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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 ---------------

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2003

                         Commission file number 1-11071

                                 UGI CORPORATION

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          Pennsylvania                                   23-2668356
(STATE OR OTHER JURISDICTION OF             (I.R.S. EMPLOYER IDENTIFICATION NO.)
 INCORPORATION OR ORGANIZATION)

                 460 North Gulph Road, King of Prussia, PA 19406
                    (ADDRESS OF PRINCIPAL OFFICES) (ZIP CODE)

                                 (610) 337-1000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

     TITLE OF CLASS                                 NAME OF EACH EXCHANGE
                                                      ON WHICH REGISTERED

Common Stock, without par value                New York Stock Exchange, Inc.
                                               Philadelphia Stock Exchange, Inc.

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:      None

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ].

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

The aggregate market value of UGI Corporation Common Stock held by nonaffiliates
of the registrant on March 31, 2003 was $1,248,875,250.

At December 12, 2003 there were 42,809,144 shares of UGI Corporation Common
Stock issued and outstanding.

Documents Incorporated By Reference: Portions of the Annual Report to
Shareholders for the year ended September 30, 2003 are incorporated by reference
into Parts I and II of this Form 10-K. Portions of the Proxy Statement for the
Annual Meeting of Shareholders to be held on February 24, 2004 are incorporated
by reference into Part III of this Form 10-K.

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]

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                        TABLE OF CONTENTS

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PART I:              BUSINESS......................................................................    1

   Items 1 And 2.    Business and Properties.......................................................    1

                     AmeriGas Propane Business.....................................................    2

                     Utility and Electric Operations...............................................    9

                     UGI Enterprises, Inc. ........................................................   18

                            -        Domestic Businesses...........................................   18

                            -        International Businesses......................................   19

                     Business Segment Information..................................................   20

                     Employees.....................................................................   21

   Item 3.           Legal Proceedings.............................................................   22

   Item 4.           Submission of Matters to a Vote of Security Holders...........................   25

PART II:             SECURITIES AND FINANCIAL INFORMATION..........................................   25

   Item 5.           Market for Registrant's Common Equity and Related Stockholder Matters.........   25

   Item 6.           Selected Financial Data.......................................................   27

   Item 7.           Management's Discussion and Analysis of Financial Condition and Results of
                     Operations....................................................................   28

   Item 7A.          Quantitative and Qualitative Disclosures About Market Risk....................   28

   Item 8.           Financial Statements and Supplementary Data...................................   28

   Item 9.           Changes in and Disagreements with Accountants on Accounting and
                     Financial Disclosure..........................................................   28

   Item 9A.          Controls and Procedures.......................................................   28

                                      (i)

                                                                                                     Page
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PART III:            UGI MANAGEMENT AND SECURITY HOLDERS...........................................   30

   Item 10.          Directors and Executive Officers of Registrant................................   30

   Item 11.          Executive Compensation........................................................   30

   Item 12.          Security Ownership of Certain Beneficial Owners and Management
                     and Related Stockholder Matters...............................................   30

   Item 13.          Certain Relationships and Related Transactions................................   30

   Item 14.          Principal Accountant Fees and Services........................................   30

PART IV:             ADDITIONAL EXHIBITS, SCHEDULES AND REPORTS....................................   34

   Item 15.          Exhibits, Financial Statement Schedules, and Reports on Form 8-K..............   34

                     Signatures....................................................................   44

Index to Financial Statements and Financial Statement Schedules....................................  F-2

                                      (ii)

PART I: BUSINESS

ITEMS 1 AND 2. BUSINESS AND PROPERTIES

         UGI Corporation is a distributor and marketer of energy products and
services. We have two primary business lines: we are a domestic and
international distributor of propane, and we are also a provider of natural gas,
electricity and related services through regulated distribution utilities as
well as through non-utility electric generation, commodity marketing and heating
and cooling installation and service businesses.

         We conduct our domestic propane distribution business through AmeriGas
Partners, L.P., ("AmeriGas Partners" or the "Partnership"), which is the
nation's largest retail propane distributor. AmeriGas Partners conducts its
business through its direct and indirect subsidiaries, AmeriGas Propane, L.P.
("AmeriGas OLP") and AmeriGas Eagle Propane, L.P. ("Eagle OLP," and together
with AmeriGas OLP, the "Operating Partnership"). Eagle OLP has a less-than-one
percent minority limited partner. The Partnership's sole general partner is our
subsidiary, AmeriGas Propane, Inc. ("AmeriGas Propane" or the "General
Partner"). The common units of AmeriGas Partners represent limited partner
interests in a Delaware limited partnership; they trade on the New York Stock
Exchange under the symbol "APU." We have an effective 48% ownership interest in
the Partnership; the remaining interest is publicly held. See Note 1 to the
Company's Consolidated Financial Statements.

         Our subsidiary UGI Utilities, Inc. ("UGI Utilities," or "Utilities")
owns and operates a natural gas distribution utility ("Gas Utility") and an
electric distribution utility ("Electric Utility") in eastern Pennsylvania. It
serves approximately 292,000 natural gas customers and approximately 61,600
electric customers. Electric Utility, together with the electric generating
interests of UGI Development Company described below, is referred to herein as
"Electric Operations."

         UGI Enterprises, Inc. ("Enterprises") conducts domestic and
international energy-related businesses through subsidiaries. UGI Energy
Services, Inc. ("ESI") markets natural gas, oil and electricity in the eastern
region of the United States under the trade name GASMARK(R). ESI also owns and
operates liquefied natural gas and propane peak-shaving plants. UGI Development
Company ("UGID"), a subsidiary of ESI, owns and operates interests in
Pennsylvania-based electric generation assets. UGI HVAC Enterprises, Inc.
operates a heating and cooling installation and service business in the
Mid-Atlantic region.

         Enterprises conducts its international propane distribution business
through wholly-owned subsidiaries and joint ventures. It owns FLAGA GmbH, the
largest retail propane distributor in Austria and one of the largest suppliers
in the Czech Republic and Slovakia. In March 2001, Enterprises acquired an
approximate 20% interest in Elf Antargaz, S.A. ("Antargaz"), one of the largest
distributors of propane in France. Enterprises also participates in a propane
distribution joint venture in China.

         UGI was incorporated in Pennsylvania in 1991. UGI Corporation is not
subject to regulation by the Pennsylvania Public Utility Commission ("PUC"). It
is also exempt from registration as a holding company and not otherwise subject
to the Public Utility Holding

Company Act of 1935, except for Section 9(a)(2), which regulates the acquisition
of voting securities of an electric or gas utility company. Our executive
offices are located at 460 North Gulph Road, King of Prussia, Pennsylvania
19406, and our telephone number is (610) 337-1000. In this report, the terms
"Company" and "UGI," as well as the terms "our," "we," and "its," are sometimes
used as abbreviated references to UGI Corporation or, collectively, UGI
Corporation and its consolidated subsidiaries. Similarly, the terms "AmeriGas
Partners" and the "Partnership" are sometimes used as abbreviated references to
AmeriGas Partners, L.P. or, collectively, AmeriGas Partners, L.P. and its
subsidiaries, including the Operating Partnership.

BUSINESS STRATEGY

         Since 1999, our strategic direction has focused on growing our existing
natural gas, electric and propane businesses while seeking additional related
and complementary growth opportunities. We are employing our core competencies
from our existing businesses, as well as using our national scope, international
experience, extensive asset base and access to customers, to accelerate growth
in related and complementary businesses, both domestic and international. During
fiscal year 2003, we completed a number of transactions in pursuit of this
strategy.

                            AMERIGAS PROPANE BUSINESS

         Our domestic propane distribution business is conducted through
AmeriGas Partners. Upon completion of the Columbia Propane acquisition described
below, we became the largest retail propane distributor in the United States,
based on retail volume. As of September 30, 2003, the Partnership operated from
approximately 650 district locations in 46 states. AmeriGas Propane manages the
Partnership. Although our consolidated financial statements include 100% of the
Partnership's revenues, assets and liabilities, our net income reflects only our
48% effective interest in the income or loss of the Partnership, due to the
publicly-owned limited partner interest. See Note 1 to the Company's
Consolidated Financial Statements.

         On August 21, 2001, AmeriGas OLP acquired the propane distribution
businesses of Columbia Energy Group. These businesses were conducted through
Columbia Propane Corporation and its approximate 99% owned subsidiary, Columbia
Propane, L.P. Prior to the acquisition, Columbia Propane, based in Richmond,
Virginia, was the seventh largest retail propane marketer in the United States,
selling approximately 308 million gallons annually from 186 locations in 29
states. Following the acquisition, Columbia Propane, L.P. changed its name to
AmeriGas Eagle Propane, L.P. and Columbia Propane Corporation changed its name
to AmeriGas Eagle Propane, Inc. Both entities do business under the trade name
AmeriGas(R). AmeriGas OLP and AmeriGas Eagle Holding, Inc. own more than 99% of
Eagle OLP and an unaffiliated third party retains the remaining interest.

         On October 1, 2003, AmeriGas OLP acquired substantially all of the
retail propane distribution assets and business of Horizon Propane LLC ("Horizon
Propane") for approximately $31 million. During its 2003 fiscal year, Horizon
Propane sold over 30 million gallons of propane from ninety locations in twelve
states.

                                       2

GENERAL INDUSTRY INFORMATION

         Propane is separated from crude oil during the refining process and
also extracted from natural gas or oil wellhead gas at processing plants.
Propane is normally transported and stored in a liquid state under moderate
pressure or refrigeration for economy and ease of handling in shipping and
distribution. When the pressure is released or the temperature is increased, it
is usable as a flammable gas. Propane is colorless and odorless; an odorant is
added to allow its detection. Propane is clean burning, producing negligible
amounts of pollutants when properly consumed.

         The primary customers for propane are residential, commercial,
agricultural, motor fuel and industrial users to whom natural gas is not readily
available. Propane is typically more expensive than natural gas, competitive
with fuel oil when operating efficiencies are taken into account and, in most
areas, cheaper than electricity on an equivalent energy basis.

PRODUCTS, SERVICES AND MARKETING

         As of September 30, 2003, the Partnership distributed propane to
approximately 1.3 million customers from approximately 650 district locations in
46 states. The Partnership also sells, installs and services propane appliances,
including heating systems. In certain markets, the Partnership also installs and
services propane fuel systems for motor vehicles. Typically, district locations
are found in suburban and rural areas where natural gas is not available.
Districts generally consist of an office, appliance showroom, warehouse and
service facilities, with one or more 18,000 to 30,000 gallon storage tanks on
the premises. As part of its overall transportation and distribution
infrastructure, the Partnership operates as an interstate carrier in 48 states
throughout the United States. It is also licensed as a carrier in Canada.

         The Partnership sells propane primarily to five markets: residential,
commercial/industrial, motor fuel, agricultural and wholesale. Approximately 84%
of the Partnership's fiscal year 2003 sales (based on gallons sold) were to
retail accounts and approximately 16% were to wholesale customers. Sales to
residential customers in fiscal 2003 represented approximately 42% of retail
gallons sold; industrial/commercial customers 34%; motor fuel customers 11%; and
agricultural customers 7%. Transport gallons, which are large-scale deliveries
to retail customers other than residential, accounted for 6% of 2003 retail
gallons. No single customer accounts for 5% or more of the Partnership's
consolidated revenues.

         In the residential market, which includes both conventional and
manufactured housing, propane is used primarily for home heating, water heating
and cooking purposes. Commercial users, which include motels, hotels,
restaurants and retail stores, generally use propane for the same purposes as
residential customers. The Partnership continues to expand its PPX Prefilled
Propane Xchange program ("PPX(R)"). At September 30, 2003, PPX was available at
approximately 20,000 retail locations throughout the United States. Sales of our
PPX grill cylinders to retailers are included in the commercial/industrial
market. The PPX program enables consumers to exchange their empty 20-pound
propane grill cylinders for filled cylinders at various retail locations such as
home centers, mass merchandisers and grocery and convenience stores. During
fiscal year 2002, the Partnership introduced PPX Plus. PPX Plus cylinders are

                                       3

equipped with a special overfill protection device ("OPD") required by the
National Fire Protection Association ("NFPA").

         Industrial customers use propane to fire furnaces, as a cutting gas and
in other process applications. Other industrial customers are large-scale
heating accounts and local gas utility customers who use propane as a
supplemental fuel to meet peak load deliverability requirements. As a motor
fuel, propane is burned in internal combustion engines that power over-the-road
vehicles, forklifts and stationary engines. Agricultural uses include tobacco
curing, chicken brooding and crop drying. In its wholesale operations, the
Partnership principally sells propane to large industrial end-users and other
propane distributors.

         Retail deliveries of propane are usually made to customers by means of
bobtail and rack trucks. Propane is pumped from the bobtail truck, which
generally holds 2,400 to 3,000 gallons of propane, into a stationary storage
tank on the customer's premises. The Partnership owns most of these storage
tanks and leases them to its customers. The capacity of these tanks ranges from
approximately 120 gallons to approximately 1,200 gallons.

         The Partnership also delivers propane to retail customers in portable
cylinders with capacities of 4 to 24 gallons. Some of these deliveries are made
to the customer's location, where empty cylinders are either picked up for
replenishment or filled in place.

PROPANE SUPPLY AND STORAGE

         The Partnership has over 200 domestic and international sources of
supply, including the spot market. Supplies of propane from the Partnership's
sources historically have been readily available. During the year ended
September 30, 2003, over 90% of the Partnership's propane supply was purchased
under supply agreements with terms of 1 to 3 years. Approximately 79% of the
volumes purchased under those agreements were from 10 suppliers, including BP
Products North America Inc. and its affiliate BP Marketing Inc. (approximately
20%); Dynegy Midstream Services (approximately 18%); and Enterprise Products
Operating LP and its affiliate Canadian Enterprises Gas Products Ltd.
(approximately 15%). The availability of propane supply is dependent upon, among
other things, the severity of winter weather and the price and availability of
competing fuels such as natural gas and crude oil. Although no assurance can be
given that supplies of propane will be readily available in the future,
management currently expects to be able to secure adequate supplies during
fiscal year 2004. If supply from major sources were interrupted, however, the
cost of procuring replacement supplies and transporting those supplies from
alternative locations might be materially higher and, at least on a short-term
basis, margins could be affected. Aside from BP, Dynegy and Enterprise Products,
no single supplier provided more than 10% of the Partnership's total propane
supply in fiscal year 2003. In certain market areas, however, some suppliers
provide 70% to 80% of the Partnership's requirements. Disruptions in supply in
these areas could also have an adverse impact on the Partnership's margins.

         During fiscal year 2003, 92% of the Partnership's supply contracts
provided for pricing based upon posted prices at the time of delivery or index
formulas based on the current prices established at major storage points such as
Mont Belvieu, Texas, or Conway, Kansas. In addition, some agreements provided
maximum and minimum seasonal purchase volume

                                       4

guidelines. The percentage of contract purchases, and the amount of supply
contracted for at fixed prices, will vary from year to year as determined by the
General Partner. The Partnership uses a number of interstate pipelines, as well
as railroad tank cars, delivery trucks and barges, to transport propane from
suppliers to storage and distribution facilities. The Partnership stores propane
at facilities in Arizona, Pennsylvania, Virginia and several other states.

         Because the Partnership's profitability is sensitive to changes in
wholesale propane costs, the Partnership generally seeks to pass on increases in
the cost of propane to customers. There is no assurance, however, that the
Partnership will always be able to pass on product cost increases fully,
particularly when product costs rise rapidly. Product cost increases can be
triggered by periods of severe cold weather, supply interruptions, or other
unforeseen events. The General Partner has adopted supply acquisition and
product price risk management practices to reduce the effect of price volatility
on product costs. These practices currently include the use of summer storage,
forward purchases and derivative commodity instruments such as options and
propane price swaps. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Market Risk Disclosures."

         The following graph shows the average prices of propane on the propane
spot market during the last five fiscal years at Mont Belvieu, Texas and Conway,
Kansas, two major storage areas.

                       AVERAGE PROPANE SPOT MARKET PRICES

[AVERAGE PROPANE SPOT MARKET PRICES GRAPH]

                 Mont Belvieu       Conway
                              
Oct-96              51.57            51.53
Nov-96              58.05            63.41
Dec-96              61.04            84.29
Jan-97              47.45            63.39
Feb-97              38.71            39.02
Mar-97              38.50            37.26
Apr-97              34.88            35.26
May-97              35.31            36.48
Jun-97              34.43            35.86
Jul-97              34.91            34.63
Aug-97              37.03            36.53
Sep-97              38.68            37.95
Oct-97              39.83            37.32
Nov-97              35.95            35.00
Dec-97              33.57            31.36
Jan-98              30.07            28.21
Feb-98              29.79            28.32
Mar-98              27.39            27.84
Apr-98              29.06            29.47
May-98              27.42            27.82
Jun-98              24.42            24.84
Jul-98              24.54            24.55
Aug-98              24.12            23.87
Sep-98              24.83            24.04
Oct-98              25.72            24.57
Nov-98              24.79            23.20
Dec-98              20.89            18.72
Jan-99              21.75            19.61
Feb-99              22.43            20.58
Mar-99              24.10            23.40
Apr-99              28.26            27.58
May-99              28.31            26.88
Jun-99              30.95            28.68
Jul-99              37.26            34.62
Aug-99              40.51            37.56
Sep-99              43.18            42.40
Oct-99              45.46            43.39
Nov-99              43.44            38.78
Dec-99              42.83            35.10
Jan-00              56.11            42.32
Feb-00              59.72            47.26
Mar-00              51.13            47.65
Apr-00              46.88            43.64
May-00              51.31            50.81
Jun-00              55.47            56.22
Jul-00              54.88            56.29
Aug-00              58.54            63.52
Sep-00              64.21            70.95
Oct-00              61.82            64.05
Nov-00              60.71            60.45
Dec-00              77.63            79.75
Jan-01              77.27            83.03
Feb-01              59.39            63.03
Mar-01              54.94            57.12
Apr-01              54.37            60.26
May-01              51.20            56.90
Jun-01              43.17            47.70
Jul-01              38.87            43.27
Aug-01              41.54            45.71
Sep-01              41.67            46.53
Oct-01              39.48            44.19
Nov-01              33.04            35.19
Dec-01              30.43            30.34
Jan-02              29.05            26.60
Feb-02              31.20            27.92
Mar-02              37.95            35.93
Apr-02              41.52            40.07
May-02              40.69            38.09
Jun-02              37.51            35.25
Jul-02              37.19            35.47
Aug-02              41.49            41.53
Sep-02              47.17            45.93
Oct-02              47.95            47.12
Nov-02              47.26            48.01
Dec-02              52.40            52.32
Jan-03              60.38            57.70
Feb-03              77.30            73.03
Mar-03              62.77            57.09
Apr-03              50.42            50.28
May-03              54.09            55.41
Jun-03              55.98            59.71
Jul-03              53.01            58.90
Aug-03              54.84            63.63
Sep-03              52.00            59.44

                                       5

COMPETITION

         Propane competes with other sources of energy, some of which are less
costly for equivalent energy value. Propane distributors compete for customers
against suppliers of electricity, fuel oil and natural gas, principally on the
basis of price, service, availability and portability. Electricity is a major
competitor of propane, but propane generally enjoys a competitive price
advantage over electricity for space heating, water heating and cooking. Fuel
oil is also a major competitor of propane and is generally less expensive than
propane. Operating efficiencies and other factors such as air quality and
environmental advantages, however, generally make propane competitive with fuel
oil as a heating source. Furnaces and appliances that burn propane will not
operate on fuel oil, and vice versa, and, therefore, a conversion from one fuel
to the other requires the installation of new equipment. Propane serves as an
alternative to natural gas in rural and suburban areas where natural gas is
unavailable or portability of product is required. Natural gas is generally a
less expensive source of energy than propane, although in areas where natural
gas is available, propane is used for certain industrial and commercial
applications and as a standby fuel during interruptions in natural gas service.
The gradual expansion of the nation's natural gas distribution systems has
resulted in the availability of natural gas in some areas that previously
depended upon propane. However, natural gas pipelines are not present in many
regions of the country where propane is sold for heating and cooking purposes.

         In the motor fuel market, propane competes with gasoline and diesel
fuel as well as electric batteries and fuel cells. Wholesale propane
distribution is a highly competitive, low margin business. Propane sales to
other retail distributors and large-volume, direct-shipment industrial end-users
are price sensitive and frequently involve a competitive bidding process.

         The retail propane industry is mature, with only modest growth in total
demand for the product foreseen. Therefore, the Partnership's ability to grow
within the industry is dependent on its ability to acquire other retail
distributors and to achieve internal growth, which includes expansion of the
PPX(R) program (through which consumers can exchange an empty propane grill
cylinder for a filled one) and strategic accounts program (formerly called
"national accounts," through which the Partnership encourages large,
multi-location propane users to enter into a supply agreement with it rather
than with many small suppliers), as well as the success of its sales and
marketing programs designed to attract and retain customers. The failure of the
Partnership to retain and grow its customer base would have an adverse effect on
its results.

         The domestic propane retail distribution business is highly
competitive. The Partnership competes in this business with other large propane
marketers, including other full-service marketers, and thousands of small
independent operators. In recent years, some rural electric cooperatives and
fuel oil distributors have expanded their businesses to include propane
distribution and the Partnership competes with them as well. The ability to
compete effectively depends on providing high quality customer service,
maintaining competitive retail prices and controlling operating expenses.

         Based on the most recent annual survey by the American Petroleum
Institute, the 2002 domestic retail market for propane (annual sales for other
than chemical uses) was approximately 11.9 billion gallons and, based on LP-GAS
magazine rankings, 2002 sales volume of the ten

                                       6

largest propane companies (including AmeriGas Partners) represented
approximately 32% of domestic retail sales. Management believes the
Partnership's 2003 retail volume represents 9% of the domestic retail market.

PROPERTIES

         As of September 30, 2003, the Partnership owned approximately 87% of
its district locations. In addition, the Partnership subleases three one-million
barrel underground storage caverns in Arizona to store propane and butane for
itself and third parties. The Partnership also owns a 600,000 barrel
refrigerated, above-ground storage facility located on leased property in
California, which could be used in connection with waterborne imports or exports
of propane or butane. The California facility, which the Partnership operates,
is currently leased to several refiners for the storage of butane. In Virginia,
the Partnership has a 50% indirect equity interest in a 476,000 barrel
refrigerated, above-ground import terminal.

         The transportation of propane requires specialized equipment. The
trucks and railroad tank cars utilized for this purpose carry specialized steel
tanks that maintain the propane in a liquefied state. As of September 30, 2003,
the Partnership operated a transportation fleet with the following assets:

APPROXIMATE QUANTITY & EQUIPMENT TYPE         % OWNED             % LEASED
                                                            
      400   Trailers                             90                   10
      200   Tractors                             45                   55
      150   Railroad tank cars                    0                  100
    2,500   Bobtail trucks                       20                   80
      350   Rack trucks                          25                   75
    2,200   Service and delivery trucks          25                   75

Other assets owned at September 30, 2003 included approximately 900,000
stationary storage tanks with typical capacities of 121 to 2,000 gallons and
approximately 2.4 million portable propane cylinders with typical capacities of
1 to 120 gallons. The Partnership also owned approximately 6,100 large volume
tanks which are used for its own storage requirements. AmeriGas OLP has debt
secured by liens and mortgages on its real and personal property. AmeriGas OLP
owns approximately 67% of the Partnership's property, plant and equipment.

TRADE NAMES, TRADE AND SERVICE MARKS

         The Partnership markets propane principally under the "AmeriGas(R),"
"America's Propane Company(R)" and "PPX Prefilled Propane Xchange(R)" trade
names and related service marks. UGI owns, directly or indirectly, all the
right, title and interest in the "AmeriGas" and related trade and service marks.
The General Partner owns all right, title and interest in the "America's Propane
Company" and "PPX Prefilled Propane Xchange" trade names and related service
marks. The Partnership has an exclusive (except for use by UGI, AmeriGas, Inc.
and the General Partner), royalty-free license to use these names and trade and
service marks. UGI and

                                       7

the General Partner each have the option to terminate its respective license
agreement (on 12 months prior notice in the case of UGI), without penalty, if
the General Partner is removed as general partner of the Partnership other than
for cause. If the General Partner ceases to serve as the general partner of the
Partnership for cause, the General Partner has the option to terminate its
license agreement upon payment of a fee equal to the fair market value of the
licensed trade names. UGI has a similar termination option, however, UGI must
provide 12 months prior notice in addition to paying the fee.

SEASONALITY

         Because many customers use propane for heating purposes, the
Partnership's retail sales volume is seasonal, with approximately 59% of the
Partnership's fiscal year 2003 retail sales volume occurring during the
five-month peak heating season from November through March. As a result of this
seasonality, sales are concentrated in the Partnership's first and second fiscal
quarters (October 1 through March 31). Cash receipts are greatest during the
second and third fiscal quarters when customers pay for propane purchased during
the winter heating season.

         Sales volume for the Partnership traditionally fluctuates from
year-to-year in response to variations in weather, prices, competition, customer
mix and other factors, such as conservation efforts and general economic
conditions. For historical information on national weather statistics, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

GOVERNMENT REGULATION

         The Partnership is subject to various federal, state and local
environmental, safety and transportation laws and regulations governing the
storage, distribution and transportation of propane. These laws include, among
others, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA" or, the
"Superfund Law"), the Clean Air Act, the Occupational Safety and Health Act, the
Homeland Security Act of 2002, the Emergency Planning and Community Right to
Know Act, the Clean Water Act and comparable state statutes. CERCLA imposes
joint and several liability on certain classes of persons considered to have
contributed to the release or threatened release of a "hazardous substance" into
the environment without regard to fault or the legality of the original conduct.
Propane is not a hazardous substance within the meaning of federal and state
environmental laws. However, the Partnership owns and operates real property
where such hazardous substances may exist. See Notes 1 and 12 to the Company's
Consolidated Financial Statements.

         All states in which the Partnership operates have adopted fire safety
codes that regulate the storage and distribution of propane. In some states
these laws are administered by state agencies, and in others they are
administered on a municipal level. The Partnership conducts training programs to
help ensure that its operations are in compliance with applicable governmental
regulations. With respect to general operations, NFPA Pamphlets No. 54 and No.
58, which establish a set of rules and procedures governing the safe handling of
propane, or comparable regulations, have been adopted as the industry standard
in a majority of the states in which the Partnership operates. Effective April
1, 2002, NFPA Pamphlet No. 58 requires portable propane cylinders to be equipped
with an OPD. Although NFPA Pamphlet No. 58 has

                                       8

not yet been adopted in all states, the Partnership complies with the OPD
requirements throughout the United States. Effective July 2004, NFPA Pamphlet
No. 58 requires stationary cylinders that are filled in place to be re-qualified
periodically. The Partnership maintains various permits under environmental laws
that are necessary to operate certain of its facilities, some of which may be
material to the operations of the Partnership. Management believes that the
procedures currently in effect at all of its facilities for the handling,
storage and distribution of propane are consistent with industry standards and
are in compliance in all material respects with applicable environmental, health
and safety laws.

         With respect to the transportation of propane by truck, the Partnership
is subject to regulations promulgated under the Federal Motor Carrier Safety Act
and the Homeland Security Act of 2002. These regulations cover the security of
and transportation of hazardous materials and are administered by the United
States Department of Transportation ("DOT"). The Natural Gas Safety Act of 1968
required the DOT to develop and enforce minimum safety regulations for the
transportation of gases by pipeline. The DOT's pipeline safety code applies to,
among other things, a propane gas system which supplies 10 or more customers
from a single source and a propane gas system any portion of which is located in
a public place. The code requires operators of all gas systems to provide
training and written instructions for employees, establish written procedures to
minimize the hazards resulting from gas pipeline emergencies, and keep records
of inspections and testing.

EMPLOYEES

         The Partnership does not directly employ any persons responsible for
managing or operating the Partnership. The General Partner provides these
services and is reimbursed for its direct and indirect costs and expenses,
including all compensation and benefit costs. At September 30, 2003, the General
Partner had approximately 6,200 employees, including approximately 400 temporary
and part-time employees, working on behalf of the Partnership. UGI also performs
certain financial and administrative services for the General Partner on behalf
of the Partnership and is reimbursed by the Partnership for its direct and
indirect costs and expenses.

                         UTILITY AND ELECTRIC OPERATIONS

         Our utility business is conducted by UGI Utilities, Inc., a wholly
owned subsidiary. Utilities operates its business through two divisions, the gas
division ("Gas Utility") and the electric division ("Electric Utility"). Until
June 2003, Utilities also owned interests in electric generating facilities in
Pennsylvania, through its subsidiary, UGID. In June 2003, ownership of UGID was
transferred to ESI. UGID's electric generation operations, together with
Electric Utility, are referred to as "Electric Operations." All of these
businesses are described below.

                                       9

GAS UTILITY

NATURAL GAS CHOICE AND COMPETITION ACT

         On June 22, 1999, Pennsylvania's Natural Gas Choice and Competition Act
("Gas Competition Act") was signed into law. The purpose of the Gas Competition
Act was to provide all natural gas consumers in Pennsylvania with the ability to
purchase their gas supplies from the supplier of their choice. Under the Gas
Competition Act, local distribution companies ("LDCs") like Gas Utility may
continue to sell gas to customers, and such sales of gas, as well as
distribution services provided by LDCs, continue to be subject to price
regulation by the PUC.

         Generally, Pennsylvania LDCs will serve as the supplier of last resort
for all residential and small commercial and industrial customers unless the PUC
approves another supplier of last resort. The Gas Competition Act requires
energy marketers seeking to serve customers of LDCs to accept assignment of a
portion of the LDC's interstate pipeline capacity and storage contracts at
contract rates, thus avoiding the creation of stranded costs.

         On October 1, 1999, Gas Utility filed its restructuring plan with the
PUC pursuant to the Gas Competition Act. On June 29, 2000, the PUC entered its
order ("Gas Restructuring Order") approving Gas Utility's restructuring plan
substantially as filed. Gas Utility designed its restructuring plan to ensure
reliability of gas supply deliveries to Gas Utility on behalf of residential and
small commercial and industrial customers. In addition, the plan changed Gas
Utility's base rates for firm customers. It also changed the calculation of
purchased gas cost rates. See "Utility Regulation and Rates."

         Since October 1, 2000, all of Gas Utility's customers have had the
option to purchase their gas supplies from an alternative gas supplier. Large
commercial and industrial customers of Gas Utility have been able to purchase
their gas from other suppliers since 1982. During fiscal year 2003, two
third-party suppliers qualified to serve residential or small commercial and
industrial customers in Gas Utility's service territory. Together, they are
serving approximately 4,500 customers. Management believes none of the Gas
Competition Act, the Gas Restructuring Order, or commodity sales to residential
and small commercial and industrial customers by third-party suppliers will have
a material adverse impact on the Company's financial condition or results of
operations.

SERVICE AREA; REVENUE ANALYSIS

         Gas Utility distributes natural gas to approximately 292,000 customers
in portions of 15 eastern and southeastern Pennsylvania counties through its
distribution system of approximately 4,800 miles of gas mains. The service area
consists of approximately 3,000 square miles and includes the cities of
Allentown, Bethlehem, Easton, Harrisburg, Hazleton, Lancaster, Lebanon and
Reading, Pennsylvania. Located in Gas Utility's service area are major
production centers for basic industries such as specialty metals, aluminum and
glass.

         System throughput (the total volume of gas sold to or transported for
customers within Gas Utility's distribution system) for the 2003 fiscal year was
approximately 83.8 billion cubic feet ("bcf"). System sales of gas accounted for
approximately 43% of system throughput, while gas transported for residential,
commercial and industrial customers (who bought their gas from

                                       10

others) accounted for approximately 57% of system throughput. Based on industry
data for 2001, residential customers account for approximately 34% of total
system throughput by LDCs in the United States. By contrast, for the 2003 fiscal
year, Gas Utility's residential customers represented 26% of its total system
throughput.

SOURCES OF SUPPLY AND PIPELINE CAPACITY

         Gas Utility meets its service requirements by utilizing a diverse mix
of natural gas purchase contracts with producers and marketers, and storage and
transportation service contracts. These arrangements enable Gas Utility to
purchase gas from Gulf Coast, Mid-Continent, Appalachian and Canadian sources.
For the transportation and storage function, Utilities has agreements with a
number of pipeline companies, including Texas Eastern Transmission Corporation,
Columbia Gas Transmission Corporation and Transcontinental Gas Pipeline
Corporation.

GAS SUPPLY CONTRACTS

         During fiscal year 2003, Gas Utility purchased approximately 37 bcf of
natural gas for sale to customers. Approximately 88% of the volumes purchased
were supplied under agreements with ten major suppliers. The remaining 12% of
gas purchased was supplied by approximately 25 producers and marketers. Gas
supply contracts are generally no longer than one year.

         In fiscal years 2002 and 2003, as a result of changing market
conditions following the bankruptcy of Enron Corp., a number of suppliers with
which Utilities formerly did business exited the wholesale trading market. This
development did not significantly impact Utilities' ability to secure gas
supplies.

SEASONAL VARIATION

         Because many of its customers use gas for heating purposes, Gas
Utility's sales are seasonal. Approximately 60% of fiscal year 2003 throughput
occurred during the winter season from November through March.

COMPETITION

         Natural gas is a fuel that competes with electricity and oil, and to a
lesser extent, with propane and coal. Competition among these fuels is primarily
a function of their comparative price and the relative cost and efficiency of
fuel utilization equipment. Electric utilities in Gas Utility's service area are
seeking new load, primarily in the new construction market. Fuel oil dealers
compete for customers in all categories, including industrial customers. Gas
Utility responds to this competition with marketing efforts designed to retain
and grow its customer base.

         In substantially all of its service territory, Gas Utility is the only
regulated gas distribution utility having the right, granted by the PUC or by
law, to provide gas distribution services. Under the Gas Competition Act, retail
customers may purchase their natural gas from a supplier other than Gas Utility.
Commercial and industrial customers in Gas Utility's service

                                       11

territory have been able to do this since 1982. As of October 2003, two
marketers have qualified to serve residential and small commercial and
industrial customers. Together they serve approximately 4,500 customers. Gas
Utility provides transportation services for residential and small commercial
and industrial customers who purchase natural gas from others.

         A number of Gas Utility's commercial and industrial customers have the
ability to switch to an alternate fuel at any time and, therefore, are served on
an interruptible basis under rates which are competitively priced with respect
to their alternate fuel. Gas Utility's profitability from these customers,
therefore, is affected by the difference, or "spread," between the customers'
delivered cost of gas and the customers' delivered alternate fuel cost. See
"Utility Regulation and Rates - Gas Utility Rates." Commercial and industrial
customers representing 18% of total system throughput have locations which
afford them the opportunity, although none has exercised it, of seeking
transportation service directly from interstate pipelines, thereby bypassing Gas
Utility. The majority of customers in this group are served under transportation
contracts having three- to twenty-year terms. Included in these two groups are
Utilities' ten largest customers in terms of annual volume. All of these
customers have contracts with Utilities, nine of which extend beyond fiscal year
2004. No single customer represents, or is anticipated to represent, more than
5% of the total revenues of Gas Utility.

OUTLOOK FOR GAS SERVICE AND SUPPLY

         Gas Utility anticipates having adequate pipeline capacity and sources
of supply available to it to meet the full requirements of all firm customers on
its system through fiscal year 2004. Supply mix is diversified, market priced,
and delivered pursuant to a number of long- and short-term firm transportation
and storage arrangements, including transportation contracts held by some of
Utilities' larger customers.

         During fiscal year 2003, Gas Utility supplied transportation service to
two major cogeneration installations and three electric generation facilities.
Gas Utility continues to pursue opportunities to supply natural gas to electric
generation projects located in its service territory. Gas Utility also continues
to seek new residential, commercial and industrial customers for both firm and
interruptible service. In the residential market sector, Gas Utility connected
approximately 9,600 residential heating customers during fiscal year 2003, which
represented a record annual increase. Of those new customers, new home
construction accounted for over 7,300 heating customers. Customers converting
from other energy sources, primarily oil and electricity, and existing
non-heating gas customers who have added gas heating systems to replace other
energy sources, accounted for the balance of the additions. The number of new
commercial and industrial customers was over 1,100.

         Utilities continues to monitor and participate extensively in
rulemaking and individual rate and tariff proceedings before the Federal Energy
Regulatory Commission ("FERC") affecting the rates and the terms and conditions
under which Gas Utility transports and stores natural gas. Among these
proceedings are those arising out of certain FERC orders and/or pipeline filings
which relate to (i) the pricing of pipeline services in a competitive energy
marketplace; (ii) the flexibility of the terms and conditions of pipeline
service tariffs and contracts; and (iii) pipelines' requests to increase their
base rates, or change the terms and conditions of their storage and
transportation services.

                                       12

         Gas Utility's objective in negotiations with interstate pipeline and
natural gas suppliers, and in proceedings before regulatory agencies, is to
assure availability of supply, transportation and storage alternatives to serve
market requirements at the lowest cost possible, taking into account the need
for security of supply. Consistent with that objective, Gas Utility negotiates
the terms of firm transportation capacity on all pipelines serving Gas Utility,
arranges for appropriate storage and peak-shaving resources, negotiates with
producers for competitively priced gas purchases and aggressively participates
in regulatory proceedings related to transportation rights and costs of service.

ELECTRIC OPERATIONS

ELECTRICITY GENERATION CUSTOMER CHOICE AND COMPETITION ACT

         On January 1, 1997, Pennsylvania's Electricity Generation Customer
Choice and Competition Act ("ECC Act") became effective. The ECC Act permits all
Pennsylvania retail electric customers to choose their electric generation
supplier. Pursuant to the Act, all electric utilities were required to file
restructuring plans with the PUC which, among other things, included unbundled
prices for electric generation, transmission and distribution and a competitive
transition charge (CTC) for the recovery of "stranded costs" which would be paid
by all customers receiving distribution service. Stranded costs generally are
electric generation-related costs that traditionally would be recoverable in a
regulated environment but may not be recoverable in a competitive electric
generation market. Under the ECC Act, Electric Utility is obligated to provide
energy to customers who do not choose alternate suppliers. Electric Utility will
continue to be the only regulated electric utility having the right, granted by
the PUC or by law, to distribute electric energy in its service territory.

         On June 19, 1998, the PUC entered its Opinion and Order (the
"Restructuring Order") in Electric Utility's restructuring proceeding under the
ECC Act. The Electric Restructuring Order authorized Electric Utility to recover
from its customers approximately $32.5 million in stranded costs (on a full
revenue requirements basis, which includes all income and gross receipts taxes)
over an estimated four-year period which commenced January 1, 1999 through a
CTC, together with carrying charges on unrecovered balances of 7.94%. Under the
terms of the Restructuring Order, Electric Utility generally could not increase
the generation component of prices during the period that stranded costs were
being recovered through the CTC. Electric Utility's recovery of stranded costs
through the CTC was completed during fiscal year 2003.

SERVICE AREA; SALES ANALYSIS

         Electric Utility supplies electric service to approximately 61,600
customers in portions of Luzerne and Wyoming Counties in northeastern
Pennsylvania through a system consisting of approximately 2,100 miles of
transmission and distribution lines and 14 transmission substations. For fiscal
year 2003, about 53% of sales volume came from residential customers, 36% from
commercial customers and 11% from industrial customers. Electricity transported
for customers who purchased their power from others pursuant to the ECC Act
represented approximately 1% of fiscal year 2003 sales volume.

                                       13

SOURCES OF SUPPLY

         Electric Utility has third-party generation supply contracts in place
for substantially all of its expected energy requirements for fiscal year 2004.
Electric Utility distributes both electricity that it purchases from others and
electricity that customers purchase from other suppliers. At September 30, 2003,
alternate suppliers served customers representing less than 1% of system load.
Electric Utility expects to continue to provide energy to the great majority of
its distribution customers for the foreseeable future.

ELECTRIC GENERATION

         In June 2003, UGID increased its ownership interest in the Conemaugh
generating station ("Conemaugh") from 1.11% to approximately 6% (102 megawatts).
Conemaugh is a 1,711 megawatt, coal-fired generation station located near
Johnstown, Pennsylvania. It is owned by a consortium of energy companies and
operated by a unit of Reliant Resources, Inc. In addition, UGID is the indirect,
50% owner of Hunlock Creek Energy Ventures ("Energy Ventures"). The generation
assets of Energy Ventures consist of the 48 megawatt, coal-fired Hunlock
generating station, located near Kingston, Pennsylvania, and a 44 megawatt,
gas-fired turbine generator at the same site. A subsidiary of Allegheny Energy,
Inc. is the other general partner in Energy Ventures. Under the joint venture
agreement, UGID has the right to purchase one-half the output of Energy
Ventures' generation at cost. It also has the right to require an affiliate of
Allegheny Energy, Inc. ("Allegheny") to purchase UGID's ownership interest in
Energy Ventures. Allegheny has a corresponding call right on UGID's interest in
Energy Ventures. These "put" and "call" rights are effective for a 90-day period
commencing January 1, 2006. UGID is a non-utility company, wholly-owned by ESI.
UGID markets the electric generation it controls to third parties.

ENVIRONMENTAL FACTORS

         Energy Ventures' operation of Hunlock Station complies with the air
quality standards of the Pennsylvania Department of Environmental Protection
("DEP") with respect to stack emissions. Under the Federal Water Pollution
Control Act, Hunlock station has a permit from the DEP to discharge water into
the North Branch of the Susquehanna River. The Federal Clean Air Act Amendments
of 1990 (the "Clean Air Act Amendments") impose emissions limitations for
certain compounds, including sulfur dioxide and nitrous oxides. Both the
Conemaugh Station and the Hunlock Station are in material compliance with these
emission standards.

UTILITY REGULATION AND RATES

PENNSYLVANIA PUBLIC UTILITY COMMISSION JURISDICTION

         Utilities' gas and electric utility operations, which exclude electric
generation, are subject to regulation by the PUC as to rates, terms and
conditions of service, accounting matters, issuance of securities, contracts and
other arrangements with affiliated entities, and various other matters. UGID has
FERC authority to sell power at market-based rates. Generally, UGID is not
subject to regulation by the PUC.

                                       14

FERC ORDERS 888 AND 889

         In April 1996, FERC issued Orders No. 888 and 889, which established
rules for the use of electric transmission facilities for wholesale
transactions. FERC has also asserted jurisdiction over the transmission
component of electric retail choice transactions. In compliance with these
orders, the PJM Interconnection, LLC ("PJM"), of which Utilities is a member,
has filed an open access transmission tariff with the FERC establishing
transmission rates and procedures for transmission within the PJM control area.
Under the PJM tariff and associated agreements, Electric Utility is entitled to
receive certain revenues when its transmission facilities are used by third
parties.

GAS UTILITY RATES

         The Gas Restructuring Order included an increase in firm-residential,
commercial and industrial ("retail core-market") base rates, effective October
1, 2000. The increase, calculated in accordance with the Gas Competition Act,
was designed to generate approximately $16.7 million in additional annual
revenues. The Order also provided that Gas Utility reduce its purchased gas cost
rates by an annualized amount of $16.7 million for the first 14 months following
the base rate increase.

         Effective December 1, 2001, Gas Utility was required to reduce its
purchased gas cost rates to retail core-market customers by an amount equal to
the margin it receives from customers served under interruptible rates to the
extent they use capacity contracted for by Gas Utility for retail core-market
customers. As a result of these changes in its regulated rates, since December
1, 2001, Gas Utility's operating results have been more sensitive to heating
season weather and less sensitive to the market prices of alternative fuel.

         BASE RATES

         As stated above, Gas Utility's current base rates went into effect
October 1, 2000 pursuant to The Gas Restructuring Order. See Note 3 to the
Company's Consolidated Financial Statements.

         PURCHASED GAS COST RATES

         Gas Utility's gas service tariff contains Purchased Gas Cost ("PGC")
rates which provide for annual increases or decreases in the rate per thousand
cubic feet ("mcf") which Gas Utility charges for natural gas sold by it, to
reflect Utilities' projected cost of purchased gas. PGC rates may also be
adjusted quarterly, or, under certain conditions monthly, to reflect purchased
gas costs. Each proposed annual PGC rate is required to be filed with the PUC
six months prior to its effective date. During this period the PUC holds
hearings to determine whether the proposed rate reflects a least-cost fuel
procurement policy consistent with the obligation to provide safe, adequate and
reliable service. After completion of these hearings, the PUC issues an order
permitting the collection of gas costs at levels which meet that standard. The
PGC mechanism also provides for an annual reconciliation. Utilities has two PGC
rates. PGC (1) is applicable to small, firm, core-market customers consisting of
the residential and small commercial and industrial classes; PGC (2) is
applicable to firm, contractual, high-load factor customers served on three
separate rates. In addition, residential customers maintaining a high load
factor may

                                       15

qualify for the PGC (2) rate. As described above, the Gas Restructuring Order
provided for ongoing adjustments to Gas Utilities' PGC rates, commencing
December 1, 2001, to reflect margins, if any, from interruptible rate customers
who do not obtain their own pipeline capacity.

ELECTRIC UTILITY RATES

         The PUC approved a settlement establishing rules for Electric Utility's
Provider of Last Resort ("POLR") service on March 28, 2002, and a separate
settlement that modified these rules on June 13, 2002 (collectively, the "POLR
Settlement") under which Electric Utility terminated stranded cost recovery
through its CTC and is no longer subject to the statutory generation rate caps
as of August 1, 2002 for commercial and industrial ("C&I") customers and as of
November 1, 2002 for residential customers. Charges for generation service (1)
were initially set at a level equal to the rates paid by Electric Utility
customers for POLR service under the statutory rate caps; (2) may be raised at
certain designated times by up to 5% of the total rate for distribution,
transmission and generation through December 2004; and (3) may be set at market
rates thereafter. Electric Utility may also offer multiple year POLR contracts
to its customers. The POLR Settlement provides for annual shopping periods
during which customers may elect to remain on POLR service or choose an
alternate supplier. Customers who do not select an alternate supplier will be
obligated to remain on POLR service until the next shopping period. Residential
customers who return to POLR service at a time other than during the annual
shopping period must remain on POLR service until the date of the second open
shopping period after returning. C&I customers who return to POLR service at a
time other than during the annual shopping period must remain on POLR service
until the next open shopping period, and may, in certain circumstances, be
subject to generation rate surcharges. Consistent with the terms of the POLR
Settlement, Electric Utility's POLR rates will increase beginning January 2004
for commercial and industrial customers, and June 2004 for residential
customers.

         Additionally, pursuant to the requirements of the ECC, the PUC is
currently developing post-rate cap POLR regulations that are expected to further
define post-rate cap POLR service obligations and pricing. As of September 30,
2003, fewer than 1% of Electric Utility's customers have chosen an alternative
electricity generation supplier.

STATE TAX SURCHARGE CLAUSES

         Utilities' gas and electric service tariffs contain state tax surcharge
clauses. The surcharges are recomputed whenever any of the tax rates included in
their calculation are changed. These clauses protect Utilities from the effect
of increases in most of the Pennsylvania taxes to which it is subject.

UTILITY FRANCHISES

         Utilities holds certificates of public convenience issued by the PUC
and certain "grandfather rights" predating the adoption of the Pennsylvania
Public Utility Code and its predecessor statutes which it believes are adequate
to authorize it to carry on its business in substantially all the territory to
which it now renders gas and electric service. Under applicable

                                       16

Pennsylvania law, Utilities also has certain rights of eminent domain as well as
the right to maintain its facilities in streets and highways in its territories.

OTHER GOVERNMENT REGULATION

         In addition to regulation by the PUC, the gas and electric utility
operations of Utilities are subject to various federal, state and local laws
governing environmental matters, occupational health and safety, pipeline safety
and other matters. Certain of Utilities' activities involving the interstate
movement of natural gas, the transmission of electricity, transactions with
non-utility generators of electricity, and other matters, are also subject to
the jurisdiction of FERC.

         Utilities is subject to the requirements of the federal Resource
Conservation and Recovery Act, CERCLA and comparable state statutes with respect
to the release of hazardous substances on property owned or operated by
Utilities. See ITEM 3. "LEGAL PROCEEDINGS - Environmental Matters-Manufactured
Gas Plants." The electric generation activities of UGID are also subject to the
Clean Air Act Amendments, the Federal Water Pollution Control Act and comparable
state statutes and regulations. See "UTILITY OPERATIONS - Electric Operations -
Environmental Factors."

EMPLOYEES

         At September 30, 2003, Utilities had approximately 1,000 employees.

                                       17

                              UGI ENTERPRISES, INC.

         Through its subsidiaries, Enterprises develops energy-related
businesses for us in the United States and abroad as described below. We expect
Enterprises to continue to evaluate and develop new related and complementary
business opportunities for us.

DOMESTIC BUSINESSES

         NATURAL GAS AND ELECTRICITY MARKETING

         ESI conducts a non-utility energy marketing business under the trade
names GASMARK(R) and POWERMARK(R). GASMARK(R) sells natural gas directly to
approximately 5,000 commercial and industrial customers in Pennsylvania, New
Jersey, New York, Delaware, Maryland, Virginia, Ohio, North Carolina and the
District of Columbia through the transportation systems of 35 utility systems.
Energy Services also sells fuel oil and has the ability to sell electricity to
commercial and industrial customers in Pennsylvania, New Jersey and Maryland.
During fiscal year 2003, ESI significantly increased its size by acquiring the
northeastern gas marketing operations of a subsidiary of TXU Corp. This
acquisition added approximately 1,000 customers to ESI's customer base and
increased its natural gas sales volume approximately 60%.

         The gas marketing business is a high revenue, low margin business. A
majority of GASMARK(R)'s commodity sales are made under fixed price agreements.
ESI manages supply cost volatility related to these agreements by entering into
exchange-traded natural gas futures contracts and fixed-price supply
arrangements with a diverse group of natural gas producers and holders of
interstate pipeline capacity. Exchange-traded natural gas futures contracts are
guaranteed by the New York Mercantile Exchange ("NYMEX") and have nominal credit
risk. ESI also bears the risk for balancing and delivering natural gas to its
customers under various pipelines and LDC tariffs. Failure to meet these
guidelines can result in additional expense in the form of penalties, which can
be substantial in relation to ESI's results of operations.

         Credit is another risk factor in the commodity marketing business. ESI
bears the risks of customer defaults and supplier non-performance on commodity
and pipeline capacity contracts. ESI seeks to mitigate risk of supplier defaults
by diversifying its supply and pipeline transportation purchases across a number
of suppliers. ESI also requires credit support from customers in higher-risk
transactions. This credit support can take the form of prepayments, bonds and
letters of credit. ESI also maintains credit insurance. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations-Market
Risk Disclosures."

         ESI also operates a natural gas liquefaction, storage and vaporization
facility in Temple, Pennsylvania and propane storage and propane-air mixing
stations in Bethlehem, Reading and Steelton, Pennsylvania. These plants were
formerly owned by Utilities. Utilities has a call on a majority of the winter
capacity of these facilities through March 2004 at a PUC-approved formula price.
ESI is able to make opportunistic off-peak sales of LNG from these facilities at
market prices.

                                       18

         ELECTRIC GENERATION

         During fiscal year 2003, UGID was transferred to ESI. See "UTILITY AND
ELECTRIC OPERATIONS - Electric Generation" for a description of UGID's
generation assets. The output from these plants is sold in the spot market and
under fixed-term contracts.

         HVAC SERVICE

         UGI HVAC Enterprises, Inc. ("HVAC") was acquired by Enterprises in
September 2000. Together with its subsidiary, McHugh Service Company, HVAC
conducts a heating, ventilation air-conditioning and refrigeration service
business serving portions of Utilities' gas service area and adjacent eastern
market areas, including Philadelphia suburbs and portions of New Jersey and
northern Delaware. It serves more than 100,000 customers in residential,
commercial, industrial and new construction markets. During fiscal year 2003,
HVAC generated approximately $46 million in revenues and employed approximately
350 people.

INTERNATIONAL BUSINESSES

         FLAGA GmbH

         In September 1999, subsidiaries of Enterprises acquired all of the
stock of Flaga GmbH, a privately-held company founded in 1947. FLAGA distributes
propane, butane and propane/butane mix (collectively, "LPG") in Austria, the
Czech Republic and Slovakia for residential, commercial, industrial and autogas
applications. During fiscal year 2003, FLAGA distributed approximately 34
million gallons of LPG. FLAGA operates from 6 distribution locations in Austria,
1 in the Czech Republic and 2 in Slovakia. In addition, FLAGA has 7 sales
offices in the Czech Republic. As of September 30, 2003, FLAGA had a total of
321 employees of which 165 were located in Austria, 120 in the Czech Republic
and 36 in Slovakia.

         FLAGA has the largest propane distribution market position in Austria
with an estimated 34% retail market share, serving residential, commercial and
industrial customers. The retail propane industry in Austria is mature, with
only modest growth in propane demand foreseen. Residential customers generally
commit to prepaid tank rental agreements. Competition for renewals and for new
customer installations is based on the terms and conditions of tank leases as
well as on product prices. Much of FLAGA's Austrian cylinder business is
conducted through approximately 600 neighborhood resellers with whom FLAGA has a
long business relationship. FLAGA competes with other propane marketers and with
other sources of energy, principally natural gas and wood.

         The Czech market for LPG, which currently represents about 30% of
FLAGA's total volume, is growing approximately 2% to 4% per year. FLAGA entered
the Czech market in 1994 when it purchased a portion of the formerly state-run
LPG company from the Czech government as part of its privatization plan. FLAGA's
main facility in the Czech Republic is its bulk storage and cylinder filling and
repair plant in Hustopece, located in the southeast quadrant of the Czech
Republic. FLAGA estimates its market share in the Czech Republic at
approximately 15%, ranking it third in the country.

                                       19

         The Slovak market for LPG has been growing significantly in the area of
autogas sales volume in the last three years. FLAGA estimates that its share of
the LPG market in Slovakia is 24%, ranking it second in the country.

         ANTARGAZ

         In March 2001, UGI France, Inc., together with Paribas Affaires
Industrielles ("PAI") and Medit Mediterranea GPL, S.r.l. ("Medit"), acquired the
stock and certain related assets of Antargaz, one of the largest distributors of
LPG in France. We acquired an approximate 20% interest, PAI an approximate 68%
interest, Medit an approximate 10% interest and certain members of Antargaz
management, the remaining interest. PAI is a leading private equity fund manager
in Europe with strong management and financial skills and Medit is a supplier of
logistics services to the LPG industry in Europe, primarily Italy. During fiscal
year 2003, Antargaz sold approximately 344 million gallons of LPG. Due, in part,
to our membership on the Board of Directors of Antargaz, we believe we have
significant influence over the company's operating and financial policies.

         Antargaz has an approximate 24% market share in France. The French LPG
market is characterized by modest growth, about 1% per year, and stable market
conditions. Antargaz serves nearly one million customers using a logistical
system that includes ten major import/storage facilities, 30 bulk storage depots
and 16 cylinder filling plants. Antargaz's customer base consists of
residential, commercial, agricultural and motor fuel accounts who use LPG for
space heating, cooking, water heating, process heat and transportation. Antargaz
has approximately 1,350 employees.

         CHINAGAS PARTNERS

         During 1998, Enterprises formed ChinaGas Partners, L.P. ("ChinaGas")
with affiliates of Energy Transportation Group, Inc. to develop, build and
operate LPG projects in the People's Republic of China. On October 28, 1998,
ChinaGas and its wholly owned subsidiary together acquired 50% of the shares of
an existing Chinese company known as the Nantong Huayang LPG Port Co., Ltd.
("Port Company") which operated an integrated LPG business, including an import
terminal and distribution business, serving the provinces along the lower and
middle reaches of the Yangtze River. On August 1, 2002, the shareholders of the
Port Company agreed to split the company into two separate companies: a terminal
company owned completely by China National Chemical Supply & Sales Corporation
and a retail distribution company owned by ChinaGas. The separation became
effective in December 2002. The terminal company is currently pursuing bulk
chemical storage business but continues to support the retail distribution
company through a long-term LPG storage lease. Enterprises owns 50% of the
distribution business.

                          BUSINESS SEGMENT INFORMATION

         The table stating the amounts of revenues, operating income (loss) and
identifiable assets attributable to each of UGI's business segments for the
2003, 2002 and 2001 fiscal years appears

                                       20

in Note 21 to the Consolidated Financial Statements contained in our 2003 Annual
Report to Shareholders and is incorporated in this Report by reference.

                                    EMPLOYEES

         At September 30, 2003, UGI and its subsidiaries had approximately 8,200
employees.

                                       21

ITEM 3. LEGAL PROCEEDINGS

         With the exception of the matters set forth below, no material legal
proceedings are pending involving UGI, any of its subsidiaries, or any of their
properties, and no such proceedings are known to be contemplated by governmental
authorities other than claims arising in the ordinary course of business.

ENVIRONMENTAL MATTERS - MANUFACTURED GAS PLANTS

         In the late 1800s through the mid-1900s, UGI Utilities and its former
subsidiaries owned and operated a number of manufactured gas plants ("MGPs")
prior to the general availability of natural gas. Some constituents of coal tars
and other residues of the manufactured gas process are today considered
hazardous substances under the Superfund Law and may be present on the sites of
former MGPs. Between 1882 and 1953, UGI Utilities owned the stock of subsidiary
gas companies in Pennsylvania and elsewhere and also operated the business of
some gas companies under agreement. Pursuant to the requirements of the Public
Utility Holding Company Act of 1935, by 1953, UGI Utilities had divested all of
its utility operations other than those which now constitute Gas Utility and
Electric Utility.

         UGI Utilities does not expect its costs for investigation and
remediation of hazardous substances at Pennsylvania MGP sites to be material to
its results of operations because UGI Utilities is currently permitted to
include in rates, through future base rate proceedings, prudently incurred
remediation costs associated with such sites. UGI Utilities has been notified of
several sites outside Pennsylvania on which (1) MGPs were formerly operated by
it or owned or operated by its former subsidiaries and (2) either environmental
agencies or private parties are investigating the extent of environmental
contamination or performing environmental remediation. UGI Utilities is
currently litigating three claims against it relating to out-of-state sites.

         Consolidated Edison Company of New York v. UGI Utilities, Inc. On
September 20, 2001, Consolidated Edison Company of New York ("ConEd") filed suit
against Utilities in the United States District Court for the Southern District
of New York, seeking contribution from Utilities for an allocated share of
response costs associated with investigating and assessing gas plant related
contamination at former MGP sites in Westchester County, New York. The complaint
alleges that Utilities "owned and operated" the MGPs prior to 1904. The
complaint also seeks a declaration that Utilities is responsible for an
allocated percentage of future investigative and remedial costs at the sites.
ConEd believes that the cost of remediation for all of the sites could exceed
$70 million. Utilities believes that it has good defenses to the claim and is
defending the suit.

         In November 2003, the court granted Utilities' motion for summary
judgment in part, dismissing all claims premised on a disregard of the separate
corporate form of Utilities' former subsidiaries and dismissing claims premised
on Utilities' operation of three of the MGPs under operating leases with ConEd's
predecessors. The court reserved decision on the remaining theory of liability,
that Utilities was a direct operator of the remaining MGPs.

                                       22

         City of Bangor, Maine v. Citizens Communications Co. In April 2003,
Citizens Communications Company ("Citizens") served a complaint naming Utilities
as a third-party defendant in a civil action pending in United States District
Court for the District of Maine. In that action, the plaintiff, City of Bangor,
sued Citizens to recover environmental response costs associated with MGP wastes
generated at a plant allegedly operated by Citizens' predecessors at a site on
the Penobscot River. Citizens subsequently joined Utilities and ten other
third-party defendants alleging that the third-party defendants are responsible
for an equitable share of any response costs Citizens may be required to pay to
the City of Bangor. Remedial proposals for the site range between $5 million and
$50 million. Utilities is unable to estimate what portion of this potential cost
may be associated with MGP wastes. Utilities believes that it has good defenses
to the claim.

         Atlanta Gas Light Company v. UGI Utilities, Inc. By letter dated July
29, 2003, Atlanta Gas Light Company ("AGL") served Utilities with a complaint
filed in the United States District Court for the Middle District of Florida in
which AGL alleges that Utilities is responsible for 20% of approximately $8
million incurred by AGL in the investigation and remediation of a former MGP
site in St. Augustine, Florida. Utilities formerly owned stock of the St.
Augustine Gas Company, the owner and operator of the MGP. Utilities believes
that it has good defenses to the claim and is defending the suit.

RELATED MATTER

         UGI Utilities, Inc. v. Insurance Co. of North America, et al. On
February 11, 1999, UGI Utilities, Inc. filed suit in the Court of Common Pleas
of Montgomery County, Pennsylvania against more than fifty insurance companies,
including Insurance Services, Ltd. (AEGIS). The complaint alleges that the
defendants breached contracts of insurance by failing to indemnify Utilities for
certain environmental costs. Utilities has now settled with all known solvent
defendants. The suit has been stayed pending resolution of the remaining claims.

OTHER

         Swiger, et al. v. UGI/AmeriGas, Inc. et al. Plaintiffs Samuel and
Brenda Swiger and their son (the "Swigers") sustained personal injuries and
property damage as a result of a fire that occurred when propane that leaked
from an underground line ignited. In July 1998, the Swigers filed a class action
lawsuit against AmeriGas Propane, L.P. (named incorrectly as "UGI/AmeriGas,
Inc."), in the Circuit Court of Monongalia County, West Virginia (Civil Action
No. 98-C-298), in which they sought to recover an unspecified amount of
compensatory and punitive damages and attorney's fees, for themselves and on
behalf of persons in West Virginia for whom the defendants had installed propane
gas lines, allegedly resulting from the defendants' failure to install
underground propane lines at depths required by applicable safety standards.
Plaintiffs have filed various motions with the court, which seek to broaden the
scope of their claims and to expand the size of the class to include customers
whose lines were installed by other propane suppliers. These motions are
currently pending before the court and defendants cannot predict the outcome of
those motions. Beginning in 2001, the defendants voluntarily undertook to
inspect and replace underground lines of its current customers that may not be
in compliance with applicable safety standards. The General Partner expects to
complete the line replacement project by late fiscal 2004 or early fiscal 2005.
In 2003, the defendants settled the

                                       23

individual personal injury and property damage claims of the Swigers. The
defendants believe they have defenses to the claims of the class members and
intend to vigorously defend against the remaining claims in this lawsuit.

                                       24

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matter was submitted to a vote of security holders during the last
fiscal quarter of fiscal year 2003.

                               EXECUTIVE OFFICERS

         Information regarding our executive officers is included in Part III of
this Report and is incorporated in Part I by reference.

PART II: SECURITIES AND FINANCIAL INFORMATION

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

         Our Common Stock is traded on the New York and Philadelphia stock
exchanges under the symbol "UGI." On January 28, 2003, our Board of Directors
approved a 3-for-2 split of our Common Stock, effective April 1, 2003. Sales
prices and dividends paid for all periods presented in the following tables are
reflected on a post-split basis. The following table sets forth the high and low
sales prices for the Common Stock on the New York Stock Exchange Composite
Transactions tape as reported in The Wall Street Journal for each full quarterly
period within the two most recent fiscal years:

2003 FISCAL YEAR                       HIGH                                LOW
                                                                    
   4th Quarter                        $33.45                              $28.86
   3rd Quarter                         35.05                               29.00
   2nd Quarter                         30.57                               24.93
   1st Quarter                         26.99                               23.27

2002 FISCAL YEAR                       HIGH                                LOW
                                                                    
   4th Quarter                        $24.51                              $17.11
   3rd Quarter                         22.14                               19.60
   2nd Quarter                         20.99                               18.06
   1st Quarter                         21.02                               17.79

                                       25

DIVIDENDS

         Quarterly dividends on our Common Stock were paid in the 2003 and 2002
fiscal years as follows:

2003 FISCAL YEAR                                           AMOUNT
                                                        
   4th Quarter                                             $0.285
   3rd Quarter                                              0.285
   2nd Quarter                                              0.275
   1st Quarter                                              0.275

2002 FISCAL YEAR                                           AMOUNT
                                                        
   4th Quarter                                             $0.275
   3rd Quarter                                              0.267
   2nd Quarter                                              0.267
   1st Quarter                                              0.267

HOLDERS

         On December 12, 2003, UGI had 9,776 holders of record of Common Stock.

                                       26

ITEM 6. SELECTED FINANCIAL DATA

                                                                                        Year Ended
                                                                                       September 30,
                                                            ---------------------------------------------------------------------
                                                               2003         2002           2001(a)       2000(a)        1999(a)
                                                               ----         ----           -------       -------        -------
                                                                        (Millions of dollars, except per share amounts)
                                                                                                        
FOR THE PERIOD:
INCOME STATEMENT DATA:

    Revenues                                                $  3,026.1    $  2,213.7     $  2,468.1     $  1,761.7     $  1,383.6
                                                            ==========    ==========     ==========     ==========     ==========
    Income before accounting changes                        $     98.9    $     75.5     $     52.0     $     44.7     $     55.7
    Cumulative effect of accounting changes (b)                     --            --            4.5             --             --
                                                            ----------    ----------     ----------     ----------     ----------
    Net income (c)                                          $     98.9    $     75.5     $     56.5     $     44.7     $     55.7
                                                            ==========    ==========     ==========     ==========     ==========

    Earnings per common share- basic (d)

         Income before accounting changes                   $     2.34    $     1.83     $     1.28     $     1.09     $     1.16

         Cumulative effect of accounting changes, net               --            --           0.11             --             --
                                                            ----------    ----------     ----------     ----------     ----------
         Net income - basic                                 $     2.34    $     1.83     $     1.39     $     1.09     $     1.16
                                                            ==========    ==========     ==========     ==========     ==========

    Earnings per common share - diluted (d)
         Income before accounting changes                   $     2.29    $     1.80     $     1.27     $     1.09     $     1.16

         Cumulative effect of accounting changes, net               --            --           0.11             --             --
                                                            ----------    ----------     ----------     ----------     ----------
         Net income - diluted (c) (e)                       $     2.29    $     1.80     $     1.38     $     1.09     $     1.16
                                                            ==========    ==========     ==========     ==========     ==========

    Cash dividends declared per common share                $     1.13    $    1.083     $    1.050     $    1.017     $     0.98
                                                            ==========    ==========     ==========     ==========     ==========

AT PERIOD END:

BALANCE SHEET DATA:

  Total assets                                              $  2,781.7    $  2,614.4     $  2,550.2     $  2,275.8     $  2,140.5
                                                            ==========    ==========     ==========     ==========     ==========
  Capitalization:
      Debt:
        Bank loans - AmeriGas Propane                       $       --    $     10.0     $       --     $     30.0     $     22.0
        Bank loans - UGI Utilities                                40.7          37.2           57.8          100.4           87.4
        Bank loans - other                                        15.9           8.6           10.0            4.3           11.6
        Long-term debt  (including current
           maturities):
             AmeriGas Propane                                    927.3         945.8        1,005.9          857.2          744.7
             UGI Utilities                                       217.3         248.4          208.4          172.9          180.0
             Other                                                78.9          81.5           80.9           85.5           91.6
                                                            ----------    ----------     ----------     ----------     ----------
       Total debt                                              1,280.1       1,331.5        1,363.0        1,250.3        1,137.3
                                                            ----------    ----------     ----------     ----------     ----------
       Minority interests in AmeriGas Partners                   134.6         276.0          246.2          177.1          209.9
       UGI Utilities preferred shares subject
           to mandatory redemption                                20.0          20.0           20.0           20.0           20.0
       Common stockholders' equity                               569.8         317.3          255.6          247.2          249.2
                                                            ----------    ----------     ----------     ----------     ----------
  Total capitalization                                      $  2,004.5    $  1,944.8     $  1,884.8     $  1,694.6     $  1,616.4
                                                            ==========    ==========     ==========     ==========     ==========
RATIO OF CAPITALIZATION:

  Total debt                                                      63.9%         68.5%          72.3%          73.8%          70.4%
  Minority interest                                                6.7%         14.2%          13.1%          10.5%          13.0%
  UGI Utilities preferred shares subject
           to mandatory redemption                                 1.0%          1.0%           1.1%           1.2%           1.2%
  Common stockholders' equity                                     28.4%         16.3%          13.5%          14.5%          15.4%
                                                            ----------    ----------     ----------     ----------     ----------
                                                                 100.0%        100.0%         100.0%         100.0%         100.0%
                                                            ==========    ==========     ==========     ==========     ==========

(a) Arthur Andersen LLP audited our consolidated financial statements for 2001,
    2000, and 1999. See Item 15 - Notice Regarding Arthur Andersen LLP.

(b) Includes cumulative effect of accounting changes associated with (1) the
    Partnership's changes in accounting for tank fee revenue and tank
    installation costs and (2) the Company's adoption of Statement of Financial
    Accounting Standards No. 133, "Accounting for Derivative Instruments and
    Hedging Activities" (see Notes 1 and 15 to Consolidated Financial
    Statements).

(c) Pro forma net income and diluted earnings per share after applying
    retroactively the Partnership's changes in accounting for tank installation
    costs and tank fee revenue are as follows: 2000 - $44.6 and $1.09; 1999 -
    $55.9 and $1.17, respectively.

(d) Earnings per share for all periods presented reflect the effects of the
    Company's 3-for-2 common stock split distributed April 1, 2003 to
    shareholders of record on February 28, 2003.

(e) SFAS No. 142, "Goodwill and Other Intangible Assets," was adopted effective
    October 1, 2001. Net income and net income per diluted share adjusted to
    reflect the impact of SFAS No. 142 as if it had been adopted at the
    beginning of the periods presented are as follows: 2001 - $70.5 and $1.72;
    2000 - $59.4 and $1.45; 1999 - $68.9 and $1.43, respectively.

                                       27

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         Management's Discussion and Analysis of Financial Condition and Results
of Operations, entitled "Financial Review" and contained on pages 13 through 26
of UGI's 2003 Annual Report to Shareholders, is incorporated in this Report by
reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         "Quantitative and Qualitative Disclosures About Market Risk" are
contained in Management's Discussion and Analysis of Financial Condition and
Results of Operations under the caption "Market Risk Disclosures" on pages 23
and 24 of the UGI 2003 Annual Report to Shareholders and are incorporated in
this Report by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The Financial Statements and Financial Statement Schedules referred to
in the Index contained on pages F-2 and F-3 of this Report are incorporated in
this Report by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         During fiscal year 2002, UGI engaged a new independent auditor,
PricewaterhouseCoopers LLP. The information required by Item 9 is incorporated
in this Report by reference to UGI's Current Report on Form 8-K dated May 21,
2002.

ITEM 9A. CONTROLS AND PROCEDURES

(a)      Evaluation of Disclosure Controls and Procedures

The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the Company's disclosure controls and procedures as of the end of the period
covered by this report. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures as of the end of the period covered by this report were designed and
functioning effectively to provide reasonable assurance that the information
required to be disclosed by the Company in reports filed under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms. The
Company believes that a controls system, no matter how well

                                       28

designed and operated, cannot provide absolute assurance that the objectives of
the controls system are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within a
company have been detected.

(b)      Change in Internal Control over Financial Reporting

No change in the Company's internal control over financial reporting occurred
during the Company's most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the Company's internal control over
financial reporting.

                                       29

PART III: UGI MANAGEMENT AND SECURITY HOLDERS

ITEMS 10 THROUGH 14.

         In accordance with General Instruction G(3), and except as set forth
below, the information required by Items 10, 11, 12, 13 and 14 is incorporated
in this Report by reference to the following portions of UGI's Proxy Statement,
which will be filed with the Securities and Exchange Commission by January 28,
2004:

                                                                       CAPTIONS OF PROXY STATEMENT
                               INFORMATION                              INCORPORATED BY REFERENCE
            --------------------------------------------       -------------------------------------------------
                                                         
Item 10.    Directors and Executive                            Election of Directors - Nominees; Corporate
            Officers of Registrant                             Governance
                                                               Board Committees and Meeting Attendance
                                                               Securities Ownership of Management - Section
                                                               16(a) - Beneficial Ownership Reporting Compliance

            Copies of the Company's Principles of
            Corporate Governance and the Code of
            Ethics for the Chief Executive Officer
            and Senior Financial Officers of UGI
            Corporation are available on the Company's
            website, www.ugicorp.com or by writing to
            Robert W. Krick, Vice President and
            Treasurer, UGI Corporation, P. O. Box 858,
            Valley Forge, PA 19482.

Item 11.    Executive Compensation                             Compensation of Directors
                                                               Compensation of Executive Officers

Item 12.    Security Ownership of Certain Beneficial Owners    Securities Ownership of Certain Beneficial Owners
            and Management and Related Stockholder Matters     Securities Ownership of Management
                                                               Approval of Proposed UGI Corporation 2004 Equity
                                                               Compensation Plan - Equity Compensation

Item 13.    Certain Relationships and Related Transactions     Compensation of Executive Officers - Stock
                                                               Ownership Policy and Indebtedness of Management

Item 14.    Principal Accountant Fees and Services             The Independent Accountants

                                       30

         The information concerning the Company's executive officers required by
Item 10 is set forth below.

                               EXECUTIVE OFFICERS

       NAME                AGE               POSITION
- ---------------------      ---       -------------------------------------------
                               
Lon R. Greenberg           53        Chairman, Director, President
                                     and Chief Executive Officer

Eugene V.N. Bissell        50        President and Chief Executive
                                     Officer, AmeriGas Propane, Inc.

Robert J. Chaney           61        President and Chief Executive
                                     Officer, UGI Utilities, Inc.

Michael J. Cuzzolina       58        Vice President - Accounting and Financial
                                     Control; Chief Accounting Officer and Chief
                                     Risk Officer

Bradley C. Hall            50        Vice President - New Business Development

Robert H. Knauss           50        Vice President and General Counsel

Anthony J. Mendicino       55        Senior Vice President - Finance
                                     and Chief Financial Officer

         All officers are elected for a one-year term at the organizational
meetings of the respective Boards of Directors held each year.

         There are no family relationships between any of the officers or
between any of the officers and any of the directors.

Lon R. Greenberg

         Mr. Greenberg was elected Chairman of UGI effective August 1, 1996,
having been elected Chief Executive Officer effective August 1, 1995. He was
elected Director and President of UGI and a Director of UGI Utilities in July
1994. He was elected a Director of AmeriGas Propane, Inc. in 1994 and has been
Chairman since 1996. He also served as President and Chief Executive Officer of
AmeriGas Propane (1996 to 2000). Mr. Greenberg was Senior Vice President - Legal
and Corporate Development (1989 to 1994). He joined the Company in 1980 as
Corporate Development Counsel.

                                       31

Eugene V.N. Bissell

         Mr. Bissell is President and Chief Executive Officer of AmeriGas
Propane, Inc. (since July 2000), having served as Senior Vice President - Sales
and Marketing (1999 to 2000) and Vice President - Sales and Operations (1995 to
1999). Previously, he was Vice President - Distributors and Fabrication, BOC
Gases (industrial gases) (1995), having been Vice President - National Sales
(1993 to 1995) and Regional Vice President Southern Region for Distributor and
Cylinder Gases Division, BOC Gases (1989 to 1993). From 1981 to 1987, Mr.
Bissell held various positions with the Company and its subsidiaries, including
Director, Corporate Development. Mr. Bissell is immediate past president, and a
member of the Board of Directors of the National Propane Gas Association.

Robert J. Chaney

         Mr. Chaney is President and Chief Executive Officer of UGI Utilities,
Inc., (since March 1999). He previously served as Executive Vice President (1998
to 1999), Vice President and General Manager - Gas Utility Division (1991 to
1998) and Vice President - Rates and Energy Utilization - Gas Utility Division
(1981 to 1991) of UGI Utilities, Inc.

Michael J. Cuzzolina

         Mr. Cuzzolina was elected Vice President - Accounting and Financial
Control, Principal Accounting Officer and Chief Risk Officer of the Company in
July 2003. He served as President and Chief Operating Officer of Flaga GmbH from
1999 to 2003. Mr. Cuzzolina joined the Company in 1974 and previously served as
Vice President - Accounting and Financial Control (1984 to 1999).

Bradley C. Hall

         Mr. Hall is Vice President - New Business Development (since October
1994). He also serves as President of UGI Enterprises, Inc. (since 1994). He
joined the Company in 1982 and held various positions in UGI Utilities, Inc.,
including Vice President - Marketing and Rates.

Robert H. Knauss

         Mr. Knauss was elected Vice President and General Counsel on September
30, 2003. He previously served as Vice President - Law and Associate General
Counsel of AmeriGas Propane, Inc. (1996 to 2003), and Group Counsel - Propane of
UGI (1989 to 1996). He joined the Company in 1985. Previously, Mr. Knauss was an
associate at the firm of Ballard, Spahr, Andrews & Ingersoll in Philadelphia.

Anthony J. Mendicino

         Mr. Mendicino is Senior Vice President - Finance and Chief Financial
Officer (since December 2002). He previously served as Vice President - Finance
and Chief Financial Officer (September 1998 to December 2002). Mr. Mendicino
served as President and Chief Operating Officer (July 1997 to June 1998) and as
Senior Vice President (January 1997 to June 1997) of Eastwind Group, Inc., a
holding company formed to acquire and consolidate middle-market

                                       32

manufacturing businesses. Mr. Mendicino was Senior Vice President and Chief
Financial Officer and a director (1987 to 1996) of UTI Energy Corp., a
diversified oil field service company. From 1981 to 1987, Mr. Mendicino held
various positions with UGI, including Treasurer.

                                       33

PART IV: ADDITIONAL EXHIBITS, SCHEDULES AND REPORTS

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

   (a)   DOCUMENTS FILED AS PART OF THIS REPORT:

                  (1) and (2) The financial statements and financial statement
                  schedules incorporated by reference or included in this report
                  are listed in the accompanying Index to Financial Statements
                  and Financial Statement Schedules set forth on pages F-2
                  through F-3 of this report, which is incorporated herein by
                  reference.

         NOTICE REGARDING ARTHUR ANDERSEN LLP

                  Arthur Andersen LLP audited our consolidated financial
                  statements for the three years in the period ended September
                  30, 2001 and issued a report thereon dated November 16, 2001.
                  Arthur Andersen LLP has not reissued their report or consented
                  to the incorporation by reference of such report into the
                  Company's prospectuses for the offer and sale of common stock.
                  On June 15, 2002, Arthur Andersen LLP was convicted of
                  obstruction of justice by a federal jury in Houston, Texas in
                  connection with Arthur Andersen LLP's work for Enron Corp. On
                  September 15, 2002, a federal judge upheld this conviction.
                  Arthur Andersen LLP ceased its audit practice before the SEC
                  on August 31, 2002. Effective May 21, 2002, we terminated the
                  engagement of Arthur Andersen LLP as our independent
                  accountants and engaged PricewaterhouseCoopers LLP to serve as
                  our independent accountants for our fiscal years ending
                  September 30, 2002 and 2003. Because of the circumstances
                  currently affecting Arthur Andersen LLP, as a practical matter
                  it may not be able to satisfy any claims arising from the
                  provision of auditing services to us, including claims
                  available to security holders under federal and state
                  securities laws.

                                       34

                  (3) LIST OF EXHIBITS:

                  The exhibits filed as part of this report are as follows
                  (exhibits incorporated by reference are set forth with the
                  name of the registrant, the type of report and registration
                  number or last date of the period for which it was filed, and
                  the exhibit number in such filing):

                                            INCORPORATION BY REFERENCE
- -----------------------------------------------------------------------------------------------------------------
EXHIBIT NO.                    EXHIBIT                           REGISTRANT           FILING             EXHIBIT
- -----------  -----------------------------------------------   --------------   -------------------      --------
                                                                                             
   3.1       (Second) Amended and Restated Articles of               UGI         Amendment No. 1 on      3.(3)(a)
             Incorporation of the Company                                        Form 8 to Form 8-B
                                                                                     (4/10/92)

   *3.2      Bylaws of UGI as amended through September 30,
             2003

    4        Instruments defining the rights of security
             holders, including indentures. (The Company
             agrees to furnish to the Commission upon
             request a copy of any instrument defining the
             rights of holders of long-term debt not
             required to be filed pursuant to Item
             601(b)(4) of Regulation S-K)

   4.1       Rights Agreement, as amended as of August 18,           UGI            Registration            4.3
             2000, between the Company and Mellon Bank,                            Statement No.
             N.A., successor to Mellon Bank (East) N.A., as
             Rights Agent, and Assumption Agreement dated                            333-49080
             April 7, 1992

   4.2       The description of the Company's Common Stock           UGI        Form 8-B/A (4/17/96)       3.(4)
             contained in the Company's registration
             statement filed under the Securities Exchange
             Act of 1934, as amended

   4.3       UGI's (Second) Amended and Restated Articles
             of Incorporation and Bylaws referred to in 3.1
             and 3.2 above

   4.4       Note Agreement dated as of April 12, 1995             AmeriGas     Form 10-Q (3/31/95)        10.8
             among The Prudential Insurance Company of          Partners, L.P.
             America, Metropolitan Life Insurance Company,
             and certain other institutional investors and
             AmeriGas Propane, L.P., New AmeriGas Propane,
             Inc. and Petrolane Incorporated

   4.5       First Amendment dated as of September 12, 1997        AmeriGas     Form 10-K (9/30/97)         4.5
             to Note Agreement dated as of April 12, 1995       Partners, L.P.
             ("1995 Note Agreement")

                                       35

                                            INCORPORATION BY REFERENCE
- ----------------------------------------------------------------------------------------------------------------
EXHIBIT NO.                    EXHIBIT                           REGISTRANT           FILING             EXHIBIT
- -----------  -----------------------------------------------   ---------------  -------------------      -------
                                                                                             
   4.6       Second Amendment dated as of September 15,            AmeriGas     Form 10-K (9/30/98)         4.6
             1998 to 1995 Note Agreement                        Partners, L.P.

   4.7       Third Amendment dated as of March 23, 1999 to         AmeriGas     Form 10-Q (3/31/99)        10.2
             1995 Note Agreement                                Partners, L.P.

   4.8       Fourth Amendment dated as of March 16, 2000 to        AmeriGas     Form 10-Q (6/30/00)        10.2
             1995 Note Agreement                                Partners, L.P.

   4.9       Fifth Amendment dated as of August 1, 2001 to         AmeriGas     Form 10-K (9/30/01)         4.8
             1995 Note Agreement                                Partners, L.P.

  4.9(a)     Second Amended and Restated Agreement of              AmeriGas      Form 8-K (9/30/00)          1
             Limited Partnership of AmeriGas Partners, L.P.     Partners, L.P.

   4.10      Amended and Restated Agreement of Limited             AmeriGas     Form 10-K (9/30/01)         3.8
             Partnership of AmeriGas Eagle Propane, L.P.        Partners, L.P.
             dated July 19, 1999

   10.1      Service Agreement (Rate FSS) dated as of                UGI        Form 10-K (9/30/95)        10.5
             November 1, 1989 between Utilities and
             Columbia, as modified pursuant to the orders
             of the Federal Energy Regulatory Commission at
             Docket No. RS92-5-000 reported at Columbia Gas
             Transmission Corp., 64 FERC Para. 61,060 (1993),
             order on rehearing, 64 FERC Para. 61,365 (1993)

   10.2      Service Agreement (Rate FTS) dated June 1,           Utilities     Form 10-K (12/31/90)      (10)o.
             1987 between Utilities and Columbia, as
             modified by Supplement No. 1 dated October 1,
             1988; Supplement No. 2 dated November 1, 1989;
             Supplement No. 3 dated November 1, 1990;
             Supplement No. 4 dated November 1, 1990; and
             Supplement No. 5 dated January 1, 1991, as
             further modified pursuant to the orders of the
             Federal Energy Regulatory Commission at Docket
             No. RS92-5-000 reported at Columbia Gas
             Transmission Corp., 64 FERC Para. 61,060 (1993),
             order on rehearing, 64 FERC Para. 61,365 (1993)

   10.3      Transportation Service Agreement (Rate FTS-1)        Utilities     Form 10-K (12/31/90)      (10)p.
             dated November 1, 1989 between Utilities and
             Columbia Gulf Transmission Company, as
             modified pursuant to the orders of the Federal
             Energy Regulatory Commission in Docket No.
             RP93-6-000 reported at Columbia Gulf
             Transmission Co., 64 FERC Para. 61,060 (1993),
             order on rehearing, 64 FERC Para. 61,365 (1993)

                                       36

                                            INCORPORATION BY REFERENCE
- ----------------------------------------------------------------------------------------------------------------
EXHIBIT NO.                    EXHIBIT                           REGISTRANT           FILING             EXHIBIT
- -----------  -----------------------------------------------   ---------------  -------------------      -------
                                                                                             
   10.4      Amended and Restated Sublease Agreement dated           UGI        Form 10-K (9/30/94)        10.35
             April 1, 1988 between Southwest Salt Co. and
             AP Propane, Inc. (the "Southwest Salt Co.
             Agreement")

   10.5      Letter dated July 8, 1998 pursuant to Article           UGI        Form 10-K (9/30/99)        10.5
             1, Section 1.2 of the Southwest Salt Co.
             Agreement re: option to renew for period of
             June 1, 2000 to May 31, 2005 and related
             extension notice

  10.6**     UGI Corporation Directors Deferred                      UGI        Form 10-K (9/30/00)        10.6
             Compensation Plan Amended and Restated as of
             January 1, 2000

  10.7       [Intentionally omitted]

  10.8**     UGI Corporation Annual Bonus Plan dated March           UGI        Form 10-Q (6/30/96)        10.4
             8, 1996

  10.9**     UGI Corporation Directors' Equity Compensation          UGI        Form 10-Q (3/31/03)        10.3
             Plan Amended and Restated as of April 29, 2003

 10.10**     UGI Corporation 1997 Stock Option and Dividend          UGI        Form 10-Q (3/31/03)        10.4
             Equivalent Plan Amended and Restated as of
             April 29, 2003

 10.11**     UGI Corporation 1992 Directors' Stock Plan              UGI        Form 10-Q (3/31/03)        10.2
             Amended and Restated as of April 29, 2003

 10.12**     UGI Corporation Senior Executive Employee               UGI        Form 10-K (9/30/97)        10.12
             Severance Pay Plan effective January 1, 1997

 10.13**     UGI Corporation 2000 Directors' Stock Option            UGI        Form 10-Q (3/31/03)        10.1
             Plan Amended and Restated as of April 29, 2003

 10.14**     UGI Corporation 2000 Stock Incentive Plan               UGI        Form 10-Q (3/31/03)        10.5
             Amended and Restated as of April 29, 2003

 10.15**     1997 Stock Purchase Loan Plan                           UGI        Form 10-K (9/30/97)        10.16

 10.16**     UGI Corporation Supplemental Executive                  UGI        Form 10-Q (6/30/98)         10
             Retirement Plan Amended and Restated effective
             October 1, 1996

 10.17**     [Intentionally omitted]

 10.18       Credit Agreement dated as of August 28, 2003          AmeriGas     Form 10-K (9/30/03)        10.1
             among AmeriGas Propane, L.P., AmeriGas             Partners, L.P.
             Propane, Inc., Petrolane Incorporated,
             Wachovia Bank, National Association, as Agent,
             Issuing Bank and Swing Line Bank, and certain
             banks.

 10.19       [Intentionally omitted]

                                       37

                                            INCORPORATION BY REFERENCE
- ----------------------------------------------------------------------------------------------------------------
EXHIBIT NO.                    EXHIBIT                           REGISTRANT           FILING             EXHIBIT
- -----------  -----------------------------------------------   ---------------  -------------------      -------
                                                                                             
  10.20      Partnership Agreement of Hunlock Creek Energy        Utilities     Form 10-K (9/30/01)        10.24
             Ventures dated December 8, 2001 by and between
             UGI Hunlock Development Company and Allegheny
             Energy Supply Hunlock Creek LLC

  *10.21     Amendment No. 1 to Partnership Agreement of
             Hunlock Creek Energy Ventures, dated June 26,
             2003, by and between UGI Hunlock Development
             Company and Allegheny Energy Supply Hunlock
             Creek, LLC

  10.22      Notice of appointment of Wachovia Bank,               AmeriGas     Form 10-K (9/30/03)        10.6
             National Association as collateral Agent           Partners, L.P.
             effective as of August 28, 2003, pursuant to
             Intercreditor and Agency Agreement dated as of
             April 19, 1995

  10.23      Intercreditor and Agency Agreement dated as of        AmeriGas     Form 10-Q (3/31/95)        10.2
             April 19, 1995 among AmeriGas Propane, Inc.,       Partners, L.P.
             Petrolane Incorporated, AmeriGas Propane,
             L.P., Bank of America National Trust and
             Savings Association ("Bank of America") as
             Agent, Mellon Bank, N.A. as Cash Collateral
             Sub-Agent, Bank of America as Collateral Agent
             and certain creditors of AmeriGas Propane, L.P.

 10.23(a)    First Amendment dated as of July 31, 2001 to          AmeriGas     Form 10-K (9/30/01)        10.8
             Intercreditor and Agency Agreement dated as of     Partners, L.P.
             April 19, 1995

  10.24      General Security Agreement dated as of April          AmeriGas     Form 10-Q (3/31/95)        10.3
             19, 1995 among AmeriGas Propane, L.P., Bank of     Partners, L.P.
             America National Trust and Savings Association
             and Mellon Bank, N.A.

 10.24(a)    First Amendment dated as of July 31, 2001 to          AmeriGas     Form 10-K (9/30/01)        10.10
             General Security Agreement dated as of April       Partners, L.P.
             19, 1995

  10.25      Subsidiary Security Agreement dated as of             AmeriGas     Form 10-Q (3/31/95)        10.4
             April 19, 1995 among AmeriGas Propane, L.P.,       Partners, L.P.
             Bank of America National Trust and Savings
             Association as Collateral Agent and Mellon
             Bank, N.A. as Cash Collateral Agent

 10.25(a)    First Amendment dated as of July 31, 2001 to          AmeriGas     Form 10-K (9/30/01)        10.12
             Subsidiary Security Agreement dated as of          Partners, L.P.
             April 19, 1995

  10.26      Restricted Subsidiary Guarantee dated as of           AmeriGas     Form 10-Q (3/31/95)        10.5
             April 19, 1995 by AmeriGas Propane, L.P. for       Partners, L.P.
             the benefit of Bank of America National Trust
             and Savings Association, as Collateral Agent

                                       38

                                            INCORPORATION BY REFERENCE
- ----------------------------------------------------------------------------------------------------------------
EXHIBIT NO.                    EXHIBIT                           REGISTRANT           FILING             EXHIBIT
- -----------  -----------------------------------------------   ---------------  -------------------      -------
                                                                                             
  10.27      Trademark License Agreement dated April 19,           AmeriGas     Form 10-Q (3/31/95)        10.6
             1995 among UGI Corporation, AmeriGas, Inc.,        Partners, L.P.
             AmeriGas Propane, Inc., AmeriGas Partners,
             L.P. and AmeriGas Propane, L.P.

