TRUST AGREEMENT
Exhibit 99.2
THIS TRUST AGREEMENT, dated as of November 24, 2010, (the “Agreement”) by and between
GreenHunter Energy, Inc., a Delaware corporation (the “Grantor”), and Xxxx X. Xxxxx, an
individual residing in the State of Texas (the “Trustee”).
WITNESSETH:
WHEREAS, Grantor issued its nonrecourse 10% Series A Secured Redeemable Debentures due 2012
(the “Debentures”) that were secured solely by all of Grantor’s common stock in its wholly
owned Texas subsidiary, GreenHunter BioFuels, Inc. (“GreenHunter BioFuels”);
WHEREAS, Grantor desires to transfer all of its common stock in GreenHunter BioFuels (the
“Trust Property”) to Trustee in an irrevocable trust (the “Trust”) for the benefit
of the holders of the Debentures and their respective successors, assigns, heirs and devisees
(collectively, the “Beneficiaries”) and, to the extent set forth in Section 4.02, the
stockholders of Grantor and their respective successors, assigns, heirs and devisees (the
“Alternative Beneficiaries”) in full and final satisfaction of any obligation Grantor might
have to the Beneficiaries;
WHEREAS, this Agreement is designed to create a Trust in order that Trustee may hold the Trust
Property for the sole benefit of the Beneficiaries and the Alternative Beneficiaries; and
WHEREAS, Trustee is willing to accept the Trust Property as herein provided.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein,
Grantor and Trustee agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement shall have the respective meanings assigned thereto
below, unless such terms are otherwise defined herein or the context hereof shall otherwise
require. The terms “hereof,” “herein,” “hereunder” and comparable terms refer to this Agreement,
as amended, modified or supplemented from time to time, and not to any particular portion hereof.
References in this Agreement to sections, paragraphs and clauses are to sections, paragraphs and
clauses in this Agreement unless otherwise indicated.
“Business Day” means a day other than a Saturday or a Sunday and other than a day on
which banking institutions in Dallas, Texas are required or authorized by law or order to be
closed.
“Business Entity” means and includes any, corporation, limited liability company,
partnership, business trust, firm, joint stock company, joint venture, trust or other entity
recognized as a separate person under applicable law.
“Rule Against Perpetuities” means the rule found in Section 112.036 of the Texas Trust
Code requiring that an interest is not good unless it must vest, if at all, no later than 21 years
after some life in being at the time of the creation of the interests, plus a period of gestation.
ARTICLE 2
CREATION OF IRREVOCABLE TRUST
Section 2.01. Transfer of Control. Grantor hereby makes an irrevocable transfer of
all its right, title and interest in and to the Trust Property to Trustee for the sole benefit of
the Beneficiaries. Trustee hereby acknowledges, on behalf of itself and the Beneficiaries, that
Grantor has indicated that all or substantially all of the assets of GreenHunter BioFuels are
mortgaged, pledged or otherwise subject to liens and security interests.
Section 2.02. Acceptance and Declaration of Trust. Trustee accepts the Trust created
hereby, and declares that it will hold the Trust for the use and sole benefit of the Beneficiaries,
in accordance with and subject to all of the terms and conditions contained in this Agreement, and
agrees to perform the same and agrees to receive and disburse all properties and moneys
constituting part of the Trust, all in accordance with the terms hereof.
ARTICLE 3
TRUSTEE
Section 3.01. Resignation. Trustee may resign at any time upon giving 15 days prior
written notice of such resignation to Grantor. Such resignation shall take effect only upon the
appointment of a successor Trustee pursuant to Section 3.02, whereupon all powers, rights and
obligations of the resigning Trustee under this Agreement shall cease and terminate.
