EMPLOYMENT, CONFIDENTIALITY, AND NONCOMPETE AGREEMENT
This Employment, Confidentiality, and Noncompete Agreement
("Agreement") is made and entered into this 17th day of July, 1998, by and among
Ferrell Companies, Inc., a Kansas corporation ("FCI"), Ferrellgas, Inc., a
Delaware corporation ("FGI"; FCI and FGI are jointly and severally referred to
herein as the "Company" or the "Companies", as the context so requires), James
E. Ferrell (the "Executive") and LaSalle National Bank, not in its corporate
capacity, but solely as Trustee ("Trustee") of the Ferrell Companies Inc.
Employee Stock Ownership Trust.
WHEREAS, the James E. Ferrell Revocable Trust, an affiliate of
Executive, has made $40,000,000 subordinated loan to FCI pursuant to a
Subordinated Note Purchase Agreement dated as of the date hereof (the
"Subordinated Loan").
WHEREAS, FGI is a wholly-owned subsidiary of FCI and 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 collectively with Ferrellgas Partners as
the "Partnerships"), which are engaged primarily in the retail sale,
distribution and marketing of propane (the "Business").
WHEREAS, the Companies, through the Partnerships, conduct the
Business throughout the United States.
WHEREAS, the Companies, through the Partnerships, have
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 the Companies depends to a substantial
extent upon the protection of the Confidential Information and customer goodwill
by all of their employees and the employees of the Partnerships.
WHEREAS, the Executive desires to be employed, and to continue
to be employed, by the Companies as Chairman of the Board of the Companies.
WHEREAS, the Executive desires to be eligible for other
opportunities within the Companies and/or compensation increases which otherwise
would not be available to the Executive and to be given access to Confidential
Information of the Companies and the Partnerships which is necessary for the
Executive to perform his duties, but which the Companies 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 the Companies.
WHEREAS, the Executive recognizes and acknowledges that the
Executive's position with the Companies has provided and/or will continue to
provide the Executive with access to Confidential Information of the Companies
and the Partnerships.
WHEREAS, the Companies compensate their employees to, among
other things, develop and preserve goodwill with their customers on each
respective Company's behalf and business information for each respective
Company's ownership and use.
NOW, THEREFORE, in consideration of the compensation and other
benefits of the Executive's employment by the Companies and the recitals, mutual
covenants and agreements hereinafter set forth, the Executive and the Companies
agree as follows:
Term. The Executive is hereby employed by the Companies, 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
five (5) years, commencing on July 17, 1998 (the "Initial Period"), and shall
continue for a period through and including July 17, 2003, 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 shall be automatically renewed for one year successive periods
following the Initial Period (the "Successive Period" and together with the
Initial Period, the "Employment Period"), until notice of either party's desire
that the Agreement not be renewed for a Successive Period is given by such party
on or prior to March 31 of the year in which the next Successive Period shall
commence, in which case, subject to Sections 8, 9 and 10, Executives employment
under this Agreement shall terminate upon the expiration of the Initial Period
or current Successive Period, as the case may be; provided, however, that except
as provided in Section 9 (a) the Companies may not terminate any Successive
Period for such time as any amount is due under the FCI Subordinated Notes from
Ferrell Companies, Inc., a Kansas corporation, to the Executive or his designee
dated as of July 17, 1998.
