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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 6
to
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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WOLVERINE ENERGY 1998-1999
DEVELOPMENT PROGRAM
Wolverine Energy 1998-1999(A) Development Company, L.L.C.,
Wolverine Energy 2001(B) Development Company, L.L.C.,
Wolverine Energy 1998-1999(C) Development Company, L.L.C.,
Wolverine Energy 1998-1999(D) Development Company, L.L.C.,
Wolverine Energy 1998-1999(E) Development Company, L.L.C.,
Wolverine Energy 1998-1999(F) Development Company, L.L.C.,
Wolverine Energy 1998-1999(G) Development Company, L.L.C.,
Wolverine Energy 1998-1999(H) Development Company, L.L.C.,
Wolverine Energy 1998-1999(I) Development Company, L.L.C., and
Wolverine Energy 1998-1999(J) Development Company, L.L.C.
(Exact name of registrants as specified in their Articles of Organization)
Michigan 1311 To be applied for
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Nos.)
organization)
4660 South Hagadorn Road, Suite 230
East Lansing, Michigan 48823
(517) 351-4444
(Address, including zip code, and telephone number,
including area code, of registrants' principal executive offices)
Iris K. Linder, Esq.
Fraser Trebilcock Davis & Dunlap, P.C.
1000 Michigan National Tower
Lansing, MI 48933
(517) 377-0803
(Address, including zip code, and telephone number,
including area code, of agent for service)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: X
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
maximum maximum
Amount offering aggregate Amount of
Title of Securities to be price per offering registration
to be registered registered(1) unit(2) price(1) fee(3)
Membership Interests 15,000 $1,000 $15,000,000 $5,172.41
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(1) This Registration Statement covers all Limited Liability Company Membership
Interests that may be acquired by investors, whether as limited liability
Interests or as general liability Interests.
(2) Subscriptions will be accepted in the minimum amount of five Interests
($5,000), subject to certain lower requirements for investments by IRAs and
Keogh Plans and certain state law requirements.
(3) Previously paid.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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WOLVERINE ENERGY 1998-1999
DEVELOPMENT PROGRAM
CROSS-REFERENCE SHEET
Cross Reference Sheet Furnished Pursuant to Item 501 of Regulation S-K
Item Number and Caption Heading in Prospectus
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1. Forepart of Registration Statement Outside front cover page of Prospectus
and Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Inside front cover page and outside
Cover Pages of Prospectus back cover page of Prospectus
3. Summary Information, Risk Factors "Summary of Program," Summary of Tax
and Ratio of Earnings to Fixed Considerations," and "Risk Factors"
Charges
4. Use of Proceeds "Application of Proceeds"
5. Determination of Offering Price "Terms of Offering"
6. Dilution Not applicable
7. Selling Security Holders Not applicable
8. Plan of Distribution "Plan of Distribution" and "Terms of
Offering"
9. Description of Securities to be "Summary of Program," "Investor
Interestholder Limited Liability and
Registered Potential Liabilities of Participating
Investor Interestholders,"
"Participation in Costs and Revenues" and
"Summary of Company Operating
Agreement"
10. Interests of Named Experts and Counsel "Legal Opinions" and "Experts"
11. Information With Respect to the Registrants:
(a) Description of Business "Summary of Program," "Proposed
Activities and Policies" and
"Application of Proceeds"
(b) Description of Property "Proposed Activities and Policies"
(c) Legal Proceedings Additional Information
(d) Market Price of and Dividends Not applicable
on the Registrants' Common Equity
and Related Stockholder Matters
(e) Financial Statements Not applicable
(f) Selected Financial Data Not applicable
(g) Supplementary Financial Not applicable
Information
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(h) Management's Discussion and Not applicable
Analysis of Financial Condition
and Results of Operations
(i) Changes in and Disagreements Not applicable
with Accountants on Accounting and
Financial Disclosure
(j) Directors and Executive "Management"
Officers
(k) Executive Compensation "Management"
(l) Security Ownership of Certain "Management"
Beneficial Owners and Management
(m) Certain Relationships and "Proposed Activities and Policies,"
Related Transactions "Application of Proceeds,"
"Participation in Costs and Revenues,"
"Compensation and Reimbursement,"
"Conflicts of Interest" and
"Management"
12. Disclosure of Commission Position "Management - Fiduciary Obligations
on Indemnification for Securities and Indemnification" and "Summary of
Act Liabilities Company Operating Agreement"
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SUPPLEMENT NO. 2
DATED: February 23, 2001
TO THE
PROSPECTUS
DATED: SEPTEMBER 4, 1998
As amended on February 21, 2001
OF
WOLVERINE ENERGY 1998-1999 DEVELOPMENT PROGRAM
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WOLVERINE ENERGY 2001(B)
DEVELOPMENT COMPANY, L.L.C.
