Exhibit 10.5

 

SECOND AMENDED AND RESTATED FERRELLGAS UNIT OPTION PLAN

 

SECTION 1.  PURPOSE

 

The Ferrellgas Unit Option Plan was adopted effective as of August 1, 1994 and
amended and restated effective as of March 1, 1995.  This Second Amended and
Restated Ferrellgas Unit Option Plan (the “Plan”) amends and restates in its
entirety those prior plans effective as of April 19, 2001 (the “Amendment
Effective Date”).  Some capitalized terms are defined in Section 10 of this
Plan.  This Plan is adopted by Ferrellgas Partners, L.P., a Delaware limited
partnership (the “Partnership”), to encourage selected Employees of
Ferrellgas, Inc., a Delaware corporation and the general partner of the
Partnership (the “Company”), to develop a proprietary interest in the growth and
performance of the Partnership, to generate an increased incentive to contribute
to the Partnership’s future success and prosperity, thus enhancing the value of
the Partnership for the benefit of its unitholders, and to enhance the ability
of the Company to attract and retain key individuals who are essential to the
progress, growth and profitability of the Partnership, by giving such Employees
the opportunity to acquire Common Units.

 

SECTION 2.  ADMINISTRATION

 

The Plan shall be administered by the Option Committee of the Board of Directors
of the Company (“the Board”) as designated by the Board to administer the Plan
and composed of not less than two directors of the Board, each of whom is a
“non-employee directors” within the meaning of Rule 16b-3.  A majority of the
Committee shall constitute a quorum, and the acts of a majority of the members
present at any meeting at which a quorum is present, or acts approved in writing
by all members of the Committee, shall be deemed the acts of the Committee.

 

Subject to the terms of the Plan and applicable law, the Committee shall have
the sole power, authority and discretion to: (i) designate the Employees who are
to be Participants; (ii) determine the number of Options to be granted to an
Employee; (iii) determine the terms and conditions of any Option;
(iv) interpret, construe and administer the Plan and any instrument or agreement
relating to an Option granted under the Plan; (v) establish, amend, suspend, or
waive such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; (vi) make a determination
as to the right of any Person to receive payment of (or with respect to) an
Option; and (vii) make any other determinations and take any other actions that
the Committee deems necessary or desirable for the administration of the Plan.

 

Except to the extent prohibited by applicable law or the applicable rules of a
stock exchange, the Committee may allocate all or any portion of its
responsibilities and powers to any one or more of its members and may delegate
all or any part of its responsibilities and powers to any person or persons
selected by it.  Any such allocation or delegation may be revoked by the
Committee at any time.

 

The Company and the Partnership shall furnish the Committee with such data and
information as it determines may be required for it to discharge its duties. 
The records of the Company and the Partnership as to an employee’s or
Participant’s employment (or other provision of services), termination of
employment (or cessation of the provision of services), leave of absence,
reemployment and compensation shall be conclusive on all Persons unless
determined to be

 

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incorrect.  Participants and other persons entitled to benefits under the Plan
must furnish the Committee such evidence, data or information as the Committee
considers desirable to carry out the terms of the Plan.

 

Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions with respect to the Plan or
any Option granted thereunder shall be within the sole discretion of the
Committee, may be made at any time, and shall be final, conclusive, and binding
upon all Persons.

 

SECTION 3.  UNITS AVAILABLE FOR OPTIONS

 

3.1           CALCULATION OF NUMBER OF COMMON UNITS AVAILABLE.  The number of
Common Units available for granting Options under the Plan shall be 1,350,000
Common Units, subject to adjustment as provided in Section 3.3.  Further, if any
Option granted under the Plan is forfeited, canceled, surrendered, or otherwise
terminates or expires without the delivery of Common Units or other
consideration, then the Common Units subject to such Option shall again be
available for granting Options under the Plan.  To comply with the rules of the
New York Stock Exchange, no single officer or director may acquire under the
Plan more than one percent (1%) of the 31,489,516 outstanding Common Units as of
the Amendment Effective Date, for a limitation of no more than 314,895 Common
Units.  In addition, all Common Units available for issuance under this Plan
together with any Common Units available for issuance under any other employee
benefit plan of the Partnership shall not exceed five percent (5%) of the
Partnership’s 31,489,516 outstanding Common Units as of Amendment Effective
Date, for a limitation of 1,574,475 Common Units.

 

3.2           SOURCES OF UNITS DELIVERABLE UNDER OPTIONS.  Common Units
delivered by the Partnership on exercise of an Option may consist, in whole or
in part, of Common Units acquired in the open market or from any Person.

