-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KGRo06ZPJvgjmPje0TZFTpcv6hrdgoOB8dTz9uP531YS2o7n6QsyQsxvGZ0eM0fO H4dy0znMxmp84Ifylgttbg== 0000893220-04-001714.txt : 20040813 0000893220-04-001714.hdr.sgml : 20040813 20040813100719 ACCESSION NUMBER: 0000893220-04-001714 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AP EAGLE FINANCE CORP CENTRAL INDEX KEY: 0001161868 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-72986-01 FILM NUMBER: 04972094 BUSINESS ADDRESS: STREET 1: P O BOX 965 CITY: VALLEY FORGE STATE: PA ZIP: 19482 BUSINESS PHONE: 6103371000 MAIL ADDRESS: STREET 1: P O BOX 965 CITY: VALLEY FORGE STATE: PA ZIP: 19482 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERIGAS FINANCE CORP CENTRAL INDEX KEY: 0000945792 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 232800532 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-92734-01 FILM NUMBER: 04972092 BUSINESS ADDRESS: STREET 1: 460 N GULPH RD CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 BUSINESS PHONE: 6103371000 MAIL ADDRESS: STREET 1: 460 NORTH GULPH ROAD CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERIGAS EAGLE FINANCE CORP CENTRAL INDEX KEY: 0001161869 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-72986-02 FILM NUMBER: 04972093 BUSINESS ADDRESS: STREET 1: P O BOX 965 CITY: VALLEY FORGE STATE: PA ZIP: 19482 BUSINESS PHONE: 6103371000 MAIL ADDRESS: STREET 1: P O BOX 965 CITY: VALLEY FORGE STATE: PA ZIP: 19482 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERIGAS PARTNERS LP CENTRAL INDEX KEY: 0000932628 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 232787918 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13692 FILM NUMBER: 04972091 BUSINESS ADDRESS: STREET 1: 460 N GULPH RD STREET 2: BOX 965 CITY: VALLEY FORGE STATE: PA ZIP: 19406 BUSINESS PHONE: 6103377000 MAIL ADDRESS: STREET 1: 460 NORTH GULPH ROAD CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 10-Q 1 w99575e10vq.txt FORM 10-Q AMERIGAS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 1-13692 Commission file number 33-92734-01 Commission file number 333-72986-02 Commission file number 333-72986-01 AMERIGAS PARTNERS, L.P. AMERIGAS FINANCE CORP. AMERIGAS EAGLE FINANCE CORP. AP EAGLE FINANCE CORP. (Exact name of registrants as specified in their charters) Delaware 23-2787918 Delaware 23-2800532 Delaware 23-3074434 Delaware 23-3077318 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 460 North Gulph Road, King of Prussia, PA 19406 (Address of principal executive offices)(Zip Code) (610) 337-7000 (Registrants' telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ] At July 31, 2004, the registrants had units and shares of common stock outstanding as follows: AmeriGas Partners, L.P. - 54,473,272 Common Units AmeriGas Finance Corp. - 100 shares AmeriGas Eagle Finance Corp. - 100 shares AP Eagle Finance Corp. - 100 shares AMERIGAS PARTNERS, L.P. TABLE OF CONTENTS
PAGES ----- PART I FINANCIAL INFORMATION Item 1. Financial Statements AmeriGas Partners, L.P. Condensed Consolidated Balance Sheets as of June 30, 2004, September 30, 2003 and June 30, 2003 1 Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2004 and 2003 2 Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2004 and 2003 3 Condensed Consolidated Statement of Partners' Capital for the nine months ended June 30, 2004 4 Notes to Condensed Consolidated Financial Statements 5 - 12 AmeriGas Finance Corp. Balance Sheets as of June 30, 2004 and September 30, 2003 13 Note to Balance Sheets 14 AmeriGas Eagle Finance Corp. Balance Sheets as of June 30, 2004 and September 30, 2003 15 Note to Balance Sheets 16 AP Eagle Finance Corp. Balance Sheets as of June 30, 2004 and September 30, 2003 17 Note to Balance Sheets 18 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 19 - 26 Item 3. Quantitative and Qualitative Disclosures About Market Risk 26 - 27 Item 4. Controls and Procedures 27 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 28 - 29 Signatures 30 - 31
-i- AMERIGAS PARTNERS, L.P. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Thousands of dollars)
June 30, September 30, June 30, 2004 2003 2003 ---------- ---------- ---------- ASSETS Current assets: Cash and cash equivalents $ 23,306 $ 45,872 $ 33,959 Accounts receivable (less allowances for doubtful accounts of $13,420, $9,192 and $10,741, respectively) 129,631 100,170 109,427 Accounts receivable - related parties 3,724 2,915 875 Inventories 63,940 70,171 59,420 Prepaid expenses and other current assets 15,283 17,204 24,414 ---------- ---------- ---------- Total current assets 235,884 236,332 228,095 Property, plant and equipment (less accumulated depreciation and amortization of $521,790, $473,090 and $457,574, respectively) 601,334 594,604 607,225 Goodwill and excess reorganization value 606,715 602,475 599,652 Intangible assets (less accumulated amortization of $15,120, $11,934 and $10,948, respectively) 27,350 27,032 27,176 Other assets 20,687 21,733 16,633 ---------- ---------- ---------- Total assets $1,491,970 $1,482,176 $1,478,781 ========== ========== ========== LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Current maturities of long-term debt $ 59,469 $ 58,705 $ 60,988 Accounts payable - trade 71,296 87,352 72,454 Accounts payable - related parties 188 930 1,006 Customer deposits and advances 21,519 52,771 14,666 Employee compensation and benefits accrued 31,944 26,307 29,253 Interest accrued 16,603 31,987 17,247 Other current liabilities 31,564 39,996 37,906 ---------- ---------- ---------- Total current liabilities 232,583 298,048 233,520 Long-term debt 842,115 868,581 868,832 Other noncurrent liabilities 58,730 54,859 52,727 Commitments and contingencies (note 7) Minority interests 8,240 7,005 7,576 Partners' capital 350,302 253,683 316,126 ---------- ---------- ---------- Total liabilities and partners' capital $1,491,970 $1,482,176 $1,478,781 ========== ========== ==========
See accompanying notes to condensed consolidated financial statements. - 1 - AMERIGAS PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (Thousands of dollars, except per unit)
Three Months Ended Nine Months Ended June 30, June 30, -------------------------- -------------------------- 2004 2003 2004 2003 ----------- ----------- ----------- ----------- Revenues: Propane $ 282,510 $ 257,705 $ 1,359,913 $ 1,263,423 Other 32,597 29,431 103,102 94,290 ----------- ----------- ----------- ----------- 315,107 287,136 1,463,015 1,357,713 ----------- ----------- ----------- ----------- Costs and expenses: Cost of sales - propane 169,095 145,637 800,514 723,258 Cost of sales - other 14,923 12,310 43,203 38,716 Operating and administrative expenses 118,125 119,136 381,283 374,005 Depreciation and amortization 19,968 18,891 59,439 54,813 Other (income), net (3,011) (2,371) (10,949) (6,573) ----------- ----------- ----------- ----------- 319,100 293,603 1,273,490 1,184,219 ----------- ----------- ----------- ----------- Operating (loss) income (3,993) (6,467) 189,525 173,494 Loss on extinguishment of debt -- -- -- (3,023) Interest expense (20,516) (21,468) (62,818) (66,051) ----------- ----------- ----------- ----------- (Loss) income before income taxes (24,509) (27,935) 126,707 104,420 Income tax benefit (expense) 237 343 (391) 405 Minority interests 140 178 (1,649) (1,451) ----------- ----------- ----------- ----------- Net (loss) income $ (24,132) $ (27,414) $ 124,667 $ 103,374 =========== =========== =========== =========== General partner's interest in net (loss) income $ (241) $ (274) $ 6,448 $ 2,708 =========== =========== =========== =========== Limited partners' interest in net (loss) income $ (23,891) $ (27,140) $ 118,219 $ 100,666 =========== =========== =========== =========== Net (loss) income per limited partner unit: Basic $ (0.45) $ (0.54) $ 2.25 $ 2.03 =========== =========== =========== =========== Diluted $ (0.45) $ (0.54) $ 2.24 $ 2.03 =========== =========== =========== =========== Average limited partner units outstanding: Basic 53,188 49,847 52,635 49,571 =========== =========== =========== =========== Diluted 53,188 49,847 52,708 49,631 =========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements. - 2 - AMERIGAS PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Thousands of dollars)
Nine Months Ended June 30, ---------------------- 2004 2003 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 124,667 $ 103,374 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 59,439 54,813 Provision for uncollectible accounts 7,833 7,955 Other, net (240) 3,050 Net change in: Accounts receivable (33,881) (26,025) Inventories 9,585 3,224 Accounts payable (19,062) (13,433) Other current assets and liabilities (39,353) (45,803) --------- --------- Net cash provided by operating activities 108,988 87,155 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property, plant and equipment (44,612) (43,425) Proceeds from disposals of assets 7,938 6,037 Acquisitions of businesses, net of cash acquired (33,388) (27,009) --------- --------- Net cash used by investing activities (70,062) (64,397) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions (87,275) (82,388) Minority interest activity (719) (358) Decrease in bank loans -- (10,000) Issuance of long-term debt 30,135 122,780 Repayment of long-term debt (55,347) (141,996) Proceeds from issuance of Common Units 51,197 75,005 Capital contributions from General Partner 517 758 --------- --------- Net cash used by financing activities (61,492) (36,199) --------- --------- Cash and cash equivalents decrease $ (22,566) $ (13,441) ========= ========= CASH AND CASH EQUIVALENTS: End of period $ 23,306 $ 33,959 Beginning of period 45,872 47,400 --------- --------- Decrease $ (22,566) $ (13,441) ========= =========
See accompanying notes to condensed consolidated financial statements. - 3 - AMERIGAS PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (unaudited) (Thousands, except unit data)
Accumulated Number of other Total Common General comprehensive partners' Units Common partner income (loss) capital ------ ------ ------- ------------- -------- BALANCE SEPTEMBER 30, 2003 52,333,208 $ 255,423 $ 2,577 $ (4,317) $ 253,683 Net income 118,219 6,448 124,667 Net gains on derivative instruments 28,777 28,777 Reclassification of net gains on derivative instruments (22,354) (22,354) --------- ------- -------- --------- Comprehensive income 118,219 6,448 6,423 131,090 Distributions (86,402) (873) (87,275) Common Units issued in connection with public offering 2,100,000 51,197 517 51,714 Common Units issued in connection with incentive compensation plan 40,064 1,090 1,090 ---------- --------- ------- -------- --------- Balance June 30, 2004 54,473,272 $ 339,527 $ 8,669 $ 2,106 $ 350,302 ========== ========= ======= ======== =========
See accompanying notes to condensed consolidated financial statements. - 4 - AMERIGAS PARTNERS, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Thousands of dollars, except per unit) 1. BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of AmeriGas Partners, L.P. ("AmeriGas Partners") and its principal operating subsidiaries AmeriGas Propane, L.P. ("AmeriGas OLP") and AmeriGas OLP's subsidiary, AmeriGas Eagle Propane, L.P. ("Eagle OLP"). AmeriGas Partners, AmeriGas OLP and Eagle OLP are Delaware limited partnerships. AmeriGas OLP and Eagle OLP are collectively referred to herein as "the Operating Partnerships," and AmeriGas Partners, the Operating Partnerships and all of their subsidiaries are collectively referred to herein as "the Partnership" or "we." We eliminate all significant intercompany accounts and transactions when we consolidate. We account for AmeriGas Propane, Inc.'s (the "General Partner's") 1.01% interest in AmeriGas OLP and an unrelated third party's approximate 0.1% limited partner interest in Eagle OLP as minority interests in the condensed consolidated financial statements. The Partnership's 50% ownership interest in Atlantic Energy, Inc. ("Atlantic Energy"), the owner of a propane storage terminal located in Chesapeake, Virginia, is accounted for by the equity method. The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). They include all adjustments which we consider necessary for a fair statement of the results for the interim periods presented. Such adjustments consisted only of normal recurring items unless otherwise disclosed. The September 30, 2003 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the year ended September 30, 2003 ("2003 Annual Report"). Weather significantly impacts demand for propane and profitability because many customers use propane for heating purposes. Due to the seasonal nature of the Partnership's propane business, the results of operations for interim periods are not necessarily indicative of the results to be expected for a full year. NET INCOME PER UNIT. Net income per unit is computed by dividing net income, after deducting the General Partner's interest in AmeriGas Partners, by the weighted average number of limited partner units outstanding. Effective April 2004, the Partnership adopted Emerging Issues Task Force Issue No. 03-6, "Participating Securities and the Two-Class Method under FASB Statement No. 128" ("EITF 03-6"), which results in the calculation of net income per limited partner unit for each period according to distributions declared and participation rights in undistributed earnings, as if all of the earnings for the period had been distributed. In periods with undistributed earnings above certain levels, the calculation according to the two-class method results in an increased allocation of undistributed earnings to the General Partner and a dilution of the earnings to the limited partners. Due to the seasonality of the - 5 - AMERIGAS PARTNERS, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Thousands of dollars, except per unit) propane business, the dilutive effect of EITF 03-6 on net income per limited partner unit will typically impact the first three fiscal quarters. EITF 03-6 is not expected to impact net income per limited partner unit for the fiscal year. The dilutive effect of EITF 03-6 on net income per limited partner unit was $(0.10) and $(0.03) for the nine months ended June 30, 2004 and 2003, respectively. Potentially dilutive Common Units included in the diluted limited partner units outstanding computation reflect the effects of restricted Common Unit awards granted under AmeriGas Propane, Inc. incentive compensation plans. COMPREHENSIVE (LOSS) INCOME. The following table presents the components of comprehensive (loss) income for the three and nine months ended June 30, 2004 and 2003:
Three Months Ended Nine Months Ended June 30, June 30, ------------------------- ----------------------------- 2004 2003 2004 2003 ---------- --------- ----------- ------------- Net (loss) income $ (24,132) $ (27,414) $ 124,667 $ 103,374 Other comprehensive income (loss) 4,025 1,571 6,423 (9,010) ---------- --------- ----------- ------------- Comprehensive (loss) income $ (20,107) $ (25,843) $ 131,090 $ 94,364 ---------- --------- ----------- -------------
Other comprehensive income (loss) is principally the result of changes in the fair value of propane commodity derivative instruments and interest rate protection agreements, net of reclassifications of net gains and losses to net income. UNIT-BASED COMPENSATION. As permitted by Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), we apply the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), in recording compensation expense for grants of equity instruments to employees. - 6 - AMERIGAS PARTNERS, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Thousands of dollars, except per unit) We use the intrinsic value method prescribed by APB 25 for our unit-based employee compensation plans. We recorded unit-based compensation expense of $72 and $556 during the three and nine months ended June 30, 2004, respectively, and $618 and $1,641 during the three and nine months ended June 30, 2003, respectively. If we had determined unit-based compensation expense under the fair value method prescribed by SFAS 123, net (loss) income and basic and diluted (loss) income per limited partner unit for the three and nine months ended June 30, 2004 and 2003 would have been as follows:
Three Months Ended Nine Months Ended June 30, June 30, ------------------------- ------------------------- 2004 2003 2004 2003 ----------- ---------- ---------- ------------ Net (loss) income as reported $ (24,132) $ (27,414) $ 124,667 $ 103,374 Add: Unit-based employee compensation expense included in reported net income 72 618 556 1,641 Deduct: Total stock and unit-based employee compensation expense determined under the fair value method for all awards (216) (726) (941) (1,972) ----------- ---------- ---------- ------------ Pro forma net (loss) income $ (24,276) $ (27,522) $ 124,282 $ 103,043 ----------- ---------- ---------- ------------ Basic (loss) income per limited partner unit: As reported $ (0.45) $ (0.54) $ 2.25 $ 2.03 Pro forma $ (0.45) $ (0.55) $ 2.24 $ 2.03 Diluted (loss) income per limited partner unit: As reported $ (0.45) $ (0.54) $ 2.24 $ 2.03 Pro forma $ (0.45) $ (0.55) $ 2.24 $ 2.02 ----------- ---------- ---------- ------------
USE OF ESTIMATES. We make estimates and assumptions when preparing financial statements in conformity with accounting principles generally accepted in the United States of America. These estimates and assumptions affect the reported amounts of assets and liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities. Actual results could differ from these estimates. 2. ACQUISITIONS On October 1, 2003, AmeriGas OLP acquired substantially all of the retail propane distribution assets and business of Horizon Propane LLC ("Horizon Propane") for total cash consideration of $31,044. In December 2003, AmeriGas OLP paid Horizon Propane a working capital adjustment of $111 in accordance with the Asset Purchase Agreement. During its fiscal year ended June 30, 2003, Horizon Propane sold over 30 million gallons of propane from ninety locations in twelve states. In addition, several smaller acquisitions of retail propane businesses were completed during the nine months ended June 30, 2004. The pro forma effect of all of these transactions is not material. - 7 - AMERIGAS PARTNERS, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Thousands of dollars, except per unit) 3. COMMON UNIT ACTIVITY On May 26, 2004, AmeriGas Partners sold 2,000,000 Common Units in an underwritten public offering at a public offering price of $25.61 per unit. On June 10, 2004, the underwriters partially exercised their overallotment option in the amount of 100,000 Common Units. The net proceeds of the public offering totaling $51,197 and the associated capital contributions from the General Partner totaling $1,045 were contributed to AmeriGas OLP and used to reduce indebtedness under its bank credit agreement and for general partnership purposes. On June 17, 2003, AmeriGas Partners sold 2,900,000 Common Units in an underwritten public offering at a public offering price of $27.12 per unit. The net proceeds of the public offering totaling $75,005 and the associated capital contributions from the General Partner totaling $1,531 were contributed to AmeriGas OLP and used to reduce indebtedness under its bank credit agreement and for general partnership purposes. The underwriters' overallotment option expired unexercised. 4. INTANGIBLE ASSETS The Partnership's intangible assets comprise the following:
