**EXHIBIT10.76**

 

THIS AGREEMENT IS SUBJECTTO ARBITRATIONUNDER 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 andbetween CAP ROCK ENERGY CORPORATION (the “Company”), a Texas corporation, andALFRED J. SCHWARTZ and ROBERT G. HOLMAN, Trustees (together with theirsuccessors, 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 ofcommon stock, $.01 par value, of the Company and may, through stock splits orother means, hereafter acquire additional shares of the common stock, $.01 parvalue of the Company (collectively, the “Shares”);

 

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

 

TERMS AND CONDITIONS

 

In consideration of the sum of $10.00 in cashpaid by the Company to the Trust, the mutual benefits to be derived and therepresentations and warranties, conditions and promises herein contained, andother good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, and intending to be legally bound hereby, the partieshereto hereby agree as follows:

 

1.     OPTION GRANT.  The Trusthereby grants to the Company the right to purchase, at the option of theCompany 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 arerespectively defined in Sections 2 and 3 of this Agreement).

 

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

 

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defined) ending five Trading Days preceding the delivery of theExercise Notice (as such term is defined in Section 4 of this Agreement) by theCompany 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 whichshall be the last sale price, regular way, or, in case no sale takes place onsuch day, the average of the closing bid and asked prices, regular way, ineither case as reported in the principal consolidated transaction reportingsystem with respect to securities listed or admitted to trading on the AmericanStock Exchange or, if the Shares are not listed or admitted to trading on theAmerican Stock Exchange, as reported in the principal consolidated transactionreporting system with respect to securities listed on the principal nationalsecurities 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 securitiesexchange, the last sales price, or if not so reported, then the last quotedprice or, if not so quoted, the average of the high bid and low asked prices inthe over-the-counter market, as reported by the NASDAQ or such other systemthen in use of, if on any such date the Shares are not quoted by any suchorganization, the average of the closing bid and asked prices as furnished by aprofessional market maker making a market in the Shares, which professionalmarket maker shall be selected by the Trustees. The term “Trading Days” means aday on which the American Stock Exchange or other principal national securitiesexchange on which the Shares are listed or admitted to trading is open for thetransaction of business or, if the Shares are not listed or admitted to tradingon any national securities exchange, a Monday, Tuesday, Wednesday, Thursday orFriday on which banking institutions in the State of Texas are not authorizedor obligated by law or executive order to close.

 

3.     OPTION TERM.  The term ofthe Option (the “Option Term”) shall commence on the date of this Agreement andshall continue until the earlier of (i) the date on which the Trust no longerowns 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 ofthe Option Term, the Company has failed to exercise the Option and properlypurchase the Shares, the Option shall terminate.

 

4.     OPTION EXERCISE.  TheOption is exercisable in whole, but not in part (except that in the event notall of the shares escheat at one time, the option is exercisable as to thoseshares as they escheat), and may be exercised at any time during the OptionTerm by the Company delivering a written notice of such exercise (the “ExerciseNotice”) to the Trustees. The Trustees agree not to take, and will refrain fromtaking, any action during the Option Term which would have the effect ofpreventing or disabling the Trust from delivering the Shares to the Companyupon exercise of the Option and otherwise performing its obligations under thisAgreement.

 

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

 

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anything to the contrary herein contained, if the Company does notexercise the Option within the required time period, the Trustees may proceedto allow the Shares to escheat to the State of Texas.

 

6.     CLOSING.  Theconsummation of the purchase and sale of the Shares (the “Closing”) shall takeplace at the principal executive offices of the Company in Midland, Texas, at10:00 a.m. (local time) on the tenth (10th) business day after the date of thedelivery of the Exercise Notice, or at such other place, time or date as theparties hereto shall mutually agree.

 

7.     PAYMENT AND DELIVERY OF CERTIFICATES.  At the Closing, (i) the Company will pay to the Trust the OptionPrice for the Shares by delivery of a confirmed wire transfer of funds, bankcashier’s check or other form of immediately available funds and (ii) the Trustwill deliver or cause to be delivered to the Company a certificate orcertificates representing the Shares, duly endorsed or accompanied by stockpowers 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 otherarrangement with respect to the sale, transfer, pledge, assignment or otherdisposition of, any of the Shares to any person other than to the Company, anAffiliate of the Company (as such term is hereinafter defined) pursuant to thisAgreement, the beneficial holders as they are located, or pursuant to a tenderoffer 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 personthat directly, or indirectly through one or more intermediaries, controls, oris controlled by, or is under common control with, the Company, and a personshall be deemed to control another person (including the Company) if thecontrolling person is the beneficial owner (as defined in Rule 13d-3 under theSecurities Act of 1934, as amended) of ten percent (10%) or more of any classof voting securities (or other voting interests) of the controlled person orpossesses, directly or indirectly, the power to direct or cause the directionof the management or policies of the controlled person, whether throughownership of securities, through serving as an officer or director, by contractor otherwise.