Wolverine Energy 2001(B) Development Company, L.L.C. (the "Company") is
hereby commencing the offer and sale of membership interests ("Interests") in
the Company pursuant to the terms and conditions described in the Prospectus of
the Wolverine Energy 1998-1999 Development Program (the "Program") dated as of
September 4, 1998 as amended on February 21, 2001 (the "Prospectus"), and as
further amended by this Supplement No. 2 dated February 23, 2001 ("Supplement
No. 2"). All capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Prospectus and all of the material terms
of the offer and sale of Interests in the Company, the business in which it will
engage and the conditions under which it will operate are restated as of the
date of this Supplement as if the Company was the Company generically described
in the Prospectus, unless modified or otherwise provided or described herein.
This Supplement No. 2 amends and restates any and all prior Supplements to the
Prospectus in their entirety. All prior Supplements, as of the date hereof, have
been superseded by this Supplement No. 2 and may not be relied upon by any
person. All terms, provisions or descriptions of any nature appearing herein
shall supersede and control any inconsistent or conflicting terms, provisions or
descriptions appearing in the Prospectus or any prior Supplement thereto.
THE COMPANY
The Company will be activated upon the first closing of the sale of
Interests pursuant to this Supplement and the Prospectus pursuant to the terms
described in the Prospectus under the caption "Terms of the Offering." The
Company will not have significant assets or have engaged in any operations as of
that date. Upon the closing of the sale of Interests and the activation of the
Company, substantially all of its net proceeds remaining from the sale of
Interests after payment of organizational and offering costs, including the
Management Fee to the Manager, shall be used to acquire working interests in the
Properties described below and to pay certain fees and expenses to the Manager
and its affiliates, among others. See "Compensation and Reimbursement"
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in the Prospectus for more information with respect to the application of the
proceeds of the sales of Interests by the Company.
TERMS OF THE OFFERING
The Interests will be offered and sold commencing on the date of this
Supplement No. 2 pursuant to the terms of the offering of Interests by the
Program described under the caption "Terms of Offering" and "Plan of
Distribution" in the Prospectus, as modified herein. The offering of Interests
of the Company commenced on the date of this Supplement No. 2. If at least
$1,000,000 of Interests have been sold, the Manager may, in its discretion,
terminate this offering at any time thereafter; provided, however, that not more
than 12,000 Interests, in the aggregate, may be sold in this offering pursuant
to this Supplement No. 2. If fewer than $1,000,000 of Interests have been sold
by December 31, 2001, this offering shall terminate
OPERATIONAL AREA
The Manager expects to focus the Company's investment efforts in
working interests in natural gas well development projects located within known
or highly-likely extent of the gas-bearing coalbed methane formations in two
areas, one in Wyoming and one in Kansas. The Wyoming prospect is located in the
Powder River Basin. The Kansas prospect is located in the Cherokee Basin.
Mineral production companies have mined low-sulfur soft coal from
Wyoming for many years. The Powder River Basin in Wyoming has also been a
long-standing source of oil and gas production. Beginning in 1994, oil and gas
producers realized that they could produce methane gas out of the coal beds.
Since 1994, over 2,000 gas wells have been drilled in the Powder River Basin
coalbed and up to 8,000 wells have been granted drilling permits.
Gas produced from Powder River Basin coal is almost 100 percent
methane. Coalbed methane refers to the methane, or dry natural gas, that is
absorbed or adhered to the coal layers and held in place by fresh water within
the coals. These shallow coal beds lie at depths approximately 300 to 1,300 feet
and are thick, permeable and full of gas. As the fresh water is pumped off of
the coals, the gas is related up the wellbore to the surface and collected by a
gathering system where it is compressed to the large main pipelines. The water
quality that is pumped off the coal is relatively good, permitting direct
discharge into stock ponds or surface disposal.
The coalbed methane development in the Powder River Basin is unique.
Coalbed methane natural gas is both generated and stored in coal beds.
