Exhibit
10.98


 


CAP ROCK
ENERGY CORPORATION


SUPPLEMENTAL
EXECUTIVE DEFERRED COMPENSATION


RETIREMENT
PLAN


 


(As
Amended and Restated, Effective January 1, 2005)


 





















 


TABLE OF CONTENTS


 


	
  ARTICLE 1
   -

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2  -

  	
  Selection, Enrollment, Eligibility

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1.

  	
  Selection by Committee

  	
   

  
	
  2.2.

  	
  Enrollment and Eligibility Requirements; Commencement of Participant

  	
   

  
	
  2.3.

  	
  Termination of a Participant’s Eligibility

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3  -

  	
  Deferral Commitments/Company Matching Amounts/Vesting/Crediting/Taxes

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1.

  	
  Deferral

  	
   

  
	
  3.2.

  	
  Company Matching Amount

  	
   

  
	
  3.3.

  	
  Crediting of Amounts after Benefit Distribution

  	
   

  
	
  3.4.

  	
  Vesting

  	
   

  
	
  3.5.

  	
  Crediting/Debiting of Account Balances

  	
   

  
	
  3.6.

  	
  FICA
  and Other Taxes

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4  -

  	
  Scheduled Distribution; Unforeseeable Financial Emergencies

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1.

  	
  Scheduled Distribution

  	
   

  
	
  4.2.

  	
  Postponing Scheduled Distributions

  	
   

  
	
  4.3.

  	
  Other Benefits Take Precedence Over Scheduled Distributions

  	
   

  
	
  4.4.

  	
  Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5
   -

  	
  Retirement
  Benefit

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1.

  	
  Retirement Benefit

  	
   

  
	
  5.2.

  	
  Payment of Retirement Benefit

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6  -

  	
  Termination Benefit

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1.

  	
  Termination Benefit

  	
   

  
	
  6.2.

  	
  Payment of Termination Benefit

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7
   -

  	
  Disability
  Benefit

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1.

  	
  Disability Benefit

  	
   

  
	
  7.2.

  	
  Payment of Disability Benefit

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8
   -

  	
  Death Benefit

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1.

  	
  Death Benefit

  	
   

  
	
  8.2.

  	
  Payment of Death Benefit

  	
   

  



 


i





















 


	
  ARTICLE 9  -

  	
  Beneficiary Designation

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1.

  	
  Beneficiary

  	
   

  
	
  9.2.

  	
  Beneficiary Designation; Change; Spousal Consent

  	
   

  
	
  9.3.

  	
  Acknowledgement

  	
   

  
	
  9.4.

  	
  No Beneficiary Designation

  	
   

  
	
  9.5.

  	
  Doubt as to Beneficiary

  	
   

  
	
  9.6.

  	
  Discharge of Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10
   -

  	
  Leave
  of Absence

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1.

  	
  Paid Leave of Absence

  	
   

  
	
  10.2.

  	
  Unpaid Leave of Absence

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11  -

  	
  Termination of Plan, Amendment or Modification

  	
   

  
	
   

  	
   

  	
   

  
	
  11.1.

  	
  Termination of Plan

  	
   

  
	
  11.2.

  	
  Amendment

  	
   

  
	
  11.3.

  	
  Plan Agreement

  	
   

  
	
  11.4.

  	
  Effect of Payment

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12
   -

  	
  Administration

  	
   

  
	
   

  	
   

  	
   

  
	
  12.1.

  	
  Committee Duties

  	
   

  
	
  12.2.

  	
  Agents

  	
   

  
	
  12.3.

  	
  Binding Effect of Decisions

  	
   

  
	
  12.4.

  	
  Indemnity of Committee

  	
   

  
	
  12.5.

  	
  Employer Information

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13  -

  	
  Other Benefits and Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  13.1.

  	
  Coordination with Other Benefits

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14  -

  	
  Claims Procedures

  	
   

  
	
   

  	
   

  	
   

  
	
  14.1.

  	
  Presentation of Claim

  	
   

  
	
  14.2.

  	
  Notification of Decision

  	
   

  
	
  14.3.

  	
  Review of a Denied Claim

  	
   

  
	
  14.4.

  	
  Decision on Review

  	
   

  
	
  14.5.

  	
  Legal Action

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 15
   -

  	
  Trust

  	
   

  
	
   

  	
   

  	
   

  
	
  15.1.

  	
  Establishment of the Trust

  	
   

  
	
  15.2.

  	
  Interrelationship of the Plan and the Trust.

  	
   

  
	
  15.3.

  	
  Distributions From the Trust

  	
   

  



 


ii





















 


	
  ARTICLE 16
   -

  	
  Miscellaneous

  	
   

  
	
   

  	
   

  	
   

  
	
  16.1.

  	
  Status
  of Plan

  	
   

  
	
  16.2.

  	
  Unsecured General Creditor

  	
   

  
	
  16.3.

  	
  Employer’s Liability

  	
   

  
	
  16.4.

  	
  Nonassignability

  	
   

  
	
  16.5.

  	
  Not a Contract of Employment

  	
   

  
	
  16.6.

  	
  Furnishing Information

  	
   

  
	
  16.7.

  	
  Terms

  	
   

  
	
  16.8.

  	
  Captions

  	
   

  
	
  16.9.

  	
  Governing Law

  	
   

  
	
  16.10.

  	
  Notice

  	
   

  
	
  16.11.

  	
  Successors

  	
   

  
	
  16.12.

  	
  Spouse’s Interest

  	
   

  
	
  16.13.

  	
  Validity

  	
   

  
	
  16.14.

  	
  Incompetent

  	
   

  
	
  16.15.

  	
  Court Order

  	
   

  
	
  16.16.

  	
  Deduction Limitation on Benefit Payments

  	
   

  
	
  16.17.

  	
  Insurance

  	
   

  
	
  16.18.

  	
  Obligations to the Company

  	
   

  
	
  16.19.

  	
  Effective Date

  	
   

  



 


iii





















 


CAP ROCK ENERGY CORPORATION


SUPPLEMENTAL EXECUTIVE DEFERRED COMPENSATION


RETIREMENT PLAN


(As Amended and Restated, Effective January 1,
2005)


 


Purpose


 


Cap Rock Energy Corporation (“Company”)
established the Cap Rock Energy Corporation Supplemental Executive Deferred
Compensation Retirement Plan (“Original Plan”) on November 14,
2002.  The Company hereby amends and
restates the Original Plan as the Cap Rock Energy Corporation Supplemental
Executive Deferred Compensation Retirement Plan (As Amended and Restated,
Effective January 1, 2005) (“Plan”) in order to (i) clarify
certain provisions of the Original Plan and (ii) comply with the
provisions of Code Section 409A, IRS Notice 2005-1, and all other
subsequent notices, rulings and regulations thereunder.


 


The purpose of this Plan is to provide
specified benefits to a select group of management or highly compensated
Employees who contribute materially to the continued growth, development and
future business success of the Company, and its subsidiaries, if any, that
sponsor this Plan.  This Plan shall be
unfunded for tax purposes and for purposes of Title I of ERISA.


 


This Plan is designed to supplement the Cap
Rock Energy Corporation Employee Thrift 401(k) Plan and Trust sponsored by the
Company by permitting employee salary reduction contributions and employer
matching contributions that exceed the various limits on such contributions
under Code Section 401(k) plans. 
These limits include (i) the salary reduction limit of Code Section 402(g),
(ii) the average deferrals percentage (ADP) nondiscrimination limits on
salary deferrals under Code Section 401(k), (iii) the average
contribution percentage (ACP) nondiscrimination limits on matching
contributions under Code Section 401(k), (iv) the Code Section 415
limits on aggregate employer and employee contributions and (v) the limit
on compensation under Code Section 401(a)(17).


 


It is the intent of the Company to operate and
administer this Plan in good faith compliance with, and a good faith reasonable
interpretation of, Code Section 409A and IRS Notice 2005-1, and any other
subsequent notices, rulings or regulations thereunder.  The Company shall not exercise discretion under
the terms of this Plan, and a Participant shall not exercise discretion with
respect to his or her benefits under this Plan, in a manner that causes the
Plan to fail to meet the requirements of Code Section 409A and all
notices, rulings and regulations thereunder.


