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UGI CORP /PA/ - 10-K - 20041214 - BUSINESS
ITEMS 1. AND 2. BUSINESS AND PROPERTIES
CORPORATE OVERVIEW
UGI Corporation 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 and butane, ("LPG");
a provider of natural gas and electric 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. Our subsidiaries
operate principally in the following five business segments:
- AmeriGas Propane
- International Propane
- Gas Utility
- Electric Utility
- Energy Services
The AmeriGas Propane segment consists of the propane distribution business
of AmeriGas Partners, L.P., ("AmeriGas Partners" or the "Partnership"), which is
the nation's largest retail propane distributor. 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 46% ownership
interest in the Partnership; the remaining interest is publicly held. See Note 1
to the Company's Consolidated Financial Statements.
The International Propane segment consists of the LPG distribution
businesses of our subsidiaries Antargaz and Flaga, and our joint venture in
China. Antargaz is one of the largest distributors of LPG in France. Flaga is
the largest LPG distributor in Austria and one of the largest suppliers in the
Czech Republic and Slovakia. In China, we participate in an LPG joint venture
business in the Nantong region.
On March 31, 2004, we purchased the approximate 80.5% interest in Antargaz
which we did not already own. This acquisition significantly increased the
Company's international operations, and beginning in fiscal year 2005, will also
significantly increase the percentage of the Company's earnings derived from LPG
distribution. For more information on the Antargaz acquisition, see Note 3 to
the Company's Consolidated Financial Statements.
The Gas Utility segment consists of the regulated natural gas distribution
business ("Gas Utility") of our subsidiary UGI Utilities, Inc. ("Utilities"),
serving approximately 300,000 customers in eastern Pennsylvania. The Electric
Utility segment consists of the regulated electric
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distribution business ("Electric Utility") of Utilities, serving approximately
62,000 customers in northeastern Pennsylvania. Gas Utility and Electric Utility
are regulated by the Pennsylvania Public Utility Commission ("PUC").
The Energy Services segment consists of non-utility, energy-related
businesses conducted by a number of subsidiaries. These businesses include (i)
marketing of natural gas, oil and electricity in the eastern region of the
United States under the trade names GASMARK(R) and POWERMARK(R), and (ii)
operating electric generation assets and liquefied natural gas and propane
peak-shaving plants in eastern Pennsylvania. In November 2004, Energy Services
acquired a propane import and storage facility in Chesapeake, Virginia.
We also own and operate a heating, ventilation, air conditioning and
refrigeration service business serving over 100,000 customers in the
Mid-Atlantic region.
BUSINESS STRATEGY
Since 1999, our strategic direction has focused on growing our propane,
natural gas and electric distribution 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 our existing business, as well as related and complementary
businesses. During fiscal year 2004, we completed a number of transactions in
pursuit of this strategy, most importantly the acquisition of the approximate
80.5% ownership interest in Antargaz which we did not already own.
CORPORATE INFORMATION
UGI was incorporated in Pennsylvania in 1991. UGI Corporation is not
subject to regulation by the 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.
The Company's corporate website can be found at www.ugicorp.com. The
Company makes available free of charge at this website (under the "Investor
Relations and Corporate Governance-SEC filings" caption) copies of its reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, including its Annual Report on Form 10-K, its Quarterly Reports on
Form 10-Q and its Current Reports on Form 8-K. The Company's Principles of
Corporate Governance, Code of Ethics for the Chief Executive Officer and Senior
Financial Officers, Code of Business Conduct and Ethics for Directors, Officers
and Employees, and charters of the Corporate Governance, Audit and Compensation
and Management Development Committees of the Board of Directors are also
available on the Company's
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website, under the caption "Investor Relations and Corporate
Governance-Corporate Governance." All of these documents are also available free
of charge by writing to Robert W. Krick, Vice President and Treasurer, UGI
Corporation, P.O. Box 858, Valley Forge, PA 19482.
FORWARD-LOOKING STATEMENTS
Information contained in this Annual Report on Form 10-K 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) cost volatility and availability of
propane, butane, oil, electricity and natural gas and the capacity to transport
them to market areas; (3) changes in domestic and foreign laws and regulations,
including safety, tax and accounting matters; (4) competitive pressures from
alternative energy sources, including alternative energy sources becoming
available through, for example, the extension of natural gas lines; (5) failure
to acquire new customers thereby reducing or limiting an 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 in excess of insurance coverage 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, propane and LPG; (11) political, regulatory and
economic conditions in the United States and foreign countries; (12) interest
rate fluctuations and other capital market conditions, including foreign
currency rate fluctuations, particularly in the euro; (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 the federal securities laws.
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AMERIGAS PROPANE
Our domestic propane distribution business is conducted through AmeriGas
Partners. As of September 30, 2004, 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 46% 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.
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, 2004, the Partnership distributed propane to
approximately 1.3 million customers from 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 82%
of the Partnership's fiscal year 2004 sales (based on gallons sold) were to
retail accounts and approximately 18% were to wholesale customers. Sales to
residential customers in fiscal 2004 represented approximately 42% of retail
gallons sold; industrial/commercial customers 33%; motor fuel customers 12%; and
agricultural customers 7%. Transport gallons, which are large-scale deliveries
to retail customers other than residential, accounted for 6% of 2004 retail
gallons. No single customer represents, or is anticipated to represent, more
than 5% of the Partnership's consolidated revenues.
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The Partnership continues to expand its PPX Prefilled Propane Xchange
program ("PPX (R)"). At September 30, 2004, PPX was available at approximately
21,800 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.
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. 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,
2004, over 90% of the Partnership's propane supply was purchased under supply
agreements with terms of 1 to 3 years. Approximately 83% of the volumes
purchased under those agreements were from 10 suppliers, including BP Products
North America Inc. and its affiliate BP Marketing Inc. (approximately 28%);
Dynegy Midstream Services (approximately 17%); and Enterprise Products Operating
LP and its affiliate Canadian Enterprises Gas Products Ltd. (approximately 14%).
The availability of propane supply is dependent upon, among other things, the
severity of winter weather, the price and availability of competing fuels such
as natural gas and crude oil, and the availability of imported supply. 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 2005. 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 2004. In certain market areas, however, some suppliers
provide
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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 2004, 92% of the Partnership's supply contracts
provided for pricing based upon (i) index formulas using the current prices
established at major storage points such as Mont Belvieu, Texas, or Conway,
Kansas, or (ii) posted prices at the time of delivery. In addition, some
agreements provided maximum and minimum seasonal purchase volume 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 large storage
facilities in Arizona, Pennsylvania and Virginia, as well as at smaller
facilities in 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, increases in
the prices of base commodities such as crude oil and natural gas, or other
unforeseen events. The General Partner has adopted supply acquisition and
product cost risk management practices to reduce the effect of volatility on
selling prices. 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."
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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 PRICES CHART]
Mont Belvieu Conway
Oct-99 45.4550 43.3900
Nov-99 43.4410 38.7780
Dec-99 42.9532 35.2314
Jan-00 56.1090 42.2140
Feb-00 59.7500 47.2630
Mar-00 51.1820 47.8180
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
Oct-03 55.44 65.21
Nov-03 54.66 58.12
Dec-03 62.87 64.15
Jan-04 74.35 67.56
Feb-04 69.98 61.99
Mar-04 58.64 56.35
Apr-04 60.62 58.55
May-04 67.65 64.37
Jun-04 67.12 64.27
Jul-04 74.21 71.65
Aug-04 83.84 86.44
Sep-04 80.18 81.98
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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,
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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
program (through which consumers can exchange an empty propane grill cylinder
for a filled one) and Strategic Accounts program (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, 2003 sales volume of the ten largest propane companies
(including AmeriGas Partners) represented approximately 36% of domestic retail
sales. Management believes the Partnership's 2004 retail volume represents 9% of
the domestic retail market.
PROPERTIES
As of September 30, 2004, the Partnership owned approximately 89% 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. The California facility, which the Partnership operates, is
currently leased to several refiners for the storage of butane.
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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, 2004, the
Partnership operated a transportation fleet with the following assets:
APPROXIMATE QUANTITY & EQUIPMENT TYPE % OWNED % LEASED
430 Trailers 94 6
240 Tractors 39 61
180 Railroad tank cars 0 100
2,600 Bobtail trucks 19 81
350 Rack trucks 20 80
2,150 Service and delivery trucks 21 79
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Other assets owned at September 30, 2004 included approximately 900,000
stationary storage tanks with typical capacities of 121 to 2,000 gallons and
approximately 2.3 million portable propane cylinders with typical capacities of
1 to 120 gallons. The Partnership also owned approximately 5,300 large volume
tanks which are used for its own storage requirements. The Partnership's
subsidiary, AmeriGas Propane, L.P. ("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 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 2004 retail sales volume occurring during the five-month peak
heating season from November through March. As a result of this seasonality,
sales are higher in the Partnership's first and second fiscal quarters
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(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 and the operation of bulk
storage LPG terminals. 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, National Fire Protection
Association ("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. The latest version of NFPA Pamphlet
No. 58, adopted by a number of states, requires certain stationary cylinders
that are filled in place to be re-qualified periodically. Management believes
that the policies and 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
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written procedures to minimize the hazards resulting from gas pipeline
emergencies, and keep records of inspections and testing. Operators are subject
to the Pipeline Safety Improvement Act of 2002, which, among other things,
protects from adverse employment actions employees who provide information to
their employers or to the federal government as to pipeline safety.
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, 2004, the General
Partner had approximately 6,100 employees, including approximately 330 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.
INTERNATIONAL PROPANE
We conduct our international LPG distribution business principally in
Europe through our wholly owned subsidiaries Antargaz and Flaga. In March 2004,
we purchased the remaining approximate 80.5% equity interest in Antargaz which
we did not already own. Antargaz operates in France; Flaga operates in Austria,
the Czech Republic and Slovakia. During fiscal year 2004, Antargaz and Flaga
sold approximately 336 million and 35 million gallons of LPG, respectively. Our
joint venture in China sold approximately 22 million gallons of LPG during
fiscal year 2004.
ANTARGAZ
PRODUCTS, SERVICES AND MARKETING
Antargaz's customer base consists of residential, commercial, agricultural
and motor fuel customer accounts that use LPG for space heating, cooking, water
heating, process heat and transportation. Antargaz sells LPG in cylinders, and
in small, medium and large bulk volumes stored in tanks. Sales of LPG are also
made to service stations to accommodate vehicles that run on LPG ("LPGc").
Antargaz sells LPG in cylinders to approximately 28,000 retail outlets such as
supermarkets, individually owned stores and gas stations. At September 30, 2004,
Antargaz had approximately 211,000 bulk customers and approximately 5 million
cylinders in circulation. Approximately 66% of Antargaz' sales (based on
volumes) for the 12 months ended September 30, 2004 were cylinder and small
bulk, 13% medium bulk, 19% large bulk, and 2% to service stations for
automobiles. Antargaz also engages in wholesale sales of LPG and provides
logistic, storage and other services to third-party LPG distributors. No single
customer represents, or is anticipated to represent, more than 5% of total
revenues for Antargaz.
Sales to small bulk customers represent the largest segment of Antargaz's
business in terms of volume, revenue and margin. Small bulk customers are
primarily residential and small business users such as restaurants that use LPG
mainly for heating and cooking. Small bulk customers also include
municipalities, which use LPG for heating sports arenas and swimming pools, and
the poultry industry, for use in chicken breeding.
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The principal end-users of cylinders are residential customers who use LPG
supplied in this form for domestic applications such as cooking and heating.
Butane-filled cylinders accounted for approximately 62% of LPG cylinders for
fiscal year 2004, with propane-filled cylinders accounting for the remainder.
Propane-filled cylinders are also used to supply fuel for forklift trucks. The
demand for butane-filled cylinders has been declining, due to customers
gradually changing to other household energy sources for heating and cooking,
such as natural gas. Antargaz is seeking to increase demand for propane-filled
cylinders through marketing and product innovations.
Medium bulk customers use propane only, and consist mainly of large
residential developments such as housing projects, hospitals, municipalities and
medium-sized industrial and agricultural enterprises. Large bulk customers are
primarily companies that use LPG in their industrial processes, and large
agricultural companies.
LPG SUPPLY AND STORAGE
Antargaz has an agreement with Totalgaz for the supply of butane and
propane, with pricing based on internationally quoted market prices. Under this
agreement, 80% of Antargaz's requirements for butane are guaranteed until June
2006 and 50% of its requirements for propane are guaranteed until June 2007.
Requirements are fixed annually, and Antargaz is free to develop other sources
of supply. For the 2004 fiscal year, Antargaz purchased approximately 95% of its
butane needs and 25% of its propane needs from Totalgaz. Antargaz also purchases
propane on the international market and, to a lesser degree, purchases butane on
the domestic market, under term agreements with international oil and gas
trading companies such as SHV Gas Supply and Trading, Shell International
Trading and Shipping Company Ltd. ("Stasco") and Vitol S.A. In addition,
purchases are made on the spot market from international oil and gas companies
such as Den Norske Stats Oldeselshap ("Statoil") and Sonatrach BV, and to a
lesser extent from domestic refineries, including those operated by BP France
and Esso SAF.
Antargaz has five primary storage facilities, including three which are
located close to deep sea harbor points, and 26 secondary storage facilities. It
also manages an extensive logistics and transportation network. Access to harbor
points allows Antargaz to diversify its LPG supplies through imports. LPG stored
in primary storage facilities is transported to smaller storage facilities by
rail, sea and road. At the secondary storage facilities, LPG is filled into
cylinders or trucks equipped with tanks and then delivered to customers.
COMPETITION
The LPG market in France is mature, with limited future growth expected.
Sales volumes are affected principally by the severity of the weather and
customer migration to alternative energy forms, including natural gas and
electricity. Antargaz competes in all product markets on a national level
principally with three LPG distribution companies, Totalgaz (owned by Total
France), Butagaz (owned by Societe des Petroles Shell) and Compagnie des Gaz de
Petrole Primagaz (an independent supplier owned by SHV Holding NV), as well as
with a smaller competitor, Vitogaz. On a regional level, Antargaz competes with
Repsol France S.A., in markets other than LPGc. Antargaz's competitors are
generally affiliates of its LPG suppliers. As a result, its competitors may
obtain product at more competitive prices.
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SEASONALITY
Because a significant amount of LPG is used for heating, demand is
typically higher during the colder months of the year. Approximately 65% of
retail sales volume for fiscal year 2004 occurred during the six months of
October through March.
GOVERNMENT REGULATION
Antargaz's business is subject to various laws and regulations at the
national and European levels with respect to protection of the environment, the
storage and handling of hazardous materials, the discharge of contaminants into
the environment and the safety of persons and property. Following an explosion
in 2001 at Grande Pariosse's chemical factory in Toulouse, France new
regulations were adopted relating to the safety risks of operations such as
Antargaz's, which involve the storage of large amounts of flammable substances.
PROPERTIES
Antargaz has five primary storage facilities consisting of underground
caverns in geological formations, with the exception of Norgal, which is a
refrigerated facility. The table below sets forth details of each of these
facilities.
Antargaz Storage Antargaz Storage
Capacity - Propane Capacity - Butane
Ownership % (m3) (m3)
----------- ------------------ -----------------
Norgal 52.7% 22,600 8,900
Geogaz Lavera 16.7 17,400 32,500
Donges 50.0(1) 30,000 0
Geovexin 44.9 54,000 0
Cobogal 15.0 1,300 900
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(1) Pursuant to a contractual arrangement with the owner.
Antargaz has 26 secondary storage facilities, 14 of which are wholly-owned. The
others are partially-owned, through joint ventures.
EMPLOYEES
At September 30, 2004, Antargaz had approximately 1,200 employees.
FLAGA
FLAGA distributes LPG principally in Austria, the Czech Republic and
Slovakia for residential, commercial, industrial and autogas applications.
During fiscal year 2004, FLAGA distributed approximately 33 million gallons of
LPG. FLAGA operates from 5 distribution
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locations in Austria, 2 in the Czech Republic and 2 in Slovakia. In addition,
FLAGA has 6 sales offices in the Czech Republic. As of September 30, 2004, FLAGA
had a total of 359 employees.
FLAGA is the market leader for propane distribution in Austria with an
estimated 28% overall market share, serving residential, commercial and
industrial customers. The retail propane industry in Austria is mature, with
slight declines in overall demand in recent years, due primarily to the
expansion of natural gas. 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, including competitors
located in other eastern European countries. FLAGA also competes with providers
of other sources of energy, principally natural gas and wood.
The market in the Czech Republic for LPG represents approximately 30% of
FLAGA's total volume. 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. Effective September 1, 2004, FLAGA
acquired the LPG business of BP in the Czech Republic. Giving effect to this
acquisition, FLAGA expects to be the market leader in the Czech Republic with
approximately 24% market share. FLAGA estimates that its share of the LPG market
in Slovakia is 24%, ranking it second in the country. During fiscal year 2004,
FLAGA expanded its LPG cylinder business to Switzerland.
GAS UTILITY
SERVICE AREA; REVENUE ANALYSIS
Gas Utility distributes natural gas to approximately 300,000 customers in
portions of 14 eastern and southeastern Pennsylvania counties through its
distribution system of approximately 4,900 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 2004 fiscal year was
approximately 82.2 billion cubic feet ("bcf"). System sales of gas to
firm-residential, commercial and industrial ("retail core-market") customers
accounted for approximately 42% of system throughput, while gas delivery service
(gas transported for residential, commercial and industrial customers who bought
their gas from others) accounted for approximately 58% of system throughput.
Based on the most recent available industry data (2002), residential customers
account for approximately 35% of total system throughput by natural gas
distribution companies in the United States. By contrast,
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for the 2004 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, Gas Utility 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 2004, Gas Utility purchased approximately 50 bcf of
natural gas for sale to retail core market and off-system sales customers.
Approximately 77% of the volumes purchased were supplied under agreements with
ten major suppliers. The remaining 23% of gas purchased was supplied by
approximately 20 different producers and marketers. Gas supply contracts are
generally no longer than one year.
SEASONAL VARIATION
Because many of its customers use gas for heating purposes, Gas Utility
sales are seasonal. Approximately 59% of fiscal year 2004 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 perceived reliability, 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, Utilities is the only
regulated gas distribution utility having the right, granted by the PUC or by
law, to provide gas distribution services. Since the 1980s, larger commercial
and industrial customers have been able to purchase gas supplies from entities
other than Gas Utility. As a result of Pennsylvania's Natural Gas Choice and
Competition Act ("Gas Competition Act"), which became effective July 1, 1999,
all of Gas Utility's customers, including residential and smaller commercial and
industrial customers, have been afforded this opportunity.
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. Profitability from these
15
customers, therefore, is affected by the difference, or "spread," between the
customers' delivered cost of gas and the customers' delivered alternate fuel
cost, and the frequency and duration of interruptions. See "Gas Utility and
Electric Utility Regulation and Rates - Gas Utility Rates." Commercial and
industrial customers representing 22% of total system throughput have locations
which afford them the opportunity, although none have 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
Gas Utility's ten largest customers in terms of annual volume. All of these
customers have contracts, eight of which extend beyond fiscal year 2005. 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 2005. 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 Gas
Utility's larger customers.
During fiscal year 2004, 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 10,600 new residential heating customers during fiscal year 2004,
which represented a record annual increase. Of those new customers, new home
construction accounted for over 8,000 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 approximately 1,200.
Gas Utility 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.
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 achievable for reliable and secure
supplies. Consistent with that objective, Gas Utility negotiates the terms of
firm transportation capacity on all pipelines serving it, arranges for
appropriate storage and peak-shaving resources, negotiates with producers for
competitively priced gas purchases and
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aggressively participates in regulatory proceedings related to transportation
rights and costs of service.
ELECTRIC UTILITY
SERVICE AREA; SALES ANALYSIS
Electric Utility supplies electric service to approximately 62,000
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 2004, about 53% of sales volume came from residential customers, 35% from
commercial customers and 12% from industrial customers. Electricity transported
for customers who purchased their power from other suppliers represented less
than 1% of fiscal year 2004 sales volume.
SOURCES OF SUPPLY
Electric Utility has third-party generation supply contracts in place for
substantially all of its expected energy requirements for fiscal year 2005.
Electric Utility distributes both electricity that it purchases from others and
electricity that customers purchase from other suppliers. At September 30, 2004,
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.
COMPETITION
As a result of the Electricity Generation Customer Choice and Competition
Act ("ECC Act") that became effective in 1997, all Pennsylvania retail electric
customers have the ability to choose their electric generation supplier. Under
the ECC Act, Electric Utility remains the provider of last resort ("POLR") for
its customers who do not choose an alternate electric generation supplier. The
terms and conditions under which Electric Utility provides POLR service, and
rules governing the rates that may be charged for such service, have been
established in a series of PUC-approved settlements, the most recent of which
became effective in June 2004 (collectively, the "POLR Settlement.") Consistent
with the terms of the POLR Settlement, Electric Utility's POLR rates will
increase beginning January 2005 and Electric Utility is permitted, but not
required, to further increase its POLR rates in January 2006. Electric Utility
is the only regulated electric utility having the right, granted by the PUC or
by law, to distribute electricity in its service territory. Sales of electricity
for residential heating purposes accounted for approximately 20% of total sales
of electricity during the 2004 fiscal year. Electricity competes with natural
gas, oil, propane and other heating fuels for this use.
GAS UTILITY AND ELECTRIC UTILITY REGULATION AND RATES
PENNSYLVANIA PUBLIC UTILITY COMMISSION JURISDICTION
Utilities' gas and electric utility operations 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.
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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 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
Effective October 1, 2000, Gas Utility increased its base rates for retail
core-market customers and implemented a credit to its purchased gas cost rates
(described below). Since December 1, 2001, Gas Utility has reduced 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 competition from alternative fuels in commercial and
industrial markets.
Gas Utility's gas service tariff contains purchased gas cost ("PGC") rates
that provide for annual increases or decreases in the rate per thousand cubic
feet ("mcf") that Gas Utility charges for natural gas sold by it, to reflect Gas
Utility's projected cost of purchased gas. PGC rates may also be adjusted
quarterly, or, under certain conditions monthly, to reflect the actual cost of
gas. 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. Gas Utility has two PGC
rates. PGC (1) is applicable to small, firm, retail 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 qualify for the PGC (2) rate. As described above, Gas Utility's PGC
rates are adjusted to reflect margins, if any, from interruptible rate customers
who do not obtain their own pipeline capacity.
ELECTRIC UTILITY RATES
Electric Utility's POLR rates will increase beginning January 2005 and
Electric Utility is permitted, but not required, to further increase its POLR
rates in January 2006. Pursuant to the requirements of the ECC Act, the PUC is
currently developing POLR regulations that are expected to further define POLR
service obligations and pricing. As of September 30, 2004, fewer than 1% of
Electric Utility's customers have chosen an alternative electricity generation
supplier.
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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 effects
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 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."
EMPLOYEES
At September 30, 2004, Utilities had approximately 1,000 employees.
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ENERGY SERVICES
We operate the non-utility, energy-related businesses described below
through various subsidiaries.
NATURAL GAS AND ELECTRICITY MARKETING
UGI Energy Services, Inc. ("ESI") conducts our non-utility energy
marketing business under the trade names GASMARK(R) and POWERMARK(R). GASMARK(R)
sells natural gas directly to approximately 5,400 commercial and industrial
customers in Pennsylvania, New Jersey, Delaware, Maryland, Virginia, New York,
Ohio, North Carolina and the District of Columbia through the use of the
transportation systems of 32 utility systems. Energy Services also sells fuel
oil, electricity and LPG 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 utility company tariffs.
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 uses credit insurance to mitigate a portion of the risk of
customer defaults. ESI also requires credit support from certain customers in
higher-risk transactions. This credit support can take the form of prepayments,
bonds and letters of credit. 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. In November 2004, ESI
purchased a propane import and storage facility located in Chesapeake, Virginia.
ELECTRIC GENERATION
In June 2003, we increased our 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, we are a 50% owner of
Hunlock Creek Energy Ventures ("Energy Ventures"). The generation
20
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. We operate these generation
assets. A subsidiary of Allegheny Energy, Inc. is the other general partner in
Energy Ventures. Under the joint venture agreement, we have the right to
purchase one-half the output of Energy Ventures' generation at cost. We also
have the right to require an affiliate of Allegheny Energy, Inc. ("Allegheny")
to purchase our ownership interest in Energy Ventures. Allegheny has a
corresponding call right on our interest in Energy Ventures. These "put" and
"call" rights are effective for a 90-day period commencing January 1, 2006. The
output from these generation assets is sold by our subsidiary UGI Development
Company ("UGID") on the spot market and under fixed-term contracts. UGID has
FERC authority to sell power at market-based rates.
ENVIRONMENTAL FACTORS
The 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.
HVAC/R
We conduct a heating, ventilation, air-conditioning and refrigeration
service business ("HVAC/R") serving portions of Utilities' gas service area and
adjacent Mid-Atlantic region market areas, including Philadelphia suburbs and
portions of New Jersey and northern Delaware. This business serves more than
100,000 customers in residential, commercial, industrial and new construction
markets. During fiscal year 2004, HVAC/R generated approximately $58 million in
revenues and employed approximately 400 people.
BUSINESS SEGMENT INFORMATION
The table stating the amounts of revenues, operating income (loss) and
identifiable assets attributable to each of UGI's reportable business segments,
and to the geographic areas in which we operate, for the 2004, 2003 and 2002
fiscal years appears in Note 19 to the Consolidated Financial Statements
contained in our 2004 Annual Report to Shareholders and is incorporated in this
Report by reference.
EMPLOYEES
At September 30, 2004, UGI and its subsidiaries had approximately 9,300
employees.
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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
From the late 1800s through the mid-1900s, 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, 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, Utilities divested all of its utility
operations other than those which now constitute Gas Utility and Electric
Utility.
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 Utilities is currently permitted to include in rates, through
future base rate proceedings, prudently incurred remediation costs associated
with such sites. Utilities has been notified of several sites outside
Pennsylvania on which private parties allege MGPs were formerly owned or
operated by Utilities or owned or operated by its former subsidiaries. Such
parties are investigating the extent of environmental contamination or
performing environmental remediation. 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.
By orders issued in November 2003 and March 2004, the court granted
Utilities' motion for summary judgment and dismissed ConEd's complaint. ConEd
has appealed.
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,
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
Utilities and ten other
22
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. Citizens alleges that Utilities
and its predecessors owned and operated the plant from 1901 to 1928. The City
believes that it could cost as much as $50 million to clean up the river.
Utilities believes that it has good defenses to the claim and is defending the
suit.
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.
Savannah, Georgia Matter. AGL previously informed Utilities that it was
investigating contamination that appeared to be related to MGP operations at a
site owned by AGL in Savannah, Georgia. A former subsidiary of Utilities
operated the MGP in the early 1900s. AGL has recently informed Utilities that it
has begun remediation of MGP wastes at the site and believes that the total cost
of remediation could be as high as $55 million. AGL has not filed suit against
Utilities for a share of these costs. Utilities believes that it will have good
defenses to any action that may arise out of this site.
Sag Harbor, New York Matter. By letter dated June 24, 2004, KeySpan Energy
("KeySpan") informed Utilities that KeySpan has spent $2.3 million and expects
to spend another $11 million to clean up an MGP site it owns in Sag Harbor, New
York. KeySpan believes that Utilities is responsible for approximately 50% of
these costs as a result of Utilities' alleged direct ownership and operation of
the plant from 1885 to 1902. Utilities is in the process of reviewing the
information provided by KeySpan and is investigating this claim.
Connecticut Gas Plants Matter. By letter dated August 5, 2004, Yankee Gas
Services Company and Connecticut Light and Power Company, subsidiaries of
Northeast Utilities, (together the "Northeast Companies"), demanded contribution
from Utilities for past and future remediation costs related to MGP operations
on thirteen sites owned by the Northeast Companies in nine cities in the State
of Connecticut. The Northeast Companies allege that Utilities controlled
operations of the plants from 1883 to 1941. According to the letter,
investigation and remedial costs at the sites to date total approximately $10
million and complete remediation costs for all sites could total $182 million.
The Northeast Companies seek an unspecified fair and equitable allocation of
these costs to Utilities. Utilities is in the process of reviewing the
information provided by Northeast Companies and is investigating this claim.
RELATED MATTER
UGI Utilities, Inc. v. Insurance Co. of North America, et al. On February
11, 1999, Utilities 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
and the suit has been dismissed.
23
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. The court
recently granted the plaintiffs' motion to include customers acquired from
Columbia Propane in August 2001 as additional potential class members, and to
amend their complaint to name additional parties consistent with such ruling. In
2003, the defendants settled the individual personal injury and property damage
claims of the Swigers. Class counsel has indicated that the class is seeking
compensatory damages in excess of $12 million plus punitive damages, civil
penalties and attorneys' fees. The defendants believe they have good 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 2004.
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:
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
Our Common Stock is traded on the New York and Philadelphia Stock
Exchanges under the symbol "UGI." 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:
2004 FISCAL YEAR HIGH LOW
4th Quarter $37.35 $30.46
3rd Quarter 33.40 29.85
2nd Quarter 34.35 31.40
1st Quarter 34.20 28.85
|
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
|
25
DIVIDENDS
Quarterly dividends on our Common Stock were paid in the 2004 and 2003
fiscal years as follows:
2004 FISCAL YEAR AMOUNT
4th Quarter $0.3125
3rd Quarter 0.285
2nd Quarter 0.285
1st Quarter 0.285
|
2003 FISCAL YEAR AMOUNT
4th Quarter $0.285
3rd Quarter 0.285
2nd Quarter 0.275
1st Quarter 0.275
|
HOLDERS
On November 1, 2004, UGI had 9,479 holders of record of Common Stock.
26
ITEM 6. SELECTED FINANCIAL DATA
Year Ended
September 30,
-------------------------------------------------------------------
2004 2003 2002 2001 (a) 2000 (a)
----------- ----------- ------------ ------------ -------------
(Millions of dollars, except per share amounts)
FOR THE PERIOD:
INCOME STATEMENT DATA:
Revenues $ 3,784.7 $ 3,026.1 $ 2,213.7 $ 2,468.1 $ 1,761.7
=========== =========== ============ ============ ============
Income before accounting changes $ 111.6 $ 98.9 $ 75.5 $ 52.0 $ 44.7
Cumulative effect of accounting changes (b) - - - 4.5 -
----------- ----------- ------------ ------------ ------------
Net income (c) $ 111.6 $ 98.9 $ 75.5 $ 56.5 $ 44.7
=========== =========== ============ ============ ============
Earnings per common share - basic
Income before accounting changes $ 2.36 $ 2.34 $ 1.83 $ 1.28 $ 1.09
Cumulative effect of accouting changes, net - - - 0.11 -
----------- ----------- ------------ ------------ ------------
Net income - basic $ 2.36 $ 2.34 $ 1.83 $ 1.39 $ 1.09
=========== =========== ============ ============ ============
Earnings per common share - diluted
Income before accounting changes $ 2.31 $ 2.29 $ 1.80 $ 1.27 $ 1.09
Cumulative effect of accouting changes, net - - - 0.11 -
----------- ----------- ------------ ------------ ------------
Net income - diluted (c) (d) $ 2.31 $ 2.29 $ 1.80 $ 1.38 $ 1.09
=========== =========== ============ ============ ============
Cash dividends declared per common share $ 1.17 $ 1.13 $ 1.083 $ 1.050 $ 1.017
=========== =========== ============ ============ ============
AT PERIOD END:
BALANCE SHEET DATA:
Total assets $ 4,235.4 $ 2,795.2 $ 2,628.0 $ 2,561.9 $ 2,284.3
=========== =========== ============ ============ ============
Capitalization:
Debt:
Bank loans - AmeriGas Propane $ - $ - $ 10.0 $ - $ 30.0
Bank loans - UGI Utilities 60.9 40.7 37.2 57.8 100.4
Bank loans - other 17.2 15.9 8.6 10.0 4.3
Long-term debt (including current maturities):
AmeriGas Propane 901.4 927.3 945.8 1,005.9 857.2
Antargaz 474.5 - - - -
UGI Utilities 217.2 217.3 248.4 208.4 172.9
Other 76.9 78.9 81.5 80.9 85.5
----------- ----------- ------------ ------------ ------------
Total debt 1,748.1 1,280.1 1,331.5 1,363.0 1,250.3
----------- ----------- ------------ ------------ ------------
Minority interests, principally in AmeriGas
Partners 178.4 134.6 276.0 246.2 177.1
UGI Utilities preferred shares subject
to mandatory redemption 20.0 20.0 20.0 20.0 20.0
Common stockholders' equity 834.1 498.7 313.8 251.0 242.0
----------- ----------- ------------ ------------ ------------
Total capitalization $ 2,780.6 $ 1,933.4 $ 1,941.3 $ 1,880.2 $ 1,689.4
=========== =========== ============ ============ ============
RATIO OF CAPITALIZATION:
Total debt 62.9% 66.2% 68.6% 72.5% 74.0%
Minority interests, principally in AmeriGas Partners 6.4% 7.0% 14.2% 13.1% 10.5%
UGI Utilities preferred shares subject
to mandatory redemption 0.7% 1.0% 1.0% 1.1% 1.2%
Common stockholders' equity 30.0% 25.8% 16.2% 13.3% 14.3%
----------- ----------- ------------ ------------ ------------
100.0% 100.0% 100.0% 100.0% 100.0%
=========== =========== ============ ============ ============
|
(a) Arthur Andersen LLP audited our consolidated financial statements for 2001
and 2000.