Commercial coalbed methane fields were first developed in high-rank bituminous
coals (hydrocarbons distilled from petroleum or coal) located in the
Appalachian, the San Juan Basin of Colorado and New Mexico. The coals of the
Powder River Basin are lower rank sub-bituminous (secondary hydrocarbon
distillations). The Powder River Basin coals are among the thickest in the world
and are found within the Tongue River member of the Paleocene Fort Union and
lower Eocene Wasatch Formation. There are as many as 10 distinct coal bed
formations in the Powder River Basin individually ranging in thickness from five
to 200 feet. Bituminous coal of higher rank contains natural gas that is
thermally generated by heat and pressure. Powder River Basin lower rank coals
contain natural gas that is primarily created by the alteration or change in the
coal formation by bacteria or biogenesis. Powder River Basin coals are generally
thicker, shallower, and more permeable, which for production purposes allows for
lower drilling and completion costs.
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Coalbed methane production is similar to conventional natural gas
production in terms of the physical production facilities and the product
produced. However, surface mechanics and some production characteristics of
coalbed methane wells are quite different from traditional natural gas
production wells. Conventional natural gas wells require a porous and permeable
reservoir, hydrocarbon migration and a natural structural or stratigraphic trap.
Coalbed methane is trapped in the molecular structure of the coal itself until
it is released by pressure changes, resulting from water removal from the
coalbed. Methane is created as part of the coalification process. Coals vary in
their methane content per ton. Methane is found in open spaces in the coal
structure, and is also absorbed onto the inner coal surfaces. As coal is exposed
to lower pressures because of the de-watering process, the natural gas leaves or
separates from the coals. The qualities of productive coalbed methane wells
include coal quality, the content of natural gas per ton of coal, thickness of
the coal beds, reservoir pressure, existence of natural fractures, and
permeability of the coal.
The economics of the Powder River Basin are affected by two factors.
One is the drilling and completion costs. The second is the lease costs.
Drilling and completion costs in the Powder River Basin are relatively low
compared to many other gas prospect wells, due to the fact that the coal beds in
the play are shallow, and do not require expensive fracture treatments to
produce at economic rates. Lease costs are relatively high. The significant
industry interest has resulted in competition forcing up the price of the
leases. There are now over 40 operators and developers currently active in the
Powder River Basin's Fort Union Formation.
The Manager has been continuously acquiring new leases in the Powder
River Basin, primarily in Sheridan and Campbell Counties and adjacent areas, for
several months, and expects to continue doing so for an indefinite period of
time. The Manager expects that a substantial portion of the Company's investment
will go in this area.
The Cherokee Basin is located in eastern Kansas and northeastern
Oklahoma. Pennsylvanian Coals have been commercially mined from the Cherokee
Basin for over 100 years. In addition, many oil wells were drilled, starting in
the early 1900s, to the Bartlesville oil and gas formation at depths of 1,200 to
2,000 feet. These drillings passed through several productive coal seams at
depths of 600 to 1,000 feet with no understanding of their natural gas content.
Thousands of these wells were drilled and produced oil in the target reservoirs
until the reservoirs were considered depleted in the 1950s.
In the early 1980s, a large oil exploration effort began in the
Cherokee Basin. These wells were drilled to the Bartlesville formation. The
development theory for producing these oil wells proved unsuccessful, and most
of the wells were depleted or abandoned because of poor economics. A high
percentage of the leases and depleted wells were given back to the landowners
through agreements or by reversion for non-production.
Montgomery County lies in the Cherokee Basin west of the coal mining
district, where coals are shallow. Depths to the coals in the Independence
Prospect are from around 450 feet to no deeper than 900 feet. Testing in the
area showed potential for coal bed methane gas flows when drilled through on the
way to the deeper Bartlesville Sandstone oil play.
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The Manager's research suggests that coal bed methane gas development
in Montgomery County beginning in the 1980s was economical when the wells were
completed properly, but that most of the fracture treatments were not
appropriate for the area. There are five coal zones above the Bartlesville
formation. Three of these zones exhibit strong methane gas production potential.
The Manager intends to focus exclusively on re-entry of existing wells that have
been drilled to the Bartlesville formation, and in each case, to tap into at
least two coal zones above the Bartlesville formation. The Manager will focus on
the area commonly called the Independence Prospect. The Manager, as a
co-operator party to the Operating Agreement for the Independence Prospect has
the right to participate directly and indirectly in the development of all wells
on the prospect that have not been previously developed through other programs.