June 30, September 30, 2004 2003 --------- --------- Subject to amortization: Customer relationships and noncompete agreements $ 42,470 $ 38,966 Accumulated amortization (15,120) (11,934) --------- --------- $ 27,350 $ 27,032 --------- --------- Not subject to amortization: Goodwill $ 513,395 $ 509,155 Excess reorganization value 93,320 93,320 --------- --------- $ 606,715 $ 602,475 --------- ---------
The increases in intangible assets during the nine months ended June 30, 2004 resulted from Partnership business acquisitions. Amortization expense of intangible assets was $1,067 and $3,186 for the three and nine months ended June 30, 2004, respectively, and $745 and $2,297 for the three and nine months ended June 30, 2003, respectively. Our expected aggregate amortization expense of intangible assets for the next five fiscal years is as follows: Fiscal 2004 - $4,196; Fiscal 2005 - $3,838; Fiscal 2006 - $3,450; Fiscal 2007 - $2,816; Fiscal 2008 - $2,586. - 8 - AMERIGAS PARTNERS, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Thousands of dollars, except per unit) 5. RELATED PARTY TRANSACTIONS Pursuant to the Partnership Agreement and a Management Services Agreement among AmeriGas Eagle Holdings, Inc., the general partner of Eagle OLP, and the General Partner, the General Partner is entitled to reimbursement for all direct and indirect expenses incurred or payments it makes on behalf of the Partnership. These costs, which totaled $71,509 and $234,946 during the three and nine months ended June 30, 2004, respectively, and $68,553 and $215,750 during the three and nine months ended June 30, 2003, respectively, include employee compensation and benefit expenses of employees of the General Partner and general and administrative expenses. UGI Corporation ("UGI") provides certain financial and administrative services to the General Partner. UGI bills the General Partner for these direct and indirect corporate expenses and the General Partner is reimbursed by the Partnership for these expenses. Such corporate expenses totaled $2,154 and $7,686 during the three and nine months ended June 30, 2004, respectively, and $2,455 and $6,699 during the three and nine months ended June 30, 2003, respectively. In addition, UGI and certain of its subsidiaries provide office space and automobile liability insurance to the Partnership. These expenses totaled $679 and $1,919 during the three and nine months ended June 30, 2004, respectively, and $441 and $1,315 during the three and nine months ended June 30, 2003, respectively. The Partnership purchases propane on behalf of Atlantic Energy. Atlantic Energy reimburses AmeriGas OLP for its purchases plus interest as Atlantic Energy sells such propane to third parties or to AmeriGas OLP itself. The total dollar value of propane purchased on behalf of Atlantic Energy was $3,875 and $25,108 during the three and nine months ended June 30, 2004, respectively, and $941 and $11,764 during the three and nine months ended June 30, 2003, respectively. Purchases of propane by AmeriGas OLP from Atlantic Energy during the three and nine months ended June 30, 2004 totaled $3,091 and $25,125, respectively, and during the three and nine months ended June 30, 2003 totaled $2,240 and $20,898, respectively. The General Partner also provides other services to Atlantic Energy including accounting, insurance and other administrative services and is reimbursed for the related costs. Such costs were not material during the three and nine months ended June 30, 2004 or 2003. On occasion, AmeriGas OLP enters into product cost hedging contracts on behalf of Atlantic Energy. When these contracts are settled, AmeriGas OLP is reimbursed the cost of any losses, or distributes the proceeds of any gains, to Atlantic Energy. Amounts due from Atlantic Energy at June 30, 2004, September 30, 2003 and June 30, 2003 totaled $1,421, $2,042 and $772, respectively. Amounts due from Atlantic Energy are included in accounts receivable - related parties in the Condensed Consolidated Balance Sheets. - 9 - AMERIGAS PARTNERS, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Thousands of dollars, except per unit) 6. LONG-TERM DEBT In April 2004, AmeriGas OLP repaid $53,750 of maturing First Mortgage Notes. In conjunction with this repayment, in April 2004, AmeriGas Partners issued $28,000 face amount of 8.875% Senior Notes due 2011 at an effective rate of 7.18%, and contributed the net proceeds of $30,135 to AmeriGas OLP. In April 2003, AmeriGas OLP repaid $53,750 of maturing First Mortgage Notes. In conjunction with this repayment, AmeriGas Partners issued $32,000 face amount of 8.875% Senior Notes due 2011 at an effective interest rate of 7.72% and contributed the net proceeds of $33,680, including debt premium, to AmeriGas OLP. On December 3, 2002, AmeriGas Partners issued $88,000 face amount of 8.875% Senior Notes due 2011 at an effective interest rate of 8.30%. The proceeds, net of underwriters' fees, of $89,100 were used on January 6, 2003 to redeem prior to maturity AmeriGas Partners' $85,000 face amount of 10.125% Senior Notes due 2007 at a redemption price of 102.25%, plus accrued interest. The Partnership recognized a loss of $3,023 in the quarter ended March 31, 2003 related to the redemption premium and other associated costs and expenses. 7. COMMITMENTS AND CONTINGENCIES The Partnership has succeeded to certain lease guarantee obligations of Petrolane relating to Petrolane's divestiture of non-propane operations before its 1989 acquisition by QFB Partners. Future lease payments under these leases total approximately $13,000 at June 30, 2004. These leases expire through 2010 and some of them are currently in default. The Partnership has succeeded to the indemnity agreement of Petrolane by which Texas Eastern Corporation ("Texas Eastern"), a prior owner of Petrolane, agreed to indemnify Petrolane against any liabilities arising out of the conduct of businesses that do not relate to, and are not a part of, the propane business, including lease guarantees. In December 1999, Texas Eastern filed for dissolution under the Delaware General Corporation Law. PanEnergy Corporation ("PanEnergy"), Texas Eastern's sole stockholder, subsequently assumed all of Texas Eastern's liabilities as of December 20, 2002, to the extent of the value of Texas Eastern's assets transferred to PanEnergy as of that date (which was estimated to exceed $94,000), and to the extent that such liabilities arise within ten years from Texas Eastern's date of dissolution. Notwithstanding the dissolution proceeding, and based on Texas Eastern previously having satisfied directly defaulted lease obligations without the Partnership's having to honor its guarantee, we believe that the probability that the Partnership will be required to directly satisfy the lease obligations subject to the indemnification agreement is remote. On August 21, 2001, AmeriGas Partners, through AmeriGas OLP, acquired the propane distribution businesses of Columbia Energy Group (the "2001 Acquisition") pursuant to the terms of a purchase agreement (the "2001 Acquisition Agreement") by and among - 10 - AMERIGAS PARTNERS, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Thousands of dollars, except per unit) Columbia Energy Group ("CEG"), Columbia Propane Corporation ("Columbia Propane"), Columbia Propane, L.P. ("CPLP"), CP Holdings, Inc. ("CPH," and together with Columbia Propane and CPLP, the "Company Parties"), AmeriGas Partners, AmeriGas OLP and the General Partner (together with AmeriGas Partners and AmeriGas OLP, the "Buyer Parties"). As a result of the 2001 Acquisition, AmeriGas OLP acquired all of the stock of Columbia Propane and CPH and substantially all of the partnership interests of CPLP. Under the terms of an earlier acquisition agreement (the "1999 Acquisition Agreement"), the Company Parties agreed to indemnify the former general partners of National Propane Partners, L.P. (a predecessor company of the Columbia Propane businesses) and an affiliate (collectively, "National General Partners") against certain income tax and other losses that they may sustain as a result of the 1999 acquisition by CPLP of National Propane Partners, L.P. (the "1999 Acquisition") or the operation of the business after the 1999 Acquisition ("National Claims"). At June 30, 2004, the potential amount payable under this indemnity by the Company Parties was approximately $61,000. These indemnity obligations will expire on the date that CPH acquires the remaining outstanding partnership interest of CPLP, which is expected to occur on or after July 19, 2009. Under the terms of the 2001 Acquisition Agreement, CEG agreed to indemnify the Buyer Parties and the Company Parties against any losses that they sustain under the 1999 Acquisition Agreement and related agreements ("Losses"), including National Claims, to the extent such claims are based on acts or omissions of CEG or the Company Parties prior to the 2001 Acquisition. The Buyer Parties agreed to indemnify CEG against Losses, including National Claims, to the extent such claims are based on acts or omissions of the Buyer Parties or the Company Parties after the 2001 Acquisition. CEG and the Buyer Parties have agreed to apportion certain losses resulting from National Claims to the extent such losses result from the 2001 Acquisition itself. We also have other contingent liabilities, pending claims and legal action arising in the normal course of our business. We cannot predict with certainty the final results of these matters. However, it is reasonably possible that some of them could be resolved unfavorably to us. Although management currently believes that damages or settlements, if any, recovered by the plaintiffs in such claims or actions will not have a material adverse effect on our financial position, damages or settlements could be material to our operating results or cash flows in future periods depending on the nature and timing of future developments with respect to these matters and the amount of future operating results and cash flows. 8. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In December 2003, the Financial Accounting Standards Board ("FASB") revised Financial Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"), which was originally issued in January 2003 and clarifies Accounting Research Bulletin No. 51, "Consolidated Financial Statements." FIN 46 was effective immediately for - 11 - AMERIGAS PARTNERS, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Thousands of dollars, except per unit) variable interest entities created or obtained after January 31, 2003. For variable interest entities created or acquired before February 1, 2003, FIN 46 was effective beginning with our interim period ended March 31, 2004. If certain conditions are met, FIN 46 requires the primary beneficiary to consolidate certain variable interest entities. The Partnership has not created or obtained any variable interest entities prior to, or after January 31, 2003. Therefore, the adoption of FIN 46 did not affect the Partnership's financial position or results of operations. - 12 - AMERIGAS FINANCE CORP. (a wholly owned subsidiary of AmeriGas Partners, L.P.) BALANCE SHEETS (unaudited)
June 30, September 30, 2004 2003 ------ ------ ASSETS Cash $1,000 $1,000 ------ ------ Total assets $1,000 $1,000 ====== ====== STOCKHOLDER'S EQUITY Common stock, without par value; 100 shares authorized, issued and outstanding $ -- $ -- Additional paid-in capital 1,000 1,000 ------ ------ Total stockholder's equity $1,000 $1,000 ====== ======
See accompanying note to balance sheets. - 13 - AMERIGAS FINANCE CORP. (A WHOLLY OWNED SUBSIDIARY OF AMERIGAS PARTNERS, L.P.) NOTE TO BALANCE SHEETS (unaudited) AmeriGas Finance Corp. ("AmeriGas Finance"), a Delaware corporation, was formed on March 13, 1995 and is a wholly owned subsidiary of AmeriGas Partners, L.P. ("AmeriGas Partners"). As of November 21, 2003, AmeriGas Partners and AmeriGas Finance have an effective unallocated shelf registration statement with the Securities and Exchange Commission under the Securities Act of 1933 under which AmeriGas Partners may issue up to $446,219,000 of debt or equity securities. AmeriGas Finance will be the co-obligor of the debt securities, if any, issued pursuant to the registration statement. AmeriGas Partners owns all 100 shares of AmeriGas Finance common stock outstanding. - 14 - AMERIGAS EAGLE FINANCE CORP. (a wholly owned subsidiary of AmeriGas Partners, L.P.) BALANCE SHEETS (unaudited)
June 30, September 30, 2004 2003 ------ ------ ASSETS Cash $1,000 $1,000 ------ ------ Total assets $1,000 $1,000 ====== ====== STOCKHOLDER'S EQUITY Common stock, without par value; 100 shares authorized, issued and outstanding $ -- $ -- Additional paid-in capital 1,000 1,000 ------ ------ Total stockholder's equity $1,000 $1,000 ====== ======
See accompanying note to balance sheets. - 15 - AMERIGAS EAGLE FINANCE CORP. (A WHOLLY OWNED SUBSIDIARY OF AMERIGAS PARTNERS, L.P.) NOTE TO BALANCE SHEETS (unaudited) AmeriGas Eagle Finance Corp. ("Eagle Finance"), a Delaware corporation, was formed on February 22, 2001 and is a wholly owned subsidiary of AmeriGas Partners, L.P. ("AmeriGas Partners"). On April 4, 2001, AmeriGas Partners and Eagle Finance jointly and severally issued $60,000,000 face amount of 10% Senior Notes due April 2006. AmeriGas Partners owns all 100 shares of Eagle Finance common stock outstanding. - 16 - AMERIGAS FINANCE CORP. (a wholly owned subsidiary of AmeriGas Partners, L.P.) BALANCE SHEETS (unaudited)
June 30, September 30, 2004 2003 ------ ------ ASSETS Cash $1,000 $1,000 ------ ------ Total assets $1,000 $1,000 ====== ====== STOCKHOLDER'S EQUITY Common stock, without par value; 100 shares authorized, issued and outstanding $ -- $ -- Additional paid-in capital 1,000 1,000 ------ ------ Total stockholder's equity $1,000 $1,000 ====== ======
See accompanying note to balance sheets. - 17 - AP EAGLE FINANCE CORP. (A WHOLLY OWNED SUBSIDIARY OF AMERIGAS PARTNERS, L.P.) NOTE TO BALANCE SHEETS (unaudited) AP Eagle Finance Corp. ("AP Eagle Finance"), a Delaware corporation, was formed on April 12, 2001 and is a wholly owned subsidiary of AmeriGas Partners, L.P. ("AmeriGas Partners"). On August 21, 2001, AmeriGas Partners and AP Eagle Finance jointly and severally issued $200,000,000 face amount of 8.875% Series A Senior Notes due May 2011. On December 20, 2001, AmeriGas Partners and AP Eagle Finance exchanged $199,985,000 face amount of 8.875% Series A Senior Notes due May 2011 for a like amount of AmeriGas Partners and AP Eagle Finance 8.875% Series B Senior Notes due May 2011 pursuant to a registered exchange offer. On May 3, 2002, AmeriGas Partners and AP Eagle Finance jointly and severally issued $40,000,000 face amount of 8.875% Series B Senior Notes due May 2011. On December 3, 2002, AmeriGas Partners and AP Eagle Finance jointly and severally issued $88,000,000 face amount of 8.875% Senior Notes due May 2011. On April 4, 2003, AmeriGas Partners and AP Eagle Finance exchanged (1) $15,000 face amount of 8.875% Series A Senior Notes due May 2011 and (2) $88,000,000 face amount of 8.875% Senior Notes due May 2011 for like amounts of AmeriGas Partners and AP Eagle Finance 8.875% Series B Senior Notes due May 2011 pursuant to a registered exchange offer. In April 2003, AmeriGas Partners and AP Eagle Finance jointly and severally issued $32,000,000 face amount of 8.875% Series B Senior Notes due May 2011. In April 2004, AmeriGas Partners and AP Eagle Finance jointly and severally issued $28,000,000 face amount of 8.875% Series B Senior Notes due May 2011. AmeriGas Partners owns all 100 shares of AP Eagle Finance common stock outstanding. - 18 - AMERIGAS PARTNERS, L.P. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS Information contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements use forward-looking words such as "believe," "plan," "anticipate," "continue," "estimate," "expect," "may," "will," or other similar words. These statements discuss plans, strategies, events or developments that we expect or anticipate will or may occur in the future. A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. However, we caution you that actual results almost always vary from assumed facts or bases, and the differences between actual results and assumed facts or bases can be material, depending on the circumstances. When considering forward-looking statements, you should keep in mind the following important factors which could affect our future results and could cause those results to differ materially from those expressed in our forward-looking statements: (1) adverse weather conditions resulting in reduced demand; (2) price volatility and availability of propane, and the capacity to transport it to our market areas; (3) changes in laws and regulations, including safety, tax and accounting matters; (4) large supplier, counterparty or customer defaults; (5) competitive pressures from the same and alternative energy sources; (6) failure to acquire new customers thereby reducing or limiting any increase in revenues; (7) liability for environmental claims; (8) customer conservation measures and improvements in energy efficiency and technology resulting in reduced demand; (9) adverse labor relations; (10) inability to make business acquisitions on economically acceptable terms resulting in failure to acquire new customers thereby limiting any increase in revenues; (11) liability for personal injury and property damage arising from explosions and other catastrophic events, including acts of terrorism, resulting from operating hazards and risks incidental to transporting, storing and distributing propane, butane and ammonia, including liability in excess of insurance coverage; (12) political, regulatory and economic conditions in the United States and in foreign countries; and (13) interest rate fluctuations and other capital market conditions. These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results. We undertake no obligation to update publicly any forward-looking statement whether as a result of new information or future events except as required by federal securities laws. - 19 - AMERIGAS PARTNERS, L.P. ANALYSIS OF RESULTS OF OPERATIONS The following analyses compare the Partnership's results of operations for (1) the three months ended June 30, 2004 ("2004 three-month period") with the three months ended June 30, 2003 ("2003 three-month period") and (2) the nine months ended June 30, 2004 ("2004 nine-month period") with the nine months ended June 30, 2003 ("2003 nine-month period"). AmeriGas Finance Corp., AmeriGas Eagle Finance Corp. and AP Eagle Finance Corp. have nominal assets and do not conduct any operations. Their sole purpose is to serve as co-obligors for debt securities issued by AmeriGas Partners, L.P. Accordingly, discussions of the results of operations and financial condition and liquidity of these entities are not presented. 2004 THREE-MONTH PERIOD COMPARED WITH 2003 THREE-MONTH PERIOD
