**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 oras of the 24th day of October, 2001.

 

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

 

**ARTICLE1**

**TERMS OFEMPLOYMENT**

 

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

 

**ARTICLE2**

**EMPLOYMENTCOMPENSATION & BENEFITS**

 

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

 

**2.02****       **Lyonshall work full time for the Company and shall be allowed time off similar toregular full-time employees of the Company as approved by Pruitt.

 

**2.03****       **Companywill reimburse Lyon for professional dues and continuing legal education requirements.

 

**2.04****       **Companywill provide Lyon with an office at the Hunt-Collin Division Office or Lyon mayoffice 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 setforth in paragraph 2.01 above, shall be reduced by the amount of rent Lyoncurrently pays and the monthly telephone service (not including long distancecharges).

 

**2.05****       **Companywill reimburse Lyon for traditional out of pocket expenses as it has prior tothis Agreement including mileage, long distance telephone, copies etc.

 

**ARTICLE3**

**COVENANT TOPERFORM**

 

**3.01****       **Lyonagrees and covenants to perform his work and services diligently and use hisbest efforts to faithfully comply with all of the assignments duly made to himon behalf of the Company by Pruitt.

 

**3.02****       **Lyonagrees to execute and honor and abide by the Company’s “Employee Pledge andProprietary Rights and Information Agreement” which all other employees of theCompany have executed and agreed to, a copy of which is attached hereto asExhibit “A”.

 

**3.03****       **Lyonshall devote full time to his duties as General Counsel of Company.  However, nothing in this Agreement shallprevent Lyon from performing nonconflicting legal work that does not interferewith his duties as General Counsel as approved by Pruitt.

 

**ARTICLE4**

**TERM ANDTERMINATION**

 

**4.01****       **TheCompany shall employ Lyon pursuant to this Agreement for the one (1) year termbeginning on the effective date of his employment hereunder, yearly renewablesubject to and following a satisfactory evaluation employee appraisal report onLyon by, for successive one year terms. However, if during such employment, Lyon fails or refuses to perform thework and services assigned to him on behalf of the Company by Pruitt, or shouldhe become derelict in so performing, or become unable to perform, or otherwisebecome in substantial breach of this Agreement all as may be determined byPruitt 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 ofLyon’s rights hereunder not already finally vested shall cease on or at suchtime as Pruitt shall notify Lyon in writing. The term “cause” shall mean the following:

 

(1)           Knowingly, willfullyand substantially, during the term of this Agreement, neglects the duties thatLyon is required to perform under the terms of this Agreement.

 

(2)           Knowingly, willfullyand substantially, during the term of this Agreement, commits clearly dishonestacts toward the Company with the intent to injure or damage the Company.

 

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(3)           Insubordination orfailing to follow the directives of the President/CEO in connection with normalassigned job related duties.

 

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

 

**4.03****       **Notwithstandingparagraphs 4.01 and 4.02, this Agreement and Lyon’s employment hereunder may beterminated at such time and upon such terms and conditions as the parties maymutually agree.

 

**4.04****       **Notwithstandingthe provisions of paragraphs 4.01, 4.02, 4.03 and 4.05 herein, Lyon’semployment hereunder shall terminate under any of the following conditions:

 

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

 

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

 

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

 

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

 

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or series of related transactions which result in more than 50% of thevoting 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 themajority of the Board not approved by at least two-thirds of the Company’sdirectors in office prior to such change or (v) the adoption of any plan ofliquidation providing for the distribution of all or substantially all of theCompany’s assets.

