EXHIBIT 10.74


 


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 this 20th day of
September, 2001, and the initial term of this Agreement and all other terms and
provisions herein, except for the amount of salary, are effective beginning as
of June 11, 2001 when CAP ROCK ENERGY CORPORATION and CELIA ZINN entered into
an Employment Contract. This Agreement modifies, amends and supercedes the
Agreement previously executed as of June 11, 2001 by and between the Parties to
this Agreement.


 


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 Celia Zinn, referred
to in this Agreement as “Zinn”, and whose principal place of employment is
Midland, Midland County, Texas, 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 or her
immediate supervisor (normally the Company’s Chief Financial Officer “CFO”),
employee Zinn accepts employment with the Company 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, Zinn shall be paid
by Company a salary of $100,000.00 per year, or any greater amount of
compensation including bonuses and deferred compensation authorized by the wage
and salary plan or board policies authorized by the Company, together with an
annual salary adjustment in an amount at least equal to any approved across the
board salary adjustments for all employees.


 


2.02        Zinn
shall receive fifteen (15) days of vacation (annual leave), available
immediately upon her employment pursuant to this Agreement, and the same sick
leave and all other benefits as are accorded regular full-time employees of the
Company including provisions governing accrual and 


 


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payment thereof on early
retirement or other methods of employment as set forth in the Company’s
employee policies.


 


2.03        Subject
to the above paragraph 2.02, all provisions of the Company’s rules and
regulations relating to annual leave (vacation), sick leave, early retirement,
insurance, savings, deferred compensation, bonuses, pension program
contributions, holiday, stock options as available and appropriate for her
responsibility and experience and other fringe benefits and working conditions
as they now exist or hereafter may be amended, shall apply to Zinn as they
would to other employees of the Company.


 


2.04        Because
Zinn’s duties will from time to time require her to work outside of, and in
addition to, the Company’s established normal workweek, work days and work
hours, Zinn shall be allowed to take compensatory time off.


 


2.05                        Company
will reimburse Zinn for professional dues and continuing education
requirements.


 


ARTICLE 3


 


COVENANT TO PERFORM


 


3.01        Zinn agrees and covenants to perform her
work and services diligently and use her best efforts to faithfully comply with
all of the assignments duly made to her on behalf of the Company by Pruitt or
her immediate supervisor, normally the Company’s CFO.


 


3.02        Zinn 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”.


 


ARTICLE 4


 


TERM AND TERMINATION


 


4.01        The Company shall employ Zinn pursuant
to this Agreement for the one (1) year term beginning with the effective date
of her employment hereunder, yearly renewable subject to and following a
satisfactory evaluation employee appraisal report on Zinn by Pruitt or her
immediate supervisor, normally the Company’s CFO, for successive one year
terms.  However, if during such
employment, Zinn fails or refuses to perform the work and services assigned to
her on behalf of the Company by Pruitt or her immediate supervisor, normally
the Company’s CFO, or should she 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


 


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Zinn’s rights
hereunder not already finally vested shall cease on or at such time as Pruitt
shall notify Zinn in writing.  The term
“cause” shall include the following:


 


1.                                       Knowingly,
willfully and substantially, during the term of this Agreement, neglects the
duties that Zinn 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.


 


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


 


4.                                       An
unsatisfactory evaluation by Pruitt (or Zinn’s immediate supervisor) of Zinn on
the annual employee appraisal,


 


4.02        If Zinn’s employment terminates for any
reason other than as provided for in paragraph 4.01, 4.03, 4.04, 4.05 or 4.06,
the Company shall pay Zinn 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
her termination of employment, payable for accrued but untaken vacation and
sick leave, compensatory time, bonuses and other compensation authorized by the
Board of Directors or Pruitt.


 


4.03        Notwithstanding paragraphs 4.01 and
4.02, this Agreement and Zinn’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, and 4.03 above, Zinn’s employment hereunder shall
terminate under any of the following conditions:


 


a.                                       Death.    Zinn’s employment under this Agreement shall
terminate automatically upon her death. 
In such event, Zinn’s Base Salary shall continue to be paid to her
designated beneficiary for the remaining term of this Agreement.


 


b.                                      Total
Disability.    The Company shall have
the right to terminate this Agreement if Zinn becomes Totally Disabled.  For purposes of this Agreement, “Totally
Disabled” means that Zinn is not working and is currently unable to perform the
substantial and material duties of her position hereunder as a result of
sickness, accident or bodily injury for a period of three months.  Prior to a determination that Zinn is
Totally Disabled, but after Zinn has exhausted all sick leave and vacation
benefits provided by the Company, Zinn shall continue to receive her Base
Salary, offset by any disability benefits she may be eligible to receive, for
the remaining term of this Agreement.


 


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4.05        Notwithstanding any other provisions in
this Agreement, if (i) Zinn remains employed until the date that is three (3)
months after the date of a Change in Control (the “Retention Date”), or (ii)
Zinn’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 Zinn for Good Reason, then, in
addition to any other amounts payable pursuant to this Agreement, the Company
shall pay Zinn a lump sum cash payment within thirty (30) days of termination
equal to six (6) times the sum of Zinn’s annual Base Salary and the greater of
(x) the highest bonus awarded to Zinn in a prior year or (y) 50% of Zinn’s
annual Base Salary.


