EXHIBIT
10.76


 


THIS AGREEMENT IS SUBJECT
TO ARBITRATION

UNDER THE TEXAS GENERAL ARBITRATION ACT


 


SHARE OPTION AGREEMENT


 


THIS SHARE OPTION AGREEMENT (this
“Agreement”) is made and entered into this 1st day of October, 2002, by and
between CAP ROCK ENERGY CORPORATION (the “Company”), a Texas corporation, and
ALFRED J. SCHWARTZ and ROBERT G. HOLMAN, Trustees (together with their
successors, the “Trustees”) of the CAP ROCK ENERGY CORPORATION SHAREHOLDERS’
TRUST (the “Trust”) dated of even date herewith.


 


BACKGROUND


 


A.    The Trust is presently the owner of record of 346,958 shares of
common stock, $.01 par value, of the Company and may, through stock splits or
other means, hereafter acquire additional shares of the common stock, $.01 par
value of the Company (collectively, the “Shares”);


 


B.    The Trust desires to grant to the Company, and the Company
desires to obtain from the Trust, the exclusive option to purchases all of the
Shares upon and subject to the terms and conditions hereinafter set forth.


 


TERMS AND CONDITIONS


 


In consideration of the sum of $10.00 in cash
paid by the Company to the Trust, the mutual benefits to be derived and the
representations and warranties, conditions and promises herein contained, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:


 


1.     OPTION GRANT.  The Trust
hereby grants to the Company the right to purchase, at the option of the
Company and on the terms and conditions hereinafter set forth (the “Option”),
all of the Shares at the Option Price during the Option Term (as such terms are
respectively defined in Sections 2 and 3 of this Agreement).


 


2.     OPTION PRICE.  The
purchase price (the “Option Price”) for the Shares shall be the average of the
Current Per Share Market Price (as such term is hereinafter defined) of the
Shares for thirty (30) consecutive Trading Days (as such term is hereinafter


 

















 


defined) ending five Trading Days preceding the delivery of the
Exercise Notice (as such term is defined in Section 4 of this Agreement) by the
Company to the Trustees, as adjusted pursuant to Section 9 of this Agreement.
The “Current Per Share Market Price” means the closing price for each day which
shall be the last sale price, regular way, or, in case no sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the American
Stock Exchange or, if the Shares are not listed or admitted to trading on the
American Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Shares are listed or admitted to trading or,
if the Shares are not listed or admitted to trading on any national securities
exchange, the last sales price, or if not so reported, then the last quoted
price or, if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by the NASDAQ or such other system
then in use of, if on any such date the Shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Shares, which professional
market maker shall be selected by the Trustees. The term “Trading Days” means a
day on which the American Stock Exchange or other principal national securities
exchange on which the Shares are listed or admitted to trading is open for the
transaction of business or, if the Shares are not listed or admitted to trading
on any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or
Friday on which banking institutions in the State of Texas are not authorized
or obligated by law or executive order to close.


 


3.     OPTION TERM.  The term of
the Option (the “Option Term”) shall commence on the date of this Agreement and
shall continue until the earlier of (i) the date on which the Trust no longer
owns any of the Shares; or (ii) the date of expiration of the Escheat Notice
(as such term is defined in Section 5 of this Agreement). If upon expiration of
the Option Term, the Company has failed to exercise the Option and properly
purchase the Shares, the Option shall terminate.


 


4.     OPTION EXERCISE.  The
Option is exercisable in whole, but not in part (except that in the event not
all of the shares escheat at one time, the option is exercisable as to those
shares as they escheat), and may be exercised at any time during the Option
Term by the Company delivering a written notice of such exercise (the “Exercise
Notice”) to the Trustees. The Trustees agree not to take, and will refrain from
taking, any action during the Option Term which would have the effect of
preventing or disabling the Trust from delivering the Shares to the Company
upon exercise of the Option and otherwise performing its obligations under this
Agreement.