Increase Three Months Ended June 30, 2004 2003 (Decrease) (millions of dollars) -------- -------- -------------- Gallons sold (millions): Retail 175.2 182.4 (7.2) (3.9)% Wholesale 55.0 21.7 33.3 153.5% -------- -------- ------- 230.2 204.1 26.1 12.8% ======== ======== ======= Revenues: Retail propane $ 247.9 $ 244.2 $ 3.7 1.5% Wholesale propane 34.6 13.5 21.1 156.3% Other 32.6 29.4 3.2 10.9% -------- -------- ------- $ 315.1 $ 287.1 $ 28.0 9.8% ======== ======== ======= Total margin (a) $ 131.1 $ 129.2 $ 1.9 1.5% EBITDA (b) $ 16.1 $ 12.6 $ 3.5 27.8% Operating loss $ (4.0) $ (6.5) $ 2.5 38.5% Net loss $ (24.1) $ (27.4) $ 3.3 12.0% Heating degree days - % warmer than normal(c) (8.0) (0.5) -- --
(a) Total margin represents total revenues less cost of sales - propane and cost of sales - other. (b) EBITDA (earnings before interest expense, income taxes, and depreciation and amortization) should not be considered as an alternative to net income (as an indicator of operating performance) or as an alternative to cash flow (as a measure of liquidity or ability to service debt obligations) and is not a measure of performance or financial condition under accounting principles generally accepted in the United States of America. Management believes EBITDA is a meaningful non-GAAP financial measure used by investors to compare the Partnership's operating performance with that of other companies within the propane industry. The Partnership's definition of EBITDA may be different from that used by other companies. Weather significantly impacts demand for propane and profitability because many customers use propane for heating purposes. Due to the seasonal nature of the Partnership's propane business, EBITDA for interim periods is not necessarily indicative of amounts to be expected for a full year. - 20 - AMERIGAS PARTNERS, L.P. The following table includes reconciliations of net loss to EBITDA for the periods presented:
Three Months Ended June 30, -------------------------- 2004 2003 --------- ------------ Net loss $ (24.1) $ (27.4) Income tax benefit (0.2) (0.3) Interest expense 20.5 21.5 Depreciation 18.6 17.8 Amortization 1.3 1.0 --------- ------------ EBITDA $ 16.1 $ 12.6 ========= ============
(c) Deviation from average heating degree days based upon national weather statistics provided by the National Oceanic and Atmospheric Administration ("NOAA") for 335 airports in the United States, excluding Alaska. Weather based upon heating degree days was 8.0% warmer than normal during the 2004 three-month period compared to weather that was essentially normal in the prior year three-month period. Notwithstanding the beneficial effects of acquisitions, retail propane volumes sold decreased 7.2 million gallons in the 2004 three-month period due primarily to the warmer than normal weather and price related conservation. Low margin wholesale volumes increased 33.3 million gallons primarily reflecting the effects of product cost hedging activities. Retail propane revenues increased $3.7 million reflecting a $13.3 million increase due to higher average selling prices partially offset by a $9.6 million decrease due to the lower retail volumes sold. Wholesale propane revenues increased $21.1 million principally reflecting the higher volumes sold due to product cost hedging activities. Selling prices in the 2004 three-month period were higher than in the prior-year three-month period as the industry continues to experience unusually high propane product costs resulting from, among other things, higher crude oil and natural gas prices. Total cost of sales increased $26.1 million primarily reflecting the previously mentioned increase in wholesale volumes sold and higher propane product costs. Total margin increased $1.9 million principally due to higher average retail propane unit margins partially offset by the lower retail volumes sold. EBITDA increased $3.5 million in the 2004 three-month period reflecting (1) the previously mentioned increase in total margin, (2) a $1.0 million decrease in operating and administrative expenses and (3) a $0.6 million increase in other income. The decrease in operating and administrative expenses was due to the absence of $3.0 million of expenses associated with initiating the management realignment in June 2003, the continued beneficial effects on operating expenses of the realignment and lower incentive compensation expenses. These decreases were partially offset by incremental operating and administrative expenses associated with the Horizon Propane and Active Propane acquisitions. Operating loss in the 2004 three-month period improved less than the increase in EBITDA due to higher depreciation and amortization expense related to recent acquisitions and higher depreciation associated with PPX(R). - 21 - AMERIGAS PARTNERS, L.P. 2004 NINE-MONTH PERIOD COMPARED WITH 2003 NINE-MONTH PERIOD
Increase Nine Months Ended June 30, 2004 2003 (Decrease) ---------- ---------- ----------------- (millions of dollars) Gallons sold (millions): Retail 883.6 900.0 (16.4) (1.8)% Wholesale 200.3 188.7 11.6 6.1 % ---------- ---------- -------- 1,083.9 1,088.7 (4.8) (0.4)% ========== ========== ======== Revenues: Retail propane $ 1,221.8 $ 1,150.2 $ 71.6 6.2 % Wholesale propane 138.1 113.2 24.9 22.0 % Other 103.1 94.3 8.8 9.3 % ---------- ---------- -------- $ 1,463.0 $ 1,357.7 $ 105.3 7.8 % ========== ========== ======== Total margin $ 619.3 $ 595.7 $ 23.6 4.0 % EBITDA (a) $ 247.3 $ 223.8 $ 23.5 10.5 % Operating income $ 189.5 $ 173.5 $ 16.0 9.2 % Net income $ 124.7 $ 103.4 $ 21.3 20.6 % Heating degree days - % (warmer) colder than normal (4.6) 0.9 -- --
(a) The following table includes reconciliations of net income to EBITDA for the periods presented:
Nine Months Ended June 30, ----------------- 2004 2003 ---- ---- Net income $ 124.7 $ 103.4 Income tax expense (benefit) 0.3 (0.4) Interest expense 62.8 66.0 Depreciation 55.6 51.8 Amortization 3.9 3.0 -------- -------- EBITDA $ 247.3 $ 223.8 ======== ========
Based upon heating degree day data, temperatures in the 2004 nine-month period were 4.6% warmer than normal compared to temperatures that were 0.9% colder than normal in the prior-year nine-month period. Notwithstanding volume growth from acquisitions, retail propane volumes sold decreased slightly in the 2004 nine-month period due principally to the effects of the warmer weather in the 2004 nine-month period. Low margin wholesale volumes increased 11.6 million gallons primarily reflecting the effects of product cost hedging activities. Retail propane revenues increased $71.6 million as a $92.6 million increase due to higher average selling prices was partially offset by a $21.0 million decrease due to the lower retail volumes sold. Wholesale propane revenues increased $24.9 million due to a $17.9 million increase due to higher average selling prices and a $7.0 million increase due to the higher volumes sold relating to product cost hedging activities. Retail and wholesale selling prices were higher during the 2004 nine-month period principally as a result of the continued high propane product costs within the industry. Although total propane volumes decreased slightly, total cost of sales increased $81.7 million reflecting the effects of higher propane product costs, the - 22 - AMERIGAS PARTNERS, L.P. previously mentioned increase in wholesale volumes sold and, to a lesser extent, greater costs associated with increased non-propane sales and services. Total margin increased $23.6 million as a result of (1) recent acquisitions and higher average retail propane unit margins on reduced gallons sold and (2) a $4.3 million increase in margin from non-propane sales and services. Notwithstanding the previously mentioned increase in propane product costs, retail and wholesale propane unit margins were higher than in the 2003 nine-month period reflecting the effects of higher average selling prices. EBITDA increased $23.5 million in the 2004 nine-month period reflecting (1) the previously mentioned increase in total margin, (2) a $4.4 million increase in other income, and (3) the absence of a $3.0 million loss on extinguishment of long-term debt in the prior year nine-month period. These increases were partially offset by a $7.3 million increase in operating and administrative expenses principally due to higher compensation and distribution expenses resulting from the impact of Horizon Propane and other recent acquisitions, partially offset by the absence of $3.0 million of expenses associated with initiating the management realignment in June 2003 and the continued beneficial effects on operating expenses of the realignment. Other income in the 2004 nine-month period includes greater income from finance charges and higher earnings from our equity investment in Atlantic Energy, while other income in the prior year nine-month period was reduced by a $1.0 million charge associated with the adoption of SFAS No. 143, "Accounting for Asset Retirement Obligations." Operating income in the 2004 nine-month period increased less than the increase in EBITDA due to higher depreciation and amortization expense related to recent acquisitions, higher depreciation associated with PPX(R) and the absence of the aforementioned loss on extinguishment of long-term debt. Net income in the 2004 nine-month period increased to $124.7 million from $103.4 million in the 2003 nine-month period due to (1) the increase in operating income, (2) a $3.2 million decrease in interest expense, and (3) the absence of the aforementioned $3.0 million loss on extinguishment of long-term debt in the 2003 nine-month period. Interest expense decreased principally as a result of lower long-term debt outstanding. FINANCIAL CONDITION AND LIQUIDITY FINANCIAL CONDITION The Partnership's long-term debt outstanding at June 30, 2004 totaled $901.6 million (including current maturities of $59.5 million) compared to $927.3 million (including current maturities of $58.7 million) at September 30, 2003. In April 2004, AmeriGas OLP repaid $53.8 million of maturing First Mortgage Notes. In conjunction with this repayment, in April 2004, AmeriGas Partners issued $28 million face amount of 8.875% Senior Notes due 2011 at an effective rate of 7.18%, and contributed the net proceeds of $30.1 million to AmeriGas OLP. AmeriGas OLP's Credit Agreement expires on October 15, 2006 and consists of (1) a $100 million Revolving Credit Facility and (2) a $75 million Acquisition Facility. The Revolving Credit Facility may be used for working capital and general purposes of AmeriGas OLP. The Acquisition Facility provides AmeriGas OLP with the ability to borrow up to $75 million to finance the purchase of propane businesses or propane business assets or, to the extent it is not so - 23 - AMERIGAS PARTNERS, L.P. used, for working capital and general purposes. There were no borrowings outstanding under the Revolving Credit Facility at June 30, 2004. AmeriGas OLP's short-term borrowing needs are seasonal and are typically greatest during the fall and winter heating season months due to the need to fund higher levels of working capital. Issued and outstanding letters of credit under the Revolving Credit Facility, which reduce the amount of available borrowing capacity, totaled $42.8 million at June 30, 2004. AmeriGas OLP also has a credit agreement with the General Partner to borrow up to $20 million on an unsecured, subordinated basis, for working capital and general purposes. UGI has agreed to contribute up to $20 million to the General Partner to fund such borrowings. AmeriGas Partners periodically issues debt and equity securities and expects to continue to do so. It has issued debt securities and common units in underwritten public offerings in each of the last three fiscal years. Most recently, it has issued debt securities in April 2004 and issued common units in an underwritten public offering in May 2004. The Partnership has effective debt and equity shelf registration statements with the SEC under which it may issue up to an additional (1) 1.4 million AmeriGas Partners Common Units and (2) up to $446.2 million of debt or equity securities pursuant to an unallocated shelf registration statement. During the nine months ended June 30, 2004, the Partnership declared and paid the minimum quarterly distribution of $0.55 (the "MQD") on all limited partner units for the quarters ended September 30, 2003, December 31, 2003 and March 31, 2004. The MQD for the quarter ended June 30, 2004 will be paid on August 18, 2004 to holders of record on August 10, 2004. The ability of the Partnership to declare and pay the MQD on its Common Units in the future depends upon a number of factors. These factors include (1) the level of Partnership earnings; (2) the cash needs of the Partnership's operations (including cash needed for maintaining and increasing operating capacity); (3) changes in operating working capital; and (4) the Partnership's ability to borrow under its Credit Agreement, to refinance maturing debt, and to increase its long-term debt. Some of these factors are affected by conditions beyond our control including weather, competition in markets we serve and the cost of propane. CASH FLOWS OPERATING ACTIVITIES. The Partnership had cash and cash equivalents totaling $23.3 million at June 30, 2004 compared to $45.9 million at September 30, 2003. Due to the seasonal nature of the propane business, cash flows from operating activities are generally strongest during the second and third fiscal quarters when customers pay for propane purchased during the heating season months. Conversely, operating cash flows are generally at their lowest levels during the first and fourth fiscal quarters when the Partnership's investment in working capital, principally accounts receivable and inventories, is generally greatest. Accordingly, cash flows from operating activities during the nine months ended June 30, 2004 are not necessarily indicative of cash flows to be expected for a full year. The Partnership uses its Credit Agreement to satisfy its seasonal cash flow needs. Cash flow provided by operating activities increased to $109.0 million during the 2004 nine-month period from $87.2 million in the prior-year nine-month period due to improved operating results. Cash flow from operating activities before changes in working capital was $191.7 million in the 2004 nine-month period compared to $169.2 million in the prior-year nine-month period. Cash required to fund changes in operating working capital during - 24 - AMERIGAS PARTNERS, L.P. the 2004 nine-month period totaled $82.7 million, comparable to the $82.0 million required in the prior-year nine-month period. INVESTING ACTIVITIES. We spent $44.6 million for property, plant and equipment (including maintenance capital expenditures of $15.1 million and growth capital expenditures of $29.5 million) during the nine months ended June 30, 2004 compared to $43.4 million (including maintenance capital expenditures of $16.2 million and growth capital expenditures of $27.2 million) during the prior-year nine-month period. The slight increase is due to greater expenditures relating to growth initiatives partially offset by lower PPX(R) capital expenditures associated with purchases of overfill protection devices ("OPDs"). The increase in proceeds received from disposals of assets reflects the sale of three district locations during the 2004 nine-month period. During the nine months ended June 30, 2004, the Partnership acquired Horizon Propane and several smaller propane distribution businesses for $33.4 million. FINANCING ACTIVITIES. Cash flow used by financing activities was $61.5 million in the 2004 nine-month period compared to $36.2 million in the prior-year period. Financing activity is primarily the result of repayments and issuances of long-term debt, borrowings under our Credit Agreement, issuances of Common Units and distributions on limited partner units. In April 2004, AmeriGas OLP repaid $53.8 million face amount of maturing First Mortgage Notes. In conjunction with this repayment, AmeriGas Partners issued $28 million face amount of 8.875% Senior Notes due 2011 at an effective rate of 7.18%, and contributed the net proceeds of $30.1 million to AmeriGas OLP. In May 2004, AmeriGas Partners sold 2,000,000 Common Units in an underwritten public offering. In June 2004, the underwriters partially exercised their overallotment option in the amount of 100,000 Common Units. The net proceeds of the public offering and the related capital contribution from the General Partner were contributed to AmeriGas OLP and used to reduce indebtedness under its Credit Agreement and for general partnership purposes. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In December 2003, the Financial Accounting Standards Board ("FASB") revised Financial Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"), which was originally issued in January 2003 and clarifies Accounting Research Bulletin No. 51, "Consolidated Financial Statements." FIN 46 was effective immediately for variable interest entities created or obtained after January 31, 2003. For variable interest entities created or acquired before February 1, 2003, FIN 46 was effective beginning with our interim period ended March 31, 2004. If certain conditions are met, FIN 46 requires the primary beneficiary to consolidate certain variable interest entities. The Partnership has not created or obtained any variable interest entities prior to, or after January 31, 2003. Therefore, the adoption of FIN 46 did not affect the Partnership's financial position or results of operations. Effective April 2004, the Partnership adopted Emerging Issues Task Force Issue No. 03-6, "Participating Securities and the Two-Class Method under FASB Statement No. 128" ("EITF 03-6"), which results in the calculation of net income per limited partner unit for each period according to distributions declared and participation rights in undistributed earnings, as if all of the earnings for the period had been distributed. In periods with undistributed earnings above - 25 - AMERIGAS PARTNERS, L.P. certain levels, the calculation according to the two-class method results in an increased allocation of undistributed earnings to the general partner and a dilution of the earnings to the limited partners. Due to the seasonality of the propane business, the dilutive effect of EITF 03-6 on net income per limited partner unit will typically impact the first three fiscal quarters. EITF 03-6 is not expected to impact net income per limited partner unit for the fiscal year. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our primary financial market risks include commodity prices for propane and interest rates on borrowings. The risk associated with fluctuations in the prices the Partnership pays for propane is principally a result of market forces reflecting changes in supply and demand for propane and other energy commodities. The Partnership's profitability is sensitive to changes in propane supply costs, and the Partnership generally attempts to pass on increases in such costs to customers. The Partnership may not, however, always be able to pass through product cost increases fully, particularly when product costs rise rapidly. In order to reduce volatility of the Partnership's propane market price risk, we use contracts for the forward purchase or sale of propane, propane fixed-price supply agreements, and over-the-counter derivative commodity instruments including price swap and option contracts. Over-the-counter derivative commodity instruments utilized by the Partnership are generally settled at expiration of the contract. In order to minimize credit risk associated with derivative commodity contracts, we monitor established credit limits with the contract counterparties. Although we use derivative financial and commodity instruments to reduce market price risk associated with forecasted transactions, we do not use derivative financial and commodity instruments for speculative or trading purposes. The Partnership has both fixed-rate and variable-rate debt. Changes in interest rates impact the cash flows of variable-rate debt but generally do not impact its fair value. Conversely, changes in interest rates impact the fair value of fixed-rate debt but do not impact its cash flows. Our variable rate debt includes borrowings under AmeriGas OLP's Credit Agreement. This agreement has interest rates that are generally indexed to short-term market interest rates. Our long-term debt is typically issued at fixed rates of interest based upon market rates for debt having similar terms and credit ratings. As these long-term debt issues mature, we may refinance such debt with new debt having interest rates reflecting then-current market conditions. This debt may have an interest rate that is more or less than the refinanced debt. In order to reduce interest rate risk associated with near-term forecasted issuances of fixed-rate debt, from time to time we enter into interest rate protection agreements. - 26 - AMERIGAS PARTNERS, L.P. The following table summarizes the fair values of unsettled market risk sensitive derivative instruments held at June 30, 2004. Fair values reflect the estimated amounts that we would receive or pay to terminate the contracts at the reporting date based upon quoted market prices of comparable contracts at June 30, 2004. The table also includes the changes in fair value that would result if there were an adverse change of ten percent in (1) the market price of propane and (2) interest rates on ten-year U.S. treasury notes:
