ASSURANCE OF VOLUNTARY COMPLIANCE. WHEREAS, on December 3, 2007, the State of Arkansas ex rei. Dustin McDaniel,

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1 IN RE MATTER OF ATTORNEY GENERAL ) INVESTIGATION OF FERRELLGAS, L.P. ) ASSURANCE OF VOLUNTARY COMPLIANCE WHEREAS, on December 3, 2007, the State of Arkansas ex rei. Dustin McDaniel, Attorney General ("the State"), filed an action against Ferrellgas, L.P. ("Ferrellgas'} to redress and restrain alleged violations of the Arkansas Deceptive Trade Practices Act, ARK. CODE ANN , et seq.; WHEREAS, the State alleged that Ferrellgas violated the Arkansas Deceptive Trade Practices Act by: attempting to wlilaterally and materially alter existing agreements with their 44,000 Arkansas customers with the initiation of a "Master Agreement for Propane Sales and Equipment Rentals" in 2004; not obtaining meaningful consent from customers to this agreement; attempting to collect unauthorized fees under that agreement; attempting to collect such fees during the heating season; WHEREAS, the State's action against FelTeIlgas was dismissed in October, 2009, without resolution of the underlying issues; nonetheless, the State and Ferrellgas wish to address and resolve through this Assurance of Voluntary Compliance the issues which arose in the litigation; WHEREAS, by entering into this Assurance of Voluntary Compliance, Ferrellgas makes no admission of liability as to any of the issues or claims raised by the State and denies that their practices are prohibited under Arkansas law; and WHEREAS, the State and Ferrellgas recognize that this Assurance of Voluntary

2 Compliance has been negotiated by the parties in good faith, and that this Assurance of Voluntary Compliance is fair, reasonable, and in the public interest. I. Jurisdiction A. This Assurance of Voluntary Compliance is entered into pursuant to ARK. CODE ANN Should it become necessary to enforce this Assurance of Voluntary Compliance by petition to a Circuit Court, the parties agree that jurisdiction and venue for such an action is proper in Pulaski County Circuit Court. II. Parties Bound B. This Assurance of Voluntary Compliance applies to and is binding upon Ferrellgas, including any successors and assigns. III. Assurances C. Within 60 days of the execution of this Assurance of Voluntary Compliance, Ferrellgas will provide to the State: 1. a separate list of all Ferrellgas' Arkansas customers who received a "low use/no use" letter from F eltellgas as of the date of the Assurance of Voluntary Compliance, including the customer's name, billing address, and whether the customer rented their propane tank from Ferrellgas or whether it was owned by the customer; 2. a separate list of all FelTellgas' Arkansas customers who paid a "minimum use fee" or "low use fee" in response to the "low use/no use" letter from Ferrellgas, as of the date of the Assurance of Voluntary Compliance, including the customer's name, and billing address; 3. a separate list of all Ferrellgas Arkansas customers who ordered a delivery of 2

3 propane in response to the "low use/no use" letter fi'om Ferrellgas, as ofthe date of the Assurance of Voluntary Compliance, including the customer's name, billing address, and the amount of gas purchased; 4. a separate list of all Ferrellgas' Arkansas customers who paid a "tank pick-up fee" in response to the "low use/no use" letter from Ferrellgas, as of the date of the Assurance of Volw1tary Compliance, including the customer's name, billing address, telephone number, and the amount of the tank pick-up fee charged; 5. a separate list of all Ferrellgas' Arkansas customers who paid a "tank purchase fee" in response to the "low use/no use" letterfi'om Ferrellgas, as of the date of the Assurance of VollU1tary Compliance, including the customer's name, billing address, telephone number; 6. a separate list of all Ferrellgas' current Arkansas customers who are currently eligible to receive a "low use/no use" letter from Ferrellgas, including the customer's name, billing address, telephone number, and the reason for their eligibility. To the extent possible, Ferrellgas will provide this infonnation in an electronically searchable fonnat, as well as paper fonnat. This infonnation shall be delivered to Sarah R. Tacker, Office of the Attorney General, 323 Center Street, Suite 500, Little Rock, Arkansas ll1is inforn1ation, which includes potential trade secrets of Ferrellgas, is received and maintained by the Attorney General pursuant to Ark. Code Ann I 11 and will not be disclosed by the Attorney General except in accordance with that section. The Attorney General may use this information in the enforcement of the consumer protection law of 3