The Manager continues to research the prospects for gas well
development in other geological formations. It is possible that the Company will
invest in prospects not described here, or that little investment will be made
in the two plays described here.
PRIOR COMPANIES' HISTORY
The Company is the second Company in the Program to offer and sell
Interests. Wolverine Energy 1998- 1999(A) Development Company, L.L.C. (the
"Previous Company") completed its offering of Interests on December 31, 1999,
having commenced such offering on September 4, 1998. The Previous Company
accepted subscriptions for a total of $2,890,592 of Interests . The Previous
Company has admitted all such subscribers as Interestholders as of the closing
date; the Previous Company has terminated all selling efforts with respect to
Interests and will not accept any further subscriptions therefor.
The Previous Company has acquired or agreed to acquire and develop
working interests in natural gas properties within the Independence prospect
located in the Cherokee Basin in Montgomery County, Kansas. The Previous Company
will acquire, develop, drill, complete and equip up to approximately 34 net
wells in the Independence prospect (the "Project").
The Project is under development by Kansas Operating Company, L.L.C.
(the "Operator"), Independence, Kansas. The Operator is owned 50% by the Manager
and 50% by an unaffiliated gas project development company. The Operator will,
in turn, subcontract substantially all of its administrative and operational
obligations to Federated Oil & Gas Properties, Inc., an affiliate of the Manager
, and Black Rain Energy, an unaffiliated gas well management company in Kansas.
The Project will consist of the Previous Company's percentage working interest
in wells to be drilled, re-entered, completed and equipped for production on the
Project. The Project has been assembled by the Operator from working interests
in such properties held by parties which are unaffiliated with the Operator or
the Manager or their respective affiliates. The Project encompasses the right to
re-enter and re-complete wells which have been shut-in after having previously
been drilled and completed by unaffiliated parties.
PLAN OF DISTRIBUTION
Escrowed funds will not be invested in loans to the Manager and its
affiliates and will only be invested in instruments permitted under applicable
SEC rules.
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TAX ASPECTS
The following discussion supplements the section titled "Tax Aspects"
contained in the Prospectus and should be reviewed in conjunction therewith.
Terms capitalized herein which are not otherwise defined shall have the same
meaning as capitalized terms in the "Tax Aspects" section of the Prospectus.
There can be no assurance that any of the tax consequences which are
described herein or in the Prospectus, or which a prospective Investor
Interestholder in the Company may contemplate, will be available. In addition,
no assurance can be given that legislative or administrative changes or court
decisions may not be forthcoming which would significantly modify the statements
expressed both herein and in the Prospectus. In some instances, these changes
could have substantial effect on the tax aspects on an investment in the
Company. Any future legislative changes may or may not be retroactive with
respect to transactions prior to the effective date of such changes. Bills have
been introduced in Congress in the past and may be introduced in the future
which, if enacted, would adversely effect some of the tax consequences presently
anticipated from an investment in the Company. EACH PROSPECTIVE INVESTOR
INTERESTHOLDER IS THEREFORE URGED TO CONSULT HIS/HER TAX ADVISOR WITH RESPECT TO
THE TAX CONSEQUENCES ARISING FROM AN INVESTMENT IN THE COMPANY.
Publicly Traded Partnerships
If a partnership's securities are actively traded on an established
securities market or on a secondary market (or the substantial equivalent
thereof), it will be treated as "publicly traded," and taxed as a corporation.
The Prospectus details various exceptions to the Company's treatment as a
publicly traded partnership (see "Tax Aspects - Classification as to Partnership
- - - Publicly Traded Partnerships"). In addition to those exceptions, Code
Section 7704(c) also provides that 90% or more of a partnership's gross income
constitutes "qualifying income," then such partnership will not be treated as
"publicly traded," notwithstanding whether it qualifies for any other exception.
The term "qualifying income" includes "income and gains derived from the
exploration, development, mining or production, processing, refining,
transportation (including pipelines transporting gas, oil or gas products
thereof) or the marketing of any mineral or natural resource (including
fertilizer, geothermal energy and timber)." In Ltr. Rul. 199904025 (11/02/98),
the Service further defined the meaning of "qualifying income." The letter
ruling confirms that the type of activities contemplated by the Company will
generate "qualifying income," however income from the transportation of oil or
gas other than by pipeline (i.e. by truck or rail) will not constitute
"qualifying income." It is not anticipated that the Company will transport a
substantial portion of the natural gas it produces by other than pipeline.
