Document:

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Empcon5.CRE 7/14/92

                               EMPLOYMENT CONTRACT

THE STATE OF TEXAS )
                                                 KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF MARTIN   )

         This Employment Contract (Agreement) is made and entered into on or
as of the 21st day of July 1992.

         By this Agreement, CAP ROCK ELECTRIC COOPERATIVE, INC,. deferred to
in thin agreement as "Cooperative", acting by and through its Chief Executive
Officer and General Manager, David W. Pruitt, hereinafter referred to as
"Pruitt", employs Ulen A. North, referred to in this Agreement as "North",
and whose principal place of employment is Stanton, Martin County, Texas who
accepts employment on the following terms and conditions:

                                    ARTICLE 1

                               TERMS OF EMPLOYMENT

         By this Agreement, the Cooperative, acting by and through and under
the direction of Pruitt, employs North and North accepts employment with the
Cooperative for an initial term of two (2) years. Unless a written notice to
terminate this Agreement is executed and properly delivered by either party
prior to an anniversary date and subject to a satisfactory evaluation by
Pruitt of North on the annual employee appraisal, this Agreement shall
annually and automatically be renewed for an additional term of two (2)
years. This Agreement may, however, be terminated earlier, as provided in
Article 4, below.

                                    ARTICLE 2

                        EMPLOYMENT COMPENSATION & BENEFITS

2.01 As compensation for all services rendered under this Agreement, North
shall be paid by Cooperative a salary of $ 66,192.00 per year, or any greater
amount of compensation including bonuses and deferred compensation authorized
by the wage and salary plan or Board policies authorized by the Cooperative,
together with an annual salary adjustment in an amount at least equal to any
approved across the board salary adjustments for all employees.

2.02 North shall receive the same annual leave and sick leave and all other
benefits as are accorded regular full-time employees of the Cooperative
including provisions governing accrual and payment therefore on early
retirement or other methods of employment.

                                       1
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2.03 Subject to the above paragraph 2.02, all provisions of the Cooperative's
rules and regulations relating to annual (vacation), sick leave, early
retirement, insurance, savings, deferred compensation, bonuses, pension
program contributions, holiday and other fringe benefits and working
conditions as they now exist or hereafter may be amended, shall apply to
North as they would to other employees of the Cooperative.

2.04 Because North's duties will from time to time require him to work
outside of, and in addition to, the Cooperative's established normal work
week, work days and work hours, North shall be allowed to take compensatory
time off.

                                    ARTICLE 3

                               COVENANT TO PERFORM

         North agrees and covenants to perform his work and services
diligently and use his best efforts to faithfully comply with all of the
assignments duly made to him on behalf of the Cooperative by Pruitt.

                                    ARTICLE 4

                              TERM AND TERMINATION

4.01 The Cooperative shall employ North pursuant to this Agreement for the
two (2) year term beginning with the effective date of his employment
hereunder, yearly renewable subject to and following a satisfactory
evaluation employee appraisal report on North by Pruitt, for successive two
year terms. However, if during such employment, North tails or refuses to
perform the work and services assigned to him on behalf of the Cooperative by
Pruitt, or should he become derelict in so performing, or become unable to
perform, or otherwise become in substantial breach of this Agreement all as
may be determined by Pruitt in his sole discretion or otherwise so act as to
give the Cooperative good cause, this Agreement shall, at Pruitt's sole
option, cease and terminate and any of North's rights hereunder not already
finally vested shall cease on or at such time as Pruitt shall notify North in
Writing. The term "good cause" shall mean the following and not otherwise:

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

         2.       Knowingly, willfully and substantially, during the term of
                  this Agreement, commits clearly dishonest acts toward the
                  Cooperative with the intent to injure or damage the
                  Cooperative.

                                       2
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4.02 If North's employment terminates for any reason other than as provided
for in paragraph 4.01, the Cooperative shall pay North a lump sum cash
settlement equal to the total salary then in effect for the two (2) year term
of the Contract, plus the amount the Cooperative would have paid during such
period for North's retirement-pension plans and health insurance, plus such
amounts, if any, are at the time of his termination of employment, payable
for accrued but untaken vacation and sick leave, compensatory time, bonuses
and other compensation authorized by the Board of Directors.

