<PAGE>   1
                                                                   EXHIBIT 10.26


                             AMERIGAS PROPANE, INC.

                          1997 LONG-TERM INCENTIVE PLAN

                      ON BEHALF OF AMERIGAS PARTNERS, L.P.
<PAGE>   2
                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
Section No.                                                                                         Page No.

<S>                                                                                                    <C>
1.     Purpose and Design......................................................................        1
2.     Definitions.............................................................................        1
3.     Number and Source of Units Available for Grants; Maximum Allotment......................        6
4.     Duration of the Plan....................................................................        6
5.     Administration..........................................................................        6
6.     Eligibility.............................................................................        7
7.     Grants:  Payment and Performance Leverage...............................................        7
8.     Distribution Equivalents................................................................        8
9.     Delivery of Units and Unitholder Privileges.............................................        8
10.    Non-Transferability of Grants...........................................................        9
11.    Termination of Employment...............................................................        9
12.    Adjustment of Grants....................................................................        9
13.    Limitation of Rights....................................................................        9
14.    Amendment or Termination of Plan........................................................       10
15.    Tax Withholding.........................................................................       10
16.    Governmental Approval...................................................................       10
17.    Effective Date of Plan..................................................................       10
18.    Successors .............................................................................       11
19.    Headings and Captions...................................................................       11
20.    Gender and Number.......................................................................       11
21.    Governing Law...........................................................................       11
Signatures        .............................................................................       11
</TABLE>


                                      (i)
<PAGE>   3
                             AMERIGAS PROPANE, INC.

                          1997 LONG-TERM INCENTIVE PLAN

                      ON BEHALF OF AMERIGAS PARTNERS, L.P.


1.   PURPOSE AND DESIGN

         The purpose of this Plan is to assist the Company in its capacity as
General Partner of APLP in securing and retaining key corporate executives of
outstanding ability who are in a position to participate significantly in the
development and implementation of the General Partner's strategic plans and
thereby to contribute materially to the long-term growth, development, and
profitability of APLP. The Plan is designed to align directly long-term
executive compensation with tangible, direct and identifiable benefits realized
by APLP unitholders, and it is hereby adopted by the Company to make available
Grants to such executives in order that they might receive Units upon the
attainment of financial criteria described in the Plan.

2.   DEFINITIONS

         Whenever used in this Plan, the following terms will have the
respective meanings set forth below:

              2.01 "Adjusted Operating Surplus" for any period means 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.

              2.02 "Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

              2.03 "APLP" means AmeriGas Partners, L.P., a Delaware limited 
partnership.

              2.04 "APLP Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of AmeriGas Partners, L.P., dated as of
September 18, 1995, as amended from time to time.


                                      -1-
<PAGE>   4
              2.05 "Arrearage Balance" means, as to each Common Unit as of the
end of a Quarter, the excess of the sum of the Minimum Quarterly Distribution
for a Common Unit for each prior Quarter over the sum of the amounts distributed
to unitholders for such prior Quarter and all prior Quarters in respect of such
an Initial Common Unit; except that all Arrearage Balances shall in all events
be zero if the General Partner is removed as general partner of APLP upon the
requisite vote by Limited Partners under circumstances where Cause does not
exist.

              2.06 "Board" means the Company's Board of Directors as constituted
from time to time, provided that whenever in this Plan Board approval is
required, such approval shall require the affirmative vote of a majority of
members of the Board who are not participants in the Plan.

              2.07 "Cause" means a court of competent jurisdiction has entered a
final, non-appealable judgment finding the General Partner liable for actual
fraud, gross negligence or willful or wanton misconduct in its capacity as
general partner of the Partnership.

              2.08 "Closing Date" means April 19, 1995.

              2.09 "Committee" means the Compensation and Pension Committee, or 
its successor, of the Board.

              2.10 "Common Unit" means a Common Unit of APLP.

              2.11 "Company" means AmeriGas Propane, Inc., a Pennsylvania
corporation, and any successor thereto that is the General Partner.

              2.12 "Date of Award" means the date the Committee awards a Unit
and Distribution Equivalent Grant.

              2.13 "Distribution Equivalent" means an amount determined by
multiplying the number of Units subject to a Grant by the per-Unit cash
distribution, or the per-Unit fair market value (as determined by the Committee)
of any distribution in consideration other than cash, paid by APLP on its Units
on a distribution payment date.