 


ARTICLE 1

Definitions


 


For the purposes of this Plan, unless
otherwise clearly apparent from the context, the following phrases (or terms)
shall have the following indicated meanings:


 


1.1           “Account Balance” shall mean, with
respect to a Participant, an entry on the records of the Employer equal to the
sum of (i) the Deferral Account balance and (ii) the Company Matching
Account balance.  The Account Balance (i) shall
be a bookkeeping entry only and (ii) shall be utilized solely as a device
for the measurement and determination of the amounts to be paid to a
Participant (or his or her designated Beneficiary) pursuant to this Plan.


 


1





















 


1.2           “Affiliate” shall mean any (i) corporation
other than the Company (i.e., either a subsidiary corporation or an affiliate
or associated corporation of the Company), which together with the Company is a
member of a “controlled group of corporations” (within the meaning of Section 414(b) of
the Code), (ii) organization that is under “common control” with the
Company (determined under Section 414(c) of the Code) or (iii) organization
which, together with the Company, is a member of an “affiliated service group”
(within the meaning of Section 414(m) of the Code).


 


1.3           “Annual Deferral Amount” shall mean
that portion of a Participant’s Compensation, Bonus and Commissions that a
Participant defers in accordance with Section 3.1 hereof for any one Plan
Year, without regard to whether such amounts are withheld and credited during
such Plan Year.  In the event of a
Participant’s Retirement, Disability, death or Termination of Employment prior
to the end of a Plan Year, such year’s Annual Deferral Amount shall be the
actual amount withheld prior to such event.


 


1.4           “Annual Installment Method” shall be
an annual installment payment over the number of years selected by the
Participant in accordance with
this Plan, calculated as follows: (i) for the first annual installment,
the Participant’s vested Account Balance shall be calculated as of the close of
business on or around the Participant’s Benefit Distribution Date,
as determined by the Committee in its sole discretion, and (ii) for remaining annual
installments, the Participant’s vested Account Balance shall be calculated on
or around the first business day of each Plan Year following the Plan Year in
which the Participant’s Benefit Distribution Date occurs.  Each annual installment shall be calculated
by multiplying this balance by a fraction, the numerator of which is one and
the denominator of which is the remaining number of annual payments due the
Participant.  By way of example, if a
Participant elects a ten (10) year Annual Installment Method for his
Retirement Benefit, the first payment shall be 1/10 of the vested Account
Balance, calculated as described in this definition.  The following year, the payment shall be 1/9
of the vested Account Balance, calculated as described in this definition.


 


1.5           “Beneficiary” shall mean one or more
persons, trusts, estates or other entities, designated in accordance with Article 9
hereof, that are entitled to receive benefits under this Plan upon the death of
a Participant.


 


1.6           “Beneficiary Designation Form” shall
mean the form established from time to time by the Committee that a Participant
completes, signs and returns to the Committee to designate one or more
Beneficiaries.


 


1.7           “Benefit Distribution Date” shall
mean the date that triggers distribution of a Participant’s vested Account
Balance.  A Participant’s Benefit
Distribution Date shall be determined upon the occurrence of any one of the
following:


 


(a)           If the Participant
Retires, his or her Benefit Distribution Date shall be:


 


(i)            the last day of the
six-month period immediately following the date on which the Participant Retires
if the Participant is a Key Employee; and


 


(ii)           the date on which the
Participant Retires for all other Participants;


 


2





















 


(iii)          provided, however,
in the event the Participant changes his or her Retirement Benefit election in
accordance with Section 5.2(a) hereof, his or her Benefit
Distribution Date shall be postponed in accordance with such Section 5.2(a); or


 


(b)           If the Participant
experiences a Termination of Employment, his or her Benefit Distribution Date
shall be:


 


(i)            the last day of the
six-month period immediately following the date on which the Participant
experiences a Termination of Employment if the Participant is a Key Employee;
and


 


(ii)           the date on which the
Participant experiences a Termination of Employment for all other Participants;
or


 


(c)           The date on which the
Committee is provided with proof that is satisfactory to the Committee of the
Participant’s death, if the Participant dies prior to the complete distribution
of his or her vested Account Balance; or


 


(d)           The date on which the
Participant becomes Disabled.


 


1.8           “Board” shall mean the board of
directors of the Company.


 


1.9           “Bonus” shall mean any compensation,
in addition to Compensation and Commissions, earned by a Participant for services
rendered to his or her Employer during a Plan Year, whether the payment of such
compensation is discretionary or under any bonus plan, program or arrangement
sponsored by an Employer.


 


1.10         “Claimant” shall have the meaning
set forth in Section 14.1 hereof.


 


1.11         “Code” shall mean the Internal
Revenue Code of 1986, as it may be amended from time to time.


 


1.12         “Commissions” shall mean any
commissions paid to an Employee under his or her Employer’s Commission payment
schedule, as identified on the Employer payroll system.


 


1.13         “Committee” shall mean the committee
described in Article 12 hereof.


 


1.14         “Company” shall mean Cap Rock Energy
Corporation, a Texas corporation, and any successors thereto.


 


1.15         “Company Matching Account” shall
mean (i) the sum of all of a Participant’s Company Matching Amounts, plus (ii) amounts
credited or debited to the Participant’s Company Matching Account in accordance
with this Plan, less (iii) all distributions made to the Participant (or
his or her Beneficiary) pursuant to this Plan that relate to the Participant’s
Company Matching Account.


 


1.16         “Company Matching Amount” shall
mean, for any one Plan Year, the amount determined in accordance with Section 3.2
hereof.


 


1.17         “Compensation” shall mean the annual
cash compensation relating to services performed during any calendar year,
including distributions from nonqualified deferred compensation plans, Bonuses,
Commissions, overtime, fringe benefits, stock options, stock grants, relocation
expenses, incentive payments, non-monetary awards, director fees and other
fees,


 


3





















 


and automobile
and other allowances paid to a Participant for employment services rendered to
his or her Employer (whether or not such allowances are included in the
Employee’s gross income).  Compensation (i) shall
be calculated before reduction for compensation voluntarily deferred (or
contributed) by the Participant pursuant to all qualified or nonqualified plans
of any Employer and (ii) shall be calculated to include amounts not
otherwise included in the Participant’s gross income under Code Sections 125,
402(e)(3), 402(h), or 403(b) pursuant to plans established by any
Employer.  However, all such amounts will
be included in compensation only to the extent that had there been no such
plan, the amount would have been payable in cash to the Employee.


 


1.18         “Death Benefit” shall mean the
benefit set forth in Article 8 hereof.


 


1.19         “Deduction Limitation” shall mean
the limitation on a benefit that may otherwise be distributable pursuant to the
provisions of this Plan, as set forth in Section 16.16 hereof.


 


1.20         “Deferral Account” shall mean (i) the
sum of all of a Participant’s Annual Deferral Amounts, plus (ii) amounts
credited or debited to the Participant’s Deferral Account in accordance with
this Plan, less (iii) all distributions made to the Participant (or his or
her Beneficiary) pursuant to this Plan that relate to his or her Deferral
Account.


 


1.21         “Disability” or “Disabled” shall mean that a
Participant (i) is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months, or (ii) is, by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than twelve (12) months, receiving income replacement benefits for a period of
not less than three (3) months under an accident or health plan covering
employees of the Participant’s Employer.


 


1.22         “Disability Benefit” shall mean the
benefit set forth in Article 7 hereof.


 


1.23         “Election Form” shall mean the form
established from time to time by the Committee that a Participant completes,
signs and returns to the Committee to make an election under the Plan.


 


1.24         “Employee” shall mean a person who
is an employee of any Employer.


 


1.25         “Employer(s)” shall mean the Company
and/or any of its Affiliates (now in existence or hereafter formed or acquired)
that (i) have been selected by the Board to participate in the Plan and (ii) have
adopted the Plan as a sponsor.


 


1.26         “ERISA” shall mean the Employee
Retirement Income Security Act of 1974, as it may be amended from time to time.


 


1.27         “Key Employee” shall mean any
Participant who the Committee, in its sole discretion, determines is a “key
employee” of any Employer, as defined in Code Section 416(i).


 


1.28         “Participant” shall mean any
Employee (i) who is selected by the Board to participate in the Plan, (ii) who
submits an executed Plan Agreement, Election Form and Beneficiary
Designation Form, which are accepted by the Committee and (iii) whose Plan
Agreement has not terminated.