(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."
(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,
respectively.
(d) 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, 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 27 of
UGI's 2004 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 24 and 25 of the
UGI 2004 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
None.
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.
Included in the Company's evaluation was consideration of the restatement of
previously issued financial statements due to reconsideration of previous
judgments related to the provision of deferred taxes in connection with gains
recorded in fiscal
28
years 2003 and 2004 in accordance with the guidance in SEC Staff Accounting
Bulletin No. 51, "Accounting for Sales of Common Stock by a Subsidiary." The
Company believes that its reconsideration of previous judgments in the
application of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," was not a result of ineffective internal controls or
procedures. The Company believes that a controls system, no matter how well
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.
As described in Note 3 to the Company's Consolidated Financial Statements, on
March 31, 2004, the Company acquired the remaining outstanding 80.5% ownership
in Antargaz that it did not already own. The internal control over financial
reporting of Antargaz is being aligned with that of the Company as part of the
post-acquisition financial integration process. As a result of this continuing
integration process, we have extended internal control procedures over quarterly
financial reporting to include Antargaz.
ITEM 9B. OTHER INFORMATION
Not applicable.
29
PART III:
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,
2005:
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
The Code of Ethics for the Chief Executive
Officer and Senior Financial Officers of UGI
Corporation is 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 Securities Ownership of Management
|
30
EQUITY COMPENSATION TABLE
The following table sets forth information as of the end of our 2004
fiscal year with respect to compensation plans under which our equity securities
are authorized for issuance.
NUMBER OF SECURITIES
NUMBER OF SECURITIES TO BE WEIGHTED AVERAGE REMAINING AVAILABLE FOR
ISSUED UPON EXERCISE OF EXERCISE PRICE OF FUTURE ISSUANCE UNDER EQUITY
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, COMPENSATION PLANS
WARRANTS AND RIGHTS WARRANTS AND RIGHTS (EXCLUDING SECURITIES REFLECTED
PLAN CATEGORY (A) (B) IN COLUMN (A)) (C)
------------- -------------------------- -------------------- -------------------------------
Equity compensation plans 2,291,708 $23.65
approved by security holders (1) 561,454 $ 0 2,508,796
Equity compensation plans not 372,752 $21.97 0
approved by security holders (2) 4,200 $ 0
Total 3,230,114 $23.41 2,508,796
|
(1) Column (a) represents 2,291,708 stock options under the 1997 Stock
Option and Dividend Equivalent Plan, the 1992 Directors' Stock Plan,
the 2000 Directors' Stock Option Plan, the 2000 Stock Incentive Plan
and the 2004 Omnibus Equity Compensation Plan, and 561,454 phantom
share units under the 2004 Omnibus Equity Compensation Plan and the
2000 Stock Incentive Plan.
(2) Column (a) represents 372,752 stock options under the 1992 and 2002
Non-Qualified Stock Option Plans, and 4,200 one-time bonus awards of
phantom restricted stock. Under the 1992 and 2002 Non-Qualified
Stock Option Plans, the option exercise price is not less than 100%
of the fair market value of the Company's common stock on the date
of grant. Generally, options become exercisable in three equal
annual installments beginning on the first anniversary of the grant
date. All options are non-transferable and generally exercisable
only while the holder is employed by the Company or an affiliate,
with exceptions for exercise following retirement, disability and
death. Options are subject to adjustment in the event of
recapitalization, stock splits, mergers, and other similar corporate
transactions affecting the Company's common stock. The phantom
restricted awards represent the right to receive a share of stock or
an amount based on the value of a share of stock if specified length
of service requirements are met.
CAPTIONS OF PROXY STATEMENT
INFORMATION INCORPORATED BY REFERENCE
----------- -------------------------
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 Public Accountants
|
31
The information concerning the Company's executive officers required by
Item 10 is set forth below.
EXECUTIVE OFFICERS
NAME AGE POSITION
---- --- --------
Lon R. Greenberg 54 Chairman, Director, President
and Chief Executive Officer
Eugene V.N. Bissell 51 President and Chief Executive
Officer, AmeriGas Propane, Inc.
Michael J. Cuzzolina 59 Vice President - Accounting and Financial
Control; Chief Accounting Officer and Chief
Risk Officer
Bradley C. Hall 51 Vice President - New Business Development
Robert H. Knauss 51 Vice President and General Counsel
Anthony J. Mendicino 56 Senior Vice President - Finance
and Chief Financial Officer
David W. Trego 46 President and Chief Executive Officer,
UGI Utilities, Inc.
Francois Varagne 49 Chairman of the Board and
Chief Executive Officer of Antargaz
|
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.
32
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 a member of the Board of
Directors of the National Propane Gas Association.
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 2004. He served as President and Chief Operating Officer of Flaga GmbH from
1999 to 2004. 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 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
David W. Trego
Mr. Trego is President and Chief Executive Officer of UGI Utilities, Inc.
(since October 2004). He previously served as Vice President-Electric
Distribution (2002 to 2004). Prior to that assignment, Mr. Trego served in a
number of capacities in the Gas Utility Division, including marketing,
operations, customer relations and engineering. He joined Utilities in 1987.
Francois Varagne
Mr. Varagne is Chairman of the Board and Chief Executive Officer of
Antargaz (since 2001), one of the leading LPG distributors in France. Before
joining Antargaz, Mr. Varagne was Chairman of the Board and Chief Executive
Officer of VIA GTI, a common carrier in France (1998-2001). Prior to that, Mr.
Varagne was Chairman of the Board and Chief Executive Officer of Brink's France,
a funds carrier (1997 to 1998).
34
PART IV:
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(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.
35
(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 UGI Form 8-K 3.2
28, 2004 (9/28/04)
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 UGI Registration 4.3
18, 2000, between the Company and Mellon Statement No.
Bank, N.A., successor to Mellon Bank (East) 333-49080
N.A., as Rights Agent, and Assumption
Agreement dated April 7, 1992
4.2 The description of the Company's Common UGI Form 8-B/A 3.(4)
Stock contained in the Company's (4/17/96)
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
|
36
INCORPORATION BY REFERENCE
--------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
----------- ------- ---------- ------ -------
4.4 Note Agreement dated as of April 12, 1995 AmeriGas Form 10-Q 10.8
among The Prudential Insurance Company of Partners, L.P. (3/31/95)
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, AmeriGas Form 10-K 4.5
1997 to Note Agreement dated as of April Partners, L.P. (9/30/97)
12, 1995 ("1995 Note Agreement")
4.6 Second Amendment dated as of September 15, AmeriGas Form 10-K 4.6
1998 to 1995 Note Agreement Partners, L.P. (9/30/98)
4.7 Third Amendment dated as of March 23, 1999 AmeriGas Form 10-Q 10.2
to 1995 Note Agreement Partners, L.P. (3/31/99)
4.8 Fourth Amendment dated as of March 16, 2000 AmeriGas Form 10-Q 10.2
to 1995 Note Agreement Partners, L.P. (6/30/00)
4.9 Fifth Amendment dated as of August 1, 2001 AmeriGas Form 10-K 4.8
to 1995 Note Agreement Partners, L.P. (9/30/01)
4.10 Second Amended and Restated Agreement of AmeriGas Form 8-K 3.1
Limited Partnership of AmeriGas Partners, Partners, L.P. (12/1/04)
L.P. dated as of December 1, 2004
4.11 Second Amended and Restated Agreement of AmeriGas Form 10-K 3.1(a)
Limited Partnership of AmeriGas Propane, Partners, L.P. (9/30/04)
L.P. dated as of December 1, 2004
4.12 Amended and Restated Agreement of Limited AmeriGas Form 10-K 3.8
Partnership of AmeriGas Eagle Propane, L.P. Partners, L.P. (9/30/01)
dated July 19, 1999
10.1 Service Agreement (Rate FSS) dated as of UGI Form 10-K 10.5
November 1, 1989 between Utilities and (9/30/95)
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 FERCP. P 61,060 (1993), order
on rehearing, 64 FERCP. P 61,365 (1993)
*10.2** UGI Corporation 2004 Omnibus Equity
Compensation Plan Directors Stock Unit
Grant Letter dated as of January 8, 2004
|
37
INCORPORATION BY REFERENCE
--------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
----------- ------- ---------- ------ -------
*10.3** UGI Corporation 2004 Omnibus Equity
Compensation Plan Directors Nonqualified
Stock Option Grant Letter dated as of
January 8, 2004
*10.4** UGI Corporation 2004 Omnibus Equity
Compensation Plan Utilities Employees
Performance Unit Grant Letter dated as of
January 1, 2004
*10.5** UGI Corporation 2004 Omnibus Equity
Compensation Plan UGI Employees Stock Unit
Grant Letter dated as of January 1, 2004
10.6** UGI Corporation Directors Deferred UGI Form 10-K 10.6
Compensation Plan Amended and Restated as (9/30/00)
of January 1, 2000
*10.7** UGI Corporation 2004 Omnibus Equity
Compensation Plan UGI Employees Performance
Unit Grant Letter dated as of January 1,
2004
10.8** UGI Corporation Annual Bonus Plan dated UGI Form 10-Q 10.4
March 8, 1996 (6/30/96)
*10.9** UGI Corporation 2004 Omnibus Equity
Compensation Plan AmeriGas Employees
Nonqualified Stock Option Grant Letter
dated as of January 1, 2004
10.10** UGI Corporation 1997 Stock Option and UGI Form 10-Q 10.4
Dividend Equivalent Plan Amended and (3/31/03)
Restated as of April 29, 2003
10.11** UGI Corporation 1992 Directors' Stock Plan UGI Form 10-Q 10.2
Amended and Restated as of April 29, 2003 (3/31/03)
*10.12** UGI Corporation Senior Executive Employee
Severance Pay Plan as amended December 7,
2004
10.12(a)** AmeriGas Propane, Inc. Executive Employee AmeriGas Form 10-K 10.4
Severance Pay Plan, as amended December 6, Partners, L.P. (9/30/04)
2004.
|
38
INCORPORATION BY REFERENCE
--------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
----------- ------- ---------- ------ -------
10.13** UGI Corporation 2000 Directors' Stock UGI Form 10-Q 10.1
Option Plan Amended and Restated as of (3/31/03)
April 29, 2003
10.14** UGI Corporation 2000 Stock Incentive Plan UGI Form 10-Q 10.5
Amended and Restated as of April 29, 2003 (3/31/03)
10.15** 1997 Stock Purchase Loan Plan UGI Form 10-K 10.16
(9/30/97)
10.16** UGI Corporation Supplemental Executive UGI Form 10-Q 10
Retirement Plan Amended and Restated (6/30/98)
effective October 1, 1996
*10.17** UGI Corporation 2004 Omnibus Equity
Compensation Plan, as amended December 7,
2004
10.18 Credit Agreement dated as of August 28, AmeriGas Form 10-K 10.1
2003 among AmeriGas Propane, L.P., AmeriGas Partners, L.P. (9/30/03)
Propane, Inc., Petrolane Incorporated,
Wachovia Bank, National Association, as Agent,
Issuing Bank and Swing Line Bank, and certain
banks.
10.19 Amendment No. 1 dated as of August 30, AmeriGas Form 8-K 10.1
2004, to the Credit Agreement dated as of Partners, L.P. (8/30/04)
August 28, 2003 among AmeriGas Propane,
L.P., AmeriGas Propane, Inc., Petrolane
Incorporated, Citicorp USA, Inc., Credit
Suisse First Boston, Wachovia Bank,
National Association, as Agent, Issuing
Bank and Swing Line Bank, and certain
financial institutions named party thereto.
10.20 Partnership Agreement of Hunlock Creek Utilities Form 10-K 10.24
Energy Ventures dated December 8, 2001 by (9/30/01)
and between UGI Hunlock Development Company
and Allegheny Energy Supply Hunlock Creek
LLC
10.21 Amendment No. 1 to Partnership Agreement of UGI Form 10-K 10.21
Hunlock Creek Energy Ventures, dated June (9/30/03)
26, 2003, by and between UGI Hunlock
Development Company and Allegheny Energy
Supply Hunlock Creek, LLC
|
39
INCORPORATION BY REFERENCE
--------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
----------- ------- ---------- ------ -------
10.22 Notice of appointment of Wachovia Bank, AmeriGas Form 10-K 10.6
National Association as collateral Agent Partners, L.P. (9/30/03)
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 AmeriGas Form 10-Q 10.2
of April 19, 1995 among AmeriGas Propane, Partners, L.P. (3/31/95)
Inc., 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 AmeriGas Form 10-K 10.8
to Intercreditor and Agency Agreement dated Partners, L.P. (9/30/01)
as of April 19, 1995
10.24 General Security Agreement dated as of AmeriGas Form 10-Q 10.3
April 19, 1995 among AmeriGas Propane, Partners, L.P. (3/31/95)
L.P., Bank of America National Trust and
Savings Association and Mellon Bank, N.A.
10.24(a) First Amendment dated as of July 31, 2001 AmeriGas Form 10-K 10.10
to General Security Agreement dated as of Partners, L.P. (9/30/01)
April 19, 1995
10.24(b) Second Amendment dated as of October 14, AmeriGas Form 10-K 10.10(a)
2004 to General Security Agreement dated as Partners, L.P. (9/30/04)
of April 19, 1995
10.25 Subsidiary Security Agreement dated as of AmeriGas Form 10-Q 10.4
April 19, 1995 among AmeriGas Propane, Partners, L.P. (3/31/95)
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 AmeriGas Form 10-K 10.12
to Subsidiary Security Agreement dated as Partners, L.P. (9/30/01)
of April 19, 1995
10.25(b) Second Amendment dated as of October 14, AmeriGas Form 10-K 10.12(a)
2004 to Subsidiary Security Agreement dated Partners, L.P. (9/30/04)
as of April 19, 1995
|
40
INCORPORATION BY REFERENCE
-----------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
-----------------------------------------------------------------------------------------------------------
10.26 Restricted Subsidiary Guarantee dated as of AmeriGas Form 10-Q 10.5
April 19, 1995 by AmeriGas Propane, L.P. Partners, L.P. (3/31/95)
for the benefit of Bank of America National
Trust and Savings Association, as
Collateral Agent
10.27 Trademark License Agreement dated April AmeriGas Form 10-Q 10.6
19, 1995 among UGI Corporation, Partners, L.P. (3/31/95)
AmeriGas, Inc., AmeriGas Propane, Inc.,
AmeriGas Partners, L.P. and AmeriGas
Propane, L.P.
10.28 Trademark License Agreement, dated April AmeriGas Form 10-Q 10.7
19, 1995 among AmeriGas Propane, Inc., Partners, L.P. (3/31/95)
AmeriGas Partners, L.P. and AmeriGas
Propane, L.P.
10.29 Stock Purchase Agreement dated May 27, Petrolane Registration 10.16(a)
1989, as amended and restated July 31, Incorporated/ Statement No. 33-
1989, between Texas Eastern Corporation AmeriGas, 69450
and QFB Partners Inc.
10.30 Pledge Agreement dated September 1999 UGI Form 10-K 10.28
between Eastfield International Holdings, (9/30/99)
Inc. and Raiffeisen Zentralbank Osterreich
Aktiengesellschaft ("RZB")
10.31 Pledge Agreement dated September 1999 UGI Form 10-K 10.29
between EuroGas Holdings, Inc. and RZB (9/30/99)
10.32 Form of Guarantee Agreement dated UGI Form 10-K 10.30
September 1999 between UGI Corporation (9/30/99)
and RZB relating to loan amount of EURO
74 million
10.33 Form of Guarantee Agreement dated UGI Form 10-K 10.33
September 2000 between UGI Corporation (9/30/00)
and RZB relating to loan amount of EURO
14.9 million
10.34 Form of Guarantee Agreement dated UGI Form 10-K 10.34
September 2000 between UGI Corporation (9/30/00)
and RZB relating to loan amount of EURO
9 million
10.34(a) Amendments dated October 11, 2001 to UGI Form 10-K 10.34(a)
September 1999 Guarantee Agreements (9/30/02)
between UGI Corporation and RZB
|
41
INCORPORATION BY REFERENCE
-----------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
-----------------------------------------------------------------------------------------------------------
10.35** Description of Change of Control UGI Form 10-K 10.33
arrangements for Messrs. Greenberg, (9/30/99)
Cuzzolina, Hall, Knauss and Mendicino
*10.36** UGI Corporation 2004 Omnibus Equity
Compensation Plan UGI Employees
Nonqualified Stock Option Grant Letter
dated as of January 1, 2004
*10.36(a)** UGI Corporation 2004 Omnibus Equity
Compensation Plan UGI Utilities
Employees Nonqualified Stock Option
Grant Letter dated as of January 1, 2004
10.37** Description of Change of Control AmeriGas Form 10-K 10.31
arrangement for Mr. Bissell Partners, L.P. (9/30/99)
10.38** 2002 Non-Qualified Stock Option Plan UGI Form 10-Q 10.7
Amended and Restated as of April 29, 2003 (3/31/03)
10.39** 1992 Non-Qualified Stock Option Plan UGI Form 10-Q 10.6
Amended and Restated as of April 29, 2003 (3/31/03)
10.40 [Intentionally omitted]
10.41 Service Agreement for comprehensive UGI Form 10-K 10.41
delivery service (Rate CDS) dated February (9/30/00)
23, 1999 between UGI Utilities, Inc. and
Texas Eastern Transmission Corporation
10.42 Purchase Agreement dated January 30, AmeriGas Form 8-K 10.1
2001 and Amended and Restated on August Partners, L.P. (8/8/01)
7, 2001 by and among Columbia Energy
Group, Columbia Propane Corporation,
Columbia Propane, L.P., CP Holdings, Inc.,
AmeriGas Propane, L.P., AmeriGas
Partners, L.P., and AmeriGas Propane, Inc.
*10.43** UGI Corporation 2004 Omnibus Equity
Compensation Plan, Sub-Plan for French
Employees Stock Option Grant Letter dated
as of 2004
10.44 Agreement by Petrolane Incorporated and Petrolane Form 10-K 10.13
certain of its subsidiaries party thereto Incorporated (9/23/94)
("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
|
42
INCORPORATION BY REFERENCE
-----------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
-----------------------------------------------------------------------------------------------------------
10.45 Purchase Agreement by and among National Form 8-K 10.5
Columbia Propane, L.P., CP Holdings, Inc., Propane (4/19/99)
Columbia Propane Corporation, National Partners, L.P.
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 10.2
August 21, 2001 by and between Columbia Partners, L.P. (8/21/01)
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., AmeriGas Form 10-K 10.39
a Delaware limited partnership in favor of Partners, L.P. (9/30/01)
Columbia Propane Corporation dated July
19, 1999
10.48 Loan Agreement dated July 19, 1999, AmeriGas Form 10-K 10.40
between National Propane, L.P. and Partners, L.P. (9/30/01)
Columbia Propane Corporation
10.49 First Amendment dated August 21, 2001 to AmeriGas Form 10-K 10.41
Loan Agreement dated July 19, 1999 Partners, L.P. (9/30/01)
between National Propane, L.P. and
Columbia Propane Corporation
10.50 Columbia Energy Group Payment Guaranty AmeriGas Form 10-K 10.42
dated April 5, 1999 Partners, L.P. (9/30/01)
10.51 Keep Well Agreement by and between AmeriGas Form 10-K 10.46
AmeriGas Propane, L.P. and Columbia Partners, L.P. (9/30/01)
Propane Corporation dated August 21, 2001
10.52** AmeriGas Propane, Inc. 2000 Long-Term AmeriGas Form 10-Q 10.2
Incentive Plan on Behalf of AmeriGas Partners, L.P. (6/30/04)
Partners, L.P., as amended December 15,
2003.
10.53 Storage Transportation Service Agreement Utilities Form 10-K 10.25
(Rate Schedule SST) between Utilities and (9/30/02)
Columbia dated November 1, 1993, as
modified pursuant to orders of the Federal
Energy Regulatory Commission
10.54 Gas Service Delivery and Supply Utilities Form 10-K 10.32
Agreement between Utilities and UGI (9/30/04)
Energy Services, Inc. dated August 26,
2004
|
43
INCORPORATION BY REFERENCE
-----------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
-----------------------------------------------------------------------------------------------------------
10.55 No-Notice Transportation Service Utilities Form 10-K 10.27
Agreement (Rate Schedule CDS) between (9/30/02)
Utilities and 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 Utilities Form 10-K 10.28
Agreement (Rate Schedule CDS) between (9/30/02)
Utilities and 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 Utilities Form 10-K 10.29
(Rate Schedule FT-1) between Utilities and (9/30/02)
Texas Eastern Transmission dated June 15,
1999, as modified pursuant to various
orders of the Federal Energy Regulatory
Commission
10.58 Amendment No. 1 dated November 1, Utilities Form 10-K 10.26
2004, to the Service Agreement (Rate FSS) (9/30/04)
dated as of 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 P 61,060
(1993), order on rehearing, 64 FERC
P 61,365 (1993)
10.59 Firm Transportation Service Agreement Utilities Form 10-K 10.31
(Rate 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
10.60 Amendment No. 1 dated November 1, Utilities Form 10-K 10.30
2004, to the No-Notice Transportation (9/30/04)
Service Agreement (Rate Schedule CDS)
between Utilities and Texas Eastern
Transmission dated February 23, 1999, as
modified pursuant to various orders of the
Federal Energy Regulatory Commission
|
44
INCORPORATION BY REFERENCE
-----------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
-----------------------------------------------------------------------------------------------------------
10.61 Amendment No. 1 dated November 1, Utilities Form 10-K 10.33
2004, to the Firm Transportation Service (9/30/04)
Agreement (Rate Schedule FT-1) between
Utilities and Texas Eastern Transmission
dated June 15, 1999, as modified pursuant
to various orders of the Federal Energy
Regulatory Commission
10.62 Firm Transportation Service Agreement Utilities Form 10-K 10.34
(Rate Schedule FTS) between Utilities and (9/30/04)
Columbia Gas Transmission dated
November 1, 2004
10.63 Amendment Agreement dated June 18, UGI Form 10-Q 10.5
2004, relating to the Senior Facilities (6/30/04)
Agreement dated June 26, 2003, as
Amended and Restated, between AGZ
Holding, as Parent, Antargaz, the Senior
Lenders, (as defined therein) and Calyon, as
Mandated Lead Arranger, Facility Agent
and Security Agent.
10.64 Creditor Accession Agreement dated June UGI Form 10-Q 10.6
18, 2004, between UGI Bordeaux Holding, (6/30/04)
as the New Investor, and Calyon, as
Security Agent.
10.65 Letter of Undertakings dated June 18, 2004, UGI Form 10-Q 10.7
by UGI Bordeaux Holding to AGZ (6/30/04)
Holding, the Parent of Antargaz, and
Calyon, the Facility Agent, acting on behalf
of the Lenders, (as defined within the
Senior Facilities Agreement).
10.66 Tax Consolidation Agreement, dated June UGI Form 10-Q 10.8
18, 2004, entered into by UGI Bordeaux (6/30/04)
Holding and its Subsidiaries named therein.
10.67** AmeriGas Propane, Inc. Executive AmeriGas Form 10-K 10.4
Employee Severance Pay Plan, as amended Partners, L.P. (9/30/04)
December 6, 2004.
10.68 Senior Facilities Agreement dated June 26, UGI Form 10-Q 10.1
2003 as Amended and Restated July 2, (3/31/04)
2003, between AGZ Holding and Antargaz,
Credit Lyonnais, as Mandated Lead
Arranger, Facility Agent and Security
Agent, and the Financial Institutions named
therein.
|
45
INCORPORATION BY REFERENCE
------------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
------------------------------------------------------------------------------------------------------------
10.69 Form of Amendment Agreement dated UGI Form 10-Q 10.1(a)
January 15, 2004 to Senior Facilities (3/31/04)
Agreement, as Amended and Restated July
2, 2003.
10.70 Pledge of Financial Instruments Account UGI Form 10-Q 10.2
relating to Financial Instruments held by (3/31/04)
AGZ Holding in Antargaz, dated July 7,
2003, between AGZ Holding, as Pledgor,
and Credit Lyonnais, as Security Agent,
and the Senior Lenders.
10.71 Pledge of Financial Instruments Accounts UGI Form 10-Q 10.3
relating to Financial Instruments held by (3/31/04)
Antargaz in certain subsidiary companies,
dated July 7, 2003, between Antargaz, as
Pledgor, and Credit Lyonnais, as Security
Agent, and the Revolving Lenders.
10.72 Intercreditor Agreement, dated July 7, UGI Form 10-Q 10.4
2003, between AGZ Holding, Antargaz, (3/31/04)
AGZ Finance, the Senior Lenders (as
defined therein), the Investors (as defined
therein), and Credit Lyonnais, as Facility
Agent for the Senior Lenders and as
Security Agent.
10.73 Seller's Guarantee dated February 16, 2001 UGI Form 10-Q 10.5
among Elf Antar France, Elf Aquitaine and (3/31/04)
AGZ Holding.
*13 Pages 13 through 55 of the 2004 Annual
Report to Shareholders
14 Code of Ethics for principal executive, UGI Form 10-K 14
financial and accounting officers (9/30/03)
*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 fiscal year ended September
30, 2004 pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
46
INCORPORATION BY REFERENCE
-----------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
-----------------------------------------------------------------------------------------------------------
*31.2 Certification by the Chief Financial Officer
relating to the Registrant's Report on Form
10-K for the fiscal year ended September
30, 2004 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, 2004,
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.
47
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 7, 2004 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 7, 2004, 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
|
48
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below on December 7, 2004, 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
|
49
UGI CORPORATION AND SUBSIDIARIES
FINANCIAL INFORMATION
FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K
YEAR ENDED SEPTEMBER 30, 2004
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 December 6, 2004, listed in the following index, are included in UGI's
2004 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 7, 7A and 8, the 2004 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 Registered Public Accounting Firm
On Consolidated Financial Statements Exhibit 13 28
On Financial Statement Schedules F-4
Financial Statements:
Consolidated Balance Sheets, September 30,
2004 and 2003 Exhibit 13 30 to 31
For the years ended September 30, 2004, 2003 and 2002:
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, 2004 and 2003 Exhibit 13 53
Financial Statement Schedules:
For the years ended September 30, 2004, 2003 and 2002:
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., UGI HVAC
Enterprises, 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 REGISTERED PUBLIC ACCOUNTING FIRM
ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Stockholders
of UGI Corporation:
Our audits of the consolidated financial statements referred to in our report
dated December 6, 2004 appearing in the 2004 Annual Report to Shareholders of
UGI Corporation (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedules listed in Item 15(a)(2) of this Form
10-K. In our opinion, these financial statement schedules present fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 6, 2004
|
F-4
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
BALANCE SHEETS
(Millions of dollars)
September 30,
Restated
ASSETS 2004 2003
------ --------- ---------
Current assets:
Cash and cash equivalents $ 0.7 $ 0.6
Accounts and notes receivable 4.2 1.7
Deferred income taxes 0.2 0.2
Prepaid expenses and other current assets 0.4 0.5
--------- ---------
Total current assets 5.5 3.0
Investments in subsidiaries 956.1 618.2
Other assets 11.4 8.6
--------- ---------
Total assets $ 973.0 $ 629.8
========= =========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
-----------------------------------------------
Current liabilities:
Accounts and notes payable $ 10.2 $ 10.7
Accrued liabilities 5.9 7.7
--------- ---------
Total current liabilities 16.1 18.4
Noncurrent liabilities 122.8 112.7
Commitments and contingencies
Common stockholders' equity:
Common Stock, without par value (authorized - 150,000,000 shares;
issued - 57,576,497 and 49,798,097 shares, respectively) 762.6 511.3
Retained earnings 146.2 90.9
Accumulated other comprehensive income 22.6 4.7
--------- ---------
931.4 606.9
Less treasury stock, at cost (97.3) (108.2)
--------- ---------
Total common stockholders' equity 834.1 498.7
--------- ---------
Total liabilities and common stockholders' equity $ 973.0 $ 629.8
========= =========
|
Commitments and Contingencies:
In addition to the guarantees of FLAGA debt described in Note 4 to
Consolidated Financial Statements, at September 30, 2004, UGI Corporation had
agreed to indemnify the issuers of $26.7 of surety bonds issued on behalf of
certain UGI subsidiaries. UGI Corporation is authorized to guarantee up to $10.0
in supplier obligations on behalf of UGI Development Company, of which $5.3 of
such obligations were outstanding as of September 30, 2004. UGI Corporation is
also authorized to guarantee up to $265.0 of supplier obligations of UGI Energy
Services, Inc., of which $235.4 of such obligations were outstanding as of
September 30, 2004.
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,
----------------------------------------
2004 2003 2002
------- ------ ------
Revenues $ - $ - $ -
Costs and expenses:
Operating and administrative expenses 24.5 18.6 13.6
Other income, net (24.0) (17.6) (12.4)
------- ------ ------
0.5 1.0 1.2
------- ------ ------
Operating loss (0.5) (1.0) (1.2)
Interest expense on intercompany debt (2.2) (1.5) (1.3)
------- ------ ------
Loss before income taxes (2.7) (2.5) (2.5)
Income tax benefit (1.3) (2.4) (0.9)
------- ------ ------
Loss before equity in income
of unconsolidated subsidiaries (1.4) (0.1) (1.6)
Equity in income of unconsolidated
subsidiaries 113.0 99.0 77.1
------- ------ ------
Net income $ 111.6 $ 98.9 $ 75.5
======= ====== ======
Earnings per common share:
Basic $ 2.36 $ 2.34 $ 1.83
======= ====== ======
Diluted $ 2.31 $ 2.29 $ 1.80
======= ====== ======
Average common shares outstanding (millions):
Basic 47.308 42.220 41.325
======= ====== ======
Diluted 48.341 43.236 41.907
======= ====== ======
|
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,
---------------------------------------
2004 2003 2002
-------- ------- -------
NET CASH PROVIDED BY OPERATING
ACTIVITIES (a) $ 100.2 $ 97.2 $ 113.9
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in unconsolidated subsidiaries (300.2) (117.1) (101.5)
Net repayments to unconsolidated subsidiary - - 13.0
-------- ------- --------
Net cash used by investing activities (300.2) (117.1) (88.5)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends on Common Stock (56.3) (47.8) (44.8)
Issuance of intercompany long-term debt - 44.5 8.0
Issuance of Common Stock 257.0 23.7 11.0
Repurchases of Common Stock (0.6) (0.1) -
-------- ------- --------
Net cash provided (used) by financing activities 200.1 20.3 (25.8)
-------- ------- --------
Cash and cash equivalents increase (decrease) $ 0.1 $ 0.4 $ (0.4)
======== ======= ========
Cash and cash equivalents:
End of period $ 0.7 $ 0.6 $ 0.2
Beginning of period 0.6 0.2 0.6
-------- ------- --------
Increase (decrease) $ 0.1 $ 0.4 $ (0.4)
======== ======= ========
|
(a) Includes dividends received from unconsolidated subsidiaries of $99.0,
$94.0 and $111.7, respectively, for the years ended September 30, 2004,
2003 and 2002.
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, 2004
-----------------------------
Reserves deducted from assets in
the consolidated balance sheet:
Allowance for doubtful accounts $ 14.8 $ 18.7 $ (16.8) (1) $ 22.3
======= =======
$ 5.6 (2)
Other reserves:
Self-insured property and casualty
liability $ 48.4 $ 26.1 $ (17.3) (3) $ 57.8
======= =======
0.6 (4)
Insured property and casualty liability $ 0.6 $ 0.6
======= =======
Environmental, litigation and other $ 15.7 $ 5.7 $ (3.8) (3) $ 30.9
======= =======
$ 13.1 (2)
0.2 (4)
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 (4)
Other reserves:
Self-insured property and casualty
liability $ 42.7 $ 21.2 $ (15.1) (3) $ 48.4
======= =======
(0.4) (4)
Insured property and casualty liability $ 3.5 $ (2.8) $ (0.1) (4) $ 0.6
======= =======
Environmental, litigation and other $ 13.9 $ 6.0 $ (4.6) (3) $ 15.7
======= =======
0.4 (4)
|
S-4
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (continued)
(Millions of dollars)
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) (4) $ -
======= =======
Other reserves:
Self-insured property and casualty liability $ 37.4 $ 19.0 $ (15.6) (3) $ 42.7
======= =======
1.9 (4)
Insured property and casualty liability $ 1.5 $ - $ 2.0 (4) $ 3.5
======= =======
Environmental, litigation and other $ 11.7 $ 3.7 $ (2.6) (3) $ 13.9
======= =======
1.1 (4)
|
(1) Uncollectible accounts written off, net of recoveries.
(2) Acquisition
(3) Payments, net.
(4) Other adjustments.
