EMPLOYMENT, CONFIDENTIALITY, AND NONCOMPETE AGREEMENT
This Employment, Confidentiality, and Noncompete Agreement
("Agreement") is made and entered into this ____ day of ____________, 2000 by
and between Ferrellgas, Inc., a Delaware corporation ("FGI") and Patrick J.
Chesterman (the "Executive").
WHEREAS, FGI serves as the general partner of Ferrellgas
Partners, L.P., a Delaware limited partnership ("Ferrellgas Partners") and
Ferrellgas, L.P., a Delaware limited partnership ("Ferrellgas", and referred to
herein jointly and severally with Ferrellgas Partners as the "Partnership" or
"Partnerships" as the context so requires), which are engaged primarily in the
sale, distribution and marketing of propane and other natural gas liquids (the
"Business").
WHEREAS, FGI, through the Partnerships, conducts the Business
throughout the United States.
WHEREAS, FGI, through the Partnerships, has expended a great
deal of time, money, and effort to develop and maintain proprietary Confidential
Information (as defined below) which, if misused or disclosed, could be harmful
to the Business.
WHEREAS, the success of FGI depends to a substantial extent
upon the protection of the Confidential Information and customer goodwill by all
of its employees and the employees of the Partnerships.
WHEREAS, the Executive desires to be employed by FGI as
Executive Vice President and Chief Operating Officer.
WHEREAS, the Executive desires to be eligible for other
opportunities within FGI and/or compensation increases which otherwise would not
be available to the Executive and to be given access to Confidential
Information, of FGI and the Partnerships which is necessary for the Executive to
perform his duties, but which FGI would not make available to the Executive but
for the Executive's signing and agreeing to abide by the terms of this Agreement
as a condition of the Executive's employment and continued employment with FGI.
WHEREAS, the Executive recognizes and acknowledges that the
Executive's position with FGI has provided and/or will continue to provide the
Executive with access to Confidential Information of FGI and the Partnerships.
NOW, THEREFORE, in consideration of the compensation and other
benefits of the Executive's employment by FGI and the recitals, mutual covenants
and agreements hereinbefore and hereinafter set forth, the Executive and FGI
agree as follows:
1. Term. The Executive is hereby employed by FGI, and the Executive hereby
accepts such employment upon the terms and conditions set forth herein. The
Executive's term of employment under this Agreement shall be for a period of
three (3) years, commencing on June 13, 2000, and shall continue for a period
through and including June 13, 2003 (the "Initial Period"), unless earlier
terminated pursuant to the terms and conditions of this Agreement.
Notwithstanding anything herein to the contrary, this Agreement and the term of
employment, unless either FGI or the Executive provides six (6) months written
notice to the other party hereto that the Agreement shall not renew upon
expiration of the then current employment period and, subject to Sections 8 and
9, shall be automatically renewed for one year successive periods following the
Initial Period (each a "Successive Period" and together with the Initial Period,
the "Employment Period").
2. Duties and Responsibilities. During the Employment Period, the Executive
shall be employed as Executive Vice President and Chief Operating Officer of
FGI, with such duties and responsibilities as are customarily incident to such
offices and as set forth on the Retail Chief Operating Officer Job Profile and
Expectations previously provided to the Executive, a copy of which is attached
hereto and incorporated by reference. The precise services of the Executive may
be extended or curtailed at the discretion of FGI, so long as after such
extension or curtailment, the duties of the Executive are consistent with the
duties normally attendant to the aforesaid offices. The Executive will perform
his duties in a diligent, trustworthy, loyal, and business-like manner, all for
the purpose of advancing the Business.
3. Performance of Services. During the Employment Period, the Executive shall
devote his primary time, attention and energies to the Business and shall not
during such time be substantially engaged in any other business activity whether
or not such business activity is pursued for gain, profit, or other pecuniary
advantage; provided, however, that nothing herein shall be construed as
preventing the Executive (i) from being involved in civic, philanthropic or
community service activities, from participating in other businesses and
receiving compensation therefore, to the extent that such involvement and
participation does not involve management or participation in day-to-day
activities thereof and does not detract from the performance by the Executive of
his duties to FGI pursuant hereto; provided, further, that at the request of the
Chief Executive Officer of FGI, the Executive shall disclose such involvement
therein, or (ii) from investing his assets in such form or manner as will not
require any appreciable services on the part of the Executive in the operation
of the affairs of any entity in which such investments are made, so long as such
activities do not substantially interfere or conflict with the Executive's
discharge of his duties and responsibilities hereunder. The Executive agrees to
follow and act in accordance with all of the rules, policies, and procedures of
FGI.
4. Compensation.
(a) During the Employment Period, Executive's base salary shall be not less
than $285,000 per year ("Base Salary"), payable in regular installments
in accordance with FGI's usual payroll practices and subject to review
and increase consistent with practices of FGI in effect from time to
time during the Employment Period, but shall not be reduced.
Executive's Base Salary shall be reviewed annually by the Chief
Executive Officer of FGI with the advice and consent of the
compensation committee.