4.03 Notwithstanding paragraphs 4.01 and 4.02, this Agreement and North's
employment hereunder may be terminated at such time and upon such terms and
conditions as the parties may mutually agree.

                                   ARTICLE 5

                       SUPERSESSION AND EFFECTIVENESS

5.01 This Agreement supersedes any other agreement or Understanding, written
or oral, between the parties with respect to the matters covered hereunder,
and it contains the entire understanding of the parties and all of the
covenants and agreements between them with respect to North's employment.

5.02 This Agreement shall bind and be for the benefit of the parties to the
agreement, as well as their respective successors, heirs and assigns, it
being understood, however that this Agreement may be assigned only with the
written consent of both parties.

5.03 The existence and effectiveness of this Agreement between the parties
hereto does not preclude or otherwise interfere with employment of North by
subsidiary corporations of Cap Rock Electric Cooperative, Inc., or by any
corporation organized by the Cooperative's Board of Directors for the benefit
of the Cooperative, or the receipt of compensation by North from any such
corporations.

5.04 This Agreement shall become binding upon the parties from and as of the
date of the execution.

         IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate originals, one being retained by each, on or as of the 21st day of
July, 1992.

                                       CAP ROCK ELECTRIC COOPERATIVE,
                                       INC.

/s/ Ulen A. North                      /s/ David W. Pruitt
-------------------------              ------------------------------
Ulen A. North                          David W. Pruitt, CEO/Gen. Mgr.

                                       3
<PAGE>

THE STATE OF TEXAS                          )

COUNTY OF MARTIN                            )

         This instrument was acknowledged before me on this the 21st day of
July, 1992, by DAVID W. PRUITT, Chief Executive Officer and General Manager
of Cap Rock Electric Cooperative, Inc., a Texas cooperative corporation, on
behalf of said Corporation.

                             /s/ Sharon A. Hoelscher
                             ------------------------------------
                             Notary Public, State of Texas
                             Printed Name of Notary: Sharon A. Hoelscher
                                                    --------------------
                             My Commission Expires: 7-11-95
                                                    --------------------

(SEAL)

THE STATE OF TEXAS                  )

COUNTY OF MARTIN                    )

         This instrument was acknowledged before me on this the 21st day of
July, 1992, by ULEN A. NORTH.

                             /s/ Sharon A. Hoelscher
                             ------------------------------------
                             Notary Public, State of Texas
                             Printed Name of Notary: Sharon A. Hoelscher
                                                    --------------------
                             My Commission Expires: 7-11-95
                                                    --------------------

         (SEAL)

                                       4<PAGE>

                       CAP ROCK ELECTRIC COOPERATIVE, INC.

                         SUPPLEMENTAL EXECUTIVE DEFERRED

                          COMPENSATION RETIREMENT PLAN

                                  PLAN DOCUMENT

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<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
                                                                                                           Page
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<S>                        <C>                                                                              <C>
       ARTICLE I           PURPOSE OF PLAN
          1.1              Purpose of Plan....................................................................1

      ARTICLE II           DEFINITIONS
          2.1              Account............................................................................1
          2.2              Beneficiary........................................................................1
          2.3              Board..............................................................................1
          2.4              Code...............................................................................1
          2.5              Committee..........................................................................1
          2.6              Company............................................................................1
          2.7              Company Contribution...............................................................1
          2.8              Compensation.......................................................................2
          2.9              Effective Date.....................................................................2
         2.10              Eligible Employee..................................................................2
         2.11              Entry Date.........................................................................2
         2.12              Nonqualified Deferral Contribution.................................................2
         2.13              Participant........................................................................2
         2.14              Participant Enrollment and Election Form...........................................2
         2.15              Plan...............................................................................2
         2.16              Plan Year..........................................................................2
         2.17              Trust..............................................................................2
         2.18              Trustee............................................................................2
         2.19              Valuation Date.....................................................................3

      ARTICLE III          ELIGIBILITY AND PARTICIPATION
          3.1              Requirements.......................................................................3
          3.2              Re-employment......................................................................3
          3.3              Change of Employment Category......................................................3

