<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
ON
FORM 8-A/A
For Registration of Certain Classes of Securities
Pursuant to Section 12(b) or 12(g) of
the Securities Exchange Act of 1934
AMERIGAS PARTNERS, L.P.
(Exact name of Registrant as specified in its charter)
DELAWARE 23-2787918
(State of incorporation (I.R.S. Employer
or organization) Identification No.)
460 NORTH GULPH ROAD
KING OF PRUSSIA, PENNSYLVANIA 19406
(Address of principal executive offices) (zip code)
(610) 337-7000
(Registrant's telephone number,
including area code)
If this Form relates to the If this Form relates to the registration of
registration of a class of debt a class of debt securities and is to become
securities and is effective upon effective simultaneously with the
filing pursuant to General effectiveness of a concurrent registration
Instruction A(c)(1) please check statement under the Securities Act of 1933
the following box. [ ] pursuant to General Instruction A(c)(2)
please check the following box. [ ]
<C157>
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
------------------- ------------------------------
Common Units representing New York Stock Exchange
Limited Partner Interests
Securities to be registered pursuant to Section 12(g) of the Act:
None
----------------
(Title of Class)
<PAGE> 2
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The securities registered are Common Units representing common limited
partner interests in the Registrant, AmeriGas Partners, L.P., a Delaware limited
partnership (the "Partnership"). As such, a description of such securities
includes a description of the principal provisions of the Amended and Restated
Agreement of Limited Partnership of AmeriGas Partners, L.P. dated as of
September 18, 1995 affecting such Common Units (the "Partnership Agreement") as
well as the material tax consequences of ownership of such Units. Capitalized
terms not otherwise defined herein are defined in the "Glossary."
THE COMMON UNITS
The Common Units have been registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder, and the Partnership is subject to the reporting and
certain other requirements of the Exchange Act.
Purchasers of Common Units in the initial offering of Common Units (the
"Initial Offering") and subsequent transferees of Common Units (or their
brokers, agents or nominees on their behalf) will be required to execute
Transfer Applications, the form of which is set forth on the reverse side of the
certificate representing Common Units. Purchasers may hold Common Units in
nominee accounts, provided that the broker (or other nominee) executes and
delivers a Transfer Application and becomes a limited partner. The Partnership
will be entitled to treat the nominee holder of a Common Unit as the absolute
owner thereof, and the beneficial owner's rights will be limited solely to those
that it has against the nominee holder as a result of or by reason of any
understanding or agreement between such beneficial owner and nominee holder.
THE UNITS
Generally, the Common Units and the Subordinated Units represent
limited partner interests in the Partnership, which entitle the holders thereof
to participate in Partnership distributions and exercise the rights or
privileges available to limited partners under the Partnership Agreement. For a
description of the relative rights and preferences of holders of Common Units
and holders of Subordinated Units in and to Partnership distributions, together
with a description of the circumstances under which Subordinated Units may
convert into Common Units, see "Cash Distribution Policy." For a description of
the rights and privileges of limited partners under the Partnership Agreement,
see "The Partnership Agreement."
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TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C. acts as a registrar and
transfer agent (the "Transfer Agent") for the Common Units and receives a fee
from the Partnership for serving in such capacities. All fees charged by the
Transfer Agent for transfers of Common Units will be borne by the Partnership
and not by the holders of Common Units, except that fees similar to those
customarily paid by stockholders for surety bond premiums to replace lost or
stolen certificates, taxes and other governmental charges, special charges for
services requested by a holder of a Common Unit and other similar fees or
charges will be borne by the affected holder. There will be no charge to holders
for disbursements of the Partnership's cash distributions. The Partnership will
indemnify the Transfer Agent, its agents and each of their respective
shareholders, directors, officers and employees against all claims and losses
that may arise out of acts performed or omitted in respect of its activities as
such, except for any liability due to any negligence, gross negligence, bad
faith or intentional misconduct of the indemnified person or entity.
The Transfer Agent may at any time resign, by notice to the
Partnership, or be removed by the Partnership, such resignation or removal to
become effective upon the appointment by the General Partner of a successor
transfer agent and registrar and its acceptance of such appointment. If no
successor has been appointed and accepted such appointment within 30 days after
notice of such resignation or removal, the General Partner is authorized to act
as the transfer agent and registrar until a successor is appointed.
TRANSFER OF UNITS
Until a Common Unit has been transferred on the books of the
Partnership, the Partnership and the Transfer Agent, notwithstanding any notice
to the contrary, may treat the record holder thereof as the absolute owner for
all purposes, except as otherwise required by law or stock exchange regulations.
Transfers of a Common Unit will not be recorded by the Transfer Agent or
recognized by the Partnership unless the transferee executes and delivers a
Transfer Application. A transferee who has completed and delivered a Transfer
Application shall be deemed to have (i) requested admission as a substituted
limited partner in the Partnership, (ii) agreed to comply with and be bound by
and to have executed the Partnership Agreement, (iii) represented and warranted
that such transferee has the right, power and authority and, if an individual,
the capacity to enter into the Partnership Agreement, (iv) granted the powers of
attorney to the General Partner and any liquidator of the Partnership as
specified in the Partnership Agreement and (v) given the consents and approvals
and made the waivers contained in the Partnership Agreement. By executing and
delivering a Transfer Application, the transferee of a Common Unit becomes the
record holder of the Unit and constitutes an assignee until admitted into the
Partnership as a substituted limited partner. An assignee will become a
substituted limited partner of the Partnership in respect of the transferred
Common Units upon the consent of the General Partner and the recordation of the
name of the assignee on the books and records of the Partnership. Such consent
may be withheld in the sole discretion of the General Partner.
Common Units are securities and are transferable according to the laws
governing transfer of securities. In addition to other rights acquired upon
transfer, the transferor gives the transferee
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<PAGE> 4
the right to request admission as a substituted limited partner in the
Partnership in respect of the transferred Common Units. A purchaser or
transferee of Common Units who does not execute and deliver a Transfer
Application obtains only (a) the right to assign the Common Units to a purchaser
or other transferee and (b) the right to transfer the right to seek admission as
a substituted limited partner in the Partnership with respect to the transferred
Common Units. Thus, a purchaser or transferee of Common Units who does not
execute and deliver a Transfer Application will not receive cash distributions
unless the Common Units are held in a nominee or "street name" account and the
nominee or broker has executed and delivered a Transfer Application with respect
to such Common Units, and may not receive certain federal income tax information
or reports furnished to record holders of Common Units. The transferor of Common
Units will have a duty to provide such transferee with all information that may
be necessary to obtain registration of the transfer of the Common Units, but a
transferee agrees, by acceptance of the certificate representing Common Units,
that the transferor will not have a duty to insure the execution of the Transfer
Application by the transferee and will have no liability or responsibility if
such transferee neglects or chooses not to execute and forward the Transfer
Application to the Transfer Agent. See "The Partnership Agreement--Status as
Limited Partner or Assignee."
CASH DISTRIBUTION POLICY
The Partnership will distribute to its partners, on a quarterly basis,
all its Available Cash in the manner described in the Partnership Agreement.
Available Cash generally means, with respect to any fiscal quarter of the
Partnership, all cash on hand at the end of such quarter, and all additional
cash of the Partnership on hand on the date of determination of Available Cash
with respect to such quarter resulting from borrowings subsequent to the end of
such quarter, less the amount of cash reserves that is necessary or appropriate
in the reasonable discretion of the General Partner to (a) provide for the
proper conduct of the Partnership's business, (b) provide funds for
distributions during the next four quarters, or (c) comply with applicable law
or any Partnership debt instrument or other agreement.
Cash distributions will be characterized as distributions from either
Operating Surplus or Capital Surplus. This distinction affects the amounts
distributed to Unitholders relative to the General Partner, and under certain
circumstances it determines whether holders of Subordinated Units receive any
distributions. See "--Quarterly Distributions of Available Cash."
Operating Surplus generally refers to (i) the cash balance of the
Partnership on the date the Partnership commenced operations, plus $40 million,
and all Partnership operating receipts, less (ii) all Partnership operating
expenses (including expenses of the General Partner incurred on behalf of the
Partnership), debt service payments, capital expenditures, distributions and
reserves established for future Partnership operations.
Capital Surplus will generally be generated only by borrowings (other
than for working capital purposes), sales of debt and equity securities and
sales or other dispositions of assets for cash (other than inventory, accounts
receivable and other current assets and assets disposed of in the ordinary
course of business).
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To avoid the difficulty of trying to determine whether Available Cash
distributed by the Partnership is from Operating Surplus or Capital Surplus, all
Available Cash distributed by the Partnership from any source will be treated as
from Operating Surplus until the sum of all Available Cash distributed from
Operating Surplus equals the cumulative amount of Operating Surplus actually
generated from the date the Partnership commenced operations through the end of
the quarter prior to such distribution. Any excess Available Cash (irrespective
of its source) will be deemed to be Capital Surplus and distributed accordingly.
If Capital Surplus is distributed in respect of each Common Unit in an
aggregate amount per Unit equal to the initial public offering price of the
Common Units in the Initial Offering (the "Initial Unit Price"), the distinction
between Operating Surplus and Capital Surplus will cease, and all distributions
will be treated as from Operating Surplus. The General Partner does not expect
that there will be significant distributions from Capital Surplus.
The Subordinated Units are a separate class of interests in the
Partnership, and the rights of holders of such interests to participate in
distributions differ from the rights of the holders of Common Units. For any
given quarter, Available Cash will be distributed to the General Partner and to
the holders of Common Units, and it may also be distributed to the holders of
Subordinated Units depending upon the amount of Available Cash for the quarter,
amounts distributed in prior quarters, whether the Subordination Period has
ended and other factors discussed below.
The discussion below indicates the percentages of cash distributions
required to be made to the General Partner and the Common Unitholders and the
circumstances under which holders of Subordinated Units are entitled to cash
distributions and the amounts thereof.
QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH
The Partnership will make distributions to its partners with respect to
each fiscal quarter of the Partnership prior to liquidation in an amount equal
to all of its Available Cash for such quarter. Distributions will be made
approximately 45 days after each March 31, June 30, September 30 and December 31
to holders of record on the applicable record date.
With respect to each quarter during the Subordination Period, to the
extent there is sufficient Available Cash, the holders of Common Units will have
the right to receive the Minimum Quarterly Distribution, plus any Arrearage
Balances, prior to any distribution of Available Cash to the holders of
Subordinated Units. Upon expiration of the Subordination Period, all
Subordinated Units will have converted (on a one-for-one basis) into Common
Units and will participate pro rata with all other holders of Common Units in
future distributions of Available Cash. Under certain circumstances, up to
9,891,074 Subordinated Units may convert into Common Units prior to the
expiration of the Subordination Period. Common Units will not accrue arrearages
for any quarter after the Subordination Period, and Subordinated Units will not
accrue any arrearages with respect to distributions for any quarter.
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The Minimum Quarterly Distribution is subject to adjustment as
described below under "--Distributions from Capital Surplus" and "--Adjustment
of Minimum Quarterly Distribution and Target Distribution Levels."
DISTRIBUTIONS FROM OPERATING SURPLUS DURING SUBORDINATION PERIOD
The Subordination Period will generally extend until the first day of
any quarter beginning on or after April 1, 2000 in respect of which (a)
distributions of Available Cash from Operating Surplus on each of the
outstanding Common Units and Subordinated Units equaled or exceeded the Minimum
Quarterly Distribution for each of the four consecutive non-overlapping
four-quarter periods immediately preceding such date, (b) the Adjusted Operating
Surplus generated during both (A) each of the two immediately preceding,
non-overlapping four-quarter periods and (B) the immediately preceding
sixteen-quarter period equaled or exceeded the Minimum Quarterly Distribution on
each of the outstanding Common Units and Subordinated Units during such periods,
and (c) there are no arrearages on the Common Units. Prior to the end of the
Subordination Period, a portion of the Subordinated Units will convert into
Common Units on the first day after the record date established for any quarter
ending on or after March 31, 1998 (with respect to 4,945,537 Subordinated Units)
and March 31, 1999 (with respect to an additional 4,945,537 Subordinated Units)
in respect of which (a) distributions of Available Cash from Operating Surplus
on each of the outstanding Common Units and Subordinated Units equaled or
exceeded the Minimum Quarterly Distribution for each of the three consecutive
non-overlapping four-quarter periods immediately preceding such date, (b) the
Adjusted Operating Surplus generated during the immediately preceding
twelve-quarter period equaled or exceeded the Minimum Quarterly Distribution on
each of the outstanding Common Units and Subordinated Units during such period,
(c) the General Partner makes a good faith estimate (in connection with which
the General Partner shall be entitled to make such assumptions as in its sole
discretion it believes are reasonable) that the Partnership will, with respect
to the four-quarter period commencing with such date, generate Adjusted
Operating Surplus in an amount equal to or exceeding the Minimum Quarterly
Distribution on each of the outstanding Common Units and Subordinated Units, (d)
the General Partner obtains approval of the Audit Committee that it has complied
with the provisions of part (c) above, and (e) there are no arrearages on the
Common Units. Adjusted Operating Surplus for any period generally means
Operating Surplus generated during such period but excluding any Operating
Surplus attributable to any net increase in working capital borrowings during
such period and Operating Surplus attributable to any net reduction in cash
reserves during such period, but including any net increases in reserves to
provide funds for distributions resulting from Operating Surplus generated
during such period. Upon expiration of the Subordination Period, all remaining
Subordinated Units will convert into Common Units and will thereafter
participate pro rata with the other Common Units in distributions of Available
Cash. In addition, if the General Partner is removed other than for cause, the
Subordination Period will end, any then-existing arrearages on the Common Units
will terminate and the Subordinated Units will immediately convert into Common
Units.
Distributions by the Partnership of Available Cash from Operating
Surplus with respect to any quarter during the Subordination Period will be made
in the following manner:
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first, 98% to the Common Unitholders, pro rata, and 2% to the
General Partner, until there has been distributed in respect of each Common Unit
an amount equal to the Minimum Quarterly Distribution for such quarter;
second, 98% to the Common Unitholders, pro rata, and 2% to the
General Partner, until there has been distributed in respect of each Common Unit
an amount equal to any Arrearage Balance on each Common Unit with respect to any
prior quarter;
third, 98% to the Subordinated Unitholders, pro rata, and 2%
to the General Partner, until there has been distributed in respect of each
Subordinated Unit an amount equal to the Minimum Quarterly Distribution for such
quarter; and
thereafter, in the manner described in "--Incentive
Distributions--Hypothetical Annualized Yield" below.
