Document:

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                                                                  Exhibit 10.49

                               McCULLOCH ELECTRIC
                                COOPERATIVE, INC.

                                    NOTICE OF
                              ANNUAL MEETING OF THE
                                     MEMBERS

                              NOTICE OF MEETING AND
                                 PROXY STATEMENT

                                      TIME:
                     SATURDAY, AUGUST 21, 1999, AT 9:00 A.M.

                                     PLACE:
                          HEART OF. TEXAS CIVIC CENTER
                               SAN ANGELO HIGHWAY
                                  BRADY, TEXAS

If you cannot be present at this year's Annual Meeting, please sign and return
the enclosed proxy promptly so that you may be represented at the meeting

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                     MC CULLOCH ELECTRIC COOPERATIVE, INC.
                               Highway 190 East
                              Brady, Texas 76825

                     NOTICE OF ANNUAL MEETING OF MEMBERSHIP
                           To Be Held August 21, 1999

To the Members of McCulloch Electric Cooperative:

The Annual Meeting of the Members of McCulloch Electric Cooperative, Inc. will
be held on Saturday, August 21, 1999, at 9:00 a.m. in the Heart of Texas Civic
Center on the San Angelo Highway in Brady, for the following purposes:

         1.   To elect 3 directors of the Cooperative.
         2.   To pass upon reports covering the previous fiscal year.
         3.   To adopt a resolution recommended by the Cooperative's Board of
              Directors to become a division of Cap Rock Electric
              Cooperative, Inc., in accordance with the terms and conditions of
              the Agreement to Combine McCulloch and Cap Rock that has been
              approved by the McCulloch Board.
         4.   To transact such other business as may properly come before the
              meeting.

Only Members of record at the close of business on July 21, 1999, are entitled
to notice of and to vote at the Annual Meeting. Voting may be accomplished by
attending the meeting in person or by returning the official proxy enclosed with
this mailing.

         REGARDLESS OF WHETHER YOU PLAN TO ATTEND IN PERSON, PLEASE SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. MAILING YOUR COMPLETED PROXY
WILL NOT PREVENT YOU FROM VOTING IN PERSON AT THE MEETING IF YOU WISH TO DO SO.

         THE PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.

                                            By order of the Board of Directors,

                                            Billy M. Crowder
                                            Secretary/Treasurer

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                      MC CULLOCH ELECTRIC COOPERATIVE, INC.
                                Highway 190 East
                                  Brady, Texas

                                  July 22, 1999

Dear Member:

You are cordially invited by the Board of Directors (the "Board") of McCulloch
Electric Cooperative (the "Cooperative"), a Texas electric cooperative, to
attend the 62nd Annual Meeting of the Members of the Cooperative (the "Annual
Meeting"). The Annual Meeting will be held at the Heart of Texas Civic Center,
San Angelo Highway, Brady, on Saturday, August 21, 1999, at 9:00 a.m., local
time.

At the Annual Meeting, Members will be asked to adopt a resolution that
McCulloch Electric become a division of Cap Rock Electric Cooperative. Inc., by
conveying to Cap Rock all the assets and liabilities of the Cooperative. The
Board of Directors of the Cooperative recommends adoption of this resolution. In
addition, Members will be asked to elect three directors of the Cooperative, and
to conduct such other business as may properly come before the Annual Meeting.
The hoard believes it is in the best interest of the Cooperative and its Members
to become a division of Cap Rock Electric and recommends you adopt this
resolution.

Important information regarding this resolution is contained in this Proxy
Statement, which you are urged to read carefully. It is important that your
Membership interest be represented and voted at the Annual Meeting. Accordingly,
you are encouraged to complete, sign, date and return the enclosed proxy in the
postage-paid envelope provided so that it is received at the Cooperative on or
before August 16, 1999. There will be a generous number of door prizes given at
the meeting. There will also be a drawing for the Grand Prize, a year's worth of
flee electricity! (Maximum for this prize is $300 per month for a full year.)
You may either attend the meeting in person or return an assigned proxy to be
eligible for the Grand Prize. Not only do you gain this eligibility, but
attending the meeting or sending in your proxy will also gain you a $5 credit on
your next electric bill.

Your interest and voting participation in the affairs of your Cooperative are
greatly appreciated.

                                    Sincerely,

                                    Board and Management of
                                    McCulloch Electric Cooperative, Inc.

<PAGE>

                      MC CULLOCH ELECTRIC COOPERATIVE, INC.
                                  Brady, Texas
                  PROXY STATEMENT FOR ANNUAL MEETING OF MEMBERS

                              SOLICITATION OF PROXY

The Board of Directors (the "Board") of McCulloch Electric Cooperative, Inc.
(the "Cooperative") solicits the accompanying proxy on behalf of the Proxy
Committee to be voted by the Proxy Committee at the Annual Meeting of the
Membership of the Cooperative to be held in the Heart of Texas Civic Center, San
Angelo Highway, Brady, Texas, on Saturday, August 21, 1999, at 9:00 a.m. The
Proxy Committee will vote all proxies as directed by majority vote of the
committee concerning the matter of conveying all.its assets and liabilities and
transferring all its Membership interests to Cap Rock Electric Cooperative, Inc.
("Cap Rock") in accordance with the provisions of the Agreement to Combine
McCulloch and Cap Rock Electric Cooperatives described below. In addition to
this mail solicitation, proxies may be solicited by the Board of Directors on
behalf of the Proxy Committee through use of personal interview; telephone and
special correspondence from directors, employees, agents and other Members of
the Cooperative. If such persons receive compensation for these services, the
Cooperative will bear the cost.

Any Member of the Cooperative who gives a proxy may revoke the proxy any time
prior to its exercise by (i) executing a subsequent proxy or (ii) mailing or
hand delivering written notice to the Secretary of the Cooperative by 5:00 p.m.,
August 20, 1999, or (iii) by attending the meeting and withdrawing the proxy
upon registration at the meeting not later than 8:00 a.m. If a Member executes
two or more valid proxies, the proxy bearing the latest date will be honored.
Undated proxies shall be deemed dated as of the date of the postmark if mailed
or the date of receipt by the Cooperative if hand-delivered.

By completing, signing and returning your proxy to the Cooperative, you will
become eligible to win the drawing for the Grand Prize to be given away at the
Annual Meeting. The Grand Prize is a year's worth of FREE ELECTRICITY (not to
exceed $300 per month, or $3,600 per year). The names of all Members who return
proxies will be included in the drawing for the Grand Prize, as will the names
of those Members who attend the Annual Meeting in person.

TO HELP ASSURE A QUORUM AT THE ANNUAL MEETING, THE BOARD URGES EACH MEMBER TO
SUBMIT A PROXY TO THE PROXY COMMITTEE. EACH MEMBER SUBMITTING A PROXY AND/OR
ATTENDING THE ANNUAL MEETING IN PERSON WILL RECEIVE A $5 CREDIT ON THE MEMBER'S
ELECTRIC BILL.

