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), Danley
K. Sheldon (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 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 sale,
distribution and marketing of propane and other natural gas liquids (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 by each of the
Companies as President and Chief Executive Officer.
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
eight (8) years, commencing on July 17, 1998 and shall continue for a period
through and including July 17, 2006 (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 the Companies or the Executive provides six (6) months
written notice to the other parties hereto that the Agreement shall not renew
upon expiration of then current employment period, subject to Sections 8, 9 and
10, 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").
Duties and Responsibilities. During the Employment Period, the Executive
shall (i) be employed as President and Chief Executive Officer of the Companies,
with such duties as are customarily incident to such offices and as consistent
with the Bylaws of the Companies, as now existing or hereafter amended, and (ii)
be a member of the Board of Directors of the Companies. The precise services of
the Executive may be extended or curtailed at the discretion of the Companies,
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.
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 the Companies pursuant hereto; provided, further, that at the
request of the Board of Directors of the Companies, 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 the Companies.
Compensation.
During the Employment Period, Executive's base salary shall be not less
than $340,000 per year ("Base Salary"), payable in regular installments in
accordance with the Companies usual payroll practices and subject to review and
increase consistent with practices of the Companies in effect from time to time
during the Employment Period, but shall not be reduced.
Performance Bonus. During the Employment Period, the Executive shall be
entitled to an annual bonus as set forth below (collectively, the "Performance
Bonus"):
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
to Budgeted EBITDA % of Base Salary
Less than 90% 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%
In the event actual EBITDA exceeds
the budgeted EBITDA, the Performance
Bonus shall include, in addition to
the bonus provided for in subpart
(1) hereof, an additional bonus of
one percent (1%) of Base Salary for
each percent that the actual EBITDA
exceeds the budgeted EBITDA.
During the Employment Period, the Performance Bonus
shall be payable within fifteen (15) calendar days following receipt of
by Ferrellgas Partners' of its audited financial statements; provided,
however, that notwithstanding anything herein to the contrary,
Executive's entitlement to and calculation and payment of a Performance
Bonus for the fiscal year ended July 31, 1998 shall be at the sole
discretion of the Board of Directors of FGI, which determination and
payment, if any, shall be made no later than September 30, 1998.
"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.
Discretionary Bonus. At the sole discretion of the Board of Directors of
FCI an additional bonus may be paid to the Executive of up to 12.5% of the Base
Salary based upon the Executive's performance with respect to FGI's "Management
by Objective" program (the "Discretionary Bonus"). Failure of the Board of
Directors of FCI to award any such Discretionary Bonus shall not give rise to
any claim against the Companies. The amount, if any, and timing of such bonus,
shall be determined by the Board of Directors of FCI in its sole discretion.
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 FCI stock
incentive plans), established by the Companies from time to time for the benefit
of executive employees of the Companies. 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 and Reimbursements.
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.
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.
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.
During the Employment Period, the Companies shall permit the Executive to
retain membership in the Young Presidents Organization and the Civic Council and
shall pay the costs of such membership; provided, however, 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 the Companies pursuant hereto.
The Board of Directors of the Companies may, in their sole discretion,
approve additional bonuses or benefits to be offered to the Executive at
including but not limited to, the carryover of earned but unused vacation, such
time as they deem appropriate.
Deductions from Salary and Benefits. The Companies, as applicable, 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.
Death or Disability.
In the event of the death or termination of employment due to permanent
disability of the Executive during the Employment Period ("Triggering Event"),
(1) all sums payable to the Executive under this Agreement (including salary and
bonuses) through the end of the second month following the month in which the
Triggering Event occurs, (2) credit for any vacation earned by the Executive but
not taken at the time of Triggering Event, (3) all other amounts earned by the
Executive and unpaid as of the time of the Triggering Event, and (4) a cash,
lump-sum amount equal to three (3) times the greater of (i) 125% of the then
current Base Salary, or (ii) the average compensation (Base Salary plus
Performance Bonus and Discretionary Bonus) 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 Triggering Event occurs or 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 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 any mental as
well as physical condition which entitles the Executive to disability benefits
under the Companies' long-term disability plan.