              2.14 "Employee" means a regular full-time salaried employee
(including officers and directors who are also employees) of the Company (i)
whose terms and conditions of employment are not determined through collective
bargaining with a third party or (ii) who is not characterized as an independent
contractor by the Company no matter how characterized by a court or government
agency, and no retroactive characterization of an individual's status for any
other purpose shall make an individual an "Employee" for purposes hereof unless
specifically determined otherwise by the Company for the purposes of this Plan.


                                      -2-
<PAGE>   5
              2.15 "Exchange Act" means the Securities Exchange Act of 1934, as 
amended.

              2.16 "Fair Market Value" of a Unit means the average, rounded to
the next highest one-eighth of a point (.125), of the highest and lowest sales
prices thereof on the New York Stock Exchange on the day on which Fair Market
Value is being determined, as reported on the Composite Tape for transactions on
the New York Stock Exchange. In the event that there are no Unit transactions on
the New York Stock Exchange on such day, the Fair Market Value will be
determined as of the immediately preceding day on which there were Unit
transactions on that exchange.

              2.17 "General Partner" means AmeriGas Propane, Inc., its successor
as general partner of APLP, or its transferee, all as provided in Section 6.4(c)
of the APLP Partnership Agreement.

              2.18 "Grant" means the right to receive Units or an amount of cash
equal to the Fair Market Value of the Units and Distribution Equivalent
according to the terms of the Plan.

              2.19 "Group Member" means a member of the Partnership Group.

              2.20 "Interim Capital Transactions" means the following
transactions if they occur prior to the liquidation date of APLP: (i)
borrowings, refinancings or 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 Group
Member; (ii) sales of equity interests by any Group Member; and (iii) sales or
other voluntary or involuntary dispositions of any assets of any Group Member
other than (a) sales or other dispositions of inventory in the ordinary course
of business, (b) sales or other dispositions of other current assets, including
receivables and accounts, and (c) sales or other dispositions of assets as part
of normal retirements or replacements.

              2.21 "Minimum Quarterly Distribution" means $.55 per Unit.

              2.22 "Operating Expenditures" means all Partnership Group
expenditures, including taxes, reimbursements of the General Partner, debt
service payments, and capital expenditures, subject to the following:

                           (a) 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, 


                                      -3-
<PAGE>   6
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
one hundred eighty (180) days before or after such payment to the extent of the
principal amount of such indebtedness.

                           (b) 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.

              2.23 "Operating Partnership" means AmeriGas Propane, L.P., a 
Delaware limited partnership.

              2.24 "Operating Surplus," as to any Quarter ending before the 
liquidation date of APLP, means:

                           (a) the sum of (i) $40 million plus all cash of the
Partnership Group on hand as of the close of business on April 19, 1995 and (ii)
all the cash receipts of the Partnership Group for the period beginning on April
19, 1995 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 April 19, 1995 and ending with the last day of such Quarter,
(ii) all distributions made pursuant to Sections 5.3 and 5.4 of the APLP
Partnership Agreement 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.

              2.25 "Participant" means an Employee designated by the Committee
to participate in the Plan.

              2.26 "Partnership Group" means APLP, AmeriGas Propane, L.P., and
any partnership subsidiary of either such entity, treated as a single
consolidated partnership.

              2.27 "Partnership Interest" means an interest in APLP, which shall
include general partner interests, Common Units, Subordinated Units or other
Partnership Securities, or a combination thereof or interest therein, as the
case may be.

              2.28 "Partnership Security" means any class or series of Unit, any
option, right, warrant or appreciation rights relating thereto, or any other
type of equity interest that APLP may lawfully issue, or any unsecured or
secured debt obligation of APLP that is convertible into any class or series of
equity interests of APLP.