 


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 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 Sections 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 Zinn’s consent:


 


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


 


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


 


(3)                                  the
relocation of Zinn’s primary work location to a location more than 50 miles
from Zinn’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


 


4.06        Zinn’s place of employment pursuant to
this Agreement shall be at the corporate offices in Midland, Texas, unless
Pruitt shall direct otherwise.  In that
event, at Zinn’s option, she may refuse to move, terminate this Agreement and
receive payment for the remainder of her contract term as set forth in
paragraph 4.02 above.


 


4.07        In the event Zinn is
eligible to receive a lump sum payment pursuant to this Agreement and such lump
sum payment would cause Zinn to be subject to an excise tax in excess of normal
income taxes on such lump sum, then and in that event, the lump sum payment
shall be increased (grossed up) 


 


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in an amount sufficient to pay such excise tax.


 


ARTICLE 5


 


TRADE SECRETS AND CONFIDENTIAL
INFORMATION


 


5.01        During the term of Zinn’s employment,
the Company will provide Zinn access to, so she may become familiar with,
various trade secrets and other confidential or proprietary information of the
Company, train her in the use of same, and provide associates a working
environment in which she can contribute toward enhancing same and upgrading her
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        Zinn acknowledges that such training and
the use of the trade secrets and confidential or proprietary information will
enable her to perform her job and enhance her compensation.  Zinn 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.  Zinn, therefore, covenants and agrees that,
except as required by her employment hereunder or with the express prior
written consent of the Company, she shall not, during the term of her
employment by the Company or at anytime thereafter, either directly or
indirectly, make independent use of, publish 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 her 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.  Zinn agrees not to use, steal,
or appropriate such items or versions thereof, whether copies or reconstructed
from memory or otherwise, in any manner. 
Zinn 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 such services and information confidential.  Zinn therefore agrees that she 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 Zinn’s employment pursuant to this Agreement.  Therefore, Zinn shall be bound by her
agreement herein not to disclose confidential information of the Company and
its affiliates or subsidiaries both during her employment with the Company and
after her employment with the Company is terminated.  A violation by Zinn of this Article shall be a material violation
of this Agreement and will justify legal and/or equitable relief.  


 


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Zinn recognizes
that if she 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, Zinn agrees
that, in the event that she 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, Zinn 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        Zinn 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


 


Zinn agrees that
upon her termination of employment from the Company, for a period of two (2)
years, she will not engage or participate, directly or indirectly, in
competition with the Company or any of its affiliates or subsidiaries without
the prior written consent of the Company which consent shall not be
unreasonably withheld.  This Agreement
shall prohibit Zinn from, among other things, attempts to serve or assist
others in serving the Company’s present or potential customers.  Zinn further agrees that she 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.


 


ARTICLE 7


 


PROHIBITIONS


 


7.01        Zinn 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. 
Zinn agrees generally to speak favorably of the Company and her
employment with the Company.


 


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


 


7.03        The
Company and Zinn 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 Zinn
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 Zinn of all amounts paid to Zinn from the time of the breach, received by
Zinn from Company pursuant to this 


 


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Agreement from the
time of the breach, or any amounts which Zinn is entitled to receive pursuant
to this Agreement, and all rights and benefits, including health insurance
benefits and stock which Zinn 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 Zinn’s employment.


 


8.02        This Agreement shall bind and be for the
benefit of the parties to the agreement, as well as their respective
successors, 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 Zinn 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
Zinn from any such corporations.


 


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.


 


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 the AAA.  The decision or award of a
majority of the arbitrators shall be final and 


 


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binding upon the
parties.  Any arbitral award may be
entered as a 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 20th day of September, 2001.


 


	
   

  	
  CAP ROCK ENERGY
  CORPORATION

  
	
   

  	
   

  
	
  By:  /s/ 
  Celia Zinn

  	
   

  	
  By:  /s/ David W. Pruitt

  	
   

  
	
  Celia Zinn

  	
  David W. Pruitt,
  President/CEO

  
				



 


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  THE STATE OF TEXAS

  	
  ) (

  
	
   

  	
  ) (

  
	
  COUNTY OF MIDLAND

  	
  ) (

  



 


This instrument
was acknowledged before me on this the 20th day of September, 2001, by DAVID W.
PRUITT, President/Chief Executive Officer of Cap Rock Energy Corporation, a
Texas corporation, on behalf of said corporation.


 


	
   

  	
  By:  /s/ Ronald W. Lyon

  
	
   

  	
  Notary Public, State of
  Texas

  
	
   

  	
  Printed Name of Notary:

  
	
   

  	
  Ronald W. Lyon

  
	
   

  	
  My Commission Expires: 

  	
  March 29, 2005

  
	
   

  	
   

  
	
   

  	
   

  
	
  (SEAL)

  	
   

  



 


 


 


	
  THE STATE OF TEXAS

  	
  ) (

  
	
   

  	
  ) (

  
	
  COUNTY OF MIDLAND

  	
  ) (

  



 


This instrument
was acknowledged before me on this the 20th day of September 2001, by CELIA
ZINN.


 


	
   

  	
  By:  /s/ Ronald W. Lyon

  
	
   

  	
  Notary Public, State of
  Texas

  
	
   

  	
  Printed Name of Notary:

  
	
   

  	
  Ronald W. Lyon

  
	
   

  	
  My Commission Expires: 

  	
  March 29, 2005

  
	
  (SEAL)

  	
   

  



 


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