Duties and Responsibilities. During the Employment Period the Executive
shall, on a non-exclusive basis, perform the duties and responsibilities
customarily incident to the position of Chairman of the Board of the Companies
("Chairman") and as are consistent with the each Company's Bylaws, as now
existing or hereafter amended. The duties and responsibilities of the Executive
shall include, but not be limited to, the following:
chairing the Board of Director meetings for the Companies;
serving as an ex-officio member of the Senior Management Committee of the
Companies;
providing strategic advice and insights related to the industry and the
operations and development of the Business, as well as acquisition
opportunities, to the Chief Executive Officer of the Companies;
interviewing and providing feedback to the Chief Executive Officer of the
Companies regarding candidates for senior management positions;
performing periodic visits to the Companies' district offices at which time
advice is provided to area managers and senior field managers, consistent with
past practices, and providing feedback to the Chief Executive Officer of the
Companies regarding such matters;
meeting on a regular basis with the Chief Executive Officer of the
Companies to provide insight, consultation, guidance, and direction related to
the operation and development of the Companies;
materially participating in company wide meetings, consistent with past
practices;
migrate the role of Chief Operating Officer-Houston as soon as practicable
following the date hereof, but in any event no later than July 17, 1999;
assisting in the re-application of FGI's membership to the National Propane
Gas Association;
maintaining PERC board membership until such membership is transferred to
another senior officer of FGI, which transfer shall occur as soon as practicable
following the date hereof, but in any event no later than July 15, 2003;
attempting to facilitate the transfer of board membership on the Propane
Vehicle Counsel to another senior officer of FGI, as soon as practicable
following the date hereof, but in any event no later than July 17, 2003;
maintaining membership with the World LPG Association as a representative
of FGI, until such membership is transferred to another senior officer of FGI,
as soon as practicable following the date hereof, but in any event no later than
July 17, 2003;
actively participating in the maintenance and development of appropriate
and
amicable lender, debtholder, and equity holder relationships; and
such other senior management activities as may be agreed to in writing by
the parties from time to time.
Performance of Services. During the Employment Period, the Executive agrees
to dedicate a reasonably sufficient amount of time per year (which the parties
estimate to equate to approximately 1,000 hours) to the accomplishment of his
duties and responsibilities and to perform the duties and responsibilities in a
diligent, trustworthy, loyal, business-like and efficient manner. The Executive
agrees to follow and act in accordance with all of the Companies' rules,
policies, and procedures.
Compensation.
(a) Salary. During the Employment Period, the Companies shall pay the
Executive as compensation for his services a monthly base salary of not less
than ten thousand dollars ($10,000), payable in accordance with the Companies'
usual practices. The Executive's base salary shall be eligible for review and
increase consistent with practices of the Companies in effect from time to time
during the Employment Period, but shall not be reduced. The Executive shall be
eligible to participate in such perquisites as may from time to time be awarded
to the Executive by the Companies payable at such times and in such amounts as
the Companies, in their sole discretion, may determine; provided, however, that
such perquisites so awarded are no less favorable to Executive than similar
perquisites awarded to other members of the Companies' senior management.
(b) Personal Service Bonus. As an additional inducement, the Executive
shall be entitled to receive a bonus (the "Incentive Bonus") payable by the
Companies on the later of: (i) the date the Executive's employment under this
Agreement terminates (for any reason; (the "Employment Termination Date");(ii)
the date that all indebtedness under the Subordinated Loan has been paid in full
(the "Subordinated Loan Payment Date"); or (iii) the Incentive Bonus is
permitted to be paid pursuant to the covenants, terms and conditions of any
financing documents applicable to FCI (the "Bonus Payment Date"). The amount of
the Incentive Bonus shall be equal to .005 of the increase in the equity value
of FCI from July 31, 1998 (as determined by an appraisal by the financial
advisor to the trustee of the ESOT (the "Appraiser")) to and including the date
of the most recent appraisal conducted by the Appraiser prior to the earlier of:
(y) the Employment Termination Date; or (z) the Subordinated Loan Payment Date.
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 the Companies' 401(k) plan and qualified
pension plans) established by the Companies from time to time for the benefit of
executive employees of the Companies; provided, however, that nothing herein
shall entitle the Executive to participate in any Company employee stock
ownership plan or any equity board incentive compensatoin plan of the Company
and its affiliates. Such employee benefit plans in which the Executive shall be
entitled to participate on the date hereof shall include those listed on
Schedule 5 hereof. The Executive shall be required to comply with the conditions
attendant to 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 the Companies to
establish or continue any particular benefit plan in discharge of their
obligations under this Agreement.
Other Benefits.
During the Employment Period, the Executive shall be entitled to such other
employment benefits extended or provided to other key executives of the
Companies, 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 the
Companies' customary policies and procedures. The Executive shall submit to the
Companies periodic statements of all expenses so incurred. Subject to such
audits as the Companies may deem necessary, the Companies shall reimburse the
Executive the full amount of any such expenses advanced by him in the ordinary
course of business.
During the Employment Period the Companies shall provide the Executive with
office space and administrative support services consistent with past practices.