      ARTICLE IV           NONQUALIFIED DEFERRAL CONTRIBUTIONS
          4.1              Nonqualified Deferral Elections....................................................3
          4.2              Payroll Deductions.................................................................3
          4.5              Timing of Contribution.............................................................3

       ARTICLE V           COMPANY CONTRIBUTION
          5.1              Company Contribution...............................................................4
          5.2              Timing of Contribution.............................................................4

      ARTICLE VI           PLAN ACCOUNTS
          6.1              Establishment of Accounts..........................................................4
          6.2              Nonqualified Deferral Account......................................................4
          6.3              Company Contribution Account.......................................................4
          6.4              Allocation of Income...............................................................4
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<CAPTION>
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<S>                        <C>                                                                              <C>
      ARTICLE VII          ALLOCATION OF FUNDS
          7.1              Allocation of Earnings or Losses on Accounts.......................................5
          7.2              Accounting for Distributions.......................................................5
          7.3              Interim Valuations.................................................................5

     ARTICLE VIII          VESTING
          8.1              Nonqualified Deferral Contributions................................................5
          8.2              Company Contributions..............................................................5

      ARTICLE IX           PAYMENTS OF BENEFITS
          9.1              Payments of Benefits...............................................................6

       ARTICLE X           COMMITTEE ADMINISTRATION
         10.1              Committee..........................................................................6

      ARTICLE XI           THE TRUST
         11.1              Establishment of Trust.............................................................6

      ARTICLE XII          ADMINISTRATION
         12.1              Administrative Authority...........................................................6
         12.2              Mutual Exclusion of Responsibility.................................................7
         12.3              Uniformity of Discretionary Acts...................................................8
         12.4              Litigation............8
         12.5              Payment of Administration Expenses.................................................8
         12.6              Claims Procedure...................................................................8
         12.7              Liability of Committee, Indemnification............................................9
         12.8              Expenses..........................................................................10
         12.9              Taxes.............................................................................10
         12.10             Attorney's Fee....................................................................10
                           Adoption of Plan Document.........................................................10
</TABLE>

<PAGE>

                           ARTICLE I - PURPOSE OF PLAN

1.1 PURPOSE OF PLAN. The Company intends and desires by the ad option of this
Plan to recognize the value to the Company of the past and present services
of Eligible Employees covered by the Plan and to encourage an assure their
continued service with the Company by making more adequate provisions for
their future retirement security.

This Plan has been adopted to be effective June 24, 1997 to provide certain
select management and highly compensated employees of Cap Rock Electric
Cooperative, Inc. the opportunity to accumulate deferred compensation until
retirement, disability, resignation, dismissal or death.

This Plan is intended to be "a plan which is unfunded and 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 Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee
Retirement Income Security Act of 1974 ("ERISA") and shall be interpreted and
administered in a manner consistent with that intent.

                            ARTICLE II - DEFINITIONS

2.1 ACCOUNT means those separate accounts established and maintained under
the Plan in the name of each Participant as required pursuant to the
provisions of Article VII.

2.2 BENEFICIARY means a Participant's beneficiary or beneficiaries identified
on the Participant Enrollment and Election Form.

2.3 BOARD means the Board of Directors of Cap Rock Electric Cooperative, Inc.

2.4 CODE means the Internal Revenue Code of 1986 and the regulations
thereunder, as amended from time to time.

2.5 COMMITTEE means the Retirement Committee appointed by the Board.

2.6 COMPANY means Cap Rock Electric Cooperative, Inc. or any company which is
a successor as a result of merger, consolidation, liquidation, transfer of
assets, or other reorganization.

2.7 COMPANY CONTRIBUTION means an amount contributed by the Company pursuant
to the provisions of Article V.

                                        1
<PAGE>

2.8 COMPENSATION means base salary or wages, plus overtime, bonuses,
commissions, etc., which is paid the employee by the Company for the
performance of duties during the Plan Year. Compensation used shall be prior
to any salary deferrals.

2.9 EFFECTIVE DATE means the date on which the Company adopts the Plan.

2.10 ELIGIBLE EMPLOYEE means, for any Plan Year (or applicable portion
thereof), a person employed by the Company who is determined by the Company's
Chef Executive Officer be a member of a select group of management or highly
compensated employees, who is designated by the Board to be eligible under
the Plan.

