**Exhibit 10.5**

 

**SECONDAMENDED AND RESTATED FERRELLGAS UNIT OPTION PLAN**

 

SECTION 1.  PURPOSE

 

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

 

SECTION 2.  ADMINISTRATION

 

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

 

Subjectto the terms of the Plan and applicable law, the Committee shall have the solepower, authority and discretion to: (i) designate the Employees who are tobe Participants; (ii) determine the number of Options to be granted to anEmployee; (iii) determine the terms and conditions of any Option; (iv) interpret,construe and administer the Plan and any instrument or agreement relating to anOption granted under the Plan; (v) establish, amend, suspend, or waivesuch rules and regulations and appoint such agents as it shall deemappropriate for the proper administration of the Plan; (vi) make adetermination as to the right of any Person to receive payment of (or withrespect to) an Option; and (vii) make any other determinations and takeany other actions that the Committee deems necessary or desirable for theadministration of the Plan.

 

Exceptto the extent prohibited by applicable law or the applicable rules of astock exchange, the Committee may allocate all or any portion of itsresponsibilities and powers to any one or more of its members and may delegateall or any part of its responsibilities and powers to any person or personsselected by it.  Any such allocation ordelegation may be revoked by the Committee at any time.

 

TheCompany and the Partnership shall furnish the Committee with such data andinformation as it determines may be required for it to discharge itsduties.  The records of the Company andthe Partnership as to an employee’s or Participant’s employment (or otherprovision of services), termination of employment (or cessation of theprovision of services), leave of absence, reemployment and compensation shallbe conclusive on all Persons unless determined to be 

 

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

 

Unlessotherwise expressly provided in the Plan, all designations, determinations,interpretations, and other decisions with respect to the Plan or any Optiongranted thereunder shall be within the sole discretion of the Committee, may bemade 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 forgranting Options under the Plan shall be 1,350,000 Common Units, subject toadjustment 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 CommonUnits or other consideration, then the Common Units subject to such Optionshall again be available for granting Options under the Plan.  To comply with the rules of the New YorkStock Exchange, no single officer or director may acquire under the Plan morethan one percent (1%) of the 31,489,516 outstanding Common Units as of theAmendment Effective Date, for a limitation of no more than 314,895 CommonUnits.  In addition, all Common Unitsavailable for issuance under this Plan together with any Common Units availablefor issuance under any other employee benefit plan of the Partnership shall notexceed five percent (5%) of the Partnership’s 31,489,516 outstanding CommonUnits as of Amendment Effective Date, for a limitation of 1,574,475 CommonUnits.

 

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

 

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

 

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

 

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SECTION 4.  ELIGIBILITY

 

AnyEmployee who is not a member of the Committee shall be eligible to be aParticipant.  Grants may be made to thesame Employee on more than one occasion.

 

SECTION 5.  OPTIONS

 

5.1           OPTION TERMS.  TheCommittee is hereby authorized to grant Options to Employees with the followingterms and conditions and with such additional terms and conditions, which arenot inconsistent with the provisions of the Plan, as the Committee shalldetermine:

 

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

 

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

 

(iii)          TERM OF OPTIONS.  Theterm 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 aperiod 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 tobe an Employee, will remain the property of the Participant until such Optionsare exercised pursuant to the Plan or expire by their terms.  Options, to the extent not vested as of thedate the Participant ceases to be an Employee, shall be automatically canceledunexercised on such date.

 

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

 

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

 

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

 

5.2           OPTION CANCELLATION RIGHTS.  Notwithstanding anything in the Plan to thecontrary, the Committee shall have the discretion to cancel all or part of anyoutstanding Options at any time or times. Upon any such cancellation the Partnership shall pay to the Participantwith respect to each Common Unit that is subject to the canceled (or canceledportion of the) Option an amount in cash equal to the excess, if any, of (i) theFair 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 anytime with respect to any Common Units for which a grant has not theretoforebeen made.  The Board shall also have theright 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 madewhich would impair the rights of the Participant without the consent of suchParticipant.

 

SECTION 7.  VESTING UPON THE OCCURRENCE OF CERTAIN EVENTS

 

Ifa plan of complete dissolution of the Partnership is adopted or the unitholdersapprove an agreement for the sale or disposition by the Partnership (in onetransaction or a series of transactions) of all or substantially all thePartnership’s assets then upon such adoption or approval all or a portion (asdetermined by the Committee and set forth in the related Option Agreement) of aParticipant’s Options outstanding as of the date of such adoption or approvalshall be immediately and fully vested and exercisable and may be exercisedwithin one year from the date of such adoption or approval, but not thereafter;provided, however, that if, on any date during such year the Participantdesires to exercise those Options, such Participant cannot exercise suchOptions and sell all of the Common Units issuable upon such exercise withoutbeing subject to liability under Section 16(b) of the 1934 Act, thenthe Partnership shall pay to such Participant with respect to each Common Unitwhich would have been issuable upon the Participant’s exercise of the thoseOptions an amount in cash equal to the excess, if any, of (i) the FairMarket Value of a Common Unit (as of the date of such exercise) over (ii) theexercise price per Common Unit of such Options. The remaining unvested and/or unexercisable Options shall be immediatelycancelled 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 thePlan.  The terms and conditions ofOptions need not be the same with respect to each Participant.

 

8.2           WITHHOLDING. The Partnership shall (i) withhold fromany transfer made with respect to any Option cancellation or exercise under thePlan 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 thePartnership to satisfy all obligations for the payment of such taxes.