 


5.     NOTIFICATION OF ESCHEAT. 
If the Trustees decide to allow any of the Shares to escheat to the
State of Texas, before implementing that decision they shall provide notice of
such decision to the Company (the “Escheat Notice”) and the Company shall have
a period of ten (10) business days from the delivery of each Escheat Notice to
exercise the Option in accordance with the terms of this Agreement.
Notwithstanding


 

















 


anything to the contrary herein contained, if the Company does not
exercise the Option within the required time period, the Trustees may proceed
to allow the Shares to escheat to the State of Texas.


 


6.     CLOSING.  The
consummation of the purchase and sale of the Shares (the “Closing”) shall take
place at the principal executive offices of the Company in Midland, Texas, at
10:00 a.m. (local time) on the tenth (10th) business day after the date of the
delivery of the Exercise Notice, or at such other place, time or date as the
parties hereto shall mutually agree.


 


7.     PAYMENT AND DELIVERY OF CERTIFICATES.  At the Closing, (i) the Company will pay to the Trust the Option
Price for the Shares by delivery of a confirmed wire transfer of funds, bank
cashier’s check or other form of immediately available funds and (ii) the Trust
will deliver or cause to be delivered to the Company a certificate or
certificates representing the Shares, duly endorsed or accompanied by stock
powers duly executed in blank.


 


8.     DISPOSITION LIMITATIONS. 
During the Option Term, the Trust agrees not to sell, transfer, pledge,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement with respect to the sale, transfer, pledge, assignment or other
disposition of, any of the Shares to any person other than to the Company, an
Affiliate of the Company (as such term is hereinafter defined) pursuant to this
Agreement, the beneficial holders as they are located, or pursuant to a tender
offer or other repurchase offer by the Company or an Affiliate of the Company.
As used in this Agreement, the term “Affiliate of the Company” means a person
that directly, or indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, the Company, and a person
shall be deemed to control another person (including the Company) if the
controlling person is the beneficial owner (as defined in Rule 13d-3 under the
Securities Act of 1934, as amended) of ten percent (10%) or more of any class
of voting securities (or other voting interests) of the controlled person or
possesses, directly or indirectly, the power to direct or cause the direction
of the management or policies of the controlled person, whether through
ownership of securities, through serving as an officer or director, by contract
or otherwise.


 


9.     ADJUSTMENTS.  If, on or
after the date of this Agreement, there shall occur any stock dividend, stock
split, recapitalization, combination or exchange of shares, merger,
consolidation, reorganization or other change or transaction of or by the
Company as a result of which shares of any class of stock or other securities
shall be issued in respect of any of the Shares, or if any of the Shares shall
be changed into the same or a different number of shares of the same or another
class of stock or other securities, or upon any other acquisition of any
securities of the Company in any other manner, and whether in compliance with
the provisions of this Agreement or otherwise, any such shares or other
securities shall, from and after their receipt or acquisition by the


 

















 


Trust, constitute additional Shares and shall be subject to the Option
as if originally included thereunder.


 


10.   NOTICE DELIVERY REQUIREMENTS. 
All notices or other communications which are required or permitted
hereunder shall be in writing and shall be delivered either personally or by
telegram, telex, telecopy or similar facsimile means, by registered or
certified mail (postage prepaid and return receipt requested), or by express
courier or delivery service, addressed as follows:


 


If to the Company:


 


Cap Rock Energy Corporation

500 W. Wall Street

Suite 400

Midland, Texas 79701

Attention:  Mr. David W. Pruitt,
President

Telecopy:  915-684-0333


 


 


If to the Trust:


 


Cap Rock Energy Corporation Shareholders’
Trust

115 S. Travis Street

Sherman, Texas 75090

Attention:  Mr. Ronald W. Lyon

Telecopy:  903-868-2492


 


or at such other address and number as either party shall have
previously designated by written notice given to the other party in the manner
hereinabove set forth. Notices shall be deemed given when received, if sent by
telegram, telex, telecopy or similar facsimile means (confirmation of such
receipt by confirmed facsimile transmission being deemed receipt of
communications sent by telex, telecopy or other facsimile means); and when
delivered and receipted for (or upon the date of attempted delivery where
delivery is refused), if hand-delivered, sent by express courier or delivery
service, or sent by certified or registered mail.