S-5
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
10.2 UGI Corporation 2004 Omnibus Equity Compensation Plan Directors
Stock Unit Grant Letter dated as of January 8, 2004
10.3 UGI Corporation 2004 Omnibus Equity Compensation Plan Directors
Nonqualified Stock Option Grant Letter dated as of January 8, 2004
10.4 UGI Corporation 2004 Omnibus Equity Compensation Plan Utilities
Employees Performance Unit Grant Letter dated as of January 1, 2004
10.5 UGI Corporation 2004 Omnibus Equity Compensation Plan UGI
Employees Stock Unit Grant Letter dated as of January 1, 2004
10.7 UGI Corporation 2004 Omnibus Equity Compensation Plan UGI
Employees Performance Unit Grant Letter dated as of January 1, 2004
10.9 UGI Corporation 2004 Omnibus Equity Compensation Plan AmeriGas
Employees Nonqualified Stock Option Grant Letter dated as of January
1, 2004
10.12 UGI Corporation Senior Executive Employee Severance Pay Plan
as amended December 7, 2004
10.17 UGI Corporation 2004 Omnibus Equity Compensation Plan, as amended
December 7, 2004
10.36 UGI Corporation 2004 Omnibus Equity Compensation Plan UGI Employees
Nonqualified Stock Option Grant Letter dated as of January 1, 2004
10.36(a) UGI Corporation 2004 Omnibus Equity Compensation Plan UGI Utilities
Employees Nonqualified Stock Option Grant Letter dated as of
January 1, 2004
10.43 UGI Corporation 2004 Omnibus Equity Compensation Plan, Sub-Plan for
French Employees Stock Option Grant Letter dated as of January 1, 2004
|
50
EXHIBIT INDEX (CONT.)
EXHIBIT NO. DESCRIPTION
----------- -----------
13 Pages 13 through 55 of the 2004 Annual Report to Shareholders
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
|
51
EXHIBIT 10.2
7/23/2004
Non-Employee Directors
UGI CORPORATION
2004 OMNIBUS EQUITY COMPENSATION PLAN
STOCK UNIT GRANT LETTER
This STOCK UNIT GRANT LETTER is dated as of January 8, 2004 (the "Date of
Grant") and delivered by UGI Corporation ("UGI"), to _________________ (the
"Participant").
RECITALS
The UGI Corporation 2004 Omnibus Equity Compensation Plan (the "Plan")
provides for the grant of stock units with respect to shares of common stock of
UGI ("Shares"). The Board of Directors of UGI (the "Board") has decided to make
a stock unit grant to the Participant.
NOW, THEREFORE, the parties to this Grant Letter, intending to be legally
bound hereby, agree as follows:
1. Grant of Stock Units.
(a) Subject to the terms and conditions set forth in this Grant Letter,
the Board hereby awards the Participant an award of 1,275 Stock Units (as
defined below). The Stock Units are granted with Dividend Equivalents (as
defined below).
(b) UGI shall keep records in an Account (as defined below) to reflect the
number of Stock Units and Dividend Equivalents credited to the Participant.
Fractional Stock Units shall accumulate in the Participant's Account and shall
be added to other fractional Stock Units to create whole Stock Units.
2. Dividend Equivalents with Respect to Stock Units.
(a) Crediting of Dividend Equivalents. From the Date of Grant until the
Participant's Account has been fully distributed, on each payment date for a
dividend paid by UGI on its Shares, UGI shall credit to the Participant's
Account an amount equal to the Dividend Equivalent associated with the Stock
Units credited to the Participant on the record date for the dividend.
(b) Conversion to Stock Units. On the last day of each Plan Year (as
defined below), the amount of the Dividend Equivalents credited to the
Participant's Account during that Plan Year shall be converted to a number of
Stock Units, based on the Unit Value (as defined below) on the last day of the
Plan Year. In the event of a Change of Control (as defined in the Plan) or in
the event the Participant dies or Separates from Service (as defined below)
prior to the last day of the Plan Year, as soon as practicable following such
event, and in no event later than the date on which Stock Units are redeemed in
accordance with Section 3, UGI shall convert the amount of Dividend Equivalents
previously credited to the Participant's Account during the Plan Year to a
number of Stock Units based on the Unit Value on the date of such Change of
Control, death or Separation from Service.
3. Events Requiring Redemption of Stock Units.
(a) Redemption. UGI shall redeem Stock Units credited to the Participant's
Account at the times and in the manner prescribed by this Section 3. Except as
described in subsection (d) below, redemptions shall be made by issuing to the
Participant a number of Shares equal to the number of Stock Units being
redeemed; provided, however, that any fractional Stock Units credited to a
Participant's Account shall be paid in cash in an amount equal to the Unit Value
of such fractional Stock Unit at the redemption date.
(b) Separation from Service or Death. In the event the Participant
Separates from Service or dies, UGI shall redeem all the Stock Units then
credited to the Participant's Account as soon as practicable following the
Participant's Separation from Service or death. In the event of death, the
redemption amount shall be paid to the Participant's estate.
(c) Elections. The Participant may elect to defer receipt of the
redemption amount payable pursuant to subsection (b) upon Separation from
Service, until the Participant attains a specific age, not to exceed the age of
the Participant in January of the Plan Year following his or her attainment of
age 72. In addition, the Participant may elect to receive such payment in (i) a
single distribution or (ii) annual or quarterly installments over a period not
to exceed 20 years. Both such elections must be made at least 13 months before
the Participant's Separation from Service, or at such earlier date as UGI shall
require.
(d) Change of Control. Unless otherwise provided by the Board, in the
event of a Change of Control, UGI shall redeem all the Stock Units then credited
to the Participant's Account. Such redemption amount shall be paid in cash. The
amount paid shall equal the product of the number of Stock Units being redeemed
multiplied by the Unit Value at the date of the Change of Control. The
Participant may elect to defer receipt of such payment until he or she attains a
specified age, not to exceed the age of the Participant in January of the Plan
Year following his or her attainment of age 72. In addition, the Participant may
elect to receive such payment in (i) a single distribution or (ii) annual or
quarterly installments over a period not to exceed 20 years. Both such elections
must be made at least 13 months before the Change of Control, or at such earlier
date as UGI shall require.
(e) Installments. Dividend Equivalents will be credited to the
Participant's Account in accordance with Section 2 until the full amount of the
Participant's Account has been distributed. Each installment payment shall be
calculated by dividing the Participant's total Account balance as of such
payment date by the number of payments remaining in the installment period.
(f) Acceleration. The Board may at any time accelerate the redemption of
outstanding Stock Units under such circumstances as the Board deems appropriate.
4. Definitions. For purposes of this Grant Letter, the following terms will have
the meanings set forth below:
2
(a) "Account" means UGI's bookkeeping account established pursuant to
Section 1, which reflects the number of Stock Units and the amount of Dividend
Equivalents standing to the credit of the Participant.
(b) "Dividend Equivalent" means an amount determined by multiplying the
number of Shares subject to Stock Units by the per-share cash dividend, or the
per-share fair market value of any dividend in consideration other than cash,
paid by UGI on its common stock.
(c) "Plan Year" means the calendar year.
(d) "Separates from Service" means the Participant's termination of
service as a non-employee director and as an employee of UGI for any reason
other than death.
(e) "Stock Unit" means the right of the Participant to receive a Share of
UGI common stock, or an amount based on the value of a Share of UGI common
stock, subject to the terms and conditions of this Grant Letter and the Plan.
(f) "Unit Value" means, at any time, the value of each Stock Unit, which
value shall be equal to the Fair Market Value (as defined in the Plan) of a
Share on such date.
5. Taxes. All obligations of UGI under this Grant Letter shall be subject to the
rights of UGI as set forth in the Plan to withhold amounts required to be
withheld for any taxes, if applicable.
6. Conditions. The obligation of UGI to deliver Shares shall also be subject to
the condition that if at any time the Board shall determine in its discretion
that the listing, registration or qualification of the Shares upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the issue of Shares, the Shares may not be
issued in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Board. The issuance of Shares to the Participant pursuant
to this Grant Letter is subject to any applicable taxes and other laws or
regulations of the United States or of any state having jurisdiction thereof.
7. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan and
the Terms and Conditions established by the Committee with respect to the Plan,
both of which are incorporated herein by reference, and in all respects shall be
interpreted in accordance with the Plan. The grant and payment of the Stock
Units are subject to interpretations, regulations and determinations concerning
the Plan established from time to time by the Board in accordance with the
provisions of the Plan, including, but not limited to, provisions pertaining to
(i) the registration, qualification or listing of the Shares issued under the
Plan, (ii) changes in capitalization of UGI and (iii) other requirements of
applicable law. The Board shall have the authority to interpret and construe
this Grant Letter pursuant to the terms of the Plan, and its decisions shall be
conclusive as to any questions arising hereunder.
8. No Shareholder Rights. Neither the Participant, nor any person entitled to
receive payment in the event of the Participant's death, shall have any of the
rights and privileges of a
3
shareholder with respect to Shares, until certificates for Shares have been
issued upon payment of Stock Units. The Participant shall not have any interest
in any fund or specific assets of UGI by reason of this award or the Stock Unit
account established for the Participant.
9. Assignment and Transfers. The rights and interests of the Participant under
this Grant Letter may not be sold, assigned, encumbered or otherwise transferred
except, in the event of the death of the Participant, by will or by the laws of
descent and distribution. If the Participant dies, any payments to be made under
this Grant Letter after the Participant's death shall be paid to the
Participant's estate. The rights and protections of UGI hereunder shall extend
to any successors or assigns of UGI and to UGI's parents, subsidiaries, and
affiliates.
10. Applicable Law. The validity, construction, interpretation and effect of
this instrument shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania, without giving effect to the conflicts of
laws provisions thereof.
11. Notice. Any notice to UGI provided for in this instrument shall be addressed
to UGI in care of the Corporate Secretary at UGI's headquarters, and any notice
to the Participant shall be addressed to such Participant at the current address
shown on the records of UGI, or to such other address as the Participant may
designate to UGI in writing. Any notice shall be delivered by hand, sent by
telecopy or enclosed in a properly sealed envelope addressed as stated above,
registered and deposited, postage prepaid, in a post office regularly maintained
by the United States Postal Service.
IN WITNESS WHEREOF, the parties have executed this Stock Unit Grant Letter
as of the Date of Grant.
Attest: UGI Corporation
______________________________ By:____________________________________
Corporate Secretary Robert H. Knauss
Vice President and General Counsel
|
I hereby acknowledge receipt of the Plan and the Terms and Conditions
incorporated herein. I accept the Performance Units described in this Grant
Letter, and I agree to be bound by the terms of the Plan, including the Terms
and Conditions, and this Grant Letter. I hereby further agree that all the
decisions and determinations of the Committee shall be final and binding on me
and any other person having or claiming a right under this Grant.
Participant
4
EXHIBIT 10.3
7/23/2004
Non-Employee Directors
UGI CORPORATION
2004 OMNIBUS EQUITY COMPENSATION PLAN
NONQUALIFIED STOCK OPTION GRANT LETTER
This STOCK OPTION GRANT, dated as of January 8, 2004 (the "Date of Grant"), is
delivered by UGI Corporation ("UGI") to _____________ (the "Participant").
RECITALS
The UGI Corporation 2004 Omnibus Equity Compensation Plan (the "Plan")
provides for the grant of options to purchase shares of common stock of UGI. The
Board of Directors of UGI (the "Board") has decided to make a stock option grant
to the Participant.
NOW, THEREFORE, the parties to this Grant Letter, intending to be legally
bound hereby, agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth in this Grant
Letter and in the Plan, the Board hereby grants to the Participant a
nonqualified stock option (the "Option") to purchase 4,250 shares of common
stock of UGI ("Shares") at an exercise price of $34.01 per Share. The Option
shall be fully and immediately exercisable on the Date of Grant.
2. Term of Option.
(a) The Option shall have a term of ten years from the Date of Grant and
shall terminate at the expiration of that period (5:00 p.m. EST on January 7,
2014), unless it is terminated at an earlier date pursuant to the provisions of
this Grant Letter or the Plan.
(b) The Option, to the extent that it has not previously been exercised,
will terminate when the Participant Separates from Service (as defined below)
with the Company (as defined below). However, if the Participant Separates from
Service by reason of Retirement (as defined below), Disability (as defined
below), or death, the Option will thereafter be exercisable pursuant to the
following:
(i) Retirement. If the Participant Separates from Service on account
of Retirement, the Option held by such Participant may be exercised at any
time prior to the earlier of the expiration date of the Option or the
expiration of the 36-month period following the Participant's Retirement.
(ii) Disability. If the Participant is determined to be Disabled by
the Board, the Option may be exercised at any time prior to the earlier of
the expiration date of the Option or the expiration of the 36-month period
following the Participant's Separation from Service on account of
Disability.
(iii) Death. In the event of the death of the Participant while
serving as a non-employee director or employee of the Company, the Option
may be exercised by the personal representative of the Participant's
estate, or the personal representative under applicable law if the
Participant dies intestate, at any time prior to the earlier of the
expiration date of the Option or the expiration of the 12-month period
following the Participant's death.
(c) In no event may the Option be exercised after the date that is
immediately before the tenth anniversary of the Date of Grant.
3. Exercise Procedures.
(a) Subject to the provisions of Paragraph 2 above, the Participant may
exercise part or all of the exercisable Option by giving UGI irrevocable written
notice of intent to exercise on a form provided by UGI and delivered in the
manner provided in Section 11 below. Payment of the exercise price must be made
prior to issuance of the Shares. The Participant shall pay the exercise price
(i) in cash, (ii) by delivering Shares (or by attestation to ownership of
Shares), which shall be valued at their fair market value on the date of
delivery, which shall have been held by the Participant for at least six months,
and which shall have a fair market value on the date of exercise equal to the
exercise price, (iii) by payment through a broker in accordance with procedures
permitted by Regulation T of the Federal Reserve Board or (iv) by such other
method as the Board may approve.
(b) The obligation of UGI to deliver Shares upon exercise of the Option
shall be subject to all applicable laws, rules, and regulations and such
approvals by governmental agencies as may be deemed appropriate by the Board,
including such actions as UGI's counsel shall deem necessary or appropriate to
comply with relevant securities laws and regulations. UGI may require that the
Participant (or other person exercising the Option after the Participant's
death) represent that the Participant is purchasing Shares for the Participant's
own account and not with a view to or for sale in connection with any
distribution of the Shares, or such other representation as UGI deems
appropriate.
(c) All obligations of UGI under this Grant Letter shall be subject to the
rights of the Company as set forth in the Plan to withhold amounts required to
be withheld for any taxes, if applicable.
4. Definitions. Whenever used in this Grant Letter, the following terms will
have the meanings set forth below:
(a) "Company" means UGI and its Subsidiaries (as defined in the Plan).
(b) "Disability" means the Participant's physical or mental disability, as
determined by the Board in its sole discretion.
(c) "Retirement" means the Participant's Separation from Service after (1)
attaining age 65 with five or more years of service with the Company or (2) ten
or more years of service with the Company.
-2-
(d) "Separates from Service" or "Separation from Service" means the
Participant's termination of service as a non-employee director and as an
employee of the Company for any reason other than death.
5. Change of Control. The provisions of the Plan applicable to a Change of
Control shall apply to the Option, and, in the event of a Change of Control, the
Board may take such actions as it deems appropriate pursuant to the Plan.
6. Restrictions on Exercise. Only the Participant may exercise the Option during
the Participant's lifetime and, after the Participant's death, the Option shall
be exercisable by the Participant's estate, to the extent that the Option is
exercisable pursuant to this Grant Letter.
7. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan and
the Terms and Conditions established by the Committee with respect to the Plan,
both of which are incorporated herein by reference, and in all respects shall be
interpreted in accordance with the Plan. The grant and exercise of the Option
are subject to interpretations, regulations and determinations concerning the
Plan established from time to time by the Board in accordance with the
provisions of the Plan, including, but not limited to, provisions pertaining to
(i) the registration, qualification or listing of the Shares, (ii) changes in
capitalization of the Company and (iii) other requirements of applicable law.
The Board shall have the authority to interpret and construe the Option pursuant
to the terms of the Plan, and its decisions shall be conclusive as to any
questions arising hereunder.
8. No Shareholder Rights. Neither the Participant, nor any person entitled to
exercise the Participant's rights in the event of the Participant's death, shall
have any of the rights and privileges of a shareholder with respect to the
Shares subject to the Option, until certificates for Shares have been issued
upon the exercise of the Option.
9. Assignment and Transfers. Except as the Board may otherwise permit pursuant
to the Plan, the rights and interests of the Participant under this Grant Letter
may not be sold, assigned, encumbered or otherwise transferred except, in the
event of the death of the Participant, by will or by the laws of descent and
distribution. The rights and protections of the Company hereunder shall extend
to any successors or assigns of the Company and to the Company's parents,
subsidiaries, and affiliates.
10. Applicable Law. The validity, construction, interpretation and effect of
this instrument shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania, without giving effect to the conflicts of
laws provisions thereof.
11. Notice. Any notice to UGI provided for in this instrument shall be addressed
to UGI in care of the Corporate Secretary at UGI's headquarters, and any notice
to the Participant shall be addressed to such Participant at the current address
shown on the records of the Company, or to such other address as the Participant
may designate to the Company in writing. Any notice shall be delivered by hand,
sent by telecopy or enclosed in a properly sealed envelope addressed as stated
above, registered and deposited, postage prepaid, in a post office regularly
maintained by the United States Postal Service.
-3-
IN WITNESS WHEREOF, UGI has caused its duly authorized officers to execute
and attest this Grant Letter, and the Participant has executed this Grant
Letter, effective as of the Date of Grant.
UGI Corporation
Attest
______________________________ By:_____________________________________
Corporate Secretary Robert H. Knauss
Vice President and General Counsel
|
I hereby acknowledge receipt of the Plan and the Terms and Conditions
incorporated herein. I accept the Option described in this Grant Letter, and I
agree to be bound by the terms of the Plan, including the Terms and Conditions,
and this Grant Letter. I hereby further agree that all the decisions and
determinations of the Board shall be final and binding on me and any other
person having or claiming a right under this Grant.
Participant
-4-
EXHIBIT 10.4
7/27/2004
Utilities Employees
UGI CORPORATION
2004 OMNIBUS EQUITY COMPENSATION PLAN
PERFORMANCE UNIT GRANT LETTER
This PERFORMANCE UNIT GRANT, dated as of January 1, 2004 (the "Date of Grant"),
is delivered by UGI Corporation ("UGI") to _____________ (the "Participant").
RECITALS
The UGI Corporation 2004 Omnibus Equity Compensation Plan (the "Plan")
provides for the grant of performance units ("Performance Units") with respect
to shares of common stock of UGI ("Shares"). The Compensation and Management
Development Committee of the Board of Directors of UGI (the "Committee") has
decided to grant Performance Units to the Participant.
NOW, THEREFORE, the parties to this Grant Letter, intending to be legally
bound hereby, agree as follows:
1. Grant of Performance Units. Subject to the terms and conditions set forth in
this Grant Letter and in the Plan, the Committee hereby grants to the
Participant __________ Performance Units. The number of Performance Units set
forth above is the target award of Performance Units. The Performance Units are
contingently awarded and will be earned and payable if and to the extent that
the performance goals and other conditions of the Grant Letter are met. The
Performance Units are granted with Dividend Equivalents (as defined in Section
9).
2. Performance Goals.
(a) The Participant shall earn the right to payment of the Performance
Units if the performance goals described in subsection (b) below are met for the
measurement period, and if the Participant continues to be employed by, or
provide service to, the Company (as defined in Section 9) through December 31,
2006. The measurement period is the period beginning January 1, 2004 and ending
December 31, 2006.
(b) The target award level of Performance Units and Dividend Equivalents
will be payable if UGI's Total Shareholder Return (TSR) equals the median TSR of
a peer group for the measurement period. The peer group is the group of
companies that comprises the S&P Utilities Index during the measurement period.
The actual amount of the award of Performance Units may be higher or lower than
the target award, or even zero, based on UGI's TSR percentile rank relative to
the companies in the S&P Utilities Index, as follows:
UGI's TSR Rank (Percentile) Percentage of Target Award Earned
--------------------------- ---------------------------------
Highest 200%
90th 175%
75th 150%
60th 125%
50th 100%
40th 50%
less than 40th 0%
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The target award percentage earned will be interpolated between each of the
measuring points.
(c) TSR shall be calculated by UGI using the comparative returns
methodology used by Bloomberg L.P. or its successor at the time of the
calculation. The share price used for determining TSR at the beginning and the
end of the measurement period will be the average price for the 90-day period
preceding the beginning of the measurement period (i.e., the 90-day period
ending on December 31, 2003) and the 90-day period ending on the last day of the
measurement period (i.e., the 90-day period ending on December 31, 2006).
(d) The target award is the number of Performance Units set forth in
Section 1 above, which is the amount designated for 100% (50th TSR rank)
performance. The Participant can earn up to 200% of the target award if UGI's
TSR rank exceeds the 50th TSR rank, according to the foregoing schedule.
(e) At the end of the measurement period, the Committee will determine
whether and to what extent the performance goals have been met and the amount to
be paid with respect to the Performance Units. Except as described in Section 3
below, the Participant must be employed by, or providing service to, the Company
on December 31, 2006 in order for the Participant to receive payment with
respect to the Performance Units.
3. Termination of Employment or Service.
(a) Except as described below, if the Participant's employment or service
with the Company terminates on or before December 31, 2006, the Performance
Units and all Dividend Equivalents credited under this Grant Letter will be
forfeited.
(b) If the Participant terminates employment or service on account of
Retirement (as defined in Section 9), Disability (as defined in Section 9) or
death, the Participant will earn a pro-rata portion of the Participant's
outstanding Performance Units and Dividend Equivalents, if the performance goals
and the requirements of this Grant Letter are met. The prorated portion will be
determined as the amount that would otherwise be paid after the end of the
measurement period, based on achievement of the performance goals, multiplied by
a fraction, the numerator of which is the number of calendar years during the
measurement period in which the Participant has been employed by, or provided
service to, the Company and the denominator of which is three. For purposes of
the proration calculation, the calendar year in which the Participant's
termination of employment or service on account of Retirement, Disability, or
death occurs will be counted as a full year.
2
(c) In the event of termination of employment or service on account of
Retirement, Disability or death, the prorated amount shall be paid after the end
of the measurement period, or at an earlier date determined by the Committee.
4. Coordination with Severance Plan. Notwithstanding anything in this Grant
Letter to the contrary, if the Participant receives severance benefits under a
Severance Plan (as defined in Section 9) and the terms of such benefits require
that severance compensation payable under the Severance Plan be reduced by
benefits payable under this Plan, any amount payable to the Participant with
respect to Performance Units and Dividend Equivalents after the Participant's
termination of employment or service shall be reduced by the amount of severance
compensation paid to the Participant under the Severance Plan, as required by,
and according to the terms of, the Severance Plan.
5. Payment with Respect to Performance Units. If the Committee determines that
the conditions to payment of the Performance Units have been met, the Company
shall pay to the Participant, after the end of the measurement period, (i)
Shares or cash, or a combination of the two, as the Committee determines, equal
to the amount to be paid according to achievement of the performance goals, up
to the target award specified in Section 1 above, and (ii) cash in an amount
equal to the Fair Market Value (as defined in the Plan) of the Shares with
respect to the amount to be paid in excess of the target award.
6. Dividend Equivalents with Respect to Performance Units.
(a) Dividend Equivalents shall accrue with respect to Performance Units
and shall be payable subject to the same performance goals and terms as the
Performance Units to which they relate. Dividend Equivalents shall be credited
with respect to the target award of Performance Units from the Date of Grant
until the payment date. If the underlying Performance Units are forfeited, all
related Dividend Equivalents shall also be forfeited.
(b) While the Performance Units are outstanding, the Company will keep
records in a bookkeeping account for the Participant. On each payment date for a
dividend paid by UGI on its common stock, the Company shall credit to the
Participant's account an amount equal to the Dividend Equivalents associated
with the target award of Performance Units held by the Participant on the record
date for the dividend. No interest will be credited to any such account.
(c) The target amount of Dividend Equivalents (100% of the Dividend
Equivalents credited to the Participant's account) will be earned if UGI's TSR
rank is at the 50th TSR rank for the measurement period. The Participant can
earn up to 200% of the target amount of Dividend Equivalents if UGI's TSR rank
exceeds the 50th TSR rank, according to the schedule in Section 2 above. Except
as described in Section 3(b) above, if the Participant's employment or service
with the Company terminates on or before December 31, 2006, all Dividend
Equivalents will be forfeited.
(d) Dividend Equivalents will be paid in cash at the same time as the
underlying Performance Units are paid, after the Committee determines that the
conditions to payment have been met. Notwithstanding anything in this Grant
Letter to the contrary, the Participant may not
3
accrue Dividend Equivalents in excess of $1,000,000 during any calendar year
under all grants under the Plan.
7. Withholding. The Participant shall be required to pay to the Company, or make
other arrangements satisfactory to the Company to provide for the payment of,
any federal, state, local or other taxes that the Company is required to
withhold with respect to the payments under this Grant Letter.
8. Change of Control. The provisions of the Plan applicable to a Change of
Control shall apply to the Performance Units, and, in the event of a Change of
Control, the Committee may take such actions as it deems appropriate pursuant to
the Plan. For Participants who are employees of UGI Utilities, Inc.
("Utilities") or a subsidiary of Utilities, the term "Change of Control" shall
mean (i) a Change of Control of UGI as defined in the Plan, or (ii) one of the
events set forth on Exhibit A with respect to Utilities.
9. Definitions. For purposes of this Grant Letter, the following terms will have
the meanings set forth below:
(a) "Company" means UGI and its Subsidiaries (as defined in the Plan).
(b) "Disability" means a long-term disability as defined in the Company's
long-term disability plan applicable to the Participant.
(c) "Dividend Equivalent" means an amount determined by multiplying the
number of shares of UGI common stock subject to the target award of Performance
Units by the per-share cash dividend, or the per-share fair market value of any
dividend in consideration other than cash, paid by UGI on its common stock.
(d) "Employed by, or provide service to, the Company" shall mean
employment or service as an employee or director of the Company.
(e) "Performance Unit" means a hypothetical unit that represents the value
of one share of UGI common stock.
(f) "Retirement" means the Participant's retirement under the Retirement
Income Plan for Employees of UGI Utilities, Inc., if the Participant is covered
by that Retirement Income Plan. "Retirement" for other Company employees means
termination of employment after attaining age 55 with ten or more years of
service with the Company.
(g) "Severance Plan" means any severance plan maintained by the Company
that is applicable to the Participant.
10. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan
and the Terms and Conditions established by the Committee with respect to the
Plan, both of which are incorporated herein by reference, and in all respects
shall be interpreted in accordance with the Plan and the Terms and Conditions.
The grant and payment of Performance Units and Dividend Equivalents are subject
to interpretations, regulations and determinations concerning the Plan
established from time to time by the Committee in accordance with the provisions
of the Plan,
4
including, but not limited to, provisions pertaining to (i) the registration,
qualification or listing of the Shares, (ii) changes in capitalization of the
Company and (iii) other requirements of applicable law. The Committee shall have
the authority to interpret and construe the grant pursuant to the terms of the
Plan, and its decisions shall be conclusive as to any questions arising
hereunder.
11. No Employment or Other Rights. The grant of Performance Units shall not
confer upon the Participant any right to be retained by or in the employ or
service of the Company and shall not interfere in any way with the right of the
Company to terminate the Participant's employment or service at any time. The
right of the Company to terminate at will the Participant's employment or
service at any time for any reason is specifically reserved.
12. No Shareholder Rights. Neither the Participant, nor any person entitled to
exercise the Participant's rights in the event of the Participant's death, shall
have any of the rights and privileges of a shareholder with respect to the
Shares related to the Performance Units, unless and until certificates for
Shares have been issued to the Participant or successor.
13. Assignment and Transfers. The rights and interests of the Participant under
this Grant Letter may not be sold, assigned, encumbered or otherwise transferred
except, in the event of the death of the Participant, by will or by the laws of
descent and distribution. If the Participant dies, any payments to be made under
this Grant Letter after the Participant's death shall be paid to the
Participant's estate. The rights and protections of the Company hereunder shall
extend to any successors or assigns of the Company and to the Company's parents,
subsidiaries, and affiliates.
14. Applicable Law. The validity, construction, interpretation and effect of
this instrument shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania, without giving effect to the conflicts of
laws provisions thereof.
5
15. Notice. Any notice to UGI provided for in this instrument shall be addressed
to UGI in care of the Corporate Secretary at UGI's headquarters, and any notice
to the Participant shall be addressed to such Participant at the current address
shown on the payroll of the Company, or to such other address as the Participant
may designate to the Company in writing. Any notice shall be delivered by hand,
sent by telecopy or enclosed in a properly sealed envelope addressed as stated
above, registered and deposited, postage prepaid, in a post office regularly
maintained by the United States Postal Service.
IN WITNESS WHEREOF, UGI has caused its duly authorized officers to execute
and attest this Grant Letter, and the Participant has executed this Grant
Letter, effective as of the Date of Grant.
UGI Corporation
Attest
_________________________________ By:_______________________________________
Corporate Secretary Robert H. Knauss
Vice President and General Counsel
|
I hereby acknowledge receipt of the Plan and the Terms and Conditions
incorporated herein. I accept the Performance Units described in this Grant
Letter, and I agree to be bound by the terms of the Plan, including the Terms
and Conditions, and this Grant Letter. I hereby further agree that all the
decisions and determinations of the Committee shall be final and binding on me
and any other person having or claiming a right under this Grant.
Participant
6
EXHIBIT A
Change of Control with Respect to Utilities
For Participants who are employees of Utilities, or a subsidiary of Utilities,
the term "Change of Control" shall include the events set forth in this Exhibit
A with respect to Utilities, and the defined terms set forth used in this
Exhibit A, if not defined in the Plan, shall have the following meanings:
1. "Change of Control" shall include any of the following events:
(A) UGI and the UGI Subsidiaries fail to own more than fifty percent
(50%) of the then outstanding shares of common stock of Utilities or more than
fifty percent (50%) of the combined voting power of the then outstanding voting
securities of Utilities entitled to vote generally in the election of directors;
or
(B) Completion by Utilities of a reorganization, merger or
consolidation (a "Business Combination"), in each case, with respect to which
all or substantially all of the individuals and entities who were the respective
Beneficial Owners of Utilities' outstanding common stock and voting securities
immediately prior to such Business Combination do not, following such Business
Combination, Beneficially Own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination in substantially the same proportion as
their ownership immediately prior to such Business Combination of Utilities'
outstanding common stock and voting securities, as the case may be; or
(C) Completion of a complete liquidation or dissolution of the
Utilities or sale or other disposition of all or substantially all of the assets
of Utilities other than to a corporation with respect to which, following such
sale or disposition, more than 50% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of the
individuals and entities who were the Beneficial Owners, respectively, of
Utilities' outstanding common stock and voting securities immediately prior to
such sale or disposition in substantially the same proportion as their ownership
of Utilities' outstanding common stock and voting securities, as the case may
be, immediately prior to such sale or disposition.
2. "Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
3. A Person shall be deemed the "Beneficial Owner" of any securities: (i) that
such Person or any of such Person's Affiliates or Associates, directly or
indirectly, has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or otherwise;
provided, however, that a person shall not be deemed the "Beneficial Owner" of
securities tendered pursuant to a
A-1
tender or exchange offer made by such Person or any of such person's Affiliates
or Associates until such tendered securities are accepted for payment, purchase
or exchange; (ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), including without limitation
pursuant to any agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of any security under this clause (ii) as a result of an oral or written
agreement, arrangement or understanding to vote such security if such agreement,
arrangement or understanding (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) that are beneficially owned, directly or indirectly, by any other Person
(or any Affiliate or Associate thereof) with which such Person (or any of such
Person's Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy as described in the proviso to
clause (ii) above) or disposing of any securities; provided, however, that
nothing in this Section 1(c) shall cause a Person engaged in business as an
underwriter of securities to be the "Beneficial Owner" of any securities
acquired through such Person's participation in good faith in a firm commitment
underwriting until the expiration of forty (40) days after the date of such
acquisition.
4. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
5. "Person" shall mean an individual or a corporation, partnership, trust,
unincorporated organization, association, or other entity.
6. "UGI Subsidiary" shall mean any corporation in which UGI directly or
indirectly, owns at least a fifty percent (50%) interest or an unincorporated
entity of which UGI, as applicable, directly or indirectly, owns at least fifty
percent (50%) of the profits or capital interests.
A-2
EXHIBIT 10.5
7/2/2004
UGI Employees
UGI CORPORATION
2004 OMNIBUS EQUITY COMPENSATION PLAN
STOCK UNIT GRANT
This STOCK UNIT GRANT, dated as of ___________, 2004 (the "Date of Grant"), is
delivered by UGI Corporation ("UGI") to _____________ (the "Participant").
RECITALS
The UGI Corporation 2004 Omnibus Equity Compensation Plan (the "Plan")
provides for the grant of stock units ("Stock Units") with respect to shares of
common stock of UGI ("Shares"). The Compensation and Management Development
Committee of the Board of Directors of UGI (the "Committee") has decided to
grant Stock Units to the Participant.
NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound hereby, agree as follows:
1. Grant of Stock Units. Subject to the terms and conditions set forth in this
Agreement and in the Plan, UGI hereby grants to the Participant __________ Stock
Units. The Stock Units are contingently awarded and will be earned and payable
if and to the extent that the conditions of this Agreement are met. The Stock
Units are granted with Dividend Equivalents (as defined in Section 9).
