EXHIBIT 1
CAP ROCK ENERGY CORPORATION
SHAREHOLDERS' TRUST
THIS SHAREHOLDERS' TRUST (this "Trust") is established this 1st day of
October, 2002, by and between CAP ROCK ENERGY CORPORATION (the "Settlor"), a
Texas corporation, XXXXXX X. XXXXXXXX and XXXXXX X. XXXXXX (the "Trustees").
ARTICLE I
PURPOSE
The Settlor has created this Trust for the purpose of receiving and holding
for the benefit of the former members of Cap Rock Electric Cooperative, Inc.
(the "Cooperative") for whom the Cooperative does not presently have valid
addresses the shares of the $.01 par value common stock of the Settlor that
would have otherwise been distributed to those former members of the Cooperative
in connection with the full implementation of the conversion of the Cooperative
from a member owned electric cooperative to a shareholder owned business
corporation.
ARTICLE II
TRUST CORPUS
A. INITIAL DEPOSIT. Concurrently with the execution of this Trust, the
Settlor has delivered to the Trustees a total of 346,958 shares of the $.01 par
value common stock of the Settlor issued in the name of this Trust, and the
Trustees shall hold, administer and distribute the Shares (as such term is
herein defined) in accordance with the terms and provisions of this Trust. The
Settlor may from time to time add additional Shares to the corpus of this Trust
by causing such additional Shares to be issued in the names of the Trustees of
this Trust, and the Trustees shall hold, administer and distribute the
additional Shares in accordance with the terms and provisions of this Trust as
if such additional Shares had originally been deposited with the Trustees of
this Trust. As used in this Trust, the term "Shares" shall include the original
shares of common stock of the
Settlor delivered to the Trustees, as well as any and all in kind
distributions with respect to the common stock of the Settlor, including
shares issued as stock dividends and stock splits.
B. RIGHTS IN THE SHARES. The Trustees are hereby vested, subject to the
limitations set forth in Article III of this Trust, with all right, title and
interest in and to the Shares, and the Trustees are authorized and empowered,
subject to such limitations, to exercise and enjoy, for the purposes of this
Trust and as record owner of the Shares, all the rights, privileges and benefits
attributable to the Shares, including, but not limited to, the right, subject to
the limitations set forth in Section C of Article III of this Trust, to vote the
Shares on all matters and the right to receive any and all dividends and other
distributions made with respect to the Shares. Until all of the Shares have been
transferred out of the Trust and into the names of the beneficial owners thereof
on the stock ownership records of the Settlor, the Settlor shall recognize the
Trustees as record owners of the Shares held at any time and from time to time
in the Trust and as fully entitled, subject to the limitations set forth in
Article III of this Trust, to all rights, privileges, benefits and interests
therein.
C. MANAGEMENT AND DISPOSITION OF TRUST CORPUS. The Trustees shall hold,
administer and distribute the Shares and other property that may be held from
time to time as a part of the corpus of this Trust in accordance with the
following terms and conditions:
(1) The Trustees shall make, directly or indirectly through the
Settlor or others, a diligent and thorough effort to locate the
beneficiaries of the Shares and other property held as a part of
the corpus of this Trust. This effort shall include, but shall
not be limited to, advertising the existence of this Trust and
the Shares held herein from time to time in newspapers of general
circulation in areas where the Settlor transacts business. The
Trustees shall continue this effort so long as there remains any
reasonable hope of finding the beneficiaries of this Trust.
(2) When a beneficiary is located, the Trustees shall cause the
Shares held for such beneficiary to be transferred on the books
and
records of the Settlor into the name of the beneficiary or as
otherwise directed by the beneficiary, and the Trustees shall
then distribute the Shares so transferred, as well as the
beneficiary's pro rata share of any other property held as a part
of the corpus of this Trust, to such beneficiary (or his
designee), free and clear of this Trust.
(3) When and if the Trustees determine that the remaining
beneficiaries of this Trust cannot, without unreasonable effort
on their part, be located, the Trustees shall provide the Settlor
with notice under the Share Option Agreement (the "Option
Agreement"), of even date herewith between the Settlor and this
Trust which Option Agreement is attached hereto as Annex "A" and
made a part hereof for all purposes, that they intend to allow
the Shares and other property held as a part of the corpus of
this Trust to escheat to the State of Texas. Upon the expiration
of the option period set forth in the Option Agreement, the
Trustees shall cause the Shares, as well as the other property
then held as a part of the corpus of this Trust, to be considered
abandoned and to escheat in accordance with the escheat laws of
State of Texas.