Fair Change in Value Fair Value ----- ---------- (Millions of dollars) June 30, 2004: Propane commodity price risk $ 2.7 $ (6.5) Interest rate risk 2.0 (3.9) ----- ------
Because the Partnership's derivative instruments generally qualify as hedges under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," we expect that changes in the fair value of derivative instruments used to manage propane price or interest rate risk would be substantially offset by gains or losses on the associated underlying transactions. ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures The Partnership's management, with the participation of the Partnership's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Partnership's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Partnership's disclosure controls and procedures as of the end of the period covered by this report were designed and functioning effectively to provide reasonable assurance that the information required to be disclosed by the Partnership in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The Partnership believes that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. (b) Change in Internal Control over Financial Reporting No change in the Partnership's internal control over financial reporting occurred during the Partnership's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Partnership's internal control over financial reporting. - 27 - AMERIGAS PARTNERS, L.P. PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) List of Exhibits: 10.1 AmeriGas Propane, Inc. Executive Employee Severance Pay Plan, as amended December 15, 2003. 10.2 AmeriGas Propane, Inc. 2000 Long-Term Incentive Plan on Behalf of AmeriGas Partners, L.P., as amended December 15, 2003. 10.3 UGI Corporation 2004 Omnibus Equity Compensation Plan, effective as of January 1, 2004. (Incorporated by reference to Exhibit 99.1 of UGI Corporation's Registration Statement No. 333-118147). 10.4 UGI Corporation 2000 Stock Incentive Plan Amended and Restated as of December 16, 2003. (Incorporated by reference to Exhibit 10.2 of UGI Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 2004). 31.1 Certification by the Chief Executive Officer relating to the Registrants' Report on Form 10-Q for the quarter ended June 30, 2004, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification by the Chief Financial Officer relating to the Registrants' Report on Form 10-Q for the quarter ended June 30, 2004, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *32 Certification by the Chief Executive Officer and the Chief Financial Officer relating to the Registrant's Report on Form 10-Q for the quarter ended June 30, 2004, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. - ---------------------- * This Exhibit shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing. - 28 - AMERIGAS PARTNERS, L.P. (b) The Registrant furnished and filed information in a Current Report on Form 8-K during the third quarter of fiscal year 2004 as follows:
DATE ITEM NUMBER(s) CONTENT - ---- -------------- ------- April 28, 2004 12 Press release reporting financial results for the fiscal quarter ended March 31, 2004 April 29, 2004 5, 7 Underwriting Agreement dated April 22, 2004 and Fourth Supplemental Indenture dated April 27, 2004 pertaining to AmeriGas Partners, L.P. 8.875% Series B Senior Notes due 2011. May 24, 2004 5, 7 Underwriting Agreement dated May 20, 2004, pertaining to AmeriGas Partners, L.P. Common Unit offering.
- 29 - AMERIGAS PARTNERS, L.P. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. AmeriGas Partners, L.P. ------------------------- (Registrant) By: AmeriGas Propane, Inc., as General Partner Date: August 13, 2004 By: /s/ Martha B. Lindsay ----------------------- Martha B. Lindsay Vice President - Finance and Chief Financial Officer By: /s/ Richard R. Eynon ----------------------- Richard R. Eynon Controller and Chief Accounting Officer AmeriGas Finance Corp. -------------------------- (Registrant) Date: August 13, 2004 By: /s/ Martha B. Lindsay ----------------------- Martha B. Lindsay Vice President - Finance and Chief Financial Officer By: /s/ Richard R. Eynon ------------------------------- Richard R. Eynon Controller and Chief Accounting Officer AmeriGas Eagle Finance Corp. ----------------------------- (Registrant) Date: August 13, 2004 By: /s/ Martha B. Lindsay ------------------------------- Martha B. Lindsay Vice President - Finance and Chief Financial Officer By: /s/ Richard R. Eynon ---------------------------------- Richard R. Eynon Controller and Chief Accounting Officer - 30 - AMERIGAS PARTNERS, L.P. AP Eagle Finance Corp. ---------------------------------- (Registrant) Date: August 13, 2004 By: /s/ Martha B. Lindsay ------------------------------- Martha B. Lindsay Vice President - Finance and Chief Financial Officer By: /s/ Richard R. Eynon ---------------------------- Richard R. Eynon Controller and Chief Accounting Officer - 31 - AMERIGAS PARTNERS, L.P. EXHIBIT INDEX 10.1 AmeriGas Propane, Inc. Executive Employee Severance Pay Plan, as amended December 15, 2003. 10.2 AmeriGas Propane, Inc. 2000 Long-Term Incentive Plan on Behalf of AmeriGas Partners, L.P., as amended December 15, 2003. 10.3 UGI Corporation 2004 Omnibus Equity Compensation Plan, effective as of January 1, 2004. (Incorporated by reference to Exhibit 99.1 of UGI Corporation's Registration Statement No. 333-118147). 10.4 UGI Corporation 2000 Stock Incentive Plan Amended and Restated as of December 16, 2003. (Incorporated by reference to Exhibit 10.2 of UGI Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 2004). 31.1 Certification by the Chief Executive Officer relating to the Registrants' Report on Form 10-Q for the quarter ended June 30, 2004, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification by the Chief Financial Officer relating to the Registrants' Report on Form 10-Q for the quarter ended June 30, 2004, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *32 Certification by the Chief Executive Officer and the Chief Financial Officer relating to the Registrant's Report on Form 10-Q for the quarter ended June 30, 2004, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. - ------------------ * This Exhibit shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing. EX-10.1 2 w99575exv10w1.txt AMERIGAS PROPANE EXECUTIVE EMPLOYEE SEVERANCE PAY PLAN EXHIBIT 10.1 AMERIGAS PROPANE, INC. EXECUTIVE EMPLOYEE SEVERANCE PAY PLAN AS IN EFFECT AS OF DECEMBER 15, 2003 TABLE OF CONTENTS
PAGE Article I Purpose and Term of Plan................................................................... 1 Article II Definitions................................................................................ 2 Article III Participation and Eligibility for Benefits................................................. 4 Article IV Benefit.................................................................................... 5 Article V Method and Duration of Benefit Payments.................................................... 8 Article VI Administration............................................................................. 9 Article VII Amendment and Termination.................................................................. 11 Article VIII Duties of the Company...................................................................... 12 Article IX Claims Procedures.......................................................................... 13 Article X Miscellaneous.............................................................................. 15 Appendix A Change of Control.......................................................................... 1 Appendix B Release.................................................................................... 1
i ARTICLE I PURPOSE AND TERM OF PLAN Section 1.01 Background. This Plan is amended and restated in its entirety as of December 15, 2003, with all changes effective as of that date. Section 1.02 Purpose of the Plan. The Plan is intended to alleviate, in part or in full, financial hardships which may be experienced by certain of those employees of the Company whose employment is terminated without fault in recognition of their past service to the Company. In essence, benefits under the Plan are intended to be additional compensation for past services or for the continuation of specified fringe benefits for a transitional period. The amount or kind of benefit to be provided is to be based on the Executive Employee's Compensation and the fringe benefit programs applicable to the Participant at the Participant's Employment Termination Date. The Plan is not intended to be included in the definitions of "employee pension benefit plan" and "pension plan" set forth under Section 3(2)(B)(i) of ERISA. Rather, this Plan is intended to meet the descriptive requirements of a plan constituting a "severance pay plan" within the meaning of regulations published by the Secretary of Labor at Title 29, Code of Federal Regulations, Section 2510.3-2(b). Accordingly, the benefits paid by the Plan are not deferred compensation and no employee shall have a vested right to such benefits. In addition, the Plan has been drafted to give the Company broad discretion in designating individuals who are eligible for benefits and the amount of such benefits. All actions taken by the Company shall be in its role as the plan sponsor and not as a fiduciary. Section 1.03 Term of the Plan. The Plan will continue until such time as the Company, acting in its sole discretion, elects to modify, supersede or terminate it in accordance with the further provisions hereof. 1 ARTICLE II DEFINITIONS Section 2.01 "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange of 1934, as amended. Section 2.02 "Benefit" or "Benefits" shall mean any or all of the benefits that a Participant is entitled to receive pursuant to Article IV of the Plan. Section 2.03 "Board of Directors" shall mean the Board of Directors of AmeriGas Propane, Inc., or any successor thereto. Section 2.04 "Chairman of the Board" shall mean the individual serving as the Chairman of the Board of Directors of AmeriGas Propane, Inc. as of the date of reference. Section 2.05 "Change of Control" shall mean a change of control as defined in the attached Appendix A, as amended from time to time by the Committee, in its discretion. Section 2.06 "Chief Executive Officer" shall mean the individual serving as the Chief Executive Officer of AmeriGas Propane, Inc. as of the date of reference. Section 2.07 "Committee" shall mean the administrative committee designated pursuant to Article VI of the Plan to administer the Plan in accordance with its terms, or its delegate. Section 2.08 "Company" shall mean AmeriGas Propane, Inc., a Pennsylvania corporation. The term "Company" shall include any successor to AmeriGas Propane, Inc. or any subsidiary or Affiliate which has adopted the Plan, or a corporation succeeding to the business of AmeriGas Propane, Inc., or any subsidiary or Affiliate, by merger, consolidation or liquidation or purchase of assets or stock or similar transaction. Section 2.09 "Compensation" shall mean the Participant's annual base salary and applicable target annual bonus amount, if any, in effect on the first day of the calendar quarter immediately preceding the Participant's Employment Termination Date. Section 2.10 "Employment Commencement Date" shall mean the most recent day on which a Participant became an employee of the Company, any Affiliate of the Company, or any entity whose business or assets have been acquired by the Company, its Affiliates or by any predecessor of such entities, unless the Committee determines to give credit for prior service, if any. Section 2.11 "Employment Termination Date" shall mean the date on which the current employment relationship between the Participant and the Company is terminated. Section 2.12 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. 2 Section 2.13 "Executive Employee" shall mean an employee of the Company who is classified as Grade 36 or above at the employee's Employment Termination Date. Section 2.14 "Executive Equity Plan" shall mean the AmeriGas Propane, Inc. 2000 Long-Term Incentive Plan (or its successor, as designated by the Committee), the UGI Corporation 1997 Stock Option and Dividend Equivalent Plan, the UGI Corporation 2000 Stock Incentive Plan, and the UGI Corporation 2004 Omnibus Equity Compensation Plan (or its successor, as designated by the Committee). Section 2.15 "Just Cause" shall mean dismissal due to misappropriation of funds, substance abuse, habitual insobriety, conviction of a crime involving moral turpitude, or gross negligence in the performance of duties, which gross negligence has had a material adverse effect on the business, operations, assets, properties or financial condition of the Company and its subsidiaries and Affiliates taken as a whole. Disputes with respect to whether Just Cause exists shall be resolved in accordance with Article IX. Section 2.16 "Participant" shall mean any Executive Employee who has been designated by the Company as a participant in this Plan. Section 2.17 "Plan" shall mean the AmeriGas Propane, Inc. Executive Employee Severance Pay Plan, as set forth herein, and as the same may from time to time be amended. Section 2.18 "Plan Year" shall mean each fiscal year of the Company during which this Plan is in effect. Section 2.19 "Release" shall mean a release of employment-related claims in such form as may be proscribed by the Company, acting as an employer and not as a fiduciary, from time to time and with such modifications as the Company deems appropriate for the Participant's particular situation. A copy of the current form is attached as Appendix B. Section 2.20 "Restricted Awards" shall mean restricted units, restricted stock, stock units, performance units, and dividend equivalents and distribution equivalents with respect to any of the foregoing that are granted to a Participant under an Executive Equity Plan as determined by the Committee. The term "Restricted Awards" shall not include stock options. Section 2.21 "Salary Continuation Period" shall equal one business day for each month which is included in the Participant's Years of Service plus the number of months of paid notice under Section 4.01(c) to a maximum of fifteen (15) months (eighteen (18) months in the case of the Chief Executive Officer). Section 2.22 "Year of Service" shall mean each twelve-month period (or part thereof) beginning on the Executive Employee's Employment Commencement Date and ending on each anniversary thereof. Additional Years of Service based on earlier employment with the Company, any Affiliate of the Company or any entity whose business or assets have been acquired by the Company, its Affiliates or by any predecessor of such entities, shall be counted only if permitted by the Committee. 3 ARTICLE III PARTICIPATION AND ELIGIBILITY FOR BENEFITS Section 3.01 General Eligibility Requirement. In its sole discretion, the Company may grant a Benefit under this Plan to any Executive Employee whom the Company designates as a Participant and whose employment is terminated by the Company other than for Just Cause, death, or continuous illness, injury or incapacity for a period of six consecutive months. Notwithstanding anything herein to the contrary, an employee will not be considered to have incurred a termination by the Company for purposes of this Plan if his or her employment is discontinued due to voluntary resignation or the expiration of a leave of absence. In addition, the Participant must meet the requirements of Section 3.03 in order to receive a Benefit under this Plan. Section 3.02 Substantially Comparable Employment. In the absence of a Change of Control, notwithstanding anything herein to the contrary, no Benefits shall be due hereunder to a Participant in connection with the disposition of a business, division, or Affiliate by the Company or an Affiliate if substantially comparable terms of employment, as determined by the Committee, have been offered to the Participant by the transferee; provided, however, that the Committee, in such situation, may determine that the Company will provide some or all of the Benefits to a Participant whose employment with the Company is terminated as described in Section 3.01. This Section 3.02 shall not apply at or after a Change of Control. Section 3.03 Conditions to Entitlement to Benefits. As further conditions to entitlement to Benefits under the Plan, all Participants must, prior to the payment of any Benefits due hereunder, (i) sign and not rescind or contest the enforceability of a Release; (ii) sign and not rescind or contest the enforceability of a confidentiality and post-employment activities agreement in such form as may be proscribed by the Company, acting as an employer and not as a fiduciary; (iii) return to the Company any and all Company property held by the Participant, including but not limited to, all reports, manuals, memoranda, computer disks, tapes and data made available to the Participant during the performance of the Participant's duties, including all copies; (iv) hold confidential any and all information concerning the Company, whether with respect to its business, subscribers, providers, customers, operations, finances, employees, contractors, or otherwise; (v) cooperate fully with the Company to complete the transition of matters with which the Participant is familiar or responsible to other employees and make himself or herself available to answer questions or assist in matters which may require attention after the Participant's Employment Termination Date. If the Company determines, in its sole discretion, that the Participant has violated one or more of the above conditions to entitlement to Benefits, the Committee may determine that it will not pay the Benefits or may discontinue the payment of Benefits under the Plan. Any remedy under this Section 3.03 shall be in addition to, and not in place of, any other remedy the Company may have, at law or otherwise. 