2. Vesting. The Participant shall earn the right to payment of the Stock Units
if the Participant is employed by, or providing service to, the Company (as
defined below) on the applicable vesting date:
Vesting Date Vested Stock Units
------------ ------------------
_________, 2005 [___%]
_________, 2006 [___%]
_________, 2007 [___%]
|
If the foregoing schedule would produce fractional Shares, the number of Shares
for which the Stock Units vest shall be rounded down to the nearest whole Share.
3. Termination of Employment or Service.
(a) Except as described below, if the Participant's employment or service
with the Company terminates before the Stock Units are fully vested, the
unvested Stock Units, and all related Dividend Equivalents, will be forfeited.
(b) If the Participant ceases to be employed by, or provide service to,
the Company by reason of (i) Retirement (as defined below), (iii) Disability (as
defined below), or (iv) death, the Participant's unvested Stock Units will
become fully vested as of the termination date.
4. Payment with Respect to Stock Units. When the Stock Units vest, the Company
shall pay to the Participant whole Shares equal to the number of Stock Units
that have become vested on the vesting date.
5. Dividend Equivalents with Respect to Stock Units.
(a) Dividend Equivalents shall accrue with respect to Stock Units and
shall be payable subject to the same vesting conditions as the Stock Units to
which they relate. Dividend Equivalents shall be credited with respect to the
Stock Units from the Date of Grant until the payment date. Dividend Equivalents
will become vested as the underlying Stock Units vest. If the underlying Stock
Units are forfeited, all related Dividend Equivalents shall also be forfeited.
(b) While the Stock Units are outstanding, the Company will keep records
in a bookkeeping account for the Participant. On each payment date for a
dividend paid by UGI on its common stock, the Company shall credit to the
Participant's account an amount equal to the Dividend Equivalents associated
with the Stock Units held by the Participant on the record date for the
dividend. No interest will be credited to any such account.
(c) Dividend Equivalents will be paid in cash at the same time as the
underlying Stock Units are paid.
(d) Notwithstanding anything in this Agreement to the contrary, the
Participant may not accrue Dividend Equivalents in excess of $1,000,000 during
any calendar year under all grants under the Plan.
6. Coordination with Severance Plan. Notwithstanding anything in this Agreement
to the contrary, if the Participant receives severance benefits under a
Severance Plan (as defined in Section 9) and the terms of such benefits require
that severance compensation payable under the Severance Plan be reduced by
benefits payable under this Plan, any amount payable to the Participant with
respect to Stock Units and Dividend Equivalents after the Participant's
termination of employment or service shall be reduced by the amount of severance
compensation paid to the Participant under the Severance Plan, as required by,
and according to the terms of, the Severance Plan.
7. Withholding. The Participant shall be required to pay to the Company, or make
other arrangements satisfactory to the Company to provide for the payment of,
any federal, state, local or other taxes that the Company is required to
withhold with respect to the payments under this Agreement. The Participant may
elect to satisfy the Company's tax withholding obligation with respect to
payments in Shares by having Shares withheld up to an amount that does not
exceed the minimum applicable withholding tax rate for federal (including FICA),
state and local tax liabilities.
8. Change of Control. The provisions of the Plan applicable to a Change of
Control shall apply to the Stock Units, and, in the event of a Change of
Control, the Committee may take such actions as it deems appropriate pursuant to
the Plan.
9. Definitions. For purposes of this Agreement, the following terms will have
the meanings set forth below:
(a) "Company" means UGI and its Subsidiaries (as defined in the Plan).
A-2
(b) "Disability" means a long-term disability as defined in the Company's
long-term disability plan applicable to the Participant.
(c) "Dividend Equivalent" means an amount determined by multiplying the
number of shares of UGI common stock subject to the target award of Stock Units
by the per-share cash dividend, or the per-share fair market value of any
dividend in consideration other than cash, paid by UGI on its common stock.
(d) "Employed by, or provide service to, the Company" shall mean
employment or service as an employee or director of the Company.
(e) "Stock Unit" means a hypothetical unit that represents the value of
one share of UGI common stock.
(f) "Retirement" means the Participant's retirement under the Retirement
Income Plan for Employees of UGI Utilities, Inc., if the Participant is covered
by that Retirement Income Plan. "Retirement" for other Company employees means
termination of employment after attaining age 55 with ten or more years of
service with the Company.
(g) "Severance Plan" means any severance plan maintained by the Company
that is applicable to the Participant.
10. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan,
the terms of which are incorporated herein by reference, and in all respects
shall be interpreted in accordance with the Plan. The grant and payment of Stock
Units and Dividend Equivalents are subject to interpretations, regulations and
determinations concerning the Plan established from time to time by the
Committee in accordance with the provisions of the Plan, including, but not
limited to, provisions pertaining to (i) the registration, qualification or
listing of the Shares, (ii) changes in capitalization of the Company and (iii)
other requirements of applicable law. The Committee shall have the authority to
interpret and construe the grant pursuant to the terms of the Plan, and its
decisions shall be conclusive as to any questions arising hereunder.
11. No Employment or Other Rights. The grant of Stock Units shall not confer
upon the Participant any right to be retained by or in the employ or service of
the Company and shall not interfere in any way with the right of the Company to
terminate the Participant's employment or service at any time. The right of the
Company to terminate at will the Participant's employment or service at any time
for any reason is specifically reserved.
12. No Shareholder Rights. Neither the Participant, nor any person entitled to
exercise the Participant's rights in the event of the Participant's death, shall
have any of the rights and privileges of a shareholder with respect to the
Shares related to the Stock Units, unless and until certificates for Shares have
been issued to the Participant or successor.
13. Assignment and Transfers. The rights and interests of the Participant under
this Agreement may not be sold, assigned, encumbered or otherwise transferred
except, in the event of the death of the Participant, by will or by the laws of
descent and distribution. If the Participant dies, any payments to be made under
this Agreement after the Participant's death shall be paid to the personal
representative of the Participant's estate, or the personal representative under
applicable law if the Participant dies intestate. The rights and protections of
the Company hereunder shall extend to any successors or assigns of the Company
and to the
A-3
Company's parents, subsidiaries, and affiliates. This Agreement may be assigned
by the Company without the Participant's consent.
14. Applicable Law. The validity, construction, interpretation and effect of
this instrument shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania, without giving effect to the conflicts of
laws provisions thereof.
15. Notice. Any notice to UGI provided for in this instrument shall be addressed
to UGI in care of the Corporate Secretary at UGI's headquarters, and any notice
to the Participant shall be addressed to such Participant at the current address
shown on the payroll of the Company, or to such other address as the Participant
may designate to the Company in writing. Any notice shall be delivered by hand,
sent by telecopy or enclosed in a properly sealed envelope addressed as stated
above, registered and deposited, postage prepaid, in a post office regularly
maintained by the United States Postal Service.
IN WITNESS WHEREOF, UGI has caused its duly authorized officers to execute
and attest this Agreement, and the Participant has executed this Agreement,
effective as of the Date of Grant.
UGI Corporation
Attest
_____________________________ By:_________________________________________
Corporate Secretary Robert H. Knauss
Vice President, General Counsel
|
I hereby accept the Stock Units described in this Agreement, and I agree to be
bound by the terms of the Plan and this Agreement. I hereby further agree that
all the decisions and determinations of the Committee shall be final and
binding.
Participant
A-4
EXHIBIT 10.7
7/23/2004
UGI Employees
UGI CORPORATION
2004 OMNIBUS EQUITY COMPENSATION PLAN
PERFORMANCE UNIT GRANT LETTER
This PERFORMANCE UNIT GRANT, dated as of January 1, 2004 (the "Date of Grant"),
is delivered by UGI Corporation ("UGI") to _____________ (the "Participant").
RECITALS
The UGI Corporation 2004 Omnibus Equity Compensation Plan (the "Plan")
provides for the grant of performance units ("Performance Units") with respect
to shares of common stock of UGI ("Shares"). The Compensation and Management
Development Committee of the Board of Directors of UGI (the "Committee") has
decided to grant Performance Units to the Participant.
NOW, THEREFORE, the parties to this Grant Letter, intending to be legally
bound hereby, agree as follows:
1. Grant of Performance Units. Subject to the terms and conditions set forth in
this Grant Letter and in the Plan, the Committee hereby grants to the
Participant __________ Performance Units. The number of Performance Units set
forth above is the target award of Performance Units. The Performance Units are
contingently awarded and will be earned and payable if and to the extent that
the performance goals and other conditions of the Grant Letter are met. The
Performance Units are granted with Dividend Equivalents (as defined in Section
9).
2. Performance Goals.
(a) The Participant shall earn the right to payment of the Performance
Units if the performance goals described in subsection (b) below are met for the
measurement period, and if the Participant continues to be employed by, or
provide service to, the Company (as defined in Section 9) through December 31,
2006. The measurement period is the period beginning January 1, 2004 and ending
December 31, 2006.
(b) The target award level of Performance Units and Dividend Equivalents
will be payable if UGI's Total Shareholder Return (TSR) equals the median TSR of
a peer group for the measurement period. The peer group is the group of
companies that comprises the S&P Utilities Index during the measurement period.
The actual amount of the award of Performance Units may be higher or lower than
the target award, or even zero, based on UGI's TSR percentile rank relative to
the companies in the S&P Utilities Index, as follows:
UGI's TSR Rank
(Percentile) Percentage of Target Award Earned
------------ ---------------------------------
Highest 200%
90th 175%
75th 150%
60th 125%
50th 100%
40th 50%
less than 40th 0%
|
The target award percentage earned will be interpolated between each of the
measuring points.
(c) TSR shall be calculated by UGI using the comparative returns
methodology used by Bloomberg L.P. or its successor at the time of the
calculation. The share price used for determining TSR at the beginning and the
end of the measurement period will be the average price for the 90-day period
preceding the beginning of the measurement period (i.e., the 90-day period
ending on December 31, 2003) and the 90-day period ending on the last day of the
measurement period (i.e., the 90-day period ending on December 31, 2006).
(d) The target award is the number of Performance Units set forth in
Section 1 above, which is the amount designated for 100% (50th TSR rank)
performance. The Participant can earn up to 200% of the target award if UGI's
TSR rank exceeds the 50th TSR rank, according to the foregoing schedule.
(e) At the end of the measurement period, the Committee will determine
whether and to what extent the performance goals have been met and the amount to
be paid with respect to the Performance Units. Except as described in Section 3
below, the Participant must be employed by, or providing service to, the Company
on December 31, 2006 in order for the Participant to receive payment with
respect to the Performance Units.
3. Termination of Employment or Service.
(a) Except as described below, if the Participant's employment or service
with the Company terminates on or before December 31, 2006, the Performance
Units and all Dividend Equivalents credited under this Grant Letter will be
forfeited.
(b) If the Participant terminates employment or service on account of
Retirement (as defined in Section 9), Disability (as defined in Section 9) or
death, the Participant will earn a pro-rata portion of the Participant's
outstanding Performance Units and Dividend Equivalents, if the performance goals
and the requirements of this Grant Letter are met. The prorated portion will be
determined as the amount that would otherwise be paid after the end of the
measurement period, based on achievement of the performance goals, multiplied by
a fraction, the numerator of which is the number of calendar years during the
measurement period in which the Participant has been employed by, or provided
service to, the Company and the denominator of which is three. For purposes of
the proration calculation, the calendar year in which the Participant's
termination of employment or service on account of Retirement, Disability, or
death occurs will be counted as a full year.
2
(c) In the event of termination of employment or service on account of
Retirement, Disability or death, the prorated amount shall be paid after the end
of the measurement period, or at an earlier date determined by the Committee.
4. Coordination with Severance Plan. Notwithstanding anything in this Grant
Letter to the contrary, if the Participant receives severance benefits under a
Severance Plan (as defined in Section 9) and the terms of such benefits require
that severance compensation payable under the Severance Plan be reduced by
benefits payable under this Plan, any amount payable to the Participant with
respect to Performance Units and Dividend Equivalents after the Participant's
termination of employment or service shall be reduced by the amount of severance
compensation paid to the Participant under the Severance Plan, as required by,
and according to the terms of, the Severance Plan.
5. Payment with Respect to Performance Units. If the Committee determines that
the conditions to payment of the Performance Units have been met, the Company
shall pay to the Participant, after the end of the measurement period, (i)
Shares or cash, or a combination of the two, as the Committee determines, equal
to the amount to be paid according to achievement of the performance goals, up
to the target award specified in Section 1 above, and (ii) cash in an amount
equal to the Fair Market Value (as defined in the Plan) of the Shares with
respect to the amount to be paid in excess of the target award.
6. Dividend Equivalents with Respect to Performance Units.
(a) Dividend Equivalents shall accrue with respect to Performance Units
and shall be payable subject to the same performance goals and terms as the
Performance Units to which they relate. Dividend Equivalents shall be credited
with respect to the target award of Performance Units from the Date of Grant
until the payment date. If the underlying Performance Units are forfeited, all
related Dividend Equivalents shall also be forfeited.
(b) While the Performance Units are outstanding, the Company will keep
records in a bookkeeping account for the Participant. On each payment date for a
dividend paid by UGI on its common stock, the Company shall credit to the
Participant's account an amount equal to the Dividend Equivalents associated
with the target award of Performance Units held by the Participant on the record
date for the dividend. No interest will be credited to any such account.
(c) The target amount of Dividend Equivalents (100% of the Dividend
Equivalents credited to the Participant's account) will be earned if UGI's TSR
rank is at the 50th TSR rank for the measurement period. The Participant can
earn up to 200% of the target amount of Dividend Equivalents if UGI's TSR rank
exceeds the 50th TSR rank, according to the schedule in Section 2 above. Except
as described in Section 3(b) above, if the Participant's employment or service
with the Company terminates on or before December 31, 2006, all Dividend
Equivalents will be forfeited.
(d) Dividend Equivalents will be paid in cash at the same time as the
underlying Performance Units are paid, after the Committee determines that the
conditions to payment have been met. Notwithstanding anything in this Grant
Letter to the contrary, the Participant may not accrue Dividend Equivalents in
excess of $1,000,000 during any calendar year under all grants under the Plan.
3
7. Withholding. The Participant shall be required to pay to the Company, or make
other arrangements satisfactory to the Company to provide for the payment of,
any federal, state, local or other taxes that the Company is required to
withhold with respect to the payments under this Grant Letter.
8. Change of Control. The provisions of the Plan applicable to a Change of
Control shall apply to the Performance Units, and, in the event of a Change of
Control, the Committee may take such actions as it deems appropriate pursuant to
the Plan.
9. Definitions. For purposes of this Grant Letter, the following terms will have
the meanings set forth below:
(a) "Company" means UGI and its Subsidiaries (as defined in the Plan).
(b) "Disability" means a long-term disability as defined in the Company's
long-term disability plan applicable to the Participant.
(c) "Dividend Equivalent" means an amount determined by multiplying the
number of shares of UGI common stock subject to the target award of Performance
Units by the per-share cash dividend, or the per-share fair market value of any
dividend in consideration other than cash, paid by UGI on its common stock.
(d) "Employed by, or provide service to, the Company" shall mean
employment or service as an employee or director of the Company.
(e) "Performance Unit" means a hypothetical unit that represents the value
of one share of UGI common stock.
(f) "Retirement" means the Participant's retirement under the Retirement
Income Plan for Employees of UGI Utilities, Inc., if the Participant is covered
by that Retirement Income Plan. "Retirement" for other Company employees means
termination of employment after attaining age 55 with ten or more years of
service with the Company.
(g) "Severance Plan" means any severance plan maintained by the Company
that is applicable to the Participant.
10. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan
and the Terms and Conditions established by the Committee with respect to the
Plan, both of which are incorporated herein by reference, and in all respects
shall be interpreted in accordance with the Plan. The grant and payment of
Performance Units and Dividend Equivalents are subject to interpretations,
regulations and determinations concerning the Plan established from time to time
by the Committee in accordance with the provisions of the Plan, including, but
not limited to, provisions pertaining to (i) the registration, qualification or
listing of the Shares, (ii) changes in capitalization of the Company and (iii)
other requirements of applicable law. The Committee shall have the authority to
interpret and construe the grant pursuant to the terms of the Plan, and its
decisions shall be conclusive as to any questions arising hereunder.
11. No Employment or Other Rights. The grant of Performance Units shall not
confer upon the Participant any right to be retained by or in the employ or
service of the Company and shall not interfere in any way with the right of the
Company to terminate the Participant's employment
4
or service at any time. The right of the Company to terminate at will the
Participant's employment or service at any time for any reason is specifically
reserved.
12. No Shareholder Rights. Neither the Participant, nor any person entitled to
exercise the Participant's rights in the event of the Participant's death, shall
have any of the rights and privileges of a shareholder with respect to the
Shares related to the Performance Units, unless and until certificates for
Shares have been issued to the Participant or successor.
13. Assignment and Transfers. The rights and interests of the Participant under
this Grant Letter may not be sold, assigned, encumbered or otherwise transferred
except, in the event of the death of the Participant, by will or by the laws of
descent and distribution. If the Participant dies, any payments to be made under
this Grant Letter after the Participant's death shall be paid to the
Participant's estate. The rights and protections of the Company hereunder shall
extend to any successors or assigns of the Company and to the Company's parents,
subsidiaries, and affiliates.
14. Applicable Law. The validity, construction, interpretation and effect of
this instrument shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania, without giving effect to the conflicts of
laws provisions thereof.
15. Notice. Any notice to UGI provided for in this instrument shall be addressed
to UGI in care of the Corporate Secretary at UGI's headquarters, and any notice
to the Participant shall be addressed to such Participant at the current address
shown on the payroll of the Company, or to such other address as the Participant
may designate to the Company in writing. Any notice shall be delivered by hand,
sent by telecopy or enclosed in a properly sealed envelope addressed as stated
above, registered and deposited, postage prepaid, in a post office regularly
maintained by the United States Postal Service.
IN WITNESS WHEREOF, UGI has caused its duly authorized officers to execute
and attest this Grant Letter, and the Participant has executed this Grant
Letter, effective as of the Date of Grant.
UGI Corporation
Attest
_______________________________ By:________________________________________
Corporate Secretary Robert H. Knauss
Vice President and General Counsel
|
I hereby acknowledge receipt of the Plan and the Terms and Conditions
incorporated herein. I accept the Performance Units described in this Grant
Letter, and I agree to be bound by the terms of the Plan, including the Terms
and Conditions, and this Grant Letter. I hereby further agree that all the
decisions and determinations of the Committee shall be final and binding on me
and any other person having or claiming a right under this Grant.
Participant
5
EXHIBIT 10.9
7/26/2004
AmeriGas Employees
UGI CORPORATION
2004 OMNIBUS EQUITY COMPENSATION PLAN
NONQUALIFIED STOCK OPTION GRANT LETTER
This STOCK OPTION GRANT, dated as of January 1, 2004 (the "Date of
Grant"), is delivered by UGI Corporation ("UGI") to _____________ (the
"Participant").
RECITALS
The UGI Corporation 2004 Omnibus Equity Compensation Plan (the "Plan")
provides for the grant of options to purchase shares of common stock of UGI. The
Compensation and Management Development Committee of the Board of Directors of
the Company (the "Committee") has decided to make a stock option grant to the
Participant.
NOW, THEREFORE, the parties to this Grant Letter, intending to be legally
bound hereby, agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth in this Grant
Letter and in the Plan, the Committee hereby grants to the Participant a
nonqualified stock option (the "Option") to purchase ______ shares of common
stock of UGI ("Shares") at an exercise price of $33.97 per Share. The Option
shall become exercisable according to Paragraph 2 below.
2. Exercisability of Option. The Option shall become exercisable on the
following dates, if the Participant is employed by, or providing service to, the
Company (as defined below) on the applicable date:
Shares for Which the
Date Option is Exercisable
---- ---------------------
January 1, 2005 33 1/3%
January 1, 2006 33 1/3%
January 1, 2007 33 1/3%
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The exercisability of the Option is cumulative, but shall not exceed 100% of the
Shares subject to the Option. If the foregoing schedule would produce fractional
Shares, the number of Shares for which the Option becomes exercisable shall be
rounded down to the nearest whole Share.
3. Term of Option.
(a) The Option shall have a term of ten years from the Date of Grant and
shall terminate at the expiration of that period (5:00 p.m. EST on December 31,
2013), unless it is terminated at an earlier date pursuant to the provisions of
this Grant Letter or the Plan.
(b) If the Participant ceases to be employed by, or provide service to,
the Company, the Option will terminate on the date the Participant ceases such
employment or service. However, if the Participant ceases to be employed by, or
provide service to, the Company by reason of (i) Termination without Cause, (ii)
Retirement (as defined below), (iii) Disability (as defined below), or (iv)
death, the Option held by the Participant will thereafter be exercisable
pursuant to the following terms:
(i) Termination Without Cause. If the Participant terminates
employment or service on account of a Termination without Cause, the
Option will thereafter be exercisable only with respect to that number of
Shares with respect to which the Option is already exercisable on the date
the Participant's employment or service terminates. Such portion of the
Option will terminate upon the earlier of the expiration date of the
Option or the expiration of the 13-month period commencing on the date the
Participant ceases to be employed by, or provide service to, the Company.
(ii) Retirement. If the Participant ceases to be employed by, or
provide service to, the Company on account of Retirement, the Option will
thereafter become exercisable as if the Participant had continued to
provide service to the Company for 36 months after the date of such
Retirement. The Option will terminate upon the earlier of the expiration
date of the Option or the expiration of such 36-month period.
(iii) Disability. If the Participant ceases to be employed by, or
provide service to, the Company on account of Disability, the Option will
thereafter become exercisable as if the Participant had continued to
provide service to the Company for 36 months after the date of such
termination of employment or service. The Option will terminate upon the
earlier of the expiration date of the Option or the expiration of such
36-month period.
(iv) Death. In the event of the death of the Participant while
employed by, or providing service to, the Company, the Option will be
fully and immediately exercisable and may be exercised at any time prior
to the earlier of the expiration date of the Option or the expiration of
the 12-month period following the Participant's death. Death of the
Participant after the Participant has ceased to be employed by, or provide
service to, the Company will not affect the otherwise applicable period
for exercise of the Option determined pursuant to subsections (i), (ii) or
(iii) above. After the Participant's death, the Participant's Option may
be exercised by the Participant's estate.
4. Exercise Procedures.
(a) Subject to the provisions of Paragraphs 2 and 3 above, the Participant
may exercise part or all of the exercisable Option by giving UGI irrevocable
written notice of intent to exercise on a form provided by UGI and delivered in
the manner provided in Section 13 below. Payment of the exercise price and any
applicable withholding taxes must be made prior to issuance of the Shares. The
Participant shall pay the exercise price (i) in cash, (ii) by delivering Shares
(or by attestation to ownership of Shares), which shall be valued at their fair
market value on the date of delivery, which shall have been held by the
Participant for at least six months, and which shall have a fair market value on
the date of exercise equal to the exercise price, (iii) by payment through a
broker in accordance with procedures acceptable to the Committee and
-2-
permitted by Regulation T of the Federal Reserve Board or (iv) by such other
method as the Committee may approve. The Committee may impose such limitations
as it deems appropriate on the use of Shares to exercise the Option.
(b) The obligation of UGI to deliver Shares upon exercise of the Option
shall be subject to all applicable laws, rules, and regulations and such
approvals by governmental agencies as may be deemed appropriate by the
Committee, including such actions as UGI's counsel shall deem necessary or
appropriate to comply with relevant securities laws and regulations. UGI may
require that the Participant (or other person exercising the Option after the
Participant's death) represent that the Participant is purchasing Shares for the
Participant's own account and not with a view to or for sale in connection with
any distribution of the Shares, or such other representation as UGI deems
appropriate.
(c) All obligations of UGI under this Grant Letter shall be subject to the
rights of the Company as set forth in the Plan to withhold amounts required to
be withheld for any taxes, if applicable.
5. Definitions. Whenever used in this Grant Letter, the following terms shall
have the meanings set forth below:
(a) "Company" means UGI and its Subsidiaries (as defined in the Plan).
(b) "Disability" means a long-term disability as defined in the Company's
long-term disability plan applicable to the Participant.
(c) "Employed by, or provide service to, the Company" shall mean
employment or service as an employee or director of the Company.
(d) "Retirement" means the Participant's retirement under the Retirement
Income Plan for Employees of UGI Utilities, Inc., if the Participant is covered
by that Retirement Income Plan. "Retirement" for other Company employees means
termination of employment after attaining age 55 with ten or more years of
service with the Company.
(e) "Termination without Cause" means termination of employment for the
convenience of the Company for any reason other than (i) misappropriation of
funds, (ii) habitual insobriety or substance abuse, (iii) conviction of a crime
involving moral turpitude, or (iv) gross negligence in the performance of
duties, which gross negligence has had a material adverse effect on the
business, operations, assets, properties or financial condition of the Company.
The Committee may determine in its sole discretion whether, and under what
circumstances, the Participant's voluntary termination upon a significant
reduction in the Participant's duties and responsibilities will constitute a
Termination without Cause for purposes of the Grant Letter.
6. Change of Control. The provisions of the Plan applicable to a Change of
Control shall apply to the Option, and, in the event of a Change of Control, the
Committee may take such actions as it deems appropriate pursuant to the Plan. If
the Grantee is an employee of AmeriGas Propane, Inc. ("AmeriGas"), the term
"Change of Control" shall mean (i) a Change of Control of UGI, as defined in the
Plan or (ii) one of the events set forth in Exhibit A with respect to AmeriGas.
-3-
7. Restrictions on Exercise. Except as the Committee may otherwise permit
pursuant to the Plan, only the Participant may exercise the Option during the
Participant's lifetime and, after the Participant's death, the Option shall be
exercisable by the Participant's estate, to the extent that the Option is
exercisable pursuant to this Grant Letter.
8. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan and
the Terms and Conditions established by the Committee with respect to the Plan,
both of which are incorporated herein by reference, and in all respects shall be
interpreted in accordance with the Plan and the Terms and Conditions. The grant
and exercise of the Option are subject to interpretations, regulations and
determinations concerning the Plan established from time to time by the
Committee in accordance with the provisions of the Plan, including, but not
limited to, provisions pertaining to (i) the registration, qualification or
listing of the Shares, (ii) changes in capitalization of the Company and (iii)
other requirements of applicable law. The Committee shall have the authority to
interpret and construe the Option pursuant to the terms of the Plan, and its
decisions shall be conclusive as to any questions arising hereunder.
9. No Employment or Other Rights. The grant of the Option shall not confer upon
the Participant any right to be retained by or in the employ or service of the
Company and shall not interfere in any way with the right of the Company to
terminate the Participant's employment or service at any time. The right of the
Company to terminate at will the Participant's employment or service at any time
for any reason is specifically reserved.
10. No Shareholder Rights. Neither the Participant, nor any person entitled to
exercise the Participant's rights in the event of the Participant's death, shall
have any of the rights and privileges of a shareholder with respect to the
Shares subject to the Option, until certificates for Shares have been issued
upon the exercise of the Option.
11. Assignment and Transfers. The rights and interests of the Participant under
this Grant Letter may not be sold, assigned, encumbered or otherwise transferred
except, in the event of the death of the Participant, by will or by the laws of
descent and distribution. The rights and protections of the Company hereunder
shall extend to any successors or assigns of the Company and to the Company's
parents, subsidiaries, and affiliates.
12. Applicable Law. The validity, construction, interpretation and effect of
this instrument shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania, without giving effect to the conflicts of
laws provisions thereof.
13. Notice. Any notice to UGI provided for in this instrument shall be addressed
to UGI in care of the Corporate Secretary at UGI's headquarters, and any notice
to the Participant shall be addressed to such Participant at the current address
shown on the payroll of the Company, or to such other address as the Participant
may designate to the Company in writing. Any notice shall be delivered by hand,
sent by telecopy or enclosed in a properly sealed envelope addressed as stated
above, registered and deposited, postage prepaid, in a post office regularly
maintained by the United States Postal Service.
-4-
IN WITNESS WHEREOF, UGI has caused its duly authorized officers to execute
and attest this Grant Letter, and the Participant has executed this Grant
Letter, effective as of the Date of Grant.
UGI Corporation
Attest
_______________________________ By:________________________________________
Corporate Secretary Robert H. Knauss
Vice President and General Counsel
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I hereby acknowledge receipt of the Plan and the Terms and Conditions
incorporated herein. I accept the Option described in this Grant Letter, and I
agree to be bound by the terms of the Plan, including the Terms and Conditions,
and this Grant Letter. I hereby further agree that all the decisions and
determinations of the Committee shall be final and binding on me and any other
person having or claiming a right under this Grant.
Participant
-5-
EXHIBIT A
Change of Control with Respect to AmeriGas
For Participants who are employees of AmeriGas, or a subsidiary of AmeriGas, the
term "Change of Control" shall include the events set forth in this Exhibit A
with respect to AmeriGas, and the defined terms used in this Exhibit A shall
have the following meanings:
1. "Change of Control" shall include any of the following events:
(A) Completion by AmeriGas, the Public Partnership or the Operating
Partnership of a reorganization, merger or consolidation (a "Propane Business
Combination"), in each case, with respect to which all or substantially all of
the individuals and entities who were the respective Beneficial Owners of the
AmeriGas voting securities or of the outstanding units of AmeriGas Partners,
L.P. ("Outstanding Units") immediately prior to such Propane Business
Combination do not, following such Propane Business Combination, Beneficially
Own, directly or indirectly, (a) if the entity resulting from such Propane
Business Combination is a corporation, more than fifty percent (50%) of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of such corporation
in substantially the same proportion as their ownership immediately prior to
such Combination of the AmeriGas' voting securities or the Outstanding Units, as
the case may be, or, (b) if the entity resulting from such Propane Business
Combination is a partnership, more than fifty percent (50%) of the then
outstanding common units of such partnership in substantially the same
proportion as their ownership immediately prior to such Propane Business
Combination of AmeriGas' voting securities or the Outstanding Units, as the case
may be; or
(B) (a) Completion of a complete liquidation or dissolution of
AmeriGas, the Public Partnership or the Operating Partnership or (b) sale or
other disposition of all or substantially all of the assets of AmeriGas, the
Public Partnership or the Operating Partnership other than to an entity with
respect to which, following such sale or disposition, (I) if such entity is a
corporation, more than fifty percent (50%) of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors is then owned beneficially, directly or indirectly, by all or
substantially all of the individuals and entities who were the Beneficial
Owners, respectively, of AmeriGas' voting securities or of the Outstanding
Units, as the case may be, immediately prior to such sale or disposition in
substantially the same proportion as their ownership of AmeriGas' voting
securities or of the Outstanding Units, as the case may be, immediately prior to
such sale or disposition, or, (II) if such entity is a partnership, more than
fifty percent (50%) of the then outstanding common units is then owned
beneficially, directly or indirectly, by all or substantially all of the
individuals and entities who were the Beneficial Owners, respectively, of
AmeriGas' voting securities or of the Outstanding Units, as the case may be,
immediately prior to such sale or disposition in substantially the same
proportion as their ownership of AmeriGas' voting securities or of the
Outstanding Units immediately prior to such sale or disposition; or
A-1
(C) UGI and the UGI Subsidiaries fail to own more than fifty percent
(50%) of the then outstanding general partnership interests of the Public
Partnership or the Operating Partnership; or
(D) UGI and the UGI Subsidiaries fail to own more than fifty percent
(50%) of the then outstanding shares of common stock of AmeriGas or more than
fifty percent (50%) of the combined voting power of the then outstanding voting
securities of AmeriGas entitled to vote generally in the election of directors;
or
(E) AmeriGas is removed as the general partner of the Public
Partnership by vote of the limited partners of the Public Partnership, or is
removed as the general partner of the Public Partnership or the Operating
Partnership as a result of judicial or administrative proceedings involving
AmeriGas, the Public Partnership or the Operating Partnership.
2. "Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
3. A Person shall be deemed the "Beneficial Owner" of any securities: (i) that
such Person or any of such Person's Affiliates or Associates, directly or
indirectly, has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or otherwise;
provided, however, that a person shall not be deemed the "Beneficial Owner" of
securities tendered pursuant to a tender or exchange offer made by such Person
or any of such person's Affiliates or Associates until such tendered securities
are accepted for payment, purchase or exchange; (ii) that such Person or any of
such Person's Affiliates or Associates, directly or indirectly, has the right to
vote or dispose of or has "beneficial ownership" of (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange Act),
including without limitation pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of any security under this clause (ii) as a
result of an oral or written agreement, arrangement or understanding to vote
such security if such agreement, arrangement or understanding (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of the General Rules and Regulations under the Exchange Act, and (B) is not then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or (iii) that are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to clause (ii) above) or disposing of any securities;
provided, however, that nothing in this Section 1(c) shall cause a Person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of any securities acquired through such Person's participation in good faith in
a firm commitment underwriting until the expiration of forty (40) days after the
date of such acquisition.
4. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
A-2
5. "Operating Partnership" shall mean AmeriGas Propane, L.P.
6. "Public Partnership" shall mean AmeriGas Partners, L.P.
7. "Person" shall mean an individual or a corporation, partnership, trust,
unincorporated organization, association, or other entity.
8. "UGI Subsidiary" shall mean any corporation in which UGI directly or
indirectly, owns at least a fifty percent (50%) interest or an unincorporated
entity of which UGI, as applicable, directly or indirectly, owns at least fifty
percent (50%) of the profits or capital interests.
