CHANGE IN CONTROL AGREEMENT
Exhibit 10.35
THIS AGREEMENT (“Agreement”), made and entered into this 8th day of December, 2008
(the “Effective Date”), by and between Ferrellgas, Inc. (the “Company”) and Xxxxxxxx Xxxxx (the
“Executive”);
WITNESSETH THAT:
WHEREAS, the Company wishes to assure itself of the continuity of the Executive’s service in
the event of a Change in Control (as defined below); and
WHEREAS, the Company and the Executive accordingly desire to enter into this Agreement on the
terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, IT IS
HEREBY AGREED by and between the parties as follows:
1. Agreement Term. The “Agreement Term” shall begin on the Effective Date and shall
continue through December 31, 2009, subject to the following:
| (a) | As of December 31, 2009, and on each December 31 thereafter, the Agreement Term shall automatically be extended for one additional year unless, not later than the preceding June 30, either party shall have given notice that such party does not wish to extend the Agreement Term. | |
| (b) | If a Change in Control occurs during the Agreement Term (as it may be extended from time to time), the Agreement Term shall continue for a period of twenty-four calendar months beyond the calendar month in which such Change in Control occurs and, following an extension in accordance with this subparagraph (b), no further extensions shall occur under subparagraph 1(a). |
2. Certain Definitions. In addition to terms otherwise defined herein, the following
capitalized terms used in this Agreement shall have the meanings specified:
| (a) | Board. The term “Board” means the Board of Directors of the Company. | |
| (b) | Cause. The term “Cause” means: |
| (i) | the willful and continued failure by the Executive to substantially perform his duties for the Company (other than any such failure resulting from the Executive’s being disabled) within a reasonable period of time after a written demand for substantial performance is |
| delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed his duties; |
| (ii) | the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; or | ||
| (iii) | the engaging by the Executive in egregious misconduct involving serious moral turpitude to the extent that, in the reasonable judgment of the Board, the Executive’s credibility and reputation no longer conform to the standard of the Company’s executives. |
| For purposes of this Agreement, no act, or failure to act, on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interest of the Company. | ||
| (c) | Change in Control. The term “Change in Control” means the first to occur of any of the following that occurs after the Effective Date: |
| (i) | any merger or consolidation of the Company in which the Company is not the survivor; | ||
| (ii) | any sale of all or substantially all of the common stock of Xxxxxxx Companies, Inc. by the Xxxxxxx Companies, Inc. Employee Stock Ownership Trust; | ||
| (iii) | a sale of all or substantially all of the common stock of the Company; | ||
| (iv) | a replacement of the Company as the General Partner of Ferrellgas Partners, L.P.; | ||
| (v) | a public sale of at least 51 percent of the equity of Xxxxxxx Companies, Inc.; or | ||
| (vi) | such other transaction designated as a Change in Control by the Board. |
| (d) | COBRA. The term “COBRA” means continuing group health coverage required by section 4980B of the Code or sections 601 et. seq. of the Employee Retirement Income Security Act of 1974, as amended. | |
| (e) | Code. The term “Code” means the Internal Revenue Code of 1986, as amended. |
2
| (f) | Covered Termination. The Executive will incur a “Covered Termination” upon his Termination Date if the Termination Date occurs (i) during the Agreement Term, (ii) upon or following a Change in Control, and (iii) on account of termination of employment by the Executive for Good Reason or by Company for reasons other than for Cause. | |
| (g) | Good Reason. The term “Good Reason” means any of the following: |
| (a) | A reduction in excess of 10% in the Executive’s base salary or target incentive potential as compared to his base salary or target incentive in effect immediately prior to the Change in Control; | ||
| (b) | A material diminution in the Executive’s authority, duties or responsibilities as compared to his authority, duties or responsibilities immediately prior to the Change in Control; | ||
| (c) | The relocation of the Executive’s principal office location to a location which is more than 50 highway miles from the location of the Executive’s principal office location immediately prior to the Change in Control; or | ||
| (d) | The Company’s material breach of any material term of this Agreement. |
| Notwithstanding any other provision of this Agreement to the contrary, the Executive’s Termination Date shall not be considered to be on account of Good Reason unless the Executive provides notice of the event or condition that the Executive believes to constitute Good Reason within 180 days of the date on which the event first occurs or the condition first exists, the Company does not cure such event or condition within 30 days following the date the Executive provides notice and the Executive resigns his employment with the Company and its affiliates for Good Reason within the Agreement Term. | ||