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                               PURPOSE OF MEETING

As stated in the Notice of Annual Meeting of Members accompanying this Proxy
Statement, the business to be conducted and the matters to be considered and
acted upon at the Annual Meeting are as follows:

         1.    To elect 3 directors of the Cooperative;
         2.    To pass upon reports covering the previous fiscal year;
         3.    To vote on the adoption of the following Member resolution
               (the "Member Resolution"):

         NOW   THEREFORE, BE IT RESOLVED that McCulloch Electric
               Cooperative,Inc., sell all of its assets and transfer all its
               liabilities to Cap Rock Electric Cooperative, Inc. on such
               terms and conditions and for such consideration as are set out
               in that certain Agreement to Combine McCulloch and Cap Rock
               Electric Cooperatives (the "Combination Agreement") previously
               approved by the Board of Directors of the Cooperative; and

         RESOLVED FURTHER that the Cooperative enter into the Combination
               Agreement and such other documents as are contemplated by the
               Combination Agreement to consummate the transaction
               contemplated thereby; and

         RESOLVED FURTHER that the President of the Cooperative is hereby
               authorized, directed and empowered to take such action and
               execute such documents in the name of and on behalf of the
               Cooperative as he shall deem reasonable, necessary and
               appropriate to effect the purposes of these resolutions and to
               consummate the transaction contemplated by the Combination
               Agreement, including but not limited to, the execution of the
               Combination Agreement.

         4.       To transact such other business as may properly come before
                  the meeting.

                              THE WAYS YOU CAN VOTE

Any person or entity who is a Member of the Cooperative or who has been approved
for membership by the Board of Directors as of the close of business on July 21,
1999, may vote in person at the Annual Meeting. Also, Members may appoint a
proxy to cast their vote. A proxy, which is the assignment to a designated
person of a Member's right to cast a vote, must be in written form, properly
completed and signed by the Member giving the proxy. A proxy is not a ballot.

The Bylaws of the Cooperative provide that each proxy shall be voted as directed
by the Proxy Committee or by a designated person who is present in person at the
meeting. No person or entity may cast a vote at the Annual Meeting unless such
person or entity is

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a Member or holds a properly certified proxy from a Member All proxies must be
received by the Secretary of the Cooperative no later than 5:00 p.m., local
time, August 16, 1999. The Cooperative's Bylaws further provide that the written
proxy must designate the particular meeting at which it is to be voted and that
a spouse of an absent Member will be deemed to hold the proxy of such absent
Member. You may appoint as your proxy the Proxy Committee or another person who
will be present in person at the Annual Meeting.

The Board recommends that you appoint the Proxy Committee as your proxy, whether
or not you plan to attend the Annual Meeting.

Any Member giving a proxy may revoke it at any time prior to its exercise by
executing a subsequent proxy, by mailing or delivering in person written notice
of revocation to the Secretary of the Cooperative by 5:00 p.m. August 20, 1999,
or by attending the Annual Meeting and withdrawing the proxy no later than one
hour prior to the announced time of the Annual Meeting. If a Member executes two
or more valid proxies, the proxy bearing the most recent date will be honored.
Undated proxies will be deemed to be dated as of the date of the postmark if
mailed or the date of receipt at the Cooperative's office if hand-delivered.

          DIRECTOR RESOLUTION PROPOSING MC CULLOCH ELECTRIC COOPERATIVE
               BECOME A DIVISION OF CAP ROCK ELECTRIC COOPERATIVE

Background

McCulloch Electric Cooperative, Inc. is a member-owned Texas transmission and
distribution electric cooperative founded in 1937 and provides electrical
service to its Members in McCulloch, San Saba, Brown, Concho, Mills, Menard, Tom
Green, Mason and Coleman Counties. Today, the Cooperative has 18 miles of
electrical transmission, and 2,616 miles of electrical distribution lines,
serving 3,298 Members, with 5,788 meters.

The Board has carefully monitored and studied the imminent deregulation of the
electric energy industry (a sweeping deregulation bill was passed by the Texas
Legislature last month) and has determined that the increased competition in the
electric industry, which is certain to arise from deregulation, poses a
substantial risk to the long and short-term future of the Cooperative and its
Members. Convinced that the Cooperative must grow larger to survive, the Board,
together with management, the Cooperative's financial advisers and consultants,
many of whom are recognized as experts in the field, have examined various
options to assure the continuation of affordable, high quality electric service
to the Members of the Cooperative.

Through this process it-became clear that the Cooperative needed a plan to join
forces with one or more cooperatives in ore to meet the future with strength.
The Board has examined several options to accomplish this goal and has carefully
and systematically

<PAGE>

interviewed several electric cooperatives. The Board studIed and evaluated each
option carefully. As a result, the Board has concluded that the best available
plan is for the assets, the liabilities and the Membership of the Cooperative to
become a part of Cap Rock Electric Cooperative, Inc.

Thus, the Board recommends that the Cooperative's Members adopt the Member
Resolution at the upcoming Annual Meeting, under which all the assets,
liabilities and Membership interests of the Cooperative would be transferred to
Cap Rock Electric Cooperative, Inc., resulting in McCulloch Electric Cooperative
becoming a separate division of Cap Rock Electric. In this resolution, the Board
is putting before the Members of the Cooperative what it has determined is the
very best long-term option available.

If the Members reject the Member Resolution, the Cooperative faces a substantial
rate increase in the near future. But if the Cooperative joins forces with Cap
Rock, that increase will not be necessary and rates are guaranteed to remain the
same for at least another five years.

But rates are only part of the picture. As part of the diligence underlying this
recommendation, the Board compared the pros and cons offered by several
different cooperatives. It found Cap Rock to be a very customer-oriented and
friendly company that brought far more advantages and better guarantees for the
future of our Members. Becoming a division of Cap Rock will almost certainly
improve the quality of electric service we receive. Savings will be achieved by
combining administrative functions of the two cooperatives and from the
diversity of the customer loads. (Cap Rock is located approximately 195 miles
from our headquarters, which creates load and weather diversity.) As a separate
division of Cap Rock, a local presence will be retained, as will the employees
you know and trust: you will retain benefit of the local crews who now maintain
your system as well as the current Cooperative office staff Also, you will gain
computer monitoring of each substation and each circuit out of each substation,
and, in emergency situations, you will have the added strength and support of
additional personnel and equipment only a few hours away.

If the Members approve this resolution, as the Board recommends, we will be
guaranteed a five-year rate freeze and will receive both new services and
enhanced provision of familiar services - at no added cost. The advantages are
many. Not only will we retain our local office and employees, but we will also
continue all current participation and involvement in our local communities. For
example, in addition to community support currently provided by the Cooperative,
an additional $5,000 annually will be given in scholarships in the counties of
the Cooperative's service area. Other community services that the Cooperative is
not able to provide also will be available.