DISTRIBUTIONS FROM OPERATING SURPLUS AFTER SUBORDINATION PERIOD
Distributions by the Partnership of Available Cash constituting
Operating Surplus with respect to any quarter after the Subordination Period
will be made in the following manner:
first, 98% to all Unitholders, pro rata, and 2% to the General
Partner, until there has been distributed in respect of each Unit an amount
equal to the Minimum Quarterly Distribution for such quarter; and
thereafter, in the manner described in "--Incentive
Distributions--Hypothetical Annualized Yield" below.
INCENTIVE DISTRIBUTIONS--HYPOTHETICAL ANNUALIZED YIELD
For any quarter for which Available Cash from Operating Surplus is
distributed in respect of both the Common Units and the Subordinated Units in an
amount equal to the Minimum Quarterly Distribution and Available Cash has been
distributed on outstanding Common Units in such amount as may be necessary to
eliminate any Arrearage Balances, then any additional Available Cash from
Operating Surplus in respect of such quarter will be distributed among the
Unitholders and the General Partner in the following manner:
first, 98% to all Unitholders, pro rata, and 2% to the General
Partner, until the Unitholders have received an additional $0.055 for such
quarter in respect of each Unit (the "First Target Distribution");
second, 85% to all Unitholders, pro rata, and 15% to the
General Partner, until the Unitholders have received an additional $0.091 for
such quarter in respect of each Unit (the "Second Target Distribution");
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third, 75% to all Unitholders, pro rata, and 25% to the
General Partner, until the Unitholders have received an additional $0.208 for
such quarter in respect of each Unit (the "Third Target Distribution"); and
thereafter, 50% to all Unitholders, pro rata, and 50% to the
General Partner.
The following table illustrates the percentage allocation of any such
additional Available Cash among the Unitholders and the General Partner up to
the various target distribution levels and a hypothetical annualized percentage
yield to be realized by a Unitholder at each different level of allocation
between the Unitholders and the General Partner. For purposes of the following
table, the annualized percentage yield is calculated on a hypothetical basis as
the annual pretax yield on an investment in a Common Unit during the first year
following the investment assuming that (i) the Common Unit was purchased at an
amount equal to $21.25 per Unit and (ii) the Partnership distributed each
quarter during the first year following the investment the amount set forth
under the column "Total Quarterly Distribution Amount." The calculations are
also based on the assumption that the quarterly distribution amounts shown do
not include any Arrearage Balances. The amounts set forth under "Marginal
Percentage Interest in Distributions" are the percentage interests of the
Unitholders and the General Partner in any Available Cash from Operating Surplus
distributed up to and including the quarterly distribution amount shown, until
Available Cash reaches the next target distribution level, if any. The
percentage interests shown for the Unitholders and the General Partner for the
Minimum Quarterly Distribution are also applicable to quarterly distribution
amounts that are less than the Minimum Quarterly Distribution.
<TABLE>
<CAPTION>
MARGINAL PERCENTAGE
INTEREST IN
DISTRIBUTIONS
---------------------
TOTAL
QUARTERLY HYPOTHETICAL
DISTRIBUTION ANNUALIZED GENERAL
AMOUNT YIELD UNITHOLDERS PARTNER
------ ----- ----------- -------
<S> <C> <C> <C> <C>
Minimum Quarterly Distribution.............. $0.550 10.353% 98% 2%
First Target Distribution................... $0.605 11.388% 98% 2%
Second Target Distribution.................. $0.696 13.101% 85% 15%
Third Target Distribution................... $0.904 17.016% 75% 25%
Thereafter.................................. -- -- 50% 50%
</TABLE>
DISTRIBUTIONS FROM CAPITAL SURPLUS
Distributions by the Partnership of Available Cash from Capital Surplus
will be made 98% to all Unitholders, pro rata, and 2% to the General Partner,
until the Partnership shall have distributed, in respect of each Unit, Available
Cash from Capital Surplus in an aggregate amount per Unit equal to the Initial
Unit Price. Thereafter, all distributions from Capital Surplus will be
distributed as if they were from Operating Surplus.
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As a distribution is made from Capital Surplus, it is treated as if it
were a repayment of the Initial Unit Price. To reflect such repayment, the
Minimum Quarterly Distribution and First, Second and Third Target Distribution
levels will be adjusted downward by multiplying each amount by a fraction, the
numerator of which is the Investment Balance immediately after giving effect to
such repayment and the denominator of which is the Investment Balance
immediately prior to such repayment.
When "payback" of the Initial Unit Price has occurred, i.e., when the
Investment Balance is zero, then in effect the Minimum Quarterly Distribution
and the First, Second and Third Target Distribution levels each will have been
reduced to zero. Thereafter, all distributions of Available Cash from all
sources will be treated as if they were from Operating Surplus and, because the
Minimum Quarterly Distribution and the First, Second and Third Target
Distributions will have been reduced to zero, the General Partner will be
entitled to receive 50% of all distributions of Available Cash after
distributions in respect of Arrearage Balances.
Distributions from Capital Surplus will not reduce the Minimum
Quarterly Distribution or any of the First, Second or Third Target Distribution
levels for the quarter with respect to which they are distributed.
ADJUSTMENT OF MINIMUM QUARTERLY DISTRIBUTION AND TARGET DISTRIBUTION LEVELS
The Minimum Quarterly Distribution, the First, Second and Third Target
Distribution levels, the Investment Balance and other amounts calculated on a
per Unit basis will be proportionately adjusted upward or downward, as
appropriate, in the event of any combination or subdivision of Common Units
(whether effected by a distribution payable in Common Units or otherwise), but
not by reason of the issuance of additional Common Units for cash or property.
For example, in the event of a two-for-one split of the Common Units (assuming
no prior adjustments), the Minimum Quarterly Distribution, the First, Second and
Third Target Distribution levels and the Investment Balance would each be
reduced to 50% of its initial level.
In addition, as noted above under "--Quarterly Distributions of
Available Cash" and "--Distributions from Capital Surplus," if a distribution is
made of Available Cash from Capital Surplus, the Minimum Quarterly Distribution
and the First, Second and Third Target Distribution levels will be adjusted
downward proportionately, by multiplying each such amount, as the same may have
been previously adjusted, by a fraction, the numerator of which is the
Investment Balance immediately after giving effect to such distribution and the
denominator of which is the Investment Balance immediately prior to such
distribution. For example, assuming the Investment Balance is $21.25 per Unit
and Available Cash from Capital Surplus of $10.625 per Unit is distributed to
Unitholders (assuming no prior adjustments), then the amount of the Minimum
Quarterly Distribution and the First, Second and Third Target Distribution
levels would each be reduced to 50% of its initial level. If and when the
Investment Balance is zero, the Minimum Quarterly Distribution and the First,
Second and Third Target Distribution levels each will have been reduced to zero,
and the General Partner will be entitled to receive 50% of all distributions of
Available Cash after distributions in respect of Arrearage Balances.
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The Minimum Quarterly Distribution and First, Second and Third Target
Distribution levels may also be adjusted if legislation is enacted or if
existing law is modified or interpreted by the relevant governmental authority
in a manner that causes the Partnership to become taxable as a corporation or
otherwise subjects the Partnership to taxation as an entity for federal, state
or local income tax purposes. In such event, the Minimum Quarterly Distribution
and First, Second and Third Target Distribution levels for each quarter
thereafter would be reduced to an amount equal to the product of (i) each of the
Minimum Quarterly Distribution and First, Second and Third Target Distribution
levels multiplied by (ii) one minus the sum of (x) the maximum marginal federal
income tax rate to which the Partnership is subject as an entity plus (y) any
increase in the effective overall state and local income tax rate to which the
Partnership is subject as a result of the new imposition of the entity level tax
(after taking into account the benefit of any deduction allowable for federal
income tax purposes with respect to the payment of state and local income
taxes). For example, assuming the Partnership was not previously subject to
state and local income tax, if the Partnership were to become taxable as an
entity for federal income tax purposes and the Partnership became subject to a
maximum marginal federal, and effective state and local, income tax rate of 38%,
then the Minimum Quarterly Distribution and the First, Second and Third Target
Distribution levels would each be reduced to 62% of the amount thereof
immediately prior to such adjustment.
DISTRIBUTIONS OF CASH UPON LIQUIDATION
Following the commencement of the dissolution and liquidation of the
Partnership, assets will be sold or otherwise disposed of as provided in the
Partnership Agreement. If and to the extent necessary to permit holders of
Common Units to receive all distributions provided in the first priority below,
98% of any Net Liquidation Gain will be allocated to the Common Units. The
distribution priorities set forth below are intended to give the holders of
outstanding Common Units a preference over the holders of outstanding
Subordinated Units that, under certain circumstances, will entitle them to
receive their Investment Balance plus any Arrearage Balance plus the Minimum
Quarterly Distribution for the quarter in which the Partnership is liquidated
before holders of Subordinated Units receive an equivalent amount. Depending on
Partnership operations prior to liquidation and the value of Partnership assets
on liquidation, however, it is quite possible that there will not be sufficient
Net Liquidation Gain to permit the Common Units to recover all of such amounts,
even though there would still be cash available to distribute to holders of the
Subordinated Units.
If the Liquidation Date occurs before the end of the Subordination
Period, the net liquidation proceeds will generally be applied in the following
order:
first, 98% to the holders of Common Units pro rata, and 2% to the
General Partner, until there has been distributed for all quarters after the
Liquidation Date in respect of the Common Units under this clause first an
amount equal to the lesser of (i) the sum of the Investment Balances, the
Arrearage Balances and the Minimum Quarterly Distributions for the current
quarter and (ii) the sum of (A) the amount that would be distributable in
respect of a Common Unit if 98% of all distributions were made in respect of all
Units pro rata, plus (B) the amount that would be allocable to a Common Unit if
98% of the Net Liquidation Gain were allocated to all Common Units pro rata;
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second, 98% to the holders of Subordinated Units, pro rata, and 2% to
the General Partner, until there has been distributed under this clause second
an amount per Subordinated Unit equal to the amount distributed in respect of
each Common Unit pursuant to clause first above to the extent of such Common
Unit's Investment Balance and the Minimum Quarterly Distribution for such
quarter;
third, 98% to all Unitholders, pro rata, and 2% to the General Partner,
until the aggregate amount distributed under this clause third in respect of all
Units outstanding on the Liquidation Date equals the sum of the First Target
Distribution for each quarter that each such Unit has been outstanding, less all
amounts previously distributed in respect of such Units as First Target
Distributions;
fourth, 85% to all Unitholders, pro rata, and 15% to the General
Partner, until the aggregate amount distributed under this clause fourth in
respect of all Units outstanding on the Liquidation Date equals the sum of the
Second Target Distribution for each quarter that each such Unit has been
outstanding, less all amounts previously distributed in respect of such Units as
Second Target Distributions;
fifth, 75% to all Unitholders, pro rata, and 25% to the General
Partner, until the aggregate amount distributed under this clause fifth in
respect of all Units outstanding on the Liquidation Date equals the sum of the
Third Target Distribution for each quarter that each such Unit has been
outstanding, less all amounts previously distributed in respect of such Units as
Third Target Distributions;
thereafter, 50% to all Unitholders, pro rata, and 50% to the General
Partner.
If the liquidation occurs after the Subordination Period, the
distinction between Common Units and Subordinated Units will disappear, so that
clause (ii) of paragraph first above and all of paragraph second above will no
longer be applicable.
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THE PARTNERSHIP AGREEMENT
The following paragraphs are a summary of certain provisions of the
Partnership Agreement. The form of the Partnership Agreement for the Partnership
is filed as Exhibit 3.1 to the Partnership's Annual Report on Form 10-K for the
fiscal year ended September 30, 1995. The form of Partnership Agreement for the
Operating Partnership (the "Operating Partnership Agreement") is included as
Exhibit 3.2 to the Partnership's Registration Statement on Form S-1 (No.
33-86028), which became effective April 12, 1995. The following discussion is
qualified in its entirety by reference to the Partnership Agreements for the
Partnership and for the Operating Partnership. The Partnership is the sole
limited partner of the Operating Partnership, which owns, manages and operates
the Partnership's business. The General Partner serves as the general partner of
the Partnership and of the Operating Partnership, collectively owning a 2%
general partner interest in the business and properties owned by the Partnership
and the Operating Partnership on a combined basis and the Unitholders (including
the General Partner as an owner of Common Units and Subordinated Units) hold a
98% interest as limited partners in the Partnership and the Operating
Partnership on a combined basis. Unless specifically described otherwise,
references herein to the term "Partnership Agreement" constitute references to
the Partnership Agreements of the Partnership and the Operating Partnership,
collectively. Certain provisions of the Partnership Agreement are summarized
elsewhere in this Form 8-A under various headings.
ORGANIZATION AND DURATION
The Partnership and the Operating Partnership are organized as Delaware
limited partnerships. The Partnership will dissolve on December 31, 2093, unless
sooner dissolved pursuant to the terms of the Partnership Agreement.
PURPOSE
The purpose of the Partnership is to serve as the limited partner of
the Operating Partnership and engage in any other activity approved by the
General Partner. The Operating Partnership Agreement provides that the Operating
Partnership may engage in any activity engaged in by AmeriGas Propane, Inc. and
Petrolane Incorporated immediately prior to the Initial Offering, any activities
that are, in the sole judgment of the General Partner, reasonably related
thereto and any other activity approved by the General Partner. The General
Partner has the ability under the Partnership Agreement to cause the Partnership
and the Operating Partnership to engage in activities other than the propane
marketing business. The General Partner is authorized in general to perform all
acts deemed necessary to carry out such purposes and to conduct the business of
the Partnership.
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POWER OF ATTORNEY
Each limited partner, and each person who acquires a Unit from a
Unitholder and executes and delivers a Transfer Application with respect
thereto, grants to the General Partner and, if a liquidator of the Partnership
has been appointed, such liquidator, a power of attorney to, among other things,
execute and file certain documents required in connection with the
qualification, continuance or dissolution of the Partnership, or the amendment
of the Partnership Agreement in accordance with the terms thereof and to make
consents and waivers contained in the Partnership Agreement.
