EXHIBIT 10.70.A

 

EMPLOYMENT CONTRACT

 

THE STATE OF TEXAS

§

 

 

§

KNOW ALL MEN BY THESE PRESENTS:    

COUNTY OF MIDLAND

§

 

 

This Employment Contract (“Agreement”) is made and entered into on or as of the
24th day of October, 2001.

 

By this Agreement, Cap Rock Energy Corporation, referred to in this Agreement as
“Company,” acting by and through its President and Chief Executive Officer,
David W. Pruitt, or his successor, hereinafter referred to as “Pruitt” employs
Ronald Lyon, referred to in this Agreement as “Lyon,” and who accepts employment
on the following terms and conditions:

 

ARTICLE 1

TERMS OF EMPLOYMENT

 

By this Agreement, the Company, acting by and through and under the direction of
Pruitt, employees Lyon and Lyon accepts employment with the Company as
Vice-President/General Counsel for an initial term of one (1) year.  Unless a
written notice to terminate this Agreement is executed and properly delivered by
either party at least ninety days prior to an anniversary date of the execution
of this Agreement, this Agreement shall annually and automatically be renewed
for an additional term of one (1) year.  This Agreement may, however, be
terminated earlier, as provided in Article 4, below.

 

ARTICLE 2

EMPLOYMENT COMPENSATION & BENEFITS

 

2.01        As compensation for all services rendered under this Agreement by
Lyon, Company shall pay to Law Offices of Ronald W. Lyon, P.C. (“Lyon PC”), of
which Lyon is the President,  $13,500.00 per month, or any greater amount of
compensation authorized by the Company, together with any annual salary
adjustment in an amount as determined by Pruitt, for Lyon’s salary and for
non-reimbursed office expenses and overhead and for secretarial and staff
support as Lyon deems necessary to perform his duties as General Counsel
including Lyon’s secretary/legal assistant.  Lyon shall be paid by Lyon P.C . 
Additionally, Company shall pay $1,000.00 per month into the executive
supplemental deferred compensation plan or a similar plan on behalf of Lyon, or
any greater amount as determined by Pruitt.

 

2.02        Lyon shall work full time for the Company and shall be allowed time
off similar to regular full-time employees of the Company as approved by Pruitt.

 

2.03        Company will reimburse Lyon for professional dues and continuing
legal education requirements.

 

2.04        Company will provide Lyon with an office at the Hunt-Collin Division
Office or Lyon may office elsewhere in the North Texas area at his expense, at
Lyon’s option.  Should Lyon

 

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choose to office at the Hunt-Collin office, then amount of payment set forth in
paragraph 2.01 above, shall be reduced by the amount of rent Lyon currently pays
and the monthly telephone service (not including long distance charges).

 

2.05        Company will reimburse Lyon for traditional out of pocket expenses
as it has prior to this Agreement including mileage, long distance telephone,
copies etc.

 

ARTICLE 3

COVENANT TO PERFORM

 

3.01        Lyon agrees and covenants to perform his work and services
diligently and use his best efforts to faithfully comply with all of the
assignments duly made to him on behalf of the Company by Pruitt.

 

3.02        Lyon agrees to execute and honor and abide by the Company’s
“Employee Pledge and Proprietary Rights and Information Agreement” which all
other employees of the Company have executed and agreed to, a copy of which is
attached hereto as Exhibit “A”.

 

3.03        Lyon shall devote full time to his duties as General Counsel of
Company.  However, nothing in this Agreement shall prevent Lyon from performing
nonconflicting legal work that does not interfere with his duties as General
Counsel as approved by Pruitt.