                                      -4-
<PAGE>   7
              2.29 "Performance Contingency" means financial and operating 
performance by APLP such that:

              (a) for each of three, consecutive, non-overlapping, four-Quarter
periods, distributions have been made to unitholders of APLP at least equal to
the sum of the Minimum Quarterly Distributions for each Quarter on all
Outstanding Common Units and Subordinated Units during such period;

              (b) the Adjusted Operating Surplus generated during the
immediately preceding twelve-Quarter period at least equals the sum of the
Minimum Quarterly Distributions for each Quarter on all Outstanding Common Units
and Subordinated Units during such period;

              (c) the Arrearages Balances on the Common Units are zero;

              (d) the General Partner has made 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 APLP
will, with respect to the four-Quarter period commencing immediately after the
applicable twelve-Quarter period, generate Adjusted Operating Surplus in an
amount at least equal to the sum of the Minimum Quarterly Distributions on all
Outstanding Common Units and Subordinated Units; and

              (e) the General Partner shall have obtained approval from the
Audit Committee of the Board that it has complied with the provisions of the
immediately preceding Section (d), provided, however, that the Performance
Contingency will not be satisfied unless Subordinated Units are convertible to
Common Units pursuant to the "early conversion" provisions of Section 4.6(a) of
the APLP Partnership Agreement.

              2.30 "Person" means an individual or a corporation, partnership,
trust, unincorporated organization, association or other entity.

              2.31 "Plan" means the AmeriGas Propane, Inc. 1997 Long-term
Incentive Plan on behalf of AmeriGas Partners, L.P. as stated herein, including
any amendments or modifications thereto.

              2.32 "Quarter" means, unless the context requires otherwise, a
three-month period of time ending on March 31, June 30, September 30, or
December 31.

              2.33 "Subordinated Unit" means a Subordinated Unit in APLP.


                                      -5-
<PAGE>   8
              2.34 "UGI" means UGI Corporation, a Pennsylvania corporation, and
any successor thereto.

              2.35 "Unit" means a Common Unit of APLP or such other Partnership
Security of APLP as may be substituted for Units or such other securities
pursuant to Section 12.

3.   NUMBER AND SOURCE OF UNITS AVAILABLE FOR GRANTS; MAXIMUM ALLOTMENT

         The number of Units which may be made the subject of Grants under this
Plan at any one time may not exceed 500,000 in the aggregate, including Units
acquired by Participants under this Plan, subject, however, to the adjustment
provisions of Section 12 below. The maximum number of Units which may be the
subject of Grants to any one individual in any calendar year shall be 100,000.
Units which are the subject of Grants may be (i) previously issued and
outstanding Units, (ii) newly issued Units, (iii) Units held by the Company, any
of its Affiliates, or any Group Member, or (iv) partly of each.

4.   DURATION OF THE PLAN

         The Plan will expire on September 30, 2001, provided however, that the
payment terms of the Plan shall remain in effect until all obligations under the
Plan have been fulfilled.

5.   ADMINISTRATION

         The Plan will be administered by the Committee. Subject to the express
provisions of the Plan, the Committee will have authority, in its complete
discretion, to determine the Employees to whom, and the time or times at which,
Grants will be awarded and the number of Units to be subject to each Grant. In
making such determinations, the Committee may take into account the nature of
the services rendered by an Employee, the present and potential contributions of
the Employee to the Partnership Group's success and such other factors as the
Committee in its discretion deems relevant. Subject to the express provisions of
the Plan, the Committee will also have authority to construe and interpret the
Plan, to prescribe, amend and rescind rules and regulations relating to it, to
determine the terms and provisions of the respective Grants (which need not be
identical), and to make all other determinations (including factual
determinations) necessary or advisable for the orderly administration of the
Plan. Any discretion, actions or interpretations to be made under the Plan by
the Committee on behalf of the Company shall be made in its sole discretion, not
acting in a fiduciary capacity, need not be uniformly applied to similarly
situated individuals, and shall be final, binding and conclusive upon the
parties. It is the intent of the Company that the Plan should comply in all
applicable respects with Rule 16b-3 under the Exchange Act so that transactions
relating to any Units awarded to a Participant who is subject to Section 16 of
the Exchange Act shall be exempt under Rule 16b-3. Accordingly, if any 


                                      -6-
<PAGE>   9
provision of the Plan or any agreement relating to a Grant does not comply with
the requirements of Rule 16b-3 as then applicable to any such Participant, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements with respect to such Participant. Any other
provision of the Plan notwithstanding, the Board may perform any function of the
Committee under the Plan, including without limitation for the purpose of
ensuring that transactions under the Plan by Participants who are subject to
Section 16 of the Exchange Act in respect of APLP are exempt under Rule 16b-3.
In any case in which the Board is performing a function of the Committee under
the Plan, each reference to the Committee herein shall be deemed to refer to the
Board (unless the context shall otherwise require).