 


4





















 


1.29         “Plan” shall mean the Cap Rock
Energy Corporation Supplemental Executive Deferred Compensation Retirement Plan
(As Amended and Restated, Effective January 1, 2005), which shall be
evidenced by this instrument and by each Plan Agreement, as they may be amended
from time to time.


 


1.30         “Plan Agreement” shall mean a
written agreement, as may be amended from time to time, which is entered into
by and between an Employer and a Participant. 
Each Plan Agreement executed by a Participant and the Participant’s
Employer shall provide for the entire benefit to which such Participant is
entitled under the Plan. In the event more than one Plan Agreement exists, the
Plan Agreement bearing the latest date of acceptance by the Employer shall
supersede all previous Plan Agreements in their entirety and shall govern such
entitlement.  The terms of any Plan
Agreement may be different for any Participant. 
Any Plan Agreement may provide additional benefits not set forth in the
Plan or limit the benefits otherwise provided under the Plan.  However, any such additional benefits or
benefit limitations (i) must be agreed to by both the Employer and the
Participant and (ii) must comply with Code Section 409A and all notices,
guidance, rulings and regulations thereunder.


 


1.31         “Plan Year” shall mean a period beginning on January 1
of each calendar year and continuing through December 31 of such calendar
year.


 


1.32         “Retirement”, “Retire(s)” or “Retired” shall mean the Participant’s
separation from service with all Employers for any reason other than a leave of
absence, death or Disability, on or after his or her attainment of age
sixty-five (65).


 


1.33         “Retirement Benefit” shall mean the
benefit set forth in Article 5 hereof.


 


1.34         “Scheduled Distribution” shall mean
the distribution set forth in Section 4.1 hereof.


 


1.35         “Terminate the Plan”, “Termination of the
Plan” shall mean the earlier of (i) the date the Plan
terminates under Section 11.1 hereof, or (ii) a determination by an
Employer’s board of directors that (a) all of its Participants shall no
longer be eligible to participate in the Plan, (b) all deferral elections
for such Participants shall terminate and (c) such Participants shall no
longer be eligible to receive Company contributions under this Plan.


 


1.36         “Termination Benefit” shall mean the
benefit set forth in Article 6 hereof.


 


1.37         “Termination of Employment” shall
mean the separation from service with all Employers, (voluntarily or
involuntarily) for any reason other than Retirement, Disability, death or an
authorized leave of absence.


 


1.38         “Trust” shall mean one or more
trusts established by the Company in accordance with Article 15 hereof.


 


1.39         “Unforeseeable Financial Emergency”
shall mean an unanticipated emergency that is caused by an event beyond the
control of the Participant that would result in severe financial hardship to
the Participant resulting from (i) a sudden and unexpected illness or
accident of the Participant, the Participant’s spouse, or a dependent of the
Participant, (ii) a loss of the Participant’s property due to casualty or (iii) such
other similar extraordinary and unforeseeable circumstances arising as a result
of events beyond the control of the Participant, all as determined in the sole
discretion of the Committee.


 


5





















 


1.40         “Year of
Service” shall mean any
Plan Year in which a Participant completes not less than one thousand (1,000)
Hours of Service with the Employer.  For
purposes of determining a Year of Service under this Plan, the crediting and
computing of Hours of Service for a Participant shall be determined in the same
manner as under the Cap Rock Energy Corporation Employee Thrift 401(k) Plan and
Trust.


 


ARTICLE 2

Selection, Enrollment, Eligibility


 


2.1           Selection
by Committee. 
Participation in the Plan shall be limited to a select group of
management or highly compensated Employees, as determined by the Board in its
sole discretion.  From that group, the
Board shall select, in its sole discretion, those individuals who may actually
participate in this Plan.


 


2.2           Enrollment
and Eligibility Requirements; Commencement of Participation.


 


(a)           As a condition to
participation, each selected Employee who is eligible to participate in the
Plan effective as of the first day of a Plan Year shall complete, execute and
return to the Committee a Plan Agreement, an Election Form and a
Beneficiary Designation Form, prior to the first day of such Plan Year in which
the Participant participates in the Plan, or such other earlier deadline as may
be established by the Committee in its sole discretion.  In addition, the Committee shall establish
from time to time such other enrollment requirements as it determines, in its
sole discretion, are necessary.


 


(b)           An Employee who first
becomes eligible to participate in this Plan after the first day of a Plan Year
must complete these requirements within thirty (30) days after he or she first
becomes eligible to participate in the Plan, or within such other earlier
deadline as may be established by the Committee, in its sole discretion, in
order to participate for that Plan Year. 
In such event, such person’s participation in this Plan shall not
commence earlier than the date determined by the Committee pursuant to Section 2.2(c) below.  Such person shall not be permitted to defer
under this Plan any portion of his or her Compensation, Bonus and/or
Commissions that are paid with respect to services performed prior to his or
her participation commencement date in this Plan.


 


(c)           Each Employee who is
eligible to participate in the Plan shall commence participation in the Plan on
the date that the Committee determines, in its sole discretion, that the
Employee has met all enrollment requirements set forth in this Plan and
required by the Committee, including returning all required documents to the
Committee within the specified time period. 
Notwithstanding the foregoing, the Committee shall process such
Participant’s deferral election as soon as administratively practicable after
such deferral election is submitted to (and accepted) by the Committee.


 


(d)           If an Employee fails to
meet all requirements contained in this Section 2.2 within the period
required, such Employee shall not be eligible to participate in the Plan during
such Plan Year.


 


6





















 


2.3           Termination
of a Participant’s Eligibility. 
If the Board determines that a Participant no longer qualifies as a
member of a select group of management or highly compensated employees, as
membership in such group is determined in accordance with Sections 201(2),
301(a)(3) and 401(a)(1) of ERISA, the Committee shall have the right,
in its sole discretion, to (i) terminate any deferral election the
Participant has made for the remainder of the Plan Year in which the Committee
makes such determination, (ii) prevent the Participant from making future
deferral elections and/or (iii) take further action that the Committee
deems appropriate.  Notwithstanding the
foregoing, in the event of a Termination of the Plan in accordance with Section 1.35
hereof, the termination of the affected Participants’ eligibility for
participation in the Plan shall not be governed by this Section 2.3, but
rather shall be governed by Section 1.35 and Section 11.1
hereof.  In the event a Participant is no
longer eligible to defer compensation under this Plan, the Participant’s
Account Balance shall continue to be governed by the terms of this Plan until
such time as the Participant’s Account Balance is paid in accordance with the
terms of this Plan.


 


ARTICLE 3

Deferral Commitments/Company Matching Amounts/


Vesting/Crediting/Taxes


 


3.1           Deferrals.


 


(a)           Annual
Deferral Amount.  For each
Plan Year, a Participant may elect to defer, as his or her Annual Deferral
Amount, Compensation, Bonus and/or Commissions in such amount(s) as he or she
may elect, in accordance with rules established by the Committee.


 


(b)           Election
to Defer; Effect of Election Form.


 


(i)            First
Plan Year.  In connection
with a Participant’s commencement of participation in the Plan, the Participant
shall make an irrevocable deferral election for the Plan Year in which the
Participant commences participation in the Plan, along with such other
elections as the Committee deems necessary or desirable under the Plan.  For these elections to be valid, the Election
Form must be completed and signed by the Participant, timely delivered to
the Committee (in accordance with Section 2.2 above) and accepted by the
Committee.


 


(ii)           Subsequent
Plan Years.  For each
succeeding Plan Year, an irrevocable deferral election for that Plan Year, and
such other elections as the Committee deems necessary or desirable under the
Plan, shall be made by timely delivering a new Election Form to the
Committee, in accordance with its rules and procedures, before the end of
the Plan Year preceding the Plan Year for which the election is made.  If no such Election Form is timely
delivered for a Plan Year, the Annual Deferral Amount shall be zero for that
Plan Year.


 


7





















 


(c)           Withholding and Crediting
of Annual Deferral Amounts. 
For each Plan Year, the Compensation portion of the Annual Deferral
Amount shall be withheld from each regularly scheduled Compensation payroll in
equal amounts, as adjusted from time to time for increases and decreases in
Compensation.  The Bonus and/or
Commissions portion of the Annual Deferral Amount shall be withheld at the time
the Bonus or Commissions are (or otherwise would be) paid to the Participant, whether
or not this occurs during the Plan Year itself. 
Annual Deferral Amounts shall be credited to a Participant’s Deferral
Account at the time such amounts would otherwise have been paid to the
Participant.