The Executive shall be entitled to reimbursement of reasonable expenses
incurred by Executive in connection with the negotiation of this Agreement,
which shall be paid to Executive upon submission to the Companies of proper
vouchers evidencing such expenses and the purposes for which the same were
incurred.
The Board of Directors of the Companies may, in their sole discretion,
approve additional benefits to be offered to the Executive at such time as they
deem appropriate.
Deductions from Salary and Benefits. The Companies shall withhold from any
compensation 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.
Death or Disability.
In the event of the death or termination of employment due to permanent
disability of the Executive during the Employment Period, (i) all sums payable
to the Executive under this Agreement through the end of the second month
following the month in which such event occurs, (ii) all amounts earned by the
Executive but not taken at the time of the termination of employment, and (iii)
a cash, lump-sum amount equal to three (3) times the greater of (X) 125% of the
then current base salary, or (Y) the average compensation paid for the prior
three (3) fiscal years, shall be paid to the Executive or the Executive's estate
or guardian, as the case may be, as soon as practicable after the death occurs
or permanent disability is determined. In addition, if such termination occurs
after the third month of the Companies' then fiscal year, sums payable to the
Executive shall include a pro rata portion of any amounts to which the Executive
would have otherwise been entitled for the year in which such event occurs under
any Company perquisite to which Executive is a participant. For purposes of
calculating any bonus as applicable pursuant to Section 6(d), to be paid to the
Executive pursuant to this Section 8(a), the Executive shall be entitled to the
payment of any bonus normally calculated with reference to a future period based
upon a percentage of the amount paid for such item in the previous fiscal year;
such percentage to be calculated by dividing the number of days of his
employment during the Companies' then current fiscal year by the number 365.
For purposes of this Agreement, "permanent disability" means the impairment
of Executive's physical or mental health which makes the performance of duties
impractical or impossible as evidenced by the certification of Executive's
doctor.
Termination by the Companies.
The Executive's duties and responsibilities under this Agreement may be
terminated by the Companies for good Cause, subject to the provisions
of this Section 9(a), upon at least sixty (60) calendar days' ("Notice
Period") written notice ("Notice") to the Executive of their intent to
terminate Executive's employment. 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 Board of Directors of
FCI and to cure such Cause to the reasonable satisfaction of the Board
of Directors of FCI during the Notice Period. 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 him
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). 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 interferes with the performance of
Executive's duties, responsibilities or obligations under this
Agreement; (ii) fraud or embezzlement related to either of the
Companies 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 Sections 15, 16 or 17 hereof, except as
permitted pursuant to Section 11 hereof; (v) any act of moral turpitude
or willful misconduct by Executive which (A) results in personal
enrichment of Executive at the expense of the Companies, or (B) may
have a material adverse impact on the Business or reputation of the
Companies; (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; (vii) any material
violation of any statutory or common law fiduciary duty of Executive to
FCI or FGI; or (viii) failure by Executive to comply with a material
Company policy, as reasonably determined by the Board of Directors of
FCI.
While the parties agree that the Companies may not terminate the
Executive's duties and responsibilities under this Agreement except as provided
in Section 9(a), if such duties and responsibilities are involuntarily
terminated by the Companies for any reason other than for good Cause as noted in
Section 9(a), the Companies shall pay Executive the payments and provide him the
benefits specified in Section 8(a) hereof.
Termination by the Executive. The Executive may terminate his employment
under this Agreement upon at least sixty (60) calendar days' ("Executive Notice
Period") written notice ("Executive Notice") to the Companies of such
termination:
without Cause, 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 pension or other plans which by their terms provide
payment beyond the date of termination); and
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 Board of Directors of FCI 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 compensation and provided all benefits due him
during the Executive Notice Period (and thereafter under Section 8(a)).
"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 11 hereof,
changes in the identity of persons on the Board shall not be considered a change
in reporting responsibilities for purposes of this Section; or (iii) withdrawal
from the Executive of his title as Chairman or a material breach of any
provision of this Agreement by the Companies.
