Document:

Exhibit 10.15

 

Execution Version

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT
(“Agreement”) is made effective as of November 9, 2005 (“Effective Date”),
by and between IT&E International Group (“Company”) and Gene Resnick, M.D.
(“Executive”).

 

RECITALS

 

A.                                   Company
and Executive entered into an Asset Purchase Agreement, dated as of the date
hereof.

 

B.                                     Company
desires to retain the services of Executive, and Executive is willing to
provide such services to the Company.

 

C.                                     Company
and Executive desire to enter into this Agreement to provide for Executive’s
employment by the Company, upon the terms and conditions set forth herein.

 

The parties hereby agree
as follows:

 

1.                                       Duties.

 

1.1.                              Position.  Executive shall serve as Senior Vice
President of IT & E of the Company and President of the Millennix
Division of the Company and shall have the duties and responsibilities incident
to such position and such other duties as may be determined in consultation
with the Company’s Board of Directors (“Board of Directors”).  Executive shall perform faithfully,
cooperatively and diligently all of his job duties and responsibilities.

 

1.2.                              Best
Efforts.  Executive will expend his
best efforts on behalf of Company in connection with his employment and will
abide by all policies and decisions made by Company, as well as all applicable
federal, state and local laws, regulations or ordinances.

 

2.                                       Employment
Term.  The term of Executive’s
employment under this Agreement shall commence as of the Effective Date and
shall continue until that date which is twenty four (24) months after the
Effective Date (the “Employment Term”), unless earlier terminated by either the
Executive or the Company.

 

3.                                       Compensation.

 

3.1.                              Base
Salary.  As compensation for
Executive’s performance of his duties hereunder, Company shall pay to Executive
an initial base salary of Twenty Thousand Dollars ($20,000) per month, which if
annualized, would represent Two Hundred Forty Thousand Dollars ($240,000) (“Annual
Base Salary”), payable in accordance with the normal payroll practices of
Company, less required deductions for state and federal withholding tax, social
security and all other employment taxes and payroll deductions.

 

3.2.                              Annual
Bonus.  In addition to the Annual
Base Salary, Executive shall be eligible to receive an annual cash bonus in an
amount consistent with the annual cash bonus provided to the other executives
of the Company, as determined by the 

 

 

Board of
Directors based upon the satisfaction of certain objective criteria and
performance standards established by the Board of Directors (the “Annual Bonus”).

 

3.3.                              Stock
Options.  On the Effective Date,
Executive will be granted an option to purchase One Million (1,000,000) shares
of the Company’s Common Stock pursuant to the Company’s 2005 Equity Incentive
Plan, with an exercise price equal to the fair market value of the Company’s
Common Stock on the Effective Date.  Executive
shall be eligible to receive stock options, restricted stock or other equity
incentive grants pursuant to one or more equity incentive plans offered by the
Company from time to time, subject to the approval of the Board of Directors.  Any and all stock options previously granted
to Executive by Company will continue to vest throughout the Employment Term.

 

4.                                       Health
and Welfare Benefit Plans.  The
Executive and/or the Executive’s family, as the case may be, shall be eligible
for participation in and shall receive all benefits under health and welfare
benefit plans, practices, policies and programs provided by the Company
(including, without limitation, medical prescription, dental disability, salary
continuance, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent generally applicable to employees
of the Company.

 

5.                                       Customary
Benefits.  Executive shall be
entitled to all customary and usual fringe benefits and shall be entitled to
participate in all savings and retirement plans, practices, policies and
programs generally applicable to employees of the Company and that are in
effect during the Employment Term, subject to the terms and conditions of
Company’s benefit plan documents, as applicable.  Company reserves the right to change or
eliminate the fringe benefits or plans, practices and programs on a
company-wide, prospective basis, at any time.

 

6.                                       Business
Expenses.  Executive shall be
entitled to receive prompt reimbursement for all reasonable, out-of-pocket
business expenses incurred in the performance of his duties on behalf of
Company.  To obtain reimbursement, expenses
must be submitted promptly with appropriate supporting documentation in
accordance with Company’s policies.

 

7.                                       Vacation.  Executive shall be entitled to an aggregate
of twenty nine (29) days of paid vacation and sick days each calendar year in
accordance with the Company’s plans, policies and programs then in effect.

 

8.                                       Severance
Package Upon Termination of Employment Other Than for Cause.  If the Company terminates Executive’s
employment without Cause or Executive resigns as an employee of the Company for
Good Reason, Company agrees to provide Executive with the Severance Package
described in section 8.1 below in accordance with the payment schedule set
forth in section 8.2 below, provided Executive agrees to comply with all
of the conditions set forth in section 8.3 below.

 

8.1.                              Description
of Severance Package.  The “Severance
Package” will consist of:

 

(a)                                  all
Accrued Obligations (defined below);

 

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(b)                                 a
“Severance Payment” equal to the greater of: (i) the amount of Executive’s
then in effect Base Salary that would have been payable to Executive if
Executive had been employed by the Company from the Date of Termination through
the end of the Employment Term, or (ii) an amount equal to one (1) year
of Executives then in effect Base Salary; and

 

(c)                                  Upon
termination of employment, the Executive will be allowed to continue in the
Company’s group health insurance plan at the Executive’s own expense for up to
eighteen (18) months, in accordance with applicable law (COBRA).  However, if the Executive elects COBRA
coverage, the Company will pay the first twelve (12) months of COBRA coverage.

 

8.2.                              Payment
Schedule.  The Severance Package will
be paid less required deductions for state and federal withholding tax, social
security and all other employment taxes as required by law.  The Accrued Obligations described in section 8.1(a) will
be paid within fifteen (15) days after the Date of Termination, unless
otherwise required by law.  The Severance
Payment described in section 8.1(b) will be payable in equal
installments in accordance with the normal payroll practices of the Company
from the Date of Termination through the end of the Employment Term or one (1) year
after the Date of Termination, whichever is applicable (the “Severance Period”),
with the first installment to be paid on the payroll date immediately following
the later of the Date of Termination or the date Executive executes the General
Release (as defined herein).  The
payments to be made under Section 8.1(c) above shall be made in
accordance with the terms of the applicable plan or policy.

 

8.3.                              Conditions
to Receive Severance Package. 
Executive will receive the Severance Package described above only if he
complies with all of the following conditions and continues to comply with the
following for the duration of the Severance Period:

 

(a)                                  Executive
executes a full general release in favor of the Company (the “General Release”)
in the form attached hereto as Exhibit A;

 

(b)                                 Executive
reaffirms in writing and complies with the Non-Competition and Non-Solicitation
Agreement between Executive and the Company (the “Non-Competition Agreement”)
in accordance with the terms thereof.

 

(c)                                  Executive
complies with the Company’s then in effect trade secrets policies and any
inventions and proprietary information agreement between Executive and the
Company (the “Confidentiality Agreement”) in accordance with the terms thereof.

 

The Company’s obligation
to make payments under this Section 8 shall cease if at any time Executive
is not in compliance with any of the foregoing agreements.

 

9.                                       Nonqualified
Deferred Compensation Plan.  To the
extent any amount payable under a “nonqualified deferred compensation plan” (as
defined in Section 409A of the U.S. Internal Revenue Code) following a “separation
from service” (as defined in Section 409A of the U.S. Internal Revenue
Code), then, notwithstanding any other provision of this Agreement to the
contrary, such payment will not be made until the date that is six (6) months
following

 

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Executive’s
separation from service, but only if the Executive is then deemed to be a “specified
employee” under Section 409A of the U.S. Internal Revenue Code.