 

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

 

8.4           NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS.  Nothing contained in the Plan shall preventthe Partnership or the Company from adopting or continuing in effect other oradditional compensation arrangements and such arrangements may be eithergenerally 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 Participantthe right to be retained in the employ of the Company or the Partnership.  Further, the Company may at any time dismissa Participant from employment, free from any liability or any claim under thePlan unless otherwise expressly provided in the Plan or in any OptionAgreement.

 

8.6           GOVERNING LAW.  Thevalidity, construction and effect of the Plan and any rules andregulations relating to the Plan shall be determined in accordance withapplicable Federal law, and to the extent not preempted thereby, with the lawsof the State of Missouri.

 

8.7           SEVERABILITY.  Ifany provision of the Plan or any Option is or becomes or is deemed to beinvalid, illegal or unenforceable in any jurisdiction, or as to any person orOption, or would disqualify the Plan or any Option under any law deemedapplicable by the Committee, such provision shall be construed or deemed amendedto conform to applicable laws.  If itcannot be so construed or deemed amended without, in the determination of theCommittee, materially altering the intent of the Plan or the Option, suchprovision shall be stricken as to such jurisdiction, Person or Option and theremainder of the Plan and any such Option shall remain in full force andeffect.

 

8.8           NO TRUST OR FUND CREATED. Neither the Plan nor any Option shall create or be construed to create atrust or separate fund of any kind or a fiduciary relationship between theCompany, the Partnership or any Affiliate and a Participant or any otherPerson.  To the extent that any Personacquires a right to receive payments from the Company, the Partnership or any Affiliatepursuant to an Option, such right shall be no greater than the right of anyunsecured 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 orany 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, terminatedor otherwise eliminated.

 

8.10         HEADINGS.  Headingsare given to the Sections and subsections of the Plan solely as a convenienceto facilitate reference.  Such headingsshall not be deemed in any way material or relevant to the construction orinterpretation of the Plan or any provision thereof.

 

8.11         NO LIMITATION.  Theexistence of the Plan and the grants of Options made hereunder shall not affectin any way the right or power of the Board, the Company in its capacity as thegeneral partner of the Partnership or unitholders of the Partnership to make orauthorize any adjustment, recapitalization, reorganization or other change inthe capital structure or business of the Partnership or any Affiliate, anymerger or consolidation of the Partnership or any Affiliate, any issue of debtor equity securities ahead of or affecting Units or the rights thereof orpertaining thereto, the dissolution or liquidation of the Partnership or anyAffiliate or any sale or transfer of all or any part of Partnership or any Affiliate’sassets or business, or any other corporate act or proceeding.

 

8.12         RULE 16b-3.  It isintended that the Plan and any Option granted to a Person subject to Section 16of the Securities Exchange Act of 1934, as amended, meet all of the requirementsof Rule 16b-3.  If any provision ofthe Plan or any such Option would disqualify the Plan or such Option under, orwould otherwise not comply with, Rule 16b-3, such provision or Optionshall 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 havebeen 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 securitieslaw purposes) of the Company or Partnership, such Common Units have beenregistered under the 1933 Act for resale by such Participant), or thePartnership has determined that an exemption from registration is available,the Partnership may require prior to and as a condition of the issuance of anyCommon Units that the person exercising an Option hereunder furnish thePartnership with a written representation in a form prescribed by the Committeeto the effect that such person is acquiring said Common Units solely with aview to investment for his or her own account and not with a view to the resaleor distribution of all or any part thereof, and that such person will notdispose of any of such Common Units otherwise than in accordance with the provisionsof Rule 144 under the 1933 Act unless and until either the Common Unitsare 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 contrarynotwithstanding, the Partnership shall not be obligated to sell or issue anyCommon Units under the Plan unless and until the Partnership is satisfied thatsuch sale or issuance complies with (i) all applicable requirements of theexchange on which the Units are traded (or the governing body of the principalmarket in which such Common Units are traded, if such Common Units are not thenlisted on an exchange), (ii) all applicable provisions of the 1933 Act,and (iii) all other laws or regulations by which the Partnership is boundor 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 thePartnership under securities laws and it shall comply with such laws andobligations of the Partnership relating thereto as if they were directlyapplicable to the Company.

 

SECTION 9.  TERM OF THE PLAN

 

NoOption shall be granted after the termination of the Plan.  However, unless otherwise expressly providedin the Plan or in an applicable Option Agreement, any Option theretoforegranted may extend beyond such date, and any authority of the Committee toamend, alter, suspend, discontinue or terminate any such Option, or to waiveany conditions or rights under any such Option, and the authority of the Boardto cancel the Option pursuant to Section 5.2, shall extend beyond suchdate.

 

SECTION 10.  DEFINITIONS

 

Asused 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) anyentity in which the Partnership owns, directly or indirectly, more than 50% ofthe beneficial interests.

 

(b)                                 “Code” shallmean 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 acommon unit as set forth in the Third Amended and Restated Agreement of LimitedPartnership of Ferrellgas Partners, L.P., dated as of April 6, 2001, asamended from time to time.

 

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

 

(e)                                  “Fair MarketValue” shall mean, at any specified time, with respect to a Common Unit, an amountequal to the average closing price of a Common Unit on the New York StockExchange 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” shallmean 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” shallmean any individual, corporation, partnership, association, joint-stockcompany, trust, unincorporated organization or government or politicalsubdivision thereof.

 

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

 

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(l)                                     “SubordinatedUnit” shall mean a limited partnership interest in the Partnership representedby a subordinated unit as set forth in the Agreement of Limited Partnership ofFerrellgas Partners, L.P., dated as of July 5, 1994.

 

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