4 Arkansas and to monitor the compliance of Ferrellgas with this Assurance of Voluntary Compliance. D. FerreIIgas agrees that its future business practices wiil conform to the following: 1. Minimum Use Fee: The Attorney General does not endorse the assessment of any fees against customers for infrequent purchase of propane or low usage of propane, however, this Assurance of Voluntary Compliance does not explicitly prohibit the assessment of such a fee. If Ferrellgas asks customers to pay additional fees, whether temled "minimum usc fee," "low use fee," "no use fee," "additional tank rental fee," or any other name, based upon the fact that the customer has not purchased a "minimum amount" of propane or has infrequently pw-chased propane, the following requirements shall apply: (a) The requirement to pay such a fee must be accompanied by a prominently disclosed option to discontinue service with Ferrellgas. If a customer chooses to discontinue service rather than pay the fee, FerreJJgas will not charge the customer for temlination of service or for pick up of a Ferrellgas-owned tank in accordance with Section D.2 of this Assurance of Voluntary Compliance. (b) The amount of the fee shall be no greater than that of a yearly tank rental in an amount previously paid by the customer or agreed to by the customer in writing. (c) The amount of the fee shall be prorated downward from the yearly tank rental amount depending upon the number of months the customer has 4

5 exceeded the agreed deadline for the purchase of the minimum amount of propane. (d) Notification to customers that such a fee is due must occur during the period from March to August in order to avoid assessing additional fees during the winter heating season. 2. Tank Pick-Up Fee: Ferrellgas will not charge a tank pick-up fee to any customer that decides to terminate service with Ferrellgas after receipt of a low/no use letter unless Ferrellgas has a substantiated reason to believe that the customer has been purchasing propane ftom another propane supplier, which is in violation of the Arkansas Container Law. In order to determine whether a Ferrellgas customer has purchased propane from another propane supplier, Ferrellgas will consider the following factors: whether the customer's tank level is higher than the last time Ferrellgas delivered propane; whether a Ferrellgas representative has witnessed another propane supplier filling the tank of a Fen"ellgas customer; whether a customer admits to a FelTellgas representative (either orally or in writing) that he or she purchased propane from another supplier; whether Fen"ellgas learns [i"om a another supplier, and FerrelJgas identifies that supplier to the customer, that it has been filling the tank of a Ferrellgas customer; whether the customer's primary home heat source is propane and the corresponding frequency of the customer's propane purchases from Ferrellgas, taking into account (a) changes in frequency due to conservation efforts on the part of the customer, (b) changes in weather conditions that would affect the volwl1e of propane used by a customer, and/or (c) a change in the 5

6 customer's living conditions such that they no longer need propane on a year-round, full-time basis as admitted to Ferrellgas by a customer. This list of factors is not exhaustive. Should Ferrellgas believe that the customer has purchased propane from another supplier, Ferrellgas will consult with that customer prior to collecting a tank pick up fee. A tank pick up fee will not be assessed against a customer whose service is terminated because the customer does not accept future changes or modifications to the Master Agreement as detailed in Section F. of this Assurance of Voluntary Compliance. 3. Tank Pump-Out Charge: If service by Ferrellgas is terminated, by either Ferrellgas or the customer, any unused propane purchased by the customer and remaining in the rental tank at the time of tem1ination shall be credited to the customer at the lower of: (1) the invoiced price of the last propane delivery the customer received; or (2) the cun ent price of propane. Under no circumstances shall the pricing provisions detailed in Section v., paragraph 5. of the Master Agreement be utilized. FelTellgas may assess a tank pump-out charge to recover labor costs associated with removal ofthe propane from the tank. The tank pump-out charge shall comply with the following requirements: (a) (b) (c) It shall be reasonable and fair to customers. It shall be based upon an hourly rate designed to collect actual costs. The hourly rate shall be prorated according to the amount of time required to pump-out the tank. (d) It shall not exceed the amount of the credit to the customer for the unused propane. 6