A-3
UGI CORPORATION
SENIOR EXECUTIVE EMPLOYEE
SEVERANCE PAY PLAN
AS AMENDED ON DECEMBER 7, 2004
.
.
.
UGI CORPORATION
SENIOR EXECUTIVE EMPLOYEE
SEVERANCE PAY PLAN
TABLE OF CONTENTS
Page
Article I Background, Purpose and Term of Plan..................... 1
Article II Definitions.............................................. 2
Article III Participation and Eligibility for Benefits............... 5
Article IV Benefits................................................. 7
Article V Method and Duration of Benefit Payments.................. 10
Article VI Administration........................................... 11
Article VII Amendment and Termination................................ 13
Article VIII Duties of the Company.................................... 14
Article IX Claims Procedures........................................ 15
Article X Miscellaneous............................................ 17
Appendix A Change of Control........................................ A-1
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i
ARTICLE I
BACKGROUND, PURPOSE AND TERM OF PLAN
Section 1.01 Background. This Plan was amended and restated in its
entirety on April 30, 1993 to reflect sponsorship by a new entity following the
April 10, 1992 reorganization of UGI Utilities, Inc. (formerly, UGI Corporation)
and was again amended and restated as of January 1, 1997, December 16, 2003 and
December 7, 2004. The terms and conditions of this Plan apply to the designated
senior executive employees in the United States of UGI Corporation, its
subsidiary UGI Utilities, Inc. and certain other affiliated entities, but not to
employees of AmeriGas Propane, Inc. or its subsidiaries.
Section 1.02 Purpose of the Plan. The Plan is intended to alleviate, in
part or in full, financial hardships which may be experienced by certain
Executive Employees employed in the United States whose employment is terminated
without Just Cause, in recognition of their past service to the Company and its
Affiliates. In essence, benefits under the Plan are intended to be additional
compensation for past services or for the continuation of specified employee
benefits for a transitional period. The amount or kind of benefit to be provided
is to be based on the Participant's Compensation, and the employee benefit
programs applicable to him or her, at his or her Employment Termination Date.
The Plan is not intended to be included in the definitions of "employee pension
benefit plan" and "pension plan" set forth under Section 3(2)(B)(i) of ERISA.
Rather, this Plan is intended to meet the descriptive requirements of a plan
constituting a "severance pay plan" within the meaning of regulations published
by the Secretary of Labor at Title 29, Code of Federal Regulations, Section
2510.3-2(b). Accordingly, the benefits paid by the Plan are not deferred
compensation and no employee shall have a vested right to such benefits. In
addition, the Plan has been drafted to give the Company broad discretion in
designating individuals who are eligible for benefits and the amount of such
benefits. All actions taken by the Company shall be in its role as the plan
sponsor and not as a fiduciary.
Section 1.03 Term of the Plan. This amendment and restatement is a
continuation of the Company's existing Plan. The Plan will continue until such
time as the Company, acting in its sole discretion, elects to modify, supersede
or terminate it in accordance with the further provisions hereof.
ARTICLE II
DEFINITIONS
Section 2.01 "Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended.
Section 2.02 "Benefit" or "Benefits" shall mean any or all of the benefits
that a Participant is entitled to receive pursuant to Article IV of the Plan.
Section 2.03 "Board of Directors" shall mean the Board of Directors of the
Company, or any successor thereto.
Section 2.04 "Chairman of the Board" shall mean the individual serving as
the Chairman of the Board of Directors of the Company as of the date of
reference.
Section 2.05 "Change of Control" shall mean a change of control as defined
in the attached Appendix A, as amended from time to time by the Committee, in
its discretion.
Section 2.06 "Chief Executive Officer" shall mean the individual serving
as the Chief Executive Officer of the Company as of the date of reference.
Section 2.07 "Committee" shall mean the administrative committee
designated pursuant to Article VI of the Plan to administer the Plan in
accordance with its terms, or its delegate.
Section 2.08 "Company" shall mean UGI Corporation, a Pennsylvania
corporation, and any corporation succeeding to the business of UGI Corporation
by merger, consolidation, liquidation, purchase of assets or stock or similar
transaction.
Section 2.09 "Compensation" shall mean the Participant's annual base
salary and applicable target annual bonus amount (if any) in effect on the first
day of the calendar quarter immediately preceding the Participant's Employment
Termination Date.
Section 2.10 "Employment Commencement Date" shall mean the most recent day
on which a Participant became an employee of the Company, any Affiliate of the
Company, or any entity whose business or assets have been acquired by the
Company, its Affiliates or any predecessor of such entities, unless the Company
determines to give credit for prior service, if any.
Section 2.11 "Employment Termination Date" shall mean the date on which
the employment relationship between the Participant and the Company and its
Affiliates is terminated.
Section 2.12 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
2
Section 2.13 "Executive Employee" shall mean any of the following
employees who are employed in the United States:
(a) An employee of the Company who is classified as Grade 76
or above;
(b) An employee of UGI Utilities, Inc. or its successor who is
classified as Grade 38 or above; or
(c) An executive level employee of any other Affiliate of the
Company operating in the United States, other than AmeriGas Propane, Inc.
and its subsidiaries, who is designated in writing by the Company as
eligible to participate in the Plan.
In no event shall employees who are employed outside the United States, or
employees of AmeriGas Propane, Inc. or its subsidiaries, participate in the
Plan. In no event shall any of the following persons be considered an employee
for purposes of the Plan: (i) independent contractors, (ii) persons performing
services pursuant to an arrangement with a third party leasing organization or
(iii) any person whom the Company determines, in its sole discretion, is not a
common law employee, whether or not any such person is later determined to have
been a common law employee of the Company or an Affiliate.
Section 2.14 "Executive Equity Plan" shall mean any long-term equity
incentive plan of the Company or any of its Affiliates, including without
limitation the UGI Corporation 2004 Omnibus Equity Compensation Plan, the UGI
Corporation 2000 Stock Incentive Plan, the UGI Corporation 1997 Stock Option and
Dividend Equivalent Plan and the AmeriGas Propane, Inc. 2000 Long-Term Incentive
Plan.
Section 2.15 "Just Cause" shall mean (i) dismissal of an Executive
Employee due to misappropriation of funds, (ii) substance abuse or habitual
insobriety that adversely affects the Executive Employee's ability to perform
his or her job, (iii) conviction of a crime involving moral turpitude, or (iv)
gross negligence in the performance of duties. Disputes with respect to whether
Just Cause exists shall be resolved in accordance with Article IX.
Section 2.16 "Participant" shall mean any Executive Employee who has been
designated by the Company as a participant in this Plan.
Section 2.17 "Plan" shall mean the UGI Corporation Senior Executive
Employee Severance Pay Plan, as set forth herein, and as the same may from time
to time be amended.
Section 2.18 "Plan Year" shall mean each fiscal year of the Company during
which this Plan is in effect.
Section 2.19 "President and Chief Operating Officer" shall mean the
individual serving as the President and Chief Operating Officer of the Company
as of the date of reference.
Section 2.20 "Release" shall mean a release and discharge of the Company,
all of its Affiliates, and all affiliated persons and entities from any and all
claims, demands and
3
causes of action, other than as to amounts or benefits due to the Participant
under any qualified employee retirement plan of the Company or an Affiliate,
which shall be in such form as may be proscribed by the Company, acting as an
employer and not as a fiduciary, from time to time and with such modifications
as the Company deems appropriate for the Participant's particular situation.
Section 2.21 "Restricted Awards" shall mean restricted stock, stock units,
performance units, restricted units, dividend equivalents, distribution
equivalents and other equity-based awards, other than stock options, that are
granted to a Participant under an Executive Equity Plan.
Section 2.22 "Salary Continuation Period" shall equal one business day for
each month which is included in the Participant's Years of Service plus the
number of months of paid notice under Section 4.01(c), to a maximum of fifteen
(15) months (thirty (30) months in the case of the Chief Executive Officer).
Section 2.23 "Year of Service" shall mean each twelve (12) month period
(or part thereof) beginning on the Participant's Employment Commencement Date
and ending on each anniversary thereof. Additional Years of Service based on
earlier employment with the Company, any Affiliate of the Company or any entity
whose business or assets have been acquired by the Company, its Affiliates or
any predecessor of such entities, shall be counted only if permitted by the
Company.
4
ARTICLE III
PARTICIPATION
AND ELIGIBILITY FOR BENEFITS
Section 3.01 General Eligibility Requirement. In its sole discretion,
acting in its role as Plan sponsor and not as a fiduciary, the Company may grant
a Benefit under this Plan to any Executive Employee whom the Company designates
as a Participant and whose employment is terminated by the Company or an
Affiliate other than for Just Cause, death, or continuous illness, injury or
incapacity for a period of six consecutive months. Notwithstanding anything
herein to the contrary, an Executive Employee will not be considered to have
incurred a termination by the Company or an Affiliate for purposes of this Plan
if his or her employment is discontinued due to voluntary resignation or the
expiration of a leave of absence. In addition, the Executive Employee must meet
the requirements of Section 3.03 in order to receive a Benefit under this Plan.
Section 3.02 Substantially Comparable Employment. In the absence of a
Change of Control, notwithstanding anything herein to the contrary, no Benefits
shall be due hereunder to an Executive Employee in connection with the
disposition of a business, division or affiliated company by the Company or an
Affiliate if substantially comparable terms of employment, as determined by the
Company, have been offered to the Executive Employee by the transferee;
provided, however, that the Company, acting in its role as Plan sponsor and not
as a fiduciary, may determine that the Company or an Affiliate will provide some
or all of the Benefits to an Executive Employee whose employment with the
Company and its Affiliates is terminated as described in Section 3.01. This
Section 3.02 shall not apply at or after a Change of Control.
Section 3.03 Conditions to Entitlement to Benefits.
(a) As further conditions to entitlement to Benefits under the Plan,
all Participants must, prior to the payment of any Benefits due hereunder, (i)
sign and not rescind or contest the enforceability of a Release; (ii) ratify any
patent assignment, confidentiality, non-solicitation, non-competition and other
post-employment activities agreement in effect between the Participant and the
Company or an Affiliate; (iii) return to the Company and its Affiliates any and
all property of the Company and its Affiliates held by the Participant,
including, but not limited to, all reports, manuals memoranda, computer disks,
tapes and data made available to the Participant during the performance of the
Participant's duties, including all copies; (iv) hold confidential any and all
information concerning the Company and its Affiliates, whether with respect to
its business, subscribers, providers, customers, operations, finances,
employees, contractors, or otherwise; and (v) cooperate fully with the Company
and its Affiliates to complete the transition of matters with which the
Participant is familiar or responsible to other employees and make himself or
herself available to answer questions or assist in matters which may require
attention after the Participant's Employment Termination Date.
5
(b) If the Committee determines, in its sole discretion, that the
Participant has violated one or more of the foregoing conditions to entitlement
to Benefits, the Committee may determine that the Participant will not receive
the Benefits or the Company may discontinue the payment of Benefits under the
Plan. Any remedy under this Section 3.03 shall be in addition to, and not in
place of, any other remedy the Company and its Affiliates may have, at law or
otherwise.
6
ARTICLE IV
BENEFITS
Section 4.01 Amount of Immediate Cash Benefit. The Company, acting in its
role as Plan sponsor and not as a fiduciary, shall determine which Executive
Employees shall be awarded a Benefit hereunder and the amount of any such
Benefit. The Company may take into account any factors it determines to be
relevant in deciding which Executive Employees shall be awarded Benefits and the
amount of such Benefits, and need not apply its determinations in a uniform
manner to terminated Executive Employees similarly situated. All such decisions
shall be final, binding and conclusive with respect to the Participant. Unless
the Company determines otherwise, the cash amount to be paid to a Participant
eligible to receive Benefits under Section 3.01 hereof shall be paid in a lump
sum as provided in Section 5.01 hereof and shall equal the sum of the amounts
described in subsections (a) through (d), less the amount described in
subsection (e), except that any payment under paragraph (b) below that is based
on annual financial performance will be excluded from the lump sum payment and
paid separately as provided below:
(a) An amount equal to the Participant's earned and accrued vacation
entitlement, including banked vacation time, and personal holidays through the
end of the Participant's Salary Continuation Period.
(b) An amount equal to the Participant's annual target bonus amount
under the applicable annual bonus plan (or its successor) for the current Plan
Year multiplied by the number of months elapsed in the current Plan Year to his
or her Employment Termination Date and divided by twelve (12), together with any
amounts previously deferred by the Participant under such plan (with interest
thereon at the rate prescribed by such plan) as well as any amounts due from the
prior year under such plan but not yet paid, provided, however, that if the
Employment Termination Date occurs in the last two (2) months of the fiscal
year, the amount of the current Plan Year target bonus to be paid pursuant to
this paragraph (b) shall be determined and paid after the end of the fiscal year
in accordance with the terms and conditions of the applicable annual bonus plan
as though the Participant were still an employee, except that the weighting to
be applied to the Participant's business/financial performance goals under the
annual bonus plan will be deemed to be 100%; provided further, however, that the
Company may, in its sole discretion, determine that the amount payable pursuant
to this paragraph (b) for Employment Termination Dates occurring in the last two
(2) months of the fiscal year may be computed in the same manner as that
provided for Employment Termination Dates occurring during the first ten (10)
months of the fiscal year.
(c) In the case of the Chief Executive Officer, an amount of paid
notice equal to eighteen (18) times a fraction, the numerator of which is his or
her Compensation and the denominator of which is twelve (12), in the case of the
President and Chief Operating Officer, an amount of paid notice equal to twelve
(12) times a fraction, the numerator of which is his or her Compensation and the
denominator of which is twelve (12), and in the case of all other Participants,
an amount of paid notice equal to sixty-five (65) times a fraction, the
numerator of which is the Participant's Compensation and the denominator of
which is two-hundred sixty (260).
7
(d) An amount equal to the number of the Participant's Years of
Service multiplied by twelve (12) times a fraction, the numerator of which is
the Participant's Compensation and the denominator of which is two-hundred sixty
(260); provided, however, that such amount shall not exceed 100% of the
Participant's Compensation.
(e) If the Participant's employment with the Company and its
Affiliates terminates before a Change of Control, the cash amount computed in
subsections (a) through (d) above shall be reduced by the amount of cash and the
fair market value of any stock, partnership units or other property that is
payable to the Participant under Restricted Awards after the Participant's
termination of employment, as determined by the Committee. The Committee may
determine that payment of a portion of the Benefit under this Plan will be
delayed pending calculation of the amount payable under Restricted Awards, or
the Committee may decide to pay the amounts described in subsections (a) through
(d) above immediately and offset amounts payable under the Restricted Awards by
the amount of the Benefit previously paid under this Plan. In no event shall a
Participant be required to return to the Company or an Affiliate any amounts
previously paid under this Plan as a result of a decline in the value of
Restricted Awards.
(f) The offset described in subsection (e) shall not apply if the
Participant's employment with the Company and its Affiliates terminates at or
after a Change of Control. In addition, the offset described in subsection (e)
shall not apply to any Restricted Awards for which all requirements for payment
have been met before the Participant's Employment Termination Date (for example,
if the restriction period for a Restricted Award ends on December 31, 2005, the
Restricted Award is payable on February 1, 2006 and the Participant's employment
is terminated on January 15, 2006, Benefits under this Plan shall not be offset
by the Restricted Award).
Section 4.02 Executive Benefits. A Participant shall continue to be
entitled, through the end of the Participant's Salary Continuation Period, to
those employee benefits listed below (but only if they are in effect from time
to time during the Salary Continuation Period) based upon the amount of coverage
or benefit provided at the Participant's Employment Termination Date:
(a) Basic Life Insurance;
(b) Supplemental Life Insurance; and
(c) Medical Plan and Dental Assistance Plan, including COBRA
continuation coverage; and
(d) Executive Retirement Plan
In each case, when contributions are required of all Executive Employees at the
time of the Participant's Employment Termination Date, or thereafter, the
Participant shall be responsible for making the required contributions at the
employee rate, on an after-tax basis only, during the Salary Continuation Period
in order to be eligible for the coverage. In lieu of any or all of the coverages
provided under any of clauses (a) through (c) above, the Company or an Affiliate
may pay to the Participant, at the time payment is otherwise to be made of cash
Benefits pursuant to
8
Section 5.01 hereof, a single lump sum payment equal to the then present value
of the cost of such coverages. Notwithstanding anything herein to the contrary,
any such coverages shall be discontinued if, and at the time, the Participant
obtains other employment and becomes eligible to participate in the plan of, or
is provided similar coverage by, a new employer; provided, however, that the
Participant shall not be required to refund any sum to the Company or an
Affiliate should a lump sum have been paid pursuant to the preceding sentence.
Any applicable conversion rights shall be provided to the Participant at the
time coverage ceases. The Committee shall determine to what extent, if any, any
other perquisites or benefit coverages such as tax preparation services, shall
continue to be provided during the Salary Continuation Period and whether the
Participant shall be entitled to outplacement services or to receive title to
the Participant's Company-supplied automobile, if any, in which case the value
of the Participant's cash Benefit under Section 4.01 hereof shall be increased
accordingly. The Participant shall be responsible for the payment of sales tax
on such automobile, if any.
Section 4.03 Retirement Plans. This Plan shall not govern and shall in no
way affect the Participant's interest in, or entitlement to benefits under, any
of the qualified retirement plans of the Company or an Affiliate and any
payments received under any such plan shall not affect a Participant's right to
any Benefit hereunder.
Section 4.04 Effect on Other Benefits. There shall not be drawn from the
continued provision by the Company of any of the aforementioned Benefits any
implication of continued employment or of continued right to accrual of benefits
under a qualified retirement plan of the Company or an Affiliate or an Executive
Equity Plan, and a terminated Executive Employee shall not, except as provided
in Section 4.01(a) hereof, accrue vacation days, paid holidays, paid sick days
or other similar benefits normally associated with employment for any part of
the Salary Continuation Period during which benefits are payable under this
Plan. The benefits payable under this Plan shall be in addition to and not in
lieu of any payments or benefits due to the Participant under any other plan,
policy, or program of the Company and its Affiliates. Notwithstanding anything
herein to the contrary, as determined by the Company, the Benefits payable under
this Plan to any Participant may be reduced by any and all payments required to
be made by the Company or an Affiliate under federal, state and local law,
including the Worker Adjustment and Retraining Notification Act, 29 U.S.C.
Section 2101 et. seq. or under any employment agreement or special severance
arrangement.
9
ARTICLE V
METHOD AND DURATION OF BENEFIT PAYMENTS
Section 5.01 Method of Payment. The cash Benefits to which a Participant
is entitled, as determined pursuant to Article IV hereof, shall be paid in a
lump sum. Payment shall be made by mailing to the last address provided by the
Participant to the Company or an Affiliate. Payment shall be made as soon as
reasonably practicable after the fulfillment of all conditions for payment of
the Benefit set forth in Section 4.01, and subject to compliance with all
requirements of Section 3.03. All payments under the Plan are subject to
applicable federal, state and local taxes.
Section 5.02 Payments to Beneficiaries. Each Participant shall designate
one or more beneficiaries to receive any Benefits due hereunder in the event of
the Participant's death prior to the receipt of all such Benefits. Such
beneficiary designation shall be made in the manner, and at the time, prescribed
by the Committee. In the absence of an effective beneficiary designation
hereunder, the Participant's estate shall be deemed to be the Participant's
designated beneficiary.
10
ARTICLE VI
ADMINISTRATION
Section 6.01 Appointment. The Committee shall consist of one (1) or more
persons appointed by the Board of Directors. Committee members may be, but need
not be, employees of the Company.
Section 6.02 Tenure. Committee members shall serve at the pleasure of the
Board of Directors. Committee members may resign at any time on ten (10) days'
written notice, and Committee members may be discharged, with or without cause,
at any time by the Board of Directors.
Section 6.03 Authority and Duties. It shall be the duty of the Committee,
on the basis of information supplied to it by the Company, to determine the
eligibility of each Participant for Benefits under the Plan, to determine the
amount of Benefits to which each such Participant may be entitled, and to
determine the manner, time of payment and other requirements of payment of
Benefits consistent with the provisions hereof. The Company shall make such
payments as are certified to it by the Committee to be due to Participants. The
Committee shall have the full power and discretionary authority to construe,
interpret and administer the Plan, to correct deficiencies therein, and to
supply omissions. All decisions, actions, and interpretations of the Committee
shall be final, binding, and conclusive upon the parties. The Committee may
delegate ministerial and other responsibilities to one or more Company
employees.
Section 6.04 Action by the Committee. A majority of the members of the
Committee shall constitute a quorum for the transaction of business at a meeting
of the Committee. Any action of the Committee may be taken upon the affirmative
vote of a majority of the members of the Committee at a meeting, or at the
direction of the Chairperson, without a meeting, by mail, telegraph, telephone,
or electronic communication device; provided that all of the members of the
Committee are informed of their right to vote on the matter before the Committee
and of the outcome of the vote thereon.
Section 6.05 Officers of the Committee. The Committee shall designate one
of its members to serve as Chairperson thereof. The Committee shall also
designate a person to serve as Secretary of the Committee, which person may be,
but need not be, a member of the Committee.
Section 6.06 Compensation of the Committee. Members of the Committee shall
receive no compensation for their services as such. However, all reasonable
expenses of the Committee shall be paid or reimbursed by the Company upon proper
documentation. The Company shall indemnify members of the Committee against
personal liability for actions taken in good faith in the discharge of their
respective duties as members of the Committee.
Section 6.07 Records, Reporting, and Disclosure. The Committee shall keep
all individual and group records relating to Participants and former
Participants and all other records necessary for the proper operation of the
Plan. Such records shall be made available to the Company and to each
Participant for examination during business hours except that a Participant
11
shall examine only such records as pertain exclusively to the examining
Participant and to the Plan. The Committee shall prepare and shall file as
required by law or regulation all reports, forms, documents and other items
required by ERISA, the Internal Revenue Code, and every other relevant statute,
each as amended, and all regulations thereunder (except that the Company, as
payor of the Benefits, shall prepare and distribute to the proper recipients all
forms relating to withholding of income or wage taxes, Social Security taxes,
and other amounts which may be similarly reportable).
Section 6.08 Actions of the Committee. All determinations made by the
Committee under the Plan shall be made solely at the discretion of the
Committee. The exercise of discretion by the Committee need not be uniformly
applied to similarly situated Participants and shall be final and binding on
each Participant or beneficiary to whom the determination is directed.
Section 6.09 Benefits of the Chief Executive Officer and other Executive
Officers. Notwithstanding the foregoing, the Compensation and Management
Development Committee shall serve as the Committee under the Plan with respect
to the Chief Executive Officer of the Company and other executive officers (as
determined by the Board of Directors). The Compensation and Management
Development Committee of the Board of Directors shall make all determinations
with respect to the Chief Executive Officer and other executive officers as to
any matter that directly pertains to, or affects, the Chief Executive Officer or
other executive officers.
Section 6.10 Bonding. The Committee shall arrange any bonding that may be
required by law, but no amount in excess of the amount required by law (if any)
shall be required by the Plan.
12
ARTICLE VII
AMENDMENT AND TERMINATION
Section 7.01 Amendment, Suspension and Termination. The Company, by action
of its Board of Directors or its Compensation and Management and Development
Committee, retains the right, at any time and from time to time, to amend,
suspend or terminate the Plan in whole or in part, for any reason, and without
either the consent of or the prior notification to any Participant. No such
amendment shall give the Company or an Affiliate the right to recover any amount
paid to a Participant prior to the date of such amendment or to cause the
cessation and discontinuance of payments of Benefits to any person or persons
under the Plan already receiving Benefits.
13
ARTICLE VIII
DUTIES OF THE COMPANY
Section 8.01 Records. The Company shall supply to the Committee all
records and information necessary to the performance of the Committee's duties.
Section 8.02 Payment. The Company shall make payments from its general
assets to Participants in accordance with the terms of the Plan, as directed by
the Committee.
Section 8.03 Discretion, Delegation.
(a) Any decisions, actions or interpretations to be made under the
Plan by the Company shall be made in its sole discretion, not in any fiduciary
capacity and need not be uniformly applied to similarly situated individuals,
and such decisions, actions or interpretations shall be final, binding and
conclusive upon all parties.
(b) The Company may take actions under the Plan by action of its
Board of Directors or its Compensation and Management Development Committee, or
by action of any officer or administrative committee to whom any of the
Company's authority with respect to the Plan shall have been delegated. The
Compensation and Management Development Committee shall be authorized to take
all Company actions under the Plan with respect to the Chief Executive Officer
and other executive officers (as determined by the Board of Directors).
14
ARTICLE IX
CLAIMS PROCEDURES
Section 9.01 Application for Benefits. Participants who believe they are
eligible for benefits under this Plan may apply for such benefits by completing
and filing with the Committee an application for benefits on a form supplied by
the Committee. Before the date on which benefit payments commence, each such
application must be supported by such information as the Committee deems
relevant and appropriate.
Section 9.02 Claim. A terminated employee may contest his or her
eligibility for the amount of benefit awarded by completing and filing with the
Committee a written request for review in the manner specified by the Committee.
Each such application must be supported by such information as the Committee
deems relevant and appropriate. The Committee will review the claim and provide
notice to the terminated employee, in writing, within 90 days after the claim is
filed unless special circumstances require an extension of time for processing
the claim. In no event shall the extension exceed a period of 90 days from the
end of the initial period. In the event that any claim for benefits is denied in
whole or in part, the terminated employee whose claim has been so denied shall
be notified of such denial in writing by the Committee. The notice advising of
the denial shall be written in a manner calculated to be understood by the
terminated employee and shall set forth: (i) specific references to the
pertinent Plan provisions on which the denial is based; (ii) a description of
any additional material or information necessary for the claimant to perfect the
claim and an explanation as to why such information is necessary; and (iii) an
explanation of the Plan's claim procedure and the time limits applicable to such
procedures, including a statement of the claimant's right to bring a civil
action under section 502(a) of ERISA following an adverse benefit determination
on appeal.
Section 9.03 Appeals of Denied Claims for Benefits. All appeals shall be
made by the following procedure:
(a) The terminated employee whose claim has been denied shall file
with the Committee a notice of appeal of the denial. Such notice shall be filed
within sixty (60) days of notification by the Committee of the claim denial,
shall be made in writing, and shall set forth all of the facts upon which the
appeal is based. Appeals not timely filed shall be barred.
(b) The claimant or his duly authorized representative may:
(i) request a review upon written notice to the Committee;
(ii) examine the Plan and obtain, upon request and without charge, copies of all
information relevant to the claimant's appeal; and
(iii) submit issues and comments in writing.
(c) The Named Appeals Fiduciary (as described in Section 9.04) shall
issue a decision no later than 60 days after receipt of a request for review
unless special circumstances, such as the need to hold a hearing, require a
longer period of time, in which case a decision shall be rendered as soon as
possible, but not later than 120 days after receipt of the terminated employee's
notice of appeal.
15
(d) The Named Appeals Fiduciary shall consider the merits of the
claimant's written presentations, the merits of any facts or evidence in support
of the denial of benefits, and such other facts and circumstances as the Named
Appeals Fiduciary shall deem relevant.
(e) The Named Appeals Fiduciary shall render a determination upon
the appealed claim which determination shall be accompanied by a written
statement setting forth:
(i) specific reasons for the decision, written in a manner calculated to be
understood by the claimant;
(ii) specific references to the pertinent Plan provisions on which the decision
is based;
(iii) the claimant's right to receive, upon request and free of charge,
reasonable access to, and copies of, all documents, records and other
information relevant to the claim for benefits; and
(iv) the claimant's right to bring a civil action under section 502(a) of ERISA.
Section 9.04 Appointment of the Named Appeals Fiduciary. The Named Appeals
Fiduciary shall be the person or persons named as such by the Board of
Directors, or, if no such person or persons be named, then the person or persons
named by the Committee as the Named Appeals Fiduciary. Named Appeals Fiduciaries
may at any time be removed by the Board of Directors, and any Named Appeals
Fiduciary named by the Committee may be removed by the Committee. All such
removals may be with or without cause and shall be effective on the date stated
in the notice of removal. The Named Appeals Fiduciary shall be a "Named
Fiduciary" within the meaning of ERISA, and unless appointed to other fiduciary
responsibilities, shall have no authority, responsibility or liability with
respect to any matter other than the proper discharge of the functions of the
Named Appeals Fiduciary as set forth herein.
16
ARTICLE X
MISCELLANEOUS
Section 10.01 Nonalienation of Benefits. None of the payments, benefits or
rights of any Participant shall be subject to any claim of any creditor, and, in
particular, to the fullest extent permitted by law, all such payments, benefits
and rights shall be free from attachment, garnishment, trustee's process, or any
other legal or equitable process available to any creditor of such Participant.
No Participant shall have the right to alienate, anticipate, commute, pledge,
encumber or assign any of the benefits or payments which the Participant may
expect to receive, contingently or otherwise, under this Plan.
Section 10.02 No Contract of Employment. Neither the establishment of the
Plan, nor any modification thereof, nor the creation of any fund, trust or
account, nor the payment of any benefits shall be construed as giving any
Participant, or any person whosoever, the right to be retained in the service of
the Company or an Affiliate, and all Participants shall remain subject to
discharge to the same extent as if the Plan had never been adopted.
Section 10.03 Severability of Provisions. If any provision of this Plan
shall be held invalid or unenforceable by a court of competent jurisdiction,
such invalidity or unenforceability shall not affect any other provisions
hereof, and this Plan shall be construed and enforced as if such provisions had
not been included.
Section 10.04 Successors, Heirs, Assigns, and Personal Representatives.
This Plan shall be binding upon the heirs, executors, administrators, successors
and assigns of the parties, including each Participant, present and future.
Unless the Committee directs otherwise, the Company shall require any successor
or successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, or a division or Affiliate thereof, (i) to acknowledge expressly that
this Plan is binding upon and enforceable against such successor in accordance
with the terms hereof, (ii) to become jointly and severally obligated with the
Company to perform the obligations under this Plan, and (iii) to agree not to
amend or terminate the Plan for a period of three (3) years after the date of
succession without the consent of the affected Participant.
Section 10.05 Headings and Captions. The headings and captions herein are
provided for reference and convenience only, shall not be considered part of the
Plan, and shall not be employed in the construction of the Plan.
Section 10.06 Gender and Number. Except where otherwise clearly indicated
by context, the masculine and the neuter shall include the feminine and the
neuter, the singular shall include the plural, and vice-versa.
Section 10.07 Unfunded Plan. The Plan shall not be funded. The Company
may, but shall not be required to, set aside or designate an amount necessary to
provide the Benefits specified herein (including the establishment of trusts).
In any event, no Participant shall have any right to, or interest in, any assets
of the Company or an Affiliate which may be applied by the Company or an
Affiliate to the payment of Benefits.
17
Section 10.08 Payments to Incompetent Persons. Any Benefit payable to or
for the benefit of a minor, an incompetent person, or other person incapable of
receipting therefor shall be deemed paid when paid to such person's guardian or
to the party providing or reasonably appearing to provide for the care of such
person, and such payment shall fully discharge the Company, its Affiliates, the
Committee and all other parties with respect thereto.
Section 10.09 Lost Payees. A Benefit shall be deemed forfeited if the
Committee is unable to locate a Participant to whom a Benefit is due. Such
Benefit shall be reinstated if application is made by the Participant for the
forfeited Benefit while this Plan is in operation.
Section 10.10 Controlling Law. This Plan shall be construed and enforced
according to the laws of the Commonwealth of Pennsylvania, to the extent not
preempted by Federal law, without giving effect to any Pennsylvania choice of
law provisions.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed
by its duly authorized officer and its corporate seal to be affixed hereto as of
the effective date described above.
UGI CORPORATION
Attest:
_________________________ By: _______________________________
Margaret M. Calabrese Robert H. Knauss
Secretary Vice President & General Counsel
|
18
APPENDIX A
CHANGE OF CONTROL
For purposes of the Plan, the term "Change of Control" shall have
the meaning set forth below and the defined terms used in the definition of
"Change of Control" shall have the meanings set forth below.
1. "Change of Control" shall mean:
(a) Any Person (except the Participant (as defined in
the Plan), his Affiliates and Associates, UGI, any Subsidiary of UGI, any
employee benefit plan of UGI or of any Subsidiary of UGI, or any Person or
entity organized, appointed or established by UGI for or pursuant to the terms
of any such employee benefit plan), together with all Affiliates and Associates
of such Person, becomes the Beneficial Owner in the aggregate of 20% or more of
either (i) the then outstanding shares of common stock of UGI (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the then outstanding
voting securities of UGI entitled to vote generally in the election of directors
(the "Company Voting Securities"), in either case unless the members of UGI's
Executive Committee in office immediately prior to such acquisition determine
within five business days of the receipt of actual notice of such acquisition
that the circumstances do not warrant the implementation of the Change of
Control provisions of this Plan; or
(b) Individuals who, as of the beginning of any
twenty-four month period, constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board, provided that any
individual becoming a director subsequent to the beginning of such period whose
election or nomination for election by UGI's stockholders was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Directors of UGI (as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or
(c) Completion by UGI of a reorganization, merger or
consolidation (a "Business Combination"), in each case, with respect to which
all or substantially all of the individuals and entities who were the respective
Beneficial Owners of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such Business Combination do not, following such
Business Combination, Beneficially Own, directly or indirectly, more than 50%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination in substantially the same proportion as
their ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock and Company Voting
A-1
Securities, as the case may be, in any such case unless the members of UGI's
Executive Committee in office immediately prior to such Business Combination
determine at the time of such Business Combination that the circumstances do not
warrant the implementation of the Change of Control provisions of this Plan; or
(d) Completion of (i) a complete liquidation or
dissolution of UGI or (ii) sale or other disposition of all or substantially all
of the assets of UGI other than to a corporation with respect to which,
following such sale or disposition, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors is then owned beneficially, directly or indirectly, by all or
substantially all of the individuals and entities who were the Beneficial
Owners, respectively, of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such sale or disposition in substantially the
same proportion as their ownership of the Outstanding Company Common Stock and
Company Voting Securities, as the case may be, immediately prior to such sale or
disposition, in any such case unless the members of UGI's Executive Committee in
office immediately prior to such sale or disposition determine at the time of
such sale or disposition that the circumstances do not warrant the
implementation of the Change of Control provisions of this Plan.