(b) Performance Bonus. During the Employment Period, the Executive shall be
entitled to an annual bonus as set forth below (collectively, the
"Performance Bonus"):
(i) A percentage of the Base Salary based
on Ferrellgas Partners achieving certain reasonably
budgeted EBITDA (as defined below) targets, which
budgeted EBITDA shall be approved at least annually
by the Board of Directors of FGI, calculated as
follows:
Actual to Bonus as a
Budgeted EBITDA % of Base Salary
--------------- ----------------
Less than 90% 0.0%
90% 15.0%
91% 17.0%
92% 19.0%
93% 21.0%
94% 23.0%
95% 25.0%
96% 27.5%
97% 30.0%
98% 32.5%
99% 35.0%
100% 37.5%
(ii) In the event actual EBITDA exceeds
100% of budgeted EBITDA, the performance bonus
provided above will be increased 1% (of Base
Salary) for each 1% over budgeted EBITDA.
(c) A discretionary bonus of up to 37.5% of base pay may be paid in the
sole discretion of the CEO of FGI, based on core objective accomplishments each
year, as from time to time amended.
(d) "EBITDA" means, for any period, consolidated net income of Ferrellgas
Partners
and its subsidiaries determined in accordance with generally accepted accounting
principles plus (i) provisions for taxes based on income or profits to the
extent included in computing such consolidated net income, plus (ii)
consolidated interest expense (including deferred financing fees and expenses)
and other expenses in respect of indebtedness of Ferrellgas Partners and its
subsidiaries for such period, whether paid or accrued or otherwise allocated, to
the extent any such expense was deducted in computing such consolidated net
income, plus (iii) depreciation, amortization and other non-cash expenses of
Ferrellgas Partners and its subsidiaries for such period (excluding any such
non-cash expenses to the extent it represents an accrual or reserve for cash
expenses in any future period or amortization of a prepaid cash expense paid in
a prior period) to the extent any such expense was deducted in computing such
consolidated net income, and plus (vii) any non-cash employee compensation or
benefit expenses to the extent that such expenses were deducted in computing
consolidated net income for such period.
(e) There shall be a cap of 80% of Base Salary applied to all payments
under Section 4(b)(i), 4(b)(ii) and 4(c).
(f) For FGI's fiscal year ending July 31, 2001, EBITDA shall be the sum of
Retail plus Houston, as the Executive will have substantial oversight and
training responsibilities for hiring and training the Executive's Houston
replacement. For years after fiscal year ending July 31, 2001, EBITDA
performance shall be Retail only.
(g) For fiscal year ending July 31, 2001, notwithstanding the
above, a guaranteed minimum bonus of $100,000 shall be payable.
(h) During the Employment Period, the Performance Bonus shall be payable
within fifteen (15) calendar days following receipt by Ferrellgas Partners' of
its audited financial statements as long as the Executive is employed the day
payment is to be made; provided, however, that notwithstanding anything herein
to the contrary, the Executive's entitlement to and calculation and payment of a
Performance Bonus for the fiscal year ended July 31, 2000 shall be determined
pursuant to his bonus arrangement in effect for his previous position.
5. Benefit Plans. During the Employment Period and as otherwise provided herein,
the Executive shall be entitled to participate in any and all employee welfare
and health benefit plans (including, but not limited to life insurance, health
and medical, dental, and disability plans) and other employee benefit plans
(including, but not limited to qualified pension plans and Ferrell Companies,
Inc. ("FCI") stock incentive plans), established by FGI from time to time for
the benefit of executive employees of FGI. The Executive shall be required to
comply with the conditions attendant to participation in and coverage by such
plans and shall comply with and, except as otherwise provided herein, shall be
entitled to benefits only in accordance with the terms and conditions of such
plans as they may be amended from time to time. Nothing herein contained shall
be construed as requiring FGI to establish or continue any particular benefit
plan in discharge of its obligations under this Agreement.
6. Other Benefits and Reimbursements.
(a) During the Employment Period, the Executive shall be entitled to not
less than four (4) weeks of paid vacation each year of his employment
hereunder, which shall accumulate if not used in any given year.
Pursuant to the provisions of this Agreement, vacation time earned but
unused shall be paid to the Executive upon termination of this
Agreement.
(b) During the Employment Period, the Executive shall be entitled to such
other employment benefits extended or provided to other key executives of FGI,
including, but not limited to, payment or reimbursement of all business expenses
incurred by the Executive in the performance of his duties and other job related
activities set forth in this Agreement or subsequently agreed to by the parties
and in the promotion of the Business in accordance with FGI customary policies
and procedures. The Executive shall submit to FGI periodic statements of all
expenses so incurred. Subject to such audits as FGI may deem necessary, FGI
shall reimburse the Executive the full amount of any such expenses advanced by
him in the ordinary course of business.
7. Deductions from Salary and Benefits. FGI shall withhold from any
compensation, bonus or benefits payable to the Executive all customary federal,
state, local and other withholdings, including, without limitation, federal and
state withholding taxes, social security taxes and state disability insurance.