 

















 


11.   FURTHER ASSURANCES.  The
parties hereto agree (i) to furnish upon request to each other such further
information; (ii) to execute and deliver to each other such other documents;
and (iii) to do such other acts and things, all as the other party hereto may
at any time reasonably request for the purpose of carrying out the intent of
this Agreement and the documents referred to herein.


 


12.   WAIVER.  The rights and
remedies of the parties to this Agreement are cumulative and not alternative.
Neither the failure nor any delay on the part of any party in exercising any
right, power or privilege under this Agreement or the documents referred to
herein shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. To the
maximum extent permitted by applicable law, (i) no claim or right arising out
of this Agreement or the documents referred to herein can be discharged by one
party hereto, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party hereto; (ii) no waiver which
may be given by a party hereto shall be applicable except in the specific
instance for which it is given; and (iii) no notice to or demand on one party
hereto shall be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to
herein.


 


13.   ENTIRE AGREEMENT AND MODIFICATION.  This Agreement is intended by the parties to this Agreement as a
final expression of their agreement with respect to the subject matter hereof,
and is intended as a complete and exclusive statement of the terms and
conditions of that agreement. This Agreement may not be modified, rescinded, or
terminated orally, and no modification, rescission, termination or attempted
waiver of any of the provisions hereof (including this Section) shall be valid
unless in writing and signed by the party against whom the same is sought to be
enforced.


 


14.   LIMITATIONS ON ASSIGNMENTS. 
The Company shall not, during the term of this Agreement, assign,
transfer or otherwise dispose of any of its rights hereunder to a person other
than an Affiliate of the Company, without the prior written consent of the
Trust. An Affiliate of the Company to whom any rights hereunder may have been
transferred in accordance with this Agreement shall not, during the term of
this Agreement, assign, transfer or otherwise dispose of any of its rights
hereunder to a person other than the Company or another Affiliate of the
Company, without the prior written consent of the Trust.


 


15.   PERSONS BOUND.  This
Agreement shall apply to and be binding in all respects upon, and shall inure
to the benefit of the parties hereto and their permitted successors and
assigns. Nothing expressed or referred to in this Agreement is intended or
shall be construed to give any person or entity other than the parties to this
Agreement, and their permitted successors and assigns, any legal or equitable
right, remedy or claim


 

















 


under or with respect to this Agreement, or any provision hereof, it
being the intention of the parties hereto that this Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement, their successors and assigns, and for the benefit of no
other person or entity.


 


16.   SEVERANCE.  In the event
any court of competent jurisdiction shall hold any provision of this Agreement
invalid or unenforceable, such holding shall not invalidate or render
unenforceable any other provisions hereof. Any provision of this Agreement held
invalid or unenforceable only in part or degree shall remain in full force and
effect to the extent not held invalid or unenforceable.


 


17.   SECTION HEADINGS, CONSTRUCTION. 
The headings of articles and sections contained in this Agreement are
provided for convenience only. They form no part of this Agreement and shall
not affect its construction or interpretation. All references to articles and
sections in this Agreement refer to the corresponding articles and sections of
this Agreement. All words used herein shall be construed to be of such gender
or number as the circumstances require. Unless otherwise specifically noted, the
words “herein,” “hereof,” “hereby,” “hereinabove,” “hereinbelow,” “hereunder,”
and words of similar import, refer to this Agreement as a whole and not to any
particular section, subsection, paragraph, clause or other subdivision hereof.