7 4. Minimum FilllPartial Fill Fee: Ferrellgas shall not prohibit partial tank fills and will cease correspondence with customers that contains language to that effect. FerreJlgas may require a minimum fill amount that is reasonable in light ofthe size of the customer's tank, the location of the customer's tank, and the minimum amow1t of propane the customer agreed to purchase. 5. Tank Rental Fees: Tank Rental Fees shall be reasonable and fair to customers. The tank rental fees are currently set at a maximwn of $48 annuajly plus taxes, with some customers currently paying rental fees as low as $12 annually. Ferrellgas shall not raise any of these tank rental fees in the future without giving customers the option oftennination of service without incurring a tank pick-up fee, or any other fee. Any change in the tank rental fee shall be accomplished in accordance with the tenns of this Assurance of Voluntary Compliance related to changes in Ferrellgas customer contracts as set out in Section F below. 6. Tank Purchase Fee: Tank purchase fees shall be reasonable and shall not exceed the actual value of the tank, giving due consideration to the tank's age and condition. Ferrellgas will also consider the following factors to detennine the actual value of the tank: the size of the tank, the amount of wear and tear to the tank, the location of the tank and accessibility to the tank. 7. Tank Ownership: Should there be a dispute regarding the ownership of a propane tank to which Ferrellgas delivers propane; the following provisions shall apply: The party asserting ownership over the tank assumes the responsibility of substantiating that ownership through the production of documentation to the other party. Under the following circumstances, a 7

8 customer is deemed to have asserted ownership of the tank and is therefore responsible for proving such ownership, if and when that assertion is disputed by the company: (a) the customer wants to move the tank to a different location on hislher property or move the tank to a separate location altogether; or (b) the customer seeks to purchase propane from a provider other than Ferrellgas. Under the following circumstances, Ferrellgas is deemed to have asserted an ownership interest in the tank and is therefore responsible for proving such ownership, if and when that assertion is disputed or questioned by the customer: (a) Ferrellgas charges a rental fee to the customer; (b) Ferrellgas sends a low/no use letter to the customer; (c) Ferrellgas charges or collects a "MinimwTI Use Fee" or "Additional Tank Rental" as the result of a low/no use letter; (d) Ferrellgas picks up a tank or charges or collects a tank pick up fee; and (e) Ferrellgas charges or collects a tank purchase fee. Should either party contest the assertion of ownership within the above stated context, the other party may prove their ownership of the tank through the following methods: (1) by producing an original bill of sale for that tank, which includes the tank's serial numbers, (2) by producing a signed lease agreement, (3) by producing a paid or receipted invoice showing purchase and payment of the tank, (4) if the customer has affinnatively indicated in writing that Ferrellgas, or FelTellgas's predecessor in interest, owns the tank (e.g. excluding the tank from the purchase of a home), (5) by producing other similar documents or by producing other evidence of ownership, including evidence of course of dealing between the customer and Ferrellgas. Ferrellgas will work in good faith to resolve any tank ownership dispute. 8. Other Changes to Master Agreement: Ferrellgas agrees that it will not 8

