Units. Because the Units will not be registered under the Securities Act or any other applicable state securities law, the Units may not be, and the Heritage GP Stockholder agrees that the Units shall not be, sold or otherwise transferred unless (i) such sale or transfer is registered pursuant to any laws that are applicable to such sale or is exempt from such registration under the Securities Act, and any other applicable state securities or "Blue Sky" laws or regulations and (ii) Heritage MLP has received an opinion of counsel acceptable to it to such effect. In addition, the Units will be subject to the restrictions on transfer contained in the employment or consulting agreement to be entered into on the Closing Date between Heritage GP and such Heritage GP Stockholder.


3.7 NO SEC REVIEW. Such Heritage GP Stockholder acknowledges that such Heritage GP Stockholder has been advised that:


None of the Units have been approved or disapproved by the SEC or any
state securities commission nor has the SEC or any state securities
commission passed upon the accuracy or adequacy of any information
provided to the Heritage GP Stockholders of the Units. Any
representation to the contrary is a criminal offense.


The Units are subject to restrictions on transferability and resale and
may not be transferred or resold except as permitted under the
Securities Act, and applicable state securities or "Blue Sky" laws,
pursuant to registration or exemption therefrom. In addition, the Units
are subject to the transfer restrictions applicable to such Heritage GP
Stockholder and described in the restrictive legend attached as Annex
II.


3.8 DELIVERIES. Prior to Closing, each of the Heritage GP Stockholders shall complete, execute and deliver to Heritage a copy of the forms attached hereto as Annexes IV and V.


ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF HERITAGE MLP


For the purposes of this Agreement, Heritage MLP represents and warrants as set forth in this Article 4. The representations and warranties set forth in Article 4 of the Contribution Agreement and the related sections of the Disclosure Letters and definitions to the Contribution Agreement are restated hereby and incorporated herein by reference, except that the representations and warranties made herein are made by Heritage MLP as if it were the LP as set forth in Article 4 of the Contribution Agreement. The representations and warranties incorporated by reference in this Agreement shall be identified by the section numbers set forth in Article 4 of the Contribution Agreement, except for the insertion of the letters "SA" in front of each such section number or article number. Heritage MLP makes no representation or warranty that would relate to any of the Heritage Assets or Business (each as defined in the Contribution Agreement).


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ARTICLE 5
AGREEMENTS OF THE PARTIES


Heritage MLP agrees with the Heritage GP Stockholders as provided in Sections 5.1, 5.2, 5.3 and 5.5 and Heritage GP agrees with the Heritage GP Stockholders as provided in Sections 5.4 and 5.5.


5.1 COSTS AND EXPENSES OF HERITAGE MLP. Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, Heritage MLP will pay, or reimburse if paid by the Heritage GP Stockholders, all costs and expenses incident to the performance of the obligations of Heritage MLP under this Agreement, including but not limited to costs and expenses of or relating to (i) the preparation, printing and filing with the SEC of the proxy statement and any documents so required to be filed with the SEC by Heritage MLP with respect to this Agreement or the transactions contemplated hereby, (ii) the preparation and delivery of certificates representing the Units to be issued at the Closing, (iii) the word processing, printing and reproduction of this Agreement, (iv) the registration or qualification of the Units for offer and sale under the securities or Blue Sky laws of such jurisdictions as Heritage MLP determines to be necessary or appropriate, and (v) the transfer agent for the Units.


5.2 USE OF PROCEEDS. Heritage MLP will apply the net proceeds from the offering and sale of the Units to be issued and sold by Heritage MLP pursuant to this Agreement to repay within 30 days a portion of the indebtedness incurred by Heritage OLP to consummate the transactions contemplated by the Contribution Agreement.


5.3 PREPARATION OF PROXY. As promptly as possible (but no later than 150 days) following the date of this Agreement, Heritage MLP shall prepare and file with the SEC a proxy statement soliciting the approval of holders of the Common Units of Heritage MLP (the "Unitholders") in favor of conversion of the Class B Subordinated Units to Common Units (the "Conversion"). If the Conversion has not been approved as of the end of the Subordination Period (as defined in the Heritage MLP Partnership Agreement), Heritage MLP shall prepare and file with the SEC an additional proxy statement soliciting the approval of the Unitholders in favor of the Conversion. Heritage MLP agrees to engage a proxy solicitor in connection with each proxy statement to solicit the affirmative votes of Unitholders in favor of the Conversion.


5.4 VOTE OF COMMON UNITS. Heritage GP and its successors and assigns and each Heritage GP Stockholder hereby covenant and agree to vote all of their respective Common Units, at each meeting or other vote of Unitholders with respect thereto, for approval of the Conversion, for the admission of U.S. Propane, L.P. or its designee as general partner of Heritage MLP, and for any amendment to the Heritage MLP Partnership Agreement related thereto.


5.5 ACTIONS BY PARTIES. Each Party agrees to use commercially reasonable best efforts to satisfy the conditions to Closing set forth in Article 6 and to use its commercially reasonable best efforts to refrain from taking any action within its control that would cause a breach of a representation, warranty, covenant or agreement set forth in this Agreement.


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