 

3.3           ADJUSTMENTS.  In the event that (i) any change is made to the
Common Units issuable under the Plan or (ii) the Partnership makes any
distribution of cash, Common Units or other property to unitholders which
results from the sale or disposition of a major asset or separate operating
division of the Partnership or any other extraordinary event and, in the
judgment of the Committee, such change or distribution would significantly
dilute the rights of Participants hereunder, then the Committee may make
appropriate adjustments in the maximum number of Units issuable under the Plan
to reflect the effect of such change or distribution upon the Partnership’s
capital structure, and may make appropriate adjustments to the number of Units
subject to, and/or the exercise price of, each outstanding Option.  The
adjustments determined by the Committee shall be final, binding and conclusive.

 

3.4           SUBORDINATED UNITS.  Under the Original Plan, the Options were
exercisable into Subordinated Units.  As of August 1, 1999, all Subordinate
Units converted into Common Units.  Any Options previously outstanding as of
that date were automatically converted into Options with respect to Common
Units.

 

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SECTION 4.  ELIGIBILITY

 

Any Employee who is not a member of the Committee shall be eligible to be a
Participant.  Grants may be made to the same Employee on more than one occasion.

 

SECTION 5.  OPTIONS

 

5.1           OPTION TERMS.  The Committee is hereby authorized to grant Options
to Employees with the following terms and conditions and with such additional
terms and conditions, which are not inconsistent with the provisions of the
Plan, as the Committee shall determine:

 

(i)            EXERCISE PRICE.  The per Unit exercise price of an Option shall
be determined by the Committee at the date of grant.

 

(ii)           TIME AND METHOD OF VESTING OR EXERCISE, The Committee shall
determine the time or times at which an Option may become vested in whole or in
part, may be exercised in whole or in part, and the method by which payment of
the exercise price with respect thereto may be made; provided, however, no
Option shall be exercisable within six months of its date of grant.  Subject to
any limitations in the Option Agreement, a Participant may purchase Common Units
subject to the vested and exercisable portion of an Option in whole at any time,
or in part from time to time, by delivering to the Chief Financial Officer of
the Company, on behalf of the Partnership, written notice specifying the number
of Common Units with respect to which the Option is being exercised, together
with payment in full of the purchase price of such Common Units plus any
applicable federal, state or local taxes for which the Partnership has a
withholding obligation in connection with such purchase.  Such payment shall be
payable in full in cash or by check acceptable to the Company.

 

(iii)          TERM OF OPTIONS.  The term of each Option shall be for such
period as may be determined by the Committee; provided, however, that in no
event shall the term of any Option exceed a period of 10 years from the date of
its grant.

 

(iv)          TERMINATION OF EMPLOYMENT.  Options, to the extent vested as of
the date the Participant ceases to be an Employee, will remain the property of
the Participant until such Options are exercised pursuant to the Plan or expire
by their terms.  Options, to the extent not vested as of the date the
Participant ceases to be an Employee, shall be automatically canceled
unexercised on such date.

 

(v)           LIMITS ON TRANSFER OF OPTIONS.  No Option or rights thereunder
shall be assignable, alienable, saleable or transferable by a Participant
otherwise than by will or by the laws of descent and distribution.  Each Option
shall be exercisable during that Participant’s lifetime only by the Participant
or, if permissible under applicable law, by the Participant’s guardian or legal
representative.  No Option or any rights thereunder may be pledged, alienated,
attached or otherwise encumbered, and any purported pledge, alienation,
attachment or encumbrance thereof shall be void and unenforceable against the
Partnership and the Company.

 

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(vi)          UNIT CERTIFICATES.  Upon exercise of an Option, delivery of a
certificate for fully paid and nonassessable Common Units shall be made to the
Person exercising the Option either at such time during ordinary business hours
after 15 days but not more than 30 days from the date of receipt of the notice
by the Partnership as shall be designed in such notice, or at such time, place
and manner as may be agreed upon by the Partnership and the Person exercising
the Option.

 

(vii)         OPTION AGREEMENT.  Each Option shall be evidenced by an Option
Agreement, which shall have such terms and provisions, not inconsistent with the
Plan, that the Committee determines.

 

5.2           OPTION CANCELLATION RIGHTS.  Notwithstanding anything in the Plan
to the contrary, the Committee shall have the discretion to cancel all or part
of any outstanding Options at any time or times.  Upon any such cancellation the
Partnership shall pay to the Participant with respect to each Common Unit that
is subject to the canceled (or canceled portion of the) Option an amount in cash
equal to the excess, if any, of (i) the Fair Market Value of a Common Unit (at
the effective date of such cancellation) over (ii) the exercise price per Common
Unit of such canceled Option.