 

ARTICLE 4

TERM AND TERMINATION

 

4.01        The Company shall employ Lyon pursuant to this Agreement for the one
(1) year term beginning on the effective date of his employment hereunder,
yearly renewable subject to and following a satisfactory evaluation employee
appraisal report on Lyon by, for successive one year terms.  However, if during
such employment, Lyon fails or refuses to perform the work and services assigned
to him on behalf of the Company by Pruitt, or should he become derelict in so
performing, or become unable to perform, or otherwise become in substantial
breach of this Agreement all as may be determined by Pruitt in his sole
discretion or otherwise so act as to give the Company cause, this Agreement
shall, at Pruitt’s sole option, cease and terminate and any of Lyon’s rights
hereunder not already finally vested shall cease on or at such time as Pruitt
shall notify Lyon in writing.  The term “cause” shall mean the following:

 

(1)           Knowingly, willfully and substantially, during the term of this
Agreement, neglects the duties that Lyon is required to perform under the terms
of this Agreement.

 

(2)           Knowingly, willfully and substantially, during the term of this
Agreement, commits clearly dishonest acts toward the Company with the intent to
injure or damage the Company.

 

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(3)           Insubordination or failing to follow the directives of the
President/CEO in connection with normal assigned job related duties.

 

4.02        If Lyon’s employment terminates for any reason other than as
provided for in paragraphs 4.01, 4.03, 4.04 or 4.05, the Company shall pay Lyon
a lump sum cash settlement equal to the total salary then in effect for one (1)
year, plus such amounts, if any, are at the time of his termination of
employment, payable for bonuses and other compensation authorized by the Board
of Directors or Pruitt.

 

4.03        Notwithstanding paragraphs 4.01 and 4.02, this Agreement and Lyon’s
employment hereunder may be terminated at such time and upon such terms and
conditions as the parties may mutually agree.

 

4.04        Notwithstanding the provisions of paragraphs 4.01, 4.02, 4.03 and
4.05 herein, Lyon’s employment hereunder shall terminate under any of the
following conditions:

 

(1)           Death.  Lyon’s employment under this Agreement shall terminate
automatically upon his death.  In such event, Lyon’s Compensation shall continue
to be paid to his designated beneficiary for the remaining term of this
Agreement.

 

(2)           Total Disability.  The Company shall have the right to terminate
this Agreement if Lyon becomes Totally Disabled.  For purposes of this
Agreement, “Totally Disabled” means that Lyon is not working and is currently
unable to perform the substantial and material duties of his position hereunder
as a result of sickness, accident or bodily injury for a period of three
months.  Prior to a determination that Lyon is Totally Disabled, Lyon shall
continue to receive his Compensation, offset by any disability benefits he may
be eligible to receive, for the remaining term of this Agreement.

 

4.05        If (i) Lyon remains employed until the date that is three (3) months
after the date of a Change in Control (the “Retention Date”), or (ii) Lyon’s
employment is terminated after or in anticipation of a Change in Control (or the
execution of a definitive agreement providing for actions which, if completed,
would constitute a Change in Control) and before the Retention Date (A) by the
Company without Good Cause or (B) by Lyon for Good Reason, then, in addition to
any other amounts payable pursuant to this Agreement, the Company shall pay Lyon
a lump sum cash payment within thirty (30) days of termination equal to six (6)
times the sum of Lyon’s annual Base Salary and the greater of (x) the highest
bonus awarded to Lyon in a prior year or (y) 50% of Lyon’s annual Compensation.

 

For purposes of this Agreement “Change in Control” means (i) a reorganization or
merger of the Company with or into any other company which will result in the
Company’s stockholders immediately prior to such transaction not holding, as a
result of such transaction, at least 50% of the voting power of the surviving or
continuing entity or the entity controlling the surviving or continuing entity;
(ii) a sale of all or substantially all of the assets of the Company to an
entity in which the Company’s stockholders immediately prior to such sale will
not hold following such sale at least 50% of the voting power of such purchasing
entity, (iii) a transaction

 

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or series of related transactions which result in more than 50% of the voting
power of the Company being “beneficially owned” by a single “person” (quoted
terms having their respective meanings under Section 13(d) and 14(d) under the
Securities Exchange Act of 1934, as amended); (iv) a change in the majority of
the Board not approved by at least two-thirds of the Company’s directors in
office prior to such change or (v) the adoption of any plan of liquidation
providing for the distribution of all or substantially all of the Company’s
assets.