9 enforce the following provisions of its Master Agreement against any Arkansas customers: Section v., subsection 6 regarding Payment of Taxes, Losses and Collection Costs; Section v., subsection 8 regarding Arbitration; Section V., subsection 10, regarding Limitation of Liability, and Section v., subsection 11, regarding Amendment of the Master Agreement. These changes to the Master Agreement shall be immediately communicated via letter to all Arkansas customers within 60 days of the execution of this Assurance of Voluntary Compliance. 9. Fees Listed in Master Agreement: Fenellgas acknowledges that the fees currently listed in the existing Master Agreement or referenced in this Assurance of Voluntary Compliance are the only authorized fees which may be charged to customers. Should Ferrellgas seek to modify the fees charged to its customers, it must do so consistent with the tenns of this Assurance ofvohmtary Compliance as described in Section F. Ferrellgas shall provide to its residential customers, at least annually, a summary sheet disclosing the fees applicable to residential accounts. 1 O.Binding Consumers to the Master Agreement: The opening clause of the Fen"e1lgas Master Agreement seeks to bind consumers to the agreement in the following ways: "By requesting delivery of or purchasing LP gas ("Propane") from us, by requesting or pennitting the delivery of or retention on your property of Propane or equipment obtained from us, by allowing services to be perfom1ed on your property or by paying applicable fees and charges, you agree to be bound by... this Agreement... If you do not wish to be bound by this Agreement, do not order or accept delivery of Propane or equipment from us or pennit Propane or equipment 9

10 obtained from us to remain on your property." Ferrellgas acknowledges that consumers cannot be bound to any contract, including the Master Agreement without knowingly, voluntarily, and affirmatively agreeing to the tenns of the contract. As such, Ferrellgas agrees that the following language shall not be enforced against Arkansas consumers and is not sufficient to constitute a knowing, voluntary, and affirmative assent: "permitting... retention on your property of Propane or equipment obtained from us..." E. To the extent that Ferrellgas has taken the position that its contractual relationship with its customers collectively, or any of them individually, is governed by the existing Master Agreement, Ferrellgas agrees to be bound by requirements of this Assurance of Voluntary Compliance where such requirements may conflict with the temls of the existing Master Agreement. While the customers offerreligas, current and future, are not parties to this Assurance of Voluntary Compliance, and cannot be bolmd by its tenns, they will nonetheless have the right to take advantage of the terms of this Assurance of VoluntalY Compliance in future dealings with Ferrellgas. Fen'ellgas shall notify all Arkansas customers of the terms of this Assurance of Volwltary Compliance that have the effect of modifying the Master Agreement as detailed herein within 60 days of the signing of this Assurance of Voluntary Compliance. Such notification shall be in letter form, with consultation fi'om the Attorney General's Office and consistent with this agreement. F. Any :fi.rture changes to the Master Agreement may not be accomplished by or through Section v., subsection 11 of the currently existing Master Agreement which states, "We may amend this Agreement at any time upon notice to you. The amendment will become effective thirty (30) days after notification to you for all Service subject to this Agreement. 10

11 If you continue to use propane, use the Rented Equipment or pay for the Service after any amendment has become effective, you will agree to the amendment." Future modifications to existing agreements shall be lmdertaken and completed only using such communications, notifications, and disclosures, which assure that each customer is bound only by such ab'yeements, as to which such customer has knowingly, voluntarily, and affim1atively agreed. G. Contemporaneous with this Assurance of Voluntary Compliance, Ferrellgas shall refund or issue a credit to existing customers for all "minimwn use fees" to the approximately 1,035 Arkansas customers who paid such fees as a result of the low/no use letter sent to Arkansas customers and shall provide the Attorney General with proof of same within 60 days of the entry of this Assurance of Voluntary Compliance. H. Contemporaneous with this Assurance of Voluntary Compliance, FelTellgas shall refund or issue a credit for all tank pick-up fees it collected as a result of the low/no use letter sent to Arkansas customers and shall provide the Attorney General with proof of San1e within 60 days of the entry ofthis Assurance of Voluntary Compliance. 1. Contemporaneous with this Assurance of Voluntary Compliance, Ferrellgas shall pay the Attorney General the sum of $85, for the costs of the investigation and prosecution of this matter. This swn shall be held by the Attorney General and deposited in the Consumer Education and Enforcement Fund and shall be held in trust there to be used by the Attorney General in his discretion to further efforts to investigate and prosecute consumer protection, environmental, public utilities and antitrust matters, and to educate consumers regarding such matters. This sum shall be delivered to: Chief Financial Officer, Office of the Attorney General, 323 Center Street, Suite 1100, Little Rock, Arkansas 72201, and shall designate on the face of the check the name Ferrellgas, L.P. 11