As you can see, the Board is confident that the proposal to be

<PAGE>

acquired by Cap Rock is in the best long and short - term interest of the
Members of McCulloch Electric Cooperative.

After carefully weighing and considering the advantages of its options at a
meeting of the Board of Directors on June 30, 1999, the Board unanimously
approved submitting to the Members a resolution authorizing McCulloch Electric
Cooperative, Inc. becoming a division of Cap Rock Electric Cooperative, Inc. on
such terms and conditions and for such consideration as are set out in the
Combination Agreement previously approved by the Board of Directors of the
Cooperative.

<PAGE>

                            THE COMBINATION AGREEMENT

Description.

         1.    The retail rates charged to Members for electricity are frozen
               for a period of five years;
         2.    The Members of McCulloch Electric Cooperative, Inc. receive
               enhancements to present electrical services, at no added cost;
         3.    A local office and retention of current office and local field
               staff will be maintained;
         4.    Cap Rock will continue to make improvements as necessary to
               ensure the quality of the system in the McCulloch service
               area;
         5.    Capital Credits of the Members of McCulloch Electric
               Cooperative, Inc. will be transferred in full to Cap Rock
               Electric Cooperative, Inc.;
         6.    Cap Rock will offer McCulloch Electric Cooperative, Inc.
               Members choices for receiving their Capital Credits
               immediately, including the opportunity to receive stock in Cap
               Rock's new stock company;
         7.    Cap Rock Electric Cooperative, Inc. shall become the owner of
               all assets of every kind whatsoever and assume all liabilities
               of McCulloch Electric Cooperative, Inc., pursuant to the
               Agreement to Combine;
         8.    McCulloch will be represented by one (1) Director on the Cap
               Rock Board, while the remaining Directors will serve in an
               advisory capacity for a period of at least ten (10) years.

This is a brief description of the main points in the Combination Agreement. A
copy of the agreement is available to you for review by contacting Jeanagayle
Behrens at the McCulloch Electric headquarters.

                                   CONCLUSION

THE BOARD OF DIRECTORS OF MC CULLOCH ELECTRIC COOPERATIVE URGES YOU TO VOTE FOR
THE ADOPTION OF THE MEMBER RESOLUTION AUTHORIZING THE COOPERATIVE TO BECOME A
DIVISION OF CAP ROCK.<PAGE>

                                                                  Exhibit 10.50

STATE OF TEXAS                                              AGREEMENT TO COMBINE
                                                              LAMAR AND CAP ROCK
COUNTIES OF MIDLAND AND LAMAR                              ELECTRIC COOPERATIVES

         THIS AGREEMENT TO COMBINE LAMAR COUNTY ELECTRIC COOPERATIVE
ASSOCIATION AND CAP ROCK ELECTRIC COOPERATIVE, INC. (Agreement) is made and
entered into on or as of the 28th day of October, 1999, by and between CAP
ROCK ELECTRIC COOPERATIVE, INC., headquartered at Midland, Texas (hereinafter
referred to as "Cap Rock" or "Cooperative"), and LAMAR COUNTY ELECTRIC
COOPERATIVE ASSOCIATION, headquartered at Paris, Texas (hereinafter referred
to as "Lamar"), both being electric cooperatives organized and operating
under the Texas Electric Cooperative Corporation Act. Cap Rock and Lamar may
collectively be referred to in this Agreement as the "Parties".
                                    RECITALS
         WHEREAS, Cap Rock has proposed that Lamar and its subsidiary
corporations named in Section 1.02 below, join Cap Rock and become a separate
division; and
         WHEREAS, Lamar is an electric distribution cooperative providing
electric utility service to its members within its duly certificated service
area; and
         WHEREAS, Cap Rock is an electric distribution cooperative providing
electric utility service to its members within its certificated service area;
and
         WHEREAS, the Board of Directors of Lamar previously determined that it
would be in the best interest of its members to explore the possibility of
combining with another electric cooperative; and
         WHEREAS, the Board of Directors of Lamar, after determining that it
would be in the best interest of its members to explore the possibility of
combining with another electric cooperative, with the aid of advisors and
consultants, developed a Strategic Plan and a Questionnaire with response by Cap
Rock, (incorporated herein for all purposes and attached hereto as EXHIBIT A),
to address items which must be considered in any consolidation study, and
received a response to those questions from Cap Rock Electric; and the Board of
Directors of Lamar have determined that a combination with Cap Rock would be
beneficial to the future well-being of Lamar and its members; and
         WHEREAS, Lamar and Cap Rock wish to join in order to promote economies
of scale and provide for a more efficient organization; and
         WHEREAS, the combination of Lamar and Cap Rock will strengthen the
combined organization by providing load diversity; and
         WHEREAS, the combined organization would be better able to acquire a
dependable and economical supply of power; and
         WHEREAS, the combination would entail Lamar transferring all of its
assets and liabilities to Cap Rock and becoming a division of Cap Rock.
         NOW, THEREFORE, in consideration of the foregoing recitals,

<PAGE>

the mutual promises and obligations contained herein and other good and
valuable consideration, Lamar and Cap Rock hereby contract and agree as
follows:

                      1.00 Transfer of Lamar Properties and
                         Assumption of Lamar Obligations
         1.01 The Board of Directors of Lamar shall take the necessary action to
obtain a vote of the membership of Lamar within ninety (90) days from the date
this Agreement is signed unless the Parties to this Agreement mutually agree
otherwise.
         1.02 This Agreement and the resulting combination shall become
effective upon approval by the membership of Lamar. Although the Parties
recognize that it may be necessary to obtain approvals from Cooperative Finance
Corporation (CFC), Public Utility Commission of Texas (PUCT),and other related
state and federal regulatory agencies, and wholesale power suppliers (tee.
Rayburn Country Electric Cooperative, Inc.) or G&T, this Agreement and the
resulting combination shall not be contingent upon obtaining any such approvals.
However, Cap Rock shall be responsible for taking the action it deems necessary
in order to comply with the terms of this Agreement and to supply electric
service to the members in the Lamar Service Area as set forth in this Agreement.
Cap Rock shall be responsible for all costs which are necessary in order to
comply with the terms of this Agreement, "Close" the transaction (as defined in
Section 9.05) and provide electric service to the persons receiving electric
service in the Lamar Service Areas (the "Lamar Service Area") as set forth
herein and Cap Rock agrees to indemnify and hold Lamar harmless for any and all
costs and expenses of every kind associated therewith, including attorney's fees
and costs of litigation Cap Rock shall become the owner of all assets of every
kind whatsoever of Lamar pursuant to this Agreement including, without
limitation, the subsidiary corporations of Lamar, identified as Lamar Electric
Associated Services Inc., Advance Alarm & Electronics, Inc., Lamar Electric
Satellite Services, Inc. and Lamar Electric Internet Services, Inc. (which
subsidiaries shall, together with Lamar County Electric Cooperative Association,
be hereinafter called "Lamar"); and Cap Rock shall assess all liabilities and
obligations of every kind of Lamar pursuant to this Agreement. Thereafter, Cap
Rock shall have the right, at its sole option, to take the action it deems
necessary with regard to such assets and obligations, so long as such action is
not in contravention of the Agreement, including, but not limited to, paying off
debt early, among other things, if Cap Rock determines that it is in its best
interest.
         1.03 At Closing, as provided for below, Lamar will, absolutely and in
&e simple or to whatever may otherwise be the greatest extent legally possible,
transfer, convey, assign and deliver to Cap Rock--and Cap Rock will receive
and acquire all of Lamar's properties and assets, of every kind whatsoever,
including but not limited to all real and personal property, tangible and
intangible, including all contracts, stock, memberships, ownership of
subsidiaries, easements, rights-of-way, privileges, permits, licenses,
franchises, causes of action, wholesale power contracts,