 

10.                                 Definitions.

 

10.1.                        Accrued
Obligations.  For purposes of this
Agreement, “Accrued Obligations” shall mean: 
(i) payment of Executive’s Annual Base Salary through the Date of
Termination to the extent not theretofore paid; and (ii) payment of any
compensation previously deferred by Executive (together with any accrued
interest thereon) and not yet paid by Company and any accrued vacation pay not
yet paid by Company.

 

10.2.                        Cause.  For purposes of this Agreement, “Cause” shall
mean: (i) any willful, material violation of any law or regulation
applicable to the business of the Company or any subsidiary of the Company; (ii) conviction
for, or guilty plea to, a felony or a crime involving moral turpitude, or any
willful perpetration of a common law fraud; (iii) commission of an act of
personal dishonesty which involves personal profit in connection with the Company
or any subsidiary of the Company, or any other entity having a business
relationship with the Company or any subsidiary of the Company; (iv) any
material breach of any provision of any agreement or understanding between the Company
or any subsidiary of the Company and Executive regarding the terms of Executive’s
service as an employee, officer, director or consultant to the Company or any
subsidiary of the Company, including without limitation, the willful and
continued failure or refusal to perform the material duties required of Executive
as an employee, officer, director or consultant of the Company or any
subsidiary of the Company (other than as a result of disability) or a breach of
any applicable creative works assignment and confidentiality agreement or
similar agreement between the Company or any subsidiary of the Company and
Executive; (v) disregard of the policies of the Company or any subsidiary
of the Company, so as to cause material loss, damage or injury to the property,
reputation or employees of the Company or any subsidiary of the Company if
Executive has been given a reasonable opportunity to comply with such policy or
cure his failure to comply; (vi) any breach of the Non-Competition
Agreement; or (vii) any other misconduct by Executive which is materially
injurious to the financial condition or business reputation of, or is otherwise
materially injurious to, the Company or any subsidiary of the Company.

 

10.3.                        Disability.  For purposes of this Agreement, “Disability”
shall mean if Executive is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment that can
be expected to result in death or can be expected to last for a continuous
period of not less than twelve (12) months, as determined by a physician
selected by Company or its insurers and acceptable to Executive or Executive’s
legal representative (such agreement as to acceptability not to be withheld
unreasonably or delayed).

 

10.4.                        Good
Reason.  For purposes of this
Agreement, “Good Reason” shall mean:

 

(a)                                  A
substantial diminution in Executive’s position, authority, duties or
responsibilities as contemplated by Section 1 of this Agreement, excluding
non-substantial changes in title or office, and excluding any isolated,
insubstantial and inadvertent action not

 

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taken in bad faith and which is remedied by Company
promptly after receipt of written notice thereof given by Executive;

 

(b)                                 Any
failure by Company to comply with any of the provisions of Section 3 of
this Agreement, other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by Company promptly after
receipt of written notice thereof given by Executive; or

 

(c)                                  The
Company requiring Executive to be based or spend a material amount of time at any
office or location other than Purchase, New York.

 

11.                                 Notice
of Termination.  Any termination by
Company for Cause or by Executive for Good Reason shall be communicated by a “Notice
of Termination” to the other party hereto given in accordance with Section 16.6
of this Agreement. For purposes of this Agreement, a “Notice of Termination”
means a written notice which:  (i) indicates
the specific termination provision in this Agreement relied upon; (ii) to
the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive’s employment
under the provision so indicated; and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than fifteen (15) days after the
giving of such notice).  The failure by
Executive or Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause, as the
case may be, shall not waive any right of Executive or Company hereunder or preclude
Executive or Company from asserting such fact or circumstance in enforcing
Executive’s or Company’s rights hereunder. 
Any termination by Company without Cause or by Executive without Good
Reason must be preceded by thirty (30) days’ advance written notice in accordance
with the terms of Sections 11 and 16.6 of this Agreement.

 

12.                                 Date
of Termination.  “Date of Termination”
means the date of death, Disability or the date of delivery of the Notice of
Termination or any later date specified therein, as the case may be; provided,
however, that if Executive’s employment is terminated by Company other than for
Cause or Executive resigns without Good Reason, the Date of Termination shall
be at least thirty (30) days after the date of the applicable Notice of
Termination.

 

13.                                 Confidentiality
and Proprietary Rights.  Executive
agrees to continue to abide by the Confidentiality Agreement, which is attached
to this Agreement as Exhibit B.

 

14.                                 Nondisparagement.  Executive agrees not to disparage, defame or
make any negative or critical public statements, whether verbally or in
writing, regarding the personal or business reputation, technology, products,
practices or conduct of Company or any of Company’s officers or directors.  In addition, except as required by law,
Executive shall not make any public statements regarding Company without the
prior written approval of the Board of Directors.  Additionally, the Company agrees not to
disparage, defame or make any negative or critical public statements, whether verbally
or in writing, regarding the personal or business reputation of Executive.

 

5

 

15.                                 Injunctive
Relief.  Executive acknowledges that
Executive’s breach of the covenants contained in sections 8.3, 13 and 14 of
this Agreement would cause irreparable injury to Company and agrees that in the
event of any such breach, Company shall be entitled to seek temporary,
preliminary and permanent injunctive relief without the necessity of proving
actual damages or posting any bond or other security.

 

16.                                 General
Provisions.

 

16.1.                        Successors
and Assigns.  The rights and
obligations of Company under this Agreement shall inure to the benefit of and
shall be binding upon the successors and assigns of Company.  Executive shall not be entitled to assign any
of Executive’s rights or obligations under this Agreement.

 

16.2.                        Waiver.  The rights and remedies of the parties to
this Agreement are cumulative and not alternative.  Neither the failure nor any delay by any
party in exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege; and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power
or privilege or the exercise of any other right, power or privilege.  To the maximum extent permitted by applicable
law, (i) no claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (ii) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and (iii) no
notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this Agreement
or the documents referred to in this Agreement.

 

16.3.                        Severability.  In the event any provision of this Agreement
is found to be unenforceable, invalid or illegal by an arbitrator or court of
competent jurisdiction, such provision shall be deemed modified to the extent
necessary to allow enforceability of the provision as so limited, it being
intended that the parties shall receive the benefit contemplated herein to the
fullest extent permitted by law.  If a
deemed modification is not satisfactory in the judgment of such arbitrator or
court, the unenforceable, invalid or illegal provision shall be deemed deleted,
and the legality, validity and enforceability of the remaining provisions shall
not be affected thereby.

 

16.4.                        Interpretation;
Construction.  The headings set forth
in this Agreement are for convenience only and shall not be used in
interpreting this Agreement.  This
Agreement has been drafted by legal counsel representing the Company, but
Executive has participated in the negotiation of its terms.  Furthermore, Executive acknowledges that
Executive has had an opportunity to review the Agreement and has had it
reviewed and negotiated by legal counsel acting on his/her behalf, and,
therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement.

 

6

 

16.5.                        Governing
Law.  This Agreement will be governed
by and construed in accordance with the laws of the United States and the State
of New York, without reference to its conflicts of laws principles.