ARTICLE III
RIGHTS AND POWERS
X. XXXXXX. In extension and not in limitation of the powers given by law or
other provisions of this Trust to the Trustees, the Trustees, acting jointly,
will have the following powers, where applicable, in each case to be exercised
in the Trustees' discretion, but only in a fiduciary capacity, to:
(1) Retain in the Trust the Shares and any other property received by
the Trustees comprising the corpus of this Trust;
(2) Do or cause to be done all such acts and things as may be
necessary, in the sole opinion of the Trustees, to preserve and
protect the rights of the Trust under the Option Agreement and
the Funding Agreement (the "Funding Agreement") of even date
herewith between the Settlor and this Trust, which Funding
Agreement is attached hereto as Annex "B" and made a part hereof
for all purposes;
(3) Commence, compromise, settle, arbitrate, mediate or defend, at
the expense of the Trust, any litigation with respect to this
Trust as the Trustees deem necessary or advisable, including, but
not limited to, litigation to enforce this Trust's rights under
the Option Agreement and under the Funding Agreement;
(4) Invest and reinvest the property, other than the Shares, held as
a part of the corpus of this Trust in any kind of real or
personal property and in any kind of investment, including, but
not limited to, corporate obligations, shares of stock, mutual
funds and investment trust, that persons of prudence, discretion
and intelligence would acquire for their own account, provided
that the return from all investments must be reasonable in light
of existing circumstances;
(5) Subject to the limitations set forth in Section C of this Article
III, vote and give proxies to vote any securities, including the
Shares, held as a part of the corpus of this Trust;
(6) Pay any assessments or other charges levied on the Shares or any
other securities held as a part of the corpus of this Trust;
(7) Exercise any subscription, conversion or other rights or options
that at any time attach, belong or are given to the holders of
the Shares or any other securities held as a part of the corpus
of this Trust;
(8) Enter into any contract or agreement that the Trustees deem to be
in the best interest of this Trust;
(9) Register and carry the Shares and any other securities held as a
part of the corpus of this Trust in the name of the Trustees, as
Trustees, or in the name of a nominee or hold such securities
unregistered,
but without increasing or decreasing the liability of the
Trustees as fiduciaries; and
(10) Subject to the limitations set forth in Sections B and C of
Article III of this Trust, exercise any other power that may be
necessary or desirable in the management of this Trust,
regardless of whether the power is of like kind or character to
the powers enumerated above, including, but not limited to, any
power necessary or desirable to enable the Trustees to act under
conditions which cannot now be foreseen.
B. SALE LIMITATIONS. Except as provided in this Section B of Article III of
this Trust, the Trustees shall not have any authority or power whatsoever to
sell or otherwise dispose of or encumber the Shares. In the case of an exercise
pursuant to the Option Agreement by the Settlor, or an Affiliate of the Settlor
(as such term is defined in Section H of Article III of this Trust), of the
option to acquire the Shares held in the corpus of this Trust, the Trustees
shall sell all of the Shares to the Settlor or its Affiliate in accordance with
the terms and conditions of the Option Agreement. In the case of a tender offer
or other repurchase offer by the Settlor or an Affiliate of the Settlor for
shares of the capital stock of the Settlor (including, but not limited to, the
tender offer for the Shares that the Settlor is required to make on the first
anniversary of the issuance of the Shares), the Trustees may, in their sole
discretion and acting jointly in the best interest of the beneficiaries of this
Trust, sell all of the eligible Shares held in the corpus of this Trust to the
Settlor or the Affiliate of the Settlor at the highest all cash price offered
under the tender offer or other repurchase offer; provided, however, that
notwithstanding the foregoing, with regard to any tender offer other than the
tender offer the Settlor is required to make on the first anniversary of the
issuance of the Shares, if the premium (i.e., the price per Share offered in the
tender offer or other repurchase offer over the then market price per share of
the Shares) for the Shares covered by the tender offer ( or other repurchase
offer) is 25% or greater, the Trustees shall sell all of the eligible Shares
held in the corpus of this Trust to the Settlor or the Affiliate of the Settlor
at the highest all cash price offered by the Settlor under the tender offer or
other repurchase offer. Finally, in the event the Settlor fails to fulfill its
obligations under the
Funding Agreement to fund the Trust for the payment of compensation and
expenses payable to the Trustees under Section G of Article III of this
Trust, the Trustees may, in their sole discretion and acting jointly in the
best interest of the beneficiaries of this Trust, sell such of the Shares as
are necessary for the Trust to timely pay such compensation and expenses;
provided, however, that notwithstanding the foregoing, the Trustees shall not
be authorized to sell Shares to pay such compensation and expenses if there
are other unencumbered assets in the corpus of this Trust of sufficient value
that can be liquidated or otherwise used to pay such compensation and
expenses.