8. Termination by FGI. FGI may terminate Executive's employment under this
Agreement upon at least sixty (60) calendar days ("Notice Period") written
notice ("Notice") to the Executive of its intent to terminate Executive's
employment:
(a) without Cause (as defined in subsection 8(b) below). The Notice shall
specify that such Termination is without Cause, and upon the expiration of the
Notice Period, FGI shall, on the condition that Executive executes a general
release of claims on terms customarily and normally used by FGI at the time, (i)
pay the Executive in a lump sum an amount equal to twice his then current Base
Salary, (ii) provide to the Executive medical insurance, on the same basis on
which he is receiving such insurance at the time of termination, for a period
ending the earlier of two (2) years from the date of termination of this
Agreement or the date Executive is covered by another medical plan at a cost to
the Executive equal to the amount that would have been charged to the Executive
in accordance with the terms of this Agreement, and (iii) an amount equal to
$75,000 for relocation expenses (the payment or provision of the items in this
Section 8(a) are referred to in this Agreement as the "Executive Payments");
(b) for Cause (as defined below). The Notice shall specify the particulars
of such Cause and shall afford the Executive an opportunity to discuss the
particulars of such Cause with the Chief Executive Officer of FGI and to cure
such Cause. If such Cause shall not be cured accordingly, Executive's employment
shall terminate upon expiration of the Notice Period and no compensation shall
be due to the Executive beyond the date of such termination (other than pursuant
to pension or other plans which by their terms provide payments beyond the date
of termination in such circumstances, including but not limited to, the Ferrell
Companies Inc. Employee Stock Ownership Plan, FGI's non-qualified deferred
compensation plan, the FCI Nonqualified Stock Option Agreement and vacation
earned but not taken ("collectively, the "FGI Benefit Plans")). For purposes of
this Agreement "Cause" means: (i) the conviction of Executive by a ----- court
of competent jurisdiction of, or entry of a plea of nolo contendere with respect
to, a felony or ---- ---------- any other crime, which other crime involves
fraud, dishonesty or moral turpitude which materially interferes with the
performance of Executive's duties, responsibilities or obligations under this
Agreement; (ii) fraud or embezzlement related to FGI or the Partnerships on the
part of Executive; (iii) Executive's chronic abuse of or dependency on alcohol
or drugs (illicit or otherwise) which materially interferes with the performance
of Executive's duties, responsibilities or obligations under this Agreement;
(iv) the material breach by Executive of any of Sections 16, 17 or 18 hereof,
except as permitted pursuant to Section 12 hereof; (v) any act of moral
turpitude or willful misconduct by Executive which (A) results in substantial
personal enrichment of the Executive at the expense of FGI or the Partnerships,
or (B) is reasonably expected to have a material adverse impact on the Business
or reputation of FGI; (vi) gross and willful neglect of material duties and
responsibilities of the Executive pursuant hereto, or an intentional violation
of a material term of this Agreement; or (vii) any material violation of any
statutory or common law fiduciary duty of Executive to FGI or the Partnerships;
or (viii) willful failure by the Executive to comply with a material FGI policy,
which results in a material, adverse impact on the Business, as reasonably
determined by the Chief Executive Officer of FGI, or (ix) repeated gross
insubordination.
9. Termination by the Executive. The Executive may terminate his employment
under this Agreement upon at least thirty (30) calendar days' ("Executive Notice
Period") written notice ("Executive Notice") to FGI of such termination:
(a) without Executive Cause (as defined below), upon expiration of the
Executive Notice Period, in which event no compensation shall be due
him beyond the date of such termination other than pursuant to the FGI
Benefit Plans; or
(b) for Executive Cause. The Executive Notice shall specify the particulars
of such Executive Cause and during the Executive Notice Period, the Executive
shall afford the Chief Executive Officer an opportunity to discuss the
particulars of such Executive Cause with the Executive and to cure such
Executive Cause to the satisfaction of the Executive during the Executive Notice
Period. If such Executive Cause shall not be cured accordingly, Executive's
employment shall terminate upon expiration of the Executive Notice Period. In
all events, Executive shall be paid all payments and benefits due him during the
Employment Period, and FGI shall pay the Executive in a lump sum or provide to
the Executive, as applicable, the Executive Payments on the condition that
Executive executes a general release of claims on terms customarily and normally
used by FGI at the time. "Executive Cause" means any --------------- of the
following to which the Executive does not agree: (i) assignment to the Executive
of duties or responsibilities, or the material diminution of duties or
responsibilities, that are inconsistent with his position, duties,
responsibilities or status as they exist at the commencement of the term of this
Agreement; (ii) material change in the reporting responsibilities of the
Executive; provided, however, that, notwithstanding the effect of changes on the
Board under Section 12 hereof, changes in the identity of persons on the Board
shall not be considered a change in reporting responsibilities for purposes of
this Section, (iii) relocation of the Executive's physical office or of FGI's
corporate offices to a site beyond a fifty (50) mile radius of its current
location of One Liberty Plaza, Liberty, Missouri; (iv) failure by any of FGI's
successors in interest to assume this Agreement in writing simultaneously with
becoming a successor in interest; (v) failure of FGI to maintain Director's and
Officer's insurance; or, (vi) a breach of any provision of this Agreement by
FGI.
10. Nondisparagement. During the term of this Agreement and for a period of two
(2) years after it is terminated, for whatever reason, Executive agrees that he
will not make any statements or provide any information that would tend to
disparage, defame or denigrate FGI, its affiliates, related entities and any of
its or their former or current officers, directors, agents or employees.