2. "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
3. A Person shall be deemed the "Beneficial Owner" of any
securities: (i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for payment, purchase or exchange; (ii) that such Person
or any of such Person's Affiliates or Associates, directly or indirectly, has
the right to vote or dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange
Act), including without limitation pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of any security under this clause (ii) as a
result of an oral or written agreement, arrangement or understanding to vote
such security if such agreement, arrangement or understanding (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of the General Rules and Regulations under the Exchange Act, and (B) is not then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or (iii) that are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates) has
A-2
any agreement, arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to clause (ii) above) or disposing of any voting
securities of UGI; provided, however, that nothing in this Section 1(c) shall
cause a Person engaged in business as an underwriter of securities to be the
"Beneficial Owner" of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of 40 days after the date of such acquisition.
4. "Board" shall mean the Board of Directors of UGI.
5. "Person" shall mean an individual or a corporation,
partnership, trust, unincorporated organization, association, or other entity.
6. "Subsidiary" shall mean any corporation in which UGI,
directly or indirectly, owns at least a 50% interest or an unincorporated entity
of which UGI, directly or indirectly, owns at least 50% of the profits or
capital interests.
7. "UGI" shall mean UGI Corporation.
A-3
EXHIBIT 10.17
UGI CORPORATION
2004 OMNIBUS EQUITY COMPENSATION PLAN
AS AMENDED ON DECEMBER 7, 2004
UGI CORPORATION
2004 OMNIBUS EQUITY COMPENSATION PLAN
TABLE OF CONTENTS
PAGE
1. Purpose...................................... 1
2. Definitions.................................. 1
3. Administration............................... 3
4. Grants....................................... 4
5. Shares Subject to the Plan................... 4
6. Eligibility for Participation................ 5
7. Options...................................... 6
8. Stock Units.................................. 7
9. Performance Units............................ 7
10. Stock Awards................................. 8
11. Dividend Equivalents......................... 8
12. Other Stock-Based Awards..................... 9
13. Qualified Performance-Based Compensation..... 9
14. Directors' Equity Plan....................... 10
15. Deferrals.................................... 10
16. Withholding of Taxes......................... 10
17. Transferability of Grants.................... 11
18. Consequences of a Change of Control.......... 11
19. Requirements for Issuance of Shares.......... 12
20. Amendment and Termination of the Plan........ 12
21. Miscellaneous................................ 13
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i
UGI CORPORATION
2004 OMNIBUS EQUITY COMPENSATION PLAN
1. PURPOSE
The purpose of the UGI Corporation 2004 Omnibus Equity Compensation Plan
(the "Plan") is to provide (i) designated employees of UGI Corporation ("UGI")
and its subsidiaries, and (ii) non-employee members of the board of directors of
UGI with the opportunity to receive grants of stock options, stock units,
performance units, stock awards, dividend equivalents and other stock-based
awards. UGI believes that the Plan will encourage the participants to contribute
materially to the growth of UGI, thereby benefitting UGI's shareholders, and
will align the economic interests of the participants with those of the
shareholders.
The Plan shall be effective as of January 1, 2004, and has been approved
by the shareholders of UGI. The UGI Corporation Directors' Equity Compensation
Plan shall be merged into the Plan as of the effective date of the Plan. The
Plan was amended in December 2004, effective as of the original effective date
of the Plan.
2. DEFINITIONS
Whenever used in this Plan, the following terms will have the respective
meanings set forth below:
(a) "Board" means UGI's Board of Directors as constituted from time to
time.
(b) "Certificate" means a certificate, or electronic book entry
equivalent, for a share of Stock.
(c) "Change of Control" means a change of control of UGI as described on
the attached Exhibit A, or as modified by the Board from time to time.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means (i) with respect to Grants to Employees, the
Compensation and Management Development Committee of the Board or its successor,
and (ii) with respect to Grants made to Non-Employee Directors, the Board or its
delegate.
(f) "Company" means UGI and any Subsidiary.
(g) "Date of Grant" means the effective date of a Grant; provided,
however, that no retroactive Grants will be made.
(h) "Directors' Equity Plan" means the UGI Corporation Directors' Equity
Compensation Plan.
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(i) "Dividend Equivalent" means an amount determined by multiplying the
number of shares of Stock subject to a Grant by the per-share cash dividend, or
the per-share fair market value (as determined by the Committee) of any dividend
in consideration other than cash, paid by UGI on its Stock.
(j) "Effective Date" of the Plan means January 1, 2004, subject to
approval of the Plan by the shareholders of UGI.
(k) "Employee" means an employee of the Company (including an officer or
director who is also an employee). For purposes of the Plan, the term "Employee"
shall also include a chief executive officer or other officer or person who
performs management and policymaking functions with respect to a Subsidiary of
UGI located outside the United States.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Fair Market Value" of Stock means the average, rounded to one cent
($0.01), of the highest and lowest sales prices of a share of Stock on the New
York Stock Exchange on the day on which Fair Market Value is being determined,
as reported on the composite tape for transactions on the New York Stock
Exchange. In the event that there are no Stock transactions on the New York
Stock Exchange on such day, the Fair Market Value will be determined as of the
immediately preceding day on which there were Stock transactions on that
exchange. Notwithstanding the foregoing, in the case of a broker-assisted
exercise pursuant to Section 7(f), the Fair Market Value will be the actual sale
price of the shares issued upon exercise of the Option.
(n) "Grant" means an Option, Stock Unit, Performance Unit, Stock Award,
Dividend Equivalent or Other Stock-Based Award granted under the Plan.
(o) "Grant Letter" means the written instrument that sets forth the terms
and conditions of a Grant, including all amendments thereto.
(p) "Non-Employee Director" means a member of the Board who is not an
employee of the Company.
(q) "Option" means an option to purchase shares of Stock, as described in
Section 7.
(r) "Option Price" means an amount per share of Stock purchasable under an
Option, as designated by the Committee.
(s) "Other Stock-Based Award" means any Grant based on, measured by or
payable in Stock (other than Grants described in Sections 7, 8, 9, 10 and 11 of
the Plan) as described in Section 12.
(t) "Participant" means an Employee or Non-Employee Director designated by
the Committee to participate in the Plan.
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(u) "Performance Unit" means an award of a phantom unit representing a
share of Stock, as described in Section 9.
(v) "Plan" means this 2004 Omnibus Equity Compensation Plan, as in effect
from time to time.
(w) "Stock" means the common stock of UGI or such other securities of UGI
as may be substituted for Stock pursuant to Section 5(d) or Section 18.
(x) "Stock Award" means an award of Stock as described in Section 10.
(y) "Stock Unit" means an award of a phantom unit representing a share of
Stock, as described in Section 8.
(z) "Subsidiary" means any corporation or partnership, at least 20% of the
outstanding voting stock, voting power or partnership interest of which is
owned, directly or indirectly, by UGI.
(aa) "Target Amount" means a target number of Shares to be issued based on
achievement of the performance goals and satisfaction of all conditions for
payment of Performance Units at the 100% level.
(bb) "UGI" means UGI Corporation, a Pennsylvania corporation or any
successor thereto.
3. ADMINISTRATION
(a) Committee. The Plan shall be administered and interpreted by the
Compensation and Management Development Committee of the Board or its successor
with respect to grants to Employees. The Plan shall be administered and
interpreted by the Board, or by a committee of directors to whom the Board has
delegated responsibility, with respect to grants to Non-Employee Directors. The
Board or committee, as applicable, that has authority with respect to a specific
Grant shall be referred to as the "Committee" with respect to that Grant.
Ministerial functions may be performed by an administrative committee comprised
of Company employees appointed by the Committee.
(b) Committee Authority. The Committee shall have the sole authority to
(i) determine the Participants to whom Grants shall be made under the Plan, (ii)
determine the type, size and terms and conditions of the Grants to be made to
each such Participant, (iii) determine the time when the grants will be made and
the duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability, (iv) amend
the terms and conditions of any previously issued Grant, subject to the
provisions of Section 19 below, and (v) deal with any other matters arising
under the Plan.
(c) Committee Determinations. The Committee shall have full power and
express discretionary authority to administer and interpret the Plan, to make
factual determinations and to adopt or amend such rules, regulations, agreements
and instruments for implementing the Plan
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and for the conduct of its business as it deems necessary or advisable, in its
sole discretion. The Committee's interpretations of the Plan and all
determinations made by the Committee pursuant to the powers vested in it
hereunder shall be conclusive and binding on all persons having any interest in
the Plan or in any awards granted hereunder. All powers of the Committee shall
be executed in its sole discretion, in the best interest of the Company, not as
a fiduciary, and in keeping with the objectives of the Plan and need not be
uniform as to similarly situated Participants.
4. GRANTS
(a) Grants under the Plan may consist of Options as described in Section
7, Stock Units as described in Section 8, Performance Units as described in
Section 9, Stock Awards as described in Section 10, Dividend Equivalents as
described in Section 11 and Other Stock-Based Awards as described in Section 12.
All Grants shall be subject to such terms and conditions as the Committee deems
appropriate and as are specified in writing by the Committee to the Participant
in the Grant Letter.
(b) All Grants shall be made conditional upon the Participant's
acknowledgement, in writing or by acceptance of the Grant, that all decisions
and determinations of the Committee shall be final and binding on the
Participant, his or her beneficiaries and any other person having or claiming an
interest under such Grant. Grants under a particular Section of the Plan need
not be uniform as among the Participants.
(c) The Committee may make Grants that are contingent on, and subject to,
shareholder approval of the Plan or an amendment to the Plan.
5. SHARES SUBJECT TO THE PLAN
(a) Shares Authorized. The total aggregate number of shares of Stock that
may be issued under the Plan is 3,500,000 shares, subject to adjustment as
described below. The maximum number of shares of Stock that may be issued under
the Plan pursuant to Grants other than Options and Dividend Equivalents during
the term of the Plan is 800,000 shares, subject to adjustment as described
below. The shares may be authorized but unissued shares of Stock or reacquired
shares of Stock, including shares purchased by the Company on the open market
for purposes of the Plan. Grants paid in cash shall not count against the
foregoing share limits.
(b) Share Counting. For administrative purposes, when the Committee makes
a Grant payable in Stock, the Committee shall reserve shares equal to the
maximum number of shares that may be issued under the Grant. If and to the
extent Options granted under the Plan terminate, expire, or are canceled,
forfeited, exchanged or surrendered without having been exercised, and if and to
the extent that any Stock Awards, Stock Units, Performance Units, Dividend
Equivalents or Other Stock-Based Awards are forfeited or terminated, or
otherwise are not paid in full, the shares reserved for such Grants shall again
be available for purposes of the Plan. Shares of Stock surrendered in payment of
the Option Price of an Option shall again be available for issuance under the
Plan. To the extent that Grants are paid in cash, and not in
4
shares of Stock, any shares previously reserved for issuance pursuant to such
Grants shall again be available for issuance under the Plan.
(c) Individual Limits. All Grants under the Plan, other than Dividend
Equivalents, shall be expressed in shares of Stock. The maximum aggregate number
of shares of Stock with respect to which all Grants, other than Dividend
Equivalents, may be made under the Plan to any individual during any calendar
year shall be 750,000 shares, subject to adjustment as described below. The
maximum aggregate number of shares of Stock with respect to which all Grants,
other than Options and Dividend Equivalents, may be made under the Plan to any
individual during any calendar year shall be 100,000 shares, subject to
adjustment as described below. A Participant may not accrue Dividend Equivalents
during any calendar year in excess of $1,000,000. The individual limits of this
subsection (b) shall apply without regard to whether the Grants are to be paid
in Stock or cash. All cash payments (other than with respect to Dividend
Equivalents) shall equal the Fair Market Value of the shares of Stock to which
the cash payment relates.
(d) Adjustments. If there is any change in the number or kind of shares of
Stock outstanding (i) by reason of a stock dividend, spinoff, recapitalization,
stock split, or combination or exchange of shares, (ii) by reason of a merger,
reorganization or consolidation, (iii) by reason of a reclassification or change
in par value, or (iv) by reason of any other extraordinary or unusual event
affecting the outstanding Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Stock is substantially
reduced as a result of a spinoff or the Company's payment of an extraordinary
dividend or distribution, the maximum number of shares of Stock available for
issuance under the Plan, the maximum number of shares of Stock for which any
individual may receive Grants in any year, the number of shares covered by
outstanding Grants, the kind of shares to be issued under the Plan, and the
price per share or the applicable market value of such Grants shall be
appropriately adjusted by the Committee to reflect any increase or decrease in
the number of, or change in the kind or value of, issued shares of Stock to
preclude, to the extent practicable, the enlargement or dilution of rights and
benefits under such Grants; provided, however, that any fractional shares
resulting from such adjustment shall be eliminated. Any adjustments determined
by the Committee shall be final, binding and conclusive.
6. ELIGIBILITY FOR PARTICIPATION
(a) Eligible Persons. All Employees, including Employees who are officers
or members of the Board, and all Non-Employee Directors shall be eligible to
participate in the Plan.
(b) Selection of Participants. The Committee shall select the Employees
and Non-Employee Directors to receive Grants and shall determine the number of
shares of Stock subject to each Grant.
5
7. OPTIONS
(a) General Requirements. The Committee may grant Options to an Employee
or Non-Employee Director upon such terms and conditions as the Committee deems
appropriate under this Section 7. The Committee may grant Dividend Equivalents
with respect to Options.
(b) Number of Shares. The Committee shall determine the number of shares
of Stock that will be subject to each Grant of Options to Employees and
Non-Employee Directors.
(c) Type of Option, Price and Term.
(i) The Committee may grant Options that are nonqualified stock
options and are not considered incentive stock options under section 422 of the
Code.
(ii) The Option Price of Stock subject to an Option shall be
determined by the Committee and shall be equal to or greater than the Fair
Market Value of a share of Stock on the Date of Grant.
(iii) The Committee shall determine the term of each Option. The
term of an Option shall not exceed ten years from the Date of Grant.
(d) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions as may be determined by the Committee
and specified in the Grant Letter. The Committee may accelerate the
exercisability of any or all outstanding Options at any time for any reason.
(e) Termination of Employment or Service. Except as provided in the Grant
Letter, an Option may only be exercised while the Participant is employed by the
Company, or providing service as a Non-Employee Director. The Committee shall
determine in the Grant Letter under what circumstances and during what time
periods a Participant may exercise an Option after termination of employment or
service.
(f) Exercise of Options. A Participant may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company. The Participant shall pay the Option Price for the Option (i) in
cash, (ii) by delivering shares of Stock owned by the Participant and having a
Fair Market Value on the date of exercise equal to the Option Price or by
attestation to ownership of shares of Stock having an aggregate Fair Market
Value on the date of exercise equal to the Option Price, (iii) by payment
through a broker in accordance with procedures permitted by Regulation T of the
Federal Reserve Board, or (iv) by such other method as the Committee may
approve. Shares of Stock used to exercise an Option shall have been held by the
Participant for the requisite period of time to avoid adverse accounting
consequences to the Company with respect to the Option. Payment for the shares
pursuant to the Option, and any required withholding taxes, must be received by
the time specified by the Committee depending on the type of payment being made,
but in all cases prior to the issuance of the Stock.
6
8. STOCK UNITS
(a) General Requirements. The Committee may grant Stock Units to an
Employee or Non-Employee Director, upon such terms and conditions as the
Committee deems appropriate under this Section 8. Each Stock Unit shall
represent the right of the Participant to receive a share of Stock or an amount
based on the value of a share of Stock. All Stock Units shall be credited to
accounts on the Company's records for purposes of the Plan.
(b) Terms of Stock Units. The Committee may grant Stock Units that are
payable on terms and conditions determined by the Committee. Stock Units may be
paid at the end of a specified period, or payment may be deferred to a date
authorized by the Committee. The Committee shall determine the number of Stock
Units to be granted and the requirements applicable to such Stock Units. The
Committee may grant Dividend Equivalents with respect to Stock Units.
(c) Payment With Respect to Stock Units. Payment with respect to Stock
Units shall be made in cash, in Stock, or in a combination of the two, as
determined by the Committee. The Grant Letter shall specify the maximum number
of shares that can be issued under the Stock Units.
(d) Requirement of Employment or Service. The Committee shall determine in
the Grant Letter under what circumstances a Participant may retain Stock Units
after termination of the Participant's employment or service, and the
circumstances under which Stock Units may be forfeited.
9. PERFORMANCE UNITS
(a) General Requirements. The Committee may grant Performance Units to an
Employee or Non-Employee Director, upon such terms and conditions as the
Committee deems appropriate under this Section 9. Each Performance Unit shall
represent the right of the Participant to receive a share of Stock or an amount
based on the value of a share of Stock, if specified performance goals and other
conditions are met. All Performance Units shall be credited to accounts on the
Company's records for purposes of the Plan.
(b) Terms of Performance Units. The Committee shall establish the
performance goals and other conditions for payment of Performance Units.
Performance Units may be paid at the end of a specified performance or other
period, or payment may be deferred to a date authorized by the Committee. The
Committee shall determine the number of Performance Units to be granted and the
requirements applicable to such Performance Units. The Committee may grant
Dividend Equivalents with respect to Performance Units.
(c) Payment With Respect to Performance Units. Payment with respect to
Performance Units shall be made in cash, in Stock, or in a combination of the
two, as determined by the Committee. The Committee shall establish a Target
Amount for Performance Units in the Grant Letter. Payment of Performance Units
in excess of the Target Amount shall be made in cash.
7
(d) Requirement of Employment or Service. The Committee shall determine in
the Grant Letter under what circumstances a Participant may retain Performance
Units after termination of the Participant's employment or service, and the
circumstances under which Performance Units may be forfeited.
10. STOCK AWARDS
(a) General Requirements. The Committee may issue shares of Stock to an
Employee or Non-Employee Director under a Stock Award, upon such terms and
conditions as the Committee deems appropriate under this Section 10. Shares of
Stock issued pursuant to Stock Awards may be issued for cash consideration or
for no cash consideration, and subject to restrictions or no restrictions, as
determined by the Committee. The Committee may establish conditions under which
restrictions on Stock Awards shall lapse over a period of time or according to
such other criteria as the Committee deems appropriate, including restrictions
based upon the achievement of specific performance goals.
(b) Number of Shares. The Committee shall determine the number of shares
of Stock to be issued pursuant to a Stock Award and any restrictions applicable
to such shares.
(c) Requirement of Employment or Service. The Committee shall determine in
the Grant Letter under what circumstances a Participant may retain Stock Awards
after termination of the Participant's employment or service, and the
circumstances under which Stock Awards may be forfeited.
(d) Restrictions on Transfer. While Stock Awards are subject to
restrictions, a Participant may not sell, assign, transfer, pledge or otherwise
dispose of the shares of a Stock Award except upon death as described in Section
17. Each Certificate for a share of a Stock Award shall contain a legend giving
appropriate notice of the restrictions in the Grant. The Participant shall be
entitled to have the legend removed when all restrictions on such shares have
lapsed. The Company may retain possession of any Certificates for Stock Awards
until all restrictions on such shares have lapsed.
(e) Right to Vote and to Receive Dividends. The Committee shall determine
to what extent, and under what conditions, the Participant shall have the right
to vote shares of Stock Awards and to receive any dividends or other
distributions paid on such shares during the restriction period.
11. DIVIDEND EQUIVALENTS.
(a) General Requirements. When the Committee makes a Grant under the Plan,
the Committee may grant Dividend Equivalents in connection with such Grants,
under such terms and conditions as the Committee deems appropriate under this
Section 11. Dividend Equivalents may be paid to Participants currently or may be
deferred, as determined by the Committee. All Dividend Equivalents that are not
paid currently shall be credited to accounts on the Company's records for
purposes of the Plan. Dividend Equivalents may be accrued as a cash obligation,
or may be converted to Stock Units for the Participant, as determined by the
Committee. Unless otherwise specified in the Grant Letter, deferred Dividend
Equivalents will not accrue interest.
8
The Committee may provide that Dividend Equivalents shall be payable based on
the achievement of specific performance goals.
(b) Payment with Respect to Dividend Equivalents. Dividend Equivalents may
be payable in cash or shares of Stock or in a combination of the two, as
determined by the Committee.
12. OTHER STOCK-BASED AWARDS
The Committee may grant other awards, including stock appreciation rights,
that are based on, measured by or payable in Stock to Employees or Non-Employee
Directors, on such terms and conditions as the Committee deems appropriate under
this Section 12. Other Stock-Based Awards may be granted subject to achievement
of performance goals or other conditions and may be payable in Stock or cash, or
in a combination of the two, as determined by the Committee in the Grant Letter.
The Committee may grant Dividend Equivalents with respect to Other Stock-Based
Awards.
13. QUALIFIED PERFORMANCE-BASED COMPENSATION
(a) Designation as Qualified Performance-Based Compensation. The Committee
may determine that Stock Units, Performance Units, Stock Awards, Dividend
Equivalents or Other Stock-Based Awards granted to an Employee shall be
considered "qualified performance-based compensation" under section 162(m) of
the Code. The provisions of this Section 13 shall apply to any such Grants that
are to be considered "qualified performance-based compensation" under section
162(m) of the Code.
(b) Performance Goals. When Stock Units, Performance Units, Stock Awards,
Dividend Equivalents or Other Stock-Based Awards that are to be considered
"qualified performance-based compensation" are granted, the Committee shall
establish in writing (i) the objective performance goals that must be met, (ii)
the period during which performance will be measured, (iii) the maximum amounts
that may be paid if the performance goals are met, and (iv) any other conditions
that the Committee deems appropriate and consistent with the requirements of
Section 162(m) of the Code for "qualified performance-based compensation." The
performance goals shall satisfy the requirements for "qualified
performance-based compensation," including the requirement that the achievement
of the goals be substantially uncertain at the time they are established and
that the performance goals be established in such a way that a third party with
knowledge of the relevant facts could determine whether and to what extent the
performance goals have been met. The Committee shall not have discretion to
increase the amount of compensation that is payable, but may reduce the amount
of compensation that is payable, pursuant to Grants identified by the Committee
as "qualified performance-based compensation."
(c) Criteria Used for Objective Performance Goals. The Committee shall use
objectively determinable performance goals based on one or more of the following
criteria: stock price, earnings per share, net earnings, operating earnings,
margin, EBITDA (earnings before interest, taxes, depreciation and amortization),
net capital employed, return on assets,
9
shareholder return, return on equity, return on capital employed, growth in
assets, unit volume, sales, cash flow, market share, relative performance to a
comparison group designated by the Committee, or strategic business criteria
consisting of one or more objectives based on meeting specified revenue goals,
market penetration goals, customer growth, geographic business expansion goals,
cost targets or goals relating to acquisitions or divestitures. The performance
goals may relate to the Participant's business unit or the performance of the
Company as a whole, or any combination of the foregoing. Performance goals need
not be uniform as among Participants.
(d) Timing of Establishment of Goals. The Committee shall establish the
performance goals in writing either before the beginning of the performance
period or during a period ending no later than the earlier of (i) 90 days after
the beginning of the performance period or (ii) the date on which 25% of the
performance period has been completed, or such other date as may be required or
permitted under applicable regulations under section 162(m) of the Code.
(e) Certification of Results. The Committee shall certify the performance
results for the performance period specified in the Grant Letter after the
performance period expires. The Committee shall determine the amount, if any, to
be paid pursuant to each Grant based on the achievement of the performance goals
and the satisfaction of all other terms of the Grant Letter.
(f) Death, Disability or Other Circumstances. The Committee may provide in
the Grant Letter that Grants identified as qualified performance-based
compensation shall be payable, in whole or in part, in the event of the
Participant's death or disability, a Change of Control or under other
circumstances consistent with the Treasury regulations and rulings under section
162(m) of the Code.
14. DIRECTORS' EQUITY PLAN
The Directors' Equity Plan shall be merged into this Plan as of the
Effective Date, and all outstanding Units and accrued Dividend Equivalents under
the Directors' Equity Plan as of the Effective Date shall be issued and paid out
of this Plan. No additional awards shall be made under the Directors' Equity
Plan. Dividend Equivalents shall be credited under this Plan with respect to
outstanding Units under the Directors' Equity Plan, according to terms and
conditions established by the Committee under Section 11.
15. DEFERRALS
The Committee may permit a Participant to defer receipt of the payment of
cash or the delivery of shares that would otherwise be due to the Participant in
connection with any Grant. The Committee shall establish rules and procedures
for any such deferrals.
16. WITHHOLDING OF TAXES
(a) Required Withholding. All Grants under the Plan shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements. The Company may require that the Participant or other person
receiving or exercising Grants pay to the Company
10
the amount of any federal, state or local taxes that the Company is required to
withhold with respect to such Grants, or the Company may deduct from other wages
paid by the Company the amount of any withholding taxes due with respect to such
Grants.
(b) Election to Withhold Shares. If the Committee so permits, a
Participant may elect to satisfy the Company's tax withholding obligation with
respect to Grants paid in Stock by having shares withheld, at the time such
Grants become taxable, up to an amount that does not exceed the minimum
applicable withholding tax rate for federal (including FICA), state and local
tax liabilities. The election must be in a form and manner prescribed by the
Committee and may be subject to the prior approval of the Committee.
17. TRANSFERABILITY OF GRANTS
Only the Participant may exercise rights under a Grant during the
Participant's lifetime, and a Participant may not transfer those rights except
by will or by the laws of descent and distribution. When a Participant dies, the
personal representative or other person entitled to succeed to the rights of the
Participant may exercise such rights. Any such successor must furnish proof
satisfactory to the Company of his or her right to receive the Grant under the
Participant's will or under the applicable laws of descent and distribution.
18. CONSEQUENCES OF A CHANGE OF CONTROL
(a) Notice and Acceleration. Upon a Change of Control, unless the
Committee determines otherwise, (i) the Company shall provide each Participant
who holds outstanding Grants with written notice of the Change of Control, (ii)
all outstanding Options shall automatically accelerate and become fully
exercisable, (iii) the restrictions and conditions on all outstanding Stock
Awards shall immediately lapse, (iv) all Stock Units and Performance Units shall
become payable in cash in an amount not less than their Target Amount or in a
larger amount, up to the maximum Grant value, as determined by the Committee,
and (v) Dividend Equivalents and Other Stock-Based Awards shall become payable
in full in cash, in amounts determined by the Committee.
(b) Assumption of Grants. Upon a Change of Control where the Company is
not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
that are not exercised shall be assumed by, or replaced with comparable options
by, the surviving corporation (or a parent or subsidiary of the surviving
corporation), and other Grants that remain outstanding after the Change of
Control shall be converted to similar grants of the surviving corporation (or a
parent or subsidiary of the surviving corporation).
(c) Other Alternatives. Notwithstanding the foregoing, subject to
subsection (d) below, in the event of a Change of Control, the Committee may
take any of the following actions with respect to any or all outstanding Grants,
without the consent of any Participant: (i) the Committee may require that
Participants surrender their outstanding Options in exchange for a payment by
the Company, in cash or Stock as determined by the Committee, in an amount equal
to the amount by which the then Fair Market Value of the shares of Stock subject
to the
11
Participant's unexercised Options exceeds the Option Price, if any, (ii) after
giving Participants an opportunity to exercise their outstanding Options, the
Committee may terminate any or all unexercised Options at such time as the
Committee deems appropriate, and (iii) with respect to Participants holding
Stock Units, Performance Units, Dividend Equivalents or Other Stock-Based
Awards, the Committee may determine that such Participants shall receive a
payment in settlement of such Stock Units, Performance Units, Dividend
Equivalents or Other Stock-Based Awards, in such amount and form as may be
determined by the Committee. Such surrender, termination or settlement shall
take place as of the date of the Change of Control or such other date as the
Committee may specify.
(d) Committee. The Committee making the determinations under this Section
18 following a Change of Control must be comprised of the same members as those
of the Committee immediately before the Change of Control. If the Committee
members do not meet this requirement, the automatic provisions of subsections
(a) and (b) shall apply, and the Committee shall not have discretion to vary
them.
(e) Other Transactions. The Committee may provide in a Grant Letter that a
sale or other transaction involving a Subsidiary or other business unit of the
Company shall be considered a Change of Control for purposes of a Grant, or the
Committee may establish other provisions that shall be applicable in the event
of a specified transaction.
19. REQUIREMENTS FOR ISSUANCE OF SHARES
No Stock shall be issued in connection with any Grant hereunder unless and
until all legal requirements applicable to the issuance of such Stock have been
complied with to the satisfaction of the Committee. The Committee shall have the
right to condition any Grant made to any Participant hereunder on such
Participant's undertaking in writing to comply with such restrictions on his or
her subsequent disposition of such shares of Stock as the Committee shall deem
necessary or advisable, and Certificates representing such shares may be
legended to reflect any such restrictions. Certificates representing shares of
Stock issued under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon. No
Participant shall have any right as a shareholder with respect to Stock covered
by a Grant until shares have been issued to the Participant.
20. AMENDMENT AND TERMINATION OF THE PLAN
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that the Board shall not amend the Plan without approval of
the shareholders of UGI if such approval is required in order to comply with the
Code or applicable laws, or to comply with applicable stock exchange
requirements. No amendment or termination of this Plan shall, without the
consent of the Participant, materially impair any rights or obligations under
any Grant previously made to the Participant under the Plan, unless such right
has been reserved in the Plan or the Grant Letter, or except as provided in
Section 21(c) below.
(b) No Repricing Without Shareholder Approval. Notwithstanding anything in
the Plan to the contrary, the Committee may not reprice Options, nor may the
Board amend the Plan
12
to permit repricing of Options, unless the shareholders of UGI provide prior
approval for such repricing. The term "repricing" shall have the meaning given
that term in Section 303A(8) of the New York Stock Exchange Listed Company
Manual, as in effect from time to time.
(c) Shareholder Approval for "Qualified Performance-Based Compensation."
If Stock Units, Performance Units, Stock Awards, Dividend Equivalents or Other
Stock-Based Awards are granted as "qualified performance-based compensation"
under Section 13 above, the Plan must be reapproved by the UGI shareholders no
later than the first shareholders meeting that occurs in the fifth year
following the year in which the shareholders previously approved the provisions
of Section 13, if additional Grants are to be made under Section 13 and if
required by section 162(m) of the Code or the regulations thereunder.
(d) Termination of Plan. The Plan shall terminate on the day immediately
preceding the tenth anniversary of its Effective Date, unless the Plan is
terminated earlier by the Board or is extended by the Board with the approval of
the shareholders. The termination of the Plan shall not impair the power and
authority of the Committee with respect to an outstanding Grant.
21. MISCELLANEOUS
(a) Grants in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to make Grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including Grants to employees thereof
who become Employees, or for other proper corporate purposes, or (ii) limit the
right of the Company to grant stock options or make other stock-based awards
outside of this Plan. Without limiting the foregoing, the Committee may make a
Grant to an employee of another corporation who becomes an Employee by reason of
a corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company in substitution for a grant
made by such corporation. The terms and conditions of the Grants may vary from
the terms and conditions required by the Plan and from those of the substituted
stock incentives, as determined by the Committee
(b) Reduction of Responsibilities. The Committee shall have discretion to
adjust an Employee's outstanding Grants if the Employee's authority, duties or
responsibilities are significantly reduced.
(c) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Stock under Grants
shall be subject to all applicable laws and to approvals by any governmental or
regulatory agency as may be required. With respect to persons subject to section
16 of the Exchange Act, it is the intent of the Company that the Plan and all
transactions under the Plan comply with all applicable provisions of Rule 16b-3
or its successors under the Exchange Act. In addition, it is the intent of the
Company that Options, and Grants made under Section 13 of the Plan, comply with
the applicable provisions of section 162(m) of the Code. To the extent that any
legal requirement of section 16 of the Exchange Act or section 162(m) of the
Code as set forth in the Plan ceases to be required under section 16 of the
Exchange Act or section 162(m) of the Code, that Plan provision shall cease to
13
apply. The Committee may revoke any Grant if it is contrary to law or modify a
Grant to bring it into compliance with any valid and mandatory government
regulation. The Committee may also adopt rules regarding the withholding of
taxes on payments to Participants. The Committee may, in its sole discretion,
agree to limit its authority under this Section.
(d) Enforceability. The Plan shall be binding upon and enforceable against
the Company and its successors and assigns.