C. VOTING LIMITATIONS. The Trustees shall not vote the Shares in favor of
the sale, mortgage, or pledge of all or substantially all of the assets of the
Settlor, or for any change in the capital structure or the powers of the
Settlor, or in connection with any merger, consolidation, reorganization,
dissolution or similar type of transaction involving the Settlor, not approved
by the Settlor's Board of Directors.
D. ACTION OF TRUSTEES. All action to be taken on any question arising
between the Trustees, except as may otherwise be expressly provided in this
Trust, shall from time to time be determined by unanimous vote or agreement of
the Trustees then in office, if there are two trustees or less, and by a
majority vote of the trustees if there are three or more, either at a meeting of
the Trustees or, with or without a meeting, by a writing signed by all of the
Trustees; provided, however, notwithstanding anything to the contrary herein
contained, at any time that there is only one Trustee serving hereunder, such
Trustee shall not take any actions with respect to the corpus of this Trust,
except such actions as may be absolutely necessary to preserve the corpus of
this Trust or such actions as may be specifically required by the terms of this
Trust (as, for example, a sale pursuant to Section B of Article III of this
Trust of the Shares pursuant to the terms of the Option Agreement). The Trustees
may provide for the authentication or evidence of any action taken by them.
E. RESIGNATION. A Trustee may resign at any time by delivering written
notice thereof to the Settlor and the other Trustee.
X. XXXX OR OTHER SECURITY. No bond or other security shall be required of
the Trustees. If, notwithstanding the foregoing provision, bond or other
security is required of the Trustees for any reason whatsoever, the Trustees,
acting jointly, may provide same
and the cost thereof shall be paid by the Settlor pursuant to its obligations
under the Funding Agreement.
G. FEES AND EXPENSES. Each Trustee who is not an Affiliate of the Settlor
shall be entitled to a fee from this Trust of $50 per hour for services rendered
as a Trustee hereunder, subject to a non-cumulative maximum amount of $5,000
annually. Each Trustee who is an Affiliate of the Settlor (as such term is
defined in Section H of this Article III) shall not be entitled to receive a fee
for services rendered as a Trustee hereunder. Each Trustee, irrespective of
whether or not he is an Affiliate of the Settlor, shall be entitled to
reimbursement from this Trust for any and all reasonable expenses incurred in
connection with the performance of his duties as Trustee hereunder. The funds
necessary to make each compensation payment and each expense reimbursement to
the Trustees under this Section G of Article III of this Trust shall be obtained
from the Settlor in accordance with the terms of the Funding Agreement, and the
Trustees shall not use any of the corpus of this Trust for such purposes unless
they, in their sole discretion, conclude that the Settlor is not going to timely
fulfill its obligations under the Funding Agreement.
H. TRUSTEES' RELATIONSHIP WITH THE SETTLOR. Any Trustee and any firm,
corporation, trust or association of which he may be a trustee, stockholder,
director, officer, member, agent or employee may contract with or be or become
pecuniarily interested, directly or indirectly, in any matter or transaction to
which the Settlor or any Affiliate of the Settlor may be a party or in which it
may be concerned, as fully and freely as though the Trustee were not a Trustee
of this Trust. A Trustee shall not be disqualified from acting as such by reason
of his being a director or officer of the Settlor or an Affiliate of the
Settlor, but in no event shall there be at any time more than one Trustee of
this Trust who is an Affiliate of the Settlor or who is employed by the Settlor
or an Affilitate of the Settlor. As used in this Trust, the term "Affiliate of
the Settlor" means a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Settlor, and a person shall be deemed to control another person (including
the Settlor) 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.
I. ACCOUNTING. The Trustees shall keep adequate books of account, which
shall be available for the inspection of the Settlor and the beneficiaries upon
reasonable notice.
J. LIABILITY OF THE TRUSTEES. The Trustees will not be responsible for any
loss that may occur by reason of the depreciation or decrease in value of the
Shares or any other property held as a part of the corpus of this Trust. No
Trustee will be liable for acts or defaults of any other Trustee or for acts or
defaults of any agent of any other Trustee. The Trustees will be free from
liability in acting upon any paper, document or signature believed by them to be
genuine and to have been signed by the proper party. The Trustees will not be
liable for any error of judgment nor for any act done or omitted, nor for any
mistake of fact or law, nor for anything that they may do or refrain from doing
in good faith, nor generally will the Trustees have any accountability pursuant
to this Trust, except that each Trustee shall be liable for his own fraud, gross
negligence or similar conduct.