 

For purposes of this Agreement, after a Change in Control, “Good Reason” shall
mean the occurrence of any one of the following circumstances without Lyon’s
consent:

 

(1)           a material reduction in Lyon’s compensation or benefits excluding
the substitution of substantially equivalent compensation and benefits;

 

(2)           a material diminution of Lyon’s duties, authority or
responsibilities as in effect immediately prior to such diminution;

 

(3)           the relocation of Lyon’s primary work location to a location more
than 50 miles from Lyon’s primary work location as of the date of this
Agreement; or

 

(4)           the failure of a successor to assume and perform under this
Agreement

 

ARTICLE 5

TRADE SECRETS AND CONFIDENTIAL INFORMATION

 

5.01        During the term of Lyon’s employment, the Company will provide Lyon
access to, so he may become familiar with, various trade secrets and other
confidential or proprietary information of the Company, train him in the use of
same, and provide associates a working environment in which he can contribute
toward enhancing same and upgrading his general knowledge.  Trade secrets,
proprietary information and confidential information encompass, without
limitation, anything which is owned by the Company and is regularly used in the
operation of the business of the Company to obtain a competitive advantage over
the Company’s competitors who do not know, have access to, or utilize such
information or trade secrets.  Proprietary information further includes, but is
not limited to, records, files, documents, bulletins, publications, manuals,
financial data and information concerning and the identity of customers,
prospects and suppliers.  Trade secrets further include, but are not limited to,
specifications, software programs, both the source code and the object code,
documentation, flow charts, diagrams, schematics, data, data bases, and business
and production methods and techniques.

 

5.02        Lyon acknowledges that such training and the use of the trade
secrets and confidential or proprietary information will enable him to perform
his job and enhance his compensation.  Lyon recognizes and acknowledges that the
trade secrets and other confidential or proprietary information of the Company
are valuable, special and unique and that the protection thereof is of critical
importance to the Company in maintaining its competitive position.  Lyon,
therefore, covenants and agrees that, except as required by his employment
hereunder or with the express prior written consent of the Company, he shall
not, during the term of his employment by the Company or at anytime thereafter,
either directly or indirectly, make independent use of, publish

 

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or otherwise disclose any of the aforesaid trade secrets or other confidential
or proprietary information of the Company (whether acquired, learned obtained or
developed by him alone or in conjunction with others) to any person, firm,
corporation, association, or other entity for any reason or purpose whatsoever
or allow any other person, firm, corporation, association or other entity to
make use of, publish or disclose any of the aforesaid trade secrets or other
confidential or proprietary information.  Lyon agrees not to use, steal, or
appropriate such items or versions thereof, whether copies or reconstructed from
memory or otherwise, in any manner.  Lyon further recognizes and acknowledges
that in order to enable Company to perform services for its customers and engage
in Company’s business, information may be furnished to the Company confidential
information and that the goodwill afforded to Company depends upon, among other
things, Company and its employees keeping all such information of the Company
confidential.  Lyon therefore agrees that he shall keep all such information of
the Company and any of its affiliates and subsidiaries completely and absolutely
confidential.  This agreement not to disclose confidential information shall
survive after the term of Lyon’s employment pursuant to this Agreement. 
Therefore, Lyon shall be bound by his agreement herein not to disclose
confidential information of the Company and its affiliates or subsidiaries both
during his employment with the Company and after his employment with the Company
is terminated.  A violation by Lyon of this Article shall be a material
violation of this Agreement and will justify legal and/or equitable relief. 
Lyon recognizes that if he breaches this agreement and discloses confidential
information or trade secrets of the Company or any of its affiliates or
subsidiaries, the Company will suffer substantial, irreparable and continuing
injuries, damages and costs attendant thereto.  Further, recognizing that money
damages may not provide adequate relief, Lyon agrees that, in the event that he
breaches or threatens to breach this Agreement, the Company shall be entitled to
a preliminary or permanent injunction in order to prevent the continuation of
such harm and, as liquidated damages, Lyon shall forfeit all payments made
pursuant to this Agreement from the date the Agreement was breached and any
payments that are or may be due pursuant to this Agreement, as well as any
rights or benefits, including health insurance benefits.