2.11 ENTRY DATE means the date as determined by the Company.

2.12 NONQUALIFIED DEFERRAL CONTRIBUTION means Compensation that is due to be
earned and which would otherwise be paid to the Participant, which the
Participant elects to defer under the Plan and which is contributed on behalf
of each Participant by the Company pursuant to the provisions of Article IV.

2.13 PARTICIPANT means any person so designated in accordance with the
provisions of Article III, including, where appropriate according to the
context of the Plan, any former employee who is or may become (or whose
Beneficiaries may become) eligible to receive a benefit under the Plan.

2.14 PARTICIPANT ENROLLMENT AND ELECTION FORM means the form on which a
Participant elects to defer Compensation hereunder and on which the
Participant makes certain other designations as required thereon.

2.15 PLAN means this Cap Rock Electric Cooperative, Inc. Supplemental
Executive Deferred Compensation Retirement Plan.

2.16 PLAN YEAR means the twelve (12) month period ending on December 31 each
year.

2.17 TRUST means the trust fund established pursuant to the Plan.

2.18 TRUSTEE means the trustee named in the agreement establishing the Trust
and such successor and/or additional trustees as may be named pursuant to the
terms of the agreement establishing the Trust.

                                        2
<PAGE>

2.19 VALUATION DATE means the last day of each Plan Year and any other date
that the Company, in its sole discretion, designates as a Valuation Date.

                   ARTICLE III - ELIGIBILITY AND PARTICIPATION

3.1 REQUIREMENTS. Every Eligible Employee as of the Effective Date shall be
eligible to become a Participant on the Effective Date. Every other Eligible
Employee shall be eligible to become a Participant on the first Entry Date
occurring on or after the date on which he or she becomes an Eligible
Employee. No individual shall become a Participant, however, if he or she in
not an Eligible Employee on the date his or her participation is to begin.

Participation in the Plan is voluntary. In order to participate, an otherwise
Eligible Employee must execute a valid Participant Enrollment and Election
Form in such manner as the Company may require and must agree to make
Nonqualified Deferral Contributions as provided in Article IV.

3.2 RE-EMPLOYMENT. If a Participant whose employment with the Company is
terminated is subsequently re-employed, he or she shall become a Participant
in the Plan in accordance with the provisions of Section 3.1 of this Article.

3.3 CHANGE OF EMPLOYMENT CATEGORY. During any period in which a Participant
remains in the employ of the Company, but ceases to be an Eligible Employee,
he or she shall not be eligible to make additional Nonqualified Deferral
Contributions under this Plan.

                ARTICLE IV - NONQUALIFIED DEFERRAL CONTRIBUTIONS

4.1 NONQUALIFIED DEFERRAL ELECTIONS. In accordance with rules established by
the Company, a Participant may elect to make a Nonqualified Deferral
Contribution with respect to a Plan Year by use of a Participant Enrollment
and Election Form.

4.2 PAYROLL DEDUCTIONS. Nonqualified Deferral Contributions shall be made
through payroll deductions. The Participant may change the amount of his or
her Nonqualified Deferral Contribution amount by delivering to the Company a
new Participant Enrollment and Election Form. Once made, a Nonqualified
Deferral Contribution payroll deduction election shall continue in force
indefinitely, until changed by the Participant on a subsequent Participant
Enrollment and Election Form delivered to the Company.

4.3 TIMING OF CONTRIBUTION. Nonqualified Deferral Contributions shall be made
at the same time Eligible Employees are paid.

                                        3
<PAGE>

                        ARTICLE V - COMPANY CONTRIBUTIONS

5.1 COMPANY CONTRIBUTION. In its sole discretion, the Company may make a
Company Contribution on behalf a Participant.

5.2 TIMING OF CONTRIBUTION. Company Contributions shall be made as soon as
administratively feasible after declared by the Board.

                           ARTICLE VI - PLAN ACCOUNTS

6.1 ESTABLISHMENT OF ACCOUNTS. There shall be established and maintained by
the Company separate Accounts in the name of each Participant, as required
and as described in this Article VI.