| (h) | Termination Date. The term “Termination Date” with respect to the Executive means the date on which the Executive’s employment with the Company and its affiliates terminates for any reason, including voluntary resignation. If the Executive becomes employed by the entity into which the Company is merged, or the purchaser of substantially all of the assets of the Company, or a successor to such entity or purchaser, the Executive’s Termination Date shall not be treated as having occurred for purposes of this Agreement until such time as the Executive terminates employment with the successor and its affiliates (including, without limitation, the merged entity or purchaser). If the Executive is transferred to employment with an affiliate (including a successor to the Company, and regardless of whether before, on, or after a Change in Control), such |
3
| transfer shall not constitute the Executive’s Termination Date for purposes of this Agreement. |
3. Payments and Benefits. If the Executive’s Termination Date occurs as the result of
a Covered Termination, the Executive shall be entitled to the following payments and benefits:
| (a) | The Executive will be entitled to a payment equal to two times the Executive’s annual base salary in effect immediately prior to the Change in Control (without regard to any reduction thereof in contemplation of the Change in Control). | |
| (b) | The Executive will be entitled to a payment equal to two times the Executive’s target bonus, at his target bonus rate in effect immediately prior to the Change in Control (without regard to any reduction thereof in contemplation of the Change in Control). | |
| (c) | For the two year period following the Termination Date, the Executive shall be entitled to receive continuing group medical coverage for himself and his dependents (on a non-taxable basis, including if necessary, payment of any gross-up payments necessary to result in net non-taxable benefits), which coverage is not materially less favorable to the Executive than the group medical coverage which was provided to the Executive by the Company or its affiliates immediately prior to the Change in Control. To the extent applicable and to the extent permitted by law, any continuing coverage provided to the Executive and/or his dependents pursuant to this subparagraph (c) shall be considered part of, and not in addition to, any coverage required under COBRA. | |
| (d) | The Executive will be provided with professional outplacement services for a period of not more than 12 months following the Termination Date, at a level customary for an executive, to be provided by a firm mutually acceptable to the Company and the Executive. |
Subject to the terms and conditions of this Agreement, payments pursuant to subparagraphs (a) and
(b) next above shall be made in substantially equal monthly installments beginning within five days
following the Termination Date. To the extent that the Company is required to make any gross-up
payments to the Executive in order to provide the benefits described in subparagraph (c) on a
non-taxable basis, such payments shall be made in the month that the Executive otherwise has
taxable income as a result of such benefits, but in no event later than the end of the year in
which the Executive pays the related taxes.
4. Mitigation. The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise. None of the
Company or any of its affiliates shall be entitled to set off against the amounts payable to the
Executive under this
4
Agreement any amounts owed to the Company or any of its affiliates by the Executive, any
amounts earned by the Executive in other employment after his Termination Date, or any amounts
which might have been earned by the Executive in other employment had he sought such other
employment.
5. Tax Payments. If:
| (a) | any payment or benefit to which the Executive is entitled from the Company, any affiliate, or trusts established by the Company or by any affiliate (the “Payments,” which shall include, without limitation, the vesting of an option or other non-cash benefit or property) are subject to the tax imposed by section 4999 of the Code or any successor provision to that section; and | |
| (b) | reduction of the Payments to the amount necessary to avoid the application of such tax would result in the Executive retaining an amount that is greater than the amount he would retain if the Payments were made without such reduction but after the reduction for the amount of the tax imposed by section 4999; |
then the Payments shall be reduced to the extent required to avoid application of the tax imposed
by section 4999. The Executive shall be entitled to select the order in which payments are to be
reduced in accordance with the preceding sentence. Determination of whether Payments would result
in the application of the tax imposed by section 4999, and the amount of reduction that is
necessary so that no such tax would be applied, shall be made, at the Company’s expense, by the
independent accounting firm employed by the Company immediately prior to the occurrence of the
Change in Control. Notwithstanding the foregoing, in no event shall the Executive be entitled to
exercise any discretion with respect to the reduction of payments that are subject to section 409A
of the Code and any such payments shall be reduced, if applicable, in the order in which they would
otherwise be paid or provided (with the payments to be made first being reduced first) and cash
payments shall be reduced prior to any non-cash payments or benefits.
6. Other Benefits. Except as may be otherwise specifically provided in an amendment
of this Agreement adopted in accordance with paragraph 10, in the event of a Covered Termination,
the Executive shall not be eligible to receive any benefits that may be otherwise payable to or on
behalf of the Executive pursuant to the terms of any severance pay arrangement of the Company (or
any affiliate of the Company), including any arrangement of the Company (or any affiliate of the
Company) providing benefits upon involuntary termination of employment.