6.   ELIGIBILITY

         Grants may be awarded only to Employees at salary grade level 36 or
higher determined in accordance with the Company's personnel policies (including
directors who are also Employees of the Company) who, in the sole judgment of
the Committee, are individuals in a position to participate significantly in the
development and implementation of the General Partner's strategic plans and
thereby to contribute materially to the continued growth and development of APLP
and to its future financial success.

7.   GRANTS:  PAYMENT AND PERFORMANCE LEVERAGE

         7.1 Payment. No payment of any kind shall be made under this Plan
pursuant to any Grant until the Performance Contingency has been satisfied. The
General Partner shall seek approval from the Audit Committee pursuant to Section
2.29(e) as soon as practicable after the conditions in section 2.29(a) through
(d) have been satisfied. Units shall be delivered (or their Fair Market Value
shall be paid in cash, as determined by the Committee) and Distribution
Equivalents shall be paid to Participants as soon as practicable.
Notwithstanding the foregoing, the Committee may accelerate the payment of any
or all outstanding Grants at any time for any reason.


                                      -7-
<PAGE>   10
         7.2 Performance Leverage. The Performance Contingency will be leveraged
according to the following table:

<TABLE>
<CAPTION>
         Performance Contingency                              Leverage Applied
              Satisfied by:                                       to Grant:

<S>                                                           <C> 
         September 30, 1999                                            150%
         December 31, 1999                                             140%
         March 31, 2000                                                130%
         June 30, 2000                                                 120%
         September 30, 2000                                            110%
         December 31, 2000                                              95%
         March 31, 2001                                                 80%
         June 30, 2001                                                  65%
         September 30, 2001                                             50%
         After September 30, 2001                                        0%
</TABLE>


8.   DISTRIBUTION EQUIVALENTS

         8.1 Amount of Distribution Equivalents Credited. From the Date of Award
of a Grant to a Participant until the earlier of payment, if any, of the Grant
pursuant to Section 7.1 or termination of the Grant, the Company shall keep
records for such Participant and shall credit on each payment date after
November 18, 1996 for the payment of a distribution made by APLP on its Units an
amount equal to the Distribution Equivalent associated with the Units subject to
such Grant. Notwithstanding the foregoing, a Participant may not accrue during
any calendar year Distribution Equivalents in excess of $300,000. No interest
shall be credited to any such Dividend Equivalent.

         8.2 Form of Payment for Distribution Equivalents. Payment of
Distribution Equivalents shall be solely in cash.

9.   DELIVERY OF UNITS AND UNITHOLDER PRIVILEGES

         9.1 Delivery of Units. If Units are to be delivered pursuant to the
Plan, then the General Partner will, without stock transfer taxes to the
Participant or to any other person entitled to payment of Units pursuant to this
Plan, deliver or cause the delivery in certificate form to, or credit
electronically on behalf of, the Participant, the Participant's designee or such
other person the requisite number of Units.


                                      -8-
<PAGE>   11
         9.2 Privileges of a Unitholder. A Participant or any other person
awarded a Grant under this Plan will have no rights as a unitholder with respect
to any Units covered by the Grant until the Units are received by the
Participant.

10.  NON-TRANSFERABILITY OF GRANTS

         Grants or other Participant's rights under the Plan are not
transferable, and a Grant may be paid, during the lifetime of the Participant,
only to the Participant.

11.  TERMINATION OF EMPLOYMENT

         Each Grant, to the extent that it has not previously been paid, will
terminate when the Participant awarded such Grant ceases to be an Employee of
the Company, unless the Committee shall, in its sole discretion, determine
otherwise as to all or any portion of such Grant.