6.2 NONQUALIFIED DEFERRAL ACCOUNT. The Company shall establish an Account to
which are credited a Participant's Nonqualified Deferral Contributions, plus
amounts equal to any income, gains, or losses (to extent realized, based upon
fair market value of the Account's assets) attributable or allocable to the
Participant's Account.

6.3 COMPANY CONTRIBUTION ACCOUNT. The Company shall establish an Account to
which are credited a Participant's Company Contributions, plus amounts equal
to any income, gains, or losses (to extent realized, based upon fair market
value of the Account's assets) attributable or allocable to the Participant's
Account.

6.4 ALLOCATION OF INCOME. The Company shall have the discretion to allocate
such income, gains, or losses among Accounts pursuant to such allocation
rules as the Company deems to be reasonable and administratively practicable.

                                        4
<PAGE>

                        ARTICLE VII - ALLOCATION OF FUNDS

7.1 ALLOCATION OF EARNINGS OR LOSSES ON ACCOUNTS. Each Participant's Account
shall be invested in such investments as the Trustee shall determine. The
Trustee may (but is not required to) consider the Participant's investment
preferences when investing amounts credited to the Participant's Accounts.
Such investment preferences shall be related to the Trustee at the time and
in the manner prescribed by the Company, in its sole discretion. The
Participant's Accounts will be credited or debited with the increase or
decrease in the realizable net asset value or credited interest, as
applicable, of each investment, as follows. As of each Valuation Date, an
amount equal to the net increase of decrease in realizable net asset value or
credited interest, as applicable (as determined by the Trustee), of each
investment option within the Trust since the preceding Valuation Date shall
be allocated among all Participants' Accounts to be invested in that
investment option in accordance with the ratio which the portion, determined
as provided herein, bears to the aggregate of all amounts to be invested
within that investment option.

7.2 ACCOUNTING FOR DISTRIBUTION. As of the date of any distribution under the
Plan to a Participant or his or her Beneficiary or Beneficiaries, such
distribution-shall be charged to the applicable Participant's Account.

7.3 INTERIM VALUATIONS. If it is determined by the Company that the value of
the Trust as of any date on which distributions are to be made differs
materially from the value of the Trust on the prior Valuation Date upon which
the distribution is to be based, the Company, in its discretion, shall have
the right to designate any date in the interim as a Valuation Date for the
purpose of revaluing the Trust so that the Account from which the
distribution is being made will, prior to the distribution, reflect its share
of such material difference in value.

                             ARTICLE VIII - VESTING

8.1 NONQUALIFIED DEFERRAL CONTRIBUTIONS. A Participant shall always be one
hundred percent (100%) vested in amounts credited to his or her Nonqualified
Deferral Account except upon voluntary termination at which time the
Participant shall be zero percent (0%) vested.

8.2 COMPANY CONTRIBUTIONS. A Participant's Company Contribution Account shall
always be one hundred percent (100%) vested in the name of the Participant
except upon voluntary termination at which time the Participant shall be zero
percent (0%) vested.

                                        5
<PAGE>

                        ARTICLE IX - PAYMENTS OF BENEFITS

9.1 PAYMENTS OF BENEFITS. The benefit payable under this Plan on account of a
Participant's termination of employment, retirement, disability, or death
shall be distributed in a cash lump sum as soon as practicable and no later
than sixty (60) days after the earlier of such termination of employment,
retirement, incurrence of disability (as determined by the Committee), or
death. Any death benefit payable under the Plan shall be payable to the
Participant's Beneficiary.

                      ARTICLE X - COMMITTEE ADMINISTRATION

10.1 COMMITTEE. The Committee shall administer, construe, and interpret this
Plan and shall determine, subject to the provisions of this Plan, the
Eligible Employees who become Participants in the Plan from time to time and
the amount, if any, due a Participant (or his or her Beneficiary) under this
Plan. No member of the Committee shall be liable for any act done or
determination made in good faith. No member of the Committee who is a
Participant in this Plan may vote on matters affecting his or her personal
benefit under this Plan, but any such member shall otherwise be fully
entitled to act in matters arising out of or affecting this Plan
notwithstanding his or her participation herein. In carrying out its duties
herein, the Committee shall have discretionary authority to exercise all
powers and to make all determinations, consistent with the terms of the Plan,
in all matters entrusted to it, and its determinations shall be given
deference and shall be final and binding on all interested parties.

