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EXHIBIT 10.32
FORM OF
ROYALTY RIGHTS PURCHASE AGREEMENT
THIS ROYALTY RIGHTS PURCHASE AGREEMENT (the "Agreement"), dated
as of March 1, 1996, (the "Effective Date") is by and between CMS NOMECO Oil &
Gas Co., a Michigan corporation ("CMS NOMECO" or "Purchaser"), and
_________________________________________, (the "Seller").
RECITALS:
The Seller is currently an officer of CMS NOMECO. Through the
"Plan B Program" terminated by CMS NOMECO effective October 31, 1995, the
Seller acquired, and currently possesses, certain overriding royalty interests
in wells as described on Exhibit A hereto (the "Royalty Rights"). CMS NOMECO
intends to make an initial public offering of a portion of its common stock
("IPO"). In furtherance of that goal, CMS NOMECO desires to align the
interests of the Seller as a key management employee with the interests of
prospective shareholders and to acquire the Royalty Rights. Accordingly, CMS
NOMECO has agreed to purchase, and the Seller has agreed to sell, the Royalty
Rights, in exchange for the consideration identified below.
NOW, THEREFORE, it is agreed between the parties as follows:
1. PURCHASE OF ROYALTY RIGHTS. Effective on the Effective
Date, Seller shall sell, and CMS NOMECO shall purchase, all Seller's right,
title and interest in the Royalty Rights, and in exchange therefore, CMS NOMECO
shall pay the Seller the consideration described below in accordance with the
terms stated in this Agreement.
2. FIRST INSTALLMENT PAYMENT. On the Effective Date, CMS
NOMECO shall pay to the Seller cash in the amount of $_______________.
3. REMAINING INSTALLMENT PAYMENTS.
(A) INITIAL CONVERSION VALUATION. On the Effective
Date, the amount of $______________ (the "Conversion Amount") shall be
converted into phantom stock units of CMS Energy Corporation ("CMS Energy")
common stock, or, if the pricing date of the IPO (the "Pricing Date") occurs on
or before the Effective Date, fifty percent (50%) of
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the Conversion Amount shall be converted into phantom stock units of CMS Energy
common stock and fifty percent (50%) of the Conversion Amount into phantom
stock of CMS NOMECO common stock. For conversion purposes, each CMS Energy
phantom stock unit shall be valued at the Trailing Average Price, as that term
is defined below, of CMS Energy common stock on the Effective Date, and each
CMS NOMECO phantom stock unit shall be valued at the initial offering price per
share of CMS NOMECO common stock as set forth in the prospectus governing the
IPO. Whenever used herein, the term Trailing Average Price means the average of
the closing prices of a security per share as reported in The Wall Street
Journal for the ten trading days preceding (and not including) a specified
date.
(B) SECOND (IPO) CONVERSION. If the Pricing Date
occurs after the Effective Date, the value of the CMS Energy phantom stock
units described in Subsection 3(a) shall be redetermined as of the Pricing
Date, based on the Trailing Average Price of CMS Energy common stock as of the
Pricing Date. Fifty percent of the value so determined shall be converted into
phantom stock units of CMS NOMECO common stock effective as of the Pricing Date
("the "IPO Conversion"). For conversion purposes, each CMS NOMECO phantom
stock unit shall be valued at the initial offering price of one share of CMS
NOMECO common stock set forth in the prospectus governing the IPO. If no IPO
occurs, the entire Conversion Amount shall remain in phantom stock units of CMS
Energy common stock.
(C) PHANTOM STOCK ACCOUNT. The phantom stock units
determined under paragraphs 3(a) and 3(b) shall be credited to a phantom stock
account ("Account") established and maintained for the Seller by CMS NOMECO.
The Account shall be an unfunded record of the phantom units allocated to the
Seller under this Agreement solely for accounting purposes, shall not require a
segregation of CMS NOMECO assets, and shall remain subject to the claims of
general creditors against CMS NOMECO. Immediately following the Conversion
Date, the IPO Conversion, at least annually thereafter, and from time to time
upon reasonable request of the Seller, CMS NOMECO shall furnish the Seller with
a statement in the form of Exhibit B to this Agreement, showing the number of
CMS NOMECO and CMS Energy phantom stock units allocated to the Seller as of
such dates.
(D) ADJUSTMENTS FOR STOCK DIVIDENDS/SPLITS, ETC.
In the event of any stock dividend, stock split, reclassification, merger,
consolidation, or similar transaction affecting the shares of common stock of
CMS NOMECO or CMS Energy underlying the Seller's phantom stock units, such
phantom stock units shall automatically be adjusted at the same time and in the
same manner as the outstanding shares of common stock are adjusted.