MANAGEMENT
The General Partner is responsible for the management and operation of
the activities of the Partnership. Unitholders may not directly or indirectly
participate in the management or operation of the Partnership. The General
Partner owes a fiduciary duty to the Unitholders. See "--Fiduciary Duties of the
General Partner." Notwithstanding any limitation on obligations or duties, the
General Partner will be liable, as the general partner of the Partnership, for
all the debts of the Partnership (to the extent not paid by the Partnership),
except to the extent that indebtedness or other obligations incurred by the
Partnership is made specifically non-recourse to the General Partner.
The General Partner has appointed two persons who are neither officers
nor employees of the General Partner or any affiliate of the General Partner to
its Board of Directors. Such directors serve on the Audit Committee with the
authority to review, at the request of the General Partner, specific matters as
to which the General Partner believes there may be a conflict of interest in
order to determine if the resolution of such conflict proposed by the General
Partner is fair and reasonable to the Partnership. Any matters approved by the
Audit Committee will be conclusively deemed to be fair and reasonable to the
Partnership, approved by all partners of the Partnership and not a breach by the
General Partner of any duties it may owe the Partnership or the Unitholders. In
addition, the Audit Committee will review external financial reporting of the
Partnership, will recommend engagement of the Partnership's independent
accountants and will review the Partnership's procedures for internal auditing
and the adequacy of the Partnership's internal accounting controls.
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RESTRICTIONS ON AUTHORITY OF THE GENERAL PARTNER
The authority of the General Partner is limited in certain respects
under the Partnership Agreement. The General Partner is prohibited, without the
prior approval of holders of record of at least a Unit Majority, from, among
other things, selling all or substantially all of the Partnership's assets in a
single transaction or a series of related transactions (including by way of
merger, consolidation or other combination) or approving on behalf of the
Partnership the sale of all or substantially all of the assets of the Operating
Partnership; provided that the Partnership may mortgage, pledge, hypothecate or
grant a security interest in all or substantially all of the Partnership's
assets without such approval. The Partnership may also sell all or substantially
all of its assets pursuant to a foreclosure or other realization upon the
foregoing encumbrances without such approval. The Unitholders are not entitled
to dissenters' rights of appraisal under the Partnership Agreement or applicable
Delaware law in the event of a merger or consolidation of the Partnership, a
sale of substantially all of the Partnership's assets or any other event.
WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNER
The General Partner has agreed not to voluntarily withdraw as general
partner of the Partnership and the Operating Partnership prior to December 31,
2004 (with limited exceptions described below), without obtaining the approval
of at least a Unit Majority and furnishing an opinion of counsel that such
withdrawal (following the selection of a successor general partner) will not
result in the loss of the limited liability of the limited partners of the
Partnership or cause the Partnership to be treated as an association taxable as
a corporation or otherwise taxed as an entity for federal income tax purposes
(an "Opinion of Counsel"). On or after December 31, 2004, the General Partner
may withdraw as general partner by giving 90 days' written notice (without first
obtaining approval from the Unitholders), and such withdrawal will not
constitute a violation of the Partnership Agreement. Notwithstanding the
foregoing, the General Partner may withdraw without Unitholder approval upon 90
days' notice to the limited partners if more than 50% of the outstanding Units
are held or controlled by one person and its affiliates (other than the General
Partner and its affiliates). In addition, the Partnership Agreement permits the
General Partner (in certain limited instances) to sell all of its general
partner interest in the Partnership. See "--Transfer of General Partner
Interest."
Upon the withdrawal of the General Partner under any circumstances
(other than as a result of a transfer by the General Partner of all or a part of
its general partner interest in the Partnership), the holders of a majority of
the outstanding Units may select a successor to such withdrawing General
Partner. If such a successor is not elected, or is elected but an Opinion of
Counsel cannot be obtained, the Partnership will be dissolved, wound up and
liquidated, unless within 180 days after such withdrawal a majority of the
Unitholders agree in writing to continue the business of the Partnership and to
the appointment of a successor General Partner. See "--Termination and
Dissolution."
The General Partner may not be removed unless such removal is approved
by the vote of the holders of not less than two-thirds of the outstanding Units
and the Partnership receives an Opinion of Counsel. Any such removal is also
subject to the approval of a successor general partner by the vote of the
holders of not less than a majority of the outstanding Units.
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Removal or withdrawal of the General Partner of the Partnership also
constitutes removal or withdrawal, as the case may be, of the General Partner as
general partner of the Operating Partnership.
In the event of withdrawal of the General Partner where such withdrawal
violates the Partnership Agreement or removal of the General Partner by the
limited partners under circumstances where cause exists, a successor general
partner will have the option to purchase the general partner interest of the
departing General Partner (the "Departing Partner") in the Partnership and the
Operating Partnership for a cash payment equal to the fair market value of such
interest. Under all other circumstances where the General Partner withdraws or
is removed by the limited partners, the Departing Partner will have the option
to require the successor general partner to purchase such general partner
interest of the Departing Partner for such amount. In each case such fair market
value will be determined by agreement between the Departing Partner and the
successor general partner, or if no agreement is reached, by an independent
investment banking firm or other independent experts selected by the Departing
Partner and the successor general partner (or if no expert can be agreed upon,
by the expert chosen by agreement of the experts selected by each of them). In
addition, the Partnership will be required to reimburse the Departing Partner
for all amounts due the Departing Partner, including, without limitation, all
employee related liabilities, including severance liabilities, incurred in
connection with the termination of the employees employed by the Departing
Partner for the benefit of the Partnership.
If the above-described option is not exercised by either the Departing
Partner or the successor general partner, as applicable, the Departing Partner's
general partner interest in the partnership will be converted into Common Units
equal to the fair market value of such interest as determined by an investment
banking firm or other independent expert selected in the manner described in the
preceding paragraph.
TRANSFER OF GENERAL PARTNER INTEREST
Except for a transfer by the General Partner of all, but not less than
all, of its general partner interest in the Partnership to an affiliate or in
connection with the merger or consolidation of the General Partner with or into
another entity, the General Partner may not transfer all or any part of its
general partner interest in the Partnership to another person or entity prior to
December 31, 2004, without the approval of holders of at least a Unit Majority;
provided that, in each case such transferee assumes the rights and duties of the
General Partner, agrees to be bound by the provisions of the Partnership
Agreement, furnishes an Opinion of Counsel and agrees to purchase all (or the
appropriate portion thereof, as applicable) of the General Partner's partnership
interest in the Operating Partnership.
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REIMBURSEMENT FOR SERVICES
The Partnership Agreement provides that the General Partner is not
entitled to receive any compensation for its services as general partner of the
Partnership; the General Partner is, however, entitled to be reimbursed on a
monthly basis (or such other basis as the General Partner may reasonably
determine) for all direct and indirect expenses it incurs or payments it makes
on behalf of the Partnership, and all other necessary or appropriate expenses
allocable to the Partnership or otherwise reasonably incurred by the General
Partner in connection with the operation of the Partnership's business
(including expenses allocated to the General Partner by its affiliates). The
Partnership Agreement provides that the General Partner shall determine the
expenses that are allocable to the Partnership in any reasonable manner
determined by the General Partner in its sole discretion.
CHANGE OF MANAGEMENT PROVISIONS
The Partnership Agreement contains certain provisions that are intended
to discourage a person or group from attempting to remove the General Partner as
general partner of the Partnership or otherwise change management of the
Partnership. If any person or group other than the General Partner and its
affiliates acquires beneficial ownership of 20% or more of the Common Units,
such person or group loses voting rights with respect to all of its Common
Units. In addition, if the General Partner is removed as General Partner other
than for cause, the Subordination Period will end, any then-existing arrearages
on the Common Units will be terminated and any Subordinated Units held by the
General Partner will immediately convert into Common Units.
STATUS AS LIMITED PARTNER OR ASSIGNEE
Except as described below under "--Limited Liability," the Units will
be fully paid, and Unitholders will not be required to make additional
contributions to the Partnership.
An assignee of a Common Unit, subsequent to executing and delivering a
Transfer Application, but pending its admission as a substituted limited partner
in the Partnership, is entitled to an interest in the Partnership equivalent to
that of a limited partner with respect to the right to share in allocations and
distributions from the Partnership, including liquidating distributions. The
General Partner will vote and exercise other powers attributable to Common Units
owned by an assignee who has not become a substitute limited partner at the
written direction of such assignee. See "--Meetings; Voting." Transferees who do
not execute and deliver a Transfer Application will be treated neither as
assignees nor as record holders of Common Units, and will not receive cash
distributions, federal income tax allocations or reports furnished to record
holders of Common Units. See "--Transfer of Units."
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NON-CITIZEN ASSIGNEES; REDEMPTION
If the Partnership is or becomes subject to federal, state or local
laws or regulations that, in the reasonable determination of the General
Partner, create a substantial risk of cancellation or forfeiture of any property
in which the Partnership has an interest because of the nationality, citizenship
or other related status of any limited partner or assignee, the Partnership may
redeem the Units held by such limited partner or assignee at their Current
Market Price. In order to avoid any such cancellation or forfeiture, the General
Partner may require each limited partner or assignee to furnish information
about his nationality, citizenship, residency or related status. If a limited
partner or assignee fails to furnish information about such nationality,
citizenship, residency or other related status within 30 days after a request
for such information, such limited partner or assignee may be treated as a
non-citizen assignee ("Non-citizen Assignee"). In addition to other limitations
on the rights of an assignee who is not a substituted limited partner, a
Non-citizen Assignee does not have the right to direct the voting of his Units
and may not receive distributions in kind upon liquidation of the Partnership.
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ISSUANCE OF ADDITIONAL SECURITIES
The Partnership Agreement authorizes the General Partner to cause the
Partnership to issue an unlimited number of additional limited partner interests
and other equity securities of the Partnership for such consideration and on
such terms and conditions as shall be established by the General Partner in its
sole discretion without the approval of any limited partners, provided that,
prior to the end of the Subordination Period, (a) except as provided in clauses
(b) and (c) below, the Partnership may not issue equity securities of the
Partnership ranking prior or senior to the Common Units or an aggregate of more
than 9,400,000 additional Common Units (excluding Common Units or parity Units
issued in connection with the exercise of the underwriters' over-allotment
option in the Initial Offering, upon conversion of Subordinated Units and
pursuant to employee benefit plans) or an equivalent amount of securities
ranking on a parity with the Common Units, in either case without the approval
of the holders of at least a majority of the outstanding Common Units; (b) the
Partnership may also issue an unlimited number of additional Common Units or
parity securities without the approval of the Unitholders if such issuance
occurs (i) in connection with an Acquisition or a Capital Improvement or (ii)
within 270 days of, and the net proceeds from such issuance are used to repay
debt incurred in connection with, an Acquisition or a Capital Improvement, in
each case where such Acquisition or Capital Improvement involves assets that
would have, if acquired by the Partnership as of the date that is one year prior
to the first day of the quarter in which such transaction is to be effected,
resulted in an increase in (A) the amount of Adjusted Operating Surplus
generated by the Partnership on a per-Unit basis for all outstanding Units with
respect to each of the four most recently completed quarters (on a pro forma
basis) over (B) the actual amount of Adjusted Operating Surplus generated by the
Partnership on a per-Unit basis for all outstanding Units with respect to each
of such four quarters; and (c) the Partnership may also issue an unlimited
number of parity Units prior to the end of the Subordination Period and without
the approval of the Unitholders if the use of proceeds from such issuance is
exclusively to repay up to an aggregate of $150 million of long-term
indebtedness of the Partnership or the Operating Partnership, in each case only
where the aggregate amount of distributions that would have been paid with
respect to such newly issued Units and the related additional distributions that
would have been made to the General Partner in respect of the four-quarter
period ending prior to the first day of the quarter in which the issuance is to
be consummated (assuming such Units had been outstanding throughout such period
and that distributions equal to the distributions that were actually paid on the
outstanding Units during the period were paid on such Units) did not exceed the
interest costs actually incurred during such period on the indebtedness that is
to be repaid (or, if such indebtedness was not outstanding throughout the entire
period, would have been incurred had such indebtedness been outstanding for the
entire period). In accordance with Delaware law and the provisions of the
Partnership Agreement, the General Partner may cause the Partnership to issue
additional partnership interests that, in the General Partner's sole discretion,
may have special voting rights to which the Common Units are not entitled.
The General Partner will have the right, which it may from time to time
assign in whole or in part to any of its affiliates, to purchase Common Units,
Subordinated Units or other equity securities of the Partnership from the
Partnership whenever, and on the same terms that, the Partnership issues such
securities or rights to persons other than the General Partner and its
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affiliates, to the extent necessary to maintain the percentage interest of the
General Partner and its affiliates in the Partnership that existed immediately
prior to each such issuance. The holders of Common Units will not have
preemptive rights to acquire additional Common Units or other partnership
interests that may be issued by the Partnership.
Additional issuances of Units, including Subordinated Units or other
equity securities of the Partnership ranking junior to the Common Units, may
reduce the likelihood of, and the amount of, any distributions above the Minimum
Quarterly Distribution.
LIMITED CALL RIGHT
If at any time less than 20% of the then-issued and outstanding limited
partner interests of any class are held by persons other than the General
Partner and its affiliates, the General Partner will have the right, which it
may assign and transfer in whole or in part to any of its affiliates or to the
Partnership, to acquire all, but not less than all, of the remaining limited
partner interests of such class held by such unaffiliated persons as of a record
date to be selected by the General Partner, on at least 10 but not more than 60
days' notice. The purchase price in the event of such purchase shall be the
greater of (a) the highest cash price paid by the General Partner or any of its
affiliates for any limited partner interests of such class purchased within the
90 days preceding the date on which the General Partner first mails notice of
its election to purchase such limited partner interests and (b) the Current
Market Price as of the date three days prior to the date such notice is mailed.
As a consequence of the General Partner's right to purchase outstanding limited
partner interests, a holder of limited partner interests may have his limited
partner interests purchased from him even though he may not desire to sell them,
or the price paid may be less than the amount the holder would desire to receive
upon the sale of his limited partner interests. The tax consequences to a
Unitholder of the exercise of this call right are the same as a sale by such
Unitholder of his Units in the market. See "Federal Income Tax
Information--Disposition of Units."
