EXHIBIT 3
FUNDING AGREEMENT
THIS FUNDING AGREEMENT (this "Agreement") is made and entered into
this 1st day of October, 2002, by and between CAP ROCK ENERGY CORPORATION
(the "Company"), a Texas corporation, and XXXXXX X. XXXXXXXX and XXXXXX X.
XXXXXX, Trustees (together with their successors, the "Trustees") of the CAP
ROCK ENERGY CORPORATION SHAREHOLDERS' TRUST (the "Trust") dated of even date
herewith.
BACKGROUND
C. On even date herewith, the Company created the Trust and deposited
346,958 issued and outstanding shares of common stock, $.01 par value, of
the Company with the Trustees for the benefit of certain former members of
the Company's predecessor;
D. The instrument creating the Trust provides, among other things, that
the Company will provide the Trust with the funds necessary to pay the
compensation and expenses of the Trustees, which agreement with the Company
was a material inducement to the Trustees to consent to serve in such
capacity;
E. The parties now desire to set forth the specific terms and
conditions under which the funds to pay the compensation and expenses of the
Trustees will be provided by the Company.
TERMS AND CONDITIONS
In consideration of the sum of $10.00 in cash paid by the Trust to the
Company, the mutual benefits to be derived and the representations and
warranties, conditions and promises herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
22. FUNDING NOTIFICATION. The Trustees may, from time to time, notify
the Company in writing (a "Funding Notice") of the need of the Trust for
funds to pay:
(a) the compensation and expenses of the Trustees under the terms of the
instrument creating the Trust; and
(b) the obligations of the Trust to indemnify the Trustees under the terms
of the instrument creating the Trust.
Each Funding Notice may be in any format deemed appropriate by the
Trustees, as long as it clearly sets forth the basis of the funding
requirement (e.g., Trustee compensation or Trustee expense reimbursement),
the amount needed and such backup material as may be requested by the Company
(which, in the case of expense reimbursement requests, may include a copy of
the expense reports being paid and a copy of the receipt backup to such
reports).
23. ADVANCEMENT OF FUNDS. Within fifteen (15) business days of the
delivery of a Funding Notice, the Company shall pay to the Trust the amount
requested in the Funding Notice. Such advancement shall be in the form of
cash, bank cashiers' check or deposit into the account of the Trust by wire
transfer of immediately available funds.
24. AGREEMENT TERM. The term of this Agreement shall commence on the date
of this Agreement and shall continue until the termination of the Trust in
accordance with the instrument creating the Trust.
25. ADMINISTRATIVE EXPENSES. The Company shall be responsible for payment
of all expenses reasonably incurred by the Trust in connection with this
Agreement, including, but not limited to, delivery and copying expenses,
attorneys' fees and costs and the expenses and costs of other professionals
hired by the Trustees on behalf of the Trust, and other similar expenses.
26. SPECIFIC PERFORMANCE. The Company acknowledges and agrees that, in
the event of any breach of this Agreement, the Trust would be irreparably and
immediately harmed and could not be made whole by monetary damages alone.
Accordingly, it is agreed that, in addition to any other remedy to which it
may be entitled at law or in equity, the Trust shall be entitled to compel
specific performance of this Agreement, and that the Company will not oppose
the granting of such relief. The Company also agrees to reimburse the Trust
for all costs and expenses, including attorneys' fees, incurred by the Trust
in attempting to enforce the obligations of the Company under this Agreement.
27. NOTICE DELIVERY REQUIREMENTS. All notices or other communications
which are required or permitted hereunder shall be in writing and shall be
delivered either personally or by telegram, telex, telecopy or similar
facsimile means, by registered or certified mail (postage prepaid and return
receipt requested), or by express courier or delivery service, addressed as
follows:
If to the Company:
Cap Rock Energy Corporation
000 X. Xxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxx, President
Telecopy: 000-000-0000
If to the Trust:
Cap Rock Energy Corporation Shareholders' Trust
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxx X. Xxxx
Telecopy: 000-000-0000
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner
hereinabove set forth. Notices shall be deemed given when received, if sent
by telegram, telex, telecopy or similar facsimile means (confirmation of such
receipt by confirmed facsimile transmission being deemed receipt of
communications sent by telex, telecopy or other facsimile means); and when
delivered and receipted for (or upon the date of attempted delivery where
delivery is refused), if hand-delivered, sent by express courier or delivery
service, or sent by certified or registered mail.
28. FURTHER ASSURANCES. The parties hereto agree (i) to furnish upon
request to each other such further information; (ii) to execute and deliver
to each other such other documents; and (iii) to do such other acts and
things, all as the other party hereto may at any time reasonably request for
the purpose of carrying out the intent of this Agreement.
29. WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay on the part
of any party in exercising any right, power or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise
of any such right, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. To the maximum extent permitted by applicable law,
(i) no claim or right arising out of this Agreement can be discharged by one
party hereto, in whole or in part, by a waiver or renunciation of the claim
or right unless in writing signed by the other party hereto; (ii) no waiver
which may be given by a party hereto shall be applicable except in the
specific instance for which it is given; and (iii) no notice to or demand on
one party hereto shall be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.