                             ARTICLE XI - THE TRUST

11.1 ESTABLISHMENT OF TRUST. The Company shall establish the Trust with the
Trustee, pursuant to such terms and conditions as are set forth in the Trust
agreement to be entered into between the Company and the Trustee. The Trust
is intended to be treated as a "grantor" trust under the Code, and the
establishment of the Trust is not intended to cause Participants to realize
current income on amounts contributed thereto, and the Trust shall be so
interpreted.

                          ARTICLE XII - ADMINISTRATION

12.1 ADMINISTRATIVE AUTHORITY. Except as otherwise specifically provided
herein, the Company shall have the sole responsibility for and the sole
control of the operation and administration of the Plan, and shall have the
power and authority to take all actions including the right to amend or
terminate the Plan, and to make all decisions and interpretations which may
be necessary or appropriate in order to administer and operate the Plan,
without limiting the generality of the foregoing, the power, duty, and
responsibility to:

                                        6
<PAGE>

         a)       Resolve and determine all disputes or questions arising under
                  the Plan, including the power to determine the rights of
                  Eligible Employees, Participants, and Beneficiaries, and their
                  respective benefits, and to remedy any ambiguities,
                  inconsistencies, or omissions in the Plan.

         b)       Adopt such rules of procedure and regulations as in its
                  opinion may be necessary for the proper and efficient
                  administration of the Plan and as are consistent with the
                  Plan.

         c)       Implement the Plan in accordance with its terms and the rules
                  and regulations adopted as above.

         d)       Make determinations with respect to the eligibility of any
                  Eligible Employee as a Participant and make determination
                  concerning the crediting and distribution of Plan Accounts.

         e)       Appoint any persons or firms, or otherwise act to secure
                  specialized advice or assistance, as it deems necessary or
                  desirable in connection with the administration and operation
                  of the Plan, and the Company shall be entitled to rely
                  conclusively upon, and shall be fully protected in any action
                  or omission taken by it in good faith reliance upon the advice
                  or delegate from time to time by written instrument all or any
                  part of its duties, powers, or responsibilities under the
                  Plan, both ministerial and discretionary, as it deems
                  appropriate, to any person or committee, and in the same
                  manner to revoke any such delegation of duties, powers, or
                  responsibilities. Any action of such person or committee in
                  the exercise of such delegated duties, powers, or
                  responsibilities shall have the same force and effect for all
                  purposes hereunder as if such action had been taken by the
                  Company. Further, the Company may authorize one or more
                  persons to execute any certificate or document on behalf of
                  the Company, in which event any person notified by the Company
                  of such authorization shall be entitled to accept and;
                  conclusively rely upon any such certificate or document
                  executed by such person as representing action by the Company
                  until such third person shall have been notified of the
                  revocation of such authority.

12.2 MUTUAL EXCLUSION OF RESPONSIBILITY. Neither the Trustee nor the Company
shall be obliged to inquire into or be responsible for any act or failure to
act, or the authority therefor, on the part of the other.

                                        7
<PAGE>

12.3 UNIFORMITY OF DISCRETIONARY ACTS. Whenever in the administration or
operation of the Plan discretionary actions by the Company are required or
permitted, such actions shall be consistently and uniformly applied to all
persons similarly situated, and no such action shall be taken which shall
discriminate in favor of any particular person or group of persons.

12.4 LITIGATION. Except as may be otherwise required by law, in any action or
judicial proceeding affecting the Plan, no Participant or Beneficiary shall
be entitled to any notice or service of process, and any final judgment
entered in such action shall be binding on all persons interested in, or
claiming under, the Plan.

12.5 PAYMENT OF ADMINISTRATION EXPENSES. All expenses incurred in the
administration and operation of the Plan and the Trust, including any taxes
payable by the Company in respect of the Plan or Trust or payable by or from
the Trust pursuant to its terms, shall be paid by the Company.