  10.28      Trademark License Agreement, dated April 19,          AmeriGas     Form 10-Q (3/31/95)        10.7
             1995 among AmeriGas Propane, Inc., AmeriGas        Partners, L.P.
             Partners, L.P. and AmeriGas Propane, L.P.

  10.29      Stock Purchase Agreement dated May 27, 1989,         Petrolane         Registration         10.16(a)
             as amended and restated July 31, 1989, between     Incorporated/      Statement No.
             Texas Eastern Corporation and QFB Partners         AmeriGas, Inc.        33-69450

  10.30      Pledge Agreement dated September 1999 between           UGI        Form 10-K (9/30/99)        10.28
             Eastfield International Holdings, Inc. and
             Raiffeisen Zentralbank Osterreich
             Aktiengesellschaft ("RZB")

  10.31      Pledge Agreement dated September 1999 between           UGI        Form 10-K (9/30/99)        10.29
             EuroGas Holdings, Inc. and RZB

  10.32      Form of Guarantee Agreement dated September             UGI        Form 10-K (9/30/99)        10.30
             1999 between UGI Corporation and RZB relating
             to loan amount of EURO 74 million

  10.33      Form of Guarantee Agreement dated September             UGI        Form 10-K (9/30/00)        10.33
             2000 between UGI Corporation and RZB relating
             to loan amount of EURO 14.9 million

  10.34      Form of Guarantee Agreement dated September             UGI        Form 10-K (9/30/00)        10.34
             2000 between UGI Corporation and RZB relating
             to loan amount of EURO 9 million

 10.34(a)    Amendments dated October 11, 2001 to September          UGI             Form 10-K           10.34(a)
             1999 Guarantee Agreements between UGI                                   (9/30/02)
             Corporation and RZB

 10.35**     Description of Change of Control arrangements           UGI        Form 10-K (9/30/99)        10.33
             for Messrs. Greenberg, Cuzzolina, Hall, Knauss
             and Mendicino

 10.36**     Change of Control Agreement for Mr. Chaney           Utilities     Form 10-K (9/30/03)        10.21

 10.37**     Description of Change of Control arrangement          AmeriGas     Form 10-K (9/30/99)        10.31
             for Mr. Bissell                                    Partners, L.P.

 10.38**     2002 Non-Qualified Stock Option Plan Amended            UGI        Form 10-Q (3/31/03)        10.7
             and Restated as of April 29, 2003

 10.39**     1992 Non-Qualified Stock Option Plan Amended            UGI        Form 10-Q (3/31/03)        10.6
             and Restated as of April 29, 2003

                                       39

                                            INCORPORATION BY REFERENCE
- ----------------------------------------------------------------------------------------------------------------
EXHIBIT NO.                    EXHIBIT                           REGISTRANT           FILING             EXHIBIT
- -----------  -----------------------------------------------   ---------------  -------------------      -------
                                                                                             
  10.40      Service Agreement for comprehensive delivery            UGI        Form 10-K (9/30/00)        10.40
             service (Rate CDS) dated February 23, 1998
             between UGI Utilities, Inc. and Texas Eastern
             Transmission Corporation

  10.41      Service Agreement for comprehensive delivery            UGI        Form 10-K (9/30/00)        10.41
             service (Rate CDS) dated February 23, 1999
             between UGI Utilities, Inc. and Texas Eastern
             Transmission Corporation

  10.42      Purchase Agreement dated January 30, 2001 and         AmeriGas           Form 8-K             10.1
             Amended and Restated on August 7, 2001 by and      Partners, L.P.
             among Columbia Energy Group, Columbia Propane                            (8/8/01)
             Corporation, Columbia Propane, L.P., CP
             Holdings, Inc., AmeriGas Propane, L.P.,
             AmeriGas Partners, L.P., and AmeriGas Propane,
             Inc.

  10.43      [Intentionally omitted]

  10.44      Agreement by Petrolane Incorporated and              Petrolane     Form 10-K (9/23/94)        10.13
             certain of its subsidiaries party thereto           Incorporated
             ("Subsidiaries") for the Sale of the
             Subsidiaries' Inventory and Assets to the
             Goodyear Tire & Rubber Company and D.C.H.,
             Inc., as Purchaser, dated as of December 18,
             1985

  10.45      Purchase Agreement by and among Columbia          National Propane  Form 8-K (4/19/99)        10.5
             Propane, L.P., CP Holdings, Inc., Columbia         Partners, L.P.
             Propane Corporation, National Propane
             Partners, L.P., National Propane Corporation,
             National Propane SPG, Inc., and Triarc
             Companies, Inc. dated as of April 5, 1999

  10.46      Capital Contribution Agreement dated as of            AmeriGas      Form 8-K (8/21/01)        10.2
             August 21, 2001 by and between Columbia            Partners, L.P.
             Propane, L.P. and AmeriGas Propane, L.P.
             acknowledged and agreed to by CP Holdings, Inc.

  10.47      Promissory Note by National Propane L.P., a           AmeriGas     Form 10-K (9/30/01)        10.39
             Delaware limited partnership in favor of           Partners, L.P.
             Columbia Propane Corporation dated July 19,
             1999

  10.48      Loan Agreement dated July 19, 1999, between           AmeriGas     Form 10-K (9/30/01)        10.40
             National Propane, L.P. and Columbia Propane        Partners, L.P.
             Corporation

  10.49      First Amendment dated August 21, 2001 to Loan         AmeriGas     Form 10-K (9/30/01)        10.41
             Agreement dated July 19, 1999 between National     Partners, L.P.
             Propane, L.P. and Columbia Propane Corporation

                                       40

                                            INCORPORATION BY REFERENCE
- ----------------------------------------------------------------------------------------------------------------
EXHIBIT NO.                    EXHIBIT                           REGISTRANT           FILING             EXHIBIT
- -----------  -----------------------------------------------   ---------------  -------------------      -------
                                                                                             
  10.50      Columbia Energy Group Payment Guaranty dated          AmeriGas     Form 10-K (9/30/01)        10.42
             April 5, 1999                                      Partners, L.P.

  10.51      Keep Well Agreement by and between AmeriGas           AmeriGas     Form 10-K (9/30/01)        10.46
             Propane, L.P. and Columbia Propane Corporation     Partners, L.P.
             dated August 21, 2001

  10.52      Management Services Agreement effective as of         AmeriGas     Form 10-K (9/30/01)        10.47
             August 21, 2001 between AmeriGas Propane, Inc.     Partners, L.P.
             and AmeriGas Eagle Holdings, Inc., the general
             partner of AmeriGas Eagle Propane, L.P.

  10.53      Storage Transportation Service Agreement (Rate       Utilities          Form 10-K             10.25
             Schedule SST) between Utilities and Columbia                            (9/30/02)
             dated November 1, 1993, as modified pursuant
             to orders of the Federal Energy Regulatory
             Commission

  10.54      No-Notice Transportation Service Agreement           Utilities          Form 10-K             10.26
             (Rate Schedule NTS) between Utilities and                               (9/30/02)
             Columbia dated November 1, 1993, as modified
             pursuant to orders of the Federal Energy
             Regulatory Commission

  10.55      No-Notice Transportation Service Agreement           Utilities          Form 10-K             10.27
             (Rate Schedule CDS) between Utilities and                               (9/30/02)
             Texas Eastern Transmission dated February
             23, 1999, as modified pursuant to various
             orders of the Federal Energy  Regulatory
             Commission

  10.56      No-Notice Transportation Service Agreement           Utilities          Form 10-K             10.28
             (Rate Schedule CDS) between Utilities and                               (9/30/02)
             Texas Eastern Transmission dated October 31,
             2000, as modified pursuant to various orders
             of the Federal Energy Regulatory Commission

  10.57      Firm Transportation Service Agreement (Rate          Utilities          Form 10-K             10.29
             Schedule FT-1) between Utilities and Texas                              (9/30/02)
             Eastern Transmission dated June 15, 1999,
             as modified pursuant to various orders of the
             Federal Energy Regulatory Commission

  10.58      Firm Transportation Service Agreement (Rate          Utilities          Form 10-K             10.30
             Schedule FT-1) between Utilities and Texas                              (9/30/02)
             Eastern Transmission dated October 31, 2000,
             as modified pursuant to various orders of the
             Federal Energy Regulatory Commission

  10.59      Firm Transportation Service Agreement (Rate          Utilities          Form 10-K             10.31
             Schedule FT) between Utilities and                                      (9/30/02)
             Transcontinental Gas Pipe Line dated October
             1, 1996, as modified pursuant to various
             orders of the Federal Energy Regulatory
             Commission

                                       41

                                            INCORPORATION BY REFERENCE
- ----------------------------------------------------------------------------------------------------------------
EXHIBIT NO.                    EXHIBIT                           REGISTRANT           FILING             EXHIBIT
- -----------  -----------------------------------------------   ---------------  -------------------      -------
                                                                                             
  *10.60     Purchase and Sale Agreement dated as of
             November 30, 2001, as amended by Amendment No.
             1 dated as of August 29, 2003 between UGI
             Energy Services, Inc. and Energy Services
             Funding Corporation

  *10.61     Receivables Purchase Agreement dated as of
             November 30, 2001, as amended by Amendment No.
             1 dated as of August 29, 2003 among Energy
             Services Funding Corporation, UGI Energy
             Services, Inc., Market Street Funding
             Corporation and PNC Bank, National Association

  *10.62     Performance Guaranty dated as of August
             29, 2003 by UGI Corporation in favor of Market
             Street Funding Corporation and PNC Bank,
             National Association

   *13       Pages 13 through 55 of the 2003 Annual Report
             to Shareholders

   *14       Code of Ethics for principal executive,
             financial and accounting officers

    18       Letter of Arthur Andersen LLP regarding change        AmeriGas          Form 10-Q              18
             in accounting principles                           Partners, L.P.       (12/31/00)

   *21       Subsidiaries of the Registrant

   *23       Consent of PricewaterhouseCoopers LLP

  *31.1      Certification by the Chief Executive Officer
             relating to the Registrant's Report on Form
             10-K for the year ended September 30, 2003
             pursuant to Section 302 of the Sarbanes-Oxley
             Act of 2002

  *31.2      Certification by the Chief Financial Officer
             relating to the Registrant's Report on Form
             10-K for the year ended September 30, 2003
             pursuant to Section 302 of the Sarbanes-Oxley
             Act of 2002

   *32       Certification by the Chief Executive Officer
             and the Chief Financial Officer relating to
             the Registrant's Report on Form 10-K for the
             fiscal year ended September 30, 2003, pursuant
             to Section 906 of the Sarbanes-Oxley Act of
             2002.

*    Filed herewith.

**   As required by Item 14(a)(3), this exhibit is identified as a compensatory
     plan or arrangement.

                                       42

(b)      REPORTS ON FORM 8-K:

         The Company furnished information in a Current Report on Form 8-K
during the fourth quarter of fiscal year 2003 as follows:

Date of Report     Item Number(s)                    Content
- --------------     --------------    -----------------------------------------
                               
   07/30/03            7, 12         Press Release reporting financial results
                                     for the third fiscal quarter ended
                                     June 30, 2003

                                       43

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                           UGI CORPORATION

Date: December 16, 2003                    By: Anthony J. Mendicino
                                               ---------------------------------
                                               Anthony J. Mendicino
                                               Senior Vice President - Finance
                                               and Chief Financial Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below on December 16, 2003, by the following persons
on behalf of the Registrant in the capacities indicated.

SIGNATURE                                        TITLE

Lon R. Greenberg                                 Chairman, President
- --------------------------                       and Chief Executive Officer
Lon R. Greenberg                                 (Principal Executive Officer)
                                                 and Director

Anthony J. Mendicino                             Senior Vice President - Finance
- --------------------------                       and Chief Financial Officer
Anthony J. Mendicino                             (Principal Financial Officer

Michael J. Cuzzolina                             Vice President - Accounting and
- --------------------------                       Financial Control
Michael J. Cuzzolina                             (Principal Accounting Officer)

Stephen D. Ban                                   Director
- --------------------------
Stephen D. Ban

Thomas F. Donovan                                Director
- --------------------------
Thomas F. Donovan

                                       44

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below on December 16, 2003, by the following persons
on behalf of the Registrant in the capacities indicated.

SIGNATURE                                     TITLE

Richard C. Gozon                              Director
- ------------------------
Richard C. Gozon

Ernest E. Jones                               Director
- ------------------------
Ernest E. Jones

Anne Pol                                      Director
- ------------------------
Anne Pol

Marvin O. Schlanger                           Director
- ------------------------
Marvin O. Schlanger

James W. Stratton                             Director
- ------------------------
James W. Stratton

                                       45

                        UGI CORPORATION AND SUBSIDIARIES

                              FINANCIAL INFORMATION

                   FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K

                          YEAR ENDED SEPTEMBER 30, 2003

                                       F-1

                        UGI CORPORATION AND SUBSIDIARIES

         INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

The consolidated financial statements and supplementary data of UGI Corporation
and subsidiaries, together with the report thereon of PricewaterhouseCoopers LLP
dated November 17, 2003 and Arthur Andersen LLP dated November 16, 2001, listed
in the following index, are included in UGI's 2003 Annual Report to Shareholders
and are incorporated in this Form 10-K Annual Report by reference. With the
exception of the pages listed in this index and information incorporated in
Items 1, 2, 7, 7A and 8, the 2003 Annual Report to Shareholders is not to be
deemed filed as part of this Report.

                                                                            Reference
                                                                   ----------------------------
                                                                                      Annual
                                                                                     Report to
                                                                   Form 10-K       Shareholders
                                                                      (page)           (page)
                                                                   -----------       ----------
                                                                             
Reports of Independent Accountants:
   On Consolidated Financial Statements                            Exhibit 13           28
   On Financial Statement Schedules                                F-4 to F-5
Financial Statements:
   Consolidated Balance Sheets, September 30,
        2003 and 2002                                              Exhibit 13        30 to 31
   For the years ended September 30, 2003, 2002 and 2001:
        Consolidated Statements of Income                          Exhibit 13           29
        Consolidated Statements of Cash Flows                      Exhibit 13           32
        Consolidated Statements of Stockholders'
           Equity                                                  Exhibit 13           33

                                      F-2

                        UGI CORPORATION AND SUBSIDIARIES

   INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (CONTINUED)

                                                                               Reference
                                                                     ---------------------------------
                                                                                             Annual
                                                                                            Report to
                                                                     Form 10-K             Shareholders
                                                                       (page)                 (page)
                                                                   ------------            ------------
                                                                                     
        Notes to Consolidated Financial
           Statements                                               Exhibit 13             34 to 55
Supplementary Data (unaudited):
    Quarterly Data for the years ended
        September 30, 2003 and 2002                                 Exhibit 13                53
Financial Statement Schedules:
    For the years ended September 30, 2003, 2002 and 2001:
           I        -  Condensed Financial
                           Information of Registrant
                           (Parent Company)                         S-1 to S-3
           II       -  Valuation and Qualifying
                           Accounts                                 S-4 to S-5

Annual Reports on Form 10-K/A

   Annual Reports on Form 10-K/A for the UGI Utilities, Inc. and AmeriGas
   Propane, Inc. savings plans will be filed by amendment within the time period
   specified by Rule 15d-21(b).

We have omitted all other financial statement schedules because the required
information is either (1) not present; (2) not present in amounts sufficient to
require submission of the schedule; or (3) the information required is included
elsewhere in the financial statements or related notes.

                                      F-3

                         REPORT OF INDEPENDENT AUDITORS

To the Directors and Stockholders of
UGI Corporation:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 15a (1) and (2) present fairly, in all material respects,
the financial position of UGI Corporation and its subsidiaries at September 30,
2003 and 2002, and the results of their operations and their cash flows for each
of the two years in the period ended September 30, 2003 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedules listed in the index
appearing under Item 15a (1) and (2) present fairly, in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedules are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. The consolidated financial
statements of UGI Corporation and its subsidiaries as of and for the year ended
September 30, 2001 were audited by other independent accountants who have ceased
operations. Those independent accountants expressed an unqualified opinion on
those financial statements in their report dated November 16, 2001.

As discussed in Note 1 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" in fiscal 2002.

As discussed above, the consolidated financial statements of UGI Corporation and
its subsidiaries for the year ended September 30, 2001, were audited by other
independent auditors who have ceased operations. As described in Note 1, these
financial statements have been restated to reflect a 3-for-2 common stock split.
We audited the adjustments described in Note 1 that were applied to restate the
2001 consolidated financial statements for the 3-for-2 common stock split. In
our opinion, such adjustments are appropriate and have been properly applied. As
described in Note 1, these financial statements have also been revised to
include the transitional disclosures required by Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" which was
adopted by the Company as of October 1, 2001. We audited the transitional
disclosures described in Note 1. In our opinion, the transitional disclosures
for 2001 in Note 1 are appropriate. However, we were not engaged to audit,
review or apply procedures to the 2001 consolidated financial statements of the
Company other than with respect to such adjustments and, accordingly, we do not
express an opinion or any other form of assurance on the 2001 consolidated
financial statements taken as a whole.

PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 17, 2003

                                      F-4

          THIS REPORT IS A COPY OF THE PREVIOUSLY ISSUED ACCOUNTANT'S
           REPORT OF ARTHUR ANDERSEN LLP AND HAS NOT BEEN REISSUED BY
                              ARTHUR ANDERSEN LLP.

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of UGI Corporation:

We have audited, in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements included in UGI
Corporation's annual report to shareholders for the year ended September 30,
2001, incorporated by reference in this Form 10-K, and have issued our report
thereon dated November 16, 2001. Our report on the financial statements includes
an explanatory paragraph with respect to the changes in the method of accounting
for tank installation costs and nonrefundable tank fees and the adoption of SFAS
No. 133 as discussed in Notes 1 and 3 to the financial statements. Our audits
were made for the purpose of forming an opinion on those basic consolidated
financial statements taken as a whole. The schedules listed in the Index on
pages F-2 and F-3 are the responsibility of UGI Corporation's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Philadelphia, Pennsylvania
November 16, 2001

                                      F-5

                        UGI CORPORATION AND SUBSIDIARIES

   SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)

                                 BALANCE SHEETS
                              (Millions of dollars)

                                                                                       September 30,
ASSETS                                                                             2003              2002
- ------                                                                             ----              ----
                                                                                               
Current assets:
     Cash and cash equivalents                                                    $  0.6             $  0.2
     Accounts and notes receivable                                                   1.7                2.2
     Deferred income taxes                                                           0.2                0.2
     Prepaid expenses and other current assets                                       0.5                0.3
                                                                                   -----              -----
        Total current assets                                                         3.0                2.9
Investments in subsidiaries                                                        689.4              388.4
Other assets                                                                         8.5                4.5
                                                                                   -----              -----
        Total assets                                                              $700.9             $395.8
                                                                                  ======             ======

LIABILITIES  AND  COMMON  STOCKHOLDERS'  EQUITY

Current liabilities:
     Accounts and notes payable                                                   $ 10.7             $ 10.2
     Accrued liabilities                                                             7.7                3.8
                                                                                   -----              -----
        Total current liabilities                                                   18.4               14.0
Noncurrent liabilities                                                             112.7               64.0
Commitments and contingencies

Common stockholders' equity:

     Common Stock, without par value (authorized - 150,000,000 shares;
        issued - 49,798,097 shares)                                                582.4              396.6
     Retained earnings                                                              90.9               39.7
     Accumulated other comprehensive income                                          4.7                6.6
                                                                                   -----              -----
                                                                                   678.0              442.9
        Less treasury stock, at cost                                              (108.2)            (125.1)
                                                                                   -----              -----
          Total common stockholders' equity                                        569.8              317.8
                                                                                   -----              -----
          Total liabilities and common stockholders' equity                       $700.9             $395.8
                                                                                  ======             ======

Commitments and Contingencies:

     In addition to the guarantees of FLAGA debt described in Note 4 to
Consolidated Financial Statements, at September 30, 2003, UGI Corporation had
agreed to indemnify the issuers of $42.0 of surety bonds issued on behalf of
certain UGI subsidiaries. As of September 30, 2003, UGI Corporation is
authorized to guarantee up to $10.0 and $180.0 of supplier obligations on behalf
of UGI Development Company and UGI Energy Services, Inc., respectively. At
September 30, 2003, UGI Corporation had guarantees outstanding of $2.0 and
$152.6 on behalf of UGI Development Company and UGI Energy Services, Inc.,
respectively.

                                      S-1

                        UGI CORPORATION AND SUBSIDIARIES

   SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)

                              STATEMENTS OF INCOME
                (Millions of dollars, except per share amounts)

                                                                          Year Ended
                                                                         September 30,
                                                               ---------------------------------
                                                               2003          2002           2001
                                                               ----          ----           ----
                                                                                  
    Revenues                                                    $-             $-             $-
    Costs and expenses:
       Operating and administrative expenses                  18.6           13.6           10.8
       Other income, net                                     (17.6)         (12.4)          (9.7)
                                                             -----          -----           ----
                                                               1.0            1.2            1.1
                                                             -----          -----           ----
    Operating loss
                                                              (1.0)          (1.2)          (1.1)
    Interest expense on intercompany debt
                                                              (1.5)          (1.3)          (2.4)
                                                             -----          -----           ----
    Loss before income taxes
                                                              (2.5)          (2.5)          (3.5)
    Income tax benefit
                                                              (2.4)          (0.9)          (0.7)
                                                             -----          -----           ----
    Loss before equity in income
        of unconsolidated subsidiaries                        (0.1)          (1.6)          (2.8)
    Equity in income before accounting changes
        of unconsolidated subsidiaries                        99.0           77.1           54.8
                                                            ------         ------         ------
    Income before equity in accounting changes
       of unconsolidated subsidiaries                         98.9           75.5           52.0
    Equity in accounting changes
       of unconsolidated subsidiaries                           --             --            4.5
                                                             -----          -----           ----
    Net income
                                                           $  98.9        $  75.5        $  56.5
                                                            ======         ======         ======
    Earnings per common share:
        Basic:
           Income before accounting changes                $  2.34        $  1.83        $  1.28
           Cumulative effect of accounting changes, net         --             --           0.11
                                                             -----          -----           ----
           Net income                                      $  2.34        $  1.83        $  1.39
                                                            ======         ======         ======
        Diluted:
           Income before accounting changes                $  2.29        $  1.80        $  1.27
           Cumulative effect of accounting changes, net         --             --           0.11
                                                             -----          -----           ----
           Net income                                      $  2.29        $  1.80        $  1.38
                                                            ======         ======         ======
    Average common shares outstanding (millions):
        Basic                                               42.220         41.325         40.745
                                                            ======         ======         ======
        Diluted                                             43.236         41.907         41.060
                                                            ======         ======         ======

                                      S-2

                        UGI CORPORATION AND SUBSIDIARIES

   SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)

                            STATEMENTS OF CASH FLOWS
                              (Millions of dollars)

                                                                                Year Ended
                                                                               September 30,
                                                                 -----------------------------------------
                                                                  2003             2002             2001
                                                                  ----             ----             ----
                                                                                          
NET CASH PROVIDED BY OPERATING
     ACTIVITIES (A)
                                                                 $ 97.2           $113.9           $108.3
CASH  FLOWS  FROM  INVESTING  ACTIVITIES:
     Investments in unconsolidated subsidiaries                  (117.1)          (101.5)           (49.2)
     Net repayments (advances) to unconsolidated subsidiary
                                                                     --             13.0            (13.0)
                                                                 ------            -----            -----
        Net cash used by investing activities                    (117.1)           (88.5)           (62.2)

CASH  FLOWS  FROM  FINANCING  ACTIVITIES:
     Payment of dividends on Common Stock                         (47.8)           (44.8)           (53.2)
     Issuance of intercompany long-term debt
                                                                   44.5              8.0               --
     Issuance of Common Stock                                      23.7             11.0              7.6
     Repurchases of Common Stock
                                                                   (0.1)              --             (1.0)
                                                                 ------            -----            -----
        Net cash used by financing activities                      20.3            (25.8)           (46.6)
                                                                 ------            -----            -----
Cash and cash equivalents increase (decrease)
                                                                 $  0.4           $ (0.4)          $ (0.5)
                                                                 ======            =====            =====
Cash and cash equivalents:
     End of period
                                                                 $  0.6           $  0.2           $  0.6
     Beginning of period                                            0.2              0.6              1.1
                                                                 ------            -----            -----
         Increase (decrease)
                                                                 $  0.4           $ (0.4)          $ (0.5)
                                                                 ======            =====            =====

(a) Includes dividends received from unconsolidated subsidiaries of $94.0,
    $111.7 and $110.4, respectively, for the years ended September 30, 2003,
    2002 and 2001.

                                      S-3

                        UGI CORPORATION AND SUBSIDIARIES
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                              (Millions of dollars)

                                                                       Charged
                                                       Balance at     (credited)                    Balance at
                                                       beginning     to costs and                     end of
                                                        of year        expenses        Other           year
                                                      --------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2003
- -----------------------------
                                                                                        
Reserves deducted from assets in
  the consolidated balance sheet:
            Allowance for doubtful accounts             $   11.8       $ 18.5       $(15.8)(1)      $    14.8
                                                       ===========                                  =========
                                                                                    $  0.3 (2)
Other reserves:
            Self-insured property and casualty
            liability                                   $   42.7       $ 21.2       $(15.1)(3)      $   48.4
                                                       ===========                                  =========
                                                                                      (0.4)(2)
            Insured property and casualty liability     $     3.5      $ (2.8)      $ (0.1)(2)      $    0.6
                                                       ===========                                  =========
            Environmental, litigation and other         $   13.9       $   6.0      $ (4.6)(3)      $   15.7
                                                       ===========                                  =========
                                                                                       0.4 (2)
YEAR ENDED SEPTEMBER 30, 2002
- -----------------------------
Reserves deducted from assets in
  the consolidated balance sheet:
            Allowance for doubtful accounts             $   15.6       $ 14.2       $(18.0)(1)      $    11.8
                                                       ===========                                  =========
            Allowance for amortization of
              other deferred costs - AmeriGas Propane   $     1.1      $    -       $ (1.1)(2)      $       -
                                                       ===========                                  =========
Other reserves:
            Self-insured property and casualty
            liability                                   $   37.4       $ 19.0       $(15.6)(3)      $    42.7
                                                       ===========                                  =========
                                                                                       1.9 (2)
            Insured property and casualty liability     $     1.5      $    -       $  2.0 (2)      $     3.5
                                                       ===========                                  =========
            Environmental, litigation and other         $   11.7       $   3.7      $ (2.6)(3)      $    13.9
                                                       ===========                                  =========
                                                                                       1.1 (2)

                                      S-4

                        UGI CORPORATION AND SUBSIDIARIES
           SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (CONTINUED)
                              (Millions of dollars)

YEAR ENDED SEPTEMBER 30, 2001
- -----------------------------
                                                                                           
Reserves deducted from assets in
  the consolidated balance sheet:

     Allowance for doubtful accounts                 $     9.3         $18.3        $ (11.7)(1)         $   15.6
                                                    ============                                       ===========
                                                                                       (0.3)(2)
     Allowance for amortization of
       other deferred costs - AmeriGas Propane       $     1.0         $ 0.1        $     -             $     1.1
                                                    ============                                       ===========

Other reserves:

     Self-insured property and casualty
     liability                                       $   36.3          $15.8        $ (15.2)(3)        $    37.4
                                                    ============                                       ===========
                                                                                        0.5 (2)

     Insured property and casualty liability         $     2.1         $(0.6)       $     -            $     1.5
                                                    ============                                       ===========

     Environmental, litigation and other             $   12.0          $  1.9       $  (2.6)(3)         $   11.7
                                                    ============                                       ===========
                                                                                        0.4 (2)

(1) Uncollectible accounts written off, net of recoveries.
(2) Other adjustments.
(3) Payments, net.

                                      S-5

                                  EXHIBIT INDEX

EXHIBIT NO.                             DESCRIPTION
- -----------         ------------------------------------------------------------
  3.2               Bylaws of UGI as amended through September 30, 2003

  10.21             Amendment No. 1 to Partnership Agreement of Hunlock Creek
                    Energy Ventures dated June 26, 2003

  10.60             Purchase and Sale Agreement dated as of November 30, 2001,
                    and amended by Amendment No. 1 dated as of August 29, 2003
                    between UGI Energy Services, Inc. and Energy Services
                    Funding Corporation

  10.61             Receivables Purchase Agreement dated as of November 30,
                    2001, as amended by Amendment No. 1 dated as of August 29,
                    2003 among Energy Services Funding Corporation, UGI Energy
                    Services, Inc., Market Street Funding Corporation and PNC
                    Bank, National Association

  10.62             Performance Guaranty dated as of August 29, 2003 by UGI
                    Corporation in favor of Market Street Funding Corporation
                    and PNC Bank, National Association

  13                Pages 13 through 55 of the 2003 Annual Report to
                    Shareholders

  14                Code of Ethics for principal executive, financial and
                    accounting officers

  21                Subsidiaries of the Registrant

  23                Consent of PricewaterhouseCoopers LLP

  31.1              Certification by the Chief Executive Officer pursuant to
                    Section 302 of the Sarbanes-Oxley Act

  31.2              Certification by the Chief Financial Officer pursuant to
                    Section 302 of the Sarbanes-Oxley Act

  32                Certification by the Chief Executive Officer and Chief
                    Financial Officer pursuant to Section 906 of the
                    Sarbanes-Oxley Act

                                       46

                                                                     EXHIBIT 3.2

                                     BYLAWS
                                       OF
                                 UGI CORPORATION
                     (A PENNSYLVANIA REGISTERED CORPORATION)

                                    ARTICLE I

                             OFFICES AND FISCAL YEAR

         SECTION 1.01. REGISTERED OFFICE. The registered office of the
corporation in the Commonwealth of Pennsylvania shall be at 460 North Gulph
Road, King of Prussia, Montgomery County, Pennsylvania 19406, until otherwise
established by an amendment of the articles of incorporation (the "articles") or
by the board of directors and a record of such change is filed with the
Department of State in the manner provided by law.

         SECTION 1.02. OTHER OFFICES. The corporation may also have offices at
such other places within or without the Commonwealth of Pennsylvania as the
board of directors may from time to time appoint or the business of the
corporation may require.

         SECTION 1.03. FISCAL YEAR. The fiscal year of the corporation shall
begin on the first day of October in each year.

                                   ARTICLE II

                        NOTICE-WAIVERS-MEETINGS GENERALLY

         SECTION 2.01. MANNER OF GIVING NOTICE.

         (a) General Rule. Any notice required to be given to any person under
the provisions of the Business Corporation Law or by the articles or these
bylaws, shall be given to the person either personally or by sending a copy
thereof:

                  (1) By first class or express mail, postage prepaid, or
         courier service, charges prepaid, to his or her postal address
         appearing on the books of the corporation or, in the case of directors,
         supplied by the director to the corporation for the purpose of notice.
         Notice pursuant to this clause (1) shall be deemed to have been given
         to the person entitled thereto when deposited in the United States mail
         or with a courier service for delivery to that person. A notice of
         meeting shall specify the place, day and hour of the meeting and any
         other information required by any other provision of the Business
         Corporation Law, the articles or these bylaws.

                  (2) By facsimile transmission, e-mail or other electronic
         communication to his or her facsimile number or address for e-mail or
         other electronic communications supplied by

         him or her to the corporation for the purpose of notice. Notice
         pursuant to this clause (2) shall be deemed to have been given to the
         person entitled thereto when sent.

         (b) Bulk Mail. If the corporation has more than 30 shareholders, notice
of any regular or special meeting of the shareholders, or any other notice
required by the Business Corporation Law or by the articles or these bylaws to
be given to all shareholders or to all holders of a class or series of shares,
may be given by any class of postpaid mail if the notice is deposited in the
United States mail at least 20 days prior to the day named for the meeting or
any corporate or shareholder action specified in the notice.

         (c) Adjourned Shareholder Meetings. When a meeting of shareholders is
adjourned, it shall not be necessary to give any notice of the adjourned meeting
or of the business to be transacted at an adjourned meeting, other than by
announcement at the meeting at which the adjournment is taken, unless the board
fixes a new record date for the adjourned meeting in which event notice shall be
given in accordance with Section 2.03.

         SECTION 2.02. NOTICE OF MEETINGS OF BOARD OF DIRECTORS. Notice of a
regular meeting of the board of directors need not be given. Notice of every
special meeting of the board of directors shall be given to each director by
telephone or in writing at least 24 hours (in the case of notice by telephone,
facsimile transmission, e-mail or other electronic communication) or 48 hours
(in the case of notice by telegraph, courier service or express mail) or five
days (in the case of notice by first class mail) before the time at which the
meeting is to be held. Every such notice shall state the time and place of the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board need be specified in a notice of the
meeting.

         SECTION 2.03. NOTICE OF MEETINGS OF SHAREHOLDERS.

              (a) General Rule. Except as otherwise provided in Section 2.01(b)
or in the articles, written notice of every meeting of the shareholders shall be
given by, or at the direction of, the secretary or other authorized person to
each shareholder of record entitled to vote at the meeting at least (1) ten days
prior to the day named for a meeting (and, in case of a meeting called to
consider a merger, consolidation, share exchange or division, to each
shareholder of record not entitled to vote at the meeting) called to consider a
fundamental change under 15 Pa.C.S. Chapter 19 or (2) five days prior to the day
named for the meeting in any other case. If the secretary neglects or refuses to
give notice of a meeting, the person or persons calling the meeting may do so.
In the case of a special meeting of shareholders, the notice shall specify the
general nature of the business to be transacted.

              (b) Notice of Action by Shareholders on Bylaws. In the case of a
meeting of shareholders that has as one of its purposes action on the bylaws,
written notice shall be given to each shareholder that the purpose, or one of
the purposes, of the meeting is to consider the adoption, amendment or repeal of
the bylaws. There shall be included in, or enclosed with, the notice a copy of
the proposed amendment or a summary of the changes to be effected thereby.

              (c) Notice of Action by Shareholders on Fundamental Change. In the
case of a meeting of the shareholders that has as one of its purposes action
with respect to any fundamental change under 15 Pa.C.S. Chapter 19, each
shareholder shall be given, together with written notice of the meeting, a copy
or summary of the amendment or plan to be considered at the meeting in
compliance with the provisions of Chapter 19.

                                      -2-

              (d) Notice of Action by Shareholders Giving Rise to Dissenters'
Rights. In the case of a meeting of the shareholders that has as one of its
purposes action that would give rise to dissenters' rights under the provisions
of 15 Pa.C.S. Subchapter 15D, each shareholder, to the extent entitled thereto
under the Business Corporation Law, shall be given, together with written notice
of the meeting:

                  (1) a statement that the shareholders have a right to dissent
and obtain payment of the fair value of their shares by complying with the
provisions of Subchapter 15D (relating to dissenters' rights); and

                  (2) a copy of Subchapter 15D.

         SECTION 2.04. WAIVER OF NOTICE.

              (a) Written Waiver. Whenever any written notice is required to be
given under the provisions of the Business Corporation Law, the articles or
these bylaws, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of the notice. Neither the business to be
transacted at, nor the purpose of, a meeting need be specified in the waiver of
notice of the meeting.

              (b) Waiver by Attendance. Attendance of a person at any meeting
shall constitute a waiver of notice of the meeting except where a person attends
a meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting was not lawfully called
or convened.

         SECTION 2.05. MODIFICATION OF PROPOSAL CONTAINED IN NOTICE. Whenever
the language of a proposed resolution is included in a written notice of a
meeting required to be given under the provisions of the Business Corporation
Law or the articles or these bylaws, the meeting considering the resolution may
without further notice adopt it with such clarifying or other amendments as do
not enlarge its original purpose.

         SECTION 2.06. EXCEPTION TO REQUIREMENT OF NOTICE.

              (a) General Rule. Whenever any notice or communication is required
to be given to any person under the provisions of the Business Corporation Law
or by the articles or these bylaws or by the terms of any agreement or other
instrument or as a condition precedent to taking any corporate action and
communication with that person is then unlawful, the giving of the notice or
communication to that person shall not be required.

              (b) Shareholders Without Forwarding Addresses. Notice or other
communications need not be sent to any shareholder with whom the corporation has
been unable to communicate for more than 24 consecutive months because
communications to the shareholder are returned unclaimed or the shareholder has
otherwise failed to provide the corporation with a current address. Whenever the
shareholder provides the corporation with a current address, the corporation
shall commence sending notices and other communications to the shareholder in
the same manner as to other shareholders.

                                      -3-

         SECTION 2.07. USE OF CONFERENCE TELEPHONE AND OTHER TECHNOLOGY. Any
director may participate in any meeting of the board of directors, and the board
of directors may provide by resolution with respect to a specific meeting or
with respect to a class of meetings that one or more persons may participate in
a meeting of the shareholders of the corporation, by means of conference
telephone or other electronic technology by means of which all persons
participating in the meeting can hear each other. Participation in a meeting
pursuant to this section shall constitute presence in person at the meeting.

                                   ARTICLE III

                                  SHAREHOLDERS

         SECTION 3.01. PLACE OF MEETING. All meetings of the shareholders of the
corporation shall be held at the registered office of the corporation unless
another place is designated by the board of directors in the notice of a
meeting. If a meeting of shareholders is held by means of the Internet or other
electronic technology pursuant to which the shareholders have an opportunity to
read or hear the proceedings substantially concurrently with their occurrence,
vote on matters submitted to the shareholders and pose questions to the
directors, the meeting need not be held at a particular geographic location.

         SECTION 3.02. ANNUAL MEETING. The board of directors may fix and
designate the date and time of the annual meeting of the shareholders, but if no
such date and time is fixed and designated by the board, the meeting for any
calendar year shall be held on the first Tuesday in March in such year, if not a
legal holiday under the laws of Pennsylvania, and, if a legal holiday, then on
the next succeeding business day, not a Saturday, at 10:00 o'clock A.M., and at
said meeting the shareholders then entitled to vote shall elect directors and
shall transact such other business as may properly be brought before the
meeting. If the annual meeting shall not have been called and held within six
months after the designated time, any shareholder may call the meeting at any
time thereafter.

         SECTION 3.03. SPECIAL MEETINGS. Special meetings of the shareholders
may be called at any time by the chief executive officer or by resolution of the
board of directors, who may fix the date, time and place of the meeting. If the
chief executive officer or the board does not fix the date, time or place of the
meeting, it shall be the duty of the secretary to do so. A date fixed by the
secretary shall not be more than 60 days after the date of the receipt of the
request from the chief executive officer or adoption of the resolution of the
board calling the special meeting.

         SECTION 3.04. QUORUM AND ADJOURNMENT.

              (a) General Rule. A meeting of shareholders of the corporation
duly called shall not be organized for the transaction of business unless a
quorum is present. The presence of shareholders entitled to cast at least a
majority of the votes that all shareholders are entitled to cast on a particular
matter to be acted upon at the meeting shall constitute a quorum for the
purposes of consideration and action on the matter. Shares of the corporation
owned, directly or indirectly, by it and controlled, directly or indirectly, by
the board of directors of this corporation, as such, shall not be counted in
determining the total number of outstanding shares for quorum purposes at any
given time.

                                      -4-

              (b) Withdrawal of a Quorum. The shareholders present at a duly
organized meeting can continue to do business until adjournment notwithstanding
the withdrawal of enough shareholders to leave less than a quorum.

              (c) Adjournments Generally. Any regular or special meeting of the
shareholders, including one at which directors are to be elected and one which
cannot be organized because a quorum has not attended, may be adjourned for such
period and to such place as the shareholders present and entitled to vote shall
direct.

              (d) Electing Directors at Adjourned Meeting. Those shareholders
entitled to vote who attend a meeting called for the election of directors that
has been previously adjourned for lack of a quorum, although less than a quorum
as fixed in this section, shall nevertheless constitute a quorum for the purpose
of electing directors.

              (e) Other Action in Absence of Quorum. Those shareholders entitled
to vote who attend a meeting of shareholders that has been previously adjourned
for one or more periods aggregating at least 15 days because of an absence of a
quorum, although less than a quorum as fixed in this section, shall nevertheless
constitute a quorum for the purpose of acting upon any matter set forth in the
notice of the meeting if the notice states that those shareholders who attend
the adjourned meeting shall nevertheless constitute a quorum for the purpose of
acting upon the matter.

              (f) Effect of Proxy on Quorum. - If a proxy casts a vote on behalf
of a shareholder on any issue other than a procedural motion considered at a
meeting of shareholders, the shareholder shall be deemed to be present during
the entire meeting for purposes of determining whether a quorum is present for
consideration of any other issue.

         SECTION 3.05. ACTION BY SHAREHOLDERS. Except as otherwise provided in
the Business Corporation Law or the articles or these bylaws, whenever any
corporate action is to be taken by vote of the shareholders of the corporation,
it shall be authorized upon receiving the affirmative vote of a majority of the
votes cast by all shareholders entitled to vote thereon and, if any shareholders
are entitled to vote thereon as a class, upon receiving the affirmative vote of
a majority of the votes cast by the shareholders entitled to vote as a class.
Except when acting by unanimous consent to remove a director or directors, the
shareholders of the corporation may act only at a duly organized meeting.

         SECTION 3.06. CONDUCT OF SHAREHOLDERS MEETING. At every meeting of the
shareholders, the chairman of the board, if there be one, or, in the case of
vacancy in office or absence of the chairman of the board, one of the following
persons present in the order stated: the vice chairman of the board, if there be
one, the president, the vice presidents in their order of rank and seniority, or
a person chosen by vote of the shareholders present, shall act as the presiding
officer of the meeting. The secretary or, in the absence of the secretary, an
assistant secretary, or, in the absence of both the secretary and assistant
secretaries, a person appointed by the chairman of the meeting, shall act as
secretary of the meeting. Except as otherwise provided by prior action of the
board of directors, the presiding officer of the meeting shall determine the
order of business and shall have the authority to establish rules for the
conduct of the meeting.

                                      -5-

         SECTION 3.07. VOTING RIGHTS OF SHAREHOLDERS. Unless otherwise provided
in the articles, every shareholder of the corporation shall be entitled to one
vote for every share standing in the name of the shareholder on the books of the
corporation.

         SECTION 3.08. VOTING AND OTHER ACTION BY PROXY.

              (a) General Rule.

                  (1) Every shareholder entitled to vote at a meeting of
shareholders may authorize another person to act for the shareholder by proxy.

                  (2) The presence of, or vote or other action at a meeting of
shareholders by a proxy of a shareholder shall constitute the presence of, or
vote or action by the shareholder.

                  (3) Where two or more proxies of a shareholder are present,
the corporation shall, unless otherwise expressly provided in the proxy, accept
as the vote of all shares represented thereby the vote cast by a majority of
them and, if a majority of the proxies cannot agree whether the shares
represented shall be voted or upon the manner of voting the shares, the voting
of the shares shall be divided equally among those persons.

              (b) Execution and Filing. Every proxy shall be executed or
authenticated by the shareholder or by the duly authorized attorney-in-fact of
the shareholder and filed with or transmitted to the secretary of the
corporation or its designated agent. A shareholder or his or her duly authorized
attorney-in fact may execute or authenticate a writing or transmit an electronic
message authorizing another person to act for such shareholder by proxy. A
telegram, telex, cablegram, datagram, email, Internet communication or other
means of electronic transmission from a shareholder or attorney-in-fact, or a
photographic, facsimile or similar reproduction of a writing executed by a
shareholder or attorney-in-fact:

                  (1) may be treated as properly executed or authenticated for
purposes of this subsection; and

                  (2) shall be so treated if it sets forth or utilizes a
confidential and unique identification number or other mark furnished by the
corporation to the shareholder for the purposes of a particular meeting or
transaction.

         (c) Revocation. A proxy, unless coupled with an interest, shall be
revocable at will, notwithstanding any other agreement or any provision in the
proxy to the contrary, but the revocation of a proxy shall not be effective
until written notice thereof has been given to the secretary of the corporation
or its designated agent in writing or by electronic transmission. An unrevoked
proxy shall not be valid after three years from the date of its execution,
authentication or transmission unless a longer time is expressly provided
therein. A proxy shall not be revoked by the death or incapacity of the maker
unless, before the vote is counted or the authority is exercised, written notice
of the death or incapacity is given to the secretary of the corporation or its
designated agent.

              (d) Expenses. The corporation shall pay the reasonable expenses of
solicitation of votes, proxies or consents of shareholders by or on behalf of
the board of directors or its nominees for election to the board, including
solicitation by professional proxy solicitors and otherwise.

                                      -6-

         SECTION 3.09. VOTING BY FIDUCIARIES AND PLEDGEES. Shares of the
corporation standing in the name of a trustee or other fiduciary and shares held
by an assignee for the benefit of creditors or by a receiver may be voted by the
trustee, fiduciary, assignee or receiver. A shareholder whose shares are pledged
shall be entitled to vote the shares until the shares have been transferred into
the name of the pledgee, or a nominee of the pledgee, but nothing in this
section shall affect the validity of a proxy given to a pledgee or nominee.

         SECTION 3.10. VOTING BY JOINT HOLDERS OF SHARES.

              (a) General Rule. Where shares of the corporation are held jointly
or as tenants in common by two or more persons, as fiduciaries or otherwise:

                  (1) if only one or more of such persons is present in person
or by proxy, all of the shares standing in the names of such persons shall be
deemed to be represented for the purpose of determining a quorum and the
corporation shall accept as the vote of all the shares the vote cast by a joint
owner or a majority of them; and

                  (2) if the persons are equally divided upon whether the shares
held by them shall be voted or upon the manner of voting the shares, the voting
of the shares shall be divided equally among the persons without prejudice to
the rights of the joint owners or the beneficial owners thereof among
themselves.

              (b) Exception. If there has been filed with the secretary of the
corporation a copy, certified by an attorney at law to be correct, of the
relevant portions of the agreement under which the shares are held or the
instrument by which the trust or estate was created or the order of court
appointing them or of an order of court directing the voting of the shares, the
persons specified as having such voting power in the document latest in date of
operative effect so filed, and only those persons, shall be entitled to vote the
shares but only in accordance therewith.

         SECTION 3.11. VOTING BY CORPORATIONS.

              (a) Voting by Corporate Shareholders. Any corporation that is a
shareholder of this corporation may vote at meetings of shareholders of this
corporation by any of its officers or agents, or by proxy appointed by any
officer or agent, unless some other person, by resolution of the board of
directors of the other corporation or a provision of its articles or bylaws, a
copy of which resolution or provision certified to be correct by one of its
officers has been filed with the secretary of this corporation, is appointed its
general or special proxy in which case that person shall be entitled to vote the
shares.

              (b) Controlled Shares. Shares of this corporation owned, directly
or indirectly, by it and controlled, directly or indirectly, by the board of
directors of this corporation, as such, shall not be voted at any meeting and
shall not be counted in determining the total number of outstanding shares for
voting purposes at any given time.

                                      -7-

         SECTION 3.12. DETERMINATION OF SHAREHOLDERS OF RECORD.

              (a) Fixing Record Date. The board of directors may fix a time
prior to the date of any meeting of shareholders as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall be not
more than 90 days prior to the date of the meeting of shareholders. Only
shareholders of record on the date fixed shall be so entitled notwithstanding
any transfer of shares on the books of the corporation after any record date
fixed as provided in this subsection. The board of directors may similarly fix a
record date for the determination of shareholders of record for any other
purpose. When a determination of shareholders of record has been made as
provided in this section for purposes of a meeting, the determination shall
apply to any adjournment thereof unless the board fixes a new record date for
the adjourned meeting.

              (b) Determination When a Record Date is Not Fixed. If a record
date is not fixed:

                  (1) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the day next preceding the day on which notice is given.

                  (2) The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.

              (c) Certification by Nominee. The board of directors may adopt a
procedure whereby a shareholder of the corporation may certify in writing to the
corporation that all or a portion of the shares registered in the name of the
shareholder are held for the account of a specified person or persons. Upon
receipt by the corporation of a certification complying with the procedure, the
persons specified in the certification shall be deemed, for the purposes set
forth in the certification, to be the holders of record of the number of shares
specified in place of the shareholder making the certification.

         SECTION 3.13. VOTING LISTS.

              (a) General Rule. The officer or agent having charge of the
transfer books for shares of the corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by each.
The list shall be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the meeting for the purposes thereof except that, if the corporation has
5,000 or more shareholders, in lieu of the making of the list the corporation
may make the information therein available at the meeting by any other means.

              (b) Effect of List. Failure to comply with the requirements of
this section shall not affect the validity of any action taken at a meeting
prior to a demand at the meeting by any shareholder entitled to vote thereat to
examine the list. The original share register or transfer book, or a duplicate
thereof kept in the Commonwealth of Pennsylvania, shall be prima facie evidence
as to who are the shareholders entitled to examine the list or share register or
transfer book or to vote at any meeting of shareholders.

                                      -8-

         SECTION 3.14. JUDGES OF ELECTION.

              (a) Appointment. In advance of any meeting of shareholders of the
corporation, the board of directors may appoint judges of election, who need not
be shareholders, to act at the meeting or any adjournment thereof. If judges of
election are not so appointed, the presiding officer of the meeting may, and on
the request of any shareholder shall, appoint judges of election at the meeting.
The number of judges shall be one or three. A person who is a candidate for an
office to be filled at the meeting shall not act as a judge.

              (b) Vacancies. In case any person appointed as a judge fails to
appear or fails or refuses to act, the vacancy may be filled by appointment made
by the board of directors in advance of the convening of the meeting or at the
meeting by the presiding officer thereof.

              (c) Duties. The judges of election shall determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, and the authenticity, validity and effect of
proxies, receive votes or ballots, hear and determine all challenges and
questions in any way arising in connection with nominations by shareholders or
the right to vote, count and tabulate all votes, determine the result and do
such acts as may be proper to conduct the election or vote with fairness to all
shareholders. The judges of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as is practical.
If there are three judges of election, the decision, act or certificate of a
majority shall be effective in all respects as the decision, act or certificate
of all.

              (d) Report. On request of the presiding officer of the meeting or
of any shareholder, the judges shall make a report in writing of any challenge
or question or matter determined by them, and execute a certificate of any fact
found by them. Any report or certificate made by them shall be prima facie
evidence of the facts stated therein.

         SECTION 3.15. MINORS AS SECURITY HOLDERS. The corporation may treat a
minor who holds shares or obligations of the corporation as having capacity to
receive and to empower others to receive dividends, interest, principal and
other payments or distributions, to vote or express consent or dissent and to
make elections and exercise rights relating to such shares or obligations
unless, in the case of payments or distributions on shares, the corporate
officer responsible for maintaining the list of shareholders or the transfer
agent of the corporation or, in the case of payments or distributions on
obligations, the treasurer or paying officer or agent has received written
notice that the holder is a minor.

         SECTION 3.16. USE OF CONFERENCE TELEPHONE OR OTHER TECHNOLOGY. The
presence or participation, including voting and taking other action, at a
meeting of shareholders, or the expression of consent or dissent to corporate
action, by a shareholder by conference telephone or other electronic means,
including the Internet, shall constitute the presence of, or vote or action by,
or consent or dissent of the shareholder for purposes of the Business
Corporation Law, the articles and these bylaws.

                                      -9-

                                   ARTICLE IV

                               BOARD OF DIRECTORS

         SECTION 4.01. POWERS; PERSONAL LIABILITY.

              (a) General Rule. Unless otherwise provided by statute, all powers
vested by law in the corporation shall be exercised by or under the authority
of, and the business and affairs of the corporation shall be managed under the
direction of, the board of directors.

              (b) Personal Liability of Directors.

                  (1) A director shall not be personally liable, as such, for
monetary damages (including, without limitation, any judgment, amount paid in
settlement, penalty, punitive damages or expense of any nature (including,
without limitation, attorneys' fees and disbursements)) for any action taken, or
any failure to take any action, unless:

                      (i) the director has breached or failed to perform the
duties of his or her office under Subchapter 17B of the Business Corporation Law
or any successor provision; and

                      (ii) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness.

                  (2) The provisions of paragraph (1) shall not apply to the
responsibility or liability of a director pursuant to any criminal statute, or
the liability of a director for the payment of taxes pursuant to local, state or
federal law.

              (The provisions of this subsection (b) were first adopted by the
shareholders of the corporation on December 20, 1991.)

              (c) Notation of Dissent. A director of the corporation who is
present at a meeting of the board of directors, or of a committee of the board,
at which action on any corporate matter is taken on which the director is
generally competent to act, shall be presumed to have assented to the action
taken unless his or her dissent is entered in the minutes of the meeting or
unless the director files his or her written dissent to the action with the
secretary of the meeting before the adjournment thereof or transmits the dissent
in writing to the secretary of the corporation immediately after the adjournment
of the meeting. The right to dissent shall not apply to a director who voted in
favor of the action. Nothing in this section shall bar a director from asserting
that minutes of the meeting incorrectly omitted his or her dissent if, promptly
upon receipt of a copy of such minutes, the director notifies the secretary, in
writing, of the asserted omission or inaccuracy.

         SECTION 4.02. QUALIFICATIONS AND SELECTION OF DIRECTORS.

              (a) Qualifications. Each director of the corporation shall be a
natural person of full age, provided that no person of age 72 years or more
shall be eligible for election as a director. Directors need not be residents of
the Commonwealth of Pennsylvania or shareholders of the corporation.

                                      -10-

              (b) Notice of Certain Nominations Required. Nominations for
election of directors may be made by any shareholder entitled to vote for the
election of directors if written notice (the "Notice") of the shareholder's
intent to nominate a director at the meeting is given by the shareholder and
received by the secretary of the corporation in the manner and within the time
specified in this section. The initial Notice shall be delivered to the
secretary of the corporation not less than 45 days prior to the anniversary of
the mailing date of the corporation's proxy statement for its previous meeting
of the shareholders called for the election of directors. In lieu of delivery to
the secretary, the Notice may be mailed to the secretary by certified mail,
return receipt requested, but shall be deemed to have been given only upon
actual receipt by the secretary. The requirements of this subsection shall not
apply to a nomination for directors made to the shareholders by the board of
directors.

              (c) Contents of Notice. The Notice shall be in writing and shall
contain or be accompanied by:

                  (1) the name and residence address of the nominating
shareholder;

                  (2) a representation that the shareholder is a holder of
record of voting stock of the corporation and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the Notice;

                  (3) such information regarding each nominee as would have been
required to be included in a proxy statement filed pursuant to Regulation 14A of
the rules and regulations established by the Securities and Exchange Commission
under the Securities Exchange Act of 1934 (or pursuant to any successor act or
regulation) had proxies been solicited with respect to such nominee by the
management or board of directors of the corporation;

                  (4) a description of all arrangements or understandings among
the shareholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the shareholder; and

                  (5) the consent of each nominee to serve as a director of the
corporation if so elected.

              (d) Determination of Compliance. If a judge or judges of election
shall not have been appointed pursuant to these bylaws, the presiding officer of
the meeting may, if the facts warrant, determine and declare to the meeting that
any nomination made at the meeting was not made in accordance with the
procedures of this section and, in such event, the nomination shall be
disregarded. Any decision by the presiding officer of the meeting made in good
faith shall be conclusive and binding upon all shareholders of the corporation
for any purpose.

              (e) Election of Directors. In elections for directors, voting need
not be by ballot, unless required by vote of the shareholders before the voting
for the election of directors begins. The candidates receiving the highest
number of votes from each class or group of classes, if any, entitled to elect
directors separately up to the number of directors to be elected by the class or
group of classes shall be elected. If at any meeting of shareholders, directors
of more than one class are to be elected, each class of directors shall be
elected in a separate election.

                                      -11-

         SECTION 4.03. NUMBER AND TERM OF OFFICE.

              (a) Number. The board of directors shall consist of such number of
directors, as may be determined from time to time by resolution of the board of
directors.

              (b) Term of Office. Each director shall hold office until the
expiration of the term for which he or she was selected and until a successor
has been selected and qualified or until his or her earlier death, resignation
or removal. A decrease in the number of directors shall not have the effect of
shortening the term of any incumbent director.

              (c) Resignation. Any director may resign at any time upon written
notice to the corporation. The resignation shall be effective upon receipt
thereof by the corporation or at such subsequent time as shall be specified in
the notice of resignation.

         SECTION 4.04. VACANCIES.

              (a) General Rule. Vacancies in the board of directors, including
vacancies resulting from an increase in the number of directors, may be filled
by a majority vote of the remaining members of the board though less than a
quorum, or by a sole remaining director, and each person so selected shall be a
director to serve until the next selection of the class for which such director
has been chosen, and until a successor has been selected and qualified or until
his or her earlier death, resignation or removal.

              (b) Action by Resigned Directors. When one or more directors
resign from the board effective at a future date, the directors then in office,
including those who have so resigned, shall have power by the applicable vote to
fill the vacancies, the vote thereon to take effect when the resignations become
effective.

         SECTION 4.05. REMOVAL OF DIRECTORS.

              (a) Removal by the Shareholders. The entire board of directors, or
any class of the board, or any individual director may be removed from office by
vote of the shareholders entitled to vote thereon only for cause. In case the
board or a class of the board or any one or more directors are so removed, new
directors may be elected at the same meeting. The repeal of a provision of the
articles or bylaws prohibiting, or the addition of a provision to the articles
or bylaws permitting, the removal by the shareholders of the board, a class of
the board or a director without assigning any cause shall not apply to any
incumbent director during the balance of the term for which the director was
selected.

              (b) Removal by the Board. The board of directors may declare
vacant the office of a director who has been judicially declared of unsound mind
or who has been convicted of an offense punishable by imprisonment for a term of
more than one year or if, within 60 days after notice of his or her selection,
the director does not accept the office either in writing or by attending a
meeting of the board of directors.

         SECTION 4.06. PLACE OF MEETINGS. Meetings of the board of directors may
be held at such place within or without the Commonwealth of Pennsylvania as the
board of directors may from time to time appoint or as may be designated in the
notice of the meeting.

                                      -12-

         SECTION 4.07. ORGANIZATION OF MEETINGS. At every meeting of the board
of directors, the chairman of the board, if there be one, or, in the case of a
vacancy in the office or absence of the chairman of the board, one of the
following officers present in the order stated: the vice chairman of the board,
if there be one, the president, the vice presidents in their order of rank and
seniority, or a person chosen by a majority of the directors present, shall act
as chairman of the meeting. The secretary or, in the absence of the secretary,
an assistant secretary, or, in the absence of the secretary and the assistant
secretaries, any person appointed by the chairman of the meeting, shall act as
secretary of the meeting.

         SECTION 4.08. REGULAR MEETINGS. Regular meetings of the board of
directors shall be held at such time and place as shall be designated from time
to time by resolution of the board of directors.

         SECTION 4.09. SPECIAL MEETINGS. Special meetings of the board of
directors shall be held whenever called by the chief executive officer or by two
or more of the directors.

         SECTION 4.10. QUORUM OF AND ACTION BY DIRECTORS.

              (a) General Rule. A majority of the directors in office of the
corporation shall be necessary to constitute a quorum for the transaction of
business and the acts of a majority of the directors present and voting at a
meeting at which a quorum is present shall be the acts of the board of
directors.

              (b) Action by Written Consent. Any action required or permitted to
be taken at a meeting of the directors may be taken without a meeting if, prior
or subsequent to the action, a consent or consents thereto by all of the
directors in office is filed with the secretary of the corporation.

              (c) Notation of Dissent. A director who is present at a meeting of
the board of directors, or of a committee of the board, at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his or her dissent is entered in the minutes of the meeting or unless the
director files a written dissent to the action with the secretary of the meeting
before the adjournment thereof or transmits the dissent in writing to the
secretary of the corporation immediately after the adjournment of the meeting.
The right to dissent shall not apply to a director who voted in favor of the
action. Nothing in this section shall bar a director from asserting that minutes
of the meeting incorrectly omitted his or her dissent if, promptly upon receipt
of a copy of such minutes, the director notifies the secretary, in writing, of
the asserted omission or inaccuracy.

         SECTION 4.11. EXECUTIVE AND OTHER COMMITTEES.

              (a) Establishment and Powers. The board of directors may, by
resolution adopted by a majority of the directors in office, establish one or
more committees to consist of one or more directors of the corporation. Any
committee, to the extent provided in the resolution of the board of directors,
shall have and may exercise all of the powers and authority of the board of
directors except that a committee shall not have any power or authority as to
the following:

                  (1) The submission to shareholders of any action requiring
approval of shareholders under the Business Corporation Law.

                  (2) The creation or filling of vacancies in the board of
directors.

                                      -13-

                  (3) The adoption, amendment or repeal of these bylaws.

                  (4) The amendment or repeal of any resolution of the board
that by its terms is amendable or repealable only by the board.

                  (5) Action on matters committed by a resolution of the board
of directors to another committee of the board.

              (b) Alternate Committee Members. The board may designate one or
more directors as alternate members of any committee who may replace any absent
or disqualified member at any meeting of the committee or for the purposes of
any written action by the committee. In the absence or disqualification of a
member and alternate member or members of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another director to act at the
meeting in the place of the absent or disqualified member.

              (c) Term. Each committee of the board shall serve at the pleasure
of the board.

              (d) Committee Procedures. The term "board of directors" or
"board," when used in any provision of these bylaws relating to the organization
or procedures of or the manner of taking action by the board of directors, shall
be construed to include and refer to any executive or other committee of the
board.

         SECTION 4.12. COMPENSATION. The board of directors shall have the
authority to fix the compensation of directors for their services as directors
and a director may be a salaried officer of the corporation.

                                    ARTICLE V

                                    OFFICERS

         SECTION 5.01. OFFICERS GENERALLY.

              (a) Number, Qualifications and Designation. The officers of the
corporation shall be a president, one or more vice presidents, a secretary, a
treasurer, and such other officers as may be elected in accordance with the
provisions of Section 5.03. Officers may but need not be directors or
shareholders of the corporation. The president and secretary shall be natural
persons of full age. The treasurer may be a corporation, but if a natural person
shall be of full age. The board of directors may elect from among the members of
the board a chairman of the board and a vice chairman of the board who may be
officers of the corporation. Any number of offices may be held by the same
person.

              (b) Bonding. The corporation may secure the fidelity of any or all
of its officers by bond or otherwise.

              (c) Standard of Care. In lieu of the standards of conduct
otherwise provided by law, officers of the corporation shall be subject to the
same standards of conduct, including standards of care and loyalty and rights of
justifiable reliance, as shall at the time be applicable to directors of

                                      -14-

the corporation. An officer of the corporation shall not be personally liable,
as such, to the corporation or its shareholders for monetary damages (including,
without limitation, any judgment, amount paid in settlement, penalty, punitive
damages or expense of any nature (including, without limitation, attorneys' fees
and disbursements)) for any action taken, or any failure to take any action,
unless the officer has breached or failed to perform the duties of his or her
office under the articles of incorporation, these bylaws, or the applicable
provisions of law and the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness. The provisions of this subsection shall not
apply to the responsibility or liability of an officer pursuant to any criminal
statute or for the payment of taxes pursuant to local, state or federal law.

         SECTION 5.02. ELECTION, TERM OF OFFICE AND RESIGNATIONS.

              (a) Election and Term of Office. The officers of the corporation
(except those elected by delegated authority pursuant to Section 5.03 or filled
pursuant to Section 5.05) shall be elected annually by the board of directors,
and each such officer shall hold office for a term of one year and until a
successor has been selected and qualified or until his or her earlier death,
resignation or removal.

              (b) Resignations. Any officer may resign at any time upon written
notice to the corporation. The resignation shall be effective upon receipt
thereof by the corporation or at such subsequent time as may be specified in the
notice of resignation.

         SECTION 5.03. SUBORDINATE OFFICERS, COMMITTEES AND AGENTS. The board of
directors may from time to time elect such other officers and appoint such
committees, employees or other agents as the business of the corporation may
require, including one or more assistant secretaries, and one or more assistant
treasurers, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these bylaws, or as the board of
directors may from time to time determine. The board of directors may delegate
to any officer or committee the power to elect subordinate officers and to
retain or appoint employees or other agents, or committees thereof, and to
prescribe the authority and duties of such subordinate officers, committees,
employees or other agents.

         SECTION 5.04. REMOVAL OF OFFICERS AND AGENTS. Any officer or agent of
the corporation may be removed by the board of directors with or without cause.
The removal shall be without prejudice to the contract rights, if any, of any
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.

         SECTION 5.05. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause, may be filled by the
board of directors or the board of directors may delegate to any officer or
committee the power to fill a vacancy in such office or to create a new such
office, subject to ratification by the board of directors, and if the office is
one for which these bylaws prescribe a term, shall be filled for the unexpired
portion of the term.

         SECTION 5.06. AUTHORITY.

              (a) General Rule. All officers of the corporation, as between
themselves and the corporation, shall have such authority and perform such
duties in the management of the corporation as may be provided by or pursuant to
resolutions or orders of the board of directors or,

                                      -15-

in the absence of controlling provisions in the resolutions or orders of the
board of directors, as may be determined by or pursuant to these bylaws.

              (b) Chief Executive Officer. The chairman of the board or the
president, as designated from time to time by the board of directors, shall be
the chief executive officer of the corporation.

         SECTION 5.07. THE CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The chairman
of the board or in the absence of the chairman, the vice chairman of the board,
shall preside at all meetings of the shareholders and of the board of directors,
and shall perform such other duties as may from time to time be requested by the
board of directors.

         SECTION 5.08. THE CHIEF EXECUTIVE OFFICER. The chief executive officer
shall be the chief executive officer of the corporation and shall have general
supervision over the business of the corporation. The chief executive officer
shall have the general powers and shall perform the duties which by law and
general usage appertain to the office, subject, however, to the control of the
board of directors. The chief executive officer shall sign, execute and
acknowledge, in the name of the corporation, deeds, mortgages, bonds, contracts
and other instruments authorized by the board of directors, except in cases
where the signing and execution thereof shall be expressly delegated by the
board of directors, or by these bylaws, to some other officer or agent of the
corporation.

         SECTION 5.09. THE PRESIDENT. The president shall perform such duties as
from time to time may be assigned by the board of directors or the chief
executive officer (unless the president shall be the chief executive officer, in
which case the president's duties shall be those specified in Section 5.08).

         SECTION 5.10. THE VICE PRESIDENTS. The vice presidents shall perform
the duties of the president in the absence of the president and such other
duties as may from time to time be assigned to them by the board of directors or
the president.

         SECTION 5.11. THE SECRETARY. The secretary or an assistant secretary
shall attend all meetings of the shareholders and of the board of directors and
all committees thereof and shall record all the votes of the shareholders and of
the directors and the minutes of the meetings of the shareholders and of the
board of directors and of committees of the board in a book or books to be kept
for that purpose; shall see that notices are given and records and reports
properly kept and filed by the corporation as required by law; shall be the
custodian of the seal of the corporation and see that it is affixed to all
documents to be executed on behalf of the corporation under its seal; and, in
general, shall perform all duties incident to the office of secretary, and such
other duties as may from time to time be assigned by the board of directors or
the president.

         SECTION 5.12. THE TREASURER. The treasurer or an assistant treasurer
shall have or provide for the custody of the funds or other property of the
corporation; shall collect and receive or provide for the collection and receipt
of monies earned by or in any manner due to or received by the corporation;
shall deposit all funds in his or her custody as treasurer in such banks or
other places of deposit as the board of directors may from time to time
designate; shall, whenever so required by the board of directors, render an
account showing all transactions as treasurer, and the financial condition of
the corporation; and, in general, shall discharge such other duties as may from
time to time be assigned by the board of directors or the president.

                                      -16-

         SECTION 5.13. SALARIES. The salaries of the officers elected by the
board of directors shall be fixed from time to time by the board of directors or
by such officer as may be designated by resolution of the board. The salaries or
other compensation of any other officers, employees and other agents shall be
fixed from time to time by the officer or committee to which the power to elect
such officers or to retain or appoint such employees or other agents has been
delegated pursuant to Section 5.03. No officer shall be prevented from receiving
such salary or other compensation by reason of the fact that the officer is also
a director of the corporation.

                                   ARTICLE VI

                      CERTIFICATES OF STOCK, TRANSFER, ETC.

         SECTION 6.01. SHARE CERTIFICATES.

              (a) Form of Certificates. Certificates for shares of the
corporation shall be in such form as approved by the board of directors, and
shall state that the corporation is incorporated under the laws of the
Commonwealth of Pennsylvania, the name of the person to whom issued, and the
number and class of shares and the designation of the series (if any) that the
certificate represents. If the corporation is authorized to issue shares of more
than one class or series, certificates for shares of the corporation shall set
forth upon the face or back of the certificate (or shall state on the face or
back of the certificate that the corporation will furnish to any shareholder
upon request and without charge), a full or summary statement of the
designations, voting rights, preferences, limitations and special rights of the
shares of each class or series authorized to be issued so far as they have been
fixed and determined and the authority of the board of directors to fix and
determine the designations, voting rights, preferences, limitations and special
rights of the classes and series of shares of the corporation.

              (b) Share Register. The share register or transfer books and blank
share certificates shall be kept by the secretary or by any transfer agent or
registrar designated by the board of directors for that purpose.

         SECTION 6.02. ISSUANCE. The share certificates of the corporation shall
be numbered and registered in the share register or transfer books of the
corporation as they are issued. They shall be executed in such manner as the
board of directors shall determine. Where a certificate is signed by a transfer
agent or a registrar, the signature of any corporate officer upon the
certificate may be a facsimile, engraved or printed. In case any officer who has
signed, or whose facsimile signature has been placed upon, any share certificate
shall have ceased to be such officer because of death, resignation or otherwise,
before the certificate is issued, it may be issued with the same effect as if
the officer had not ceased to be such at the date of its issue. The provisions
of this Section 6.02 shall be subject to any inconsistent or contrary agreement
in effect at the time between the corporation and any transfer agent or
registrar.

         SECTION 6.03. TRANSFER. Transfers of shares shall be made on the share
register or transfer books of the corporation upon surrender of the certificate
therefor, endorsed by the person named in the certificate or by an attorney
lawfully constituted in writing. No transfer shall be made inconsistent with the
provisions of the Uniform Commercial Code, 13 Pa.C.S. (S)(S)8101 et seq., and
its amendments and supplements.

                                      -17-

         SECTION 6.04. RECORD HOLDER OF SHARES. The corporation shall be
entitled to treat the person in whose name any share or shares of the
corporation stand on the books of the corporation as the absolute owner thereof,
and shall not be bound to recognize any equitable or other claim to, or interest
in, such share or shares on the part of any other person.

         SECTION 6.05. LOST, DESTROYED OR MUTILATED CERTIFICATES. The holder of
any shares of the corporation shall immediately notify the corporation of any
loss, destruction or mutilation of the certificate therefor, and the board of
directors may, in its discretion, cause a new certificate or certificates to be
issued to such holder, in case of mutilation of the certificate, upon the
surrender of the mutilated certificate or, in case of loss or destruction of the
certificate, upon satisfactory proof of such loss or destruction and, if the
board of directors shall so determine, the deposit of a bond in such form and in
such sum, and with such surety or sureties, as it may direct.

         SECTION 6.06. UNCERTIFICATED SHARES. Notwithstanding anything herein to
the contrary, any or all classes and series of shares, or any part thereof, may
be represented by uncertificated shares, except that shares represented by a
certificate that is issued and outstanding shall continue to be represented
thereby until the certificate is surrendered to the corporation. Within a
reasonable time after the issuance or transfer of uncertificated shares, the
corporation shall send to the registered owner thereof, a written notice
containing the information required to be set forth or stated on certificates.
The rights and obligations of the holders of shares represented by certificates
and the rights and obligations of the holders of uncertificated shares of the
same class or series shall be identical. Notwithstanding anything herein to the
contrary, the provisions of Sections 6.01 through 6.03 and 6.05 hereof shall be
inapplicable to uncertificated shares and in lieu thereof the board of directors
shall adopt alternative procedures for registration of transfers.

                                   ARTICLE VII

                   INDEMNIFICATION OF DIRECTORS, OFFICERS AND
                        OTHER AUTHORIZED REPRESENTATIVES

         (The provisions of this Article VII were first adopted by the
shareholders of the corporation on December 20, 1991.)

         SECTION 7.01. SCOPE OF INDEMNIFICATION.

              (a) General Rule. The corporation shall indemnify an indemnified
representative against any liability incurred in connection with any proceeding
in which the indemnified representative may be involved as a party or otherwise
by reason of the fact that such person is or was serving in an indemnified
capacity, including, without limitation, liabilities resulting from any actual
or alleged breach or neglect of duty, error, misstatement or misleading
statement, negligence, gross negligence or act giving rise to strict or products
liability, except:

                  (1) where such indemnification is expressly prohibited by
applicable law;

                  (2) where the conduct of the indemnified representative has
been finally determined pursuant to Section 7.06 or otherwise:

                                      -18-

                      (i) to constitute willful misconduct or recklessness
within the meaning of 15 Pa.C.S. (S)1746(b) or any superseding provision of law
sufficient in the circumstances to bar indemnification against liabilities
arising from the conduct; or

                      (ii) to be based upon or attributable to the receipt by
the indemnified representative from the corporation of a personal benefit to
which the indemnified representative is not legally entitled; or

                  (3) to the extent such indemnification has been finally
determined in a final adjudication pursuant to Section 7.06 to be otherwise
unlawful.

              (b) Partial Payment. If an indemnified representative is entitled
to indemnification in respect of a portion, but not all, of any liabilities to
which such person may be subject, the corporation shall indemnify such
indemnified representative to the maximum extent for such portion of the
liabilities.

              (c) Presumption. The termination of a proceeding by judgment,
order, settlement or conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that the indemnified
representative is not entitled to indemnification.

              (d) Definitions. For purposes of this Article:

                  (1) "indemnified capacity" means any and all past, present and
future service by an indemnified representative in one or more capacities as a
director, officer, employee or agent of the corporation, or, at the request of
the corporation, as a director, officer, employee, agent, fiduciary or trustee
of another corporation, partnership, joint venture, trust, employee benefit plan
or other entity or enterprise;

                  (2) "indemnified representative" means any and all directors
and officers of the corporation and any other person designated as an
indemnified representative by the board of directors of the corporation (which
may, but need not, include any person serving at the request of the corporation,
as a director, officer, employee, agent, fiduciary or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan or other
entity or enterprise);

                  (3) "liability" means any damage, judgment, amount paid in
settlement, fine, penalty, punitive damages, excise tax assessed with respect to
an employee benefit plan, or cost or expense of any nature (including, without
limitation, attorneys' fees and disbursements); and

                  (4) "proceeding" means any threatened, pending or completed
action, suit, appeal or other proceeding of any nature, whether civil, criminal,
administrative or investigative, whether formal or informal, and whether brought
by or in the right of the corporation, a class of its security holders or
otherwise.

         SECTION 7.02. PROCEEDINGS INITIATED BY INDEMNIFIED REPRESENTATIVES.
Notwithstanding any other provision of this Article, the corporation shall not
indemnify under this Article an indemnified representative for any liability
incurred in a proceeding initiated (which shall not be deemed to include counter
claims or affirmative defenses) or participated in as an intervenor or amicus
curiae by the person seeking indemnification unless such initiation of or
participation in the proceeding is authorized, either before or after its
commencement, by the affirmative vote of a majority of the

                                      -19-

directors in office. This section does not apply to reimbursement of expenses
incurred in successfully prosecuting or defending an arbitration under Section
7.06 or otherwise successfully prosecuting or defending the rights of an
indemnified representative granted by or pursuant to this Article.

         SECTION 7.03. ADVANCING EXPENSES. The corporation shall pay the
expenses (including attorneys' fees and disbursements) incurred in good faith by
an indemnified representative in advance of the final disposition of a
proceeding described in Section 7.01 or the initiation of or participation in
which is authorized pursuant to Section 7.02 upon receipt of an undertaking by
or on behalf of the indemnified representative to repay the amount if it is
ultimately determined pursuant to Section 7.06 that such person is not entitled
to be indemnified by the corporation pursuant to this Article. The financial
ability of an indemnified representative to repay an advance shall not be a
prerequisite to the making of such advance.

         SECTION 7.04. SECURING OF INDEMNIFICATION OBLIGATIONS. To further
effect, satisfy or secure the indemnification obligations provided herein or
otherwise, the corporation may maintain insurance, obtain a letter of credit,
act as self-insurer, create a reserve, trust, escrow, cash collateral or other
fund or account, enter into indemnification agreements, pledge or grant a
security interest in any assets or properties of the corporation, or use any
other mechanism or arrangement whatsoever in such amounts, at such costs, and
upon such other terms and conditions as the board of directors shall deem
appropriate. Absent fraud, the determination of the board of directors with
respect to such amounts, costs, terms and conditions shall be conclusive against
all security holders, officers and directors and shall not be subject to
voidability.

         SECTION 7.05. PAYMENT OF INDEMNIFICATION. An indemnified representative
shall be entitled to indemnification within 30 days after a written request for
indemnification has been delivered to the secretary of the corporation.

         SECTION 7.06. ARBITRATION.

              (a) General Rule. Any dispute related to the right to
indemnification, contribution or advancement of expenses as provided under this
Article, except with respect to indemnification for liabilities arising under
the Securities Act of 1933 that the corporation has undertaken to submit to a
court for adjudication, shall be decided only by arbitration in the county in
which the principal executive offices of the corporation are located at the
time, in accordance with the commercial arbitration rules then in effect of the
American Arbitration Association, before a panel of three arbitrators, one of
whom shall be selected by the corporation, the second of whom shall be selected
by the indemnified representative and the third of whom shall be selected by the
other two arbitrators. In the absence of the American Arbitration Association,
or if for any reason arbitration under the arbitration rules of the American
Arbitration Association cannot be initiated, and if one of the parties fails or
refuses to select an arbitrator or the arbitrators selected by the corporation
and the indemnified representative cannot agree on the selection of the third
arbitrator within 30 days after such time as the corporation and the indemnified
representative have each been notified of the selection of the other's
arbitrator, the necessary arbitrator or arbitrators shall be selected by the
presiding judge of the court of general jurisdiction in such county.

              (b) Qualifications of Arbitrators. Each arbitrator selected as
provided herein is required to be or have been a director or executive officer
of a corporation whose shares of common stock were listed during at least one
year of such service on the New York Stock Exchange or the

                                      -20-

American Stock Exchange or quoted on the National Association of Securities
Dealers Automated Quotations System.

              (c) Burden of Proof. The party or parties challenging the right of
an indemnified representative to the benefits of this Article shall have the
burden of proof.

              (d) Expenses. The corporation shall reimburse an indemnified
representative for the expenses (including attorneys' fees and disbursements)
incurred in successfully prosecuting or defending such arbitration.

              (e) Effect. Any award entered by the arbitrators shall be final,
binding and nonappealable and judgment may be entered thereon by any party in
accordance with applicable law in any court of competent jurisdiction, except
that the corporation shall be entitled to interpose as a defense in any such
judicial enforcement proceeding any prior final judicial determination adverse
to the indemnified representative under Section 7.01(a)(2) in a proceeding not
directly involving indemnification under this Article. This arbitration
provision shall be specifically enforceable.

         SECTION 7.07. CONTRIBUTION. If the indemnification provided for in this
Article or otherwise is unavailable for any reason in respect of any liability
or portion thereof, the corporation shall contribute to the liabilities to which
the indemnified representative may be subject in such proportion as is
appropriate to reflect the intent of this Article or otherwise.

         SECTION 7.08. MANDATORY INDEMNIFICATION OF DIRECTORS, OFFICERS, ETC. To
the extent that an authorized representative of the corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1741 or 1742 of the Business Corporation Law
or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees and disbursements)
actually and reasonably incurred by such person in connection therewith.

         SECTION 7.09. CONTRACT RIGHTS; AMENDMENT OR REPEAL. All rights under
this Article shall be deemed a contract between the corporation and the
indemnified representative pursuant to which the corporation and each
indemnified representative intend to be legally bound. Any repeal, amendment or
modification hereof shall be prospective only and shall not affect any rights or
obligations then existing.

         SECTION 7.10. SCOPE OF ARTICLE. The rights granted by this Article
shall not be deemed exclusive of any other rights to which those seeking
indemnification, contribution or advancement of expenses may be entitled under
any statute, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in an indemnified capacity and as to action in any
other capacity. The indemnification, contribution and advancement of expenses
provided by or granted pursuant to this Article shall continue as to a person
who has ceased to be an indemnified representative in respect of matters arising
prior to such time, and shall inure to the benefit of the heirs, executors,
administrators and personal representatives of such a person.

         SECTION 7.11. RELIANCE ON PROVISIONS. Each person who shall act as an
indemnified representative of the corporation shall be deemed to be doing so in
reliance upon the rights of indemnification, contribution and advancement of
expenses provided by this Article.

                                      -21-

         SECTION 7.12. INTERPRETATION. The provisions of this Article are
intended to constitute bylaws authorized by 15 Pa.C.S. (S)1746.

                                  ARTICLE VIII

                                  MISCELLANEOUS

         SECTION 8.01. CORPORATE SEAL. The corporation shall have a corporate
seal in the form of a circle containing the name of the corporation, the year of
incorporation and such other details as may be approved by the board of
directors. The affixation of the corporate seal shall not be necessary to the
valid execution, assignment or endorsement by the corporation of any instrument
or other document.

         SECTION 8.02. CHECKS. All checks, notes, bills of exchange or other
similar orders in writing shall be signed by such one or more officers or
employees of the corporation as the board of directors may from time to time
designate.

         SECTION 8.03. CONTRACTS. Except as otherwise provided in the Business
Corporation Law in the case of transactions that require action by the
shareholders, the board of directors may authorize any officer or agent to enter
into any contract or to execute or deliver any instrument on behalf of the
corporation, and such authority may be general or confined to specific
instances.

         SECTION 8.04. INTERESTED DIRECTORS OR OFFICERS; QUORUM.

              (a) General Rule. A contract or transaction between the
corporation and one or more of its directors or officers or between the
corporation and another corporation, partnership, joint venture, trust or other
enterprise in which one or more of its directors or officers are directors or
officers or have a financial or other interest, shall not be void or voidable
solely for that reason, or solely because the director or officer is present at
or participates in the meeting of the board of directors that authorizes the
contract or transaction, or solely because his, her or their votes are counted
for that purpose, if:

                  (1) the material facts as to the relationship or interest and
as to the contract or transaction are disclosed or are known to the board of
directors and the board authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors even though the
disinterested directors are less than a quorum;

                  (2) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to the
shareholders entitled to vote thereon and the contract or transaction is
specifically approved in good faith by vote of those shareholders; or

                  (3) the contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified by the board of directors
or the shareholders.

              (b) Quorum. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board which authorizes
a contract or transaction specified in subsection (a).

                                      -22-

         SECTION 8.05. DEPOSITS. All funds of the corporation shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositaries as the board of directors may approve or
designate, and all such funds shall be withdrawn only upon checks signed by such
one or more officers or employees of the corporation as the board of directors
shall from time to time designate.

         SECTION 8.06. CORPORATE RECORDS.

              (a) Required Records. The corporation shall keep complete and
accurate books and records of account, minutes of the proceedings of the
incorporators, shareholders and directors and a share register giving the names
and addresses of all shareholders and the number and class of shares held by
each. The share register shall be kept at either the registered office of the
corporation in the Commonwealth of Pennsylvania or at its principal place of
business wherever situated or at the office of its registrar or transfer agent.
Any books, minutes or other records may be in written form or any other form
capable of being converted into written form within a reasonable time.

                      (b) Right of Inspection. Every shareholder shall, upon
written verified demand stating the purpose thereof, have a right to examine, in
person or by agent or attorney, during the usual hours for business for any
proper purpose, the share register, books and records of account, and records of
the proceedings of the incorporators, shareholders and directors and to make
copies or extracts therefrom. A proper purpose shall mean a purpose reasonably
related to the interest of the person as a shareholder. In every instance where
an attorney or other agent is the person who seeks the right of inspection, the
demand shall be accompanied by a verified power of attorney or other writing
that authorizes the attorney or other agent to so act on behalf of the
shareholder. The demand shall be directed to the corporation at its registered
office in the Commonwealth of Pennsylvania or at its principal place of business
wherever situated.

         SECTION 8.07. AMENDMENT OF BYLAWS. Except as otherwise provided in the
express terms of any series of the shares of the corporation:

              (a) The shareholders shall have the power to amend or repeal these
bylaws, or to adopt new bylaws, only with the approval of the board of
directors. A direction by the board that a shareholder proposal with respect to
the bylaws shall be submitted to the shareholders for action thereon, or the
sufferance by the board that such a proposal shall be so submitted, shall not
constitute approval by the board of directors of the amendment, repeal or new
bylaws.

              (b) These bylaws may be amended or repealed, or new bylaws may be
adopted, by vote of a majority of the board of directors of the corporation in
office at any regular or special meeting of directors, including in
circumstances otherwise reserved by statute exclusively to the shareholders, the
board of directors of the corporation having under the articles of incorporation
the full authority conferred by law upon the shareholders of the corporation to
adopt, amend or repeal these bylaws. Any bylaw adopted by the board of directors
under this paragraph shall be consistent with the articles of incorporation.

As amended through September 30, 2003.

                                      -23-

                                                                   Exhibit 10.21

                    AMENDMENT NO. 1 TO PARTNERSHIP AGREEMENT
                        OF HUNLOCK CREEK ENERGY VENTURES

      This Amendment No. 1 to Partnership Agreement (this "Amendment"), dated as
of June 26, 2003, is entered into by and among UGI HUNLOCK DEVELOPMENT COMPANY,
a Pennsylvania corporation ("UGI GP") and ALLEGHENY ENERGY SUPPLY HUNLOCK CREEK,
LLC, a Delaware limited liability company ("Allegheny GP"). Capitalized terms
used herein but not defined shall have the meanings assigned to such terms in
the Partnership Agreement (as hereinafter defined).

                                    RECITALS

      WHEREAS, UGI GP and Allegheny GP entered into a Partnership Agreement of
Hunlock Creek Energy Ventures dated as of December 8, 2000 (the "Partnership
Agreement");

      WHEREAS, a dispute has arisen between the parties concerning the
obligations of Allegheny Energy Supply in Sections 9.6(b) and 9.6(c) of the
Partnership Agreement and the enforceability of the put and call options
contained in such Sections against Allegheny Energy Supply (the "Disputed
Matter"), and the parties have agreed to execute this Amendment in order to
resolve such dispute;

      WHEREAS, the parties hereto desire to amend the Partnership Agreement
as set forth in this Amendment; and

      WHEREAS, Allegheny Energy Supply desires that the parties to the
Partnership Agreement execute this Amendment.

      NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency is hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:

      1.    Section 9.6(b) of the Partnership Agreement is hereby amended and
restated in its entirety as follows:

      (b) UGI GP PUT RIGHTS. For a period of ninety (90) days commencing January
      1, 2006, UGI GP (or an Affiliate thereof) shall have the right, but not
      the obligation, to require Allegheny GP (or an Affiliate thereof) to
      purchase the Plant (including all inventory of the Partnership associated
      with the Plant) or the CT, or both of them, from the Partnership
      (collectively, the "UGI Put Right"). The purchase price for the Plant and
      such inventory shall be the sum of Fifteen Million Dollars ($15,000,000)
      plus the value of all inventory of the Partnership associated with the
      Plant at the time of such purchase, which amount shall be paid by
      Allegheny GP (or an Affiliate thereof) to the Partnership by wire transfer
      of immediately available funds at a closing of such purchase to be held as
      soon as

      practicable following written notice from UGI GP (or an Affiliate thereof)
      to Allegheny GP (or an Affiliate thereof) of its determination to require
      such purchase. The purchase price for the CT shall be the amount of the
      book value of the CT on the books of the Partnership as of the date of
      closing of such purchase, which amount shall be paid by Allegheny GP (or
      an Affiliate thereof) to the Partnership by wire transfer of immediately
      available funds at a closing of such purchase to be held as soon as
      practicable following written notice from UGI GP (or an Affiliate thereof)
      to Allegheny GP (or an Affiliate thereof) of its determination to require
      such purchase. In connection with any such closing, UGI GP (or an
      Affiliate thereof) and Allegheny GP (or an Affiliate thereof) shall
      jointly prepare, execute and deliver such instruments of transfer that are
      reasonably required to effectuate the purchase and sale of the Plant or
      the CT, or both of them. All funds received by the Partnership in
      connection with the sale of the Plant or the CT, or both of them, shall be
      paid, as soon as practicable following the closing of any such sale, to
      the Partners in a special distribution in proportion to the Percentage
      Interests of each as of the date of distribution. In the event that UGI GP
      (or an Affiliate thereof) exercises the UGI Put Right with respect to the
      Plant and the CT and, upon such exercise, the Partnership's assets consist
      solely of intangible items, the Partners thereafter shall cause the
      orderly dissolution of the Partnership. Notwithstanding anything to the
      contrary contained in this Section 9.6(b), an Affiliate of Allegheny GP
      shall only be permitted to exercise the rights of and perform the
      obligations of Allegheny GP described herein if the following conditions
      are satisfied: (i) UGI GP (or an Affiliate thereof) consents, in its sole
      discretion, to the substitution of such Affiliate for Allegheny GP and
      (ii) the performance by such Affiliate of its obligations hereunder does
      not violate any federal, state or local law, statute, ordinance, rule,
      regulation, judgment, order, injunction, decree, license, permit,
      contract, agreement, or other document, commitment or arrangement, whether
      oral or written, and UGI GP (or an Affiliate thereof) shall have received,
      prior to the date of the closing of such sale, an opinion of outside legal
      counsel for Allegheny GP (which counsel shall be reasonably satisfactory
      to UGI GP) to that effect.