<PAGE>

certificates of public convenience and necessity and Service Area assignments;
and Cap Rock will assume and fulfill, satisfy and carry out--and will relieve
and save harmless Lamar of and from--all of Lamar's liabilities and obligations,
including the obligation to provide adequate and dependable electric service to
Lamar's members on a low cost basis as such service is currently furnished by
Lamar--all subject to and in accordance with the terms and conditions herein set
forth.
         1.04 Cap Rock and Lamar shall be combined pursuant to the terms of this
Agreement. Other than being subject to the approval of Lamar's members as set
forth in Section 1.02, the combination shall occur, regardless of whether or not
any contractual obligations or rights of Lamar with any other third parties are
assignable. As such, all contractual rights and obligations and other rights and
responsibilities of Lamar shall become the sole rights and responsibilities of
Cap Rock, which shall assume all such rights and obligations.
         1.05 In addition to the other agreements set forth above and hereafter,
Cap Rock specifically agrees to assume the current wholesale Power Contract
between Lamar and Rayburn Country Electric Cooperative, Inc. ("Rayburn Country")
including all obligations and benefits under such contract with Rayburn Country.
Cap Rock agrees to index and hold Lamar harmless from any liability whatsoever
under such wholesale Power Contract with Rayburn Country. Lamar agrees to assign
all wholesale Power Contracts, including the contract with Rayburn Country, to
Cap Rock and to take any and all action necessary to assist Cap Rock in assuming
the current power supply contract with Rayburn Country and any other contracts
that Lamar currently has.

                              2.00 Lamar's Members
         2.01 All of Lamar's then-existing members, on and after the date of
closing the transaction (the "Closing") as provided for below, shall
automatically become members of and be furnished electric service by Cap Rock;
their Lamar membership fees shall,, within a reasonable period, be refunded to
them; and they shall have and enjoy and may exercise any and all of the rights
of Cap Rock's other members, including rights of ownership of Cap Rock.
         2.02 As provided under Section 5.00 below (entitled "Board of
Directors"), persons receiving electric service in the Lamar Service Area, shall
have representation on Cap Rock's Board.
         2.03 As provided in Cap Rock's Bylaws and Articles of Incorporation,
the Lamar Division members will have the opportunity to participate and vote in
the annual meeting to elect directors and at all special meetings and they will
have the right to participate in nominating meetings to nominate director(s)
from their nominating district to the same extent as all members of Cap Rock.

         2.04 All outstanding allocated capital credits of Lamar shall remain
allocated to those Lamar members entitled to receive the same, as shown by final
audit of Lamar, and shall be allocated as book credits of Cap Rock in the same
amounts as allocated on the Lamar books. Prospectively, Lamar members will be
subject to

<PAGE>

the same capital credit allocation and payment terms and conditions
as other Cap Rock members. No capital credits will be reduced merely as the
result of the combination and they will be transferred in fill' to Cap Rock as
set forth above.
         2.05 Since the membership of Cap Rock voted in October, 1998, to
convert Cap Rock into a stock company at such time that it becomes feasible to
do so, Cap Rock has offered its current members three choices for receiving
their capital credits. Those three choices are: (1) credit on their electric
bill for the amount of their capital credits; (2) Cash through a Dutch Auction
process; or (3) stock in the new company in the amount of their capital credits.
Cap Rock will make those options available to current members of Lamar, on the
same terms and conditions as the options are made available to all Cap Rock
members within six (6) months after the Closing. Any stock issued to Lamar
members will have the same rights, prohibitions, restrictions and other terms as
the stock issued to all other members or as may be amended. The term" Dutch
Auction" as just used means a "reverse auction" with the person bidding the
LOWEST amount being the successful bidder.
         2.06 The Lamar Division of Cap Rock will continue programs to schools,
communities, members, and the general public in the same fashion as the other
divisions of Cap Rock. This includes support to livestock shows, fire
departments, 4-H Clubs and other organizations in the Lamar Service Area.
         2.07 Members of Lamar will not lose any recourse to directors,
management, regulatory agencies or ally of the usual and normal benefits
available to the members currently. As set forth more specifically below in
Section 6.00 (entitled "Lamar Advisory Council"), an Advisory Council made up of
the current Lamar Board members will continue in effect for the Lamar Division
for a period of at least nine (9) years.
         2.08 The headquarters office of Lamar in Paris, Texas will become a
division office of Cap Rock after the combination.
         2.09 Sufficient equipment and personnel of Lamar, and Cap Rock, if
necessary, will remain in the Lamar Service Area as necessary to provide
electric service and assistance to the members of Lamar on a local basis
consistent with good utility practice and in no case less than the quality of
service and assistance available to Lamar members prior to the combination with
Cap Rock. In the event of major system damage, the corporate office of Cap Rock
will when necessary, hastily assemble and dispatch equipment and personnel to
assist in restoring service to the system.