 

For purposes of this Agreement, after a Change in Control, “GoodReason” shall mean the occurrence of any one of the following circumstances withoutLyon’s consent:

 

(1)           a material reduction inLyon’s compensation or benefits excluding the substitution of substantiallyequivalent compensation and benefits;

 

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

 

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

 

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

 

**ARTICLE5**

**TRADESECRETS AND CONFIDENTIAL INFORMATION**

 

**5.01****       **Duringthe term of Lyon’s employment, the Company will provide Lyon access to, so hemay become familiar with, various trade secrets and other confidential orproprietary information of the Company, train him in the use of same, andprovide associates a working environment in which he can contribute towardenhancing same and upgrading his general knowledge.  Trade secrets, proprietary information and confidentialinformation encompass, without limitation, anything which is owned by theCompany and is regularly used in the operation of the business of the Companyto obtain a competitive advantage over the Company’s competitors who do notknow, 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 ofcustomers, 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 andproduction methods and techniques.

 

**5.02****       **Lyonacknowledges that such training and the use of the trade secrets andconfidential or proprietary information will enable him to perform his job andenhance his compensation.  Lyonrecognizes and acknowledges that the trade secrets and other confidential orproprietary information of the Company are valuable, special and unique andthat the protection thereof is of critical importance to the Company inmaintaining its competitive position. Lyon, therefore, covenants and agrees that, except as required by hisemployment 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 anytimethereafter, either directly or indirectly, make independent use of, publish

 

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or otherwise disclose any of the aforesaid trade secrets or otherconfidential or proprietary information of the Company (whether acquired,learned obtained or developed by him alone or in conjunction with others) toany person, firm, corporation, association, or other entity for any reason orpurpose whatsoever or allow any other person, firm, corporation, association orother entity to make use of, publish or disclose any of the aforesaid tradesecrets or other confidential or proprietary information.  Lyon agrees not to use, steal, orappropriate such items or versions thereof, whether copies or reconstructedfrom memory or otherwise, in any manner. Lyon further recognizes and acknowledges that in order to enable Companyto perform services for its customers and engage in Company’s business,information may be furnished to the Company confidential information and thatthe goodwill afforded to Company depends upon, among other things, Company andits employees keeping all such information of the Company confidential.  Lyon therefore agrees that he shall keep allsuch information of the Company and any of its affiliates and subsidiariescompletely and absolutely confidential. This agreement not to disclose confidential information shall surviveafter the term of Lyon’s employment pursuant to this Agreement.  Therefore, Lyon shall be bound by hisagreement herein not to disclose confidential information of the Company andits affiliates or subsidiaries both during his employment with the Company andafter his employment with the Company is terminated.  A violation by Lyon of this Article shall be a material violationof this Agreement and will justify legal and/or equitable relief.  Lyon recognizes that if he breaches thisagreement and discloses confidential information or trade secrets of theCompany or any of its affiliates or subsidiaries, the Company will suffersubstantial, irreparable and continuing injuries, damages and costs attendantthereto.  Further, recognizing thatmoney damages may not provide adequate relief, Lyon agrees that, in the eventthat he breaches or threatens to breach this Agreement, the Company shall beentitled to a preliminary or permanent injunction in order to prevent thecontinuation of such harm and, as liquidated damages, Lyon shall forfeit allpayments made pursuant to this Agreement from the date the Agreement wasbreached and any payments that are or may be due pursuant to this Agreement, aswell as any rights or benefits, including health insurance benefits.

 

**5.03****       **Lyonand the Company acknowledge and agree that the fact that the Parties haveentered into this Agreement and the terms of this Agreement areconfidential.  Neither of the Partiesmay therefore disclose the terms of this Agreement to others, except asnecessary with regard to the filing of income taxes and other necessarydocuments or as required by law, or pursuant to a subpoena or court order,unless such disclosure has been approved by the other Party’s writtenpermission.