12.6 CLAIMS PROCEDURE.

         a)       Notice of Claim. Any Eligible Employee or Beneficiary, or the
                  duly authorized representative of an Eligible Employee or
                  Beneficiary, may file with the Committee a claim for a Plan
                  benefit. Such a claim must be in writing on a form provided by
                  the Committee and must be delivered to the Committee, in
                  person or by mail, postage prepaid. Within ninety (90) days
                  after the receipt of such a claim, the Committee shall send to
                  the claimant, by mail, postage prepaid, a notice of the
                  granting or the denying, in whole or in part, of such claim,
                  unless special circumstances require an extension of time for
                  processing the claim. In no event may the extension exceed
                  ninety (90) days from the end of the initial period. If such
                  an extension is necessary, the claimant will be given a
                  written notice to this effect prior to the expiration of the
                  initial ninety (90) day period. The Committee shall have full
                  discretion to deny or grant a claim in whole or in part in
                  accordance with the terms of the Plan. If notice of the denial
                  of a claim is not furnished in accordance with this Section,
                  the claim shall be denied and the claimant shall be permitted
                  to exercise his or her right to review pursuant to Sections
                  13.6 (c) and 13.6 (d) of the Plan, as applicable.

                                        8
<PAGE>

         b)       Action on Claim. The Committee shall provide to every claimant
                  who is denied a claim for benefits a written notice setting
                  forth, in a manner calculated to be understood by the
                  claimant:

                  (i)      The specific reason or reasons for the denial;

                  (ii)     A specific reference to the pertinent Plan provisions
                           on which the denial is based;

                  (iii)    A description of any additional material or
                           information necessary of the claimant to perfect the
                           claim and an explanation of why such material or
                           information is necessary; and

                  (iv)     An explanation of the Plan's claim review procedure.

         c)       Review of Denial. Within sixty (60) days after the receipt by
                  a claimant of written notification of the denial (in whole or
                  in part) of a claim, the claimant or the claimant's duly
                  authorized representative, upon written application to the
                  Committee, delivered in person or by certified mail, postage
                  prepaid, may review pertinent documents and may submit to the
                  Committee, in writing, issues and comments concerning the
                  claim.

         d)       Decision on Review. Upon the Committee's receipt of a notice
                  of a request for review, the Committee shall make a prompt
                  decision on the review and shall communicate the decision on
                  review in writing to the claimant. The decision on review
                  shall be written in a manner calculated to be understood by
                  the claimant and shall include specific reasons for the
                  decision and specific references to the pertinent Plan
                  provisions on which the decision is based. The decision on
                  review shall be made not later than sixty (60) days after the
                  Committee's receipt of a request for a review, unless special
                  circumstances require an extension of time for processing, in
                  which case a decision shall be rendered not later than one
                  hundred twenty (120) days after receipt of the request for
                  review. If an extension is necessary, the claimant shall be
                  given written notice of the extension by the Committee prior
                  to the expiration of the initial sixty (60) day period. If
                  notice of the decision on review is not furnished in
                  accordance with this Section, the claim shall be denied on
                  review.

12.7 LIABILITY OF COMMITTEE, INDEMNIFICATION. To the extent permitted by law,
the Committee or any Company employee shall not be liable to any person for
any action taken or omitted in connection with the interpretation and
administration of this Plan unless attributable to his or her own had faith
or willful misconduct.

                                        9
<PAGE>

12.8 EXPENSES. The cost of the establishment of the Plan and the adoption of
the Plan by the Company, including but not limited to legal and accounting
fees, shall be borne by the Company.

12.9 TAXES. All amounts payable hereunder shall be reduced by any and all
federal, state, and local taxes imposed upon an Eligible Employee or his or
her Beneficiary which are required to be paid or withheld by Company. The
determination by the Company regarding applicable income and employment tax
withholding requirements shall be final and binding on the Eligible Employee.

12.10 ATTORNEY'S FEES. The Company shall pay the reasonable attorney's fees
incurred by any Eligible Employee in an action brought against Company to
enforce Eligible Employee's rights under the Plan, provided that such fees
shall only be payable in the even that the Eligible Employee prevails in such
action.

                                  CAP ROCK ELECTRIC COOPERATIVE, INC.

                                  By: /s/ John D. Parker
                                     ------------------------------------------
                                          John D. Parker
                                          Vice President/Chief Financial Office

                                        10

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