 

5.03        Lyon and the Company acknowledge and agree that the fact that the
Parties have entered into this Agreement and the terms of this Agreement are
confidential.  Neither of the Parties may therefore disclose the terms of this
Agreement to others, except as necessary with regard to the filing of income
taxes and other necessary documents or as required by law, or pursuant to a
subpoena or court order, unless such disclosure has been approved by the other
Party’s written permission.

 

ARTICLE 6

NON-COMPETITION AGREEMENT

 

Lyon agrees that upon his termination of employment from the Company, for a
period of two (2) years, he will not engage or participate, directly or
indirectly, in competition with the Company or any of its affiliates or
subsidiaries without prior written consent of the Company which consent shall
not be unreasonably withheld.  This Agreement shall prohibit Lyon from, among
other things, attempts to serve or assist others in serving the Company’s
present or potential customers.  Lyon further agrees that he will never at any
time after executing this Agreement, assist any person or entity in buying,
merging with or acquiring the Company unless the Company consents in writing. 
Notwithstanding the foregoing, nothing in this Agreement

 

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does not apply to legal services whether rendered to Company or to a subsequent
employer of Lyon and nothing in this Agreement shall be construed to relieve
Lyon of his ethical duties regarding conflicts of interest.

 

ARTICLE 7

PROHIBITIONS

 

7.01        Lyon shall not, at any time during or after the term of this
Agreement, make derogatory, false, or misleading oral or written comments to any
person or entity regarding the Company, its management, officers, directors,
employees or agents.  Lyon agrees generally to speak favorably of the Company
and his employment with the Company.

 

7.02        Lyon agrees that neither he nor any member of his immediate family,
shall run for or serve as a Director of the Company for a period of five (5)
years after Lyon’s employment with the Company is terminated.

 

7.03        The Company and Lyon recognize and agree that the damages to the
Company for violation of Articles 5, 6, and 7 may be difficult, if not
impossible to ascertain, and therefore the Parties hereby agree that in the
event Lyon breaches these Articles 5, 6, and 7, the Company shall be entitled to
liquidated damages for such breach which shall be forfeiture and reimbursement
by Lyon of all amounts paid to Lyon from the time of the breach, received by
Lyon from Company pursuant to this Agreement from the time of the breach, or any
amounts which Lyon is entitled to receive pursuant to this Agreement, and all
rights and benefits, including health insurance benefits and stock which Lyon
may be entitled to receive pursuant to this Agreement.

 

ARTICLE 8

SUPERSESSION AND EFFECTIVENESS

 

8.01        This Agreement supersedes any other agreement or understanding,
written or oral, between the parties with respect to the matters covered
hereunder, and it contains the entire understanding of the parties and all of
the covenants and agreements between them with respect to Lyon’s employment.

 

8.02        This Agreement shall bind and be for the benefit of the parties to
the agreement, as well as their respective successor, heirs and assigns, it
being understood, however that this Agreement may be assigned only with the
written consent of both parties.

 

 

8.03        The existence and effectiveness of this Agreement between the
parties hereto does not preclude or otherwise interfere with employment of Lyon
by subsidiary corporations of Cap Rock Energy Corporation, or by any corporation
organized by the Company’s Board of Directors for the benefit of the Company, or
the receipt of compensation by Lyon from any such corporations.

 

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8.04        This Agreement shall become binding upon the parties from and as of
the date of the execution.