Effect of Certain Terminations; Change in Control. If (a) any Company or
Partnership merges with or is consolidated into another corporation or other
entity not theretofore affiliated with any 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, or if all or substantially all of the assets of any 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, or if more than a majority of the Board of
Directors of either Company changes within a 12-month period, or if FGI is no
longer the general partner of the Partnerships, or if either Company registures
a class of equity securities under the Securities Exchange Act of 1934 (all such
events being referred to herein as "Change in Control"), and (b) within eighteen
(18) months after any such Change in Control the Executive's employment under
this Agreement is terminated, then upon such termination or occurence: (i) the
Companies shall pay the Executive a cash, lump-sum termination benefit not later
than thirty (30) calendar days after such termination equal to three (3) times
the greatest of 125% of (A) his then current base salary, (B) the average
compensation (base salary plus bonuses, if any) paid for the prior three (3)
fiscal years prior to such termination, or (C) the total compensation remaining
for the Initial Period, if such Change of Control occurs during the Initial
Period, or for the Successive Period, if such occurs during any Successive
Period, (ii) the Companies shall pay the Executive any other amounts earned but
unpaid, (iii) if such termination occurs after the third month of the Companies'
then current fiscal year, the Companies shall pay the Executive a pro rata
portion (such proration shall be on the basis that the number of months of his
employment during the Companies' 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, (iv) the Companies, at their expense, shall continue the
Executive's health, accident and life insurance benefits for six (6) months
after the month in which such termination occurs (following which the Executive,
at his expense, shall have the right to extend such benefits under COBRA for a
period of eighteen (18) months), and (iv) Section 17 hereof shall terminate and
be of no effect. For purposes of calculating any bonus, if applicable, to be
paid to the Executive pursuant to this Section 11, 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.
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.
Certain Additional Payments by the Companies.
(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 or distribution by the Companies to or for
the benefit of the Executive (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) (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
Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 13(c), all
determinations required to be made under this Section 13, 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 certified public accounting firm as
designated by the Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Companies 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 the Companies. 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 the Companies. Any Gross-Up Payment, as
determined pursuant to this Section 13, shall be paid by the Companies
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 the Companies 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
the Companies should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event that the
Companies exhaust their remedies pursuant to Section 13(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 the
Companies to or for the benefit of the Executive.
(c) The Executive shall notify the Companies in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Companies of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no
later than ten (10) business days after the Executive is informed in
writing of such claim and shall apprise the Companies 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 the Companies (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the
Companies notify the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the Executive shall:
(1) give the Companies any information reasonably requested by the
Companies relating to such claim,
(2) take such action in connection with contesting such claim as the
Companies 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 the Companies,
(3) cooperate with the Companies in good faith in order to effectively
contest such claim, and
(4) permit the Companies to participate in any proceedings relating to such
claim;
provided, however, that the Companies shall bear and pay directly all
costs and expenses (including 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 13(c), the Companies shall control all proceedings taken in
connection with such contest and, at their 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 their 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 the Companies
shall determine; provided, however, that if the Companies direct the
Executive to pay such claim and sue for a refund, the Companies 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, the
Company'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.
(d) If, after the receipt by the Executive of an
amount advanced by the Companies pursuant to Section 13(c), the
Executive becomes entitled to receive any refund with respect to such
claim, the Executive shall (subject to the Companies' complying with
the requirements of Section 13(c)) promptly pay to the Companies 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 the Companies pursuant to Section
13(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Companies do not
notify the Executive in writing of their 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.
Indemnification. The Companies shall indemnify the Executive to the fullest
extent permitted by law against any liability he incurs, or which is threatened
against him, during or after termination of his employment, by reason of the
fact that he is or was a director, officer, employee or agent of the Companies,
or is or was serving at the request of the Companies as a director, officer,
employee or agent of another corporation or other entity. In providing such
indemnification, and in addition to and not in lieu of its general obligations
to indemnify the Executive, the Companies shall reimburse the Executive upon
demand for all reasonable expenses and payments incurred or made by the
Executive relating to any matter for such indemnification hereunder is due.