 


18.   CONSENT OR PERMISSION NOT TO BE UNREASONABLY WITHHELD.  Except as otherwise expressly stated herein,
whenever the consent or permission of a party hereto is required hereunder,
such consent or permission shall not be unreasonably withheld or delayed.


 


19.   TIME OF ESSENCE.  With
regard to all time periods set forth or referred to in this Agreement, time is
of the essence.


 


20.   GOVERNING LAW.  THIS
AGREEMENT AND ALL RIGHTS ARISING HEREUNDER SHALL BE CONSTRUED AND DETERMINED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND THE PERFORMANCE THEREOF
SHALL BE GOVERNED AND ENFORCED IN ACCORDANCE WITH SUCH LAWS. IN THE EVENT ANY
CONTROVERSY ARISES OUT OF OR RELATES TO THIS AGREEMENT, THE TRUSTEES AND
REPRESENTATIVES OF THE COMPANY SHALL FIRST MEET IN MIDLAND, TEXAS, AND ATTEMPT
TO NEGOTIATE A RESOLUTION OF THEIR DISPUTE. IN THE EVENT SUCH NEGOTIATION SHALL
FAIL TO RESOLVE ANY SUCH CONFLICT, THE PARTIES HEREBY AGREE TO SUBMIT TO
ARBITRATION ADMINISTERED BY THE AMERICAN ARBITRATION ASSOCIATION UNDER ITS THEN
CURRENT COMMERCIAL ARBITRATION RULES. ANY SUCH CONTROVERSY SHALL BE SUBMITTED
IN DALLAS, TEXAS, TO A PANEL OF THREE (3) ARBITRATORS, ONE CHOSEN BY EACH PARTY
AND THE THIRD UNDER THE AMERICAN ARBITRATION RULES. AT LEAST TWO (2) OF THE
ARBITRATORS SHALL HAVE EXPERIENCE WITH SECURITIES. THE ARBITRATORS WILL HAVE NO
AUTHORITY TO AWARD PUNITIVE OR OTHER DAMAGES NOT MEASURED BY THE PREVAILING
PARTY’S ACTUAL DAMAGES AND MAY NOT, IN ANY EVENT, MAKE ANY RULING, FINDING, OR
AWARD THAT DOES NOT CONFORM TO THE TERMS AND CONDITIONS OF THIS AGREEMENT. THE
PARTIES SHALL FAITHFULLY


 

















 


OBSERVE THIS AGREEMENT AND SUCH RULES, AND WILL ABIDE BY AND PERFORM
ANY AWARD RENDERED BY THE ARBITRATORS, AND A JUDGMENT OF ANY COURT HAVING
JURISDICTION MAY BE ENTERED ON THE AWARD. THE PROVISIONS OF THIS SECTION 20 ARE
A MATERIAL INDUCEMENT FOR BOTH THE COMPANY AND THE TRUST ENTERING INTO THE
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN. THE COMPANY AND THE TRUST
EACH HEREBY ACKNOWLEDGE THAT IT HAS REVIEWED THE PROVISIONS OF THIS SECTION 20
WITH ITS INDEPENDENT LEGAL COUNSEL.


 


21.   COUNTERPARTS.  This
Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original copy of this Agreement, and all of which, when taken
together, shall be deemed to constitute but one and the same agreement.


 

















 


SIGNATURES


 


To evidence the binding effect of the
covenants and agreements described above, the Company (by its duly authorized
officer) and the Trust (by the Trustees) have caused this Agreement to be
executed and delivered as of, but not necessarily on, the date first written
above.


 


 


	
   

  	
  CAP ROCK ENERGY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DAVID W. PRUITT

  
	
   

  	
   

  	
  David W. Pruitt, President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CAP ROCK ENERGY CORPORATION

  SHAREHOLDERS’ TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ ALFRED J. SCHWARTZ

  
	
   

  	
  Alfred J. Schwartz, Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ ROBERT G. HOLMAN

  
	
   

  	
  Robert G. Holman, Trustee