K. CONCLUSIVENESS OF ACTIONS. Every action taken by the Trustees, acting
jointly, pursuant to this Trust shall be conclusive and binding upon all persons
and no person will have any right or responsibility to look into the authority
of the Trustees to perform any act.
ARTICLE IV
SUCCESSOR TRUSTEES
A. APPOINTMENT OF SUCCESSOR TRUSTEES. If a Trustee dies, resigns or is
removed, the vacancy occurring as a result of such death, resignation or removal
shall be promptly filled with a qualified individual by the Settlor; provided,
however, that at no time shall there be more than one Trustee of this Trust who
is an Affiliate of the Settlor, or who is employed by the Settlor or by an
Affiliate of the Settlor.
B. RIGHTS AND POWERS OF SUCCESSOR TRUSTEE. A successor Trustee shall have
the rights and powers and shall be subject to the duties and responsibilities of
a
predecessor Trustee. A successor Trustee is authorized and directed, without
requiring an audit or other independent accounting, to accept from a predecessor
Trustee the assets delivered by the predecessor Trustee to the successor Trustee
on the basis of the accounting submitted by the predecessor Trustee. A successor
Trustee shall not have any duty or responsibility for the actions, defaults or
omissions of a predecessor Trustee.
C. TRANSFER OF SHARES TO SUCCESSOR TRUSTEES. Notwithstanding any changes in
the identity of the Trustees, the certificates for the Shares or other
securities standing in the name of the Trustees may be endorsed and transferred
by any successor Trustee or Trustees with the same effect as if endorsed and
transferred by the Trustee or Trustees who have ceased to act. The Trustees,
acting jointly, are authorized and empowered to cause any further transfer of
the Shares or other securities held a part of the corpus of this Trust that may
be necessary because of any change of persons holding the office of Trustee.
ARTICLE V
INDEMNIFICATION OF TRUSTEES
A. MANDATORY INDEMNIFICATION. (1) Subject to the conditions and limitations
of this Article V, the Trust shall indemnify and hold harmless any Trustee who
is or was a party, or is threatened to be made a party to, any threatened,
pending or completed action, claim, litigation, suit or proceeding, whether
civil, criminal, administrative or investigative, whether predicated on foreign,
federal, state or local law, and whether formal or informal (collectively,
"actions") by reason of his status as, or the fact that he is or was or has
agreed to become, a Trustee of this Trust (an "Indemnitee"), and as to acts
performed in the course of an Indemnitee's duty to this Trust and to the
beneficiaries of this Trust, against:
(i) expenses, fees, costs and charges, including, without
limitation, attorneys' fees and disbursements (collectively,
"expenses") reasonably incurred by or on behalf of an Indemnitee
in connection with any action (including, without limitation, in
connection with the investigation, defense, settlement or appeal
of such action), no matter by whom brought; provided, that it is
not determined
pursuant to Section B of Article V of this Trust, or by the
court before which such action was brought, that:
(a) the Indemnitee did not act in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of this Trust and the beneficiaries of this
Trust;
(b) the Indemnitee engaged in criminal, fraudulent or
intentional misconduct in the performance of his duty to
this Trust and to the beneficiaries of this Trust; and
(c) with respect to criminal actions, the Indemnitee had
reasonable cause to believe his conduct was unlawful;
(ii) subject to the restrictions of Section A(3) of Article V of this
Trust, amounts incurred by an Indemnitee in settlement of any
action, no matter by whom brought; provided, that it is not
determined pursuant to Section B of Article V of this Trust, or
by the court before which such action was brought, that:
(a) such settlement was not in the best interests of this Trust
and the beneficiaries of this Trust;
(b) such settlement was unreasonable (to a material extent) in
light of all of the circumstances of such action;
(c) the Indemnitee did not act in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of this Trust and the beneficiaries of this
Trust; and
(d) the Indemnitee engaged in criminal, fraudulent or
intentional misconduct in the performance of his duty to
this Trust and to the beneficiaries of this Trust; and
(iii) subject to the restrictions of Section A(3) of Article V of this
Trust, judgments, fines, penalties or other amounts incurred by
an Indemnitee pursuant to an adjudication of liability in
connection with any action; provided, that it is not determined
pursuant to
Section B of Article V of this Trust, or by the court before
which such action was brought, that:
(a) the Indemnitee did not act in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of this Trust and the beneficiaries of this Trust;
(b) the Indemnitee engaged in criminal, fraudulent or
intentional misconduct in the performance of his duty to
this Trust and to the beneficiaries of this Trust; and
(c) with respect to criminal actions, the Indemnitee had
reasonable cause to believe his conduct was unlawful and
that he otherwise did not act in good faith and in a manner
he reasonably believed to be in or not opposed to the best
interests of this Trust and to the beneficiaries of this
Trust.