 

The Executive hereby agrees to submit to binding
arbitration before the American Arbitration Association (which means A WAIVER
OF THE EXECUTIVE’S RIGHT TO SUE IN COURT AND PROCEED BY A JUDGE OR JURY TRIAL)
of all disputes and claims arising out of this Agreement.  The Executive further understands and agrees
that the Executive shall execute the Company’s standard agreement to arbitrate,
which is separate from this Agreement and may be contained in the Company’s
Employee Handbook.  This Agreement will
be the exclusive method to resolve all disputes or controversies that the
Executive or the Company may have, whether or not arising out of the Executive’s
employment or termination of that employment with the Company, except as
provided in Section 15 hereof.  THE
AGREEMENT TO ARBITRATE CONSTITUTES A WAIVER OF ANY RIGHT THAT THE EXECUTIVE OR
THE COMPANY MAY HAVE TO LITIGATE ANY CLAIM IN COURT IN A JUDGE OR JURY
TRIAL.

 

16.6.                        Notices.  All notices, consents, waivers and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (i) delivered by hand (with written confirmation
of receipt); (ii) sent by facsimile (with written confirmation of
receipt); or (iii) when received by the addressee, if sent by a nationally
recognized overnight delivery service, return receipt requested, in each case
to the appropriate addresses and facsimile numbers set forth below or on the
signature pages hereto (or to such other address as a party may designate
by notice to the other parties):

 

	
  If to IT&E:

  	
  IT&E
  International Group

  
	
   

  	
  Attention: Peter
  Sollenne, Chief Executive Officer and

  Dave Vandertie, Chief Financial Officer

  
	
   

  	
  505 Lomas Santa
  Fe Drive, Suite 200

  
	
   

  	
  Solana Beach,
  California 92075

  
	
   

  	
  Telephone: (858)
  777-1644

  
	
   

  	
  Facsimile: (858)
  366-0961

  
	
   

  	
   

  
	
  with a required
  copy to:

  	
  Foley &
  Lardner LLP

  
	
   

  	
  Attention:
  Kenneth D. Polin, Esq.

  
	
   

  	
  402 West
  Broadway, Suite 2300

  
	
   

  	
  San Diego,
  California 92101

  
	
   

  	
  Telephone: (619)
  234-6655

  
	
   

  	
  Facsimile: (619)
  234-3510

  
	
   

  	
   

  
	
  If to Executive:

  	
  Gene Resnick,
  M.D.

  
	
   

  	
  Telephone: 

  
	
   

  	
  Facsimile: 

  

 

7

 

	
  With a required
  copy to:

  	
  Herrick,
  Feinstein LLP

  
	
   

  	
  Attention: John
  Goldman, Esq.

  
	
   

  	
  2 Park Avenue

  
	
   

  	
  New York, New
  York

  
	
   

  	
  Telephone: (212)
  592-1400

  
	
   

  	
  Facsimile: (212)
  592-1500

  

 

or to such other address as either party shall have
furnished to the other in writing in accordance herewith.

 

16.7.                        Counterparts;
Facsimile.  This Agreement may be
executed in one or more counterparts, all of which when fully executed and
delivered by all parties hereto and taken together shall constitute a single
agreement, binding against each of the parties. 
To the maximum extent permitted by law or by any applicable governmental
authority, any document may be signed and transmitted by facsimile with the
same validity as if it were an ink-signed document.  Each signatory below represents and warrants
by his or her signature that he or she is duly authorized (on behalf of the
respective entity for which such signatory has acted) to execute and deliver
this instrument and any other document related to this transaction, thereby
fully binding each such respective entity.

 

16.8.                        Survival.  Sections 8 (“Separation Package Upon
Termination of Employment Other than for Cause”), 10 (“Definitions”), 13 (“Confidentiality
and Proprietary Rights”), 14 (“Nondisparagement”), 15 (“Injunctive Relief”), 16
(“General Provisions”) and 17 (“Entire Agreement”) of this Agreement shall
survive Executive’s employment by Company.

 

17.                                 Entire
Agreement.  This Agreement, including
the Confidentiality Agreement attached as Exhibit A, constitutes the
entire agreement between the parties relating to this subject matter and
supersedes all prior or simultaneous representations, discussions,
negotiations, and agreements, whether written or oral.  This Agreement may be amended or modified
only with the written consent of Executive and the Company.  No oral waiver, amendment or modification
will be effective under any circumstances whatsoever.

 

[Remainder of Page Intentionally Left Blank]

 

8

 

THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING
AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN.
WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.

 

 

	
  Dated:

  	
  November 9, 2005

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
  /s/ Gene Resnick

  	
   

  
	
   

  	
  Gene Resnick,
  M.D.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
  November 9, 2005

  	
   

  	
  IT&E
  International Group

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter
  Sollenne

  	
   

  
	
   

  	
   

  	
  Peter Sollenne,
  Chief Executive Officer

  
						

 

 

EXHIBIT A

 

FORM OF GENERAL RELEASE

 

A-1

 

EXHIBIT B

 

CONFIDENTIALITY AGREEMENT

 

B-2Exhibit 10.96

 

CAP ROCK ENERGY CORPORATION

 

INDEMNIFICATION AGREEMENT

 

THIS AGREEMENT is entered into as of August 31,
2005 (this “Agreement”), between Cap Rock Energy Corporation, a Texas
corporation (the “Corporation”), and                                         
(the “Indemnitee”).

 

Background Statement and Recitals

 

Highly competent and experienced persons are becoming
more reluctant to serve corporations as directors or in other capacities unless
they are provided with adequate protection through insurance and adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of the corporation.

 

The Board of Directors of the Corporation (the “Board”)
has determined that the inability to attract and retain such persons would be
detrimental to the best interests of the Corporation and its shareholders and
that the Corporation should act to assure such persons that there will be
increased certainty of such protection in the future.

 

The Board has also determined that it is reasonable,
prudent and necessary for the Corporation, in addition to purchasing and
maintaining directors’ and officers’ liability insurance (or otherwise
providing for adequate arrangements of self-insurance), contractually to
obligate itself to indemnify such persons to the fullest extent permitted by
current and future applicable law so that they will serve or continue to serve
the Corporation free from undue concern that they will not be so indemnified.

 

Indemnitee is willing to serve, to continue to serve
and to take on additional service for or on behalf of the Corporation on the
condition that he be so indemnified.