      2.    Section 9.6(c) of the Partnership Agreement is hereby amended and
restated in its entirety as follows:

      (c) ALLEGHENY GP CALL RIGHTS. For a period of ninety (90) days commencing
      January 1, 2006, Allegheny GP (or an Affiliate thereof) shall have the
      right, but not the obligation, to purchase the Plant (including all
      inventory of the Partnership associated with the Plant) or the CT, or both
      of them, from the Partnership (collectively, the "Allegheny Call Right").
      The purchase price for the Plant and such inventory shall be the sum of
      Fifteen Million Dollars ($15,000,000) plus the value of all inventory of
      the Partnership associated with the Plant at the time of such purchase,
      which amount shall be paid by Allegheny GP (or an Affiliate thereof) to
      the Partnership by wire transfer of immediately available funds at a
      closing of such purchase to be held as soon as practicable following
      written notice from Allegheny GP (or an Affiliate thereof) to UGI GP of
      its determination to undertake such purchase. The purchase price for the
      CT shall be the amount of the book value of the CT on the books of the
      Partnership as of the date of closing of such purchase, which amount shall
      be paid by Allegheny GP (or an Affiliate thereof) to the Partnership by
      wire transfer of immediately available funds at a closing of such purchase
      to be held as soon as practicable following written notice from Allegheny
      GP (or an Affiliate thereof) to UGI GP of its determination to

                                       2

      undertake such purchase. The purchase price for the CT shall be the amount
      of the book value of the CT on the books of the Partnership as of the date
      of closing of such purchase, which amount shall be paid by Allegheny GP
      (or an Affiliate thereof) to the Partnership by wire transfer of
      immediately available funds at a closing of such purchase to be held as
      soon as practicable following written notice from Allegheny GP (or an
      Affiliate thereof) to UGI GP of its determination to undertake such
      purchase. In connection with any such closing, UGI GP and Allegheny GP (or
      an Affiliate thereof) shall jointly prepare, execute and deliver such
      instruments of transfer that are reasonably required to effectuate the
      purchase and sale of the Plant or the CT, or both of them. All funds
      received by the Partnership in connection with the sale of the Plant or
      the CT, or both of them, shall be paid, as soon as practicable following
      the closing of any such sale, to the Partners in a special distribution in
      proportion to the Percentage Interests of each as of the date of
      distribution. In the event that Allegheny GP (or an Affiliate thereof)
      exercises the Allegheny Call Right with respect to the Plant and the CT
      and, upon such exercise, the Partnership's assets consist solely of
      intangible items, the Partners thereafter shall cause the orderly
      dissolution of the Partnership. Notwithstanding anything to the contrary
      contained in this Section 9.6(c), an Affiliate of Allegheny GP shall only
      be permitted to exercise the rights of and perform the obligations of
      Allegheny GP described herein if the following conditions are satisfied:
      (i) UGI GP (or an Affiliate thereof) consents, in its sole discretion, to
      the substitution of such Affiliate for Allegheny GP and (ii) the
      performance by such Affiliate of its obligations hereunder does not
      violate any federal, state or local law, statute, ordinance, rule,
      regulation, judgment, order, injunction, decree, license, permit,
      contract, agreement, or other document, commitment or arrangement, whether
      oral or written, and UGI GP (or an Affiliate thereof) shall have received,
      prior to the date of the closing of such sale, an opinion of outside legal
      counsel for Allegheny GP (which counsel shall be reasonably satisfactory
      to UGI GP) to that effect.

      3. The parties acknowledge and agree that the execution of this Amendment
fully resolves all disputes between them concerning the Disputed Matter solely
with respect to the time period on or prior to the date hereof. The parties
hereby waive and release each other, and their respective subsidiaries,
affiliates, officers, directors, employees and representatives from any
liabilities, known or unknown, direct, indirect or contingent, that may arises
with respect to the Disputed Matter solely with respect to the time period on or
prior to the date hereof. Notwithstanding anything to the contrary contained in
this Amendment, nothing in this Amendment shall be construed as limiting,
restricting or excusing the payment obligations of Allegheny GP (or its
Affiliates) contemplated by Section 9.6(b) of the Partnership Agreement, and
neither UGI GP nor any of its Affiliates waives or releases any other rights or
liabilities of any party under the Partnership Agreement.

      4. Except as specifically amended by this Amendment, the Partnership
Agreement shall remain in full force and effect and is hereby ratified and
confirmed. This Amendment shall be construed as one with the Partnership
Agreement, and the Partnership Agreement shall, where the context requires, be
read and construed

                                       3

throughout so as to incorporate this Amendment.

      5. This Amendment shall be governed by and construed and enforced in
accordance with the internal laws of the Commonwealth of Pennsylvania without
reference to any conflict of law or choice of law principles that might apply
the law of another jurisdiction.

      6. This Amendment may be executed in any number of counterparts, all of
which shall for all purposes constitute one Agreement binding on all of the
parties hereto, notwithstanding that all of the other parties did not execute
the same counterpart. The signatures of the parties may be on separate signature
pages all of which, when attached hereto, shall constitute the execution of one
Agreement binding on all the parties hereto, notwithstanding that all of the
other parties did not execute the same signature page.

                                       4

      IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment
as of the day and year first written above.

ALLEGHENY GP:     ALLEGHENY ENERGY SUPPLY HUNLOCK CREEK, LLC

                  By:  Allegheny Energy, Inc., its sole member

                  By: ___________________________________
                      Name:
                      Title:

UGI GP:     UGI HUNLOCK DEVELOPMENT COMPANY

                  By: ___________________________________
                      Name:
                      Title:

                                       5

                                                                   Exhibit 10.60

                                                                  CONFORMED COPY

================================================================================

                           PURCHASE AND SALE AGREEMENT

                          Dated as of November 30, 2001

                          As Amended by AMENDMENT NO. 1

                           Dated as of August 29, 2003

                                     between

                            UGI ENERGY SERVICES, INC.

                                       and

                       ENERGY SERVICES FUNDING CORPORATION

================================================================================

      THIS PURCHASE AND SALE AGREEMENT (this "Agreement"), dated as of November
30, 2001, as amended by Amendment No. 1, dated as of August 29, 2003, is entered
into between UGI ENERGY SERVICES, INC. (the "Originator"), a Pennsylvania
corporation, and ENERGY SERVICES FUNDING CORPORATION, a Delaware corporation
(the "Company").

                                   DEFINITIONS

      Unless otherwise indicated herein, capitalized terms used in this
Agreement are defined in Exhibit I to the Receivables Purchase Agreement of even
date herewith (as the same may be amended, supplemented or otherwise modified
from time to time, the "Receivables Purchase Agreement") among the Company, as
the Seller; UGI Energy Services, Inc. (individually, "UGI"), as the initial
Servicer; Market Street Funding Corporation; and PNC Bank, National Association,
as the Administrator. All references herein to months are to calendar months
unless otherwise expressly indicated.

                                   BACKGROUND:

      1. The Company is a special purpose corporation, the issued and
outstanding shares of which are owned by the Originator;

      2. The Originator generates Receivables in the ordinary course of its
business;

      3. The Originator, in order to finance its business, wishes to sell or
contribute, as the case may be, Receivables to the Company, and the Company is
willing to purchase or accept Receivables, as the case may be, from the
Originator, on the terms and subject to the conditions set forth herein; and

      4. The Originator and the Company intend this transaction to be an
absolute and irrevocable true sale and conveyance of Receivables by the
Originator to the Company, providing the Company with the full benefits of
ownership of the Receivables, and the Originator and the Company do not intend
the transactions hereunder to be characterized as a loan from the Company to the
Originator.

      NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:

                                   ARTICLE I
                         AGREEMENT TO PURCHASE AND SELL

      SECTION 1.1 Agreement To Purchase and Sell. On the terms and subject to
the conditions set forth in this Agreement, the Originator, severally and for
itself, agrees to sell to the Company, and the Company agrees to purchase from
the Originator, from time to time on or after the Closing Date, but before the
Purchase and Sale Termination Date, all of the Originator's right, title and
interest in and to:

            (a) each Receivable of the Originator that existed and was owing to
the Originator at the closing of the Originator's business on December 3, 2001
(the "Cut-off Date") other than Receivables contributed pursuant to Section 3.1
(the "Contributed Receivables");

            (b) each Receivable generated by the Originator from and including
the Cut-off Date to and including the Purchase and Sale Termination Date (other
than any Receivable later contributed pursuant to the second sentence of Section
3.1(a));

            (c) all rights to, but not the obligations of the Originator under,
all Related Security;

            (d) all monies due or to become due to the Originator with respect
to any of the foregoing;

            (e) all books and records of the Originator related to any of the
foregoing, and all rights, remedies, powers, privileges, title and interest of
the Originator in each lock-box and related lock-box address and account to
which Collections are sent, all amounts on deposit therein, all certificates and
instruments, if any, from time to time evidencing such accounts and amounts on
deposit therein, and all related agreements between the Originator and each
Lock-Box Bank; and

            (f) all collections and other proceeds and products of any of the
foregoing (as defined in the applicable UCC) that are or were received by the
Originator on or after the Cut-off Date, including, without limitation, all
funds which either are received by the Originator, the Company or the Servicer
from or on behalf of the Obligors in payment of any amounts owed (including,
without limitation, invoice price, finance charges, interest and all other
charges) in respect of Receivables, or are applied to such amounts owed by the
Obligors (including, without limitation, any insurance payments that the
Originator or the Servicer applies in the ordinary course of its business to
amounts owed in respect of any Receivable, and net proceeds of sale or other
disposition of repossessed goods or other collateral or property of the Obligors
in respect of Receivables or any other parties directly or indirectly liable for
payment of such Receivables).

All purchases and contributions hereunder are absolute and irrevocable and shall
be made without recourse except as expressly provided in Sections 3.3, 3.4 and
9.1, but shall be made pursuant to, and in reliance upon, the representations,
warranties and covenants of the Originator set forth in this Agreement and each
other Transaction Document. No obligation or liability to any Obligor on any
Receivable is intended to be, or shall be, assumed by the Company hereunder, and
any such assumption is expressly disclaimed. The Company's foregoing commitment
to purchase Receivables and the proceeds and rights described in clauses (c)
through (f) (collectively, the "Related Rights") is herein called the "Purchase
Facility."

In connection with the transfer of ownership or the grant of the security
interest in the Receivables and Related Rights, by signing this Agreement in the
space provided, the Originator hereby authorizes the filing of all applicable
UCC financing statements in all necessary jurisdictions.

      SECTION 1.2 Timing of Purchases.

                                       2

            (a) Closing Date Purchases. The Originator's entire right, title and
interest in, to and under (i) each Receivable that existed and was owing to the
Originator at the Cut-off Date (other than Contributed Receivables), (ii) all
Receivables created by the Originator from and including the Cut-off Date, to
and including the Closing Date (other than Contributed Receivables), and (iii)
all Related Rights with respect thereto automatically shall be deemed to have
been sold by the Originator to the Company on the Closing Date.

            (b) Subsequent Purchases. After the Closing Date, until the Purchase
and Sale Termination Date, each Receivable and the Related Rights generated by
the Originator shall be, and shall be deemed to have been, sold by the
Originator to the Company immediately (and without further action) upon the
creation of such Receivable.

      SECTION 1.3 Consideration for Purchases. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to make Purchase
Price payments to the Originator in accordance with Article III and to reflect
all contributions in accordance with Section 3.1.

      SECTION 1.4 Purchase and Sale Termination Date. The "Purchase and Sale
Termination Date" shall be the earlier to occur of (a) the date the Purchase
Facility is terminated pursuant to Section 8.2 and (b) the Facility Termination
Date.

      SECTION 1.5 Intention of the Parties. It is the express intent of the
parties hereto that the transfers of the Receivables, Contributed Receivables
and Related Rights by the Originator to the Company, as contemplated by this
Agreement, be treated as true, final, absolute and irrevocable sales or
contributions, as applicable (without recourse except as expressly provided in
Sections 3.3, 3.4 and 9.1), of all of the Originator's legal and equitable
right, title and interest in, to and under the Receivables or the Contributed
Receivables, as applicable, and Related Rights. If, however, notwithstanding the
intent of the parties, such transactions are deemed to be loans, the Originator
hereby grants to the Company a first priority security interest in all of the
Originator's right, title and interest in and to: (i) the Receivables,
Contributed Receivables and the Related Rights now existing and hereafter
created by the Originator, (ii) all monies due or to become due and all amounts
received with respect thereto, (iii) all books and records of the Originator
related to any of the foregoing, and all rights, remedies, powers, privileges,
title and interest of the Originator in each lock-box and related lock-box
address and account to which Collections are sent, all amounts on deposit
therein, all certificates and instruments, if any, from time to time evidencing
such accounts and amounts on deposit therein, and all related agreements between
the Originator and each Lock-Box Bank, and (iv) all proceeds and products of any
of the foregoing to secure all of the Originator's obligations hereunder.

                                   ARTICLE II
                 PURCHASE REPORT; CALCULATION OF PURCHASE PRICE

      SECTION 2.1 Purchase Report. On the Closing Date and on each Settlement
Date, the Servicer shall deliver to the Company and the Originator a report in
substantially the form of Exhibit A (each such report being herein called a
"Purchase Report") setting forth, among other things:

                                       3

            (a) Receivables purchased by the Company from the Originator on the
Closing Date (in the case of the Purchase Report to be delivered on the Closing
Date);

            (b) Receivables purchased by the Company from the Originator during
the period commencing on, and including, the Settlement Date immediately
preceding such Settlement Date to (but not including) such Settlement Date (in
the case of each subsequent Purchase Report); and

            (c) the calculations of reductions of the Purchase Price for any
Receivables as provided in Section 3.3 (a) and (b).

      SECTION 2.2 Calculation of Purchase Price. The "Purchase Price" to be paid
to the Originator (or in the case of Contributed Receivables, the amount to be
recognized as a capital contribution) for the Receivables that are hereunder
purchased from or contributed by, as the case may be, the Originator shall be
determined in accordance with the following formula:

            PP        =   OB x FMVD

            where:

            PP        =   Purchase Price for each Receivable as calculated on
                          the relevant Payment Date.

            OB        =   The Outstanding Balance of such Receivable on the
                          relevant Payment Date.

            FMVD      =   Fair Market Value Discount, as measured on such
                          Payment Date, which is equal to the quotient
                          (expressed as percentage) of (a) one divided by (b)
                          the sum of (i) one, plus (ii) the product of (A) the
                          Prime Rate on such Payment Date plus 0.25% and (B) a
                          fraction, the numerator of which is the Turnover Rate
                          (calculated as of the last day of the Settlement
                          Period next preceding such Payment Date) and the
                          denominator of which is 12.

      "Payment Date" means (i) the Closing Date and (ii) each Business Day
thereafter that the Originator is open for business.

      "Prime Rate" means a per annum rate equal to the "Prime Rate" as published
in the "Money Rates" section of The Wall Street Journal or if such information
ceases to be published in The Wall Street Journal, such other publication as
determined by the Administrator in its reasonable discretion.

                                  ARTICLE III
                            PAYMENT OF PURCHASE PRICE

      SECTION 3.1 Contribution of Receivables and Initial Purchase Price
Payment.

            (a) On the Closing Date, UGI shall, and hereby does, irrevocably and
absolutely contribute to the capital of the Company Receivables and Related
Rights consisting of

                                       4

each Receivable of UGI that existed and was owing to UGI on the Closing Date
beginning with the oldest of such Receivables and continuing chronologically
thereafter such that the aggregate Outstanding Balance of all such Contributed
Receivables shall be not less than $4,000,000. Notwithstanding anything in this
Agreement to the contrary, UGI shall not be prevented from contributing
Receivables to the Company from time to time. Contributions made in connection
with the immediately preceding sentence (i) shall have no effect on the
aggregate Purchase Price of any Receivables sold by UGI to the Company on the
date of such contribution and (ii) shall not affect the aggregate outstanding
balance of any Company Note.

            (b) On the terms and subject to the conditions set forth in this
Agreement, the Company agrees to pay to the Originator the Purchase Price for
the purchase to be made from the Originator on the Closing Date partially in
cash (in an amount to be agreed between the Company and the Originator and set
forth in the initial Purchase Report) and partially by issuing a promissory note
in the form of Exhibit B to the Originator with an initial principal balance
equal to the remaining Purchase Price (each such promissory note, as it may be
amended, supplemented, endorsed or otherwise modified from time to time,
together with all promissory notes issued from time to time in substitution
therefor or renewal thereof in accordance with the Transaction Documents, each
being herein called a "Company Note").

      SECTION 3.2 Subsequent Purchase Price Payments. On each Payment Date
subsequent to the Closing Date, on the terms and subject to the conditions set
forth in this Agreement, the Company shall pay to the Originator the Purchase
Price for the Receivables generated by the Originator on such Payment Date and
sold to the Company hereunder:

            (a) First, in cash to the extent the Company has cash available
therefor; and

            (b) Second, to the extent any portion of the Purchase Price remains
unpaid, the principal amount outstanding under the applicable Company Note shall
be increased by an amount equal to such remaining Purchase Price.

The Servicer shall make all appropriate record keeping entries with respect to
each of the Company Notes to reflect the foregoing payments and reductions made
pursuant to Section 3.3, and in the absence of manifest error the Servicer's
books and records shall constitute rebuttable presumptive evidence of the
principal amount of, and accrued interest on, each of the Company Notes at any
time. Furthermore, the Servicer shall hold the Company Notes for the benefit of
the Originator. The Originator hereby irrevocably authorizes the Servicer to
mark the Company Notes "CANCELED" and to return such Company Notes to the
Company upon the final payment thereof after the occurrence of the Purchase and
Sale Termination Date.

      SECTION 3.3 Settlement as to Specific Receivables and Dilution.

            (a) If, on the day of purchase or contribution of any Receivable
from the Originator hereunder, any of the representations or warranties set
forth in Sections 5.4 and 5.12 are not true with respect to such Receivable or
as a result of any action or inaction of the Originator, on any subsequent day,
any of such representations or warranties set forth in Sections 5.4 and 5.12 are
no longer true with respect to such Receivable, then the Purchase Price (or in
the case of a Contributed Receivable, the capital contribution with respect to
such Receivable (the

                                       5

"Contributed Value")), with respect to such Receivable shall be reduced by an
amount equal to the Outstanding Balance of such Receivable and shall be
accounted to the Originator as provided in clause (c) below; provided, that if
the Company thereafter receives payment on account of Collections due with
respect to such Receivable, the Company promptly shall deliver such funds to the
Originator.

            (b) If, on any day, the Outstanding Balance of any Receivable
(including any Contributed Receivable) purchased or contributed hereunder is
reduced or adjusted as a result of any defective, rejected, returned goods or
services, or any discount or other adjustment made by the Originator, the
Company or the Servicer or any setoff or dispute between the Originator or the
Servicer and an Obligor as indicated on the books of the Company (or, for
periods prior to the Closing Date, the books of the Originator), then the
Purchase Price or Contributed Value, as the case may be, with respect to such
Receivable shall be reduced by the amount of such net reduction and shall be
accounted to the Originator as provided in clause (c) below.

            (c) Any reduction in the Purchase Price or Contributed Value of any
Receivable pursuant to clause (a) or (b) above shall be applied as a credit for
the account of the Company against the Purchase Price of Receivables
subsequently purchased by or contributed to the Company from the Originator
hereunder; provided, however if there have been no purchases of Receivables from
the Originator (or insufficiently large purchases of Receivables) to create a
Purchase Price sufficient to so apply such credit against, the amount of such
credit: (i) shall be paid in cash to the Company by the Originator in the manner
and for application as described in the following proviso, or (ii) shall be
deemed to be a payment under, and shall be deducted from the principal amount
outstanding under, the Company Note payable to the Originator;

provided, further, that at any time (y) when a Termination Event or Unmatured
Termination Event exists under the Receivables Purchase Agreement or (z) on or
after the Purchase and Sale Termination Date, the amount of any such credit
shall be paid by the Originator to the Company by deposit in immediately
available funds into the relevant Lock-Box Account for application by the
Servicer to the same extent as if Collections of the applicable Receivable in
such amount had actually been received on such date.

      SECTION 3.4 Reconveyance of Receivables. In the event that the Originator
has paid to the Company the full Outstanding Balance of any Receivable pursuant
to Section 3.3, the Company shall reconvey such Receivable to the Originator,
without representation or warranty, but free and clear of all liens, security
interests, charges, and encumbrances created by the Company.

                                   ARTICLE IV
                             CONDITIONS OF PURCHASES

      SECTION 4.1 Conditions Precedent to Initial Purchase. The initial purchase
hereunder is subject to the condition precedent that the Servicer (on the
Company's behalf) shall have received, on or before the Closing Date, the
following, each (unless otherwise indicated) dated the Closing Date, and each in
form and substance satisfactory to the Servicer (acting on the Company's
behalf):

                                       6

            (a) An Originator Assignment Certificate in the form of Exhibit C
from the Originator, duly completed, executed and delivered by the Originator;

            (b) A copy of the resolutions of the Board of Directors of the
Originator approving the Transaction Documents to be delivered by it and the
transactions contemplated hereby and thereby, certified by the Secretary or
Assistant Secretary of the Originator;

            (c) Good standing or validly subsisting certificates for the
Originator issued as of a recent date acceptable to the Servicer by the
Secretary of State of the jurisdiction of the Originator's organization and each
jurisdiction where the Originator is qualified to transact business;

            (d) A certificate of the Secretary or Assistant Secretary of the
Originator certifying the names and true signatures of the officers authorized
on such Person's behalf to sign the Transaction Documents to be delivered by it
(on which certificate the Servicer and the Company may conclusively rely until
such time as the Servicer shall receive from such Person a revised certificate
meeting the requirements of this clause (d));

            (e) Copies of the certificate or articles of incorporation or other
organizational document of the Originator duly certified by the Secretary of
State of the jurisdiction of the Originator's organization as of a recent date,
together with a copy of the by-laws of the Originator, each duly certified by
the Secretary or an Assistant Secretary of the Originator;

            (f) Originals of the proper financing statements (Form UCC-1) that
have been duly executed and name the Originator as the debtor/seller and the
Company as the secured party/purchaser (and the Issuer, as assignee of the
Company) of the Receivables generated by the Originator as may be necessary or,
in the Servicer's or the Administrator's opinion, desirable under the UCC of all
appropriate jurisdictions to perfect the Company's ownership interest in all
Receivables and such other rights, accounts, instruments and moneys (including,
without limitation, Related Security) in which an ownership or security interest
may be assigned to it hereunder;

            (g) A written search report from a Person satisfactory to the
Servicer listing all effective financing statements that name the Originator as
debtor or seller and that are filed in the jurisdictions in which filings were
made pursuant to the foregoing clause (f), together with copies of such
financing statements (none of which, except for those described in the foregoing
clause (f), shall cover any Receivable or any Related Rights which are to be
sold to the Company hereunder), and tax and judgment lien search reports from a
Person satisfactory to the Servicer showing no evidence of such liens filed
against the Originator;

            (h) A favorable opinion of Morgan, Lewis & Bockius LLP, counsel to
the Originator, in form and substance satisfactory to the Servicer and the
Administrator;

            (i) [Intentionally Omitted.]

            (j) A certificate from an officer of the Originator to the effect
that the Servicer and the Originator have placed on the most recent, and have
taken all steps reasonably necessary to ensure that there shall be placed on
each subsequent, data processing report that the

                                       7

Originator generates which are of the type that a proposed purchaser or lender
would use to evaluate the Receivables, the following legend (or the substantive
equivalent thereof): "THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN CONTRIBUTED OR
SOLD BY UGI ENERGY SERVICES, INC. TO ENERGY SERVICES FUNDING CORPORATION
PURSUANT TO A PURCHASE AND SALE AGREEMENT, DATED AS OF NOVEMBER 30, 2001, AS MAY
BE AMENDED FROM TIME TO TIME, BETWEEN UGI ENERGY SERVICES, INC. AND ENERGY
SERVICES FUNDING CORPORATION, AS PURCHASER; AND AN UNDIVIDED, FRACTIONAL
OWNERSHIP INTEREST IN THE RECEIVABLES DESCRIBED HEREIN HAS BEEN SOLD TO MARKET
STREET FUNDING CORPORATION PURSUANT TO A RECEIVABLES PURCHASE AGREEMENT, DATED
AS OF NOVEMBER 30, 2001 AS MAY BE AMENDED FROM TIME TO TIME, AMONG ENERGY
SERVICES FUNDING CORPORATION, AS SELLER, UGI ENERGY SERVICES, INC., AS SERVICER,
MARKET STREET FUNDING CORPORATION, AND PNC BANK, NATIONAL ASSOCIATION, AS
ADMINISTRATOR"; and

            (k) Such other approvals, opinions or documents as the Administrator
or the Issuer may reasonably request.

      SECTION 4.2 Certification as to Representations and Warranties. The
Originator, by accepting the Purchase Price related to each purchase of
Receivables generated by the Originator, shall be deemed to have certified that
the representations and warranties contained in Article V are true and correct
on and as of such day, with the same effect as though made on and as of such
day.

      SECTION 4.3 Additional Originators. Additional Persons may be added as
Originators hereunder, with the consent of the Company and the Administrator,
provided that the following conditions are satisfied on or before the date of
such addition:

            (a) The Servicer shall have given the Administrator and the Company
at least thirty days prior written notice of such proposed addition and the
identity of the proposed additional Originator and shall have provided such
other information with respect to such proposed additional Originator as the
Administrator may reasonably request;

            (b) such proposed additional Originator has executed and delivered
to the Company and the Administrator an agreement substantially in the form
attached hereto as Exhibit D (a "Joinder Agreement");

            (c) such proposed additional Originator has delivered to the Company
and the Administrator each of the documents with respect to the Originator
described in Sections 4.1 and 4.2;

            (d) the Administrator shall have received a written statement from
each of Moody's and Standard & Poor's confirming that the addition of the
Originator will not result in a downgrade or withdrawal of the current ratings
of the Notes; and

            (e) the Purchase and Sale Termination Date shall not have occurred.

                                       8

                                   ARTICLE V
                REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR

      In order to induce the Company to enter into this Agreement and to make
purchases hereunder, the Originator hereby makes, with respect to itself, the
representations and warranties set forth in this Article V.

      SECTION 5.1 Organization and Valid Subsistence. The Originator has been
duly incorporated or formed and is validly existing or subsisting as a
corporation, limited liability company or partnership, as applicable, in good
standing under the laws of its jurisdiction of incorporation or formation, with
corporate power and authority to own its properties and to conduct its business
as such properties are presently owned and such business is presently conducted.

      SECTION 5.2 Due Qualification. The Originator is located and is qualified
to transact business as a foreign corporation, limited liability company or
partnership, as applicable, in good standing in all jurisdictions in which (a)
the ownership or lease of its property or the conduct of its business requires
such licensing or qualification (except for the District of Columbia and the
State of New York, in which jurisdictions the Originator shall be qualified
within 90 days after the Closing Date) and (b) the failure to be so licensed or
qualified would be reasonably likely to have a Material Adverse Effect.

      SECTION 5.3 Power and Authority; Due Authorization. The Originator has (a)
all necessary corporate power, authority and legal right (i) to execute and
deliver, and perform its obligations under, each Transaction Document to which
it is a party (including the use of the proceeds of the Purchase Price) and (ii)
to generate, own, sell, contribute and assign Receivables on the terms and
subject to the conditions herein and therein provided; and (b) duly authorized
such execution and delivery and such sale, contribution and assignment and the
performance of such obligations by all necessary corporate action.

      SECTION 5.4 Valid Sale; Binding Obligations. Each sale or contribution, as
the case may be, of Receivables made by the Originator pursuant to this
Agreement is and shall constitute an irrevocable and absolute valid sale or
contribution, as the case may be, transfer, and assignment of Receivables to the
Company, enforceable against creditors of, and purchasers from, the Originator;
and this Agreement constitutes, and each other Transaction Document to be signed
by the Originator, when duly executed and delivered by the Originator, will
constitute, a legal, valid, and binding obligation of the Originator,
enforceable against the Originator in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.

      SECTION 5.5 No Violation. The consummation by the Originator of the
transactions contemplated by this Agreement and the other Transaction Documents
to be signed by the Originator, and the fulfillment by the Originator of the
terms hereof or thereof, will not (a) conflict with, result in any breach of any
of the terms and provisions of, or constitute (with or without notice or lapse
of time) a default under (i) the Originator's certificate or articles of

                                       9

incorporation or bylaws, limited partnership agreements, articles of
organization or limited liability company agreements, as applicable or (ii) any
indenture, loan agreement, mortgage, deed of trust, or other similar agreement
or instrument to which it is a party or by which it is bound, (b) result in the
creation or imposition of any Adverse Claim upon any of its properties pursuant
to the terms of any such indenture, loan agreement, mortgage, deed of trust, or
other similar agreement or instrument, other than the Transaction Documents, or
(c) violate any law or any order, rule or regulation applicable to it of any
court or of any state or foreign regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over it or any of its
properties.

      SECTION 5.6 Proceedings. Except as set forth in Schedule 5.6, there is no
action, suit, proceeding or investigation pending before any court, regulatory
body, arbitrator, administrative agency, or other tribunal or governmental
instrumentality (a) asserting the invalidity of any Transaction Document, (b)
seeking to prevent the Originator from transferring any Receivable hereunder (or
in the case such transfer does not constitute a sale or an absolute conveyance
under any applicable law, from granting or maintaining the security interest in
any Receivable) to the Company or the consummation of any of the transactions
contemplated by any Transaction Document or (c) seeking any determination or
ruling that is reasonably likely to have a Material Adverse Effect.

      SECTION 5.7 Bulk Sales Acts. No transaction contemplated hereby requires
compliance with, or will be subject to avoidance under, any bulk sales act or
similar law.

      SECTION 5.8 Government Approvals. Except for the filing of the UCC
financing statements referred to in Article IV, all of which, at the time
required in Article IV, shall have been duly made and shall be in full force and
effect, no authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
Originator's due execution, delivery and performance of any Transaction Document
to which it is a party.

      SECTION 5.9 Financial Condition.

            (a) Material Adverse Effect. Since September 30, 2001, no event has
occurred that has had, or is reasonably likely to have, a Material Adverse
Effect.

            (b) Solvent. On the date hereof, and on the date of each purchase
hereunder (both before and after giving effect to such purchase), the Originator
shall be Solvent.

      SECTION 5.10 Licenses, Contingent Liabilities, and Labor Controversies.

            (a) The Originator has not failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its properties or to the conduct of its business, which violation or failure to
obtain would be reasonably likely to have a Material Adverse Effect.

            (b) There are no labor controversies pending against the Originator
that have had (or are reasonably likely to have) a Material Adverse Effect.

                                       10

      SECTION 5.11 Margin Regulations. No use of any funds acquired by the
Originator under this Agreement will conflict with or contravene any of
Regulations, T, U and X promulgated by the Federal Reserve Board from time to
time.

      SECTION 5.12 Quality of Title.

            (a) Each Receivable of the Originator (together with the Related
Rights with respect to such Receivable) which is to be sold to the Company
hereunder is or shall be owned by the Originator, free and clear of any Adverse
Claim, except as provided herein and in the Receivables Purchase Agreement.
Whenever the Company makes a purchase or accepts a contribution hereunder, it
shall have acquired and shall continue to have maintained a valid and perfected
ownership interest (free and clear of any Adverse Claim) in all Receivables
(except for those Receivables reconveyed to the Originator pursuant to Section
3.4) generated by the Originator and all Collections related thereto, and in the
Originator's entire right, title and interest in and to the Related Rights with
respect thereto.

            (b) No effective financing statement or other instrument similar in
effect covering any Receivable generated by the Originator or any Related Rights
is on file in any recording office except such as may be filed in favor of the
Company or the Originator, as the case may be, in accordance with this Agreement
or in favor of the Issuer in accordance with the Receivables Purchase Agreement.

            (c) Unless otherwise identified to the Company on the date of the
purchase or contribution hereunder, each Receivable purchased hereunder is on
the date of purchase or contribution an Eligible Receivable.

      SECTION 5.13 Accuracy of Information. All factual written information
heretofore or contemporaneously furnished (and prepared) by the Originator to
the Company or the Administrator for purposes of or in connection with any
Transaction Document or any transaction contemplated hereby or thereby is, and
all other such factual written information hereafter furnished (and prepared) by
the Originator to the Company or the Administrator pursuant to or in connection
with any Transaction Document will be, true and accurate in all material
respects on the date as of which such information is dated or certified.

      SECTION 5.14 Offices. The Originator's principal place of business and
chief executive office is located at the address set forth in Schedule 5.14A and
the offices where the Originator keeps all its books, records and documents
evidencing its Receivables, the related Contracts and all other agreements
related to such Receivables are located at the addresses specified in Schedule
5.14B (or at such other locations, notified to the Servicer and the
Administrator in accordance with Section 6.1(f)), in jurisdictions where all
action required by Section 7.3 has been taken and completed. The Originator's
organization type, jurisdiction of organization and organizational
identification number are set forth on Schedule 5.14A.

      SECTION 5.15 Trade Names. The Originator does not use any trade name other
than its actual corporate name and the trade names set forth in Schedule 5.15.
From and after the date that fell five (5) years before the date hereof, except
as set forth in Schedule 5.15, the Originator

                                       11

has not been known by any legal name other than its corporate name as of the
date hereof, nor has the Originator been the subject of any merger or other
corporate reorganization.

      SECTION 5.16 Taxes. The Originator has filed all tax returns and reports
required by law to have been filed by it and has paid all taxes and governmental
charges thereby shown to be owing, except any such taxes or charges which are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on its
books.

      SECTION 5.17 Compliance with Applicable Laws. The Originator is in
compliance with the requirements of all applicable laws, rules, regulations and
orders of all Governmental Authorities, a breach of any of which, individually
or in the aggregate, would be reasonably likely to have a Material Adverse
Effect.

      SECTION 5.18 Reliance on Separate Legal Identity. The Originator
acknowledges that the Issuer and the Administrator are entering into the
Receivables Purchase Agreement in reliance upon the Company's identity as a
legal entity separate from the Originator.

      SECTION 5.19 Investment Company. The Originator is not an "investment
company," or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940 as amended. In addition, the
Originator is not a "holding company," a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.

      SECTION 5.20 Valid Contracts. Each Contract with respect to each
Receivable is effective to create, and has created, a legal, valid and binding
obligation of the related Obligor to pay the Outstanding Balance of the
Receivable created thereunder and any accrued interest thereon, enforceable
against the Obligor in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).

                                   ARTICLE VI
                           COVENANTS OF THE ORIGINATOR

      SECTION 6.1 Affirmative Covenants. Until the latest of the Facility
Termination Date, the date on which no Capital of or Discount in respect of the
Purchased Interest shall be outstanding or the date on which all other amounts
owed by the Originator under this Agreement or the Receivables Purchase
Agreement to the Seller, the Issuer, the Administrator and any other Indemnified
Party or Affected Person shall be paid in full, the Originator will, unless the
Administrator and the Company shall otherwise consent in writing:

            (a) Compliance with Laws, Etc. Comply in all material respects with
all applicable laws, rules, regulations and orders with respect to the
Receivables generated by it and the Contracts and other agreements related
thereto except where the failure to so comply would not materially and adversely
affect the collectibility of such Receivables or the rights of the Company
hereunder.

                                       12

            (b) Preservation of Corporate Existence. Except as otherwise
permitted in Section 6.3(e), preserve and maintain its existence as a
corporation, partnership or limited liability company, as applicable, and all
rights, franchises and privileges in the jurisdiction of its incorporation, and
qualify and remain qualified in good standing as a foreign corporation,
partnership or limited liability company, as applicable, in each jurisdiction
where the failure to preserve and maintain such existence, rights, franchises,
privileges and qualification would be reasonably likely to have a Material
Adverse Effect.

            (c) Receivables Reviews. (i) From time to time during regular
business hours as reasonably requested in advance by the Company or the
Administrator (unless a Termination Event or an Unmatured Termination Event
exists or there shall be a material variance in the performance of the
Receivables), permit the Company or the Administrator, or their respective
agents or representatives, (A) to examine and make copies of and abstracts from
all books, records and documents (including, without limitation, computer tapes
and disks) in possession or under the control of the Originator relating to
Receivables, including, without limitation, the related Contracts and purchase
orders and other agreements related thereto, and (B) to visit the offices and
properties of the Originator for the purpose of examining such materials
described in clause (A) above and to discuss matters relating to Receivables
originated by it or the performance hereunder with any of the officers or
employees of the Originator having knowledge of such matters, and (ii) without
limiting the foregoing clause (i) above, permit certified public accountants or
other auditors acceptable to the Company and Administrator to conduct, at the
Company's expense, a review of the Originator's books and records with respect
to such Receivables, provided that the Company shall not pay for more than one
audit per year unless a Termination Event has occurred and is continuing.

            (d) Keeping of Records and Books of Account. Maintain and implement
administrative and operating procedures (including, without limitation, an
ability to re-create records evidencing Receivables it generates in the event of
the destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for the
collection of such Receivables (including, without limitation, records adequate
to permit the daily identification of each new Receivable and all Collections of
and adjustments to each existing Receivable).

            (e) Performance and Compliance with Receivables and Contracts.
Timely and fully perform and comply, in all material respects, with all
provisions, covenants and other promises required to be observed by it under the
Contracts and all other agreements related to the Receivables that it generates.

            (f) Location of Records. Keep its principal place of business and
chief executive office, and the offices where it keeps its records concerning or
related to Receivables, at the address(es) referred to in Schedule 5.14 or, upon
15 days' prior written notice to the Company and the Administrator, at such
other locations in jurisdictions where all action required by Section 7.3 shall
have been taken and completed.

            (g) Credit and Collection Policies. Comply in all material respects
with its Credit and Collection Policy in connection with the Receivables that it
generates and all Contracts and other agreements related thereto.

                                       13

            (h) Post Office Boxes. Within 30 days of the Closing Date, the only
post office boxes into which Obligors will have been directed to send payments
are post office boxes in the name of the relevant Lock-Box Banks.

            (i) Transaction Documents. Comply in all material respects with the
Transaction Documents to which it is a party.

            (j) Change Affecting UCC. At least 30 days before any change in the
Originator's name or any other change requiring the amendment of UCC financing
statements, provide to the Company and the Servicer notice setting forth such
changes and the effective date thereof and, prior to the effectiveness of such
change, take all steps necessary to amend such financing statements to reflect
such change.

      SECTION 6.2 Reporting Requirements. Until the latest of the Facility
Termination Date, the date on which no Capital of or Discount in respect of the
Purchased Interest shall be outstanding or the date on which all other amounts
owed by the Originator under this Agreement or the Receivables Purchase
Agreement to the Seller, the Issuer, the Administrator and any other Indemnified
Party or Affected Person shall be paid in full, the Originator will, unless the
Servicer (on behalf of the Company) shall otherwise consent in writing, furnish
to the Company and the Administrator:

            (a) Purchase and Sale Termination Events. As soon as possible after
the Originator has knowledge of the occurrence of, and in any event within three
Business Days after the Originator has knowledge of the occurrence of each
Purchase and Sale Termination Event or each Unmatured Purchase and Sale
Termination Event in respect of the Originator, the statement of the chief
financial officer or chief accounting officer of the Originator describing such
Purchase and Sale Termination Event or Unmatured Purchase and Sale Termination
Event and the action that the Originator proposes to take with respect thereto,
in each case in reasonable detail;

            (b) Proceedings. As soon as possible and in any event within three
Business Days after the Originator otherwise has knowledge thereof, written
notice of (i) material litigation, investigation or proceeding of the type
described in Section 5.6 not previously disclosed to the Company and (ii) all
materially adverse developments that have occurred with respect to any
previously disclosed litigation, proceedings and investigations; and

            (c) Other. Promptly, from time to time, such other information,
documents, records or reports respecting the Receivables or the conditions or
operations, financial or otherwise, of the Originator as the Company, the Issuer
or the Administrator may from time to time reasonably request in order to
protect the interests of the Company, the Issuer or the Administrator under or
as contemplated by the Transaction Documents.

      SECTION 6.3 Negative Covenants. Until the latest of the Facility
Termination Date, the date on which no Capital of or Discount in respect of the
Purchased Interest shall be outstanding or the date on which all other amounts
owed by the Originator under this Agreement or the Receivables Purchase
Agreement to the Seller, the Issuer, the Administrator and any other Indemnified
Party or Affected Person shall be paid in full, the Originator agrees that,
unless the

                                       14

Servicer (on behalf of the Company) and the Administrator shall otherwise
consent in writing, it shall not:

            (a) Sales, Liens, Etc. Except as otherwise provided herein or in any
other Transaction Document, sell, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist any Adverse Claim upon or
with respect to, any Receivable or related Contract or Related Security, or any
interest therein, or any Collections thereon, or assign any right to receive
income in respect thereof.

            (b) Extension or Amendment of Receivables. Except as otherwise
permitted in Section 4.2(a) of the Receivables Purchase Agreement, extend, amend
or otherwise modify the terms of any Receivable in any material respect
generated by it, or amend, modify or waive, in any material respect, any
Contract related thereto (which term or condition relates to payments under, or
the enforcement of, such Contract).

            (c) Change in Business or Credit and Collection Policy. Make any
change in the character of its business or materially alter its Credit and
Collection Policy (other than a change to the insurance provisions of any such
policy), which change or alteration would, in either case, materially adversely
change the credit standing required of particular Obligors or potential Obligors
or impair the collectibility of a material portion of Receivables generated by
it.

            (d) Receivables Not to be Evidenced by Promissory Notes or Chattel
Paper. Take any action to cause or permit any Receivable generated by it to
become evidenced by any "instrument" or "chattel paper" (as defined in the
applicable UCC).

            (e) Mergers, Acquisitions, Sales, etc. (i) Be a party to any merger
or consolidation, except a merger or consolidation where the Originator is the
surviving entity, or (ii) directly or indirectly sell, transfer, assign, convey
or lease (A) whether in one or a series of transactions, all or substantially
all of its assets or (B) any Receivables or any interest therein (other than
pursuant to this Agreement).

            (f) Lock-Box Banks. Make any changes in its instructions to Obligors
regarding Collections or add or terminate any bank as a Lock-Box Bank unless the
requirements of paragraph 2(g) of Exhibit IV to the Receivables Purchase
Agreement have been met.

            (g) Accounting for Purchases. Account for or treat (whether in
financial statements or otherwise) the transactions contemplated hereby in any
manner other than as sales or contributions to capital of the Receivables and
Related Rights by the Originator to the Company.

            (h) Transaction Documents. Enter into, execute, deliver or otherwise
become bound by any agreement, instrument, document or other arrangement that
restricts the right of the Originator to amend, supplement, amend and restate or
otherwise modify, or to extend or renew, or to waive any right under, this
Agreement or any other Transaction Document.

      SECTION 6.4 Substantive Consolidation. The Originator hereby acknowledges
that this Agreement and the other Transaction Documents are being entered into
in reliance upon the

                                       15

Company's identity as a legal entity separate from the Originator and its
Affiliates. Therefore, from and after the date hereof, the Originator shall take
all reasonable steps necessary to make it apparent to third Persons that the
Company is an entity with assets and liabilities distinct from those of the
Originator and any other Person, and is not a division of the Originator, its
Affiliates or any other Person. Without limiting the generality of the foregoing
and in addition to and consistent with the other covenants set forth herein, the
Originator shall take such actions as shall be required in order that:

            (a) except as provided for in Section 10.6, the Originator shall not
be involved in the day to day management of the Company;

            (b) the Originator shall maintain separate corporate records and
books of account from the Company and otherwise will observe corporate
formalities and have a separate area from the Company for its business;

            (c) the financial statements and books and records of the Originator
shall be prepared after the date of creation of the Company to reflect and shall
reflect the separate existence of the Company; provided, that the Company's
assets and liabilities may be included in a consolidated financial statement
issued by an Affiliate of the Company; provided, however, all financial
statements of UGI or any Affiliate thereof that are consolidated to include the
Company will contain detailed notes clearly stating that (i) a special purpose
corporation exists as a Subsidiary of UGI, (ii) the Originator has sold
receivables and other related assets to such special purpose Subsidiary that, in
turn, has sold undivided interests therein to certain financial institutions and
other entities and (iii) that the special purpose Subsidiary's assets are not
available to satisfy the obligations of UGI or any Affiliate;

            (d) except as permitted by the Receivables Purchase Agreement or
this Agreement, (i) the Originator shall maintain its assets separately from the
assets of the Company, and (ii) the Company's assets, and records relating
thereto, have not been, are not, and shall not be, commingled with those of the
Originator;

            (e) all of the Company's business correspondence and other
communications shall be conducted in the Company's own name and on its own
stationery;

            (f) the Originator shall not act as an agent for the Company, other
than UGI in its capacity as the Servicer, and in connection therewith, shall
present itself to the public as an agent for the Company and a legal entity
separate from the Company;

            (g) the Originator shall not conduct any of the business of the
Company in its own name;

            (h) except as provided in Section 10.6, the Originator shall not pay
any liabilities of the Company out of its own funds or assets;

            (i) the Originator shall maintain an arm's-length relationship with
the Company;

                                       16

            (j) the Originator shall not assume or guarantee or become obligated
for the debts of the Company or hold out its credit as being available to
satisfy the obligations of the Company;

            (k) the Originator shall not acquire obligations of the Company;

            (l) the Originator shall allocate fairly and reasonably overhead or
other expenses that are properly shared with the Company, including, without
limitation, shared office space;

            (m) the Originator shall identify and hold itself out as a separate
and distinct entity from the Company;

            (n) the Originator shall correct any known misunderstanding
respecting its separate identity from the Company;

            (o) the Originator shall not enter into, or be a party to, any
transaction with the Company, except in the ordinary course of its business and
on terms which are intrinsically fair and not less favorable to it than would be
obtained in a comparable arm's-length transaction with an unrelated third party;
and

            (p) the Originator shall not pay the salaries of the Company's
employees, if any.

The provisions of this Section 6.4 shall survive any termination of this
Agreement for one year and one day after the latest of the Facility Termination
Date, the date on which no Capital of or Discount in respect of the Purchased
Interest shall be outstanding or the date on which all other amounts owed by the
Originator under this Agreement or the Receivables Purchase Agreement to the
Seller, the Issuer, the Administrator and any other Indemnified Party or
Affected Person shall be paid in full.

                                  ARTICLE VII
                      ADDITIONAL RIGHTS AND OBLIGATIONS IN
                             RESPECT OF RECEIVABLES

      SECTION 7.1 Rights of the Company. The Originator hereby authorizes the
Company, the Servicer or their respective designees to take any and all steps in
the Originator's name necessary or desirable, in their respective determination,
to collect on behalf of the Company all amounts due under any and all
Receivables, including, without limitation, indorsing the name of the Originator
on checks and other instruments representing Collections and enforcing such
Receivables and the provisions of the related Contracts that concern payment
and/or enforcement of rights to payment.

      SECTION 7.2 Responsibilities of the Originator. Anything herein to the
contrary notwithstanding:

            (a) Collection Procedures. Within 30 days of the Closing Date, the
Originator agrees to direct its respective Obligors to make payments of
Receivables directly to a post office

                                       17

box related to the relevant Lock-Box Account at a Lock-Box Bank. The Originator
further agrees to transfer any Collections that it receives directly to the
Servicer (for the Company's account) within two (2) Business Days of receipt
thereof, and agrees that all such Collections shall be deemed to be received in
trust for the Company.

            (b) The Originator shall perform its obligations hereunder, and the
exercise by the Company or its designee of its rights hereunder shall not
relieve the Originator from such obligations.

            (c) None of the Company, the Servicer or the Administrator shall
have any obligation or liability to any Obligor or any other third Person with
respect to any Receivables, Contracts related thereto or any other related
agreements, nor shall the Company, the Servicer, the Issuer or the Administrator
be obligated to perform any of the obligations of the Originator thereunder.

            (d) The Originator hereby grants to the Servicer an irrevocable
power of attorney, with full power of substitution, coupled with an interest, to
take, upon the occurrence and continuation of a Purchase and Sale Termination
Event, in the name of the Originator and on behalf of the Company all steps
necessary or advisable to endorse, negotiate or otherwise realize on any writing
or other right of any kind held or transmitted by the Originator or transmitted
or received by the Company (whether or not from the Originator) in connection
with any Receivable and to take all other steps necessary to comply with its
obligations as Servicer set forth in Article IV of the Receivables Purchase
Agreement.

      SECTION 7.3 Further Action Evidencing Purchases. The Originator agrees
that from time to time, at its expense, it will promptly execute and deliver all
further instruments and documents, and take all further action that the Servicer
may reasonably request in order to perfect, protect or more fully evidence the
Receivables and Related Rights purchased by or contributed to the Company
hereunder, or to enable the Company to exercise or enforce any of its rights
hereunder or under any other Transaction Document. Without limiting the
generality of the foregoing, upon the request of the Servicer, the Originator
will:

            (a) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate; and

            (b) mark the master data processing records that evidence or list
(i) such Receivables and (ii) related Contracts with the legend set forth in
Section 4.1(j).

The Originator hereby authorizes the Company or its designee to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any of the Receivables and Related Rights now
existing or hereafter generated by the Originator. If the Originator fails to
perform any of its agreements or obligations under this Agreement, the Company
or its designee may (but shall not be required to) itself perform, or cause the
performance of, such agreement or obligation, and the expenses of the Company or
its designee incurred in connection therewith shall be payable by the Originator
as provided in Section 9.1.

                                       18

      SECTION 7.4 Application of Collections. Any payment by an Obligor in
respect of any amount owed by it to the Originator shall, except as otherwise
specified by such Obligor or required by applicable law and unless otherwise
instructed by the Servicer (with the prior written consent of the Administrator)
or the Administrator, be applied as a Collection of any Receivable or
Receivables of such Obligor to the extent of any amounts then due and payable
thereunder (such application to be made starting with the oldest outstanding
Receivable or Receivables) before being applied to any other indebtedness of
such Obligor.

                                  ARTICLE VIII
                      PURCHASE AND SALE TERMINATION EVENTS

      SECTION 8.1 Purchase and Sale Termination Events. Each of the following
events or occurrences described in this Section 8.1 shall constitute a "Purchase
and Sale Termination Event":

            (a) A Termination Event (as defined in the Receivables Purchase
Agreement) shall have occurred and, in the case of a Termination Event (other
than one described in paragraph (f) of Exhibit V of the Receivables Purchase
Agreement), the Administrator, shall have declared the Facility Termination Date
to have occurred; or

            (b) The Originator shall fail to make any payment or deposit to be
made by it hereunder when due and such failure shall remain unremedied for two
(2) Business Days; or

            (c) Any representation or warranty made or deemed to be made
(pursuant to Section 4.2) by the Originator (or any of its officers) under or in
connection with this Agreement, any other Transaction Documents, or any other
written information or report delivered pursuant hereto or thereto shall prove
to have been false or incorrect in any material respect when made or deemed
made; provided, however, that if the violation of this paragraph (c) by the
Originator may be cured without any potential or actual detriment to the
Purchaser, the Administrator or any Program Support Provider, the Originator
shall have 30 days from the earlier of (i) such Person's knowledge of such
failure and (ii) notice to such Person of such failure to cure any such
violation, before a Purchase and Sale Termination Event shall occur so long as
such Person is diligently attempting to effect such cure; or

            (d) The Originator shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be performed or
observed and such failure shall remain unremedied for 30 days after written
notice thereof shall have been given by the Servicer to the Originator.

      SECTION 8.2 Remedies.

            (a) Optional Termination. Upon the occurrence of a Purchase and Sale
Termination Event, the Company (and not the Servicer) shall have the option, by
notice to the Originator (with a copy to the Administrator), to declare the
Purchase Facility as terminated.

            (b) Remedies Cumulative. Upon any termination of the Purchase
Facility pursuant to Section 8.2(a), the Company shall have, in addition to all
other rights and remedies

                                       19

under this Agreement, all other rights and remedies provided under the UCC of
each applicable jurisdiction and other applicable laws, which rights shall be
cumulative.

                                   ARTICLE IX
                                 INDEMNIFICATION

      SECTION 9.1 Indemnities by the Originator. Without limiting any other
rights which the Company may have hereunder or under applicable law, the
Originator hereby agrees to indemnify the Company and each of its officers,
directors, employees and agents (each of the foregoing Persons being
individually called a "Purchase and Sale Indemnified Party"), forthwith on
demand, from and against any and all damages, losses, claims, judgments,
liabilities and related costs and expenses, including reasonable attorneys' fees
and disbursements (all of the foregoing being collectively called "Purchase and
Sale Indemnified Amounts") awarded against or incurred by any of them arising
out of or as a result of the failure of the Originator to perform its
obligations under this Agreement or any other Transaction Document, or arising
out of the claims asserted against a Purchase and Sale Indemnified Party
relating to the transactions contemplated herein or therein or the use of
proceeds thereof or therefrom, excluding, however, (i) Purchase and Sale
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of such Purchase and Sale Indemnified Party, (ii)
recourse with respect to any Receivable to the extent that such Receivable is
uncollectible on account of insolvency, bankruptcy or lack of creditworthiness
of the related Obligor (except as otherwise specifically provided under this
Agreement) and (iii) any tax based upon or measured by net income property, or
gross receipts. Without limiting the foregoing, the Originator shall indemnify
each Purchase and Sale Indemnified Party for Purchase and Sale Indemnified
Amounts relating to or resulting from:

            (a) the transfer by the Originator of an interest in any Receivable
to any Person other than the Company;

            (b) the breach of any representation or warranty made by the
Originator (or any of its officers) under or in connection with this Agreement
or any other Transaction Document, or any written information or report
delivered by the Originator pursuant hereto or thereto, which shall have been
false or incorrect in any respect when made or deemed made;

            (c) the failure by the Originator to comply with any applicable law,
rule or regulation with respect to any Receivable generated by the Originator or
the related Contract, or the nonconformity of any Receivable generated by the
Originator or the related Contract with any such applicable law, rule or
regulation;

            (d) the failure to vest and maintain vested in the Company an
ownership interest in the Receivables generated by the Originator free and clear
of any Adverse Claim, other than an Adverse Claim arising solely as a result of
an act of the Company, the Issuer or the Administrator whether existing at the
time of the purchase or contribution of such Receivables or at any time
thereafter;

            (e) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other

                                       20

applicable laws with respect to any Receivables or purported Receivables
generated by the Originator, whether at the time of any purchase or contribution
or at any subsequent time;

            (f) any dispute, claim, offset or defense (other than discharge in
bankruptcy) of the Obligor to the payment of any Receivable or purported
Receivable generated by the Originator (including, without limitation, a defense
based on such Receivable's or the related Contract's not being a legal, valid
and binding obligation of such Obligor enforceable against it in accordance with
its terms), or any other claim resulting from the services related to any such
Receivable or the furnishing of or failure to furnish such services;

            (g) any product liability claim arising out of or in connection with
services that are the subject of any Receivable generated by the Originator; and

            (h) any tax or governmental fee or charge (other than any tax
excluded pursuant to clause (iii) in the proviso to the preceding sentence), all
interest and penalties thereon or with respect thereto, and all out-of-pocket
costs and expenses, including the reasonable fees and expenses of counsel in
defending against the same, which may arise by reason of the purchase or
ownership of the Receivables generated by the Originator or any Related Security
connected with any such Receivables.

If for any reason the indemnification provided above in this Section 9.1 is
unavailable to a Purchase and Sale Indemnified Party or is insufficient to hold
such Purchase and Sale Indemnified Party harmless, then the Originator,
severally and for itself, shall contribute to the amount paid or payable by such
Purchase and Sale Indemnified Party to the maximum extent permitted under
applicable law.

                                   ARTICLE X
                                  MISCELLANEOUS

      SECTION 10.1 Amendments, etc.

            (a) The provisions of this Agreement may from time to time be
amended, modified or waived, if such amendment, modification or waiver is in
writing and executed by the Company and the Originator (with the prior written
consent of the Administrator).

            (b) No failure or delay on the part of the Company, the Servicer,
the Originator or any third party beneficiary in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice to or demand on
the Company, the Servicer or the Originator in any case shall entitle it to any
notice or demand in similar or other circumstances. No waiver or approval by the
Company or the Servicer under this Agreement shall, except as may otherwise be
stated in such waiver or approval, be applicable to subsequent transactions. No
waiver or approval under this Agreement shall require any similar or dissimilar
waiver or approval thereafter to be granted hereunder.

            (c) The Transaction Documents contain a final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter thereof and shall

                                       21

constitute the entire agreement among the parties hereto with respect to the
subject matter thereof, superseding all prior oral or written understandings.

      SECTION 10.2 Notices, etc. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be personally delivered or sent by certified
mail, postage prepaid, via nationally recognized courier, or by facsimile, to
the intended party at the mailing address or facsimile number of such party set
forth under its name on the signature pages hereof or at such other address or
facsimile number as shall be designated by such party in a written notice to the
other parties hereto. All such notices and communications shall be effective (i)
if personally delivered, when received, (ii) if sent by certified mail three (3)
Business Days after having been deposited in the mail, postage prepaid, (iii) if
transmitted by facsimile, when sent, receipt confirmed by telephone or
electronic means (and shall be followed by a hard copy sent by first class
mail), and (iv) if by nationally recognized overnight courier, the next Business
Day.

      SECTION 10.3 No Waiver; Cumulative Remedies. The remedies herein provided
are cumulative and not exclusive of any remedies provided by law. Without
limiting the foregoing, the Originator hereby authorizes the Company, at any
time and from time to time, to the fullest extent permitted by law, to set off,
against any obligations of the Originator to the Company arising in connection
with the Transaction Documents (including, without limitation, amounts payable
pursuant to Section 9.1) that are then due and payable or that are not then due
and payable but are accruing in respect of the then current Settlement Period,
any and all indebtedness at any time owing by the Company to or for the credit
or the account of the Originator.

      SECTION 10.4 Binding Effect; Assignability. This Agreement shall be
binding upon and inure to the benefit of the Company and the Originator and
their respective successors and permitted assigns. The Originator may not assign
any of its rights hereunder or any interest herein without the prior written
consent of the Company, except as otherwise herein specifically provided. This
Agreement shall create and constitute the continuing obligations of the parties
hereto in accordance with its terms, and shall remain in full force and effect
until such time as the parties hereto shall agree in writing. The rights and
remedies with respect to any breach of any representation and warranty made by
the Originator pursuant to Article V and the indemnification and payment
provisions of Article IX and Section 10.6 shall be continuing and shall survive
any termination of this Agreement.

      SECTION 10.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

      SECTION 10.6 Costs, Expenses and Taxes. In addition to the obligations of
the Originator under Article IX, the Originator, agrees to pay on demand:

            (a) to the Company (and any successor and permitted assigns thereof)
all reasonable costs and expenses incurred by such Person in connection with the
enforcement of this Agreement and the other Transaction Documents; and

                                       22

            (b) all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and recording of this
Agreement or the other Transaction Documents to be delivered hereunder, and
agrees to indemnify each Purchase and Sale Indemnified Party against any
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees.

      SECTION 10.7 SUBMISSION TO JURISDICTION. EACH PARTY HERETO HEREBY
IRREVOCABLY (a) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE OF NEW
YORK OR THE FEDERAL COURT OF THE UNITED STATES FOR SOUTHERN DISTRICT OF NEW
YORK, NEW YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY
TRANSACTION DOCUMENT; (b) AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE OR UNITED STATES FEDERAL
COURT; (c) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING; (d)
IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO SUCH PERSON AT ITS
ADDRESS SPECIFIED IN SECTION 10.2; AND (e) AGREES THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING IN THIS SECTION 10.7 SHALL AFFECT THE COMPANY'S RIGHT TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING ANY ACTION OR
PROCEEDING AGAINST THE ORIGINATOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTIONS.

      SECTION 10.8 WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER
OR RELATING TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND AGREES
THAT (a) ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY AND (b) ANY PARTY HERETO (OR ANY ASSIGNEE OR THIRD PARTY
BENEFICIARY OF THIS AGREEMENT) MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF ANY OTHER
PARTY OR PARTIES HERETO TO WAIVER OF ITS OR THEIR RIGHT TO TRIAL BY JURY.

      SECTION 10.9 Captions and Cross References; Incorporation by Reference.
The various captions (including, without limitation, the table of contents) in
this Agreement are included for convenience only and shall not affect the
meaning or interpretation of any provision of this Agreement. References in this
Agreement to any underscored Section or Exhibit are to such Section or Exhibit
of this Agreement, as the case may be. The Exhibits hereto are hereby
incorporated by reference into and made a part of this Agreement.

                                       23

      SECTION 10.10 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
Agreement.

      SECTION 10.11 Acknowledgment and Agreement. By execution below, the
Originator expressly acknowledges and agrees that all of the Company's rights,
title, and interests in, to, and under this Agreement (but not its obligations),
shall be assigned by the Company pursuant to the Receivables Purchase Agreement,
and the Originator consents to such assignment. Each of the parties hereto
acknowledges and agrees that the Administrator, and the Issuer are third party
beneficiaries of the rights of the Company arising hereunder and under the other
Transaction Documents to which the Originator is a party.

      SECTION 10.12 No Proceeding. The Originator hereby agrees that it will not
institute against, or cause to be instituted against, the Issuer, or join any
other Person in instituting against the Issuer, any insolvency proceeding
(namely, any proceeding of the type referred to in the definition of Insolvency
Proceeding) so long as any Notes shall be outstanding or there shall have
elapsed less than one year plus two days since the last day on which any such
Notes shall have been outstanding.

      SECTION 10.13 Limited Recourse. Except as explicitly set forth herein, the
obligations of the Company and the Originator under this Agreement or any other
Transaction Documents to which each is a party are solely the obligations of the
Company and each Originator. No recourse under any Transaction Document shall be
had against, and no liability shall attach to, any officer, employee, director,
or beneficiary, whether directly or indirectly, of the Company or the
Originator; provided, however, that this Section shall not relieve any such
Person of any liability it might otherwise have for its own gross negligence or
willful misconduct.

                            [Signature Page Follows]

                                       24

      IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the date first
above written.

                                  ENERGY SERVICES FUNDING CORPORATION

                                  By:___________________________________________
                                       Name:____________________________________
                                       Title:___________________________________

                                  Address:   Energy Services Funding Corporation
                                             460 North Gulph Road, Suite 200
                                             King of Prussia, PA  19406-2815

                                  Attention: Robert W.  Krick
                                  Telephone: (610) 337-1000 ext. 3141
                                  Facsimile: (610) 992-3259

                                  UGI ENERGY SERVICES, INC.

                                  By:___________________________________________
                                       Name:____________________________________
                                       Title:___________________________________

                                  Address:   UGI Energy Services, Inc.
                                             1100 Berkshire Boulevard, Suite 305
                                             Wyomissing, PA 19610

                                  Attention: Joseph L.  Hartz
                                  Telephone: (610) 373-7999 ext. 106
                                  Facsimile: (610) 374-4288

                                         S-1         Purchase and Sale Agreement
                                                                           (UGI)

                                                                    Schedule 5.6

                                   PROCEEDINGS

      Complaint of GASMARK against Columbia Gas of Pennsylvania, Inc.
("Columbia"), filed with the Public Utility Commission on July 19, 2001,
regarding (i) the imposition of Operational Flow Orders and Operational Matching
Orders, (ii) the imposition of penalties for the failure to deliver gas to
Columbia's local market areas, and (iii) certain of Columbia's tariff provisions
and business practices; Answer and new matter of Columbia filed on August 13,
2001, seeking unspecified sanctions against GASMARK for failure to honor its
delivery obligations as a licensed supplier on the Columbia system.

                                 Schedule 5.6-2

                                                                  Schedule 5.14A

                    CHIEF EXECUTIVE OFFICE OF THE ORIGINATOR

                                       JURISDICTION OF
                                      ORGANIZATION AND                                     ORGANIZATIONAL
                                           TYPE OF                 CHIEF EXECUTIVE         IDENTIFICATION
        ORIGINATOR                     ORGANIZATION                    OFFICE                 NUMBER
        ----------                     ------------                    ------                 ------
                                                                                  
UGI Energy Services, Inc.         Pennsylvania corporation       1100 Berkshire Blvd          2627451
                                                                 Suite 305
                                                                 Wyomissing, PA 19610

                                Schedule 5.14A-1

                                                                  Schedule 5.14B

                 LOCATION OF BOOKS AND RECORDS OF THE ORIGINATOR

ORIGINATOR                             LOCATION OF BOOKS AND RECORDS
- ----------                             -----------------------------

UGI Energy Services, Inc.              460 North Gulph Road
                                       King of Prussia, Pennsylvania  19406-2815

                                       100 Kachel Boulevard
                                       Suite 400
                                       Reading, Pennsylvania  19607

                                       1100 Berkshire Boulevard
                                       Suite 305
                                       Wyomissing, Pennsylvania  19610

                                Schedule 5.14B-1

                                                                   Schedule 5.15

                                   TRADE NAMES

LEGAL NAME                                   TRADE NAMES
- ----------                                   -----------

UGI Energy Services, Inc.                    GASMARK

                                             POWERMARK

                                Schedule 5.15-1

                                                                       Exhibit A

                             FORM OF PURCHASE REPORT

      Originator:

      Purchaser:         Energy Services Funding Corporation

      Payment Date:

      1.    Outstanding Balance of Receivables Purchased:

      2.    Fair Market Value Discount:

            1 / {1+ [(Prime Rate + 0.25%) x Turnover Rate]}
                                            _____________
                                                 12

            Where:

            Prime Rate   =   __________

            Turnover Rate = ___________

      3.    Purchase Price (1 x 2) = $ __________

                                  Exhibit A-1

                                                                       Exhibit B

                       FORM OF SUBORDINATED COMPANY NOTE

                                                                      __________
                                                                _________, 200__

      FOR VALUE RECEIVED, the undersigned, Energy Services Funding Corporation,
a Delaware corporation ("Company"), promises to pay to UGI Energy Services Inc.,
a Pennsylvania corporation (the "Originator"), on the terms and subject to the
conditions set forth herein and in the Purchase and Sale Agreement referred to
below, the aggregate unpaid Purchase Price of all Receivables purchased by the
Company from the Originator pursuant to such Purchase and Sale Agreement, as
such unpaid Purchase Price is shown in the records of the Servicer.

      1. Purchase and Sale Agreement. This Company Note is one of the Company
Notes described in, and is subject to the terms and conditions set forth in,
that certain Purchase and Sale Agreement of even date herewith (as the same may
be amended, supplemented, amended and restated or otherwise modified in
accordance with its terms, the "Purchase and Sale Agreement"), between the
Company and the Originator. Reference is hereby made to the Purchase and Sale
Agreement for a statement of certain other rights and obligations of the Company
and the Originator.

      2. Definitions. Capitalized terms used (but not defined) herein have the
meanings assigned thereto in Exhibit I to the Receivables Purchase Agreement (as
defined in the Purchase and Sale Agreement). In addition, as used herein, the
following terms have the following meanings:

      "Bankruptcy Proceedings" has the meaning set forth in clause (b) of
paragraph 9 hereof.

      "Final Maturity Date" means the Payment Date immediately following the
date that falls one hundred twenty one (121) days after the Purchase and Sale
Termination Date.

      "Interest Period" means the period from and including a Settlement Date
(or, in the case of the first Interest Period, the date hereof) to but excluding
the next Settlement Date.

      "Prime Rate" has the meaning assigned thereto in the Purchase and Sale
Agreement.

      "Receivables Purchase Agreement" means the Receivables Purchase Agreement,
dated as of November 30, 2001, entered into among Energy Services Funding
Corporation, UGI Energy Services, Inc., Market Street Funding Corporation and
PNC Bank, National Association, as may be amended, amended and restated,
supplemented or otherwise modified from time to time.

      "Senior Interests" means, collectively, (i) all accrued and unpaid
Discount, (ii) all fees payable by the Company to the Senior Interest Holders
pursuant to the Receivables Purchase Agreement, (iii) all amounts payable
pursuant to Section 1.7 and 1.8 of the Receivables Purchase Agreement, (iv) the
aggregate Capital and (v) all other obligations owed by the Company to the

                                  Exhibit B-1

Senior Interest Holders under the Receivables Purchase Agreement and other
Transaction Documents that are due and payable, together with any and all
interest and Discount accruing on any such amount after the commencement of any
Bankruptcy Proceedings, notwithstanding any provision or rule of law that might
restrict the rights of any Senior Interest Holder, as against the Company or
anyone else, to collect such interest.

      "Senior Interest Holders" means, collectively, the Issuer, the
Administrator and the Indemnified Parties.

      "Subordination Provisions" means, collectively, clauses (a) through (l) of
paragraph 9 hereof.

      "One-Month LIBOR Rate" means, for any Interest Period, the rate set forth
for "one month" under "London Interbank Offered Rates (Libor):" as published in
the Wall Street Journal on the first day of such Interest Period.

      3. Interest. Subject to the Subordination Provisions set forth below, the
Company promises to pay interest on this Company Note as follows:

            (a) Prior to the Final Maturity Date, the aggregate unpaid Purchase
Price from time to time outstanding during any Interest Period shall bear
interest at a rate per annum equal to the One-Month LIBOR Rate for such Interest
Period as determined by the Servicer; and

            (b) From (and including) the Final Maturity Date to (but excluding)
the date on which the entire aggregate unpaid Purchase Price payable to the
Originator is fully paid, such aggregate unpaid Purchase Price from time to time
outstanding shall bear interest at a rate per annum equal to the Prime Rate.

      4. Interest Payment Dates. Subject to the Subordination Provisions set
forth below, the Company shall pay accrued interest on this Company Note on each
Settlement Date, and shall pay accrued interest on the amount of each principal
payment made in cash on a date other than a Settlement Date at the time of such
principal payment.

      5. Basis of Computation. Interest accrued hereunder that is computed by
reference to the One-Month LIBOR Rate shall be computed for the actual number of
days elapsed on the basis of a 360-day year, and interest accrued hereunder that
is computed by reference to the rate described in paragraph 3(b) of this Company
Note shall be computed for the actual number of days elapsed on the basis of a
365- or 366-day year.

      6. Principal Payment Dates. Subject to the Subordination Provisions set
forth below, payments of the principal amount of this Company Note shall be made
as follows:

            (a) The principal amount of this Company Note shall be reduced by an
amount equal to each payment deemed made pursuant to Section 3.3 of the Purchase
and Sale Agreement; and

                                  Exhibit B-2

            (b) The entire remaining unpaid Purchase Price of all Receivables
purchased by the Company from the Originator pursuant to the Purchase and Sale
Agreement shall be due and payable on the Final Maturity Date.

      Subject to the Subordination Provisions set forth below, the principal
amount of and accrued interest on this Company Note may be prepaid on any
Business Day without premium or penalty.

      7. Payment Mechanics. All payments of principal and interest hereunder are
to be made in lawful money of the United States of America.

      8. Enforcement Expenses. In addition to and not in limitation of the
foregoing, but subject to the Subordination Provisions set forth below and to
any limitation imposed by applicable law, the Company agrees to pay all
expenses, including reasonable attorneys' fees and legal expenses, incurred by
the Originator in seeking to collect any amounts payable hereunder which are not
paid when due.

      9. Subordination Provisions. The Company covenants and agrees, and the
Originator and any other holder of this Company Note (collectively, the
Originator and any such other holder are called the "Holder"), by its acceptance
of this Company Note, likewise covenants and agrees on behalf of itself and any
holder of this Company Note, that the payment of the principal amount of and
interest on this Company Note is hereby expressly subordinated in right of
payment to the payment and performance of the Senior Interests to the extent and
in the manner set forth in the following clauses of this paragraph 9:

            (a) No payment or other distribution of the Company's assets of any
kind or character, whether in cash, securities, or other rights or property,
shall be made on account of this Company Note except to the extent such payment
or other distribution is (i) permitted under paragraph 1(n) of Exhibit IV of the
Receivables Purchase Agreement or (ii) made pursuant to clause (a) or (b) of
paragraph 6 of this Company Note;

            (b) In the event of any dissolution, winding up, liquidation,
readjustment, reorganization or other similar event relating to the Company,
whether voluntary or involuntary, partial or complete, and whether in
bankruptcy, insolvency or receivership proceedings, or upon an assignment for
the benefit of creditors, or any other marshalling of the assets and liabilities
of the Company or any sale of all or substantially all of the assets of the
Company other than as permitted by the Purchase and Sale Agreement (such
proceedings being herein collectively called "Bankruptcy Proceedings"), the
Senior Interests shall first be paid and performed in full and in cash before
the Originator shall be entitled to receive and to retain any payment or
distribution in respect of this Company Note. In order to implement the
foregoing during any Bankruptcy Proceeding: (i) all payments and distributions
of any kind or character in respect of this Company Note to which Holder would
be entitled except for this clause (b) shall be made directly to the
Administrator (for the benefit of the Senior Interest Holders); (ii) Holder
shall promptly file a claim or claims, in the form required in any Bankruptcy
Proceedings, for the full outstanding amount of this Company Note, and shall use
commercially reasonable efforts to cause said claim or claims to be approved and
all payments and other distributions in respect thereof to be made directly to
the Administrator (for the benefit of the Senior Interest Holders)

                                  Exhibit B-3

until the Senior Interests shall have been paid and performed in full and in
cash; and (iii) Holder hereby irrevocably agrees that the Issuer (or the
Administrator acting on the Issuer's behalf), in the name of Holder or
otherwise, may demand, sue for, collect, receive and receipt for any and all
such payments or distributions, and file, prove and vote or consent in any such
Bankruptcy Proceedings with respect to any and all claims of Holder relating to
this Company Note, in each case until the Senior Interests shall have been paid
and performed in full and in cash;

            (c) In the event that Holder receives any payment or other
distribution of any kind or character from the Company or from any other source
whatsoever, in respect of this Company Note, other than as expressly permitted
by the terms of this Company Note, such payment or other distribution shall be
received in trust for the Senior Interest Holders and shall be turned over by
Holder to the Administrator (for the benefit of the Senior Interest Holders)
forthwith. Holder will mark its books and records so as clearly to indicate that
this Company Note is subordinated in accordance with the terms hereof. All
payments and distributions received by the Administrator in respect of this
Company Note, to the extent received in or converted into cash, may be applied
by the Administrator (for the benefit of the Senior Interest Holders) first to
the payment of any and all expenses (including reasonable attorneys' fees and
legal expenses) paid or incurred by the Senior Interest Holders in enforcing
these Subordination Provisions, or in endeavoring to collect or realize upon
this Company Note, and any balance thereof shall, solely as between the
Originator and the Senior Interest Holders, be applied by the Administrator (in
the order of application set forth in Section 1.4(d)(ii) of the Receivables
Purchase Agreement) toward the payment of the Senior Interests; but as between
the Company and its creditors, no such payments or distributions of any kind or
character shall be deemed to be payments or distributions in respect of the
Senior Interests;

            (d) Notwithstanding any payments or distributions received by the
Senior Interest Holders in respect of this Company Note, while any Bankruptcy
Proceedings are pending Holder shall not be subrogated to the then existing
rights of the Senior Interest Holders in respect of the Senior Interests until
the Senior Interests have been paid and performed in full and in cash. If no
Bankruptcy Proceedings are pending, Holder shall only be entitled to exercise
any subrogation rights that it may acquire (by reason of a payment or
distribution to the Senior Interest Holders in respect of this Company Note) to
the extent that any payment arising out of the exercise of such rights would be
permitted under paragraph 1(n) of Exhibit IV of the Receivables Purchase
Agreement;

            (e) These Subordination Provisions are intended solely for the
purpose of defining the relative rights of Holder, on the one hand, and the
Senior Interest Holders on the other hand. Nothing contained in these
Subordination Provisions or elsewhere in this Company Note is intended to or
shall impair, as between the Company, its creditors (other than the Senior
Interest Holders) and Holder, the Company's obligation, which is unconditional
and absolute, to pay Holder the principal of and interest on this Company Note
as and when the same shall become due and payable in accordance with the terms
hereof or to affect the relative rights of Holder and creditors of the Company
(other than the Senior Interest Holders);

            (f) Holder shall not, until the Senior Interests have been paid and
performed in full and in cash, (i) cancel, waive, forgive, transfer or assign,
or commence legal proceedings to enforce or collect, or subordinate to any
obligation of the Company, howsoever created,

                                  Exhibit B-4

arising or evidenced, whether direct or indirect, absolute or contingent, or now
or hereafter existing, or due or to become due, other than the Senior Interests,
this Company Note or any rights in respect hereof or (ii) convert this Company
Note into an equity interest in the Company, unless Holder shall have received
the prior written consent of the Administrator and the Issuer in each case;

            (g) Holder shall not, without the advance written consent of the
Administrator and the Issuer, commence, or join with any other Person in
commencing, any Bankruptcy Proceedings with respect to the Company until at
least one year and one day shall have passed since the Senior Interests shall
have been paid and performed in full and in cash;

            (h) If, at any time, any payment (in whole or in part) of any Senior
Interest is rescinded or must be restored or returned by a Senior Interest
Holder (whether in connection with Bankruptcy Proceedings or otherwise), these
Subordination Provisions shall continue to be effective or shall be reinstated,
as the case may be, as though such payment had not been made;

            (i) Each of the Senior Interest Holders may, from time to time, at
its sole discretion, without notice to Holder, and without waiving any of its
rights under these Subordination Provisions, take any or all of the following
actions: (i) retain or obtain an interest in any property to secure any of the
Senior Interests; (ii) retain or obtain the primary or secondary obligations of
any other obligor or obligors with respect to any of the Senior Interests; (iii)
extend or renew for one or more periods (whether or not longer than the original
period), alter or exchange any of the Senior Interests, or release or compromise
any obligation of any nature with respect to any of the Senior Interests; (iv)
amend, supplement, amend and restate, or otherwise modify any Transaction
Document; and (v) release its security interest in, or surrender, release or
permit any substitution or exchange for all or any part of any rights or
property securing any of the Senior Interests, or extend or renew for one or
more periods (whether or not longer than the original period), or release,
compromise, alter or exchange any obligations of any nature of any obligor with
respect to any such rights or property;

            (j) Holder hereby waives: (i) notice of acceptance of these
Subordination Provisions by any of the Senior Interest Holders; (ii) notice of
the existence, creation, non-payment or non-performance of all or any of the
Senior Interests; and (iii) all diligence in enforcement, collection or
protection of, or realization upon, the Senior Interests, or any thereof, or any
security therefor;

            (k) Each of the Senior Interest Holders may, from time to time, on
the terms and subject to the conditions set forth in the Transaction Documents
to which such Persons are party, but without notice to Holder, assign or
transfer any or all of the Senior Interests, or any interest therein; and,
notwithstanding any such assignment or transfer or any subsequent assignment or
transfer thereof, such Senior Interests shall be and remain Senior Interests for
the purposes of these Subordination Provisions, and every immediate and
successive assignee or transferee of any of the Senior Interests or of any
interest of such assignee or transferee in the Senior Interests shall be
entitled to the benefits of these Subordination Provisions to the same extent as
if such assignee or transferee were the assignor or transferor; and

                                  Exhibit B-5

            (l) These Subordination Provisions constitute a continuing offer
from the holder of this Company Note to all Persons who become the holders of,
or who continue to hold, Senior Interests; and these Subordination Provisions
are made for the benefit of the Senior Interest Holders, and the Administrator
may proceed to enforce such provisions on behalf of each of such Persons.

      10. General. No failure or delay on the part of the Originator in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No amendment, modification or waiver of, or consent with respect to, any
provision of this Company Note shall in any event be effective unless (i) the
same shall be in writing and signed and delivered by the Company and Holder and
(ii) all consents required for such actions under the Transaction Documents
shall have been received by the appropriate Persons.

      11. Maximum Interest. Notwithstanding anything in this Company Note to the
contrary, the Company shall never be required to pay unearned interest on any
amount outstanding hereunder and shall never be required to pay interest on the
principal amount outstanding hereunder at a rate in excess of the maximum
interest rate that may be contracted for, charged or received under applicable
federal or state law (such maximum rate being herein called the "Highest Lawful
Rate"). If the effective rate of interest which would otherwise by payable under
this Company Note would exceed the Highest Lawful Rate, or if the holder of this
Company Note shall receive any unearned interest or shall receive monies that
are deemed to constitute interest which would increase the effective rate of
interest payable by the Company under this Company Note to a rate in excess of
the Highest Lawful Rate, then (i) the amount of interest which would otherwise
by payable by the Company under this Company Note shall be reduced to the amount
allowed by applicable law, and (ii) any unearned interest paid by the Company or
any interest paid by the Company in excess of the Highest Lawful Rate shall be
refunded to the Company. Without limitation of the foregoing, all calculations
of the rate of interest contracted for, charged or received by the Originator
under this Company Note that are made for the purpose of determining whether
such rate exceeds the Highest Lawful Rate applicable to the Originator (such
Highest Lawful Rate being herein called the "Originator's Maximum Permissible
Rate") shall be made, to the extent permitted by usury laws applicable to the
Originator (now or hereafter enacted), by amortizing, prorating and spreading in
equal parts during the actual period during which any amount has been
outstanding hereunder all interest at any time contracted for, charged or
received by the Originator in connection herewith. If at any time and from time
to time (i) the amount of interest payable to the Originator on any date shall
be computed at the Originator's Maximum Permissible Rate pursuant to the
provisions of the foregoing sentence and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to the
Originator would be less than the amount of interest payable to the Originator
computed at the Originator's Maximum Permissible Rate, then the amount of
interest payable to the Originator in respect of such subsequent interest
computation period shall continue to be computed at the Originator's Maximum
Permissible Rate until the total amount of interest payable to the Originator
shall equal the total amount of interest which would have been payable to the
Originator if the total amount of interest had been computed without giving
effect to the provisions of the foregoing sentence.

                                  Exhibit B-6

      12. No Negotiation. This Company Note is not negotiable except that is may
be assigned to any Affiliate of the Originator.

      13. GOVERNING LAW. THIS COMPANY NOTE HAS BEEN DELIVERED IN THE STATE OF
NEW YORK, AND SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK.

      14. Captions. Paragraph captions used in this Company Note are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Company Note.

                            [signature page follows]

                                  Exhibit B-7

                                             ENERGY SERVICES FUNDING
                                             CORPORATION

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

                                  Exhibit B-8

                                                                       Exhibit C

                    FORM OF ORIGINATOR ASSIGNMENT CERTIFICATE

                        ORIGINATOR ASSIGNMENT CERTIFICATE

      Reference is made to the Purchase and Sale Agreement of even date herewith
(as the same may be amended, supplemented, amended and restated or otherwise
modified from time to time, the "Purchase and Sale Agreement") between the
undersigned and Energy Services Funding Corporation (the "Company"). Unless
otherwise defined herein, capitalized terms used herein have the meanings
provided in the Purchase and Sale Agreement or in Exhibit I to the Receivables
Purchase Agreement (as defined in the Purchase and Sale Agreement), as
applicable.

      The undersigned hereby sells, assigns and transfers unto the Company and
its successors and assigns all right, title and interest of the undersigned in
and to:

            (a) each Receivable of the undersigned that existed and was owing to
      the undersigned as of the Cut-off Date other than Receivables contributed
      pursuant to Section 3.1 of the Purchase and Sale Agreement;

            (b) each Receivable generated by the undersigned from and including
      the Cut-off Date to and including the Purchase and Sale Termination Date
      (other than any Receivable later contributed pursuant to the second
      sentence of Section 3.1(a) of the Purchase and Sale Agreement);

            (c) all rights of the undersigned to, but not the obligations under,
      all Related Security;

            (d) all monies due or to become due to the undersigned with respect
      to any of the foregoing;

            (e) all books and records of the undersigned related to any of the
      foregoing, and all rights, remedies, powers, privileges, title and
      interest of the undersigned in each lock-box and related lock-box address
      and account to which Collections are sent, all amounts on deposit therein,
      all certificates and instruments, if any, from time to time evidencing
      such accounts and amounts on deposit therein, and all related agreements
      between the undersigned and each Lock-Box Bank; and

            (f) all collections and other proceeds and products of any of the
      foregoing (as defined in the applicable UCC) that are or were received by
      the undersigned on or after the Cut-off Date, including, without
      limitation, all funds which either are received by the undersigned, the
      Company or the Servicer from or on behalf of the Obligors in payment of
      any amounts owed (including, without limitation, invoice price, finance
      charges, interest and all other charges) in respect of Receivables, or are
      applied to such amounts owed by the Obligors (including, without
      limitation, insurance payments that the undersigned or the Servicer
      applies in the ordinary course of its business to amounts

                                  Exhibit C-1

owed in respect of any Receivable, and net proceeds of sale or other disposition
of repossessed goods or other collateral or property of the Obligors in respect
of Receivables or any other parties directly or indirectly liable for payment of
such Receivables).

      This Originator Assignment Certificate is made without recourse but on the
terms and subject to the conditions set forth in the Transaction Documents to
which the undersigned is a party. The undersigned acknowledges and agrees that
the Company and its successors and assigns are accepting this Originator
Assignment Certificate in reliance on the representations, warranties and
covenants of the undersigned contained in the Transaction Documents to which the
undersigned is a party.

      THIS ORIGINATOR ASSIGNMENT CERTIFICATE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE PURCHASE AND SALE AGREEMENT AND THE INTERNAL LAWS OF THE
STATE OF NEW YORK.

                            [signature page follows]

                                  Exhibit C-2

      IN WITNESS WHEREOF, the undersigned has caused this Originator Assignment
Certificate to be duly executed and delivered by its duly authorized officer
this ___ day of _____________, 200__.

                                             [ORIGINATOR]

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

                                  Exhibit C-3

                                                                       Exhibit D

                            FORM OF JOINDER AGREEMENT

      THIS JOINDER AGREEMENT, dated as of ___________, 20__ (this "Agreement")
is executed by__________, a corporation organized under the laws of __________
(the "Additional Seller"), with its principal place of business located at
__________.

                                   BACKGROUND:

      A. Energy Services Funding Corporation (the "Buyer") and UGI Energy
Services, Inc. (the "Seller") have entered into that certain Purchase and Sale
Agreement, dated as of November 30, 2001 (as amended through the date hereof,
and as it may be further amended from time to time, the "Purchase and Sale
Agreement").

      B. The Additional Seller desires to become a Seller pursuant to Section
4.3 of the Purchase and Sale Agreement.

      NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Additional Seller hereby agrees as follows:

      SECTION 1. Definitions. Capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings assigned thereto in the
Purchase and Sale Agreement or in the Receivables Purchase Agreement (as defined
in the Purchase and Sale Agreement).

      SECTION 2. Transaction Documents. The Additional Seller hereby agrees that
it shall be bound by all of the terms, conditions and provisions of, and shall
be deemed to be a party to (as if it were an original signatory to), the
Purchase and Sale Agreement and each of the other relevant Transaction
Documents. From and after the later of the date hereof and the date that the
Additional Seller has complied with all of the requirements of Section 4.3 of
the Purchase and Sale Agreement, the Additional Seller shall be a Seller for all
purposes of the Purchase and Sale Agreement and all other Transaction Documents.
The Additional Seller hereby acknowledges that it has received copies of the
Purchase and Sale Agreement and the other Transaction Documents.

      SECTION 3. Representations and Warranties. The Additional Seller hereby
makes all of the representations and warranties set forth in Article V (to the
extent applicable) of the Purchase and Sale Agreement as of the date hereof
(unless such representations or warranties relate to an earlier date, in which
as of such earlier date), as if such representations and warranties were fully
set forth herein. The Additional Seller hereby represents and warrants that the
chief place of business and chief executive office of the Additional Seller, and
the offices where the Additional Seller keeps all of its Records and Related
Security is as follows:

            _________________________________

            _________________________________

            _________________________________

                                  Exhibit D-1

      The Additional Seller hereby represents and warrants that it is a
[CORPORATION], [LIMITED LIABILITY COMPANY] [LIMITED PARTNERSHIP] organized in
__________ and its organizational number is ___________________.

      SECTION 4. Miscellaneous. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York. This
Agreement is executed by the Additional Seller for the benefit of the Buyer, and
its assigns, and each of the foregoing parties may rely hereon. This Agreement
shall be binding upon, and shall inure to the benefit of, the Additional Seller
and its successors and permitted assigns.

                            [Signature Page Follows]

                                  Exhibit D-2

      IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
executed by its duly authorized officer as of the date and year first above
written.

                                             [NAME OF ADDITIONAL SELLER]

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

Consented to

ENERGY SERVICES FUNDING CORPORATION

By:________________________________
   Name:___________________________
   Title:__________________________

PNC BANK, NATIONAL ASSOCIATION,
as Administrator

By:________________________________
   Name:___________________________
   Title:__________________________

                                  Exhibit D-3

                                TABLE OF CONTENTS

                                                                                   Page
                                                                                
                                    ARTICLE I

                         AGREEMENT TO PURCHASE AND SELL

SECTION 1.1     Agreement To Purchase and Sell..................................     1

SECTION 1.2     Timing of Purchases.............................................     2

SECTION 1.3     Consideration for Purchases.....................................     3

SECTION 1.4     Purchase and Sale Termination Date..............................     3

SECTION 1.5     Intention of the Parties........................................     3

                                   ARTICLE II

                 PURCHASE REPORT; CALCULATION OF PURCHASE PRICE

SECTION 2.1     Purchase Report.................................................     3

SECTION 2.2     Calculation of Purchase Price...................................     4

                                   ARTICLE III

                            PAYMENT OF PURCHASE PRICE

SECTION 3.1     Contribution of Receivables and Initial Purchase Price Payment..     4

SECTION 3.2     Subsequent Purchase Price Payments..............................     5

SECTION 3.3     Settlement as to Specific Receivables and Dilution..............     5

SECTION 3.4     Reconveyance of Receivables.....................................     6

                                   ARTICLE IV

                             CONDITIONS OF PURCHASES

SECTION 4.1     Conditions Precedent to Initial Purchase........................     6

SECTION 4.2     Certification as to Representations and Warranties..............     8

SECTION 4.3     Additional Originators..........................................     8

                                    ARTICLE V

                REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR

SECTION 5.1     Organization and Valid Subsistence..............................     9

SECTION 5.2     Due Qualification...............................................     9

SECTION 5.3     Power and Authority; Due Authorization..........................     9

SECTION 5.4     Valid Sale; Binding Obligations.................................     9

SECTION 5.5     No Violation....................................................     9

SECTION 5.6     Proceedings.....................................................    10

                                       -i-

                                TABLE OF CONTENTS
                                   (continued)

                                                                                   Page
                                                                                
SECTION 5.7     Bulk Sales Acts.................................................    10

SECTION 5.8     Government Approvals............................................    10

SECTION 5.9     Financial Condition.............................................    10

SECTION 5.10    Licenses, Contingent Liabilities, and Labor Controversies.......    10

SECTION 5.11    Margin Regulations..............................................    11

SECTION 5.12    Quality of Title................................................    11

SECTION 5.13    Accuracy of Information.........................................    11

SECTION 5.14    Offices.........................................................    11

SECTION 5.15    Trade Names.....................................................    11

SECTION 5.16    Taxes...........................................................    12

SECTION 5.17    Compliance with Applicable Laws.................................    12

SECTION 5.18    Reliance on Separate Legal Identity.............................    12

SECTION 5.19    Investment Company..............................................    12

SECTION 5.20    Valid Contracts.................................................    12

                                   ARTICLE VI

                           COVENANTS OF THE ORIGINATOR

SECTION 6.1     Affirmative Covenants...........................................    12

SECTION 6.2     Reporting Requirements..........................................    14

SECTION 6.3     Negative Covenants..............................................    14

SECTION 6.4     Substantive Consolidation.......................................    15

                                   ARTICLE VII

           ADDITIONAL RIGHTS AND OBLIGATIONS IN RESPECT OF RECEIVABLES

SECTION 7.1     Rights of the Company...........................................    17

SECTION 7.2     Responsibilities of the Originator..............................    17

SECTION 7.3     Further Action Evidencing Purchases.............................    18

SECTION 7.4     Application of Collections......................................    19

                                  ARTICLE VIII

                      PURCHASE AND SALE TERMINATION EVENTS

SECTION 8.1     Purchase and Sale Termination Events............................    19

SECTION 8.2     Remedies........................................................    19

                                      -ii-

                                TABLE OF CONTENTS
                                   (continued)

                                                                                   Page
                                                                                
                                   ARTICLE IX

                                 INDEMNIFICATION

SECTION 9.1     Indemnities by the Originator...................................    20

                                    ARTICLE X

                                  MISCELLANEOUS

SECTION 10.1    Amendments, etc.................................................    21

SECTION 10.2    Notices, etc....................................................    22

SECTION 10.3    No Waiver; Cumulative Remedies..................................    22

SECTION 10.4    Binding Effect; Assignability...................................    22

SECTION 10.5    Governing Law...................................................    22

SECTION 10.6    Costs, Expenses and Taxes.......................................    22

SECTION 10.7    SUBMISSION TO JURISDICTION......................................    23

SECTION 10.8    WAIVER OF JURY TRIAL............................................    23

SECTION 10.9    Captions and Cross References; Incorporation by Reference.......    23

SECTION 10.10   Execution in Counterparts.......................................    24

SECTION 10.11   Acknowledgment and Agreement....................................    24

SECTION 10.12   No Proceeding...................................................    24

SECTION 10.13   Limited Recourse................................................    24

                                    SCHEDULES

Schedule 5.6      Proceedings

Schedule 5.14A    Chief Executive Office of the Originator

Schedule 5.14B    Location of Books and Records of the Originator

Schedule 5.15     Trade Names

                                    EXHIBITS

Exhibit A         Form of Purchase Report

Exhibit B         Form of Subordinated Company Note

Exhibit C         Form of Originator Assignment Certificate

Exhibit D         Form of Joinder Agreement

                                     -iii-

                                                                   Exhibit 10.61

                                                                  CONFORMED COPY

                         RECEIVABLES PURCHASE AGREEMENT

                          dated as of November 30, 2001

                          As amended by AMENDMENT NO.1

                           dated as of August 29, 2003

                                      among

                       ENERGY SERVICES FUNDING CORPORATION

                            UGI ENERGY SERVICES, INC.