AMENDMENT OF PARTNERSHIP AGREEMENT
Amendments to the Partnership Agreement may be proposed only by or with
the consent of the General Partner. In order to adopt a proposed amendment, the
General Partner is required to seek written approval of the holders of the
number of Units required to approve such amendment or call a meeting of the
limited partners to consider and vote upon the proposed amendment, except as
described below. Proposed amendments (unless otherwise specified) must be
approved by holders of at least a Unit Majority except that no amendment may be
made that would (i) enlarge the obligations of any limited partner, without its
consent, (ii) enlarge the obligations of, restrict in any way any action by or
rights of, or reduce in any way the amounts distributable, reimbursable or
otherwise payable to, the General Partner, without its consent, which may be
given or withheld in its sole discretion, (iii) change the term of the
Partnership, (iv) provide that the Partnership is not dissolved upon expiration
of its term or (v) give any person the right to dissolve the Partnership other
than the General Partner's right to dissolve the Partnership with the approval
of holders of at least a Unit Majority.
The General Partner may make amendments to the Partnership Agreement
without the approval of any limited partner or assignee of the Partnership to
reflect (i) a change in the name of
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<PAGE> 20
the Partnership, the location of the principal place of business of the
Partnership, the registered agent or the registered office of the Partnership,
(ii) admission, substitution, withdrawal or removal of partners in accordance
with the Partnership Agreement, (iii) a change that, in the sole discretion of
the General Partner, is necessary or advisable to qualify or continue the
qualification of the Partnership as a partnership in which the limited partners
have limited liability or that is necessary or advisable in the opinion of the
General Partner to ensure that the Partnership and the Operating Partnership
will not be treated as an association taxable as a corporation or otherwise
taxed as an entity for federal income tax purposes, (iv) an amendment that is
necessary, in the opinion of counsel to the Partnership, to prevent the
Partnership or the General Partner or its respective directors or officers from
in any manner being subjected to the provisions of the Investment Company Act of
1940, as amended, the Investment Advisors Act of 1940, as amended, or "plan
asset" regulations adopted under the Employee Retirement Income Security Act of
1974, as amended, whether or not substantially similar to plan asset regulations
currently applied or proposed, (v) subject to the limitations on the issuance of
additional Common Units or other limited or general partner interests described
above, an amendment that in the sole discretion of the General Partner is
necessary or advisable in connection with the authorization of additional
limited or general partner interests, (vi) any amendment expressly permitted in
the Partnership Agreement to be made by the General Partner acting alone, (vii)
an amendment effected, necessitated or contemplated by a merger agreement that
has been approved pursuant to the terms of the Partnership Agreement, (viii) any
amendment that, in the sole discretion of the General Partner, is necessary or
advisable in connection with the formation by the Partnership of, or its
investment in, any corporation, partnership or other entity (other than the
Operating Partnership) as otherwise permitted by the Partnership Agreement, (ix)
a change in the fiscal year and taxable year of the Partnership and changes
related thereto, and (x) any other amendments substantially similar to the
foregoing.
In addition, the General Partner may make amendments to the Partnership
Agreement without the approval of any limited partner or assignee if such
amendments (i) do not adversely affect the limited partners in any material
respect, (ii) are necessary or advisable (in the sole discretion of the General
Partner) to satisfy any requirements, conditions or guidelines contained in any
opinion, directive, ruling or regulation of any federal or state agency or
judicial authority or contained in any federal or state statute, (iii) are
necessary or advisable to facilitate the trading of the Units or to comply with
any rule, regulation, guideline or requirement of any securities exchange on
which the Units are or will be listed for trading, compliance with any of which
the General Partner deems to be in the best interests of the Partnership and the
Unitholders or (iv) are required or contemplated by the Partnership Agreement.
The General Partner will not be required to obtain an Opinion of
Counsel in the event of the amendments described in the two immediately
preceding paragraphs. No other amendments to the Partnership Agreement will
become effective without the approval of at least 90% of the Units unless the
Partnership obtains an opinion of counsel to the effect that such amendment will
not affect the limited liability of any limited partner in the Partnership or
the limited partner of the Operating Partnership.
Any amendment that materially and adversely affects the rights or
preferences of any type or class of outstanding Units in relation to other
classes of Units will require the approval of
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holders of at least a majority of the outstanding Units so affected (excluding,
during the Subordination Period, any Common Units held by the General Partner
and its affiliates).
MEETINGS; VOTING
Except as described below with respect to a person or group owning 20%
or more of all Common Units, Unitholders or assignees who are record holders of
Units on the record date set pursuant to the Partnership Agreement will be
entitled to notice of, and to vote at, meetings of limited partners of the
Partnership and to act with respect to matters as to which approvals may be
solicited. With respect to voting rights attributable to Common Units that are
owned by an assignee who is a record holder but who has not yet been admitted as
a limited partner, the General Partner shall be deemed to be the limited partner
with respect thereto and shall, in exercising the voting rights in respect of
such Common Units on any matter, vote such Common Units at the written direction
of such record holder. Absent such direction, such Common Units will not be
voted (except that, in the case of Units held by the General Partner on behalf
of Non-citizen Assignees, the General Partner shall distribute the votes in
respect of such Units in the same ratios as the votes of limited partners in
respect of other Units are cast).
Any action that is required or permitted to be taken by the limited
partners may be taken either at a meeting of the limited partners or without a
meeting if consents in writing setting forth the action so taken are signed by
holders of such number of limited partner interests as would be necessary to
authorize or take such action at a meeting of all of the limited partners.
Meetings of the limited partners of the Partnership may be called by the General
Partner or by limited partners owning at least 20% of the outstanding Units of
the class for which a meeting is proposed. Limited partners may vote either in
person or by proxy at meetings. The holders of a majority of the outstanding
Units of the class or classes for which a meeting has been called represented in
person or by proxy shall constitute a quorum at a meeting of limited partners of
such class or classes, unless any such action by the limited partners requires
approval by holders of a greater percentage of such Units, in which case the
quorum shall be such greater percentage (excluding, in either case, if such are
to be excluded from the vote, outstanding Units owned by the General Partner and
its affiliates).
Each record holder of a Unit has a vote according to his percentage
interest in the Partnership, although additional limited partner interests
having special voting rights could be issued by the General Partner. See
"--Issuance of Additional Securities." However, Common Units owned beneficially
by any person and its affiliates (other than the General Partner and its
affiliates) that own beneficially 20% or more of all Common Units may not be
voted on any matter and will not be considered to be outstanding when sending
notices of a meeting of limited partners, calculating required votes,
determining the presence of a quorum or for other similar Partnership purposes.
The Partnership Agreement provides that Units held in nominee or street name
account will be voted by the broker (or other nominee) pursuant to the
instruction of the beneficial owner unless the arrangement between the
beneficial owner and his nominee provides otherwise. Except as otherwise
provided in the Partnership Agreement, Subordinated Units will vote together
with Common Units as a single class.
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Any notice, demand, request, report or proxy material required or
permitted to be given or made to record holders of Units (regardless of whether
such record holder has been admitted as a limited partner) under the terms of
the Partnership Agreement will be delivered to the record holder by the
Partnership or by the Transfer Agent at the request of the Partnership.
INDEMNIFICATION
The Partnership Agreement provides that the Partnership will indemnify
the General Partner, any Departing Partner, any person who is or was an
affiliate of the General Partner or any Departing Partner, any Person who is or
was an officer, director, employee, partner, agent or trustee of the General
Partner or any Departing Partner or any affiliate of the General Partner or any
Departing Partner, or any Person who is or was serving at the request of the
General Partner or any Departing Partner or any affiliate of the General Partner
or any Departing Partner as an officer, director, employee, partner, agent or
trustee of another Person ("Indemnitees"), to the fullest extent permitted by
law, from and against any and all losses, claims, damages, liabilities (joint or
several), expenses (including, without limitation, legal fees and expenses),
judgments, fines, penalties, interest, settlements and other amounts arising
from any and all claims, demands, actions, suits or proceedings, whether civil,
criminal, administrative or investigative, in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, by reason of
its status as any of the foregoing; provided that in each case the Indemnitee
acted in good faith and in a manner that such Indemnitee reasonably believed to
be in or not opposed to the best interests of the Partnership and, with respect
to any criminal proceeding, had no reasonable cause to believe its conduct was
unlawful. Any indemnification under these provisions will be only out of the
assets of the Partnership, and the General Partner shall not be personally
liable for, or have any obligation to contribute or loan funds or assets to the
Partnership to enable it to effectuate, such indemnification. The Partnership is
authorized to purchase (or to reimburse the General Partner or its affiliates
for the cost of) insurance, on behalf of the General Partner and such other
persons as the General Partner shall determine, against liabilities asserted
against and expenses incurred by such persons in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such person against such liabilities under the provisions
described above.
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LIMITED LIABILITY
Assuming that a limited partner does not participate in the control of
the business of the Partnership within the meaning of the Delaware Revised
Uniform Limited Partnership Act (the "Delaware Act") and that he otherwise acts
in conformity with the provisions of the Partnership Agreement, his liability
under the Delaware Act will be limited, subject to certain possible exceptions,
to the amount of capital he is obligated to contribute to the Partnership in
respect of his Units plus his share of any undistributed profits and assets of
the Partnership. If it were determined, however, that the right or exercise of
the right by the limited partners as a group to remove or replace the General
Partner, to approve certain amendments to the Partnership Agreement or to take
other action pursuant to the Partnership Agreement constituted "participation in
the control" of the Partnership's business for the purposes of the Delaware Act,
then the limited partners could be held personally liable for the Partnership's
obligations under the laws of the State of Delaware to the same extent as the
General Partner with respect to persons who transact business with the
Partnership reasonably believing, based on the limited partner's conduct, that
the limited partner is a general partner.
Under the Delaware Act, a limited partnership may not make a
distribution to a partner to the extent that at the time of the distribution,
after giving effect to the distribution, all liabilities of the partnership,
other than liabilities to partners on account of their partnership interests and
nonrecourse liabilities, exceed the fair value of the assets of the limited
partnership. For the purpose of determining the fair value of the assets of a
limited partnership, the Delaware Act provides that the fair value of property
subject to nonrecourse liability shall be included in the assets of the limited
partnership only to the extent that the fair value of that property exceeds that
nonrecourse liability. The Delaware Act provides that a limited partner who
receives such a distribution and knew at the time of the distribution that the
distribution was in violation of the Delaware Act shall be liable to the limited
partnership for the amount of the distribution for three years from the date of
the distribution. Under the Delaware Act, an assignee who becomes a substituted
limited partner of a limited partnership is liable for the obligations of his
assignor to make contributions to the partnership, except the assignee is not
obligated for liabilities unknown to him at the time he became a limited partner
and which could not be ascertained from the partnership agreement.
The General Partner expects that the Operating Partnership will conduct
business in 48 states. Maintenance of limited liability may require compliance
with legal requirements in such jurisdictions in which the Operating Partnership
conducts business, including qualifying the Operating Partnership to do business
therein. Limitations on the liability of limited partners for the obligations of
a limited partnership have not been clearly established in many jurisdictions.
If it were determined that the Partnership was, by virtue of its limited partner
interest in the Operating Partnership or otherwise, conducting business in any
state without compliance with the applicable limited partnership statute, or
that the right or exercise of the right by the limited partners as a group to
remove or replace the General Partner, to approve certain amendments to the
Partnership Agreement, or to take other action pursuant to the Partnership
Agreement constituted "participation in the control" of the Partnership's
business for the purposes of the statutes of any relevant jurisdiction, then the
limited partners could be held personally liable for the Partnership's
obligations under the law of such jurisdiction to the same extent as the General
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Partner under certain circumstances. The Partnership will operate in such manner
as the General Partner deems reasonable and necessary or appropriate to preserve
the limited liability of Unitholders.
BOOKS AND REPORTS
The General Partner is required to keep appropriate books of the
business of the Partnership at the principal offices of the Partnership. The
books will be maintained for both tax and financial reporting purposes on an
accrual basis. The fiscal year of the Partnership is October 1 to September 30.
As soon as practicable, but in no event later than 120 days after the
close of each fiscal year, the General Partner will furnish each record holder
of Units (as of a record date selected by the General Partner) with an annual
report containing audited financial statements of the Partnership for the past
fiscal year, prepared in accordance with generally accepted accounting
principles. As soon as practicable, but in no event later than 90 days after the
close of each quarter (except the last quarter of each fiscal year), the General
Partner will furnish each record holder of Units (as of a record date selected
by the General Partner) a report containing unaudited financial statements of
the Partnership with respect to such quarter and such other information as may
be required by law.
The General Partner will use all reasonable efforts to furnish each
record holder of a Unit information reasonably required for tax reporting
purposes within 90 days after the close of each calendar year in which the
Partnership's taxable year ends. Such information is expected to be furnished in
summary form so that certain complex calculations normally required of partners
can be avoided. The General Partner's ability to furnish such summary
information to Unitholders will depend on the cooperation of such Unitholders in
supplying certain information to the General Partner. Every Unitholder (without
regard to whether he supplies such information to the General Partner) will
receive information to assist him in determining his federal and state tax
liability and filing his federal and state income tax returns.
RIGHT TO INSPECT PARTNERSHIP BOOKS AND RECORDS
The Partnership Agreement provides that a limited partner can for a
purpose reasonably related to such limited partner's interest as a limited
partner, upon reasonable demand and at his own expense, have furnished to him
(i) a current list of the name and last known address of each partner, (ii) a
copy of the Partnership's tax returns, (iii) information as to the amount of
cash, and a description and statement of the net agreed value of any other
property or services, contributed or to be contributed by each partner and the
date on which each became a partner, (iv) copies of the Partnership Agreement,
the certificate of limited partnership of the Partnership, amendments thereto
and powers of attorney pursuant to which the same have been executed, (v)
information regarding the status of the Partnership's business and financial
condition and (vi) such other information regarding the affairs of the
Partnership as is just and reasonable. The General Partner may, and intends to,
keep confidential from the limited partners trade secrets or other information
the disclosure of which the General Partner believes in good faith is not in the
best interests of the
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Partnership or which the Partnership is required by law or by agreements with
third parties to keep confidential.
TERMINATION AND DISSOLUTION
The Partnership will continue until December 31, 2093, unless sooner
terminated pursuant to the Partnership Agreement. The Partnership will be
dissolved upon (i) the election of the General Partner to dissolve the
Partnership, if approved by holders of at least a Unit Majority, (ii) the sale
of all or substantially all of the assets and properties of the Partnership and
the Operating Partnership, (iii) the entry of a decree of judicial dissolution
of the Partnership or (iv) withdrawal or removal of the General Partner or any
other event that results in its ceasing to be the General Partner (other than by
reason of a transfer of its general partner interest in accordance with the
Partnership Agreement or withdrawal or removal following approval and admission
of a successor). Upon a dissolution pursuant to clause (iv), the holders of at
least a majority of the outstanding Units may also elect, within certain time
limitations, to reconstitute the Partnership and continue its business on the
same terms and conditions set forth in the Partnership Agreement by forming a
new limited partnership on terms identical to those set forth in the Partnership
Agreement and having as a general partner a person or entity approved by at
least the holders of a majority of the outstanding Units, subject to receipt by
the Partnership of an Opinion of Counsel.