 

NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants herein contained, and other good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged,
the parties hereby agree as follows:

 

ARTICLE I

 

CERTAIN DEFINITIONS

 

As used herein, the following words and terms shall
have the following respective meanings (whether singular or plural):

 

“Change in Control” means a change in control of the
Corporation occurring any time after the date hereof of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A (or in response to any similar item on any similar schedule or
form) promulgated under the Securities Exchange Act of 1934, as amended (the

 

 

“Exchange Act”), whether
or not the Corporation is then subject to such reporting requirement; provided, however, that, without limiting the generality of
the foregoing, a Change in Control shall be deemed to have occurred
(irrespective of the applicability of the initial clause of this definition) if
at any time after the date hereof (a) any “person” (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act, but excluding (i) any
employee benefit plan of the Corporation or of any subsidiary of the
Corporation, and (ii) any entity organized, appointed or established by
the Corporation pursuant to the terms of any such plan) is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 40% or more of the
combined voting power of the Corporation’s then outstanding securities without
the prior approval of at least two-thirds of the members of the whole Board in
office immediately prior to such person attaining such percentage interest; (b) the
Corporation is a party to a merger, consolidation, share exchange, sale of
assets or other reorganization, or a proxy contest (a “Business Combination”),
as a consequence of which (x) members of the Board in office immediately prior
to such transaction or event constitute less than a majority of the whole Board
thereafter or (y) all or substantially all of the individuals and entities who
were the beneficial owners of the Corporation’s then outstanding voting
securities immediately prior to such Business Combination fail to beneficially
own, directly or indirectly, more than 50% of the then outstanding voting
securities entitled to vote generally in the election of directors (or similar
body) of the entity resulting from such Business Combination (including without
limitation, an entity which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation’s assets either
directly or through one or more subsidiaries) in proportions not materially
different from their ownership, immediately prior to such Business Combination,
of the Corporation’s then outstanding voting securities; or (c) during any
period of two consecutive years, individuals who at the beginning of such
period constituted members of the Board (including for this purpose any new
member whose election or nomination for election by the Corporation’s
shareholders was approved by a vote of at least two-thirds of the members of
the whole Board then still in office who were members of the Board at the
beginning of such period) cease for any reason to constitute a majority of the
whole Board.

 

“Claim” means an actual or threatened claim or request
for relief.

 

“Corporate Status” means the status of a person who is
or was a director, nominee for director, officer, employee, agent or fiduciary
of the Corporation (including any predecessors to the Corporation) or of any
other corporation, employee benefit plan, other enterprise or other entity for
or in which such person is or was serving as a director, nominee for director,
officer, employee, agent or fiduciary at the request of or after election or
nomination by the Corporation.

 

“Disinterested Director,” with respect to any request
by Indemnitee for indemnification hereunder, means a director of the
Corporation who neither is nor was a party to the Proceeding or subject to a
Claim, issue or matter in respect of which indemnification is sought by
Indemnitee.

 

“Expenses” means all attorneys’ fees, retainers, court
costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees and all other disbursements or expenses of the types

 

2

 

customarily incurred in
connection with prosecuting, defending, preparing to prosecute or defend,
investigating, being or preparing to be a witness in, or participating in
(including on appeal), a Proceeding.

 

“Independent Counsel” means a law firm, or a member of
a law firm, that is experienced in matters of corporation law and neither
contemporaneously is, nor in the five years theretofore has been, retained to
represent (a) the Corporation or Indemnitee in any matter material to
either such party, (b) any other party to the Proceeding giving rise to a
claim for indemnification hereunder or (c) the beneficial owner, directly
or indirectly, of securities of the Corporation representing 40% or more of the
combined voting power of the Corporation’s then outstanding voting securities
(other than, in each such case, with respect to matters concerning the rights
of Indemnitee under this Agreement, or of other indemnitees under similar
indemnification agreements). 
Notwithstanding the foregoing, the term “Independent Counsel” shall not
include any person who, under the applicable standards of professional conduct
then prevailing, would have a conflict of interest in representing either the
Corporation or Indemnitee in an action to determine Indemnitee’s rights under
this Agreement.

 

“Person” shall have the meaning ascribed to such term
in Sections 13(d) and 14(d) of the Exchange Act.

 

“Proceeding” means any threatened, pending or
completed action, suit, arbitration, investigation, alternate dispute
resolution mechanism, administrative hearing or any other proceeding, whether
civil, criminal, administrative, arbitrative or investigative and whether or
not based upon events occurring, or actions taken, before the date hereof
(except any of the foregoing initiated by Indemnitee pursuant to Article VI
or Section 7.9 to enforce his rights under this Agreement), and any appeal
in or related to any such action, suit, arbitration, investigation, hearing or
proceeding and any appeal in or related to any such action, suit, arbitration,
investigation, hearing or proceeding and any inquiry or investigation that
could lead to, and any appeal in or related to, any such action, suit,
arbitration, alternative dispute resolution mechanism, hearing or proceeding.

 

“TBCA” means the Texas Business Corporation Act and
any successor statute thereto as either of them may from time to time be
amended.

 

ARTICLE II

 

SERVICES BY INDEMNITEE

 

Section 2.1             Services.  Indemnitee
agrees to serve, or continue to serve, as a director of the Corporation.  Indemnitee may from time to time also agree
to serve, as the Corporation may request from time to time, as a director,
officer, partner, venturer, proprietor, trustee, employee, agent, fiduciary or
similar functionary of another foreign or domestic corporation, employee
benefit plan, other enterprise or other entity. 
Indemnitee and the Corporation each acknowledge that they have entered
into this Agreement as a means of inducing Indemnitee to serve, or continue to
serve, the Corporation in such capacities. 
Indemnitee may at any time and for any reason resign from such position
or positions (subject to

 

3

 

any other contractual
obligation or any obligation imposed by operation of law).  The Corporation shall have no obligation
under this Agreement to continue Indemnitee in any such position or positions.  This Agreement will not be deemed an
employment contract between the Corporation (or any of its subsidiaries) and
the Indemnitee.

 

ARTICLE III

 

INDEMNIFICATION

 

Section 3.1             General.  The
Corporation shall indemnify, and advance Expenses to, Indemnitee to the fullest
extent permitted by applicable law in effect on the date hereof and to such
greater extent as applicable law may thereafter from time to time permit.  The rights of Indemnitee provided under the
preceding sentence shall include, but shall not be limited to, the right to be
indemnified and to have Expenses advanced in all Proceedings to the fullest
extent permitted by Article 2.02-1 of the TBCA.  The provisions set forth in this Agreement
are provided in addition to and as a means of furtherance and implementation
of, and not in limitation of, the obligations expressed in this Article III.  No requirement, condition or limitation of
any right to indemnification under this Article III, or to advancement of
Expenses under Articles III and IV shall in any way limit the rights of
Indemnitee under Section 7.3.

 

Section 3.2             Additional Indemnity  of the Corporation.  Indemnitee shall be entitled to
indemnification pursuant to this Section 3.2 if, by reason of his
Corporate Status, he was, is or is threatened to be made, a party to any
Proceeding (except to the extent limited by Section 3.3).  Pursuant to this Section 3.2, Indemnitee
shall be indemnified against reasonable Expenses, judgments, penalties
(including excise or similar taxes), fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with any such Expenses, judgments, penalties, fines and amounts paid
in settlement) actually incurred by him or on his behalf in connection with
such Proceeding or any Claim, issue or matter, therein, if (a) he
conducted himself in good faith; (b) he reasonably believed (i) in
the case of conduct in his official capacity, that his conduct was in the
Corporation’s best interest; and (ii) in all other cases, that his conduct
was at least not opposed to the best interests of the Corporation, and (c) in
the case of any criminal Proceeding, had no reasonable cause to believe his
conduct was unlawful.  Nothing in this Section 3.2
shall limit the benefits of Section 3.1 or any other Section hereunder.