 

ARTICLE 9

GOVERNING LAW

 

This Agreement has been executed in the State of Texas and shall be governed by
and construed in all respects in accordance with the laws of the State of
Texas.  Nothing in this Agreement, including but not limited to Section 5, 6,
and 7, shall conflict with all ethical rules applicable to attorneys, and to the
extent the contractual requirements conflict with such ethical rules, the
ethical rules shall control.

 

ARTICLE 10

ARBITRATION

 

All disputes, claims and matters in question arising under, with respect to or
out of this Agreement or the relationship between the parties created by this
agreement, whether sounding in contract, tort or otherwise, which cannot be
resolved between the Parties, shall be resolved by binding arbitration pursuant
to the Federal Arbitration Act.  The arbitration shall be administered by the
American Arbitration Association (“AAA”) in Dallas, Texas in accordance with the
Commercial Arbitration Rules of the AAA.  There shall be three arbitrators. 
Each party shall designate an arbitrator, who need not be neutral, within 30
days of receiving notification of the filing with the AAA of a demand for
arbitration.  The two arbitrators so designated shall elect a third arbitrator. 
If either party fails to designate an arbitrator within the time specified or
the two parties’ arbitrators fail to designate a third arbitrator within 30 days
of their appointments, the third arbitrator shall be appointed by AAA.  The
decision or award of a majority of the judgment or order in any court of
competent jurisdiction.  It is expressly agreed that the arbitrators shall have
no authority to award punitive or exemplary damages, the parties hereby waiving
their right, if any to recover punitive or exemplary damages, either in
arbitration or in litigation.

 

IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate
originals, one being retained by each, on or as of the 24th day of October,
2001.

 

 

 

CAP ROCK ENERGY CORPORATION

 

 

By:

/s/ Ronald Lyon

 

By:

/s/

David W. Pruitt

 

Ronald Lyon

 

David W. Pruitt/CEO

 

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STATE OF TEXAS

)(

 

)(

COUNTY OF MIDLAND

)(

 

This instrument was acknowledged before me on this 24th day of October, 2001, by
DAVID W. PRUITT, President/Chief Executive Officer of Cap Rock Energy
Corporation, a Texas corporation, on behalf of said corporation.

 

 

By:

/s/ Sharon A. Hoelscher

 

 

 

Sharon A. Hoelscher

 

(SEAL)

 

STATE OF TEXAS

)(

 

)(

COUNTY OF GRAYSON

)(

 

This instrument was acknowledged before me on this 24th day of October, 2001, by
Ronald Lyon.

 

 

By:

/s/ Leslie A. Melson

 

 

Leslie A. Melson

 

(SEAL)

 

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Exhibit "A"

 

CAP ROCK ENERGY CORPORATION

 

EMPLOYEE PLEDGE AND

PROPRIETARY RIGHTS AND INFORMATION AGREEMENT

 

This Agreement sets forth the understanding between you and Cap Rock Energy
Corporation (“Cap Rock Energy”) concerning your relationship as an employee of
Cap Rock Energy and your treatment of Cap Rock Energy’s confidential and
proprietary information.  Cap Rock has agreed to employ you with the
understanding and expectation that you agree to and will abide by the following
terms and conditions:

 

I.              Employee Pledge

 

a.             Conduct as an Employee.  I will conduct myself at all times while
I am on duty in a manner that will reflect well on Cap Rock Energy Corporation
since I am aware that my conduct as an employee of Cap Rock Energy reflects on
the Cooperative.  I understand that when people observe me and my actions, they
are looking at me as a representative of Cap Rock Energy and will judge Cap Rock
Energy through my actions.  Therefore, I will conduct myself in a professional
and dignified manner at all times.

 

b.             Giving the best.  I will strive to give the best of my ability in
my duties as an employee of Cap Rock Energy, and

 

c.             Defending and Promoting.  I will defend and promote the mission
statement, goals, and decisions of Cap Rock Energy whenever appropriate.