11. Cooperation. In the event that FGI or any of its affiliates becomes involved
in any civil or criminal litigation, administrative proceeding or governmental
investigation, Executive shall, upon request, provide reasonable cooperation and
assistance to FGI, including without limitation, furnishing relevant
information, attending meetings and providing statements and testimony. FGI will
reimburse Executive for all reasonable and necessary expenses he incurs in
complying with this Section 11. In addition, at any time more than two (2) years
after the termination of this Agreement for any reason, Executive need not
comply with this Section 11 unless FGI has agreed in writing to reimburse
Executive's employer, if applicable, or to reimburse Executive if self-employed,
for Executive's time at a rate agreed to by the applicable parties.
12. Effect of Certain Transactions; Change in Control.
(a) In the event of a Change in Control (as hereinafter defined) FGI shall
pay the Executive, not later than thirty (30) calendar days after such Change in
Control, a lump cash sum equal to the greater of (A) two and one-half (2.5)
times 125% of his then current Base Salary, or (B) two and one-half (2.5) times
the average actual cash compensation (including, but not limited to, bonuses)
paid for the prior three (3) fiscal years prior to such Change in Control. Such
payment shall reduce any lump sum Executive Payments payable to the Executive
under Sections 8 or 9. In addition, if the Executive's employment is terminated
pursuant to Section 8(a) or 9(b) within eighteen (18) months after such Change
in Control, (i) FGI shall pay the Executive for any vacation earned by the
Executive but not taken and any other amounts earned but unpaid, (ii) FGI shall
pay the Executive a pro rata portion (such proration shall be on the basis that
the number of months of his employment during FGI's then current fiscal year
bears to the number 12, considering the month of termination as a month of full
employment, and in the case of any plan measured over a full year, such
determination and payment shall be made after the close of such year of any
amounts to which he would have otherwise been entitled under any Company
perquisite to which Executive is a participant (excluding any bonus), and (iii)
FGI shall continue the Executive's health, accident and life insurance benefits
at FGI's cost on the same basis on which he is receiving such benefits at the
time of termination, until the earlier of the COBRA period of eighteen (18)
months after the month in which such termination occurs or Executive obtains
coverage under another plan or comparable coverage. For purposes of calculating
any bonus to be paid to the Executive pursuant to this Section 12, the Executive
shall be entitled to the payment of any bonus normally calculated with reference
to a future period based upon the total amount paid for such bonus in the three
(3) previous fiscal years.
(b) For purposes of this Agreement a "Change In Control" shall be deemed to
occur if:
(i) FGI or FCI (FGI and FCI will hereinafter be jointly and severally
referred to as "Company" or the ------- "Companies" as the context so requires)
or either Partnership merges with or is consolidated ---------- into another
corporation or other entity not theretofore affiliated with either Company or
Partnership (i.e., controlled by, controlling or under common control with the
Companies or the Partnerships, as applicable) and the Company or Partnership so
merging or consolidating is not the surviving entity pursuant to such merger or
consolidation (other than a transaction in which the persons who were the equity
owners of the Company or Partnership so merging own more than 50% of the
surviving entity);
(ii) All or substantially all of the assets of either Company or
Partnership are acquired by another corporation or other
entity not theretofore affiliated with either Company or
Partnership in a single transaction or a series of related
transactions, and a majority of the then current Board of
Directors of neither Company does not control the entity that
has made such acquisition;
(iii) There is consummated any transaction or series of transactions
or any event or series of events, the result of which is that
FGI is no longer the sole general partner of either
Partnership;
(iv) There is consummated any transaction or series of transactions
or any event or series of events, the result of which is that
the Board of FGI does not have control of the affairs of
either Partnership;
(v) There is consummated a purchase or other acquisition by any
persons, entity or group of persons, within the meaning of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (excluding, for this purpose,
either Company or its subsidiaries or any employee benefit
plan of either Company or its subsidiaries), of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 50% or more of either the
then-outstanding equity securities of either Company or
Partnership or the combined voting power of either Company's
or Partnership's then-outstanding voting securities;
(vi) Individuals who, as of the date hereof, constitute the Board of either
Company (as the date hereof, the "Incumbent Boards") cease for any reason to
constitute at least a majority of the Boards, provided that any person who
becomes a director subsequent to the date hereof whose election, or nomination
for election by either Company's equity owners, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board (other
than an individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of directors of
either Company, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for purposes of this section,
considered as though such person were a member of the applicable Incumbent
Board;
(vii) There is consummated a reorganization, merger or
consolidation, in each case with respect to which persons who
were the equity holders of either Company or Partnership
immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than
50% of, respectively, the equity securities and the combined
voting power entitled to vote generally in the elections of
directors or managers of the reorganized, merged or
consolidated entity's then-outstanding voting securities;
(viii) There is a liquidation or dissolution of either Company or
Partnership (other than a liquidation or dissolution where the
equity owners of the surviving Company or Partnership do not
change) or of the sale of all or substantially all of the
assets of either Company or Partnership;
(ix) There is consummated a public sale of a "material" amount of
FCI's equity (with materiality being determined by the
Committee administering the Ferrell Companies Inc. Employee
Stock Ownership Trust ("ESOT"), but with a material amount of
such equity being at least 50% thereof).
13. Mitigation or Reduction of Benefits. Executive shall not be required to
mitigate or reduce the amount of any payment upon termination provided for
herein by seeking other employment or otherwise nor, except as otherwise
specifically set forth herein, shall the amount of any payment or benefits
provided upon termination be reduced by any compensation or other amounts paid
to or earned by Executive as the result of employment by another employer after
such termination or otherwise.