 

SECTION 6.  AMENDMENT AND TERMINATION

 

(i)            The Board in its discretion may terminate the Plan at any time
with respect to any Common Units for which a grant has not theretofore been
made.  The Board shall also have the right to alter or amend the Plan or any
part thereof from time to time; provided, however, that no change in any Option
theretofore made may be made which would impair the rights of the Participant
without the consent of such Participant.

 

SECTION 7.  VESTING UPON THE OCCURRENCE OF CERTAIN EVENTS

 

If a plan of complete dissolution of the Partnership is adopted or the
unitholders approve an agreement for the sale or disposition by the Partnership
(in one transaction or a series of transactions) of all or substantially all the
Partnership’s assets then upon such adoption or approval all or a portion (as
determined by the Committee and set forth in the related Option Agreement) of a
Participant’s Options outstanding as of the date of such adoption or approval
shall be immediately and fully vested and exercisable and may be exercised
within one year from the date of such adoption or approval, but not thereafter;
provided, however, that if, on any date during such year the Participant desires
to exercise those Options, such Participant cannot exercise such Options and
sell all of the Common Units issuable upon such exercise without being subject
to liability under Section 16(b) of the 1934 Act, then the Partnership shall pay
to such Participant with respect to each Common Unit which would have been
issuable upon the Participant’s exercise of the those Options an amount in cash
equal to the excess, if any, of (i) the Fair Market Value of a Common Unit (as
of the date of such exercise) over (ii) the exercise price per Common Unit of
such Options.  The remaining unvested and/or unexercisable Options shall be
immediately cancelled unexercised and without the payment of any consideration.

 

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SECTION 8.  GENERAL PROVISIONS

 

8.1           NO RIGHTS TO OPTIONS.  No Person shall have any claim to be
granted any Option under the Plan, and there is no obligation for uniformity of
treatment of Persons under the Plan.  The terms and conditions of Options need
not be the same with respect to each Participant.

 

8.2           WITHHOLDING. The Partnership shall (i) withhold from any transfer
made with respect to any Option cancellation or exercise under the Plan the
amount (in cash or Units) of withholding taxes due in respect thereof, and
(ii) take such other action as may be necessary in the opinion of the
Partnership to satisfy all obligations for the payment of such taxes.

 

8.3           CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES.  The
Committee may correct any defect, supply any omission, or reconcile any
inconsistency in the Plan or any Option in the manner and to the extent it shall
deem desirable in the establishment or administration of the Plan.

 

8.4           NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS.  Nothing contained in
the Plan shall prevent the Partnership or the Company from adopting or
continuing in effect other or additional compensation arrangements and such
arrangements may be either generally applicable or applicable only in specific
cases.

 

8.5           NO RIGHT TO EMPLOYMENT.  The grant of an Option shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or the Partnership.  Further, the Company may at any time dismiss a
Participant from employment, free from any liability or any claim under the Plan
unless otherwise expressly provided in the Plan or in any Option Agreement.

 

8.6           GOVERNING LAW.  The validity, construction and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with applicable Federal law, and to the extent not preempted thereby,
with the laws of the State of Missouri.

 

8.7           SEVERABILITY.  If any provision of the Plan or any Option is or
becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction, or as to any person or Option, or would disqualify the Plan or any
Option under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws.  If it cannot be so
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Option, such provision shall
be stricken as to such jurisdiction, Person or Option and the remainder of the
Plan and any such Option shall remain in full force and effect.

 

8.8           NO TRUST OR FUND CREATED.  Neither the Plan nor any Option shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company, the Partnership or any Affiliate and
a Participant or any other Person.  To the extent that any Person acquires a
right to receive payments from the Company, the Partnership or any Affiliate
pursuant to an Option, such right shall be no greater than the right of any
unsecured general creditor of the Company, the Partnership or any Affiliate.

 

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8.9           NO FRACTIONAL UNITS.  No fractional Units shall be issued or
delivered pursuant to the Plan or any Option, and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Units, or whether such fractional Units or any rights
thereto shall be canceled, terminated or otherwise eliminated.

 

8.10         HEADINGS.  Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference.  Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.

 

8.11         NO LIMITATION.  The existence of the Plan and the grants of Options
made hereunder shall not affect in any way the right or power of the Board, the
Company in its capacity as the general partner of the Partnership or unitholders
of the Partnership to make or authorize any adjustment, recapitalization,
reorganization or other change in the capital structure or business of the
Partnership or any Affiliate, any merger or consolidation of the Partnership or
any Affiliate, any issue of debt or equity securities ahead of or affecting
Units or the rights thereof or pertaining thereto, the dissolution or
liquidation of the Partnership or any Affiliate or any sale or transfer of all
or any part of Partnership or any Affiliate’s assets or business, or any other
corporate act or proceeding.