                        MARKET STREET FUNDING CORPORATION

                                       and

                         PNC BANK, NATIONAL ASSOCIATION

      This RECEIVABLES PURCHASE AGREEMENT (as amended, supplemented or otherwise
modified from time to time, this "Agreement") is entered into as of November 30,
2001, as amended by Amendment No. 1, dated as of August 29, 2003, among ENERGY
SERVICES FUNDING CORPORATION, a Delaware corporation, as seller (the "Seller"),
UGI ENERGY SERVICES, INC., a Pennsylvania corporation ("UGI"), as initial
servicer (in such capacity, together with its successors and permitted assigns
in such capacity, the "Servicer"), MARKET STREET FUNDING CORPORATION, a Delaware
corporation (together with its successors and permitted assigns, the "Issuer"),
and PNC BANK, NATIONAL ASSOCIATION, a national banking association ("PNC"), as
administrator (in such capacity, together with its successors and assigns in
such capacity, the "Administrator").

      PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in Exhibit I. References in the Exhibits
hereto to the "Agreement" refer to this Agreement.

      The Seller desires to sell, transfer and assign an undivided variable
percentage interest in a pool of receivables, and the Issuer desires to acquire
such undivided variable percentage interest, as such percentage interest shall
be adjusted from time to time based upon, in part, reinvestment payments that
are made by the Issuer.

      In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:

                                   ARTICLE I.
                       AMOUNTS AND TERMS OF THE PURCHASES

      Section 1.1 Purchase Facility. (a) On the terms and conditions hereinafter
set forth, the Issuer hereby agrees to purchase, and make reinvestments of,
undivided percentage ownership interests with regard to the Purchased Interest
from the Seller from time to time from December 4, 2001 to the Facility
Termination Date. Under no circumstances shall the Issuer make any such purchase
or reinvestment if, after giving effect to such purchase or reinvestment, the
aggregate outstanding Capital of the Purchased Interest would exceed the
Purchase Limit.

      (b) The Seller may, upon at least 60 days' written notice to the
Administrator, terminate the Purchase Facility provided in this Section in whole
or, upon at least 30 days' written notice to the Administrator, from time to
time, irrevocably reduce in part the unused portion of the Purchase Limit;
provided, that each partial reduction shall be in the amount of at least
$5,000,000, or an integral multiple of $1,000,000 in excess thereof, and that,
unless terminated in whole, the Purchase Limit shall in no event be reduced
below $20,000,000.

      Section 1.2 Making Purchases. (a) Each purchase (but not reinvestment) of
undivided percentage ownership interests with regard to the Purchased Interest
hereunder shall be made upon the Seller's irrevocable written notice in the form
of Annex B (the "Purchase Notice") delivered to the Administrator in accordance
with Section 5.2 (which notice must be received by the Administrator before
11:00 a.m., New York City time) at least (x) one Business Day before the
requested purchase date in the case of a purchase of less than $50,000,000 and
(y) two Business Days before the requested purchase date in the case of a
purchase of at least

$50,000,000, which notice in each case shall specify: (A) the amount requested
to be paid to the Seller (such amount, which shall not be less than $1,000,000
and shall be in integral multiples of $100,000, being the Capital relating to
the undivided percentage ownership interest then being purchased), (B) the date
of such purchase (which shall be a Business Day), and (C) the pro forma
calculation of the Purchased Interest after giving effect to the increase in
Capital.

      (b) On the date of each purchase (but not reinvestment) of undivided
percentage ownership interests with regard to the Purchased Interest hereunder,
the Issuer shall, upon satisfaction of the applicable conditions set forth in
Exhibit II, make available to the Seller in same day funds, at Mellon Bank,
Pittsburgh, Pennsylvania, account number 016-7425, ABA# 043000261, an amount
equal to the Capital relating to the undivided percentage ownership interest
then being purchased as set forth in the applicable Purchase Notice.

      (c) Effective on the date of each purchase pursuant to this Section and
each reinvestment pursuant to Section 1.4, the Seller hereby sells and assigns
to the Issuer an undivided percentage ownership interest in: (i) each Pool
Receivable then existing, (ii) all Related Security with respect to such Pool
Receivables, and (iii) all Collections with respect to, and other proceeds of,
such Pool Receivables and Related Security.

      (d) To secure all of the Seller's obligations (monetary or otherwise)
under this Agreement and the other Transaction Documents to which it is a party,
whether now or hereafter existing or arising, due or to become due, direct or
indirect, absolute or contingent, the Seller hereby grants to the Issuer a
security interest in all of the Seller's right, title and interest (including
any undivided interest of the Seller) in, to and under all of the following,
whether now or hereafter owned, existing or arising: (i) all Pool Receivables,
(ii) all Related Security with respect to such Pool Receivables, (iii) all
Collections with respect to, and other proceeds of, such Pool Receivables and
Related Security, (iv) the Lock-Box Accounts (and the related lock-boxes) and
all amounts on deposit therein, and all certificates and instruments, if any,
from time to time evidencing such Lock-Box Accounts (and such related
lock-boxes) and such amounts on deposit therein, (v) all books and records of
each Receivable, and all rights, remedies, powers and privileges of the Seller
in any accounts into which Collections are or may be received and all rights
(but none of the obligations) of the Seller under the Purchase and Sale
Agreement and (vi) all proceeds and products of, and all amounts received or
receivable under any or all of, the foregoing (collectively, the "Pool Assets").
The Issuer shall have, with respect to the Pool Assets, and in addition to all
the other rights and remedies available to the Issuer, all the rights and
remedies of a secured party under any applicable UCC. In connection with the
transfer of the undivided interest set forth in Section 1.2(c) or the grant of
the security interest in the Pool Assets set forth in this Section 1.2(d), by
signing this Agreement in the space provided, the Seller hereby authorizes the
filing of all applicable UCC financing statements in all necessary
jurisdictions.

      Section 1.3 Purchased Interest Computation. The Purchased Interest shall
be initially computed on the date of the initial purchase hereunder. Thereafter,
until the Facility Termination Date, the Purchased Interest shall be
automatically recomputed (or deemed to be recomputed) on each Business Day other
than a Termination Day. From and after the occurrence of any Termination Day,
the Purchased Interest shall (until the event(s) giving rise to such Termination
Day are satisfied or are waived by the Administrator or the happening of the
events set forth in

                                       2

the next sentence) be deemed to be 100%. The Purchased Interest shall become
zero when the Capital thereof and Discount thereon shall have been paid in full,
all the amounts owed by the Seller and required to be deposited by the Servicer
hereunder to the Issuer, the Administrator and any other Indemnified Party or
Affected Person are paid in full, and the Servicer shall have received the
accrued Servicing Fee thereon.

      Section 1.4 Settlement Procedures. (a) The collection of the Pool
Receivables shall be administered by the Servicer in accordance with this
Agreement. The Seller shall provide to the Servicer on a timely basis all
information needed for such administration, including notice of the occurrence
of any Termination Day and current computations of the Purchased Interest.

      (b) The Servicer shall, on each day on which Collections of Pool
Receivables are received (or deemed received) by the Seller or the Servicer:

            (i) set aside and hold in trust (and shall, at the request of the
      Administrator, segregate in a separate account approved by the
      Administrator) for the Issuer, out of the Issuer's Share of such
      Collections, first, an amount equal to the Discount accrued through such
      day for each Portion of Capital and not previously set aside, second, an
      amount equal to the fees set forth in the Fee Letter accrued and unpaid
      through such day, and third, to the extent funds are available therefor,
      an amount equal to the Issuer's Share of the Servicing Fee accrued through
      such day and not previously set aside,

            (ii) subject to Section 1.4(f), if such day is not a Termination
      Day, remit to the Seller, on behalf of the Issuer, the remainder of the
      Issuer's Share of such Collections. Such remainder shall be automatically
      reinvested in Pool Receivables, and in the Related Security, Collections
      and other proceeds with respect thereto; provided, however, that if the
      Purchased Interest would exceed 100%, then the Servicer shall not
      reinvest, but shall set aside and hold in trust for the Issuer (and shall,
      at the request of the Administrator, segregate in a separate account
      approved by the Administrator) a portion of such Collections that,
      together with the other Collections set aside pursuant to this paragraph,
      shall equal the amount necessary to reduce the Purchased Interest to 100%,

            (iii) if such day is a Termination Day, set aside, segregate and
      hold in trust (and shall, at the request of the Administrator, segregate
      in a separate account approved by the Administrator) for the Issuer the
      entire remainder of the Issuer's Share of the Collections; provided, that
      if amounts are set aside and held in trust on any Termination Day of the
      type described in clause (a) of the definition of "Termination Day" and,
      thereafter, the conditions set forth in Section 2 of Exhibit II are
      satisfied or waived by the Administrator, such previously set-aside
      amounts shall be reinvested in accordance with clause (ii) on the day of
      such subsequent satisfaction or waiver of conditions, and

            (iv) release to the Seller (subject to Section 1.4(f)) for its own
      account any Collections in excess of: (x) amounts required to be
      reinvested in accordance with clause (ii) or the proviso to clause (iii)
      plus (y) the amounts that are required to be set aside pursuant to clause
      (i), the proviso to clause (ii) and clause (iii) plus (z) the Seller's
      Share of the Servicing Fee accrued and unpaid through such day.

                                       3

      (c) The Servicer shall deposit into the Administration Account (or such
other account designated by the Administrator), on each Settlement Date (or
solely with respect to Collections held for the Issuer pursuant to clause (f)
such other date as set forth in clause (f)(iii) for such payment), Collections
held for the Issuer pursuant to clause (b)(i) or (f) plus the amount of
Collections then held for the Issuer pursuant to clauses (b)(ii) and (iii) of
Section 1.4; provided, that if UGI or an Affiliate thereof is the Servicer, such
day is not a Termination Day and the Administrator has not notified UGI (or such
Affiliate) that the right to retain the portion of the Collections set aside
pursuant to clause (b)(i) that represent the Issuer's Share of the Servicing Fee
is revoked, UGI (or such Affiliate) may retain the portion of the Collections
set aside pursuant to clause (b)(i) that represents the Issuer's Share of the
Servicing Fee in payment in full of the Issuer's Share of accrued Servicing Fees
so set aside. On the last day of each Settlement Period, the Administrator will
notify the Servicer by facsimile of the amount of Discount accrued with respect
to each Portion of Capital during such Settlement Period or portion thereof.

      (d) Upon receipt of funds deposited into the Administration Account
pursuant to clause (c), the Administrator shall cause such funds to be
distributed as follows:

            (i) if such distribution occurs on a day that is not a Termination
      Day and the Purchased Interest does not exceed 100%, first to the Issuer
      in payment in full of all accrued Discount and fees (other than Servicing
      Fees) with respect to each Portion of Capital, and second, if the Servicer
      has set aside amounts in respect of the Servicing Fee pursuant to clause
      (b)(i) and has not retained such amounts pursuant to clause (c), to the
      Servicer (payable in arrears on each Settlement Date) in payment in full
      of the Issuer's Share of accrued Servicing Fees so set aside, and

            (ii) if such distribution occurs on a Termination Day or on a day
      when the Purchased Interest exceeds 100%, first to the Issuer in payment
      in full of all accrued Discount with respect to each Portion of Capital,
      second to the Issuer in payment in full of Capital (or, if such day is not
      a Termination Day, the amount necessary to reduce the Purchased Interest
      to 100%), third, to the Servicer in payment in full of all accrued
      Servicing Fees, and fourth, if the Capital and accrued Discount with
      respect to each Portion of Capital have been reduced to zero, and all
      accrued Servicing Fees payable to the Servicer have been paid in full, to
      the Issuer, the Administrator and any other Indemnified Party or Affected
      Person in payment in full of any other amounts owed thereto by the Seller
      hereunder.

After the Capital, Discount, fees payable pursuant to the Fee Letter and
Servicing Fees with respect to the Purchased Interest, and any other amounts
payable by the Seller and the Servicer to the Issuer, the Administrator or any
other Indemnified Party or Affected Person hereunder, have been paid in full,
all additional Collections with respect to the Purchased Interest shall be paid
to the Seller for its own account.

      (e)   For the purposes of this Section 1.4:

            (i) if on any day the Outstanding Balance of any Pool Receivable is
      reduced or adjusted as a result of any defective, rejected, returned,
      repossessed or foreclosed goods or services, or any revision,
      cancellation, allowance, rebate, discount or other adjustment

                                       4

      made by the Seller or any Affiliate of the Seller, or any setoff or
      dispute between the Seller or any Affiliate of the Seller and an Obligor,
      the Seller shall be deemed to have received on such day a Collection of
      such Pool Receivable in the amount of such reduction or adjustment;

            (ii) if on any day any of the representations or warranties in
      Section 1(g) or (n) of Exhibit III, or Section 2, 3 or 4 of Exhibit VI is
      not true with respect to any Pool Receivable, the Seller shall be deemed
      to have received on such day a Collection of such Pool Receivable in full;

            (iii) except as provided in clause (i) or (ii), or as otherwise
      required by applicable law or the relevant Contract, all Collections
      received from an Obligor of any Receivable shall be applied to the
      Receivables of such Obligor in the order of the age of such Receivables,
      starting with the oldest such Receivable, unless such Obligor designates
      its payment for application to specific Receivables; and

            (iv) if and to the extent the Administrator or the Issuer shall be
      required for any reason to pay over to an Obligor (or any trustee,
      receiver, custodian or similar official in any Insolvency Proceeding) any
      amount received by it hereunder, such amount shall be deemed not to have
      been so received by the Administrator or the Issuer but rather to have
      been retained by the Seller and, accordingly, the Administrator or the
      Issuer, as the case may be, shall have a claim against the Seller for such
      amount, payable when and to the extent that any distribution from or on
      behalf of such Obligor is made in respect thereof.

      (f) If at any time, the Seller shall wish to cause the reduction of the
Capital (but not to commence the liquidation, or reduction to zero, of the
entire Capital of the Purchased Interest), the Seller may do so as follows:

            (i) the Seller shall give the Administrator and the Servicer written
      notice in the form of Annex C (A) at least one Business Day prior to the
      date of such reduction for any reduction of Capital less than or equal to
      $20,000,000; (B) at least two Business Days prior to the date of such
      reduction for any reduction of Capital greater than $20,000,000 and less
      than or equal to $50,000,000; and (C) at least three Business Days prior
      to the date of such reduction for any reduction of Capital greater than
      $50,000,000, in each case such notice shall have been received by 3:00
      p.m. New York City time on such date and shall include the amount of such
      proposed reduction and the proposed date on which such reduction will
      commence;

            (ii) on the proposed date of the commencement of such reduction and
      on each day thereafter, the Servicer shall cause Collections not to be
      reinvested until the amount thereof not so reinvested shall equal the
      desired amount of reduction; and

            (iii) the Servicer shall hold such Collections in trust for the
      Issuer, for payment to the Administrator on (1) solely with respect to any
      reduction described in subsections (f)(i)(B) or (f)(i)(C) the next Weekly
      Settlement Date, or (2) with respect to any reduction described in
      subsection (f)(i)(A), such other date with at least one (1) Business Day
      prior

                                       5

      written notice to the Administrator of such payment, and the Capital shall
      be deemed reduced in the amount to be paid to the Administrator only when
      in fact finally so paid;

provided, that the amount of any such reduction shall be not less than
$1,000,000 and shall be an integral multiple of $100,000.

      Section 1.5 Fees. The Seller shall pay to the Administrator certain fees
in the amounts and on the dates set forth in a fee letter, dated the date
hereof, among UGI, the Seller and the Administrator (as such letter agreement
may be amended, supplemented or otherwise modified from time to time, the "Fee
Letter").

      Section 1.6 Payments and Computations, Etc. (a) All amounts to be paid or
deposited by the Seller or the Servicer hereunder shall be made without
reduction for offset or counterclaim and shall be paid or deposited no later
than noon (New York City time) on the day when due in same day funds to the
Administration Account. All amounts received after noon (New York City time)
will be deemed to have been received on the next Business Day.

      (b) The Seller or the Servicer, as the case may be, shall, to the extent
permitted by applicable law, pay interest on any amount not paid or deposited by
the Seller or the Servicer, as the case may be, when due hereunder, at an
interest rate equal to 2.0% per annum above the Base Rate, payable on demand.

      (c) All computations of interest under clause (b) and all computations of
Discount, fees and other amounts hereunder shall be made on the basis of a year
of 360 (or 365 or 366, as applicable, with respect to Discount or other amounts
calculated by reference to the Base Rate) days for the actual number of days
elapsed. Whenever any payment or deposit to be made hereunder shall be due on a
day other than a Business Day, such payment or deposit shall be made on the next
Business Day and such extension of time shall be included in the computation of
such payment or deposit.

      Section 1.7 Increased Costs. (a) If the Administrator, the Issuer, any
Purchaser, any other Program Support Provider or any of their respective
Affiliates (each an "Affected Person") reasonably determines that the existence
of or compliance with: (i) any law or regulation or any change therein or in the
interpretation or application thereof by a Governmental Authority, in each case
adopted, issued or occurring after the date hereof, or (ii) any request,
guideline or directive from any central bank or other Governmental Authority
(whether or not having the force of law) issued or occurring after the date of
this Agreement, affects or would affect the amount of capital required or
expected to be maintained by such Affected Person, and such Affected Person
reasonably determines that the amount of such capital is increased by or based
upon the existence of any commitment to make purchases of (or otherwise to
maintain the investment in) Pool Receivables related to this Agreement or any
related liquidity facility, credit enhancement facility and other commitments of
the same type related to this Agreement, then, upon demand by such Affected
Person (with a copy to the Administrator), the Seller shall promptly pay to the
Administrator, for the account of such Affected Person, from time to time as
specified by such Affected Person, additional amounts sufficient to compensate
such Affected Person in the light of such circumstances, to the extent that such
Affected Person reasonably determines such increase in capital to be allocable
to the existence of any of such commitments.

                                       6

A certificate as to such amounts submitted to the Seller and the Administrator
by such Affected Person shall be conclusive and binding for all purposes, absent
manifest error.

      (b) If, due to either: (i) the introduction of or any change in or in the
interpretation of any law or regulation by any Governmental Authority occurring
after the date hereof or (ii) compliance with any guideline or request from any
central bank or other Governmental Authority (whether or not having the force of
law), there shall be any increase in the cost to any Affected Person of agreeing
to purchase or purchasing, or maintaining the ownership of, the Purchased
Interest in respect of which Discount is computed by reference to the Euro-Rate,
then, upon demand by such Affected Person, the Seller shall promptly pay to such
Affected Person, from time to time as specified by such Affected Person,
additional amounts sufficient to compensate such Affected Person for such
increased costs. A certificate as to such amounts submitted to the Seller and
the Administrator by such Affected Person shall be conclusive and binding for
all purposes, absent manifest error.

      (c) If such increased costs affect the related Affected Person's portfolio
of financing transactions, such Affected Person shall use reasonable averaging
and attribution methods to allocate such increased costs to the transactions
contemplated by this Agreement.

      (d) The Administrator will make reasonable efforts to cause the interest
of any Affected Party (other than the Issuer or its domestic Affiliates) that
makes a claim under this Section 1.7 to be transferred to a party that is not
subject to increased costs under this Section 1.7; provided that neither the
Administrator nor any of its Affiliates shall be required hereunder to itself
accept such transferred interest.

      (e) Notwithstanding any language in this Section 1.7 to the contrary,
nothing in this Section 1.7 shall be construed as requiring the Seller to make
any payments attributable to or in respect of any tax of any kind whatsoever
imposed upon or required to be withheld or deducted from payments to any
Affected Person.

      Section 1.8 Requirements of Law. If any Affected Person reasonably
determines that the existence of or compliance with: (a) any law or regulation
or any change therein or in the interpretation or application thereof, in each
case adopted, issued or occurring after the date hereof, or (b) any request,
guideline or directive from any central bank or other Governmental Authority
(whether or not having the force of law) issued or occurring after the date of
this Agreement:

            (i) does or shall subject such Affected Person to any tax of any
      kind whatsoever with respect to this Agreement, any increase in the
      Purchased Interest or in the amount of Capital relating thereto, or does
      or shall change the basis of taxation of payments to such Affected Person
      on account of Collections, Discount or any other amounts payable hereunder
      (excluding taxes imposed on the overall or branch pre-tax net income of
      such Affected Person, and franchise taxes imposed on such Affected Person
      by the jurisdiction under the laws of which such Affected Person is
      organized or otherwise is considered doing business (unless the Affected
      Person would not be considered doing business in such jurisdiction, but
      for having entered into, or engaged in the transactions in connection

                                       7

      with, this Agreement or any other Transaction Document) or a political
      subdivision thereof,

            (ii) does or shall impose, modify or hold applicable any reserve,
      special deposit, compulsory loan or similar requirement against assets
      held by, or deposits or other liabilities in or for the account of,
      purchases, advances or loans by, or other credit extended by, or any other
      acquisition of funds by, any office of such Affected Person that are not
      otherwise included in the determination of the Euro-Rate or the Base Rate
      hereunder, or

            (iii) does or shall impose on such Affected Person any other
      condition,

and the result of any of the foregoing is: (A) to increase the cost to such
Affected Person of acting as Administrator, or of agreeing to purchase or
purchasing or maintaining the ownership of undivided percentage ownership
interests with regard to the Purchased Interest (or interests therein) or any
Portion of Capital, or (B) to reduce any amount receivable hereunder (whether
directly or indirectly), then, in any such case, without duplication to any
amounts paid or payable pursuant to Section 1.7 or Section 3.1 upon demand by
such Affected Person, the Seller shall promptly pay to such Affected Person
additional amounts necessary to compensate such Affected Person for such
additional cost or reduced amount receivable. All such amounts shall be payable
as incurred. A certificate from such Affected Person to the Seller and the
Administrator certifying, in reasonably specific detail, the basis for,
calculation of, and amount of such additional costs or reduced amount receivable
shall be conclusive and binding for all purposes, absent manifest error;
provided, however, that no Affected Person shall be required to disclose any
confidential or tax planning information in any such certificate.

      Section 1.9 Inability to Determine Euro-Rate. (a) If the Administrator
determines before the first day of any Settlement Period (which determination
shall be final and conclusive) that, by reason of circumstances affecting the
interbank eurodollar market generally, deposits in dollars (in the relevant
amounts for such Settlement Period) are not being offered to banks in the
interbank eurodollar market for such Settlement Period, or adequate means do not
exist for ascertaining the Euro-Rate for such Settlement Period, then the
Administrator shall give notice thereof to the Seller. Thereafter, until the
Administrator notifies the Seller that the circumstances giving rise to such
suspension no longer exist, (i) no Portion of Capital shall be funded at the
Alternate Rate determined by reference to the Euro-Rate and (ii) the Discount
for any outstanding Portions of Capital then funded at the Alternate Rate
determined by reference to the Euro-Rate shall, on the last day of the then
current Settlement Period, be converted to the Alternate Rate determined by
reference to the Base Rate.

      (b) If, on or before the first day of any Settlement Period, the
Administrator shall have been notified by any Purchaser that such Purchaser has
determined (which determination shall be final and conclusive) that any
enactment, promulgation or adoption of or any change in any applicable law, rule
or regulation, or any change in the interpretation or administration thereof by
a Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Purchaser with
any guideline, request or directive (whether or not having the force of law) of
any such authority, central bank or comparable agency shall make it unlawful or
impossible for such Purchaser to fund or maintain any Portion

                                       8

of Capital at the Alternate Rate and based upon the Euro-Rate, the Administrator
shall notify the Seller thereof. Upon receipt of such notice, until the
Administrator notifies the Seller that the circumstances giving rise to such
determination no longer apply, (i) no Portion of Capital shall be funded at the
Alternate Rate determined by reference to the Euro-Rate and (ii) the Discount
for any outstanding Portions of Capital then funded at the Alternate Rate
determined by reference to the Euro-Rate shall be converted to the Alternate
Rate determined by reference to the Base Rate either (A) on the last day of the
then current Settlement Period if such Purchaser may lawfully continue to
maintain such Portion of Capital at the Alternate Rate determined by reference
to the Euro-Rate to such day, or (B) immediately, if such Purchaser may not
lawfully continue to maintain such Portion of Capital at the Alternate Rate
determined by reference to the Euro-Rate to such day.

                                   ARTICLE II.
                   REPRESENTATIONS AND WARRANTIES; COVENANTS;
                               TERMINATION EVENTS

      Section 2.1 Representations and Warranties; Covenants. Each of the Seller,
UGI and the Servicer hereby makes the representations and warranties, and hereby
agrees to perform and observe the covenants, applicable to it set forth in
Exhibits III, IV and VI, respectively.

      Section 2.2 Termination Events. If any of the Termination Events set forth
in Exhibit V shall occur, the Administrator may, by notice to the Seller,
declare the Facility Termination Date to have occurred (in which case the
Facility Termination Date shall be deemed to have occurred); provided, that
automatically upon the occurrence of any event (without any requirement for the
passage of time or the giving of notice) described in paragraph (f) of Exhibit
V, the Facility Termination Date shall occur. Upon any such declaration,
occurrence or deemed occurrence of the Facility Termination Date, the Issuer and
the Administrator shall have, in addition to the rights and remedies that they
may have under this Agreement, all other rights and remedies provided after
default under the New York UCC and under other applicable law, which rights and
remedies shall be cumulative.

                                  ARTICLE III.
                                 INDEMNIFICATION

      Section 3.1 Indemnities by the Seller. Without limiting any other rights
that the Administrator, the Issuer, any Program Support Provider or any of their
respective Affiliates, employees, officers, directors, agents, counsel,
successors, transferees or assigns (each, an "Indemnified Party") may have
hereunder or under applicable law, the Seller hereby agrees to indemnify each
Indemnified Party from and against any and all claims, damages, expenses, costs,
losses and liabilities (including Attorney Costs) (all of the foregoing being
collectively referred to as "Indemnified Amounts") incurred by any Indemnified
Party arising out of or resulting from this Agreement (whether directly or
indirectly), the use of proceeds of purchases or reinvestments, the ownership of
the Purchased Interest, or any interest therein, or in respect of any
Receivable, Related Security or Contract, excluding, however: (a) Indemnified
Amounts to the extent resulting from gross negligence or willful misconduct on
the part of such Indemnified Party or its employees, officers, directors, agents
or counsel, (b) recourse with respect to any Receivable to the extent that such
Receivable is uncollectible on account of insolvency,

                                       9

bankruptcy or lack of creditworthiness of the related Obligor (except as
otherwise specifically provided in this Agreement), or (c) any overall net
income taxes or franchise taxes imposed on such Indemnified Party by the
jurisdiction under the laws of which such Indemnified Party is organized or
otherwise is considered doing business (unless the Indemnified Party would not
be considered doing business in such jurisdiction, but for having entered into,
or engaged in the transactions in connection with, this Agreement or any other
Transaction Document) or any political subdivision thereof. Without limiting or
being limited by the foregoing, and subject to the exclusions set forth in the
preceding sentence, the Seller shall pay on demand (which demand shall be
accompanied by documentation of the Indemnified Amounts, in reasonable detail)
to each Indemnified Party any and all amounts necessary to indemnify such
Indemnified Party from and against any and all Indemnified Amounts relating to
or resulting from any of the following:

            (i) the failure of any Receivable included in the calculation of the
      Net Receivables Pool Balance as an Eligible Receivable to be an Eligible
      Receivable, the failure of any information contained in an Information
      Package to be true and correct, or the failure of any other information
      provided to the Issuer or the Administrator with respect to Receivables or
      this Agreement to be true and correct,

            (ii) the failure of any representation, warranty or statement made
      or deemed made by the Seller (or any of its officers) under or in
      connection with this Agreement to have been true and correct as of the
      date made or deemed made (pursuant to paragraph 2(b) of Exhibit II hereof)
      in all respects when made,

            (iii) the failure by the Seller to comply with any applicable law,
      rule or regulation with respect to any Pool Receivable or the related
      Contract, or the failure of any Pool Receivable or the related Contract to
      conform to any such applicable law, rule or regulation,

            (iv) the failure to vest in the Issuer a valid and enforceable: (A)
      perfected undivided percentage ownership interest, to the extent of the
      Purchased Interest, in the Receivables in, or purporting to be in, the
      Receivables Pool and the other Pool Assets, or (B) first priority
      perfected security interest in the Pool Assets, in each case, free and
      clear of any Adverse Claim,

            (v) the failure to have filed, or any delay in filing, financing
      statements or other similar instruments or documents under the UCC of any
      applicable jurisdiction or other applicable laws with respect to any
      Receivables in, or purporting to be in, the Receivables Pool and the other
      Pool Assets, whether at the time of any purchase or reinvestment or at any
      subsequent time,

            (vi) any dispute, claim, offset or defense (other than discharge in
      bankruptcy of the Obligor) of the Obligor to the payment of any Receivable
      in, or purporting to be in, the Receivables Pool (including a defense
      based on such Receivable or the related Contract not being a legal, valid
      and binding obligation of such Obligor enforceable against it in
      accordance with its terms), or any other claim resulting from the sale of
      the goods or services related to such Receivable or the furnishing or
      failure to furnish such goods or services or relating to collection
      activities with respect to such Receivable (if

                                       10

      such collection activities were performed by the Seller or any of its
      Affiliates acting as Servicer or by any agent or independent contractor
      retained by the Seller or any of its Affiliates),

            (vii) any failure of the Seller (or any of its Affiliates acting as
      the Servicer) to perform its duties or obligations in accordance with the
      provisions hereof or under the Contracts,

            (viii) any products liability or other claim, investigation,
      litigation or proceeding arising out of or in connection with merchandise,
      insurance or services that are the subject of any Contract,

            (ix)  the commingling of Collections at any time with other funds,

            (x) the use of proceeds of purchases or reinvestments by the Seller,
      or

            (xi) any reduction in Capital as a result of the distribution of
      Collections pursuant to Section 1.4(d), if all or a portion of such
      distributions shall thereafter be rescinded or otherwise must be returned
      for any reason.

      Section 3.2 Indemnities by the Servicer. Without limiting any other rights
that the Administrator, the Issuer or any other Indemnified Party may have
hereunder or under applicable law, the Servicer hereby agrees to indemnify each
Indemnified Party from and against any and all Indemnified Amounts incurred by
any Indemnified Party arising out of or resulting from (whether directly or
indirectly): (a) the failure of any information contained in an Information
Package to be true and correct, or the failure of any other information provided
to the Issuer or the Administrator by, or on behalf of, the Servicer to be true
and correct, (b) the failure of any representation, warranty or statement made
or deemed made by the Servicer (or any of its officers) under or in connection
with this Agreement to have been true and correct as of the date made or deemed
made (with respect to any Information Package) in all respects when made, (c)
the failure by the Servicer to comply with any applicable law, rule or
regulation with respect to any Pool Receivable or the related Contract, (d) any
dispute, claim, offset or defense (other than as a result of a discharge in
bankruptcy) of the Obligor to the payment of any Receivable in, or purporting to
be in, the Receivables Pool resulting from or related to the collection
activities with respect to such Receivable, or (e) any failure of the Servicer
to perform its duties or obligations in accordance with the provisions hereof or
any other Transaction Document to which it is a party, (f) the failure to have
filed, or any delay in filing, financing statements or other similar instruments
or documents under the UCC of any applicable jurisdiction or other applicable
laws with respect to any Receivables, in or purporting to be in the Receivables
Pool and any other Pool Assets, whether at the time of any purchase or
reinvestment or at any subsequent time, or (g) any commingling by the Servicer
of Collections at any time with other funds.

      Section 3.3 Notice of Claims. Promptly after the receipt by an Indemnified
Party of a notice of the commencement of any action, suit, proceeding,
investigation or claim against such Indemnified Party as to which it proposes to
demand indemnification from the Seller or Servicer (each, as applicable, an
"Indemnifying Party") pursuant to Section 3.1 or 3.2, as applicable, such
Indemnified Party shall notify the applicable Indemnifying Party in writing of
the

                                       11

commencement thereof; provided that the failure so to notify such Indemnifying
Party shall not relieve such Indemnifying Party from any liability which such
Indemnifying Party may have to such Indemnified Party pursuant to Section 3.1 or
3.2 unless to the extent that such failure results in the forfeiture by any such
Indemnifying Party of substantive rights or defenses.

                                   ARTICLE IV.
                         ADMINISTRATION AND COLLECTIONS

      Section 4.1 Appointment of the Servicer. (a) The servicing, administering
and collection of the Pool Receivables shall be conducted by the Person so
designated from time to time as the Servicer in accordance with this Section.
Until and unless the Administrator gives notice to UGI upon the occurrence of a
Termination Event (in accordance with this Section) of the designation of a new
Servicer, UGI is hereby designated as, and hereby agrees to perform the duties
and obligations of, the Servicer pursuant to the terms hereof. Upon the
occurrence of a Termination Event, the Administrator may designate as Servicer
any Person (including itself) to succeed UGI or any successor Servicer, on the
condition in each case that any such Person so designated shall agree to perform
the duties and obligations of the Servicer pursuant to the terms hereof.

      (b) Upon the designation of a successor Servicer as set forth in clause
(a), UGI agrees that it will terminate its activities as Servicer hereunder in a
manner that the Administrator determines will facilitate the transition of the
performance of such activities to the new Servicer, and UGI shall cooperate with
and assist such new Servicer. Such cooperation shall include reasonable access
to and transfer of related records and use by the new Servicer of all licenses
(or the obtaining of new licenses), hardware or software necessary or desirable
to collect the Pool Receivables and the Related Security.

      (c) UGI acknowledges that, in making their decision to execute and deliver
this Agreement, the Administrator and the Issuer have relied on UGI's agreement
to act as Servicer hereunder. Accordingly, UGI agrees that it will not
voluntarily resign as Servicer.

      (d) The Servicer may delegate its duties and obligations hereunder to any
subservicer (each a "Sub-Servicer"); provided, that, in each such delegation:
(i) such Sub-Servicer shall agree in writing to perform the duties and
obligations of the Servicer pursuant to the terms hereof, (ii) the Servicer
shall remain primarily liable for the performance of the duties and obligations
so delegated, (iii) the Seller, the Administrator and the Issuer shall have the
right to look solely to the Servicer for performance, and (iv) the terms of any
agreement with any Sub-Servicer shall provide that the Administrator may
terminate such agreement upon the termination of the Servicer hereunder by
giving notice of its desire to terminate such agreement to the Servicer (and the
Servicer shall provide appropriate notice to each such Sub-Servicer); provided,
however, that if any such delegation is to any Person other than the Originator,
the Administrator shall have consented in writing in advance to such delegation;
provided, further, that the requirements set forth in clauses (i) and (iv) of
the first proviso shall not apply to any Sub-Servicer that is a utility
providing billing and collection services to the Servicer where amounts owed on
the Receivables are included in the invoice that such utility sends to its
customers.

      Section 4.2 Duties of the Servicer. (a) The Servicer shall take or cause
to be taken all such action as may be reasonably necessary or advisable to
administer and collect each Pool

                                       12

Receivable from time to time, all in accordance with this Agreement and all
applicable laws, rules and regulations, with reasonable care and diligence, and
in accordance with the Credit and Collection Policies. The Servicer shall set
aside, for the accounts of the Seller and the Issuer, the amount of the
Collections to which each is entitled in accordance with Article I. The Servicer
may, in accordance with the applicable Credit and Collection Policy, take such
action as the Servicer may reasonably determine to be appropriate to maximize
Collections thereof or reflect adjustments required under applicable laws, rules
or regulations or the applicable Contract; provided, however, that: for the
purposes of this Agreement, (i) such action shall not change the number of days
such Pool Receivable has remained unpaid from the date of the original due date
related to such Pool Receivable, (ii) such action shall not alter the status of
such Pool Receivable as a Delinquent Receivable or a Defaulted Receivable or
limit the rights of the Issuer or the Administrator under this Agreement and
(iii) if a Termination Event has occurred and is continuing and UGI or an
Affiliate thereof is serving as the Servicer, UGI or such Affiliate may take
such action only upon the prior approval of the Administrator. The Seller shall
deliver to the Servicer and the Servicer shall hold for the benefit of the
Seller and the Administrator (individually and for the benefit of the Issuer),
in accordance with their respective interests, all records and documents
(including computer tapes or disks) with respect to each Pool Receivable.
Notwithstanding anything to the contrary contained herein, the Administrator may
direct the Servicer (whether the Servicer is UGI or any other Person) to
commence or settle any legal action to enforce collection of any Pool Receivable
or to foreclose upon or repossess any Related Security; provided, however, that
no such direction may be given unless either: (A) a Termination Event has
occurred or (B) the Administrator believes in good faith that the failure to
commence, settle or effect such legal action, foreclosure or repossession could
adversely affect Receivables constituting a material portion of the Pool
Receivables.

      (b) The Servicer shall, as soon as practicable following actual receipt of
collected funds, turn over to the Seller (or to the Originator in the case of
payment due to a Reseller) the collections of any indebtedness that is not a
Pool Receivable, less, if UGI or an Affiliate thereof is not the Servicer, all
reasonable and appropriate out-of-pocket costs and expenses of such Servicer of
servicing, collecting and administering such collections. The Servicer, if other
than UGI or an Affiliate thereof, shall, as soon as practicable upon demand,
deliver to the Seller all records in its possession that evidence or relate to
any indebtedness that is not a Pool Receivable, and copies of records in its
possession that evidence or relate to any indebtedness that is a Pool
Receivable.

      (c) The Servicer's obligations hereunder shall terminate on the later of:
(i) the Facility Termination Date and (ii) the date on which all amounts
required to be paid to the Issuer, the Administrator and any other Indemnified
Party or Affected Person hereunder shall have been paid in full.

      After such termination, if UGI or an Affiliate thereof was not the
Servicer on the date of such termination, the Servicer shall promptly deliver to
the Seller all books, records and related materials that the Seller previously
provided to the Servicer, or that have been obtained by the Servicer, in
connection with this Agreement.

      Section 4.3 Lock-Box Arrangements. Within 30 days of the initial purchase
hereunder, the Seller shall enter into Lock-Box Agreements with all of the
Lock-Box Banks and deliver

                                       13

original counterparts thereof to the Administrator. Upon the occurrence of and
continuance of a Termination Event, the Administrator may at any time thereafter
give notice to each Lock-Box Bank that the Administrator is exercising its
rights under the Lock-Box Agreements to do any or all of the following: (a) to
have the exclusive ownership and control of the Lock-Box Accounts (and the
related lock-boxes) transferred to the Administrator and to exercise exclusive
dominion and control over the funds deposited therein, (b) to have the proceeds
that are sent to the respective Lock-Box Accounts (and the respective related
lock-boxes) redirected pursuant to the Administrator's instructions rather than
deposited in the applicable Lock-Box Account (or sent to the applicable related
lock-box), and (c) to take any or all other actions permitted under the
applicable Lock-Box Agreement. The Seller hereby agrees that if the
Administrator at any time takes any action set forth in the preceding sentence,
the Administrator shall have exclusive control of the proceeds (including
Collections) of all Pool Receivables and the Seller hereby further agrees to
take any other action that the Administrator may reasonably request to transfer
such control. Any proceeds of Pool Receivables received by the Seller or the
Servicer thereafter shall be sent immediately to the Administrator. The parties
hereto hereby acknowledge that if at any time the Administrator takes control of
any Lock-Box Account (and any such related lock-box), the Administrator shall
not have any rights to the funds therein in excess of the unpaid amounts due to
the Administrator, the Issuer or any other Person hereunder, and the
Administrator shall distribute or cause to be distributed such funds in
accordance with Section 4.2(b) and Article I (in each case as if such funds were
held by the Servicer thereunder).

      Section 4.4 Enforcement Rights. (a) At any time following the occurrence
and continuance of a Termination Event:

            (i) the Administrator may direct the Obligors that payment of all
      amounts payable under any Pool Receivable is to be made directly to the
      Administrator or its designee,

            (ii) the Administrator may instruct the Seller or the Servicer to
      give notice of the Issuer's interest in Pool Receivables to each Obligor,
      which notice shall direct that payments be made directly to the
      Administrator or its designee, and the Seller or the Servicer, as the case
      may be, shall give such notice at the expense of the Seller or the
      Servicer, as the case may be; provided, that if the Seller or the
      Servicer, as the case may be, fails to so notify each Obligor within a
      reasonable time after said instruction (in no event not later than 10 days
      thereafter), the Administrator (at the Seller's or the Servicer's, as the
      case may be, expense) may so notify the Obligors, and

            (iii) the Administrator may request the Servicer to, and upon such
      request the Servicer shall: (A) assemble all of the records in the
      Servicer's possession or under its control necessary or desirable to
      collect the Pool Receivables and the Related Security, and transfer or
      license (or obtain new licenses) to a successor Servicer the use of all
      software in the Servicer's possession or under its control necessary or
      desirable to collect the Pool Receivables and the Related Security, and
      make the same available to the Administrator or its designee at a place
      selected by the Administrator to the extent permissible under such
      agreements, and (B) segregate all cash, checks and other instruments
      received by it from time to time constituting Collections in a manner
      reasonably acceptable to the Administrator and, promptly upon receipt,
      remit all such

                                       14

      cash, checks and instruments, duly endorsed or with duly executed
      instruments of transfer, to the Administrator or its designee.

      (b) The Seller hereby authorizes the Administrator, and irrevocably
appoints the Administrator as its attorney-in-fact with full power of
substitution and with full authority in the place and stead of the Seller, which
appointment is coupled with an interest, upon the occurrence and continuation of
a Termination Event to take any and all steps in the name of the Seller and on
behalf of the Seller necessary or desirable, in the determination of the
Administrator, to collect any and all amounts or portions thereof due under any
and all Pool Assets, including endorsing the name of the Seller on checks and
other instruments representing Collections and enforcing such Pool Assets.
Notwithstanding anything to the contrary contained in this subsection, none of
the powers conferred upon such attorney-in-fact pursuant to the preceding
sentence shall subject such attorney-in-fact to any liability if any action
taken by it shall prove to be inadequate or invalid, nor shall they confer any
obligations upon such attorney-in-fact in any manner whatsoever; provided,
however, that the Administrator shall not be relieved of any liability it might
otherwise have to any party hereunder for its own gross negligence or willful
misconduct.

      Section 4.5 Responsibilities of the Seller. (a) Anything herein to the
contrary notwithstanding, the Seller shall: (i) perform all of its obligations,
if any, under the Contracts related to the Pool Receivables to the same extent
as if interests in such Pool Receivables had not been transferred hereunder, and
the exercise by the Administrator or the Issuer of their respective rights
hereunder shall not relieve the Seller from such obligations, and (ii) pay when
due any taxes, including any sales taxes payable in connection with the Pool
Receivables and their creation and satisfaction. The Administrator and the
Issuer shall not have any obligation or liability with respect to any Pool
Asset, nor shall either of them be obligated to perform any of the obligations
of the Seller, UGI or the Originator thereunder.

      (b) UGI hereby irrevocably agrees that if at any time it shall cease to be
the Servicer hereunder, it shall act (if the then-current Servicer so requests)
as the data-processing agent of the Servicer and, in such capacity, UGI shall
conduct the data-processing functions of the administration of the Receivables
and the Collections thereon in substantially the same way that UGI conducted
such data-processing functions while it acted as the Servicer.

      Section 4.6 Servicing Fee. (a) Subject to clause (b), the Servicer shall
be paid a fee equal to 0.50% per annum (the "Servicing Fee Rate") of the daily
average aggregate Outstanding Balance of the Pool Receivables. The Issuer's
Share of such fee shall be paid through the distributions contemplated by
Section 1.4(d), and the Seller's Share of such fee shall be paid by the Seller
on each Settlement Date.

      (b) If the Servicer ceases to be UGI or an Affiliate thereof, the
servicing fee shall be the greater of: (i) the amount calculated pursuant to
clause (a), and (ii) an alternative amount specified by the successor Servicer
not to exceed 110% of the aggregate reasonable costs and expenses incurred by
such successor Servicer in connection with the performance of its obligations as
Servicer.

                                       15

                                   ARTICLE V.
                                  MISCELLANEOUS

      Section 5.1 Amendments, Etc. No amendment or waiver of any provision of
this Agreement or any other Transaction Document, or consent to any departure by
the Seller or the Servicer therefrom, shall be effective unless in a writing
signed by the Administrator, and, in the case of any amendment, by the other
parties thereto; and then such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given. No
failure on the part of the Issuer or the Administrator to exercise, and no delay
in exercising any right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right.

      Section 5.2 Notices, Etc. (a) All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by
certified mail, postage prepaid, via nationally recognized courier or by
facsimile, to the intended party at the mailing address or facsimile number of
such party set forth under its name on the signature pages hereof or at such
other address or facsimile number as shall be designated by such party in a
written notice to the other parties hereto. All such notices and communications
shall be effective (i) if personally delivered, when received, (ii) if sent by
certified mail three (3) Business Days after having been deposited in the mail,
postage prepaid, (iii) if via nationally recognized courier for delivery the
next Business Day, and (iv) if transmitted by facsimile, when sent, receipt
confirmed by telephone or electronic means (and shall be followed by a hard copy
sent by first class mail).

      Section 5.3 Assignability. (a) This Agreement and the Issuer's rights
and obligations herein (including ownership of the Purchased Interest or an
interest therein) shall be assignable, in whole or in part, by the Issuer and
its successors and assigns with the prior written consent of the Seller;
provided, however, that such consent shall not be unreasonably withheld; and
provided further, that no such consent shall be required if the assignment is
made to PNC, any Affiliate of PNC (other than a director or officer of PNC), any
Purchaser or other Program Support Provider, or any Person that is (i) in the
business of issuing Notes and (ii) administered by PNC or any Affiliate of PNC.
Each assignor may, in connection with the assignment, disclose to the applicable
assignee (that shall have agreed to be bound by Section 5.6) any information
relating to the Servicer, the Seller or the Pool Receivables furnished to such
assignor by or on behalf of the Servicer, the Seller, the Issuer or the
Administrator. The Administrator shall give prior written notice of any
assignment of the Issuer's rights and obligations (including ownership of the
Purchased Interest to any Person other than a Program Support Provider).

      (b) The Issuer may at any time grant to one or more banks or other
institutions (each a "Purchaser") party to the Liquidity Agreement, or to any
other Program Support Provider, participating interests in the Purchased
Interest; provided, however, that in the case of any such grant to PNC or any
Affiliate of PNC, the Seller shall have approved such Purchaser at the time such
Purchaser became a party to the Liquidity Agreement (such approval to not be
unreasonably withheld). In the event of any such grant by the Issuer of a
participating interest to a Purchaser or other Program Support Provider, the
Issuer shall remain responsible for the performance of its

                                       16

obligations hereunder. The Seller agrees that each Purchaser or other Program
Support Provider shall be entitled to the benefits of Sections 1.7 and 1.8.

      (c) This Agreement and the rights and obligations of the Administrator
hereunder shall be assignable, in whole or in part, by the Administrator and its
successors and assigns; provided, that unless: (i) such assignment is to an
Affiliate of PNC, (ii) it becomes unlawful for PNC to serve as the Administrator
or (iii) a Termination Event exists, the Seller has consented to such
assignment, which consent shall not be unreasonably withheld.

      (d) Except as provided in Section 4.1(d), none of the Seller, UGI or the
Servicer may assign its rights or delegate its obligations hereunder or any
interest herein without the prior written consent of the Administrator.

      (e) Without limiting any other rights that may be available under
applicable law, the rights of the Issuer may be enforced through it or by its
agents.

      (f) Each of (A) the Issuer, (B) its successors and assigns, (C) any
Program Support Provider, (D) any assignee under Section 5.3(a) and (E) any
recipient of a participating interest under Section 5.3(b) that, in each case,
is not a United States Person (as such term is defined in Section 7701(a)(30) of
the United States Internal Revenue Code of 1986, as amended) for United States
federal tax purposes shall deliver to the Seller, with a copy to the Servicer, a
United States Internal Revenue Service Form W-8BEN or W-8ECI (or successor form)
properly completed and certifying in each case that the party delivering such
form is entitled to a complete exemption from withholding or deduction for or on
account of any United States federal income taxes with respect to amounts
derived, directly or indirectly, in connection with this Agreement. The Issuer,
if required to deliver such form, shall deliver such form on the Closing Date. A
party described in any of the foregoing clauses (B) through (E) shall deliver
such form concurrently with such party becoming described in any of such
clauses. Each party obligated to deliver a form under the first sentence of this
Section 5.3(f) shall, to the extent permitted by law, further deliver to the
Seller, with a copy to the Servicer, a United States Internal Revenue Service
Form W-8BEN or W-8ECI (or successor form) on or before the date that any such
form expires or becomes obsolete or after the occurrence of any event requiring
a change in the most recent form previously delivered by such party to the
Seller, properly completed and certifying in each case that the party delivering
such form is entitled to a complete exemption from withholding or deduction for
or on account of any United States federal income taxes with respect to amounts
derived, directly or indirectly, in connection with this Agreement. The Seller
shall not be required to pay to or on behalf of any party described in the
foregoing clauses (A) through (E) any additional amount under Section 1.8 or
Section 3.1 attributable to any tax, duty, levy or other charge of any kind
whatsoever imposed upon or required to be withheld or deducted from payments to
any such party if such party shall have failed to satisfy the requirements of
this Section 5.3(f); provided that nothing in this Section 5.3(f) shall relieve
the Seller of any obligation to pay additional amounts under Section 1.8 or
Section 3.1 if, as a result of a change in treaty, law or regulation or the
interpretation or application thereof, adopted, issued or occurring after the
satisfaction by such party of such requirements, such party is no longer
properly entitled to deliver Form W-8BEN or Form W-8ECI (or successor forms)
certifying that such party is entitled to a complete exemption from withholding
or deduction for or on account

                                       17

of any United States federal income taxes with respect to amounts derived,
directly or indirectly, in connection with this Agreement.

      Section 5.4 Costs, Expenses and Taxes. (a) In addition to the rights of
indemnification granted under Section 3.1, the Seller agrees to pay on demand
(which demand shall be accompanied by documentation thereof in reasonable
detail) all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration (including periodic internal audits by
the Administrator of Pool Receivables, provided that the Seller shall not pay
for more than one audit per year unless a Termination Event has occurred and is
continuing) of this Agreement, the other Transaction Documents and the other
documents and agreements to be delivered hereunder (and all reasonable costs and
expenses in connection with any amendment, waiver or modification of any
thereof), including: (i) Attorney Costs for the Administrator, the Issuer and
their respective Affiliates and agents with respect thereto and with respect to
advising the Administrator, the Issuer and their respective Affiliates and
agents as to their rights and remedies under this Agreement and the other
Transaction Documents, and (ii) all reasonable costs and expenses (including
Attorney Costs), if any, of the Administrator, the Issuer and their respective
Affiliates and agents in connection with the enforcement of this Agreement and
the other Transaction Documents.

      (b) In addition, the Seller shall pay on demand any and all stamp and
other similar taxes and fees payable in connection with the execution, delivery,
filing and recording of this Agreement or the other documents or agreements to
be delivered hereunder, and agrees to save each Indemnified Party harmless from
and against any liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees.

      Section 5.5 No Proceedings; Limitation on Payments. Each of the Seller,
UGI, the Servicer, the Administrator, each assignee of the Purchased Interest or
any interest therein, and each Person that enters into a commitment to purchase
the Purchased Interest or interests therein, hereby covenants and agrees that it
will not institute against, or join any other Person in instituting against, the
Issuer any bankruptcy, reorganization, similar arrangement, insolvency or
liquidation proceeding, or other proceeding under any federal or state
bankruptcy or similar law, for one year and one day after the latest maturing
Note issued by the Issuer is paid in full. The provision of this Section 5.5
shall survive any termination of this Agreement.

      Section 5.6 Confidentiality. Unless otherwise required by applicable law,
each of the Seller and the Servicer agrees to maintain the confidentiality of
the terms of this Agreement and the other Transaction Documents (and all drafts
thereof) in communications with third parties and otherwise; provided, that this
Agreement may be disclosed to: (a) third parties to the extent such disclosure
is made pursuant to a written agreement of confidentiality in form and substance
reasonably satisfactory to the Administrator, and (b) the Seller's legal counsel
and auditors if they agree to hold it confidential. Unless otherwise required by
applicable law, each of the Administrator and the Issuer agrees to maintain the
confidentiality of non-public information regarding UGI and its Subsidiaries and
Affiliates; provided, that such information may be disclosed to: (i) third
parties to the extent such disclosure is made pursuant to a written agreement of
confidentiality in form and substance reasonably satisfactory to UGI, (ii) legal
counsel and auditors of the Issuer or the Administrator if they agree to hold it
confidential, (iii) the rating agencies rating the Notes, (iv) any Program
Support Provider or potential Program

                                       18

Support Provider (if they agree to hold it confidential), (v) any placement
agent placing the Notes and (vi) any regulatory authorities having jurisdiction
over PNC, the Issuer, any Program Support Provider or any Purchaser.

      Section 5.7 GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTION 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF A SECURITY INTEREST OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK.

      (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FEDERAL
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE
PARTIES HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY
BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.

      Section 5.8 Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which, when so executed, shall be deemed to
be an original, and all of which, when taken together, shall constitute one and
the same agreement.

      Section 5.9 Survival of Termination. The provisions of Sections 1.7, 1.8,
3.1, 3.2, 5.4, 5.5, 5.6, 5.7, 5.10 and 5.13 shall survive any termination of
this Agreement.

      Section 5.10 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH OF THE PARTIES HERETO AGREES
THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES
THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING THAT SEEKS, IN WHOLE
OR IN

                                       19

PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY
PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

      Section 5.11 Entire Agreement. This Agreement and the other Transaction
Documents embody the entire agreement and understanding between the parties
hereto, and supersede all prior or contemporaneous agreements and understandings
of such Persons, verbal or written, relating to the subject matter hereof and
thereof, except for any prior arrangements made with respect to the payment by
the Issuer of (or any indemnification for) any fees, costs or expenses payable
to or incurred (or to be incurred) by or on behalf of the Seller, the Servicer
and the Administrator.

      Section 5.12 Headings. The captions and headings of this Agreement and any
Exhibit, Schedule or Annex hereto are for convenience of reference only and
shall not affect the interpretation hereof or thereof.

      Section 5.13 Issuer's, Administrator's, Seller's and Servicer's
Liabilities. The obligations of the Issuer, the Administrator, the Seller and
the Servicer under the Transaction Documents are solely the corporate
obligations of the Issuer, the Administrator, the Seller and the Servicer,
respectively. No recourse shall be had for any obligation or claim arising out
of or based upon any Transaction Document against any stockholder, employee,
officer, director or incorporator of the Issuer, the Administrator, the Seller
or the Servicer; provided, however, that this Section shall not relieve any such
Person of any liability it might otherwise have for its own gross negligence or
willful misconduct.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       20

      IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.

                              ENERGY SERVICES FUNDING CORPORATION

                              By: ____________________________________________
                                 Name: _______________________________________
                                 Title: ______________________________________

                              Address:    Energy Services Funding Corporation
                                          460 North Gulph Road, Suite 200
                                          King of Prussia, PA  19406-2815

                              Attention:  Robert W. Krick
                              Telephone:  610-337-1000 ext. 3141
                              Facsimile:  610-992-3259

                              UGI ENERGY SERVICES, INC.

                              By: ____________________________________________
                                 Name: _______________________________________
                                 Title: ______________________________________

                              Address:    UGI Energy Services, Inc.
                                          1100 Berkshire Boulevard, Suite 305
                                          Wyomissing, PA 19610

                              Attention:  Joseph L. Hartz
                              Telephone:  610-373-7999 ext. 106
                              Facsimile:  610-374-4288

                              MARKET STREET FUNDING CORPORATION

                              By: ____________________________________________
                                 Name: _______________________________________
                                 Title: ______________________________________

                              Address:    Market Street Funding Corporation
                                          c/o AMACAR Group, LLC
                                          6525 Morrison Boulevard, Suite 318
                                          Charlotte, NC  28211

                              Attention:  Douglas K. Johnson
                              Telephone:  (704) 365-0569
                              Facsimile:  (704) 365-1362

                                       S-1        Receivables Purchase Agreement
                                                                           (UGI)

                                  With a copy to:

                              PNC Bank, National Association
                              One PNC Plaza
                              249 Fifth Avenue
                              Pittsburgh, PA 15222-2707

                              Attention:  John T. Smathers
                              Telephone:  (412) 762-6440
                              Facsimile:  (412) 762-9184

                              PNC BANK, NATIONAL ASSOCIATION,
                              as Administrator

                              By: ____________________________________________
                                 Name: _______________________________________
                                 Title: ______________________________________

                              Address:    PNC Bank, National Association
                                          One PNC Plaza
                                          249 Fifth Avenue
                                          Pittsburgh, PA  15222-2707

                              Attention:  John T. Smathers
                              Telephone:  (412) 762-6440
                              Facsimile:  (412) 762-9184

                                       S-2        Receivables Purchase Agreement
                                                                           (UGI)

                                    EXHIBIT I
                                   DEFINITIONS

      As used in the Agreement (including its Exhibits, Schedules and Annexes),
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined).
Unless otherwise indicated, all Section, Annex, Exhibit and Schedule references
in this Exhibit are to Sections of and Annexes, Exhibits and Schedules to the
Agreement.

      "Administration Account" means the account (account number 1002422076, ABA
number 043000096) of the Issuer maintained at the office of PNC at One PNC
Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707, or such other
account as may be so designated in writing by the Administrator to the Servicer.

      "Administrator" has the meaning set forth in the preamble to the
Agreement.

      "Adverse Claim" means a lien, security interest or other charge or
encumbrance, or any other type of preferential arrangement; it being understood
that any thereof in favor of, or assigned to, the Issuer or the Administrator
(for the benefit of the Issuer) shall not constitute an Adverse Claim.

      "Affected Person" has the meaning set forth in Section 1.7 of the
Agreement.

      "Affiliate" means, as to any Person: (a) any Person that, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person, or (b) who is a director or officer: (i) of such Person or (ii) of
any Person described in clause (a), except that, with respect to the Issuer,
Affiliate shall mean the holder(s) of its capital stock. For purposes of this
definition, control of a Person shall mean the power, direct or indirect: (x) to
vote 51% or more of the securities having ordinary voting power for the election
of directors or managers of such Person, or (y) to direct or cause the direction
of the management and policies of such Person, in either case whether by
ownership of securities, contract, proxy or otherwise.

      "Agreement" has the meaning set forth in the preamble to the Agreement.

      "Alternate Rate" for any Settlement Period for any Portion of Capital of
the Purchased Interest means an interest rate per annum equal to: (a) 1.25% per
annum above the Euro-Rate for such Settlement Period; provided, however, that if
(x) it shall become unlawful for any Purchaser or Program Support Provider to
obtain funds in the London interbank eurodollar market in order to make, fund or
maintain any Purchased Interest, or if such funds shall not be reasonably
available to any Purchaser or Program Support Provider, or (y) there shall not
be at least two Business Days prior to the commencement of an applicable
Settlement Period to determine a Euro-Rate in accordance with its terms, then
the "Alternate Rate" shall be equal to the Base Rate in effect for each day
during the remainder of such Settlement Period or (b) if requested by the Seller
the Base Rate for such Settlement Period; provided, however, that the "Alternate
Rate" for any day while a Termination Event exists shall be an interest rate
equal to 2.00% per annum above the Base Rate in effect on such day.

                                      I-1

      "Attorney Costs" means and includes all reasonable fees and disbursements
of any law firm or other external counsel, the reasonable allocated cost of
internal legal services and all reasonable disbursements of internal counsel.

      "Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978
(11 U.S.C.Section 101, et seq.), as amended from time to time.

      "Base Rate" means, for any day, a fluctuating interest rate per annum as
shall be in effect from time to time, which rate shall be at all times equal to
the higher of:

            (a) the rate of interest in effect for such day as publicly
      announced from time to time by PNC in Pittsburgh, Pennsylvania as its
      "prime rate." Such "prime rate" is set by PNC based upon various factors,
      including PNC's costs and desired return, general economic conditions and
      other factors, and is used as a reference point for pricing some loans,
      which may be priced at, above or below such announced rate, and

            (b)   0.50% per annum above the latest Federal Funds Rate.

      "BBA" means the British Bankers' Association.

      "Benefit Plan" means any employee benefit pension plan as defined in
Section 3(2) of ERISA in respect of which the Seller, the Originator, UGI or any
ERISA Affiliate is an "employer" as defined in Section 3(5) of ERISA.

      "Business Day" means any day (other than a Saturday or Sunday) on which:
(a) banks are not authorized or required to close in New York City, New York or
Pittsburgh, Pennsylvania, and (b) if this definition of "Business Day" is
utilized in connection with the Euro-Rate, dealings are carried out in the
London interbank market.

      "Capital" means the amount paid to the Seller in respect of the Purchased
Interest by the Issuer pursuant to the Agreement, or such amount divided or
combined in order to determine the Discount applicable to any Portion of
Capital, in each case reduced from time to time by Collections distributed and
applied on account of such Capital pursuant to Section 1.4(d) of the Agreement;
provided, that if such Capital shall have been reduced by any distribution, and
thereafter all or a portion of such distribution is rescinded or must otherwise
be returned for any reason, such Capital shall be increased by the amount of
such rescinded or returned distribution as though it had not been made.

      "Change in Control" means that (a) with respect to the Seller, UGI ceases
to own, directly or indirectly, 100% of the capital stock of the Seller free and
clear of all Adverse Claims, (b) with respect to UGI, UGI Enterprises, Inc.
shall cease to own 51% or more of the shares of outstanding voting stock of UGI
on a fully diluted basis, and (c) with respect to UGI, the Performance Guarantor
shall cease to beneficially own, directly or indirectly, 51% of the shares of
outstanding voting stock of UGI on a fully diluted basis.

      "Closing Date" means November 30, 2001.

                                      I-2

      "Collections" means, with respect to any Pool Receivable: (a) all funds
that are received by the Originator, UGI, the Seller or the Servicer in payment
of any amounts owed in respect of such Receivable (including purchase price,
finance charges, interest and all other charges), or applied to amounts owed in
respect of such Receivable (including insurance payments and net proceeds of the
sale or other disposition of repossessed goods or other collateral or property
of the related Obligor or any other Person directly or indirectly liable for the
payment of such Pool Receivable and available to be applied thereon), (b) all
amounts deemed to have been received pursuant to Section 1.4(e) of the Agreement
and (c) all other proceeds of such Pool Receivable.

      "Concentration Percentage" means for any: (a) Group A Obligor, 16.00%, (b)
Group B Obligor, 16.00%, (c) Group C Obligor, 8.00% and (d) Group D Obligor,
4.00%.

      "Concentration Reserve" means, at any time: (a) the aggregate Capital at
such time multiplied by (b)(i) the Concentration Reserve Percentage, divided by
(ii) 100%, minus the Concentration Reserve Percentage.

      "Concentration Reserve Percentage" means, at any time, the largest of: (a)
the sum of four largest Group D Obligor Percentages, (b) the sum of the two
largest Group C Obligor Percentages and (c) the largest Group B Obligor
Percentage or Group A Obligor Percentage.

      "Consolidated Net Worth" means, with respect to any Person and as of any
date of determination, total stockholders' equity of such Person and its
Subsidiaries as of such date, determined in accordance with GAAP.

      "Contract" means, with respect to any Receivable, any and all contracts,
instruments, agreements, leases, invoices, notes or other writings pursuant to
which such Receivable arises or that evidence such Receivable or under which an
Obligor becomes or is obligated to make payment in respect of such Receivable.

      "Contributed Receivables" has the meaning set forth in Section 2.2 of the
Purchase and Sale Agreement.

      "CP Rate" for any Settlement Period for any Portion of Capital means a
rate calculated by the Administrator equal to: (a) the rate (or if more than one
rate, the weighted average of the rates) at which Notes of the Issuer on each
day during such period have been outstanding; provided, that if such rate(s) is
a discount rate(s), then the CP Rate shall be the rate (or if more than one
rate, the weighted average of the rates) resulting from converting such discount
rate(s) to an interest-bearing equivalent rate plus (b) the commissions and
charges charged by such placement agent or commercial paper dealer with respect
to such Notes, expressed as a percentage of the face amount of such Notes and
converted to an interest-bearing equivalent rate per annum. Notwithstanding the
foregoing, the "CP Rate" for any day while a Termination Event exists shall be
an interest rate equal to 2.00% above the Base Rate in effect on such day.

      "Credit and Collection Policy" means, as the context may require, those
receivables credit and collection policies and practices of the Originator in
effect on the date of the Agreement and described in Schedule I to the
Agreement, as modified in compliance with the Agreement.

                                      I-3

      "Cut-off Date" has the meaning set forth in the Purchase and Sale
Agreement.

      "Debt" means: (a) indebtedness for borrowed money, (b) obligations
evidenced by bonds, debentures, notes or other similar instruments, (c)
obligations to pay the deferred purchase price of property or services, (d)
obligations as lessee under leases that shall have been or should be, in
accordance with GAAP, recorded as capital leases, and (e) obligations under
direct or indirect guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, indebtedness or obligations of others of the kinds
referred to in clauses (a) through (d).

      "Default Ratio" means the ratio (expressed as a percentage and rounded to
the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of the
last day of each calendar month by dividing: (a) the aggregate Outstanding
Balance of all Pool Receivables that became Defaulted Receivables during such
month, by (b) the aggregate credit sales made by the Originator during the month
that is three calendar months before such month.

      "Defaulted Receivable" means a Receivable:

      (a) as to which any payment, or part thereof, remains unpaid for more than
90 days from the original invoice date for such payment, or

      (b) without duplication (i) as to which an Insolvency Proceeding shall
have occurred with respect to the Obligor thereof or any other Person obligated
thereon with respect thereto, or (ii) that has been written off the Seller's
books as uncollectible.

The Outstanding Balance of any Defaulted Receivable shall be determined without
regard to any credit memos or credit balances.

      "Delinquency Ratio" means the ratio (expressed as a percentage and rounded
to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of
the last day of each calendar month by dividing: (a) the aggregate Outstanding
Balance of all Pool Receivables that were Delinquent Receivables on such day by,
(b) the aggregate Outstanding Balance of all Pool Receivables (excluding
Delinquent Receivables that have a stated maturity which is more than 60 days
after the original invoice date of such Receivable) on such day.

      "Delinquent Receivable" means any portion of a Receivable as to which any
payment, or part thereof, remains unpaid for more than 90 days from the original
invoice date for such payment. The Outstanding Balance of any Delinquent
Receivable shall be determined without regard to any credit memos or credit
balances and shall exclude Delinquent Receivables that have a stated maturity
which is more than 60 days after the original invoice date of such Receivable.

      "Dilution Horizon" means, for any calendar month, the ratio (expressed as
a percentage and rounded to the nearest 1/100th of 1%, with 5/1000th of 1%
rounded upward) computed as of the last day of such calendar month of: (a) the
aggregate credit sales made by the Originator during the most recent calendar
month and 50% of the next most recent calendar month's credit sales to (b) the
Net Receivables Pool Balance at the last day of the most recent calendar month.

                                      I-4

      "Dilution Ratio" means the ratio (expressed as a percentage and rounded to
the nearest 1/100th of 1%, with 5/1000th of 1% rounded upward) computed as of
the last day of each calendar month by dividing: (a) the aggregate amount of
payments required to be made by the Seller pursuant to Section 1.4(e)(i) of the
Agreement during such calendar month, by (b) the aggregate credit sales made by
the Originator during the month that is one calendar month before such month.

      "Dilution Reserve" means, on any date, an amount equal to: (a) the Capital
at the close of business of the Servicer on such date multiplied by (b) (i) the
Dilution Reserve Percentage on such date, divided by (ii) 100% minus the
Dilution Reserve Percentage on such date.

      "Dilution Reserve Percentage" means on any date, the greater of (a) 5% or
(b) the product of (i) the Dilution Horizon multiplied by (ii) the sum of (x)
2.0 times the average of the Dilution Ratios for the twelve most recent calendar
months and (y) the Spike Factor.

      "Discount" means:

            (a) for the Portion of Capital for any Settlement Period to the
      extent the Issuer will be funding such Portion of Capital during such
      Settlement Period through the issuance of Notes:

                              CPR x C x ED/360

            (b) for the Portion of Capital for any Settlement Period to the
      extent the Issuer will not be funding such Portion of Capital during such
      Settlement Period through the issuance of Notes:

                              AR x C x ED/Year + TF

      where:

            AR    =     the Alternate Rate for the Portion of Capital for such
                        Settlement Period,

            C     =     the Portion of Capital during such Settlement Period,

            CPR   =     the CP Rate for the Portion of Capital for such
                        Settlement Period,

            ED    =     the actual number of days during such Settlement Period,

            TF    =     the Termination Fee, if any, for the Portion of Capital
                        for such Settlement Period, and

            Year  =     if such Portion of Capital is funded based upon: (i) the
                        Euro-Rate, 360 days, and (ii) the Base Rate, 365 or 366
                        days, as applicable;

provided, that no provision of the Agreement shall require the payment or permit
the collection of Discount in excess of the maximum permitted by applicable law;
and provided further, that

                                      I-5

Discount for the Portion of Capital shall not be considered paid by any
distribution to the extent that at any time all or a portion of such
distribution is rescinded or must otherwise be returned for any reason.

      "Eligible Receivable" means, at any time, a Pool Receivable:

            (a) the Obligor of which is (i) a United States resident, (ii) not a
      government or a governmental subdivision, affiliate or agency, provided,
      however, if the Obligor of such Receivable is a government or a
      governmental subdivision, affiliate or agency, such Receivable shall
      satisfy the requirements of this clause (a)(ii) if the sum of the
      Outstanding Balance of such Receivable and the aggregate Outstanding
      Balance of all other Eligible Receivables of Obligors who are governments
      or governmental subdivisions, affiliates or agencies does not exceed
      $200,000, (iii) not subject to any action of the type described in
      paragraph (f) of Exhibit V to the Agreement, (iv) not an Affiliate of UGI,
      and (iv) not a Reseller, provided, however, if the Obligor of such
      Receivable is a Reseller, such Receivable shall satisfy the requirements
      of this clause (a)(iv) if the sum of the Outstanding Balance of such
      Receivable and the aggregate Outstanding Balance of all other Eligible
      Receivables of Obligors who are Resellers does not exceed $2,000,000,

            (b) that is denominated and payable only in U.S. dollars in the
      United States,

            (c) that does not have a stated maturity which is more than 45 days
      after the original invoice date of such Receivable; provided, however,
      that up to 10% of the aggregate Outstanding Balance of all Receivables may
      have a stated maturity which is more than 45 days but not more than 60
      days after the original invoice date of such Receivable,

            (d) that arises under a duly authorized Contract for the sale and
      delivery of goods and services in the ordinary course of the Originator's
      business,

            (e) that arises under a duly authorized Contract that is in full
      force and effect and that is a legal, valid and binding obligation of the
      related Obligor, enforceable against such Obligor in accordance with its
      terms, subject to applicable bankruptcy, fraudulent transfer or
      conveyance, insolvency, reorganization, moratorium and other similar laws
      limiting the enforceability of creditors' rights generally, as from time
      to time in effect,

            (f) that conforms in all material respects with all applicable laws,
      rulings and regulations in effect,

            (g) that is not the subject of any asserted dispute, offset, hold
      back defense, Adverse Claim or other claim,

            (h) that satisfies in all material respects all applicable
      requirements of the applicable Credit and Collection Policy,

            (i) that has not been modified, waived or restructured since its
      creation, except as permitted pursuant to Section 4.2 of the Agreement,

                                      I-6

            (j) in which the Seller owns good and marketable title, free and
      clear of any Adverse Claims, and that arise under Contracts, the terms of
      which do not expressly prohibit the Seller from assigning its right to
      receive payment under the Contract or require any consent of the related
      Obligor for such assignment,

            (k) for which the Issuer shall have a valid and enforceable
      undivided percentage ownership or security interest, to the extent of the
      Purchased Interest, and a valid and enforceable first priority perfected
      security interest therein and in the Related Security and Collections with
      respect thereto, in each case free and clear of any Adverse Claim,

            (l) that constitutes an account as defined in the UCC, and that is
      not evidenced by instruments or chattel paper,

            (m) that is neither a Defaulted Receivable nor a Delinquent
      Receivable,

            (n) for which neither the Originator thereof, the Seller nor the
      Servicer has established any offset arrangements with the related Obligor,

            (o) of an Obligor as to which Defaulted Receivables of such Obligor
      do not exceed 25% of the Outstanding Balance of all such Obligor's
      Receivables; provided, however, that amounts owing from Cooperative
      Industries Inc. that are more than 90 days from the original invoice date
      as of the Closing Date and that are being paid in accordance with a
      negotiated payment schedule shall not be considered Defaulted Receivables
      for purposes of this clause (o), and

            (p) that represents amounts earned and payable by the Obligor that
      are not subject to the performance of additional services by the
      Originator thereof.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.

      "ERISA Affiliate" means: (a) any corporation that is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Internal Revenue Code) as the Seller, the Originator or UGI, (b) a trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Internal Revenue Code) with the Seller, the Originator
or UGI, or (c) a member of the same affiliated service group (within the meaning
of Section 414(m) of the Internal Revenue Code) as the Seller, the Originator,
any corporation described in clause (a) or any trade or business described in
clause (b).

      "Euro-Rate" means with respect to any Settlement Period the interest rate
per annum determined by the Administrator by dividing (the resulting quotient
rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the
rate of interest determined by the Administrator in accordance with its usual
procedures (which determination shall be conclusive absent manifest error) to be
the average of the London interbank market offered rates for U.S. dollars quoted
by the BBA as set forth on Dow Jones Markets Service (formerly known as
Telerate) (or appropriate successor or, if the BBA or its successor ceases to
provide display page

                                      I-7

3750 (or such other display page on the Dow Jones Markets Service system as may
replace display page 3750) at or about 11:00 a.m. (London time) on the Business
Day which is two (2) Business Days prior to the first day of such Settlement
Period for an amount comparable to the Portion of Capital to be funded at the
Alternate Rate and based upon the Euro-Rate during such Settlement Period by
(ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage. The
Euro-Rate may also be expressed by the following formula:

     Euro-Rate  = Average of London interbank offered rates quoted by BBA as
                  shown on Dow Jones Markets Service display page 3750 or
                  appropriate successor
                  ----------------------------------------------------------
                            1.00 - Euro-Rate Reserve Percentage

where "Euro-Rate Reserve Percentage" means, the maximum effective percentage in
effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including without limitation, supplemental, marginal, and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as
"Eurocurrency Liabilities"). The Euro-Rate shall be adjusted with respect to any
Portion of Capital funded at the Alternate Rate and based upon the Euro-Rate
that is outstanding on the effective date of any change in the Euro-Rate Reserve
Percentage as of such effective date. The Administrator shall give prompt notice
to the Seller of the Euro-Rate as determined or adjusted in accordance herewith
(which determination shall be conclusive absent manifest error).

      "Excess Concentration" means the sum of the amounts by which the
Outstanding Balance of Eligible Receivables of each Obligor then in the
Receivables Pool exceeds an amount equal to: (a) the applicable Concentration
Percentage for such Obligor multiplied by (b) the Outstanding Balance of all
Eligible Receivables then in the Receivables Pool.

      "Facility Termination Date" means the earliest to occur of: (a) August 26,
2006, (b) the date determined pursuant to Section 2.2 of the Agreement, (c) the
date the Purchase Limit reduces to zero pursuant to Section 1.1(b) of the
Agreement, (d) the date, after written notice from the Purchasers, that the
commitments of the Purchasers terminate under the Liquidity Agreement, but the
failure to give or delay in giving such notice shall not prevent or delay such
termination, and (e) the Issuer shall fail to cause the amendment or
modification of any Transaction Document or related opinion as required by
Moody's or Standard and Poor's, and such failure shall continue for 30 days
after such amendment is initially requested.

      "Federal Funds Rate" means, for any day, the per annum rate set forth in
the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)." If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotations") for such day under the caption "Federal Funds Effective Rate." If
on any relevant day the appropriate rate is not yet published in either
H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be
the arithmetic mean as determined

                                      I-8

by the Administrator of the rates for the last transaction in overnight Federal
funds arranged before 9:00 a.m. (New York time) on that day by each of three
leading brokers of Federal funds transactions in New York City selected by the
Administrator.

      "Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any entity succeeding to any of its principal functions.

      "Fee Letter" has the meaning set forth in Section 1.5 of the Agreement.

      "GAAP" means the generally accepted accounting principles and practices in
the United States, consistently applied.

      "Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any body or entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including any court, and any Person owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.

      "Group A Obligor" means any Obligor with a short-term rating of at least:
(a) "A-1" by Standard & Poor's, or if such Obligor does not have a short-term
rating from Standard & Poor's, a rating of "A+" or better by Standard & Poor's
on its long-term senior unsecured and uncredit-enhanced debt securities, and (b)
"P-1" by Moody's, or if such Obligor does not have a short-term rating from
Moody's, "A1" or better by Moody's on its long-term senior unsecured and
uncredit-enhanced debt securities.

      "Group A Obligor Percentage" means, at any time, for each Group A Obligor,
the percentage equivalent of: (a) the aggregate Outstanding Balance of the
Eligible Receivables of such Group A Obligor less any Excess Concentrations of
such Obligor, divided by (b) the aggregate Outstanding Balance of all Eligible
Receivables at such time.

      "Group B Obligor" means an Obligor, not a Group A Obligor, with a
short-term rating of at least: (a) "A-2" by Standard & Poor's, or if such
Obligor does not have a short-term rating from Standard & Poor's, a rating of
"BBB+" to "A" by Standard & Poor's on its long-term senior unsecured and
uncredit-enhanced debt securities, and (b) "P-2" by Moody's, or if such Obligor
does not have a short-term rating from Moody's, "Baa1" to "A2" by Moody's on its
long-term senior unsecured and uncredit-enhanced debt securities.

      "Group B Obligor Percentage" means, at any time, for each Group B Obligor,
the percentage equivalent of: (a) the aggregate Outstanding Balance of the
Eligible Receivables of such Group B Obligor less any Excess Concentrations of
such Obligor, divided by (b) the aggregate Outstanding Balance of all Eligible
Receivables at such time.

      "Group C Obligor" means an Obligor, not a Group A Obligor or a Group B
Obligor, with a short-term rating of at least: (a) "A-3" by Standard & Poor's,
or if such Obligor does not have a short-term rating from Standard & Poor's, a
rating of "BBB-" to "BBB" by Standard & Poor's on its long-term senior unsecured
and uncredit-enhanced debt securities, and (b) "P-3" by Moody's, or if such
Obligor does not have a short-term rating from Moody's, "Baa3" to "Baa2" by
Moody's on its long-term senior unsecured and uncredit-enhanced debt securities.

                                      I-9

      "Group C Obligor Percentage" means, at any time, for each Group C Obligor,
the percentage equivalent of: (a) the aggregate Outstanding Balance of the
Eligible Receivables of such Group C Obligor less any Excess Concentrations of
such Obligor, divided by (b) the aggregate Outstanding Balance of all Eligible
Receivables at such time.

      "Group D Obligor" means any Obligor that is not a Group A Obligor, Group B
Obligor or Group C Obligor.

      "Group D Obligor Percentage" means, at any time, for each Group D Obligor:
(a) the aggregate Outstanding Balance of the Eligible Receivables of such Group
D Obligor less any Excess Concentrations of such Obligor, divided by (b) the
aggregate Outstanding Balance of all Eligible Receivables at such time.

      "Indemnified Amounts" has the meaning set forth in Section 3.1 of the
Agreement.

      "Indemnified Party" has the meaning set forth in Section 3.1 of the
Agreement.

      "Indemnifying Party" has the meaning set forth in Section 3.3 of the
Agreement.

      "Independent Director" has the meaning set forth in paragraph 3(c) of
Exhibit IV to the Agreement.

      "Information Package" means a report, in substantially the form of either
Annex A-1 (in the case of an Information Package delivered in connection with a
Settlement Date) or Annex A-2 (in the case of an Information Package delivered
at any other time) to the Agreement, furnished to the Administrator pursuant to
the Agreement.

      "Insolvency Proceeding" means: (a) any case, action or proceeding before
any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of creditors
of a Person, or composition, marshaling of assets for creditors of a Person, or
other, similar arrangement in respect of its creditors generally or any
substantial portion of its creditors, in each of cases (a) and (b) undertaken
under U.S. Federal, state or foreign law, including the Bankruptcy Code.

      "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to time.
References to sections of the Internal Revenue Code also refer to any successor
sections.

      "Issuer" has the meaning set forth in the preamble to the Agreement.

      "Issuer's Share" of any amount means such amount multiplied by the
Purchased Interest at the time of determination.

      "Liquidity Agent" means PNC in its capacity as the Liquidity Agent
pursuant to the Liquidity Agreement.

                                      I-10

      "Liquidity Agreement" means the Liquidity Asset Purchase Agreement, dated
as of even date herewith, between the Purchasers from time to time party
thereto, the Issuer and PNC, as Administrator and Liquidity Agent, as the same
may be further amended, supplemented or otherwise modified from time to time.

      "Lock-Box Account" means an account in the name of the Seller and
maintained by the Seller at a bank or other financial institution for the
purpose of receiving Collections.

      "Lock-Box Agreement" means an agreement, in form and substance
satisfactory to the Administrator, among the Seller, the Originator, the
Servicer, the Administrator, the Issuer and a Lock-Box Bank.

      "Lock-Box Bank" means any of the banks or other financial institutions
holding one or more Lock-Box Accounts.

      "Loss Reserve" means, on any date, an amount equal to: (a) the Capital at
the close of business of the Servicer on such date multiplied by (b)(i) the Loss
Reserve Percentage on such date divided by (ii) 100% minus the Loss Reserve
Percentage on such date.

      "Loss Reserve Percentage" means, on any date, the greater of: (a) 10% or
(b) the product of 2.0 times (i) the highest average of the Default Ratios for
any three consecutive calendar months during the twelve most recent calendar
months plus (ii) (A) the aggregate credit sales made by the Originator during
the four most recent calendar months, divided by (B) the Net Receivables Pool
Balance as of such date.

      "Material Adverse Effect" means, relative to any Person with respect to
any event or circumstance, a material adverse effect on:

            (a) the assets, operations, business or financial condition of such
      Person,

            (b) the ability of any of such Person to perform its obligations
      under the Agreement or any other Transaction Document to which it is a
      party,

            (c) the validity or enforceability of any other Transaction
      Document, or the validity, enforceability or collectibility of a material
      portion of the Pool Receivables, or

            (d) the status, perfection, enforceability or priority of the
      Issuer's or the Seller's interest in the Pool Assets.

      "Moody's" means Moody's Investors Service, Inc.

      "Net Receivables Pool Balance" means, at any time: (a) the Outstanding
Balance of Eligible Receivables then in the Receivables Pool minus (b) the
Excess Concentration.

      "Notes" means short-term promissory notes issued, or to be issued, by the
Issuer to fund its investments in accounts receivable or other financial assets.

                                      I-11

      "Obligor" means, with respect to any Receivable, the Person obligated to
make payments pursuant to the Contract relating to such Receivable.

      "Originator" has the meaning set forth in the Purchase and Sale Agreement.

      "Originator Assignment Certificate" means the assignment, in substantially
the form of Exhibit C to the Purchase and Sale Agreement, evidencing Seller's
ownership of the Receivables generated by the Originator, as the same may be
amended, supplemented, amended and restated, or otherwise modified from time to
time in accordance with the Purchase and Sale Agreement.

      "Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof.

      "Payment Date" has the meaning set forth in Section 2.2 of the Purchase
and Sale Agreement.

      "Performance Guarantor" means UGI Corporation, a Pennsylvania corporation,
as performance guarantor under the Performance Guaranty.

      "Performance Guaranty" means that certain Performance Guaranty, dated as
of August 29, 2003 by the Performance Guarantor in favor of the Issuer and the
Administrator, as the same may be amended, restated or otherwise modified from
time to time.

      "Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company or other entity, or a government or any
political subdivision or agency thereof.

      "PNC" has the meaning set forth in the preamble to the Agreement.

      "Pool Assets" has the meaning set forth in Section 1.2(d) of the
Agreement.

      "Pool Receivable" means a Receivable in the Receivables Pool.

      "Portion of Capital" means any separate portion of Capital being funded or
maintained by the Issuer (or its successors or permitted assigns) by reference
to a particular interest rate basis. In addition, at any time when the Capital
of the Purchased Interest is not divided into two or more such portions,
"Portion of Capital" means 100% of the Capital.

      "Program Support Agreement" means and includes the Liquidity Agreement and
any other agreement entered into by any Program Support Provider providing for:
(a) the issuance of one or more letters of credit for the account of the Issuer
in connection with the Issuer's Receivables securitization program, (b) the
issuance of one or more surety bonds in connection with the Issuer's Receivables
securitization program for which the Issuer is obligated to reimburse the
applicable Program Support Provider for any drawings thereunder, (c) the sale by
the Issuer to any Program Support Provider of the Purchased Interest (or
portions thereof) and/or (d) the making of loans and/or other extensions of
credit to the Issuer in connection with the Issuer's Receivables-securitization
program contemplated in the Agreement, together with any

                                      I-12

letter of credit, surety bond or other instrument issued thereunder (but
excluding any discretionary advance facility provided by the Administrator).

      "Program Support Provider" means and includes any Purchaser and any other
Person (other than any customer of the Issuer) now or hereafter extending credit
or having a commitment to extend credit to or for the account of, or to make
purchases from, the Issuer pursuant to any Program Support Agreement.

      "Purchase and Sale Agreement" means the Purchase and Sale Agreement, dated
as of even date herewith, between the Seller and UGI, as such agreement may be
amended, amended and restated, supplemented or otherwise modified from time to
time.

      "Purchase and Sale Indemnified Amounts" has the meaning set forth in
Section 9.1 of the Purchase and Sale Agreement.

      "Purchase and Sale Indemnified Party" has the meaning set forth in Section
9.1 of the Purchase and Sale Agreement.

      "Purchase and Sale Termination Date" has the meaning set forth in Section
1.4 of the Purchase and Sale Agreement.

      "Purchase and Sale Termination Event" has the meaning set forth in Section
8.1 of the Purchase and Sale Agreement.

      "Purchase Facility" has the meaning set forth in Section 1.1 of the
Purchase and Sale Agreement.

      "Purchase Limit" means $100,000,000, as such amount may be reduced
pursuant to Section 1.1(b) of the Agreement. References to the unused portion of
the Purchase Limit shall mean, at any time, the Purchase Limit minus the then
outstanding Capital.

      "Purchase Notice" has the meaning set forth in Section 1.2(a) of the
Agreement.

      "Purchase Price" has the meaning set forth in Section 2.1 of the Purchase
and Sale Agreement.

      "Purchase Report" has the meaning set forth in Section 2.1 of the Purchase
and Sale Agreement.

      "Purchased Interest" means, at any time, the undivided percentage
ownership interest in: (a) each and every Pool Receivable now existing or
hereafter arising, (b) all Related Security with respect to such Pool
Receivables and (c) all Collections with respect to, and other proceeds of, such
Pool Receivables and Related Security. Such undivided percentage interest shall
be computed as:

                            Capital + Total Reserves
                          ----------------------------
                          Net Receivables Pool Balance

                                      I-13

The Purchased Interest shall be determined from time to time pursuant to Section
1.3 of the Agreement.

      "Purchaser" has the meaning set forth in Section 5.3(b) of the Agreement.

      "Receivable" means any indebtedness and other obligations (whether or not
earned by performance) owed to the Seller (as assignee of the Originator) or the
Originator by, or any right of the Seller or the Originator to payment from or
on behalf of, an Obligor, whether constituting an account, chattel paper,
instrument or general intangible, arising in connection with property or goods
that have been or are to be sold or otherwise disposed of, or services rendered
or to be rendered by the Originator, and includes the obligation to pay any
finance charges, fees and other charges with respect thereto. Indebtedness and
other obligations arising from any one transaction, including indebtedness and
other obligations represented by an individual invoice or agreement, shall
constitute a Receivable separate from a Receivable consisting of the
indebtedness and other obligations arising from any other transaction.

      "Receivables Pool" means, at any time, all of the then outstanding
Receivables purchased or otherwise acquired by the Seller pursuant to the
Purchase and Sale Agreement prior to the Facility Termination Date.

      "Reference Bank" means PNC.