                       3.00 Service in Lamar Service Area
         3.01 As used int his Agreement, Lamar Service Area means the areas
furnished with electric service by Lamar immediately prior to the Closing, as
defined by Lamar's Service Area PUCT certification maps.
         3.02 Until the rates for service to all of Cap Rock's members,
including those in the Lamar Service Area, become uniform as provided for in
Section 4.00 below (entitled "Rates"), the separate rates and fees for the Lamar
Service Area That shall be in effect in that Service Area shall be no higher
than current

<PAGE>

rates, subject only to increase in Lamar's wholesale power costs.
         3.03 Cap Rock will finish programs and services to improve Lamar's
customer service and reduce outage time on the same basis as Cap Rock currently
does in its other divisions. As soon as feasible after the Closing, Cap Rock
will implement its programs and procedures in the Lamar Service Area to cut
outage time and improve service. Cap Rock will install SCADA controls in the
Lamar Service Area to be linked into the main Cap Rock SCADA system within
eighteen (18) months after the closing. Cap Rock will train employees in the
Lamar Service Area in the procedures that Cap Rock uses to provide exemplary
service to its members and reduce outage times.
         3.04 As soon as practical after the Closing, Cap Rock will institute
its outage procedures in the Lamar Division, which include the procedures
currently in place at Cap Rock that assure that outage time will be as short as
possible. This includes the procedures outlined in Cap Rock's responses to
Lamar's Questionnaire which is attached hereto as Exhibit "A".
         3.05 Cap Rock will as soon as possible after the Closing, implement its
programs in the Lamar Service Area and provide the members in the Lamar Service
Area the same type of services that it now offers in its other divisions at the
same level as it currently provides those services in its other divisions. Cap
Rock will, after the Closing, complete the current or any future Lamar work
plans, including, system improvements that have been planned for by Lamar and as
determined by Cap Rock's engineering staff, along with any changes or
modifications the Cap Rock engineering staff deem necessary. Cap Rock will
continue to make improvements as necessary to ensure the quality of the system
in the Lamar Service Area.
         3.06 Cap Rock will as soon as possible after the Closing, implement its
pro&an)s in the Lamar Service Area and provide the members in the Lamar Service
Area the same type of services that it now offers in its other divisions at the
same level as it currently provides those services in its other divisions.
Barring unusual circumstances, Cap Rock expects to accomplish this within
eighteen (18) months after the Closing. For example, within eighteen months
after the Closing, Cap Rock will institute its current outage reporting system
that it uses in its other divisions. That is, these outages will be handled out
of the division office through a toll-free number. Cap Rock will also begin to
implement its after hours outage reporting as soon as possible after Closing,
recognizing that it will take time to train its dispatchers to become familiar
with Lamar's Service Area, so that outages after hours are handled the same as
it is in Cap Rock's other divisions, through Cap Rock's toll-free number with
Cap Rock's dispatchers.
         3.07 After the Closing, service crews will continue to be located in
the Lamar Service Area. Cap Rock does not intend to decrease the number of
service crews or relocate them and anticipates that the same number of service
crews will continue to work out of the Lamar Division office in Paris, Texas.
After the Closing, Cap Rock's employees and contractors will support the service
crews located in the Lamar Service Area to the extent

<PAGE>

necessary in the event of an emergency outage such as a storm, etc.
         3.08 After the Closing, Cap Rock will incorporate the Lamar Service
Area into Cap Rock's capital improvement plans and will handle system
improvements in the Lamar Service Area in the same way that Cap Rock currently
performs those system improvements in its other divisions.
         3.09 After the Closing, Cap Rock will represent the Lamar Service Area
load in ERCOT at all committee levels etc. and be totally responsible for all
power supply in that service Area.

                                   4.00 Rates
         4.01 The electric rates for persons served within the Lamar Service
Area shall be adjusted to be the same uniform rates in effect for Cap Rock's
other members within not more than ten (10) years after the Closing, and even
earlier Wit is reasonably practicable and prudent to do so or if Cap Rock's
rates become lower. In the interim, the Lamar Service Area rates, as set forth
above, shall remain the same as they currently are and then phased toward such
uniformity with Cap Rock's rates as soon as is reasonably practicable and
prudent.
         4.02 Cap Rock's service rules, regulations, policies, practices and
procedures for the Lamar Service Area (all together referred to as "Service
Rules") shall, on and after the Closing, be brought or phased into harmony and
uniformity with the service rules and regulations for all Cap Rock service areas
within not more than five (5) years after the Closing, and even earlier if it is
reasonably practicable and prudent to do so.
         4.03 All adjustments in rates, and all changes in, additions, or
deletions to, Service Rules or rates classifications, shall be subject to the
approval of any entity or governmental authority having jurisdiction for that
purpose.

                             5.00 Board of Directors
         5.01 After Lamar members have approved the agreement to combine the
cooperatives, Cap Rock shall create a directorate district from the present
Lamar Service Area (the "Lamar District") and shall add one additional position
to the Cap Rock Electric Board which shall be filled by a director chosen by the
present Lamar Board (the "Lamar District Director") for a three-year term.
Thereafter, the Lamar District is expected to remain a distinct district, unless
the Cap Rock board finds clear evidence of disproportionate representation for
members of the district as compared to membership of the entire Cap Rock system;
provided however, that the current "Lamar Service Area" will always have at
least one representative serving on the Cap Rock Corporate Board of Directors,
as is provided in Section 5.06 below.
         5.02 The initial Cap Rock Corporate Board member from the Lamar Service
Area shall be appointed by the current Lamar Board.
         5.03 Cap Rock shall insure the Lamar director an initial term of at
least three years before he or she stands for election.
         5.04 Her his or her initial appointment to Cap Rock's Board, the
additional director, like all other directors of Cap Rock, shall be elected by
the members pursuant to the plan of

<PAGE>

districting and staggered three-year terms in effect as set forth in Cap Rock's
bylaws.
         5.05 The director from the Lamar District Director who serves on the
Cap Rock Corporate Board shall be paid the same corporate director fee and
benefits as other Cap Rock corporate directors under the current bylaws and
policies.
         5.06 Nothing in this Sec. 5.00 shall preclude Cap Rock in subsequent
years from amending its Bylaws so as to increase or decrease the number of its
Board members or to increase or decrease, or to change the boundaries of
directorate districts if the Board determines that any such change is in the
best interest of the Cooperative and its members. However, in that event, the
Lamar Service Area will still have a representative serving on the Board.

                           6.00 Lamar Advisory Council
         6.01 Cap Rock acknowledges that for several years after the Closing,
Cap Rock will from time to time need to have access to the knowledge,
consultation and advice of the Directors of Lamar as that Board is comprised
just prior to Closing. Therefore, effective immediately upon the Closing, the
Cap Rock Board shall appoint an Advisory Council ("Council") consisting of the
current members of the Lamar Board of Directors as it exists on the day prior to
Closing. Except however, that the representative of the Lamar Board of Directors
who is appointed to the Cap Rock Corporate Board of Directors, will chair the
Advisory Council but shall not be eligible to serve on the Advisory Council in
the event that he or she is not subsequently elected to or resigns from the Cap
Rock Corporate Board, It shall be the duty of the Council to advise and consult
with Cap Rock's President and Chef Executive Officer ("CEO"), officers and Board
with respect to matters of particular relevance and importance to the Lamar
Service Are& The Council shall meet and consult with Cap Rock's Board,
President/CEO (or his staff) or officers when so requested by any of them, but
shall have no vote on any Corporate Board matters.
         6.02 While serving on the Council, Lamar's members on the Council shall
receive from the Cooperative the same fees, expenses, benefits, and per diem
allowances as do members of the Advisory Councils from other divisions of Cap
Rock. Council members shall also be entitled to such other benefits or options
generally provided to other Advisory Councils.
         6.03 It is anticipated that the Lamar Advisory Council will meet
quarterly or less, if they desire. However, the Council may, at its option, meet
monthly during the transition period after the Closing to assist in this
transition period. However, regardless of how the Council meets, the Council
members will be paid the same per diem as other Cap Rock Advisory Councils and
on the same basis.
         6.04 If a person resigns from the Council or becomes ineligible or
otherwise unable to continue serving thereon, his seat shall become permanently
vacant. Such a person, or one who is on the Council when it ceases to exist,
shall be entitled to retain such benefits for him/herself as he/she is eligible
for