14. Certain Additional Payments by FGI.
(a) Notwithstanding anything in this Agreement to the contrary and except
as set forth below, in the event it shall be determined that any payment,
benefit or distribution (or contribution thereof) from FGI, any affiliate, or
trusts established by FGI or by any affiliate, for the benefit of its employees,
to the Executive or for the Executive's benefit (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section, and with a "Payment" including, without limitation, the
vesting of an option or other non-cash benefit or property) (any of which are
referred to as a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any interest or penalties are incurred by the Executive with respect to such
excise tax (such ----- excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
- ---------- --------- Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or ------- penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the sum of (i) the Excise Tax imposed upon the Payments; plus (ii) an
amount equal to the product of any deductions disallowed to Executive for
federal, state, or local income tax purposes solely because of the inclusion of
the Gross-up Payment in the Executive's adjusted gross income multiplied by the
highest applicable marginal rate of federal, state, or local income taxation,
respectively, for the calendar year in which the Gross-up Payment is to be made.
(b) Subject to the provisions of Section 14(c), all determinations required
to be made under this Section 14, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by a nationally
recognized certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to FGI and the Executive ---------------- within fifteen (15)
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by FGI. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting a Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by FGI. Any Gross-Up Payment, as determined pursuant to this Section 14,
shall be paid by FGI to the Executive within five (5) calendar days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon FGI and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by FGI should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that FGI -------------- exhausts its remedies pursuant
to Section 14(c) and the Executive thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by FGI to or for the benefit of the Executive.
(c) The Executive shall notify FGI in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by FGI of the
Gross-Up Payment. Such notification shall be given as soon as practicable but no
later than thirty (30) business days after the Executive is informed in writing
of such claim and shall apprise FGI of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which the
Executive gives such notice to FGI (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If FGI notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(i) give FGI any information reasonably requested by FGI relating to such
claim,
(ii) take such action in connection with contesting such claim as
FGI shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected
by FGI,
(iii) cooperate with FGI in good faith in order to effectively contest such
claim, and
(iv) permit FGI to participate in any proceedings relating to such claim;
provided, however, that FGI shall bear and pay directly all costs and
expenses (including attorneys' fees and costs and additional interest
and penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis, for
any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment
of costs and expenses. Without limitation on the foregoing provisions
of this Section 14(c), FGI shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may,
at its sole option, either direct the Executive to pay the tax claimed
and sue for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as FGI shall determine; provided,
however, that if FGI directs the Executive to pay such claim and sue
for a refund, FGI shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, FGI's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
If, after the receipt by the Executive of an amount
advanced by FGI pursuant to Section 14(c), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to FGI's complying with the requirements of
Section 14(c)) promptly pay to FGI the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced
by FGI pursuant to Section 14(c), a determination is made that the
Executive shall not be entitled to any refund with respect to such
claim and FGI does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30)
calendar days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
15. Indemnification. Executive has executed on _______________ a
Director/Officer Indemnification Agreement which agreement controls the terms of
indemnification between the parties.
16. Confidential Information.
(a) In connection with Executive's employment, FGI will disclose and/or has
disclosed to Executive certain Confidential Information (defined
below). The Confidential Information is not generally known to others
and could have economic value if disclosed to others and/or used by
Executive, directly or indirectly, in competition with FGI or the
Partnerships. Further, Executive will in the future participate in the
development of, have access to, or use in performing Executive's
employment duties, some or all of the Confidential Information. FGI
makes reasonable efforts to keep its Confidential Information secret
and confidential, and Executive has a duty to keep it secret and
confidential.
(b) Executive may have significant contacts with the customers and accounts
of FGI and/or be provided with FGI's confidential customer and
customer-related information, including various customer lists,
analyses, and summaries. These contacts and/or this information could
enable Executive, at FGI's expense, to have access to and establish
favorable relations with, and put Executive in a position to influence,
FGI's customers and accounts.
(c) FGI's customer lists and customer information are trade secrets, and
this Agreement is intended, among other things, to protect FGI's trade
secrets, customer relationships, customer goodwill and other business
interests.
(d) The Executive will not use or reveal Confidential Information to anyone
other than for on or behalf of FGI both during and after Executive's
employment.
(e) Executive shall keep all Confidential Information secret and confidential.
(f) Executive shall return to FGI all Confidential Information and all
property of FGI immediately upon termination of Executive's employment
for any reason and also at any time upon FGI's request.
(g) "Confidential Information" shall mean: (i) Company Information (as
defined below); (ii) Customer Information (as defined below); and (iii) all
other information, whether or not reduced to writing, relating to the
Partnerships, the Business or FGI's customers which gives FGI an advantage over
competitors who do not know or use it, have not compiled the information
themselves, or is otherwise not generally known in the industry, including, but
not limited to, trade secrets, proprietary information, customer lists, route
books, inventions, computer programs and software, and including information
conceived, originated, or developed by Executive. Confidential Information
includes, but is not limited to, originals and copies of all materials
containing such information, regardless of the media used to record such
information, including but not limited to computers, computer disks, CD ROMS, or
other electronic media, microfiche or microfilm.