Section 3.02. Successor Trustee. Promptly upon receipt of a notice of resignation
from Trustee in accordance with Section 3.01, a successor trustee shall be appointed by a written
instrument signed by duly authorized officers of Grantor and the successor trustee shall execute
and deliver to the predecessor trustee an instrument accepting such appointment. Such successor
trustee shall assume all powers, rights and obligations of such trustee hereunder immediately upon
the resignation of such trustee becoming effective. If Grantor shall not have so appointed a
successor trustee within 15 days after such resignation or removal, Trustee may apply to any court
of competent jurisdiction to appoint a successor trustee to act until such time, if any, as a
successor or successors shall have been appointed by Grantor in accordance with the procedures of
this Section 3.02.
Section 3.03. Vacancies. If any vacancy shall occur in the position of Trustee for
any reason, including, without limitation, removal, resignation, or the inability or refusal of
such trustee to act as Trustee, the vacancy shall be filled in accordance with Section 3.02.
Section 3.04. Merger. Any Business Entity into which Trustee may be merged or
converted or with which it may be consolidated, or any Business Entity resulting from any merger,
conversion or consolidation to which Trustee shall be a party, or any Business Entity to which
substantially all the corporate trust business of Trustee may be transferred, shall be Trustee
without further act.
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Section 3.05. Tax Returns. Trustee shall keep all appropriate books and records
relating to the receipt and disbursement of all monies under this Agreement or any agreement
contemplated hereby. Trustee shall be responsible for causing to be prepared, at the request and
expense of Grantor, all income tax returns required to be filed with respect to the Trust and shall
execute and file such returns. Each party hereto, upon request, will furnish the other party with
all such information as may be reasonably required from the other party in connection with the
preparation of such income tax returns.
Section 3.06. Compensation. Trustee shall receive from Grantor as compensation for
Trustee’s services hereunder such fees as may heretofore and from time to time hereafter be agreed
upon by Trustee and Grantor. Trustee shall also be reimbursed by Grantor for all reasonable costs
and expenses incurred or made by it in accordance with any of the provisions of this Agreement.
Section 3.07. Trustee May Rely. Trustee shall not incur any liability to any person
in acting or refraining from acting upon any signature, instrument, notice, resolution, request,
consent, order, certificate, report, opinion, bond or other document or paper reasonably believed
by it to be genuine and reasonably believed by it to be signed by the proper party or parties. As
to any fact or matter, the manner or ascertainment of which is not specifically described herein,
Trustee may for all purposes hereof rely on a certificate, signed by or on behalf of the party
executing such certificate, as to such fact or matter, and such certificate shall constitute full
protection of Trustee for any action taken or omitted to be taken by it in good faith in reliance
thereon.
Section 3.08. Trustee Acts as Trustee. In accepting the Trust, Trustee acts solely as
trustee hereunder and not in any individual capacity, and all persons other than Grantor or the
Beneficiaries having any claim against Trustee by reason of the transactions contemplated hereby
shall not have any recourse to Trustee in its individual capacity.
Section 3.09. No Expenses for Trustee. Trustee shall not have any obligation by
virtue of this Agreement to expend or risk any of its own funds, or to take any action which could,
in the reasonable opinion of Trustee, result in any cost or expense being incurred by Trustee.
Trustee shall not be required to take any action or refrain from taking any action under this
Agreement unless it shall have been indemnified by Grantor in a manner and form satisfactory to
Trustee against any liability, cost or expense (including reasonable attorneys’ fees) which may be
incurred in connection therewith.