LIQUIDATION AND DISTRIBUTION OF PROCEEDS
Upon dissolution of the Partnership, unless the Partnership is
reconstituted and continued as a new limited partnership, the person authorized
to wind up the affairs of the Partnership (the "Liquidator") will, acting with
all of the powers of the General Partner that such Liquidator deems necessary or
desirable in its good faith judgment in connection therewith, liquidate the
Partnership's assets and apply the proceeds of the liquidation as provided in
"Cash Distribution Policy--Distributions of Cash Upon Liquidation." Under
certain circumstances and subject to certain limitations, the Liquidator may
defer liquidation or distribution of the Partnership's assets for a reasonable
period of time or distribute assets to partners in kind on such terms as the
Liquidator and the receiving partner may agree.
REGISTRATION RIGHTS
Pursuant to the terms of the Partnership Agreement and subject to
certain limitations described therein, the Partnership has agreed to register
for resale under the Securities Act and applicable state securities laws any
Units proposed to be sold by AmeriGas Propane, Inc. or its affiliates if an
exemption from such registration requirements is not otherwise available for
such proposed transaction. The Partnership is obligated to pay all expenses
incidental to such registration, excluding underwriting discounts and
commissions.
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COMPETITION
The General Partner may not engage in any business or activity or incur
any debts or liabilities except in connection with or incidental to (i) its
performance as general partner of the Partnership or one or more affiliates of
the Partnership, (ii) the acquiring, owning or disposing of debt or equity
securities of the Partnership or such affiliates, (iii) engaging in the
activities described in the following two paragraphs, and (iv) permitting its
employees to perform services for its affiliates. Except as limited by the next
paragraph, affiliates of the General Partner are not restricted from engaging in
any business activities, including those in competition with the Partnership.
The General Partner and its affiliates may engage in a business
activity that involves the retail sales of propane to end users in the
continental United States in the manner engaged in by AmeriGas Propane, Inc. and
Petrolane Incorporated immediately prior to the closing date of the Initial
Offering only if (i) the General Partner determines, prior to commencing such
activity, that it is inadvisable for the Partnership to engage in such activity
either because (A) of the financial commitments associated with such activity or
(B) such activity is not consistent with the Partnership's business strategy or
cannot otherwise be integrated with the Partnership's operations on a beneficial
basis, and such determination is approved by the Audit Committee; (ii) such
activity arises as a result of an acquisition utilizing primarily equity
securities of a corporate affiliate of the Partnership, and the aggregate
consideration paid in connection with such acquisition and all other
acquisitions of then-owned entities made pursuant to this subpart (ii) does not
exceed $50 million; or (iii) such activity arises as a result of an acquisition
of stock of one or more Special Propane Corporations and the aggregate total
assets of all then-owned Special Propane Corporations acquired pursuant to the
exception provided by this subpart (iii) and owned for more than 24 months does
not exceed 10% of the total assets of the Partnership (in each case as such
assets shall be determined in accordance with generally accepted accounting
principles). During the period the activity being undertaken pursuant to
subparagraph (i), (ii) or (iii) is being carried on directly or indirectly by
the General Partner or an affiliate, the personnel engaged in such activity will
not be permitted to attempt to (A) sell propane to persons to whom the
Partnership is selling propane or (B) seek new customers in geographical areas
in which the Partnership is engaged in the retail propane business and in which
the business was not engaged at the time it was acquired by the General Partner
or an affiliate.
There are no restrictions on the ability of affiliates of the General
Partner to engage in the retail sale of propane outside the continental United
States or in the trading, transportation, storage and wholesale distribution of
propane. In the event an affiliate of the General Partner acquires a business in
accordance with the foregoing, the General Partner may operate such business for
the affiliate. The Partnership Agreement expressly provides that if the General
Partner acts in accordance with the foregoing, it shall not constitute a breach
of the General Partner's fiduciary duties to the Partnership or the Unitholders
if the General Partner or its affiliates engage in direct competition with the
Partnership.
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FIDUCIARY DUTIES OF THE GENERAL PARTNER
The General Partner will be accountable to the Partnership and the
Unitholders as a fiduciary. Consequently, the General Partner must exercise good
faith and integrity in handling the assets and affairs of the Partnership. In
contrast to the relatively well developed law concerning fiduciary duties owed
by officers and directors to the shareholders of a corporation, the law
concerning the duties owed by general partners to other partners and to
partnerships is relatively undeveloped. Neither the Delaware Act nor case law
defines with particularity the fiduciary duties owed by general partners to
limited partners or a limited partnership, but the Delaware Act provides that
Delaware limited partnerships may, in their partnership agreements, restrict or
expand the fiduciary duties that might otherwise be applied by a court in
analyzing the standard of duty owed by general partners to limited partners and
the partnership. Fiduciary duties are generally considered to include an
obligation to act with the highest good faith, fairness and loyalty. Such duty
of loyalty, in the absence of a provision in a partnership agreement providing
otherwise, would generally prohibit a general partner of a Delaware limited
partnership from taking any action or engaging in any transaction as to which it
has a conflict of interest. In order to induce the General Partner to manage the
business of the Partnership, the Partnership Agreement, as permitted by the
Delaware Act, contains various provisions that have the effect of restricting
the fiduciary duties that might otherwise be owed by the General Partner to the
Partnership and its partners and waiving or consenting to conduct by the General
Partner and its affiliates that might otherwise raise issues as to compliance
with fiduciary duties or applicable law.
The Partnership Agreement provides that whenever a conflict of interest
arises between the General Partner or its affiliates, on the one hand, and the
Partnership or any other partner, on the other, the General Partner shall
resolve such conflict. The General Partner shall not be in breach of its
obligations under the Partnership Agreement or its duties to the Partnership or
the Unitholders if the resolution of such conflict is fair and reasonable to the
Partnership, and any resolution shall conclusively be deemed to be fair and
reasonable to the Partnership if such resolution is (i) approved by the Audit
Committee (although no party is obligated to seek such approval and the General
Partner may adopt a resolution or course of action that has not received such
approval), (ii) on terms no less favorable to the Partnership than those
generally being provided to or available from unrelated third parties or (iii)
fair to the Partnership, taking into account the totality of the relationships
between the parties involved (including other transactions that may be
particularly favorable or advantageous to the Partnership). In resolving such
conflict, the General Partner may (unless the resolution is specifically
provided for in the Partnership Agreement) consider the relative interests of
the parties involved in such conflict or affected by such action, any customary
or accepted industry practices or historical dealings with a particular person
or entity and, if applicable, generally accepted accounting or engineering
practices or principles and such other factors as it deems relevant. Thus,
unlike the strict duty of a fiduciary who must act solely in the best interests
of his beneficiary, the Partnership Agreement permits the General Partner to
consider the interests of all parties to a conflict of interest, including the
interests of the General Partner. In connection with the resolution of any
conflict that arises, unless the General Partner has acted in bad faith, the
action taken by the General Partner shall not constitute a breach of the
Partnership Agreement, any other agreement or any standard of care or duty
imposed by the Delaware Act or other applicable law. The Partnership Agreement
also
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provides that in certain circumstances the General Partner may act in its
sole discretion, in good faith or pursuant to other appropriate standards.
The Partnership Agreement also provides that any standard of care and
duty imposed thereby or under the Delaware Act or any applicable law, rule or
regulation will be modified, waived or limited, to the extent permitted by law,
as required to permit the General Partner and its officers and directors to act
under the Partnership Agreement or any other agreement contemplated therein and
to make any decision pursuant to the authority prescribed in the Partnership
Agreement so long as such action is reasonably believed by the General Partner
to be in, or not inconsistent with, the best interests of the Partnership.
Further, the Partnership Agreement provides that the General Partner and its
officers and directors will not be liable for monetary damages to the
Partnership, the limited partners or assignees for errors of judgment or for any
acts or omissions if the General Partner and such other persons acted in good
faith.
In addition, under the terms of the Partnership Agreement, the
Partnership is required to indemnify the General Partner and its officers,
directors, employees, affiliates, partners, agents and trustees, to the fullest
extent permitted by law, against liabilities, costs and expenses incurred by the
General Partner or other such persons, if the General Partner or such persons
acted in good faith and in a manner they reasonably believed to be in, or not
opposed to, the best interests of the Partnership and, with respect to any
criminal proceedings, had no reasonable cause to believe the conduct was
unlawful. See "The Partnership Agreement-Indemnification." Thus, the General
Partner could be indemnified for its negligent acts if it meets such
requirements concerning good faith and the best interests of the Partnership.
FEDERAL INCOME TAX INFORMATION
This section discusses the material federal income tax matters relevant
to individual citizens or residents of the United States who purchase Units in
the Initial Offering or in the market, but it does not describe the actual tax
effect that any of such matters will have on a particular investor in light of
his tax status and his other income and deductions. Except where noted, the
conclusions have limited application to domestic corporations; to persons who
are not citizens or residents of the United States; to entities subject to
specialized federal income tax treatment, such as regulated investment companies
and insurance companies; and to Individual Retirement Accounts and other
organizations described in section 501(a) ("Tax-Exempt Entities"). Unless
otherwise indicated, section references are to the Internal Revenue Code of 1986
(the "Code"); regulatory references are to the regulations thereunder; "tax"
means federal income tax; "income" includes gains; "deductions" include
expenses, depreciation, and losses; "depreciation" includes amortization;
"income and deductions" include credits; and "IRS" means Internal Revenue
Service.
No IRS rulings have been requested, and there is a risk the IRS might
dispute one or more of the conclusions set forth below. In such event,
litigation with the IRS may be required, with its attendant costs and risks. See
"--Administrative Matters." In addition, any Partnership dispute with the IRS
might also result in the IRS's auditing other income and deductions of the
Unitholders.
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In light of the foregoing, each prospective investor is advised to
consult a tax advisor before purchasing Units.
TAX STATUS OF PARTNERSHIP
The Partnership intends to conduct its business and carry on its
affairs so that it will at all times be classified as a partnership for federal
income tax purposes rather than as a corporation. Partnership classification is
important primarily because the net income of a corporation is taxed to the
corporation in the year earned and to the shareholders as dividends in the year
and to the extent distributed to them, while the net income of a partnership is
taxable only to the partners, whether or not distributed. See "--Tax
Consequences of Unit Ownership."
Apart from a change in the tax law (which is not expected), the only
event that realistically could affect the Partnership's status as a partnership
for tax purposes is an inability to cause at least 90% of its gross income for
each taxable year to be derived from a combination of the following: the
purchase, storage, transportation, and wholesale and retail sale of propane;
dividends received from corporate subsidiaries; and interest that is not
measured by income or profits of the payor and is not earned in a financial or
insurance business ("Qualifying Income"). In each year to date, the
Partnership's Qualifying Income has been at least 92.6% of its total gross
income.
TAX STATUS OF UNITHOLDERS
General Rule. A limited partner for tax purposes includes (a) each
Unitholder who has been admitted as a limited partner, (b) each Unitholder who
has executed and delivered a Transfer Application and is awaiting admission as a
limited partner, and (c) each Unitholder whose Units are held in street name or
by another nominee if the Unitholder has the right to direct the nominee in the
exercise of all substantive rights attributable to the ownership of the Units. A
Unitholder who is entitled to execute and deliver a Transfer Application but has
not done so may not receive the federal income tax information and reports
furnished to record holders. There is also a risk that the IRS will not
recognize his status as a limited partner, the effect of which might be to cause
100% of his distributions to be taxable.
Short Sales. A Unitholder whose Units are loaned to a "short seller" to
cover a short sale of Units may be considered as having transferred beneficial
ownership of those Units and, thus, as ceasing to be a partner with respect to
those Units during the period of the loan. As a result, Partnership income and
deductions allocable to those Units during this period would not be reportable
by the Unitholder; any cash distributions received by the Unitholder with
respect to those Units would be fully taxable; and all of such distributions
would be ordinary income. The IRS may also contend that a loan of Units to a
"short seller" constitutes a taxable exchange. If this contention were
successfully made, the lending Unitholder may be required to recognize gain or
loss. Unitholders desiring to assure their status as partners should modify
their brokerage account agreements, if any, to prohibit their brokers from
borrowing their Units. The IRS has announced that it is actively studying issues
relating to the tax treatment of short sales of partnership interests.
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TAX CONSEQUENCES OF UNIT OWNERSHIP
Flow-Through Reporting. For each taxable year ending September 30
("Partnership Year"), the Partnership will file a partnership information return
in which it will account on the accrual method for all the income and deductions
attributable to the business and operations of the Partnership for such year and
will allocate such items in the manner described below under "Allocation of
Partnership Income and Deductions." The tax items so allocated to a Unitholder
for a Partnership Year that ends with or within the Unitholder's taxable year
must be reported on the Unitholder's tax return for such year. Thus, a
calendar-year taxpayer who acquired a Unit in the Initial Offering and owned it
through all of 1995, would include on his individual 1995 tax return only his
share of Partnership income and deductions accrued through September 30, 1995,
and the income and deductions through the balance of 1995 would be included on
the Unitholder's 1996 return. Moreover, a Unitholder who sells Units between
October 1 and December 31 of a year and thereby ceases to be a Unitholder will
not receive a Schedule KI with respect to the income and deductions allocated to
him during the period from October 1 to December 31 until up to 15 months after
the end of such period, even though such items must be taken into account by the
Unitholder in the calendar year in which the sale is made. See "--Administrative
Matters -- Partnership Information Returns."
Tax Effect of Allocations and Distributions. The income and deductions
of the Partnership are includable in computing the Unitholder's tax liability
without regard to distributions; but for any Partnership Year in which
Partnership deductions exceed income, the Unitholder's use of the excess
deductions is limited in the manner provided below under "--Limitations on Use
of Deductions." Distributions are not themselves taxable, except indirectly for
non-pro rata distributions as described in "--Allocation of Partnership Income
and Deductions" and to the extent they exceed a Unitholder's Unit Basis, which
is discussed under "--Tax Basis Matters." Cash distributions in excess of Unit
Basis are taxable as gain from the sale of Units, which is discussed under
"--Disposition of Units."