(e) Funding of the Plan; Limitation on Rights. This Plan shall be
unfunded. The Company shall not be required to establish any special or separate
fund or to make any other segregation of assets to assure the payment of any
Grants under this Plan. Nothing contained in the Plan and no action taken
pursuant hereto shall create or be construed to create a fiduciary relationship
between the Company and any Participant or any other person. No Participant or
any other person shall under any circumstances acquire any property interest in
any specific assets of the Company. To the extent that any person acquires a
right to receive payment from the Company hereunder, such right shall be no
greater than the right of any unsecured general creditor of the Company.
(f) Rights of Participants. Nothing in this Plan shall entitle any
Employee, Non-Employee Director or other person to any claim or right to receive
a Grant under this Plan. Neither this Plan nor any action taken hereunder shall
be construed as giving any individual any rights to be retained by or in the
employment or service of the Company.
(g) No Fractional Shares. No fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Grant. The Committee shall determine
whether cash, other awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(h) Employees Subject to Taxation Outside the United States. With respect
to Participants who are subject to taxation in countries other than the United
States, the Committee may make Grants on such terms and conditions as the
Committee deems appropriate to comply with the laws of the applicable countries,
and the Committee may create such procedures, addenda and subplans and make such
modifications as may be necessary or advisable to comply with such laws.
(i) Governing Law. The validity, construction, interpretation and effect
of the Plan and Grant Letters issued under the Plan shall be governed and
construed by and determined in accordance with the laws of the Commonwealth of
Pennsylvania, without giving effect to the conflict of laws provisions thereof.
14
UGI CORPORATION
2004 OMNIBUS EQUITY COMPENSATION PLAN
EXHIBIT A
For purposes of the Plan, the term "Change of Control," and other defined terms
used in the definition of "Change of Control," shall have the following
meanings:
1. "Change of Control" shall mean:
(i) Any Person (except UGI, any UGI Subsidiary, any employee
benefit plan of UGI or of any UGI Subsidiary, or any Person or entity organized,
appointed or established by UGI for or pursuant to the terms of any such
employee benefit plan), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner in the aggregate of 20% or more of either
(i) the then outstanding shares of common stock of UGI (the "Outstanding UGI
Common Stock") or (ii) the combined voting power of the then outstanding voting
securities of UGI entitled to vote generally in the election of directors (the
"UGI Voting Securities"); or
(ii) Individuals who, as of the beginning of any 24-month period,
constitute the UGI Board of Directors (the "Incumbent UGI Board") cease for any
reason to constitute at least a majority of the Incumbent UGI Board, provided
that any individual becoming a director of UGI subsequent to the beginning of
such period whose election or nomination for election by the UGI shareholders
was approved by a vote of at least a majority of the directors then comprising
the Incumbent UGI Board shall be considered as though such individual were a
member of the Incumbent UGI Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors of UGI (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
(iii) Consummation by UGI of a reorganization, merger or
consolidation (a "Business Combination"), in each case, with respect to which
all or substantially all of the individuals and entities who were the respective
Beneficial Owners of the Outstanding UGI Common Stock and UGI Voting Securities
immediately prior to such Business Combination do not, following such Business
Combination, Beneficially Own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination in substantially the same proportion as
their ownership immediately prior to such Business Combination of the
Outstanding UGI Common Stock and UGI Voting Securities, as the case may be; or
(iv) Consummation of (a) a complete liquidation or dissolution of
UGI or (b) a sale or other disposition of all or substantially all of the assets
of UGI other than to a corporation with respect to which, following such sale or
disposition, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
A-1
directors is then owned beneficially, directly or indirectly, by all or
substantially all of the individuals and entities who were the Beneficial
Owners, respectively, of the Outstanding UGI Common Stock and UGI Voting
Securities immediately prior to such sale or disposition in substantially the
same proportion as their ownership of the Outstanding UGI Common Stock and UGI
Voting Securities, as the case may be, immediately prior to such sale or
disposition.
2. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
3. A Person shall be deemed the "Beneficial Owner" of any
securities: (i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for payment, purchase or exchange; (ii) that such Person
or any of such Person's Affiliates or Associates, directly or indirectly, has
the right to vote or dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange
Act), including without limitation pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of any security under this clause (ii) as a
result of an oral or written agreement, arrangement or understanding to vote
such security if such agreement, arrangement or understanding (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of the General Rules and Regulations under the Exchange Act, and (B) is not then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or (iii) that are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to clause (ii) above) or disposing of any securities;
provided, however, that nothing in this Section 1(c) shall cause a Person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of any securities acquired through such Person's participation in good faith in
a firm commitment underwriting until the expiration of forty (40) days after the
date of such acquisition.
4. "Person" shall mean an individual or a corporation, partnership,
trust, unincorporated organization, association, or other entity.
5. "UGI Subsidiary" shall mean any corporation in which UGI directly
or indirectly, owns at least a fifty percent (50%) interest or an unincorporated
entity of which UGI, as applicable, directly or indirectly, owns at least fifty
percent (50%) of the profits or capital interests.
A-2
EXHIBIT 10.36
7/23/2004
UGI Employees
UGI CORPORATION
2004 OMNIBUS EQUITY COMPENSATION PLAN
NONQUALIFIED STOCK OPTION GRANT LETTER
This STOCK OPTION GRANT, dated as of January 1, 2004 (the "Date of
Grant"), is delivered by UGI Corporation ("UGI") to _____________ (the
"Participant").
RECITALS
The UGI Corporation 2004 Omnibus Equity Compensation Plan (the "Plan")
provides for the grant of options to purchase shares of common stock of UGI. The
Compensation and Management Development Committee of the Board of Directors of
the Company (the "Committee") has decided to make a stock option grant to the
Participant.
NOW, THEREFORE, the parties to this Grant Letter, intending to be legally
bound hereby, agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth in this Grant
Letter and in the Plan, the Committee hereby grants to the Participant a
nonqualified stock option (the "Option") to purchase ______ shares of common
stock of UGI ("Shares") at an exercise price of $33.97 per Share. The Option
shall become exercisable according to Paragraph 2 below.
2. Exercisability of Option. The Option shall become exercisable on the
following dates, if the Participant is employed by, or providing service to, the
Company (as defined below) on the applicable date:
Shares for Which the
Date Option is Exercisable
---- ---------------------
January 1, 2005 33 1/3%
January 1, 2006 33 1/3%
January 1, 2007 33 1/3%
|
The exercisability of the Option is cumulative, but shall not exceed 100% of the
Shares subject to the Option. If the foregoing schedule would produce fractional
Shares, the number of Shares for which the Option becomes exercisable shall be
rounded down to the nearest whole Share.
3. Term of Option.
(a) The Option shall have a term of ten years from the Date of Grant and
shall terminate at the expiration of that period (5:00 p.m. EST on December 31,
2013), unless it is terminated at an earlier date pursuant to the provisions of
this Grant Letter or the Plan.
(b) If the Participant ceases to be employed by, or provide service to,
the Company, the Option will terminate on the date the Participant ceases such
employment or service. However, if the Participant ceases to be employed by, or
provide service to, the Company by reason of (i) Termination without Cause, (ii)
Retirement (as defined below), (iii) Disability (as defined below), or (iv)
death, the Option held by the Participant will thereafter be exercisable
pursuant to the following terms:
(i) Termination Without Cause. If the Participant terminates
employment or service on account of a Termination without Cause, the
Option will thereafter be exercisable only with respect to that number of
Shares with respect to which the Option is already exercisable on the date
the Participant's employment or service terminates. Such portion of the
Option will terminate upon the earlier of the expiration date of the
Option or the expiration of the 13-month period commencing on the date the
Participant ceases to be employed by, or provide service to, the Company.
(ii) Retirement. If the Participant ceases to be employed by, or
provide service to, the Company on account of Retirement, the Option will
thereafter become exercisable as if the Participant had continued to
provide service to the Company for 36 months after the date of such
Retirement. The Option will terminate upon the earlier of the expiration
date of the Option or the expiration of such 36-month period.
(iii) Disability. If the Participant ceases to be employed by, or
provide service to, the Company on account of Disability, the Option will
thereafter become exercisable as if the Participant had continued to
provide service to the Company for 36 months after the date of such
termination of employment or service. The Option will terminate upon the
earlier of the expiration date of the Option or the expiration of such
36-month period.
(iv) Death. In the event of the death of the Participant while
employed by, or providing service to, the Company, the Option will be
fully and immediately exercisable and may be exercised at any time prior
to the earlier of the expiration date of the Option or the expiration of
the 12-month period following the Participant's death. Death of the
Participant after the Participant has ceased to be employed by, or provide
service to, the Company will not affect the otherwise applicable period
for exercise of the Option determined pursuant to subsections (i), (ii) or
(iii) above. After the Participant's death, the Participant's Option may
be exercised by the Participant's estate.
4. Exercise Procedures.
(a) Subject to the provisions of Paragraphs 2 and 3 above, the Participant
may exercise part or all of the exercisable Option by giving UGI irrevocable
written notice of intent to exercise on a form provided by UGI and delivered in
the manner provided in Section 13 below. Payment of the exercise price and any
applicable withholding taxes must be made prior to issuance of the Shares. The
Participant shall pay the exercise price (i) in cash, (ii) by delivering Shares
(or by attestation to ownership of Shares), which shall be valued at their fair
market value on the date of delivery, which shall have been held by the
Participant for at least six months, and which shall have a fair market value on
the date of exercise equal to the exercise price, (iii) by payment through a
broker in accordance with procedures acceptable to the Committee and
-2-
permitted by Regulation T of the Federal Reserve Board or (iv) by such other
method as the Committee may approve. The Committee may impose such limitations
as it deems appropriate on the use of Shares to exercise the Option.
(b) The obligation of UGI to deliver Shares upon exercise of the Option
shall be subject to all applicable laws, rules, and regulations and such
approvals by governmental agencies as may be deemed appropriate by the
Committee, including such actions as UGI's counsel shall deem necessary or
appropriate to comply with relevant securities laws and regulations. UGI may
require that the Participant (or other person exercising the Option after the
Participant's death) represent that the Participant is purchasing Shares for the
Participant's own account and not with a view to or for sale in connection with
any distribution of the Shares, or such other representation as UGI deems
appropriate.
(c) All obligations of UGI under this Grant Letter shall be subject to the
rights of the Company as set forth in the Plan to withhold amounts required to
be withheld for any taxes, if applicable.
5. Definitions. Whenever used in this Grant Letter, the following terms shall
have the meanings set forth below:
(a) "Company" means UGI and its Subsidiaries (as defined in the Plan).
(b) "Disability" means a long-term disability as defined in the Company's
long-term disability plan applicable to the Participant.
(c) "Employed by, or provide service to, the Company" shall mean
employment or service as an employee or director of the Company.
(d) "Retirement" means the Participant's retirement under the Retirement
Income Plan for Employees of UGI Utilities, Inc., if the Participant is covered
by that Retirement Income Plan. "Retirement" for other Company employees means
termination of employment after attaining age 55 with ten or more years of
service with the Company.
(e) "Termination without Cause" means termination of employment for the
convenience of the Company for any reason other than (i) misappropriation of
funds, (ii) habitual insobriety or substance abuse, (iii) conviction of a crime
involving moral turpitude, or (iv) gross negligence in the performance of
duties, which gross negligence has had a material adverse effect on the
business, operations, assets, properties or financial condition of the Company.
The Committee may determine in its sole discretion whether, and under what
circumstances, the Participant's voluntary termination upon a significant
reduction in the Participant's duties and responsibilities will constitute a
Termination without Cause for purposes of the Grant Letter.
6. Change of Control. The provisions of the Plan applicable to a Change of
Control shall apply to the Option, and, in the event of a Change of Control, the
Committee may take such actions as it deems appropriate pursuant to the Plan.
-3-
7. Restrictions on Exercise. Except as the Committee may otherwise permit
pursuant to the Plan, only the Participant may exercise the Option during the
Participant's lifetime and, after the Participant's death, the Option shall be
exercisable by the Participant's estate, to the extent that the Option is
exercisable pursuant to this Grant Letter.
8. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan and
the Terms and Conditions established by the Committee with respect to the Plan,
both of which are incorporated herein by reference, and in all respects shall be
interpreted in accordance with the Plan and the Terms and Conditions. The grant
and exercise of the Option are subject to interpretations, regulations and
determinations concerning the Plan established from time to time by the
Committee in accordance with the provisions of the Plan, including, but not
limited to, provisions pertaining to (i) the registration, qualification or
listing of the Shares, (ii) changes in capitalization of the Company and (iii)
other requirements of applicable law. The Committee shall have the authority to
interpret and construe the Option pursuant to the terms of the Plan, and its
decisions shall be conclusive as to any questions arising hereunder.
9. No Employment or Other Rights. The grant of the Option shall not confer upon
the Participant any right to be retained by or in the employ or service of the
Company and shall not interfere in any way with the right of the Company to
terminate the Participant's employment or service at any time. The right of the
Company to terminate at will the Participant's employment or service at any time
for any reason is specifically reserved.
10. No Shareholder Rights. Neither the Participant, nor any person entitled to
exercise the Participant's rights in the event of the Participant's death, shall
have any of the rights and privileges of a shareholder with respect to the
Shares subject to the Option, until certificates for Shares have been issued
upon the exercise of the Option.
11. Assignment and Transfers. The rights and interests of the Participant under
this Grant Letter may not be sold, assigned, encumbered or otherwise transferred
except, in the event of the death of the Participant, by will or by the laws of
descent and distribution. The rights and protections of the Company hereunder
shall extend to any successors or assigns of the Company and to the Company's
parents, subsidiaries, and affiliates.
12. Applicable Law. The validity, construction, interpretation and effect of
this instrument shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania, without giving effect to the conflicts of
laws provisions thereof.
13. Notice. Any notice to UGI provided for in this instrument shall be addressed
to UGI in care of the Corporate Secretary at UGI's headquarters, and any notice
to the Participant shall be addressed to such Participant at the current address
shown on the payroll of the Company, or to such other address as the Participant
may designate to the Company in writing. Any notice shall be delivered by hand,
sent by telecopy or enclosed in a properly sealed envelope addressed as stated
above, registered and deposited, postage prepaid, in a post office regularly
maintained by the United States Postal Service.
-4-
IN WITNESS WHEREOF, UGI has caused its duly authorized officers to execute
and attest this Grant Letter, and the Participant has executed this Grant
Letter, effective as of the Date of Grant.
UGI Corporation
Attest
________________________________ By:________________________________________
Corporate Secretary Robert H. Knauss
Vice President and General Counsel
|
I hereby acknowledge receipt of the Plan and the Terms and Conditions
incorporated herein. I accept the Option described in this Grant Letter, and I
agree to be bound by the terms of the Plan, including the Terms and Conditions,
and this Grant Letter. I hereby further agree that all the decisions and
determinations of the Committee shall be final and binding on me and any other
person having or claiming a right under this Grant.
Participant
-5-
EXHIBIT 10.36(a)
7/26/2004
Utilities Employees
UGI CORPORATION
2004 OMNIBUS EQUITY COMPENSATION PLAN
NONQUALIFIED STOCK OPTION GRANT LETTER
This STOCK OPTION GRANT, dated as of January 1, 2004 (the "Date of
Grant"), is delivered by UGI Corporation ("UGI") to _____________ (the
"Participant").
RECITALS
The UGI Corporation 2004 Omnibus Equity Compensation Plan (the "Plan")
provides for the grant of options to purchase shares of common stock of UGI. The
Compensation and Management Development Committee of the Board of Directors of
the Company (the "Committee") has decided to make a stock option grant to the
Participant.
NOW, THEREFORE, the parties to this Grant Letter, intending to be legally
bound hereby, agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth in this Grant
Letter and in the Plan, the Committee hereby grants to the Participant a
nonqualified stock option (the "Option") to purchase ______ shares of common
stock of UGI ("Shares") at an exercise price of $33.97 per Share. The Option
shall become exercisable according to Paragraph 2 below.
2. Exercisability of Option. The Option shall become exercisable on the
following dates, if the Participant is employed by, or providing service to, the
Company (as defined below) on the applicable date:
Shares for Which the
Date Option is Exercisable
---- ---------------------
January 1, 2005 33 1/3%
January 1, 2006 33 1/3%
January 1, 2007 33 1/3%
|
The exercisability of the Option is cumulative, but shall not exceed 100% of the
Shares subject to the Option. If the foregoing schedule would produce fractional
Shares, the number of Shares for which the Option becomes exercisable shall be
rounded down to the nearest whole Share.
3. Term of Option.
(a) The Option shall have a term of ten years from the Date of Grant and
shall terminate at the expiration of that period (5:00 p.m. EST on December 31,
2013), unless it is terminated at an earlier date pursuant to the provisions of
this Grant Letter or the Plan.
(b) If the Participant ceases to be employed by, or provide service to,
the Company, the Option will terminate on the date the Participant ceases such
employment or service. However, if the Participant ceases to be employed by, or
provide service to, the Company by reason of (i) Termination without Cause, (ii)
Retirement (as defined below), (iii) Disability (as defined below), or (iv)
death, the Option held by the Participant will thereafter be exercisable
pursuant to the following terms:
(i) Termination Without Cause. If the Participant terminates
employment or service on account of a Termination without Cause, the
Option will thereafter be exercisable only with respect to that number of
Shares with respect to which the Option is already exercisable on the date
the Participant's employment or service terminates. Such portion of the
Option will terminate upon the earlier of the expiration date of the
Option or the expiration of the 13-month period commencing on the date the
Participant ceases to be employed by, or provide service to, the Company.
(ii) Retirement. If the Participant ceases to be employed by, or
provide service to, the Company on account of Retirement, the Option will
thereafter become exercisable as if the Participant had continued to
provide service to the Company for 36 months after the date of such
Retirement. The Option will terminate upon the earlier of the expiration
date of the Option or the expiration of such 36-month period.
(iii) Disability. If the Participant ceases to be employed by, or
provide service to, the Company on account of Disability, the Option will
thereafter become exercisable as if the Participant had continued to
provide service to the Company for 36 months after the date of such
termination of employment or service. The Option will terminate upon the
earlier of the expiration date of the Option or the expiration of such
36-month period.
(iv) Death. In the event of the death of the Participant while
employed by, or providing service to, the Company, the Option will be
fully and immediately exercisable and may be exercised at any time prior
to the earlier of the expiration date of the Option or the expiration of
the 12-month period following the Participant's death. Death of the
Participant after the Participant has ceased to be employed by, or provide
service to, the Company will not affect the otherwise applicable period
for exercise of the Option determined pursuant to subsections (i), (ii) or
(iii) above. After the Participant's death, the Participant's Option may
be exercised by the Participant's estate.
4. Exercise Procedures.
(a) Subject to the provisions of Paragraphs 2 and 3 above, the Participant
may exercise part or all of the exercisable Option by giving UGI irrevocable
written notice of intent to exercise on a form provided by UGI and delivered in
the manner provided in Section 13 below. Payment of the exercise price and any
applicable withholding taxes must be made prior to issuance of the Shares. The
Participant shall pay the exercise price (i) in cash, (ii) by delivering Shares
(or by attestation to ownership of Shares), which shall be valued at their fair
market value on the date of delivery, which shall have been held by the
Participant for at least six months, and which shall have a fair market value on
the date of exercise equal to the exercise price, (iii) by payment through a
broker in accordance with procedures acceptable to the Committee and
-2-
permitted by Regulation T of the Federal Reserve Board or (iv) by such other
method as the Committee may approve. The Committee may impose such limitations
as it deems appropriate on the use of Shares to exercise the Option.
(b) The obligation of UGI to deliver Shares upon exercise of the Option
shall be subject to all applicable laws, rules, and regulations and such
approvals by governmental agencies as may be deemed appropriate by the
Committee, including such actions as UGI's counsel shall deem necessary or
appropriate to comply with relevant securities laws and regulations. UGI may
require that the Participant (or other person exercising the Option after the
Participant's death) represent that the Participant is purchasing Shares for the
Participant's own account and not with a view to or for sale in connection with
any distribution of the Shares, or such other representation as UGI deems
appropriate.
(c) All obligations of UGI under this Grant Letter shall be subject to the
rights of the Company as set forth in the Plan to withhold amounts required to
be withheld for any taxes, if applicable.
5. Definitions. Whenever used in this Grant Letter, the following terms shall
have the meanings set forth below:
(a) "Company" means UGI and its Subsidiaries (as defined in the Plan).
(b) "Disability" means a long-term disability as defined in the Company's
long-term disability plan applicable to the Participant.
(c) "Employed by, or provide service to, the Company" shall mean
employment or service as an employee or director of the Company.
(d) "Retirement" means the Participant's retirement under the Retirement
Income Plan for Employees of UGI Utilities, Inc., if the Participant is covered
by that Retirement Income Plan. "Retirement" for other Company employees means
termination of employment after attaining age 55 with ten or more years of
service with the Company.
(e) "Termination without Cause" means termination of employment for the
convenience of the Company for any reason other than (i) misappropriation of
funds, (ii) habitual insobriety or substance abuse, (iii) conviction of a crime
involving moral turpitude, or (iv) gross negligence in the performance of
duties, which gross negligence has had a material adverse effect on the
business, operations, assets, properties or financial condition of the Company.
The Committee may determine in its sole discretion whether, and under what
circumstances, the Participant's voluntary termination upon a significant
reduction in the Participant's duties and responsibilities will constitute a
Termination without Cause for purposes of the Grant Letter.
6. Change of Control. The provisions of the Plan applicable to a Change of
Control shall apply to the Option, and, in the event of a Change of Control, the
Committee may take such actions as it deems appropriate pursuant to the Plan.
For Participants who are employees of UGI Utilities, Inc. ("Utilities") or a
subsidiary of Utilities, the term "Change of Control" shall mean (i) a Change of
Control of UGI as defined in the Plan, or (ii) one of the events set forth on
Exhibit A with respect to Utilities.
-3-
7. Restrictions on Exercise. Except as the Committee may otherwise permit
pursuant to the Plan, only the Participant may exercise the Option during the
Participant's lifetime and, after the Participant's death, the Option shall be
exercisable by the Participant's estate, to the extent that the Option is
exercisable pursuant to this Grant Letter.
8. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan and
the Terms and Conditions established by the Committee with respect to the Plan,
both of which are incorporated herein by reference, and in all respects shall be
interpreted in accordance with the Plan and the Terms and Conditions. The grant
and exercise of the Option are subject to interpretations, regulations and
determinations concerning the Plan established from time to time by the
Committee in accordance with the provisions of the Plan, including, but not
limited to, provisions pertaining to (i) the registration, qualification or
listing of the Shares, (ii) changes in capitalization of the Company and (iii)
other requirements of applicable law. The Committee shall have the authority to
interpret and construe the Option pursuant to the terms of the Plan, and its
decisions shall be conclusive as to any questions arising hereunder.
9. No Employment or Other Rights. The grant of the Option shall not confer upon
the Participant any right to be retained by or in the employ or service of the
Company and shall not interfere in any way with the right of the Company to
terminate the Participant's employment or service at any time. The right of the
Company to terminate at will the Participant's employment or service at any time
for any reason is specifically reserved.
10. No Shareholder Rights. Neither the Participant, nor any person entitled to
exercise the Participant's rights in the event of the Participant's death, shall
have any of the rights and privileges of a shareholder with respect to the
Shares subject to the Option, until certificates for Shares have been issued
upon the exercise of the Option.
11. Assignment and Transfers. The rights and interests of the Participant under
this Grant Letter may not be sold, assigned, encumbered or otherwise transferred
except, in the event of the death of the Participant, by will or by the laws of
descent and distribution. The rights and protections of the Company hereunder
shall extend to any successors or assigns of the Company and to the Company's
parents, subsidiaries, and affiliates.
12. Applicable Law. The validity, construction, interpretation and effect of
this instrument shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania, without giving effect to the conflicts of
laws provisions thereof.
13. Notice. Any notice to UGI provided for in this instrument shall be addressed
to UGI in care of the Corporate Secretary at UGI's headquarters, and any notice
to the Participant shall be addressed to such Participant at the current address
shown on the payroll of the Company, or to such other address as the Participant
may designate to the Company in writing. Any notice shall be delivered by hand,
sent by telecopy or enclosed in a properly sealed envelope addressed as stated
above, registered and deposited, postage prepaid, in a post office regularly
maintained by the United States Postal Service.
-4-
IN WITNESS WHEREOF, UGI has caused its duly authorized officers to execute
and attest this Grant Letter, and the Participant has executed this Grant
Letter, effective as of the Date of Grant.
UGI Corporation
Attest
______________________________ By:_________________________________________
Corporate Secretary Robert H. Knauss
Vice President and General Counsel
|
I hereby acknowledge receipt of the Plan and the Terms and Conditions
incorporated herein. I accept the Option described in this Grant Letter, and I
agree to be bound by the terms of the Plan, including the Terms and Conditions,
and this Grant Letter. I hereby further agree that all the decisions and
determinations of the Committee shall be final and binding on me and any other
person having or claiming a right under this Grant.
Participant
-5-
EXHIBIT A
Change of Control with Respect to Utilities
For Participants who are employees of Utilities, or a subsidiary of Utilities,
the term "Change of Control" shall include the events set forth in this Exhibit
A with respect to Utilities, and the defined terms set forth used in this
Exhibit A, if not defined in the Plan, shall have the following meanings:
1. "Change of Control" shall include any of the following events:
(A) UGI and the UGI Subsidiaries fail to own more than fifty percent
(50%) of the then outstanding shares of common stock of Utilities or more than
fifty percent (50%) of the combined voting power of the then outstanding voting
securities of Utilities entitled to vote generally in the election of directors;
or
(B) Completion by Utilities of a reorganization, merger or
consolidation (a "Business Combination"), in each case, with respect to which
all or substantially all of the individuals and entities who were the respective
Beneficial Owners of Utilities' outstanding common stock and voting securities
immediately prior to such Business Combination do not, following such Business
Combination, Beneficially Own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination in substantially the same proportion as
their ownership immediately prior to such Business Combination of Utilities'
outstanding common stock and voting securities, as the case may be; or
(C) Completion of a complete liquidation or dissolution of the
Utilities or sale or other disposition of all or substantially all of the assets
of Utilities other than to a corporation with respect to which, following such
sale or disposition, more than 50% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of the
individuals and entities who were the Beneficial Owners, respectively, of
Utilities' outstanding common stock and voting securities immediately prior to
such sale or disposition in substantially the same proportion as their ownership
of Utilities' outstanding common stock and voting securities, as the case may
be, immediately prior to such sale or disposition.
2. "Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
3. A Person shall be deemed the "Beneficial Owner" of any securities: (i) that
such Person or any of such Person's Affiliates or Associates, directly or
indirectly, has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or otherwise;
provided, however, that a person shall not be deemed the "Beneficial Owner" of
securities tendered pursuant to a
A-1
tender or exchange offer made by such Person or any of such person's Affiliates
or Associates until such tendered securities are accepted for payment, purchase
or exchange; (ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), including without limitation
pursuant to any agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of any security under this clause (ii) as a result of an oral or written
agreement, arrangement or understanding to vote such security if such agreement,
arrangement or understanding (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) that are beneficially owned, directly or indirectly, by any other Person
(or any Affiliate or Associate thereof) with which such Person (or any of such
Person's Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy as described in the proviso to
clause (ii) above) or disposing of any securities; provided, however, that
nothing in this Section 1(c) shall cause a Person engaged in business as an
underwriter of securities to be the "Beneficial Owner" of any securities
acquired through such Person's participation in good faith in a firm commitment
underwriting until the expiration of forty (40) days after the date of such
acquisition.
4. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
5. "Person" shall mean an individual or a corporation, partnership, trust,
unincorporated organization, association, or other entity.
6. "UGI Subsidiary" shall mean any corporation in which UGI directly or
indirectly, owns at least a fifty percent (50%) interest or an unincorporated
entity of which UGI, as applicable, directly or indirectly, owns at least fifty
percent (50%) of the profits or capital interests.
A-2
EXHIBIT 10.43
UGI 7/22/2004
UGI CORPORATION
2004 OMNIBUS EQUITY COMPENSATION PLAN
SUB-PLAN FOR FRENCH EMPLOYEES
STOCK OPTION GRANT LETTER
This STOCK OPTION GRANT, dated as of____________ ___, 2004 (the "Date of
Grant"), is delivered by UGI Corporation ("UGI") to _____________ (the
"Participant").
RECITALS
The UGI Corporation Sub-Plan for French Employees under the 2004 Omnibus
Equity Compensation Plan (the "Plan") provides for the grant of options to
purchase shares of common stock of UGI. The Board of Directors of UGI (the
"Board") authorizes and administers all option grants to employees in France,
and the Board has decided to make a stock option grant to the Participant.
NOW, THEREFORE, the parties to this Grant Letter, intending to be legally
bound hereby, agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth in this Grant
Letter and in the Plan, UGI hereby grants to the Participant a stock option (the
"Option") to purchase ______ shares of common stock of UGI ("Shares") at an
exercise price of U.S. $______ per Share. The Option is intended to be a
qualified option for French tax purposes and a nonqualified stock option for
U.S. tax purposes. The Option shall become exercisable according to Section 2
below.
2. Exercisability of Option. The Option shall become exercisable on the
following date, if the Participant is employed by the Company (as defined below)
on the applicable date:
Shares for Which the
Date Option is Exercisable
---- ---------------------
_______________ __, 2008 100%
|
3. Term of Option.
(a) The Option shall have a term of nine years and six months from the
Date of Grant and shall terminate at the expiration of that period (5:00 p.m.
U.S. EST on ______________ __, 201_), unless it is terminated at an earlier date
pursuant to the provisions of this Grant Letter or the Plan.
(b) If the Participant ceases to be employed by the Company, the Option
will terminate on the date the Participant ceases such employment, except as
provided below. If the Participant ceases to be employed by the Company by
reason of (i) Termination without Cause (as defined below), (ii) Retirement (as
defined below), (iii) Disability (as defined below), or (iv) death, the Option
held by the Participant will thereafter be exercisable pursuant to the following
terms:
(i) Termination Without Cause. If the Participant's employment
terminates on account of a Termination without Cause, the Option will
thereafter be exercisable only with respect to that number of Shares with
respect to which the Option is already exercisable on the date the
Participant's employment terminates. Such portion of the Option will
terminate upon the earlier of the expiration date of the Option or the
expiration of the 13-month period commencing on the date the Participant
ceases to be employed by the Company.
(ii) Retirement. If the Participant ceases to be employed by the
Company on account of Retirement, the Option will thereafter become
exercisable as if the Participant had remained employed by the Company for
48 months after the date of such Retirement. The Option will terminate
upon the earlier of the expiration date of the Option or the expiration of
such 48-month period.
(iii) Disability. If the Participant is determined to be Disabled,
the Option will thereafter become exercisable as if the Participant had
remained employed by the Company for 48 months after the date of such
Disability. The Option will terminate upon the earlier of the expiration
date of the Option or the expiration of such 48-month period.
(iv) Death. In the event of the death of the Participant while
employed by the Company or while the Option is outstanding pursuant to
subsections (i), (ii) or (iii) above, the Option will be fully and
immediately exercisable and may be exercised at any time prior to
expiration of the six-month period following the Participant's death.
After the Participant's death, the Participant's Option may be exercised
by the Participant's estate.
4. Exercise Procedures.
(a) Subject to the provisions of Sections 2 and 3 above, the Participant
may exercise part or all of the exercisable Option by giving UGI irrevocable
written notice of intent to exercise on a form provided by UGI and delivered in
the manner provided in Section 13 below. Payment of the exercise price and any
applicable withholding taxes must be made prior to issuance of the Shares. The
Participant shall pay the exercise price (i) in cash in U.S. dollars or (ii) by
payment through a broker in accordance with procedures acceptable to the Board
and permitted by Regulation T of the U.S. Federal Reserve Board.
(b) The obligation of UGI to deliver Shares upon exercise of the Option
shall be subject to all applicable laws, rules, and regulations and such
approvals by governmental agencies as may be deemed appropriate by the Board,
including such actions as UGI's counsel shall deem necessary or appropriate to
comply with relevant securities laws and regulations. UGI may require that the
Participant (or other person exercising the Option after the Participant's
2
death) represent that the Participant is purchasing Shares for the Participant's
own account and not with a view to or for sale in connection with any
distribution of the Shares, or such other representation as UGI deems
appropriate.
(c) All obligations of UGI under this Grant Letter shall be subject to the
rights of the Company as set forth in the Plan to withhold amounts required to
be withheld for any taxes, if applicable.
5. Definitions. Whenever used in this Grant Letter, the following terms shall
have the meanings set forth below:
(a) "Company" means UGI and its Subsidiaries (as defined in the Plan).
(b) "Disability" means a long-term disability as defined in the Company's
long-term disability plan applicable to the Participant.
(c) "Employed by the Company" shall mean employment as an employee of the
Company. For purposes of this Grant Letter, the Participant's period of
employment shall not include any period of notice of termination of employment,
whether expressed or implied. The Participant's date of cessation of employment
shall mean the date upon which the Participant ceases active performance of
services for the Company following the provision of such notification of
termination or resignation from employment and shall be determined solely by
this Grant Letter and without reference to any other agreement, written or oral,
including the Participant's contract of employment.
(d) "Retirement" means termination of employment after attaining age 55
with ten or more years of service with the Company.
