**EXHIBIT 10.74**

 

**EMPLOYMENT CONTRACT**

 
| THE STATE OF TEXAS | )( |                             |
|--------------------|----|----------------------------------|
|               | )( | KNOW ALL MEN BY THESE  PRESENTS: |
| COUNTY OF MIDLAND  | )( |                             |

 

This EmploymentContract (“Agreement”) is made and entered into on this 20th day ofSeptember, 2001, and the initial term of this Agreement and all other terms andprovisions herein, except for the amount of salary, are effective beginning asof June 11, 2001 when CAP ROCK ENERGY CORPORATION and CELIA ZINN entered intoan Employment Contract. This Agreement modifies, amends and supercedes theAgreement previously executed as of June 11, 2001 by and between the Parties tothis Agreement.

 

By this Agreement,Cap Rock Energy Corporation, referred to in this Agreement as “Company”, actingby and through its President and Chief Executive Officer, David W. Pruitt, orhis successor, hereinafter referred to as “Pruitt” employs Celia Zinn, referredto in this Agreement as “Zinn”, and whose principal place of employment isMidland, Midland County, Texas, who accepts employment on the following terms andconditions:

 

**ARTICLE 1**

 

# **TERMSOF EMPLOYMENT**

 

By this Agreement,the Company, acting by and through and under the direction of Pruitt or herimmediate 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 toterminate this Agreement is executed and properly delivered by either party atleast ninety days prior to an anniversary date of the execution of thisAgreement, this Agreement shall annually and automatically be renewed for anadditional term of one (1) year.  ThisAgreement may, however, be terminated earlier, as provided in Article 4, below.

 

**ARTICLE 2**

 

# **EMPLOYMENTCOMPENSATION & BENEFITS**

 

**2.01**        Ascompensation for all services rendered under this Agreement, Zinn shall be paidby Company a salary of $100,000.00 per year, or any greater amount ofcompensation including bonuses and deferred compensation authorized by the wageand salary plan or board policies authorized by the Company, together with anannual salary adjustment in an amount at least equal to any approved across theboard salary adjustments for all employees.

 

**2.02**        Zinnshall receive fifteen (15) days of vacation (annual leave), availableimmediately upon her employment pursuant to this Agreement, and the same sickleave and all other benefits as are accorded regular full-time employees of theCompany including provisions governing accrual and 

 

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payment thereof on earlyretirement or other methods of employment as set forth in the Company’semployee policies.

 

**2.03**        Subjectto the above paragraph 2.02, all provisions of the Company’s rules andregulations relating to annual leave (vacation), sick leave, early retirement,insurance, savings, deferred compensation, bonuses, pension programcontributions, holiday, stock options as available and appropriate for herresponsibility and experience and other fringe benefits and working conditionsas they now exist or hereafter may be amended, shall apply to Zinn as theywould to other employees of the Company.

 

**2.04       **BecauseZinn’s duties will from time to time require her to work outside of, and inaddition to, the Company’s established normal workweek, work days and workhours, Zinn shall be allowed to take compensatory time off.

 

**2.05****                       **Companywill reimburse Zinn for professional dues and continuing educationrequirements.

 

**ARTICLE 3**

 

# **COVENANT TO PERFORM**

 

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

 

**3.02**        Zinn agrees to execute and honor andabide by the Company’s “Employee Pledge and Proprietary Rights and InformationAgreement” which all other employees of the Company have executed and agreedto, a copy of which is attached hereto as Exhibit “A”.

 

**ARTICLE 4**

 

# **TERM AND TERMINATION**

 

**4.01**        The Company shall employ Zinn pursuantto this Agreement for the one (1) year term beginning with the effective dateof her employment hereunder, yearly renewable subject to and following asatisfactory evaluation employee appraisal report on Zinn by Pruitt or herimmediate supervisor, normally the Company’s CFO, for successive one yearterms.  However, if during suchemployment, Zinn fails or refuses to perform the work and services assigned toher on behalf of the Company by Pruitt or her immediate supervisor, normallythe Company’s CFO, or should she become derelict in so performing, or becomeunable to perform, or otherwise become in substantial breach of this Agreementall as may be determined by Pruitt in his sole discretion or otherwise so actas 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 rightshereunder not already finally vested shall cease on or at such time as Pruittshall notify Zinn in writing.  The term“cause” shall include the following:

 

1.                                       Knowingly,willfully and substantially, during the term of this Agreement, neglects theduties that Zinn is required to perform under the terms of this Agreement.

 

2.                                       Knowingly,willfully and substantially, during the term of this Agreement, commits clearlydishonest acts toward the Company with the intent to injure or damage theCompany.

 

3.                                       Insubordinationor failing to follow the directives of the President/CEO in connection normalassigned job related duties.