 

Section 3.3             Limitation on Indemnity. 
The Indemnification otherwise available to an Indemnitee under Section 3.2
shall be limited to the extent set forth in this Section 3.3.  In the event that an Indemnitee is found
liable to the Corporation or is found liable on the basis that personal benefit
was improperly received by the Indemnitee whether or not the benefit resulted
from an action taken in Indemnitee’s official capacity the Indemnitee shall,
with respect to the Claim, issue or matter, in the Proceeding in which such
finding is made, be indemnified only against reasonable Expenses actually
incurred by him in connection with that Claim, issue or matter therein.  Notwithstanding the foregoing, no
indemnification against such Expenses shall be made in respect of any Claim,
issue or matter, in such Proceeding as to which Indemnitee shall have been
adjudged to be liable for willful or intentional misconduct in the performance
of

 

4

 

his duty to the
Corporation; provided, however, that, if
applicable law so permits, indemnification against such Expenses shall
nevertheless be made by the Corporation in such event if and only to the extent
that the court in which such Proceeding shall have been brought or is pending,
shall determine.

 

ARTICLE IV

 

EXPENSES

 

Section 4.1             Expenses of a Party Who Is Wholly or Partly Successful.  Notwithstanding any other provision of this
Agreement to the contrary (except as set forth in Section 7.2(c) or
7.7), and without a requirement for any determination described in Section 5.2,
the Corporation shall indemnify Indemnitee against all Expenses actually and
reasonably incurred by him or on his behalf in connection with any Proceeding
to which Indemnitee was or is a party by reason of his Corporate Status and in
which Indemnitee is wholly successful, on the merits or otherwise, in the
defense of the Proceeding.  If Indemnitee
is not wholly successful, on the merits or otherwise, in a Proceeding but is
successful, on the merits or otherwise, as to any Claim, issue or matter in
such Proceeding, the Corporation shall indemnify Indemnitee against all
Expenses actually and reasonably incurred by him or on his behalf relating to
each successfully resolved Claim, issue or matter.  For purposes of this Section 4.1 and
without limitation, the termination of a Claim, issue or matter in a Proceeding
by dismissal, with or without prejudice, shall be deemed to be a successful
result as to such Claim, issue or matter.

 

Section 4.2             Expenses of a Witness or Non-Party.  Notwithstanding any other provision of this
Agreement to the contrary, to the extent that Indemnitee is, by reason of his
Corporate Status, a witness or otherwise participates in any Proceeding at a
time when he is not a party in the Proceeding, the Corporation shall indemnify
him against all Expenses actually and reasonably incurred by him or on his
behalf in connection therewith.

 

Section 4.3             Advancement of Expenses. 
The Corporation shall pay all reasonable Expenses incurred by or on
behalf of Indemnitee in connection with any Proceeding, whether brought by or
in the right of the Corporation or otherwise, in advance of any determination
with respect to entitlement to indemnification pursuant to Article V
within 15 days after the receipt by the
Corporation of (a) a written affirmation by the director of his good faith
belief that he has met the standard of conduct necessary for indemnification
under Article III and (b) a written undertaking by or on behalf of
Indemnitee to repay the amount paid or reimbursed if it is ultimately
determined that he has not met that standard or if it is ultimately determined
that indemnification of the Indemnitee against expenses incurred by him in
connection with that proceeding is prohibited by the TBCA.  Such statement or statements shall reasonably
evidence the Expenses incurred by Indemnitee. 
Indemnitee hereby undertakes and agrees that he will reimburse and repay
the Corporation for any Expenses so advanced to the extent that it shall
ultimately be determined, in a final adjudication by a court from which there
is no further right of appeal, that Indemnitee is not entitled to be
indemnified against such Expenses.

 

5

 

ARTICLE V

 

PROCEDURE FOR DETERMINATION OF ENTITLEMENT

TO INDEMNIFICATION

 

Section 5.1             Request by Indemnitee. 
To obtain indemnification under this Agreement, Indemnitee shall submit
to the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification.  The
Secretary or an Assistant Secretary of the Corporation shall, promptly upon
receipt of such a request for indemnification, advise the members of the Board
in writing that Indemnitee has requested indemnification.

 

Section 5.2             Determination of Request. 
Upon written request by Indemnitee for indemnification pursuant to Section 5.1,
a determination, if required by applicable law, with respect to Indemnitee’s
entitlement thereto shall be made in the specific case as follows:

 

(a) If a Change in Control shall have occurred,
by Independent Counsel (selected in accordance with Section 5.3) in a written
opinion to the Board, a copy of which shall be delivered to Indemnitee, unless
Indemnitee shall request that such determination be made by the Board, or a
committee of the Board, in which case by the person or persons or in the manner
provided for in clause (i) or (ii) of paragraph (b) below;

 

(b) If a Change in Control shall not have
occurred, (i) by the Board by a majority vote of a quorum of the Board
consisting of Disinterested Directors, or (ii) if a quorum of the Board
consisting of Disinterested Directors is not obtainable, by a majority vote of
a committee of the Board designated to act in the matter by a majority vote of
the entire Board, consisting solely of two or more Disinterested Directors, (iii) by
Independent Counsel selected by the Board or a committee of the Board by a vote
as set forth in clauses (i) or (ii) of this paragraph (b), or if such
quorum is not obtainable or such committee cannot be established, by a majority
vote of all directors, or (iv) if Indemnitee and the Company agree, by the
shareholders of the Company in a vote that excludes the shares held by the
Indemnitee and directors who are not Disinterested Directors; or

 

(c) As provided in Section 5.4(b).

 

If it is so determined that Indemnitee is entitled to indemnification
hereunder, payment to Indemnitee shall be made within 15 days after such
determination.  Indemnitee shall
cooperate with the person, persons or entity making such determination with
respect to Indemnitee’s entitlement to indemnification, including providing to
such person, persons or entity upon reasonable advance request any
documentation or information that is not privileged or otherwise protected from
disclosure and that is reasonably available to Indemnitee and reasonably
necessary for such determination.  Any
costs or expenses (including attorneys’ fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making such
determination shall be borne by the Corporation (irrespective of the
determination

 

6

 

as to Indemnitee’s entitlement to indemnification), and the Corporation
shall indemnify and hold harmless Indemnitee therefrom.

 