 

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

 

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

 

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

 

If to the Company:

 

Cap Rock Energy Corporation500 W. Wall StreetSuite 400Midland, Texas 79701Attention:  Mr. David W. Pruitt,PresidentTelecopy:  915-684-0333

 

 

If to the Trust:

 

Cap Rock Energy Corporation Shareholders’Trust115 S. Travis StreetSherman, Texas 75090Attention:  Mr. Ronald W. LyonTelecopy:  903-868-2492

 

or at such other address and number as either party shall havepreviously designated by written notice given to the other party in the mannerhereinabove set forth. Notices shall be deemed given when received, if sent bytelegram, telex, telecopy or similar facsimile means (confirmation of suchreceipt by confirmed facsimile transmission being deemed receipt ofcommunications sent by telex, telecopy or other facsimile means); and whendelivered and receipted for (or upon the date of attempted delivery wheredelivery is refused), if hand-delivered, sent by express courier or deliveryservice, or sent by certified or registered mail.

 

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11.   FURTHER ASSURANCES.  Theparties hereto agree (i) to furnish upon request to each other such furtherinformation; (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 mayat any time reasonably request for the purpose of carrying out the intent ofthis Agreement and the documents referred to herein.

 

12.   WAIVER.  The rights andremedies 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 anyright, power or privilege under this Agreement or the documents referred toherein shall operate as a waiver thereof, nor shall any single or partialexercise of any such right, power or privilege preclude any other or furtherexercise thereof or the exercise of any other right, power or privilege. To themaximum extent permitted by applicable law, (i) no claim or right arising outof this Agreement or the documents referred to herein can be discharged by oneparty hereto, in whole or in part, by a waiver or renunciation of the claim orright unless in writing signed by the other party hereto; (ii) no waiver whichmay be given by a party hereto shall be applicable except in the specificinstance for which it is given; and (iii) no notice to or demand on one partyhereto shall be deemed to be a waiver of any obligation of such party or of theright of the party giving such notice or demand to take further action withoutnotice or demand as provided in this Agreement or the documents referred toherein.

 

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

 

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 otherthan an Affiliate of the Company, without the prior written consent of theTrust. An Affiliate of the Company to whom any rights hereunder may have beentransferred in accordance with this Agreement shall not, during the term ofthis Agreement, assign, transfer or otherwise dispose of any of its rightshereunder to a person other than the Company or another Affiliate of theCompany, without the prior written consent of the Trust.

 

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

 

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under or with respect to this Agreement, or any provision hereof, itbeing the intention of the parties hereto that this Agreement and all of itsprovisions and conditions are for the sole and exclusive benefit of the partiesto this Agreement, their successors and assigns, and for the benefit of noother person or entity.

 

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

 

17.   SECTION HEADINGS, CONSTRUCTION. The headings of articles and sections contained in this Agreement areprovided for convenience only. They form no part of this Agreement and shallnot affect its construction or interpretation. All references to articles andsections in this Agreement refer to the corresponding articles and sections ofthis Agreement. All words used herein shall be construed to be of such genderor number as the circumstances require. Unless otherwise specifically noted, thewords “herein,” “hereof,” “hereby,” “hereinabove,” “hereinbelow,” “hereunder,”and words of similar import, refer to this Agreement as a whole and not to anyparticular 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.  Withregard to all time periods set forth or referred to in this Agreement, time isof the essence.

 

20.   GOVERNING LAW.  THISAGREEMENT AND ALL RIGHTS ARISING HEREUNDER SHALL BE CONSTRUED AND DETERMINED INACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND THE PERFORMANCE THEREOFSHALL BE GOVERNED AND ENFORCED IN ACCORDANCE WITH SUCH LAWS. IN THE EVENT ANYCONTROVERSY ARISES OUT OF OR RELATES TO THIS AGREEMENT, THE TRUSTEES ANDREPRESENTATIVES OF THE COMPANY SHALL FIRST MEET IN MIDLAND, TEXAS, AND ATTEMPTTO NEGOTIATE A RESOLUTION OF THEIR DISPUTE. IN THE EVENT SUCH NEGOTIATION SHALLFAIL TO RESOLVE ANY SUCH CONFLICT, THE PARTIES HEREBY AGREE TO SUBMIT TOARBITRATION ADMINISTERED BY THE AMERICAN ARBITRATION ASSOCIATION UNDER ITS THENCURRENT COMMERCIAL ARBITRATION RULES. ANY SUCH CONTROVERSY SHALL BE SUBMITTEDIN DALLAS, TEXAS, TO A PANEL OF THREE (3) ARBITRATORS, ONE CHOSEN BY EACH PARTYAND THE THIRD UNDER THE AMERICAN ARBITRATION RULES. AT LEAST TWO (2) OF THEARBITRATORS SHALL HAVE EXPERIENCE WITH SECURITIES. THE ARBITRATORS WILL HAVE NOAUTHORITY TO AWARD PUNITIVE OR OTHER DAMAGES NOT MEASURED BY THE PREVAILINGPARTY’S ACTUAL DAMAGES AND MAY NOT, IN ANY EVENT, MAKE ANY RULING, FINDING, ORAWARD THAT DOES NOT CONFORM TO THE TERMS AND CONDITIONS OF THIS AGREEMENT. THEPARTIES SHALL FAITHFULLY

 

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

 

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

 

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SIGNATURES

 

To evidence the binding effect of thecovenants and agreements described above, the Company (by its duly authorizedofficer) and the Trust (by the Trustees) have caused this Agreement to beexecuted and delivered as of, but not necessarily on, the date first writtenabove.

 

 
|   | 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                             |

 

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