Exhibit 10.19





Exhibit 10.19




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;


 


2









 






(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.


 


3









 





4. Compensation.




(a) Salary. During the Employment Period, the Companies shall pay the Executive as
compensation for his services a monthly base salary of not less than ten thousand dollars
($10,000), payable in accordance with the Companies’ usual practices. The Executive’s base salary
shall be eligible for review and increase consistent with practices of the Companies in effect from
time to time during the Employment Period, but shall not be reduced. The Executive shall be
eligible to participate in such perquisites as may from time to time be awarded to the Executive by
the Companies payable at such times and in such amounts as the Companies, in their sole discretion,
may determine; provided, however, that such perquisites so awarded are no less favorable to
Executive than similar perquisites awarded to other members of the Companies’ senior management.




(b) Personal Service Bonus. As an additional inducement, the Executive shall be
entitled to receive a bonus (the “Incentive Bonus”) payable by the Companies on the later of: (i)
the date the Executive’s employment under this Agreement terminates (for any reason; (the
“Employment Termination Date”);(ii) the date that all indebtedness under the Subordinated Loan has
been paid in full (the “Subordinated Loan Payment Date”); or (iii) the Incentive Bonus is permitted
to be paid pursuant to the covenants, terms and conditions of any financing documents applicable to
FCI (the “Bonus Payment Date”). The amount of the Incentive Bonus shall be equal to .005 of the
increase in the equity value of FCI from July 31, 1998 (as determined by an appraisal by the
financial advisor to the trustee of the ESOT (the “Appraiser”)) to and including the date of the
most recent appraisal conducted by the Appraiser prior to the earlier of: (y) the Employment
Termination Date; or (z) the Subordinated Loan Payment Date.



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.


 


4









 






6. Other Benefits.




(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.




8. Death or Disability.




(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.


 


5









 






(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.


 


6









 





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



 


7









 






Period,
if such Change of Control occurs during the Initial Period, or for the Successive Period, if such occurs during any Successive Period, (ii) the Companies shall pay
the Executive any other amounts earned but unpaid, (iii) if such termination occurs after the third
month of the Companies’ then current fiscal year, the Companies shall pay the Executive a pro rata
portion (such proration shall be on the basis that the number of months of his employment during
the Companies’ then current fiscal year bears to the number 12, considering the month of
termination as a month of full employment, and in the case of any plan measured over a full year,
such determination and payment shall be made after the close of such year) of any amounts to which
he would have otherwise been entitled under any Company perquisite to which Executive is a
participant, (iv) the Companies, at their expense, shall continue the Executive’s health, accident
and life insurance benefits for six (6) months after the month in which such termination occurs
(following which the Executive, at his expense, shall have the right to extend such benefits under
COBRA for a period of eighteen (18) months), and (iv) Section 17 hereof shall terminate and be of
no effect. For purposes of calculating any bonus, if applicable, to be paid to the Executive
pursuant to this Section 11, the Executive shall be entitled to the payment of any bonus normally
calculated with reference to a future period based upon the total amount paid for such bonus in the
three (3) previous fiscal years.



12. 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.




13. 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.


 


8









 






(b) Subject to the provisions of Section 13(c), all determinations required to be made
under this Section 13, including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by certified public accounting
firm as designated by the Executive (the “Accounting Firm”) which shall provide
detailed supporting calculations both to the Companies and the Executive within fifteen (15)
business days of the receipt of notice from the Executive that there has been a Payment, or
such earlier time as is requested by the Companies. In the event that the Accounting Firm
is serving as accountant or auditor for the individual, entity or group effecting a Change
of Control, the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be
borne solely by the Companies. Any Gross-Up Payment, as determined pursuant to this
Section 13, shall be paid by the Companies to the Executive within five (5) calendar days of
the receipt of the Accounting Firm’s determination. Any determination by the Accounting
Firm shall be binding upon the Companies and the Executive. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the initial determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have
been made by the Companies should have been made (“Underpayment”), consistent with
the calculations required to be made hereunder. In the event that the Companies exhaust
their remedies pursuant to Section 13(c) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid by the
Companies to or for the benefit of the Executive.