Termination by the Companies. The Companies may terminate Executive's
employment under this Agreement upon at least sixty (60) calendar days ("Notice
Period") written notice ("Notice") to the Executive of their intent to terminate
Executive's employment:
without Cause (as defined in subsection (b) hereof). The Notice shall
specify that such Termination is without Cause, and upon the expiration of the
Notice Period, the Companies shall pay the Executive the payments and provide
him the benefits specified in Section 8(a) hereof (the expiration of the notice
period pursuant to this Section 9(a) shall be considered a "Triggering Event"
with respect thereto).
for good 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 Board of Directors of FCI 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, the Companies' non-qualified
deferred compensation plan and vacation earned but not taken). 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 the Executive to comply with a material Company policy, as reasonably
determined by the Board of Directors of FCI.
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, including but not limited to, the
Ferrell Companies, Inc. Employee Stock Plan, the Companies' non-qualified
deferred compensation plan and vacation earned but not taken); or
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 payments and benefits due him during the Employment
Period (and thereafter as specified in Section 8(a) hereof (expiration of the
Executive Notice Period shall be considered a "Triggering Event" for such
purpose)). "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) a breach of
any material 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, and a majority of the then current Board of
Directors of the Companies does not control the entity that has made such
acquisition, changes within a 12-month period, or if FGI is no longer the
general partner of the Partnerships, or if eitherCompany registers a class of
equity securities under the Securities and 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 Performance Bonus and Discretionary Bonus) 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, (ii) the Companies shall pay the Executive for any
vacation earned by the Executive but not taken and any other amounts earned but
unpaid, (iii) if such termination occurs after the third month of the 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 shall continue the Executive's health, accident
and life insurance benefits for the COBRA period of eighteen (18) months after
the month in which such termination occurs, and (v) Section 17 hereof shall
terminate and be of no effect. For purposes of calculating any bonus 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 may
be 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
Companies' 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 the Companies or a
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 Companies, 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, 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 each Company's legitimate interests in its 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 related or
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 two (2) years
(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 of the Companies, 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 are engaged in business on the date of
the termination of Executive's employment.
Nothing herein shall prohibit Executive from being a passive owner of not
more than 2% 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.
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 FCI.
Covenants. The Companies hereby covenant unless the Executives 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, (ii) the Executive, James E. Ferrell and Elizabeth
Solberg are elected as the Plan Administrator as defined in and pursuant to, the
Ferrell Companies, Inc. Employee 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. The Trustee, subject to
compliance with applicable ERISA regulations, hereby covenants to vote the
capital of the Ferrell Companies Inc. Employee Stock Ownership Trust to elect
the Executive to the Board of the Companies, during the Employment Period. 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 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 the Companies breach or threaten 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 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,
including that certain Employee Agreement between FGI and the Executive dated as
of March 23, 1998. 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. Danley K. Sheldon
421 N.W. Briarcliff Parkway
Kansas City, Missouri 64116
(b) With a copy to: Bryan Cave LLP
One Kansas City Place
1200 Main Street
Kansas City, MO 64105
Attn: John M. Edgar, Esq.
(c) If to FCI, to: Ferrell Companies, Inc.
One Liberty Plaza
Liberty, Missouri 64068
Attention: Mr. James E. Ferrell
(d) If to FGI, to: Ferrellgas, Inc.
One Liberty Plaza
Liberty, Missouri 64068
Attention: Mr. James E. Ferrell
(e) If to the Trustee, to: LaSalle National Bank
Trust & Asset Management
125 S. LaSalle, 17th Floor
Chicago, Illinois 60603
Attn: Mr. E. Vaughn Gordy
(f) With a copy to: McDermott, Will & Emery
227 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 /s/ Danley K. Sheldon
- ------------------------------- -----------------------------------
Kevin T. Kelly Danley K. Sheldon
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
Dan Sheldon:
1998 Ferrell Companies, Inc. Stock Incentive Plan.
Ferrell Companies, Inc. Employee Stock Plan.
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.