      "Related Rights" has the meaning set forth in Section 1.1 of the Purchase
and Sale Agreement.

      "Related Security" means, with respect to any Receivable:

            (a) all of the Seller's and the Originator thereof's interest in any
      goods (including returned goods), and documentation of title evidencing
      the shipment or storage of any goods (including returned goods), relating
      to any sale giving rise to such Receivable,

            (b) all instruments and chattel paper that may evidence such
      Receivable,

            (c) all other security interests or liens and property subject
      thereto from time to time purporting to secure payment of such Receivable,
      whether pursuant to the Contract related to such Receivable or otherwise,
      together with all UCC financing statements or similar filings relating
      thereto, and

            (d) all of the Seller's and the Originator thereof's rights,
      interests and claims under the Contracts and all guaranties, indemnities,
      insurance, letters of credit and other agreements (including the related
      Contract) or arrangements of whatever character from time to time
      supporting or securing payment of such Receivable or otherwise relating to
      such Receivable, whether pursuant to the Contract related to such
      Receivable or otherwise.

      "Reseller" means an Obligor that purchases product from the Originator and
for which the Originator acts as billing and collection agent with respect to
such Obligor's resale of the product.

                                      I-14

      "Restricted Payment" has the meaning set forth in paragraph 1(n) of
Exhibit IV to the Agreement.

      "Seller" has the meaning set forth in the preamble to the Agreement.

      "Seller's Share" of any amount means the greater of: (a) $0 and (b) such
amount minus the Issuer's Share.

      "Servicer" has the meaning set forth in the preamble to the Agreement.

      "Servicing Fee" shall mean the fee referred to in Section 4.6 of the
Agreement.

      "Servicing Fee Rate" shall mean the rate referred to in Section 4.6 of the
Agreement.

      "Settlement Date" means with respect to any Portion of Capital for any
Settlement Period, (i) prior to the Facility Termination Date, the third
Wednesday of each calendar month (or the next succeeding Business Day if such
day is not a Business Day) beginning with December 19, 2001 and (ii) on and
after the Facility Termination Date, each day selected from time to time by the
Administrator (it being understood that the Administrator may select such
Settlement Date to occur as frequently as daily), or, in the absence of such
selection, the date specified in clause (i) above.

      "Settlement Period" means: (a) before the Facility Termination Date: (i)
initially the period commencing on the date of the initial purchase pursuant to
Section 1.2 of the Agreement (or in the case of any fees payable hereunder,
commencing on the Closing Date) and ending on (but not including) the next
Settlement Date, and (ii) thereafter, each period commencing on such Settlement
Date and ending on (but not including) the next Settlement Date, and (b) on and
after the Facility Termination Date: such period (including a period of one day)
as shall be selected from time to time by the Administrator or, in the absence
of any such selection, each period of 30 days from the last day of the preceding
Settlement Period.

      "Solvent" means, with respect to any Person at any time, a condition under
which:

            (i) the fair value and present fair saleable value of such Person's
      total assets is, on the date of determination, greater than such Person's
      total liabilities (including contingent and unliquidated liabilities) at
      such time;

            (ii) the fair value and present fair saleable value of such Person's
      assets is greater than the amount that will be required to pay such
      Person's probable liability on its existing debts as they become absolute
      and matured ("debts," for this purpose, includes all legal liabilities,
      whether matured or unmatured, liquidated or unliquidated, absolute, fixed,
      or contingent);

            (iii) such Person is and shall continue to be able to pay all of its
      liabilities as such liabilities mature; and

            (iv) such Person does not have unreasonably small capital with which
      to engage in its current and in its anticipated business.

                                      I-15

      For purposes of this definition:

            (A) the amount of a Person's contingent or unliquidated liabilities
      at any time shall be that amount which, in light of all the facts and
      circumstances then existing, represents the amount which can reasonably be
      expected to become an actual or matured liability;

            (B) the "fair value" of an asset shall be the amount which may be
      realized within a reasonable time either through collection or sale of
      such asset at its regular market value;

            (C) the "regular market value" of an asset shall be the amount which
      a capable and diligent business person could obtain for such asset from an
      interested buyer who is willing to Purchase such asset under ordinary
      selling conditions; and

            (D) the "present fair saleable value" of an asset means the amount
      which can be obtained if such asset is sold with reasonable promptness in
      an arm's-length transaction in an existing and not theoretical market.

      "Spike Factor" means, for any calendar month, (a) the positive difference,
if any, between: (i) the highest Dilution Ratio for any calendar month during
the twelve most recent calendar months and (ii) the arithmetic average of the
Dilution Ratios for such twelve months times (b) (i) the highest Dilution Ratio
for any calendar month during the twelve most recent calendar months divided by
(ii) the arithmetic average of the Dilution Ratios for such twelve months.

      "Standard & Poor's" means Standard & Poor's, a division of The McGraw-Hill
Companies, Inc.

      "Subsidiary" means, as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock of each class or
other interests having ordinary voting power (other than stock or other
interests having such power only by reason of the happening of a contingency) to
elect a majority of the Board of Directors or other managers of such entity are
at the time owned, or management of which is otherwise controlled: (a) by such
Person, (b) by one or more Subsidiaries of such Person or (c) by such Person and
one or more Subsidiaries of such Person.

      "Tangible Net Worth" means, with respect to any Person, the tangible net
worth of such Person as adjusted to eliminate the impact of any charges related
to SFAS 133 and as determined in accordance with GAAP.

      "Termination Day" means: (a) each day on which the conditions set forth in
Section 2 of Exhibit II to the Agreement are not satisfied or (b) each day that
occurs on or after the Facility Termination Date.

      "Termination Event" has the meaning specified in Exhibit V to the
Agreement.

                                      I-16

      "Termination Fee" means, for any Settlement Period during which a
Termination Day occurs, the amount, if any, by which: (a) the additional
Discount (calculated without taking into account any Termination Fee or any
shortened duration of such Settlement Period pursuant to the definition thereof)
that would have accrued during such Settlement Period on the reductions of
Capital relating to such Settlement Period had such reductions not been made,
exceeds (b) the income, if any, received by the Issuer from investing the
proceeds of such reductions of Capital, as determined by the Administrator,
which determination shall be binding and conclusive for all purposes, absent
manifest error.

      "Total Reserves" means, at any time the sum of: (a) the Yield Reserve,
plus (b) the greater of (i) the sum of (A) the Loss Reserve plus (B) the
Dilution Reserve or (ii) the Concentration Reserve.

      "Transaction Documents" means the Agreement, the Lock-Box Agreements, the
Fee Letter, Performance Guaranty, the Purchase and Sale Agreement and all other
certificates, instruments, UCC financing statements, reports, notices,
agreements and documents executed or delivered under or in connection with any
of the foregoing, in each case as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the Agreement.

      "Turnover Rate" means, for any calendar month, an amount computed as of
the last day of such calendar month equal to: (a) the Outstanding Balance of all
Pool Receivables as of the last day of such calendar month divided by (b)(i) the
aggregate credit sales made by the Originator during the three calendar months
ended on or before the last day of such calendar month divided by (ii) 3.

      "UCC" means the Uniform Commercial Code as from time to time in effect in
the applicable jurisdiction.

      "UGI" has the meaning set forth in the preamble to the Agreement.

      "Unmatured Purchase and Sale Termination Event" means any event which,
with the giving of notice or lapse of time, or both, would become a Purchase and
Sale Termination Event.

      "Unmatured Termination Event" means an event that, with the giving of
notice or lapse of time, or both, would constitute a Termination Event.

      "Weekly Settlement Date" means each Wednesday of each week (or the next
succeeding Business Day if such day is not a Business Day), beginning December
5, 2001.

      "Yield Reserve" means, on any date, an amount equal to: (a) the Capital at
the close of business of the Servicer on such date multiplied by (b)(i) the
Yield Reserve Percentage on such date divided by (ii) 100% minus the Yield
Reserve Percentage on such date.

      "Yield Reserve Percentage" means at any time:

                       (PY + SFR)   x 1.5  x TR
                       ---------
                          12

                                      I-17

      where:

            PY    =   the Base Rate as of the last day of the most recent
                      Settlement Period,

            TR    =   the Turnover Rate, and

            SFR   =   the Servicing Fee Rate

      Other Terms. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. All terms used in Article 9 of the UCC in the
State of New York, and not specifically defined herein, are used herein as
defined in such Article 9. Unless the context otherwise requires, "or" means
"and/or," and "including" (and with correlative meaning "include" and
"includes") means including without limiting the generality of any description
preceding such term.

                                      I-18

                                   EXHIBIT II
                             CONDITIONS OF PURCHASES

      1. Conditions Precedent to Initial Purchase. The Initial Purchase under
this Agreement is subject to the following conditions precedent that the
Administrator shall have received on or before the date of such purchase, each
in form and substance (including the date thereof) satisfactory to the
Administrator:

      (a) A counterpart of the Agreement and the other Transaction Documents
executed by the parties thereto.

      (b) Certified copies of: (i) the resolutions of the Board of Directors of
each of the Seller, the Originator and UGI authorizing the execution, delivery
and performance by the Seller, the Originator and UGI, as the case may be, of
the Agreement and the other Transaction Documents to which it is a party; (ii)
all documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to the Agreement and the other Transaction
Documents and (iii) the certificate of incorporation and by-laws of the Seller
and UGI.

      (c) A certificate of the Secretary or Assistant Secretary of the Seller,
the Originator and UGI certifying the names and true signatures of its officers
who are authorized to sign the Agreement and the other Transaction Documents.
Until the Administrator receives a subsequent incumbency certificate from the
Seller, the Originator or UGI, as the case may be, the Administrator shall be
entitled to rely on the last such certificate delivered to it by the Seller, the
Originator or UGI, as the case may be.

      (d) Proper financing statements or other instrument similar in effect,
suitable for filing, under the UCC of all jurisdictions that the Administrator
may deem necessary or desirable in order to perfect the interests of the Seller,
UGI and the Issuer contemplated by the Agreement and the Purchase and Sale
Agreement.

      (e) Proper financing statements or other instrument similar in effect,
suitable for filing, if any, necessary to release all security interests and
other rights of any Person in the Receivables, Contracts or Related Security
previously granted by the Originator, UGI or the Seller.

      (f) Completed UCC search reports, dated on or shortly before the date of
the initial purchase hereunder, listing the financing statements filed in all
applicable jurisdictions referred to in subsection (e) above that name the
Originator or the Seller as debtor, together with copies of such other financing
statements, and similar search reports with respect to judgment liens, federal
tax liens and liens of the Pension Benefit Guaranty Corporation in such
jurisdictions, as the Administrator may request, showing no Adverse Claims on
any Pool Assets.

      (g) Copies of executed Lock-Box Agreements with each Lock-Box Bank (to be
delivered within 30 days of the Closing Date).

      (h) Favorable opinions, in form and substance reasonably satisfactory to
the Administrator, of Morgan, Lewis & Bockius LLP, counsel for the Seller, the
Originator and the Servicer.

                                      II-1

      (i) Satisfactory results of a review and audit (performed by
representatives of the Administrator) of the Servicer's collection, operating
and reporting systems, the Credit and Collection Policy of the Originator,
historical receivables data and accounts, including satisfactory results of a
review of the Servicer's operating location(s) and satisfactory review and
approval of the Eligible Receivables in existence on the date of the initial
purchase under the Agreement.

      (j) A pro forma Information Package representing the performance of the
Receivables Pool for the calendar month before closing.

      (k) Evidence of payment by the Seller of all accrued and unpaid fees
(including those contemplated by the Fee Letter), costs and expenses to the
extent then due and payable on the date thereof, including any such costs, fees
and expenses arising under or referenced in Section 5.4 of the Agreement and the
Fee Letter.

      (l)   The Fee Letter duly executed by the Seller and the Servicer.

      (m) Good standing certificates with respect to each of the Seller, the
Originator and the Servicer issued by the Secretary of State (or similar
official) of the state of each such Person's organization or formation and
principal place of business.

      (n) The Liquidity Agreement and all other Transaction Documents duly
executed by the parties thereto.

      (o) A computer file containing all information with respect to the
Receivables as the Administrator or the Issuer may reasonably request.

      (p) Such other approvals, opinions or documents as the Administrator or
the Issuer may reasonably request.

      2. Conditions Precedent to All Purchases and Reinvestments. Each purchase
(except as to clause (a), including the initial purchase) and each reinvestment
shall be subject to the further conditions precedent that:

      (a) in the case of each purchase, the Servicer shall have delivered to the
Administrator on or before such purchase, in form and substance satisfactory to
the Administrator, a completed pro forma Information Package to reflect the
level of Capital and related reserves and the calculation of the Purchased
Interest after such subsequent purchase and a completed Purchase Notice in the
form of Annex B; and

      (b) on the date of such purchase or reinvestment the following statements
shall be true (and acceptance of the proceeds of such purchase or reinvestment
shall be deemed a representation and warranty by the Seller that such statements
are then true):

            (i) the representations and warranties contained in Exhibit III or
      VI to the Agreement are true and correct in all material respects on and
      as of the date of such purchase or reinvestment as though made on and as
      of such date (except to the extent that such representations and
      warranties relate expressly to an earlier date, and in which case

                                      II-2

      such representations and warranties shall be true and correct in all
      material respects as of such earlier date);

            (ii) no event has occurred and is continuing, or would result from
      such purchase or reinvestment, that constitutes a Termination Event or an
      Unmatured Termination Event;

            (iii) after giving effect to such purchase proposed hereby, the
      Purchased Interest will not exceed 100% and the Capital does not exceed
      the Purchase Limit; and

            (iv)  the Facility Termination Date shall not have occurred.

                                      II-3

                                   EXHIBIT III
                         REPRESENTATIONS AND WARRANTIES

      1. Representations and Warranties of the Seller. The Seller represents and
warrants as follows:

      (a) The Seller is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, and is duly qualified to
do business and is in good standing as a foreign corporation in every
jurisdiction where the nature of its business requires it to be so qualified,
except where the failure to be so qualified would not have a Material Adverse
Effect.

      (b) The execution, delivery and performance by the Seller of the Agreement
and the other Transaction Documents to which it is a party, including its use of
the proceeds of purchases and reinvestments: (i) are within its corporate
powers; (ii) have been duly authorized by all necessary corporate action; (iii)
do not contravene or result in a default under or conflict with: (A) its charter
or by-laws, (B) any law, rule or regulation applicable to it, (C) any indenture,
loan agreement, mortgage, deed of trust or other material agreement or
instrument to which it is a party or by which it is bound, or (D) any order,
writ, judgment, award, injunction or decree binding on or affecting it or any of
its property; and (iv) do not result in or require the creation of any Adverse
Claim upon or with respect to any of its properties. The Agreement and the other
Transaction Documents to which it is a party have been duly executed and
delivered by the Seller.

      (c) No authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or other Person is required for its due
execution, delivery and performance by the Seller of its obligations under the
Agreement or any other Transaction Document to which it is a party, other than
the Uniform Commercial Code filings referred to in Exhibit II to the Agreement,
all of which shall be suitable for filing on or before the date of the first
purchase hereunder.

      (d) Each of the Agreement and the other Transaction Documents to which the
Seller is a party constitutes a legal, valid and binding obligation enforceable
against the Seller in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws from
time to time in effect affecting the enforcement of creditors' rights generally
and by general principles of equity, regardless of whether such enforceability
is considered in a proceeding in equity or at law.

      (e) There is no pending or, to Seller's knowledge, threatened action or
proceeding affecting Seller or any of its properties before any Governmental
Authority or arbitrator.

      (f) No proceeds of any purchase or reinvestment will be used to acquire
any equity security of a class that is registered pursuant to Section 12 of the
Securities Exchange Act of 1934.

      (g) The Seller is the legal and beneficial owner of the Pool Receivables
and Related Security, free and clear of any Adverse Claim. Upon each purchase or
reinvestment, the Issuer

                                     III-1

shall acquire a valid and enforceable perfected undivided percentage ownership
or security interest, to the extent of the Purchased Interest, in each Pool
Receivable then existing or thereafter arising and in the Related Security,
Collections and other proceeds with respect thereto, free and clear of any
Adverse Claim. The Agreement creates a security interest in favor of the Issuer
in the Pool Assets, and the Issuer has a first priority perfected security
interest in the Pool Assets, free and clear of any Adverse Claims. No effective
financing statement or other instrument similar in effect covering any Pool
Asset is on file in any recording office, except those filed in favor of the
Seller pursuant to the Purchase and Sale Agreement and the Issuer relating to
the Agreement.

      (h) Each Information Package (if prepared by the Seller or one of its
Affiliates, or to the extent that information contained therein is supplied by
the Seller or an Affiliate), written information, exhibit, financial statement,
document, book, record or report furnished or to be furnished at any time by or
on behalf of the Seller to the Administrator in connection with the Agreement or
any other Transaction Document to which it is a party is or will be complete and
accurate in all material respects as of its date or (except as otherwise
disclosed to the Administrator at such time) as of the date so furnished,

      (i) The Seller's principal place of business and chief executive office
(as such terms are used in the UCC) are located at the address referred to in
Sections 1(b) of Exhibit IV to the Agreement and the offices where it keeps its
records concerning the Receivables are located at the addresses set forth in
Schedule IV to the Agreement.

      (j) The names and addresses of all the Lock-Box Banks, together with the
account numbers of the Lock-Box Accounts (and the related lock-boxes) at such
Lock-Box Banks, are specified in Schedule II to the Agreement (or at such other
Lock-Box Banks and/or with such other Lock-Box Accounts (and such other related
lock-boxes) as have been notified to the Administrator in accordance with the
Agreement) and all Lock-Box Accounts (and all related lock-boxes) are subject to
Lock-Box Agreements. The Seller has not granted to any Person, other than the
Administrator as contemplated by the Lock-Box Agreements dominion and control of
any Lock-Box Account (and any related lock-boxes, or the right to take control
of any such account at a future time or upon the occurrence of a future event.

      (k) The Seller is not in violation of any order of any court, arbitrator
or Governmental Authority.

      (l) No proceeds of any purchase or reinvestment will be used for any
purpose that violates any applicable law, rule or regulation, including
Regulations T, U or X of the Federal Reserve Board.

      (m) Each Pool Receivable included as an Eligible Receivable in the
calculation of the Net Receivables Pool Balance is an Eligible Receivable.

      (n) No event has occurred and is continuing, or would result from a
purchase in respect of, or reinvestment in respect of, the Purchased Interest or
from the application of the proceeds therefrom, that constitutes a Termination
Event or an Unmatured Termination Event.

                                     III-2

      (o) The Seller has accounted for each sale of undivided percentage
ownership interests in Receivables in its books and financial statements as
sales, consistent with GAAP.

      (p) The Seller has complied in all material respects with the Credit and
Collection Policies of the Originator with regard to each Receivable originated
by the Originator.

      (q) The Seller has complied in all material respects with all of the
terms, covenants and agreements contained in the Agreement and the other
Transaction Documents that are applicable to it.

      (r) The Seller's complete corporate name is set forth in the preamble to
the Agreement, and it does not use and has not during the last six years used
any other corporate name, trade name, doing-business name or fictitious name,
except as set forth on Schedule III to the Agreement and except for names first
used after the date of the Agreement and set forth in a notice delivered to the
Administrator pursuant to Section 1(l)(v) of Exhibit IV to the Agreement.

      (s) The Seller is not an "investment company," or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended. In addition, the Seller is not a "holding company," a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company" within the meaning
of the Public Utility Holding Company Act of 1935, as amended.

      (t) With respect to each Receivable transferred to the Seller under the
Purchase and Sale Agreement, Seller has given reasonably equivalent value to the
Originator thereof in consideration therefor and such transfer was not made for
or on account of an antecedent debt. No transfer by the Originator of any
Receivable under the Purchase and Sale Agreement is or may be voidable under any
section of the Bankruptcy Code.

      (u) Each Contract with respect to each Receivable is effective to create,
and has created, a legal, valid and binding obligation of the related Obligor to
pay the Outstanding Balance of the Receivable created thereunder and any accrued
interest thereon, enforceable against the Obligor in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to or limiting creditors' rights
generally and by general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law).

      (v) Since its most recent fiscal year end, there has been no change in the
business, operations, financial condition, properties or assets of the Seller
which would have a Material Adverse Effect on its ability to perform its
obligations under the Agreement or any other Transaction Document to which it is
a party or materially and adversely affect the transactions contemplated under
the Agreement or such other Transaction Documents.

      2. Representations and Warranties of UGI (including in its capacity as the
Servicer). UGI, individually and in its capacity as the Servicer, represents and
warrants as follows:

      (a) UGI is a corporation duly formed and validly subsisting under the laws
of the Commonwealth of Pennsylvania and is duly qualified to do business and is
in good standing as a

                                     III-3

foreign corporation in every jurisdiction where the nature of its business
requires it to be so qualified, except (i) for the District of Columbia and the
State of New York, in which jurisdictions the Servicer shall be qualified within
90 days after the Closing Date and (ii) where the failure to be so qualified
would not have a Material Adverse Effect.

      (b) The execution, delivery and performance by UGI of its obligations
under the Agreement and the other Transaction Documents to which it is a party,
including UGI in its capacity as the Servicer: (i) are within its corporate
powers; (ii) have been duly authorized by all necessary corporate action; (iii)
do not contravene or result in a default under or conflict with: (A) its charter
or bylaws, (B) any law, rule or regulation applicable to it, (C) any indenture,
loan agreement, mortgage, deed of trust or other material agreement or
instrument to which it is a party or by which it is bound, or (D) any order,
writ, judgment, award, injunction or decree binding on or affecting it or any of
its property; and (iv) do not result in or require the creation of any Adverse
Claim upon or with respect to any of its properties. The Agreement and the other
Transaction Documents to which UGI is a party have been duly executed and
delivered by UGI.

      (c) No authorization, approval or other action by, and no notice to or
filing with any Governmental Authority or other Person, is required for the due
execution, delivery and performance by UGI of its obligations under the
Agreement or any other Transaction Document to which it is a party.

      (d) Each of the Agreement and the other Transaction Documents to which UGI
is a party constitutes the legal, valid and binding obligation of UGI
enforceable against UGI in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or other similar laws
from time to time in effect affecting the enforcement of creditors' rights
generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.

      (e) The balance sheets of UGI and its consolidated Subsidiaries as at
September 30, 2001, and the related statements of income and retained earnings
for the fiscal year then ended, copies of which have been furnished to the
Administrator, fairly present the financial condition of UGI and its
consolidated Subsidiaries as at such date and the results of the operations of
UGI and its Subsidiaries for the period ended on such date, all in accordance
with GAAP consistently applied, and since September 30, 2001 there has been no
event or circumstances which have had a Material Adverse Effect.

      (f) Except as disclosed in the most recent audited financial statements of
UGI furnished to the Administrator or as otherwise disclosed in writing to the
Administrator, there is no pending or, to its best knowledge, threatened action
or proceeding affecting it or any of its Subsidiaries before any Governmental
Authority or arbitrator that could reasonably be expected to have a Material
Adverse Effect.

      (g) No proceeds of any purchase or reinvestment will be used to acquire
any equity security of a class that is registered pursuant to Section 12 of the
Securities Exchange Act of 1934.

                                     III-4

      (h) Each Information Package (if prepared by UGI or one of its Affiliates,
or to the extent that information contained therein is supplied by UGI or an
Affiliate), written information, exhibit, financial statement, document, book,
record or report furnished or to be furnished at any time by or on behalf of UGI
to the Administrator in connection with the Agreement is or will be complete and
accurate in all material respects as of its date or (except as otherwise
disclosed to the Administrator at such time) as of the date so furnished.

      (i) The principal place of business and chief executive office (as such
terms are used in the UCC) of UGI and the office where it keeps its records
concerning the Receivables are located at the address referred to in Section
2(b) of Exhibit IV to the Agreement.

      (j) UGI is not in violation of any order of any court, arbitrator or
Governmental Authority to which UGI or any of its assets are bound, which is
reasonably likely to have a Material Adverse Effect.

      (k) UGI has complied in all material respects with the Credit and
Collection Policy of the Originator with regard to each Receivable originated by
the Originator.

      (l) UGI has complied in all material respects with all of the terms,
covenants and agreements contained in the Agreement and the other Transaction
Documents that are applicable to it.

      (m) UGI is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended. In addition, UGI is not a "holding company," a "subsidiary company"
of a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.

      (n) Since its most recent fiscal year end, there has been no change in the
business, operations, financial condition, properties or assets of UGI which is
reasonably likely to have a Material Adverse Effect on its ability to perform
its obligations under the Agreement or any other Transaction Document to which
it is a party or materially and adversely affect the transactions contemplated
under the Agreement or such other Transaction Documents.

      (o) No license or approval is required for the Administrator or any
successor Servicer to use any program (other than MAS90 Software) used by the
Servicer in the servicing of the Receivables, other than such licenses and
approvals that have been obtained and are in full force and effect.

                                     III-5

                                   EXHIBIT IV
                                    COVENANTS

      1. Covenants of the Seller. Until the latest of the Facility Termination
Date, the date on which no Capital of or Discount in respect of the Purchased
Interest shall be outstanding or the date all other amounts owed by the Seller
under the Agreement to the Issuer, the Administrator and any other Indemnified
Party or Affected Person shall be paid in full:

      (a) Compliance with Laws, Etc. The Seller shall comply in all material
respects with all applicable laws, rules, regulations and orders, and preserve
and maintain its corporate existence, rights, franchises, qualifications and
privileges, except to the extent that the failure so to comply with such laws,
rules, regulations or orders or the failure so to preserve and maintain such
rights, franchises, qualifications and privileges would not have a Material
Adverse Effect.

      (b) Offices, Records and Books of Account, Etc. The Seller: (i) shall keep
its principal place of business and chief executive office (as such terms or
similar terms are used in the UCC) and the office where it keeps its records
concerning the Receivables at the address of the Seller set forth under its name
on the signature page to the Agreement or, pursuant to clause (l)(v) below, at
any other locations in jurisdictions where all actions reasonably requested by
the Administrator to protect and perfect the interest of the Issuer in the
Receivables and related items (including the Pool Assets) have been taken and
completed and (ii) shall provide the Administrator with at least 30 days'
written notice before making any change in the Seller's name or making any other
change in the Seller's identity or corporate structure (including a Change in
Control) that could render any UCC financing statement filed in connection with
this Agreement "seriously misleading" as such term (or similar term) is used in
the UCC; each notice to the Administrator pursuant to this sentence shall set
forth the applicable change and the effective date thereof. The Seller also will
maintain and implement (or cause the Servicer to maintain and implement)
administrative and operating procedures (including an ability to recreate
records evidencing Receivables and related Contracts in the event of the
destruction of the originals thereof), and keep and maintain (or cause the
Servicer to keep and maintain) all documents, books, records, computer tapes and
disks and other information reasonably necessary or advisable for the collection
of all Receivables (including records adequate to permit the daily
identification of each Receivable and all Collections of and adjustments to each
existing Receivable).

      (c) Performance and Compliance with Contracts and Credit and Collection
Policy. The Seller shall (and shall cause the Servicer to), at its expense,
timely and fully perform and comply with all material provisions, covenants and
other promises required to be observed by it under the Contracts related to the
Receivables, and timely and fully comply in all material respects with the
applicable Credit and Collection Policies with regard to each Receivable and the
related Contract.

      (d) Ownership Interest, Etc. The Seller shall (and shall cause the
Servicer to), at its expense, take all action necessary or desirable to
establish and maintain a valid and enforceable undivided percentage ownership or
security interest, to the extent of the Purchased Interest, in the Pool
Receivables, the Related Security and Collections with respect thereto, and a
first

                                      IV-1

priority perfected security interest in the Pool Assets, in each case free and
clear of any Adverse Claim, in favor of the Issuer, including taking such action
to perfect, protect or more fully evidence the interest of the Issuer as the
Issuer, through the Administrator, may reasonably request.

      (e) Sales, Liens, Etc. The Seller shall not sell, assign (by operation of
law or otherwise) or otherwise dispose of, or create or suffer to exist any
Adverse Claim upon or with respect to, any or all of its right, title or
interest in, to or under any Pool Assets (including the Seller's undivided
interest in any Receivable, Related Security or Collections, or upon or with
respect to any account to which any Collections of any Receivables are sent), or
assign any right to receive income in respect of any items contemplated by this
paragraph.

      (f) Extension or Amendment of Receivables. Except as provided in the
Agreement, the Seller shall not, and shall not permit the Servicer to, extend
the maturity or adjust the Outstanding Balance or otherwise modify the terms of
any Pool Receivable in any material respect, or amend, modify or waive, in any
material respect, any term or condition of any related Contract (which term or
condition relates to payments under, or the enforcement of, such Contract).

      (g) Change in Business or Credit and Collection Policy. The Seller shall
not make (or permit the Originator to make) any material change in the character
of its business or in any Credit and Collection Policy (other than a change to
the insurance provisions of any such policy) that would have a Material Adverse
Effect with respect to the Receivables. The Seller shall not make (or permit the
Originator to make) any other material adverse change in any Credit and
Collection Policy without receiving the prior written consent of the
Administrator.

      (h) Audits. The Seller shall (and shall cause the Originator to), from
time to time during regular business hours as reasonably requested in advance
(unless a Termination Event or an Unmatured Termination Event exists or there
shall be a material adverse variance in the performance of the Receivables) by
the Administrator, permit the Administrator, or its agents or representatives:
(i) to examine and make copies of and abstracts from all books, records and
documents (including computer tapes and disks) in the possession or under the
control of the Seller (or the Originator) relating to Receivables and the
Related Security, including the related Contracts, (ii) to visit the offices and
properties of the Seller and the Originator for the purpose of examining such
materials described in clause (i) above, and to discuss matters relating to
Receivables and the Related Security or the Seller's, UGI's or the Originator's
performance under the Transaction Documents or under the Contracts with any of
the officers, employees, agents or contractors of the Seller or the Originator
having knowledge of such matters and (iii) without limiting the clauses (i) and
(ii) above, no more than once annually (unless a Termination Event has occurred
and is continuing or there shall be a material variance in the performance of
the Receivables) to engage certified public accountants or other auditors
acceptable to the Seller and the Administrator to conduct, at the Seller's
expense, a review of the Seller's books and records with respect to such
Receivables.

      (i) Change in Lock-Box Banks, Lock-Box Accounts and Payment Instructions
to Obligors. The Seller shall not, and shall not permit the Servicer or the
Originator to, add or terminate any bank as a Lock-Box Bank or any account as a
Lock-Box Account (or any related

                                      IV-2

lock-box) from those listed in Schedule II to the Agreement, or make any change
in its instructions to Obligors regarding payments to be made to the Seller, the
Originator, the Servicer or any Lock-Box Account (or the related lock-box),
unless the Administrator shall have consented thereto in writing and the
Administrator shall have received copies of all agreements and documents
(including Lock-Box Agreements) that it may request in connection therewith.

      (j) Deposits to Lock-Box Accounts. The Seller shall (or shall cause the
Servicer to): (i) within 30 days of the initial purchase hereunder, instruct all
Obligors to make payments of all Receivables to one or more Lock-Box Accounts or
to lock-boxes to which only Lock-Box Banks have access (and shall instruct the
Lock-Box Banks to cause all items and amounts relating to such Receivables
received in such lock-boxes to be removed and deposited into a Lock-Box Account
on a daily basis), and (ii) deposit, or cause to be deposited, any Collections
received by it, the Servicer or the Originator into Lock-Box Accounts not later
than two Business Days after receipt thereof. Each Lock-Box Account shall at all
times be subject to a Lock-Box Agreement. The Seller will not (and will not
permit the Servicer to) deposit or otherwise credit, or cause or permit to be so
deposited or credited, to any Lock-Box Account cash or cash proceeds other than
(i) Collections and (ii) on payments received from end-users payable to a
Reseller in respect of product sold by such Reseller to such end-user, provided
that such payments do not remain on deposit in such Lock-Box Account for more
than two Business Days after deposit therein.

      (k) Marking of Records. At its expense, the Seller shall: (i) mark (or
cause the Servicer to mark) its master data processing records relating to Pool
Receivables and related Contracts with a legend evidencing that the undivided
percentage ownership interests with regard to the Purchased Interest related to
such Receivables and related Contracts have been sold in accordance with the
Agreement, and (ii) cause the Originator so to mark its master data processing
records pursuant to the Purchase and Sale Agreement.

      (l) Reporting Requirements. The Seller will provide to the Administrator
(in multiple copies, if requested by the Administrator) the following:

            (i) as soon as available and in any event within 105 days after the
      end of each fiscal year of the Seller, a copy of the annual report for
      such year for the Seller containing unaudited financial statements for
      such year certified as to accuracy by the chief financial officer or
      treasurer of the Seller;

            (ii) as soon as possible and in any event within five Business Days
      after becoming aware of the occurrence of each Termination Event or
      Unmatured Termination Event, a statement of the chief financial officer of
      the Seller setting forth details of such Termination Event or Unmatured
      Termination Event and the action that the Seller has taken and proposes to
      take with respect thereto;

            (iii) promptly after the filing or receiving thereof, copies of all
      reports and notices that the Seller or any Affiliate files under ERISA
      with the Internal Revenue Service, the Pension Benefit Guaranty
      Corporation or the U.S. Department of Labor with respect to any Benefit
      Plan that is subject to Title IV of ERISA or that the Seller or any
      Affiliate receives with respect to any Benefit Plan that is subject to
      Title IV of ERISA from any of the foregoing or from any multiemployer plan
      (within the meaning of Section 4001(a)(3)

                                      IV-3

      of ERISA) to which the Seller or any of its Affiliates is or was, within
      the preceding five years, a contributing employer, in each case in respect
      of the assessment of withdrawal liability or an event or condition that
      could, in the aggregate, reasonably result in the imposition of material
      liability on the Seller and/or any such Affiliate;

            (iv) at least thirty days before any change in the Seller's name or
      any other change requiring the amendment of UCC financing statements, a
      notice setting forth such changes and the effective date thereof;

            (v) promptly after the Seller obtains knowledge thereof, notice of
      any: (A) material litigation, investigation or proceeding that may exist
      at any time between the Seller and any Person or (B) material litigation
      or proceeding relating to any Transaction Document;

            (vi) promptly after becoming aware of the occurrence thereof, notice
      of a material adverse change in the business, operations, property or
      financial or other condition of the Seller, the Servicer or the
      Originator; and

            (vii) such other information respecting the Receivables or the
      condition or operations, financial or otherwise, of the Seller or any of
      its Affiliates as the Administrator may from time to time reasonably
      request.

      (m) Certain Agreements. Without the prior written consent of the
Administrator, the Seller will not (and will not permit the Originator to)
amend, modify, waive, revoke or terminate any Transaction Document to which it
is a party or any provision of Seller's certificate of incorporation or by-laws;

      (n) Restricted Payments. (i) Except pursuant to clause (ii) below, the
Seller will not: (A) purchase or redeem any shares of its capital stock, (B)
declare or pay any dividend or set aside any funds for any such purpose, (C)
prepay, purchase or redeem any Debt, (D) lend or advance any funds or (E) repay
any loans or advances to, for or from any of its Affiliates (the amounts
described in clauses (A) through (E) being referred to as "Restricted
Payments").

            (ii) Subject to the limitations set forth in clause (iii) below, the
      Seller may make Restricted Payments only by declaring and paying dividends
      or making returns of capital.

            (iii) The Seller may make Restricted Payments only out of the funds
      it receives pursuant to Sections 1.4(b)(ii) and (iv) of the Agreement.
      Furthermore, the Seller shall not pay, make or declare: (A) any dividend
      if, after giving effect thereto, the Seller's Tangible Net Worth would be
      less than $4,000,000, or (B) any Restricted Payment (including any
      dividend) if, after giving effect thereto, any Termination Event or
      Unmatured Termination Event shall have occurred and be continuing.

      (o) Other Business. The Seller will not: (i) engage in any business other
than the transactions contemplated by the Transaction Documents; (ii) create,
incur or permit to exist any Debt of any kind (or cause or permit to be issued
for its account any letters of credit or bankers' acceptances) other than
pursuant to this Agreement; or (iii) form any Subsidiary or make any investments
in any other Person; provided, however, that the Seller shall be permitted to
incur

                                      IV-4

minimal obligations to the extent necessary for the day-to-day operations of the
Seller (such as expenses for stationery, audits, maintenance of legal status,
etc.).

      (p) Use of Seller's Share of Collections. The Seller shall apply the
Seller's Share of Collections to make payments in the following order of
priority: (i) the payment of its expenses (including all obligations payable to
the Issuer and the Administrator under the Agreement and under the Fee Letter);
and (ii) other legal and valid corporate purposes.

      (q) Tangible Net Worth. The Seller will not permit its Tangible Net Worth,
at any time, to be less than $6,000,000.

      2. Covenants of the Servicer and UGI. Until the latest of the Facility
Termination Date, the date on which no Capital of or Discount in respect of the
Purchased Interest shall be outstanding or the date all other amounts owed by
the Seller under the Agreement to the Issuer, the Administrator and any other
Indemnified Party or Affected Person shall be paid in full:

      (a) Compliance with Laws, Etc. The Servicer and, to the extent that it
ceases to be the Servicer, UGI shall comply (and shall cause the Originator to
comply) in all material respects with all applicable laws, rules, regulations
and orders, and preserve and maintain its corporate existence, rights,
franchises, qualifications and privileges, except to the extent that the failure
so to comply with such laws, rules, regulations or orders or the failure so to
preserve and maintain such existence, rights, franchises, qualifications and
privileges would not have a Material Adverse Effect.

      (b) Offices, Records and Books of Account, Etc. The Servicer and, to the
extent that it ceases to be the Servicer, UGI, shall keep (and shall cause the
Originator to keep) its principal place of business and chief executive office
(as such terms or similar terms are used in the applicable UCC) and the office
where it keeps its records concerning the Receivables at the address of the
Servicer set forth under its name on the signature page to the Agreement or,
upon at least 30 days' prior written notice of a proposed change to the
Administrator, at any other locations in jurisdictions where all actions
reasonably requested by the Administrator to protect and perfect the interest of
the Issuer in the Receivables and related items (including the Pool Assets) have
been taken and completed. The Servicer and, to the extent that it ceases to be
the Servicer, UGI, also will (and will cause the Originator to) maintain and
implement administrative and operating procedures (including an ability to
recreate records evidencing Receivables and related Contracts in the event of
the destruction of the originals thereof), and keep and maintain all documents,
books, records, computer tapes and disks and other information reasonably
necessary or advisable for the collection of all Receivables (including records
adequate to permit the daily identification of each Receivable and all
Collections of and adjustments to each existing Receivable).

      (c) Performance and Compliance with Contracts and Credit and Collection
Policy. The Servicer and, to the extent that it ceases to be the Servicer, UGI,
shall (and shall cause the Originator to), at its expense, timely and fully
perform and comply with all material provisions, covenants and other promises
required to be observed by it under the Contracts related to the Receivables,
and timely and fully comply in all material respects with the Credit and
Collection Policy with regard to each Receivable and the related Contract.

                                      IV-5

      (d) Extension or Amendment of Receivables. Except as provided in the
Agreement, the Servicer and, to the extent that it ceases to be the Servicer,
UGI, shall not extend (and shall not permit the Originator to extend), the
maturity or adjust the Outstanding Balance or otherwise modify the terms of any
Pool Receivable in any material respect, or amend, modify or waive, in any
material respect, any term or condition of any related Contract (which term or
condition relates to payments under, or the enforcement of, such Contract).

      (e) Change in Business or Credit and Collection Policy. The Servicer and,
to the extent that it ceases to be the Servicer, UGI, shall not make (and shall
not permit the Originator to make) any material change in the character of its
business or in any Credit and Collection Policy (other than a change to the
insurance provisions of any such policy) without the consent of the
Administrator that would be reasonably likely to have a Material Adverse Effect.
The Servicer and, to the extent that it ceases to be the Servicer, UGI, shall
not make (and shall not permit the Originator to make) any other material
adverse change in any Credit and Collection Policy without receiving the prior
written consent of the Administrator.

      (f) Audits. The Servicer and, to the extent that it ceases to be the
Servicer, UGI, shall (and shall cause the Originator to), from time to time
during regular business hours as reasonably requested in advance (unless a
Termination Event or an Unmatured Termination Event exists or there shall be a
material adverse variance in the performance of the Receivables) by the
Administrator, permit the Administrator, or its agents or representatives: (i)
to examine and make copies of and abstracts from all books, records and
documents (including computer tapes and disks) in its possession or under its
control relating to Receivables and the Related Security, including the related
Contracts; (ii) to visit its offices and properties for the purpose of examining
such materials described in clause (i) above, and to discuss matters relating to
Receivables and the Related Security or its performance hereunder or under the
Contracts with any of its officers, employees, agents or contractors having
knowledge of such matters and (iii), without limiting the clauses (i) and (ii)
above, no more than once annually (unless a Termination Event has occurred and
is continuing or there shall be a material variance in the performance of the
Receivables) to engage certified public accountants or other auditors acceptable
to the Servicer and the Administrator to conduct, at the Servicer's expense, a
review of the Servicer's books and records with respect to such Receivables.

      (g) Change in Lock-Box Banks, Lock-Box Accounts and Payment Instructions
to Obligors. The Servicer and, to the extent that it ceases to be the Servicer,
UGI, shall not (and shall not permit the Originator to) add or terminate any
bank as a Lock-Box Bank or any account as a Lock-Box Account (or any related
lock-box) from those listed in Schedule II to the Agreement, or make any change
in its instructions to Obligors regarding payments to be made to the Servicer or
any Lock-Box Account (or the related lock-box), unless the Administrator shall
have consented thereto in writing and the Administrator shall have received
copies of all agreements and documents (including Lock-Box Agreements) that it
may request in connection therewith.

      (h) Deposits to Lock-Box Accounts. The Servicer shall: (i) within 30 days
of the initial purchase hereunder, instruct all Obligors to make payments of all
Receivables to one or more Lock-Box Accounts or to the lock-boxes to which only
Lock-Box Banks have access (and shall instruct the Lock-Box Banks to cause all
items and amounts relating to such Receivables

                                      IV-6

received in such lock-boxes to be removed and deposited into a Lock-Box Account
on a daily basis), and (ii) deposit, or cause to be deposited, any Collections
received by it into Lock-Box Accounts not later than one Business Day after
receipt thereof. Each Lock-Box Account shall at all times be subject to a
Lock-Box Agreement. The Servicer will not (and will not permit the Originator
to) deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box Account cash or cash proceeds other than (i)
Collections and (ii) on payments received from end-users payable to a Reseller
in respect of product sold by such Reseller to such end-user, provided that such
payments do not remain on deposit in such Lock-Box Account for more than two
Business Days after deposit therein.

      (i) Marking of Records. At its expense, the Servicer shall mark its master
data processing records relating to Pool Receivables and related Contracts with
a legend evidencing that the undivided percentage ownership interests with
regard to the Purchased Interest related to such Receivables and related
Contracts have been sold in accordance with the Agreement.

      (j) Reporting Requirements. UGI shall provide to the Administrator (in
multiple copies, if requested by the Administrator) the following:

            (i) as soon as available and in any event within 50 days after the
      end of the first three quarters of each fiscal year of UGI, balance sheets
      of UGI and its consolidated Subsidiaries as of the end of such quarter and
      statements of income, retained earnings and cash flow of UGI and its
      consolidated Subsidiaries for the period commencing at the end of the
      previous fiscal year and ending with the end of such quarter, certified by
      the chief financial officer of such Person;

            (ii) as soon as available and in any event within 105 days after the
      end of each fiscal year of such Person, a copy of the annual report for
      such year for such Person and its consolidated Subsidiaries, containing
      financial statements for such year audited by independent certified public
      accountants of nationally recognized standing;

            (iii) as to the Servicer only, as soon as available and in any event
      not later than two Business Days prior to (A) the Settlement Date, an
      Information Package as of the most recently completed calendar month, (B)
      any purchase made pursuant to Section 1.2, an Information Package as of
      the most recent purchase, or within six Business Days of a request by the
      Administrator, an Information Package for such periods as is specified by
      the Administrator (including on a semi-monthly, weekly or daily basis);

            (iv) as soon as possible and in any event within five Business Days
      after becoming aware of the occurrence of each Termination Event or
      Unmatured Termination Event, a statement of the chief financial officer of
      UGI setting forth details of such Termination Event or Unmatured
      Termination Event and the action that such Person has taken and proposes
      to take with respect thereto;

            (v) promptly after the sending or filing thereof, copies of (or
      notice thereof if available on EDGAR) all reports that UGI sends to any of
      its security holders, and copies of all reports and registration
      statements that UGI or any Subsidiary files with the Securities and
      Exchange Commission; provided, that any filings with the Securities and

                                      IV-7

      Exchange Commission that have been granted "confidential" treatment shall
      be provided promptly after such filings have become publicly available;

            (vi) promptly after the filing or receiving thereof, copies of all
      reports and notices that UGI or any of its Affiliate files under ERISA
      with the Internal Revenue Service, the Pension Benefit Guaranty
      Corporation or the U.S. Department of Labor with respect to any Benefit
      Plan that is subject to Title IV of ERISA or that UGI or any of its
      Affiliates receives with respect to any Benefit Plan that is subject to
      Title IV of ERISA from any of the foregoing or from any multiemployer plan
      (within the meaning of Section 4001(a)(3) of ERISA) to which UGI or any of
      its Affiliate is or was, within the preceding five years, a contributing
      employer, in each case in respect of the assessment of withdrawal
      liability or an event or condition that could, in the aggregate,
      reasonably result in the imposition of material liability on UGI and/or
      any such Affiliate;

            (vii) at least thirty days before any change in UGI's or the
      Originator's name or any other change requiring the amendment of UCC
      financing statements, a notice setting forth such changes and the
      effective date thereof;

            (viii) promptly after UGI obtains knowledge thereof, notice of any:
      (A) litigation, investigation or proceeding that may exist at any time
      between UGI or any of its Subsidiaries and any Governmental Authority
      that, if not cured or if adversely determined, as the case may be, would
      have a Material Adverse Effect; (B) litigation or proceeding adversely
      affecting UGI or any of its Subsidiaries in which the amount involved is
      $1,000,000 or more and not covered by insurance or in which injunctive or
      similar relief is sought; or (C) litigation or proceeding relating to any
      Transaction Document;

            (ix) promptly after becoming aware thereof, notice of a material
      adverse change in the business, operations, property or financial or other
      condition of UGI or any of its Subsidiaries; and

            (x) such other information respecting the Receivables or the
      condition or operations, financial or otherwise, of UGI or any of its
      Affiliates as the Administrator may from time to time reasonably request.

      (k) Tangible Net Worth. The Servicer will not permit its Tangible Net
Worth, at any time, to be less than $9,000,000.

      3. Separate Existence. Each of the Seller and UGI hereby acknowledges that
the Purchasers, the Issuer and the Administrator are entering into the
transactions contemplated by this Agreement and the other Transaction Documents
in reliance upon the Seller's identity as a legal entity separate from UGI, the
Performance Guarantor and their Affiliates. Therefore, from and after the date
hereof, each of the Seller and UGI shall take all steps specifically required by
the Agreement or reasonably required by the Administrator to continue the
Seller's identity as a separate legal entity and to make it apparent to third
Persons that the Seller is an entity with assets and liabilities distinct from
those of UGI, the Performance Guarantor and any other Person, and is not a
division of UGI, the Performance Guarantor, their Affiliates or any other

                                      IV-8

Person. Without limiting the generality of the foregoing and in addition to and
consistent with the other covenants set forth herein, each of the Seller and UGI
shall take such actions as shall be required in order that:

            (a) The Seller will be a limited purpose corporation whose primary
      activities are restricted in its certificate of incorporation to: (i)
      purchasing or otherwise acquiring from the Originator (or its Affiliates),
      owning, holding, granting security interests or selling interests in Pool
      Assets (or other receivables originated by the Originator or its
      Affiliates, and certain related assets), (ii) entering into agreements for
      the selling and servicing of the Receivables Pool (or other receivables
      pools originated by the Originator or its Affiliates), and (iii)
      conducting such other activities as it deems necessary or appropriate to
      carry out its primary activities;

            (b) The Seller shall not engage in any business or activity, or
      incur any indebtedness or liability, other than as expressly permitted by
      the Transaction Documents;

            (c) Not less than one member of the Seller's Board of Directors (the
      "Independent Director") shall be an individual who is not a direct,
      indirect or beneficial stockholder, officer, director, employee,
      affiliate, associate or supplier of UGI, the Performance Guarantor or any
      of their Affiliates. The certificate of incorporation of the Seller shall
      provide that: (i) the Seller's Board of Directors shall not approve, or
      take any other action to cause the filing of, a voluntary bankruptcy
      petition with respect to the Seller unless the Independent Director shall
      approve the taking of such action in writing before the taking of such
      action, and (ii) such provision cannot be amended without the prior
      written consent of the Independent Director;

            (d) The Independent Director shall not at any time serve as a
      trustee in bankruptcy for the Seller, UGI, the Performance Guarantor or
      any Affiliate thereof;

            (e) Any employee, consultant or agent of the Seller will be
      compensated from the Seller's funds for services provided to the Seller.
      The Seller will not engage any agents other than its attorneys, auditors
      and other professionals, and a servicer and any other agent contemplated
      by the Transaction Documents for the Receivables Pool, which servicer will
      be fully compensated for its services by payment of the Servicing Fee;

            (f) The Seller will contract with the Servicer to perform for the
      Seller all operations required on a daily basis to service the Receivables
      Pool. The Seller will pay the Servicer the Servicing Fee pursuant hereto.
      The Seller will not incur any material indirect or overhead expenses for
      items shared with UGI or the Performance Guarantor (or any other Affiliate
      thereof) that are not reflected in the Servicing Fee. To the extent, if
      any, that the Seller (or any Affiliate thereof) shares items of expenses
      not reflected in the Servicing Fee or the manager's fee, such as legal,
      auditing and other professional services, such expenses will be allocated
      to the extent practical on the basis of actual use or the value of
      services rendered, and otherwise on a basis reasonably related to the
      actual use or the value of services rendered; it being understood that UGI
      shall pay all expenses

                                      IV-9

      relating to the preparation, negotiation, execution and delivery of the
      Transaction Documents, including legal, agency and other fees;

            (g)   The Seller's operating expenses will not be paid by UGI , the
      Performance Guarantor or any other Affiliate thereof;

            (h) All of the Seller's business correspondence and other
      communications shall be conducted in the Seller's own name and on its own
      separate stationery;

            (i) The Seller's books and records will be maintained separately
      from those of UGI, the Performance Guarantor and any other Affiliate
      thereof;

            (j) All financial statements of UGI or any Affiliate thereof that
      are consolidated to include Seller will contain detailed notes clearly
      stating that: (i) a special purpose corporation exists as a Subsidiary of
      UGI, (ii) the Originator has sold receivables and other related assets to
      such special purpose Subsidiary that, in turn, has sold undivided
      interests therein to certain financial institutions and other entities and
      (iii) that the special purpose Subsidiary's assets are not available to
      satisfy the obligations of UGI, the Performance Guarantor or any
      Affiliate;

            (k) The Seller's assets will be maintained in a manner that
      facilitates their identification and segregation from those of UGI, the
      Performance Guarantor or any Affiliate thereof;

            (l) The Seller will strictly observe corporate formalities in its
      dealings with UGI, the Performance Guarantor or any Affiliate thereof, and
      funds or other assets of the Seller will not be commingled with those of
      UGI, the Performance Guarantor or any Affiliate thereof except as
      permitted by the Agreement in connection with servicing the Pool
      Receivables. The Seller shall not maintain joint bank accounts or other
      depository accounts to which UGI, the Performance Guarantor or any
      Affiliate thereof (other than UGI in its capacity of Servicer) has
      independent access. The Seller is not named, and has not entered into any
      agreement to be named, directly or indirectly, as a direct or contingent
      beneficiary or loss payee on any insurance policy (other than directors
      and officers liability and credit insurance policies) with respect to any
      loss relating to the property of UGI, the Performance Guarantor or any
      Subsidiary or other Affiliate of UGI. The Seller will pay to the
      appropriate Affiliate the marginal increase or, in the absence of such
      increase, the market amount of its portion of the premium payable with
      respect to any insurance policy that covers the Seller and such Affiliate;

            (m) The Seller will maintain arm's-length relationships with UGI and
      the Performance Guarantor (and any Affiliate thereof). Any Person that
      renders or otherwise furnishes services to the Seller will be compensated
      by the Seller at market rates for such services it renders or otherwise
      furnishes to the Seller. Neither the Seller nor UGI will be or will hold
      itself out to be responsible for the debts of the other (or of the
      Performance Guarantor) or the decisions or actions respecting the daily
      business and affairs of the other (or of the Performance Guarantor). The
      Seller and UGI will immediately correct any known misrepresentation with
      respect to the foregoing, and they will not operate or

                                     IV-10

      purport to operate as an integrated single economic unit with respect to
      each other (or with respect to the Performance Guarantor) or in their
      dealing with any other entity; and

            (n) Neither UGI nor the Performance Guarantor shall pay the salaries
      of Seller's employees, if any.

                                     IV-11

                                    EXHIBIT V
                               TERMINATION EVENTS

      Each of the following shall be a "Termination Event":

      (a) (i) the Seller, UGI, the Originator or the Servicer (if UGI or any of
its Affiliates) shall fail to perform or observe in any material respect any
term, covenant or agreement under the Agreement or any other Transaction
Document and, except as otherwise provided herein, such failure shall continue
for thirty days after knowledge or notice thereof, (ii) the Seller or the
Servicer shall fail to make when due any payment or deposit to be made by it
under the Agreement and such failure shall continue unremedied for two (2)
Business Days or (iii) UGI shall resign as Servicer, and no successor Servicer
reasonably satisfactory to the Administrator shall have been appointed;

      (b) UGI (or any Affiliate thereof) shall fail to transfer to any successor
Servicer when required any rights pursuant to the Agreement that UGI (or such
Affiliate) then has as Servicer;

      (c) any representation or warranty made or deemed made by the Seller, UGI
or the Originator (or any of their respective officers) under or in connection
with the Agreement or any other Transaction Document, or any written information
or report delivered by the Seller, UGI or the Originator or the Servicer
pursuant to the Agreement or any other Transaction Document, shall prove to have
been incorrect or untrue in any respect when made or deemed made (pursuant to
paragraph 2(b) of Exhibit II hereof or with respect to any Information Package)
or delivered; provided, however, if the violation of this paragraph (c) by the
Seller or the Servicer may be cured without any potential or actual detriment to
the Purchaser, the Administrator, or any Program Support Provider, the Seller or
the Servicer as applicable shall have 30 days from the earlier of (i) such
Person's knowledge of such failure and (ii) notice to such Person of such
failure to cure any such violation, before a Termination Event shall occur so
long as such Person is diligently attempting to effect such cure;

      (d) the Seller or the Servicer shall fail to deliver the Information
Package pursuant to the Agreement, and such failure shall remain unremedied for
two Business Days;

      (e) the Agreement or any purchase or reinvestment pursuant to the
Agreement shall for any reason: (i) cease to create, or the Purchased Interest
shall for any reason cease to be, a valid and enforceable perfected undivided
percentage ownership or security interest to the extent of the Purchased
Interest in each Pool Receivable, the Related Security and Collections with
respect thereto, free and clear of any Adverse Claim, or (ii) cease to create
with respect to the Pool Assets, or the interest of the Issuer with respect to
such Pool Assets shall cease to be, a valid and enforceable first priority
perfected security interest, free and clear of any Adverse Claim;

      (f) the Seller, UGI, the Performance Guarantor or the Originator shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against
the Seller, UGI, the Performance Guarantor or the Originator seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization,

                                      V-1

arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of 60 days, or any of the actions
sought in such proceeding (including the entry of an order for relief against,
or the appointment of a receiver, trustee, custodian or other similar official
for, it or for any substantial part of its property) shall occur; or the Seller,
UGI, the Performance Guarantor or the Originator shall take any corporate action
to authorize any of the actions set forth above in this paragraph;

      (g) (i) the (A) Default Ratio shall exceed 4.0% or (B) Delinquency Ratio
shall exceed 13.0% or (ii) the average for three consecutive calendar months of
(A) the Default Ratio shall exceed 2.50%, (B) the Delinquency Ratio shall exceed
12.0% or (C) the Dilution Ratio shall exceed 2.75%;

      (h) a Change in Control shall occur with respect to the Seller, the
Originator or UGI,

      (i) at any time (i) the sum of (A) the Capital plus (B) the Total
Reserves, exceeds (ii) the sum of (A) the Net Receivables Pool Balance at such
time plus (B) the Issuer's Share of the amount of Collections then on deposit in
the Lock-Box Accounts (other than amounts set aside therein representing
Discount and fees), and such circumstance shall not have been cured within five
(5) Business Days of becoming aware thereof;

      (j) (i) UGI or any of its Subsidiaries shall fail to pay any principal of
or premium or interest on any of its Debt that is outstanding in a principal
amount of at least $5,000,000 in the aggregate when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement, mortgage, indenture or instrument
relating to such Debt (and shall have not been waived); or (ii) any other event
shall occur or condition shall exist under any agreement, mortgage, indenture or
instrument relating to any such Debt and shall continue after the applicable
grace period, if any, specified in such agreement, mortgage, indenture or
instrument (and shall have not been waived), if, in either case: (a) the effect
of such non-payment, event or condition is to give the applicable debt holders
the right (whether acted upon or not) to accelerate the maturity of such Debt,
or (b) any such Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), redeemed,
purchased or defeased, or an offer to repay, redeem, purchase or defease such
Debt shall be required to be made, in each case before the stated maturity
thereof;

      (k) either: (i) a contribution failure shall occur with respect to any
Benefit Plan sufficient to give rise to a lien under Section 302(f) of ERISA,
(ii) the Internal Revenue Service shall file a notice of lien asserting a claim
or claims pursuant to the Internal Revenue Code with regard to any of the assets
of Seller, the Originator or any ERISA Affiliate and such lien shall have been
filed and not released within 10 days, or (iii) the Pension Benefit Guaranty
Corporation shall, or shall indicate its intention in writing to the Seller, the
Originator or any ERISA Affiliate to, either file a notice of lien asserting a
claim pursuant to ERISA with regard to any assets of the

                                      V-2

Seller, the Originator or any ERISA Affiliate or terminate any Benefit Plan
subject to Title IV of ERISA that has unfunded benefit liabilities, or any steps
shall have been taken to terminate any Benefit Plan subject to Title IV of ERISA
that has unfunded benefit liabilities so as to result in any material liability
to the Seller or the Originator and such lien shall have been filed and not
released within 10 days;

      (l) (i) one or more final and unappealable judgments for the payment of
money shall be entered against the Seller or (ii) one or more final and
unappealable judgments for the payment of money in an amount in excess of
$20,000,000, individually or in the aggregate, shall be entered against the
Servicer or the Originator on claims not covered by insurance or as to which the
insurance carrier has denied its responsibility, and such judgment shall
continue unsatisfied and in effect for sixty (60) consecutive days without a
stay of execution;

      (m) UGI Corporation shall at any time (i) fail to perform, maintain or
observe any representation, warranty, covenant or agreement set forth in the
Performance Guaranty or (ii) repudiate any of its obligations under the
Performance Guaranty; or

      (n) the "Purchase and Sale Termination Date" under and as defined in the
Purchase and Sale Agreement shall occur under the Purchase and Sale Agreement or
the Originator shall for any reason cease to transfer, or cease to have the
legal capacity to transfer, or otherwise be incapable of transferring
Receivables to the Seller under the Purchase and Sale Agreement.

                                      V-3

                                   EXHIBIT VI
                    SUPPLEMENTAL PERFECTION REPRESENTATIONS,
                            WARRANTIES AND COVENANTS

      In addition to the representations, warranties and covenants contained in
Exhibit III hereof, the Seller hereby makes the following additional
representations, warranties and covenants:

      1.    Receivables; Lock-box Accounts.

            (a) The Pool Receivables constitute "accounts", "general
intangibles" or "tangible chattel paper", each within the meaning of the
applicable UCC.

            (b) Lock-Box Accounts. Each Lock-Box Account constitutes a "deposit
account" within the meaning of the applicable UCC.

      2. Creation of Security Interest. The Seller owns and has good and
marketable title to the Pool Receivables and Lock-Box Accounts (and the related
lock-boxes), free and clear of any Adverse Claim. The Agreement creates a valid
and continuing security interest (as defined in the applicable UCC) in the Pool
Receivables and the Lock-Box Accounts (and the related lock-boxes) in favor of
the Issuer, which security interest is prior to all other Adverse Claims and is
enforceable as such as against any creditors of and purchasers from the Seller.

      3.    Perfection.

            (a) General. The Seller has or has caused, or will or will cause
within ten days after the date hereof, the filing of all appropriate financing
statements in the proper filing office in the appropriate jurisdictions under
applicable law in order to perfect the sale of the Pool Receivables from the
Originator to the Seller pursuant to the Purchase and Sale Agreement and the
security interest granted by the Seller to the Issuer in the Receivables and
Lock-Box Accounts (and the related lock-boxes) hereunder.

            (b) Tangible Chattel Paper. With respect to any Pool Receivable that
constitutes "tangible chattel paper", the Servicer is in possession of the
original copies of the tangible chattel paper that constitute or evidence such
Pool Receivables, and the Seller has filed or has caused the Originator to file,
or will file or will cause the Originator to file within ten days after the date
hereof, the financing statements described in paragraph (a) above, each of which
will contain a statement that: "A purchase of or a grant of a security interest
in any property described in this financing statement will violate the rights of
the Issuer." The Pool Receivables to the extent they are evidenced by "tangible
chattel paper" do not have any marks or notations indicating that they have been
pledged, assigned or otherwise conveyed to any Person other than the Seller or
the Issuer.

            (c) Lock-Box Accounts. With respect to all Lock-Box Accounts (and
all related lock-boxes), the Seller has delivered to the Administrator, on
behalf of the Issuer, a fully executed Lock-Box Agreement pursuant to which the
applicable Lock-Box Bank has agreed, following the occurrence and continuation
of a Termination Event, to comply with all instructions given by the
Administrator with respect to all funds on deposit in such Lock-Box

                                      VI-1

Account (and all funds sent to the respective lock-box), without further consent
by the Seller or the Servicer.

      4.    Priority.

            (a) Other than the transfer of the Receivables by the Originator to
the Seller pursuant to the Purchase and Sale Agreement and the grant of security
interest by the Seller to the Issuer in the Pool Receivables and Lock-Box
Accounts (and the related lock-boxes) hereunder, neither the Seller nor the
Originator has pledged, assigned, sold, conveyed, or otherwise granted a
security interest in any of the Pool Receivables or Lock-Box Accounts (and the
related lock-boxes) to any other Person.

            (b) Neither the Seller nor the Originator has authorized, or is
aware of, any filing of any financing statement against the Seller or the
Originator that includes a description of collateral covering the Pool
Receivables or any other Pool Assets, other than any financing statement filed
pursuant to the Purchase and Sale Agreement and the Agreement or financing
statements that have been validly terminated prior to the date hereof.

            (c) The Seller is not aware of any judgment, ERISA or tax lien
filings against either the Seller or the Originator.

            (d) None of the Lock-Box Accounts (and the related lock-boxes) are
in the name of any Person other than the Seller or the Issuer. None of the
Seller, the Servicer or the Originator has consented to any Lock-Box Bank's
complying with instructions of any person other than the Administrator.

      5. Survival of Supplemental Representations. Notwithstanding any other
provision of the Agreement or any other Transaction Document, the
representations contained in this Exhibit VI shall be continuing, and remain in
full force and effect until such time as all the Capital has finally been paid
in full and all other obligations of the Seller under the Agreement or any other
Transaction Documents have been fully performed.

      6. No Waiver. The parties to the Agreement: (i) shall not, without
obtaining a confirmation of the then-current rating of the Notes, waive any of
the representations set forth in this Exhibit VI; (ii) shall provide the ratings
agencies rating the Notes with prompt written notice of any breach of any
representations set forth in this Exhibit VI, and (iii) shall not, without
obtaining a confirmation of the then-current rating of the Notes (as determined
after any adjustment or withdrawal of the ratings following notice of such
breach) waive a breach of any of the representations set forth in this Exhibit
VI.

      7. Seller to Maintain Perfection and Priority. In order to evidence the
interests of the Issuer under this Agreement, the Seller shall, from time to
time take such action, or execute and deliver such instruments (other than
filing financing statements) as may be necessary or advisable (including,
without limitation, such actions as are requested by the Administrator on behalf
of the Issuer) to maintain and perfect, as a first-priority interest, the
Issuer's security interest in the Pool Assets. The Seller shall, from time to
time and within the time limits established by law, prepare and present to the
Administrator for the Administrator's authorization and approval all financing
statements, amendments, continuations or initial

                                      VI-2

financing statements in lieu of a continuation statement, or other filings
necessary to continue, maintain and perfect the Purchaser's security interest in
the Pool Assets as a first-priority interest. The Administrator's approval of
such filings shall authorize the Seller to file such financing statements under
the UCC without the signature of the Seller, the Originator or the Issuer where
allowed by applicable law. Notwithstanding anything else in the Transaction
Documents to the contrary, neither the Seller, the Servicer, nor the Originator,
shall have any authority to file a termination, partial termination, release,
partial release or any amendment that deletes the name of a debtor or excludes
collateral of any such financing statements, without the prior written consent
of the Administrator, on behalf of the Issuer.

                                      VI-3

                                   SCHEDULE I
                          CREDIT AND COLLECTION POLICY

                                  Schedule I-1

                                   SCHEDULE II
                      LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS

 Lock-Box Bank        Seller                    Lock Box No.   Account No.
 -------------        ------                    ------------   -----------
                                                      
 PNC Bank, National   Energy Services Funding   827032         8606074246
 Association          Corporation

                                  Schedule II-1

                                  SCHEDULE III
                                   TRADE NAMES

Corporate Name                               Trade Names / Fictitious Names
- --------------                               ------------------------------

Energy Services Funding Corporation          None

                                 Schedule III-1

                                   SCHEDULE IV
                          LOCATION OF RECORDS OF SELLER

460 North Gulph Road
King of Prussia, Pennsylvania  19406-2815

100 Kachel Boulevard
Suite 400
Reading, Pennsylvania  19607

1100 Berkshire Boulevard
Suite 305
Wyomissing, Pennsylvania  19610

                                 Schedule IV-1

                                                                       ANNEX A-1
                                               TO RECEIVABLES PURCHASE AGREEMENT

                       FORM OF INFORMATION PACKAGE (SETTLEMENT DATE)

                                    Annex A-1

                                                                       ANNEX A-2
                                               TO RECEIVABLES PURCHASE AGREEMENT

               FORM OF INFORMATION PACKAGE (INTER-SETTLEMENT DATE)

                                    Annex A-2

                                                                         ANNEX B
                                               TO RECEIVABLES PURCHASE AGREEMENT

                             FORM OF PURCHASE NOTICE

                                    Annex B-1

                             FORM OF PURCHASE NOTICE

                                ________, [2001]

PNC Bank, National Association
One PNC Plaza, 3rd Floor
249 Fifth Avenue
Pittsburgh, PA 15222-2707

Ladies and Gentlemen:

      Reference is hereby made to the Receivables Purchase Agreement, dated as
of November 30, 2001 (as heretofore amended or supplemented, the "Receivables
Purchase Agreement"), among Energy Services Funding Corporation ("Seller"), UGI
Energy Services, Inc., as Servicer, Market Street Funding Corporation ("Issuer")
and PNC Bank National Association (the "Administrator"). Capitalized terms used
in this Purchase Notice and not otherwise defined herein shall have the meanings
assigned thereto in the Receivables Purchase Agreement.

      This letter constitutes a Purchase Notice pursuant to Section 1.2(a) of
the Receivables Purchase Agreement. Seller desires to sell pursuant to the
Receivables Purchase Agreement an undivided variable percentage interest in a
pool of receivables on [ , 200 ], for a Purchase Price of $____________.
Subsequent to this purchase, the aggregate outstanding Capital will be
$___________. The pro forma calculation of the Purchased Interest after giving
effect to the increase in Capital is [_______________].

      Seller hereby represents and warrants as of the date hereof, and as of the
date of purchase, as follows:

      (i) the representations and warranties contained in Exhibit III of the
Receivables Purchase Agreement are correct in all respects on and as of such
dates as though made on and as of such dates and shall be deemed to have been
made (pursuant to paragraph 2(b) of Exhibit II of the Receivables Purchase
Agreement) on such dates (except to the extent that such representations and
warranties relate expressly to an earlier date, and in which case such
representations and warranties shall be true and correct in all respects as of
such earlier date);

      (ii) no Termination Event or Unmatured Termination Event has occurred and
is continuing, or would result from such purchase;

      (iii) after giving effect to the purchase proposed hereby, the Purchased
Interest will not exceed 100% and the Capital will not exceed the Purchase
Limit;

      (iv) no Default Event shall have occurred and is continuing; and

      (v) the Facility Termination Date shall not have occurred.

                                    Annex B-2

      IN WITNESS WHEREOF, the undersigned has caused this Purchase Notice to be
executed by its duly authorized officer as of the date first above written.

                              ENERGY SERVICES FUNDING CORPORATION

                              By:_____________________________________________
                              Name Printed:___________________________________
                              Title:__________________________________________

                                    Annex B-3

                                                                         ANNEX C
                                               TO RECEIVABLES PURCHASE AGREEMENT

                             FORM OF PAYDOWN NOTICE

                                    Annex C-1

                             FORM OF PAYDOWN NOTICE

                             ______________, _____

PNC Bank, National Association
249 Fifth Avenue
Pittsburgh, New York 15222-2707
Attention: John T. Smathers

Ladies and Gentlemen:

      Reference is hereby made to the Receivables Purchase Agreement, dated as
of November 30, 2001 (as amended, supplemented or otherwise modified, the
"Receivables Purchase Agreement"), among Energy Services Funding Corporation, as
Seller, UGI Energy Services, Inc., as Servicer, Market Street Funding
Corporation, as Issuer, and PNC Bank, National Association, as Administrator.
Capitalized terms used in this paydown notice and not otherwise defined herein
shall have the meanings assigned thereto in the Receivables Purchase Agreement.

      This letter constitutes a paydown notice pursuant to Section 1.4(f)(i) of
the Receivables Purchase Agreement. The Seller desires to reduce the Capital on
____________, _____1 by the application of $___________ in cash to pay Capital
and Discount to accrue (until such cash can be used to pay commercial paper
notes) with respect to such Capital, together with all costs related to such
reduction of Capital.

________

1    Notice must be given (i) at least one Business Day prior to the requested
     paydown date, in the case of reductions of greater than $1,000,000 and less
     than or equal to $3,000,000; (ii) at least two Business Days prior the
     requested paydown date, in the case of reductions of greater than
     $3,000,000 and less than or equal to $10,000,000; and (ii) at least five
     Business Days prior to the requested paydown date, in the case of
     reductions of greater than $10,000,000.

                                    Annex C-2

      IN WITNESS WHEREOF, the undersigned has caused this paydown notice to be
executed by its duly authorized officer as of the date first above written.

                              ENERGY SERVICES FUNDING CORPORATION

                              By:_____________________________________________
                              Name:___________________________________________
                              Title:__________________________________________

Receivables Purchase Agreement

(UGI)

                                    Annex C-3

                                TABLE OF CONTENTS

                                                                                             
                                   ARTICLE I.
                       AMOUNTS AND TERMS OF THE PURCHASES

Section 1.1       Purchase Facility........................................................      1
Section 1.2       Making Purchases.........................................................      1
Section 1.3       Purchased Interest Computation...........................................      2
Section 1.4       Settlement Procedures....................................................      3
Section 1.5       Fees.....................................................................      6
Section 1.6       Payments and Computations, Etc...........................................      6
Section 1.7       Increased Costs..........................................................      6
Section 1.8       Requirements of Law......................................................      7
Section 1.9       Inability to Determine Euro-Rate.........................................      8

                                   ARTICLE II.
                   REPRESENTATIONS AND WARRANTIES; COVENANTS;
                               TERMINATION EVENTS

Section 2.1       Representations and Warranties; Covenants................................      9
Section 2.2       Termination Events.......................................................      9

                                  ARTICLE III.
                                 INDEMNIFICATION

Section 3.1       Indemnities by the Seller................................................      9
Section 3.2       Indemnities by the Servicer..............................................     11
Section 3.3       Notice of Claims.........................................................     11

                                   ARTICLE IV.
                         ADMINISTRATION AND COLLECTIONS

Section 4.1       Appointment of the Servicer..............................................     12
Section 4.2       Duties of the Servicer...................................................     12
Section 4.3       Lock-Box Arrangements....................................................     13
Section 4.4       Enforcement Rights.......................................................     14
Section 4.5       Responsibilities of the Seller...........................................     15
Section 4.6       Servicing Fee............................................................     15

                                   ARTICLE V.
                                  MISCELLANEOUS

Section 5.1       Amendments, Etc..........................................................     16
Section 5.2       Notices, Etc.............................................................     16
Section 5.3       Assignability............................................................     16
Section 5.4       Costs, Expenses and Taxes................................................     18
Section 5.5       No Proceedings; Limitation on Payments...................................     18
Section 5.6       Confidentiality..........................................................     18
Section 5.7       GOVERNING LAW AND JURISDICTION...........................................     19

                                       i

                                                                                             
Section 5.8       Execution in Counterparts................................................     19
Section 5.9       Survival of Termination..................................................     19
Section 5.10      WAIVER OF JURY TRIAL.....................................................     19
Section 5.11      Entire Agreement.........................................................     20
Section 5.12      Headings.................................................................     20
Section 5.13      Issuer's, Administrator's, Seller's and Servicer's Liabilities...........     20

EXHIBIT I         Definitions
EXHIBIT II        Conditions of Purchases
EXHIBIT III       Representations and Warranties
EXHIBIT IV        Covenants
EXHIBIT V         Termination Events
EXHIBIT VI        Supplemental Perfection Representations, Warranties and Covenants

SCHEDULE I        Credit and Collection Policy
SCHEDULE II       Lock-Box Banks and Lock-Box Accounts
SCHEDULE III      Trade Names
SCHEDULE IV       Location of Records of Seller

ANNEX A-1         Form of Information Package (Settlement Date)
ANNEX A-2         Form of Information Package (Inter-Settlement Date)
ANNEX B           Form of Purchase Notice
ANNEX C           Form of Paydown Notice

                                       ii

                                                                   Exhibit 10.62

                              PERFORMANCE GUARANTY

         This PERFORMANCE GUARANTY (this "Performance Guaranty"), dated as of
August 29, 2003, made by UGI Corporation, a Pennsylvania corporation (the
"Company"), in favor of MARKET STREET FUNDING CORPORATION, a Delaware
corporation, as Issuer ("Issuer"), and PNC BANK, NATIONAL ASSOCIATION, a
national banking association, as Administrator (the "Administrator").
Capitalized terms not otherwise defined herein that are defined in the
Receivables Purchase Agreement and the Purchase and Sale Agreement referred to
below shall when used herein have the meanings specified in the Receivables
Purchase Agreement and the Purchase and Sale Agreement, as applicable.

                             PRELIMINARY STATEMENTS:

         (1)      UGI Energy Services, Inc., a Pennsylvania corporation
("UGIES"), in its capacity as an Originator and any other party that shall
become a party to the Purchase and Sale Agreement (as defined below) as an
Originator are collectively referred to herein as "Originators" and each
individually as an "Originator") and Energy Services Funding Corporation, a
Delaware corporation (the "Seller"), have entered into a Purchase and Sale
Agreement, dated as of November 30, 2001 (as amended through the date hereof,
and as the same may be amended, supplemented or otherwise modified from time to
time, the "Purchase and Sale Agreement"), pursuant to which each Originator has
sold and will sell Receivables and Related Rights (as defined in the Purchase
and Sale Agreement) to the Seller.

         (2)      The Seller, UGIES, as the Servicer (the "Servicer"), Issuer
and the Administrator have entered into the Receivables Purchase Agreement,
dated as of November 30, 2001 (as amended through the date hereof, and as the
same may be amended, supplemented or otherwise modified from time to time, the
"Receivables Purchase Agreement" and together with the Purchase and Sale
Agreement, the "Agreements"), pursuant to which the Seller has sold and will
sell undivided interests in the Receivables and the Related Rights to the
Issuer.

         NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company hereby agrees as follows:

         SECTION 1. Unconditional Undertaking; Enforcement. (a) The Company
hereby unconditionally and irrevocably undertakes and agrees, as set forth
herein, with and for the benefit of the Issuer, the Administrator and each
Program Support Provider that, in the event that any Originator or the Servicer
shall fail in any manner whatsoever to perform or observe any of the terms,
covenants, conditions, agreements and undertakings to be performed or observed
by (1) any such Originator under the Purchase and Sale Agreement in accordance
with the terms thereof, including, without limitation, the obligations of each
Originator under Sections 3.3 and 9.1 of the Purchase and Sale Agreement or (2)
the Servicer under the Receivables Purchase Agreement in accordance with the
terms thereof (all such terms, covenants, conditions, agreements and
undertakings on the part of each Originator and the Servicer to be performed or
observed being collectively called the "Guaranteed Obligations"), when the same
shall be required to be performed or observed under such Agreement, then the
Company shall guarantee and ensure that each Originator, the Servicer or the
Company or some other Person duly and punctually performs and observes each
Guaranteed Obligation; it being understood that the term

"Guaranteed Obligations" shall not be interpreted as a covenant, agreement or
undertaking on the part of any Originator or the Servicer regarding the
collectibility of any of the Receivables on account of insolvency, bankruptcy or
lack of creditworthiness of the related Obligor. It shall not be a condition to
the accrual of the obligation of the Company hereunder to guarantee and ensure
the performance or observance of any of the Guaranteed Obligations that the
Issuer, the Administrator or any Program Support Provider shall have first made
any request of or demand upon or given any notice to the Company or any other
person or have instituted any action or proceeding against the Company or any
other Person in respect thereof.

                  (b)      The Issuer, the Administrator or any Program Support
         Provider may proceed to enforce the obligations of any Originator or
         the Servicer under this Section 1 after their failure to perform such
         obligations in accordance with the terms of the Agreements without
         first pursuing or exhausting any right or remedy which Issuer, the
         Administrator or any Program Support Provider may have against any such
         Originator, the Servicer or any other Person or with respect to the
         Receivables or the Related Rights.

         SECTION 2. Obligation Absolute. The Company undertakes and agrees with
and for the benefit of the Issuer, the Administrator and each Program Support
Provider to ensure the performance of all Guaranteed Obligations strictly in
accordance with the terms of the Agreements. The obligations of the Company
under this Performance Guaranty are independent of the Guaranteed Obligations,
and a separate action or actions may be brought and prosecuted against the
Company to enforce this Performance Guaranty, irrespective of whether any action
is brought against any Originator or the Servicer or whether any such Originator
or the Servicer is joined in any such action or actions; provided that no such
action shall be brought prior to compliance with any notice requirement and the
expiration of any cure period applicable to the Guaranteed Obligations, in each
case as set forth in the Agreements. The obligations of the Company under this
Performance Guaranty shall be absolute and unconditional irrespective of:

                  (a)      any lack of validity or enforceability of either
         Agreement (other than as a result of any lack of validity or
         enforceability against the Issuer, the Administrator or any Program
         Support Provider);

                  (b)      any change in the time, manner or place of payment
         of, or in any other term of, all or any of the Guaranteed Obligations,
         or any other amendment or waiver of or any consent to departure from
         either Agreement including, without limitation, any increase in, or
         addition to, the Guaranteed Obligations resulting from additional
         purchases under the Receivables Purchase Agreement or otherwise;

                  (c)      any taking, exchange, release or non-perfection of
         any collateral, or any taking, release or amendment or waiver of or
         consent to departure from any other guaranty, for all or any of the
         Guaranteed Obligations;

                  (d)      any manner of application of collateral, or proceeds
         thereof, to all or any of the Guaranteed Obligations, or any manner of
         sale or other disposition of any collateral for all or any of the
         Guaranteed Obligations or any other assets of any Originator or the
         Servicer;

                                       2

                  (e)      any change, restructuring or termination of the
         corporate structure or existence of any Originator or the Servicer;

                  (f)      the insolvency, bankruptcy or reorganization of any
         Originator or the Servicer, or any stay or discharge of any of the
         Guaranteed Obligations in connection therewith; or

                  (g)      any other circumstance which might otherwise
         constitute a defense (except for a valid defense of any Originator or
         the Servicer not arising as a result of any such Originator's or the
         Servicer's breach of its obligations under either Agreement) available
         to, or a discharge of any such Originator or the Servicer.

This Performance Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment or performance of any of the
Guaranteed Obligations is rescinded or must otherwise be returned by the Issuer,
the Administrator or any Program Support Provider upon the insolvency,
bankruptcy or reorganization of any Originator or the Servicer or otherwise, all
as though such payment had not been made.

         SECTION 3. Waiver. The Company hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations except to the extent such notice is required to be provided with
regard to such Guaranteed Obligations in accordance with the terms of the
Agreements and this Performance Guaranty and any requirement that the Issuer,
the Administrator or any Program Support Provider protect, secure, perfect or
insure any security interest or lien or any property subject thereto or exhaust
any right or take any action against any Originator, the Servicer or any other
Person or any collateral.

         SECTION 4. Subrogation. The Company will not exercise any rights that
it may acquire by reason of any payment or performance hereunder, whether by way
of subrogation, reimbursement or otherwise resulting from its performance
hereunder until all unpaid or unperformed Guaranteed Obligations have been
discharged.

         SECTION 5. Representations and Warranties. The Company hereby
represents and warrants as follows:

                  (a)      The Company is a corporation duly incorporated and in
         existence under the laws of the Commonwealth of Pennsylvania.

                  (b)      The execution, delivery and performance by the
         Company of this Performance Guaranty are within the Company's corporate
         powers and have been duly authorized by all necessary corporate action
         and do not contravene (i) the Company's charter or by-laws or (ii) any
         material law or contractual restriction binding on or affecting the
         Company.

                  (c)      No authorization or approval or other action by, and
         no notice to or filing with, any governmental authority or regulatory
         body is required for the due execution, delivery and performance by the
         Company of this Performance Guaranty.

                                       3

                  (d)      This Performance Guaranty is a legal, valid and
         binding obligation of the Company enforceable against the Company in
         accordance with its terms, except as enforceability may be limited by
         bankruptcy, insolvency, reorganization or other similar laws affecting
         the enforcement of creditors' rights generally and by general
         principles of equity, regardless of whether enforceability is
         considered in a proceeding in equity or at law.

                  (e)      There are no pending or, to the Company's knowledge,
         threatened actions, suits or proceedings affecting the Company before
         any court, governmental agency or arbitrator, which could reasonably be
         expected to materially adversely affect the ability of the Company to
         perform its obligations under this Performance Guaranty, or which
         purports to affect the legality, validity or enforceability of this
         Performance Guaranty.

                  (f)      There are no conditions precedent to the
         effectiveness of this Performance Guaranty.

         SECTION 6. Covenants. (a) The Company agrees that, until the date (the
"Final Collection Date") which is the later of the Facility Termination Date
and, the date on which no Investment of or Discount in respect of the Purchased
Interest shall be outstanding and all other amounts owed by the Seller under the
Receivables Purchase Agreement to the Issuer, the Administrator or any other
Indemnified Party or Affected Person shall be paid in full, the Company will,
unless the Administrator shall otherwise consent in writing:

                           (i)      comply in all material respects with all
applicable laws, rules, regulations and orders, and preserve and maintain its
corporate existence, rights, franchises, qualifications and privileges, except
to the extent that the failure so to comply with such laws, rules, regulations
or orders or the failure so to preserve and maintain such rights, franchises,
qualifications and privileges would not be reasonably expected to have a
material adverse effect on (1) the ability of the Company to perform its
obligations hereunder or (2) the validity or enforceability of this Performance
Guaranty;

                           (ii)     (1) provide to the Administrator the annual
reports and quarterly reports (i.e., reports on Form 10-K and Form 10-Q) that
are specified in or required by Sections 13 and 15(d) of the Securities Exchange
Act of 1934 (the "Exchange Act") within one Business Day after such reports are
filed by the Company with the Securities and Exchange Commission (the
"Commission") and (2) provide notice to the Administrator of the filing by the
Company with the Commission of any current reports (i.e., reports on Form 8-K)
that are specified in or required by Sections 13 and 15(d) of the Exchange Act
within five Business Days after such reports are filed with the Commission;
provided, however, in the event that the Company is not subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will
provide to the Administrator:

                                    (1)      as soon as available and in any
event within 50 days after the end of each of the first three quarters of each
fiscal year of the Company, balance sheets of the Company and its consolidated
Subsidiaries as of the end of such quarter and statements of income, retained
earnings and cash flow of the Company and its consolidated Subsidiaries for

                                       4

the period commencing at the end of the previous fiscal year and ending with the
end of such quarter, certified by the chief financial officer of the Company;
and

                                    (2)      as soon as available and in any
event within 105 days after the end of each fiscal year of the Company,
financial statements for the Company and its consolidated Subsidiaries (similar
to those that would be included in annual reports if the Company were subject to
the reporting requirements of Sections 13 and 15(d) of the Exchange Act) for
such year audited by independent certified public accountants of nationally
recognized standing;

                           (iii)    provide to the Administrator, promptly after
becoming aware of the occurrence thereof, notice of a material adverse change in
the business, operations, property or financial or other condition of the
Company which can reasonably be expected to have a material adverse effect on
the ability of the Company to perform its obligations hereunder; and

                           (iv)     not permit its Consolidated Net Worth, at
any time, to be less than $275,000,000.

                  (b)      The Company hereby acknowledges that the
         Administrator and the Issuer are entering into this Performance
         Guaranty in reliance upon the Seller's identity as a legal entity
         separate from UGI, the Company and their Affiliates. Therefore, from
         and after the date hereof, the Company shall take all steps
         specifically required by this Performance Guaranty or pursuant to the
         Receivables Purchase Agreement to continue the Seller's identity as a
         separate legal entity and to make it apparent to third Persons that the
         Seller is an entity with assets and liabilities distinct from those of
         UGI, the Company and any other Person, and is not a division of UGI,
         the Company, their Affiliates or any other Person. Without limiting the
         generality of the foregoing and in addition to and consistent with the
         other covenants set forth herein, the Company shall take such actions
         as shall be required in order that the Company will not be and will not
         hold itself out to be responsible for the debts of the Seller or the
         decisions or actions respecting the daily business and affairs of the
         Seller. The Company will immediately correct any known
         misrepresentation with respect to the foregoing, and the Company will
         not operate or purport to operate as an integrated single economic unit
         with respect to the Seller in its dealing with any other entity.

         SECTION 7. Amendments, Etc. No amendment or waiver of any provision of
this Performance Guaranty, and no consent to any departure by the Company
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Administrator, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

         SECTION 8. Expenses. The Company will upon demand pay to the Issuer,
the Administrator, or any Program Support Provider the amount of any and all
reasonable expenses, including reasonable attorneys' fees and expenses, which
they may incur in connection with the exercise or enforcement of any of their
respective rights or interests hereunder.

                                       5

         SECTION 9. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including by facsimile or electronic
mail) and mailed, telecopied, telegraphed, telexed, cabled, sent by electronic
mail or delivered to it, if to the Company, at its address at 460 North Gulph
Road, King of Prussia, Pennsylvania 19406, and if to the Administrator or
Issuer, at its address designated on the signature pages of the Receivables
Purchase Agreement, or, as to any party, at such other address as shall be
designated by such party in a written notice to each other party. All such
notices and other communications shall, when mailed, faxed, or sent by
electronic mail be effective when deposited in the mails, faxed or received,
respectively.

         SECTION 10. No Waiver; Remedies. No failure on the part of the Issuer,
the Administrator or any Program Support Provider to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

         SECTION 11. Continuing Agreement. This Performance Guaranty is a
continuing agreement and shall (i) remain in full force and effect until the
later of (x) the payment in full of the Guaranteed Obligations and all other
amounts payable under this Performance Guaranty and (y) one year and a day after
the Final Collection Date, (ii) be binding upon the Company, its successors and
assigns, and (iii) inure to the benefit of, and be enforceable by, the Issuer,
the Administrator and each Program Support Provider and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (iii), the Issuer may assign all or any of its Receivables or
interest therein under the Receivables Purchase Agreement to any assignee, and
such assignee shall thereupon become vested with all the benefits in respect
thereof granted to such Issuer herein or otherwise.

         SECTION 12. Section Captions. Section captions used in this Performance
Guaranty are for convenience of reference only and shall not affect the
construction of this Performance Guaranty.

         SECTION 13. Severablility. Wherever possible each provision of this
Performance Guaranty shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Performance Guaranty
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Performance Guaranty.

         SECTION 14. Consent to Jurisdiction. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS PERFORMANCE GUARANTY MAY BE BROUGHT IN THE COURTS OF THE
STATE NEW YORK SITTING IN THE CITY OF NEW YORK OR THE UNITED STATES FEDERAL
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND
DELIVERY OF THIS PERFORMANCE GUARANTY, THE COMPANY CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS WITH
RESPECT TO ANY SUCH ACTION OR PROCEEDING. THE COMPANY IRREVOCABLY WAIVES, TO THE
MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION,

                                       6

INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS PERFORMANCE GUARANTY OR
ANY DOCUMENT RELATED HERETO. THE COMPANY WAIVES PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
NEW YORK LAW.

         SECTION 15. GOVERNING LAW. THIS PERFORMANCE GUARANTY SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO CONFLICT OF LAWS PRINCIPLES.

         SECTION 16. WAIVER OF JURY TRIAL. EACH OF THE COMPANY, ISSUER, THE
ADMINISTRATOR AND EACH PROGRAM SUPPORT PROVIDER, HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS PERFORMANCE
GUARANTY OR THE ACTIONS OF ISSUER, THE ADMINISTRATOR AND ANY PROGRAM SUPPORT
PROVIDER, IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.

         SECTION 17. Execution in Counterparts. This Performance Guaranty may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Performance Guaranty.

                            [signature page follows]

                                       7

         IN WITNESS WHEREOF, the Company has caused this Performance Guaranty to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.