(2) To the extent an Indemnitee has been successful on the merits or
otherwise in connection with any action referred to in Section A(1) of Article V
of this Trust, no matter by whom brought (including, without limitation, the
settlement, dismissal, abandonment or withdrawal of any such action where the
Indemnitee does not pay, incur or assume any material liability), or in
connection with any claim, issue or matter therein, he shall be indemnified by
this Trust against expenses reasonably incurred by or on behalf of him in
connection therewith. This Trust shall pay such amounts (net of all amounts, if
any, previously advanced to the Indemnitee pursuant to Section D of Article V of
this Trust) to the Indemnitee (or to such other person or entity as the
Indemnitee may designate in writing to this Trust) upon the executive's written
request therefor without regard to the provisions of Section B of Article V of
this Trust.
(3) Notwithstanding the provisions of Section A(1)(ii), and A(1)(iii) of
Article V of this Trust, no indemnification shall be made to an Indemnitee by
this Trust for monetary damages incurred by the Indemnitee pursuant to an action
brought by a beneficiary of this Trust if it is determined pursuant to Section B
of Article V of this Trust, or by the court before which such action was
brought:
(i) the Indemnitee breached his duty of loyalty to this Trust or to the
beneficiaries of this Trust;
(ii) the Indemnitee committed acts or omissions in bad faith or which
involve intentional misconduct or a knowing violation of the law; or
(iii) the Indemnitee derived an improper personal benefit from any
transaction, unless such improper personal benefit is determined to
be immaterial in light of all of the circumstances of such action.
B. RIGHT TO INDEMNIFICATION; HOW DETERMINED. (1) Except as otherwise
set forth in this Section B of Article V of this Trust, any indemnification to
be provided to an Indemnitee by this Trust under Section A of Article V of this
Trust upon the final disposition or conclusion of an action (or a claim, issue
or matter associated with such an action), unless otherwise ordered by the court
before which such action was brought, shall be paid by this Trust (net of all
amounts, if any, previously advanced to the Indemnitee pursuant to Section D of
Article V of this Trust) to the Indemnitee (or to such other person or entity as
the Indemnitee may designate in writing to this Trust) within sixty (60) days
after the receipt of the Indemnitee's written request therefor, which request
shall include a comprehensive accounting of amounts for which indemnification is
being sought and shall reference the provision of Article V of this Trust
pursuant to which such claim is being made.
Notwithstanding the foregoing, the payment of the requested
amounts may be denied by this Trust if (i) the disinterested Trustees of this
Trust, by a majority vote thereof, determine that such payment, in whole or in
part, would not be in the best interests of this Trust and the beneficiaries of
this Trust and would contravene the terms and conditions of Article V of this
Trust; or (ii) a majority of the Trustees of this Trust are a party in interest
to such action. In either of such events, the Trustees shall immediately
authorize and direct, by appropriate resolution, that an independent
determination be made as to whether the Indemnitee has met the applicable
standard of conduct set forth in Section A of Article V of this Trust and,
therefore, whether indemnification is proper pursuant to this Article V.
Such independent determination shall be made by a panel of
three arbitrators in the city where the principal office of this Trust is
located in accordance with the rules then prevailing of the American Arbitration
Association, or, at the option of the
Indemnitee, by an independent legal counsel mutually selected by the Trustees
and the Indemnitee (such panel of arbitrators or independent legal counsel
being hereinafter referred to as the "Authority").
In any such determination there shall exist a rebuttable
presumption that the Indemnitee has met such standard of conduct and is
therefore entitled to indemnification pursuant to Article V of this Trust. The
burden of rebutting such presumption by clear and convincing evidence shall be
on this Trust.
If a panel of arbitrators is to be employed, one of such
arbitrators shall be selected by the Trustees, by a majority vote of the
Trustees who were not parties in interest to such action (or, if such vote is
not obtainable, by an independent legal counsel chosen by the Trustees), the
second by the Indemnitee and the third by the previous two arbitrators.