Accordingly, while there can be no assurances that the Company will meet the
"90% of qualifying income" exception from being treated as a publicly traded
partnership, the activities of the partnership should generate gross income
which substantially constitutes "qualifying income." Accordingly, even if the
Company's Interests are deemed to be traded on the secondary market (or
substantial equivalent thereof), the Company would not likely be treated as a
publicly traded partnership.
Allocations
In Ltr. Rul. 9829045 (4/21/98) the Service analyzed the allocations of
profit and loss of a limited partnership formed to operate oil and gas
properties within a defined geographical area. The limited partnership
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agreement of the partnership in the letter ruling provided for allocations of
profit and loss in a manner substantially similar to the Company's allocations
of profit and loss, especially with respect to the allocations relating to basis
of oil and gas properties for purposes of the depletion allowance. The letter
ruling concluded that these allocations had substantial economic effect pursuant
to Code Section 704. In particular, the letter ruling determined that the
allocations met the "substantiality test" and as there was not a substantial
likelihood that allocations of deduction and loss would be offset by allocations
of income and gain. In making this determination, the letter ruling confirmed
the discussion in the Prospectus that the fair market value of partnership
property is assumed to be its book value, that is, depreciation and depletion
expenses are presumed, for purposes of the "substantiality test," to reduce the
fair market value of the property. The letter ruling concluded that: (i) given
the speculative nature of the partnership's oil and gas exploration activities,
and (ii) the fair market value of the property has been reduced for purposes of
the Code Section 704 regulations, there cannot be a strong likelihood that a
current allocation of income or loss or deduction will be offset by an
allocation of gain in the future.
This letter ruling supports the analysis contained in the Prospectus and
the opinion of Special Tax Counsel with respect to the Company's allocations of
profit and loss contained in "Tax Aspects - Allocations."
Alternative Minimum Tax
The discussion contained in the Prospectus captioned "Tax Aspects -
Alternative Minimum Tax" is deleted in its entirety and replaced with the
following section:
The Code imposes an alternative minimum tax ("AMT") in order to assure that
taxpayers may not reduce their tax below minimum levels through certain "tax
preference items." In general, the alternative minimum tax liability of a
non-corporate taxpayer is calculated by determining AMT income ("AMTI"), which
is arrived at by (i) adding together the taxpayer's adjusted gross income and
the taxpayer's tax preference items, (ii) adding and subtracting certain other
specified items, and (iii) then subtracting the applicable exemption amount of
$33,750 for single taxpayers or $45,000 for married taxpayers filing joint
returns, or $22,250 for estates, trusts and married taxpayers filing separate
returns. The alternative minimum tax is 26% of AMTI up to $175,000 and 28% of
AMTI over $175,000. The taxpayer must then pay the greater of the AMT or the
regular income tax. Generally, tax credits are not allowable against the AMT,
except the foreign tax credit. Under the Code, the $45,000 exemption ($33,750
for single taxpayers and $22,250 for estates, trusts and married taxpayers
filing separately) is phased out where AMTI exceeds $150,000 ($112,500 for
single persons and $75,000 for estates, trusts and married persons filing
separately).
Among the tax preference items that could result from investing the Company
and which would be included in determining AMTI are the following:
Depletion. The excess of the depletion deduction allowable over the
adjusted basis of the property at the end of the year, disregarding the
current year's depletion deduction, is an item of tax preference. This
excess is computed on each separate "property" as defined for depletion
purposes. Accordingly, basis in one property will not reduce excess
depletion in connection with another. The preference is measured on a
cumulative basis. Depletion will not be considered an item of tax
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preference until the total depletion deductions have exceeded the adjusted
basis of the property. Then, the entire amount of the percentage depletion
in excess of that basis will be considered an item of tax preference. This
item of tax preference does not apply to taxpayers other than integrated
oil companies, that is, it does not apply to independent producers of oil
or gas. With respect to natural gas, an independent producer is defined as
a producer whose average daily production of domestic natural gas does not
exceed the taxpayer's "depletable natural gas quantity." Average daily
production is defined as determined by dividing the taxpayer's aggregate
production of domestic crude oil or natural gas in the taxable year by the
number of days in such taxable year. For natural gas production, the
depletable natural gas quantity for any taxpayer for each such year shall
be equal to 6,000 cubic feet multiplied by the number of barrels of the
taxpayer's depletable oil quantity which the taxpayer elects to have
applied. The taxpayer's depletable oil quantity for any taxable year shall
be reduced by the number of barrels with respect to the election described
herein. The Company will supply the Investor Interestholders with
information with respect to the independent producer exemption annually.