                                    UGI CORPORATION

                                    By:_________________________________________
                                    Name:_______________________________________
                                    Title:______________________________________

Accepted as of the
date hereof:

PNC BANK, NATIONAL ASSOCIATION,
as Administrator

By:_________________________________
Name:
Title:

MARKET STREET FUNDING CORPORATION

By:_________________________________
Name:
Title:

                                                            Performance Guaranty

                                      S-1

                                 AMENDMENT NO. 1
                           DATED AS OF AUGUST 29, 2003
                                       TO
                         RECEIVABLES PURCHASE AGREEMENT
                          DATED AS OF NOVEMBER 30, 2001

         This AMENDMENT NO. 1 (this "Amendment") dated as of August 29, 2003 is
entered into among ENERGY SERVICES FUNDING CORPORATION, a Delaware corporation,
as the seller (the "Seller"), UGI ENERGY SERVICES, INC., a Pennsylvania
corporation ("UGI"), as initial servicer (in such capacity, together with its
successors and permitted assigns in such capacity, the "Servicer"), MARKET
STREET FUNDING CORPORATION, a Delaware corporation (together with its successors
and permitted assigns, the "Issuer"), and PNC BANK, NATIONAL ASSOCIATION, a
national banking association, as administrator (in such capacity, together with
its successors and assigns in such capacity, the "Administrator").

                                    RECITALS

         WHEREAS, the parties hereto have entered into a certain Receivables
Purchase Agreement dated as of November 30, 2001 (as amended through the date
hereof, the "Agreement");

         WHEREAS, the parties hereto wish to make certain changes to the
Agreement as herein provided;

         NOW, THEREFORE, in consideration of the promises and the mutual
agreements contained herein and in the Agreement, the parties hereto agree as
follows:

         SECTION 1. Definitions. All capitalized terms not otherwise defined
herein are used as defined in the Agreement.

         SECTION 2. Amendments to the Agreement.

         2.1      Clause (a) of Section 1.2 of the Agreement is hereby amended
by deleting the phrase "two Business Days before the requested purchase date,
which notice" therein and substituting the phrase "(x) one Business Day before
the requested purchase date in the case of a purchase of less than $50,000,000
and (y) two Business Days before the requested purchase date in the case of a
purchase of at least $50,000,000, which notice in each case" therefor.

         2.2      Clause (f)(i) of Section 1.4 of the Agreement is hereby
amended and restated in its entirety as follows:

                  (i) the Seller shall give the Administrator and the Servicer
         written notice in the form of Annex C (A) at least one Business Day
         prior to the date of such reduction for any reduction of Capital less
         than or equal to $20,000,000; (B) at least two Business Days prior to
         the date of such reduction for any reduction of Capital greater than
         $20,000,000 and less than or equal to $50,000,000; and (C) at least
         three Business Days prior to the date of such reduction for any
         reduction of

         Capital greater than $50,000,000, in each case such notice shall have
         been received by 3:00 p.m. New York City time on such date and shall
         include the amount of such proposed reduction and the proposed date on
         which such reduction will commence;

         2.3      The following definitions of "Consolidated Net Worth,"
"Performance Guarantor" and "Performance Guaranty" are hereby added to Exhibit I
to the Agreement, as alphabetically appropriate:

                  "Consolidated Net Worth" means, with respect to any Person and
         as of any date of determination, total stockholders' equity of such
         Person and its Subsidiaries as of such date, determined in accordance
         with GAAP.

                  "Performance Guarantor" means UGI Corporation, a Pennsylvania
         corporation, as performance guarantor under the Performance Guaranty.

                  "Performance Guaranty" means that certain Performance
         Guaranty, dated as of August 29, 2003 by the Performance Guarantor in
         favor of the Issuer and the Administrator, as the same may be amended,
         restated or otherwise modified from time to time.

         2.4      The definition of "Change in Control" set forth in Exhibit I
to the Agreement is hereby amended by adding the phrase ", and (c) with respect
to UGI, the Performance Guarantor shall cease to beneficially own, directly or
indirectly, 51% of the shares of outstanding voting stock of UGI on a fully
diluted basis" immediately prior to the period at the end thereof.

         2.5      The definition of "Defaulted Receivable" set forth in Exhibit
I to the Agreement is hereby amended by adding the following sentence
immediately at the end thereof:

         The Outstanding Balance of any Defaulted Receivable shall be determined
         without regard to any credit memos or credit balances.

         2.6      Clause (b) of the definition of "Delinquency Ratio" set forth
in Exhibit I to the Agreement is hereby amended by adding the parenthetical
"(excluding Delinquent Receivables that have a stated maturity which is more
than 60 days after the original invoice date of such Receivable)" immediately
following the phrase "Pool Receivables" therein.

         2.7      The definition of "Delinquent Receivable" set forth in Exhibit
I to the Agreement is hereby amended by adding the following sentence
immediately at the end thereof:

         The Outstanding Balance of any Delinquent Receivable shall be
         determined without regard to any credit memos or credit balances and
         shall exclude Delinquent Receivables that have a stated maturity which
         is more than 60 days after the original invoice date of such
         Receivable.

         2.8      The definition of "Facility Termination Date" set forth in
Exhibit I to the Agreement is hereby amended by deleting the date "November 30,
2004" and substituting the date "August 26, 2006" therefor.

                                     - 2 -

         2.9      The definition of "Purchase Limit" set forth in Exhibit I to
the Agreement is hereby amended by deleting the amount "$50,000,000" therein and
substituting the amount "$100,000,000" therefor.

         2.10     The definition of "Transaction Documents" set forth in Exhibit
I to the Agreement is hereby amended by adding the phrase "Performance
Guaranty," immediately following the phrase "Fee Letter," therein.

         2.11     Paragraph (q) of Section 1 of Exhibit IV to the Agreement is
hereby amended by deleting the amount "$4,000,000" therein and substituting the
amount "$6,000,000" therefor.

         2.12     The first paragraph of Section 3 of Exhibit IV to the
Agreement is hereby amended by (i) deleting each reference to the phrase "UGI
and" therein and substituting the phrase "UGI, the Performance Guarantor and"
therefor, (ii) deleting each reference to the phrase "its Affiliates" therein
and substituting the phrase "their Affiliates" therefor and (iii) deleting the
phrase "division of UGI" with the phrase "division of UGI, the Performance
Guarantor".

         2.13     Paragraph (c) of Section 3 of Exhibit IV to the Agreement is
hereby amended by deleting the phrase "UGI or any of its Affiliates" therein and
substituting the phrase "UGI, the Performance Guarantor or any of their
Affiliates" therefor.

         2.14     Paragraph (d) of Section 3 of Exhibit IV to the Agreement is
hereby amended by adding the phrase ", the Performance Guarantor" immediately
following the word "UGI" therein.

         2.15     Paragraph (f) of Section 3 of Exhibit IV to the Agreement is
hereby amended by adding the phrase "or the Performance Guarantor" immediately
following the phrase "shared with UGI" therein.

         2.16     Paragraph (g) of Section 3 of Exhibit IV to the Agreement is
hereby amended by adding the phrase ", the Performance Guarantor" immediately
following the word "UGI" therein.

         2.17     Paragraph (i) of Section 3 of Exhibit IV to the Agreement is
hereby amended by adding the phrase ", the Performance Guarantor" immediately
following the word "UGI" therein.

         2.18     Paragraph (j)(iii) of Section 3 of Exhibit IV to the Agreement
is hereby amended by adding the phrase ", the Performance Guarantor" immediately
following the word "UGI" therein.

         2.19     Paragraph (k) of Section 3 of Exhibit IV to the Agreement is
hereby amended by deleting the phrase "UGI or" therein and substituting the
phrase "UGI, the Performance Guarantor or" therefor.

         2.20     Paragraph (l) of Section 3 of Exhibit IV to the Agreement is
hereby amended by deleting each reference to the phrase "UGI or" therein and
substituting the phrase "UGI, the Performance Guarantor or" therefor.

         2.21     Paragraph (m) of Section 3 of Exhibit IV to the Agreement is
hereby amended by (i) deleting the phrase "with UGI" therein and substituting
the phrase "with UGI and the

                                     - 3 -

Performance Guarantor" therefor, (ii) adding the parenthetical "(or of the
Performance Guarantor)" immediately following each reference to the phrase "the
other" therein and (iii) adding the parenthetical "(or with respect to the
Performance Guarantor)" immediately following the phrase "each other" therein.

         2.22     Paragraph (n) of Section 3 of Exhibit IV to the Agreement is
hereby amended by deleting the phrase "UGI shall not" therein and substituting
the phrase "Neither UGI nor the Performance Guarantor shall" therefor.

         2.23     Paragraph (f) of Exhibit V to the Agreement is hereby amended
by adding the phrase ", the Performance Guarantor" immediately following each
reference to the word "UGI" therein.

         2.24     Paragraph (g) of Exhibit V to the Agreement is hereby amended
by (i) deleting the percentage "17.0%" therein and substituting the percentage
"13.0%" therefor and (ii) deleting the percentage "15.0%" therein and
substituting the percentage "12.0%" therefor.

         2.25     The existing paragraph (m) to Exhibit V to the Agreement is
hereby renumbered as paragraph (n) therein, and a new paragraph (m) is hereby
added to Exhibit V to the Agreement in its entirety as follows:

                  (m) UGI Corporation shall at any time (i) fail to perform,
         maintain or observe any representation, warranty, covenant or agreement
         set forth in the Performance Guaranty or (ii) repudiate any of its
         obligations under the Performance Guaranty; or

         SECTION 3. Miscellaneous.

         3.1      Effectiveness. This Amendment shall become effective on the
date when the Administrator shall have received (i) counterparts of this
Amendment (whether by facsimile or otherwise), executed and delivered by each of
the parties hereto, (ii) favorable opinions, in form and substance reasonably
satisfactory to the Administrator, of Morgan, Lewis & Bockius LLP, counsel for
the Seller, the Originator, the Servicer and the Performance Guarantor (except
in the case of the opinion with respect to true sale and non-consolidation
matters, which opinion shall be delivered within 10 days of the date hereof) and
(iii) such other information, certificates, documents and opinions as the
Administrator shall reasonably request.

         3.2      References to Agreement. Upon the effectiveness of this
Amendment, each reference in the Agreement to "this Agreement", "hereunder",
"hereof", "herein", or words of like import shall mean and be a reference to the
Agreement as amended hereby, and each reference to the Agreement in any other
document, instrument or agreement executed and/or delivered in connection with
the Agreement shall mean and be a reference to the Agreement as amended hereby.

         3.3      Effect on the Agreement. Except as specifically amended above,
the Agreement and all other documents, instruments and agreements executed
and/or delivered in connection therewith shall remain in full force and effect
and are hereby ratified and confirmed.

                                     - 4 -

         3.4      No Waiver. The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of any
party under the Agreement or any other document, instrument or agreement
executed in connection therewith, nor constitute a waiver of any provision
contained therein, except as specifically set forth herein.

         3.5      Governing Law. This Amendment, including the rights and duties
of the parties hereto, shall be governed by, and construed in accordance with,
the laws of the State of New York (without giving effect to the conflict of laws
principles thereof).

         3.6      Successors and Assigns. This Amendment shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.

         3.7      Headings. The Section headings in this Amendment are inserted
for convenience of reference only and shall not affect the meaning or
interpretation of this Amendment or any provision hereof.

         3.8      Counterparts. This Amendment may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.

                            [Signature Pages Follow]

                                     - 5 -

         IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first above written.

                                    ENERGY SERVICES FUNDING CORPORATION

                                    By: ________________________________________
                                    Name: ______________________________________
                                    Title: _____________________________________

                                    UGI ENERGY SERVICES, INC.

                                    By: ________________________________________
                                    Name: ______________________________________
                                    Title: _____________________________________

                                                              Amendment No. 1 to
                                                  Receivables Purchase Agreement

                                      S-1

                                    MARKET STREET FUNDING CORPORATION

                                    By: ________________________________________
                                    Name: ______________________________________
                                    Title: _____________________________________

                                                              Amendment No. 1 to
                                                  Receivables Purchase Agreement

                                      S-2

                                    PNC BANK, NATIONAL ASSOCIATION, as
                                    Administrator

                                    By: ________________________________________
                                    Name: ______________________________________
                                    Title: _____________________________________

                                                              Amendment No. 1 to
                                                  Receivables Purchase Agreement

                                      S-3

                                 AMENDMENT NO. 1
                           DATED AS OF AUGUST 29, 2003
                                       TO
                           PURCHASE AND SALE AGREEMENT
                          DATED AS OF NOVEMBER 30, 2001

         This AMENDMENT NO. 1 (this "Amendment") dated as of August 29, 2003 is
entered into among ENERGY SERVICES FUNDING CORPORATION, a Delaware corporation
(the "Company"), and UGI ENERGY SERVICES, INC., a Pennsylvania corporation (the
"Originator").

                                    RECITALS

         WHEREAS, the parties hereto have entered into a certain Purchase and
Sale Agreement dated as of November 30, 2001 (as amended through the date
hereof, the "Agreement");

         WHEREAS, the parties hereto wish to make certain changes to the
Agreement as herein provided;

         NOW, THEREFORE, in consideration of the promises and the mutual
agreements contained herein and in the Agreement, the parties hereto agree as
follows:

         SECTION 1. Definitions. All capitalized terms not otherwise defined
herein are used as defined in the Agreement.

         SECTION 2. Amendments to the Agreement.

         2.1      Section 3.1 of the Agreement is hereby amended by (i) adding
the marker "(a)" immediately prior to the first sentence therein and (ii)
deleting the final sentence therein and substituting the following sentence
therefor:

         Contributions made in connection with the immediately preceding
         sentence (i) shall have no effect on the aggregate Purchase Price of
         any Receivables sold by UGI to the Company on the date of such
         contribution and (ii) shall not affect the aggregate outstanding
         balance of any Company Note.

         2.2      A new clause (b) of Section 3.1 of the Agreement is hereby
added, to be and to read in its entirety as follows:

                  (b)      On the terms and subject to the conditions set forth
         in this Agreement, the Company agrees to pay to the Originator the
         Purchase Price for the purchase to be made from the Originator on the
         Closing Date partially in cash (in an amount to be agreed between the
         Company and the Originator and set forth in the initial Purchase
         Report) and partially by issuing a promissory note in the form of
         Exhibit B to the Originator with an initial principal balance equal to
         the remaining Purchase Price (each such promissory note, as it may be
         amended, supplemented, endorsed or otherwise modified from time to
         time, together with

         all promissory notes issued from time to time in substitution therefor
         or renewal thereof in accordance with the Transaction Documents, each
         being herein called a "Company Note").

         2.3      Clause (b) of Section 3.2 of the Agreement is hereby amended
and restated in its entirety as follows:

                  (b)      Second, to the extent any portion of the Purchase
         Price remains unpaid, the principal amount outstanding under the
         applicable Company Note shall be increased by an amount equal to such
         remaining Purchase Price.

         2.4      Section 3.2 of the Agreement is hereby amended by adding the
following paragraph immediately following clause (b) thereof, to be and to read
in its entirety as follows:

         The Servicer shall make all appropriate record keeping entries with
         respect to each of the Company Notes to reflect the foregoing payments
         and reductions made pursuant to Section 3.3, and in the absence of
         manifest error the Servicer's books and records shall constitute
         rebuttable presumptive evidence of the principal amount of, and accrued
         interest on, each of the Company Notes at any time. Furthermore, the
         Servicer shall hold the Company Notes for the benefit of the
         Originator. The Originator hereby irrevocably authorizes the Servicer
         to mark the Company Notes "CANCELED" and to return such Company Notes
         to the Company upon the final payment thereof after the occurrence of
         the Purchase and Sale Termination Date.

         2.5      Clause (c) of Section 3.3 of the Agreement is hereby amended
by deleting the phrase "such credit" therein and substituting the following
phrase therefor:

         such credit: (i) shall be paid in cash to the Company by the Originator
         in the manner and for application as described in the following
         proviso, or (ii) shall be deemed to be a payment under, and shall be
         deducted from the principal amount outstanding under, the Company Note
         payable to the Originator;

         2.6      A new Exhibit B is hereby added to the Agreement, to be and to
read in its entirety as set forth in Exhibit B attached hereto.

         SECTION 3. Miscellaneous.

         3.1      Effectiveness. This Amendment shall become effective on the
date when PNC Bank, National Association shall have received (i) counterparts of
this Amendment (whether by facsimile or otherwise), executed and delivered by
each of the parties hereto, (ii) a Company Note in favor of the Originator, duly
executed by the Company, (iii) favorable opinions, in form and substance
reasonably satisfactory to PNC Bank, National Association, of Morgan, Lewis &
Bockius LLP, counsel for the Company and the Originator (except in the case of
the opinion with respect to true sale and non-consolidation matters, which
opinion shall be delivered within 10 days of the date hereof), (iv) such other
information, certificates, documents and opinions as PNC Bank, National
Association shall reasonably request.

                                      -2-

         3.2      References to Agreement. Upon the effectiveness of this
Amendment, each reference in the Agreement to "this Agreement", "hereunder",
"hereof", "herein", or words of like import shall mean and be a reference to the
Agreement as amended hereby, and each reference to the Agreement in any other
document, instrument or agreement executed and/or delivered in connection with
the Agreement shall mean and be a reference to the Agreement as amended hereby.

         3.3      Effect on the Agreement. Except as specifically amended above,
the Agreement and all other documents, instruments and agreements executed
and/or delivered in connection therewith shall remain in full force and effect
and are hereby ratified and confirmed.

         3.4      No Waiver. The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of any
party under the Agreement or any other document, instrument or agreement
executed in connection therewith, nor constitute a waiver of any provision
contained therein, except as specifically set forth herein.

         3.5      Governing Law. This Amendment, including the rights and duties
of the parties hereto, shall be governed by, and construed in accordance with,
the laws of the State of New York (without giving effect to the conflict of laws
principles thereof).

         3.6      Successors and Assigns. This Amendment shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.

         3.7      Headings. The Section headings in this Amendment are inserted
for convenience of reference only and shall not affect the meaning or
interpretation of this Amendment or any provision hereof.

         3.8      Counterparts. This Amendment may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.

                            [Signature Pages Follow]

                                      -3-

         IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first above written.

                                                ENERGY SERVICES FUNDING
                                                CORPORATION

                                                By: ____________________________
                                                Name: __________________________
                                                Title: _________________________

                                                UGI ENERGY SERVICES, INC.

                                                By: ____________________________
                                                Name: __________________________
                                                Title: _________________________

                                                     Purchase and Sale Agreement
                                                                 Amendment No. 1

                                      S-1

                                                                       Exhibit B

                        FORM OF SUBORDINATED COMPANY NOTE
                                                                     ___________
                                                                _________, 200__

         FOR VALUE RECEIVED, the undersigned, Energy Services Funding
Corporation, a Delaware corporation ("Company"), promises to pay to UGI Energy
Services Inc., a Pennsylvania corporation (the "Originator"), on the terms and
subject to the conditions set forth herein and in the Purchase and Sale
Agreement referred to below, the aggregate unpaid Purchase Price of all
Receivables purchased by the Company from the Originator pursuant to such
Purchase and Sale Agreement, as such unpaid Purchase Price is shown in the
records of the Servicer.

         1.       Purchase and Sale Agreement. This Company Note is one of the
Company Notes described in, and is subject to the terms and conditions set forth
in, that certain Purchase and Sale Agreement of even date herewith (as the same
may be amended, supplemented, amended and restated or otherwise modified in
accordance with its terms, the "Purchase and Sale Agreement"), between the
Company and the Originator. Reference is hereby made to the Purchase and Sale
Agreement for a statement of certain other rights and obligations of the Company
and the Originator.

         2.       Definitions. Capitalized terms used (but not defined) herein
have the meanings assigned thereto in Exhibit I to the Receivables Purchase
Agreement (as defined in the Purchase and Sale Agreement). In addition, as used
herein, the following terms have the following meanings:

         "Bankruptcy Proceedings" has the meaning set forth in clause (b) of
paragraph 9 hereof.

         "Final Maturity Date" means the Payment Date immediately following the
date that falls one hundred twenty one (121) days after the Purchase and Sale
Termination Date.

         "Interest Period" means the period from and including a Settlement Date
(or, in the case of the first Interest Period, the date hereof) to but excluding
the next Settlement Date.

         "Prime Rate" has the meaning assigned thereto in the Purchase and Sale
Agreement.

         "Receivables Purchase Agreement" means the Receivables Purchase
Agreement, dated as of November 30, 2001, entered into among Energy Services
Funding Corporation, UGI Energy Services, Inc., Market Street Funding
Corporation and PNC Bank, National Association, as may be amended, amended and
restated, supplemented or otherwise modified from time to time.

         "Senior Interests" means, collectively, (i) all accrued and unpaid
Discount, (ii) all fees payable by the Company to the Senior Interest Holders
pursuant to the Receivables Purchase Agreement, (iii) all amounts payable
pursuant to Section 1.7 and 1.8 of the Receivables Purchase Agreement, (iv) the
aggregate Capital and (v) all other obligations owed by the Company to the

                                   Exhibit B-1

Senior Interest Holders under the Receivables Purchase Agreement and other
Transaction Documents that are due and payable, together with any and all
interest and Discount accruing on any such amount after the commencement of any
Bankruptcy Proceedings, notwithstanding any provision or rule of law that might
restrict the rights of any Senior Interest Holder, as against the Company or
anyone else, to collect such interest.

         "Senior Interest Holders" means, collectively, the Issuer, the
Administrator and the Indemnified Parties.

         "Subordination Provisions" means, collectively, clauses (a) through (l)
of paragraph 9 hereof.

         "One-Month LIBOR Rate" means, for any Interest Period, the rate set
forth for "one month" under "London Interbank Offered Rates (Libor):" as
published in the Wall Street Journal on the first day of such Interest Period.

         3.       Interest. Subject to the Subordination Provisions set forth
below, the Company promises to pay interest on this Company Note as follows:

                  (a)      Prior to the Final Maturity Date, the aggregate
unpaid Purchase Price from time to time outstanding during any Interest Period
shall bear interest at a rate per annum equal to the One-Month LIBOR Rate for
such Interest Period as determined by the Servicer; and

                  (b)      From (and including) the Final Maturity Date to (but
excluding) the date on which the entire aggregate unpaid Purchase Price payable
to the Originator is fully paid, such aggregate unpaid Purchase Price from time
to time outstanding shall bear interest at a rate per annum equal to the Prime
Rate.

         4.       Interest Payment Dates. Subject to the Subordination
Provisions set forth below, the Company shall pay accrued interest on this
Company Note on each Settlement Date, and shall pay accrued interest on the
amount of each principal payment made in cash on a date other than a Settlement
Date at the time of such principal payment.

         5.       Basis of Computation. Interest accrued hereunder that is
computed by reference to the One-Month LIBOR Rate shall be computed for the
actual number of days elapsed on the basis of a 360-day year, and interest
accrued hereunder that is computed by reference to the rate described in
paragraph 3(b) of this Company Note shall be computed for the actual number of
days elapsed on the basis of a 365- or 366-day year.

         6.       Principal Payment Dates. Subject to the Subordination
Provisions set forth below, payments of the principal amount of this Company
Note shall be made as follows:

                  (a)      The principal amount of this Company Note shall be
reduced by an amount equal to each payment deemed made pursuant to Section 3.3
of the Purchase and Sale Agreement; and

                                   Exhibit B-2

                  (b)      The entire remaining unpaid Purchase Price of all
Receivables purchased by the Company from the Originator pursuant to the
Purchase and Sale Agreement shall be due and payable on the Final Maturity Date.

         Subject to the Subordination Provisions set forth below, the principal
amount of and accrued interest on this Company Note may be prepaid on any
Business Day without premium or penalty.

         7.       Payment Mechanics. All payments of principal and interest
hereunder are to be made in lawful money of the United States of America.

         8.       Enforcement Expenses. In addition to and not in limitation of
the foregoing, but subject to the Subordination Provisions set forth below and
to any limitation imposed by applicable law, the Company agrees to pay all
expenses, including reasonable attorneys' fees and legal expenses, incurred by
the Originator in seeking to collect any amounts payable hereunder which are not
paid when due.

         9.       Subordination Provisions. The Company covenants and agrees,
and the Originator and any other holder of this Company Note (collectively, the
Originator and any such other holder are called the "Holder"), by its acceptance
of this Company Note, likewise covenants and agrees on behalf of itself and any
holder of this Company Note, that the payment of the principal amount of and
interest on this Company Note is hereby expressly subordinated in right of
payment to the payment and performance of the Senior Interests to the extent and
in the manner set forth in the following clauses of this paragraph 9:

                  (a)      No payment or other distribution of the Company's
assets of any kind or character, whether in cash, securities, or other rights or
property, shall be made on account of this Company Note except to the extent
such payment or other distribution is (i) permitted under paragraph 1(n) of
Exhibit IV of the Receivables Purchase Agreement or (ii) made pursuant to clause
(a) or (b) of paragraph 6 of this Company Note;

                  (b)      In the event of any dissolution, winding up,
liquidation, readjustment, reorganization or other similar event relating to the
Company, whether voluntary or involuntary, partial or complete, and whether in
bankruptcy, insolvency or receivership proceedings, or upon an assignment for
the benefit of creditors, or any other marshalling of the assets and liabilities
of the Company or any sale of all or substantially all of the assets of the
Company other than as permitted by the Purchase and Sale Agreement (such
proceedings being herein collectively called "Bankruptcy Proceedings"), the
Senior Interests shall first be paid and performed in full and in cash before
the Originator shall be entitled to receive and to retain any payment or
distribution in respect of this Company Note. In order to implement the
foregoing during any Bankruptcy Proceeding: (i) all payments and distributions
of any kind or character in respect of this Company Note to which Holder would
be entitled except for this clause (b) shall be made directly to the
Administrator (for the benefit of the Senior Interest Holders); (ii) Holder
shall promptly file a claim or claims, in the form required in any Bankruptcy
Proceedings, for the full outstanding amount of this Company Note, and shall use
commercially reasonable efforts to cause said claim or claims to be approved and
all payments and other distributions in respect thereof to be made directly to
the Administrator (for the benefit of the Senior Interest Holders)

                                   Exhibit B-3

until the Senior Interests shall have been paid and performed in full and in
cash; and (iii) Holder hereby irrevocably agrees that the Issuer (or the
Administrator acting on the Issuer's behalf), in the name of Holder or
otherwise, may demand, sue for, collect, receive and receipt for any and all
such payments or distributions, and file, prove and vote or consent in any such
Bankruptcy Proceedings with respect to any and all claims of Holder relating to
this Company Note, in each case until the Senior Interests shall have been paid
and performed in full and in cash;

                  (c)      In the event that Holder receives any payment or
other distribution of any kind or character from the Company or from any other
source whatsoever, in respect of this Company Note, other than as expressly
permitted by the terms of this Company Note, such payment or other distribution
shall be received in trust for the Senior Interest Holders and shall be turned
over by Holder to the Administrator (for the benefit of the Senior Interest
Holders) forthwith. Holder will mark its books and records so as clearly to
indicate that this Company Note is subordinated in accordance with the terms
hereof. All payments and distributions received by the Administrator in respect
of this Company Note, to the extent received in or converted into cash, may be
applied by the Administrator (for the benefit of the Senior Interest Holders)
first to the payment of any and all expenses (including reasonable attorneys'
fees and legal expenses) paid or incurred by the Senior Interest Holders in
enforcing these Subordination Provisions, or in endeavoring to collect or
realize upon this Company Note, and any balance thereof shall, solely as between
the Originator and the Senior Interest Holders, be applied by the Administrator
(in the order of application set forth in Section 1.4(d)(ii) of the Receivables
Purchase Agreement) toward the payment of the Senior Interests; but as between
the Company and its creditors, no such payments or distributions of any kind or
character shall be deemed to be payments or distributions in respect of the
Senior Interests;

                  (d)      Notwithstanding any payments or distributions
received by the Senior Interest Holders in respect of this Company Note, while
any Bankruptcy Proceedings are pending Holder shall not be subrogated to the
then existing rights of the Senior Interest Holders in respect of the Senior
Interests until the Senior Interests have been paid and performed in full and in
cash. If no Bankruptcy Proceedings are pending, Holder shall only be entitled to
exercise any subrogation rights that it may acquire (by reason of a payment or
distribution to the Senior Interest Holders in respect of this Company Note) to
the extent that any payment arising out of the exercise of such rights would be
permitted under paragraph 1(n) of Exhibit IV of the Receivables Purchase
Agreement;

                  (e)      These Subordination Provisions are intended solely
for the purpose of defining the relative rights of Holder, on the one hand, and
the Senior Interest Holders on the other hand. Nothing contained in these
Subordination Provisions or elsewhere in this Company Note is intended to or
shall impair, as between the Company, its creditors (other than the Senior
Interest Holders) and Holder, the Company's obligation, which is unconditional
and absolute, to pay Holder the principal of and interest on this Company Note
as and when the same shall become due and payable in accordance with the terms
hereof or to affect the relative rights of Holder and creditors of the Company
(other than the Senior Interest Holders);

                  (f)      Holder shall not, until the Senior Interests have
been paid and performed in full and in cash, (i) cancel, waive, forgive,
transfer or assign, or commence legal proceedings to enforce or collect, or
subordinate to any obligation of the Company, howsoever created,

                                   Exhibit B-4

arising or evidenced, whether direct or indirect, absolute or contingent, or now
or hereafter existing, or due or to become due, other than the Senior Interests,
this Company Note or any rights in respect hereof or (ii) convert this Company
Note into an equity interest in the Company, unless Holder shall have received
the prior written consent of the Administrator and the Issuer in each case;

                  (g)      Holder shall not, without the advance written consent
of the Administrator and the Issuer, commence, or join with any other Person in
commencing, any Bankruptcy Proceedings with respect to the Company until at
least one year and one day shall have passed since the Senior Interests shall
have been paid and performed in full and in cash;

                  (h)      If, at any time, any payment (in whole or in part) of
any Senior Interest is rescinded or must be restored or returned by a Senior
Interest Holder (whether in connection with Bankruptcy Proceedings or
otherwise), these Subordination Provisions shall continue to be effective or
shall be reinstated, as the case may be, as though such payment had not been
made;

                  (i)      Each of the Senior Interest Holders may, from time to
time, at its sole discretion, without notice to Holder, and without waiving any
of its rights under these Subordination Provisions, take any or all of the
following actions: (i) retain or obtain an interest in any property to secure
any of the Senior Interests; (ii) retain or obtain the primary or secondary
obligations of any other obligor or obligors with respect to any of the Senior
Interests; (iii) extend or renew for one or more periods (whether or not longer
than the original period), alter or exchange any of the Senior Interests, or
release or compromise any obligation of any nature with respect to any of the
Senior Interests; (iv) amend, supplement, amend and restate, or otherwise modify
any Transaction Document; and (v) release its security interest in, or
surrender, release or permit any substitution or exchange for all or any part of
any rights or property securing any of the Senior Interests, or extend or renew
for one or more periods (whether or not longer than the original period), or
release, compromise, alter or exchange any obligations of any nature of any
obligor with respect to any such rights or property;

                  (j)      Holder hereby waives: (i) notice of acceptance of
these Subordination Provisions by any of the Senior Interest Holders; (ii)
notice of the existence, creation, non-payment or non-performance of all or any
of the Senior Interests; and (iii) all diligence in enforcement, collection or
protection of, or realization upon, the Senior Interests, or any thereof, or any
security therefor;

                  (k)      Each of the Senior Interest Holders may, from time to
time, on the terms and subject to the conditions set forth in the Transaction
Documents to which such Persons are party, but without notice to Holder, assign
or transfer any or all of the Senior Interests, or any interest therein; and,
notwithstanding any such assignment or transfer or any subsequent assignment or
transfer thereof, such Senior Interests shall be and remain Senior Interests for
the purposes of these Subordination Provisions, and every immediate and
successive assignee or transferee of any of the Senior Interests or of any
interest of such assignee or transferee in the Senior Interests shall be
entitled to the benefits of these Subordination Provisions to the same extent as
if such assignee or transferee were the assignor or transferor; and

                                   Exhibit B-5

                  (l)      These Subordination Provisions constitute a
continuing offer from the holder of this Company Note to all Persons who become
the holders of, or who continue to hold, Senior Interests; and these
Subordination Provisions are made for the benefit of the Senior Interest
Holders, and the Administrator may proceed to enforce such provisions on behalf
of each of such Persons.

         10.      General. No failure or delay on the part of the Originator in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No amendment, modification or waiver of, or consent with respect to, any
provision of this Company Note shall in any event be effective unless (i) the
same shall be in writing and signed and delivered by the Company and Holder and
(ii) all consents required for such actions under the Transaction Documents
shall have been received by the appropriate Persons.

         11.      Maximum Interest. Notwithstanding anything in this Company
Note to the contrary, the Company shall never be required to pay unearned
interest on any amount outstanding hereunder and shall never be required to pay
interest on the principal amount outstanding hereunder at a rate in excess of
the maximum interest rate that may be contracted for, charged or received under
applicable federal or state law (such maximum rate being herein called the
"Highest Lawful Rate"). If the effective rate of interest which would otherwise
by payable under this Company Note would exceed the Highest Lawful Rate, or if
the holder of this Company Note shall receive any unearned interest or shall
receive monies that are deemed to constitute interest which would increase the
effective rate of interest payable by the Company under this Company Note to a
rate in excess of the Highest Lawful Rate, then (i) the amount of interest which
would otherwise by payable by the Company under this Company Note shall be
reduced to the amount allowed by applicable law, and (ii) any unearned interest
paid by the Company or any interest paid by the Company in excess of the Highest
Lawful Rate shall be refunded to the Company. Without limitation of the
foregoing, all calculations of the rate of interest contracted for, charged or
received by the Originator under this Company Note that are made for the purpose
of determining whether such rate exceeds the Highest Lawful Rate applicable to
the Originator (such Highest Lawful Rate being herein called the "Originator's
Maximum Permissible Rate") shall be made, to the extent permitted by usury laws
applicable to the Originator (now or hereafter enacted), by amortizing,
prorating and spreading in equal parts during the actual period during which any
amount has been outstanding hereunder all interest at any time contracted for,
charged or received by the Originator in connection herewith. If at any time and
from time to time (i) the amount of interest payable to the Originator on any
date shall be computed at the Originator's Maximum Permissible Rate pursuant to
the provisions of the foregoing sentence and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to the
Originator would be less than the amount of interest payable to the Originator
computed at the Originator's Maximum Permissible Rate, then the amount of
interest payable to the Originator in respect of such subsequent interest
computation period shall continue to be computed at the Originator's Maximum
Permissible Rate until the total amount of interest payable to the Originator
shall equal the total amount of interest which would have been payable to the
Originator if the total amount of interest had been computed without giving
effect to the provisions of the foregoing sentence.

                                   Exhibit B-6

         12.      No Negotiation. This Company Note is not negotiable except
that is may be assigned to any Affiliate of the Originator.

         13.      GOVERNING LAW. THIS COMPANY NOTE HAS BEEN DELIVERED IN THE
STATE OF NEW YORK, AND SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED
BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.

         14.      Captions. Paragraph captions used in this Company Note are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Company Note.

                            [signature page follows]

                                   Exhibit B-7

                                         ENERGY SERVICES FUNDING
                                         CORPORATION

                                         By: ___________________________________
                                             Name: _____________________________
                                             Title: ____________________________

                                   Exhibit B-8

                                 August 29, 2003

Energy Services Funding Corporation
460 North Gulph Road, Suite 200
King of Prussia, PA 19406-2815

         Re: Amended and Restated Fee Letter

Ladies and Gentlemen:

         This Amended and Restated Fee Letter (the "Fee Letter") sets forth the
fees payable by you in connection with the Receivables Purchase Agreement dated
as of November 30, 2001 (such agreement, as now or hereafter amended or
otherwise modified from time to time, being the "Receivables Purchase
Agreement"), among Energy Services Funding Corporation ("Seller"), UGI Energy
Services, Inc., as initial servicer (the "Servicer"), Market Street Funding
Corporation ("Issuer") and PNC Bank, National Association ("PNC"), as
Administrator. Terms defined in the Receivables Purchase Agreement are used
herein as therein defined. This Fee Letter amends and restates that certain fee
letter agreement dated November 30, 2001, among the parties hereto. This Fee
Letter is the "Fee Letter" referred to in Section 1.5 of the Receivables
Purchase Agreement.

         Seller agrees to pay, to PNC for Issuer's account (in the case of the
fees described in paragraphs (i), (ii) and (iii) below) and for PNC Capital
Markets, Inc.'s account (in the case of the fees described in paragraphs (iv),
(v) and (vi) below), the following fees:

                  (i) a "Program Fee" at the per annum rate of 0.50% of the
         aggregate of the average daily Capital outstanding, each from December
         4, 2001 until the later of the Facility Termination Date and the date
         on which such aggregate Capital outstanding shall have been paid in
         full, payable in arrears monthly on each Settlement Date (for the
         Settlement Period immediately preceding such Settlement Date) and on
         the later of the Facility Termination Date and the date on which such
         aggregate Capital outstanding shall have been finally paid in full if
         such date is not a Settlement Date;

                  (ii) a "Commitment Fee" at the per annum rate of 0.25% of the
         excess of 102% of the Purchase Limit over the aggregate of the average
         daily Capital outstanding from December 4, 2001 until the later of the
         Facility Termination Date and the date on which the such aggregate
         Capital outstanding shall have been paid in full, payable in arrears
         monthly on each Settlement Date (for the Settlement Period immediately
         preceding such Settlement Date) and on the later of the Facility
         Termination Date and the date on which such aggregate Capital
         outstanding shall have been paid in full if such date is not a
         Settlement Date;

                  (iii) if the average daily Capital outstanding is less than
         50% of the Purchase Limit (as determined quarterly in arrears), a
         quarterly unused fee at the per annum rate of 0.05% of the excess of
         102% of the Purchase Limit over the aggregate of the average daily
         Capital outstanding from the date hereof until the later of the
         Facility Termination Date and the date on which such aggregate Capital
         outstanding shall have been paid in full, payable in arrears on the
         Settlement Date in each January, April, July and October (commencing
         October 2003) (in the case of the October 2003 payment of such fee, for
         the period commencing from the date hereof through the end of the
         quarter immediately preceding such Settlement Date; and in the case of
         each subsequent payment of such fee, for the quarter immediately
         preceding such Settlement Date) and on the later of the Facility
         Termination Date and the date on which such aggregate Capital
         outstanding shall have been paid in full if such date is not such a
         Settlement Date;

                  (iv) a structuring fee in an amount equal to One Hundred
         Seventy-Five Thousand U.S. Dollars ($175,000), which fee has previously
         been paid to PNC;

                  (v) an administration fee annually in advance in an amount
         equal to Thirty-Five Thousand U.S. Dollars ($35,000); and

                  (vi) an amendment fee in an amount equal to Twenty-Five
         Thousand U.S. Dollars ($25,000), payable on the date hereof.

         This Fee Letter may be executed by the signatories hereto in several
counterparts, each of which shall be deemed to be an original and all of which
shall together constitute but one and the same Fee Letter. This Fee Letter shall
be governed by, and construed in accordance with the internal laws of the State
of New York.

                          (continued on following page)

                                       2

         Please evidence your agreement to the terms of this Fee Letter by
signing the enclosed copy and returning it to the undersigned. Delivery of an
executed counterpart of a signature page to this letter agreement shall be
effective as delivery of a manually executed counterpart of this Fee Letter.

                                         Very truly yours,

                                         PNC BANK, NATIONAL ASSOCIATION,
                                         as Administrator

                                         By: ___________________________________
                                         Name:
                                         Title:

ACKNOWLEDGED AND AGREED TO
as of the date first above written

MARKET STREET FUNDING CORPORATION,
as Issuer

By:___________________________
Name:_________________________
Title:________________________

                                                 Amended and Restated Fee Letter

                                      S-1

ACKNOWLEDGED AND AGREED TO
as of the date first above written
ENERGY SERVICES FUNDING CORPORATION

By:______________________________
Name:____________________________
Title:___________________________

UGI ENERGY SERVICES, INC.

By:______________________________
Name:____________________________
Title:___________________________

                                                 Amended and Restated Fee Letter

                                      S-2

                                                                      EXHIBIT 13

                                              UGI Corporation 2003 Annual Report

FINANCIAL REVIEW

BUSINESS OVERVIEW

UGI Corporation ("UGI") is a holding company that distributes and markets energy
products and related services through subsidiaries and joint-venture affiliates.
We are a domestic and international distributor of propane; a provider of
natural gas and electricity service through regulated local distribution
utilities; a generator of electricity through our ownership interests in
electric generation facilities; a regional marketer of energy commodities; and a
provider of heating and cooling services.

         We conduct a national propane distribution business through AmeriGas
Partners, L.P. ("AmeriGas Partners") and its principal operating subsidiaries
AmeriGas Propane, L.P. ("AmeriGas OLP") and AmeriGas Eagle Propane, L.P. ("Eagle
OLP"). At September 30, 2003, UGI, through its wholly owned second-tier
subsidiary AmeriGas Propane, Inc. (the "General Partner"), held an approximate
48% effective interest in the Partnership. We refer to AmeriGas Partners and its
subsidiaries together as "the Partnership" and the General Partner and its
subsidiaries, including the Partnership, as "AmeriGas Propane."

         Our natural gas and electric distribution utilities are conducted
through UGI Utilities, Inc. ("UGI Utilities"). UGI Utilities owns and operates a
natural gas distribution utility ("Gas Utility") in parts of eastern and
southeastern Pennsylvania and an electricity distribution utility ("Electric
Utility") in northeastern Pennsylvania. Gas Utility and Electric Utility are
subject to regulation by the Pennsylvania Public Utility Commission ("PUC").

         Our wholly owned subsidiary UGI Enterprises, Inc. ("Enterprises")
conducts an energy marketing business primarily in the Eastern region of the
United States through its wholly owned subsidiary, UGI Energy Services, Inc.
("Energy Services"). Energy Services' wholly owned subsidiary UGI Development
Company ("UGID") and UGID's joint-venture affiliate Hunlock Creek Energy
Ventures ("Energy Ventures") own interests in Pennsylvania-based electricity
generation assets. UGID's electricity generation assets along with Electric
Utility are collectively referred to herein as "Electric Operations." Prior to
its transfer to Energy Services in June 2003, UGID was a wholly owned subsidiary
of UGI Utilities. Through other subsidiaries, Enterprises (1) owns and operates
a propane distribution business in Austria, the Czech Republic and Slovakia
("FLAGA"); (2) owns and operates a heating, ventilation and air-conditioning
service business in the Middle Atlantic states ("HVAC"); and (3) participates in
propane joint-venture businesses in France ("Antargaz") and in the Nantong
region of China.

         This Financial Review should be read in conjunction with our
Consolidated Financial Statements and Notes to Consolidated Financial Statements
including the business segment information included in Note 21.

RESULTS OF OPERATIONS

2003 COMPARED WITH 2002
CONSOLIDATED RESULTS

                                                                                                            Variance -
                                                                                                            Favorable
                                                    2003                          2002                     (Unfavorable)
                                       ---------------------------   ---------------------------    ---------------------------
                                                        DILUTED                        Diluted                        Diluted
                                           NET          EARNINGS         Net          Earnings          Net          Earnings
                                          INCOME       PER SHARE        Income       Per Share         Income       Per Share
                                       ----------------------------------------------------------------------------------------
                                                                                                 
(Millions of dollars, except per
 share)
AmeriGas Propane                       $     23.2     $     0.55     $     17.4     $     0.42     $      5.8      $     0.13
Gas Utility                                  48.0           1.11           36.4           0.87           11.6            0.24
Electric Operations                          13.9           0.32            6.1           0.14            7.8            0.18
Energy Services                               7.9           0.18            6.5           0.15            1.4            0.03
International Propane                         3.6           0.08            7.5           0.18           (3.9)          (0.10)
Corporate & Other                             2.3           0.05            1.6           0.04            0.7            0.01
                                       ----------     ----------     ----------     ----------     ----------      ----------
Total                                  $     98.9     $     2.29     $     75.5     $     1.80     $     23.4      $     0.49
                                       ----------     ----------     ----------     ----------     ----------      ----------

         Net income and earnings per share were higher in Fiscal 2003 reflecting
the effects of colder heating-season weather in our Gas Utility, Electric
Utility and AmeriGas Propane service territories and the effects of acquisitions
and other growth initiatives in our electricity generation and Energy Services
businesses. This improved performance was partially offset by a decline in
FLAGA's Fiscal 2003 results and the absence of income from our debt investments
in Antargaz redeemed in July 2002.

                                                                              13

FINANCIAL REVIEW (continued)

         The following table presents certain financial and statistical
information by reportable segment for Fiscal 2003 and Fiscal 2002:

                                                                             Increase
                                            2003          2002              (Decrease)
                                         ----------    ----------     ------------------------
                                                                            
(Millions of dollars)
AMERIGAS PROPANE:
Revenues                                 $  1,628.4    $  1,307.9     $    320.5          24.5%
Total margin (a)                         $    718.1    $    654.8     $     63.3           9.7%
Partnership EBITDA (b)                   $    234.4    $    209.6     $     24.8          11.8%
Operating income                         $    164.5    $    145.0     $     19.5          13.4%
Retail gallons sold (millions) (c)          1,074.9         987.5           87.4           8.9%
Degree days - % colder (warmer)
      than normal (d)                           0.2%        (10.0)%            -             -

GAS UTILITY:
Revenues                                 $    539.9    $    404.5     $    135.4          33.5%
Total margin (a)                         $    196.9    $    162.9     $     34.0          20.9%
Operating income                         $     96.1    $     77.1     $     19.0          24.6%
Income before income taxes               $     80.7    $     62.9     $     17.8          28.3%
System throughput -
      billions of cubic feet ("bcf")           83.8          70.5           13.3          18.9%
Degree days - % colder (warmer)
      than normal                               7.0%        (17.4)%            -             -

ELECTRIC OPERATIONS:
Revenues                                 $    108.1    $     86.0     $     22.1          25.7%
Total margin (a)                         $     47.4    $     32.8     $     14.6          44.5%
Operating income                         $     25.9    $     13.2     $     12.7          96.2%
Income before income taxes               $     23.6    $     10.8     $     12.8         118.5%
Distribution sales - millions of
      kilowatt hours ("gwh")                  980.0         933.6           46.4           5.0%
Third-party generation sales - gwh            471.8          24.0          447.8           N.M

ENERGY SERVICES:
Revenues                                 $    648.7    $    332.3     $    316.4          95.2%
Total margin (a)                         $     28.5    $     21.4     $      7.1          33.2%
Income before income taxes               $     13.6    $     11.1     $      2.5          22.5%

INTERNATIONAL PROPANE:
Revenues                                 $     54.5    $     46.7     $      7.8          16.7%
Total margin (a)                         $     27.1    $     24.1     $      3.0          12.4%
Operating income                         $      0.7    $      3.9     $     (3.2)        (82.1)%
Income from equity investees             $      5.9    $      8.3     $     (2.4)        (28.9)%
Income before income taxes               $      2.5    $      8.0     $     (5.5)        (68.8)%
                                         ----------    ----------     ----------        ------

N.M. - Not meaningful

(a) Total margin represents total revenues less total cost of sales and, with
respect to Electric Operations, revenue-related taxes, i.e. Electric Utility
gross receipts taxes, of $4.8 million and $4.6 million in 2003 and 2002,
respectively. For financial statement purposes, revenue-related taxes are
included in "taxes other than income taxes" on the Consolidated Statements of
Income.

(b) Partnership EBITDA (earnings before interest expense, income taxes,
depreciation and amortization) should not be considered as an alternative to net
income (as an indicator of operating performance) or as an alternative to cash
flow (as a measure of liquidity or ability to service debt obligations) and is
not a measure of performance or financial condition under accounting
principles generally accepted in the United States of America. Management uses
Partnership EBITDA as the primary measure of segment profitability for the
AmeriGas Propane segment (see Note 21 to Consolidated Financial Statements).

(c) Retail gallons sold in 2003 include certain bulk gallons previously
considered wholesale gallons. Prior-year gallon amounts have been adjusted to
conform to the current year classification.

(d) Deviation from average heating degree days based upon national weather
statistics provided by the National Oceanic and Atmospheric Administration
("NOAA") for 335 airports in the United States, excluding Alaska.

         AMERIGAS PROPANE. Weather based upon heating degree days was
essentially normal during Fiscal 2003 compared to weather that was 10.0% warmer
than normal in Fiscal 2002. Although temperatures nationwide averaged near
normal during Fiscal 2003, our overall results reflect weather that was
significantly warmer in the West and generally colder than normal in the East.
Retail propane volumes sold increased 87.4 million gallons in Fiscal 2003 due
principally to the effects of the colder weather and, to a much lesser extent,
volume growth from acquisitions and customer growth. These increases were
achieved notwithstanding the effects of price-induced customer conservation and,
with respect to commercial and industrial customers, continuing economic
weakness.

         Retail propane revenues increased $272.7 million reflecting (1) a
$175.1 million increase due to higher average selling prices and (2) a $97.6
million increase due to the higher retail volumes sold. Wholesale propane
revenues increased $38.3 million reflecting (1) a $31.7 million increase due to
higher average selling prices and (2) a $6.6 million increase due to the higher
volumes sold. The higher retail and wholesale selling prices reflect
significantly higher propane product costs during Fiscal 2003 resulting from,
among other things, higher crude oil and natural gas prices and lower propane
inventories. Other revenues from ancillary sales and services were $125.8
million in Fiscal 2003 and $116.3 million in Fiscal 2002. Total cost of sales
increased $257.2 million reflecting the higher propane product costs and higher
volumes sold.

         The $63.3 million increase in total margin is principally due to the
higher propane gallons sold and, to a lesser extent, slightly higher average
retail propane unit margins. Notwithstanding the previously mentioned
significant increase in the commodity price of propane, retail propane unit
margins were slightly higher than the prior year reflecting the effects of the
higher average selling prices and the benefits of favorable propane product cost
management activities. Beginning in Fiscal 2002 and continuing in Fiscal 2003,
unit margins associated with the Partnership's Prefilled Propane Xchange program
("PPX(R)") were higher than historical levels reflecting increases in PPX(R)
sales prices to fund cylinder valve replacement capital expenditures. These
capital expenditures resulted from National Fire Protection Association ("NFPA")
guidelines enacted in Fiscal 2002 requiring propane grill cylinders be fitted
with overfill protection devices ("OPDs"). The extent to which this level of
PPX(R) margin is sustainable in the future will depend upon a number of factors
including the continuing rate of OPD valve replacement and competitive market
conditions.

         Partnership EBITDA increased $24.8 million in Fiscal 2003 reflecting
the previously mentioned increase in total margin and a $4.6 million increase in
other income partially offset by a $40.6 million increase in Partnership
operating and administrative expenses and a $2.3 million increase in losses
associated with early extinguishments of long-term debt. Operating and
administrative expenses increased principally due to higher medical and general
insurance expenses, higher distribution expenses as a result of the previously
mentioned greater retail volumes, and higher incentive compensation and
uncollectible accounts expenses. In addition, the Partnership incurred $3.8
million of costs during Fiscal 2003 associated with a realign-

14

                                              UGI Corporation 2003 Annual Report

ment of the Partnership's management structure announced in June 2003. Other
income in Fiscal 2003 includes a gain of $1.1 million from the settlement of
certain hedge contracts and greater income from finance charges and asset sales
while other income in the prior year was reduced by a $2.1 million loss from
declines in the value of propane commodity option contracts. Operating income in
Fiscal 2003 increased less than the increase in Partnership EBITDA due to higher
depreciation expense principally associated with PPX(R) partially offset by the
previously mentioned increase in losses associated with early extinguishments of
long-term debt.

GAS UTILITY. Weather in Gas Utility's service territory based upon heating
degree days was 7.0% colder than normal during Fiscal 2003 compared to weather
that was 17.4% warmer than normal during Fiscal 2002. The significantly colder
weather resulted in higher heating-related sales to firm- residential,
commercial and industrial ("retail core-market") customers and, to a lesser
extent, greater volumes transported for residential, commercial and industrial
delivery service customers. System throughput in Fiscal 2003 also benefited from
a year-over-year increase in the number of customers.

         Gas Utility revenues increased principally as a result of the
previously mentioned greater retail core-market and delivery service volumes and
higher average retail core-market purchased gas cost ("PGC") rates resulting
from higher natural gas costs. Gas Utility cost of gas was $343.0 million in
Fiscal 2003, an increase of $101.3 million from the prior year, reflecting the
higher retail core-market volumes sold and the higher retail core-market PGC
rates.

         The increase in Gas Utility total margin principally reflects a $27.1
million increase in retail core-market total margin due to the higher retail
core-market sales and increased margin from greater delivery service volumes.

         The increase in Gas Utility operating income principally reflects the
increase in total margin partially offset by a $12.7 million increase in
operating and administrative expenses and lower other income. Fiscal 2003
operating and administrative expenses include higher costs associated with
litigation-related costs and expenses, greater distribution system maintenance
expenses, higher uncollectible accounts expenses and increased incentive
compensation costs. Other income declined $3.2 million principally reflecting a
$2.2 million decrease in pension income and lower interest income on PGC
undercollections. The increase in Gas Utility income before income taxes
reflects the increase in operating income offset by higher interest expense on
PGC overcollections and, beginning July 1, 2003, dividends on preferred shares.

ELECTRIC OPERATIONS. Electric Utility's Fiscal 2003 kilowatt-hour distribution
sales increased principally as a result of weather that was 8.4% colder than
normal compared to weather that was 14.5% warmer than normal in the prior year.

         The higher Electric Operations' revenues reflect greater sales of
electricity produced by UGID's electric generation assets to third parties and
the previously mentioned increase in Electric Utility kilowatt-hour distribution
sales. Prior to September 2002, UGID sold substantially all of the electricity
it produced to Electric Utility with the associated revenue and margin
eliminated in our consolidated results. Beginning September 2002, Electric
Utility began purchasing its power needs exclusively from third-party
electricity suppliers under fixed-price energy and capacity contracts and, to a
much lesser extent, on the spot market, and UGID began selling electric power
produced from its interests in electricity generating facilities to third
parties on the spot market. Additionally, the greater Fiscal 2003 UGID sales and
revenues reflect UGID's June 26, 2003 purchase of an additional 4.9% (83
megawatt) interest in the Conemaugh electricity generation station located near
Johnstown, Pennsylvania ("Conemaugh"). Notwithstanding the significant increase
in Electric Operations' revenues, cost of sales increased only $7.3 million in
Fiscal 2003 due in part to lower Electric Utility per-unit purchased power
costs.

         The increase in Electric Operations' total margin principally reflects
lower Electric Utility per-unit purchased power costs, the increase in Electric
Utility sales, and margin from the greater sales of electricity produced by
UGID's electricity generation assets to third parties. The higher Fiscal 2003
operating income reflects the greater total margin and a $0.5 million increase
in other income partially offset by higher operating and administrative expenses
resulting principally from the additional investment in Conemaugh and, to a
lesser extent, higher Electric Utility transmission and distribution expenses.
The increase in Electric Operations income before income taxes reflects the
increase in operating income and slightly lower interest expense.

ENERGY SERVICES. The increase in Energy Services' revenues in Fiscal 2003
resulted from higher natural gas prices and, to a lesser extent, a more than 40%
increase in natural gas volumes sold due in large part to the March 2003
acquisition of the northeastern U.S. gas marketing business of TXU Energy Retail
Company, L.P., a subsidiary of TXU Energy (the "TXU Energy Acquisition"). The
greater Energy Services' Fiscal 2003 total margin reflects the increase in
natural gas volumes sold partially offset by slightly lower average unit
margins. The increase in total margin was partially offset by higher operating
expenses resulting principally from the TXU Energy Acquisition and growth
initiatives.

INTERNATIONAL PROPANE. FLAGA's revenues increased $7.8 million, notwithstanding
a 5% decline in volumes sold, primarily reflecting the currency translation
effects of a stronger euro and, to a lesser extent, higher average selling
prices. Volumes were lower in Fiscal 2003 principally due to the loss of a
high-volume, low unit margin customer and, to a lesser extent, price-induced
conservation and continued weak economic activity. The increase in Fiscal 2003
total margin reflects the translation effects of the stronger euro. The decline
in FLAGA operating income, notwithstanding the increase in total margin, is
substantially the result of the translation effects of the stronger euro on
operating and administrative expenses and, to a lesser extent, higher
base-currency expenses.

         The decline in Fiscal 2003 earnings from our equity investees is
principally a result of the July 2002 redemption of our debt investments in AGZ
Holdings ("AGZ"), the parent company of Antargaz. Income from our debt
investments in AGZ in Fiscal 2002 includes $0.9 million of interest income and a
currency transaction

                                                                              15

FINANCIAL REVIEW (continued)

gain of $1.6 million resulting from the early redemption of this
euro-denominated debt in July 2002. Equity income from AGZ in Fiscal 2003 was
comparable with Fiscal 2002, notwithstanding a decline in Antargaz'
base-currency results, reflecting the effects of the stronger euro. The decline
in International Propane income before income taxes reflects the combined
decrease in FLAGA operating income and in our income from equity investees
offset by slightly lower interest expense.

INTEREST EXPENSE AND INCOME TAXES. Interest expense was $109.2 million in Fiscal
2003 compared to $109.1 million in Fiscal 2002 as slightly higher UGI Utilities
interest expense was partially offset by slightly lower Partnership interest
expense. The Company's effective income tax rate was 37.8% in Fiscal 2003 and
Fiscal 2002.

2002 COMPARED WITH 2001
CONSOLIDATED RESULTS

                                                                                                        Variance -
                                                                                                         Favorable
                                                    2002                       2001                    (Unfavorable)
                                         -------------------------   ------------------------    ------------------------
                                                                                    Diluted                     Diluted
                                                          Diluted        Net        Earnings        Net         Earnings
                                              Net        Earnings      Income       (Loss)         Income        (Loss)
                                            Income       Per Share     (Loss)      Per Share       (Loss)      Per Share
                                         ------------   ----------   ----------    ----------    ----------    ----------
                                                                                             
(Millions of dollars, except per share)
AmeriGas Propane                           $     17.4   $     0.42   $     13.5    $     0.33    $      3.9    $     0.09
Gas Utility                                      36.4         0.87         41.9          1.02          (5.5)        (0.15)
Electric Operations                               6.1         0.14          4.7          0.11           1.4          0.03
Energy Services                                   6.5         0.15          4.0          0.10           2.5          0.05
International Propane                             7.5         0.18         (4.4)        (0.11)         11.9          0.29
Corporate & Other (a)                             1.6         0.04         (7.7)        (0.18)          9.3          0.22
Changes in accounting (b)                           -            -          4.5          0.11          (4.5)        (0.11)
                                           ----------   ----------   ----------    ----------    ----------    ----------
Total (c)                                  $     75.5   $     1.80   $     56.5    $     1.38    $     19.0    $     0.42
                                           ----------   ----------   ----------    ----------    ----------    ----------

(a) Net loss in Fiscal 2001 includes after-tax shut-down costs of $5.5 million
or $0.13 per share associated with Hearth USA(TM) (see Note 16 to Consolidated
Financial Statements) and a $1.2 million loss or $0.03 per share associated with
the write-down of an investment in a business-to-business e-commerce company.

(b) Fiscal 2001 amounts include cumulative effect of accounting changes
associated with (1) the Partnership's changes in accounting for tank fee revenue
and tank installation costs and (2) the Company's adoption of SFAS 133 (see Note
15 to Consolidated Financial Statements).

(c) Results for Fiscal 2002 reflect the elimination of goodwill amortization
resulting from the adoption of Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets." Pro Forma net income
and diluted earnings per share for Fiscal 2001 as if the adoption of SFAS 142
had occurred as of October 1, 2000 is $70.5 million and $1.72, respectively. For
a detailed discussion of SFAS 142 and its impact on the Company's results, see
Note 1 to Consolidated Financial Statements.

         Although significantly warmer than normal weather negatively affected
UGI Utilities' and AmeriGas Propane's Fiscal 2002 operating results, our Fiscal
2002 net income and earnings per share increased more than 30%. The increase in
net income reflects the elimination of goodwill amortization as a result of the
adoption of SFAS 142, a significant increase in income from our International
Propane businesses, and the benefit of higher growth-related earnings from our
Energy Services business. In addition, results in Fiscal 2001 were negatively
impacted by operating losses and shut-down costs associated with Hearth USA(TM).

         The following table presents certain financial and statistical
information by reportable segment for Fiscal 2002 and Fiscal 2001:

                                                                            Increase
                                         2002           2001               (Decrease)
                                      ----------     ----------     ------------------------
                                                                      
(Millions of dollars)
AMERIGAS PROPANE:
Revenues                              $  1,307.9     $  1,418.4     $   (110.5)         (7.8)%
Total margin                          $    654.8     $    571.4     $     83.4           14.6%
Partnership EBITDA                    $    209.6     $    220.3     $    (10.7)          (4.9%)
Operating income                      $    145.0     $    133.8     $     11.2            8.4%
Retail gallons sold (millions) (a)         987.5          866.8          120.7           13.9%
Degree days - % colder (warmer)
     than normal                           (10.0)%          2.6%             -              -

GAS UTILITY:
Revenues                              $    404.5     $    500.8     $    (96.3)        (19.2)%
Total margin                          $    162.9     $    177.9     $    (15.0)         (8.4)%
Operating income                      $     77.1     $     87.8     $    (10.7)        (12.2)%
Income before income taxes            $     62.9     $     71.5     $     (8.6)        (12.0)%
System throughput - bcf                     70.5           77.3           (6.8)         (8.8)%
Degree days - % colder (warmer)
     than normal                           (17.4)%          2.0%             -             -

ELECTRIC OPERATIONS:
Revenues                              $     86.0     $     83.9     $      2.1            2.5%
Total margin (b)                      $     32.8     $     28.6     $      4.2           14.7%
Operating income                      $     13.2     $     10.7     $      2.5           23.4%
Income before income taxes            $     10.8     $      8.0     $      2.8           35.0%
Distribution sales - gwh                   933.6          945.5          (11.9)         (1.3)%
Third-party generation sales - gwh          24.0              -           24.0            N.M.

ENERGY SERVICES:
Revenues                              $    332.3     $    370.7     $    (38.4)        (10.4)%
Total margin                          $     21.4     $     13.4     $      8.0           59.7%
Operating income                      $     11.1     $      7.3     $      3.8           52.1%
Income before income taxes            $     11.1     $      6.9     $      4.2           60.9%

INTERNATIONAL PROPANE:
Revenues                              $     46.7     $     50.9     $     (4.2)         (8.3)%
Total margin                          $     24.1     $     22.5     $      1.6            7.1%
Operating income                      $      3.9     $      0.8     $      3.1          387.5%
Income (loss) from equity investees   $      8.3     $     (1.5)    $      9.8           N.M.
Income before income taxes            $      8.0     $     (5.6)    $     13.6           N.M.

N.M. - Not meaningful

(a) Retail gallons sold in 2002 and 2001 have been adjusted to include certain
bulk gallons previously considered wholesale gallons.

(b) Electric Operations total margin represents total revenues less cost of
sales and Electric Utility gross receipts taxes of $4.6 million and $3.4 million
in 2002 and 2001, respectively.

AMERIGAS PROPANE. The Partnership's Fiscal 2002 operating results were
negatively impacted by significantly warmer than normal heating-season weather.
Fiscal 2002 temperatures based upon heating degree day data provided by NOAA
were approximately 10.0% warmer than normal and 12.3% warmer than Fiscal 2001.
Notwithstanding the impact of the warmer weather on heating-related sales and
the effects of a sluggish U.S. economy on commercial sales, retail gallons sold
increased 120.7 million gallons principally as a result of the full-

16

                                              UGI Corporation 2003 Annual Report

year effect of the Partnership's August 21, 2001 acquisition of Columbia Propane
and, to a much lesser extent, greater volumes from our PPX(R) grill cylinder
exchange business. The increase in PPX(R) sales principally reflects the effect
on Fiscal 2002 grill cylinder exchanges resulting from the previously mentioned
NFPA guidelines requiring grill cylinders be fitted with OPDs and, to a lesser
extent, the full-year effects of Fiscal 2001 increases in the number of PPX(R)
distribution outlets.

         Retail propane revenues were $1,102.8 million in Fiscal 2002, a
decrease of $44.5 million from Fiscal 2001, reflecting a $204.3 million decrease
as a result of lower average selling prices partially offset by a $159.8 million
increase as a result of the greater retail volumes sold. Wholesale propane
revenues were $88.8 million in Fiscal 2002, a decrease of $86.8 million,
reflecting a $50.2 million decrease due to lower average selling prices and a
$36.6 million decrease as a result of lower wholesale volumes sold. The lower
Fiscal 2002 retail and wholesale selling prices resulted from lower Fiscal 2002
propane product costs. Revenues from other sales and services increased $20.8
million primarily due to the full-year impact of the Columbia Propane
acquisition. Total cost of sales declined $193.9 million in Fiscal 2002
reflecting lower average propane product costs and the lower wholesale sales
partially offset by the higher retail gallons sold.

         Total margin increased $83.4 million reflecting the full-year volume
impact of the Columbia Propane acquisition and a $25.5 million increase in total
margin from PPX(R) reflecting higher volumes and unit margins. PPX(R) propane
unit margins in Fiscal 2002 were higher than in Fiscal 2001 reflecting increases
in sales prices to fund OPD valve replacement capital expenditures on
out-of-compliance grill cylinders.

         Partnership EBITDA increased $1.8 million (excluding the $12.5 million
cumulative effect of the Partnership's changes in accounting for tank fee
revenue and tank installation costs and the adoption of SFAS 133 in Fiscal 2001)
as the significant increase in total margin was substantially offset by a $78.9
million increase in Partnership operating and administrative expenses and a
decrease in other income. EBITDA of PPX(R) increased approximately $21 million
in Fiscal 2002 partially offsetting the effects of the significantly warmer
winter weather on our heating-related volumes. The greater operating and
administrative expenses in Fiscal 2002 resulted primarily from the full-year
impact of the Columbia Propane acquisition and higher volume-driven PPX(R)
expenses. During Fiscal 2002, the Partnership completed its planned blending of
90 Columbia Propane distribution locations with existing AmeriGas Propane
locations. As a result of these district consolidations and other cost reduction
activities, management believes that by September 30, 2002 it achieved its
anticipated $24 million reduction in annualized operating cost savings
subsequent to the acquisition of Columbia Propane. Operating income increased
$11.2 million principally due to the cessation of goodwill amortization in
Fiscal 2002 as a result of the adoption of SFAS 142 partially offset by higher
depreciation and intangible asset amortization associated with Columbia Propane
and higher PPX(R) depreciation. Fiscal 2001 operating income includes $23.8
million of goodwill amortization.

GAS UTILITY. Weather in Gas Utility's service territory during Fiscal 2002 based
upon heating degree days was 17.4% warmer than normal compared to weather that
was 2.0% colder than normal in Fiscal 2001. As a result of the significantly
warmer weather and the effects of a weak economy on commercial and industrial
natural gas usage, distribution system throughput declined 8.8%.

         The $96.3 million decrease in Fiscal 2002 Gas Utility revenue reflects
the impact of lower PGC rates, resulting from the pass through of lower natural
gas costs to retail core-market customers, and the lower distribution system
throughput. Gas Utility cost of gas was $241.7 million in Fiscal 2002 compared
to $322.9 million in Fiscal 2001 reflecting lower natural gas costs and the
decline in retail core-market throughput in Fiscal 2002.

         The decline in Gas Utility margin principally reflects a $6.0 million
decline in retail core-market margin due to the lower sales; a $6.6 million
decline in interruptible margin due principally to the flowback of certain
interruptible customer margin to retail core-market customers beginning December
1, 2001 pursuant to the Gas Restructuring Order; and lower firm delivery service
total margin due to lower delivery service volumes. Interruptible customers are
those who have the ability to switch to alternate fuels.

         Gas Utility operating income declined $10.7 million in Fiscal 2002
reflecting the previously mentioned decline in total margin and a decrease in
pension income partially offset by lower operating expenses. Operating expenses
declined $4.1 million primarily as a result of lower charges for uncollectible
accounts and lower distribution system expenses. Depreciation expense declined
$1.2 million due to a change effective April 1, 2002 in the estimated useful
lives of Gas Utility's natural gas distribution assets resulting from an asset
life study required by the PUC. The decline in Gas Utility income before income
taxes reflects the decrease in operating income offset by lower interest expense
resulting from lower levels of UGI Utilities bank loans outstanding and lower
short-term interest rates.

ELECTRIC OPERATIONS. The decline in Electric Utility kilowatt-hour sales in
Fiscal 2002 reflects the effects on heating-related sales of significantly
warmer winter weather partially offset by the beneficial effect on air
conditioning sales of warmer summer weather. Notwithstanding the decrease in
total kilowatt-hour sales, revenues increased $2.1 million principally due to
an increase in state tax surcharge revenue and greater third-party sales of
electricity produced by UGID's electric generation facilities. Electric
Operations cost of sales was $48.6 million in Fiscal 2002 compared to $51.9
million in Fiscal 2001 principally reflecting the impact of the lower sales and
lower purchased power unit costs partially offset by the full-period increase in
cost of sales resulting from the December 2000 transfer of our Hunlock Creek
electricity generation assets to our electricity generation joint venture,
Energy Ventures. Subsequent to the formation of Energy Ventures, our electricity
generating business purchases its share of the power produced by Energy Ventures
rather than producing this electricity itself. As a result, the purchased cost
of this power is reflected in cost of sales whereas prior to the formation of
Energy Ventures electricity generation costs were reflected in operating and
administrative expenses.

         Electric Operations total margin increased $4.2 million in Fiscal 2002
as a result of lower purchased power unit costs partially offset by the warmer
winter weather-driven decline in sales. Operating income increased $2.5 million
reflecting the

17

FINANCIAL REVIEW (continued)

greater total margin and lower operating and administrative costs subsequent to
the formation of Energy Ventures partially offset by a decline in other income.
The increase in Electric Operations income before income taxes reflects the
increase in operating income and lower interest expense.

ENERGY SERVICES. Revenues from Energy Services declined $38.4 million,
notwithstanding a 27% increase in natural gas volumes sold, reflecting
significantly lower natural gas prices. Total margin increased principally as a
result of the acquisition of the energy marketing businesses of PG Energy in
July 2001, income from providing winter storage services and higher average unit
margins. The increase in total margin was partially offset by higher operating
expenses subsequent to the PG Energy acquisition. The increase in Energy
Services income before income taxes reflects the increase in operating income
and the absence of interest expense on debt under its financing agreement with
UGI that was repaid in Fiscal 2002.

INTERNATIONAL PROPANE. FLAGA's revenues in Fiscal 2002 were lower than in the
prior year as a result of lower average selling prices reflecting lower average
propane product costs. Weather based upon heating degree days was approximately
10% warmer than normal in Fiscal 2002 compared to weather that was 12% warmer
than normal in Fiscal 2001. The increase in FLAGA's total margin reflects higher
average unit margins principally as a result of declining propane product costs.
FLAGA's operating results also benefited from lower operating expenses,
principally reduced payroll costs, and a $1.2 million decrease in goodwill
amortization resulting from the adoption of SFAS 142.

         The significant increase in income from our international propane joint
ventures in Fiscal 2002 principally reflects the full-year benefits from our
debt and equity investments in AGZ Holdings acquired on March 27, 2001.
Operating results of Antargaz in Fiscal 2002 benefited from higher than normal
unit margins, principally as a result of lower propane product costs, and the
elimination of goodwill amortization effective April 1, 2002. In addition,
income from our debt investments in AGZ in Fiscal 2002 includes $0.9 million of
interest income and a currency transaction gain of $1.6 million resulting from
AGZ's early redemption of this euro-denominated debt in July 2002. Loss from
International Propane joint ventures in Fiscal 2001 includes a loss of $1.1
million from the write-off of our propane joint-venture investment located in
Romania. The increase in International Propane income before income taxes
reflects the combined increase in FLAGA operating income and in our income from
equity investees and lower interest expense resulting from lower short-term
interest rates.

INTEREST EXPENSE AND INCOME TAXES. The increase in interest expense principally
reflects higher Partnership long-term debt outstanding resulting from the
Columbia Propane acquisition partially offset by lower levels of UGI Utilities
and Partnership bank loans outstanding and lower short-term interest rates. The
lower effective income tax rate in Fiscal 2002 principally reflects the
elimination of nondeductible goodwill amortization resulting from the adoption
of SFAS 142 and greater equity income from Antargaz.

FINANCIAL CONDITION AND LIQUIDITY

CAPITALIZATION AND LIQUIDITY

Total cash, cash equivalents and short-term investments were $192.1 million at
September 30, 2003 compared with $194.3 million at September 30, 2002. These
amounts include $116.3 million and $114.0 million, respectively, of cash, cash
equivalents and short-term investments held by UGI.

         The primary sources of UGI's cash and short-term investments are the
cash dividends it receives from its principal operating subsidiaries AmeriGas,
Inc., UGI Utilities and, to a lesser extent, Enterprises. AmeriGas, Inc.'s
ability to pay dividends to UGI is largely dependent upon distributions it
receives from AmeriGas Partners. At September 30, 2003, our approximate 48%
effective ownership interest in the Partnership consisted of 24.5 million Common
Units and a 2% general partner interest. Approximately 45 days after the end of
each fiscal quarter, the Partnership distributes all of its Available Cash (as
defined in the Second Amended and Restated Agreement of Limited Partnership of
AmeriGas Partners, the "Partnership Agreement") relating to such fiscal quarter.
Since its formation in 1995, the Partnership has paid the Minimum Quarterly
Distribution of $0.55 ("MQD") on all limited partner units outstanding. The
amount of Available Cash needed annually to pay the MQD on all units and the
general partner interests in Fiscal 2003, 2002 and 2001 was approximately $112
million, $109 million and $99 million, respectively. Based upon the number of
Partnership units outstanding on September 30, 2003, the amount of Available
Cash needed annually to pay the MQD on all units and the general partner
interests is approximately $117 million. The ability of the Partnership to pay
the MQD on all units depends upon a number of factors. These factors include (1)
the level of Partnership earnings; (2) the cash needs of the Partnership's
operations (including cash needed for maintaining and increasing operating
capacity); (3) changes in operating working capital; and (4) the ability of the
Partnership to borrow under its Credit Agreement, to refinance maturing debt and
to increase its long-term debt. Some of these factors are affected by conditions
beyond our control including weather, competition in markets we serve, the cost
of propane and changes in capital market conditions.

         During Fiscal 2003, 2002 and 2001, AmeriGas, Inc., UGI Utilities and
Enterprises paid cash dividends to UGI as follows:

     Year Ended September 30,           2003            2002            2001
- -----------------------------------   ----------     ----------     ----------
                                                           
(Millions of dollars)
AmeriGas, Inc.                           $  44.7       $   49.4      $    41.0
UGI Utilities                               33.9           37.9           35.3
Enterprises                                  7.1         23.6(a)             -
                                      ----------     ----------     ----------
Total dividends to UGI                   $  85.7       $  110.9      $    76.3
                                      ----------     ----------     ----------

(a) Includes $17.0 of the proceeds related to the redemption of AGZ Bonds.

         Dividends received by UGI are available to pay dividends on UGI Common
Stock and for investment purposes.

         On January 28, 2003, UGI's Board of Directors approved a 3-for-2 split
of UGI's Common Stock. On April 1, 2003, UGI issued one additional common share
for every two common shares outstanding to shareholders of record on February
28,

18

                                              UGI Corporation 2003 Annual Report

2003. Also on January 28, 2003, UGI's Board of Directors approved an increase in
the quarterly dividend rate on UGI Common Stock to $0.285 per post-split share,
or $1.14 per post-split share on an annual basis, commencing April 1, 2003.

AMERIGAS PARTNERS. The Partnership's debt outstanding at September 30, 2003
totaled $927.3 million. There were no amounts outstanding under AmeriGas OLP's
Credit Agreement at September 30, 2003.

         AmeriGas OLP's Credit Agreement expires on October 15, 2006 and
consists of (1) a $100 million Revolving Credit Facility and (2) a $75 million
Acquisition Facility. The Revolving Credit Facility may be used for working
capital and general purposes of AmeriGas OLP. The Acquisition Facility provides
AmeriGas OLP with the ability to borrow up to $75 million to finance the
purchase of propane businesses or propane business assets or, to the extent it
is not so used, may be used for working capital and general purposes. Issued and
outstanding letters of credit under the Revolving Credit Facility, which reduce
the amount available for borrowings, totaled $33.4 million at September 30,
2003. AmeriGas OLP's short-term borrowing needs are seasonal and are typically
greatest during the fall and winter heating-season months due to the need to
fund higher levels of working capital.

         AmeriGas OLP also has a credit agreement with the General Partner to
borrow up to $20 million on an unsecured, subordinated basis, for working
capital and general purposes. UGI has agreed to contribute up to $20 million to
the General Partner to fund such borrowings.

         AmeriGas Partners periodically issues debt and equity securities and
expects to continue to do so. It has effective debt and equity shelf
registration statements with the U.S. Securities and Exchange Commission ("SEC")
under which it may issue up to an additional (1) $28 million principal amount of
8.875% Senior Notes due 2011, (2) 1.4 million AmeriGas Partners Common Units and
(3) up to $500 million of debt or equity pursuant to an unallocated shelf
registration statement.

         AmeriGas OLP must maintain certain financial ratios in order to borrow
under its Credit Agreement including a minimum interest coverage ratio and a
maximum debt to EBITDA ratio, as defined. AmeriGas OLP's ratios calculated as of
September 30, 2003 permit it to borrow up to the maximum amount available. For a
more detailed discussion of the Partnership's credit facilities, see Note 4 to
Consolidated Financial Statements. Based upon existing cash balances, cash
expected to be generated from operations, borrowings available under its Credit
Agreement, and the expected refinancing of its maturing long-term debt, the
Partnership's management believes that the Partnership will be able to meet its
anticipated contractual commitments and projected cash needs during Fiscal 2004.

UGI UTILITIES. UGI Utilities' total debt outstanding was $258.0 million at
September 30, 2003. Included in this amount is $40.7 million under revolving
credit agreements.

UGI Utilities has revolving credit commitments under which it may borrow up to a
total of $107 million. These agreements are currently scheduled to expire in
June 2005 and 2006. The revolving credit agreements have restrictions on such
items as total debt, debt service and payments for investments. At September 30,
2003, UGI Utilities was in compliance with these covenants. UGI Utilities has a
shelf registration statement with the SEC under which it may issue up to an
additional $40 million of Medium-Term Notes or other debt securities. Based upon
cash expected to be generated from Gas Utility and Electric Utility operations
and borrowings available under revolving credit agreements, management believes
that UGI Utilities will be able to meet its anticipated contractual and
projected cash commitments during Fiscal 2004. For a more detailed discussion of
UGI Utilities' long-term debt and revolving credit facilities, see Note 4 to
Consolidated Financial Statements.

ENERGY SERVICES. Energy Services has a $100 million receivables purchase
facility ("Receivables Facility") with an issuer of receivables-backed
commercial paper expiring on August 26, 2006, although the Receivables Facility
may terminate prior to such date due to the termination of the commitments of
the Receivables Facility back-up purchasers. Under the Receivables Facility,
Energy Services transfers, on an ongoing basis and without recourse, its trade
accounts receivable to its wholly owned, special purpose subsidiary, Energy
Services Funding Corporation ("ESFC"), which is consolidated for financial
statement purposes. ESFC, in turn, has sold, and subject to certain conditions,
may from time to time sell, an undivided interest in the receivables to a
commercial paper conduit of a major bank. The maximum level of funding available
at any one time from this facility is $100 million. The proceeds of these sales
are less than the face amount of the accounts receivable sold by an amount that
approximates the purchaser's financing cost of issuing its own
receivables-backed commercial paper. ESFC was created and has been structured to
isolate its assets from creditors of Energy Services and its affiliates,
including UGI. This two-step transaction is accounted for as a sale of
receivables following the provisions of SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." Energy
Services continues to service, administer and collect trade receivables on
behalf of the commercial paper issuer and ESFC. At September 30, 2003, the
outstanding balance of ESFC receivables was $38.5 million which amount is net of
$17 million in trade receivables sold to the commercial paper conduit. Based
upon cash expected to be generated from operations and borrowings available
under its Receivables Facility, management believes that Energy Services will be
able to meet its anticipated contractual and projected cash commitments during
Fiscal 2004.

         In addition, a major bank has committed to issue up to $50 million of
standby letters of credit, secured by cash or marketable securities ("LC
Facility"). Energy Services expects to fund the collateral requirements with
borrowings under its Receivables Facility. The LC Facility expires on September
13, 2004.

FLAGA. FLAGA has a 15 million euro working capital loan commitment from a
European bank expiring in November 2004. Borrowings under the working capital
facility totaled 13.6 million euro ($15.9 million U.S. dollar equivalent) at
September 30, 2003. Debt issued under this agreement, as well as $73.1 million
of acquisition and special purpose debt of FLAGA, are subject to guarantees of
UGI. For a more detailed discussion of FLAGA's debt, see Note 4 to Consolidated
Financial Statements.

                                                                              19

FINANCIAL REVIEW (continued)

FLAGA's management expects to repay long-term debt maturing in Fiscal 2004 of
$5.7 million principally through cash generated from operations and capital
contributions from UGI.

CASH FLOWS

OPERATING ACTIVITIES. Due to the seasonal nature of the Company's businesses,
cash flows from operating activities are generally strongest during the second
and third fiscal quarters when customers pay for natural gas, propane and
electricity consumed during the heating season months. Conversely, operating
cash flows are generally at their lowest levels during the first and fourth
fiscal quarters when the Company's investment in working capital, principally
inventories and accounts receivable, is generally greatest. The Company's major
business units use revolving credit facilities, or in the case of Energy
Services its Receivables Facility, to satisfy their seasonal operating cash flow
needs. Cash flow from operating activities was $249.1 million in Fiscal 2003,
$247.5 million in Fiscal 2002, and $203.5 million in Fiscal 2001. Cash flow from
operating activities before changes in operating working capital was $256.3
million in Fiscal 2003, $233.7 million in Fiscal 2002, and $179.8 million in
Fiscal 2001. Changes in operating working capital used $7.2 million of cash in
Fiscal 2003, and provided $13.8 million and $23.7 million of cash in Fiscal 2002
and Fiscal 2001, respectively. Cash needed to fund Fiscal 2003 increases in
accounts receivable and inventories resulting from higher natural gas and
propane commodity prices was substantially offset by cash provided from changes
in accounts payable, Gas Utility fuel cost overcollections, and accrued income
taxes.

INVESTING ACTIVITIES. Cash flow used in investing activities was $226.1 million
in Fiscal 2003, $66.4 million in Fiscal 2002, and $313.3 million in Fiscal 2001.
Investing activity cash flow is principally affected by capital expenditures and
investments in property, plant and equipment, cash paid for acquisitions of
businesses, investments in and distributions from our equity investees, and
proceeds from sales of assets. During Fiscal 2003, we spent $100.9 million for
property, plant and equipment, an increase of $6.2 million from Fiscal 2002,
principally reflecting higher Gas Utility and FLAGA capital expenditures. Cash
paid for business acquisitions in Fiscal 2003 principally reflects Partnership
business acquisitions and Energy Services' TXU Energy Acquisition. Additionally,
during Fiscal 2003 the Company purchased an additional 4.9% interest in
Conemaugh for $51.3 million and received a cash dividend from AGZ of $5.6
million. Also during Fiscal 2003, UGI invested $50 million of its cash and cash
equivalents in short-term investments.

FINANCING ACTIVITIES. Cash flow used by financing activities was $75.3 million
in Fiscal 2003 and $74.3 million in Fiscal 2002 compared to cash flow provided
by financing activities of $103.7 million in Fiscal 2001. Financing activity
cash flow changes are primarily due to issuances and repayments of long-term
debt, net borrowings under revolving credit facilities, dividends and
distributions on UGI Common Stock and AmeriGas Partners Common Units, and
proceeds from public offerings of AmeriGas Partners Common Units and issuances
of UGI Common Stock.

         In June 2003, AmeriGas Partners sold 2.9 million Common Units in an
underwritten public offering at a public offering price of $27.12 per unit. The
net proceeds of the public offering totaling $75.0 million, and associated
capital contributions from the General Partner totaling $1.5 million, were
contributed to AmeriGas OLP and used to reduce indebtedness under its bank
credit agreement and for general partnership purposes. The underwriters'
overallotment option expired unexercised. Concurrent with this sale of Common
Units, the Company recorded a gain in the amount of $22.6 million, which is
reflected as an increase in common stockholders' equity, in accordance with the
guidance in SEC Staff Accounting Bulletin, No. 51, "Accounting for Sales of
Common Stock by a Subsidiary" ("SAB 51"). The gain had no effect on the
Company's net income or cash flow.

         The Partnership also completed a number of debt transactions during
Fiscal 2003. In December 2002, AmeriGas Partners issued $88 million face amount
of 8.875% Senior Notes due 2011 at an effective interest rate of 8.30%. The net
proceeds of $89.1 million were used in January 2003 to redeem prior to maturity
AmeriGas Partners' $85 million face amount of 10.125% Senior Notes due April
2007 at a redemption price of 102.25%, plus accrued interest. The Company
recognized a pre-tax loss, net of minority interests, of $1.5 million relating
to the redemption premium and other associated costs and expenses. In April
2003, AmeriGas OLP repaid $53.8 million of maturing First Mortgage Notes. In
conjunction with this repayment, in April 2003 AmeriGas Partners issued $32
million face amount of 8.875% Senior Notes due 2011 at an effective interest
rate of 7.72% and contributed the net proceeds of $33.7 million, including debt
premium, to AmeriGas OLP.

         In August 2003, UGI Utilities issued $25 million of ten-year notes at
an interest rate of 5.37% and $20 million of 30-year notes at an interest rate
of 6.50% under its Medium-Term Note program. The net proceeds along with
existing cash balances were used to repay $50 million of 6.50% Senior Notes that
matured in August 2003.

         During Fiscal 2003 we paid cash dividends on UGI Common Stock of $47.7
million and the Partnership paid the MQD on all limited partner units. The
increase in cash flow from the issuance of UGI Common Stock in Fiscal 2003 is
principally the result of greater employee stock option exercise activity.

CONVERSION OF AMERIGAS PARTNERS SUBORDINATED UNITS

In December 2002, the General Partner determined that the cash-based performance
and distribution requirements for the conversion of the then-remaining 9,891,072
Subordinated Units of AmeriGas Partners, all of which were held by the General
Partner, had been met in respect of the quarter ended September 30, 2002. As a
result, in accordance with the Second Amended and Restated Agreement of Limited
Partnership of AmeriGas Partners, L.P., the Subordinated Units were converted to
an equivalent number of Common Units effective November 18, 2002. Concurrent
with the Subordinated Unit conversion, the Company recorded a $157.0 million
increase in common stockholders' equity, and a corresponding decrease in
minority interests in AmeriGas Partners, associated with gains from sales of
Common Units by AmeriGas Partners in conjunction with, and subsequent to, the
Partnership's April 19, 1995 initial public offering. These gains

20

                                              UGI Corporation 2003 Annual Report

were determined in accordance with the guidance in SAB 51. The gains resulted
because the public offering prices of the AmeriGas Partners Common Units
exceeded the associated carrying amount of our investment in the Partnership on
the dates of their sale. Due to the preference nature of the Common Units, the
Company was precluded from recording these gains until the Subordinated Units
converted to Common Units. No deferred income taxes were recorded on these gains
due to the Company's intent to hold its investment in the Partnership
indefinitely. The changes to the Company's balance sheet resulting from the
Subordinated Unit conversion had no effect on the Company's net income or cash
flow and did not result in an increase in the number of AmeriGas Partners
limited partner units outstanding.

UGI UTILITIES PENSION PLAN

UGI Utilities sponsors a defined benefit pension plan ("Pension Plan") for
employees of UGI Utilities, UGI, and certain of UGI's other subsidiaries. During
Fiscal 2002 and 2001, the market value of plan assets was negatively affected by
declines in the equity markets. Equity market performance improved in Fiscal
2003 and, as a result, the fair value of Pension Plan assets increased to $183.9
million at September 30, 2003 compared to $166.1 million at September 30, 2002.
At September 30, 2003 and 2002, the Pension Plan's assets exceeded its
accumulated benefit obligations by $7.3 million and $7.2 million, respectively.
The Company is in full compliance with regulations governing defined benefit
pension plans, including ERISA rules and regulations, and does not anticipate it
will be required to make a contribution to the Pension Plan in Fiscal 2004.
Pre-tax pension income reflected in Fiscal 2003, 2002 and 2001 results was $1.1
million, $4.0 million and $5.9 million, respectively. The decrease in pension
income during this period reflects the significant declines in the market value
of Pension Plan assets and decreases in the discount rate assumption. Pension
expense in Fiscal 2004 is expected to be approximately $1.2 million compared to
pension income of $1.1 million in Fiscal 2003 due to decreases in the discount
rate and expected return on Pension Plan assets assumptions.

CAPITAL EXPENDITURES

In the following table, we present capital expenditures (which include
expenditures for capital leases but exclude acquisitions) by business segment
for Fiscal 2003, 2002 and 2001. We also provide amounts we expect to spend in
Fiscal 2004. We expect to finance Fiscal 2004 capital expenditures principally
from cash generated by operations and borrowings under our credit facilities.

Year Ended September 30,     2004          2003       2002      2001
- ------------------------   --------     --------   --------   --------
                                                  
(Millions of dollars)      (estimate)
AmeriGas Propane           $   58.1     $   53.4   $   53.5   $   39.2
Gas Utility                    38.0         37.2       31.0       31.8
Electric Operations             4.9          4.1        4.9        5.0
Energy Services                 1.3          1.0        0.9        0.2
International Propane           4.2          4.5        3.9        2.7
Other                           1.0          1.2        0.5        0.4
                           --------     --------   --------   --------
Total                      $  107.5     $  101.4   $   94.7   $   79.3
                           --------     --------   --------   --------

CONTRACTUAL CASH OBLIGATIONS AND COMMITMENTS

The Company has certain contractual cash obligations that extend beyond Fiscal
2003 including scheduled repayments of long-term debt and UGI Utilities
preferred shares subject to mandatory redemption, operating lease payments and
unconditional purchase obligations for pipeline capacity, pipeline
transportation and natural gas storage services, and commitments to purchase
natural gas, propane and electricity. The following table presents significant
contractual cash obligations under agreements existing as of September 30, 2003
(in millions).

                                              Payments Due by Period
                           --------------------------------------------------------
                                        less than    2 - 3      4 - 5         After
                             Total        1 year     years      years        5 years
                           --------     ---------    ------     ------       -------
                                                              
Long-term debt             $1,207.2       $ 61.9     $307.9     $132.8       $704.6
UGI Utilities preferred
   shares subject to
   mandatory redemption        20.0            -        2.0        2.0         16.0
Operating leases              189.3         40.1       63.0       43.3         42.9
AmeriGas Propane
   supply contracts            16.7         16.7          -          -            -
Energy Services supply
   contracts                  510.4        435.3       73.7        1.4            -
Gas Utility and Electric
   Utility supply, storage
   and service contracts      406.9        157.1      136.0       39.8         74.0
                           --------     ---------   -------     ------       -------
Total                      $2,350.5       $711.1     $582.6     $219.3       $837.5
                           --------     ---------   -------     ------       -------

RELATED PARTY TRANSACTIONS

During Fiscal 2003, 2002 and 2001, the Company did not enter into any related
party transactions that had a material effect on its financial condition or
results of operations.