 


3.2           Company Matching Amount.  For each Plan Year, an Employer, in its sole
discretion, may, but is not required to, credit any amount it desires to any
Participant’s Company Matching Account under this Plan.  Such amount shall be the Company Matching
Amount for such Participant for that Plan Year. 
If an Employer determines that it shall provide a Company Matching
Amount to a Participant for a Plan Year, the Employer shall announce to the
Participant the amount it will credit, or the method for determining such
amount, prior to the beginning of the Plan Year to which the Company Matching
Amount relates.  The amount so credited
to a Participant may be smaller or larger than the amount credited to any other
Participant.  The amount credited to any
Participant for a Plan Year may be zero, even though one or more other
Participants receive a Company Matching Amount for that Plan Year.  The Company Matching Amount, if any, shall be
credited on a date (or dates) to be determined by the Committee, in its sole
discretion.


 


3.3           Crediting of Amounts after Benefit Distribution.  Notwithstanding any provision in this Plan to
the contrary, should the complete distribution of a Participant’s vested
Account Balance occur prior to the date on which any portion of (i) the
Annual Deferral Amount that a Participant has elected to defer in accordance
with Section 3.1(b) above or (ii) the Company Matching Amount,
would otherwise be credited to the Participant’s Account Balance in accordance
with Section 3.2 above, such amounts shall not be credited to the
Participant’s Account Balance, but shall be paid to the Participant in a manner
determined by the Committee, in its sole discretion.


 


3.4           Vesting.


 


(a)           A Participant shall at
all times be one hundred percent (100%)
vested in his or her Deferral Account.


 


(b)           A Participant shall be
vested in his or her Company Matching Account in accordance with the vesting schedule set
forth in his or her Plan Agreement, employment agreement or any other agreement
entered into between the Participant and his or her Employer.  If not addressed in such agreements, a
Participant shall vest in his or her Company Matching Account, plus amounts
credited and debited on such amount(s), in accordance with the following
schedule;


 


8





















 


	
  Years of Service With Employer

  	
   

  	
  Vested Percentage

  	
   

  
	
  Less than 1 year

  	
   

  	
  0

  	
  %

  
	
  1 year or more, but less than 2

  	
   

  	
  10

  	
  %

  
	
  2 years or more, but less than 3

  	
   

  	
  20

  	
  %

  
	
  3 years or more, but less than 4

  	
   

  	
  30

  	
  %

  
	
  4 years or more, but less than 5

  	
   

  	
  40

  	
  %

  
	
  5 years or more, but less than 6

  	
   

  	
  60

  	
  %

  
	
  6 years or more, but less than 7

  	
   

  	
  80

  	
  %

  
	
  7 years or more

  	
   

  	
  100

  	
  %

  



 


(c)           For purposes of vesting
under this Plan, “Years of Service” include all prior service that a
Participant may have been credited with under the Cap Rock Electric Cooperative, Inc.
Supplemental Executive Deferred Compensation Retirement Plan.


 


(d)           Notwithstanding
anything to the contrary contained in this Section 3.4, upon a Participant’s
Retirement, death while employed by an Employer, or Disability, a Participant’s
Company Matching Account shall immediately become one hundred percent (100%)
vested (if it is not already vested in accordance with the above vesting
schedule).


 


3.5           Crediting/Debiting of
Account Balances.  In
accordance with, and subject to, the rules and procedures that are established
from time to time by the Committee, in its sole discretion, amounts shall be
credited or debited to a Participant’s Account Balance in accordance with the
following rules:


 


(a)           Measurement
Funds.  The Participant
may elect one or more of the measurement funds selected by the Committee, in
its sole discretion, which are based on certain mutual funds (the “Measurement
Funds”), for the purpose of crediting or debiting additional amounts to his
or her Account Balance.  As necessary,
the Committee may, in its sole discretion, discontinue, substitute or add a
Measurement Fund.  Each such action will
take effect as of the first day of the first calendar quarter that begins at
least thirty (30) days after the day on which the Committee gives Participants
advance written notice of such change, or if necessary to comply with
applicable tax law, including, but not limited to, guidance issued after the
effective date of this Plan, or such other date designated by the Committee, in
its sole discretion.


 


(b)           Election of
Measurement Funds.  A
Participant, in connection with his or her initial deferral election in
accordance with Section 3.1 above, shall elect, on the Election Form, one
or more Measurement Fund(s) (as described in Section 3.5(a) above) to
be used to determine the amounts to be credited or debited to his or her
Account Balance.  If a Participant does
not elect any of the Measurement Funds as described in the previous sentence,
the Participant’s Account Balance shall automatically be allocated into the
lowest-risk Measurement Fund, as determined by the Committee, in its sole
discretion.  The Participant may (but is
not required to) elect, by submitting an Election Form to the Committee
that is accepted by the Committee, to add or delete one or more Measurement
Fund(s) to be used to determine the amounts to be credited or debited to his or
her Account Balance, or to change the portion of his or her Account Balance
allocated to each previously or newly elected Measurement


 


9





















 


Fund.  If an election is made in accordance with the
previous sentence, it (i) shall apply as of the first business day deemed
reasonably practicable by the Committee, in its sole discretion, and (ii) shall
continue thereafter for each subsequent day in which the Participant
participates in the Plan, unless changed in accordance with the previous
sentence.


 


(c)           Proportionate
Allocation.  In making any
election described in Section 3.5(b) above, the Participant shall
specify on the Election Form, in increments of one percent (1%), the percentage
of his or her Account Balance or Measurement Fund, as applicable, to be
allocated/reallocated.


 


(d)           Crediting or Debiting
Method.  The performance
of each Measurement Fund (either positive or negative) will be determined on a
daily basis based on the manner in which such Participant’s Account Balance has
been hypothetically allocated among the Measurement Funds by the
Participant.  Such Measurement Fund
performance shall be credited or debited to a Participant’s Deferral Account or
Company Matching Account, as applicable.


 


(e)           No Actual
Investment. 
Notwithstanding any other provision of this Plan that may be interpreted
to the contrary, the Measurement Funds are to be used for measurement purposes
only.  A Participant’s election of any
such Measurement Fund, the allocation of his or her Account Balance thereto,
the calculation of additional amounts and the crediting or debiting of such
amounts to a Participant’s Account Balance shall  not be
considered or construed in any manner as an actual investment of his or her
Account Balance in any such Measurement Fund. 
In the event that the Company or the Trustee (as that term is defined in
the Trust), in its own discretion, decides to invest funds in any or all of the
investments on which the Measurement Funds are based, no Participant shall have
any rights in (or to) such investments themselves.  Without limiting the foregoing, a Participant’s
Account Balance (i) shall at all times be a bookkeeping entry only and (ii) shall
not represent any investment made on his or her behalf by the Company or the
Trustee.  The Participant shall at all
times remain an unsecured creditor of the Company.


 


3.6           FICA and Other Taxes.


 


(a)           Annual
Deferral Amounts.  For
each Plan Year in which an Annual Deferral Amount is being withheld from a
Participant, the Participant’s Employer(s) shall withhold from that portion of
the Participant’s Compensation, Bonus and/or Commissions that is not being
deferred, in a manner determined by the Employer(s), the Participant’s share of
FICA and other employment taxes on such Annual Deferral Amount.  If necessary, the Committee may reduce the
Annual Deferral Amount in order to comply with this Section 3.6.


 


(b)           Company
Matching Account.  When a
Participant becomes vested in a portion of his or her Company Matching Account,
the Participant’s Employer(s) shall withhold from that portion of the
Participant’s Compensation, Bonus and/or Commissions that is not deferred, in a
manner determined by the Employer(s), the Participant’s share of FICA and other
employment taxes on such portion of his or her Company Matching


 


10





















 


Account.  If necessary, the Committee may reduce the
vested portion of the Participant’s Company Matching Account in order to comply
with this Section 3.6.


 


(c)           Distributions.  The Participant’s Employer(s), or the
Trustee, shall withhold from any payments made to a Participant under this Plan
all federal, state and local income, employment and other taxes required to be
withheld by the Employer(s), or the Trustee, in connection with such payments,
in such amounts and in such manner to be determined in the sole discretion of
the Employer(s) and the Trustee.