(e) "Termination without Cause" means termination of employment for the
convenience of the Company for any reason other than (i) misappropriation of
funds, (ii) habitual insobriety or substance abuse, (iii) conviction of a crime
involving moral turpitude, or (iv) gross negligence in the performance of
duties, which gross negligence has had a material adverse effect on the
business, operations, assets, properties or financial condition of the Company.
6. Change of Control. The provisions of the Plan applicable to a Change of
Control shall apply to the Option, and, in the event of a Change of Control, the
Board may take such actions as it deems appropriate pursuant to the Plan.
7. Restrictions on Exercise. Except as the Board may otherwise permit pursuant
to the Plan, only the Participant may exercise the Option during the
Participant's lifetime and, after the Participant's death, the Option shall be
exercisable solely by the Participant's estate, to the extent that the Option is
exercisable pursuant to this Grant Letter.
8. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan and
the Sub-Plan for French Employees, the terms of which are incorporated herein by
reference, and in all respects shall be interpreted in accordance with the Plan.
The grant and exercise of the Option are subject to interpretations, regulations
and determinations concerning the Plan established from time to time by the
Board in accordance with the provisions of the Plan, including, but not
3
limited to, provisions pertaining to (i) the registration, qualification or
listing of the Shares, (ii) changes in capitalization of the Company and (iii)
other requirements of applicable law. The Board shall have the authority to
interpret and construe the Option pursuant to the terms of the Plan, and its
decisions shall be conclusive as to any questions arising hereunder.
9. No Employment or Other Rights. The grant of the Option shall not confer upon
the Participant any right to be retained by or in the employ of the Company and
shall not interfere in any way with the right of the Company to terminate the
Participant's employment at any time. The right of the Company to terminate at
will the Participant's employment at any time for any reason is specifically
reserved.
10. No Shareholder Rights. Neither the Participant, nor any person entitled to
exercise the Participant's rights in the event of the Participant's death, shall
have any of the rights and privileges of a shareholder with respect to the
Shares subject to the Option, until certificates for Shares have been issued
upon the exercise of the Option.
11. Assignment and Transfers. The rights and interests of the Participant under
this Grant Letter may not be sold, assigned, encumbered or otherwise transferred
except, in the event of the death of the Participant, by will or by the laws of
descent and distribution. The rights and protections of the Company hereunder
shall extend to any successors or assigns of the Company and to the Company's
parents, subsidiaries, and affiliates.
12. Applicable Law. The validity, construction, interpretation and effect of
this instrument shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania, without giving effect to the conflicts of
laws provisions thereof.
13. Notice. Any notice to UGI provided for in this instrument shall be addressed
to UGI in care of the Corporate Secretary at UGI's headquarters, and any notice
to the Participant shall be addressed to such Participant at the current address
shown on the payroll of the Company, or to such other address as the Participant
may designate to the Company in writing. Any notice shall be delivered by hand,
sent by telecopy or enclosed in a properly sealed envelope addressed as stated
above, registered and deposited, postage prepaid, in a post office regularly
maintained by the United States Postal Service.
14. Authorization to Release Necessary Personal Information.
(a) The Participant hereby authorizes and directs the Participant's
employer to collect, use and transfer in electronic or other form, any personal
information (the "Data") regarding the Participant's employment, the nature and
amount of the Participant's compensation and the fact and conditions of the
Participant's participation in the Plan (including, but not limited to, the
Participant's name, home address, telephone number, date of birth, social
security number (or any other social or national identification number), salary,
nationality, job title, number of Shares held and the details of all options or
any other entitlement to Shares awarded, cancelled, exercised, vested, unvested
or outstanding) for the exclusive purpose of implementing, administering and
managing the Participant's participation in the Plan. The Participant
understands that the Data may be transferred to the Company, or to any third
parties assisting in the implementation, administration and management of the
Plan, including any requisite transfer
4
to a broker or other third party assisting with the exercise of options under
the Plan or with whom Shares acquired upon exercise of this Option or cash from
the sale of such shares may be deposited. The Participant acknowledges that
recipients of the Data may be located in different countries, and those
countries may have data privacy laws and protections different from those in the
country of the Participant's residence. Furthermore, the Participant
acknowledges and understands that the transfer of the Data to the Company, or to
any third parties, is necessary for the Participant's participation in the Plan.
The Participant understands that the Data will be held only as long as necessary
to implement, administer and manage the Participant's participation in the Plan.
For all transfers, the Participant's employer agrees and warrants that the
processing, including the transfer itself, of the Data will be carried out in
accordance with the French and European legal data protection regulation.
(b) The Participant may at any time amend the Data and/or withdraw the
consents herein, by contacting the Participant's local human resources
representative in writing. The Participant further acknowledges that withdrawal
of consent may affect the Participant's ability to exercise or realize benefits
from the Option, and the Participant's ability to participate in the Plan.
15. No Entitlement or Claims for Compensation.
(a) The grant of options under the Plan is made at the discretion of the
Board, and the Plan may be suspended or terminated by UGI at any time. The grant
of an option in one year or at one time does not in any way entitle the
Participant to an option grant in the future. The Plan is wholly discretionary
in nature and is not to be considered part of the Participant's normal or
expected compensation subject to severance, resignation, redundancy or similar
compensation. The value of the Option is an extraordinary item of compensation
which is outside the scope of the Participant's employment contract (if any).
(b) The Participant shall have no rights to compensation or damages as a
result of the Participant's cessation of employment for any reason whatsoever,
whether or not in breach of contract, insofar as those rights arise or may arise
from the Participant's ceasing to have rights under or be entitled to exercise
this Option as a result of such cessation or from the loss or diminution in
value of such rights. If the Participant did acquire any such rights, the
Participant is deemed to have waived them irrevocably by accepting the Option.
5
IN WITNESS WHEREOF, UGI has caused its duly authorized officers to execute
and attest this Grant Letter, and the Participant has executed this Grant
Letter, effective as of the Date of Grant.
UGI Corporation
Attest
__________________________________ By:_____________________________________
Corporate Secretary Robert H. Knauss
Vice President and General Counsel
|
I hereby acknowledge receipt of the Plan and the Sub-Plan for French Employees
incorporated herein. I accept the Option described in this Grant Letter, and I
agree to be bound by the terms of the Plan, including the Sub-Plan for French
Employees, and this Grant Letter. I hereby further agree that all the decisions
and determinations of the Board shall be final and binding on me and any other
person having or claiming a right under this Grant.
Participant
6
UGI Corporation 2004 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 and butane-based
liquefied petroleum gases (collectively, "LPG"); a provider of natural gas and
electric 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, 2004, UGI, through its wholly owned second-tier
subsidiary AmeriGas Propane, Inc. (the "General Partner"), held an approximate
46% effective interest in AmeriGas Partners. 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 wholly owned subsidiary UGI Enterprises, Inc. ("Enterprises") (1)
conducts an LPG distribution business in France; (2) conducts an LPG
distribution business in Austria, the Czech Republic and Slovakia ("FLAGA"); and
(3) participates in an LPG joint-venture business in the Nantong region of
China. Our LPG distribution business in France is conducted through Antargaz, an
operating subsidiary of AGZ Holding ("AGZ"), and its operating subsidiaries
(collectively, "Antargaz"). We refer to our foreign operations collectively as
"International 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 electric distribution utility ("Electric Utility") in
northeastern Pennsylvania. Gas Utility and Electric Utility are subject to
regulation by the Pennsylvania Public Utility Commission ("PUC").
Enterprises also 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 electric generation assets. Prior to its transfer to Energy
Services in June 2003, UGID was a wholly owned subsidiary of UGI Utilities.
Through other subsidiaries, Enterprises owns and operates a heating,
ventilation, air-conditioning and refrigeration service business in the Middle
Atlantic states ("HVAC/R").
This Financial Review should be read in conjunction with our Consolidated
Financial Statements and Notes to Consolidated Financial Statements including
the reportable segment information included in Note 19.
RESULTS OF OPERATIONS
EXECUTIVE OVERVIEW
Fiscal 2004 marked another year of earnings growth as we continued to focus on
our core competencies as a marketer and distributor of energy products and
services.
On March 31, 2004, we purchased the remaining 80.5% ownership interest in
AGZ that we did not already own ("Antargaz Acquisition"). AGZ is the parent
company of Antargaz, a leading distributor of LPG in France. This transaction
was $0.26 per share dilutive in 2004 due to the following factors. First, we
incurred a $9.1 million pre-tax foreign exchange loss ($0.13 per diluted share)
as we fixed the euro-denominated purchase price in dollars. Second, we issued
7.8 million shares of our common stock in March ($0.22 per diluted share) to
finance part of the acquisition. Partially offsetting the first two items were
the additional Antargaz earnings ($0.09 per diluted share) after March 31, 2004
resulting from our increased ownership. The Antargaz Acquisition has also
significantly changed our business. In Fiscal 2005, assuming normal weather, we
expect our domestic and international LPG operations collectively to represent
approximately one-half of our net income and our utility business operations to
represent about one-third.
Winter weather conditions in the United States and Europe are the most
important variables affecting our annual earnings performance. This is because a
substantial portion of the energy products we sell are used in heating
applications.
2004 COMPARED WITH 2003
CONSOLIDATED RESULTS
Effective October 1, 2003, our Energy Services segment includes the operating
results of Energy Services' gas marketing business as well as UGID's electric
generation business. Prior-year amounts have been restated to be consistent with
the current period presentation.
Variance -
Favorable
2004 2003 (Unfavorable)
---- ---- -------------
% OF TOTAL % of total
NET NET Net Net Net
INCOME INCOME Income Income Income % change
------- ---------- ------- ---------- ------- --------
(Millions of dollars)
AmeriGas Propane $ 29.4 26.3% $ 23.2 23.5% $ 6.2 26.7%
International Propane 13.3 11.9% 3.6 3.6% 9.7 N.M.
Gas Utility 37.9 34.0% 48.0 48.5% (10.1) (21.0)%
Electric Utility 11.0 9.9% 10.6 10.7% 0.4 3.8%
Energy Services 18.2 16.3% 11.2 11.3% 7.0 62.5%
Corporate & Other 1.8 1.6% 2.3 2.3% (0.5) (21.7)%
------- ----- ------- ----- ------- -----
Total $ 111.6 100.0% $ 98.9 100.0% $ 12.7 12.8%
------- ----- ------- ----- ------- -----
|
N.M. - Due to the Antargaz Acquisition, variance is not meaningful.
13
FINANCIAL REVIEW (continued)
The following table presents certain financial and statistical information
for our principal businesses for Fiscal 2004 and Fiscal 2003:
Increase
2004 2003 (Decrease)
-------- -------- ---------------------
(Millions of dollars)
AMERIGAS PROPANE:
Revenues $1,775.9 $1,628.4 $ 147.5 9.1%
Total margin (a) $ 746.7 $ 718.1 $ 28.6 4.0%
Partnership EBITDA (b) $ 255.9 $ 234.4 $ 21.5 9.2%
Operating income $ 176.0 $ 164.5 $ 11.5 7.0%
Retail gallons sold (millions) 1,059.1 1,074.9 (15.8) (1.5)%
Degree days - % (warmer) colder
than normal (c) (4.9)% 0.2% - -
INTERNATIONAL PROPANE:
Revenues $ 333.4 $ 54.5 $ 278.9 N.M.
Total margin (a) $ 195.4 $ 27.1 $ 168.3 N.M.
Operating income $ 20.5 $ 0.7 $ 19.8 N.M.
Income from equity investees $ 10.6 $ 5.9 $ 4.7 N.M.
Income before income taxes $ 13.7 $ 2.5 $ 11.2 N.M.
GAS UTILITY:
Revenues $ 560.4 $ 539.9 $ 20.5 3.8%
Total margin (a) $ 191.5 $ 196.9 $ (5.4) (2.7)%
Operating income $ 80.1 $ 96.1 $ (16.0) (16.6)%
Income before income taxes $ 64.2 $ 80.7 $ (16.5) (20.4)%
System throughput -
billions of cubic feet ("bcf") 82.2 83.8 (1.6) (1.9)%
Degree days - % (warmer) colder
than normal (2.9)% 7.0% - -
ELECTRIC UTILITY:
Revenues $ 89.7 $ 88.8 $ 0.9 1.0%
Total margin (a) $ 41.6 $ 40.3 $ 1.3 3.2%
Operating income $ 20.9 $ 20.3 $ 0.6 3.0%
Income before income taxes $ 18.9 $ 18.0 $ 0.9 5.0%
Distribution sales - millions of
kilowatt hours ("gwh") 983.9 980.0 3.9 0.4%
ENERGY SERVICES:
Revenues $ 967.2 $ 668.0 $ 299.2 44.8%
Total margin (a) $ 55.0 $ 35.6 $ 19.4 54.5%
Operating Income $ 31.1 $ 19.2 $ 11.9 62.0%
Income before income taxes $ 31.1 $ 19.2 $ 11.9 62.0%
|
N.M. - Due to the Antargaz Acquisition, variance is not meaningful.
(a) Total margin represents total revenues less total cost of sales and, with
respect to Electric Utility, revenue-related taxes, i.e. Electric Utility gross
receipts taxes of $4.8 million in both Fiscal 2004 and Fiscal 2003. For
financial statement purposes, revenue-related taxes are included in "Utility
taxes other than income taxes" on the Consolidated Statements of Income.
(b) Partnership EBITDA (earnings before interest expense, income taxes and
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
reportable segment (see Note 19 to Consolidated Financial Statements).
(c) 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. Based upon heating degree day data, temperatures in Fiscal
2004 were 4.9% warmer than normal compared to temperatures that were essentially
normal in Fiscal 2003. Retail propane volumes sold during Fiscal 2004 decreased
slightly compared to Fiscal 2003 as the effects of warmer than normal winter
weather more than offset volume growth from acquisitions, principally the
October 2003 acquisition of Horizon Propane LLC ("Horizon Propane"). In
addition, Fiscal 2004 retail propane volumes were also negatively affected by
customer conservation driven by record-high propane product costs. Low margin
wholesale volumes increased primarily reflecting greater product cost hedging
activities.
Retail propane revenues increased $104.6 million as a $124.8 million
increase due to higher average selling prices was partially offset by a $20.2
million decrease due to the lower retail volumes sold. Wholesale propane
revenues increased $32.5 million reflecting (1) a $23.3 million increase due to
higher average selling prices and (2) a $9.2 million increase due to the higher
volumes sold relating to product cost hedging activities. In Fiscal 2004, the
propane industry experienced sustained higher propane product costs which
resulted in higher average retail and wholesale selling prices. Total propane
cost of sales increased $115.4 million principally reflecting the effects of
significantly higher propane product costs.
Despite lower retail volumes sold as a result of the warmer weather, total
margin increased $28.6 million due to higher average retail propane margins per
gallon and greater margin from non-propane sales and services. As a result of
significantly higher propane product costs, the Partnership increased average
retail selling prices realizing higher average margins per gallon while
remaining competitive in the marketplace. Average margin per gallon associated
with the Partnership's Prefilled Propane Xchange program ("PPX(R)") decreased in
Fiscal 2004 as selling prices were lowered in response to competition in the
marketplace. The effects of lower average PPX(R) selling prices on PPX(R) margin
per gallon were partially offset by effective cost management initiatives.
Margin from non-propane sales and services increased $6.9 million principally
reflecting higher margin from tank rentals, PPX(R) cylinder sales and hauling
and terminal sales and services.
Partnership EBITDA increased $21.5 million in Fiscal 2004 reflecting (1)
the previously mentioned increase in total margin, (2) the absence of a $3.0
million loss on extinguishment of long-term debt incurred in Fiscal 2003, and
(3) a $2.8 million increase in other income. These increases were partially
offset by a $12.6 million increase in operating and administrative expenses
principally due to higher compensation, distribution, administrative and general
insurance expenses partially offset by the absence of $3.8 million of expenses
associated with initiating the management realignment in Fiscal 2003 and the
continued beneficial effects on Fiscal 2004 operating expenses of the
realignment. Other income in Fiscal 2004 increased principally due to greater
income from finance charges.
Operating income in Fiscal 2004 increased $11.5 million as the previously
mentioned increases in margin and other income were partially offset by (1)
higher depreciation and amortization expense related to recent acquisitions, (2)
higher depreciation associated with PPX(R) and (3) the aforementioned increase
in operating expenses.
14
UGI Corporation 2004 Annual Report
INTERNATIONAL PROPANE. International Propane results of operations in Fiscal
2004 have significantly increased compared to Fiscal 2003 due to the
consolidation of all of Antargaz' operations beginning April 1, 2004 as a result
of the Antargaz Acquisition. Antargaz' revenues, total margin and operating
income from April 1, 2004 to September 30, 2004 were $270.8 million, $164.8
million and $15.1 million, respectively. During the twelve months ended
September 30, 2004, Antargaz sold approximately 336 million gallons of LPG while
experiencing weather that was 5% warmer than normal compared to 342 million
gallons sold and weather that was 11% warmer than normal during the twelve
months ended September 30, 2003. Despite the improved weather in Fiscal 2004
compared to Fiscal 2003, volumes declined due primarily to lower high volume,
low margin sales principally to crop-drying customers. International Propane's
revenues increased significantly during Fiscal 2004 principally due to including
all of Antargaz' results of operations on a consolidated basis beginning April
1, 2004. FLAGA's revenues increased $8.1 million in Fiscal 2004 due to the
effects of an approximately 12% stronger euro on slightly higher base-currency
revenues despite lower volumes sold. International Propane total margin
increased primarily due to the Antargaz Acquisition and a $3.5 million increase
in FLAGA's margin. FLAGA's margin increased in Fiscal 2004 as a result of the
effects of a stronger euro on slightly improved base-currency margin.
The increase in International Propane operating income principally
reflects the previously mentioned increases in margin partially offset by (1)
higher operating expenses resulting from the Antargaz Acquisition and (2) a loss
of $9.1 million resulting from the settlement of contracts for the forward
purchase of euros used to fund a portion of the purchase price of the Antargaz
Acquisition. FLAGA's operating income increased during Fiscal 2004 primarily
reflecting lower operating expenses as a result of cost reduction initiatives
partially offset by the effects of a stronger euro.
International Propane income from equity investees in Fiscal 2004 includes
equity investee income from our 19.5% ownership interest in AGZ through March
31, 2004. The $4.7 million increase over Fiscal 2003 primarily reflects higher
income from AGZ resulting from (1) the effects of colder weather during the
Fiscal 2004 winter heating season and (2) lower base-currency LPG product costs
partially offset by the effect of the stronger euro.
The increase in International Propane income before income taxes reflects
the combined increase in Antargaz' results as an equity investee and on a
consolidated basis and the previously mentioned increase in FLAGA's operating
income partially offset by greater interest expense resulting from the Antargaz
Acquisition.
GAS UTILITY. Weather in Gas Utility's service territory based upon heating
degree days was 2.9% warmer than normal in Fiscal 2004 compared with weather
that was 7.0% colder than normal in Fiscal 2003. Total distribution system
throughput decreased 1.6 bcf or 1.9% as the adverse effects of the warmer
weather on heating-related sales to firm- residential, commercial and industrial
("retail core-market") customers were partially offset by greater volumes
transported for delivery service customers and the volume effects of
year-over-year retail core-market customer growth. The increase in Gas Utility
revenues during Fiscal 2004 includes a $20.1 million increase in revenues from
off-system sales partially offset by lower retail core-market and delivery
service revenues. The decline in retail core-market revenues reflects the
effects of the reduced retail core-market volumes partially offset by higher
average purchased gas cost ("PGC") rates reflecting higher natural gas costs.
Gas Utility's cost of gas was $368.9 million in Fiscal 2004 compared to $343.0
million in Fiscal 2003 reflecting greater cost of gas associated with the higher
off-system sales and the higher average retail core-market PGC rates partially
offset by the effects of the lower retail core-market volumes sold. Increases or
decreases in Gas Utility's cost of gas associated with retail core-market
customers result from changes in retail core-market volumes, the price of the
gas purchased and the level of gas costs collected through the PGC recovery
mechanism. Under this recovery mechanism, Gas Utility records the cost of gas
associated with sales to retail core-market customers equal to the amount
included in rates and defers the difference on the balance sheet as a regulatory
asset or liability representing an amount to be collected from or refunded to
customers in a future period. As a result, increases or decreases in the cost of
gas associated with retail core-market customers have no direct effect on retail
core-market margin.
Gas Utility total margin declined $5.4 million principally reflecting a
$4.0 million decline in retail core-market margin and the effects of lower
margins on delivery-service.
Gas Utility operating income declined $16.0 million in Fiscal 2004
principally reflecting the previously mentioned decline in total margin, lower
other income and higher operating and administrative expenses. Other income
declined $5.4 million due in large part to a decline in non-tariff service
income, costs related to settling a regulatory claim and the absence of pension
income in Fiscal 2004. Operating and administrative expenses increased $3.8
million due primarily to higher compensation and benefits expense, including the
effects of a lump-sum payment made to a participant of UGI Utilities' unfunded
executive retirement plan, partially offset by the absence of costs related to
settling an environmental claim recorded in the prior year and lower Fiscal 2004
distribution system maintenance expenses. The decrease in Gas Utility income
before income taxes reflects the decline in operating income and slightly higher
interest expense in Fiscal 2004 resulting from classifying dividends paid on
preferred shares subject to mandatory redemption as interest expense beginning
July 1, 2003, in accordance with Statement of Financial Accounting Standards
("SFAS") No. 150, "Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity" ("SFAS 150").
ELECTRIC UTILITY. Electric Utility's Fiscal 2004 kilowatt-hour sales were
slightly higher than in Fiscal 2003 due in large part to greater air
conditioning sales partially offset by the adverse effects of slightly warmer
winter weather on heating-related sales.
The increase in Electric Utility revenues in Fiscal 2004 reflects the
higher kilowatt-hour sales and higher rates. Electric Utility's cost of sales
declined $0.4 million in Fiscal 2004 reflecting lower Electric Utility purchased
power costs.
Electric Utility total margin in Fiscal 2004 increased $1.3 million
reflecting the previously mentioned increase in revenues and decrease in
purchased power costs. Operating income was higher in Fiscal 2004 reflecting the
increase in total margin partially offset by slightly higher operating and
administrative expenses
15
FINANCIAL REVIEW (continued)
and lower other income. The increase in income before income taxes reflects the
increase in total operating income and slightly lower interest expense.
ENERGY SERVICES. The increase in Energy Services revenues in Fiscal 2004
resulted primarily from (1) a 30% increase in natural gas volumes sold due in
large part to the full year effect of 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"), and to a lesser extent
customer growth, (2) the full year effect of UGID's June 2003 purchase of an
additional 4.9% (83 megawatt) interest in the Conemaugh electric generation
station located near Johnstown, Pennsylvania ("Conemaugh"), and (3) higher
natural gas and power prices. Energy Services total margin in Fiscal 2004 grew
$19.3 million over Fiscal 2003. The total margin increase contributed by UGID's
electric generation business was $10.5 million primarily reflecting the
additional interest in Conemaugh and the previously mentioned higher power
prices. The remaining increase in Energy Services total margin in Fiscal 2004,
generated by Energy Services' gas marketing business, reflects the higher
natural gas volumes sold and winter peaking services.
The increase in Energy Services income before income taxes principally
reflects the previously mentioned increase in total margin partially offset by
higher operating expenses resulting from our purchase of the additional interest
in Conemaugh and the TXU Energy Acquisition.
INTEREST EXPENSE AND INCOME TAXES. Interest expense increased to $119.1 million
in Fiscal 2004 from $109.2 million in Fiscal 2003 due to significantly higher
International Propane interest expense as a result of the Antargaz Acquisition
partially offset by lower AmeriGas Propane interest expense. The Company's
effective income tax rate was 36.6% in Fiscal 2004 and 37.8% in Fiscal 2003.
2003 COMPARED WITH 2002
CONSOLIDATED RESULTS
Variance -
Favorable
2003 2002 (Unfavorable)
---- ---- -------------
% of total % of total
Net Net Net Net Net
Income Income Income Income Income % Change
------ ---------- ------ ------ ---------- --------
(Millions of dollars)
AmeriGas Propane $23.2 23.5% $17.4 23.0% $ 5.8 33.3%
Gas Utility 48.0 48.5% 36.4 48.2% 11.6 31.9%
Electric Utility 10.6 10.7% 5.3 7.0% 5.3 100.0%
Energy Services 11.2 11.3% 7.3 9.7% 3.9 53.4%
International Propane 3.6 3.6% 7.5 9.9% (3.9) (52.0)%
Corporate & Other 2.3 2.3% 1.6 2.1% 0.7 43.8%
----- ----- ----- ----- ----- -----
Total $98.9 100.0% $75.5 100.0% $23.4 31.0%
----- ----- ----- ----- ----- -----
|
Net income was 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 electric 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 AGZ redeemed in July 2002.
The following table presents certain financial and statistical information
by our principal businesses 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 $ 718.1 $ 654.8 $ 63.3 9.7%
Partnership EBITDA $ 234.4 $ 209.6 $ 24.8 11.8%
Operating income $ 164.5 $ 145.0 $ 19.5 13.4%
Retail gallons sold (millions) 1,074.9 987.5 87.4 8.9%
Degree days - % colder (warmer)
than normal 0.2% (10.0)% - -
GAS UTILITY:
Revenues $ 539.9 $ 404.5 $ 135.4 33.5%
Total margin $ 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 UTILITY:
Revenues $ 88.8 $ 83.5 $ 5.3 6.3%
Total margin (a) $ 40.3 $ 30.2 $ 10.1 33.4%
Operating income $ 20.3 $ 11.7 $ 8.6 73.5%
Income before income taxes $ 18.0 $ 9.3 $ 8.7 93.5%
Distribution sales - millions of
kilowatt hours ("gwh") 980.0 933.6 46.4 5.0%
ENERGY SERVICES:
Revenues $ 668.0 $ 344.8 $ 323.2 93.7%
Total margin $ 35.6 $ 24.1 $ 11.5 47.7%
Operating income $ 19.2 $ 12.6 $ 6.6 52.4%
Income before income taxes $ 19.2 $ 12.6 $ 6.6 52.4%
INTERNATIONAL PROPANE:
Revenues $ 54.5 $ 46.7 $ 7.8 16.7%
Total margin $ 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)%
|
(a) Electric Utility total margin represents total revenues less cost of sales
and Electric Utility gross receipts taxes of $4.8 million and $4.6 million in
2003 and 2002, respectively.
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
16
UGI Corporation 2004 Annual Report
notwithstanding the effects of price-induced customer conservation and, with
respect to commercial and industrial customers, continued 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.
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 realignment 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 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 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 over-collections and, beginning July 1, 2003, the classification of
dividends on preferred shares as a component of interest expense.
ELECTRIC UTILITY. Electric Utility's Fiscal 2003 kilowatt-hour distribution
sales increased principally as a result of weather based upon heating degree
days that was 8.4% colder than normal compared to weather that was 14.5% warmer
than normal in the prior year.
The higher Electric Utility revenues reflect the previously mentioned
increase in Electric Utility kilowatt-hour distribution sales. 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. Notwithstanding the
increase in Electric Utility revenues, cost of sales decreased $5.0 million in
Fiscal 2003 due to lower Electric Utility per-unit purchased power costs.
The increase in Electric Utility total margin principally reflects lower
Electric Utility per-unit purchased power costs and the increase in Electric
Utility sales. The higher Fiscal 2003 operating income reflects the greater
total margin partially offset by higher operating and administrative expenses
resulting from higher transmission and distribution expenses and a $0.4 million
decrease in other income. The increase in Electric Utility 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 TXU
Energy Acquisition and greater sales of electricity produced by UGID's electric
generation assets. 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, UGID
began selling electric power
17
FINANCIAL REVIEW (continued)
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 2003 purchase of an additional 4.9% (83 megawatt)
interest in Conemaugh. The greater Energy Services' Fiscal 2003 total margin
reflects the increase in natural gas volumes sold partially offset by slightly
lower average unit margins and margin from the greater sales of electricity
produced by UGID's electric generation assets. The increase in total margin was
partially offset by higher operating expenses resulting principally from the TXU
Energy Acquisition, growth initiatives and our purchase of the additional
interest in Conemaugh.
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's 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.
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
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.
FINANCIAL CONDITION AND LIQUIDITY
CAPITALIZATION AND LIQUIDITY
Total cash, cash equivalents and short-term investments were $199.6 million at
September 30, 2004 compared with $192.1 million at September 30, 2003. These
amounts include $114.6 million and $116.3 million, respectively, of cash, cash
equivalents and short-term investments readily available to UGI.
The primary sources of UGI's cash and short-term investments are the cash
dividends it receives from its principal subsidiaries AmeriGas, Inc., UGI
Utilities and Enterprises. AmeriGas, Inc.'s ability to pay dividends to UGI is
largely dependent upon distributions it receives from AmeriGas Partners. At
September 30, 2004, our approximately 46% 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 Third
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 2004, 2003 and 2002 was approximately $118 million, $112 million and $109
million, respectively. Based upon the number of Partnership units outstanding on
September 30, 2004, the amount of Available Cash needed annually to pay the MQD
on all units and the general partner interests is approximately $120 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.
Dividends from Enterprises' indirect subsidiary, Antargaz, are subject to
restrictions under its debt agreements. During Fiscal 2004, the Senior
Facilities Agreement was amended to permit AGZ to pay a one-time cumulative
dividend of approximately $54.4 million which was based on 50% of AGZ's
consolidated net income for the two-year period ended March 31, 2004. The amount
of any dividends expected to be received, based on AGZ's consolidated net income
for the period April 1, 2004 through September 30, 2004, is minimal. The
earliest that dividends relating to AGZ's Fiscal 2005 consolidated net income
can be received is during the first quarter of Fiscal 2006.
During Fiscal 2004, 2003 and 2002, AmeriGas, Inc., UGI Utilities and
Enterprises paid cash dividends to UGI as follows:
Year Ended September 30, 2004 2003 2002
----------------------- ------- ------- -------
(Millions of dollars)
AmeriGas, Inc. $ 39.0 $ 44.7 $ 49.4
UGI Utilities 45.0 33.9 37.9
Enterprises 69.4(a) 7.1 23.6(b)
------- ------- -------
Total dividends to UGI $ 153.4 $ 85.7 $ 110.9
------- ------- -------
|
(a) Includes dividend from Antargaz of $54.4 million.
(b) Includes $17.0 of the proceeds related to the redemption of debt
investments in AGZ.
Dividends received by UGI are available to pay dividends on UGI Common
Stock and for investment purposes.
On July 27, 2004, UGI's Board of Directors declared a quarterly dividend
on UGI Common Stock of $0.3125 per share payable on October 1, 2004 to
shareholders of record on August 31, 2004. UGI raised the annual dividend rate
to $1.25 per share, or $0.3125
18
UGI Corporation 2004 Annual Report
per share on a quarterly basis, from $1.14 per share, or $0.2850 per share on a
quarterly basis, effective with this quarterly dividend.
AMERIGAS PARTNERS. The Partnership's debt outstanding at September 30,
2004 totaled $901.4 million. There were no amounts outstanding under AmeriGas
OLP's Credit Agreement at September 30, 2004.
AmeriGas OLP's Credit Agreement expires on October 15, 2008 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, for working capital and general purposes, subject to
restrictions in the AmeriGas Partners Senior Notes indentures. Issued and
outstanding letters of credit under the Revolving Credit Facility, which reduce
the amount available for borrowings, totaled $45.9 million at September 30,
2004. 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 issued debt securities and common units in
underwritten public offerings in each of the last three fiscal years. Most
recently it issued debt securities in April 2004 and common units in May 2004,
both in underwritten public offerings. Proceeds of its public offerings are used
by the Partnership to reduce indebtedness and for general Partnership purposes,
including funding acquisitions. AmeriGas Partners 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) 1.4 million AmeriGas
Partners Common Units and (2) up to $446.2 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, 2004 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 2005.
INTERNATIONAL PROPANE. At September 30, 2004, Antargaz had total debt
outstanding of $474.5 million. There were no amounts outstanding under the
revolver portion of the Senior Facilities Agreement at September 30, 2004.
Antargaz' Senior Facilities Agreement expires June 30, 2008 and consists
of (1) a euro-denominated variable-rate term loan and (2) a E50 million
revolver. At September 30, 2004, there was E193 million ($240.0 million)
outstanding under the term loan. Principal payments of E9 million on the term
loan are due semi-annually on March 31 and September 30 each year with final
payments of E39 million and E100 million due March 31, 2008 and June 30, 2008,
respectively. The Senior Facilities term loan has been collateralized by
substantially all of Antargaz' shares in its subsidiaries, its equity investee
and by substantially all of its accounts receivable.
In July 2002, AGZ issued E165 million of 10% Senior Notes due 2011 (the
"High Yield Bonds"), through one of its subsidiaries, AGZ Finance ("AGZ
Finance"). Interest on the High Yield Bonds is payable semi-annually on January
15 and July 15. AGZ Finance may redeem the bonds in whole or in part at a
premium commencing July 2006. The High Yield Bonds are listed on the Luxembourg
Exchange. Antargaz' management believes that it will be able to meet its
anticipated contractual commitments and projected cash needs during Fiscal 2005
principally with cash generated from operations.
The Senior Facilities Agreement and the Trust Deed, dat |
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