(c) The Executive shall notify the Companies in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Companies of the
Gross-Up Payment. Such notification shall be given as soon as practicable but no later than
ten (10) business days after the Executive is informed in writing of such claim and shall
apprise the Companies of the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which the Executive gives such notice to the Companies
(or such shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Companies notify the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the Executive shall:




	 	(1)	 	give the Companies any information reasonably
requested by the Companies relating to such claim,







	 	(2)	 	take such action in connection with contesting
such claim as the Companies shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Companies,







	 	(3)	 	cooperate with the Companies in good faith in
order to effectively contest such claim, and







	 	(4)	 	permit the Companies to participate in any
proceedings relating to such claim;





 


9









 











provided, however, that the Companies shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income
tax (including interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 13(c), the Companies shall control all proceedings taken in
connection with such contest and, at their sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at their sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the
Companies shall determine; provided, however, that if the Companies direct the Executive to
pay such claim and sue for a refund, the Companies shall advance the amount of such payment to
the Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on
an after-tax basis, from any Excise Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with respect to any imputed income
with respect to such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company’s control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal Revenue Service
or any other taxing authority.




(d) If, after the receipt by the Executive of an amount advanced by the Companies
pursuant to Section 13(c), the Executive becomes entitled to receive any refund with respect
to such claim, the Executive shall (subject to the Companies’ complying with the
requirements of Section 13(c)) promptly pay to the Companies the amount of such refund
(together with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Companies pursuant to
Section 13(c), a determination is made that the Executive shall not be entitled to any
refund with respect to such claim and the Companies do not notify the Executive in writing
of their intent to contest such denial of refund prior to the expiration of thirty (30)
calendar days after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.



14. 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.


 


10









 





15. Confidential Information. The Executive acknowledges that the information,
observations and data (whether in human or machine readable form) obtained by him while employed by
the Companies concerning the business or affairs of the Companies, a Partnership, or any other
affiliate, including any information pertaining to the Business which is not generally known in the
propane industry, including, but not limited to, trade secrets, internal processes, designs, design
information, products, test data, research and development plans and activities, equipment
modifications, techniques, software and computer programs and derivative works, business and
marketing plans, projections, sales data and reports, confidential evaluations, compilations and/or
analyses of technical or business information, profit margins, customer requirements, costs,
profitability, sales and marketing strategies, pricing policies, strategic plans, training
materials, internal financial information, operating and financial data and projections, names and
addresses of customers, inventory lists, sources of supplies, supply lists, employee lists, mailing
lists, and information concerning relationships between any Company or Partnership and their
employees or customers which gives or may give the Companies or the Partnerships an advantage over
competitors (“Confidential Information”) are the property of the Company, the Partnership
or such other affiliate, as applicable. Therefore, Executive agrees that he shall not use any
Confidential Information other than in connection with performing the Executive’s services for or
on behalf of the Companies in accordance with this Agreement, or disclose to any unauthorized
person or use for his own account any Confidential Information without the prior written consent of
the Board of the Companies, unless and to the extent that the aforementioned matters become
generally known to and available for use by the public other than as a result of Executive’s acts
or omissions to act. Executive shall deliver to the Companies at the termination of Executive’s
employment, or at any other time the Companies may request, all memoranda, notes, plans, records,
reports, computer tapes and software and other documents and data (and copies thereof) relating to
the Confidential Information, Work Product (as defined below) and the Business which he may then
possess or have under his control. The Companies and the Executive acknowledge that: (a) the
Confidential Information is commercially and competitively valuable to the Companies and their
affiliates; (b) the unauthorized use or disclosure of the Confidential Information would cause
irreparable harm to the Companies and their affiliates; (c) the Companies have taken and are taking
all reasonable measures to protect their legitimate interest in the Confidential Information,
including, without limitation, affirmative action to safeguard the confidentiality of such
Confidential Information; (d) the restrictions on the activities in which Executive may engage set
forth in this Agreement, and the periods of time for which such restrictions apply, are reasonably
necessary in order to protect the Companies’ legitimate interests in their Confidential
Information; and (e) nothing herein shall prohibit the Companies from pursuing any remedies,
whether in law or equity, available to the Companies for breach or threatened breach of this
Agreement, including the recovery of damages from Executive.



16. Inventions and Patents. Executive agrees that all inventions, innovations,
improvements, developments, methods, designs, analyses, drawings, reports, and all similar or
related information which relates to the Companies’ actual or anticipated business (to the extent
the Executive is aware thereof), research and development or existing or future products or
services and which are conceived, developed or made by Executive while employed by the Companies or
any of their affiliates (whether prior to or during the Employment Period) (“Work Product”)
belong to the Companies or such other affiliate, and Executive hereby assigns to the Companies his
entire right, title and interest in any such Work Product. Executive will promptly disclose such
Work Product to the Board of the Companies and perform all actions reasonably requested by the
Board of the Companies (whether during or after Executive’s employment period) to establish and
confirm such ownership (including, without limitation, assignments, consents, powers of attorney
and other instruments).