 

**ARTICLE6**

**NON-COMPETITIONAGREEMENT**

 

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 orindirectly, in competition with the Company or any of its affiliates orsubsidiaries without prior written consent of the Company which consent shallnot be unreasonably withheld.  ThisAgreement shall prohibit Lyon from, among other things, attempts to serve orassist others in serving the Company’s present or potential customers.  Lyon further agrees that he will never atany time after executing this Agreement, assist any person or entity in buying,merging with or acquiring the Company unless the Company consents inwriting.  Notwithstanding the foregoing,nothing in this Agreement

 

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

 

**ARTICLE7**

**PROHIBITIONS**

 

**7.01****       **Lyonshall not, at any time during or after the term of this Agreement, makederogatory, false, or misleading oral or written comments to any person orentity regarding the Company, its management, officers, directors, employees oragents.  Lyon agrees generally to speakfavorably of the Company and his employment with the Company.

 

**7.02****       **Lyonagrees that neither he nor any member of his immediate family, shall run for orserve as a Director of the Company for a period of five (5) years after Lyon’semployment with the Company is terminated.

 

**7.03****       **TheCompany and Lyon recognize and agree that the damages to the Company forviolation of Articles 5, 6, and 7 may be difficult, if not impossible toascertain, and therefore the Parties hereby agree that in the event Lyonbreaches these Articles 5, 6, and 7, the Company shall be entitled toliquidated damages for such breach which shall be forfeiture and reimbursementby Lyon of all amounts paid to Lyon from the time of the breach, received byLyon from Company pursuant to this Agreement from the time of the breach, orany amounts which Lyon is entitled to receive pursuant to this Agreement, andall rights and benefits, including health insurance benefits and stock whichLyon may be entitled to receive pursuant to this Agreement.

 

**ARTICLE8**

**SUPERSESSIONAND EFFECTIVENESS**

 

**8.01****       **ThisAgreement supersedes any other agreement or understanding, written or oral,between the parties with respect to the matters covered hereunder, and itcontains the entire understanding of the parties and all of the covenants andagreements between them with respect to Lyon’s employment.

 

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

 

 

**8.03****       **Theexistence and effectiveness of this Agreement between the parties hereto doesnot preclude or otherwise interfere with employment of Lyon by subsidiarycorporations of Cap Rock Energy Corporation, or by any corporation organized bythe Company’s Board of Directors for the benefit of the Company, or the receiptof compensation by Lyon from any such corporations.

 

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**8.04****       **ThisAgreement shall become binding upon the parties from and as of the date of theexecution.

 

**ARTICLE9**

**GOVERNINGLAW**

 

This Agreement has been executed in the State of Texas and shall begoverned by and construed in all respects in accordance with the laws of theState of Texas.  Nothing in thisAgreement, including but not limited to Section 5, 6, and 7, shall conflictwith all ethical rules applicable to attorneys, and to the extent the contractualrequirements conflict with such ethical rules, the ethical rules shall control.

 

**ARTICLE10**

**ARBITRATION**

 

All disputes, claims and matters in question arising under, withrespect to or out of this Agreement or the relationship between the partiescreated by this agreement, whether sounding in contract, tort or otherwise,which cannot be resolved between the Parties, shall be resolved by bindingarbitration pursuant to the Federal Arbitration Act.  The arbitration shall be administered by the American ArbitrationAssociation (“AAA”) in Dallas, Texas in accordance with the CommercialArbitration Rules of the AAA.  Thereshall be three arbitrators.  Each partyshall designate an arbitrator, who need not be neutral, within 30 days ofreceiving notification of the filing with the AAA of a demand forarbitration.  The two arbitrators sodesignated shall elect a third arbitrator. If either party fails to designate an arbitrator within the timespecified or the two parties’ arbitrators fail to designate a third arbitratorwithin 30 days of their appointments, the third arbitrator shall be appointedby AAA.  The decision or award of amajority of the judgment or order in any court of competent jurisdiction.  It is expressly agreed that the arbitratorsshall have no authority to award punitive or exemplary damages, the partieshereby 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 induplicate originals, one being retained by each, on or as of the 24th day ofOctober, 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 dayof October, 2001, by DAVID W. PRUITT, President/Chief Executive Officer of CapRock 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 dayof October, 2001, by Ronald Lyon.