 


ARTICLE 4

 Scheduled Distribution; Unforeseeable
Financial Emergencies 


 


4.1           Scheduled Distribution.  In connection with each election to defer an
Annual Deferral Amount, a Participant may irrevocably elect to receive a
Scheduled Distribution, in the form of a lump sum payment, from the Plan with
respect to all (or a portion) of the Annual Deferral Amount.  The Scheduled Distribution shall be a lump
sum payment in an amount that is equal to the portion of the Annual Deferral
Amount the Participant elected to have distributed as a Scheduled Distribution,
plus amounts credited or debited in the manner provided in Section 3.5
above on that amount, calculated as of the close of business on or around the
date on which the Scheduled Distribution becomes payable, as determined by the
Committee in its sole discretion. 
Subject to the other terms and conditions of this Plan, each Scheduled
Distribution elected shall be paid out during a sixty (60) day period
commencing immediately after the first day of any Plan Year designated by the
Participant.  The Plan Year designated by
the Participant must be at least four (4) Plan Years after the end of the
Plan Year to which the Participant’s deferral election described in Section 3.1(b) above
relates.  By way of example, if a
Scheduled Distribution is elected for Annual Deferral Amounts that are earned
in the Plan Year commencing January 1, 2006, the Scheduled Distribution
would become payable during a sixty (60) day period commencing January 1,
2011.


 


4.2           Postponing Scheduled Distributions.  A Participant may make a one time election to
postpone a Scheduled Distribution described in Section 4.1 above, and have
such amount paid out during a sixty (60) day period commencing immediately
after an allowable alternative distribution date designated by the Participant
in accordance with this Section 4.2. 
In order to make this election, the Participant must submit a new
Scheduled Distribution Election Form to the Committee in accordance with
the following criteria:


 


(a)           Such Scheduled
Distribution Election Form must be submitted to and accepted by the
Committee, in its sole discretion, at least twelve (12) months prior to the
Participant’s previously designated Scheduled
Distribution date;


 


(b)           The new Scheduled
Distribution date selected by the Participant must be the first day of a Plan
Year, and must be at least five (5) years after the previously designated Scheduled Distribution
date; and


 


(c)           The election of the new Scheduled Distribution date shall have no
effect until at least twelve (12) months after the date on which the election
is made.


 


11





















 


4.3           Other
Benefits Take Precedence Over Scheduled Distributions.  Should a Benefit Distribution date occur that
triggers a benefit under Articles 5, 6, 7 or 8 hereof, any Annual Deferral
Amount that is subject to a Scheduled Distribution election under Section 4.1
above shall not be paid in accordance with Section 4.1, but shall be paid
in accordance with the other applicable Article. Notwithstanding the foregoing,
the Committee shall interpret this Section 4.3 in a manner that is
consistent with applicable tax law, including, but not limited to, guidance
issued after the effective date of this Plan.


 


4.4           Withdrawal
Payout/Suspensions for Unforeseeable Financial Emergencies.


 


(a)           If
the Participant experiences an Unforeseeable Financial Emergency, the
Participant may petition the Committee to suspend deferrals of Compensation,
Bonus and Commissions to the extent deemed necessary by the Committee to
satisfy the Unforeseeable Financial Emergency. If suspension of deferrals is
not sufficient to satisfy the Participant’s Unforeseeable Financial Emergency,
or if suspension of deferrals is not required under applicable tax law, the
Participant may further petition the Committee to receive a partial or full
payout from the Plan.  The Participant
shall only receive a payout from the Plan to the extent such payout is deemed
necessary by the Committee to satisfy the Participant’s Unforeseeable Financial
Emergency, plus amounts reasonably necessary to pay taxes reasonably
anticipated as a result of the distribution.


 


(b)           The payout shall not
exceed the lesser of (i) the Participant’s vested Account Balance
(calculated as of the close of business on or around the date on which the
amount becomes payable, as determined by the Committee in its sole discretion)
or (ii) the amount necessary to satisfy the Unforeseeable Financial
Emergency, plus amounts reasonably necessary to pay taxes reasonably
anticipated as a result of the distribution. 
Notwithstanding the foregoing, a Participant may not receive a payout
from the Plan to the extent that the Unforeseeable Financial Emergency is or
may be relieved (i) through reimbursement or compensation by insurance or
otherwise, (ii) by liquidation of the Participant’s assets, to the extent
the liquidation of such assets would not itself cause severe financial
hardship, or (iii) by suspension of deferrals under this Plan, if the
Committee, in its sole discretion, determines that suspension is required by
applicable tax law.


 


(c)           If the Committee, in
its sole discretion, approves a Participant’s petition for suspension, the
Participant’s deferrals under this Plan shall be suspended as of the date of
such approval.  If the Committee, in its
sole discretion, approves a Participant’s petition for suspension and payout, (i) the
Participant’s deferrals under this Plan shall be suspended as of the date of
such approval and (ii) the Participant shall receive a payout from the
Plan within sixty (60) days of the date of such approval.


 


(d)           Notwithstanding the
foregoing, the Committee shall interpret all provisions relating to suspension
and/or payout under this Section 4.4 in a manner consistent with
applicable tax law, including, but not limited, to guidance issued after the effective
date of this Plan.


 


12





















 


ARTICLE 5


Retirement Benefit


 


5.1           Retirement Benefit.  A Participant who Retires shall receive, as a
Retirement Benefit, his or her vested Account Balance, calculated as of the
close of business on or around the Participant’s Benefit Distribution Date, as
determined by the Committee in its sole discretion.


 


5.2           Payment of Retirement
Benefit.


 


(a)           A Participant, in
connection with his or her commencement of participation in the Plan, shall
elect on an Election Form to receive the Retirement Benefit in a lump sum
or pursuant to an Annual Installment Method of up to ten (10) years.  The Participant may change this election one
time by submitting an Election Form to the Committee in accordance with
the following criteria:


 


(i)            Such Election Form must
be submitted to (and accepted by) the Committee, in its sole discretion, at
least twelve (12) months prior to the Participant’s originally scheduled
Benefit Distribution Date (as described in Section 1.7(a) hereof);
and


 


(ii)           The first Retirement
Benefit payment is delayed at least
five (5) years from the Participant’s originally scheduled Benefit
Distribution Date (as described
in Section 1.7(a) hereof); and


 


(iii)          The election to modify the Retirement Benefit shall have no effect
until at least twelve (12) months after the date on which the election is made;
and


 


(iv)          Notwithstanding the
foregoing, the Committee shall interpret all provisions relating to changing
the Retirement Benefit election under this Section 5.2 in a manner that is
consistent with applicable tax law, including, but not limited to, guidance
issued after the effective date of this Plan. 
Accordingly, if a Participant’s subsequent Retirement Benefit
distribution election would result in the shortening of the length of the
Retirement Benefit payment period (e.g., a Participant changes an existing
distribution election from annual installments to a lump sum payment; from ten
annual installments to five annual installments, etc.), and the Committee
determines such election to be inconsistent with applicable tax law, the
election shall not be effective.


 


The Election Form most
recently accepted by the Committee shall govern the payout of the Retirement
Benefit.  If a Participant does not make any election
with respect to the payment of the Retirement Benefit in connection with his or
her commencement of participation in the Plan, then such Participant shall be
deemed to have elected to receive the Retirement Benefit in a lump sum.


 


(b)           The lump sum payment
shall be made, or installment payments shall commence, no later than sixty
(60) days after the Participant’s Benefit Distribution Date.


 


13





















 


Remaining
installments, if any, shall be paid no later than sixty (60) days after the
first day of each Plan Year following the Plan Year in which the Participant’s
Benefit Distribution Date occurs.


 


ARTICLE 6

Termination Benefit


 


6.1           Termination Benefit.  A Participant who experiences a Termination
of Employment shall receive, as a Termination Benefit, his or her vested
Account Balance, calculated as of the close of business on or around the
Participant’s Benefit Distribution Date, as determined by the Committee in its
sole discretion.


 


6.2           Payment of Termination
Benefit.  The Termination
Benefit shall be paid to the Participant in a lump sum payment no later than
sixty (60) days after the Participant’s Benefit Distribution Date.