Limitations on Use of Deductions. A Unitholder's ability to use
deductions in excess of income is subject to the following limitations:
Passive Activity Loss Limitation. The limitation most likely to affect
Unitholders is the passive activity loss limitation imposed by section 469,
which applies to individuals, estates, trusts, closely held corporations, and
personal service corporations. This limitation provides that, so long as a
Unitholder continues to own any Unit, the Partnership deductions allocated to
him for a year and otherwise usable by him may be used only to offset
Partnership income allocated to him for such year and any future year. They
cannot be used to offset income from other activities, even passive income from
other publicly traded partnerships. If a Unitholder sells all his Units in a
taxable transaction to an unrelated party, the deductions that have not been
used because of the passive loss limitation are deductible in the year the last
Unit is sold. The passive loss limitation is applied after the basis and at-risk
limitations discussed below.
Basis and At-Risk Limitations. The following limitations are not likely
to affect Unitholders who purchase Units in the Initial Offering or in the
market. Section 704(d) provides that no Unitholder can deduct a loss that is in
excess of his Unit Basis; and section 465 provides
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that the aggregate deductions allowable to a Unitholder who is an individual,
estate, trust, or closely held corporation are limited to the amount the
Unitholder is treated as having at-risk. As a practical matter, a Unitholder's
at-risk amount is his Unit Basis (determined without regard to Partnership debt)
reduced by any amount of money he borrows to acquire or hold his Units if the
person from whom the money is borrowed owns an interest in the Partnership, is
related to such a person, or can look only to the Units for repayment. Moreover,
a Unitholder must recapture losses deducted in previous years to the extent that
Partnership distributions cause the Unitholder's at-risk amount to be less than
zero at the end of any taxable year. Losses disallowed to a Unitholder or
recaptured as a result of these limitations will carry forward and will be
allowable to the extent that the Unitholder's Unit Basis or at-risk amount
(whichever is the limiting factor) is increased. Upon the taxable disposition of
a Unit, any gain recognized by a Unitholder can be offset by losses that were
previously suspended by the at-risk limitation but may not be offsetable by
losses suspended by the basis limitation. Any excess loss (above such gain)
previously suspended by the at-risk or basis limitations is no longer
utilizable.
Investment Interest Expense Limitation. Finally, section 163(d)
provides that a non-corporate taxpayer can deduct investment interest expense
only to the extent of his net investment income. Under IRS Notice 88-75, a
Unitholder's share of Partnership net income will be included in computing his
net investment income, and any interest incurred by him on a loan, including a
margin account loan, to purchase or carry Units will be included in computing
investment interest. Capital gain realized on the disposition of Units, however,
will not be treated as investment income.
INCOME AND DEDUCTIONS OF THE PARTNERSHIP
General. Substantially all of the Partnership's income and deductions
are ordinary business income and deductions, and little or no tax credits are
generated. Some depreciation deductions and other deductions constitute items of
tax preference for alternative minimum tax purposes. For Tax-Exempt Entities,
substantially all of the Partnership income constitutes unrelated business
taxable income. The Partnership also expects to incur substantial costs each
year for tangible and intangible assets that cannot be deducted when incurred
but must be depreciated over a number of years. The tax treatment of the
principal Partnership assets are described below.
Intangible Assets. A substantial part of the value of the Partnership
is represented by customer lists, goodwill, and similar intangible assets in
which the General Partner had no tax basis at the time they were contributed to
the Partnership and as to which the Unitholders will be entitled to amortization
deductions only to the limited extent permitted by the Section 754 Election. See
"Section 754 Election." (The Partnership does have a tax basis in certain
contributed intangible assets, but any deductions relating thereto are being
allocated to the General Partner or its Affiliates.) As a result, the taxable
income of the Partnership (and of the Unitholders) substantially exceeds the
taxable income that would have been realized by the Partnership if it had
acquired such assets by purchase at fair market value. Similar intangibles are
also expected to constitute a substantial part of the value of businesses
subsequently acquired by the Partnership. Intangible assets acquired by the
Partnership by purchase may be amortized
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ratably over 15 years. Intangible assets acquired in exchange for additional
Units may or may not be amortizable depending on their status in the hands of
the transferor at the time of the exchange.
Plant and Equipment. The remaining assets contributed to the
Partnership by the General Partner consist primarily of equipment that is
depreciable over five years. A lesser amount of plant and equipment is
depreciable over longer periods ranging from seven to 39 years. Although the
General Partner believes the Partnership's tax basis in its plant and equipment
is substantially less than their current fair market value, the adverse effects
of this low basis to the Common Units issued in the offering will be reduced but
not eliminated by special tax allocations, which are discussed under "--Section
704(c) Allocations."
Organization and Syndication Costs. Costs incurred in organizing the
Partnership will be amortized over five years, but costs incurred in promoting
the issuance of Units can not be deducted currently, ratably, or upon
termination of the Partnership. Uncertainty exists as to which category certain
costs belong. More importantly, a question exists whether the rule that
syndication costs cannot be deducted precludes treating the gain realized by the
underwriters on the sale of Common Units to the public as gain that gives rise
to an Aggregate 743(b) Adjustment. See "--Section 754 Election."
ALLOCATION OF PARTNERSHIP INCOME AND DEDUCTIONS
General. The income and deductions of the Partnership are generally
allocated 2% to the General Partner and 98% among the General Partner and the
other Unitholders in the ratio of both the Common Units and Subordinated Units
owned by each ("Pro Rata Allocation"). The principal exceptions are described
below. In addition, the General Partner is authorized to modify any of the above
allocations if and to the extent it determines that such modifications are
required by the Code or that such modifications are both permitted by the Code
and are in the best interest of the Partnership, taking into account ease of
administration, the desire to match taxable income and deductions with economic
income and deductions, the economic interests of the Partners in the
Partnership, and the risk of proposed adjustments by the IRS and the
consequences thereof. However, with respect to assets contributed to the
Partnership in subsequent transactions, special tax-only allocations that are
permitted but not required by section 704(c) will be made only if and to the
extent that the General Partner determines that such allocations will not cause
material adverse tax consequences to the General Partner.
Non-Pro Rata Distributions. For each quarter in which the per-Unit
amount distributed to the Common Units exceeds the per-Unit amount distributed
to the Subordinated Units, income for such quarter that would otherwise be
allocated in respect of all Units pro rata shall first be allocated to each
Common Unit in an amount equal to such per-unit excess. Similarly, the General
Partner will be allocated additional income equal to any incentive distributions
it receives. Finally, if the Partnership is liquidated during the Subordination
Period and the per-Unit amount distributed to the Common Units exceeds the
per-Unit amount distributed to the Subordinated Units, income and deductions
that would otherwise be allocated among all Units pro rata will be specially
allocated among the Units in the manner required to cause the net income
per-Unit allocated to the Common Units to exceed the net income per Unit
allocated to the Subordinated Units by an amount equal to the excess
distribution.
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Section 704(c) Allocations. Pursuant to section 704(c), depreciation
deductions attributable to the Partnership's adjusted basis in each depreciable
tangible asset contributed by the General Partner to the Partnership were
allocated to the Initial Common Units in an amount equal to all of the
depreciation allowable to the Partnership as to such asset, or if less, the
depreciation that would be allocable to such Unit if the asset had been
purchased by the Partnership at fair market value. In addition, as permitted but
not required by section 704(c), income otherwise allocable to the Initial Common
Units is allocable each year to the General Partner in the amounts that are
necessary, in the General Partner's opinion and pursuant to permitted methods
chosen by the General Partner on the closing date of the Initial Offering, to
cause the cumulative taxable income allocable in respect of the Common Units
sold in the Initial Offering during the period from the beginning of the
Partnership through September 30, 1998, not to exceed 30% of the cumulative
distributions in respect of such Units for such period. Essentially no
amortization deductions will be allocated to the Common Units sold in the
Initial Offering in respect of intangible assets that the General Partner
contributed to the Partnership, but any taxable gain recognized on the
disposition of such assets will be allocated to the General Partner to the
extent of the excess of their fair market value at the time of contribution over
the tax basis at such time.
Section 754 Allocations. The amount of depreciation and amortization
deductions allocated to a Unitholder who purchases his Units from another
Unitholder will be affected by the amount he pays for the Unit.
See "--Section 754 Election."
Intangibles. Any deductions to the Partnership resulting from the
ownership of certain intangible property, including the right to use the "FAST"
propane purchase optimization and fuel accounting system, and the trademark,
trade name and similar intangible rights of Petrolane, the General Partner or
its other Affiliates are specially allocated to the General Partner.
Transferor-Transferee Allocations. The General Partner currently
allocates gain or loss realized on a sale or other disposition of Partnership
assets not in the ordinary course of business to the month in which the sale
occurred, prorates the Partnership's other income and deductions for a year
equally among the months in such year, and allocates the income and deductions
for a month to the Unitholder of record as of the opening of the first business
day of such month. As a result of such monthly allocations, a Unitholder
transferring Units in the open market may be allocated income and deductions
accruing after the transfer, even though not entitled to any portion of the
distribution made for the quarter in which the Unit was owned. While the General
Partner believes that such allocations are both fair and convenient, they do not
conform to existing Treasury Regulations and the possibility exists on audit
that Partnership income and deductions might be reallocated among transferors
and transferees. The General Partner is authorized to revise the Partnership's
method of allocation between transferors and transferees (as well as among
partners whose interests otherwise vary during a taxable period) to conform to a
method permitted by future Treasury Regulations.
Constructive Termination. Under current tax law, if there is a sale or
exchange of 50% or more of the total interests in partnership capital and
profits within a 12-month period, the then existing tax partnership is deemed to
have been terminated and a new tax partnership formed. No constructive
termination can occur so long as the General Partner retains over 50% interest
in the
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Partnership. A constructive termination results in the closing of the old
partnership's taxable year and the deemed distribution of its assets and the
beginning of a new taxable year for the new partnership and a deemed
contribution of assets to the new partnership. The closing of a tax year of the
Partnership may result in more than 12 months' taxable income or loss of the
Partnership being includable in the partners' taxable income for the year of
termination. Because a new partnership would have to make a new Section 754
Election, a constructive termination could result in a loss of basis adjustments
under section 754 during the period that the Partnership is unable to determine
that a termination had occurred. See "--Section 754 Election." A constructive
termination could adversely affect the tax fungibility of Units and could also
result in reduced depreciation deductions or a deferral of depreciation
deductions. In addition, a termination could conceivably subject the Partnership
to any tax legislation enacted with effective dates after the closing of the
Initial Offering.
Entity-Level Collections. If the Partnership is required or elects
under applicable law to pay any federal, state, or local income tax on behalf of
any Unitholder, the General Partner, or any former Unitholder, the General
Partner is authorized to pay such taxes from Partnership funds. To the extent
feasible, each such payment will be treated as a distribution in respect of the
person on whose behalf the payment was made. If the payment is made on behalf of
a person whose identity cannot be determined, the General Partner is authorized
to treat the payment as a distribution to current Unitholders of the same class
as the obligor, or if the class is not known, to all Unitholders. Alternatively,
the General Partner may elect to treat an amount paid on behalf of the General
Partner and Unitholders as an expenditure of the Partnership if the amount paid
on behalf of the General Partner is not substantially greater than 2% of the
total amount paid.
DISPOSITION OF UNITS
Gain or Loss on Sale. Upon the sale of a Unit, a Unitholder who holds
such Unit as a capital asset may recognize both ordinary income and capital gain
or loss.
(a) Ordinary income is recognized in an amount equal to the
Unitholder's share of "Section 751 Gain." In general, such amount would consist
primarily of the depreciation deductions allocated to the Unit while owned by
the Unitholder with respect to each depreciable property whose fair market value
exceeds the Unitholder's tax basis therein. Ordinary income may be recognized
even if a net loss is realized on the sale. See "--Section 754 Election."
(b) The amount of capital gain or loss will normally be the
difference between the amount realized from the sale of the Unit (less the
amount used in computing the Section 751 Gain) and the Unitholder's adjusted
Unit Basis (less any basis used in computing the Section 751 Gain). The gain or
loss will be long-term if the Unit has been held for more than one year. For
purposes of the foregoing, any Partnership debt taken into account for adjusted
Unit Basis purposes is also treated as an additional amount realized on the
disposition. As a consequence, Partnership debt will normally not affect the net
amount realized. Under section 1211, a corporation cannot use capital losses to
offset ordinary income, and an individual can do so only to the extent of $3,000
per year.
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Notification Requirements. A Unitholder who sells or exchanges Units is
required to notify the Partnership in writing of such sale or exchange within 30
days of the sale or exchange and in any event no later than January 15 of the
year following the calendar year in which the sale or exchange occurred. The
Partnership is required to notify the IRS of such transaction and to furnish
certain information to the transferor and transferee. However, these reporting
requirements do not apply with respect to a sale by an individual who is a
citizen of the United States and who effects such sale through a broker.
Additionally, a transferor and a transferee of a Unit will be required to file
statements with their income tax returns for the taxable year in which the sale
or exchange occurred that set forth the amount of the consideration received for
such Unit that is allocated to goodwill or going concern value of the
Partnership. Failure to satisfy such reporting obligations may lead to the
imposition of substantial penalties.
TAX BASIS MATTERS
Unit Basis. A Unitholder who acquires a Unit by purchase has an initial
tax basis in the Unit ("Unit Basis") equal to the amount paid therefor, plus his
share of any liability of the Partnership as to which neither the General
Partner nor any Unitholder has personal liability ("Non-Recourse Debt").
(Different rules apply to Units not acquired by purchase, such as those acquired
by gift or bequest.) The initial Unit Basis is increased primarily by the
taxable income attributable to such Unit and decreased (but not below zero)
primarily by any taxable loss attributable to such Unit, by the distributions
made as to such Unit and by the Unitholder's share of any decrease in
Non-Recourse Debt. Contributions, non-deductible expenditures, tax-exempt
income, and other items theoretically could affect Unit Basis, but none of them
is expected to be material to Unitholders.
Multiple Unit Acquisitions. In contrast to the rules applicable to the
acquisition and disposition of shares of corporate stock, some uncertainty
exists whether a Unitholder who acquires Units at different times and different
amounts will have (a) a separate basis and a separate holding period for each
Unit, (b) one aggregate basis and a single holding period for all Units, or (c)
an aggregate basis for all Units and a separate holding period for each Unit.