OFF-BALANCE SHEET ARRANGEMENTS

We lease various buildings and other facilities and transportation, computer and
office equipment. We account for these arrangements as operating leases. These
off-balance sheet arrangements enable us to lease facilities and equipment from
third parties rather than, among other options, purchasing the equipment and
facilities using on-balance sheet financing. For a summary of scheduled future
payments under these lease arrangements, see "Contractual Cash Obligations and
Commitments."

UTILITY REGULATORY MATTERS

As a result of Pennsylvania's Natural Gas Choice and Competition Act ("Gas
Competition Act") signed into law on June 22, 1999, all natural gas consumers in
Pennsylvania have the ability to purchase their gas supplies from the supplier
of their choice. Under the Gas Competition Act, local gas distribution companies
("LDCs") like Gas Utility may continue to sell gas to customers, and such sales
of gas, as well as distribution services provided by LDCs, continue to be
subject to rate regulation by the PUC. LDCs serve as the supplier of last resort
for all residential and small commercial and industrial customers. As of

                                                                              21

FINANCIAL REVIEW (continued)

September 30, 2003, less than five percent of Gas Utility's retail customers
purchase their gas from alternative suppliers.

         On June 29, 2000, the PUC issued its order ("Gas Restructuring Order")
approving Gas Utility's restructuring plan filed by Gas Utility pursuant to the
Gas Competition Act. Among other things, the implementation of the Gas
Restructuring Order resulted in an increase in Gas Utility's retail core-market
base rates effective October 1, 2000. This base rate increase was designed to
generate approximately $16.7 million in additional net annual revenues. In
accordance with the Gas Restructuring Order, Gas Utility reduced its retail
core-market PGC rates by an annualized amount of $16.7 million in the first 14
months following the October 1, 2000 base rate increase.

         Effective December 1, 2001, Gas Utility was required to reduce its
retail core-market PGC rates by amounts equal to the margin it receives from
interruptible customers using pipeline capacity contracted by Gas Utility for
retail core-market customers. As a result, Gas Utility operating results are
more sensitive to the effects of heating-season weather and less sensitive to
the market prices of alternative fuels.

         The PUC approved a settlement establishing rules for Electric Utility
Provider of Last Resort ("POLR") service on March 28, 2002, and a separate
settlement that modified these rules on June 13, 2002 (collectively, the "POLR
Settlement"). Under the terms of the POLR Settlement, Electric Utility
terminated stranded cost recovery from commercial and industrial ("C&I")
customers on July 31, 2002, and from residential customers on October 31, 2002,
and is no longer subject to the statutory generation rate caps as of August 1,
2002 for C&I customers and as of November 1, 2002 for residential customers.
Stranded costs are electric generation-related costs that traditionally would be
recoverable in a regulated environment but may not be recoverable in a
competitive electric generation market. Charges for generation service (1) were
initially set at a level equal to the rates paid by Electric Utility customers
for POLR service under the statutory rate caps; (2) may be raised at certain
designated times by up to 5% of the total rate for distribution, transmission
and generation through December 2004; and (3) may be set at market rates
thereafter. Electric Utility may also offer multiple-year POLR contracts to its
customers. The POLR Settlement provides for annual shopping periods during which
customers may elect to remain on POLR service or choose an alternate supplier.
Customers who do not select an alternate supplier will be obligated to remain on
POLR service until the next shopping period. Residential customers who return to
POLR service at a time other than during the annual shopping period must remain
on POLR service until the date of the second open shopping period after
returning. C&I customers who return to POLR service at a time other than during
the annual shopping period must remain on POLR service until the next open
shopping period, and may, in certain circumstances, be subject to generation
rate surcharges. Consistent with the terms of the POLR Settlement, Electric
Utility's POLR rates for commercial and industrial customers will increase
beginning January 2004, and for residential customers beginning June 2004. Also,
Electric Utility has offered and entered into multiple-year POLR contracts with
certain of its customers. Additionally, pursuant to the requirements of the
Electricity Choice Act, the PUC is currently developing post-rate cap POLR
regulations that are expected to further define post-rate cap POLR service
obligations and pricing. As of September 30, 2003, less than 1% of Electric
Utility's customers have chosen an alternative electricity generation supplier.

         We account for the operations of Gas Utility and Electric Utility in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 71,
"Accounting for the Effects of Certain Types of Regulation" ("SFAS 71"). SFAS 71
allows us to defer expenses and revenues on the balance sheet as regulatory
assets and liabilities when it is probable that those expenses and income will
be allowed in the ratemaking process in a period different from the period in
which they would have been reflected in the income statement of an unregulated
company. These deferred assets and liabilities are then flowed through the
income statement in the period in which the same amounts are included in rates
and recovered from or refunded to customers. As required by SFAS 71, we monitor
our regulatory and competitive environments to determine whether the recovery of
our regulatory assets continues to be probable. If we were to determine that
recovery of these regulatory assets is no longer probable, such assets would be
written off against earnings.

MANUFACTURED GAS PLANTS

From the late 1800s through the mid-1900s, UGI Utilities and its former
subsidiaries owned and operated a number of manufactured gas plants ("MGPs")
prior to the general availability of natural gas. Some constituents of coal tars
and other residues of the manufactured gas process are today considered
hazardous substances under the Superfund Law and may be present on the sites of
former MGPs. Between 1882 and 1953, UGI Utilities owned the stock of subsidiary
gas companies in Pennsylvania and elsewhere and also operated the businesses of
some gas companies under agreement. Pursuant to the requirements of the Public
Utility Holding Company Act of 1935, UGI Utilities divested all of its utility
operations other than those which now constitute Gas Utility and Electric
Utility.

         UGI Utilities does not expect its costs for investigation and
remediation of hazardous substances at Pennsylvania MGP sites to be material to
its results of operations because Gas Utility is currently permitted to include
in rates, through future base rate proceedings, prudently incurred remediation
costs associated with such sites. UGI Utilities has been notified of several
sites outside Pennsylvania on which (1) MGPs were formerly operated by it or
owned or operated by its former subsidiaries and (2) either environmental
agencies or private parties are investigating the extent of environmental
contamination or performing environmental remediation. UGI Utilities is
currently litigating three claims against it relating to out-of-state sites.

         Management believes that under applicable law UGI Utilities should not
be liable in those instances in which a former subsidiary owned or operated an
MGP. There could be, however, significant future costs of an uncertain amount
associated with environmental damage caused by MGPs outside Pennsylvania that
UGI Utilities directly operated, or that were owned or operated by former
subsidiaries of UGI Utilities, if a court were to conclude that (i) the
subsidiary's separate corporate form should be disregarded or (ii) UGI Utilities
should be considered to have

22

                                              UGI Corporation 2003 Annual Report

been an operator because of its conduct with respect to its subsidiary's MGP.

         With respect to a manufactured gas plant site in Manchester, New
Hampshire, EnergyNorth Natural Gas, Inc. ("EnergyNorth") filed suit against UGI
Utilities seeking contribution from UGI Utilities for response and remediation
costs associated with the contamination on the site of a former MGP allegedly
operated by former subsidiaries of UGI Utilities. UGI Utilities and EnergyNorth
agreed to a settlement of this matter in June 2003. UGI Utilities recorded its
estimated liability for contingent payments to EnergyNorth under the terms of
the settlement agreement which did not have a material effect on Fiscal 2003 net
income.

         In April 2003, Citizens Communications Company ("Citizens") served a
complaint naming UGI Utilities as a third party defendant in a civil action
pending in United States District Court for the District of Maine. In that
action, the plaintiff, City of Bangor, Maine ("City") sued Citizens to recover
environmental response costs associated with MGP wastes generated at a plant
allegedly operated by Citizens' predecessors at a site on the Penobscot River.
Citizens subsequently joined UGI Utilities and ten other third party defendants
alleging that the third party defendants are responsible for an equitable share
of costs Citizens may be required to pay to the City for cleaning up tar
deposits in the Penobscot River. The City believes that it could cost as much as
$50 million to clean up the river. UGI Utilities believes that it has good
defenses to the claim.

         By letter dated July 29, 2003, Atlanta Gas Light Company ("AGL") served
UGI Utilities with a complaint filed in the United States District Court for the
Middle District of Florida in which AGL alleges that UGI Utilities is
responsible for 20% of approximately $8.0 million incurred by AGL in the
investigation and remediation of a former MGP site in St. Augustine, Florida.
UGI Utilities formerly owned stock of the St. Augustine Gas Company, the owner
and operator of the MGP. UGI Utilities believes that it has good defenses to the
claim and is defending the suit.

         On September 20, 2001, Consolidated Edison Company of New York
("ConEd") filed suit against UGI Utilities in the United States District Court
for the Southern District of New York, seeking contribution from UGI Utilities
for an allocated share of response costs associated with investigating and
assessing gas plant related contamination at former MGP sites in Westchester
County, New York. The complaint alleges that UGI Utilities "owned and operated"
the MGPs prior to 1904. The complaint also seeks a declaration that UGI
Utilities is responsible for an allocated percentage of future investigative and
remedial costs at the sites. ConEd believes that the cost of remediation for all
of the sites could exceed $70 million. UGI Utilities believes that it has good
defenses to the claim and is defending the suit. In November 2003, the court
granted UGI Utilities' motion for summary judgement in part, dismissing all
claims premised on a disregard of the separate corporate form of UGI Utilities'
former subsidiaries and dismissing claims premised on UGI Utilities' operation
of three of the MGPs under operating leases with ConEd's predecessors. The court
reserved decision on the remaining theory of liability, that UGI Utilities was a
direct operator of the remaining MGPs.

MARKET RISK DISCLOSURES

Our primary market risk exposures include (1) market prices for propane, natural
gas and electricity; (2) changes in interest rates; and (3) foreign currency
exchange rates.

         The risk associated with fluctuations in the prices the Partnership and
our International Propane operations pay for propane is principally a result of
market forces reflecting changes in supply and demand for propane and other
energy commodities. The Partnership's profitability is sensitive to changes in
propane supply costs, and the Partnership generally attempts to pass on
increases in such costs to customers. The Partnership may not, however, always
be able to pass through product cost increases fully, particularly when product
costs rise rapidly. In order to reduce the volatility of the Partnership's
propane market price risk, it uses contracts for the forward purchase or sale of
propane, propane fixed-price supply agreements, and over-the-counter derivative
commodity instruments including price swap and option contracts. International
Propane's profitability is also sensitive to changes in propane supply costs.
FLAGA uses derivative commodity instruments to reduce market risk associated
with a portion of its propane purchases. Over-the-counter derivative commodity
instruments utilized by the Partnership and FLAGA to hedge forecasted purchases
of propane are generally settled at expiration of the contract. In order to
minimize credit risk associated with its derivative commodity contracts, the
Partnership monitors established credit limits with the contract counterparties.
Although we use derivative financial and commodity instruments to reduce
market price risk associated with forecasted transactions, we do not use
derivative financial and commodity instruments for speculative or trading
purposes.

         Gas Utility's tariffs contain clauses that permit recovery of
substantially all of the prudently incurred costs of natural gas it sells to its
customers. The recovery clauses provide for a periodic adjustment for the
difference between the total amounts actually collected from customers through
PGC rates and the recoverable costs incurred. Because of this ratemaking
mechanism, there is limited commodity price risk associated with our Gas Utility
operations. Gas Utility uses exchange-traded natural gas call option contracts
to reduce volatility in the cost of gas it purchases for its retail core-market
customers. The cost of these call option contracts, net of associated gains, is
included in Gas Utility's PGC recovery mechanism.

         Prior to September 2002, Electric Utility purchased its electric power
needs from UGID and under third-party power supply arrangements of various
lengths and on the spot market. Beginning September 2002, Electric Utility began
purchasing its power needs exclusively from third-party electricity suppliers
under fixed-price energy and capacity contracts and, to a much lesser extent, on
the spot market, and UGID began selling electric power produced from its
interests in electricity generating facilities to third parties on the spot
market. Prices for electricity can be volatile especially during periods of high
demand or tight supply. Although the generation component of Electric Utility's
rates is subject to various rate cap provisions as a result of the POLR
Settlement, Electric Utility's fixed-price contracts

                                                                              23

FINANCIAL REVIEW (continued)

with electricity suppliers mitigate most risks associated with offering
customers a fixed price during the contract periods. However, should any of the
suppliers under these contracts fail to provide electric power under the terms
of the power and capacity contracts, increases, if any, in the cost of
replacement power or capacity would negatively impact Electric Utility results.
In order to reduce this non-performance risk, Electric Utility has diversified
its purchases across several suppliers and entered into bilateral collateral
arrangements with certain of them.

         UGID has entered into fixed-price sales agreements for a portion of the
electricity expected to be generated by its interests in electricity generating
assets. In the unlikely event that these generation assets would not be able to
produce all of the electricity needed to supply electricity under these
agreements, UGID would be required to purchase such electricity on the spot
market or under contract with other electricity suppliers. Accordingly,
increases in the cost of replacement power could negatively impact the Company's
results.

         In order to manage market price risk relating to substantially all of
Energy Services' forecasted fixed-price sales of natural gas, Energy Services
purchases exchange-traded natural gas futures contracts or enters into
fixed-price supply arrangements. Exchange-traded natural gas futures contracts
are guaranteed by the New York Mercantile Exchange ("NYMEX") and have nominal
credit risk. The change in market value of these contracts generally requires
daily cash deposits in margin accounts with brokers. Although Energy Services'
fixed-price supply arrangements mitigate most risks associated with its
fixed-price sales contracts, should any of the natural gas suppliers under these
arrangements fail to perform, increases, if any, in the cost of replacement
natural gas would adversely impact Energy Services' results. In order to reduce
this risk of supplier nonperformance, Energy Services has diversified its
purchases across a number of suppliers.

         We have both fixed-rate and variable-rate debt. Changes in interest
rates impact the cash flows of variable-rate debt but generally do not impact
its fair value. Conversely, changes in interest rates impact the fair value of
fixed-rate debt but do not impact their cash flows.

         Our variable-rate debt includes borrowings under AmeriGas OLP's Credit
Agreement, borrowings under UGI Utilities' revolving credit agreements, and a
substantial portion of FLAGA's debt. These debt agreements have interest rates
that are generally indexed to short-term market interest rates. At September
30, 2003 and 2002, combined borrowings outstanding under these agreements
totaled $119.7 million and $131.0 million, respectively. Based upon
weighted-average borrowings outstanding under these agreements during Fiscal
2003 and Fiscal 2002, an increase in short-term interest rates of 100 basis
points (1%) would have increased our interest expense by $1.8 million and $1.4
million, respectively.

         The remainder of our debt outstanding is subject to fixed rates of
interest. A 100 basis point increase in market interest rates would result in
decreases in the fair value of this fixed-rate debt of $57.1 million and $52.5
million at September 30, 2003 and 2002, respectively. A 100 basis point decrease
in market interest rates would result in increases in the fair value of this
fixed-rate debt of $61.7 million and $56.4 million at September 30, 2003 and
2002, respectively.

         Our long-term debt is typically issued at fixed rates of interest based
upon market rates for debt having similar terms and credit ratings. As these
long-term debt issues mature, we may refinance such debt with new debt having
interest rates reflecting then-current market conditions. This debt may have an
interest rate that is more or less than the refinanced debt. In order to reduce
interest rate risk associated with near-term forecasted issuances of fixed-rate
debt, from time to time we enter into interest rate protection agreements.

         The primary currency for which the Company has exchange rate risk is
the U.S. dollar versus the euro. We do not currently use derivative instruments
to hedge foreign currency exposure associated with our international propane
businesses, principally FLAGA and Antargaz. As a result, the U.S. dollar value
of our foreign-denominated assets and liabilities will fluctuate with changes in
the associated foreign currency exchange rates. With respect to FLAGA, the net
effect of changes in foreign currency exchange rates on their U.S. dollar
denominated assets and liabilities would not be material because FLAGA's U.S.
dollar denominated financial instrument assets and liabilities are not
materially different in amount. With respect to our net investments in FLAGA and
Antargaz, a 10% decline in the value of the euro versus the U.S. dollar would
reduce their aggregate net book value by approximately $5.7 million, which
amount would be reflected in other comprehensive income.

         The following table summarizes the fair values of unsettled market risk
sensitive derivative instruments held at September 30, 2003 and 2002. It also
includes the changes in fair value that would result if there were an adverse
change in (1) the market price of propane of 10 cents a gallon; (2) the market
price of natural gas of 50 cents a dekatherm; and (3) interest rates on ten-year
U.S. treasury notes of 50 basis points.

                                                           Change in
                                         Fair Value       Fair Value
                                        ------------      ----------
                                                    
(Millions of dollars)
September 30, 2003:
   Propane commodity price risk                $(0.6)          $(24.3)
   Natural gas commodity price risk             (1.0)            (9.2)
   Interest rate risk                            0.2             (2.4)

September 30, 2002:
   Propane commodity price risk                $ 9.8           $(11.1)
   Natural gas commodity price risk              5.1             (6.0)
   Interest rate risk                           (4.0)            (6.6)
                                               -----           ------

         Gas Utility's exchange traded natural gas call option contracts are
excluded from the table above because any associated net gains or losses are
included in Gas Utility's PGC recovery mechanism. Because the Company's
derivative instruments generally qualify as hedges under SFAS 133, we expect
that changes in the fair value of derivative instruments used to manage
commodity or interest rate market risk would be substantially offset by gains or
losses on the associated anticipated transactions.

24

                                              UGI Corporation 2003 Annual Report

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements and related disclosures in compliance
with generally accepted accounting principles requires the selection and
application of appropriate accounting principles to the relevant facts and
circumstances of the Company's operations and the use of estimates made by
management. The Company has identified the following critical accounting
policies that are most important to the portrayal of the Company's financial
condition and results of operations. Changes in these policies could have a
material effect on the financial statements. The application of these accounting
policies necessarily requires management's most subjective or complex judgments
regarding estimates and projected outcomes of future events which could have a
material impact on the financial statements. Management has reviewed these
critical accounting policies, and the estimates and assumptions associated with
them, with its Audit Committee. In addition, management has reviewed the
following disclosures regarding the application of these critical accounting
policies with the Audit Committee.

LITIGATION ACCRUALS AND ENVIRONMENTAL REMEDIATION LIABILITIES. We are involved
in litigation regarding pending claims and legal actions that arise in the
normal course of our businesses. In addition, UGI Utilities and its former
subsidiaries owned and operated a number of MGPs in Pennsylvania and elsewhere
at which hazardous substances may be present. In accordance with accounting
principles generally accepted in the United States of America, the Company
establishes reserves for pending claims and legal actions or environmental
remediation obligations when it is probable that a liability exists and the
amount or range of amounts can be reasonably estimated. Reasonable estimates
involve management judgments based on a broad range of information and prior
experience. These judgments are reviewed quarterly as more information is
received and the amounts reserved are updated as necessary. Such estimated
reserves may differ materially from the actual liability, and such reserves may
change materially as more information becomes available and estimated reserves
are adjusted.

REGULATORY ASSETS AND LIABILITIES. Gas Utility and Electric Utility are subject
to regulation by the PUC. In accordance with SFAS No. 71, we record the effects
of rate regulation in our financial statements as regulatory assets or
regulatory liabilities. We continually assess whether the regulatory assets are
probable of future recovery by evaluating the regulatory environment, recent
rate orders and public statements issued by the PUC, and the status of any
pending deregulation legislation. If future recovery of regulatory assets ceases
to be probable, the elimination of those regulatory assets would adversely
impact our results of operations. As of September 30, 2003, our regulatory
assets totaled $60.3 million.

DEPRECIATION AND AMORTIZATION OF LONG-LIVED ASSETS. We compute depreciation on
UGI Utilities' property, plant and equipment on a straight-line basis over the
average remaining lives of its various classes of depreciable property and on
our other property, plant and equipment on a straight-line basis over estimated
useful lives generally ranging from 2 to 40 years. We also use amortization
methods and determine asset values of intangible assets other than goodwill
using reasonable assumptions and projections. Changes in the estimated useful
lives of property, plant and equipment and changes in intangible asset
amortization methods or values could have a material effect on our results of
operations.

IMPAIRMENT OF GOODWILL. Certain of the Company's business units have goodwill
resulting from purchase business combinations. In accordance with SFAS 142, each
of our reporting units with goodwill is required to perform impairment tests
annually or whenever events or circumstances indicate that the value of goodwill
may be impaired. In order to perform these impairment tests, management must
determine the reporting unit's fair value using quoted market prices or, in the
absence of quoted market prices, valuation techniques which use discounted
estimates of future cash flows to be generated by the reporting unit. These cash
flow estimates involve management judgments based on a broad range of
information and historical results. To the extent estimated cash flows are
revised downward, the reporting unit may be required to write down all or a
portion of its goodwill which would adversely impact our results of operations.
As of September 30, 2003, our goodwill totaled $671.5 million.

DEFINED BENEFIT PENSION PLAN. The costs of providing benefits under our Pension
Plan are dependent on historical information such as employee age, length of
service, level of compensation and the actual rate of return on plan assets. In
addition, certain assumptions relating to the future are utilized including, the
discount rate applied to benefit obligations, the expected rate of return on
plan assets and the rate of compensation increase. Pension Plan assets are held
in trust and consist principally of equity and fixed income mutual funds and a
commingled bond fund. Changes in plan assumptions as well as fluctuations in
actual equity or bond market returns could have a material impact on future
pension costs.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" ("SFAS 148"). SFAS 148 provides
alternative methods of transition for an entity that voluntarily changes to a
fair value based method of accounting for stock-based employee compensation. In
addition, SFAS 148 amends SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), to require more prominent disclosure about the
effects on reported net income of stock-based employee compensation. As
permitted by SFAS 148 and SFAS 123, the Company expects to continue to account
for stock-based compensation in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and will continue to
provide the prominent disclosures required in its annual and interim financial
statements.

         In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging

                                                                              25

FINANCIAL REVIEW(continued)

Activities" ("SFAS 149"). SFAS 149 is effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after June
30, 2003. SFAS 149 (1) clarifies under what circumstances a contract with an
initial net investment meets the characteristic of a derivative, (2) clarifies
when a derivative contains a financing component, (3) amends the definition of
an underlying- rate, price or index to conform it to language used in FASB
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others," and (4)
amends certain other existing pronouncements. SFAS 149 did not change the
methods the Company uses to account for and report its derivatives and hedging
activities.

         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity"
("SFAS 150"). SFAS 150 is effective at the beginning of the first interim period
beginning after June 15, 2003. SFAS 150 establishes guidelines on how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. SFAS 150 further defines and requires that certain
instruments within its scope be classified as liabilities on the financial
statements. The adoption of SFAS 150 resulted in the Company presenting UGI
Utilities preferred shares subject to mandatory redemption in the liabilities
section of the balance sheet, and reflecting dividends paid on these shares as a
component of interest expense, for all periods presented after June 30, 2003.
Because SFAS 150 specifically prohibits the restatement of financial statements
prior to its adoption, prior period amounts have not been reclassified.

         In January 2003, the FASB issued Financial Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46"), which clarifies
Accounting Research Bulletin No. 51, "Consolidated Financial Statements." FIN 46
is effective immediately for variable interest entities created or obtained
after January 31, 2003. For variable interests created or acquired before
February 1, 2003, FIN 46 is effective for the first fiscal or interim period
beginning after December 15, 2003. If certain conditions are met, FIN 46
requires the primary beneficiary to consolidate certain variable interest
entities in which the other equity investors lack the essential characteristics
of a controlling financial interest or their investment at risk is not
sufficient to permit the variable interest entity to finance its activities
without additional subordinated financial support from other parties. The
Company has not created or obtained any variable interest entities after January
31, 2003, and is currently in the process of evaluating the impact of FIN 46,
which is not expected to have a material effect on its financial position or
results of operations.

FORWARD-LOOKING STATEMENTS

Information contained in this Financial Review and elsewhere in this Annual
Report may contain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Such statements use forward-looking words such as "believe," "plan,"
"anticipate," "continue," "estimate," "expect," "may," "will," or other similar
words. These statements discuss plans, strategies, events or developments that
we expect or anticipate will or may occur in the future.

         A forward-looking statement may include a statement of the assumptions
or bases underlying the forward-looking statement. We believe that we have
chosen these assumptions or bases in good faith and that they are reasonable.
However, we caution you that actual results almost always vary from assumed
facts or bases, and the differences between actual results and assumed facts or
bases can be material, depending on the circumstances. When considering
forward-looking statements, you should keep in mind the following important
factors which could affect our future results and could cause those results to
differ materially from those expressed in our forward-looking statements: (1)
adverse weather conditions resulting in reduced demand; (2) price volatility and
availability of propane, oil, electricity, and natural gas and the capacity to
transport them to our market areas; (3) changes in laws and regulations,
including safety, tax and accounting matters; (4) competitive pressures from the
same and alternative energy sources; (5) failure to acquire new customers
thereby reducing or limiting any increase in revenues; (6) liability for
environmental claims; (7) customer conservation measures and improvements in
energy efficiency and technology resulting in reduced demand; (8) adverse labor
relations; (9) large customer, counterparty or supplier defaults; (10) liability
for personal injury and property damage arising from explosions and other
catastrophic events, including acts of terrorism, resulting from operating
hazards and risks incidental to generating and distributing electricity and
transporting, storing and distributing natural gas and propane including
liability in excess of insurance coverage; (11) political, regulatory and
economic conditions in the United States and in foreign countries; (12) interest
rate fluctuations and other capital market conditions, including foreign
currency rate fluctuations; (13) reduced distributions from subsidiaries; and
(14) the timing and success of the Company's efforts to develop new business
opportunities.

         These factors are not necessarily all of the important factors that
could cause actual results to differ materially from those expressed in any of
our forward-looking statements. Other unknown or unpredictable factors could
also have material adverse effects on future results. We undertake no obligation
to update publicly any forward-looking statement whether as a result of new
information or future events except as required by federal securities laws.

26

                                              UGI Corporation 2003 Annual Report

REPORT OF MANAGEMENT

The Company's consolidated financial statements and other financial information
contained in this Annual Report are prepared by management, which is responsible
for their fairness, integrity and objectivity. The consolidated financial
statements and related information were prepared in accordance with accounting
principles generally accepted in the United States of America and include
amounts that are based on management's best judgments and estimates.

         The Company maintains a system of internal controls. Management
believes the system provides reasonable, but not absolute, assurance that assets
are safeguarded and that transactions are executed in accordance with
management's authorization and are properly recorded to permit the preparation
of reliable financial information. There are limits in all systems of internal
control, based on the recognition that the cost of the system should not exceed
the benefits to be derived. We believe that the Company's internal control
system is cost effective and provides reasonable assurance that material errors
or irregularities will be prevented or detected within a timely period. The
internal control system and compliance therewith are monitored by the Company's
internal audit staff.

         The Audit Committee of the Board of Directors is composed of three
members, none of whom is an employee of the Company. This Committee is
responsible for overseeing the financial reporting process and the adequacy of
controls, and for monitoring the independence of the Company's independent
accountants and the performance of the independent accountants and internal
audit staff. The Committee appoints the independent accountants to conduct the
annual audit of the Company's consolidated financial statements. The Committee
is also responsible for maintaining direct channels of communication between the
Board of Directors and both the independent accountants and internal auditors.

         The independent accountants, whose appointment is ratified by the
shareholders, perform certain procedures, including an evaluation of internal
controls to the extent required by auditing standards generally accepted in the
United States of America, in order to express an opinion on the consolidated
financial statements and to obtain reasonable assurance that such financial
statements are free of material misstatement.

/s/ Lon R. Greenberg
- -------------------------
Lon R. Greenberg
Chief Executive Officer

/s/ Anthony J. Mendicino
- ---------------------------
Anthony J. Mendicino
Chief Financial Officer

/s/ Michael J. Cuzzolina
- ---------------------------
Michael J. Cuzzolina
Chief Accounting Officer

                                                                              27

REPORT OF INDEPENDENT AUDITORS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF UGI CORPORATION:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of UGI
Corporation and its subsidiaries at September 30, 2003 and 2002, and the results
of their operations and their cash flows for each of the two years in the period
ended September 30, 2003 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion. The
consolidated financial statements of UGI Corporation and its subsidiaries for
the year ended September 30, 2001, prior to the revisions discussed in Note 1,
were audited by other independent auditors who have ceased operations. Those
independent auditors expressed an unqualified opinion on those financial
statements in their report dated November 16, 2001.

         As discussed in Note 1 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting. Standards No. 142, "Goodwill
and Other Intangible Assets" in fiscal 2002.

         As discussed above, the consolidated financial statements of UGI
Corporation and its subsidiaries for the year ended September 30, 2001, were
audited by other independent auditors who have ceased operations. As described
in Note 1, these financial statements have been restated to reflect a 3-for-2
common stock split. We audited the adjustments described in Note 1 that were
applied to restate the 2001 consolidated financial statements for the 3-for-2
common stock split. In our opinion, such adjustments are appropriate and have
been properly applied. As described in Note 1, these financial statements have
also been revised to include the transitional disclosures required by Statement
of Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets" which was adopted by the Company as of October 1, 2001. We audited the
transitional disclosures described in Note 1. In our opinion, the transitional
disclosures for 2001 in Note 1 are appropriate. However, we were not engaged to
audit, review or apply procedures to the 2001 consolidated financial statements
of the Company other than with respect to such adjustments and, accordingly, we
do not express an opinion or any other form of assurance on the 2001
consolidated financial statements taken as a whole.

PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 17, 2003

  THIS REPORT IS A COPY OF THE PREVIOUSLY ISSUED ACCOUNTANT'S REPORT OF ARTHUR
         ANDERSEN LLP AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF UGI CORPORATION:

We have audited the accompanying consolidated balance sheets of UGI Corporation
and subsidiaries as of September 30, 2001 and 2000, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended September 30, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial state-
ment presentation. We believe that our audits provide a reasonable basis for our
opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
UGI Corporation and subsidiaries as of September 30, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 2001, in conformity with accounting principles
generally accepted in the United States.

         As explained in Notes 1 and 3 to the financial statements, effective
October 1, 2000, the Partnership changed its methods of accounting for tank
installation costs and nonrefundable tank fees and the Company adopted the
provisions of SFAS No. 133.

ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
November 16, 2001

28

                                              UGI Corporation 2003 Annual Report

CONSOLIDATED STATEMENTS OF INCOME
(Millions of dollars, except per share amounts)

                                                                                   Year Ended September 30,
                                                                      ------------------------------------------------
                                                                         2003               2002                2001
                                                                      ---------           --------            --------
                                                                                                     
REVENUES
AmeriGas Propane                                                      $ 1,628.4           $1,307.9            $1,418.4
Utilities                                                                 628.7              488.0               582.7
International Propane                                                      54.5               46.7                50.9
Energy Services and other                                                 714.5              371.1               416.1
                                                                      ---------           --------            --------
                                                                        3,026.1            2,213.7             2,468.1
                                                                      ---------           --------            --------
COSTS AND EXPENSES
Cost of sales                                                           1,984.3            1,296.6             1,632.4
Operating and administrative expenses                                     643.3              576.5               506.8
Utility taxes other than income taxes                                      13.0               11.9                 9.2
Depreciation and amortization                                             103.0               93.5               105.2
Provision for shut-down costs - Hearth USA(TM)                                -                  -                 8.5
Other income, net                                                         (19.8)             (18.1)              (23.0)
                                                                      ---------           --------            --------
                                                                        2,723.8            1,960.4             2,239.1
                                                                      ---------           --------            --------
OPERATING INCOME                                                          302.3              253.3               229.0
Income (loss) from equity investees                                         5.3                8.5                (1.6)
Loss on extinguishments of debt                                            (3.0)              (0.7)                  -
Interest expense                                                         (109.2)            (109.1)             (104.8)
Minority interests in AmeriGas Partners                                   (34.6)             (28.0)              (23.6)
                                                                      ---------           --------            --------
INCOME BEFORE INCOME TAXES, SUBSIDIARY PREFERRED STOCK DIVIDENDS
       AND ACCOUNTING CHANGES                                             160.8              124.0                99.0
Income taxes                                                              (60.7)             (46.9)              (45.4)
Dividends on UGI Utilities preferred shares subject to
       mandatory redemption                                                (1.2)              (1.6)               (1.6)
                                                                      ---------           --------            --------
Income before accounting changes                                           98.9               75.5                52.0
Cumulative effect of accounting changes, net                                  -                  -                 4.5
                                                                      ---------           --------            --------
NET INCOME                                                            $    98.9           $   75.5            $   56.5
                                                                      =========           ========            ========

EARNINGS PER COMMON SHARE
Basic:
      Income before accounting changes                                $    2.34           $   1.83            $   1.28
      Cumulative effect of accounting changes, net                            -                  -                0.11
                                                                      ---------           --------            --------
      Net income                                                      $    2.34           $   1.83            $   1.39
                                                                      =========           ========            ========
Diluted:
      Income before accounting changes                                $    2.29           $   1.80            $   1.27
      Cumulative effect of accounting changes, net                            -                  -                0.11
                                                                      ---------           --------            --------
      Net income                                                      $    2.29           $   1.80            $   1.38
                                                                      =========           ========            ========

AVERAGE COMMON SHARES OUTSTANDING (MILLIONS):
Basic                                                                    42.220             41.325              40.745
                                                                      =========           ========            ========
Diluted                                                                  43.236             41.907              41.060
                                                                      =========           ========            ========

See accompanying notes to consolidated financial statements.

                                                                              29

CONSOLIDATED BALANCE SHEETS
(Millions of dollars)

                                                                                   September 30,
                                                                           ----------------------------
                            ASSETS                                           2003                2002
                            ------                                         --------            --------
                                                                                         
CURRENT ASSETS
Cash and cash equivalents                                                  $  142.1            $  194.3
Short-term investments (at cost, which approximates fair value)                50.0                   -
Accounts receivable (less allowances for doubtful accounts
   of $14.8 and $11.8, respectively)                                          199.2               157.7
Accrued utility revenues                                                        7.4                 8.1
Inventories                                                                   136.6               109.2
Deferred income taxes                                                          23.5                10.4
Income taxes recoverable                                                          -                 1.7
Utility regulatory assets                                                         -                 4.3
Prepaid expenses and other current assets                                      28.6                37.9
                                                                           --------            --------
      Total current assets                                                    587.4               523.6
                                                                           --------            --------

PROPERTY, PLANT AND EQUIPMENT
AmeriGas Propane                                                            1,076.2             1,028.6
UGI Utilities                                                                 907.9               883.3
Other                                                                         157.9                80.5
                                                                           --------            --------
                                                                            2,142.0             1,992.4
Accumulated depreciation and amortization                                    (805.2)             (720.5)
                                                                           --------            --------
      Net property, plant, and equipment                                    1,336.8             1,271.9
                                                                           --------            --------

OTHER ASSETS
Goodwill and excess reorganization value                                      671.5               644.9
Intangible assets (less accumulated amortization
   of $16.4 and $10.3, respectively)                                           34.7                25.8
Utility regulatory assets                                                      60.3                57.7
Other assets                                                                   91.0                90.5
                                                                           --------            --------
      Total assets                                                         $2,781.7            $2,614.4
                                                                           ========            ========

See accompanying notes to consolidated financial statements.

30

                                              UGI Corporation 2003 Annual Report

                                                                                                September 30,
                                                                                        ----------------------------
                     LIABILITIES AND STOCKHOLDERS' EQUITY                                 2003                2002
                     ------------------------------------                               --------            --------
                                                                                                      
CURRENT LIABILITIES
Current maturities of long-term debt                                                    $   65.0            $  148.7
AmeriGas Propane bank loans                                                                    -                10.0
UGI Utilities bank loans                                                                    40.7                37.2
Other bank loans                                                                            15.9                 8.6
Accounts payable                                                                           202.5               166.1
Employee compensation and benefits accrued                                                  41.9                35.4
Dividends and interest accrued                                                              40.1                41.5
Income taxes accrued                                                                         8.9                   -
Deposits and advances                                                                       69.1                68.8
Other current liabilities                                                                   86.2                70.1
                                                                                        --------            --------
      Total current liabilities                                                            570.3               586.4
                                                                                        --------            --------

DEBT AND OTHER LIABILITIES
Long-term debt                                                                           1,158.5             1,127.0
Deferred income taxes                                                                      223.1               200.2
Deferred investment tax credits                                                              8.0                 8.4
UGI Utilities preferred shares subject to mandatory redemption, without par value           20.0                   -
Other noncurrent liabilities                                                                97.4                79.1
                                                                                        --------            --------
      Total liabilities                                                                  2,077.3             2,001.1
                                                                                        --------            --------

Commitments and contingencies (note 12)

Minority interests in AmeriGas Partners                                                    134.6               276.0

UGI Utilities preferred shares subject to mandatory redemption, without par value              -                20.0
Preference Stock, without par value (authorized - 5,000,000 shares)                            -                   -

COMMON STOCKHOLDERS' EQUITY
Common Stock, without par value
      (authorized - 150,000,000 shares; issued - 49,798,097 shares)                        582.4               396.6
Retained earnings                                                                           90.9                39.7
Accumulated other comprehensive income                                                       4.7                 6.6
                                                                                        --------            --------
                                                                                           678.0               442.9
Treasury stock, at cost                                                                   (108.2)             (125.6)
                                                                                        --------            --------
      Total common stockholders' equity                                                    569.8               317.3
                                                                                        --------            --------
      Total liabilities and stockholders' equity                                        $2,781.7            $2,614.4
                                                                                        ========            ========

                                                                              31

                                              UGI Corporation 2003 Annual Report

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)

                                                                                  Year Ended September 30,
                                                                     ------------------------------------------------
                                                                        2003               2002                2001
                                                                     ---------           --------            --------
                                                                                                    
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                           $    98.9           $   75.5            $   56.5
Reconcile to net cash provided by operating activities:
   Depreciation and amortization                                         103.0               93.5               105.2
   Cumulative effect of accounting changes, net                              -                  -                (4.5)
   Minority interests in AmeriGas Partners                                34.6               28.0                23.6
   Deferred income taxes, net                                             (2.8)              11.0                (5.5)
   Provision for uncollectible accounts                                   18.5               14.2                18.3
   Net change in settled accumulated other comprehensive income           (5.2)              13.3               (16.9)
   Other, net                                                              9.3               (1.8)                3.1
   Net change in:
      Accounts receivable and accrued utility revenues                   (55.7)              12.6               (13.6)
      Inventories                                                        (25.3)              19.7                (4.2)
      Deferred fuel costs                                                 19.0               (7.1)                9.9
      Accounts payable                                                    34.9               (0.4)                5.8
      Other current assets and liabilities                                19.9              (11.0)               25.8
                                                                     ---------           --------            --------
   Net cash provided by operating activities                             249.1              247.5               203.5
                                                                     ---------           --------            --------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment                          (100.9)             (94.7)              (78.0)
Acquisitions of businesses, net of cash acquired                         (38.6)              (0.7)             (209.1)
Acquisition of additional interest in Conemaugh Station                  (51.3)                 -                   -
Proceeds from redemption of AGZ Bonds                                        -               17.7                   -
Net proceeds from disposals of assets                                      5.9                9.7                 4.2
Investments in equity investees                                           (0.4)              (0.3)              (32.6)
Increase in short-term investments                                       (50.0)                 -                   -
Other, net                                                                 9.2                1.9                 2.2
                                                                     ---------           --------            --------
   Net cash used by investing activities                                (226.1)             (66.4)             (313.3)
                                                                     ---------           --------            --------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends on UGI Common Stock                                            (47.7)             (44.8)              (53.2)
Distributions on AmeriGas Partners publicly held Common Units            (56.4)             (53.5)              (44.3)
Issuance of long-term debt                                               167.8               81.1               308.2
Repayment of long-term debt                                             (236.5)            (105.0)             (137.0)
AmeriGas Propane bank loans (decrease) increase                          (10.0)              10.0               (30.0)
UGI Utilities bank loans increase (decrease)                               3.5              (20.6)              (42.6)
Other bank loans increase (decrease)                                       5.4               (2.2)                6.2
Issuance of AmeriGas Partners Common Units                                75.0               49.7                39.8
Proceeds from sale of AmeriGas OLP interest                                  -                  -                50.0
Issuance of UGI Common Stock                                              23.7               11.0                 7.6
Repurchases of UGI Common Stock                                           (0.1)                 -                (1.0)
                                                                     ---------           --------            --------
   Net cash (used) provided by financing activities                      (75.3)             (74.3)              103.7
                                                                     ---------           --------            --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                                    0.1                  -                (0.3)
                                                                     ---------           --------            --------
Cash and cash equivalents (decrease) increase                        $   (52.2)          $  106.8            $   (6.4)
                                                                     =========           ========            ========
CASH AND CASH EQUIVALENTS:
End of year                                                          $   142.1           $  194.3            $   87.5
Beginning of year                                                        194.3               87.5                93.9
                                                                     ---------           --------            --------
   (Decrease) increase                                               $   (52.2)          $  106.8            $   (6.4)
                                                                     =========           ========            ========

See accompanying notes to consolidated financial statements.

32

                                              UGI Corporation 2003 Annual Report

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Millions of dollars, except per share amounts)

                                                                 Retained      Accumulated     Unearned
                                                                 Earnings         Other      Compensation-
                                                      Common   (Accumulated   Comprehensive   Restricted     Treasury
                                                      Stock      Deficit)     Income (Loss)     Stock         Stock       Total
                                                      -----      --------     -------------     -----         -----       -----
                                                                                                       
BALANCE SEPTEMBER 30, 2000                            $394.5      $ (4.9)        $     -        $(0.7)       $(141.7)    $ 247.2
Net income                                                          56.5                                                    56.5
Cumulative effect of change in accounting
      principle - SFAS No. 133 (net of tax of $4.8)                                  7.1                                     7.1
Net loss on derivative instruments
      (net of tax of $7.9)                                                         (10.5)                                  (10.5)
Reclassification of net gains on
      derivative instruments (net of tax of $6.5)                                  (10.3)                                  (10.3)
Foreign currency translation adjustments
      (net of tax of $0.1)                                                           0.2                                     0.2
                                                                  ------         -------                                 -------
Comprehensive income                                                56.5           (13.5)                                   43.0
Cash dividends on Common Stock
      ($1.05 per share)                                            (42.6)                                                  (42.6)
Common Stock issued:
      Employee and director plans                        0.3                                                     5.5         5.8
      Dividend reinvestment plan                         0.2                                                     2.3         2.5
Common Stock reacquired                                                                                         (1.0)       (1.0)
Amortization of unearned compensation-
      restricted stock awards                                                                     0.7                        0.7
                                                      ------      ------         -------        -----        -------     -------
BALANCE SEPTEMBER 30, 2001                             395.0         9.0           (13.5)           -         (134.9)      255.6
Net income                                                          75.5                                                    75.5
Net loss on derivative instruments
      (net of tax of $0.4)                                                          (1.5)                                   (1.5)
Reclassification of net losses on derivative
      instruments (net of tax of $11.6)                                             18.3                                    18.3
Foreign currency translation adjustments
      (net of tax of $2.2)                                                           4.4                                     4.4
Reclassification of foreign currency translation
      gain (net of tax of $0.5)                                                     (1.1)                                   (1.1)
                                                                  ------         -------                                 -------
Comprehensive income                                                75.5            20.1                                    95.6
Cash dividends on Common Stock
      ($1.083 per share)                                           (44.8)                                                  (44.8)
Common Stock issued:
      Employee and director plans                        1.0                                                     7.4         8.4
      Dividend reinvestment plan                         0.6                                                     2.0         2.6
Common Stock reacquired                                                                                         (0.1)       (0.1)
                                                      ------      ------         -------        -----        -------     -------
BALANCE SEPTEMBER 30, 2002                             396.6        39.7             6.6            -         (125.6)      317.3
Net income                                                          98.9                                                    98.9
Net gain on derivative instruments
      (net of tax of $9.1)                                                          13.5                                    13.5
Reclassification of net gains on
      derivative instruments (net of tax of $14.0)                                 (20.7)                                  (20.7)
Foreign currency translation adjustments
      (net of tax of $3.1)                                                           5.3                                     5.3
                                                                  ------         -------                                 -------
Comprehensive income                                                98.9            (1.9)                                   97.0
Cash dividends on Common Stock
      ($1.13 per share)                                            (47.7)                                                  (47.7)
Common Stock issued:
      Employee and director plans                        5.0                                                    16.0        21.0
      Dividend reinvestment plan                         1.2                                                     1.5         2.7
Gain in connection with issuances of units
      by AmeriGas Partners                             179.6                                                               179.6
Common Stock reacquired                                                                                         (0.1)       (0.1)
                                                      ------      ------         -------        -----        -------     -------
BALANCE SEPTEMBER 30, 2003                            $582.4      $ 90.9         $   4.7        $   -        $(108.2)    $ 569.8
                                                      ======      ======         =======        =====        =======     =======

See accompanying notes to consolidated financial Statements.

                                                                              33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION. UGI Corporation ("UGI") is a holding company that owns and
operates natural gas and electric utility, electricity generation, retail
propane distribution, energy marketing and related businesses in the United
States. Through foreign subsidiaries and joint-venture affiliates, UGI also
distributes propane in Austria, the Czech Republic, Slovakia, France and China.
We refer to UGI and its consolidated subsidiaries collectively as "the Company"
or "we."

         Our natural gas and electric distribution utility businesses are
conducted through our wholly owned subsidiary UGI Utilities, Inc. ("UGI
Utilities"). UGI Utilities owns and operates a natural gas distribution utility
("Gas Utility") in parts of eastern and southeastern Pennsylvania and an
electricity distribution utility ("Electric Utility") in northeastern
Pennsylvania. Gas Utility and Electric Utility (collectively, "Utilities") are
subject to regulation by the Pennsylvania Public Utility Commission ("PUC").

         We conduct a national propane distribution business through AmeriGas
Partners, L.P. ("AmeriGas Partners") and its principal operating subsidiaries
AmeriGas Propane, L.P. ("AmeriGas OLP") and AmeriGas OLP's subsidiary, AmeriGas
Eagle Propane, L.P. ("Eagle OLP"). AmeriGas Partners, AmeriGas OLP and Eagle OLP
are Delaware limited partnerships. UGI's wholly owned second-tier subsidiary
AmeriGas Propane, Inc. (the "General Partner") serves as the general partner of
AmeriGas Partners and AmeriGas OLP. AmeriGas OLP and Eagle OLP (collectively
referred to as "the Operating Partnerships") comprise the largest retail propane
distribution business in the United States serving residential, commercial,
industrial, motor fuel and agricultural customers from locations in 46 states.
We refer to AmeriGas Partners and its subsidiaries together as "the Partnership"
and the General Partner and its subsidiaries, including the Partnership, as
"AmeriGas Propane." At September 30, 2003, the General Partner and its wholly
owned subsidiary Petrolane Incorporated ("Petrolane") collectively held a 1%
general partner interest and a 46.4% limited partner interest in AmeriGas
Partners, and effective 47.9% and 47.8% ownership interests in AmeriGas OLP and
Eagle OLP, respectively. Our limited partnership interest in AmeriGas Partners
comprised 24,525,004 Common Units. The remaining 52.6% interest in AmeriGas
Partners comprises 27,808,204 publicly held Common Units representing limited
partner interests.

         The Partnership has no employees. Employees of the General Partner
conduct, direct and manage the activities of AmeriGas Partners and AmeriGas OLP.
The General Partner also provides management and administrative services to
AmeriGas Eagle Holdings, Inc., the general partner of Eagle OLP, under a
management services agreement. The General Partner is reimbursed monthly for all
direct and indirect expenses it incurs on behalf of the Partnership including
all General Partner employee compensation costs and a portion of UGI employee
compensation and administrative costs. Although the Partnership's operating
income represents a significant portion of our consolidated operating income,
the Partnership's impact on our consolidated net income is considerably less due
to the Partnership's significant minority interest; higher relative interest
charges; and, prior to 2002, higher effective income taxes resulting from
nondeductible goodwill amortization.

         Our wholly owned subsidiary UGI Enterprises, Inc. ("Enterprises")
conducts an energy marketing business primarily in the Eastern region of the
United States through its wholly owned subsidiary, UGI Energy Services, Inc.
("Energy Services"). Energy Services' wholly owned subsidiary UGI Development
Company ("UGID"), and UGID's subsidiaries and joint-venture affiliate Hunlock
Creek Energy Ventures ("Energy Ventures"), own and operate interests in
Pennsylvania-based electricity generation assets. Prior to their transfer to
Energy Services in June 2003, UGID and its subsidiaries were wholly owned
subsidiaries of UGI Utilities. Through other subsidiaries, Enterprises (1) owns
and operates a propane distribution business in Austria, the Czech Republic and
Slovakia ("FLAGA"); (2) owns and operates a heating, ventilation and
air-conditioning service business in the Middle Atlantic states ("HVAC"); and
(3) participates in propane joint-venture businesses in France ("Antargaz") and
China.

         UGI is exempt from registration as a holding company because it files
an annual exemption statement with the U.S. Securities and Exchange Commission
("SEC") and is not otherwise subject to regulation under the Public Utility
Holding Company Act of 1935 except for acquisitions under Section 9(a)(2). UGI
is not subject to regulation by the PUC.

CONSOLIDATION PRINCIPLES. The consolidated financial statements include the
accounts of UGI and its controlled subsidiary companies, which, except for the
Partnership, are majority owned. We eliminate all significant intercompany
accounts and transactions when we consolidate. We report the public's limited
partner interests in the Partnership as minority interests. Entities in which we
own 50 percent or less and in which we exercise significant influence over
operating and financial policies are accounted for by the equity method (see
Note 19). Investments in equity investees are included in other assets in the
Consolidated Balance Sheets.

RECLASSIFICATIONS. In order to more appropriately classify direct costs
associated with the Partnership's Prefilled Propane Xchange ("PPX(R)") program,
for the year ended September 30, 2003, certain costs previously considered
operating and administrative expenses have been included in cost of sales. We
have reclassified $21.0 and $11.0 of such costs incurred during the years ended
September 30, 2002 and 2001, respectively, to conform to the current-year
presentation.

         In January 2003, the Partnership recorded a loss of $3.0 resulting from
an early extinguishment of long-term debt. This loss has been reflected in the
2003 Consolidated Statement of Income as "loss on extinguishments of debt." A
loss of $0.7 associated with a November 2001 early extinguishment of Partnership
long-term debt previously included in other income, net, in the 2002
Consolidated Statement of Income has been reclassified to conform to the
current-year presentation (see Note 4).

         We have reclassified certain other prior-year balances to conform to
the current-year presentation.

USE OF ESTIMATES. We make estimates and assumptions when preparing financial
statements in conformity with accounting principles generally accepted in the
United States. These estimates and assumptions affect the reported amounts of
assets

34

                                              UGI Corporation 2003 Annual Report

and liabilities, revenues and expenses, as well as the disclosure of contingent
assets and liabilities. Actual results could differ from these estimates.

REGULATED UTILITY OPERATIONS. We account for the operations of Gas Utility and
Electric Utility in accordance with Statement of Financial Accounting Standards
("SFAS") No. 71, "Accounting for the Effects of Certain Types of Regulation"
("SFAS 71"). SFAS 71 requires us to record the effects of rate regulation in the
financial statements. Certain expenses and credits subject to utility regulation
and normally reflected in income as incurred are deferred on the balance sheet
and recognized in income as the related amounts are included in rates and
recovered from or refunded to customers. As required by SFAS 71, we monitor our
regulatory and competitive environments to determine whether the recovery of our
regulatory assets continues to be probable. If we were to determine that
recovery of these regulatory assets is no longer probable, such assets would be
written off against earnings.

         On June 29, 2000, the PUC issued its order ("Gas Restructuring Order")
approving Gas Utility's restructuring plan filed by Gas Utility pursuant to
Pennsylvania's Natural Gas Choice and Competition Act ("Gas Competition Act").
Based upon the provisions of the Gas Restructuring Order and the Gas Competition
Act, we believe Gas Utility's regulatory assets continue to satisfy the criteria
of SFAS 71. For further information on the impact of the Gas Competition Act and
Pennsylvania's Electricity Customer Choice and Competition Act ("Electricity
Choice Act"), see Note 3.

DERIVATIVE INSTRUMENTS. Effective October 1, 2000, we adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").
SFAS 133, as amended, establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that all
derivative instruments be recognized as either assets or liabilities and
measured at fair value. The accounting for changes in fair value depends upon
the purpose of the derivative instrument and whether it is designated and
qualifies for hedge accounting.

         The adoption of SFAS 133 on October 1, 2000 resulted in an after-tax
cumulative effect charge to 2001 net income of $0.3 and an after-tax cumulative
effect increase to accumulated other comprehensive income of $7.1. The after-tax
cumulative effect increase in accumulated other comprehensive income is
attributable to net gains on derivative instruments designated and qualifying as
cash flow hedges on October 1, 2000.

         For a detailed description of the derivative instruments we use, our
objectives for using them, and related supplemental information required by SFAS
133, see Note 13.

CONSOLIDATED STATEMENTS OF CASH FLOWS. We define cash equivalents as all highly
liquid investments with maturities of three months or less when purchased. We
record cash equivalents at cost plus accrued interest, which approximates market
value. We paid interest totaling $109.8 in 2003, $106.2 in 2002 and $103.9 in
2001. We paid income taxes totaling $48.2 in 2003, $48.0 in 2002 and $43.0 in
2001.

REVENUE RECOGNITION. We recognize revenues from the sale of propane principally
as product is delivered to customers. Revenue from the sale of appliances and
equipment is recognized at the time of sale or installation. We record
Utilities' regulated revenues for service provided to the end of each month
which includes an accrual for certain unbilled amounts based upon estimated
usage. We reflect the impact of Utilities' rate increases or decreases at the
time they become effective. Energy Services records revenues when energy
products are delivered to customers.

INVENTORIES. Our inventories are stated at the lower of cost or market. We
determine cost using an average cost method for natural gas and propane,
specific identification for appliances and the first-in, first-out ("FIFO")
method for all other inventories.

EARNINGS PER COMMON SHARE. On January 28, 2003, UGI's Board of Directors
approved a 3-for-2 split of UGI's Common Stock. On April 1, 2003, UGI issued one
additional common share for every two common shares outstanding to shareholders
of record on February 28, 2003. Average shares outstanding, earnings per share
and dividends declared per share for all years presented are reflected on a
post-split basis.

         Basic earnings per share reflect the weighted-average number of common
shares outstanding. Diluted earnings per share include the effects of dilutive
stock options and common stock awards. In the following table, we present the
shares used in computing basic and diluted earnings per share for 2003, 2002 and
2001:

                                                 2003       2002          2001
                                                ------     ------        ------
                                                                
Denominator (millions of shares):
      Average common shares
        outstanding for basic computation       42.220     41.325        40.745
      Incremental shares issuable for stock
        options and awards                       1.016      0.582         0.315
                                                ------     ------        ------
Average common shares outstanding for
      diluted computation                       43.236     41.907        41.060
                                                ------     ------        ------

INCOME TAXES. AmeriGas Partners and the Operating Partnerships are not directly
subject to federal income taxes. Instead, their taxable income or loss is
allocated to the individual partners. We record income taxes on our share of (1)
the Partnership's current taxable income or loss and (2) the differences between
the book and tax bases of the Partnership's assets and liabilities. The
Operating Partnerships have subsidiaries which operate in corporate form and are
directly subject to federal income taxes.

         Gas Utility and Electric Utility record deferred income taxes in the
Consolidated Statements of Income resulting from the use of accelerated
depreciation methods based upon amounts recognized for ratemaking purposes. They
also record a deferred tax liability for tax benefits that are flowed through to
ratepayers when temporary differences originate and record a regulatory income
tax asset for the probable increase in future revenues that will result when the
temporary differences reverse.

         We are amortizing deferred investment tax credits related to Utilities'
plant additions over the service lives of the related property. Utilities
reduces its deferred income tax liability for the future tax benefits that will
occur when investment tax credits, which are not taxable, are amortized. We also
reduce the regulatory income tax asset for the probable reduction in future
revenues that will result when such deferred investment tax credits amortize.

                                                                              35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

Note 1 continued

PROPERTY, PLANT AND EQUIPMENT AND RELATED DEPRECIATION. The amounts we assign to
property, plant and equipment of businesses we acquire are based upon estimated
fair value at date of acquisition. When Gas Utility and Electric Utility retire
depreciable utility plant and equipment, we charge the original cost, net of
removal costs and salvage value, to accumulated depreciation for financial
accounting purposes. When our unregulated businesses retire or otherwise dispose
of plant and equipment, we remove the cost and accumulated depreciation from the
appropriate accounts and any resulting gain or loss is recognized in "other
income, net" in the Consolidated Statements of Income. We record depreciation
expense for Utilities' plant and equipment on a straight-line method over the
estimated average remaining lives of the various classes of its depreciable
property. Depreciation expense as a percentage of the related average
depreciable base for Gas Utility was 2.3% in 2003, 2.5% in 2002 and 2.6% in
2001. Depreciation expense as a percentage of the related average depreciable
base for Electric Utility was 3.0% in each of 2003 and 2002 and 3.3% in 2001.
The declines in the Gas Utility and Electric Utility percentages for 2003 and
2002 are the result of changes, effective April 1, 2002, in the estimated
remaining useful lives of Gas Utility's and Electric Utility's distribution
assets. We compute depreciation expense on plant and equipment associated with
our propane operations using the straight-line method over estimated service
lives generally ranging from 15 to 40 years for buildings and improvements; 7 to
30 years for storage and customer tanks and cylinders; and 2 to 10 years for
vehicles, equipment, and office furniture and fixtures. We compute depreciation
expense on plant and equipment associated with our electricity generation assets
on a straight-line basis over 25 years. Depreciation expense was $97.1 in 2003,
$88.2 in 2002 and $75.7 in 2001.

         Effective October 1, 2000, the Partnership changed its method of
accounting for costs to install Partnership-owned tanks at customer locations.
Under the new accounting method, all costs to install such tanks, net of amounts
billed to customers, are capitalized and amortized over the estimated period of
benefit not exceeding ten years. For a detailed description of this change in
accounting and its impact on our results, see Note 15.

INTANGIBLE ASSETS. Intangible assets comprise the following at September 30:

                                                 2003       2002
                                                ------     ------
                                                     
Subject to amortization:
  Customer relationships, noncompete
    agreements and other (a)                    $ 51.1     $ 36.1
  Accumulated amortization                       (16.4)     (10.3)
                                                ------     ------
                                                $ 34.7     $ 25.8
                                                ------     ------
Not subject to amortization:
  Goodwill (a)                                  $578.2     $551.6
  Excess reorganization value                     93.3       93.3
                                                ------     ------
                                                $671.5     $644.9
                                                ------     ------

(a) The increase in the carrying amount of intangible assets during the year
ended September 30, 2003 is principally the result of business acquisitions and,
with respect to goodwill, foreign currency translation effects.

         We amortize customer relationship and noncompete agreement intangibles
over their estimated periods of benefit which do not exceed 15 years. Prior to
the adoption of SFAS 142, we amortized goodwill resulting from purchase business
combinations on a straight-line basis over 40 years, and excess reorganization
value (resulting from Petrolane's July 1993 reorganization under Chapter 11 of
the U.S. Bankruptcy Code) on a straight-line basis over 20 years. Amortization
expense of intangible assets was $6.1 in 2003 and $4.6 in 2002 including
amortization expense associated with customer contracts recorded in cost of
sales. Amortization expense of intangible assets in 2001, which includes
amortization of goodwill and excess reorganization value prior to the adoption
of SFAS 142, was $27.7. Estimated amortization expense of intangible assets
during the next five fiscal years is as follows: Fiscal 2004 - $5.4; Fiscal 2005
- - $4.6; Fiscal 2006 - $4.1; Fiscal 2007 - $3.5; Fiscal 2008 - $3.1.

         Effective October 1, 2001, we early adopted the provisions of SFAS No.
142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142 addresses the
financial accounting and reporting for acquired goodwill and other intangible
assets and supersedes Accounting Principles Board ("APB") Opinion No. 17,
"Intangible Assets." SFAS 142 addresses the financial accounting and reporting
for intangible assets acquired individually or with a group of other assets
(excluding those acquired in a business combination) at acquisition and also
addresses the financial accounting and reporting for goodwill and other
intangible assets subsequent to their acquisition. Under SFAS 142, an intangible
asset is amortized over its useful life unless that life is determined to be
indefinite. Goodwill, including excess reorganization value, and other
intangible assets with indefinite lives are not amortized but are subject to
tests for impairment at least annually. In accordance with the provisions of
SFAS 142, we ceased the amortization of goodwill and excess reorganization value
effective October 1, 2001.

         The following table provides reconciliations of reported and adjusted
net income and diluted earnings per share as if SFAS 142 had been adopted as of
October 1, 2000. Basic earnings per share is not materially different from
diluted earnings per share and, therefore, is not presented:

                                                    Year Ended September 30,
                                                 2003       2002          2001
                                                ------     ------        ------
                                                                
NET INCOME:
Reported income before accounting changes       $ 98.9     $ 75.5        $ 52.0
Add back goodwill and excess
  reorganization value amortization                  -          -          25.2
Adjust minority interests in AmeriGas Partners       -          -         (10.5)
Adjust income tax expense                            -          -          (0.7)
                                                ------     ------        ------
Adjusted income before accounting changes         98.9       75.5          66.0
Cumulative effect of accounting changes              -          -           4.5
                                                ------     ------        ------
Adjusted net income                             $ 98.9     $ 75.5        $ 70.5
                                                ------     ------        ------
DILUTED EARNINGS PER SHARE:
Reported income before accounting changes       $ 2.29     $ 1.80        $ 1.27
Add back goodwill and excess
  reorganization value amortization                  -          -          0.61
Adjust minority interests in AmeriGas Partners       -          -         (0.25)
Adjust income tax expense                            -          -         (0.02)
                                                ------     ------        ------
Adjusted income per share before accounting
  changes                                         2.29       1.80          1.61
Cumulative effect of accounting changes              -          -          0.11
                                                ------     ------        ------
Adjusted net income per share                   $ 2.29     $ 1.80        $ 1.72
                                                ------     ------        ------

36

                                              UGI Corporation 2003 Annual Report

         SFAS 142 requires that we perform impairment tests annually or more
frequently if events or circumstances indicate that the value of goodwill might
be impaired. No provisions for goodwill impairments were recorded during 2003 or
2002.

STOCK-BASED COMPENSATION. As permitted by SFAS No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), we apply the provisions of APB Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), in recording
compensation expense for grants of stock, stock options, and other equity
instruments to employees.

         We use the intrinsic value method prescribed by APB 25 for our
stock-based employee compensation plans. We recognized total stock and
unit-based compensation expense of $10.4, $5.7 and $2.7 in 2003, 2002 and 2001,
respectively. If we had determined stock-based compensation expense under the
fair value method prescribed by SFAS 123, net income and basic and diluted
earnings per share for 2003, 2002 and 2001 would have been as follows:

                                                       Year Ended September 30,
                                                    2003       2002          2001
                                                   ------     ------        ------
                                                                   
Net income, as reported                            $ 98.9     $ 75.5        $ 56.5
Add: Stock and unit-based employee
      compensation expense included in
      reported net income, net of related
      tax effects                                     6.8        3.7           1.8
Deduct: Total stock and unit-based
      employee compensation expense
      determined under the fair value method
      for all awards, net of related tax effects     (7.6)      (4.7)         (2.6)
                                                   ------     ------        ------
Pro forma net income                               $ 98.1     $ 74.5        $ 55.7
                                                   ------     ------        ------
Basic earnings per share:
      As reported                                  $ 2.34     $ 1.83        $ 1.39
      Pro forma                                    $ 2.32     $ 1.80        $ 1.37
Diluted earnings per share:
      As reported                                  $ 2.29     $ 1.80        $ 1.38
      Pro forma                                    $ 2.27     $ 1.78        $ 1.36
                                                   ------     ------        ------

For a description of our stock-based compensation plans and related disclosures,
see Note 9.

DEFERRED DEBT ISSUANCE COSTS. Included in other assets are net deferred debt
issuance costs of $15.5 at September 30, 2003 and $14.8 at September 30, 2002.
We are amortizing these costs over the term of the related debt.

COMPUTER SOFTWARE COSTS. We include in property, plant and equipment costs
associated with computer software we develop or obtain for use in our
businesses. We amortize computer software costs on a straight-line basis over
expected periods of benefit not exceeding ten years once the installed software
is ready for its intended use.

DEFERRED FUEL COSTS. Gas Utility's tariffs contain clauses which permit recovery
of certain purchased gas costs through the application of purchased gas cost
("PGC") rates. The clauses provide for periodic adjustments to PGC rates for the
difference between the total amount of purchased gas costs collected from
customers and the recoverable costs incurred. In accordance with SFAS 71, we
defer the difference between amounts recognized in revenues and the applicable
gas costs incurred until they are subsequently billed or refunded to customers.

UGI UTILITIES PREFERRED SHARES SUBJECT TO MANDATORY REDEMPTION. Beginning July
1, 2003, the Company accounts for UGI Utilities preferred shares subject to
mandatory redemption in accordance with SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity"
("SFAS 150"). SFAS 150 establishes guidelines on how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. The adoption of SFAS 150 results in the Company presenting UGI
Utilities preferred shares subject to mandatory redemption in the liabilities
section of the balance sheet, and reflecting dividends paid on these shares as a
component of interest expense, for periods presented after June 30, 2003.
Because SFAS 150 specifically prohibits the restatement of financial statements
prior to its adoption, prior period amounts have not been reclassified.

ENVIRONMENTAL LIABILITIES. We accrue environmental investigation and cleanup
costs when it is probable that a liability exists and the amount or range of
amounts can be reasonably estimated. Our estimated liability for environmental
contamination is reduced to reflect anticipated participation of other
responsible parties but is not reduced for possible recovery from insurance
carriers. In those instances for which the amount and timing of cash payments
associated with environmental investigation and cleanup are reliably
determinable, we discount such liabilities to reflect the time value of money.
We intend to pursue recovery of any incurred costs through all appropriate
means, including regulatory relief. Gas Utility is permitted to amortize as
removal costs site-specific environmental investigation and remediation costs,
net of related third-party payments, associated with Pennsylvania sites. Gas
Utility is currently permitted to include in rates, through future base rate
proceedings, a five-year average of such prudently incurred removal costs. At
September 30, 2003, the Company's liability for environmental investigation and
cleanup costs was not material.

FOREIGN CURRENCY TRANSLATION. Balance sheets of international subsidiaries and
investments in international propane joint ventures are translated into U.S.
dollars using the exchange rate at the balance sheet date. Income statements and
equity method results are translated into U.S. dollars using a weighted-average
exchange rate for each reporting period. Where the local currency is the
functional currency, translation adjustments are recorded in other comprehensive
income. Where the local currency is not the functional currency, translation
adjustments are recorded in net income.

                                                                              37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

Note 1 continued

COMPREHENSIVE INCOME. Comprehensive income comprises net income and other
comprehensive (loss) income. Other comprehensive (loss) income principally
results from gains and losses on derivative instruments qualifying as cash flow
hedges and foreign currency translation adjustments. The components of
accumulated other comprehensive income at September 30, 2002 and 2003 follows:

                                  Derivative      Foreign
                                 Instruments     Currency
                                    Gains       Translation
                                   (Losses)     Adjustments    Total
                                   --------     -----------    -----
                                                      
Balance - September 30, 2002        $ 3.1          $3.5        $ 6.6
Balance - September 30, 2003        $(4.1)         $8.8        $ 4.7
                                    -----          ----        -----

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS. In December 2002, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure" ("SFAS 148"). SFAS 148
provides alternative methods of transition for an entity that voluntarily
changes to a fair value based method of accounting for stock-based employee
compensation. In addition, SFAS 148 amends SFAS No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), to require more prominent disclosure
about the effects on reported net income of stock-based employee compensation.
As permitted by SFAS 148 and SFAS 123, the Company expects to continue to
account for stock-based compensation in accordance with APB 25, and will
continue to provide the prominent disclosures required in its annual and interim
financial statements.

         In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities" ("SFAS 149"). SFAS 149 is
effective for contracts entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. SFAS 149 (1) clarifies
under what circumstances a contract with an initial net investment meets the
characteristic of a derivative, (2) clarifies when a derivative contains a
financing component, (3) amends the definition of an underlying-rate, price or
index to conform it to language used in FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," and (4) amends certain other existing
pronouncements. SFAS 149 is not expected to materially change the methods the
Company uses to account for and report its derivatives and hedging activities.

         In January 2003, the FASB issued Financial Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46"), which clarifies
Accounting Research Bulletin No. 51, "Consolidated Financial Statements." FIN 46
is effective immediately for variable interest entities created or obtained
after January 31, 2003. For variable interests created or acquired before
February 1, 2003, FIN 46 is effective for the first fiscal or interim period
beginning after December 15, 2003. If certain conditions are met, FIN 46
requires the primary beneficiary to consolidate certain variable interest
entities in which the other equity investors lack the essential characteristics
of a controlling financial interest or their investment at risk is not
sufficient to permit the variable interest entity to finance its activities
without additional subordinated financial support from other parties. The
Company has not created or obtained any variable interest entities after January
31, 2003, and is currently in the process of evaluating the impact of FIN 46,
which is not expected to have a material effect on its financial position or
results of operations.

NOTE 2 - ACQUISITIONS AND INVESTMENTS

In June 2003, pursuant to an asset purchase agreement between and among
Allegheny Energy Supply Company, LLC, Allegheny Energy Supply Conemaugh, LLC
("Allegheny Conemaugh"), UGID, and UGI, UGID acquired an additional 83 megawatt
ownership interest in the Conemaugh electricity generation station ("Conemaugh")
from Allegheny Conemaugh, a unit of Allegheny Energy, Inc. ("Allegheny"), for
$51.3 in cash, subject to a $3.0 credit. Conemaugh is a 1,711-megawatt,
coal-fired electricity generation station located near Johnstown, Pennsylvania
and is owned by a consortium of energy companies and operated by a unit of
Reliant Resources, Inc. under contract. The purchase increased UGID's ownership
interest in Conemaugh to 102 megawatts (6.0%) from 19 megawatts (1.1%)
previously. Substantially all of the purchase price for the additional interest
in Conemaugh is included in property, plant and equipment in the Consolidated
Balance Sheet.

         In March 2003, Energy Services acquired the northeastern U.S. gas
marketing business of TXU Energy Retail Company, L.P., a subsidiary of TXU Corp.
(the "TXU Energy Acquisition") for approximately $10.0 in cash. As a result of
the TXU Energy Acquisition, Energy Services assumed the existing sales and
supply agreements for approximately one thousand commercial and industrial
customers located primarily in New York, Pennsylvania, Ohio and New Jersey.

         During 2003, AmeriGas OLP acquired several retail propane distribution
businesses and HVAC acquired a heating, ventilation and air conditioning
business for total cash consideration of $28.6. In conjunction with these
acquisitions, liabilities of $1.5 were incurred. The operating results of these
businesses have been included in our results of operations from their respective
dates of acquisition.

         The total purchase price of the TXU Energy Acquisition and the AmeriGas
OLP and HVAC acquisitions has been allocated to the assets and liabilities
acquired as follows:

                                                         
Net current assets                                          $ 2.5
Property, plant and equipment                                 6.4
Customer relationships and noncompete agreements
  (estimated useful life of 10 and 5 years, respectively)    17.8
Goodwill (tax deductible)                                    13.5
Other assets and liabilities                                 (0.1)
                                                            -----
Total                                                       $40.1
                                                            -----

         The pro forma effect of these acquisitions was not material to our
results of operations.

         On August 21, 2001, AmeriGas Partners, through AmeriGas OLP, acquired
the propane distribution businesses of Columbia Energy Group ("Columbia Propane
Businesses") in a series of equity and asset purchases pursuant to the terms of
the Purchase Agreement dated January 30, 2001, and Amended and Restated August
7, 2001 ("Columbia Purchase Agreement")

38

                                              UGI Corporation 2003 Annual Report

by and among Columbia Energy Group ("CEG"), Columbia Propane Corporation
("Columbia Propane"), Columbia Propane, L.P. ("CPLP"), CP Holdings, Inc.
("CPH"), AmeriGas Partners, AmeriGas OLP, and the General Partner. The acquired
businesses comprised the seventh largest retail marketer of propane in the
United States with annual sales of over 300 million gallons from locations in 29
states. The acquired businesses were principally conducted through Columbia
Propane and its approximate 99% owned subsidiary, CPLP (referred to after the
acquisition as "Eagle OLP"). AmeriGas OLP acquired substantially all of the
assets of Columbia Propane, including an indirect 1% general partner interest
and an approximate 99% limited partnership interest in Eagle OLP.

         The purchase price of the Columbia Propane Businesses consisted of
$201.8 in cash. In addition, AmeriGas OLP agreed to pay CEG for the amount of
working capital, as defined, in excess of $23. In April 2002, the Partnership's
management and CEG agreed upon the amount of working capital acquired by
AmeriGas OLP and AmeriGas OLP made an additional payment for working capital and
other adjustments totaling $0.7. The Columbia Purchase Agreement also provided
for the purchase by CEG of limited partnership interests in AmeriGas OLP valued
at $50 for $50 in cash, which interests were exchanged for 2,356,953 Common
Units of AmeriGas Partners having an estimated fair value of $54.4. Concurrently
with the acquisition, AmeriGas Partners issued $200 of 8.875% Senior Notes due
May 2011, the net proceeds of which were contributed to AmeriGas OLP to finance
the acquisition of the Columbia Propane Businesses, to fund related fees and
expenses, and to repay debt outstanding under AmeriGas OLP's bank credit
agreement. The operating results of the Columbia Propane Businesses are included
in our consolidated results from August 21, 2001.

         The following table identifies the components of the purchase price of
the Columbia Propane Businesses:

                                                                      
Cash paid                                                                $202.5
Cash received from sale of AmeriGas OLP limited partner interests         (50.0)
Fair value of AmeriGas Partners'  Common Units issued in
  exchange for the AmeriGas OLP limited partner interests                  54.4
Transaction costs and expenses                                              8.2
Involuntary employee termination benefits and relocation costs              2.6
Other liabilities and obligations incurred                                  1.0
                                                                         ------
Total                                                                    $218.7
                                                                         ------

         The purchase price of the Columbia Propane Businesses was allocated to
the assets and liabilities acquired as follows:

                                                                     
Net current assets                                                      $  16.7
Property, plant and equipment                                             182.8
Customer relationships and noncompete agreement
      (estimated useful life of 15 and 5 years, respectively)              19.9
Other assets and liabilities                                               (0.7)
                                                                        -------
Total                                                                   $ 218.7
                                                                        -------

         The following table presents unaudited pro forma income statement and
diluted per share data for 2001 as if the acquisition of the Columbia Propane
Businesses had occurred as of the beginning of that year:

                                                         2001
                                                       --------
                                                    
Revenues                                               $2,838.3
Income before accounting changes                           50.8
Net income                                                 55.3
Diluted earnings per share:
      Income before accounting changes                     1.24
      Net income                                           1.35
                                                       --------

         The pro forma results of operations reflect the Columbia Propane
Businesses' historical operating results after giving effect to adjustments
directly attributable to the transaction that are expected to have a continuing
impact. They are not adjusted for, among other things, the impact of normal
weather conditions, operating synergies and anticipated cost savings. In our
opinion, the unaudited pro forma results are not necessarily indicative of the
actual results that would have occurred had the acquisition of the Columbia
Propane Businesses occurred as of the beginning of the year presented or of
future operating results under our management.

         During 2001, in addition to the acquisitions of the Columbia Propane
Businesses, Energy Services acquired two energy marketing businesses and the
Partnership acquired several small propane distribution businesses for total
cash consideration of $5.4. The operating results of these businesses have been
included in the consolidated results from their respective dates of acquisition.
These transactions did not have a material effect on our results of operations.

         On October 1, 2003, AmeriGas OLP acquired substantially all of the
retail propane distribution assets and business of Horizon Propane LLC ("Horizon
Propane") for total cash consideration of $31.0. In addition, AmeriGas OLP
agreed to pay Horizon for the amount of working capital, as defined in the Asset
Purchase Agreement, in excess of $2.6. During its 2003 fiscal year, Horizon
Propane sold over 30 million gallons of propane from ninety locations in twelve
states.

NOTE 3 - UTILITY REGULATORY MATTERS

GAS UTILITY

GAS RESTRUCTURING ORDER. On June 29, 2000, the PUC issued the Gas Restructuring
Order approving Gas Utility's restructuring plan filed by Gas Utility pursuant
to the Gas Competition Act. The purpose of the Gas Competition Act, which was
signed into law on June 22, 1999, is to provide all natural gas consumers in
Pennsylvania with the ability to purchase their gas supplies from the supplier
of their choice. Under the Gas Competition Act, local gas distribution companies
("LDCs") like Gas Utility may continue to sell gas to customers, and such sales
of gas, as well as distribution services provided by LDCs, continue to be
subject to price regulation by the PUC. LDCs serve as the supplier of last
resort for all residential and small commercial and industrial customers.

                                                                              39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

Note 3 continued

         Among other things, the implementation of the Gas Restructuring Order
resulted in an increase in Gas Utility's firm-residential, commercial and
industrial ("retail core-market") base rates effective October 1, 2000. This
base rate increase was designed to generate approximately $16.7 in additional
net annual revenues. In accordance with the Gas Restructuring Order, Gas Utility
reduced its retail core-market PGC rates by an annualized amount of $16.7 in the
first 14 months following the October 1, 2000 base rate increase.

         Effective December 1, 2001, Gas Utility was required to reduce its
retail core-market PGC rates by amounts equal to the margin it receives from
interruptible customers using pipeline capacity contracted by Gas Utility for
retail core-market customers. As a result, Gas Utility operating results are
more sensitive to the effects of heating-season weather and less sensitive to
the market prices of alternative fuels.

ELECTRIC UTILITY

ELECTRIC UTILITY RESTRUCTURING ORDER. On June 19, 1998, the PUC entered its
Opinion and Order ("Electricity Restructuring Order") in Electric Utility's
restructuring proceeding pursuant to the Electricity Choice Act. Under the terms
of the Electricity Restructuring Order, Electric Utility was authorized to
recover $32.5 in stranded costs over a four-year period beginning January 1,
1999 through a Competitive Transition Charge ("CTC") together with carrying
charges on unrecovered balances of 7.94% and to charge unbundled rates for
generation, transmission and distribution services. Stranded costs are electric
generation-related costs that traditionally would be recoverable in a regulated
environment but may not be recoverable in a competitive electric generation
market. Under the terms of the Electricity Restructuring Order and in accordance
with the Electricity Choice Act, Electric Utility generally could not increase
the generation component of prices during the period that stranded costs were
being recovered through the CTC. Since January 1, 1999, all of Electric
Utility's customers have been permitted to choose an alternative generation
supplier.

         The PUC approved a settlement establishing rules for Electric Utility
Provider of Last Resort ("POLR") service on March 28, 2002, and a separate
settlement that modified these rules on June 13, 2002 (collectively the "POLR
Settlement") under which Electric Utility terminated stranded cost recovery
through its CTC from commercial and industrial ("C&I") customers on July 31,
2002, and from residential customers on October 31, 2002, and is no longer
subject to the statutory generation rate caps as of August 1, 2002 for C&I
customers and as of November 1, 2002 for residential customers. Charges for
generation service (1) were initially set at a level equal to the rates paid by
Electric Utility customers for POLR service under the statutory rate caps; (2)
may be raised at certain designated times by up to 5% of the total rate for
distribution, transmission and generation through December 2004; and (3) may be
set at market rates thereafter. Electric Utility may also offer multiple-year
POLR contracts to its customers. The POLR Settlement provides for annual
shopping periods during which customers may elect to remain on POLR service or
choose an alternate supplier. Customers who do not select an alternate supplier
will be obligated to remain on POLR service until the next shopping period.
Residential customers who return to POLR service at a time other than during the
annual shopping period must remain on POLR service until the date of the second
open shopping period after returning. C&I customers who return to POLR service
at a time other than during the annual shopping period must remain on POLR
service until the next open shopping period, and may, in certain circumstances,
be subject to generation rate surcharges. Consistent with the terms of the POLR
Settlement, Electric Utility's POLR rates for commercial and industrial
customers will increase beginning January 2004, and for residential customers
beginning June 2004. Also, Electric Utility has offered and entered into
multiple-year POLR contracts with certain of its customers. Additionally,
pursuant to the requirements of the Electricity Choice Act, the PUC is currently
developing post-rate cap POLR regulations that are expected to further define
post-rate cap POLR service obligations and pricing. As of September 30, 2003,
less than 1% of Electric Utility's customers have chosen an alternative
electricity generation supplier.

FORMATION OF HUNLOCK CREEK ENERGY VENTURES. On December 8, 2000, UGID
contributed its coal-fired Hunlock Creek generating station ("Hunlock") and
certain related assets having a net book value of approximately $4.2, and $6 in
cash, to Energy Ventures, a general partnership jointly owned by us and a
subsidiary of Allegheny Energy, Inc. ("Allegheny"). The contribution was
recorded at carrying value and no gain was recognized by the Company. Also on
December 8, 2000, Allegheny contributed a newly constructed, gas-fired
combustion turbine generator to Energy Ventures to be operated at the Hunlock
site. Under the terms of our arrangement with Allegheny, each partner is
entitled to purchase 50% of the output of the joint venture at cost. Total
purchases from Energy Ventures in 2003, 2002 and 2001 were $9.9, $9.8 and $8.0,
respectively.

REGULATORY ASSETS AND LIABILITIES

The following regulatory assets and liabilities are included in our accompanying
balance sheets at September 30:

                                     2003      2002
                                    ------    -----
                                        
Regulatory assets:
   Income taxes recoverable         $ 57.6    $54.7
   Other postretirement benefits       2.2      2.4
   Deferred fuel costs                   -      4.3
   Other                               0.5      0.6
                                    ------    -----
Total regulatory assets             $ 60.3    $62.0
                                    ------    -----
Regulatory liabilities:
   Other postretirement benefits    $  3.8    $ 4.3
   Deferred fuel costs                14.7        -
                                    ------    -----
Total regulatory liabilities        $ 18.5    $ 4.3
                                    ------    -----

         Utilities' regulatory liabilities relating to other postretirement
benefits and deferred fuel costs are included in "other noncurrent liabilities"
and "other current liabilities," respectively, on the Consolidated Balance
Sheets. Utilities does not recover a rate of return on its regulatory assets.

40

                                              UGI Corporation 2003 Annual Report

NOTE 4 - DEBT

Long-term debt comprises the following at September 30:

                                                                  2003       2002
                                                                --------   --------
                                                                     
AMERIGAS PROPANE:
AmeriGas Partners Senior Notes:
      8.875%, due May 2011 (including unamortized
        premium of $6.4 and $1.6, respectively,
        effective rate - 8.56%)                                 $  366.4   $  241.6
      10%, due April 2006 (less unamortized discount
        of $0.2, effective rate - 10.125%)                          59.8       59.8
      10.125%, due April 2007                                          -       85.0
AmeriGas OLP First Mortgage Notes:
      Series A, 9.34% - 11.71%, due April 2002 through
        April 2009 (including unamortized premium of
        $6.6 and $7.9, respectively, effective rate - 8.91%)       166.6      167.9
      Series B, 10.07%, due April 2002 through April 2005
        (including unamortized premium of $1.1 and $2.3,
        respectively, effective rate - 8.74%)                       81.1      122.3
      Series C, 8.83%, due April 2003 through April 2010            96.3      110.0
      Series D, 7.11%, due March 2009 (including
        unamortized premium of $1.9 and $2.2,
        respectively, effective rate - 6.52%)                       71.9       72.2
      Series E, 8.50%, due July 2010 (including
        unamortized premium of $0.1, effective
        rate - 8.47%)                                               80.1       80.1
Other                                                                5.1        6.9
                                                                --------   --------
Total AmeriGas Propane                                             927.3      945.8
                                                                --------   --------
UGI UTILITIES:
Medium-Term Notes:
      7.25% Notes, due November 2017                                20.0       20.0
      7.17% Notes, due June 2007                                    20.0       20.0
      7.37% Notes, due October 2015                                 22.0       22.0
      6.73% Notes, due October 2002                                    -       26.0
      6.62% Notes, due May 2005                                     20.0       20.0
      7.14% Notes, due December 2005 (including
        unamortized premium of $0.3 and $0.4,
        respectively, effective rate - 6.64%)                       30.3       30.4
      7.14% Notes, due December 2005                                20.0       20.0
      5.53% Notes, due September 2012                               40.0       40.0
      5.37% Notes, due August 2013                                  25.0          -
      6.50% Notes, due August 2033                                  20.0          -
6.50% Senior Notes, due August 2003                                    -       50.0
                                                                --------   --------
Total UGI Utilities                                                217.3      248.4
                                                                --------   --------
OTHER:
FLAGA Acquisition Note, due through
      September 2006                                                68.9       64.3
FLAGA euro special purpose facility                                  4.2       10.8
Other                                                                5.8        6.4
                                                                --------   --------
Total long-term debt                                             1,223.5    1,275.7
Less current maturities (including net unamortized
      premiums of $3.1 and $2.9, respectively)                     (65.0)    (148.7)
                                                                --------   --------
Total long-term debt due after one year                         $1,158.5   $1,127.0
                                                                --------   --------

Scheduled principal repayments of long-term debt due in fiscal years 2004 to
2008 follows:

                         2004      2005      2006     2007      2008
                        -----     -----     ------   -----     -----
                                                
AmeriGas Propane        $55.6     $55.5     $114.4   $54.1     $54.1
UGI Utilities               -      20.0       50.0    20.0         -
Other                     6.3      11.9       56.1     1.5       3.1
                        -----     -----     ------   -----     -----
Total                   $61.9     $87.4     $220.5   $75.6     $57.2
                        -----     -----     ------   -----     -----

AMERIGAS PROPANE

AMERIGAS PARTNERS SENIOR NOTES. The 8.875% Senior Notes generally cannot be
redeemed at our option prior to May 20, 2006. A redemption premium applies
thereafter through May 19, 2009. However, prior to May 20, 2004, AmeriGas
Partners may use the proceeds of a public offering of Common Units to redeem up
to 33% of the 8.875% Senior Notes at 108.875% plus accrued and unpaid interest.
The 10% Senior Notes generally cannot be redeemed at our option prior to their
maturity. AmeriGas Partners prepaid $15 of its 10.125% Senior Notes in November
2001 at a redemption price of 103.375% and the remaining $85 of its 10.125%
Senior Notes in January 2003 at a redemption price of 102.25%, in each instance,
including accrued interest. AmeriGas Partners recognized losses of $3.0 and $0.7
associated with these prepayments which amounts are reflected in "Loss on
extinguishments of debt" in the 2003 and 2002 Consolidated Statements of Income,
respectively. AmeriGas Partners may, under certain circumstances following the
disposition of assets or a change of control, be required to offer to prepay its
Senior Notes.

AMERIGAS OLP FIRST MORTGAGE NOTES. AmeriGas OLP's First Mortgage Notes are
collateralized by substantially all of its assets. The General Partner and
Petrolane are co-obligors of the Series A, B, and C First Mortgage Notes, and
the General Partner is co-obligor of the Series D and E First Mortgage Notes.
AmeriGas OLP may prepay the First Mortgage Notes, in whole or in part. These
prepayments include a make whole premium. Following the disposition of assets or
a change of control, AmeriGas OLP may be required to offer to prepay the First
Mortgage Notes, in whole or in part.

AMERIGAS OLP CREDIT AGREEMENT. AmeriGas OLP's Credit Agreement ("Credit
Agreement") consists of (1) a Revolving Credit Facility and (2) an Acquisition
Facility. AmeriGas OLP's obligations under the Credit Agreement are
collateralized by substantially all of its assets. The General Partner and
Petrolane are guarantors of amounts outstanding under the Credit Agreement.

         Under the Revolving Credit Facility, AmeriGas OLP may borrow up to $100
(including a $100 sublimit for letters of credit) subject to restrictions in the
AmeriGas Partners Senior Notes indentures (see "Restrictive Covenants" below).
The Revolving Credit Facility may be used for working capital and general
purposes of AmeriGas OLP. The Revolving Credit Facility expires on October 15,
2006, but may be extended for additional one-year periods with the consent of
the participating banks representing at least 80% of the commitments thereunder.
There were no borrowings outstanding under AmeriGas OLP's Revolving Credit
Facility at September 30, 2003. AmeriGas OLP had borrowings under the Revolving
Credit Facility totaling $10

                                                                              41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

Note 4 Continued

at September 30, 2002, which we classify as bank loans. Issued and outstanding
letters of credit, which reduce available borrowings under the Revolving Credit
Facility, totaled $33.4 and $19.8 at September 30, 2003 and 2002, respectively.

         The Acquisition Facility provides AmeriGas OLP with the ability to
borrow up to $75 to finance the purchase of propane businesses or propane
business assets or, to the extent it is not so used, may be used for working
capital and general purposes. The Acquisition Facility operates as a revolving
facility through October 15, 2006, at which time amounts then outstanding will
be immediately due and payable. There were no amounts outstanding under the
Acquisition Facility at September 30, 2003 and 2002.

         The Revolving Credit Facility and the Acquisition Facility permit
AmeriGas OLP to borrow at prevailing interest rates, including the base rate,
defined as the higher of the Federal Funds rate plus 0.50% or the agent bank's
prime rate (4.00% at September 30, 2003), or at a two-week, one-, two-, three-,
or six-month Eurodollar Rate, as defined in the Credit Agreement, plus a margin.
The margin on Eurodollar Rate borrowings (which ranges from 1.00% to 2.25%), and
the Credit Agreement facility fee rate (which ranges from 0.25% to 0.50%) are
dependent upon AmeriGas OLP's ratio of funded debt to earnings before interest
expense, income taxes, depreciation and amortization ("EBITDA"), each as defined
in the Credit Agreement.

GENERAL PARTNER FACILITY. AmeriGas OLP also has a revolving credit agreement
with the General Partner under which it may borrow up to $20 for working capital
and general purposes. This agreement is coterminous with, and generally
comparable to, AmeriGas OLP's Revolving Credit Facility except that borrowings
under the General Partner Facility are unsecured and subordinated to all senior
debt of AmeriGas OLP. Interest rates on borrowings are based upon one-month
offshore interbank offering rates. Facility fees are determined in the same
manner as fees under the Revolving Credit Facility. UGI has agreed to contribute
up to $20 to the General Partner to fund such borrowings.