Intangible Drilling Costs. The amount by which an integrated oil
company's IDCs exceeds 65% of the net income from oil, gas and geothermal
properties is treated as a preference item pursuant to Code Section
57(a)(2). Independent oil and gas producers and royalty owners are not
subject to this preference item provided, however, their AMTI may not be
reduced by more than 40% of the AMTI that would otherwise be determined if
they were subject to the IDC preference and did not compute an AMTI
operating loss deduction. The definition of an independent producer is the
same as in "Depletion" above.
Depreciation. An adjustment may increase or decrease AMTI is
depreciation is attributable to personal property that differs from the
amount available under the 150% of declining balance method.
Tax Credits. Generally, tax credits other than the foreign tax credit
are not allowable against the alternative minimum tax. Thus, the Section 29
Credit for production of fuel from a non-conventional source is allowed
only to the extent that the taxpayer's regular income tax exceeds his/her
alternative minimum tax. Any Section 29 Credit which is disallowed as a
result of this limitation however may be carried forward as a credit in
future years against the excess of the regular tax or the AMT.
The applicability of the AMT must be determined by each individual Investor
Interestholder based upon the operations of the Company and his/her personal tax
situation. Due to the inherently factual nature of the application of the AMT to
an Investor Interestholder, Special Tax Counsel is unable to express an opinion
with respect to such issue. In many circumstances, the federal (and state)
minimum tax provisions will substantially eliminate the value of IDC and Section
29 Credits for individual taxpayers. Accordingly, any potential investor in the
Company should consult his/her own tax advisor to determine the tax consequences
to him/her personally of the AMT.
Possible Changes in Tax Laws
The statutes, regulations and rules with respect to the tax matters
contained in this Supplement and in the Prospectus are constantly subject to
change by Congress or by the Department of the Treasury, and the interpretations
of such statutes, regulations and rules may be modified or
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effected by judicial decision or by the Department of the Treasury. Significant
amendments have been made to the Code in recent years and few final regulations
have been promulgated pursuant to such amendments to the Code. Additionally,
very few rulings have been issued. For example, the tax legislation recently
passed by Congress and vetoed by President Clinton contained several provisions
which could have materially impacted an Investor Interestholder, both with
respect to his investment in the Company and generally. Accordingly, due to the
continual changes made by Congress, the Department of the Treasury and the
courts with respect to the administration and interpretation of the tax laws, no
assurance can be given that the foregoing opinions and interpretations will be
sustained or the tax aspects summarized herein or in the Prospectus will prevail
and be available to the Investor Interestholders.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC registration fee $ 5,172.41
NASD filing fee - 0 -
Accounting fees 35,000.00
Costs of printing and engraving 100,000.00
Resident agent's fees and expenses - 0 -
Engineering fees - 0 -
Legal fees 55,000.00
Registration fees - 0 -
Taxes and fees, federal - 0 -
Taxes and fees, state - 0 -
Transfer agent's fees - 0 -
Miscellaneous - 0 -
Total $ 235,172.41
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 407 and 408 of the Michigan Limited Liability Company Act provides
that a Michigan limited liability company may indemnify and hold harmless any
person associated with the company and/or purchase and maintain insurance for
the same purpose subject to the restrictions contained therein.
Sections 3.5 through 3.7 of the Company Operating Agreement provide as
follows:
3.5 DUTIES AND LIABILITY OF MANAGING PERSONS TO COMPANY AND
INTERESTHOLDERS.
(a) The Managing Persons shall discharge their duties for and
on behalf of the Manager in good faith, with the care an ordinarily
prudent person in a like position would exercise under similar
circumstances, and in a manner the Managing Person reasonably believes
to be in the best interests of the Company.
(b) No act of the Company shall be affected or invalidated by
the fact that a Managing Person may be a party to or has an interest in any
contract or transaction of the Company if the interest of the Managing
Person has been disclosed or is known to the Interestholders.