12.  ADJUSTMENT OF GRANTS

         Notwithstanding anything to the contrary in this Plan, in the event (a)
any recapitalization, reorganization, merger, consolidation, spin-off,
combination, repurchase, exchange of Common or Subordinated Units or other
securities of APLP; security split or reverse split, extraordinary distribution,
liquidation, dissolution, significant corporate or partnership transaction
(whether relating to assets, partnership units, or stock) involving APLP, or
other extraordinary transaction or event affects Units such that an adjustment
is determined by the Committee to be appropriate in order to prevent dilution or
enlargement of Participants' rights under the Plan or (b) a Participant's salary
grade changes to grade 35 or lower, then the Committee may adjust (i) any or all
of the number of Units reserved for issuance under the Plan, (ii) the maximum
number of Units which may be the subject of Grants to any one individual in any
calendar year, (iii) the number of Units to be subject to Grants thereafter
awarded under the Plan, (iv) the number of Units payable pursuant to outstanding
Grants, (v) the form of payment of Grants, including without limitation, the
payment of cash value equivalents of Units instead of Units themselves, (vi) the
amount of Dividend Equivalents, and/or (vii) the terms and conditions applicable
to Distribution Equivalents, provided that the number of Units subject to any
Grant will always be a whole number. Any such determination of adjustments by
the Committee will be conclusive for all purposes of the Plan and of each Grant.

13.  LIMITATION OF RIGHTS

         Nothing contained in this Plan shall be construed to give an Employee
any right to be awarded a Grant except as may be authorized in the discretion of
the Committee. The awarding of a Grant under this Plan shall not constitute or
be evidence of any agreement or understanding, 


                                      -9-
<PAGE>   12
expressed or implied, that the Company will employ a Participant for any
specified period of time, in any specific position, or at any particular rate of
remuneration.

14.  AMENDMENT OR TERMINATION OF PLAN

         Subject to Board approval, the Committee may at any time, and from time
to time, alter, amend, suspend or terminate this Plan without the consent of the
Company's shareholders, APLP's unitholders, or Participants, except that any
such alteration, amendment, suspension or termination shall be subject to the
provisions of the APLP Partnership Agreement and to the approval of APLP's
unitholders within one year after such Committee and Board action if such
unitholder approval is required by any federal or state law or regulation or the
rules of any stock exchange or automated quotation system on which the Units are
then listed or quoted, or if the Committee in its discretion determines that
obtaining such unitholder approval is for any reason advisable. No termination
or amendment of this Plan may, without the consent of a Participant to whom any
Grant has previously been awarded, adversely affect the rights of such
Participant under such Grant. Notwithstanding the foregoing, the Committee may
make minor amendments to this Plan which do not materially affect the rights of
Participants or significantly increase the cost to the Partnership Group or to
the Company.

15.  TAX WITHHOLDING

         Upon payment of any Grant under this Plan, the Company will require the
recipient of the payment to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements. However, to the extent
authorized by the Committee, the Company may withhold or receive Units and make
cash payments in respect thereof in satisfaction of a recipient's tax
obligations, including tax obligations in excess of mandatory withholding
requirements.

16.  GOVERNMENTAL APPROVAL

         Each Grant will be subject to the requirement that if at any time the
listing, registration or qualification of the Units covered thereby upon any
securities exchange, or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of or in connection with the awarding of such Grant or payment of
Units and a Dividend Equivalent thereunder, then no such Grant may be paid in
whole or in part unless and until such listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions not
acceptable to the Board.

17.  EFFECTIVE DATE OF PLAN

         This Plan will become effective as of October 1, 1996.


                                      -10-
<PAGE>   13
18.  SUCCESSORS

         This Plan shall be binding upon and inure to the benefit of APLP, the
General Partner, their successors and assigns and the Participant and his heirs,
executors, administrators and legal representatives.

19.  HEADINGS AND CAPTIONS

         The headings and captions herein are provided for reference and
convenience only, shall not be considered part of the Plan, and shall not be
employed in the construction of the Plan.

20.  GENDER AND NUMBER

         Except where otherwise clearly indicated by the context, the masculine
and neuter shall include the feminine and the neuter, the singular shall include
the plural, and vice-versa.

21.  GOVERNING LAW

         The validity, construction, interpretation and effect of the Plan and
Grants under the Plan shall be governed exclusively by and determined in
accordance with the law of the Commonwealth of Pennsylvania, exclusive of any
choice of law provisions thereof.


              IN WITNESS WHEREOF, the Company has caused the Plan to be executed
by its duly authorized officer and its corporate seal to be affixed hereto as of
the ____ day of _________ , 1997.



                                      AMERIGAS PROPANE, INC.,
                                      on behalf of
                                      AMERIGAS PARTNERS, L.P.
Attest:

_____________________________         By: ______________________________
Robert H. Knauss                          Lon R. Greenberg
Secretary                                 Chairman of the Board
                                          of Directors and Chief
                                          Executive Officer



                                      -11-