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:
1. 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.
2. 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:
(a) chairing the Board of Director meetings
for the Companies;
(b) serving as an ex-officio member of the
Senior Management Committee of the Companies;
(c) 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;
(d) interviewing and providing feedback to
the Chief Executive Officer of the Companies regarding candidates
for senior management positions;
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(e) 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;
(f) 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;
(g) materially participating in company
wide meetings, consistent with past practices;
(h) 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;
(i) assisting in the re-application of
FGI’s membership to the National Propane Gas
Association;
(j) 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;
(k) 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;
(l) 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;
(m) actively participating in the
maintenance and development of appropriate and amicable lender,
debtholder, and equity holder relationships; and
(n) such other senior management activities
as may be agreed to in writing by the parties from time to
time.
3. 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.
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(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.
5. Benefit Plans . During the
Employment Period and as otherwise provided herein, the Executive
shall be entitled to participate in any and all employee welfare
and health benefit plans (including, but not limited to life
insurance, health and medical, dental, and disability plans) and
other employee benefit plans (including but not limited to 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.
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(a) 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.
(b) During the Employment Period the
Companies shall provide the Executive with office space and
administrative support services consistent with past
practices.
(c) 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.
(d) 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.
7. 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.
(a) 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.
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(b) 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.
9.
Termination by the Companies .
(a) 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.
(b) 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.
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10. 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:
(a) 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
(b) for Executive Cause. The Executive
Notice shall specify the particulars of such Executive Cause and
during the Executive Notice Period the Executive shall afford the
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.
11. 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
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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,
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