Section 5.3             Independent Counsel. 
If the determination of entitlement to indemnification is to be made by
Independent Counsel, the Independent Counsel shall be selected (a) by the
Board by a majority vote of a quorum of the Board consisting of Disinterested
Directors, or (b) if a quorum of the Board consisting of Disinterested
Directors is not obtainable, by a majority vote of a committee of the Board
designated to select such Independent Counsel by a majority vote of all
directors of the Corporation, consisting solely of two or more Disinterested
Directors, or (c) if such quorum is not obtainable or such committee
cannot be established, by a majority vote of all directors.  The Corporation shall give written notice to
Indemnitee, within 10 days after receipt by the Corporation of Indemnitee’s
request for indemnification, specifying the identity and address of the
Independent Counsel so selected and (i) such notice to Indemnitee shall be
accompanied by a written affirmation of the Independent Counsel so selected
that it satisfies the requirements of the definition of “Independent Counsel”
in Article I and that it agrees to serve in such capacity and (ii) Indemnitee
may, within seven days after such written notice of selection shall have been
given, deliver to the Corporation a written objection to such selection.  Any objection to selection of Independent
Counsel pursuant to this Section 5.3 may be asserted only on the ground
that the Independent Counsel so selected does not meet the requirements of the
definition of “Independent Counsel” in Article I hereof, and the objection
shall set forth with particularity the factual basis of such assertion.  If such written objection is timely made, the
Independent Counsel so selected may not serve as Independent Counsel unless and
until a court of competent jurisdiction (the “Court”) has determined that such
objection is without merit.  In the event
of a timely written objection to a choice of Independent Counsel, the
Corporation shall have seven days to make an alternate selection of Independent
Counsel and to give written notice of such selection to the Indemnitee, after
which time the Indemnitee shall have five days to make a written objection to
such alternate selection.  If, within 30
days after submission of Indemnitee’s request for indemnification pursuant to Section 5.1
hereof, no Independent Counsel shall have been selected and not objected to,
the Corporation may petition the Court for resolution of any objection that
shall have been made by the Indemnitee to the Corporation’s selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel under Section 5.2
hereof.  The Corporation shall pay any
and all reasonable fees and expenses incurred by such Independent Counsel in
connection with acting pursuant to Section 5.2, and the Corporation shall
pay all reasonable fees and expenses incident to the procedures of this Section 5.3,
regardless of the manner in which such Independent Counsel was selected or
appointed.  Upon the due commencement of
any judicial proceeding or arbitration pursuant to Section 6.1,
Independent Counsel shall be discharged and relieved of any further responsibility
in such capacity (subject to the applicable standards of professional conduct
then prevailing).

 

Section 5.4             Presumptions and Effect of Certain Proceedings.

 

(a)           The
Indemnitee shall be presumed to be entitled to indemnification under this
Agreement upon submission of a request for indemnification pursuant to Section 5.1,

 

7

 

and thereafter the
Corporation shall have the burden of proof in overcoming that presumption in
reaching a determination contrary to that presumption.  Such presumption shall be used by Independent
Counsel (or other person or persons determining entitlement to indemnification)
as a basis for a determination of entitlement to indemnification unless the
Corporation provides information sufficient to overcome such presumption by
clear and convincing evidence.

 

(b)           If
the person or persons empowered or selected under this Article V to
determine whether Indemnitee is entitled to indemnification shall not have made
a determination within 60 days after receipt by the Corporation of Indemnitee’s
request for indemnification, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee shall be
entitled to such indemnification, absent (i) a knowing misstatement by
Indemnitee of a material fact, or knowing omission of a material fact necessary
to make Indemnitee’s statement not materially misleading, in connection with
Indemnitee’s request for indemnification, or (ii) a prohibition of such
indemnification under applicable law; provided, however,
that such 60-day period may be extended for a reasonable time, not to exceed an
additional 30 days, if the person making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information relating to
such determination; provided further,
that the 60-day limitation set forth in this Section 5.4(b) shall not
apply and such period shall be extended as necessary (i) if within 30 days
after receipt by the Corporation of Indemnitee’s request for indemnification
under Section 5.1 Indemnitee and the Company have agreed, and the Board
has resolved to submit, such determination to the shareholders of the Corporation
pursuant to Section 5.2(b) for their consideration at an annual
meeting of shareholders to be held within 90 days after such agreement and such
determination is made thereat, or a special meeting of shareholders for the
purpose of making such determination to be held within 60 days after such
agreement and such determination is made thereat (any vote at such meetings
will exclude any shares held by the Indemnitee and directors who are not
Disinterested Directors), or (ii) if the determination of entitlement to
indemnification is to be made by Independent Counsel, in which case the
applicable period shall be as set forth in clause (c) of Section 6.1.

 

(c)           The
termination of any Proceeding or of any Claim, issue or matter by judgment,
order, settlement (whether with or without court approval) or conviction, or
upon a plea of nolo contendere or its
equivalent, shall not (except as otherwise expressly provided in this
Agreement) by itself adversely affect the rights of Indemnitee to
indemnification or create a presumption that Indemnitee did conduct himself in
good faith or in a manner that he reasonably believed in the case of conduct in
his official capacity, that was in the best interests of the Corporation, or,
in all other cases, that was not opposed to the best interests of the
Corporation or, with respect to any criminal Proceeding, that Indemnitee had
reasonable cause to believe that his conduct was unlawful.  Indemnitee shall be deemed to have been found
liable in respect of any Claim, issue or matter only after he shall have been
so adjudged by the Court after exhaustion of all appeals therefrom.

 

8

 

ARTICLE VI

 

CERTAIN REMEDIES OF INDEMNITEE

 

Section 6.1             Indemnitee Entitled to Adjudication in an Appropriate Court.  If (a) a determination is made pursuant
to Article V that Indemnitee is not entitled to indemnification under this
Agreement, (b) there has been any failure by the Company to make timely
payment or advancement of any amounts due hereunder, or (c) the
determination of entitlement to indemnification is to be made by Independent
Counsel and such determination shall not have been made and delivered in a
written opinion within 90 days after the latest of (i) such Independent
Counsel’s being appointed, (ii) the overruling by the Court of objections
to such counsel’s selection or (iii) expiration of all periods for the
Corporation or Indemnitee to object to such counsel’s selection, Indemnitee
shall be entitled to commence an action seeking an adjudication in the Court,
of his entitlement to such indemnification or advancement of Expenses.  Alternatively, Indemnitee, at his option, may
seek an award in arbitration to be conducted by a single arbitrator pursuant to
the commercial arbitration rules of the American Arbitration
Association.  Indemnitee shall commence
such action seeking an adjudication or an award in arbitration within 180 days
following the date on which Indemnitee first has the right to commence such
action pursuant to this Section 6.1, or such right shall expire.  The Corporation shall not oppose Indemnitee’s
right to seek any such adjudication or award in arbitration.

 

Section 6.2             Adverse Determination Not to Affect any Judicial Proceeding.  If a determination shall have been made pursuant
to Article V that Indemnitee is not entitled to indemnification under this
Agreement, any judicial proceeding or arbitration commenced pursuant to this Article VI
shall be conducted in all respects as a de novo trial
or arbitration on the merits, and Indemnitee shall not be prejudiced by reason
of such initial adverse determination. 
In any judicial proceeding or arbitration commenced pursuant to this Article VI,
Indemnitee shall be presumed to be entitled to indemnification or advancement
of Expenses, as the case may be, under this Agreement and the Corporation shall
have the burden of proof in overcoming such presumption and to show by clear
and convincing evidence that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.

 

Section 6.3             Corporation Bound by Determination Favorable to Indemnitee in any
Judicial Proceeding or Arbitration. 
If a determination shall have been made or deemed to have been made
pursuant to Article V that Indemnitee is entitled to indemnification, the
Corporation shall be irrevocably bound by such determination in any judicial
proceeding or arbitration commenced pursuant to this Article VI and shall
be precluded from asserting that such determination has not been made or that
the procedure by which such determination was made is not valid, binding and
enforceable, in each such case absent (a) a knowing misstatement by
Indemnitee of a material fact, or a knowing omission of a material fact
necessary to make a statement by Indemnitee not materially misleading, in
connection with Indemnitee’s request for indemnification or (b) a
prohibition of such indemnification under applicable law.

 

9

 

Section 6.4             Corporation Bound by the Agreement.  The Corporation shall be precluded from
asserting in any judicial proceeding or arbitration commenced pursuant to this Article VI
that the procedures and presumptions of this Agreement are not valid, binding
and enforceable and shall stipulate in any such court or before any such
arbitrator that the Corporation is bound by all the provisions of this
Agreement.