RESTRICTIVE COVENANTS. The Senior Notes of AmeriGas Partners restrict the
ability of the Partnership to, among other things, incur additional
indebtedness, make investments, incur liens, issue preferred interests, prepay
subordinated indebtedness, and effect mergers, consolidations and sales of
assets. Under the Senior Notes indentures, AmeriGas Partners is generally
permitted to make cash distributions equal to available cash, as defined, as of
the end of the immediately preceding quarter, if certain conditions are met.
These conditions include:

         1. no event of default exists or would exist upon making such
            distributions and

         2. the Partnership's consolidated fixed charge coverage ratio, as
            defined, is greater than 1.75-to-1.

         If the ratio in item 2 above is less than or equal to 1.75-to-1, the
Partnership may make cash distributions in a total amount not to exceed $24 less
the total amount of distributions made during the immediately preceding 16
fiscal quarters. At September 30, 2003, such ratio was 2.79-to-1.

         The Credit Agreement and the First Mortgage Notes restrict the
incurrence of additional indebtedness and also restrict certain liens,
guarantees, investments, loans and advances, payments, mergers, consolidations,
asset transfers, transactions with affiliates, sales of assets, acquisitions and
other transactions. The Credit Agreement and First Mortgage Notes require the
ratio of total indebtedness, as defined, to EBITDA, as defined (calculated on a
rolling four-quarter basis or eight-quarter basis divided by two), to be less
than or equal to 4.75-to-1 with respect to the Credit Agreement and 5.25-to-1
with respect to the First Mortgage Notes. In addition, the Credit Agreement
requires that AmeriGas OLP maintain a ratio of EBITDA to interest expense, as
defined, of at least 2.25-to-1 on a rolling four-quarter basis. Generally, as
long as no default exists or would result, AmeriGas OLP is permitted to make
cash distributions not more frequently than quarterly in an amount not to exceed
available cash, as defined, for the immediately preceding calendar quarter. At
September 30, 2003, the Partnership was in compliance with its financial
covenants.

UGI UTILITIES

REVOLVING CREDIT AGREEMENTS. At September 30, 2003, UGI Utilities had revolving
credit agreements with five banks providing for borrowings of up to $107. These
agreements are currently scheduled to expire in June 2005 and 2006. UGI
Utilities may borrow at various prevailing interest rates, including LIBOR and
the banks' prime rate. UGI Utilities pays quarterly commitment fees on these
credit lines. UGI Utilities had revolving credit agreement borrowings totaling
$40.7 at September 30, 2003 and $37.2 at September 30, 2002, which we classify
as bank loans. The weighted-average interest rates on UGI Utilities bank loans
were 1.63% at September 30, 2003 and 2.35% at September 30, 2002.

RESTRICTIVE COVENANTS. UGI Utilities' credit agreements have restrictions on
such items as total debt, debt service, and payments for investments. They also
require consolidated tangible net worth of at least $125. At September 30, 2003,
UGI Utilities was in compliance with these financial covenants.

OTHER

At September 30, 2003, FLAGA's multi-currency acquisition note ("Acquisition
Note") consisted of $9.9 of U.S. dollar denominated obligations and 50.6 million
of euro-denominated obligations. The U.S. dollar denominated obligations under
the Acquisition Note bear interest at fixed rates ranging from 5.14% to 5.92%
while the eurodollar obligations bear interest at a rate of 1.25% over one- to
twelve-month euribor rates (as chosen by FLAGA from time to time). The effective
interest rates on the Acquisition Note at September 30, 2003 and September 30,
2002 were 4.00% and 4.86%, respectively. FLAGA may prepay the Acquisition Note,
in whole or in part. Prior to March 11, 2005, such prepayments shall be at a
premium.

42

                                              UGI Corporation 2003 Annual Report

         At September 30, 2003, FLAGA has a 15 million euro working capital
loan commitment from a European bank. The working capital facility expires in
November 2004, but may be extended with the bank's consent. Loans under the
working capital facility, as well as borrowings under FLAGA's special purpose
facility, bear interest at market rates. The weighted-average interest rates on
FLAGA's working capital facility were 3.40% at September 30, 2003 and 4.40% at
September 30, 2002. Borrowings under the working capital facility at September
30, 2003 and 2002 totaled 13.6 million euro ($15.9 U.S. dollar equivalent) and
8.7 million euro ($8.6 U.S. dollar equivalent), respectively, and are classified
as bank loans.

         The FLAGA Acquisition Note, special purpose facility and working
capital facility are subject to guarantees of UGI. In addition, under certain
conditions regarding changes in the credit rating of UGI Utilities' long-term
debt, the lending bank may require UGI to grant additional security or may
accelerate repayment of the debt.

NOTE 5 - INCOME TAXES

Income (loss) before income taxes comprises the following:

                                              2003     2002     2001
- ---------------------------------------------------------------------
                                                      
Domestic                                     $157.1   $117.2   $103.0
Foreign                                         3.7      6.8     (4.0)
- ---------------------------------------------------------------------
Total income before income taxes             $160.8   $124.0   $ 99.0
- ---------------------------------------------------------------------

The provisions for income taxes consist of the following:

                                              2003     2002     2001
- ---------------------------------------------------------------------
                                                      
Current expense:
   Federal                                   $ 48.1   $ 26.5   $ 39.2
   State                                       15.4      9.3     11.7
   Foreign                                        -      0.1        -
- ---------------------------------------------------------------------
   Total current expense                       63.5     35.9     50.9
Deferred (benefit) expense:
   Federal                                      2.3     11.8     (2.9)
   State                                       (3.6)    (0.4)    (1.2)
   Foreign                                     (1.1)       -     (1.0)
   Investment tax credit amortization          (0.4)    (0.4)    (0.4)
- ---------------------------------------------------------------------
   Total deferred (benefit) expense            (2.8)    11.0     (5.5)
- ---------------------------------------------------------------------
Total income tax expense                     $ 60.7   $ 46.9   $ 45.4
- ---------------------------------------------------------------------

         A reconciliation from the statutory federal tax rate to our effective
tax rate is as follows:

                                              2003     2002     2001
- ---------------------------------------------------------------------
                                                      
Statutory federal tax rate                     35.0%    35.0%    35.0%
Difference in tax rate due to:
   State income taxes, net of federal           4.6      5.3      7.3
   Goodwill amortization                          -        -      4.4
Other, net                                     (1.8)    (2.5)    (0.8)
- ---------------------------------------------------------------------
Effective tax rate                             37.8%    37.8%    45.9%
- ---------------------------------------------------------------------

         Deferred tax liabilities (assets) comprise the following at September
30:

                                                       2003      2002
- ----------------------------------------------------------------------
                                                          
Excess book basis over tax basis of property, plant
   and equipment                                      $224.3    $199.2
Utility regulatory assets                               25.0      25.7
Pension plan asset                                      11.0      10.5
Other                                                   16.7      15.0
- ----------------------------------------------------------------------
Gross deferred tax liabilities                         277.0     250.4
- ----------------------------------------------------------------------
Self-insured property and casualty liability            (9.9)     (9.0)
Employee-related benefits                              (20.6)    (16.2)
Premium on long-term debt                               (3.0)     (2.5)
Deferred investment tax credits                         (3.3)     (3.5)
Utility regulatory liabilities                          (7.7)     (1.8)
Operating loss carryforwards                           (17.0)    (13.3)
Allowance for doubtful accounts                         (3.9)     (2.4)
Other                                                  (13.7)    (13.8)
- ----------------------------------------------------------------------
Gross deferred tax assets                              (79.1)    (62.5)
- ----------------------------------------------------------------------
Deferred tax assets valuation allowance                  1.7       1.9
- ----------------------------------------------------------------------
Net deferred tax liabilities                          $199.6    $189.8
- ----------------------------------------------------------------------

         Deferred income taxes of approximately $4.4 have not been provided on
the excess of book basis over tax basis of our equity investment in AGZ
Holdings, the parent company of Antargaz, because the Company's intent is to
reinvest all equity earnings.

         UGI Utilities had recorded deferred tax liabilities of approximately
$37.0 as of September 30, 2003 and $35.5 as of September 30, 2002, pertaining to
utility temporary differences, principally a result of accelerated tax
depreciation for state income tax purposes, the tax benefits of which previously
were or will be flowed through to ratepayers. These deferred tax liabilities
have been reduced by deferred tax assets of $3.3 at September 30, 2003 and $3.5
at September 30, 2002, pertaining to utility deferred investment tax credits.
UGI Utilities had recorded regulatory income tax assets related to these net
deferred taxes of $57.6 as of September 30, 2003 and $54.7 as of September 30,
2002. These regulatory income tax assets represent future revenues expected to
be recovered through the ratemaking process. We will recognize this regulatory
income tax asset in deferred tax expense as the corresponding temporary
differences reverse and additional income taxes are incurred.

         Foreign net operating loss carryforwards of FLAGA totaled approximately
$44.5 of which $7.9 expires through 2010 and $36.6 of which has no expiration
date. At September 30, 2003, deferred tax assets relating to operating loss
carryforwards include those of FLAGA and $2.1 of deferred tax assets associated
with state net operating loss carryforwards expiring through 2023. Substantially
all of our deferred tax valuation allowances relate to state operating loss
carryforwards.

                                                                              43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

NOTE 6 - EMPLOYEE RETIREMENT PLANS

DEFINED BENEFIT PENSION AND OTHER POSTRETIREMENT PLANS. We sponsor a defined
benefit pension plan ("UGI Utilities Pension Plan") for employees of UGI, UGI
Utilities, and certain of UGI's other wholly owned subsidiaries. In addition, we
provide postretirement health care benefits to certain retirees and a limited
number of active employees meeting certain age and service requirements, and
postretirement life insurance benefits to nearly all domestic active and
retired employees.

      The following provides a reconciliation of projected benefit
obligations, plan assets, and funded status of these plans as of September 30:

                                            Pension           Other Postretirement
                                            Benefits               Benefits
                                        -----------------     --------------------
                                         2003       2002       2003          2002
- ----------------------------------------------------------------------------------
                                                                
CHANGE IN BENEFIT OBLIGATIONS:
    Benefit obligations -
        beginning of year               $190.9     $165.2     $ 27.3        $ 21.3
    Service cost                           4.5        3.6        0.2           0.1
    Interest cost                         13.0       12.5        1.8           1.7
    Plan amendments                          -        0.4          -             -
    Actuarial loss                        10.5       18.6        1.1           5.8
    Benefits paid                         (9.4)      (9.4)      (1.6)         (1.6)
- ----------------------------------------------------------------------------------
    Benefit obligations - end of year   $209.5     $190.9     $ 28.8        $ 27.3
- ----------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS:
    Fair value of plan assets -
        beginning of year               $166.1     $183.7     $  7.8        $  7.0
    Actual return on plan assets          27.2       (8.3)       0.2           0.1
    Employer contributions                   -          -        2.6           2.3
    Benefits paid                         (9.4)      (9.3)      (1.6)         (1.6)
- ----------------------------------------------------------------------------------
    Fair value of plan assets -
        end of year                     $183.9     $166.1     $  9.0        $  7.8
- ----------------------------------------------------------------------------------
Funded status of the plans              $(25.6)    $(24.8)    $(19.8)       $(19.5)
Unrecognized net actuarial loss           51.2       50.2        5.9           4.7
Unrecognized prior service cost            2.4        3.0          -             -
Unrecognized net transition (asset)
    obligation                            (1.4)      (3.0)       7.7           8.7
- ----------------------------------------------------------------------------------
Prepaid (accrued) benefit cost -
    end of year                         $ 26.6     $ 25.4     $ (6.2)       $ (6.1)
- ----------------------------------------------------------------------------------
ASSUMPTIONS AS OF SEPTEMBER 30:
Discount rate                              6.2%       6.8%       6.2%          6.8%
Expected return on plan assets             9.0%       9.5%       6.0%          6.0%
Rate of increase in salary levels          4.0%       4.5%       4.0%          4.5%
- ----------------------------------------------------------------------------------

         Net pension income is determined using assumptions as of the beginning
of each year. Funded status is determined using assumptions as of the end of
each year.

         Net periodic pension income and other postretirement benefit costs
include the following components:

                                          Pension                 Other Postretirement
                                          Benefits                      Benefits
                                 --------------------------    --------------------------
                                  2003      2002      2001      2003      2002      2001
- -----------------------------------------------------------------------------------------
                                                                 
Service cost                     $  4.5    $  3.6    $  3.1    $  0.2    $  0.1    $  0.1
Interest cost                      13.0      12.5      12.1       1.8       1.7       1.6
Expected return on assets         (17.9)    (19.1)    (18.9)     (0.4)     (0.3)     (0.3)
Amortization of:
    Transition (asset)
        obligation                 (1.6)     (1.6)     (1.6)      0.9       0.9       0.9
    Prior service cost              0.6       0.6       0.6         -         -         -
    Actuarial (gain) loss           0.3         -      (1.2)      0.1      (0.1)     (0.1)
- -----------------------------------------------------------------------------------------
Net benefit cost (income)          (1.1)     (4.0)     (5.9)      2.6       2.3       2.2
Change in regulatory
    assets and liabilities            -         -         -       1.0       1.2       1.4
- -----------------------------------------------------------------------------------------
Net expense (income)             $ (1.1)   $ (4.0)   $ (5.9)   $  3.6    $  3.5    $  3.6
- -----------------------------------------------------------------------------------------

         UGI Utilities Pension Plan assets are held in trust and consist
principally of equity and fixed income mutual funds and a commingled bond fund.
UGI Common Stock comprised approximately 7% of trust assets at September 30,
2003. Although the UGI Utilities Pension Plan projected benefit obligations
exceeded plan assets at September 30, 2003 and 2002, plan assets exceeded
accumulated benefit obligations by $7.3 and $7.2, respectively.

         Pursuant to orders issued by the PUC, UGI Utilities has established a
Voluntary Employees' Beneficiary Association ("VEBA") trust to pay retiree
health care and life insurance benefits and to fund the UGI Utilities'
postretirement benefit liability. UGI Utilities is required to fund its
postretirement benefit obligations by depositing into the VEBA the annual amount
of postretirement benefits costs determined under SFAS No. 106, "Employers
Accounting for Postretirement Benefits Other than Pensions." The difference
between such amounts and amounts included in UGI Utilities' rates is deferred
for future recovery from, or refund to, ratepayers. VEBA investments consist
principally of equity and fixed income mutual funds.

         The assumed health care cost trend rates are 11.0% for fiscal 2004,
decreasing to 5.5% in fiscal 2010. A one percentage point change in the assumed
health care cost trend rate would change the 2003 postretirement benefit cost
and obligation as follows:

                                               1% Increase   1% Decrease
- -------------------------------------------------------------------------
Effect on total service and interest costs     $       0.1   $       (0.1)
Effect on postretirement benefit obligation    $       1.6   $       (1.4)
- -------------------------------------------------------------------------

         We also sponsor unfunded retirement benefit plans for certain key
employees. At September 30, 2003 and 2002, the projected benefit obligations
of these plans were $11.9 and $7.9, respectively. We recorded expense for these
plans of $1.9 in 2003, $1.4 in 2002 and $1.2 in 2001.

44

                                              UGI Corporation 2003 Annual Report

DEFINED CONTRIBUTION PLANS. We sponsor 401(k) savings plans for eligible
employees of UGI, UGI Utilities, AmeriGas Propane, HVAC and certain of UGI's
other wholly owned domestic subsidiaries. Generally, participants in these
plans may contribute a portion of their compensation on either a before-tax
basis, or on both a before-tax and after-tax basis. These plans also provide for
either mandatory or discretionary employer matching contributions at various
rates. The cost of benefits under the savings plans totaled $7.3 in 2003, $4.5
in 2002 and $6.2 in 2001.

NOTE 7 - INVENTORIES

Inventories comprise the following at September 30:

                                                2003     2002
- --------------------------------------------------------------
                                                  
Propane gas                                    $ 53.8   $ 40.4
Utility fuel and gases                           54.6     36.6
Materials, supplies and other                    28.2     32.2
- --------------------------------------------------------------
Total inventories                              $136.6   $109.2
- --------------------------------------------------------------

NOTE 8 - SERIES PREFERRED STOCK

         The UGI Series Preferred Stock, including both series subject to and
series not subject to mandatory redemption, has 5,000,000 shares authorized for
issuance. We had no shares of UGI Series Preferred Stock outstanding at
September 30, 2003 or 2002.

         UGI Utilities Series Preferred Stock, including both series subject to
and series not subject to mandatory redemption, has 2,000,000 shares authorized
for issuance. The holders of shares of UGI Utilities Series Preferred Stock have
the right to elect a majority of UGI Utilities' Board of Directors (without
cumulative voting) if dividend payments on any series are in arrears in an
amount equal to four quarterly dividends. This election right continues until
the arrearage has been cured. We have paid cash dividends at the specified
annual rates on all outstanding UGI Utilities Series Preferred Stock.

         At September 30, 2003 and 2002, UGI Utilities had outstanding 200,000
shares of $7.75 Series cumulative preferred stock. UGI Utilities is required to
establish a sinking fund to redeem on October 1 in each year, commencing October
1, 2004, 10,000 shares of its $7.75 Series at a price of $100 per share. The
$7.75 Series is redeemable, in whole or in part, at the option of UGI Utilities
on or after October 1, 2004, at a price of $100 per share. All outstanding
shares of $7.75 Series are subject to mandatory redemption on October 1, 2009,
at a price of $100 per share.

NOTE 9 - COMMON STOCK AND INCENTIVE STOCK
AWARD PLANS

Common Stock share activity for 2001, 2002 and 2003 follows:

                                     Issued        Treasury      Outstanding
- -----------------------------------------------------------------------------
                                                        
Balance September 30, 2000          49,798,097     (9,307,533)     40,490,564
Issued:
    Employee and director plans              -        361,559         361,559
    Dividend reinvestment plan               -        148,218         148,218
Reacquired                                   -        (55,745)        (55,745)
- -----------------------------------------------------------------------------
Balance September 30, 2001          49,798,097     (8,853,501)     40,944,596
Issued:
    Employee and director plans              -        482,794         482,794
    Dividend reinvestment plan               -        130,593         130,593
Reacquired                                   -         (5,388)         (5,388)
- -----------------------------------------------------------------------------
Balance September 30, 2002          49,798,097     (8,245,502)     41,552,595
Issued:
    Employee and director plans              -      1,050,921       1,050,921
    Dividend reinvestment plan               -         97,665          97,665
Reacquired                                   -         (1,823)         (1,823)
- -----------------------------------------------------------------------------
Balance September 30, 2003          49,798,097     (7,098,739)     42,699,358
- -----------------------------------------------------------------------------

STOCK OPTION AND INCENTIVE PLANS. Under UGI's current employee stock option and
incentive plans, we may grant options to acquire shares of Common Stock, or
issue awards of restricted stock, to key employees. The exercise price for
options granted under these plans may not be less than the fair market value on
the grant date. Grants of stock options or awards of restricted stock under
these plans may vest immediately or ratably over a period of years, and stock
options generally can be exercised no later than ten years from the grant date.

         Under the 2000 Stock Incentive Plan ("2000 Incentive Plan"), awards
representing up to 1,650,000 shares of Common Stock may be granted in connection
with stock options and awards of restricted stock. However, awards representing
no more than 750,000 shares of restricted stock may be issued. In addition, the
2000 Incentive Plan provides that both option grants and restricted stock awards
may provide for the crediting of Common Stock dividend equivalents to
participants' accounts. Dividend equivalents will be paid in cash, and such
payments may, at the participants' request, be deferred. Awards of restricted
stock may be settled, at the option of the Company, in shares of Common Stock,
cash, or a combination of Common Stock and cash. The actual number of shares (or
their cash equivalent) ultimately issued, and the actual amount of dividend
equivalents paid, is dependent upon the achievement of objective performance
goals. During 2003, 2002 and 2001, the Company made restricted stock awards
representing 81,750, 254,250, and 166,013 shares, respectively. At September 30,
2003, awards representing 458,813 shares of restricted stock were outstanding.
In addition to the 2000 Incentive Plan, at September 30, 2003, there remained
available for grant options to acquire 17,791 shares of Common Stock

                                                                              45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

Note 9 continued

under the 1997 Stock Option and Dividend Equivalent Plan ("1997 SODEP Plan"). In
addition to the 2000 Incentive Plan and the 1997 SODEP Plan, we have
non-qualified stock option plans under which we may grant options to acquire
shares of Common Stock to key employees other than executive officers of UGI.

         In addition to these employee incentive plans, UGI may grant options to
acquire up to a total of 300,000 shares of Common Stock to each of UGI's
nonemployee Directors. No Director may be granted options to acquire more than
15,000 shares of Common Stock in any calendar year, and the exercise price may
not be less than the fair market value of the Common Stock on the grant date.
Generally, all options will be fully vested on the grant date.

         Stock option transactions under all of our plans for 2001, 2002, and
2003 follow:

                                             Shares      Average Option Price
- -----------------------------------------------------------------------------
                                                   
Shares under option - September 30, 2000    2,825,466         $ 14.121
- -----------------------------------------------------------------------------
Granted                                        50,400           17.250
Exercised                                    (304,009)          13.871
Forfeited                                     (18,500)          13.885
- -----------------------------------------------------------------------------
Shares under option - September 30, 2001    2,553,357           14.214
- -----------------------------------------------------------------------------
Granted                                       714,375           20.470
Exercised                                    (437,967)          14.019
- -----------------------------------------------------------------------------
Shares under option - September 30, 2002    2,829,765           15.857
- -----------------------------------------------------------------------------
Granted                                       694,500           25.179
Exercised                                    (997,526)          14.681
Forfeited                                     (44,250)          22.725
- -----------------------------------------------------------------------------
Shares under option - September 30, 2003    2,482,489           18.818
- -----------------------------------------------------------------------------
Options exercisable 2001                    1,651,356           14.533
Options exercisable 2002                    1,706,889           14.515
Options exercisable 2003                    1,428,987           15.454
- -----------------------------------------------------------------------------

         The following table presents additional information relating to stock
options outstanding and exercisable at September 30, 2003:

                                                Range of exercise prices
                                                ------------------------
                                                          
                                                $    13.58 -      $20.41 -
                                                $    20.40      $  25.61
- ------------------------------------------------------------------------
Options outstanding at September 30, 2003:
     Number of options                           1,754,114       728,375
     Weighted average remaining
         contractual life (in years)                  6.67          9.21
     Weighted average exercise price            $    16.24      $  24.88

Options exercisable at September 30, 2003:
     Number of options                           1,370,612        58,375
     Weighted average exercise price            $    15.08      $  24.27
- ------------------------------------------------------------------------

         At September 30, 2003, 1,043,951 shares of Common Stock were available
for future option grants or restricted stock awards under all of our stock
option and incentive plans.

OTHER STOCK-BASED COMPENSATION PLANS AND AWARDS. Under the AmeriGas Propane,
Inc. 2000 Long-Term Incentive Plan ("2000 Propane Plan"), the General Partner
may grant to key employees the right to receive a total of 500,000 AmeriGas
Partners Common Units, or cash equivalent to the fair market value of such
Common Units, upon the achievement of performance goals. In addition, the 2000
Propane Plan may provide for the crediting of Partnership distribution
equivalents to participants' accounts. Distribution equivalents will be paid in
cash and such payments may, at the participants' request, be deferred. The
actual number of Common Units (or their cash equivalent) ultimately issued,
and the actual amount of distribution equivalents paid, is dependent upon the
achievement of performance goals. Generally, each grant, unless paid, will
terminate when the participant ceases to be employed by the General Partner.
We also have a nonexecutive Common Unit plan under which the General Partner may
grant awards of up to a total of 200,000 Common Units to key employees who do
not participate in the 2000 Propane Plan. Generally, awards under the
nonexecutive plan vest at the end of a three-year period and will be paid in
Common Units and cash. The General Partner made awards under the 2000 Propane
Plan and the nonexecutive plan representing 112,500, 43,250 and 66,075 Common
Units in 2003, 2002 and 2001, respectively. At September 30, 2003 and 2002,
awards representing 209,336 and 105,825 Common Units, respectively, were
outstanding.

         Under the 1997 UGI Corporation Directors' Equity Compensation Plan
("1997 Directors' Plan"), we make annual awards to our nonemployee Directors of
(1) "Units," each representing an interest equivalent to one share of Common
Stock, and (2) Common Stock for a portion of their annual retainer. Through
December 31, 2002, Directors could have elected to receive the cash portion of
their retainer fee and all or a portion of their meeting fees in the form of
Units. The 1997 Directors' Plan also provides for the crediting of dividend
equivalents in the form of additional Units. Units and dividend equivalents are
fully vested when credited to a Director's account and will be converted to
shares of Common Stock and paid upon retirement or termination of service. Units
issued relating to annual awards and deferred compensation totaled 7,218, 14,174
and 17,334 in 2003, 2002 and 2001, respectively. At September 30, 2003 and 2002,
there were 106,069 and 94,778 Units, respectively, outstanding.

FAIR VALUE INFORMATION. The per share weighted-average fair value of stock
options granted under our option plans was $2.60 in 2003, $3.27 in 2002 and
$2.90 in 2001. These amounts were determined using the Black-Scholes option
pricing model, which values options based on the stock price at the grant date,
the expected life of the option, the estimated volatility of the stock, expected
dividend payments, and the risk-free interest rate over the expected life of the
option.

         The assumptions we used for option grants during 2003, 2002 and 2001
are as follows:

                            2003        2002        2001
- ----------------------------------------------------------
                                          
Expected life of option    6 years     6 years     6 years
Expected volatility           21.6%       28.8%       29.1%
Expected dividend yield        6.1%        6.7%        6.6%
Risk free interest rate        3.1%        4.7%        5.0%
- ----------------------------------------------------------

46

                                              UGI Corporation 2003 Annual Report

STOCK OWNERSHIP POLICY. Under the terms of our Stock Ownership Policy,
executives and certain key employees are required to own UGI Common Stock having
a fair value equal to approximately 40% to 450% of their base salaries. Prior to
the enactment of the Sarbanes-Oxley Act of 2002, we offered full recourse,
interest-bearing loans to employees in order to assist them in meeting the
ownership requirements. Each loan may not exceed ten years and is collateralized
by the Common Stock purchased. At September 30, 2003 and 2002, loans out-
standing totaled $0.4 and $3.5, respectively. The Company is not currently
offering loans under this program.

NOTE 10 - PREFERENCE STOCK PURCHASE RIGHTS

Holders of our Common Stock own one-third of one right (as described below) for
each outstanding share of Common Stock. The rights expire in 2006. Each right
entitles the holder to purchase one one-hundredth of a share of First Series
Preference Stock, without par value, at an exercise price of $120 per one
one-hundredth of a share or, under the circumstances summarized below, to
purchase the Common Stock described in the following paragraph. The rights are
exercisable only if a person or group, other than certain underwriters:

         1.       acquires 20% or more of our Common Stock ("Acquiring Person")
                  or

         2.       announces or commences a tender offer for 30% or more of our
                  Common Stock.

         We are entitled to redeem the rights at five cents per right at any
time before the earlier of:

         1.       the expiration of the rights in April 2006 or

         2.       ten days after a person or group has acquired 20% of our
                  Common Stock if a majority of continuing Directors concur and,
                  in certain circumstances, thereafter.

         Each holder of a right, other than an Acquiring Person, is entitled
to purchase, at the exercise price of the right, Common Stock having a market
value of twice the exercise price of the right if:

         1.       an Acquiring Person merges with UGI or engages in certain
                  other transactions with us or

         2.       a person acquires 40% or more of our Common Stock.

         In addition, if, after UGI (or an Acquiring Person) publicly announces
that an Acquiring Person has become such, UGI engages in a merger or other
business combination transaction in which:

         1.       we are not the surviving corporation, or

         2.       we are the surviving corporation, but our Common Stock is
                  changed or exchanged, or

         3.       50% or more of our assets or earning power is sold or
                  transferred, then each holder of a right is entitled to pur-
                  chase, at the exercise price of the right, common stock of the
                  acquiring company having a market value of twice the exercise
                  price of the right.

         The rights have no voting or dividend rights and, until exercisable,
have no dilutive effect on our earnings.

NOTE 11 - PARTNERSHIP DISTRIBUTIONS

The Partnership makes distributions to its partners approximately 45 days after
the end of each fiscal quarter in a total amount equal to its Available Cash for
such quarter. Available Cash generally means:

         1.       all cash on hand at the end of such quarter,

         2.       plus all additional cash on hand as of the date of
                  determination resulting from borrowings after the end of such
                  quarter,

         3.       less the amount of cash reserves established by the General
                  Partner in its reasonable discretion.

         The General Partner may establish reserves for the proper conduct of
the Partnership's business and for distributions during the next four
quarters. In addition, certain of the Partnership's debt agreements require
reserves be established for the payment of debt principal and interest.

         Distributions of Available Cash are made 98% to limited partners and
2% to the General Partner. The Partnership may pay an incentive distribution if
Available Cash exceeds the Minimum Quarterly Distribution of $0.55 ("MQD") on
all units.

NOTE 12 - COMMITMENTS AND CONTINGENCIES

We lease various buildings and other facilities and transportation, computer,
and office equipment under operating leases. Certain of our leases contain
renewal and purchase options and also contain escalation clauses. Our aggregate
rental expense for such leases was $47.4 in 2003, $46.5 in 2002 and $38.4 in
2001.

         Minimum future payments under operating leases that have initial or
remaining noncancelable terms in excess of one year are as follows:

                                                                     After
                         2004     2005     2006     2007     2008     2008
- ---------------------------------------------------------------------------
                                                   
AmeriGas Propane        $ 35.7   $ 30.7   $ 25.7   $ 21.3   $ 17.9   $ 39.6
UGI Utilities              2.9      2.4      2.1      1.8      1.0      3.2
International Propane
  and other                1.5      1.2      0.9      0.7      0.6      0.1
- ---------------------------------------------------------------------------
Total                   $ 40.1   $ 34.3   $ 28.7   $ 23.8   $ 19.5   $ 42.9
- ---------------------------------------------------------------------------

         Gas Utility has gas supply agreements with producers and marketers with
terms not exceeding one year. Gas Utility also has agreements for firm pipeline
transportation and storage capacity, which Gas Utility may terminate at various
dates through 2016. Gas Utility's costs associated with transportation and
storage capacity agreements are included in its annual PGC filing with the PUC
and are recoverable through PGC rates. In addition, Gas Utility has short-term
gas supply agreements which permit it to purchase certain of its gas supply
needs on a firm or interruptible basis at spot-market prices.

         Electric Utility purchases its capacity requirements and electric
energy needs under contracts with various suppliers and on the spot market.
Contracts with producers for capacity and energy needs expire at various dates
through 2008.

         Energy Services enters into fixed price contracts with suppliers to
purchase natural gas to meet its sales commitments. Generally, these contracts
have terms of less than two years.

         The Partnership enters into fixed price contracts to purchase a portion
of its supply requirements. These contracts generally have terms of less than
one year.

                                                                              47

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

Note 12 continued

         The following table presents contractual obligations under Gas Utility,
Electric Utility, Energy Services and AmeriGas Propane supply, storage and
service contracts existing at September 30, 2003:

                                                                              After
                                  2004     2005     2006     2007     2008     2008
- ------------------------------------------------------------------------------------
                                                            
Gas Utility and Electric
       Utility supply, storage
       and service contracts     $157.1   $ 87.9   $ 48.1   $ 25.1   $ 14.7   $ 74.0
Energy Services
       supply contracts           435.3     65.6      8.1      1.4        -        -
AmeriGas Propane
       supply contracts            16.7        -        -        -        -        -
- ------------------------------------------------------------------------------------
Total                            $609.1   $153.5   $ 56.2   $ 26.5   $ 14.7   $ 74.0
- ------------------------------------------------------------------------------------

         The Partnership also enters into contracts to purchase propane to meet
additional supply requirements. Generally, these contracts are one- to
three-year agreements subject to annual review and call for payment based on
either fixed prices or market prices at date of delivery.

         The Partnership has succeeded to certain lease guarantee obligations of
Petrolane relating to Petrolane's divestiture of non-propane operations before
its 1989 acquisition by QFB Partners. Future lease payments under these leases
total approximately $15 at September 30, 2003. The leases expire through 2010
and some of them are currently in default. The Partnership has succeeded to
the indemnity agreement of Petrolane by which Texas Eastern Corporation ("Texas
Eastern"), a prior owner of Petrolane, agreed to indemnify Petrolane against any
liabilities arising out of the conduct of businesses that do not relate to, and
are not a part of, the propane business, including lease guarantees. In
December 1999, Texas Eastern filed for dissolution under the Delaware General
Corporation Law. In May 2001, Petrolane filed a declaratory judgment action in
the Delaware Chancery Court seeking confirmation of Texas Eastern's
indemnification obligations and judicial supervision of Texas Eastern's
dissolution to ensure that its indemnification obligations to Petrolane are paid
or adequately provided for in accordance with law. Those proceedings are
pending. Pursuant to a Liquidation and Winding Up Agreement dated September 17,
2002, PanEnergy Corporation ("PanEnergy"), Texas Eastern's sole stockholder,
assumed all of Texas Eastern's liabilities as of December 20, 2002, to the
extent of the value of Texas Eastern's assets transferred to PanEnergy as of
that date (which was estimated to exceed $94), and to the extent that such
liabilities arise within ten years from Texas Eastern's date of dissolution.
Notwithstanding the dissolution proceeding, and based on Texas Eastern
previously having satisfied directly defaulted lease obligations without the
Partnership's having to honor its guarantee, we believe that the probability
that the Partnership will be required to directly satisfy the lease obligations
subject to the indemnification agreement is remote.

         On August 21, 2001, AmeriGas Partners, through AmeriGas OLP, acquired
the propane distribution businesses of Columbia Energy Group (the "2001
Acquisition") pursuant to the terms of a purchase agreement (the "2001
Acquisition Agreement") by and among Columbia Energy Group ("CEG"), Columbia
Propane Corporation ("Columbia Propane"), Columbia Propane, L.P. ("CPLP"), CP
Holdings, Inc. ("CPH," and together with Columbia Propane and CPLP, the "Company
Parties"), AmeriGas Partners, AmeriGas OLP and the General Partner (together
with AmeriGas Partners and AmeriGas OLP, the "Buyer Parties"). As a result of
the 2001 Acquisition, AmeriGas OLP acquired all of the stock of Columbia Propane
and CPH and substantially all of the partnership interests of CPLP. Under the
terms of an earlier acquisition agreement (the "1999 Acquisition Agreement"),
the Company Parties agreed to indemnify the former general partners of
National Propane Partners, L.P. (a predecessor company of the Columbia Propane
businesses) and an affiliate (collectively, "National General Partners")
against certain income tax and other losses that they may sustain as a result of
the 1999 acquisition by CPLP of National Propane Partners, L.P. (the "1999
Acquisition") or the operation of the business after the 1999 Acquisition
("National Claims"). At September 30, 2003, the potential amount payable under
this indemnity by the Company Parties was approximately $65. These indemnity
obligations will expire on the date that CPH acquires the remaining outstanding
partnership interest of CPLP, which is expected to occur on or after July 19,
2009.

         Under the terms of the 2001 Acquisition Agreement, CEG agreed to
indemnify the Buyer Parties and the Company Parties against any losses that they
sustain under the 1999 Acquisition Agreement and related agreements ("Losses"),
including National Claims, to the extent such claims are based on acts or
omissions of CEG or the Company Parties prior to the 2001 Acquisition. The Buyer
Parties agreed to indemnify CEG against Losses, including National Claims, to
the extent such claims are based on acts or omissions of the Buyer Parties or
the Company Parties after the 2001 Acquisition. CEG and the Buyer Parties have
agreed to apportion certain losses resulting from National Claims to the extent
such losses result from the 2001 Acquisition itself.

         From the late 1800s through the mid-1900s, UGI Utilities and its former
subsidiaries owned and operated a number of manufactured gas plants ("MGPs")
prior to the general availability of natural gas. Some constituents of coal tars
and other residues of the manufactured gas process are today considered
hazardous substances under the Superfund Law and may be present on the sites of
former MGPs. Between 1882 and 1953, UGI Utilities owned the stock of subsidiary
gas companies in Pennsylvania and elsewhere and also operated the businesses of
some gas companies under agreement. Pursuant to the requirements of the Public
Utility Holding Company Act of 1935, UGI Utilities divested all of its utility
operations other than those which now constitute Gas Utility and Electric
Utility.

         UGI Utilities does not expect its costs for investigation and
remediation of hazardous substances at Pennsylvania MGP sites to be material to
its results of operations because Gas Utility is currently permitted to include
in rates, through future base rate proceedings, prudently incurred remediation
costs associated with such sites. UGI Utilities has been notified of several
sites outside Pennsylvania on which (1) MGPs were formerly operated by it or
owned or operated by its former subsidiaries and (2) either environmental
agencies or private parties are investigating the extent of environmental
contamination or performing environmental remediation. UGI Utilities is
currently

48

                                              UGI Corporation 2003 Annual Report

litigating three claims against it relating to out-of-state sites.

         Management believes that under applicable law UGI Utilities should not
be liable in those instances in which a former subsidiary owned or operated an
MGP. There could be, however, significant future costs of an uncertain amount
associated with environmental damage caused by MGPs outside Pennsylvania that
UGI Utilities directly operated, or that were owned or operated by former
subsidiaries of UGI Utilities, if a court were to conclude that (1) the
subsidiary's separate corporate form should be disregarded or (2) UGI Utilities
should be considered to have been an operator because of its conduct with
respect to its subsidiary's MGP.

         With respect to a manufactured gas plant site in Manchester, New
Hampshire, EnergyNorth Natural Gas, Inc. ("EnergyNorth") filed suit against UGI
Utilities seeking contribution from UGI Utilities for response and remediation
costs associated with the contamination on the site of a former MGP allegedly
operated by former subsidiaries of UGI Utilities. UGI Utilities and EnergyNorth
agreed to a settlement of this matter in June 2003. UGI Utilities recorded its
estimated liability for contingent payments to EnergyNorth under the terms of
the settlement agreement which did not have a material effect on Fiscal 2003 net
income.

         In April 2003, Citizens Communications Company ("Citizens") served a
complaint naming UGI Utilities as a third-party defendant in a civil action
pending in United States District Court for the District of Maine. In that
action, the plaintiff, City of Bangor, Maine ("City"), sued Citizens to recover
environmental response costs associated with MGP wastes generated at a plant
allegedly operated by Citizens' predecessors at a site on the Penobscot River.
Citizens subsequently joined UGI Utilities and ten other third party defendants
alleging that the third-party defendants are responsible for an equitable share
of costs Citizens may be required to pay to the City for cleaning up tar
deposits in the Penobscot River. The City believes that it could cost as much as
$50 to clean up the river. UGI Utilities believes that it has good defenses to
the claim.

         By letter dated July 29, 2003, Atlanta Gas Light Company ("AGL") served
UGI Utilities with a complaint filed in the United States District Court for the
Middle District of Florida in which AGL alleges that UGI Utilities is
responsible for 20% of approximately $8.0 incurred by AGL in the investigation
and remediation of a former MGP site in St. Augustine, Florida. UGI Utilities
formerly owned stock of the St. Augustine Gas Company, the owner and operator of
the MGP. UGI Utilities believes that it has good defenses to the claim and is
defending the suit.

         On September 20, 2001, Consolidated Edison Company of New York
("ConEd") filed suit against UGI Utilities in the United States District Court
for the Southern District of New York, seeking contribution from UGI Utilities
for an allocated share of response costs associated with investigating and
assessing gas plant related contamination at former MGP sites in Westchester
County, New York. The complaint alleges that UGI Utilities "owned and operated"
the MGPs prior to 1904. The complaint also seeks a declaration that UGI
Utilities is responsible for an allocated percentage of future investigative and
remedial costs at the sites. ConEd believes that the cost of remediation for all
of the sites could exceed $70. UGI Utilities believes that it has good defenses
to the claim and is defending the suit. In November 2003, the court granted UGI
Utilities' motion for summary judgement in part, dismissing all claims
premised on a disregard of the separate corporate form of UGI Utilities'
former subsidiaries and dismissing claims premised on UGI Utilities' operation
of three of the MGPs under operating leases with ConEd's predecessors. The court
reserved decision on the remaining theory of liability, that UGI Utilities was a
direct operator of the remaining MGPs.

         In addition to these matters, there are other pending claims and legal
actions arising in the normal course of our businesses. We cannot predict with
certainty the final results of environmental and other matters. However, it is
reasonably possible that some of them could be resolved unfavorably to us.
Although we currently believe, after consultation with counsel, that damages or
settlements, if any, recovered by the plaintiffs in such claims or actions
will not have a material adverse effect on our financial position, damages or
settlements could be material to our operating results or cash flows in future
periods depending on the nature and timing of future developments with respect
to these matters and the amounts of future operating results and cash flows.

NOTE 13 - FINANCIAL INSTRUMENTS

In accordance with its propane price risk management policy, the Partnership
uses derivative instruments, including price swap and option contracts and
contracts for the forward sale of propane, to manage the cost of a portion of
its forecasted purchases of propane and to manage market risk associated with
propane storage inventories. These derivative instruments have been designated
by the Partnership as cash flow or fair value hedges under SFAS 133. The fair
values of these derivative instruments are affected by changes in propane
product prices. In addition to these derivative instruments, the Partnership may
also enter into contracts for the forward purchase of propane as well as
fixed-price supply agreements to manage propane market price risk. These
contracts generally qualify for the normal purchases and normal sales exception
of SFAS 133 and therefore are not adjusted to fair value. FLAGA also uses
derivative instruments, principally price swap contracts, to reduce market risk
associated with purchases of propane. These contracts may or may not qualify for
hedge accounting under SFAS 133.

         Energy Services uses exchange-traded natural gas futures contracts to
manage market risk associated with forecasted purchases of natural gas it
sells under firm commitments. These derivative instruments are designated as
cash flow hedges. The fair values of these futures contracts are affected by
changes in natural gas prices.

         During 2003 and 2002, Gas Utility entered into natural gas call option
contracts to reduce volatility in the cost of gas it purchases for retail
core-market customers. Because net gains or losses associated with these
contracts will be included in Gas Utility's PGC recovery mechanism, as these
contracts are marked to market in accordance with SFAS 133, any gains or
losses are deferred for future recovery from or refund to Gas Utility
ratepayers.

         During 2001, we used a managed program of derivative instruments
including natural gas and oil futures contracts, to preserve gross margin
associated with certain of our natural gas customers. These contracts were
designated as cash flow hedges.

                                                                              49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

Note 13 continued

         Gas Utility and Electric Utility are parties to a number of contracts
that have elements of a derivative instrument. These contracts include, among
others, binding purchase orders, contracts which provide for the delivery of
natural gas, and service contracts that require the counterparty to provide
commodity storage, transportation or capacity service to meet our normal sales
commitments. Although many of these contracts have the requisite elements of a
derivative instrument, these contracts are not subject to the accounting
requirements of SFAS 133 because they provide for the delivery of products or
services in quantities that are expected to be used in the normal course of
operating our business or the value of the contract is directly associated with
the price or value of a service.

         On occasion, we enter into interest rate protection agreements
("IRPAs") designed to manage interest rate risk associated with planned
issuances of fixed-rate long-term debt. We designate these IRPAs as cash flow
hedges. Gains or losses on IRPAs are included in other comprehensive income and
are reclassified to interest expense as the interest expense on the associated
debt issue affects earnings.

         During the year ended September 30, 2003 and 2002, the net pre-tax loss
recognized in earnings representing cash flow hedge ineffectiveness was $3.1 and
$2.1, respectively. During the year ended September 30, 2001, such amount was
not material. The amount of cash flow hedge gains reclassified to net income
because it became probable that the original forecasted transactions would not
occur was $1.0 in 2001.

         Gains and losses included in accumulated other comprehensive income at
September 30, 2003 relating to cash flow hedges will be reclassified into (1)
cost of sales when the forecasted purchase of propane or natural gas subject to
the hedges impacts net income and (2) interest expense when interest on
anticipated issuances of fixed-rate long-term debt is reflected in net income.
Included in accumulated other comprehensive income at September 30, 2003 are net
after-tax losses of approximately $2.9 from IRPAs associated with forecasted
issuances of debt generally anticipated to occur during the next two years. The
amount of this net loss which is expected to be reclassified into net income
during the next twelve months is not material. Also included in accumulated
other comprehensive income at September 30, 2003 are net after-tax losses of
approximately $1.2 principally associated with future purchases of natural gas
and propane generally anticipated to occur during the next twelve months. The
actual amount of gains or losses on unsettled derivative instruments that
ultimately is reclassified into net income will depend upon the value of such
derivative contracts when settled. The fair value of derivative instruments is
included in other current assets, other assets, other current liabilities and
other noncurrent liabilities in the Consolidated Balance Sheets.

         The carrying amounts of financial instruments included in current
assets and current liabilities (excluding unsettled derivative instruments and
current maturities of long-term debt) approximate their fair values because of
their short-term nature. The carrying amounts and estimated fair values of our
remaining financial instruments (including unsettled derivative instruments) at
September 30 are as follows:

                                                  Carrying    Estimated
                                                   Amount     Fair Value
- ------------------------------------------------------------------------
                                                        
2003:
    Natural gas futures and options contracts     $    1.1    $      1.1
    Propane swap and option contracts                 (0.6)         (0.6)
    Interest rate protection agreements                0.2           0.2
    Long-term debt                                 1,223.5       1,337.7
    UGI Utilities preferred shares subject to
        mandatory redemption                          20.0          20.9
2002:
    Natural gas futures contracts                 $    5.1    $      5.1
    Propane swap and option contracts                  9.8           9.8
    Interest rate protection agreements               (4.0)         (4.0)
    Long-term debt                                 1,275.7       1,328.1
    UGI Utilities preferred shares subject to
        mandatory redemption                          20.0          20.4
- ------------------------------------------------------------------------

         We estimate the fair value of long-term debt by using current market
prices and by discounting future cash flows using rates available for similar
type debt. The estimated fair value of UGI Utilities preferred shares subject to
mandatory redemption is based on the fair value of redeemable preferred stock
with similar credit ratings and redemption features. Fair values of derivative
instruments reflect the estimated amounts that we would receive or pay to
terminate the contracts at the reporting date based upon quoted market prices of
comparable contracts at September 30, 2003 and 2002.

         We have financial instruments such as short-term investments and trade
accounts receivable, which could expose us to concentrations of credit risk.
We limit our credit risk from short-term investments by investing only in
investment-grade commercial paper, money market mutual funds and securities
guaranteed by the U.S. Government or its agencies. The credit risk from trade
accounts receivable is limited because we have a large customer base, which
extends across many different U.S. markets. We attempt to minimize our credit
risk associated with our derivative financial instruments through the
application of credit policies.

NOTE 14 - ENERGY SERVICES ACCOUNTS RECEIVABLE SECURITIZATION FACILITY

Energy Services has a $100 receivables purchase facility ("Receivables
Facility") with an issuer of receivables-backed commercial paper expiring on
August 26, 2006, although the Receivables Facility may terminate prior to such
date due to the termination of the commitments of the Receivables Facility back-
up purchasers. Under the Receivables Facility, Energy Services transfers, on an
ongoing basis and without recourse, its trade accounts receivable to its wholly
owned, special purpose subsidiary, Energy Services Funding Corporation
("ESFC"), which is consolidated for financial statement purposes. ESFC, in turn,
has sold, and subject to certain conditions, may from time to time sell, an
undivided interest in the receivables to a commercial paper conduit of a major
bank. The maximum level of

50

                                              UGI Corporation 2003 Annual Report

funding available at any one time from this facility is $100. The proceeds of
these sales are less than the face amount of the accounts receivable sold by an
amount that approximates the purchaser's financing cost of issuing its own
receivables-backed commercial paper. ESFC was created and has been structured to
isolate its assets from creditors of Energy Services and its affiliates,
including UGI. This two-step transaction is accounted for as a sale of
receivables following the provisions of SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." Energy
Services continues to service, administer and collect trade receivables on
behalf of the commercial paper issuer and ESFC.

         During 2003 and 2002, Energy Services sold trade receivables totaling
$651.3 and $302.4, respectively, to ESFC. During 2003 and 2002, ESFC sold an
aggregate $196.0 and $34.0, respectively, of undivided interests in its trade
receivables to the commercial paper conduit. At September 30, 2003, the out-
standing balance of ESFC trade receivables was $38.5 which amount is net of $17
in trade receivables sold to the commercial paper conduit. At September 30,
2002, there were $22.9 of ESFC trade receivables outstanding and no receivables
had been sold to the commercial paper conduit and removed from the balance
sheet. Losses on sales of receivables to the commercial paper conduit that
occurred during the years ended September 30, 2003 and 2002, which losses are
included in other income, net, were $0.3 and $0.1, respectively.

         In addition, a major bank has committed to issue up to $50 of standby
letters of credit, secured by cash or marketable securities ("LC Facility").
Energy Services expects to fund the collateral requirements with borrowings
under its Receivables Facility. The LC Facility expires on September 13, 2004.

NOTE 15 - CHANGES IN ACCOUNTING

TANK FEE REVENUE RECOGNITION. In order to apply the guidance of SEC Staff
Accounting Bulletin No. 101 entitled "Revenue Recognition," effective October 1,
2000, the Partnership changed its method of accounting for annually billed
nonrefundable tank fees. Prior to the change in accounting, nonrefundable tank
fees for installed Partnership-owned tanks were recorded as revenue when billed.
Under the new accounting method, revenues from such fees are being recorded on
a straight-line basis over one year. As a result of this change in accounting,
on October 1, 2000, we recorded an after-tax charge of $2.1 representing the
cumulative effect of the change in accounting on prior years. The change in
accounting for nonrefundable tank fees did not have a material impact on
reported revenues in 2003, 2002 and 2001.

ACCOUNTING FOR TANK INSTALLATION COSTS. Effective October 1, 2000, the
Partnership changed its method of accounting for tank installation costs which
are not billed to customers. Prior to the change in accounting, costs to install
Partnership-owned tanks at customer locations were expensed as incurred. Under
the new accounting method, all such costs, net of amounts billed to customers,
are capitalized in property, plant and equipment and amortized over the
estimated period of benefit not exceeding ten years. The Partnership believes
that this accounting method better matches the costs of installing
Partnership-owned tanks with the periods benefited. As a result of this change
in accounting, on October 1, 2000, we recorded after-tax income of $6.9
representing the cumulative effect of the change in accounting on prior years.
The change in accounting for tank installation costs did not have a material
effect on 2001 net income.

CUMULATIVE EFFECT OF ACCOUNTING CHANGES. The cumulative effect reflected on the
2001 Consolidated Statement of Income and related diluted per share amounts
resulting from the above changes in accounting principles, as well as the
cumulative effect resulting from the adoption of SFAS 133 (see Note 1), comprise
the following:

                                                                  Diluted
                            Pre-Tax    Income Tax    After-Tax    Earnings
                            Income      (Expense)     Income       (Loss)
                            (Loss)       Benefit      (Loss)      Per Share
- ---------------------------------------------------------------------------
                                                      
Tank fees                   $  (3.5)   $      1.4    $    (2.1)   $   (0.05)
Tank installation costs        11.3          (4.4)         6.9         0.17
SFAS 133                       (0.4)          0.1         (0.3)       (0.01)
- ---------------------------------------------------------------------------
Total                       $   7.4    $     (2.9)   $     4.5    $    0.11
- ---------------------------------------------------------------------------

NOTE 16 - PROVISION FOR SHUT-DOWN COSTS - HEARTH USA(TM)

In September 2001, after evaluating the prospects for Hearth USA(TM) in light of
the weak retail environment and the capital required to expand beyond its
two-store pilot phase, we committed to close both of its stores and cease all
operations by the end of October 2001. Hearth USA(TM) sold, installed and
serviced hearth, grill and spa products and sold related accessories from two
superstores located in Rockville, Maryland and Springfield, Virginia. As a
result of this action, in September 2001 we recorded a pre-tax charge of $8.5.
The pre-tax charge reflects $3.7 associated with the impairment of leasehold
improvements; $3.2 for estimated costs associated with lease guaranty
arrangements and the restoration of the leased facilities; $1.1 associated with
the write-down of inventory to net realizable value; and $0.5 associated with
vehicle lease, severance and other costs directly resulting from the decision to
close the stores. These charges and accrued costs have been reflected in the
2001 Consolidated Statement of Income as "Provision for shut-down costs - Hearth
USA(TM)." At September 30, 2002, all amounts had been settled.

NOTE 17 - OTHER INCOME, NET

Other income, net, comprises the following:

                                               2003      2002      2001
- -------------------------------------------------------------------------
                                                         
Interest and interest-related income          $ (6.6)   $ (5.3)   $ (6.7)
Utility non-tariff service income               (5.7)     (5.7)     (5.4)
Gain on sales of fixed assets                   (1.6)     (1.6)     (2.4)
Pension income                                  (1.1)     (4.0)     (5.9)
Other                                           (4.8)     (1.5)     (2.6)
- ------------------------------------------------------------------------
Total other income, net                       $(19.8)   $(18.1)   $(23.0)
- ------------------------------------------------------------------------

                                                                              51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

NOTE 18 - CONVERSION OF AMERIGAS PARTNERS SUBORDINATED UNITS AND COMMON UNIT
ISSUANCE

In December 2002, the General Partner determined that the cash-based performance
and distribution requirements for the conversion of the then-remaining 9,891,072
Subordinated Units of AmeriGas Partners, all of which were held by the General
Partner, had been met in respect of the quarter ended September 30, 2002. As a
result, in accordance with the Second Amended and Restated Agreement of Limited
Partnership of AmeriGas Partners, L.P., the Subordinated Units were converted to
an equivalent number of Common Units effective November 18, 2002. Concurrent
with the Subordinated Unit conversion, the Company recorded a $157.0 increase in
common stockholders' equity, and a corresponding decrease in minority interests
in AmeriGas Partners, associated with gains from sales of Common Units by
AmeriGas Partners in conjunction with, and subsequent to, the Partnership's
April 19, 1995 initial public offering. These gains were determined in
accordance with the guidance in SEC Staff Accounting Bulletin No. 51,
"Accounting for Sales of Common Stock by a Subsidiary" ("SAB 51"). The gains
resulted because the public offering prices of the AmeriGas Partners Common
Units exceeded the associated carrying amount of our investment in the
Partnership on the dates of their sale. Due to the preference nature of the
Common Units, the Company was precluded from recording these gains until the
Subordinated Units converted to Common Units. No deferred income taxes were
recorded on these gains due to the Company's intent to hold its investment in
the Partnership indefinitely. The changes to the Company's balance sheet
resulting from the Subordinated Unit conversion had no effect on the Company's
net income or cash flow and did not result in an increase in the number of
AmeriGas Partners limited partner units outstanding.

         On June 17, 2003, AmeriGas Partners sold 2,900,000 Common Units in an
underwritten public offering at a public offering price of $27.12 per unit. The
net proceeds of the public offering totaling $75.0 and associated capital
contributions from the General Partner totaling $1.5, were contributed to
AmeriGas OLP and used to reduce indebtedness under its bank credit agreement and
for general partnership purposes. The underwriters' overallotment option
expired unexercised. Concurrent with this sale of Common Units, the Company
recorded a gain in the amount of $22.6 which is reflected in the Company's
balance sheet as an increase in common stockholders' equity in accordance with
the guidance in SAB 51. The gain had no effect on the Company's net income or
cash flow.

NOTE 19 - INVESTMENTS IN EQUITY INVESTEES

Our principal investments accounted for using the equity method and our
approximate ownership interest in each at September 30, 2003 and 2002 are as
follows:

            Company                   Percentage Ownership
- ----------------------------------------------------------
                                   
Atlantic Energy                                       50.0%
AGZ Holdings                                          19.5%
China Gas Partners                                    50.0%
Hunlock Creek Energy Ventures                         50.0%
- ----------------------------------------------------------

         Income (loss) from our equity investees comprises the following:

                                               2003     2002     2001
- ----------------------------------------------------------------------
                                                       
Equity in income (loss) of equity investees   $  5.3   $  6.0   $ (2.1)
Interest income on AGZ Bonds                       -      0.9      0.5
Currency gain from redemption of AGZ Bonds         -      1.6        -
- ----------------------------------------------------------------------
Total                                         $  5.3   $  8.5   $ (1.6)
- ----------------------------------------------------------------------

         Undistributed net earnings (loss) of our equity investees included in
consolidated retained earnings were $3.3 and $3.6 at September 30, 2003 and
2002, respectively.

         On March 27, 2001, UGI France, Inc. ("UGI France"), a wholly owned
indirect subsidiary of Enterprises, together with Paribas Affaires Industrielles
("PAI") and Medit Mediterranea GPL, S.r.L. ("Medit"), acquired, through AGZ
Holdings ("AGZ"), the stock and certain related assets of Elf Antargaz, S.A.,
one of the largest distributors of liquefied petroleum gas in France (referred
to after the transaction and herein as "Antargaz"). Prior to the transaction,
Antargaz was a subsidiary of Total Fina Elf S.A., a French petroleum and
chemical company. Under the

52

                                              UGI Corporation 2003 Annual Report

terms of the Shareholders' Funding Agreement among UGI France, PAI and Medit, we
acquired an approximate 19.5% equity interest in Antargaz; PAI an approximate
68.1 % interest; Medit an approximate 9.7% interest; and certain members of
management of Antargaz an approximate 2.7% interest. PAI is a leading private
equity fund manager in Europe and an affiliate of BNP Paribas, one of Europe's
largest commercial and investment banks. Medit is a supplier of logistics
services to the liquefied petroleum gas industry in Europe, primarily Italy.

         Pursuant to the Shareholders' Funding Agreement, on March 27, 2001, UGI
France made a 29.8 million euro ($26.6 U.S. dollar equivalent) investment
comprising a 9.8 million euro investment in shares of AGZ and a 20.0 million
euro investment in redeemable bonds of AGZ ("AGZ Bonds"). In July 2003, the
Company received a dividend of 5.0 million euro ($5.6 U.S. dollar equivalent)
from AGZ. In July 2002, the Company received $19.3 in cash from AGZ in repayment
of 18 million euro face value ($17.7 U.S. dollar equivalent) of AGZ Bonds,
representing 90% of such bonds held by the Company, plus accrued interest. This
repayment was funded from the proceeds of an AGZ placement of high-yield debt.
Concurrent with the repayment, the remaining 2.0 million euro (10%) investment
in AGZ Bonds was redeemed in the form of additional shares of AGZ. After these
transactions, the Company continues to hold an approximate 19.5% equity
investment in shares of AGZ. As a result of the redemption of AGZ Bonds, we
recorded a pretax currency transaction gain of $1.6 which is included in income
from equity investees on the 2002 Consolidated Statement of Income. Because we
believe we have significant influence over operating and financial policies of
Antargaz due, in part, to our membership on its Board of Directors, our
investment in AGZ shares is accounted for by the equity method.

         Summarized financial information for AGZ follows:

                                          2003        2002      2001(a)
- ------------------------------------------------------------------------
                                                       
STATEMENT OF INCOME DATA:
Revenues                                $  698.4    $  534.8    $  243.8
- ------------------------------------------------------------------------
Operating income                        $   96.7    $   79.4    $   22.5
Interest, net                              (37.7)      (27.9)      (13.9)
- ------------------------------------------------------------------------
Income before income taxes              $   59.0    $   51.5    $    8.6
Income taxes                            $  (24.4)   $  (20.7)   $   (5.1)
Net income                              $   32.7    $   29.9    $    2.9
- ------------------------------------------------------------------------
BALANCE SHEET DATA (AT SEPTEMBER 30):
Current assets                          $  196.8    $  171.5
Property, plant and equipment, net         321.6       259.5
Goodwill                                   443.8       378.8
Other assets                               106.2       116.7
- ------------------------------------------------------------
   Total assets                         $1,068.4    $  926.5
- ------------------------------------------------------------
Current liabilities                     $  136.2    $  106.1
Long-term debt                             453.9       436.2
Other liabilities                          354.8       292.0
- ------------------------------------------------------------
   Total liabilities                    $  944.9    $  834.3
- ------------------------------------------------------------
Equity                                  $  123.5    $   92.2
- ------------------------------------------------------------

(a) Statement of income data is for the period March 27, 2001 to September 30,
2001.

         Summarized financial information for our other equity investments are
not presented because they are not material to our Consolidated Balance Sheets
or Consolidated Statements of Income.

NOTE 20 - QUARTERLY DATA (UNAUDITED)

                                         December 31,         March 31,         June 30,          September 30,
                                        2002     2001      2003      2002     2003     2002     2003      2002(a)
- -----------------------------------------------------------------------------------------------------------------
                                                                                  
Revenues                               $739.9   $619.4   $1,135.9   $764.0   $623.1   $446.3   $ 527.2    $ 384.0
Operating income (loss)                $107.4   $ 73.8   $  184.4   $150.5   $  8.4   $ 29.0   $   2.1    $  (0.7)
Income (loss) from equity investees    $  1.9   $  3.8   $    5.0   $  3.7   $  0.2   $  0.7   $  (1.8)   $   0.3
Net income (loss)                      $ 36.7   $ 24.1   $   69.8   $ 54.0   $ (2.0)  $  4.0   $  (5.6)   $  (6.6)

Earnings (loss) per share:
   Basic                               $ 0.88   $ 0.59   $   1.66   $ 1.31   $(0.05)  $ 0.10   $ (0.13)   $ (0.16)
   Diluted                             $ 0.86   $ 0.58   $   1.62   $ 1.28   $(0.05)  $ 0.09   $ (0.13)   $ (0.16)
- -----------------------------------------------------------------------------------------------------------------

The quarterly data above includes all adjustments (consisting only of normal
recurring adjustments with the exception of those indicated below) that we
consider necessary for a fair presentation. Our quarterly results fluctuate
because of the seasonal nature of our businesses.

(a) Includes euro currency transaction gain resulting from the redemption of AGZ
Bonds which increased income from equity investees by $1.6 and decreased net
loss by $1.1 or $0.03 per share.

                                                                              53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

NOTE 21 - SEGMENT INFORMATION

We have organized our business units into five reportable segments generally
based upon products sold, geographic location (domestic or international) or
regulatory environment. Our reportable segments are: (1) AmeriGas Propane; (2)
Gas Utility; (3) Electric Operations (comprising Electric Utility and UGlD's
electricity generation business); (4) Energy Services; and (5) an international
propane segment comprising FLAGA and our international propane equity
investments ("International Propane").

         AmeriGas Propane derives its revenues principally from the sale of
propane and related equipment and supplies to retail customers from locations in
46 states. Gas Utility's revenues are derived principally from the sale and
distribution of natural gas to customers in eastern and southeastern
Pennsylvania. Electric Operations derives its revenues principally from the sale
and distribution of electricity in two northeastern Pennsylvania counties.
Energy Services revenues are derived from the sale of natural gas and, to a
lesser extent, electricity and fuel oil to customers located primarily in the
Eastern region of the United States. Our International Propane segment's
revenues are derived principally from the distribution of propane to retail
customers in Austria, the Czech Republic and Slovakia.

         The accounting policies of our reportable segments are the same as
those described in Note 1. We evaluate AmeriGas Propane's performance
principally based upon the Partnership's earnings before interest expense,
income taxes, depreciation and amortization ("Partnership EBITDA"). Although we
use Partnership EBITDA to evaluate AmeriGas Propane's profitability, it should
not be considered as an alternative to net income (as an indicator of operating
performance) or as an alternative to cash flow (as a measure of liquidity or
ability to service debt obligations) and is not a measure of performance or
financial condition under accounting principles generally accepted in the United
States of America. The Company's definition of Partnership EBITDA may be
different from that used by other companies. We evaluate the performance of our
Gas Utility, Electric Operations, Energy Services and International Propane
segments principally based upon their income (loss) before income taxes.

         No single customer represents more than ten percent of our consolidated
revenues and there are no significant intersegment transactions. In addition,
all of our reportable segments' revenues, other than those of our International
Propane segment, are derived from sources within the United States, and all of
our reportable segments' long-lived assets, other than those of our
International Propane segment, are located in the United States.

54

                                              UGI Corporation 2003 Annual Report

Financial information by reportable business segment follows:

                                                                             Reportable Segments
                                                       -----------------------------------------------------------
                                                       AmeriGas       Gas     Electric      Energy    International    Corporate &
                              Total     Eliminations   Propane      Utility  Operations    Services      Propane          Other
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                              
2003
   Revenues                 $ 3,026.1     $  (2.4)     $1,628.4     $ 539.9  $    108.1(a) $  648.7  $        54.5    $      48.9
   Cost of sales            $ 1,984.3     $     -      $  910.3     $ 343.0  $     55.9    $  620.2  $        27.4    $      27.5
   Operating income         $   302.3     $     -      $  164.5     $  96.1  $     25.9    $   13.6  $         0.7    $       1.5
   Income (loss) from
       equity investees           5.3           -          (0.6)          -           -           -            5.9              -
   Loss on
       extinguishments
       of debt                   (3.0)          -          (3.0)          -           -           -              -              -
   Interest expense            (109.2)          -         (87.1)      (15.4)       (2.3)          -           (4.1)          (0.3)
   Minority interests           (34.6)          -         (34.6)          -           -           -              -              -
- ---------------------------------------------------------------------------------------------------------------------------------
   Income before
       income taxes         $   160.8     $     -      $   39.2     $  80.7  $     23.6    $   13.6  $         2.5    $       1.2
   Depreciation and
       amortization         $   103.0     $     -      $   74.8     $  18.1  $      3.7    $    1.5  $         3.9    $       1.0
   Partnership
       EBITDA (b)                                      $  234.4
   Total assets             $ 2,781.7     $ (39.6)     $1,504.6     $ 725.1  $    160.1    $   88.1  $       165.0    $     178.4
   Capital expenditures     $   101.4     $     -      $   53.4(c)  $  37.2  $      4.1    $    1.0  $         4.5    $       1.2
   Acquisition of
       additional interest
       in Conemaugh Station $    51.3     $     -      $      -     $     -  $     51.3    $      -  $           -    $         -
   Investments in equity
       investees            $    39.9     $     -      $    2.8     $     -  $     10.3    $      -  $        26.8    $         -
   Goodwill and excess
       reorganization value $   671.5     $     -      $  601.6     $     -  $        -    $    2.8  $        62.8    $       4.3
=================================================================================================================================
2002
   Revenues                 $ 2,213.7     $  (2.0)     $1,307.9     $ 404.5  $     86.0(a) $  332.3  $        46.7    $      38.3
   Cost of sales            $ 1,296.6     $     -      $  653.1     $ 241.7  $     48.6    $  310.9  $        22.6    $      19.7
   Operating income         $   253.3     $     -      $  145.0     $  77.1  $     13.2    $   11.1  $         3.9    $       3.0
   Income (loss) from
       equity investees           8.5           -           0.3           -           -           -            8.3(d)        (0.1)
   Loss on extinguishments
       of debt                   (0.7)          -          (0.7)          -           -           -              -              -
   Interest expense            (109.1)          -         (87.8)      (14.2)       (2.4)          -           (4.2)          (0.5)
   Minority interests           (28.0)          -         (28.0)          -           -           -              -              -
- ---------------------------------------------------------------------------------------------------------------------------------
   Income before
       income taxes         $   124.0     $     -      $   28.8     $  62.9  $     10.8    $   11.1  $         8.0    $       2.4
   Depreciation and
       amortization         $    93.5     $     -      $   66.4     $  19.0  $      3.2    $    0.8  $         3.2    $       0.9
   Partnership EBITDA (b)                              $  209.6
   Total assets             $ 2,614.4     $ (34.1)     $1,492.2     $ 689.1  $    109.0    $   57.2  $       141.1    $     159.9
   Capital expenditures     $    94.7     $     -      $   53.5     $  31.0  $      4.9    $    0.9  $         3.9    $       0.5
   Investments in equity
       investees            $    35.5     $     -      $    3.4     $     -  $     10.0    $      -  $        22.1    $         -
   Goodwill and excess
       reorganization value $   644.9     $     -      $  589.1     $     -  $        -    $      -  $        53.1    $       2.7
=================================================================================================================================
2001
   Revenues                 $ 2,468.1     $  (2.8)     $1,418.4     $ 500.8  $     83.9    $  370.7  $        50.9    $      46.2
   Cost of sales            $ 1,632.4     $     -      $  847.0     $ 322.9  $     51.9    $  357.3  $        28.4    $      24.9
   Operating income (loss)  $   229.0     $  (0.4)     $  133.8     $  87.8  $     10.7    $    7.3  $         0.8    $     (11.0)
   Loss from equity
       investees                 (1.6)          -             -           -           -           -           (1.5)(d)       (0.1)
   Interest expense            (104.8)        0.4         (80.3)      (16.3)       (2.7)       (0.4)          (4.9)          (0.6)
   Minority interests           (23.6)          -         (23.6)          -           -           -              -              -
- ---------------------------------------------------------------------------------------------------------------------------------
   Income (loss)
       before income taxes  $    99.0     $     -      $   29.9     $  71.5  $      8.0    $    6.9  $        (5.6)   $     (11.7)
   Depreciation and
       amortization         $   105.2     $     -      $   75.5     $  20.2  $      3.6    $    0.3  $         4.3    $       1.3
   Partnership EBITDA (b)                              $  220.3
   Total assets             $ 2,550.2     $ (43.3)     $1,522.3     $ 678.9  $    105.5    $   44.7  $       141.2    $     100.9
   Capital expenditures     $    79.3     $     -      $   39.2(c)  $  31.8  $      5.0    $    0.2  $         2.7    $       0.4
   Investments in
       equity investees     $    44.8     $     -      $    3.2     $     -  $     10.8    $      -  $        30.8(e) $         -
   Goodwill and excess
       reorganization value $   641.1     $     -      $  589.0     $     -  $        -    $      -  $        48.6    $       3.5
=================================================================================================================================

(a)      Electric Operations' 2003 and 2002 revenues include UGID's unregulated
         electricity generation revenues totaling $19.3 and $2.6, respectively.

(b)      The following table provides a reconciliation of Partnership EBITDA to
         AmeriGas Propane operating income:

       Year ended September 30,            2003      2002      2001
- --------------------------------------------------------------------
                                                     
Partnership EBITDA                        $234.4    $209.6    $220.3
Depreciation and amortization (i)          (74.6)    (66.1)    (74.7)
Minority interests (ii)                      1.1       1.1       0.7
Income (loss) from equity investees          0.6      (0.3)        -
Loss on extinguishments of debt              3.0       0.7         -
Cumulative effect of accounting changes        -         -     (12.5)
- --------------------------------------------------------------------
Operating income                          $164.5    $145.0    $133.8
- --------------------------------------------------------------------

(i) Excludes General Partner depreciation and amortization of $0.2, $0.3, and
$0.8 in 2003, 2002, and 2001, respectively.

(ii) Principally represents the General Partner's 1.01% interest in AmeriGas
OLP.

(c)      Includes capital leases of $0.5 and $1.3 in 2003 and 2001,
         respectively.

(d)      In addition to equity income (loss) of international propane equity
         investees, (1) 2002 amount includes a currency transaction gain of $1.6
         from the redemption of AGZ Bonds and $0.9 of interest income on AGZ
         Bonds and (2) 2001 amount includes $0.5 of interest income on AGZ
         Bonds.

(e)      Includes investment in AGZ Bonds of $18.2.

                                                                              55

                                                                      EXHIBIT 14

                                 CODE OF ETHICS

                                       FOR

                           CHIEF EXECUTIVE OFFICER AND
                            SENIOR FINANCIAL OFFICERS

                                       OF

                                 UGI CORPORATION

Introduction

      The reputation for integrity of UGI Corporation (the "Company") is a
valuable asset that is vital to the Company's success. To enhance the Company's
ability to maintain its reputation for integrity, the Board of Directors of the
Company (the "Board") has adopted this Code of Ethics, which applies to the
Company's Chief Executive Officer (the "CEO"), Chief Financial Officer and
Principal Accounting Officer (together the "Senior Financial Officers"). This
Code of Ethics is designed to give the CEO and Senior Financial Officers a broad
understanding of the conduct that we expect from them to protect and enhance our
reputation for integrity.

      Each employee of the Company is responsible for conducting his or her
duties in a manner that demonstrates a commitment to the highest standards of
integrity. This integrity is critical to ensure that the Company's business is
conducted in an honest and ethical manner and in compliance with the law. The
purpose of this Code is to focus the CEO and Senior Financial Officers on areas
of ethical risk, help them to recognize and deal with ethical issues, explain
the mechanisms available to them to report unethical conduct and foster a
culture of honesty and accountability.

Implementation and Oversight of This Code

      The Board, acting through its Audit Committee, is ultimately responsible
for the implementation of this Code. The Board has designated the Vice President
and General Counsel to be the compliance officer (the "Compliance Officer") for
the implementation and administration of this Code. Statements in this Code to
the effect that certain actions may be taken only with the "Company's approval"
mean that the Audit Committee of the Board or the Board of Directors acting
through its independent members must give prior written approval before the
proposed action may be undertaken. You should feel free to direct questions to
the Compliance Officer.

      You should read this Code in conjunction with the Company's Code of
Business Conduct and Ethics for Directors, Officers and Employees. For
simplicity sake, we will refer to both codes together as the "Code." We will ask
you to certify on an annual basis that you are in compliance with the Code.

Requests for Waiver of Any Provision of this Code

      You must submit any requests for a waiver of any provision of this Code in
writing to the Compliance Officer for review. Only the independent members of
the Board or the Audit Committee of the Board have the authority to waive any
provision of this Code. If a waiver of any provision of this Code is granted to
you, the Company must publicly disclose the nature of the granted waiver,
including any implicit waiver, your name, the date of the waiver and any other
disclosures as and to the extent required by any SEC rule or applicable stock
exchange listing standard.

Compliance with Law and Regulations

      A variety of laws apply to the Company and its operations, and some laws
carry criminal penalties. These laws include, but are not limited to, federal
environmental, securities, antitrust and occupational safety laws, and federal
and state laws governing the Company's status as a public company. Examples of
criminal violations of the law include making false or misleading disclosures in
documents filed with the Securities and Exchange Commission (the "SEC"); trading
on inside information; stealing, embezzling or misapplying the Company's funds;
making a payment for an expressed purpose on the Company's behalf to an
individual who intends to use it for a different purpose; or making payments,
whether from your funds or the Company's funds, of cash or other items of value
that are intended improperly to influence the judgment or actions of political
candidates, government officials or businesspersons in connection with any of
the Company's activities. The Company will investigate, address and report, as
appropriate, violations of law. It is your responsibility to comply with the
laws, rules and regulations applicable to you personally as a senior executive
of the Company. You cannot delegate that responsibility to another person or to
the Company.

Avoiding Actual, Potential or Apparent Conflicts of Interest

      The Company requires you to conduct your outside associations and personal
business, financial and other relationships in a manner that will avoid any
actual, potential or apparent conflict of interest between you and the Company.
The term "outside association" refers to any affiliation, association, interest
or employment that you have with an entity other than with the Company. It is
impractical to set forth rules that cover all situations in which a conflict of
interest may arise. The basic factor in all conflict of interest situations is,
however, the division of loyalty or the appearance of a division of loyalty,
between the Company's best interests and your interests. Guidelines with respect
to several of the more sensitive areas in which actual, potential or apparent
conflicts of interest are likely to occur are set forth below. We emphasize,
however, that the following is not an exhaustive list of problem areas, but
rather a guide in applying the Company's basic conflict of interest policy to
any situation.

Business Relationships

      You may have a conflict of interest if you, a member of your immediate
family or your business or financial partner owns or has a substantial direct or
indirect investment in an entity with which the Company has or is likely to have
a business relationship or with which the Company competes. Investments in small
amounts of the stocks or bonds of a publicly held company should not alone give
rise to any conflict of interest. The question of when an investment may become
so substantial as to possibly affect or appear to affect your judgment is
largely dependent on the particular circumstances and must be considered on a
case-by-case basis.

                                       2

      A conflict of interest may also arise when you, a member of your immediate
family or your business or financial partner holds a position as director,
officer, employee or partner of or consultant, broker, finder or intermediary
with an entity with which the Company has or is likely to have a business
relationship or with which the Company competes or is likely to compete. In
addition, a conflict of interest may arise if you, a member of your immediate
family or your business or financial partner incurs significant indebtedness to
an entity whose business may be affected by your actions on behalf of the
Company.

      Any associations, interests and business or financial relationships that
you have that might cause you to act in ways that are not in the best interests
of the Company, or that create the appearance of divided loyalties, will be
permitted only with the Company's approval. In some circumstances, a
relationship will only be permitted if the proposed transaction is competitive
and/or fairly bargained for. Notwithstanding the foregoing, a transaction
between the Company and any of your outside associations will be permitted if it
is first reported, reviewed and approved in the manner prescribed by the Board
or Audit Committee and set forth below.

Acceptance of Gifts

      You may not, without the Company's approval, accept, either directly or
indirectly, gifts, favors, entertainment or anything else of more than nominal
value from persons or entities with which the Company has or is likely to have a
business relationship. Payment of expenses for attendance at appropriate
business meals and conferences will not ordinarily be considered the receipt of
a gratuity under this section. (The Company's Code of Business Conduct and
Ethics for Directors, Officers and Employees provides some examples of other
permissible gifts and should be consulted for a discussion on this subject.)

Outside Activities/Employment

      Unless expressly authorized by the Company, any outside association,
including activities with other entities, should not encroach on the time and
attention you are expected to devote to your Company duties and
responsibilities, adversely affect the quality or quantity of your work product
for the Company or entail your use of any Company assets, including its real and
personal property, or imply (without the Company's approval) the Company's
sponsorship or support. In addition, under no circumstances are you permitted to
compete with the Company or take for yourself, your family members or any
business or financial partner any business or financial opportunity belonging to
the Company that you discover or that is made available to you by virtue of your
position with the Company.

Civic/Political Activities

      The Company supports your participation in civic, charitable and political
activities so long as such participation does not encroach on the time and
attention that you are expected to devote to Company duties and
responsibilities. Unless the Company expressly sanctions the activity, you are
to conduct any such activities in a manner that does not involve the Company or
its assets or create an appearance of Company involvement or endorsement.

                                       3

Reporting Procedure

      You must report promptly to the Compliance Officer the existence of any
outside association, interest, relationship or activity, as it arises, that
actually, potentially or apparently involves a conflict of interest. Failure to
report such relationships, activities and interests will be a ground for
disciplinary action. The Compliance Officer will notify the Board or Audit
Committee of any actual, potential or apparent conflict of interest. You must
cooperate fully in the review process by providing all information that the
Compliance Officer or the Audit Committee deems necessary to its review.

      You must sign annually a statement reflecting your continuing awareness
and understanding of this Code, including its conflicts of interest policy. At
the same time, you must report either the absence or presence of actual,
potential or apparent conflicts of interest, including such conflicts involving
others within the Company of which you are aware.

      All interests, relationships or participation in transactions disclosed by
any employee in accordance with this policy shall be held in confidence unless
disclosure is required by law or applicable listing standards or is in the best
interests of the Company.

Resolution of Conflicts

      In all cases, actual, potential or apparent conflicts of interest must be
handled in an ethical manner; in particular, they must be fully disclosed and
considered prior to being resolved. The Compliance Officer or, where
appropriate, the Audit Committee will handle all questions of actual, potential
or apparent conflicts of interest that involve you. Actual, potential or
apparent conflicts of interest may be approached in the following ways, among
others:

   -  In the case of an offer of a gift, the appropriate resolution may be for
      you to accept or reject the gift.

   -  Where the nature of the conflict of interest is such that you are unable
      to disclose the details thereof without breaching other confidences, you
      may, upon notice to the Audit Committee, remove yourself from all
      meetings, discussions and actions at which such conflict of interest is
      considered.

   -  Where you can disclose the details of the conflict of interest, the Audit
      Committee may determine the proper action on its own or in consultation
      with the Board.

   -  Any outside association, interest, relationship or participation in a
      transaction that is fully disclosed in writing to, and is approved in
      writing by, the Audit Committee or the Board shall not be deemed to
      involve a conflict of interest for purposes of this Code.

   -  When it is concluded that there is an actual, apparent or potential
      conflict of interest, the Audit Committee or the Board may suspend you
      from all or some of your duties or

                                       4

      require you to perform other duties with the Company for such period of
      time as is deemed appropriate or may request that you resign from your
      position with the Company.

   -  In the event that the conflict of interest involves an outside
      association, the Company may permanently cease doing business with the
      association.

Full, Fair, Accurate and Timely Disclosures by the Company to the Public

      Because you participate, directly or indirectly, in the preparation of the
financial and other disclosures that the Company makes to the public, including
disclosures in its filings with the SEC or by press releases, you must, in
addition to complying with all applicable laws, rules and regulations, follow
these guidelines:

   -  Ensure full, fair, timely, accurate and understandable disclosure in the
      Company's filings with the SEC to the best of your ability.

   -  Through leadership, including communication, make sure that employees of
      the Company understand the Company's obligations to the public and under
      the law with respect to its disclosures.

   -  Encourage employees to raise questions and concerns regarding the
      Company's public disclosures and ensure that such questions and concerns
      are appropriately addressed.

   -  Provide the Company's directors, employees, consultants and advisors
      involved in the preparation of the Company's disclosures to the public
      with information that is accurate, complete, objective, relevant, timely
      and understandable.

   -  Act in good faith, responsibly, and with due care, competence and
      diligence, without misrepresenting material facts or allowing your
      independent judgment to be compromised by others.

   -  Ensure that the recording of entries in the Company's books and records is
      accurate to the best of your knowledge.

   -  Comply with the Company's disclosure controls and procedures and internal
      controls and procedures for financial reporting.

Prompt Internal Reporting of Violations of This Code

      If you violate or think you have violated any provision of this Code, or
if you observe, learn of, or, in good faith, suspect that another person subject
to this Code has violated any of its provisions, you must immediately report the
actual or suspected violation to the Compliance Officer who will promptly notify
the Chairman of the Audit Committee of the Board of such violation. If you
report an actual or suspected violation in good faith, the Company may not

                                       5

subject you to retaliation of any kind. A violation of the requirement to report
violations or to cooperate in a Code investigation may result in disciplinary
action.

Accountability for Complying With This Code

      Reported violations of this Code will be investigated and addressed
promptly and the identity of the reporting person treated confidentially to the
extent possible. We strive to impose discipline for each Code violation that
fits the nature and particular facts of the violation. We generally will issue
warnings or letters of reprimand for less significant, first-time violations.
Violations of a more serious nature may result in suspension without pay,
demotion, loss or reduction of bonus or option awards, or any combination of
such disciplinary violations. Termination of employment generally is reserved
for violations amounting to a breach of trust, such as fraud or theft, or for
cases where a person has engaged in multiple violations.

      The SEC treats violations of the Code that go unaddressed as implicit
waivers of the Code. Accordingly, any violation that is discovered and not
addressed will have to be disclosed in accordance with the rules and regulations
of the SEC or applicable stock exchange listing standards. In such cases, the
SEC's rules currently require disclosure of the nature of any violation, the
date of the violation and the name of the person who committed the violation.
Such disclosure could be harmful to the Company. Moreover, depending on the
nature of the violation, the violator may be dismissed or her or his duties and
responsibilities with the Company changed significantly.

                                       6

                                                                               .
                                                                               .
                                                                               .
                                                                      EXHIBIT 21

                         SUBSIDIARIES OF UGI CORPORATION

                                                                                                         STATE OF
SUBSIDIARY                                                                      OWNERSHIP              INCORPORATION
- ----------                                                                      ---------              -------------
                                                                                                 
AMERIGAS, INC.                                                                      100%                     PA
   FOUR FLAGS DRILLING COMPANY, INC.                                                100%                     PA
   AMERIGAS PROPANE, INC. *                                                         100%                     PA
      AmeriGas Partners, L.P.                                                        (1)                     DE
         AmeriGas Finance Corp.                                                     100%                     DE
         AmeriGas Propane L.P.                                                  98.9899%                     DE
            AmeriGas Eagle Propane, L.P.                                             99%                     DE
               AmeriGas Eagle Parts & Service, Inc.                                 100%                     PA
            AmeriGas Propane Parts & Service, Inc.                                  100%                     PA
            AmeriGas Eagle Propane, Inc.                                            100%                     DE
               AmeriGas Eagle Holdings, Inc. **                                     100%                     DE
                  Active Propane of Wisconsin LLC                                   100%                     DE
         AmeriGas Eagle Finance Corp.                                               100%                     DE
         AP Eagle Finance Corp.                                                     100%                     DE
      AmeriGas Technology Group, Inc.                                               100%                     PA
      Petrolane Incorporated                                                        100%                     PA
ASHTOLA PRODUCTION COMPANY                                                          100%                     PA
   UGI ETHANOL DEVELOPMENT CORPORATION                                              100%                     PA
NEWBURY HOLDING COMPANY                                                             100%                     DE
UGI ENTERPRISES, INC.                                                               100%                     PA
   CFN ENTERPRISES, INC.                                                            100%                     DE
      CF Networks LLC                                                                60%                     DE
   EASTFIELD INTERNATIONAL HOLDINGS, INC.                                           100%                     DE
            Flaga GmbH                                                              100%                   AUSTRIA
               Flaga Energievorsorgung                                              100%                   GERMANY
               Flaga Plyn, spol. s r.o.                                             100%               CZECH REPUBLIC
               Flaga Slovplyn, spol. s r.o.                                         100%                  SLOVAKIA
               Flaga Tech Trade GmbH                                                100%                   AUSTRIA
               Osterreichische Flussiggas-Gesellschaft m.b.H.                        40%                   AUSTRIA
               T.S.G.- Transport - und Speditionsgesellschaft m.b.H.                 50%                   AUSTRIA
               G.T.P. Gas Trans Praha spol. s r.o.                                   60%               CZECH REPUBLIC
               GTE Gastrans-Erfurt-GmbH                                              90%                   GERMANY
   EUROGAS HOLDINGS, INC.                                                           100%                     DE
   HEARTH USA, INC.                                                                 100%                     DE
   MCHUGH SERVICE COMPANY                                                           100%                     PA
   UGI ENERGY SERVICES, INC.                                                        100%                     PA
      Energy Services Funding Corporation                                           100%                     DE
      Hellertown Pipeline Company                                                   100%                     PA
      Homestead Holding Company                                                     100%                     DE
      UGI DEVELOPMENT COMPANY                                                       100%                     PA
         UGID Holding Company                                                       100%                     DE
         UGI Hunlock Development Company                                            100%                     PA
   UGI POWER SUPPLY, INC.                                                           100%                     PA
   UGI INTERNATIONAL ENTERPRISES, INC.                                              100%                     PA
      UGI France, Inc.                                                              100%                     DE
   UGI BLACK SEA ENTERPRISES, INC.                                                  100%                     PA
   UGI INTERNATIONAL (ROMANIA), INC.                                                100%                     PA
   UGI ROMANIA, INC.                                                                100%                     PA
   UGI INTERNATIONAL (CHINA), INC.                                                  100%                     DE
   UGI CHINA, INC.                                                                  100%                     DE
   UGI SOUTHWEST CHINA DEVELOPMENT COMPANY, LLC                                     100%                     DE
   UGI HVAC ENTERPRISES, INC.                                                       100%                     DE
UGI PROPERTIES, INC.                                                                100%                     PA
UGI UTILITIES, INC.                                                                 100%                     PA
UNITED VALLEY INSURANCE COMPANY                                                     100%                     VT

(1)   AmeriGas Propane, Inc. and its subsidiary, Petrolane Incorporated, hold a
      combined 50.7% interest in AmeriGas Partners, L.P.

*     Sole General Partner of each of AmeriGas Partners, L.P. and AmeriGas
      Propane, L.P.

**    Sole General Partner of AmeriGas Eagle Propane, L.P.

                                   EXHIBIT 23

                       CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-47319, 33-61722, 333-22305, 333-37903, 333-49080
and 333-104938) and Form S-3 (No. 33-78776 and 333-42296) of UGI Corporation of
our report dated November 17, 2003 relating to the financial statements and
financial statement schedules, which appears in this Form 10-K.

PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 23, 2003

                                                                    EXHIBIT 31.1

                                 CERTIFICATIONS

I, Lon R. Greenberg, certify that:

1.       I have reviewed this annual report on Form 10-K of UGI Corporation;

2.       Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(d)) for the
         registrant and have:

         (a)      designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter that has
                  materially affected, or is reasonably likely to materially
                  affect the registrant's internal control over financial
                  reporting.

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of
         registrant's board of directors:

         (a)      all significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

                                                                    EXHIBIT 31.1

         (b)      any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date: December 16, 2003

                                            /s/ Lon R. Greenberg
                                            ----------------------------------
                                            Lon R. Greenberg
                                            Chairman, President and
                                            Chief Executive Officer of
                                            UGI Corporation

                                                                    EXHIBIT 31.2

I, Anthony J. Mendicino, certify that:

1.       I have reviewed this annual report on Form 10-K of UGI Corporation;

2.       Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(d)) for the
         registrant and have:

         (a)      designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter that has
                  materially affected, or is reasonably likely to materially
                  affect the registrant's internal control over financial
                  reporting.

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of
         registrant's board of directors:

         (a)      all significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

                                                                    EXHIBIT 31.2

         (b)      any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date: December 16, 2003

                                             /s/ Anthony J. Mendicino
                                             -----------------------------------
                                             Anthony J. Mendicino
                                             Senior Vice President - Finance and
                                             Chief Financial Officer of
                                             UGI Corporation

                                                                      EXHIBIT 32

    CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
          RELATING TO A PERIODIC REPORT CONTAINING FINANCIAL STATEMENTS

         I, Lon R. Greenberg, Chief Executive Officer, and I, Anthony J.
Mendicino, Chief Financial Officer, of UGI Corporation, a Pennsylvania
corporation (the "Company"), hereby certify that:

         (1)      The Company's periodic report on Form 10-K for the period
                  ended September 30, 2003 (the "Form 10-K") fully complies with
                  the requirements of Section 13(a) of the Securities Exchange
                  Act of 1934, as amended; and

         (2)      The information contained in the Form 10-K fairly presents, in
                  all material respects, the financial condition and results of
                  operations of the Company.

                                      * * *

CHIEF EXECUTIVE OFFICER                             CHIEF FINANCIAL OFFICER

/s/ Lon R. Greenberg                                /s/ Anthony J. Mendicino
- ------------------------------------                ----------------------------
Lon R. Greenberg                                    Anthony J. Mendicino

Date: December 18, 2003                             Date: December 18, 2003

         A signed original of this written statement required by Section 906 has
         been provided to UGI Corporation and will be retained by UGI
         Corporation and furnished to the Securities and Exchange Commission or
         its staff upon request.