The Authority shall make a determination within sixty days of
being selected and shall simultaneously submit a written opinion of its
conclusions to both the Trustees of this Trust, collectively, and to the
Indemnitee, individually, and, if the Authority determines that the Indemnitee
is entitled to be indemnified for any amounts pursuant to Article V of this
Trust, this Trust shall pay such amounts (net of all amounts, if any,
previously advanced to the Indemnitee pursuant to Section D of Article V of
this Trust), including interest thereon as provided in Section E(3) of Article
V of this Trust, to the Indemnitee (or to such other person or entity as the
Indemnitee may designate in writing to this Trust) within ten days of receipt
of such opinion.
(2) The Indemnitee may, either before or within two years after a
determination, if any, has been made by the Authority, petition any court of
competent jurisdiction to determine whether the Indemnitee is entitled to
indemnification under Article V of this Trust. Such court shall thereupon have
the exclusive power to make such determination unless and until such court
dismisses or otherwise terminates such proceeding without having made such
determination.
The court shall make an independent determination of whether the
Indemnitee is entitled to indemnification as provided under Article V of this
Trust, irrespective of any prior determination made by the Authority;
provided, however, that there shall exist a rebuttable presumption that the
Indemnitee has met the applicable
standard of conduct and is therefore entitled to indemnification pursuant to
Article V of this Trust. The burden of rebutting such presumption by clear
and convincing evidence shall be on this Trust.
If the court determines that the Indemnitee is entitled to be
indemnified for any amounts pursuant to Article V of this Trust, unless
otherwise ordered by such court, this Trust shall pay such amounts (net of all
amounts, if any previously advanced to the executive pursuant to Section D of
Article V of this Trust), including interest thereon as provided in Section
E(3) of Article V of this Trust, to the Indemnitee (or to such other person or
entity as the Indemnitee may designate in writing to this Trust) within ten
(10) days of the rendering of such determination.
The Indemnitee shall pay all expenses incurred by the Indemnitee
in connection with the judicial determination provided in Section B(2) of
Article V of this Trust, unless it shall ultimately be determined by the court
that he is entitled to be indemnified, in whole or in part, by this Trust as
authorized hereby. All expenses incurred by the Indemnitee in connection with
any subsequent appeal of the judicial determination provided for in Section
B(2) of Article V of this Trust shall be paid by the Indemnitee regardless of
the disposition of such appeal.
(3) Except as otherwise set forth in Section B of Article V of
this Trust, the expenses associated with the indemnification process set forth
in Section B of Article V of this Trust, including, without limitation, the
expenses of the Authority selected hereunder, shall be paid by this Trust.
C. TERMINATION OF AN ACTION IS NONCONCLUSIVE. The termination of any
action, no matter by whom brought, by judgment, order, settlement,
conviction, or upon a plea of no contest or its equivalent, shall not, of
itself, create a presumption that the Indemnitee has not met the applicable
standard of conduct set forth in Section A of Article V of this Trust.
D. ADVANCE PAYMENT. (1) Expenses reasonably incurred by or on
behalf of an Indemnitee in connection with any action (or claim, issue or
matter associated with such action), no matter by whom brought, shall be paid
by this Trust to the Indemnitee (or to such other person or entity as the
Indemnitee may designate in writing to this Trust) in advance of the final
disposition or conclusion of such action (or claim, issue or matter
associated with such action) upon the receipt of the Indemnitee's written
request therefor; provided, the following conditions are satisfied:
(i) the Indemnitee has first requested an advance of such
expenses in writing (and delivered a copy of such
request to this Trust) from each insurance carrier,
to whom a claim has been reported under an insurance
policy purchased by this Trust, if any, as provided
under Section G of Article V of this Trust, and each
such insurance carrier has declined to make such an
advance;
(ii) the Indemnitee furnishes to this Trust an executed
written certificate affirming his good faith belief
that he has met the applicable standard of conduct
set forth in Section A of Article V of this Trust;
and
(iii) the Indemnitee furnishes to this Trust an executed
written agreement to repay any advances made under
Section D of Article V of this Trust if it is
ultimately determined that he is not entitled to be
indemnified by this Trust for such amounts pursuant
to Article V of this Trust.
(2) If this Trust makes an advance of expenses to an Indemnitee
pursuant to this Section D of Article V of this Trust, this Trust shall be
subrogated to every right of recovery the Indemnitee may have against any
insurance carrier from whom this Trust has purchased insurance for such
purpose.
E. PARTIAL INDEMNIFICATION; INTEREST. (1) If it is determined by the
Authority pursuant to Section B of Article V of this Trust, or by the court
before which such action was brought, that an Indemnitee is entitled to
indemnification as to some claims, issues or matters, but not as to other
claims, issues or matters, involved in any action, no matter by whom brought,
the Authority (or the court) shall authorize the reasonable proration of such
expenses, judgments, penalties, fines and amounts incurred in settlement with
respect to which indemnification is sought by the Indemnitee, among such
claims, issues or matters as the Authority (or the court) shall deem
appropriate in light of all of the circumstances of such action.