 


ARTICLE 7


Disability Benefit


 


7.1           Disability Benefit. Upon a Participant’s Disability, the
Participant shall receive a Disability Benefit, which shall be equal to the
Participant’s vested Account Balance, calculated as of the close of business on
or around the Participant’s Benefit Distribution Date, as selected by the
Committee in its sole discretion.


 


7.2           Payment of Disability
Benefit.  The Disability
Benefit shall be paid to the Participant in a lump sum payment no later than
sixty (60) days after the Participant’s Benefit Distribution Date.


 


ARTICLE 8


Death Benefit


 


8.1           Death Benefit.  The Participant’s Beneficiary(ies) shall
receive a Death Benefit upon the Participant’s death which will be equal to the
Participant’s vested Account Balance, calculated as of the close of business on
or around the Participant’s Benefit Distribution Date, as selected by the
Committee in its sole discretion.


 


8.2           Payment of Death Benefit.  The Death Benefit shall be paid to the
Participant’s Beneficiary(ies) in a lump sum payment no later than sixty (60)
days after the Participant’s Benefit Distribution Date.


 


ARTICLE 9

Beneficiary Designation


 


9.1           Beneficiary.  Each Participant shall have the right, at any
time, to designate his or her Beneficiary(ies) (both primary as well as
contingent) to receive any benefits payable under


 


14





















 


the Plan to a
Beneficiary upon the death of a Participant. 
The Beneficiary designated under this Plan may be the same as (or
different) from the Beneficiary designation under any other plan of an Employer
in which the Participant participates.


 


9.2           Beneficiary Designation;
Change; Spousal Consent. 
A Participant shall designate his or her Beneficiary by completing and
signing the Beneficiary Designation Form, and returning such form to the
Committee or its designated agent.  A
Participant shall have the right to change a Beneficiary by completing, signing
and otherwise complying with the terms of the Beneficiary Designation Form and
the Committee’s rules and procedures, as in effect from time to time.  If the Participant names someone other than
his or her spouse as a Beneficiary, the Committee may, in its sole discretion,
determine that spousal consent is required to be provided in a form designated
by the Committee, executed by such Participant’s spouse and returned to the
Committee.  Upon the acceptance by the
Committee of a new Beneficiary Designation Form, all Beneficiary designations
previously filed shall be canceled.  The
Committee shall be entitled to rely on the last Beneficiary Designation Form filed
by the Participant (and accepted by the Committee) prior to his or her
death.  Notwithstanding the foregoing, if
a Participant is divorced and the Participant’s former spouse is the
Beneficiary named by the Participant, the former spouse shall be deemed to have
predeceased the Participant.  Such
designation of the former spouse shall be void and the Participant’s benefits
remaining under the Plan, with the exception of any portion of the Participant’s
benefits under the Plan awarded to the Participant’s former spouse pursuant to
a valid court order in connection with a division of property pursuant to
divorce, shall be paid pursuant to Section 9.4 hereof as if the
Participant had not designated a Beneficiary.


 


9.3           Acknowledgment.  No designation (or change in designation) of
a Beneficiary shall be effective until received and acknowledged in writing by
the Committee or its designated agent.


 


9.4           No Beneficiary Designation.  If a Participant fails to designate a
Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all
designated Beneficiaries predecease the Participant or die prior to complete
distribution of the Participant’s benefits, then the Participant’s designated
Beneficiary shall be deemed to be his or her surviving spouse.  If the Participant has no surviving spouse,
the benefits remaining under the Plan to be paid to a Beneficiary shall be
payable to the executor or personal representative of the Participant’s estate.


 


9.5           Doubt as to Beneficiary.  If the Committee has any doubt as to the proper
Beneficiary to receive payments pursuant to this Plan, the Committee shall have
the right, exercisable in its discretion, to cause the Participant’s Employer
to withhold such payments until such matter is resolved to the Committee’s
satisfaction.


 


9.6           Discharge of Obligations.  The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and the
Committee from all further obligations under this Plan with respect to the
Participant.  Such Participant’s Plan Agreement
shall terminate upon such full payment of benefits.


 


15





















 


ARTICLE 10

Leave of Absence


 


10.1         Paid Leave of Absence.  If a Participant is authorized by his or her
Employer to take a paid leave of absence from the employment of the Employer, (i) the
Participant shall continue to be considered eligible for the benefits provided
in Articles 4, 5, 6, 7 or 8 in accordance with the provisions of those
Articles, and (ii) the Annual Deferral Amount shall continue to be withheld during such paid leave of
absence in accordance with Section 3.1(b) above.


 


10.2         Unpaid Leave of Absence.  If a Participant is authorized by his or her
Employer to take an unpaid leave of absence from the employment of the Employer
for any reason, such Participant shall continue to be eligible for the benefits
provided in Articles 4, 5, 6, 7 or 8 hereof in accordance with the provisions
of those Articles. However, the Participant shall be excused from
fulfilling his or her Annual Deferral Amount commitment that would otherwise
have been withheld during the remainder of the Plan Year in which the unpaid
leave of absence is taken.  During the
unpaid leave of absence, the Participant shall not be allowed to make any
additional deferral elections.  However,
if the Participant returns to employment, the Participant may elect to defer an
Annual Deferral Amount for the Plan Year following his or her return to
employment and for every Plan Year thereafter while a Participant in the Plan,
provided (i) such deferral elections are otherwise allowed and (ii) an
Election Form is delivered to and accepted by the Committee for each such
election in accordance with Section 3.1(b) above.


 


ARTICLE 11

Termination of Plan, Amendment or Modification


 


11.1         Termination of Plan.  Although each Employer anticipates that the
Plan will continue, there is no guarantee that any Employer will continue the
Plan or will not terminate the Plan at any time.  Accordingly, each Employer reserves the right
to Terminate the Plan (as defined in Section 1.35 hereof).  In
the event of a Termination of the Plan, the Measurement Funds available to
Participants following the Termination of the Plan shall be comparable in
number and type to those Measurement Funds available to Participants in the
Plan Year preceding the Plan Year in which the Termination of the Plan is
effective. 
Following a Termination of the Plan, Participant Account
Balances shall remain in the Plan until the Participant becomes eligible for
the benefits provided in Articles 4, 5, 6, 7 or 8 hereof in accordance with the
provisions of those Articles.  The termination of the Plan shall
not adversely affect any Participant or Beneficiary who has become entitled to
payment of any benefits under the Plan as of the date of termination.


 


11.2         Amendment.  Any Employer may, at any time, amend or
modify the Plan in whole or in part with respect to that Employer.  Notwithstanding the foregoing, no amendment
or modification shall be effective to decrease the value of a Participant’s vested
Account Balance in existence at the time the amendment or modification is made.


 


11.3         Plan Agreement.  Despite the provisions of Section 11.1
and 11.2 above, if a Participant’s Plan Agreement contains benefits or
limitations that are not contained in this Plan document,


 


16





















 


the Employer
may only amend or terminate such provisions with the written consent of the
Participant.


 


11.4         Effect of Payment.  The full payment of the Participant’s vested
Account Balance under Articles 4, 5, 6, 7 or 8 hereof shall completely
discharge all obligations to a Participant and his or her designated
Beneficiaries under this Plan, and the Participant’s Plan Agreement shall
terminate.


 


ARTICLE 12

Administration


 


12.1         Committee Duties.  Except as otherwise provided in this Article 12,
this Plan shall be administered by a Committee, which shall consist of the
Board, the Executive Committee, or such other individuals as the Board shall
appoint.  Members of the Committee may be
Participants under this Plan.  The
Committee shall also have the discretion and authority to (i) make, amend,
interpret, and enforce all appropriate rules and regulations for the
administration of this Plan and (ii) decide or resolve any and all
questions, including interpretations of this Plan, as may arise in connection
with the Plan.  Any individual serving on
the Committee who is a Participant shall not vote or act on any matter relating
solely to himself or herself.  When
making a determination or calculation, the Committee shall be entitled to rely
on information furnished by a Participant or the Employer.


 


12.2         Agents. In
the administration of this Plan, the Committee may, from time to time, (i) employ
agents and delegate to them such administrative duties as it sees fit
(including acting through a duly appointed representative) and (ii) consult
with counsel who may be counsel to any Employer.