7. Withholding. All payments to the Executive under this Agreement will be subject to
all applicable withholding of applicable taxes.
5
8. Assistance with Claims. The Executive agrees that, for the period beginning on the
Effective Date, and continuing for a reasonable period after the Executive’s Termination Date, the
Executive will assist the Company and its affiliates in defense of any claims that may be made
against the Company or its affiliates and will assist the Company and its affiliates in the
prosecution of any claims that may be made by the Company or its affiliates, to the extent that
such claims may relate to services performed by the Executive for the Company or its affiliates.
The Executive agrees to promptly inform the Company if he becomes aware of any lawsuits involving
such claims that may be filed against the Company or its affiliates. The Company agrees to provide
legal counsel to the Executive in connection with such assistance (to the extent legally
permitted), and to reimburse the Executive for all of his reasonable out-of-pocket expenses
associated with such assistance, including travel expenses. For periods after the Executive’s
employment with the Company terminates, the Company agrees to provide reasonable compensation to
the Executive for such assistance. The Executive also agrees to promptly inform the Company if he
is asked to assist in any investigation of the Company or its affiliates (or their actions) that
may relate to services performed by the Executive for the Company or its affiliates, regardless of
whether a lawsuit has then been filed against the Company or its affiliates with respect to such
investigation. Any compensation payable to the Executive pursuant to this paragraph 8 for services
provided to the Company shall be paid within ten days after the Executive provides the applicable
services. To the extent that any reimbursements to be provided pursuant to this paragraph 8 are
taxable to the Executive, such reimbursements shall be paid to the Executive only if (a) the
expenses are incurred and reimbursable pursuant to a reimbursement plan that provides an
objectively determinable nondiscretionary definition of the expenses that are eligible for
reimbursement and (b) the expenses are incurred within two years following the Termination Date.
With respect to any expenses that are reimbursable pursuant to the preceding sentence, the amount
of the expenses that are eligible for reimbursement during one calendar year may not affect the
amount of reimbursements to be provided in any subsequent calendar year, the reimbursement of an
eligible expense shall be made on or before the last day of the calendar year following the
calendar year in which the expense was incurred, and the right to reimbursement of the expenses
shall not be subject to liquidation or exchange for any other benefit.
9. Nonalienation. The interests of the Executive under this Agreement are not subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors of the Executive or the Executive’s beneficiary.
10. Amendment. This Agreement may be amended or canceled only by mutual agreement of
the parties in writing without the consent of any other person. So long as the Executive lives, no
person, other than the parties hereto, shall have any rights under or interest in this Agreement or
the subject matter hereof.
6
11. Applicable Law. The provisions of this Agreement shall be construed in accordance
with the laws of the State of Kansas, without regard to the conflict of law provisions of any
state.
12. Severability. The invalidity or unenforceability of any provision of this
Agreement will not affect the validity or enforceability of any other provision of this Agreement,
and this Agreement will be construed as if such invalid or unenforceable provision were omitted
(but only to the extent that such provision cannot be appropriately reformed or modified).
13. Obligation of Company. Except as otherwise specifically provided in this
Agreement, nothing in this Agreement shall be construed to affect the Company’s right to modify the
Executive’s position or duties, compensation, or other terms of employment, or to terminate the
Executive’s employment. Nothing in this Agreement shall be construed to require the Company or any
other person to take steps or not take steps (including, without limitation, the giving or
withholding of consents) that would result in a Change in Control.
14. Waiver of Breach. No waiver by any party hereto of a breach of any provision of
this Agreement by any other party, or of compliance with any condition or provision of this
Agreement to be performed by such other party, will operate or be construed as a waiver of any
subsequent breach by such other party of any similar or dissimilar provisions and conditions at the
same or any prior or subsequent time. The failure of any party hereto to take any action by reason
of such breach will not deprive such party of the right to take action at any time while such
breach continues.