<PAGE>

under the Board Policies of Cap Rock.
         6.05 The Council shall exist for a period of nine (9) years or until no
members continue to serve on the Council, whichever occurs first. At the end of
such nine (9) year period, the Corporate Board of Cap Rock will determine if
there is a need to continue with an Advisory Council and if so, the makeup of
the Council. Members of the Council who retire, die, or cease to serve on the
Council for any reason prior to the end of the nine (9) year term shall not be
replaced and the Council shall be reduced by attrition.
         6.06 An Council members shall be required to sign the Cap Rock
Directors Pledge that all corporate directors are required to sign as a
condition for serving on the Council.

                              7.00 Lamar Employees
         7.01 If the employee so consents, each employee of Lamar at the time of
Closing will continue as an employee of Cap Rock and will receive, until
retirement or earlier separation from the Cooperative, the same or better
compensation and fringe benefits to which he or she would have received had he
or she continued to be employed by Lamar. No employee's employment with Lamar
will be terminated solely as a result of the combination of Lamar with Cap Rock.
An employees of Lamar who continue as employees of Cap Rock after the closing
shall be required to sign the Cap Rock "Employee Pledge and Proprietary Rights
and Information Agreement" as a condition of continued employment.
         7.02 After thee Closing, all current employees of Lamar who desire to
continue as employees of Cap Rock, will be convened to the Cap Rock pay and
benefit package, unless those employees choose to keep their current total pay
and benefit package as currently provided by Lamar. Each employee shall have the
option of choosing to be covered by the Cap Rock employee benefit package
instead of the current employee benefit package provided by Lamar if they desire
unless the law and/or NRECA rules and regulations prevent such employee from
receiving the current employee benefit package provided by Lamar. However, an
employee choosing to be covered by the Lamar employee benefit package would have
to choose the entire package and employees would not be allowed to pick and
choose between the Lamar and Cap Rock employee benefit package with regard to
individual items. Notwithstanding any of the above, even though the Cap Rock
total pay and benefit package, currently exceeds the total Lamar pay and benefit
package, in addition notwithstanding the above provisions, for a period of two
(2) years after the Closing, Lamar employees will continue to receive, at no
additional costs to the Lamar employees, health insurance benefits equivalent to
or under the same policy that they now have with Lamar.
         7.03 If the law and/or NRECA rules and regulations prevent Lamar's
employees from continuing to receive the current Lamar employee benefit package,
Lamar employees existing retirement savings plan shall be placed into a rollover
IRA account and will be self-directed by each individual employee.
Simultaneously, the Lamar employees will be placed on the existing Cap Rock
employee retirement, savings and benefit plan. In the event that applicable

<PAGE>

law and/or NRECA rules and regulations prevent an employee of Lamar from
continuing to receive the current employee benefit package provided by Lamar
and in the further event that such current benefit package as it applies to
any Lamar employee exceeds the current benefit package of Cap Rock for such
employee, Cap Rock will take such action as is necessary in order to assure
that the employee will receive a benefit package equal to or exceeding the
current Lamar benefit package by purchasing an annuity or taking such other
action as is necessary.
         7.04 Current employees of Lamar will not have their pay reduced as a
result of the combination After the Closing, such employees shall continue to
receive the same pay as they currently receive from Lamar. As soon as
practicable after the Closing, at Cap Rock's discretion, employees will be
tested, and based upon testing results, the employees will be provided with
opportunities to increase their rates of pay. However, no matter how the test
results come out, no employee's pay will be reduced. Further, as soon as
practicable after the Closing, the Lamar employees will be paid in accordance
with Cap Rock's pay and benefit package in accordance with the job and grade,
unless it would not benefit an employee, in which case the employee would
continue to receive the Lamar pay and benefit package.
         7.05 Current employees of Lamar will not be required to transfer or
relocate to any other Service Area solely because of this combination.
         7.06 within sixty (60) days after Closing, all Lamar employees will be
offered a lump sum cash severance payment equal to one month's pay for each
continuous year of service at the time of the severance payment. All employees
receiving such offer will have ninety (90) days after the offer to notify
management of their desire to accept such offer. Acceptance of the option shall
be at the option of the employee. At Cap Rock's sole option, such offer may be
extended to some or all employees (who do not accept such offer within the time
period specified above) at a later time.
         7.07 Cap Rock will provide employees of Lamar with job enhancement
training on the same basis as other Cap Rock employees. Such job enhancement
training will be available to all current employees of Lamar who continue as
employees of Cap Rock. This job enhancement training should provide employees of
Lamar with opportunities to receive increases in pay that are currently
unavailable to them.
         7.08 Lamar employees who are already retired at the date of Closing or
who thereafter retire from the Cooperative's employment shall be entitled to
retain, their health insurance in the same manner and method as in effect for
Lamar other retired employees.
         7.09 Except as otherwise specifically detailed in this Agreement, Lamar
employees who continue to be employed by Cap Rock shall be covered by Cap Rock's
policies that apply to all other employees.
         7.10 Retired Lamar employees who are already retired at the Closing
shall be entitled to retain, the same benefits in the same manner and method as
is currently in effect for Lamar's retired employees as shown on Exhibit "B"
attached hereto.

<PAGE>

         7.11 Lamar employees who continue to be employed by Cap Rock shall have
the same opportunities to advance in position and/or compensation and fringe
benefits or the equivalent, as will Cap Rock's other employees. Lamar employees
who continue as Cap Rock employees will be tested to determine their
qualifications and appropriate grade Regardless of test scores, no employees
salary will be reduced.
         7.12 The provisions of this Sec. 7.00 that enable Lamar employees to
continue employment, equal training, opportunities for advancement, and that
prohibit decreases in wages, salaries or related fringe benefits shall not
necessarily apply to such an employee if and after, because of his or her
becoming partially disabled or because of his or her own request, he or she is
allowed to continue in Cap Rock's employment in a different position. Nothing in
this Sec. 7.00 or in any other provision of this Agreement shall preclude or
impair the right of Cap Rock to terminate any employee as allowed by Federal or
Texas law. Further, nothing in this Sec. 7.00 or anywhere in this Agreement
shall constitute an employment contract with any employee and nothing herein
shall change or modify the standing of the Lamar's employees as
employees-at-will.