The resolution of these issues could affect the amount of gain or loss upon a
sale of some Units and the characterization of such gain or loss as long-term or
short-term. The IRS has ruled that a partner who acquired partnership interests
at different times has a single aggregate basis in the partnership, but the IRS
has not yet publicly addressed the holding period issue. Moreover, the IRS
ruling on the basis issue did not involve a partnership that was publicly traded
or whose beneficial interests have been divided into Units represented by
certificates. The conclusions set forth in this Federal Income Tax Information
section assume that the holding period and basis should be determined separately
for each Unit.
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SECTION 754 ELECTION
Tax Effect. The Partnership has made the election permitted by section
754 ("Section 754 Election"). The election is irrevocable without the consent of
the IRS. As a result of the election, a person who purchases a Unit from another
Unitholder will be required by section 743(b) to adjust his share of the
Partnership's basis in its properties in light of their fair market value as
reflected by his Unit price. The section 743(b) adjustment for a Unit is
attributed solely to the Unitholder causing the adjustment and does not affect
other Unitholders. For purposes of discussion, a Unitholder's basis in the
Partnership's assets is referred to as "inside basis," which is made up of two
components: (a) his share of the Partnership's actual basis in such assets
("Common Basis"); and (b) the difference between the Common Basis and his
initial basis (usually the purchase price) in the Units ("Aggregate 743(b)
Adjustment"). Under the generally prevailing interpretation of section 743(b)
(which the General Partner intends to follow), unrealized gain on assets subject
to special allocation under section 704(c) is included in the Common Basis. As a
result, a Unitholder's basis in the intangible assets will be increased only to
the extent the value of intangibles increases subsequent to the offering.
Market Relevance. A Section 754 Election is advantageous to a purchaser
of a Unit if his initial Unit Basis is higher than the Common Basis attributable
to such Unit and is disadvantageous if the purchaser's Unit Basis is lower than
the Common Basis attributable to such Unit. Thus, the amount which a Unitholder
will be able to obtain upon the sale of his Common Units may be affected either
favorably or adversely by the election.
Valuation and Other Uncertainties. The Aggregate 743(b) Adjustment must
be apportioned among the various assets of the Partnership. The manner in which
they are apportioned requires the General Partner to make numerous assumptions
concerning the value and other characteristics of various assets. For example,
some uncertainty may exist as to how much should be allocated to equipment,
which is generally depreciated over five years, and how much to goodwill and
other intangibles, which is amortizable ratably over 15 years. Moreover, the
General Partner may adopt some procedures that it thinks are reasonable and that
are used by other publicly traded partnerships, but that may not conform to
existing Treasury regulations. There is therefore a risk that the determinations
made by the Partnership will be successfully challenged by the IRS and that the
deductions attributable to them will be disallowed or reduced. Should the IRS
require a different basis adjustment to be made, and should the General Partner
decide that the expense of compliance exceeds the benefit of the election, the
General Partner may seek permission from the IRS to revoke the Section 754
Election for the Partnership. If such permission is granted, a purchaser of
Units subsequent to such revocation may incur increased tax liability.
Tax Fungibility. The tax deductions allocable to a person who purchases
Common Units that are issued in the Initial Offering ("Initial Primary Units")
will be different from the tax deductions allocable to a person who purchases
Common Units (including Common Units resulting from the conversion of
Subordinated Units) initially sold by the General Partner ("Secondary Units"),
even if both persons bought the same number of Common Units at the same time for
the same price. The principal difference is that the purchaser of Secondary
Units will be entitled to amortize ratably over 15 years the difference between
the fair market value of the
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intangible assets of the Partnership at the time of purchase and the
Partnership's tax basis in such assets at such time, while the purchaser of
Initial Primary Units will be able to amortize only a relatively small portion
of such difference. The General Partner may sell its Common Units at any time.
In such event, the General Partner may either offer its Common Units as a
separate class in order to preserve the favorable tax benefits to subsequent
purchasers of the Secondary Units or as part of the same class as the Initial
Primary Units, the effect of which would be the loss of the favorable tax
benefits to persons who could not prove that they purchased Secondary Units.
Similar differences in tax treatment may occur between the Initial Common Units
and Common Units subsequently issued by the Partnership to acquire properties.
In such cases, however, any differences are expected to be much smaller, which
the General Partner will attempt to minimize further by special allocation under
section 704(c). See "--Allocation of Partnership Income and Deductions--Section
704(c) Allocations." In most cases, the General Partner would not expect to
create a separate class for newly issued Primary Units simply to preserve
minimal tax benefits.
TAXATION OF FOREIGN UNITHOLDERS
Regular United States Tax. A nonresident alien individual, foreign
corporation, foreign trust, or foreign estate that owns Units is deemed to be
engaged in business in the United States, and will be required to file federal
tax returns and to pay federal income tax at regular rates on the net income
attributable to such Units.
Withholding. Generally, a partnership is required to pay a withholding
tax on the portion of its United States business income that is allocable to the
foreign partners, even if not distributed. Under rules applicable to publicly
traded partnerships, however, the Partnership will withhold (currently at the
rate of 39.6%) on actual cash distributions made quarterly to foreign
Unitholders. Each foreign Unitholder must obtain a taxpayer identification
number from the IRS and submit that number to the Transfer Agent of the
Partnership on a Form W-8 in order to obtain credit for the taxes withheld.
Subsequent adoption of Treasury Regulations or the issuance of other
administrative pronouncements may require the Partnership to change these
procedures.
Branch Profits Tax. In addition to the regular federal income tax, and
except as otherwise provided by applicable treaty, a foreign corporate
Unitholder will also be subject to United States branch profits tax at a rate of
30% on the net income attributable to its Units (as reduced by the regular
federal income tax and subject to certain other adjustments). A foreign
corporate Unitholder is also subject to special information reporting
requirements under section 6038C of the Code.
Sale of Units. Uncertainty exists whether a foreign Unitholder will be
subject to tax on gain realized from the sale of Units. The IRS has issued a
published ruling involving non-publicly traded partnerships in which a sale of a
partnership interest is deemed to be a sale of the assets of the partnership. If
the rationale of the ruling were applied to the Partnership, all or
substantially all of the gain realized by a Unitholder would be subject to tax.
There is doubt, however, as to the validity of the ruling or, if valid, its
applicability to Units of a publicly traded partnership. Apart from the
foregoing, Unitholders will not be subject to tax on any gain realized from the
sale of Units if the Units are regularly traded on an established securities
market and the selling
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Unitholder has not held more than 5% in value of the Units at any time during
the five-year period ending on the date of the disposition.
ADMINISTRATIVE MATTERS
Partnership Information Returns. Within 90 days after the close of each
calendar year, the Partnership intends to furnish to each Unitholder a Schedule
K-1 and other tax information that sets forth each Unitholder's share of the
Partnership's income and deductions for the preceding Partnership taxable year.
In preparing this information, which will generally not be reviewed by counsel,
the General Partner will use various accounting and reporting conventions, some
of which have been mentioned in the previous discussion, to determine the
respective Unitholders' share of income and deductions. There is no assurance
that any such conventions will yield a result that conforms to the requirements
of the Code, regulations, or administrative interpretations of the IRS. The
General Partner cannot assure prospective Unitholders that the IRS will not
successfully contend in court that such accounting and reporting conventions are
impermissible.
Audit Procedures. The federal income tax information returns filed by
the Partnership may be audited by the IRS. Adjustments resulting from any such
audit may require each Unitholder to file an amended tax return and may result
in an audit of the Unitholder's own return. Any audit of a Unitholder's return
could result in adjustments of non-Partnership as well as Partnership items.
Partnerships generally are treated as separate entities for purposes of federal
tax audits, judicial review of administrative adjustments by the IRS, and tax
settlement proceedings. The tax treatment of partnership items of income and
deductions are determined at the partnership level in a unified partnership
proceeding rather than in separate proceedings with the partners. The Code
provides for one partner to be designated as the "Tax Matters Partner" for these
purposes. The Partnership Agreement appoints the General Partner as the Tax
Matters Partner.
Tax Dispute Resolution Procedure. The Tax Matters Partner will make
certain elections on behalf of the Partnership and Unitholders and can extend
the statute of limitations for assessment of tax deficiencies against
Unitholders with respect to Partnership items. The Tax Matters Partner may bind
a Unitholder with less than a 1% profits interest in the Partnership to a
settlement with the IRS unless such Unitholder elects, by filing a statement
with the IRS, not to give such authority to the Tax Matters Partner. The Tax
Matters Partner may seek judicial review (to which all the Unitholders are
bound) of a final Partnership administrative adjustment and, if the Tax Matters
Partner fails to seek judicial review, such review may be sought by any
Unitholder having at least 1% interest in the profits of the Partnership and by
the Unitholders having in the aggregate at least a 5% profits interest. However,
only one action for judicial review will go forward, and each Unitholder with an
interest in the outcome may participate.
Reporting Consistency. A Unitholder must file a statement with the IRS
identifying the treatment of any item on its federal income tax return that is
not consistent with the treatment of the item on the Partnership's return to
avoid the requirement that all items be treated consistently on both returns.
Intentional or negligent disregard of the consistency requirement may subject a
Unitholder to substantial penalties.
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Nominee Reporting. Persons who hold Units as a nominee for another
person are required to provide the Partnership and the beneficial owner with
certain information, including the following:
(a) the name, address, and taxpayer identification number
of the beneficial owner and the nominee;
(b) whether the beneficial owner is a foreign person, a
foreign government or international organization or any wholly owned agency or
instrumentality of either of the foregoing, a Tax-Exempt Entity;
(c) the number and description of Units held, acquired, or
transferred for the beneficial owners; and
(d) the dates of acquisitions and transfers, means of
acquisitions and transfers, and acquisition cost for purchases, as well as the
amount of net proceeds from sale.
Brokers and financial institutions are required to furnish additional
information, including whether they are United States persons and certain
information on Units they acquire, hold, or transfer for their own account. A
penalty of $50 per failure (up to a maximum of $100,000 per calendar year) is
imposed by the Code for failure to report such information to the Partnership.
Registration as a Tax Shelter. The Code requires that "tax shelters" be
registered with the Secretary of the Treasury. The temporary Treasury
Regulations interpreting the tax shelter registration provisions of the Code are
extremely broad. It is arguable that the Partnership will not be subject to the
registration requirement on the basis that it will not constitute a tax shelter.
However, the General Partner, as a principal organizer of the Partnership, has
registered the Partnership as a tax shelter with the IRS in the absence of
assurance that the Partnership will not be subject to tax shelter registration
and in light of the substantial penalties which might be imposed if registration
is required and not undertaken. The Partnership's tax shelter registration
number is 95192000149. ISSUANCE OF THE REGISTRATION NUMBER DOES NOT INDICATE
THAT AN INVESTMENT IN THE PARTNERSHIP OR THE CLAIMED TAX BENEFITS HAVE BEEN
REVIEWED, EXAMINED OR APPROVED BY THE IRS. The Partnership must furnish the
registration number to the Unitholders, and a Unitholder who sells or otherwise
transfers a Unit in a subsequent transaction must furnish the registration
number to the transferee. The penalty for failure of the transferor of a Common
Unit to furnish such registration number to the transferee is $100 for each such
failure. The Unitholders must disclose the tax shelter registration number of
the Partnership on Form 8271 to be attached to the tax return on which any
deduction, loss, credit, or other benefit generated by the Partnership is
claimed or income of the Partnership is included. A Unitholder who fails to
disclose the tax shelter registration number on his return, without reasonable
cause for such failure, will be subject to a $250 penalty for each such failure.
Any penalties discussed herein are not deductible for federal income tax
purposes.
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Accuracy-Related Penalties. The Code imposes an additional tax equal to
20% of the amount of any portion of an underpayment of tax that is attributable
to one or more of certain listed causes, including negligence or disregard of
rules or regulations, substantial understatements of income tax, and substantial
valuation misstatements. No penalty will be imposed, however, with respect to
any portion of an underpayment if it is shown that there was a reasonable cause
for such portion and that the taxpayer acted in good faith with respect thereto.
A substantial understatement of income tax in any taxable year exists
if the amount of the understatement exceeds the greater of 10% of the tax
required to be shown on the return for the taxable year or $5,000 ($10,000 for
most corporations). The amount of any understatement subject to penalty
generally is reduced if any portion is attributable to a position adopted on the
return (a) with respect to which there is, or was, "substantial authority" or
(b) as to which there is a reasonable basis and the pertinent facts of such
position are disclosed on the return. Certain more stringent rules apply to "tax
shelters," a term that does not appear to include the Partnership. If any
Partnership item of income and deduction included in the distributive shares of
Unitholders might result in such an "understatement" of income for which no
"substantial authority" exists, the Partnership must disclose the pertinent
facts on its return. In addition, the Partnership will make a reasonable effort
to furnish sufficient information for Unitholders to make adequate disclosure on
their returns to avoid liability for this penalty.
A substantial valuation misstatement exists if the value of any
property (or the adjusted basis of any property) claimed on a tax return is 200%
or more of the amount determined to be the correct amount of such valuation or
adjusted basis. No penalty is imposed unless the portion of the underpayment
attributable to a substantial valuation misstatement exceeds $5,000 ($10,000 for
most corporations). If the valuation claimed on a return is 400% or more than
the correction valuation, the penalty imposed increases to 40%.
STATE TAX CONSIDERATIONS
In addition to federal income taxes, Unitholders may be subject to
other taxes, such as state and local income taxes, unincorporated business
taxes, inheritance taxes, and intangible taxes, that may be imposed by the
various jurisdictions in which the Partnership does business or owns property.
Although an analysis of those various taxes cannot be presented here, each
prospective Unitholder should consider this potential impact on his investment
in the Partnership.