 

8.12         RULE 16b-3.  It is intended that the Plan and any Option granted to
a Person subject to Section 16 of the Securities Exchange Act of 1934, as
amended, meet all of the requirements of Rule 16b-3.  If any provision of the
Plan or any such Option would disqualify the Plan or such Option under, or would
otherwise not comply with, Rule 16b-3, such provision or Option shall be
construed or deemed amended to conform to Rule 16b-3.

 

8.13         INVESTMENT REPRESENTATION.  Unless the Common Units subject to
Options granted under the Plan have been registered under the Securities Act of
1933, as amended (the “1933 Act”), (and, in the case of any Participant who may
be deemed an affiliate (for securities law purposes) of the Company or
Partnership, such Common Units have been registered under the 1933 Act for
resale by such Participant), or the Partnership has determined that an exemption
from registration is available, the Partnership may require prior to and as a
condition of the issuance of any Common Units that the person exercising an
Option hereunder furnish the Partnership with a written representation in a form
prescribed by the Committee to the effect that such person is acquiring said
Common Units solely with a view to investment for his or her own account and not
with a view to the resale or distribution of all or any part thereof, and that
such person will not dispose of any of such Common Units otherwise than in
accordance with the provisions of Rule 144 under the 1933 Act unless and until
either the Common Units are registered under the 1933 Act or the Company, on
behalf of the Partnership, is satisfied that an exemption from such registration
is available.

 

8.14         COMPLIANCE WITH SECURITIES LAWS.  Anything contained herein to the
contrary notwithstanding, the Partnership shall not be obligated to sell or
issue any Common Units under the Plan unless and until the Partnership is
satisfied that such sale or issuance complies with (i) all applicable
requirements of the exchange on which the Units are traded (or the governing
body of the principal market in which such Common Units are traded, if such
Common Units are not then listed on an exchange), (ii) all applicable provisions
of the 1933 Act, and (iii) all other laws or regulations by which the
Partnership is bound or to which the Partnership is subject.  The

 

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Company acknowledges that, as the general partner of the Partnership, it is an
affiliate of the Partnership under securities laws and it shall comply with such
laws and obligations of the Partnership relating thereto as if they were
directly applicable to the Company.

 

SECTION 9.  TERM OF THE PLAN

 

No Option shall be granted after the termination of the Plan.  However, unless
otherwise expressly provided in the Plan or in an applicable Option Agreement,
any Option theretofore granted may extend beyond such date, and any authority of
the Committee to amend, alter, suspend, discontinue or terminate any such
Option, or to waive any conditions or rights under any such Option, and the
authority of the Board to cancel the Option pursuant to Section 5.2, shall
extend beyond such date.

 

SECTION 10.  DEFINITIONS

 

As used in the Plan, the following terms shall have the meanings set forth
below:

 

(a)                                  “Affiliate” shall mean (i) the Partnership,
(ii) the Company, and (iii) any entity in which the Partnership owns, directly
or indirectly, more than 50% of the beneficial interests.

 

(b)                                 “Code” shall mean the Internal Revenue Code
of 1986, as amended from time to time.

 

(c)                                  “Common Unit” shall mean a limited
partnership interest in the Partnership represented by a common unit as set
forth in the Third Amended and Restated Agreement of Limited Partnership of
Ferrellgas Partners, L.P., dated as of April 6, 2001, as amended from time to
time.

 

(d)                                 “Employee” shall mean any employee of the
Company or any Affiliate.

 

(e)                                  “Fair Market Value” shall mean, at any
specified time, with respect to a Common Unit, an amount equal to the average
closing price of a Common Unit on the New York Stock Exchange for the 20 trading
days immediately preceding such determination or, if not so traded, as
determined by the Committee.

 

(f)                                    “1933 Act” shall mean the Securities Act
of 1933, as amended.

 

(g)                                 “1934 Act” shall mean the Securities
Exchange Act of 1934, as amended.

 

(h)                                 “Option” shall mean a right granted under
the Plan to purchase Units under the Plan.

 

(i)                                     “Participant” shall mean an Employee
granted an Option under the Plan.

 

(j)                                     “Person” shall mean any individual,
corporation, partnership, association, joint-stock company, trust,
unincorporated organization or government or political subdivision thereof.

 

(k)                                  “Rule 16b-3” shall mean Rule 16b-3
promulgated by the Securities and Exchange Commission under the 1934 Act.

 

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(l)                                     “Subordinated Unit” shall mean a limited
partnership interest in the Partnership represented by a subordinated unit as
set forth in the Agreement of Limited Partnership of Ferrellgas Partners, L.P.,
dated as of July 5, 1994.

 

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