4 ARTICLE IV BENEFIT Section 4.01 Amount of Immediate Cash Benefit. Subject to the provisions of Article VII, the Company, acting in its role as plan sponsor and not as a fiduciary, shall determine which Executive Employees shall be awarded a Benefit hereunder and the amount of such Benefit. The Company may take into account any factors it determines to be relevant in deciding which Executive Employees shall be awarded Benefits and the amount of such Benefits, and need not apply its determinations in a uniform manner to terminated Executive Employees similarly situated. All such decisions shall be final, binding, and conclusive with respect to the Participant. The cash amount to be paid to a Participant eligible to receive Benefits under Section 3.01 hereof shall be paid in a lump sum as provided in Section 5.01 hereof and shall equal the sum of the amounts described in subsections (a) through (d), less the amount described in subsection (e), except that any payment under paragraph (b) below that is based on annual financial performance will be excluded from the lump sum payment and paid separately as provided below: (a) An amount equal to the Participant's earned and accrued vacation entitlement, including banked vacation time, and personal holidays through the end of the Participant's Salary Continuation Period. (b) An amount equal to the Participant's annual target bonus amount under the applicable annual bonus plan (or its successor) for the current Plan Year multiplied by the number of months elapsed in the current Plan Year to his or her Employment Termination Date and divided by twelve (12), together with any amounts previously deferred by the Participant under such plan (with interest thereon at the rate prescribed by such plan) as well as any amounts due from the prior year under such plan but not yet paid, provided, however, that if the Employment Termination Date occurs in the last two (2) months of the fiscal year, in lieu of the payment described above, the amount to be paid pursuant to this clause (b) shall be determined and paid after the end of the fiscal year in accordance with the terms and conditions of the applicable annual bonus plan as though the Participant were still an Employee, except that the weighting to be applied to the Participant's business/financial performance goals under the annual bonus plan will be deemed to be 100%; provided further, however, that in the discretion of the Chief Executive Officer, the amount payable pursuant to this paragraph (b) for Employment Termination Dates occurring in the last two (2) months of the fiscal year may be computed in the same manner as that provided for Employment Termination Dates occurring during the first ten (10) months of the fiscal year. (c) In the case of the Chief Executive Officer, an amount of paid notice equal to one hundred thirty (130) times a fraction, the numerator of which is the Chief Executive Officer's Compensation and the denominator of which is two hundred sixty (260), and in the case of all other Participants, paid notice calculated as an amount equal to sixty-five (65) times a fraction the numerator of which is the Participant's Compensation and the denominator of which is two-hundred sixty (260). 5 (d) An amount equal to the number of the Participant's Years of Service multiplied by twelve (12) times a fraction, the numerator of which is the Participant's Compensation and the denominator of which is two-hundred sixty (260); provided, however, that such amount shall not exceed 100% of the Participant's Compensation. (e) If the Participant's employment with the Company terminates before a Change of Control, the cash amount computed in subsections (a) through (d) above shall be reduced by the amount of cash and the fair market value of any partnership units, stock or other property that is payable to the Participant under Restricted Awards after the Participant's termination of employment, as determined by the Committee. The Committee may determine that payment of a portion of the Benefit under this Plan will be delayed pending calculation of the amount payable under Restricted Awards, or the Committee may decide to pay the amounts described in subsections (a) through (d) above immediately and offset amounts payable under the Restricted Awards by the amount of the Benefit previously paid under this Plan. In no event shall a Participant be required to return to the Company any amounts previously paid under this Plan as a result of a decline in the value of Restricted Awards. (f) The offset described in subsection (e) shall not apply if the Participant's employment with the Company terminates at or after a Change of Control. In addition, the offset described in subsection (e) shall not apply to any Restricted Awards for which all requirements for payment have been met before the Participant's Employment Termination Date (for example, if the restriction period for a Restricted Award ends on December 31, 2003, the Restricted Award is payable on February 1, 2004 and the Participant's employment is terminated on January 15, 2004, Benefits under this Plan shall not be offset by the Restricted Award). (g) Notwithstanding the foregoing, the minimum payment calculated under subsections (a) through (d) above shall not be less than six (6) months of base salary at the level in effect on the beginning of the quarter immediately preceding the Employment Termination Date, without regard for target bonus, for Participants in employment grades 36-39 and one (1) year's base salary in effect on the beginning of the quarter immediately preceding the Employment Termination Date, without regard for target bonus, for Participants in employment grades 40 and higher. Section 4.02 Executive Benefits. The Participant shall continue to be entitled, through the end of the Participant's Salary Continuation Period, to those employee benefits and executive perquisites listed below, and as in effect from time to time during the Salary Continuation Period, if any, based upon the amount of coverage or benefit provided at the Participant's Employment Termination Date: (a) Basic Life Insurance; (b) Supplemental Life Insurance; (c) Medical Plan and Denial Assistance Plan, including COBRA continuation coverage; (d) AmeriGas Propane, Inc. Supplemental Executive Retirement Plan, and 6 (e) UGI Corporation Senior Executive Retirement Plan, to the extent applicable. In each case, when contributions are required of all executive employees at the time of the Participant's Employment Termination Date, or thereafter, if required of all other executive employees, the Participant shall be responsible for making the required contributions, on an after-tax basis only, during the Salary Continuation Period in order to be eligible for the coverage. Notwithstanding the foregoing language, the Participant shall not be entitled to make any Flexible Spending Account (childcare or medical) contributions during the Salary Continuation Period. In lieu of any or all of the coverages provided under any of clauses (a) through (c) above, the Company may pay to the Participant, at the time payment is otherwise to be made of cash Benefits pursuant to Section 5.01 hereof, a single lump sum payment equal to the then present value of the cost of such coverages. Notwithstanding anything herein to the contrary, any such coverages shall be discontinued if, and at the time, the Participant obtains other employment and becomes eligible to participate in the plan of, or is provided similar coverage by, a new employer; provided, however, that the Participant shall not be required to refund any sum to the Company should a lump sum have been paid pursuant to the preceding sentence. Any applicable conversion rights shall be provided to the Participant at the time coverage ceases. The Committee shall determine to what extent, if any, any other perquisites or benefit coverage such as tax preparation services, etc. shall continue to be provided during the Salary Continuation Period and whether the Participant shall be entitled to outplacement services or to receive title to the Participant's Company-supplied automobile, if any, in which case the value of the Participant's cash Benefit under Section 4.01 hereof shall be increased accordingly. The Participant shall be responsible for the payment of sales tax on such automobile, if any. Section 4.03 Retirement Plans. This Plan shall not govern and shall in no way affect the Participant's interest in, or entitlement to benefits under, any of the Company's "qualified" retirement plans, and any payments received under any such plan shall not affect a Participant's right to any Benefit hereunder. Section 4.04 Effect on Other Benefits. There shall not be drawn from the continued provision by the Company of any of the aforementioned Benefits any implication of continued employment or of continued right to accrual of retirement benefits under the Company's "qualified" retirement plans or an Executive Equity Plan, and a terminated employee shall not, except as provided in Section 4.01(a) hereof, accrue vacation days, paid holidays, paid sick days or other similar benefits normally associated with employment for any part of the Salary Continuation Period during which benefits are payable under this Plan. The benefits payable under this Plan shall be in addition to and not in lieu of any payments or benefits due to the Participant under any other plan, policy, or program of the Company, and its subsidiaries, or Affiliates. Notwithstanding anything herein to the contrary, as determined by the Committee, the Benefits payable under this Plan to any Participant may be reduced by any and all payments required to be made by the Company under federal, state and local law, including, the Worker Adjustment and Retraining Notification Act, 29 U.S.C. Section 2101 et. seq., or under any employment agreement or special severance arrangement. 7 ARTICLE V METHOD AND DURATION OF BENEFIT PAYMENTS Section 5.01 Method of Payment. The cash Benefits to which a Participant is entitled, as determined pursuant to Article IV hereof, shall be paid in a lump sum. Payment shall be made by mailing to the last address provided by the Participant to the Company. Payment shall be made within thirty (30) days after the Participant's Employment Termination Date, except as otherwise provided in Section 4.01(b), and after the execution of the Release required under Section 3.03 and the expiration of the required revocation period specified in the Release. All payments under the Plan are subject to applicable federal, state and local taxes. Section 5.02 Payments to Beneficiaries. Each Participant shall designate one or more beneficiaries to receive any Benefits due hereunder in the event of the Participant's death prior to the receipt of all such Benefits. Such beneficiary designation shall be made in the manner, and at the time, prescribed by the Committee in its sole discretion. In the absence of an effective beneficiary designation hereunder, the Participant's estate shall be deemed to be the Participant's designated beneficiary. 8 ARTICLE VI ADMINISTRATION Section 6.01 Appointment. The Committee shall consist of one (1) or more persons appointed by the Chairman of the Board. Committee members may be, but need not be, employees of the Company, including the Chairman of the Board and the Chief Executive Officer, whether or not they are one and the same person. Section 6.02 Tenure. Committee members shall serve at the pleasure of the Chairman of the Board. Committee members may resign at any time on ten (10) days' written notice, and Committee members may be discharged, with or without cause, at any time by the Chairman of the Board. Section 6.03 Authority and Duties. It shall be the duty of the Committee, on the basis of information supplied to it by the Company, to determine the eligibility of each Participant for Benefits under the Plan, to determine the amount of Benefit to which each such Participant may be entitled, and to determine the manner and time of payment of the Benefit consistent with the provisions hereof. The Company shall make such payments as are certified to it by the Committee to be due to Participants. The Committee shall have the full power and discretionary authority to construe, interpret and administer the Plan, to correct deficiencies therein, and to supply omissions. All decisions, actions, and interpretations of the Committee shall be final, binding, and conclusive upon the parties. The Committee may delegate ministerial and other responsibilities to one or more Company employees. Section 6.04 Action by the Committee. A majority of the members of the Committee shall constitute a quorum for the transaction of business at a meeting of the Committee. Any action of the Committee may be taken upon the affirmative vote of a majority of the members of the Committee at a meeting. or at the direction of the Chairperson, without a meeting, by mail, telegraph, telephone, or electronic communication device; provided that all of the members of the Committee are informed of their right to vote on the matter before the Committee and of the outcome of the vote thereon. Section 6.05 Officers of the Committee. The Chairman of the Board shall designate one of the members of the Committee to serve as Chairperson thereof. The Chairman of the Board shall also designate a person to serve as Secretary of the Committee, which person may be, but need not be, a member of the Committee. Section 6.06 Compensation of the Committee. Members of the Committee shall receive no compensation for their services as such. However, all reasonable expenses of the Committee shall be paid or reimbursed by the Company upon proper documentation. The Company shall indemnify members of the Committee against personal liability for actions taken in good faith in the discharge of their respective duties as members of the Committee. Section 6.07 Records, Reporting, and Disclosure. The Committee shall keep all individual and group records relating to Participants and former Participants and all other records necessary for the proper operation of the Plan. Such records shall be made available to the 9 Company and to each Participant for examination during business hours except that a Participant shall examine only such records as pertain exclusively to the examining Participant and to the Plan. The Committee shall prepare and shall file as required by law or regulation all reports, forms, documents and other items required by ERISA, the Internal Revenue Code, and every other relevant statute, each as amended, and all regulations thereunder (except that the Company, as payor of the Benefits, shall prepare and distribute to the proper recipients all forms relating to withholding of income or wage taxes, Social Security taxes, and other amounts which may be similarly reportable). Section 6.08 Actions of the Committee. Whenever a determination is required of the Committee under the Plan, such determination shall be made solely at the discretion of the Committee. In addition, the exercise of discretion by the Committee need not be uniformly applied to similarly situated Participants and shall be final and binding on each Participant or beneficiary(ies) to whom the determination is directed. Section 6.09 Benefits of the Chief Executive Officer. Whenever a determination is required with respect to the Chief Executive Officer under the Plan, the individual then serving as the Chairman of the Board of Directors of UGI Corporation shall make all determinations with respect to the Chief Executive Officer as to any matter that directly pertains to, or affects, the Chief Executive Officer. Section 6.10 Bonding. The Committee shall arrange any bonding that may be required by law, but no amount in excess of the amount required by law, if any, shall be required by the Plan. 10 ARTICLE VII AMENDMENT AND TERMINATION Section 7.01 Amendment, Suspension, and Termination. AmeriGas Propane, Inc., by action of its Board of Directors or Compensation/Pension Committee, retains the right, at any time and from time to time, to amend, suspend, or terminate the Plan in whole or in part, for any reason, and without either the consent of or prior notification to any Participant. No such amendment shall give the Company the right to recover any amount paid to a Participant prior to the date of such amendment or to cause the cessation and discontinuance of payments of Benefits to any person or persons under the Plan already receiving Benefits. 11 ARTICLE VIII DUTIES OF THE COMPANY Section 8.01 Records. The Company shall supply to the Committee all records and information necessary to the performance of the Committee's duties. Section 8.02 Payment. The Company shall make payments from its general assets to Participants in accordance with the terms of the Plan, as directed by the Committee. Section 8.03 Discretion. Any decisions, actions or interpretations to be made under the Plan by the Company shall be made in its sole discretion, not in any fiduciary capacity and need not be uniformly applied to similarly situated individuals, and such decisions, actions or interpretations shall be final, binding and conclusive upon all parties. 