15. Confidential Information. The Executive acknowledges that
the information, observations and data (whether in human or machine readable
form) obtained by him while employed by the Companies concerning the business or
affairs of the Companies, a Partnership, or any other affiliate, including any
information pertaining to the Business which is not generally known in the
propane industry, including, but not limited to, trade secrets, internal
processes, designs, design information, products, test data, research and
development plans and activities, equipment modifications, techniques, software
and computer programs and derivative works, business and marketing plans,
projections, sales data and reports, confidential evaluations, compilations
and/or analyses of technical or business information, profit margins, customer
requirements, costs, profitability, sales and marketing strategies, pricing
policies, strategic plans, training materials, internal financial information,
operating and financial data and projections, names and addresses of customers,
inventory lists, sources of supplies, supply lists, employee lists, mailing
lists, and information concerning relationships between any Company or
Partnership and their employees or customers which gives or may give the
Companies or the Partnerships an advantage over competitors ("Confidential
Information") are the property of the Company, the Partnership or such other
affiliate, as applicable. Therefore, Executive agrees that he shall not use any
Confidential Information other than in connection with performing the
Executive's services for or on behalf of the Companies in accordance with this
Agreement, or disclose to any unauthorized person or use for his own account any
Confidential Information without the prior written consent of the Board of the
Companies, unless and to the extent that the aforementioned matters become
generally known to and available for use by the public other than as a result of
Executive's acts or omissions to act. Executive shall deliver to the Companies
at the termination of Executive's employment, or at any other time the Companies
may request, all memoranda, notes, plans, records, reports, computer tapes and
software and other documents and data (and copies thereof) relating to the
Confidential Information, Work Product (as defined below) and the Business which
he may then possess or have under his control. The Companies and the Executive
acknowledge that: (a) the Confidential Information is commercially and
competitively valuable to the Companies and their affiliates; (b) the
unauthorized use or disclosure of the Confidential Information would cause
irreparable harm to the Companies and their affiliates; (c) the Companies have
taken and are taking all reasonable measures to protect their legitimate
interest in the Confidential Information, including, without limitation,
affirmative action to safeguard the confidentiality of such Confidential
Information; (d) the restrictions on the activities in which Executive may
engage set forth in this Agreement, and the periods of time for which such
restrictions apply, are reasonably necessary in order to protect the Companies'
legitimate interests in their Confidential Information; and (e) nothing herein
shall prohibit the Companies from pursuing any remedies, whether in law or
equity, available to the Companies for breach or threatened breach of this
Agreement, including the recovery of damages from Executive.
16. 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 the
Companies or any of their affiliates (whether prior to or during the Employment
Period) ("Work Product") belong to the Companies or such other affiliate, and
Executive hereby assigns to the Companies his entire right, title and interest
in any such Work Product. Executive will promptly disclose such Work Product to
the Board of the Companies and perform all actions reasonably requested by the
Board of the Companies (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).
Noncompete; Nonsolicitation.
Executive acknowledges that in the course of his employment with the
Companies he will become familiar with Confidential Information and that his
services will be of special, unique and extraordinary value to the Companies.
Therefore, Executive agrees that, during the time he is employed by the
Companies pursuant hereto and thereafter for the period of time of five (5)
years (ii) until the payment in full of the Senior Secured Notes (as defined in
the Subordinated Note Purchase Agreement) and any indebtdness incurred in
connection with any extensions, renewals, replacements or refinancing of the
indebtedness evidenced thereby in the extent that all or any portion of the
Subordiantd Loan has been transferred or assigned to any person who is not a
"Permitted Assignee" (as defined in the Subordinated Note Purchase
Agreement)(the "Noncompete Period"), Executive shall not directly or indirectly
own, manage, control, or engage in any business with any person (including by
himself or in association with any person, firm, corporate or other business
organization or through any other entity) whose business is substantially
similar to the Business (as defined in the first "Whereas" clause of this
Agreement, and for purposes of this Section 17, shall be limited to the retail
aspects of the Business) as such business exists or is in process on the date of
the termination of Executive's employment, within any geographical area in which
the Companies engage in Business on the date of the termination of Executive's
employment; provided, however, that nothing herein shall prohibit the Executive
either directly or indirectly from owning, managing, controlling or engaging in
any business which competes with the Companies in areas other than the retail
sale of propane gas.
Nothing herein shall prohibit Executive from being a passive owner of not
more than 5% of the outstanding stock of a corporation which is publicly traded,
so long as Executive has no active participation in the business of such
corporation.