(c) The Company shall not be liable to any Interestholder nor
shall any Managing Person be considered to have received a financial
benefit to which the Managing Person is not entitled or breached any
fiduciary duty of loyalty to the Company or any Interestholder as the
result of any of the following:
(1) The retention of a Managing Person as a
consultant, agent or adviser to an enterprise in which the
Company has an interest;
(2) The ownership by a Managing Person of debt,
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equity or other interests in a venture in which the Company
owns or may in the future own an interest or the organization,
operation or advising of or the ownership of interests in any
entity that may participate in such venture, whether or not
the interests of the Managing Person are on terms more or less
favorable than those afforded the Company;
(3) The participation by a Managing Person or any
entity organized or advised by it in a venture in lieu of the
Company's participation or increasing its participation in The
venture, whether or not the terms afforded to the Managing
Person are more or less favorable than those afforded the
Company;
(4) Any transactions with Managing Persons or
entities in which they have an interest, whether or not the
terms of those transactions are determined by costs to the
Managing Persons or entities, independent appraisals or
comparable third party transactions; or
(5) Any other conflict of interest or conflicting
duty described in the Prospectus or this Agreement.
This Section 3.5(c) does not relieve any Managing Person from any duty to
exercise appropriate business judgment or care (but which shall not be
enhanced by any duty of loyalty), which duty of judgment or care shall be
governed by the other provisions of this Agreement, but the taking of any
action described in any portion of this Section 3.5(c) shall not in and of
itself be considered failure to exercise appropriate judgment or to take
the appropriate level of care.
3.6 INDEMNIFICATION OF MANAGING PERSONS.
(a) The Company shall indemnify and hold harmless each
Managing Person from and against any and all losses, expenses, claims,
and demands sustained by reason of any acts or omissions or alleged
acts or omissions taken for, on behalf of or as the Manager, including
judgments, settlements, penalties, fines or expenses (including
reasonable attorney's fees) incurred in a proceeding to which the
Managing Person is a party or threatened to be made a party because the
Managing Person was acting for, on behalf of, or as the Manager, so
long as:
(i) The Manager has determined, in good faith, that
the course of conduct which caused the loss or
liability was in the best interests of the
Company;
(ii) The Managing Person was acting on behalf of or
performing services for the Company;
(iii) The liability or loss was not the result of
negligence, misconduct or a knowing violation of
the law by the Managing Person; and
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(iv) Payments for the indemnification or hold harmless
are made only out of the Company's tangible net
assets.
(b) Notwithstanding the foregoing, no Managing Person nor any
broker-dealer shall be indemnified, nor shall expenses be advanced on its
behalf, for any losses, liabilities or expenses arising from or out of an
alleged violation of federal or state securities laws, unless (i) there has
been a successful adjudication on the merits of each count involving
alleged securities law violations as to the particular indemnitee, or (ii)
those claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee, or (iii) a court of
competent jurisdiction approves a settlement of the claims against the
particular indemnitee. In any claim for federal or state securities law
violations, the party seeking indemnification shall place before the court
the positions of the Securities and Exchange Commission, and any applicable
state securities administrators to the extent required by them with respect
to the issue of indemnification for securities law violations.
(c) The Company may advance funds for legal expenses and other
costs incurred by a Managing Person as a result of any legal action for
which indemnification is being sought only if the Company has adequate
funds available and the following conditions are satisfied:
(i) the legal action relates to an act or omission
with respect to the performance of duties or
services on behalf of the Company;
(ii) The legal action is initiated by a third party who
is not an Interestholder, or the legal action is
initiated by an Interestholder and a court of
competent jurisdiction specifically approves the
advance; and
(iii) The Managing Person undertakes to repay the
advanced funds to the Company, together with the
applicable legal rate of interest, if the Managing
Person is found not to be entitled to
indemnification.
(d) The Company shall not incur the cost of that portion of
any insurance, other than public liability insurance, that insures any
person against any liability for which indemnification hereunder is
prohibited.
3.7 General Provisions. The following provisions apply to all rights
of indemnification and advances of expenses under this Agreement and all
liabilities described in this Article 3:
(a) Expenses, including attorneys' fees, incurred by a
Managing Person in defending any action, suit or proceeding may be paid by
the Company in advance of the final disposition of the action, suit or
proceeding upon receipt of an undertaking by the recipient to repay such
amount if it shall ultimately be determined that it is not entitled to be
indemnified by the Company under this Agreement or otherwise.
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(b) Rights to indemnification and advances of expenses under
this Agreement are not exclusive of any other rights to indemnification or
advances to which a Managing Person may be entitled, both as to action in a
representative capacity or as to action in another capacity taken while
representing another.