15. Successors, Assumption of Contract. This Agreement is personal to the Executive
and may not be assigned by the Executive without the written consent of the Company. However, to
the extent that rights or benefits under this Agreement otherwise survive the Executive’s death,
the Executive’s heirs and estate shall succeed to such rights and benefits pursuant to the
Executive’s will or the laws of descent and distribution; provided that the Executive shall have
the right at any time and from time to time, by notice delivered to the Company, to designate or to
change the beneficiary or beneficiaries with respect to such benefits. This Agreement shall be
binding upon and inure to the benefit of the Company and any successor of the Company, subject to
the following:
| (a) | The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. | |
| (b) | After a successor assumes this Agreement in accordance with this paragraph 15, only such successor shall be liable for amounts payable |
7
| after such assumption, and no other companies (including, without limitation, the Company and any other predecessors) shall have liability for amounts payable after such assumption. |
| (c) | If the successor is required to assume the obligations of this Agreement under subparagraph (a), the successor shall execute and deliver to the Executive a written acknowledgment of the assumption of the Agreement. |
16. Notices. Notices and all other communications provided for in this Agreement
shall be in writing and shall be delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid (provided that international mail shall be sent via
overnight or two-day delivery), or sent by facsimile or prepaid overnight courier to the parties at
the addresses set forth below. Such notices, demands, claims and other communications shall be
deemed given:
| (a) | in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery; | |
| (b) | in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; or | |
| (c) | in the case of facsimile, the date upon which the transmitting party received confirmation of receipt by facsimile, telephone or otherwise; |
provided, however, that in no event shall any such communications be deemed to be given later than
the date they are actually received. Communications that are to be delivered by the U.S. mail or
by overnight service or two-day delivery service are to be delivered to the addresses set forth
below:
to the Company:
Xxxx Xxxxxxx
Vice President, Human Resources
0000 Xxxxxxx Xxxx., Xxxxx 0000
Xxxxxxxx Xxxx, Xxxxxx 00000
Vice President, Human Resources
0000 Xxxxxxx Xxxx., Xxxxx 0000
Xxxxxxxx Xxxx, Xxxxxx 00000
or to the Executive:
Xxxxxxxx Xxxxx
00000 Xxxxxxxxxx
Xxxxxxxx Xxxx, XX 00000
00000 Xxxxxxxxxx
Xxxxxxxx Xxxx, XX 00000
Each party, by written notice furnished to the other party, may modify the applicable delivery
address, except that notice of change of address shall be effective only upon receipt.
8
17. Arbitration of All Disputes. Any controversy or claim arising out of or relating
to this Agreement (or the breach thereof) shall be settled by final, binding and non-appealable
arbitration in Overland Park, Kansas by three arbitrators. Except as otherwise expressly provided
in this paragraph 17, the arbitration shall be conducted in accordance with the rules of the
American Arbitration Association (the “Association”) then in effect. One of the arbitrators shall
be appointed by the Company, one shall be appointed by the Executive, and the third shall be
appointed by the first two arbitrators. If the first two arbitrators cannot agree on the third
arbitrator within 30 days of the appointment of the second arbitrator, then the third arbitrator
shall be appointed by the Association.
18. Survival of Agreement. Except as otherwise expressly provided in this Agreement,
the rights and obligations of the parties to this Agreement shall survive the termination of the
Executive’s employment with the Company.
19. Entire Agreement. Except as otherwise provided herein, this Agreement constitutes
the entire agreement between the parties concerning the subject matter hereof and supersedes all
prior or contemporaneous agreements, if any, between the parties relating to the subject matter
hereof, including, but not limited to, the Prior Agreement; provided, however, that nothing in this
Agreement shall be construed to limit any policy or agreement that is otherwise applicable relating
to confidentiality, rights to inventions, copyrightable material, business and/or technical
information, trade secrets, solicitation of employees, interference with relationships with other
businesses, competition, and other similar policies or agreement for the protection of the business
and operations of the Company and its affiliates.
20. Code Section 409A. Notwithstanding any other provision of this Agreement to the
contrary, if any payment or benefit hereunder is subject to section 409A of the Code and if such
payment or benefit is to be paid or provided on account of the Executive’s separation from service
(within the meaning of section 409A of the Code) and if the Executive is a specified employee
(within the meaning of section 409A(a)(2)(B) of the Code), such payment or benefit shall be paid or
provided on the later of (a) the first day of the seventh month following the Executive’s
separation from service or (b) the date on which such payment or benefit would otherwise be paid or
provided pursuant to the terms of this Agreement. To the extent that any payments or benefits
under the Agreement are subject to section 409A of the Code and are paid or provided on account of
the Executive’s termination of employment or service, the determination as to whether the Executive
has had a termination of employment or service shall be made in accordance with section 409A of the
Code and the guidance issued thereunder.
21. Counterparts. This Agreement may be executed in two or more counterparts, any one
of which shall be deemed the original without reference to the others.
9
IN WITNESS THEREOF, the Executive has hereunto set his hand, and the Company has caused these
presents to be executed in its name and on its behalf, all as of the Effective Date.
| EXECUTIVE |
||||||
| FERRELLGAS, INC. | ||||||
| By | ||||||
| Its | ||||||
10