 

Section 6.5             Indemnitee Entitled to Expenses of Judicial Proceeding.  If Indemnitee seeks a judicial adjudication
of or an award in arbitration to enforce his rights under, or to recover
damages for breach of, this Agreement, Indemnitee shall be entitled to recover
from the Corporation, and the Corporation shall indemnify Indemnitee against,
any and all expenses (of the types described in the definition of Expenses in Article I)
actually and reasonably incurred by him in such judicial adjudication or
arbitration but only if Indemnitee prevails therein.  If it shall be determined in such judicial
adjudication or arbitration that Indemnitee is entitled to receive part but not
all of the indemnification or advancement of expenses or other benefit sought,
the expenses incurred by Indemnitee in connection with such judicial
adjudication or arbitration shall be equitably allocated between the
Corporation and Indemnitee. 
Notwithstanding the foregoing, if a Change in Control shall have
occurred, Indemnitee shall be entitled to indemnification under this Section 6.5
regardless of whether Indemnitee ultimately prevails in such judicial
adjudication or arbitration.

 

ARTICLE VII

 

MISCELLANEOUS

 

Section 7.1             Non-Exclusivity.  The
rights of Indemnitee to receive indemnification and advancement of Expenses
under this Agreement shall not be deemed exclusive of any other rights to which
Indemnitee may at any time be entitled under applicable law, the Articles of
Incorporation or Bylaws of the Corporation, any other agreement, vote of
shareholders or a resolution of directors, or otherwise.  No amendment or alteration of the Articles of
Incorporation or Bylaws of the Corporation or any provision thereof shall
adversely affect Indemnitee’s rights hereunder and such rights shall be in
addition to any rights Indemnitee may have under the Corporation’s Articles of
Incorporation, Bylaws and the TBCA or otherwise.  To the extent that there is a change in the
TBCA or other applicable law (whether by statute or judicial decision) that
allows greater indemnification by agreement than would be afforded currently
under the Corporation’s Articles of Incorporation or Bylaws and this Agreement,
it is the intent of the parties hereto that the Indemnitee shall enjoy by
virtue of this Agreement the greater benefit so afforded by such change.

 

Section 7.2             Insurance and Subrogation.

 

(a)           To
the extent the Corporation maintains an insurance policy or policies providing
liability insurance for directors, officers, employees, agents or fiduciaries
of the Corporation or for directors of the Corporation serving at the request
of the Corporation as directors, officers, partners, venturers, proprietors,
trustees, employees, agents, fiduciaries or similar functionaries of another
foreign or domestic corporation, employee benefit plan, other enterprise or
other entity that such person serves at the request of the Corporation,
Indemnitee

 

10

 

shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee, agent or
fiduciary under such policy or policies.

 

(b)           In
the event of any payment by the Corporation under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and
take all action necessary to secure such rights, including execution of such
documents as are necessary to enable the Corporation to bring suit to enforce
such rights.

 

(c)           The
Corporation shall not be liable under this Agreement to make any payment of
amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee
has otherwise actually received such payment under the Corporation’s Articles
of Incorporation or Bylaws or any insurance policy, contract, agreement or
otherwise.

 

Section 7.3             Self Insurance; Other Arrangements.  The parties hereto recognize that the
Corporation may, but is not required to, procure or maintain insurance or other
arrangements, at its expense, to protect itself and any person, including
Indemnitee, who is or was a director, officer, employee or agent of the
Corporation or who is or was serving at the request of the Corporation as a
director, officer, partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another foreign or domestic corporation, employee
benefit plan, other enterprise or other entity against any expense, liability
or loss asserted against or incurred by such person, in such a capacity or
arising out of his status as such a person, whether or not the Corporation
would have the power to indemnify such person against such expense, liability
or loss.

 

In considering the cost and availability of such
insurance, the Corporation, (through the exercise of the business judgment of
its directors and officers), may from time to time, purchase insurance which
provides for any and all of (a) deductibles, (b) limits on payments
required to be made by the insurer, or (c) coverage exclusions and/or
coverage which may not be as comprehensive as that which might otherwise be
available to the Corporation but which otherwise available insurance the
officers or directors of the Corporation determine is inadvisable for the
Corporation to purchase given the cost involved.  The purchase of insurance with deductibles,
limits on payments and coverage exclusions will be deemed to be in the best
interest of the Corporation but may not be in the best interest of the
Indemnitee.  As to the Corporation,
purchasing insurance with deductibles, limits on payments and coverage
exclusions is similar to the Corporation’s practice of self-insurance in other
areas.  In order to protect Indemnitee
who would otherwise be more fully or entirely covered under such policies, the
Corporation shall indemnify and hold Indemnitee harmless to the extent (a) of
such deductibles, (b) of amounts exceeding payments required to be made by
an insurer or (c) of coverage under policies of officer’s and director’s
liability insurance that are available, were available or which became
available to the Corporation or which are generally available to companies
comparable to the Corporation but which the officers or directors of the
Corporation determine is inadvisable for the Corporation to purchase, given the
cost involved.  The obligation of the
Corporation in the preceding sentence shall be without regard to whether the
Corporation would otherwise be entitled to indemnify such officer or director
under the other provisions of this Agreement, or

 

11

 

under any law, agreement,
vote of shareholders or directors or other arrangement.  Notwithstanding the foregoing provisions of
this Section 7.3, the Indemnitee shall not be entitled to indemnification
for the results of his conduct that is intentionally adverse to the interests
of the Corporation.  Without limiting the
generality of any provision of this Agreement, the procedures in Article V
hereof shall, to the extent applicable, be used for determining entitlement to
indemnification under this Section 7.3. 
This Agreement is authorized by Section 2.02-1(R) of the TBCA as in
effect on the date hereof, and further is intended to establish an arrangement
of self-insurance pursuant to that section.

 

Section 7.4             Certain Settlement Provisions.  The Corporation shall have no obligation to
indemnify Indemnitee under this Agreement for amounts paid in settlement of a
Proceeding or Claim without the Corporation’s prior written consent.  The Corporation shall not settle any
Proceeding or Claim in any manner that would impose any fine or other
obligation on Indemnitee without Indemnitee’s prior written consent.  Neither the Corporation nor Indemnitee shall
unreasonably withhold their consent to any proposed settlement.

 

Section 7.5             Duration of Agreement. 
This Agreement shall continue for so long as Indemnitee serves as a
director, nominee for director, officer, employee, agent or fiduciary of the
Corporation or, at the request of the Corporation, as a director, nominee for
director, officer, employee, agent or fiduciary of another foreign or domestic
corporation, employee benefit plan, other enterprise or other entity, and
thereafter shall survive until and terminate upon the latest to occur of (a) the
expiration of 10 years after the latest date that Indemnitee shall have ceased
to serve in any such capacity; (b) the final termination of all pending
Proceedings in respect of which Indemnitee is granted rights of indemnification
or advancement of Expenses hereunder and of any proceeding commenced by
Indemnitee pursuant to Article VI relating thereto; or (c) the
expiration of all statutes of limitation applicable to possible Claims arising
out of Indemnitee’s Corporate Status.