                               8.00 Lamar Identity
         8.01 Lamar will, after the Closing, become a division of Cap Rock.
Initially, during a transition period, the Lamar Service Area will be called
"Lamar Electric Cooperative, a division of Cap Rock Electric Cooperative, Inc."
Later, with the advice of the Advisory Council and employees of Lamar, the Lamar
Service Area will eventually be known as "Cap Rock Electric - Lamar Division."
This local presence and identity will also be carried out, initially, by the
continuation of a Lamar Division business office in Paris, Texas alter the
combination. Consistent with prudent practices and convenience to the Lamar
Service Area members, Cap Rock may maintain accounts in one or more banks
located within the Lamar Service Area Cap Rock will continue to maintain an
office in Paris as currently utilized in the Lamar system.
                           9.00 Miscellaneous Matters
         9.01 Lamar shall recommend to its members such amendments to its
articles of incorporation and bylaws as necessary, to facilitate and expedite
the unconditional approval of this Agreement by its members and their related
simultaneous authorization for Lamar to be dissolved.
         9.02 Cap Rock will also amend its Articles of incorporation or Bylaws
in whatever ways, if any, that are necessary to carry out this Agreement.
However, no changes are known to be needed at this time to fulfill this
Agreement by Cap Rock.
         9.03 After execution of this Agreement by the parties and until the
closing, Lamar will not take any action that will or might materially affect its
operations or financial condition without first giving timely notice thereof to
Cap Rock and conferring with Cap Rock with respect thereto. Lamar will timely
notify Cap Rock of any actual or potential development or event beyond its
control that will or might materially affect its operations or financial
condition, and the parties will consider

<PAGE>

and address that matter in such ways as they mutually agree upon Lamar will
also periodically inform Cap Rock, at least monthly, of its operations,
revenues, expenses, balance sheet and other information and data routinely
reported to its own Board of Directors.
         9.04 From the date of execution of this Agreement, Cap Rock shall bear
the costs directly attributable to promoting the Lamar member approval of this
Agreement, so long as this Agreement is submitted to the membership for their
approval with an affirmative recommendation from the Board of Directors and
management. The Board of Directors of Lamar hereby agree to use their best
efforts with all resources available after the execution of this Agreement to
recommend and promote this combination with Cap Rock to the members of Lamar,
pursuant to the terms and conditions of this Agreement. Cap Rock shall also bear
the costs directly attributable to securing all other necessary approvals, which
may include a joint application of the parties to the Texas Public Utility
Commission for transfer of Lamar's service area assignments to the Cooperative,
provided the Acquisition is completed. If the combination is not completed, then
Cap Rock and Lamar shall share proportionately the costs directly related to
this Agreement. However, Cap Rock, without charge and at its own expense, will
make available to Lamar any of its personnel or consultants to assist in
securing member approval.
         9.05 Notwithstanding the above provisions, if prior to the completion
of this combination and prior to the completion of a "Closing" (defined herein
to be the event whereby all assets and liabilities of Lamar are transferred to
and assumed by Cap Rock), Lamar cannot complete or elects not to complete the
combination set forth in this Agreement and the "Closing" does not take place
because of (i) the failure of Lamar's members to approve the combination, or
(ii) any of the representations, statements or warranties of Cap Rock which are
made to Lamar are shown to be untrue, and the default of Cap Rock in (ii) cannot
be cured or corrected, then management and the Board will continue to operate
Lamar as before, and may consider other strategic alternatives. However, if
after the execution of this Agreement, the combination is not completed and the
"Closing" does not occur, for any reason other than (i) or (ii) just stated,
then Lamar shall be responsible for all of its costs and expenses under this
Agreement and reimbursement to Cap Rock for all of its costs and expenses.
         9.06 The parties, through their officials and other representatives,
shall consult and confer with each other to the end of developing and agreeing
upon all document necessary or desirable to close this transaction and
thereafter to consummate and carry out the combination as herein contemplated.
"Documents", as used in this Sec. 9.05, means all such documents created on a
prospective basis following execution of this Agreement and shall include but
not be limited to the following: correspondence, including opinions of legal
counsel; studies and analysis; notices, related articles and bylaw changes;
contracts; ballots and/or proxy forms; cooperative member communications; Board
and member resolutions; deeds, title transfers, and other documents of
conveyance; and applications or petitions for approvals or

<PAGE>

consents required from any governmental authority or private entity. This
commitment to consult and confer is without regard to whether a document is
the responsibility of; or may be sponsored by, one or by both parties. At no
charge and at its own expense, Cap Rock will make available to Lamar, ,if
Lamar so desires, any of its personnel or consultants to draft or assist in
the drafting of any such document. Either party may cause any such document
to be drafted and recommended to the other.
         9.07 The Closing and legal effectiveness of the combination shall take
place as soon as practicable and legally possible after the Agreement has been
approved by the Lamar members and all documents of transfer, sale and conveyance
are prepared for execution by the parties, as of 10:00 a.m. on the date, and at
such site as the parties agree upon. The Closing shall include the execution and
delivery of all documents and the taking of any other action necessary to
complete the transaction resulting in the combination. Unless mutually agreed to
otherwise, such date will be the first of a calendar month.
         9.08 After the execution of this Agreement, the Parties will cooperate
in all appropriate ways to enable The Parties (a) to conduct an inventory and
inspection of the Parties' properties, including materials and supplies to
inspect and review all books and records of the Parties that either Party deems
necessary, and to conduct an inventory and inspection of any executory contracts
to which Lamar or Cap Rock is a party or of which it is a third parry
beneficiary, and (b) to conduct such audits, including a management audit if a
Party so elects, as a Party may deem desirable or appropriate in connection with
this Agreement.
         9.09 Each party hereto warrants and covenants with the other that it
has, or will use its best efforts to obtain, all authority necessary for it to
execute and carry out the provisions of This Agreement, and each will furnish to
the other, at or prior to Closing, an opinion of counsel with usual
qualifications and assumptions, satisfactory to the other, that it is so
authorized, that it has taken all action legally necessary to validly consummate
the Agreement. Also, at or prior to Closing, Lamar will furnish to Cap Rock a
commitment for an owner's title policy issued by Stone Title Company, Inc., in
Paris, Texas (the "Title Company"), subject to the printed exceptions and all
matters of record, in the amount of the book value of all fee property to be
conveyed to Cap Rock; a properly endorsed certificate of title for all
certificated property included in the assets; and an affidavit of the President
of Lamar that (i) Lamar has paid in full for all items of personal property
included among the assets shown on its books as of closing and (ii) that such
assets are in the possession of Lamar, (iii) subject to such debts, liens and
encumbrances That the parties agree should not be paid in fill' at Closing, but
should, instead, be assumed by Cap Rock. At the Closing the Title Company will
issue the Owner Policies of Title Insurance to Cap Rock covering Lamar's
acquired real property, and Cap Rock shall pay the premiums therefor, based upon
the book values of the respective real properties.
         9.10 Prior to closing Lamar will furnish Cap Rock with a Certificate of
Litigation and other claims which sets forth a