 


11









 






17. Noncompete; Nonsolicitation.




(a) Executive acknowledges that in the course of his employment with the Companies he
will become familiar with Confidential Information and that his services will be of special,
unique and extraordinary value to the Companies. Therefore, Executive agrees that, during
the time he is employed by the Companies pursuant hereto and thereafter for the period of
time of five (5) years (ii) until the payment in full of the Senior Secured Notes (as
defined in the Subordinated Note Purchase Agreement) and any indebtdness incurred in
connection with any extensions, renewals, replacements or refinancing of the indebtedness
evidenced thereby in the extent that all or any portion of the Subordiantd Loan has been
transferred or assigned to any person who is not a “Permitted Assignee” (as defined in the
Subordinated Note Purchase Agreement)(the “Noncompete Period”), Executive shall not
directly or indirectly own, manage, control, or engage in any business with any person
(including by himself or in association with any person, firm, corporate or other business
organization or through any other entity) whose business is substantially similar to the
Business (as defined in the first “Whereas” clause of this Agreement, and for purposes of
this Section 17, shall be limited to the retail aspects of the Business) as such business
exists or is in process on the date of the termination of Executive’s employment, within any
geographical area in which the Companies engage in Business on the date of the termination
of Executive’s employment; provided, however, that nothing herein shall prohibit the
Executive either directly or indirectly from owning, managing, controlling or engaging in
any business which competes with the Companies in areas other than the retail sale of
propane gas.




(b) Nothing herein shall prohibit Executive from being a passive owner of not more than
5% of the outstanding stock of a corporation which is publicly traded, so long as Executive
has no active participation in the business of such corporation.




(c) 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.


 


12









 






(d) 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.




(e) 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.




(f) The Executive hereby agrees that he shall at no time either prior to or following
expiration of the Noncompete Period use the name “Ferrellgas” in any business venture
unrelated to FGI engaged in by Executive without the prior written consent of the FGI;
provided, however, that nothing herein shall be construed to limit the Executive from using
the name “Ferrell” in any context which is not substantially related to the Business of the
Companies.



18. 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.



19. 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.



20. 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.


 


13









 





21. Payments to Executive. For the avoidance of doubt, while the Companies are
jointly and severally liable for payments due to the Executive hereunder nothing herein shall be
construed to entitle the Executive to duplicate compensation or benefits to be paid by both of FCI
and FGI pursuant hereto. Payments due to the Executive by the Companies shall be paid by FCI
and/or FGI as determined appropriate by the Board of Directors of FGI.




22. Covenants.




(a) The Companies hereby covenant that unless the Executive’s employment is terminated
for good Cause pursuant to Section 9 (a) hereof, they shall ensure that during the
Employment Period, (i) the Executive is elected to the Board of Directors of the Companies
and that the Executive shall be appointed as Chairman, (ii) the Executive, and Danley K.
Sheldon and Elizabeth Solberg are elected as the Plan Administrator as defined in, and
pursuant to, the Ferrell Companies, Inc. Stock Ownership Plan, and that they are, and they
each remain, for so long as they are Directors of the Company, the only members thereof, and
(iii) the Plan Administrator directs the Trustee that the Executive is elected to the Board
of the Companies and appointed Chairman thereof.




(b) The Trustee, subject to its duties to comply with applicable provisions of ERISA
and the Department of Labor regulations promulgated in connection therewith, hereby
covenants to vote the capital stock of the Ferrell Companies Inc. Employee Stock Ownership
Trust to elect the Executive to the Board of the Companies.




(c) The Executive may designate in writing to the Companies, a replacement director
(the “Designee”) to take Executive’s place on the Board of Directors of the Companies in the
event of termination of Executive’s employment pursuant to Section 8, 9 or 10 hereof at such
time as the FCI Subordinated Notes are outstanding. The Companies acknowledge that in the
event of such a termination of Executive’s employment and for such time as the FCI
Subordinated Notes are outstanding and held directly or indirectly by the Executive’s trust,
estate, hiers or beneficiaries, the Executive or the Executor (or guardian, as the case may
be) of the Executive’s estate shall have the right to appoint the Designee, or if not so
designated by Executive pursuant hereto, in its sole discretion to designate the Designee,
and the Companies hereby covenant to ensure that the Designee is elected to the Board of the
Companies.




(d) In the event that the Executive’s employment is terminated pursuant to Section 8, 9
or 10 hereof at such time as the FCI Subordinated Notes are outstanding, the Trustee,
subject to compliance with applicable ERISA and the Department of Labor regulations
promulgated thereunder, hereby covenants to vote the
capital of the Ferrell Companies Inc. Employee Stock Ownership Trust to elect the
Designee to the Board of the Companies, for such period as the FCI Subordinated Notes are
outstanding and held directly or indirectly by the Executive’s estate, hiers or
beneficiaries.