Section 3.10. Certain Duties and Responsibilities of Trustee. Trustee undertakes to
perform only such duties and responsibilities as are specifically set forth in this Agreement, and
no implied duties, covenants or obligations shall be read into this Agreement against Trustee. In
performing its duties under this Agreement, Trustee shall not be liable to anyone for damages,
losses or expenses which may be incurred as a result of Trustee so acting or failing to so act;
provided, however, that Trustee shall not be relieved from liability for damages arising out of its
proven gross negligence or willful misconduct under this Agreement. Trustee shall have no
obligation to take any legal action in connection with this Agreement or towards its enforcement,
or to appear in, prosecute or defend any action or legal proceeding which would or might involve it
in any cost, expense, loss or liability unless security and indemnity, as provided in this
Agreement, shall be furnished to its reasonable satisfaction. Trustee shall in no event incur any
liability with respect to any action taken or omitted to be taken in good faith upon advice of
legal
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counsel, which may be counsel to any party hereto, given with respect to any question relating
to the duties and responsibilities of Trustee hereunder. Trustee shall not be bound by, subject
to, or obligated to recognize any other agreement or contract between or direction or instruction
of, any or all of the parties hereto, and shall not be charged with knowledge of the contents or
conditions of any such agreement or contract.
Section 3.11. Attachments, Garnishments and Levies to Trustee. If any property
subject hereto, including the Trust Property, is at any time attached, garnished, or levied upon
under any governmental decree or court order, or in case the payment, assignment, transfer,
conveyance or delivery of any such property shall be stayed or enjoined by any court order, or in
case any order, judgment, or decree shall be made or entered by any court affecting such property
or any party hereto, then in any such events, Trustee is authorized, in its sole discretion, to
rely upon and comply with any such order, writ, judgment or decree with which it is advised by
legal counsel of its own choosing, and if it complies with any such order, writ, judgment or decree
it shall not be liable to any other party hereto or to any other person, firm or corporation by
reason of such compliance even though such order, writ, judgment or decree may be subsequently
reversed, modified, annulled, set aside, or vacated.
Section 3.12. Powers of Trustee. Trustee shall have the power and authority to do any
act or thing necessary or advisable for the proper administration and distribution of the Trust.
ARTICLE 4
DISTRIBUTIONS
Section 4.01. Distributions. Grantor represents and warrants to Trustee that on the
date hereof (i) the aggregate principal amount of Debentures is $21,043,147.88 (the “Debenture
Total”) and (ii) the aggregate number of shares of common stock of GreenHunter BioFuels
constituting the Trust Property is 1,000,000 (the “Stock Total”). Upon the written request
of any Beneficiary, together with surrender of such Beneficiary’s original Debenture for
cancellation, the Trustee will:
| (i) cancel, or cause to be cancelled, the surrendered Debenture; |
| (ii) issue, or cause to be issued, to such Beneficiary that number of shares of common stock (which may include fractional shares) equal to the mathematical product of (A) the Stock Total multiplied by (B) a fraction of which (x) the numerator is the principal amount of the Debenture surrendered for cancellation and (y) the denominator is the Debenture Total; and |
| (iii) cancel that number of shares (including fractional shares) determined under clause (ii) from the remaining shares of common stock of GreenHunter BioFuels held as part of the Trust Property. |
Section 4.02. Alternative Distributions. In the event any Beneficiary advises Grantor
that such Beneficiary is disclaiming any interest in the Trust Property, or if Grantor advises the
Trustee in writing that it has determined in good faith that one or more Beneficiaries does not
wish to claim any interest in the Trust Property, the Trustee will thereafter hold the disclaimed
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portion of the Trust Property (the “Disclaimed Trust Property”) for the benefit of the
Alternative Beneficiaries. Upon the written request of Grantor, the Trustee will:
| (i) to the extent reasonably practicable, cancel, or cause to be cancelled, the surrendered Debenture; |