(h) "Company Information" shall mean: Information that FGI, the Companies
or the Partnerships have developed, acquired, organized, compiled or
maintained regarding FGI's products, services, processes, methods,
operations, proposals, projects, contracts, bids, pricing, costs,
profitability, marketing plans and strategies, revenues and finances to
the extent not subject to public disclosure requirements, business
relationships, correspondence, and other matters related to FGI's
development and operation of the Business.
(i) "Customer Information" shall mean: Information that FGI or the
Partnerships have developed, acquired, organized, compiled, or
maintained by FGI regarding FGI's customers, former customers and
prospective customers while developing and operating the Business,
including, but not limited to, information relating to their identity,
location, personnel, usage of petroleum products, and incidental or
related appliances, equipment and supplies, purchasing experience,
delivery schedules and routing, payment habits, credit experience,
ownership of storage facilities, contract renewal and expiration dates,
pricing, and other terms and conditions contained in their contracts
with FGI or its predecessors.
17. Inventions and Patents. Executive agrees that all inventions, innovations,
improvements, developments, methods, designs, analyses, drawings, reports, and
all similar or related information which relates to the Companies' actual or
anticipated business (to the extent the Executive is aware thereof), research
and development or existing or future products or services and which are
conceived, developed or made by Executive while employed by FGI or any of its
affiliates (whether prior to or during the Employment Period) ("Work Product")
belong to FGI or such other affiliate, and Executive hereby assigns to FGI his
entire right, title and interest in any such Work Product. Executive will
promptly disclose such Work Product to the Chief Executive Officer of FGI and
perform all actions reasonably requested by the Chief Executive Officer of FGI
(whether during or after Executive's Employment Period) to establish and confirm
such ownership (including, without limitation, assignments, consents, powers of
attorney and other instruments).
18. Noncompete; Nonsolicitation.
(a) Executive acknowledges that in the course of his employment with FGI he
will become familiar with Confidential Information and that his services will be
of special, unique and extraordinary value to FGI. Therefore, Executive agrees
that, during the time he is employed by FGI pursuant hereto and for two (2)
years thereafter (the "Noncompete Period"), in the entire United States and any
other countries ----------------- in which the Companies or Partnerships are
providing, or actively planning to provide goods and services, he will not: (i)
compete with the Companies or the Partnerships in the sale of propane or related
competitive products or services; (ii) directly or indirectly, in person or
through others, for the benefit of Executive or another, call upon, solicit,
sell, divert, take away, deliver to, accept business or orders from or otherwise
engage in propane-related business with FGI's Customers (as defined below), nor
shall Executive, in any capacity, assist others to do so; or (iii) directly or
indirectly interfere with the business relationship between FGI and any FGI
Customers. The restrictions in this paragraph apply only to products and
services that are competitive with the Business and/or products and services of
FGI.
(b) While employed by FGI and for two (2) years thereafter, Executive will
not (i) interfere with, disrupt, or attempt to disrupt relations,
contractual or otherwise, between FGI and its employees, vendors or
suppliers, or (ii) hire or take away, directly or indirectly, any FGI
employee.
(c) "Customers" shall mean: (i) all persons, firms, corporations, and other
business enterprises for whom FGI performs or performed services or to whom FGI
sells or sold products, appliances, equipment, or supplies during the two year
period immediately prior to the termination of Executive's employment; and (ii)
all persons, corporations, and other business enterprises actively solicited by
FGI or to whom FGI has furnished a quotation or proposal or estimate for the
sale of products or services within the one year period immediately prior to the
termination of Executive's employment. Customers of FGI shall include, but not
be limited to, those for whom either Executive or anyone under Executive's
supervision provided products or services and those who may have become
customers through the efforts of Executive while employed by FGI.
(d) FGI and Executive agree that: (i) the covenants set forth in Sections
16 and 18 are reasonable in geographical and temporal scope and in all
other respects, (ii) FGI would not have entered into this Agreement but
for these covenants of Executive contained herein, and (iii) these
covenants contained herein have been made in order to induce FGI to
enter into this Agreement.
(e) If, at the time of enforcement of this Section 18, a court or arbiter
shall hold that the duration, scope or area restrictions stated herein
are unreasonable under circumstances then existing, the parties agree
that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or
area and that the court or arbitrator shall be allowed to revise the
restrictions contained herein to cover the maximum period, scope and
area permitted by law.
(f) FGI does not have to enforce all provisions of Sections 16 and 18 of
this Agreement at all times to preserve its rights to enforce any other
provision of Sections 16 and 18 of this Agreement. Executive also
acknowledges FGI does not have to enforce similar agreements with other
employees and/or officers to preserve its rights to enforce Sections 16
and 18 of this Agreement with Executive.
(g) Executive shall provide a copy of this Agreement to any new or
potential employer which competes against the Companies or the
Partnerships.
19. Arbitration.
(a) Except as set forth in Section 19(c), arbitration shall be the sole and
exclusive remedy for any dispute, claim, or controversy of any kind or
nature (a "Claim") arising out of, related to, or connected with
Executive's employment relationship with FGI, or the termination of
Executive's employment relationship with FGI, including any Claim
against any parent, subsidiary, or affiliated entity of FGI, or any
director, officer, general or limited partner, employee or agent of FGI
or of any such parent, subsidiary or affiliated entity.