12 J. If Ferrellgas fails to pay the amounts outlined herein within the time allotted herein, the following stipulated penalties shall be assessed in addition to all other payment amounts: First day through tenth day: Eleventh day through twentieth day: Twenty-first day through thirtieth day: Each day beyond thirtieth day: $ per day $ per day $ per day $ per day K. Fen-ellgas acknowledges that this Assurance of Voluntary Compliance is an exercise ofthe State's police and regulatory powers. L. This Assw-ance of Voluntary Compliance operates as a release only as to those claims raised within the Complaint filed by the State, as filed on December 3, 2007 and claims related to the claims raised in the Compliant and known to the Attomey General's office through the date of the Assurance of Voluntary Compliance. Nothing shall limit the A ttomey General from investigating alleged violations of law occurring after the date of this Assurance of Voluntary Compliance or other violations not relating to claims raised within the Complaint, including, but not limited to, future attempts by Defendant to change its agreements with customers without obtaining meaningful consent from customers to any agreements. Nothing shall further limit the Attorney General from investigating potential violations of this Assurance of Voluntary Compliance. M. Nothing in this Assurance of Voluntary Compliance shall be construed to authorize or require action by Ferrellgas that would be in violation of applicable federal or state law. N. Nothing herein relieves Ferrellgas of its duty to comply with the applicable laws 12

13 of the State of Arkansas nor constitutes authorization by the State to engage in acts and practices prohibited by such laws. This judgment shall be governed by Arkansas law. O. Ferrellgas further agrees that this Assurance of Voluntary Compliance constitutes a legally-enforceable obligation of Ferrellgas in accordance with its temls. All parties agree that if Ferrellgas fails to comply with any of the terms of this Assurance of Voluntary Compliance, the state may seek to enforce this Assurance of Voluntary Compliance in accordance with the Arkansas Deceptive Trade Practices Act, the telms of t11is Assurance of Voluntary Compliance, and through t11e invocation of the contempt powers of this Court. P. Not11ing in this Assurance of Voluntary Compliance constitutes approval by the Attorney General of the past or future business practices of Fenellgas. Ferrellgas shall make no representations contrary to this paragraph. Q. Not11ing in this Assurance of Volw1tary Compliance shall be construed as a waiver of any private rights, causes of action, or remedies of any person against Ferrellgas with respect to the acts and practices covered herein. R. This Assurance of Voluntary Compliance constitutes the entire agreement of the parties. The undersigned acknowledge that there are no commw1ications or oral understandings contrary, different, or whic11 in any way restrict this Assurance of Voluntary Compliance and that any and all prior agreements or understandings within the subject matter of this Assurance of Voluntary Compliance are, upon the effective date of the Assurance of Voluntary Compliance superseded, null and void. S. This Assurance of Voluntary Compliance and the obligations of Ferrellgas contained herein apply only to its customers residing in the State of Arkansas. 13

14 IV. Modification T. This Assurance of Voluntary Compliance may not be modified without the express, written consent of each of the parties hereto. V. Signatories U. Each undersigned representative of a party certifies that he or she is fully authorized to enter into the tenns and conditions of this Assurance of Voluntary Compliance and legally bind such party to its terms. V. This Assurance of Voluntary Compliance is made and entered into by and between the parties hereto and their respective counsel on this to-hi day of FOR THE ATTORNEY GENERAL: ~WA1l/la Ai.eU arah R. Tacker Senior Assistant Attorney General.P. PREPARED BY: Sarah R. Tacker, Ark. Bar No Senjor Assistant Attorney General Office of the Attorney General 323 Center Street, Suite 500 Little Rock, Arkansas