At September 30, 1996, the Partnership Group had district locations in
44 states, including California, New York, Michigan, Florida, Pennsylvania and
North Carolina and the Operating Partnership was qualified to do business in all
50 states. The gross and net income derived by the Partnership from the various
states will be deemed to have been derived by the individual Unitholders in
proportion to each such Unitholder's share of total Partnership gross and net
income, respectively. Most states have laws that technically (a) would require a
non-resident Unitholder to file a tax return in such state in any year that such
Unitholder has gross income attributable to such state even if no tax is due,
and to pay any tax of $1.00 or more that is due on the net income of such
Unitholder attributable to such state, and (b) would impose penalties for
failure to comply with such requirements. Some states require the Partnership to
pay such taxes on behalf of the Unitholder and other states permit it. Where
discretionary, the General Partner
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has the power, but is not obligated, to pay state taxes on behalf of the
Unitholders and to reduce their distributions by like amount. The General
Partner estimates that, even if the Partnership's net income per year equaled
$2.20 per Unit, the annual amount of tax owed by a Unitholder who owns 1,000
Units and has $100,000 of net income annually from other sources would be
substantially less than $2.50 per 1,000 Units in most states and in no state
would be more than $6.00 per 1,000 Units. In addition, Unitholders may be
entitled to a deduction against their federal taxable income and a credit
against their state income tax liability with respect to their state of
residency for any state income taxes paid or withheld. The Partnership will
notify Unitholders of the percentage of gross and net income per Unit
attributable to each state in which the Partnership does business.
It is the responsibility of each prospective Unitholder to investigate
the legal and tax consequences, under the laws of pertinent states and
localities, of an investment in the Partnership. Accordingly, each prospective
Unitholder should consult, and must depend upon, his own counsel or other
advisor with regard to those matters. Further, it is the responsibility of each
Unitholder to file all state and local, as well as federal, tax returns that may
be required of such Unitholder.
GLOSSARY
Acquisition: Any transaction in which any member of the Partnership
Group acquires (through an asset acquisition, merger, stock acquisition or other
form of investment) control over all or a portion of the assets, properties or
business of another Person for the purpose of increasing the operating capacity
of the Partnership Group from the operating capacity of the Partnership Group
existing immediately prior to such transaction.
Adjusted Operating Surplus: With respect to any period, Operating
Surplus generated during such period as adjusted to (a) exclude Operating
Surplus attributable to (i) any net increase in working capital borrowings
during such period and (ii) any net reduction in cash reserves during such
period, and (b) include any net increases in reserves to provide funds for
distributions resulting from Operating Surplus generated during such period.
Adjusted Operating Surplus does not include that portion of Operating Surplus
included in clause (a) (i) of the definition of Operating Surplus.
Arrearage Balance: As to each Common Unit as of the end of a quarter,
the excess of the sum of the Minimum Quarterly Distributions for an Initial
Common Unit for each prior quarter over the sum of amounts distributed for such
prior quarter and all prior quarters in respect of an Initial Common Unit;
except that no increases shall be made after the Subordination Period and all
Arrearage Balances shall in all events be zero if the General Partner is removed
as general partner of the Partnership upon the requisite vote by Limited
Partners under circumstances where cause does not exist.
Audit Committee: A committee of the board of directors of the General
Partner composed entirely of two or more directors who are neither officers nor
employees of the General Partner or any affiliate of the General Partner.
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Available Cash: As to any quarter ending before the liquidation date
means:
(a) the sum of (i) all cash of the Partnership Group on hand
at the end of such quarter and (ii) all additional cash of the Partnership Group
on hand on the date of determination of Available Cash with respect to such
quarter resulting from borrowings subsequent to the end of such quarter, less
(b) the amount of cash reserves that is necessary or
appropriate in the reasonable discretion of the General Partner to (i) provide
for the proper conduct of the business of the Partnership Group (including
reserves for future capital expenditures) subsequent to such quarter, (ii)
provide funds for Minimum Quarterly Distributions and Arrearage Balances in
respect of any one or more of the next four quarters, or (iii) comply with
applicable law or any debt instrument or other agreement or obligation to which
any member of the Partnership Group is a party or its assets are subject.
Capital Improvements: Additions or improvements to the capital assets
owned by any member of the Partnership Group or the acquisition of existing or
the construction of new capital assets (including retail distribution outlets,
propane tanks, pipeline systems, storage facilities and related assets), made to
increase the operating capacity of the Partnership Group from the operating
capacity of the Partnership Group existing immediately prior to such addition,
improvement, acquisition or construction.
Capital Surplus: Available Cash in excess of Operating Surplus as of
the end of a quarter ending prior to the dissolution and liquidation of the
Partnership.
Current Market Price: With respect to any class of Units listed or
admitted to trading on any national securities exchange as of any date, the
average of the daily Closing Prices (as hereinafter defined for the 20
consecutive Trading Days (as hereinafter defined) immediately prior to such
date. "Closing Price" for any day means the last sale price on such day, regular
way, or in case no such sale takes place on such day, the average of the closing
bid and asked prices on such day, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the principal national securities exchange on
which the Units of such class are listed or admitted to trading or, if the Units
of such class are not listed or admitted to trading on any national securities
exchange, the last quoted price on such day, or, if not so quoted, the average
of the high bid and low asked prices on such day in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or such other system then in use, or if on any such day the
Units of such class are not quoted by any such organization, the average of the
closing bid and asked prices on such day as established by a professional market
maker making a market in the Units of such class selected by the Board of
Directors of the General Partner, or if on any such day no market maker is
making a market in the Units of such class, the fair value of such Units on such
day as determined reasonably and in good faith by the Board of Directors of the
General Partner. "Trading Day" means a day on which the principal national
securities exchange on which Units of any class are listed or admitted to
trading is open for the transaction of business or, if the Units of a class are
not listed or admitted to trading on any national securities exchange, a day on
which banking institutions in New York City generally are open.
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Departing Partner: A former General Partner from and after the
effective date of any withdrawal or removal of such former General Partner.
Eligible Citizen: A person qualified to own interests in real property
in jurisdictions in which any Group Member does business or propose to do
business from time to time, and whose status as a limited partner or assignee
does not or would not subject such Group Member to a substantial risk of
cancellation or forfeiture of any of its properties or any interest therein.
General Partner: AmeriGas Propane, Inc., a Pennsylvania corporation,
and its successors, as general partner of the Partnership.
Interim Capital Transactions: (a) borrowings, refinancing and
refundings of indebtedness and sales of debt securities (other than for working
capital purposes and other than for items purchased on open account in the
ordinary course of business) by any member of the Partnership Group, (b) sales
of equity interests (including the Common Units sold to the underwriters
pursuant to the exercise of their over-allotment option in the Initial Offering)
by any member of the Partnership Group and (c) sales or other voluntary or
involuntary dispositions of any assets of any member of the Partnership Group
(other than (i) sales or other dispositions of inventory in the ordinary course
of business, (ii) sales or other dispositions of other current assets,
including, without limitation, receivables and accounts and (iii) sales or other
dispositions of assets as a part of normal retirements or replacements), in each
case prior to the commencement of the dissolution and liquidation of the
Partnership.
Investment Balance: As to each Unit at the end of each quarter, the
Initial Unit Price for each Initial Common Unit reduced (but not below zero) by
distributions of Capital Surplus and liquidating distributions.
Minimum Quarterly Distribution: $0.55 per Unit with respect to each
quarter, subject to adjustment as described in "Cash Distribution Policy--
Distributions from Capital Surplus" and "Cash Distribution Policy--Adjustment of
Minimum Quarterly Distribution and Target Distribution Levels."
Net Liquidation Gain: The excess of all the gains realized after the
date of liquidation from the sale or other disposition of Partnership assets
over all the losses realized from such dispositions, determined separately for
each asset in accordance with generally accepted accounting principles, except
that the initial basis of each contributed property shall be deemed to equal its
fair market value when contributed and each intangible asset shall be amortized
only if and at the rate amortizable for federal income tax purposes.
Non-citizen Assignee: A person whom the General Partner has determined
in its sole discretion does not constitute an Eligible Citizen and as to whose
partnership interest the General Partner has become the substituted limited
partner pursuant to Section 11.5 of the Partnership Agreement.
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Operating Expenditures: All Partnership Group expenditures, including
taxes, reimbursements of the General Partner, debt service payments, and capital
expenditures, subject to the following:
(1) Payments (including prepayments) of principal and premium
on a debt shall not be an Operating Expenditure if the payment is (i) required
in connection with the sale or other disposition of assets or (ii) made in
connection with the refinancing or refunding of indebtedness with the proceeds
from new indebtedness or from the sale of equity interests. For purposes of the
foregoing, at the election and in the reasonable discretion of the General
Partner, any payment of principal or premium shall be deemed to be refunded or
refinanced by any indebtedness incurred or to be incurred by the Partnership
Group within 180 days before or after such payment to the extent of the
principal amount of such indebtedness.
(2) Operating Expenditures shall not include (i) capital
expenditures made for Acquisitions or for Capital Improvements or (ii) payment
of transaction expenses relating to Interim Capital Transactions. Where capital
expenditures are made in part for Acquisitions or Capital Improvements and in
part for other purposes, the General Partner's good faith allocation between the
amounts paid for each shall be conclusive.
Operating Partnership: AmeriGas Propane, L.P., a Delaware limited
partnership, and any successors thereto.
Operating Surplus: At the close of any quarter but prior to
liquidation:
(a) the sum of (i) $40 million plus all cash of the
Partnership Group on hand as of the close of business on the Closing Date and
(ii) all the cash receipts of the Partnership Group for the period beginning on
the Closing Date and ending with the last day of such Quarter, other than cash
receipts from Interim Capital Transactions, less
(b) the sum of (i) Operating Expenditures for the period
beginning on the Closing Date and ending with the last day of such Quarter, (ii)
all distributions made with respect to Units and any general partner interests
in the Partnership in respect of all prior Quarters, and (iii) the amount of
cash reserves that is necessary or advisable in the reasonable discretion of the
General Partner to provide funds for future Operating Expenditures.
Partnership Agreement: The Amended and Restated Agreement of Limited
Partnership of AmeriGas Partners, L.P., dated as of September 18, 1995 (the form
of which has been filed as Exhibit 3.1 to the Partnership's Annual Report on
Form 10-K for the fiscal year ended September 30, 1995), and unless the context
requires otherwise, references to the Partnership Agreement constitute
references to the Partnership Agreements of the Partnership and of the Operating
Partnership, collectively.
Partnership Group: The Partnership, the Operating Partnership and any
partnership subsidiary of either such entity, treated as a single consolidated
partnership.
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Special Propane Corporation: Any corporation that is engaged in retail
sales of propane to end users in the continental United States in the manner
engaged in by AmeriGas Propane, Inc. and Petrolane Incorporated immediately
prior to the closing date of the Initial Offering, is not an S Corporation
within the meaning of Section 1361 of the Code, and whose tax basis in its
assets is in the aggregate substantially less than the fair market value of such
assets.
Subordinated Unit: A Unit representing a fractional part of the limited
partner partnership interests of all limited partners of the Partnership and
assignees of any such limited partner interest and having the rights and
obligations specified with respect to Subordinated Units in the Partnership
Agreement.
Subordination Period: The Subordination Period will generally extend
until the first day of any quarter beginning on or after April 1, 2000 in
respect of which (a) distributions of Available Cash from Operating Surplus on
each of the outstanding Common Units and Subordinated Units equaled or exceeded
the Minimum Quarterly Distribution for each of the four consecutive,
non-overlapping four-quarter periods immediately preceding such date, (b) the
Adjusted Operating Surplus generated during both (A) each of the two immediately
preceding, non-overlapping four-quarter periods and (B) the immediately
preceding sixteen-quarter period equaled or exceeded the Minimum Quarterly
Distribution on each of the outstanding Common Units and Subordinated Units
during such periods, and (c) there are no arrearages on the Common Units prior
to the end of the Subordination Period, a portion of the Subordinated Units will
convert into Common Units on the first day after the record date established for
any quarter ending on or after March 31, 1998 (with respect to 4,945,537
Subordinated Units) and March 31, 1999 (with respect to an additional 4,945,537
Subordinated Units) in respect of which (a) distributions of Available Cash from
Operating Surplus on each of the outstanding Common Units and Subordinated Units
equaled or exceeded the Minimum Quarterly Distribution for each of the three
consecutive, non-overlapping four-quarter periods immediately preceding such
date, (b) the Adjusted Operating Surplus generated during the immediately
preceding twelve-quarter period equaled or exceeded the Minimum Quarterly
Distribution on each of the outstanding Common Units and Subordinated Units
during such period, (c) the General Partner makes a good faith estimate (in
connection with which the General Partner shall be entitled to make such
assumptions as in its sole discretion it believes are reasonable) that the
Partnership will, with respect to the four-quarter period commencing with such
date, generate Adjusted Operating Surplus in an amount equal to or exceeding the
Minimum Quarterly Distribution on each of the outstanding Common Units and
Subordinated Units, (d) the General Partner obtains approval of the Audit
Committee that it has complied with the provisions of part (c) above, and (e)
there are no arrearages on the Common Units. In addition, if the General Partner
is removed other than for cause, the Subordination period will end, any
then-existing arrearages on the Common Units will terminate and the Subordinated
Units will immediately convert into Common Units.
Transfer Application: An application for transfer of Units in the form
set forth on the back of a certificate, substantially in the form of Exhibit A
to the Partnership Agreement, or in a form substantially to the same effect in a
separate instrument.
Unitholders: Holders of the Common Units and the Subordinated Units.
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Unit Majority: At least a majority of the Outstanding Units (as defined
in the Partnership Agreement) of each class during the Subordination Period and
at least a majority of the Outstanding Units thereafter.
Units: The Common Units and the Subordinated Units, collectively.
ITEM 2. EXHIBITS.
I. Not applicable because the Registrant has no other class
of securities registered on the New York Stock Exchange and the securities
registered hereunder are not being registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended.
II. The following Exhibits shall be filed with each copy of
this amended registration statement filed with the New York Stock Exchange:
1 - Annual Report on Form 10-K for the fiscal year ended
September 30, 1996.
2 - Not applicable.
3 - Not applicable.
4(a) - Certificate of Limited Partnership of the Registrant.
4(b) - Amended and Restated Agreement of Limited Partnership
of the Registrant dated as of September 18, 1995
("Partnership Agreement")
4(c) - Amended and Restated Agreement of Limited Partnership
of AmeriGas Propane, L.P., dated as of April 12, 1995.
5 - Form of Common Units of the Registrant (included as
Exhibit A to the Partnership Agreement).
6 - 1996 Annual Report of the Registrant.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment No. 2 to its
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: January 16, 1997
AMERIGAS PARTNERS, L.P.
By: AmeriGas Propane, Inc., as
General Partner
By: Brendan P. Bovaird
-------------------------------------
Brendan P. Bovaird
Vice President and General Counsel
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