 


14









 






	 	 	 	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.






23. Survival. The provisions of this Agreement, except as otherwise provided herein,
shall continue in full force in accordance with their terms notwithstanding any termination of the
Executive’s employment by the Companies.



24. Right to Recover Costs and Fees. The Executive and the Companies undertake and
agree that if either the Executive or a Company breaches or threatens to breach this Agreement (the
“Breaching Party”), the Breaching Party shall be liable for any attorneys’ fees and costs
incurred by the non-Breaching Party in enforcing the non-Breaching Party’s rights hereunder.



25. Entire Agreement, Amendments and Modifications. This Agreement constitutes the
entire agreement and understanding of the parties regarding the employment of the Executive by the
Companies and supersedes all prior agreements and understandings between the Executive and the
Companies to the extent that any such agreements or understandings conflict with the terms of this
Agreement. No modification, amendment or waiver of any of the provisions of this Agreement shall
be effective unless in writing specifically referring hereto, and signed by the parties hereto.



26. 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.



27. 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.


 


15









 





28. 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.



29. 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.



30. Notices. Any notice, request, consent or communication (collectively, a
“Notice”) under this Agreement shall be effective only if it is in writing and (i)
personally delivered with written receipt thereof, (ii) sent by certified or registered mail,
return receipt requested, postage prepaid or (iii) sent by a nationally recognized overnight
delivery service, with delivery confirmed, addressed as follows (or at such other address for a
party as shall be specified by like notice):



	 	 	 	 	 
	 

	 	(a) If to the Executive, to:
	 	Mr. James E. Ferrell
	 

	 	 	 	2142 Inwood Drive
	 

	 	 	 	Houston, Texas 77019
	 
	 	 	 	 
	 

	 	(b) With a copy to:
	 	Bryan Cave LLP
	 

	 	 	 	One Kansas City Place
	 

	 	 	 	1200 Main Street
	 

	 	 	 	Kansas City, Missouri 64105
	 

	 	 	 	Attn: John M. Edgar, Esq.
	 
	 	 	 	 
	 

	 	(c) If to FGI, to:
	 	Ferrellgas, Inc.
	 

	 	 	 	One Liberty Plaza
	 

	 	 	 	Liberty, Missouri 64068
	 

	 	 	 	Attention: Mr. Danley K. Sheldon, President
	 
	 	 	 	 
	 

	 	(d) If to FCI, to:
	 	Ferrell Companies, Inc.
	 

	 	 	 	One Liberty Plaza
	 

	 	 	 	Liberty, Missouri 64068
	 

	 	 	 	Attention: Mr. Danley K. Sheldon, President
	 
	 	 	 	 
	 

	 	(e) If to the Trustee, to:
	 	LaSalle National Bank
	 

	 	 	 	Trust & Asset Management
	 

	 	 	 	135 S. LaSalle, 19th Floor
	 

	 	 	 	Chicago, Illinois 60606-5096
	 

	 	 	 	Attn: William W. Merten, Esq.
	 
	 	 	 	 
	 

	 	(f) With a copy to:
	 	McDermott, Will & Emery
	 

	 	 	 	277 West Monroe Street
	 

	 	 	 	Chicago, Illinois 60606-5096
	 

	 	 	 	Attn: William W. Merten, Esq.






 


16









 





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.


 


17









 





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
 

Kevin T. Kelly
Vice President
	 	 	 	By:
	 	/s/ James E. Ferrell
 

James E. Ferrell
	 	 






	 	 	 	 	 	 	 	 	 	 	 
	FERRELLGAS, INC.	 	 	 	TRUSTEE	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Kenneth A. Heinz
 

Kenneth A. Heinz
	 	 	 	By:
	 	/s/ E. Vaughn Gordy
 

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.


 


18









 





Schedule 5




Employee Benefit Plans





The following is a listing of the benefit plans available to James E. Ferrell:




	 	1.	 	Comprehensive medical plan.

	 
	 	2.	 	Dental plan.

	 
	 	3.	 	Vision plan.

	 
	 	4.	 	Short-term disability plan.

	 
	 	5.	 	Long-term disability plan.

	 
	 	6.	 	Employee life insurance — maximum of $500,000.

	 
	 	7.	 	Dependent life insurance.

	 
	 	8.	 	Accidental death and disability — maximum of $300,000.

	 
	 	9.	 	401(k) plan — maximum employee contribution of 15%; employer match of 50% of
first 8% of employee contribution. Maximum contributions subject to statutory
limitations.

	 
	 	10.	 	Profit sharing plan — discretionary employer contribution to retirement plan.
Contribution subject to statutory limitations.

	 
	 	11.	 	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.







 


19