| (ii) issue, or cause to be issued, to the Alterative Beneficiaries that number of shares of common stock (which may include fractional shares) (the “Distributed Shares”) equal to the mathematical product of (A) the Stock Total multiplied by (B) a fraction of which (x) the numerator is the principal amount of the Disclaimed Trust Property and (y) the denominator is the Debenture Total, with each Alternative Beneficiary receiving that number of Distributed Shares equal to the mathematical product of the total number of Distributed Shares multiplied by a fraction of which [1] the numerator is the number of shares of common stock of Grantor owned by such Alternative Beneficiary on the record date for such distribution and [2] the denominator is the number of shares of common stock of Grantor outstanding on such record date; and |
| (iii) cancel that number of shares (including fractional shares) constituting the Distributed Shares determined under clause (ii) from the remaining shares of common stock of GreenHunter BioFuels held as part of the Trust Property. |
ARTICLE 5
INDEMNIFICATION OF TRUSTEE BY GRANTOR
Section 5.01. Indemnification. Grantor hereby agrees to indemnify Trustee, its
affiliates and respective directors, officers, agents, attorneys, and employees (the
“Indemnified Persons”) and save the Indemnified Persons harmless from and against any and
all claims, tax liabilities, lawsuits, causes of action or other legal actions and proceedings of
whatever nature (whether by way of direct action, counterclaim, cross action or impleader),
liabilities, costs (including without limitation, any and all court costs and reasonable attorneys’
fees) losses, demands and damages (each, a “Claim”) by any person or entity which may be
incurred by the Indemnified Persons (1) as a result of or in connection with Trustee’s capacity as
such under this Agreement, (2) in any way related to or arising out of or in connection with this
Agreement or any action taken or not taken by Trustee pursuant to this Agreement, or (3) as a
result of Trustee’s performance of its duties pursuant to this Agreement. Upon the written request
of any such Indemnified Person, Grantor agrees to assume the investigation and defense of any
Claim, including the employment of counsel reasonably acceptable to the applicable Indemnified
Person, and the payment of all expenses related thereto and, notwithstanding any such assumptions,
the Indemnified Person shall have the right, and Grantor agrees to pay the cost and expense
thereof, to employ separate counsel with respect to any such Claim and participate in the
investigation and defense thereof in the event that such Indemnified Party shall have been advised
by counsel that there may be one or more legal defenses available to such Indemnified Person which
are different from or additional to those available to Grantor. Grantor hereby agrees to indemnify
and hold harmless the Indemnified Persons from and against any and all loss, liability, cost,
damage and expense, including, without limitation, reasonable attorneys’ fees, arising out of or
relating in any way to this Agreement or any transaction to which this Agreement relates, including
any loss, liability, cost, damage or expense resulting from Trustee’s own negligence. Trustee may
consult counsel in respect of any question regarding this Agreement or any question arising out of
or
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related to this Agreement, and Trustee shall not be liable to any party for any action taken
or omitted in good faith upon advice of such counsel. Grantor agrees that Trustee shall have no
liability hereunder, including but not limited to liability for any error of judgment or for any
act done or step taken or omitted by it in good faith, or for any mistake of fact or law, or for
its own negligence or for anything which it may do or refrain from doing in connection herewith,
except for its proved gross negligence or willful misconduct. Grantor hereby agrees that the
indemnifications and protections afforded to Trustee in this Section 5.01 shall survive the
termination of this Agreement.
ARTICLE 6
TERMINATION
Section 6.01. Termination Date. The Trust shall terminate without any notice or other
action of Trustee upon the earlier of (i) the sale or other final disposition by Trustee of all
property constituting the Trust, or (ii) 21 years less one day after the earliest execution of this
Trust Agreement by any party hereto.
Section 6.02. Distribution of Trust Upon Termination. Upon any termination of the
Trust or if a court of proper jurisdiction finds that this Trust is invalid under applicable law or
if the Trust violates the Rule Against Perpetuities, Trustee shall convey any remaining Trust
Property to the Beneficiaries.
ARTICLE 7
MISCELLANEOUS
Section 7.01. Nature of Title of Beneficiaries. No Beneficiary or Alternative
Beneficiary shall have any legal title to any part of the Trust. No transfer, by operation of law
or otherwise, of the right, title and interest of the Beneficiaries in and to the Trust or the
trusts hereunder, in accordance with the terms hereof, shall operate to terminate this Agreement or
the trusts hereunder or entitle any successor or transferee of the Beneficiaries or the Alternative
Beneficiaries to an accounting or to the transfer of it of legal title to any part of the Trust.