During the Noncompete Period, Executive shall not directly or indirectly
through another entity (i) induce or attempt to induce any employee of the
Companies or any affiliate of the Companies to leave the employ of the Companies
or such affiliate, or in any way interfere with the relationship between the
Companies and any employee thereof, (ii) hire any person who was an employee of
the Companies at any time within the six-month period prior to the date of
termination of Executive's employment with the Companies or any affiliate
thereof, or (iii) induce or attempt to induce any customer, supplier, licensee,
licensor, franchisee, franchisor or other business relation of the Companies or
any affiliate to cease doing business with the Companies or such affiliate, or
in any way interfere with the relationship between any such customer, supplier,
licensee, licensor, franchisee, franchisor or business relation and the
Companies or any affiliate thereof.
The Companies and the Executive agree that: (i) the covenants set forth in
this Section 17 are reasonable in geographical and temporal scope and in all
other respects, (ii) the Companies would not have entered into this Agreement
but for the covenants of Executive contained herein, and (iii) the covenants
contained herein have been made in order to induce the Companies to enter into
this Agreement.
If, at the time of enforcement of this Section 17, 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 shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
The Executive hereby agrees that he shall at no time either prior to or
following expiration of the Noncompete Period use the name "Ferrellgas" in any
business venture unrelated to FGI engaged in by Executive without the prior
written consent of the FGI; provided, however, that nothing herein shall be
construed to limit the Executive from using the name "Ferrell" in any context
which is not substantially related to the Business of the Companies.
Companies' 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 15, 16 or 17 hereof, the Companies 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 15, 16 or 17 hereof would be
largely irreparable.
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.
Executive Warranties and Representations. The Executive warrants and
represents that the execution and delivery of the Agreement and the Executive's
employment with the Companies do not violate any previous employment agreement
or other contractual obligation of the Executive.
Payments to Executive. For the avoidance of doubt, while the Companies are
jointly and severally liable for payments due to the Executive hereunder nothing
herein shall be construed to entitle the Executive to duplicate compensation or
benefits to be paid by both of FCI and FGI pursuant hereto. Payments due to the
Executive by the Companies shall be paid by FCI and/or FGI as determined
appropriate by the Board of Directors of FGI.
Covenants.
The Companies hereby covenant that unless the Executive's employment is
terminated for good Cause pursuant to Section 9 (a) hereof, they shall ensure
that during the Employment Period, (i) the Executive is elected to the Board of
Directors of the Companies and that the Executive shall be appointed as
Chairman, (ii) the Executive, and Danley K. Sheldon and Elizabeth Solberg are
elected as the Plan Administrator as defined in, and pursuant to, the Ferrell
Companies, Inc. Stock Ownership Plan, and that they are, and they each remain,
for so long as they are Directors of the Company, the only members thereof, and
(iii) the Plan Administrator directs the Trustee that the Executive is elected
to the Board of the Companies and appointed Chairman thereof.
The Trustee, subject to its duties to comply with applicable provisions of
ERISA and the Department of Labor regulations promulgated in connection
therewith, hereby covenants to vote the capital stock of the Ferrell Companies
Inc. Employee Stock Ownership Trust to elect the Executive to the Board of the
Companies.
The Executive may designate in writing to the Companies, a replacement
director (the "Designee") to take Executive's place on the Board of Directors of
the Companies in the event of termination of Executive's employment pursuant to
Section 8, 9 or 10 hereof at such time as the FCI Subordinated Notes are
outstanding. The Companies acknowledge that in the event of such a termination
of Executive's employment and for such time as the FCI Subordinated Notes are
outstanding and held directly or indirectly by the Executive's trust, estate,
hiers or beneficiaries, the Executive or the Executor (or guardian, as the case
may be) of the Executive's estate shall have the right to appoint the Designee,
or if not so designated by Executive pursuant hereto, in its sole discretion to
designate the Designee, and the Companies hereby covenant to ensure that the
Designee is elected to the Board of the Companies.
In the event that the Executive's employment is terminated pursuant to
Section 8, 9 or 10 hereof at such time as the FCI Subordinated Notes are
outstanding, the Trustee, subject to compliance with applicable ERISA and the
Department of Labor regulations promulgated thereunder, hereby covenants to vote
the capital of the Ferrell Companies Inc. Employee Stock Ownership Trust to
elect the Designee to the Board of the Companies, for such period as the FCI
Subordinated Notes are outstanding and held directly or indirectly by the
Executive's estate, hiers or beneficiaries.