<PAGE>

description of all pending litigation and all other asserted or non-asserted
claims known by Lamar to exist. Cap Rock agrees to assume the liability for
payment of any damages, costs, expenses and attorneys fees adjudicated
against Lamar and any of its officers and directors relating to the
performance of their duties as such with Lamar, regarding the litigation and
claims disclosed in the Certificate of Litigation, and Cap Rock agrees to
assume and be responsible for the defense of such litigation and claims
disclosed in the Certificate of Litigation. This agreement of Cap Rock just
stated shall never be construed to eliminate or release the liability of any
insurance carrier to pay such liabilities of Lamar under any existing
liability policies Lamar owns; and if Cap Rock assumes the liabilities it has
agreed to assume in this Section 9.10, Cap Rock shall be entitled to The
proceeds of any liability insurance policy that are payable with respect to
such litigation and claims. Also at or prior to Closing, Lamar will furnish
Cap Rock with an affidavit from Management and the Board that there has been
no material change in its system, operations or financial condition or any
development or event portending such a change of which the other party has
not theretofore been fully notified pursuant to Sec. 10.03 of the Agreement.
         9.11 Each party represents, covenants and warrants to The other that
its execution of this Agreement, action and/or inactions consummating the
combination resulting therefrom, do not violate The provisions of the party's
Articles of Incorporation, Bylaws, The provisions of law, or any other
instrument to which either is a patty.
         9.12 All representations and warranties made by the parties each to the
other pursuant to this Agreement shall survive the closing date and the delivery
of items as specified in this Agreement, except to the extent provided in this
Agreement.
         9.13 Each party agrees to indemnify the other and to hold it harmless,
at all times after the date of this Agreement, against and with respect to:
                  (1)   any and all damage, loss, cost, and expense resulting
                        from any misrepresentations, breach of warranty, or
                        nonfulfillment of any obligation on the part of
                        itself under this Agreement or from any
                        misrepresentation in or omission from any instrument
                        furnished to the other party under this Agreement,
                        and

                  (2)   any and all actions, suits proceedings, demands,
                        assessments, judgments, costs, and legal and other
                        expenses incident to liabilities specified in
                        subsection (1) above; and,

                  (3)   any and all actions, suits, proceedings, demands,
                        assessments, judgments, costs, and legal and other
                        expenses arising as a result of the consummation of
                        this Agreement caused by the misrepresentation or
                        other wrongful conduct of the other pay hereto.

<PAGE>

         9.14 Nothing in this Agreement, expressed or implied, is intended to
confer upon any person, other than the parties and their successors, any rights
or remedies under this Agreement, or to impose any personal liability upon any
individual officer, director, attorney or employee for any representation,
statement or action made in good faith and in the performance of their
respective offices with or duties to a party hereto.

                             10.00 Lamar Dissolution
         10.01 Within a reasonable time after the Closing, after the Lamar
members authorize Lamar's dissolution, and after any necessary regulatory
approvals or contract assignments are obtained, and Cap Rock determines that it
is no longer necessary for Lamar to continue in existence as a corporation, the
Lamar Board, acting in such manner as agreed to by the parties and in conformity
with the applicable laws of Texas, shall duly cause Lamar to be dissolved.
         10.02 The cost and expense of all matters covered in Sec. 10.01 shall
be borne by Cap Rock.

                   11.00 Amendment or Abandonment of Agreement
         11.01 From and after the approval of this Agreement by the Lamar
members and their authorization for Lamar to be dissolved and until the Closing,
the Agreement may be amended by action of the two Cooperative's Board of
Directors (a) upon their determination that such is necessary or desirable to
accomplish or enhance the principal purposes of the Agreement or (b) because of
a requirement so to amend as a condition of securing any necessary approval of
the Agreement by a governmental agency or private entity, but only if such
amendment(s) will not substantially defeat or impair the achievement of the
principal purposes of the Agreement.
         11.02 At any time after the execution of this Agreement and prior to
Closing, this Agreement may be terminated and abandoned (a) upon the mutual
agreement of the parties based upon their joint determination that it is in the
best interest of either party or (b) unilaterally if developments of a material
nature occur upon the basis of which it may reasonably conclude that failure to
so terminate and abandon will result in a substantial detriment to itself or its
members with respect to the cost, adequacy or dependability of its member's
electric service. If a party unilaterally decides to terminate and abandon, it
shall deliver written notice thereof to the other party, specifying the facts
upon which it has based its decision, as soon as possible after such decision is
made.
         IN WITNESS WHEREOF, The parties have duly authorized and caused their
respective officers to execute this Agreement in quadruplicate originals, with
two of the same being retained by each party, on or as of the 28 day of OCT.,
1999.

LAMAR ELECTRIC                                       CAP ROCK ELECTRIC
COOPERATIVE, INC.                                    COOPERATIVE, INC.

<PAGE>

By:______________________________  By:____________________________
     Darrell Coats,                       Russell E. Jones,
     Chairman of the Board                Chairman of the Board

ATTEST:__________________________  _______________________________
          Secretary                    Alfred J. Schwartz, Secretary

                         CORPORATE ACKNOWLEDGEMENT

THE STATE OF TEXAS         )(
                           )(
COUNTY OF LAMAR )(
          -----

         THIS instrument was acknowledged before me on the 28TH day OCTOBER ,
1999 by DARRELL COATS, Chairman of the Board, and ZED SMITH, Secretary of Lamar
County Electric Cooperative, Inc., a Texas electric cooperative corporation, on
behalf of said corporation.

                                              ----------------------------------
                                              Notary Public, State of Texas
                                              Notary's Printed Name:____________
                                              My Commission Expires:____________

(SEAL)

<PAGE>

THE STATE OF TEXAS         )(
                           )(
COUNTY OF MIDLAND          )(

         THIS instrument was acknowledged before me on the 26TH day of OCTOBER,
         1999 by RUSSELL E. JONES, Chairman and ALFRED J. SCHWARTZ, Secretary of
         Cap Rock Electric Cooperative, Inc., a Texas electric cooperative
         corporation, on behalf of said corporation.

                                               ---------------------------------
                                               Notary Public, State of Texas
                                               Notary's Printed Name:___________
                                               My Commission Expires:___________

(SEAL)

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