(b) This agreement to arbitrate specifically includes (without limitation)
any dispute between or among the parties to this Agreement relating to or in
respect of this Agreement, its negotiation, execution, performance, subject
matter, or any course of conduct or dealing or actions under or in respect of
this Agreement, all claims under or relating to any federal, state or local law
or regulation prohibiting discrimination, harassment or retaliation based on
race, color, religion, national origin, sex, age, disability or any other
condition or characteristic protected by law; demotion, discipline, termination
or other adverse action in violation of any contract, law or public policy;
entitlement to wages or other economic compensation; and any claim for personal,
emotional, physical, economic or other injury.
(c) This agreement to arbitrate does not apply to any legal action by FGI
seeking injunctive relief or damages for breach or enforcement of
Sections 16 or 18 of the Agreement. This agreement to arbitrate also
does not apply to any claims by Executive: (a) for workers'
compensation benefits; (b) for unemployment insurance benefits; (c)
under a benefit plan where the plan specifies a separate arbitration
procedure; (d) filed with an administrative agency which are not
legally subject to arbitration under this Agreement; or (e) which are
otherwise expressly prohibited by law from being subject to arbitration
under this Agreement.
(d) Any party may demand arbitration by sending notice to the other party
as set forth in this Agreement. Any Claim submitted to arbitration shall be
decided by a single, neutral arbitrator (the "Arbitrator"). The parties to the
arbitration shall mutually select the Arbitrator not later than 45 days after
service of the demand for arbitration. If the parties for any reason do not
mutually select the Arbitrator within the 45 day period, then any party may
apply to any court of competent jurisdiction to appoint a retired judge as the
Arbitrator. The parties agree that arbitration shall be conducted in accordance
with the American Arbitration Association Rules for the Resolution of Employment
Disputes. The Arbitrator shall apply the substantive federal, state, or local
law and statute of limitations governing any Claim submitted to arbitration. The
arbitration shall take place at a mutually agreeable site in Liberty or Kansas
City, Missouri and shall be conducted within one hundred eighty (180) days of
the receipt by a party of the other party's demand for arbitration. The
Arbitrator, in making his decision, shall be bound to follow the substantive
state and federal laws of jurisprudence as well as the applicable rules of
evidence in arriving at a decision. The decision rendered shall be in writing
and delivered to the parties within thirty (30) days after the conclusion of the
arbitration. The award of the Arbitrator shall be final, and judgment upon the
award rendered may be entered and enforced in any court, state or federal,
having jurisdiction. In ruling on any Claim submitted to arbitration, the
Arbitrator shall have the authority to award only such remedies or forms of
relief as are provided for under the substantive law governing such Claim.
(e) Any fees and costs incurred in the arbitration (e.g., filing fees,
transcript costs and Arbitrator's fees) will be shared equally by
Executive and FGI, except that the Arbitrator may reallocate such fees
among the parties if the Arbitrator determines that an equal allocation
would impose an unreasonable financial burden on Executive. The parties
shall be responsible for their own attorneys' fees and costs, except
that the Arbitrator shall have the authority to award attorneys' fees
and costs to the prevailing party in accordance with the applicable law
governing the dispute.
(f) The Arbitrator, and not any federal or state court, shall have the
exclusive authority to resolve any issue relating to the
interpretation, formation or enforceability of this Agreement, or any
issue relating to whether a Claim is subject to arbitration under this
Agreement, except that any party may bring an action in any court of
competent jurisdiction to compel arbitration in accordance with the
terms of this Agreement.
20. FGI's Right to Injunctive Relief, Tolling. In the event of a breach or
threatened breach of any of the Executive's duties and obligations under the
terms and provisions of Sections 16, 17 or 18 hereof, FGI shall be entitled, in
addition to any other legal or equitable remedies it may have in connection
therewith (including any right to damages that it may suffer), to temporary,
preliminary, and permanent injunctive relief restraining such breach or
threatened breach. The Executive hereby expressly acknowledges that the harm
which might result to the Business as a result of any noncompliance by the
Executive with any of the provisions of sections 16, 17 or 18 hereof would be
largely irreparable.
21. Judicial Enforcement. If any provision of this Agreement is adjudicated to
be invalid or unenforceable under applicable law in any jurisdiction, the
validity or enforceability of the remaining provisions thereof shall be
unaffected as to such jurisdiction and such adjudication shall not affect the
validity or enforceability of such provisions in any other jurisdiction. To the
extent that any provision of this Agreement is adjudicated to be invalid or
unenforceable because it is overbroad, that provision shall not be void but
rather shall be limited only to the extent required by applicable law and
enforced as so limited. The parties expressly acknowledge and agree that this
Section is reasonable in view of the parties' respective interests.
22. Executive Warranties and Representations. The Executive warrants and
represents that the execution and delivery of the Agreement and the Executive's
employment with FGI do not violate any previous employment agreement or other
contractual obligation of the Executive.
23. Survival. The provisions of this Agreement, except as otherwise provided
herein, shall continue in full force in accordance with their terms
notwithstanding any termination of Executive's employment by FGI.