12 ARTICLE IX CLAIMS PROCEDURES Section 9.01 Application for Benefits. Participants who believe they are eligible for benefits under this Plan may apply for such benefits by completing and filing with the Committee an application for benefits on a form supplied by the Committee. Before the date on which benefit payments commence, each such application must be supported by such information as the Committee deems relevant and appropriate. Section 9.02 Claim. A terminated employee may contest his or her eligibility for the amount of benefit awarded by completing and filing with the Committee a written request for review in the manner specified by the Committee. Each such application must be supported by such information as the Committee deems relevant and appropriate. The Committee will review the claim and provide notice to the terminated employee, in writing, within 90 days after the claim is filed unless special circumstances require an extension of time for processing the claim. In no event shall the extension exceed a period of 90 days from the end of the initial period. In the event that any claim for benefits is denied in whole or in part, the terminated employee whose claim has been so denied shall be notified of such denial in writing by the Committee. The notice advising of the denial shall be written in a manner calculated to be understood by the terminated employee and shall set forth: (i) specific references to the pertinent Plan provisions on which the denial is based; (ii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation as to why such information is necessary; and (iii) an explanation of the Plan's claim procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on appeal. Section 9.03 Appeals of Denied Claims for Benefits. All appeals shall be made by the following procedure: (a) The terminated employee whose claim has been denied shall file with the Committee a notice of appeal of the denial. Such notice shall be filed within sixty (60) days of notification by the Committee of the claim denial, shall be made in writing, and shall set forth all of the facts upon which the appeal is based. Appeals not timely filed shall be barred. (b) The claimant or his duly authorized representative may: 1. request a review upon written notice to the Committee; 2. examine the Plan and obtain, upon request and without charge, copies of all information relevant to the claimant's appeal; and 3. submit issues and comments in writing. (c) The Named Appeals Fiduciary (as described in Section 9.04) shall issue a decision no later than 60 days after receipt of a request for review unless special circumstances, such as the need to hold a hearing, require a longer period of time, in which case a decision shall 13 be rendered as soon as possible, but not later than 120 days after receipt of the terminated employee's notice of appeal. (d) The Named Appeals Fiduciary shall consider the merits of the claimant's written presentations, the merits of any facts or evidence in support of the denial of benefits, and such other facts and circumstances as the Named Appeals Fiduciary shall deem relevant. (e) The Named Appeals Fiduciary shall render a determination upon the appealed claim, which determination shall be accompanied by a written statement setting forth: 1. specific reasons for the decision, written in a manner calculated to be understood by the claimant; 2. specific references to the pertinent Plan provisions upon which the decision is based; 3. the claimant's right to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits; and 4. the claimant's right to bring a civil action under section 502(a) of ERISA. Section 9.04 Appointment of the Named Appeals Fiduciary. The Named Appeals Fiduciary shall be the person or persons named as such by the Board of Directors, or, if no such person or persons be named, then the person or persons named by the Committee as the Named Appeals Fiduciary. Named Appeals Fiduciaries may at any time be removed by the Board of Directors, and any Named Appeals Fiduciary named by the Committee may be removed by the Committee. All such removals may be with or without cause and shall be effective on the date stated in the notice of removal. The Named Appeals Fiduciary shall be a "Named Fiduciary" within the meaning of ERISA, and unless appointed to other fiduciary responsibilities, shall have no authority, responsibility or liability with respect to any matter other than the proper discharge of the functions of the Named Appeals Fiduciary as set forth herein. 14 ARTICLE X MISCELLANEOUS Section 10.01 Nonalienation of Benefits. None of the payments, benefits or rights of any Participant shall be subject to any claim of any creditor, and, in particular, to the fullest extent permitted by law, all such payments, benefits and rights shall be free from attachment, garnishment, trustee's process, or any other legal or equitable process available to any creditor of such Participant. No Participant shall have the right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments which the Participant may expect to receive, contingently or otherwise, under this Plan. Section 10.02 No Contract of Employment. Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Participant, or any person whosoever, the right to be retained in the service of the Company, and all Participants shall remain subject to discharge to the same extent as if the Plan had never been adopted. Section 10.03 Severability of Provisions. If any provision of this Plan shall be held invalid or unenforceable by a court of competent jurisdiction, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included. Section 10.04 Successors, Heirs, Assigns, and Personal Representatives. This Plan shall be binding upon the heirs, executors, administrators, successors and assigns of the parties, including each Participant, present and future. Unless the Committee directs otherwise, the Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, or a division or Affiliate thereof, (i) to acknowledge expressly that this Plan is binding upon and enforceable against the Company in accordance with the terms hereof, (ii) to become jointly and severally obligated with the Company to perform the obligations under this Plan, and (iii) to agree not to amend or terminate the Plan for a period of three (3) years after the date of succession without the consent of the affected Participant. Section 10.05 Headings and Captions. The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. Section 10.06 Gender and Number. Except where otherwise clearly indicated by context, the masculine and the neuter shall include the feminine and the neuter, the singular shall include the plural, and vice-versa. Section 10.07 Unfunded Plan. The Plan shall not be funded. The Company may, but shall not be required to, set aside or designate an amount necessary to provide the Benefits specified herein (including the establishment of trusts). In any event no Participant shall have any right to, or interest in, any assets of the Company which may be applied by the Company to the payment of Benefits. 15 Section 10.08 Payments to Incompetent Persons. etc. Any Benefit payable to or for the benefit of a minor, an incompetent person, or other person incapable of receipting therefor shall be deemed paid when paid to such person's guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge the Company, the Committee and all other parties with respect thereto. Section 10.09 Lost Payees. A Benefit shall be deemed forfeited if the Committee is unable to locate a Participant to whom a Benefit is due. Such Benefit shall be reinstated if application is made by the Participant for the forfeited Benefit while this Plan is in operation. Section 10.10 Controlling Law. This Plan shall be construed and enforced according to the laws of the Commonwealth of Pennsylvania, to the extent not preempted by Federal law, without giving effect to any Pennsylvania choice of law provisions. IN WITNESS WHEREOF, the Company has caused the Plan to be executed by its duly authorized officer and its corporate seal to be affixed hereto as of the____ day of __________. AMERIGAS PROPANE, INC. Attest ____________________________________ By:_________________________________ Secretary Vice President - Human Resources 16 APPENDIX A CHANGE OF CONTROL For purposes of this Plan, the term "Change of Control," and defined terms used in the definition of "Change of Control," shall have the following meanings: 1. "Change of Control" shall mean: (a) Any Person (except UGI, any Subsidiary of UGI, any employee benefit plan of UGI or of any Subsidiary of UGI, or any Person or entity organized, appointed or established by UGI for or pursuant to the terms of any such employee benefit plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner in the aggregate of twenty percent (20%) or more of either (i) the then outstanding shares of common stock of UGI (the "Outstanding UGI Common Stock") or (ii) the combined voting power of the then outstanding voting securities of UGI entitled to vote generally in the election of directors (the "UGI Voting Securities"); in either case unless the members of UGI's Executive Committee in office immediately prior to such acquisition determine within five business days of the receipt of actual notice of such acquisition that the circumstances do not warrant the implementation of the Change of Control provisions of this Plan; or (b) Individuals who, as of the beginning of any twenty-four (24) month period, constitute the UGI Board of Directors (the "Incumbent UGI Board") cease for any reason to constitute at least a majority of the Incumbent UGI Board, provided that any individual becoming a director of UGI subsequent to the beginning of such period whose election or nomination for election by the UGI stockholders was approved by a vote of at least a majority of the directors then comprising the Incumbent UGI Board shall be considered as though such individual were a member of the Incumbent UGI Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of UGI (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or (c) Completion by UGI of a reorganization, merger or consolidation (a "Business Combination"), in each case, with respect to which all or substantially all of the individuals and entities who were the respective Beneficial Owners of the Outstanding UGI Common Stock and UGI Voting Securities immediately prior to such Business Combination do not, following such Business Combination, Beneficially Own, directly or indirectly, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination in substantially the same proportion as their ownership immediately prior to such Business Combination of the Outstanding UGI Common Stock and UGI Voting Securities, as the case may be; in either case unless the members of UGI's Executive Committee in office immediately prior to such Business Combination determine at the time of such Business Combination that the circumstances do not warrant the implementation of the Change of Control provisions of this Plan; or A-1 (d) Completion of (a) a complete liquidation or dissolution of UGI or (b) sale or other disposition of all or substantially all of the assets of UGI other than to a corporation with respect to which, following such sale or disposition, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding UGI Common Stock and UGI Voting Securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the Outstanding UGI Common Stock and UGI Voting Securities, as the case may be, immediately prior to such sale or disposition; in either case unless the members of UGI's Executive Committee in office immediately prior to such sale or disposition determine at the time of such sale or disposition that the circumstances do not warrant the implementation of the Change of Control provisions of this Plan; or (e) Completion by the Company, Public Partnership or the Operating Partnership of a reorganization, merger or consolidation (a "Propane Business Combination"), in each case, with respect to which all or substantially all of the individuals and entities who were the respective Beneficial Owners of the Company's voting securities or of the outstanding units of AmeriGas Partners, L.P. ("Outstanding Units") immediately prior to such Propane Business Combination do not, following such Propane Business Combination, Beneficially Own, directly or indirectly, (a) if the entity resulting from such Propane Business Combination is a corporation, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of such corporation in substantially the same proportion as their ownership immediately prior to such Combination of the Company's voting securities or the Outstanding Units, as the case may be, or, (b) if the entity resulting from such Propane Business Combination is a partnership, more than fifty percent (50%) of the then outstanding common units of such partnership in substantially the same proportion as their ownership immediately prior to such Propane Business Combination of the Company's voting securities or the Outstanding Units, as the case may be; or (f) Completion of (a) a complete liquidation or dissolution of the Company, the Public Partnership or the Operating Partnership or (b) sale or other disposition of all or substantially all of the assets of the Company, the Public Partnership or the Operating Partnership other than to an entity with respect to which, following such sale or disposition, (I) if such entity is a corporation, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Company's voting securities or of the Outstanding Units, as the case may be, immediately prior to such sale or disposition in substantially the same proportion as their ownership of the Company's voting securities or of the Outstanding Units, as the case may be, immediately prior to such sale or disposition, or, (II) if such entity is a partnership, more than fifty percent (50%) of the then outstanding common units is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Company's voting securities or of the Outstanding Units, as the case may be, immediately prior to such sale or disposition in substantially the same proportion as their A-2 ownership of the Company's voting securities or of the Outstanding Units immediately prior to such sale or disposition; or (g) UGI and its Subsidiaries fail to own more than fifty percent (50%) of the then outstanding general partnership interests of the Public Partnership or the Operating Partnership; or (h) UGI and its Subsidiaries fail to own more than fifty percent (50%) of the then outstanding shares of common stock of the Company or more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; or (i) The Company is removed as the general partner of the Public Partnership by vote of the limited partners of the Public Partnership, or is removed as the general partner of the Public Partnership or the Operating Partnership as a result of judicial or administrative proceedings involving the Company, the Public Partnership or the Operating Partnership. 2. "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 3. A Person shall be deemed the "Beneficial Owner" of any securities: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for payment, purchase or exchange; (ii) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including without limitation pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of any security under this clause (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) that are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to clause (ii) above) or disposing of any securities; provided, however, that nothing in this Section 1(c) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial A-3 Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty (40) days after the date of such acquisition. 4. "Operating Partnership" shall mean AmeriGas Propane, L.P. 5. "Public Partnership" shall mean AmeriGas Partners, L.P. 6. "Person" shall mean an individual or a corporation, partnership, trust, unincorporated organization, association, or other entity. 7. "Subsidiary" shall mean any corporation in which UGI or the Company, as applicable, directly or indirectly, owns at least a fifty percent (50%) interest or an unincorporated entity of which UGI or the Company, as applicable, directly or indirectly, owns at least fifty percent (50%) of the profits or capital interests. 8. "UGI" shall mean UGI Corporation. A-4 APPENDIX B RELEASE B-1 EX-10.2 3 w99575exv10w2.txt AMERIGAS PROPANE 2000 LONG-TERM INCENTIVE PLAN EXHIBIT 10.2 AMERIGAS PROPANE, INC. 2000 LONG-TERM INCENTIVE PLAN ON BEHALF OF AMERIGAS PARTNERS, L.P. AS IN EFFECT AS OF DECEMBER 15, 2003 TABLE OF CONTENTS
PAGE 1. Purpose and Design...................................................................................... 1 2. Definitions............................................................................................. 1 3. Maximum Number of Units Available for Grants............................................................ 3 4. Duration of the Plan.................................................................................... 4 5. Administration.......................................................................................... 4 6. Eligibility............................................................................................. 4 7. Restricted Units........................................................................................ 4 8. Restricted Unit Distribution Equivalents................................................................ 7 9. Requirements for Performance Goals and Performance Periods.............................................. 8 10. Non-transferability..................................................................................... 8 11. Consequences of a Change of Control..................................................................... 8 12. Adjustment of Number and Price of Units, Etc............................................................ 9 13. Limitation of Rights.................................................................................... 9 14. Amendment or Termination of Plan........................................................................ 10 15. Tax Withholding......................................................................................... 10 16. Governmental Approval................................................................................... 10 17. Effective Date of Plan.................................................................................. 10 18. Successors.............................................................................................. 10 19. Headings and Captions................................................................................... 11 20. Governing Law........................................................................................... 11 Exhibit A........................................................................................................ 1