 

Section 7.6             More Favorable Terms.  In the event the Corporation enters into an
indemnification agreement with another person containing terms more favorable
to the indemnitee thereof than the terms contained herein (and absent special
circumstances justifying such more favorable terms), Indemnitee will be
afforded the benefit of such more favorable terms and such terms will be deemed
incorporated by reference herein.  As
promptly as practicable following the execution thereof, the Corporation will (a) send
a copy of the agreement containing the more favorable terms to the Indemnitee,
and (b) prepare, execute and deliver to Indemnitee an amendment to this
Agreement containing such terms.

 

Section 7.7             Notice by Each Party. 
Indemnitee shall promptly notify the Corporation in writing upon being
served with any summons, citation, subpoena, complaint, indictment, information
or other document or communication relating to any Proceeding or Claim for
which Indemnitee may be entitled to indemnification or advancement of Expenses
hereunder; provided, however, that any failure of Indemnitee to so notify the
Corporation shall not adversely affect Indemnitee’s rights under this Agreement
except to the extent the Corporation shall have been materially prejudiced as a
direct result of such failure.  The
Corporation shall notify promptly Indemnitee in writing, as to the pendency of
any Proceeding or

 

12

 

Claim that may involve a
claim against the Indemnitee for which Indemnitee may be entitled to
indemnification or advancement of Expenses hereunder.

 

Section 7.8             Certain Persons Not Entitled to Indemnification.  Notwithstanding any other provision of this
Agreement to the contrary, Indemnitee shall not be entitled to indemnification
or advancement of Expenses hereunder with respect to any Proceeding or any
Claim, issue or matter therein, brought or made by Indemnitee against the
Corporation or any affiliate of the Corporation, except as specifically
provided in Article V or Article VI hereof.

 

Section 7.9             Indemnification for Negligence, Gross Negligence, etc.  Without limiting the generality of any other
provision hereunder, it is the express intent of this Agreement that Indemnitee
be indemnified and Expenses be advanced regardless of Indemnitee’s acts of
negligence, gross negligence or intentional or willful misconduct to the extent
that indemnification and advancement of Expenses is allowed pursuant to the
terms of this Agreement and under applicable law.

 

Section 7.10           Enforcement.  The
Corporation agrees that its execution of this Agreement shall constitute a
stipulation by which it shall be irrevocably bound in any court or arbitration
in which a proceeding by Indemnitee for enforcement of his rights hereunder
shall have been commenced, continued or appealed, that its obligations set
forth in this Agreement are unique and special, and that failure of the
Corporation to comply with the provisions of this Agreement will cause
irreparable and irremediable injury to Indemnitee, for which a remedy at law
will be inadequate.  As a result, in
addition to any other right or remedy he may have at law or in equity with respect
to breach of this Agreement, Indemnitee shall be entitled to injunctive or
mandatory relief directing specific performance by the Corporation of its
obligations under this Agreement.

 

Section 7.11           Successors and Assigns. 
All of the terms and provisions of this Agreement shall be binding upon,
shall inure to the benefit of and shall be enforceable by the parties hereto
and their respective successors, assigns, heirs, executors, administrators,
legal representatives.  The Corporation
shall require and cause any direct or indirect successor (whether by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Corporation, by written agreement in form and substance
reasonably satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Corporation
would be required to perform if no such succession had taken place.

 

Section 7.12           Amendment.  This
Agreement may not be modified or amended except by a written instrument
executed by or on behalf of each of the parties hereto.

 

Section 7.13           Waivers.  The
observance of any term of this Agreement may be waived (either generally or in
a particular instance and either retroactively or prospectively) by the party
entitled to enforce such term only by a writing signed by the party against
which such waiver is to be asserted. 
Unless otherwise expressly provided herein, no delay on the part of any
party hereto in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party
hereto of any right, power or privilege

 

13

 

hereunder operate as a
waiver of any other right, power or privilege hereunder nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder.

 

Section 7.14           Entire Agreement. 
This Agreement and the documents expressly referred to herein constitute
the entire agreement between the parties hereto with respect to the matters
covered hereby, and any other prior or contemporaneous oral or written
understandings or agreements with respect to the matters covered hereby are
expressly superseded by this Agreement.

 

Section 7.15           Severability.  If any
provision of this Agreement (including any provision within a single section,
paragraph or sentence) or the application of such provision to any person or
circumstance, shall be judicially declared to be invalid, unenforceable or
void, such decision will not have the effect of invalidating or voiding the
remainder of this Agreement or affect the application of such provision to
other persons or circumstances, it being the intent and agreement of the parties
that this Agreement shall be deemed amended by modifying such provision to the
extent necessary to render it valid, legal and enforceable while preserving its
intent, or if such modification is not possible, by substituting therefor
another provision that is valid, legal and unenforceable and that achieves the
same objective.  Any such finding of
invalidity or unenforceability shall not prevent the enforcement of such
provision in any other jurisdiction to the maximum extent permitted by
applicable law.

 

Section 7.16           Notices.  All notices
and other communications hereunder shall be in writing and shall be deemed
given upon (a) transmitter’s confirmation of a receipt of a facsimile
transmission, (b) confirmed delivery of a standard overnight courier or
when delivered by hand or (c) the expiration of five business days after
the date mailed by certified or registered mail (return receipt requested),
postage prepaid, to the parties at the following addresses (or at such other
addresses for a party as shall be specified by like notice):

 

If to the Corporation, to:

 

Cap Rock Energy Corporation

500 West Wall Street, Suite 400

Midland, Texas 
79701

Attention:  Ronnie
Lyon

Facsimile:  (432)
684-0333

 

If to Indemnitee, to:

 

14

 

Section 7.17           Certain Construction Rules.

 

(a)           The
article and section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.  As
used in this Agreement, unless otherwise provided to the contrary, (i) all
references to days shall be deemed references to calendar days and (ii) any
reference to a “Section” or “Article” shall be deemed to refer to a section or
article of this Agreement.  The
words “hereof,” “herein” and “hereunder” and words of similar import referring
to this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement.  Whenever
the words “include,” “includes” or “including” are used in this Agreement, they
shall be deemed to be followed by the words “without limitation.”  Unless otherwise specifically provided for
herein, the term “or” shall not be deemed to be exclusive.  Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.

 

(b)           For
purposes of this Agreement, references to “other enterprises” shall include
employee benefit plans; references to “fines” shall include any excise taxes
assessed on a person with respect to any employee benefit plan; references to “serving
at the request of the Corporation” shall include any service as a director,
nominee for director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, nominee, officer,
employee or agent with respect to an employee benefit plan, its participants or
beneficiaries; and action taken or omitted by a director with respect to an
employee benefit plan in the performance of his duties for a purpose reasonably
believed by him to be in the interest of the participants and beneficiaries of
the employee benefit plan shall be deemed to be for a purpose that is “not opposed
to the best interests of the Corporation” as referred to in this Agreement.

 

Section 7.18           Governing Law.  This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Texas, without giving effect to the conflicts of laws principles
thereof.

 

Section 7.19           Counterparts.  This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original and all of which together shall be deemed to be one
and the same instrument, notwithstanding that both parties are not signatories
to the original or same counterpart.

 

15

 

IN WITNESS
WHEREOF, this Agreement has been duly executed and delivered to be effective as
of the date first above written.

 

	
   

  	
  CAP ROCK ENERGY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INDEMNITEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  
							

 

16

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