 


12.3         Binding Effect of
Decisions.  The decision
or action of the Committee with respect to any question arising out of (or in
connection with) the administration, interpretation and application of the Plan
(and the rules and regulations promulgated hereunder) shall be final and
conclusive and binding upon all persons having any interest in the Plan.


 


12.4         Indemnity of Committee.  All Employers shall indemnify and hold
harmless the members of the Committee and any Employee to whom the duties of
the Committee may be delegated, against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure to act with respect
to this Plan, except in the case of willful misconduct by the Committee, any of
its members or any such Employee.


 


12.5         Employer Information.  To enable the Committee to perform its
functions, the Company and each Employer shall supply full and timely
information to the Committee on all matters relating to the compensation of its
Participants, the date and circumstances of the Retirement, Disability, death
or Termination of Employment of its Participants, and such other pertinent
information as the Committee may reasonably require.


 


17





















 


ARTICLE 13

Other Benefits and Agreements


 


13.1         Coordination with Other
Benefits.  The benefits
provided for a Participant and Participant’s Beneficiary under the Plan are in
addition to any other benefits available to such Participant under any other
plan or program for employees of the Participant’s Employer.  The Plan shall supplement and shall not
supersede, modify or amend any other such plan or program except as may
otherwise be expressly provided.


 


ARTICLE 14

Claims Procedures


 


14.1         Presentation of Claim.  Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below as a “Claimant”)
may deliver to the Committee a written claim for a determination with respect
to the amounts distributable to such Claimant from the Plan.  If such a claim relates to the contents of a
notice received by the Claimant, the claim must be made within sixty
(60) days after such notice was received by the Claimant.  All other claims must be made within one
hundred eighty (180) days of the date on which the event that caused the
claim to arise occurred.  The claim must
state with particularity the determination desired by the Claimant.


 


14.2         Notification of Decision.  The Committee shall consider a Claimant’s
claim within a reasonable time, but no later than ninety (90) days (forty five
(45) days in the case of a claim for disability benefits) after receiving the
claim.  If the Committee determines that
special circumstances require an extension of time for processing the claim (or
in the case of a claim for disability benefits, an extension is necessary for
reasons beyond the control of the Plan), written notice of the extension shall
be furnished to the Claimant prior to the termination of the initial ninety
(90) day (or forty five (45) day) period. 
In no event shall such extension exceed a period of ninety (90) days
(thirty (30) days in the case of a claim for disability benefits which may be
further extended for an additional thirty (30) days if the additional extension
is due to reasons beyond the control of the Plan) from the end of the initial
period.  The extension notice shall
indicate the special circumstances requiring an extension of time and the date
by which the Committee expects to render the benefit determination.  The Committee shall notify the Claimant in
writing:


 


(a)           that the Claimant’s
requested determination has been made, and that the claim has been allowed in
full; or


 


(b)           that the Committee has
reached a conclusion contrary, in whole or in part, to the Claimant’s requested
determination, and such notice must set forth in a manner calculated to be
understood by the Claimant:


 


(i)            the specific reason(s)
for the denial of the claim, or any part thereof;


 


(ii)           specific reference(s)
to pertinent provisions of the Plan upon which such denial was based;


 


18





















 


(iii)          a description of any
additional material or information necessary for the Claimant to perfect the
claim, and an explanation of why such material or information is necessary;


 


(iv)          if the claim is a claim
for disability benefits, an internal rule, guideline, protocol or other similar
criterion which was relied on in connection with the review of the claim and
that such internal rule, guideline, protocol or similar criterion may be
obtained by the Claimant at the Claimant’s request free of charge;


 


(v)           if the claim is a claim
for disability benefits, and the denial is based on medical necessity or other
similar exclusion or limit, Claimant’s right to receive free of charge an
explanation of how that exclusion or limit and any related clinical judgments
apply to the Claimant’s medical circumstances;


 


(vi)          an explanation of the
claim review procedure set forth in Section 14.3 below; and


 


(vii)         a statement of the
Claimant’s right to bring a civil action under ERISA Section 502(a) following
an adverse benefit determination on review.


 


14.3         Review of a Denied Claim.  On or before sixty (60) days (180 days
in the case of a claim for disability benefits) after receiving a notice from
the Committee that a claim has been denied, in whole or in part, a Claimant (or
the Claimant’s duly authorized representative) may file with the Committee a
written request for a review of the denial of the claim.  The Claimant (or the Claimant’s duly
authorized representative):


 


(a)           may, upon request and
free of charge, have reasonable access to, and copies of, all documents,
records and other information relevant to the claim for benefits;


 


(b)           may submit written
comments or other documents; and/or


 


(c)           may request a hearing,
which the Committee, in its sole discretion, may grant.


 


14.4         Decision on Review.  The Committee shall render its decision on
review promptly, and no later than sixty (60) days (forty five (45) days
in the case of a claim for disability benefits) after the Committee receives
the Claimant’s written request for a review of the denial of the claim.  If the Committee determines that special
circumstances require an extension of time for processing the claim, written
notice of the extension shall be furnished to the Claimant prior to the
termination of the initial sixty (60) day (or forty five (45) day) period.  In no event shall such extension exceed a
period of sixty (60) days (forty five (45) days in the case of a disability
claim) from the end of the initial period. 
The extension notice shall indicate the special circumstances requiring
an extension of time and the date by which the Committee expects to render the
benefit determination.  In rendering its
decision, the Committee shall take into account all comments, documents,
records and other information submitted by the Claimant relating to the claim,
without regard to whether such information was submitted or considered in the
initial benefit determination.  In the
case of a claim for disability benefits, the review on appeal must be made by a
different decision-maker from the Committee and the decision-maker cannot give
procedural deference to the original decision.


 


19





















 


The decision
must be written in a manner calculated to be understood by the Claimant, and it
must contain:


 


(a)           specific reasons for
the decision;


 


(b)           specific reference(s)
to the pertinent Plan provisions upon which the decision was based;


 


(c)           a statement that the
Claimant is entitled to receive, upon request and free of charge, reasonable
access to and copies of, all documents, records and other information relevant
(as defined in applicable ERISA regulations) to the Claimant’s claim for
benefits;


 


(d)           if the claim is a claim
for disability benefits, an internal rule, guideline, protocol or other similar
criterion which was relied on in connection with the review of the claim and
that such internal rule, guideline, protocol or similar criterion may be
obtained by the Claimant at the Claimant’s request free of charge;


 


(e)           if the claim is a claim
for disability benefits, and the denial is based on medical necessity or other
similar exclusion or limit, Claimant’s right to receive free of charge an
explanation of how that exclusion or limit and any related clinical judgments
apply to the Claimant’s medical circumstances; and


 


(f)            a statement of the
Claimant’s right to bring a civil action under ERISA Section 502(a).


 


14.5         Legal Action.  A Claimant’s compliance with the foregoing
provisions of this Article 14 is a mandatory prerequisite to a Claimant’s
right to commence any legal action with respect to any claim for benefits under
this Plan. 


 


ARTICLE 15

Trust


 


15.1         Establishment of the Trust.  In order to provide assets from which to
fulfill the obligations of the Participants and their Beneficiaries under the
Plan, the Company may establish a trust by a trust agreement with a third
party, the trustee, to which each Employer may, in its discretion, contribute
cash or other property to provide for the benefit payments under the Plan (the “Trust”).


 


15.2         Interrelationship of the
Plan and the Trust.  The
provisions of the Plan and the Plan Agreement shall govern the rights of a
Participant to receive distributions pursuant to the Plan.  The provisions of the Trust shall govern the
rights of the Employers, Participants and the creditors of the Employers to the
assets transferred to the Trust.  Each
Employer shall at all times remain liable to carry out its obligations under
the Plan.


 


15.3         Distributions From the
Trust.  Each Employer’s
obligations under the Plan may be satisfied with Trust assets distributed pursuant
to the terms of the Trust.  Any such
distribution shall reduce the Employer’s obligations under this Plan.


 


20





















 


ARTICLE 16


Miscellaneous


 


16.1         Status of Plan.


 


(a)           Intent.  The
Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and
that “is unfunded and is maintained by an employer primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees” within the meaning of ERISA Sections 201(2), 301(a)(3) and
401(a)(1).  The Plan shall be
administered and interpreted to the extent possible in a manner consistent with
that intent.