30. ENTIRE AGREEMENT AND MODIFICATION. This Agreement is intended by the
parties to this Agreement as a final expression of their agreement with
respect to the subject matter hereof, and is intended as a complete and
exclusive statement of the terms and conditions of that agreement. This
Agreement may not be modified, rescinded or terminated orally, and no
modification, rescission, termination or attempted waiver of any of the
provisions hereof (including this Section) shall be valid unless in writing
and signed by the party against whom the same is sought to be enforced.
31. LIMITATIONS ON ASSIGNMENTS. The Company shall not, during the term of
this Agreement, assign, transfer or otherwise dispose of any of its rights or
obligations hereunder to a person other than an Affiliate of the Company,
without the prior written consent of the Trust. An Affiliate of the Company
to whom any rights or obligations hereunder may have been transferred in
accordance with this Agreement shall not, during the term of this Agreement,
assign, transfer or otherwise dispose of any of its rights hereunder to a
person other than the Company or another Affiliate of the Company, without
the prior written consent of the Trust. As used in this Agreement, the term
"Affiliate of the Company" means a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is
under common control with, the Company, and a person shall be deemed to
control another person (including the Company) if the controlling person is
the beneficial owner (as defined in Rule 13d-3 under the Securities Act of
1934, as amended) of ten percent (10%) or more of any class of voting
securities (or other voting interests) of the controlled person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management or policies of the controlled person, whether through ownership of
securities, through serving as an officer or director, by contract or
otherwise.
32. PERSONS BOUND. This Agreement shall apply to and be binding in all
respects upon, and shall inure to the benefit of the parties hereto and their
permitted successors and assigns. Nothing expressed or referred to in this
Agreement is intended or shall be construed to give any person or entity
other than the parties to this Agreement, and their permitted successors and
assigns, any legal or equitable right, remedy or claim under or with respect
to this Agreement, or any provision hereof, it being the intention of the
parties hereto that this Agreement and all of its provisions and conditions
are for the sole and exclusive benefit of the parties to this Agreement,
their successors and assigns, and for the benefit of no other person or
entity.
33. SEVERANCE. In the event any court of competent jurisdiction shall
hold any provision of this Agreement invalid or unenforceable, such holding
shall not invalidate or render unenforceable any other provisions hereof. Any
provision of this Agreement held invalid or unenforceable only in part or
degree shall remain in full force and effect to the extent not held invalid
or unenforceable.
34. SECTION HEADINGS, CONSTRUCTION. The headings of articles and sections
contained in this Agreement are provided for convenience only. They form no
part of this Agreement and shall not affect its construction or
interpretation. All references to articles and sections in this Agreement
refer to the corresponding articles and sections of this Agreement. All words
used herein shall be construed to be of such gender or number as the
circumstances require. Unless otherwise specifically noted, the words
"herein," "hereof," "hereby," "hereinabove," "hereinbelow," "hereunder," and
words of similar import, refer to this Agreement as a whole and not to any
particular section, subsection, paragraph, clause or other subdivision hereof.
35. CONSENT OR PERMISSION NOT TO BE UNREASONABLY WITHHELD. Except as
otherwise expressly stated herein, whenever the consent or permission of a
party hereto is required hereunder, such consent or permission shall not be
unreasonably withheld or delayed.
36. TIME OF ESSENCE. With regard to all time periods set forth or
referred to in this Agreement, time is of the essence.
37. GOVERNING LAW. This Agreement and all rights arising hereunder shall
be construed and determined in accordance with the laws of the State of
Texas, and the performance thereof shall be governed and enforced in
accordance with such laws. In the event any controversy arises out of or
relates to this Agreement, the Trustees and representatives of the Company
shall first meet in Midland, Texas, and attempt to negotiate a resolution of
their dispute. In the event such negotiation shall fail to resolve any such
conflict, the parties hereby agree to submit to arbitration administered by
the American Arbitration Association under its then current Commercial
Arbitration Rules. Any such controversy shall be submitted in Dallas, Texas,
to a panel of three (3) arbitrators, one chosen by each party and the third
under the American Arbitration Rules. At least two (2) of the arbitrators
shall have experience with securities. The arbitrators will have no authority
to award punitive or other damages not measured by the prevailing party's
actual damages and may not, in any event, make any ruling, finding, or award
that does not conform to the terms and conditions of this Agreement. The
parties shall faithfully observe this Agreement and such rules, and will
abide by and perform any award rendered by the arbitrators, and a judgment of
any court having jurisdiction may be entered on the award. The provisions of
this Section 16 are a material inducement for both the Company and the Trust
entering into the Agreement and the transactions
contemplated herein. The Company and the Trust each hereby acknowledge that
it has reviewed the provisions of this Section 16 with its independent legal
counsel.
38. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to
constitute but one and the same agreement.
SIGNATURES
To evidence the binding effect of the covenants and agreements described
above, the Company (by its duly authorized officer) and the Trust (by the
Trustees) have caused this Agreement to be executed and delivered as of, but
not necessarily on, the date first written above.
CAP ROCK ENERGY CORPORATION
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Xxxxx X. Xxxxxx, President
CAP ROCK ENERGY CORPORATION
SHAREHOLDERS' TRUST
/s/ Xxxxxx X. Xxxxxxxx
----------------------------------------
Xxxxxx X. Xxxxxxxx, Trustee
/s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx, Trustee