Section 7.02. Notices. Unless otherwise expressly provided herein, all notices,
instructions, demands and other communications hereunder shall be in writing and shall be deemed to
have been duly given when delivered personally (including by courier or overnight courier with
confirmation) to the parties at the following addresses: (i) if to Trustee, to Xxxx X. Xxxxx, 0000
Xxxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000, and (ii) if to Grantor, to GreenHunter Energy,
Inc., 0000 Xxxxx Xxxxx, Xxxxxxxxx, Xxxxx 00000 Attention: Corporate Secretary.
Section 7.03. Situs of Trust; Governing Law. The Trust has been accepted by Trustee
and will be administered in the State of Texas. The validity, construction and enforcement of this
Agreement shall be governed by the laws of the State of Texas without giving effect to principles
of conflict of law. The parties to this Agreement hereby agree that the jurisdiction over such
parties and over the subject matter of any action or proceeding arising under this Agreement may be
exercised by a competent court in Dallas County, Texas or by a United States District Court sitting
in Dallas County, exclusively. The parties agree that delivery or mailing of
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any process or other papers in the manner provided herein, or in such other manner as may be
permitted by law, shall be valid and sufficient service thereof. If any provision of this
Agreement shall be invalid or unenforceable, the remaining provisions hereof shall continue to be
fully effective, provided that such remaining provisions do not increase the obligations or
liabilities of Trustee.
Section 7.04. Assignment. Nothing in this Agreement, expressed or implied, shall give
or be construed to give any person, firm or corporation, other than the parties hereto and their
successors and assigns, any legal claim under any covenant, condition or provision hereof, all the
covenants, conditions, and provisions contained in this Agreement being for the sole benefit of the
parties hereto, the Beneficiaries and their successors and assigns. No party may assign any of its
rights or obligations under this Agreement without (i) the written consent of the other parties,
which consent may be withheld in the sole discretion of the party whose consent is sought and (ii)
the written agreement of the transferee that it will be bound by the provisions of this Agreement.
Section 7.05. Amendment. This Agreement may not be amended, modified, supplemented,
or otherwise altered except by an instrument in writing signed by the parties hereto. No such
modification or amendment shall be deemed to be or shall constitute a modification with respect to
any other terms or provisions of this Agreement, whether or not similar. Any modification shall be
effective only in the specific instance and for the purpose for which it was given, and shall not,
unless agreed upon by the parties hereto, constitute a continuing modification. No waiver of any
provision hereof shall be effective unless expressed in a writing signed by the party to be
charged.
Section 7.06. Headings. The headings of the Articles and Sections of this Agreement
are inserted for convenience only and shall not affect the meaning or construction of any of the
provisions hereof.
Section 7.07. Entire Agreement. This Agreement contains the completed agreement of
the parties with respect to its subject matter and supersedes and replaces any previously made
proposals, representations, warranties or agreements with respect thereto by any of the parties
hereto.
Section 7.08. Facsimile Signature. Any signature of any party required or
contemplated by this Agreement, including, without limitation, the execution of this Agreement, may
be made, obtained or submitted via facsimile transmission or similar electronic transmission and
any signature so made shall be valid and binding as an original signature.
Section 7.09. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original, and such
counterparts together shall constitute and be one and the same instrument.
(The remainder of this page left blank intentionally)
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IN WITNESS WHEREOF, Trustee and Grantor have caused this Agreement to be duly executed all as
of the date first above written.
| GREENHUNTER ENERGY, INC. |
||||
| By: | ||||
| Xxxxxx X. Xxxxxxxx | ||||
| Xx. VP, General Counsel and Secretary | ||||
| XXXX X. XXXXX |
||||
| By: | ||||
| Xxxx X. Xxxxx, Trustee | ||||
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