i AMERIGAS PROPANE, INC. 2000 LONG-TERM INCENTIVE PLAN ON BEHALF OF AMERIGAS PARTNERS, L.P. 1. PURPOSE AND DESIGN The purpose of this Plan is to assist the Company in its capacity as General Partner of AmeriGas Partners, L.P. in securing and retaining key corporate executives of outstanding ability who are in a position to participate significantly in the development and implementation of the General Partner's strategic plans and thereby to contribute materially to the long-term growth, development, and profitability of AmeriGas Partners, L.P. by affording them an opportunity to acquire Units by the achievement of specific performance goals. The Plan is designed to align directly long-term executive compensation with tangible, direct and identifiable benefits realized by AmeriGas Partners, L.P. Unitholders. 2. DEFINITIONS Whenever used in this Plan, the following terms will have the respective meanings set forth below: 2.1 "Account" means a bookkeeping account established on the records of the Company to record a Participant's interests under the Plan. 2.2 "Administrative Committee" means the committee of employees of the Company and its affiliates appointed by the Committee to perform ministerial and other assigned functions. 2.3 "Affiliate" will have the meaning ascribed to such term in Rule 12b-2 of the General Rules under the Exchange Act. 2.4 "APLP" means AmeriGas Partners, L.P., a Delaware limited partnership. 2.5 "APLP Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership of AmeriGas Partners, L.P., dated as of September 18, 1995, as amended from time to time. 2.6 "Board" means the Company's Board of Directors as constituted from time to time. 2.7 "Change of Control" means a change of control as defined in the attached Exhibit A, as amended from time to time by the Committee in its discretion. 2.8 "Committee" means the Compensation/Pension Committee of the Board or its successor. 2.9 "Company" means AmeriGas Propane, Inc., a Pennsylvania corporation, and any successor thereto that is the General Partner. 2.10 "Comparison Group" means the group selected by the Committee and consisting of the Partnership and such other entities deemed by the Committee (in its sole discretion) to be reasonably comparable to the Partnership. 2.11 "Date of Grant" means the effective date of a Restricted Unit grant; provided, however, that no retroactive grants will be made. 2.12 "Disability" or "Disabled" means a long-term disability as determined under the long-term disability plan of the Company, UGI or an Affiliate of the Company or UGI, which is applicable to the Participant. 2.13 "Employee" means a regular full-time salaried employee (including officers and directors who are also employees) of the Company who performs services directly or indirectly for the benefit of the Partnership. 2.14 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 2.15 "Fair Market Value" of a Unit means the average, rounded to one cent ($0.01), of the highest and lowest sales prices thereof on the New York Stock Exchange on the day on which Fair Market Value is being determined, as reported on the Composite Tape for transactions on the New York Stock Exchange. In the event that there are no Unit transactions on the New York Stock Exchange on such day, the Fair Market Value will be determined as of the immediately preceding day on which there were Unit transactions on that exchange. 2.16 "General Partner" means AmeriGas Propane, Inc., its successor as general partner of APLP, or its transferee, all as provided in Section 6.4(c) of the APLP Partnership Agreement. 2.17 "Grant Letter" means the written instrument that sets forth the terms and conditions of a grant, including all amendments thereto. 2.18 "Operating Partnership" means AmeriGas Propane, L.P., a Delaware limited partnership. 2.19 "Participant" means an Employee designated by the Committee to participate in the Plan. 2.20 "Partnership" means AmeriGas Partners, L.P., a Delaware limited Partnership or any successor thereto. 2.21 "Partnership Security" means any class or series of Partnership interest, any option, right, warrant or appreciation rights relating thereto, or any other type of equity interest that APLP may lawfully issue, or any unsecured or secured debt obligation of APLP that is convertible into any class or series of equity interests of APLP. 2 2.22 "Performance Goal" means the goal or goals and other requirements that must be met in order for Restricted Unit Distribution Equivalents, if any, to be paid and restrictions on Restricted Units to lapse. All Performance Goals must meet the requirements of Section 9. 2.23 "Performance Period" means the period during which performance will be measured, as specified by the Committee. Performance Periods must meet the requirements of Section 9. 2.24 "Plan" means the AmeriGas Propane, Inc. 2000 Long-Term Incentive Plan on behalf of AmeriGas Partners, L.P. as stated herein, including any amendments or modifications thereto. 2.25 "Restricted Unit Distribution Equivalent" means an amount determined by multiplying the number of Restricted Units granted to a Participant, subject to any adjustment under Section 12, by the per-Unit cash distribution, or the per-Unit fair market value (as determined by the Committee) of any distribution in consideration other than cash, paid by APLP on its Units on a distribution payment date that falls within the relevant Restriction Period set forth in the Grant Letter. 2.26 "Restricted Units" means Units that are subject to restrictions as determined by the Committee. 2.27 "Restriction Period" means the period of time during which Restricted Units and Restricted Unit Distribution Equivalents shall be subject to restrictions or conditions, including the Performance Period and any other period specified in the Grant Letter. 2.28 "Retirement" means separation from employment upon or after attaining (i) age 55 with at least 10 years of service with the Company or its affiliates, or (ii) age 65 with at least 5 years of service with the Company or its affiliates. 2.29 "Severance Plan" means any severance plan maintained by the Company, UGI or an affiliate of the Company or UGI that is applicable to the Participant. 2.30 "UGI" means UGI Corporation. 2.31 "Unit or "Common Unit" means a unit representing a fractional part of the Partnership interests of all limited partners and assignees and having the rights and obligations specified with respect to Common Units in the Amended and Restated Agreement of Limited Partnership of the Partnership, as amended from time to time. 3. MAXIMUM NUMBER OF UNITS AVAILABLE FOR GRANTS The number of Restricted Units that may be granted under this Plan may not exceed 500,000 in the aggregate, subject, however, to the adjustment provisions of Section 12 below. With regard to grants to any one individual in a calendar year, the number of Restricted Units that may be issued will not exceed 50,000. If Restricted Units are forfeited, forfeited Restricted 3 Units will again be available for the purposes of the Plan. Restricted Units may be (i) previously issued and outstanding Units, (ii) newly issued Units, or (iii) a combination of each. 4. DURATION OF THE PLAN The Plan will remain in effect until all Units subject to the Plan have been issued and transferred to Participants. Notwithstanding the foregoing, Restricted Units may not be granted after December 31, 2009. 5. ADMINISTRATION The Plan will be administered by the Committee. Subject to the express provisions of the Plan, the Committee will have authority, in its complete discretion, to determine the Employees to whom, and the time or times at which grants will be made. In making such determinations, the Committee may take into account the nature of the services rendered by an Employee, the present and potential contributions of the Employee to the Partnership's success and such other factors as the Committee in its discretion deems relevant. Grants under the Plan need not be uniform as among Participants. Subject to the express provisions of the Plan, the Committee will also have authority, in its complete discretion, to construe and interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of the restrictions relating to Restricted Units (none of which need be identical), and to make all other determinations (including factual determinations) necessary or advisable for the orderly administration of the Plan. All ministerial functions, in addition to those specifically delegated elsewhere in the Plan, shall be performed by the Administrative Committee. The Grant Letter shall set forth the terms of each Restricted Unit grant. Each Participant's receipt of a Grant Letter shall constitute that Participant's acknowledgement and acceptance of the terms of the Plan and the grant and the Committee's authority and discretion. 6. ELIGIBILITY Grants hereunder may be made only to Employees (including directors who are also Employees of the Company) who, in the sole judgment of the Committee, are individuals who are in a position to significantly participate in the development and implementation of the General Partner's strategic plans for the Partnership and thereby contribute materially to the continued growth and development of the Partnership and to its future financial success. 7. RESTRICTED UNITS 7.1 Grant of Restricted Units. Subject to the provisions of Section 3, Restricted Units and Restricted Unit Distribution Equivalents may be granted to Participants at any time and from time to time as may be determined by the Committee. Restricted Units may be granted with or without Restricted Unit Distribution Equivalents as determined by the Committee. Units issued or transferred pursuant to awards of Restricted Units may be issued or transferred for consideration or for no consideration, and will be subject to Performance Goals meeting the requirements of Section 9, including and all requirements set forth in the Grant Letter. 4 7.2 Requirement of Employment. (a) The restrictions on a Participant's Restricted Units shall lapse, and the Restricted Units shall be payable, at the end of the Restriction Period according to the terms set forth in the Grant Letter. If the Participant ceases to be an Employee before the end of the Restriction Period, the Participant's Restricted Units will terminate as to all Units covered by the grant as to which the restrictions have not lapsed, and those Units must be immediately returned to the Company, except as provided below. (b) For Restricted Units granted before December 15, 2003, if a Participant holding Restricted Units ceases to be an Employee by reason of (i) Retirement, (ii) Disability, or (iii) death, the restrictions on Restricted Units held by such Participant will lapse pursuant to the following: (i) Retirement. If a Participant terminates employment on account of Retirement, the restrictions on such Participant's Restricted Units will lapse with regard to any Performance Period that ends within 36 months after the date of such Retirement if the Performance Goals associated with such Performance Period are achieved within that 36-month period. (ii) Disability. If a Participant is determined to be Disabled, the restrictions on such Participant's Restricted Units will lapse with regard to any Performance Period that ends within 36 months after the date of such Disability; provided that Performance Goals associated with such Performance Period are achieved within that 36 month period. (iii) Death. In the event of the death of a Participant while employed by the Company, the restrictions on such Participant's Restricted Units will lapse at the end of the Performance Period associated with such Restricted Units upon the achievement of the related Performance Goals. (iv) Time of Payment. In the event of Retirement, Disability or death, the Participant's Restricted Units shall be paid at the date specified for payment of the Restricted Units in the Grant Letter, or at an earlier date determined by the Committee. (c) For Restricted Units granted on or after December 15, 2003, if a Participant holding Restricted Units ceases to be an Employee by reason of Retirement, Disability or death, the restrictions on Restricted Units held by such Participant will lapse pursuant to the following: (i) If a Participant ceases to be an Employee on account of Retirement, Disability or death, the restrictions shall lapse on a prorated portion of the Participant's outstanding Restricted Units at the end of the Restriction Period, if the Performance Goals and all requirements of the Grant Letter (other than continued employment) are met. The prorated portion will be determined, for each Restricted Unit, as the amount that would otherwise be paid according to the terms of the Restricted Unit, based on achievement of the Performance Goals, multiplied by a fraction, the numerator of which is the number of years during the Restriction 5 Period in which the Participant has been an Employee and the denominator of which is the number of years in the Restriction Period applicable to such Restricted Units. For purposes of the proration calculation, the year in which the Participant's Retirement, Disability or death occurs will be counted as a full year. (ii) In the event of Retirement, Disability or death, the prorated portion of the Restricted Units shall be paid at the date specified for payment of the Restricted Units in the Grant Letter, or at an earlier date determined by the Committee. (d) Transfers. If a Participant ceases to be an Employee but remains employed by the Company, UGI or an Affiliate of the Company or UGI, the Committee may determine that the Participant shall retain his or her outstanding Restricted Units as if the Participant had continued to be an Employee, or the Committee may determine that restrictions on a prorated portion of the Participant's outstanding Restricted Units shall lapse in a manner similar to that described in subsection (c) above. (e) Coordination with Severance Plan. Notwithstanding anything in this Plan to the contrary, if a Participant receives severance benefits under a Severance Plan, the terms of which require that severance compensation payable under the Severance Plan be reduced by benefits payable under this Plan, any amount payable to the Participant under Restricted Units and Restricted Unit Distribution Equivalents after the Participant's termination of employment shall be reduced by the amount of severance compensation paid to the Participant under the Severance Plan, as required by, and according to the terms of, the Severance Plan. (f) Reduction of Responsibilities. With respect to Restricted Units granted after December 15, 2003, the Committee shall have discretion to adjust a Participant's outstanding Restricted Units at any time if the Participant's authority, duties or responsibilities are significantly reduced. 7.3 Restrictions on Transfer and Legend on Unit Certificate. During the Restriction Period set forth in the Grant Letter, a Participant may not sell, assign, transfer, pledge or otherwise dispose of the Restricted Units or rights to Restricted Unit Distribution Equivalents, if any. Any certificate for Restricted Units will contain a legend giving appropriate notice of the restrictions in the grant. The Participant will be entitled to have the legend removed from the certificate covering the Units subject to restrictions when all restrictions on such Units have lapsed. The Administrative Committee may determine that the Company will not issue certificates for Restricted Units until all restrictions on such Units have lapsed, or that the Company will retain possession of certificates for Restricted Units until all restrictions on such Units have lapsed. 7.4 Privileges of a Unitholder. Unless the Committee determines otherwise, during the Restriction Period set forth in the Grant Letter, a Participant who has been issued certificates under Section 7.3 will have the right to vote Restricted Units, and to receive any distributions paid on such Units subject to any restrictions deemed appropriate by the Committee. 6 7.5 Form of Payment for Restricted Units. The Committee will have the sole discretion to determine whether the Company's obligation in respect of payment of awards of Restricted Units for a Participant who is not issued certificates under Section 7.3 will be paid in Units or their Fair Market Value in cash, or partly in Units and partly in cash. 8. RESTRICTED UNIT DISTRIBUTION EQUIVALENTS 8.1 Amount of Distribution Equivalents Credited. If the Committee so specifies when granting Restricted Units, from the Date of Grant of Restricted Units to a Participant until the date on which the Restricted Units are paid, the Company will maintain an Account for such Participant and will credit on each payment date for the payment of a distribution made by APLP on its Units an amount equal to the Restricted Unit Distribution Equivalent associated with such Restricted Units. Notwithstanding the foregoing, a Participant may not accrue during any calendar year Distribution Equivalents in excess of $500,000. No interest will be credited to any such Account. 8.2 Payment of Credited Restricted Unit Distribution Equivalents. Restricted Unit Distribution Equivalents will be paid only if the Committee determines that all requirements of the Performance Goals associated with such Distribution Equivalents have been achieved as prescribed in accordance with Section 9. 8.3 Timing of Payment of Restricted Unit Distribution Equivalents. Restricted Stock Distribution Equivalents shall be paid at the same time and under the same conditions as the underlying Restricted Units are paid. Except as otherwise determined by the Committee, no payments of Restricted Unit Dividend Equivalents will be made (A) prior to the end of the Restriction Period set forth in the Grant Letter or (B) to any Participant whose employment by the Company terminates prior to the end of the Restriction Period for any reason other than Retirement, death, Disability or transfer to an Affiliate of the Company. Unless a Participant will have made an election under Section 8.4 to defer receipt of any portion of such amount, a Participant will receive the aggregate amount of the Participant's Restricted Unit Dividend Equivalents in cash at the end of the applicable Restriction Period. 8.4 Deferral of Restricted Unit Distribution Equivalents. A Participant will have the right to defer receipt of any Restricted Unit Distribution Equivalent payments if the Participant elects to do so on or prior to December 31 of the year preceding the beginning of the last full year of the applicable Performance Period (or such other time as the Administrative Committee will determine is appropriate to make such deferral effective under the applicable requirements of federal tax laws). The terms and conditions of any such deferral (including the period of time thereof) will be subject to approval by the Administrative Committee and all deferrals will be made on a form provided a Participant for this purpose. 7 9. REQUIREMENTS FOR PERFORMANCE GOALS AND PERFORMANCE PERIODS 9.1 Requirements for Performance Goals. When Restricted Units and Restricted Unit Distribution Equivalents are granted, the Committee will establish in writing Performance Goals either before the beginning of the Performance Period or during a period ending no later than the earlier of (i) 90 days after the beginning of the Performance Period or (ii) the date on which 25% of the Performance Period has elapsed. The Performance Goals must specify (A) the Performance Goal(s) that must be met in order for restrictions on the Restricted Units to lapse or the Restricted Unit Distribution Equivalents to be paid, (B) the Performance Period during which performance will be measured, (C) the maximum amounts that may be paid if the Performance Goals are met, and (D) any other conditions that the Committee deems appropriate and consistent with the Plan, including any Restriction Period, the time of payment and other requirements. 