(2) If it is determined by the Authority pursuant to Section B of
Article V of this Trust or by the court before which such action was brought,
that certain amounts incurred by the Indemnitee are for whatever reason
unreasonable in amount, the Authority (or the court) shall authorize
indemnification to be paid by this Trust to the Indemnitee for only such
amounts as the authority (or the court) shall deem reasonable in light of all
of the circumstances of such action.
(3) To the extent deemed appropriate by the Authority, or by the
court before which such action was brought, this Trust shall pay interest to
the Indemnitee, at a reasonable interest rate, for amounts for which this
Trust indemnifies the Indemnitee.
F. NONEXCLUSIVITY OF AGREEMENT. The right to indemnification and
advancement` expenses provided to an Indemnitee pursuant to Article V of this
Trust shall not be deemed exclusive of any other rights to which the
Indemnitee may be entitled by law, contract or otherwise, and the terms and
provisions of Article V of this Trust shall continue as to the Indemnitee if
he ceases to be a Trustee of this Trust, and such terms and provisions shall
inure to the benefit of the heirs, executors and administrators of the
Indemnitee.
G. INSURANCE. (1) This Trust may purchase and maintain insurance on
half of an Indemnitee against any liability asserted against him or incurred
by or behalf of him in such capacity as a Trustee of this Trust or of an
affiliate, or arising out of his status as such, whether or not this Trust
would have the power to indemnify him against such liability under the
provisions of Article V of this Trust.
The purchase and maintenance of such insurance shall not in any
way limit or affect the rights and obligations of this Trust or an Indemnitee
under of Article V of this Trust and the adoption of Article V of this Trust
by this Trust shall not in any way limit or affect the rights and obligations
of this Trust or of the of the other party or parties thereto under any such
policy or agreement of insurance.
(2) If the Indemnitee shall receive payment from any insurance
carrier or from the plaintiff in any action against the Indemnitee in respect
of indemnified amounts after payments on account of all or part of such
indemnified amounts have been made by this Trust pursuant to Article V of this
Trust, the Indemnitee shall promptly reimburse this Trust for the amount, if
any, by which the sum of such payment by such
insurance carrier or such plaintiff and payments by this Trust to the
Indemnitee exceeds such indemnified amounts; provided, however, at such
portions, if any, of such insurance proceeds that are required to be
reimbursed to the insurance carrier under the terms of its insurance policy,
such as deductible or coinsurance payments, shall not be deemed to be
payments to the Indemnitee hereunder.
In addition, upon payment of indemnified amounts under Article V
of this Trust, this Trust shall be subrogated to the Indemnitee's rights
against any insurance carrier in respect of such indemnified amounts and the
Indemnitee shall execute and deliver any and all instruments and documents and
perform any and all other acts and deeds which this Trust deems necessary or
advisable to secure such rights. The Indemnitee shall do nothing to prejudice
such rights of recovery or subrogation.
H. WITNESS EXPENSES. Upon an Indemnitee's written request, this
Trust shall pay (in advance or otherwise) or reimburse any and all expenses
reasonably incurred by the Indemnitee in connection with his appearance as a
witness in any action at a time when he has not been formally named a
defendant or respondent to such an action.
I. CONTRIBUTION. (1) If the indemnity provided for in Section A of
Article V of this Trust is unavailable to an Indemnitee for any reason
whatsoever, this Trust, in lieu of indemnifying the Indemnitee, shall
contribute to the amount reasonably incurred by or on behalf of the
Indemnitee, whether for judgments, fines, penalties, amounts incurred in
settlement or for expenses in connection with any action, no matter by whom
brought, in such proportion as deemed fair and reasonable by the Authority
pursuant to Section B of Article V of this Trust, or by the court before
which such action was brought, taking into account all of the circumstances
of such action, in order to reflect (i) the relative benefits received by
this Trust and the Indemnitee as a result of the event or transaction giving
cause to such action; and (ii) the relative fault of this Trust (and its
other Trustees) and the Indemnitee in connection with such event or
transaction.
(2) An Indemnitee shall not be entitled to contribution from this
Trust under Section I of Article V of this Trust if it is determined by the
Authority pursuant to Section B of Article V of this Trust, or bar the court
before which such action was brought, that the Indemnitee engaged in criminal,
fraudulent or intentional misconduct in
the performance of his duty to this Trust or otherwise violated the
provisions of Section A(3) of Article V of this Trust.