24. Right to Recover Costs and Fees. The Executive and FGI undertake and agree
that if either the Executive or FGI breach or threaten to breach Sections 16 or
18 of this Agreement (the "Breaching Party"), the Breaching Party shall be
liable for any attorneys' fees and costs incurred by the non-Breaching Party in
enforcing the non-Breaching Party's rights hereunder.
25. Executive Right. If the Executive believes that any benefit on account of
the termination of the Executive's service with FGI under this Agreement has not
been paid by FGI within fifteen (15) days after the date on which that benefit
should have been paid to the Executive under the terms of this Agreement, the
Executive may give notice to FGI of that failure and the amount of the benefit
that should have been paid. FGI shall pay the Executive the amount specified in
that notice within thirty (30) days after its receipt of the notice; provided,
however, that the payment shall not preclude FGI from disputing that payment in
accordance with the arbitration provisions of this Agreement.
26. Entire Agreement, Amendments and Modifications. This Agreement constitutes
the entire agreement and understanding of the parties regarding the employment
of Executive by FGI and supersedes all prior agreements and understandings
between the Executive and FGI to the extent that any such agreements or
understandings conflict with the terms of this Agreement. The parties
specifically agree that the Option Grantee Agreement entered into between
Executive and Ferrellgas is hereby terminated. No modification, amendment or
waiver of any of the provisions of this Agreement shall be effective unless in
writing specifically referring hereto, and signed by the parties hereto.
27. Assignments. This Agreement shall be freely assignable by FGI to, and shall
inure to the benefit of and be binding upon, its successors and assigns and/or
any other entity which shall succeed to the business presently being conducted
by FGI or the Partnerships. In that regard, FGI shall assign and shall require
any successor, whether in a Change of Control transaction or not, of either of
the Companies or any of the Partnerships to expressly assume in writing FGI's
obligations under this Agreement simultaneously with the consummation of an
applicable transaction, which assumption shall not relieve FGI of any of its
obligations hereunder. Being a contract for personal services, neither this
Agreement nor any rights hereunder shall be assigned by the Executive; provided,
however that the rights and benefits hereunder shall inure to and be enforceable
by the Executive's estate, heirs, executors, administrators or legal guardians
or representatives.
28. Choice of Forum; Governing Law. In light of FGI's substantial contacts with
the State of Missouri, the parties' interests in ensuring that disputes
regarding the interpretation, validity, and enforceability of this Agreement are
resolved on a uniform basis, and FGI's execution of, and the making of, this
Agreement in Missouri, the parties agree that: (i) any litigation involving this
Agreement shall be filed and conducted in the state or federal courts in the
State of Missouri; and (ii) the Agreement shall be interpreted in accordance
with and governed by the laws of the State of Missouri, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
Missouri or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Missouri.
29. Headings and Interpretation. Section headings are provided in this Agreement
for convenience only and shall not be deemed to substantively alter the content
of such sections. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". References to the singular or plural tense of a word shall
also include the plural or singular as the context may require.
30. Neutral Construction. Each party acknowledges that in the negotiation and
drafting of this Agreement, they have been represented by and relied upon the
advice of counsel of their choice. The parties affirm that they and their
counsel have had a substantial role in such negotiation and drafting of this
Agreement, and, therefore, the parties agree that this Agreement shall be deemed
to have been drafted by all the parties hereto and the rule of construction to
the effect that any contract ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement or any
exhibit or schedule hereto.
31. Notices. Any notice, request, consent or communication (collectively, a
"Notice") under this Agreement shall be effective only if it is in writing and
(i) personally delivered with written receipt thereof, (ii) sent by certified or
registered mail, return receipt requested, postage prepaid or (iii) sent by a
nationally recognized overnight delivery service, with delivery confirmed,
addressed as follows (or at such other address for a party as shall be specified
by like notice):
(a) If to the Executive, to: Patrick J. Chesterman
[Address]
(b) with a copy to: Bryan Cave LLP
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Attn: Beth Romans Bower
(c) If to FGI, to: Ferrellgas, Inc.
One Liberty Plaza
Liberty, Missouri 64068
Attention: Mr. Danley K. Sheldon
A Notice shall be deemed to have been given as of the date
when (i) personally delivered as indicated by date of receipt, (ii) five (5)
days after the date when deposited with the United States certified mail, return
receipt requested, properly addressed, or (iii) when receipt of a Notice sent by
an overnight delivery service is confirmed by such overnight delivery service,
as the case may be, unless the sending party has actual knowledge that a Notice
was not received by the intended recipient.
32. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and together shall constitute one and
the same Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first above written.
FERRELLGAS, INC. EXECUTIVE
By: __________________
Name:_________________ Patrick J. Chesterman
Title:___________________
PLEASE NOTE: BY SIGNING THIS AGREEMENT, EXECUTIVE IS HEREBY CERTIFYING THAT
EXECUTIVE (A) HAS RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND STUDY BEFORE
EXECUTING IT; (B) HAS READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT; (C)
UNDERSTANDS THAT THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION; (D)
HAS HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS
EXECUTIVE HAS ABOUT THE AGREEMENT AND HAS RECEIVED SATISFACTORY ANSWERS TO ALL
SUCH QUESTIONS; AND (E) UNDERSTANDS EXECUTIVE'S RIGHTS AND OBLIGATIONS UNDER THE
AGREEMENT.