 

4.                                       Anunsatisfactory evaluation by Pruitt (or Zinn’s immediate supervisor) of Zinn onthe annual employee appraisal,

 

**4.02**        If Zinn’s employment terminates for anyreason 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 salarythen in effect for one (1) year, plus such amounts, if any, are at the time ofher termination of employment, payable for accrued but untaken vacation andsick leave, compensatory time, bonuses and other compensation authorized by theBoard of Directors or Pruitt.

 

**4.03**        Notwithstanding paragraphs 4.01 and4.02, this Agreement and Zinn’s employment hereunder may be terminated at suchtime and upon such terms and conditions as the parties may mutually agree.

 

**4.04**        Notwithstanding the provisions ofparagraphs 4.01, 4.02, and 4.03 above, Zinn’s employment hereunder shallterminate under any of the following conditions:

 

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

 

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

 

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**4.05**        Notwithstanding any other provisions inthis 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, ifcompleted, 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, inaddition to any other amounts payable pursuant to this Agreement, the Companyshall pay Zinn a lump sum cash payment within thirty (30) days of terminationequal 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’sannual Base Salary.

 

For purposes ofthis Agreement “Change in Control” means: (i) a reorganization or merger of theCompany with or into any other company which will result in the Company’sstockholders immediately prior to such transaction not holding, as a result ofsuch transaction, at least 50% of the voting power of the surviving or continuingentity or the entity controlling the surviving or continuing entity; (ii) asale of all or substantially all of the assets of the Company to an entity inwhich the Company’s stockholders immediately prior to such sale will not holdfollowing 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 than50% 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 changein the majority of the Board not approved by at least two-thirds of theCompany’s directors in office prior to such change or (v) the adoption of anyplan of liquidation providing for the distribution of all or substantially allof the Company’s assets.

 

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

 

(1)                                  amaterial reduction in Zinn’s salary or benefits excluding the substitution ofsubstantially equivalent compensation and benefits;

 

(2)                                  amaterial diminution of Zinn’s duties, authority or responsibilities as ineffect immediately prior to such diminution;

 

(3)                                  therelocation of Zinn’s primary work location to a location more than 50 milesfrom Zinn’s primary work location as of the date of this Agreement; or

 

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

 

**4.06**        Zinn’s place of employment pursuant tothis Agreement shall be at the corporate offices in Midland, Texas, unlessPruitt shall direct otherwise.  In thatevent, at Zinn’s option, she may refuse to move, terminate this Agreement andreceive payment for the remainder of her contract term as set forth inparagraph 4.02 above.

 

**4.07       **In the event Zinn iseligible to receive a lump sum payment pursuant to this Agreement and such lumpsum payment would cause Zinn to be subject to an excise tax in excess of normalincome taxes on such lump sum, then and in that event, the lump sum paymentshall be increased (grossed up) 

 

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in an amount sufficient to pay such excise tax.

 

#### **ARTICLE 5**

 

**TRADE SECRETS AND CONFIDENTIALINFORMATION**

 

**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 theCompany, train her in the use of same, and provide associates a workingenvironment in which she can contribute toward enhancing same and upgrading hergeneral knowledge.  Trade secrets,proprietary information and confidential information encompass, withoutlimitation, anything which is owned by the Company and is regularly used in theoperation of the business of the Company to obtain a competitive advantage overthe Company’s competitors who do not know, have access to, or utilize suchinformation or trade secrets. Proprietary information further includes, but is not limited to,records, files, documents, bulletins, publications, manuals, financial data andinformation concerning and the identity of customers, prospects andsuppliers.  Trade secrets furtherinclude, but are not limited to, specifications, software programs, both thesource code and the object code, documentation, flow charts, diagrams,schematics, data, data bases, and business and production methods andtechniques.

 

**5.02**        Zinn acknowledges that such training andthe use of the trade secrets and confidential or proprietary information willenable her to perform her job and enhance her compensation.  Zinn recognizes and acknowledges that thetrade secrets and other confidential or proprietary information of the Companyare valuable, special and unique and that the protection thereof is of criticalimportance 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 priorwritten consent of the Company, she shall not, during the term of heremployment by the Company or at anytime thereafter, either directly orindirectly, make independent use of, publish or otherwise disclose any of theaforesaid trade secrets or other confidential or proprietary information of theCompany (whether acquired, learned, obtained or developed by her alone or inconjunction with others) to any person, firm, corporation, association or otherentity for any reason or purpose whatsoever or allow any other person , firm,corporation, association or other entity to make use of, publish or discloseany of the aforesaid trade secrets or other confidential or proprietaryinformation.  Zinn agrees not to use, steal,or appropriate such items or versions thereof, whether copies or reconstructedfrom memory or otherwise, in any manner. Zinn 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 such services and information confidential.  Zinn therefore agrees that she shall keepall such 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 Zinn’s employment pursuant to this Agreement.  Therefore, Zinn shall be bound by heragreement herein not to disclose confidential information of the Company andits affiliates or subsidiaries both during her employment with the Company andafter her employment with the Company is terminated.  A violation by Zinn of this Article shall be a material violationof this Agreement and will justify legal and/or equitable relief.  