In the event of a breach or threatened breach of this Section 22, the
Executive shall be entitled, in addition to any other legal or
equitable remedies he may have in connection therewith (including any
right to damages that he may suffer) to temporary, preliminary, and
permanent injunctive relief restraining such breach or threatened
breach.
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 the Executive's employment by the Companies.
Right to Recover Costs and Fees. The Executive and the Companies undertake
and agree that if either the Executive or a Company breaches or threatens to
breach 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.
Entire Agreement, Amendments and Modifications. This Agreement constitutes
the entire agreement and understanding of the parties regarding the employment
of the Executive by the Companies and supersedes all prior agreements and
understandings between the Executive and the Companies to the extent that any
such agreements or understandings conflict with the terms of this Agreement. 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.
Assignments. This Agreement shall be freely assignable by the Companies to,
and shall inure to the benefit of and be binding upon, their successors and
assigns and/or any other entity which shall succeed to the business presently
being conducted by the Companies. Being a contract for personal services,
neither this Agreement nor any rights hereunder shall be assigned by the
Executive.
Choice of Forum; Governing Law. In light of the Companies' 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 the Companies execution of, and
the making of, this Agreement in Missouri, the parties agree that: (i) any
litigation involving any noncompliance with or breach of the Agreement, or
regarding the interpretation, validity and/or enforceability of the 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.
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.
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 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
hereto.
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: Mr. James E. Ferrell
2142 Inwood Drive
Houston, Texas 77019
(b) With a copy to: Bryan Cave LLP
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Attn: John M. Edgar, Esq.
(c) If to FGI, to: Ferrellgas, Inc.
One Liberty Plaza
Liberty, Missouri 64068
Attention: Mr. Danley K. Sheldon,
President
(d) If to FCI, to: Ferrell Companies, Inc.
One Liberty Plaza
Liberty, Missouri 64068
Attention: Mr. Danley K. Sheldon,
` President
(e) If to the Trustee, to: LaSalle National Bank
Trust & Asset Management
135 S. LaSalle, 19th Floor
Chicago, Illinois 60606-5096
Attn: William W. Merten, Esq.
(f) With a copy to: McDermott, Will & Emery
277 West Monroe Street
Chicago, Illinois 60606-5096
Attn: William W. Merten, Esq.
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.
FERRELL COMPANIES, INC. EXECUTIVE
By: /s/ Kevin T. Kelly By: /s/ James E. Ferrell
- ---------------------------- ---------------------------
Kevin T. Kelly James E. Ferrell
Vice President
FERRELLGAS, INC. TRUSTEE
By: /s/ Kenneth A. Heinz By: /s/ E. Vaughn Gordy
- -------------------------- -----------------------------------
Kenneth A. Heinz E. Vaughn Gordy, on behalf of
Assistant Secretary LaSalle National Bank, solely as
Trustee of the Ferrell Companies Inc.
Employee Stock Ownership Trust,
and not in Mr.Gordy's individual
capacity or LaSalle National Bank's
corporate capacity.
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) 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 (D) UNDERSTANDS EXECUTIVE'S RIGHTS AND OBLIGATIONS UNDER THE
AGREEMENT.
Schedule 5
Employee Benefit Plans
The following is a listing of the benefit plans available to
James E. Ferrell:
Comprehensive medical plan.
Dental plan.
Vision plan.
Short-term disability plan.
Long-term disability plan.
Employee life insurance - maximum of $500,000.
Dependent life insurance.
Accidental death and disability - maximum of $300,000.
401(k) plan - maximum employee contribution of 15%; employer
match of 50% of first 8% of employee contribution. Maximum
contributions subject to statutory limitations.
Profit sharing plan - discretionary employer contribution to
retirement plan. Contribution subject to statutory
limitations.
Supplemental savings plan - non-qualified deferred
compensation plan. Maximum contribution of 100% of earnings,
subject to annual limitation. This plan provides the balance
of the 4% match contemplated by the 401(k) plan for Employee's
capped out of the 401(k) plan due to statutory limitations.