(3) This Trust's payment of, and the Indemnitee's right to,
contribution under this Section I of Article V of this Trust shall be made and
determined in accordance with Section B of Article V of this Trust relating to
this Trust's payment of, and the Indemnitee's right to, indemnification.
J. SEVERABILITY. If any provision of Article V of this Trust shall
be deemed invalid or inoperative, or if a court of competent jurisdiction
determines that any of the provisions of Article V of this Trust
contravene public policy, Article V of this Trust shall be construed so that
the remaining provisions shall not be affected, but shall remain in full
force and effect, and any such provisions which are invalid and
inoperative or which contravene public policy shall be deemed, without
further action or deed on the part of any person, to be modified,
amended or limited, but only to the extent necessary to render the same valid
and enforceable, and this Trust shall indemnify the Indemnitee as to
expenses, judgments, fines and amounts incurred in settlement with
respect to any action, no matter by whom brought, to the full extent
permitted by any applicable provision of Article V of this Trust that shall
not have been invalidated.
ARTICLE VI
MISCELLANEOUS PROVISIONS
A. TERM OF TRUST. This Trust shall continue in full force and effect
until all of the Shares and other property held as a part of the corpus of
this Trust shall have been distributed by the Trustees.
B. REVOCATION OF TRUST. This Trust is irrevocable and the Settlor
shall have no right, either alone or in combination with others in whatever
capacity, to alter, amend, revoke or terminate this Trust.
C. ANTICIPATORY ASSIGNMENTS. No beneficiary of this Trust may in any
event anticipate any benefits that he may be entitled to receive hereunder.
No assignment or order by a beneficiary by way of anticipation of any part of
the Shares or other property held as a part of the corpus of this Trust will
be valid, nor may the Trustees accept it, and the Trustees shall make all
distributions pursuant to this Trust directly to the
beneficiaries. No interest in the Shares or other property held as a part of
the corpus of this Trust will be subject to the claims of a creditor, or be
subject to attachment, garnishment, execution or other legal or equitable
process or lien brought by or in favor of a creditor of a beneficiary of this
Trust.
D. MANNER OF DISTRIBUTION. The Trustees may distribute the Shares
and other property held as a part of the corpus of this Trust to the
beneficiary directly or to the guardian, custodian, trustee, receiver,
conservator or other similar official for the beneficiary. The Trustees will
not be responsible for any distribution of the Shares or other property held
as a part of the corpus of this Trust once it has been made to the
beneficiary or for his benefit as herein provided.
E. SEVERABILITY. If any part, clause, provision or condition set
forth in this Trust shall be held to be invalid or unenforceable, the
remainder of this Trust shall be construed in all respects as if such invalid
or unenforceable part, clause, provision or condition were omitted.
F. RULES OF CONSTRUCTION. In this Trust, words in the singular
number include the plural, and in the plural include the singular. Words of
the masculine gender include the feminine and the neuter, and when the sense
so indicates, words of the neuter gender may refer to any gender, and the
word "or" is disjunctive but not exclusive. The captions and section numbers
appearing in this Trust are inserted only as a matter of convenience and do
not define, limit or describe the scope or intent of the provisions of this
Trust.
G. CHOICE OF LAW. THE SETTLOR AND THE TRUSTEES AGREE THAT CERTAIN
MATERIAL EVENTS, OCCURRENCES AND TRANSACTIONS RELATING TO THIS TRUST BEAR A
REASONABLE RELATIONSHIP TO THE STATE OF TEXAS. THE VALIDITY, TERMS,
PERFORMANCE AND ENFORCEMENT OF THIS TRUST SHALL BE GOVERNED BY THOSE LAWS OF
THE STATE OF TEXAS WHICH ARE APPLICABLE TO TRUSTS WHICH ARE EXECUTED,
DELIVERED AND PERFORMED SOLELY IN THE STATE OF TEXAS.
H. COUNTERPARTS. This Trust may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and
the Settlor and the Trustees may execute this Trust by signing and delivering
one or more counterparts.
SIGNATURES
To evidence the binding effect of the terms and conditions of this
Trust, the Settlor (through its duly authorized officer) and the Trustee have
caused this Trust to be executed and delivered as of, but not necessarily on,
the date first above written.
SETTLOR:
CAP ROCK ENERGY CORPORATION
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx, President
TRUSTEES:
/s/ Xxxxxx X. Xxxxxxxx
----------------------
Xxxxxx X. Xxxxxxxx
/s/ Xxxxxx X. Xxxxxx
--------------------
Xxxxxx X. Xxxxxx