 
|   | By:              | /s/ Leslie A. Melson |   |
|--------|------------------|----------------------|--------|
|   | Leslie A. Melson |

 

(SEAL)

 

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Exhibit "A"

 

CAP ROCK ENERGY CORPORATION

 

EMPLOYEEPLEDGE AND

PROPRIETARYRIGHTS AND INFORMATION AGREEMENT

 

This Agreement sets forth the understanding between you and Cap RockEnergy Corporation (“Cap Rock Energy”) concerning your relationship as anemployee of Cap Rock Energy and your treatment of Cap Rock Energy’sconfidential and proprietary information. Cap Rock has agreed to employ you with the understanding and expectationthat 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 Iam on duty in a manner that will reflect well on Cap Rock Energy Corporationsince I am aware that my conduct as an employee of Cap Rock Energy reflects onthe Cooperative.  I understand that whenpeople observe me and my actions, they are looking at me as a representative ofCap Rock Energy and will judge Cap Rock Energy through my actions.  Therefore, I will conduct myself in aprofessional and dignified manner at all times.

 

b.             Giving the best.  I will strive to give the best of my abilityin 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 CapRock Energy creates a relationship of a confidential or proprietary nature thatmay be disclosed to you by Cap Rock Energy or learned by you in the course ofyour duties at Cap Rock Energy, and that relates to:  (i) the business of Cap Rock Energy or that of any of itssubsidiaries, affiliates, customers, suppliers, or (ii) any confidentialinformation of third parties disclosed to Cap Rock Energy.  Such confidential and proprietaryinformation includes information concerning business strategies, financialinformation and forecasts, personnel information and member-consumer lists andis referred to collectively in this Agreement as “Proprietary Information.”

 

a.             Confidentiality of ProprietaryInformation.  At all times, bothduring your employment by Cap Rock Energy and after its termination, you agreeto keep all Proprietary Information in confidence and trust, and you will notuse or disclose Proprietary Information without the written consent of Cap RockEnergy, except as may be necessary to perform your duties as an employee of CapRock Energy.  Upon termination of youremployment with Cap Rock Energy, you will promptly deliver to Cap Rock Energyall documents and materials of any kind pertaining to your work with Cap RockEnergy, and you will not take with you any documents, materials or copiesthereof, whether on paper, magnetic or optical media, or any other mediumcontaining Proprietary Information.

 

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

 

III.           NO CONFLICTING OBLIGATIONS

 

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

 

b.             No Conflicting Agreements.  You represent to Cap Rock Energy that youhave no other agreements or commitments that would hinder or prevent the fullperformance of your duties as a Cap Rock Energy employee or your obligationsunder this Agreement, and you agree not to enter into such conflicting agreementduring the term of your employment at Cap Rock Energy.

 

c.             Disclosure of Agreement.  You hereby authorize Cap Rock Energy tonotify others, including customers of Cap Rock Energy, and any future employersyou may have, of the terms of this Agreement and your responsibilities underthis Agreement.

 

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IV.           NO IMPLIED EMPLOYMENT RIGHTS

 

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

 

V.            GENERAL PROVISIONS

 

a.             Severability.  If one or more of the provisions of thisAgreement are deemed void by law, then the remaining provisions will continuein full force and effect.

 

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

 

c.             Entire Agreement.  This Agreement sets forth the entireAgreement and understanding between you and Cap Rock Energy relating to thesubject matter of this Agreement.  Nomodification or amendment of this Agreement, nor any waiver of any rights underthis Agreement will be effective unless in writing signed by both you and anauthorized representative of Cap Rock Energy. Any subsequent changes in your duties, salary or compensation will notaffect the validity or scope of this Agreement.

 

d.             Successors and Assigns.  This Agreement will be binding upon yourheirs, executors, administrators and other legal representatives and will befor 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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