 


(b)           Compliance with IRC Section 409A.  The Company intends that this Plan comply
with Code Section 409A (and all notices, rulings, guidance and regulations
hereunder) in all respects.  In the event
any required provision of Code Section 409A (or of any notice, ruling,
guidance or regulation hereunder) is needed in order for this Plan to be in
compliance thereof, such required provision is hereby incorporated by reference
for all purposes of this Plan.


 


16.2         Unsecured General Creditor.  Participants and their Beneficiaries, heirs,
executors, administrators, successors and assigns shall have no legal or
equitable rights, interests or claims in any property or assets of an
Employer.  For purposes of the payment of
benefits under this Plan, any and all of an Employer’s assets shall be, and
remain, the general, unpledged unrestricted assets of the Employer.  An Employer’s obligation under the Plan shall
be merely that of an unfunded and unsecured promise to pay money in the future.


 


16.3         Employer’s Liability.  An Employer’s liability for the payment of
benefits shall be defined only by the Plan and the Plan Agreement, as entered
into between the Employer and a Participant. 
An Employer shall have no obligation to a Participant under the Plan
except as expressly provided in the Plan and his or her Plan Agreement.


 


16.4         Nonassignability.  Neither a Participant nor any other person
shall have any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in
advance of actual receipt, the amounts, if any, payable under this Plan, or any
part thereof, which are, and all rights to which are expressly declared to be,
unassignable and non-transferable.  No
part of the amounts payable under this Plan shall, prior to actual payment, be
subject to seizure, attachment, garnishment or sequestration for the payment of
any debts, judgments, alimony or separate maintenance owed by a Participant or
any other person, be transferable by operation of law in the event of a
Participant’s (or any other person’s) bankruptcy or insolvency or, except as
provided in Sections 9.2 and 16.12 hereof, be transferable to a spouse as a
result of a property settlement or otherwise.


 


16.5         Not a Contract of
Employment.  The terms and
conditions of this Plan shall not be deemed to constitute a contract of employment
between any Employer and the Participant. 
Such employment is hereby acknowledged to be an “at will” employment
relationship that can be terminated at any time for any reason, or no reason,
with or without cause, and with or without notice, unless expressly provided in
a written employment agreement.  Nothing
in


 


21





















 


this Plan shall be deemed to give a
Participant the right to be retained in the service of any Employer, or to
interfere with the right of any Employer to discipline or discharge the
Participant at any time.


 


16.6         Furnishing Information.  A Participant (or his or her Beneficiary)
will cooperate with the Committee by furnishing any and all information
requested by the Committee and take such other actions as may be requested in
order to facilitate the administration of the Plan and the payments of benefits
hereunder, including but not limited to taking such physical examinations as
the Committee may deem necessary.


 


16.7         Terms.  Whenever any words are used herein in the
masculine, they shall be construed as though they were in the feminine in all
cases where they would so apply. 
Whenever any words are used herein in the singular or in the plural,
they shall be construed as though they were used in the plural or the singular,
as the case may be, in all cases where they would so apply.


 


16.8         Captions.  The captions of the articles, sections and
paragraphs of this Plan are for convenience only and shall not control or
affect the meaning or construction of any of its provisions.


 


16.9         Governing Law.  Subject to ERISA, the provisions of this Plan
shall be construed and interpreted according to the laws of the State of Texas
without regard to its conflicts of laws principles.


 


16.10       Notice.  Any notice or filing required or permitted to
be given to the Committee under this Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to the address below:


 


Cap
Rock Energy Corporation


Office
of General Counsel


500
West Wall Street


Suite 400


Midland,
Texas  79701


 


Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification.


 


Any notice or filing required or permitted to be given to a Participant
(or Beneficiary) under this Plan shall be sufficient if in writing and
hand-delivered, or sent by mail, to the last known address of the Participant.


 


16.11       Successors.  The provisions of this Plan shall bind and
inure to the benefit of the Participant’s Employer and its successors and
assigns and the Participant and the Participant’s designated Beneficiaries.


 


16.12       Spouse’s Interest.  The interest in the benefits hereunder of a
spouse of a Participant who has predeceased the Participant shall automatically
pass to the Participant and shall not be transferable by such spouse in any
manner, including, but not limited to, such spouse’s will, nor shall such
interest pass under the laws of intestate succession.  Notwithstanding the 


 


22





















 


foregoing, if
a spouse is awarded all or a portion of the Participant’s benefit under the
Plan pursuant to a division of property in connection with a divorce, such
spouse’s share of the Participant’s benefit shall be his or her separate
property and shall be transferable by the Participant’s former spouse by will
or pursuant to the laws of descent and distribution.  In order to be effective, notice of such
division of the Participant’s benefit under the Plan pursuant to a division of
property in connection with divorce must be provided in the form and manner
prescribed by the Committee.  Any such
benefit to which a Participant’s former spouse may be entitled shall be payable
to the former spouse under this Plan only at the time payment of the
Participant’s benefit commences under the Plan.


 


16.13       Validity.  In case any provision of this Plan shall be
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof.  This
Plan shall be construed and enforced as if such illegal or invalid provision
had never been inserted herein.


 


16.14       Incompetent.  If the Committee determines in its discretion
that a benefit under this Plan is to be paid to a minor, a person declared
incompetent or to a person incapable of handling the disposition of that person’s
property, the Committee may direct payment of such benefit to the guardian,
legal representative or person having the care and custody of such minor, incompetent
or incapable person.  The Committee may
require proof of minority, incompetence, incapacity or guardianship, as it may
deem appropriate prior to distribution of the benefit.  Any payment of a benefit shall be a payment
for the account of the Participant and the Participant’s Beneficiary, as the
case may be, and shall be a complete discharge of any liability under the Plan
for such payment amount.


 


16.15       Court Order.  The Committee is authorized to comply with
any court order in any action in which the Plan or the Committee has been named
as a party, including any action involving a determination of the rights or
interests in a Participant’s benefits under the Plan.  Notwithstanding the foregoing, the Committee
shall interpret this provision in a manner that is consistent with applicable
tax law, including but not limited to guidance issued after the effective date
of this Plan.


 


16.16       Deduction Limitation on
Benefit Payments.  An
Employer may determine that as a result of the application of the limitation
under Code Section 162(m), a distribution payable to a Participant
pursuant to this Plan would not be deductible by the Employer if such
distribution were made at the time required by the Plan.  If an Employer makes such a determination,
then the distribution shall not be paid to the Participant until such time as
the distribution first becomes deductible. 
The amount of the distribution shall continue to be adjusted in
accordance with Section 3.5 hereof until it is distributed to the
Participant.  The amount of the
distribution, plus amounts credited or debited thereon, shall be paid to the
Participant or his or her Beneficiary (in the event of the Participant’s death)
at the earliest possible date, as determined by the Employer, on which the
deductibility of compensation paid (or payable) to the Participant for the
taxable year of the Employer during which the distribution is made will not be
limited by Code Section 162(m).


 


16.17       Insurance.  The Employers, on their own behalf or on
behalf of the Trustee, and, in their sole discretion, may apply for and procure
insurance on the life of the Participant, in such amounts and in such forms as
the Trustee may choose.  The Employers or
the Trustee, as the case may be, shall be the sole owner and beneficiary of any
such insurance.  The Participant 


 


23





















 


shall have no
interest whatsoever in any such policy (or policies).  At the request of the Employers, a
Participant shall submit to medical examinations and supply such information
and execute such documents as may be required by the insurance company (or
companies) to whom the Employers have applied for insurance.


 


16.18       Obligations to the Company.   If a Participant becomes entitled to a
distribution of benefits under the Plan, and if at such time the Participant
has outstanding any debt, obligation, or other liability representing an amount
owed to any Employer, then such Employer may offset such amounts owing it
against the amount of benefits otherwise distributable.


 


16.19       Effective Date.  The effective date of this Plan shall be January 1,
2005, or such other date as may be required by Code Section 409A, IRS
Notice 2005-1, or any other relevant guidance, ruling or regulation thereunder.


 


IN WITNESS WHEREOF, the Company has signed this Plan document on September 1,
2005.


 


	
   

  	
    CAP ROCK ENERGY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Ulen North, Jr.

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
  Ulen North, Jr.

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Executive Vice President

  	
   

  
									



 


24