(E) INSTALLMENT PAYMENT DATES. On the first,
second, third, fourth and fifth anniversaries of the Conversion Date, the then
value of the Seller's aggregate remaining phantom stock units shall be
determined, and the Seller shall receive a cash
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installment payment from CMS NOMECO calculated on a declining balance basis,
representing the following percentages of the then value of the Seller's
aggregate remaining phantom stock units:
ANNIVERSARY DATE PERCENTAGE PAYMENT
March 1, 1997 21% of balance
March 1, 1998 26% of balance
March 1, 1999 36% of balance
March 1, 2000 56% of balance
March 1, 2001 100% of balance
For installment payment valuation purposes, each phantom stock
unit shall be valued at the Trailing Average Price of CMS Energy or CMS NOMECO
common stock, as applicable. Each installment payment shall be comprised of an
equal percentage of CMS Energy and CMS NOMECO phantom stock units. The phantom
stock units in the Seller's Account shall be reduced by the number of phantom
stock units paid out in each installment.
(F) DIVIDEND EQUIVALENT PAYMENTS. CMS NOMECO will
pay to Seller, on each date on which CMS NOMECO or CMS Energy pay a dividend
with respect to its common stock in cash or other property (other than its
common stock), an amount equal to the dividends the phantom stock units at that
time remaining in the Seller's Account would have received if such units were
actual shares of common stock of CMS NOMECO or CMS Energy, as applicable.
4. ACCELERATION EVENT.
(A) ACCELERATION OF INSTALLMENTS. If (A) the
Seller's employment with CMS NOMECO terminates due to the Seller's death; or
(B) the Seller terminates his employment due to a serious health problem of the
Seller or his immediate family and, within 10 days after such termination and
written request of CMS NOMECO, executes and delivers to CMS NOMECO a covenant
not to complete through March 1, 2001, in the form attached hereto as Exhibit
D; or (C) the Seller's employment is terminated by CMS NOMECO for any reason
(including misconduct by the Seller); or (D) the Seller terminates his
employment within 3 months after having incurred an adverse change in
officer-level responsibilities or other terms and conditions of employment of
the Seller; or (E) the Seller terminates his employment within 3 months after
receiving notice from CMS NOMECO of his employment transfer to a work location
other than Jackson, Michigan or Houston, Texas (provided that the transfer to
any work location within a 50 mile radius of Jackson, Michigan or Houston,
Texas shall be disregarded under this Subsection 4(a)); or (F) the Seller
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terminates his employment within 3 months following a Change in Control of CMS
NOMECO (as defined below) or CMS Energy (as defined in the CMS Energy
Corporation Performance Incentive Plan) (each such event (A) through (F) of
this Subsection 4(a) being referred to as an "Acceleration Event"), then all
remaining unpaid installments automatically shall become due as of Seller's
date of termination, and CMS NOMECO shall make a final cash installment payment
to the Seller or the Seller's estate or beneficiary, as applicable, within 30
days thereafter equal to the then value, based on the Trailing Average Price of
CMS Energy and CMS NOMECO common stock, as applicable, of the Seller's
aggregate remaining phantom stock units as of such due date (the "Regular
Acceleration Event Installment"). For purposes of this Subsection 4(a),
"Control" means ownership of 50% or more of the voting stock of or equity
interests in an entity and a "Change in Control of CMS NOMECO" shall be deemed
to have occurred if CMS Energy, directly or indirectly through an affiliate
controlled by, or under common control with CMS Energy, no longer holds a 50%
equity or asset ownership interest in CMS NOMECO.
(B) SUPPLEMENTAL ACCELERATION EVENT INSTALLMENT
PAYMENT. Within 30 days after the occurrence of an Acceleration Event, CMS
NOMECO shall pay to the Seller or the Seller's estate or beneficiary, as
applicable, an additional installment amount as set forth in Exhibit C hereto
(the "Supplemental Acceleration Event Installment").
(C) FORFEITURE EVENT. If, and only if, the Seller
resigns his employment with CMS NOMECO before March 1, 2001 under circumstances
other than as contemplated by Clauses (B), (D), (E) or (F) of Subsection 4(a),
then no Regular or Supplemental Acceleration Event Installment shall be paid
and all remaining installment payments outstanding as of the date of such
resignation automatically shall be forfeited.
5. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller
represents and warrants to CMS NOMECO that Seller has and is conveying hereby
good title to the Royalty Rights, free and clear of all liens, encumbrances or
assignments, other than those liens, encumbrances, assignments, adverse claims
and other title defects burdening or affecting the interests when received by
the Seller from CMS NOMECO or created by CMS NOMECO thereafter.
6. PRE-TRANSFER PRODUCTION PAYMENTS. The payment of
production revenue with respect to the Royalty Rights for production that
occurs prior to the Effective Date shall be paid to the Seller at the time such
payment is received by CMS NOMECO.
7. NONTRANSFERABILITY AND NONALIENATION. The Seller's
rights, title and interest in this Agreement and the installment payments
hereunder may not be transferred, pledged, assigned or otherwise alienated or
hypothecated during the Seller's lifetime, except into trust for estate
planning purposes, and any transfer in violation of this covenant without
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the consent of CMS NOMECO shall be void.