9.2 Criteria Used for Performance Goals. The Committee will use objectively determinable business criteria for the Performance Goals based on one or more of the following criteria: Unit price, earnings per Unit, net earnings, operating earnings, return on assets, unitholder return, return on equity, growth in assets, unit volume, sales, cash flow, market share, relative performance to a Comparison Group, or strategic business criteria, including, but not limited to, meeting specified revenue goals, market penetration goals, geographic business expansion goals, cost targets or goals relating to acquisitions or divestitures. The Performance Goals may relate to the Participant's business unit or the performance of the Partnership as a whole, or any combination of the foregoing. Performance Goals need not be uniform as among Participants. 9.3 Forfeitures. If and to the extent that all requirements of the Performance Goals and Grant Letter are not met, grants of Restricted Units and Restricted Unit Distribution Equivalents will be forfeited. 10. NON-TRANSFERABILITY No Restricted Unit, rights to Restricted Unit Distribution Equivalents or other rights granted under the Plan will be transferable otherwise than by will or the laws of descent and distribution. 11. CONSEQUENCES OF A CHANGE OF CONTROL 11.1 Notice and Acceleration. Upon a Change of Control, unless the Committee determines otherwise, (i) the Company will provide each Participant with outstanding grants written notice of such Change of Control, (ii) the restrictions and conditions on all outstanding Restricted Units will immediately lapse and such Restricted Units will be paid to the Participants, and (iii) outstanding Restricted Unit Distribution Equivalents will be paid to the Participants in such amounts as the Committee may determine. With respect to Restricted Units granted after December 15, 2003, unless the Committee determines otherwise, outstanding Restricted Units and Restricted Unit Distribution Equivalents will be paid in an amount not less than their target value, as determined by the Committee. Outstanding Restricted Units shall be paid in Units or 8 cash, as described in Section 7.5, and outstanding Restricted Unit Distribution Equivalents shall be paid in cash. 11.2 Assumption of Grants. Upon a Change of Control where the Partnership is not the surviving entity (or survives only as a subsidiary of another entity), unless the Committee determines otherwise, all outstanding grants will be converted to similar grants of the surviving entity (or a parent of the surviving entity). 11.3 Committee. The Committee making the determinations under this Section 11 following a Change of Control must be comprised of the same members as those on the Committee immediately before the Change of Control. If the Committee members do not meet this requirement, the automatic provisions of Section 11.1 will apply, and the Committee will not have discretion to vary them. 11.4 Limitations. Notwithstanding anything in the Plan to the contrary, in the event of a Change of Control, the Committee will not have the right to take any actions described in the Plan (including without limitation actions described in this Section 11) that would make the Change of Control ineligible for desired accounting treatment if, in the absence of such right, the Change of Control would qualify for such treatment and the Company intends to use such treatment with respect to the Change of Control. 12. ADJUSTMENT OF NUMBER AND PRICE OF UNITS, ETC. Notwithstanding anything to the contrary in this Plan, in the event (a) any recapitalization, reorganization, merger, consolidation, spin-off, combination, repurchase, exchange of Common Units or other securities of APLP; security split or reverse split, extraordinary distribution, liquidation, dissolution, significant corporate or partnership transaction (whether relating to assets, limited partnership interests, or stock) involving APLP, or other extraordinary transaction or event affects Units such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of Participants' rights under the Plan, then the Committee may adjust (i) any or all of the number or kind of Partnership interests reserved for issuance under the Plan, (ii) the maximum number of Units which may be the subject of grants to any one individual in any calendar year, (iii) the number or kind of Partnership interests to be subject to future grants under the Plan, (iv) the number of Restricted Units, (v) the terms and conditions applicable to Restricted Units, and/or (vi) the terms and conditions applicable to Restricted Unit Distribution Equivalents, provided that the number of Restricted Units will always be a whole number. Any such determination of adjustments by the Committee will be conclusive for all purposes of the Plan. 13. LIMITATION OF RIGHTS Nothing contained in this Plan will be construed to give an Employee any right to a grant hereunder except as may be authorized in the discretion of the Committee. A grant under this Plan will not constitute or be evidence of any agreement or understanding, expressed or implied, that the Company will employ a Participant for any specified period of time, in any specific position or at any particular rate of remuneration. 9 14. AMENDMENT OR TERMINATION OF PLAN Subject to Board approval, the Committee may at any time, and from time to time, alter, amend, suspend or terminate this Plan without the consent of the Company's shareholders, APLP's unitholders, or Participants, except that any such alteration, amendment, suspension or termination will be subject to the provisions of the APLP Partnership Agreement and to the approval of the Company's shareholder within one year after such Committee and Board action if such shareholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the Units are then listed or quoted, or if the Committee in its discretion determines that obtaining such shareholder approval is for any reason advisable. No termination or amendment of this Plan may, without the consent of the Participant to whom any Restricted Unit has previously been granted, adversely affect the rights of such Participant under such Restricted Unit, including any Restricted Unit Distribution Equivalents. Notwithstanding the foregoing, the Committee may make minor amendments to this Plan which do not materially affect the rights of Participants or significantly increase the cost to the Partnership. 15. TAX WITHHOLDING Upon the lapse of restrictions on Restricted Units, the Company will require the recipient to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements. However, to the extent authorized by rules and regulations of the Administrative Committee, the Company may withhold Units and make cash payments in respect thereof in satisfaction of a recipient's tax obligations in an amount that does not exceed the recipient's minimum applicable withholding tax obligations. 16. GOVERNMENTAL APPROVAL Each grant of Restricted Units will be subject to the requirement that if at any time the listing, registration or qualification of the Units covered thereby upon any securities exchange, or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of or in connection with the awarding of such grant of Restricted Units, then no such grant may be paid in whole or in part unless and until such listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Board. 17. EFFECTIVE DATE OF PLAN This Plan will become effective as of January 1, 2000, subject to approval by the Company's shareholder. The amendment and restatement of the Plan is effective as of December 15, 2003. 18. SUCCESSORS This Plan will be binding upon and inure to the benefit of APLP, the General Partner, their successors and assigns and the Participant and his heirs, executors, administrators and legal representatives. 10 19. HEADINGS AND CAPTIONS The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. 20. GOVERNING LAW The validity, construction, interpretation and effect of the Plan will be governed exclusively by and determined in accordance with the law of the Commonwealth of Pennsylvania. 11 AMERIGAS PROPANE, INC. 2000 LONG-TERM INCENTIVE PLAN ON BEHALF OF AMERIGAS PARTNERS, L.P. EXHIBIT A For purposes of this Plan, the term "Change of Control," and defined terms used in the definition of "Change of Control," shall have the following meanings: 1. "Change of Control" shall mean: (i) Any Person (except UGI, any Subsidiary of UGI, any employee benefit plan of UGI or of any Subsidiary of UGI, or any Person or entity organized, appointed or established by UGI for or pursuant to the terms of any such employee benefit plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner in the aggregate of twenty percent (20%) or more of either (i) the then outstanding shares of common stock of UGI (the "Outstanding UGI Common Stock") or (ii) the combined voting power of the then outstanding voting securities of UGI entitled to vote generally in the election of directors (the "UGI Voting Securities"); or (ii) Individuals who, as of the beginning of any twenty-four (24) month period, constitute the UGI Board of Directors (the "Incumbent UGI Board") cease for any reason to constitute at least a majority of the Incumbent UGI Board, provided that any individual becoming a director of UGI subsequent to the beginning of such period whose election or nomination for election by the UGI stockholders was approved by a vote of at least a majority of the directors then comprising the Incumbent UGI Board shall be considered as though such individual were a member of the Incumbent UGI Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of UGI (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or (iii) Completion by UGI of a reorganization, merger or consolidation (a "Business Combination"), in each case, with respect to which all or substantially all of the individuals and entities who were the respective Beneficial Owners of the Outstanding UGI Common Stock and UGI Voting Securities immediately prior to such Business Combination do not, following such Business Combination, Beneficially Own, directly or indirectly, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination in substantially the same proportion as their ownership immediately prior to such Business Combination of the Outstanding UGI Common Stock and UGI Voting Securities, as the case may be; or A-1 (iv) Completion of (a) a complete liquidation or dissolution of UGI or (b) sale or other disposition of all or substantially all of the assets of UGI other than to a corporation with respect to which, following such sale or disposition, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding UGI Common Stock and UGI Voting Securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the Outstanding UGI Common Stock and UGI Voting Securities, as the case may be, immediately prior to such sale or disposition; or (v) Completion by the Company, Public Partnership or the Operating Partnership of a reorganization, merger or consolidation (a "Propane Business Combination"), in each case, with respect to which all or substantially all of the individuals and entities who were the respective Beneficial Owners of the Company's voting securities or of the outstanding units of AmeriGas Partners, L.P. ("Outstanding Units") immediately prior to such Propane Business Combination do not, following such Propane Business Combination, Beneficially Own, directly or indirectly, (a) if the entity resulting from such Propane Business Combination is a corporation, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of such corporation in substantially the same proportion as their ownership immediately prior to such Combination of the Company's voting securities or the Outstanding Units, as the case may be, or, (b) if the entity resulting from such Propane Business Combination is a partnership, more than fifty percent (50%) of the then outstanding common units of such partnership in substantially the same proportion as their ownership immediately prior to such Propane Business Combination of the Company's voting securities or the Outstanding Units, as the case may be; or (vi) Completion of (a) a complete liquidation or dissolution of the Company, the Public Partnership or the Operating Partnership or (b) sale or other disposition of all or substantially all of the assets of the Company, the Public Partnership or the Operating Partnership other than to an entity with respect to which, following such sale or disposition, (I) if such entity is a corporation, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Company's voting securities or of the Outstanding Units, as the case may be, immediately prior to such sale or disposition in substantially the same proportion as their ownership of the Company's voting securities or of the Outstanding Units, as the case may be, immediately prior to such sale or disposition, or, (II) if such entity is a partnership, more than fifty percent (50%) of the then outstanding common units is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Company's voting securities or of the Outstanding Units, as the case may be, immediately prior to such sale or disposition in A-2 substantially the same proportion as their ownership of the Company's voting securities or of the Outstanding Units immediately prior to such sale or disposition; or (vii) UGI and its Subsidiaries fail to own more than fifty percent (50%) of the then outstanding general partnership interests of the Public Partnership or the Operating Partnership; or (viii) UGI and its Subsidiaries fail to own more than fifty percent (50%) of the then outstanding shares of common stock of the Company or more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; or (ix) The Company is removed as the general partner of the Public Partnership by vote of the limited partners of the Public Partnership, or is removed as the general partner of the Public Partnership or the Operating Partnership as a result of judicial or administrative proceedings involving the Company, the Public Partnership or the Operating Partnership. 2. "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 3. A Person shall be deemed the "Beneficial Owner" of any securities: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for payment, purchase or exchange; (ii) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including without limitation pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of any security under this clause (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) that are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to clause (ii) above) or disposing of any securities; provided, however, that nothing in this Section A-3 1(c) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty (40) days after the date of such acquisition. 4. "Operating Partnership" shall mean AmeriGas Propane, L.P. 5. "Public Partnership" shall mean AmeriGas Partners, L.P. 6. "Person" shall mean an individual or a corporation, partnership, trust, unincorporated organization, association, or other entity. 7. "Subsidiary" shall mean any corporation in which UGI or the Company, as applicable, directly or indirectly, owns at least a fifty percent (50%) interest or an unincorporated entity of which UGI or the Company, as applicable, directly or indirectly, owns at least fifty percent (50%) of the profits or capital interests. 8. "UGI" shall mean UGI Corporation. A-4 EX-31.1 4 w99575exv31w1.txt CERTIFICATION OF PRESIDENT AND CEO PURSUANT TO SECTION 302 EXHIBIT 31.1 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Eugene V. N. Bissell, certify that: 1. I have reviewed this interim report on Form 10-Q of AmeriGas Partners, L.P., AmeriGas Finance Corp., AmeriGas Eagle Finance Corp. and AP Eagle Finance Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report; 4. The registrants' other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrants and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrants' disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrants' internal control over financial reporting that occurred during the registrants' most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants' internal control over financial reporting; and 5. The registrants' other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants' auditors and the audit committee of the registrants' board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants' ability to record, process, summarize and report financial information; and EXHIBIT 31.1 (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal control over financial reporting. Date: August 13, 2004 /s/ Eugene V. N. Bissell ------------------------------------------- Eugene V. N. Bissell President and Chief Executive Officer AmeriGas Propane, Inc. AmeriGas Finance Corp. AmeriGas Eagle Finance Corp. AP Eagle Finance Corp. EX-31.2 5 w99575exv31w2.txt CERTIFICATION OF VICE PRESIDENT-FINANCE & CFO PURSUANT TO SECTION 302 EXHIBIT 31.2 CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Martha B. Lindsay, certify that: 1. I have reviewed this interim report on Form 10-Q of AmeriGas Partners, L.P., AmeriGas Finance Corp., AmeriGas Eagle Finance Corp. and AP Eagle Finance Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report; 4. The registrants' other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrants and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrants' disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrants' internal control over financial reporting that occurred during the registrants' most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants' internal control over financial reporting; and 5. The registrants' other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants' auditors and the audit committee of the registrants' board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants' ability to record, process, summarize and report financial information; and EXHIBIT 31.2 (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal control over financial reporting. Date: August 13, 2004 /s/ Martha B. Lindsay ---------------------------------------------------- Martha B. Lindsay Vice President - Finance and Chief Financial Officer AmeriGas Propane, Inc. AmeriGas Finance Corp. AmeriGas Eagle Finance Corp. AP Eagle Finance Corp. EX-32 6 w99575exv32.txt CERTIFICATION BY CEO & CFO PURSUANT TO SECTION 906 EXHIBIT 32 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER RELATING TO A PERIODIC REPORT CONTAINING FINANCIAL STATEMENTS I, Eugene V. N. Bissell, Chief Executive Officer, and I, Martha B. Lindsay, Chief Financial Officer, of each of AmeriGas Propane, Inc., a Pennsylvania corporation and the General Partner of AmeriGas Partners, L.P., a Delaware limited partnership (the "Partnership"), AmeriGas Finance Corp. ("Finance Corp."), AmeriGas Eagle Finance Corp. ("Eagle Finance Corp.") and AP Eagle Finance Corp. ("AP Finance Corp." and collectively with the Partnership, Finance Corp. and Eagle Finance Corp., the "Registrant") hereby certify that to our knowledge: (1) The Registrant's periodic report on Form 10-Q for the period ended June 30, 2004 (the "Form 10-Q") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Registrant. * * * CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER /s/ Eugene V. N. Bissell /s/ Martha B. Lindsay - --------------------------- --------------------------- Eugene V. N. Bissell Martha B. Lindsay Date: August 13, 2004 Date: August 13, 2004 -----END PRIVACY-ENHANCED MESSAGE-----