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.





<PAGE>


     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.


<PAGE>


                                   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.