8. SECURITIES LAW RESTRICTIONS.
(A) PHANTOM STOCK CASH PAYMENT EXEMPTION. At the
time that the IPO is completed, this Agreement is intended to qualify for the
"derivative security" cash payment exemption set forth in Rule 16a-1(c)(3) of
the Securities Exchange Act of 1934, as amended ("Exchange Act") by satisfying
the provisions of (a)(1), (a)(2) and (c)(2) of Rule 16b-3 of the Exchange Act.
(B) PLAN REQUIREMENTS. If a plan is required to
satisfy the aforementioned exemption, then this Agreement, when aggregated with
the purchase agreements issued by CMS NOMECO to the other top five CMS NOMECO
executives to purchase their respective "Plan B Program" royalty interests,
shall constitute a "plan" for purposes of the cash payment exemption under Rule
16a-1(c)(3) of the Exchange Act. The maximum number of CMS NOMECO shares under
such plan shall be the aggregate number of shares of CMS NOMECO Common Stock
underlying the CMS NOMECO phantom stock units allocated among all six purchase
agreements. In the event that the IPO is completed and under Rule 16a-1(c)(3)
of the Exchange Act there is a need for a "disinterested committee" within the
definition of Rule 16b-3 of the Exchange Act, the disinterested committee and
not the CMS NOMECO Board of Directors shall administer the terms of the plan.
9. EMPLOYMENT OF SUCCESSORS. Nothing herein confers any
right or obligation on the Seller to continue in the employ of CMS NOMECO, nor
shall it affect in any way the Seller's right or the right of CMS NOMECO to
terminate the Seller's employment at any time. This Agreement shall be binding
upon and inure to the benefit of any successor or successors of CMS NOMECO.
10. DISPUTES. As part of the consideration for this
Agreement, the Seller and the Seller's successors and assigns agree that any
dispute or disagreement which shall arise under or as a result of this
Agreement shall be determined by arbitration under the Commercial Arbitration
Rules of the American Arbitration Association with venue in the Detroit
metropolitan area. Any such determination of a dispute under this Agreement
shall be final, binding and conclusive for all purposes.
11. NOTICES. Every notice relating to this Agreement shall
be in writing and if given by mail shall be given by registered or certified
mail with return receipt requested. All notices to CMS NOMECO shall be
delivered to the [Chairman of the Board] of CMS NOMECO at its headquarters.
All notices by CMS NOMECO to the Seller shall be delivered to the Seller
personally or addressed to the Seller at the Seller's last residence
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address as then contained in CMS NOMECO's records or such other address as the
Seller may designate. Either party by notice to the other may designate a
different address to which notices shall addressed. Any notice given by CMS
NOMECO to the Seller at the Seller's last designated address shall be effective
to bind any other person who shall acquire rights hereunder.
12. MISCELLANEOUS. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and supersedes
any prior written or oral agreements or understandings relating to the subject
matter hereof. No modification or amendment of this Agreement shall be valid
unless in writing and signed by or on behalf of the parties hereto. A waiver
of the breach of any term or condition of this Agreement shall not be deemed to
constitute a waiver of any subsequent breach of the same or any other term or
condition. This Agreement is intended to be performed in accordance with, and
only to the extent permitted by, all applicable laws, ordinances, rules and
regulations. If any provisions of this Agreement, or the application thereof
to any person or circumstance, shall, for any reason and to any extent, be held
invalid or unenforceable, such invalidity and unenforceability shall not affect
the remaining provisions hereof and the application of such provisions to other
persons or circumstances, all of which shall be enforced to the greatest extent
permitted by law. The headings in this Agreement are inserted for convenience
of reference only and shall not be a part of or control or affect the meaning
of any provision hereof.
13. GOVERNING LAW. This Agreement shall be construed under
and governed by the laws of the State of Michigan.
This Agreement is hereby executed on this the ____ day of __________, 199__.
PURCHASER:
CMS NOMECO OIL & GAS CO.
By: _________________________
[_______________________]
Its:[__________________]
SELLER:
[____________________________]
[Name of Executive]
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EXHIBIT A
ROYALTY RIGHTS
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EXHIBIT B
PHANTOM STOCK ACCOUNT
Name of Account Holder (Seller) ___________________________________
CMS ENERGY PHANTOM STOCK UNITS
NUMBER VALUE OF
DATE AMOUNT UNIT VALUE OF UNITS BALANCE
- -------- ------------- -------------- -------- ------------
CMS NOMECO PHANTOM STOCK UNITS
NUMBER VALUE OF
DATE AMOUNT UNIT VALUE OF UNITS BALANCE
- -------- ------------- --------------- -------- ------------
TOTAL ACCOUNT VALUE _________________
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EXHIBIT C
SUPPLEMENTAL ACCELERATION
EVENT INSTALLMENT
If an Acceleration Event occurs under Subsection 4(a) of the Agreement, the
amount of the Supplemental Acceleration Event Installment payment payable
pursuant to Subsection 4(b) shall be determined as follows:
Date of Amount of Supplemental
Acceleration Event Acceleration Event Installment Payment
- -------------------------------- --------------------------------------
On or but prior
after to
- ------ ---------