 

II.            PROPRIETARY INFORMATION

 

You understand that your employment with Cap Rock Energy creates a relationship
of a confidential or proprietary nature that may be disclosed to you by Cap Rock
Energy or learned by you in the course of your duties at Cap Rock Energy, and
that relates to:  (i) the business of Cap Rock Energy or that of any of its
subsidiaries, affiliates, customers, suppliers, or (ii) any confidential
information of third parties disclosed to Cap Rock Energy.  Such confidential
and proprietary information includes information concerning business strategies,
financial information and forecasts, personnel information and member-consumer
lists and is referred to collectively in this Agreement as “Proprietary
Information.”

 

a.             Confidentiality of Proprietary Information.  At all times, both
during your employment by Cap Rock Energy and after its termination, you agree
to keep all Proprietary Information in confidence and trust, and you will not
use or disclose Proprietary Information without the written consent of Cap Rock
Energy, except as may be necessary to perform your duties as an employee of Cap
Rock Energy.  Upon termination of your employment with Cap Rock Energy, you will
promptly deliver to Cap Rock Energy all documents and materials of any kind
pertaining to your work with Cap Rock Energy, and you will not take with you any
documents, materials or copies thereof, whether on paper, magnetic or optical
media, or any other medium containing Proprietary Information.

 

b.             Information of Former Employer.  You agree that during your
employment at Cap Rock Energy you will not improperly use or disclose any
confidential or proprietary information of your former employers.

 

III.           NO CONFLICTING OBLIGATIONS

 

a.             No Conflicting Employment.  You agree that during the term of
your employment at Cap Rock Energy you will not plan or engage in any other
employment, occupation, consulting or other business activity directly related
to the business in which Cap Rock Energy is now involved or becomes involved
during the term of your employment, nor will you engage in any other activities
that conflict with your employment obligations to Cap Rock Energy.

 

b.             No Conflicting Agreements.  You represent to Cap Rock Energy that
you have no other agreements or commitments that would hinder or prevent the
full performance of your duties as a Cap Rock Energy employee or your
obligations under this Agreement, and you agree not to enter into such
conflicting agreement during the term of your employment at Cap Rock Energy.

 

c.             Disclosure of Agreement.  You hereby authorize Cap Rock Energy to
notify others, including customers of Cap Rock Energy, and any future employers
you may have, of the terms of this Agreement and your responsibilities under
this Agreement.

 

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IV.           NO IMPLIED EMPLOYMENT RIGHTS

 

You understand and agree that this Agreement does not confer upon you any right
to continued employment by Cap Rock Energy that you would not otherwise have,
nor does this Agreement obligate Cap Rock Energy to employ you for any specific
period of time.

 

V.            GENERAL PROVISIONS

 

a.             Severability.  If one or more of the provisions of this Agreement
are deemed void by law, then the remaining provisions will continue in full
force and effect.

 

b.             Governing Law.  This Agreement will be governed by the laws of
the State of Texas.

 

c.             Entire Agreement.  This Agreement sets forth the entire Agreement
and understanding between you and Cap Rock Energy relating to the subject matter
of this Agreement.  No modification or amendment of this Agreement, nor any
waiver of any rights under this Agreement will be effective unless in writing
signed by both you and an authorized representative of Cap Rock Energy.  Any
subsequent changes in your duties, salary or compensation will not affect the
validity or scope of this Agreement.

 

d.             Successors and Assigns.  This Agreement will be binding upon your
heirs, executors, administrators and other legal representatives and will be for
the benefit of Cap Rock Energy, its successors and assigns.

 

 

By:

/s/ Ronnie Lyon

 

10/24/01

 

Employee Signature

Date Signed

 

 

 

 

 

 

 

Print Name

/s/ Ronnie Lyon

 

 

 

 

 

 

 

 

 

By:

David W. Pruitt

 

10/24/01

 

CRE Representative

Date Signed

 

 

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