 

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Zinn recognizesthat if she breaches this agreement and discloses confidential information ortrade secrets of the Company or any of its affiliates or subsidiaries, theCompany will suffer substantial, irreparable and continuing injuries, damagesand costs attendant thereto.  Further,recognizing that money damages may not provide adequate relief, Zinn agreesthat, in the event that she breaches or threatens to breach this Agreement, theCompany shall be entitled to a preliminary or permanent injunction in order toprevent the continuation of such harm and, as liquidated damages, Zinn shallforfeit all payments made pursuant to this Agreement from the date theAgreement was breached and any payments that are or may be due pursuant to thisAgreement, as well as any rights or benefits, including health insurancebenefits.

 

**5.03**        Zinn and the Company acknowledge andagree that the fact that the Parties have entered into this Agreement and theterms of this Agreement are confidential. Neither of the Parties may therefore disclose the terms of thisAgreement to others, except as necessary with regard to the filing of incometaxes and other necessary documents or as required by law, or pursuant to asubpoena or court order, unless such disclosure has been approved by the otherParty’s written permission.

 

**ARTICLE 6**

 

**NON-COMPETITION AGREEMENT**

 

Zinn agrees thatupon her termination of employment from the Company, for a period of two (2)years, she will not engage or participate, directly or indirectly, incompetition with the Company or any of its affiliates or subsidiaries withoutthe prior written consent of the Company which consent shall not beunreasonably withheld.  This Agreementshall prohibit Zinn from, among other things, attempts to serve or assistothers in serving the Company’s present or potential customers.  Zinn further agrees that she 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 in writing.

 

**ARTICLE 7**

 

**PROHIBITIONS**

 

**7.01**        Zinn shall not, at any time during orafter the term of this Agreement, make derogatory, false, or misleading oral orwritten 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 heremployment with the Company.

 

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

 

**7.03       **TheCompany and Zinn 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 Zinnbreaches these Articles 5, 6, and 7, the Company shall be entitled toliquidated damages for such breach which shall be forfeiture and reimbursementby Zinn of all amounts paid to Zinn from the time of the breach, received byZinn from Company pursuant to this 

 

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Agreement from thetime of the breach, or any amounts which Zinn is entitled to receive pursuantto this Agreement, and all rights and benefits, including health insurancebenefits and stock which Zinn may be entitled to receive pursuant to this Agreement.

 

**ARTICLE 8**

 

# **SUPERSESSION AND EFFECTIVENESS**

 

**8.01**        This Agreement supersedes any otheragreement or understanding, written or oral, between the parties with respectto the matters covered hereunder, and it contains the entire understanding ofthe parties and all of the covenants and agreements between them with respectto Zinn’s employment.

 

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

 

**8.03**        The existence and effectiveness of thisAgreement between the parties hereto does not preclude or otherwise interferewith employment of Zinn by subsidiary corporations of Cap Rock EnergyCorporation, or by any corporation organized by the Company’s Board ofDirectors for the benefit of the Company, or the receipt of compensation byZinn from any such corporations.

 

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

 

#### **ARTICLE 9**

 

**GOVERNING LAW**

 

This Agreement hasbeen executed in the State of Texas and shall be governed by and construed inall respects in accordance with the laws of the State of Texas.

 

**ARTICLE 10**

 

**ARBITRATION**

 

 All disputes, claims and matters in questionarising under, with respect to or out of this Agreement or the relationshipbetween the parties created by this agreement, whether sounding in contract,tort or otherwise, which cannot be resolved between the Parties, shall beresolved by binding arbitration pursuant to the Federal Arbitration Act.  The arbitration shall be administered by theAmerican Arbitration Association (“AAA”) in Dallas, Texas in accordance withthe 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 demandfor arbitration.  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 the AAA.  The decision or award of amajority of the arbitrators shall be final and 

 

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binding upon theparties.  Any arbitral award may beentered as a 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 in duplicate originals, one beingretained 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 instrumentwas acknowledged before me on this the 20th day of September, 2001, by DAVID W.PRUITT, President/Chief Executive Officer of Cap Rock Energy Corporation, aTexas 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 instrumentwas acknowledged before me on this the 20th day of September 2001, by CELIAZINN.

 
|   | 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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