(c) Each Managing Person shall be entitled to rely upon the
opinion or advice of or any statement or computation by any counsel,
engineer, accountant, investment banker or other person which he believes
to be within such person's professional or expert competence. In so doing,
he will be deemed to be acting in good faith and with the requisite degree
of care unless he has actual knowledge concerning the matter in question
that would cause such reliance to be unwarranted.
Notwithstanding the above, there is no indemnification for losses or
expenses arising out of an alleged violation of federal or state securities
laws unless there has been a dismissal with prejudice on the merits or a
successful adjudication on the merits of each count involving such a violation
and the court approves indemnification of litigation costs, or a court approves
a settlement and finds that indemnification of the settlement and related costs
should be made.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
1.1 Form of Soliciting Dealers Agreement*
3.1 Articles of Organization of Wolverine Energy, L.L.C.*
3.2 Operating Agreement of Wolverine Energy, L.L.C.*
4.1 Form of Company Operating Agreement//
5.1 Form of opinion of Fraser Trebilcock Davis & Foster, P.C.*
8.1 Form of opinion of Patzik, Frank & Samotny Ltd.*
10.1 Form of Escrow Deposit Agreement*
10.2 Form of Turnkey Agreement*
23.1 Consent of Plante & Moran, LLP for Manager Financial
Statements*
23.2 Consent of Plante & Moran, LLP for Program A Financial
Statements*
23.3 Consent of Fraser Trebilcock Davis & Foster, P.C.+
23.4 Consent of Patzik, Frank and Samotny Ltd+
27 Financial Disclosure Schedule*
+ Included in respective opinion
++ To be filed by amendment
// Included in Prospectus
* Previously filed
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ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) The registrant undertakes to send to each Investor Interestholder at
least on an annual basis a detailed statement of any transactions with the
Manager or its affiliates, and of fees, commissions, compensation and other
benefits paid, or accrued to the Manager or its affiliates for the fiscal year
completed, showing the amount paid or accrued to each recipient and the services
performed.
(5) The registrant undertakes to file a sticker supplement pursuant to Rule
424(c) under the Act during the distribution period describing each working
intrust in a natural gas development property not identified in the prospectus
at such time as there arises a reasonable probability that such working intrust
in a natural gas development property will b acquired and to consolidate all
such stickers into a post-effective amendment filed at least once every three
months, with the information contained in such amendment provided simultaneously
to the existing Investor Interestholders. Each sticker supplement should
disclose all compensation and fees received by the Manager and its affiliates in
connection with any such acquisition. The post-effective amendment shall include
audited financials statements meeting the requirements of Rule 3-14 of
Regulation S-X only for working interest in a natural gas development properties
acquired during the distribution period.
The registrant also undertakes to file, after the end of the
distribution period, a current report on Form 8-K containing the financial
statements and any additional information required by Rule 3-14 of Regulation
S-X, to reflect each commitment (i.e., the signing of a binding purchase
agreement) made after the end of the distribution period involving the use of
10% or more (on a cumulative basis) of the net proceeds of the offering and to
provide the
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information contained in such report to the Limited Partners at least once each
quarter after the distribution period of the offering has ended.
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, as amended, the undersigned registrant hereby undertakes
to file with the Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to the authority
conferred in that Section.
The registrant undertakes to file an annual report of Form 10-K at the
conclusion of the fiscal year in which this registration statement is declared
effective.
The registrant undertakes to file a final Form SR indicating the actual
application of the proceeds from this offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, (the "Act"), may be permitted to directors, officers and
controlling persons of Wolverine Energy, L.L.C. (the "Manager"), pursuant to the
provisions described hereunder, or otherwise, the Manager has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
that the payment by the Manager of expenses incurred or paid by a director,
officer or controlling person of the Manager in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Manager will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 6 to its Registration Statement
No. 33-95156 on Form SB-2 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of East Lansing, State of Michigan, on
the 23rd day of February, 2001.
WOLVERINE ENERGY 1998-1999 DEVELOPMENT PROGRAM
By: Wolverine Energy, L.L.C.
------------------------
Manager
By: /s/George H. Arbaugh, Jr.
---------------------------------------------------------
George H. Arbaugh, Jr., Sole Manager and
Chief Executive Officer
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Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
By: /s/ George H. Arbaugh, Jr. Sole Manager, Chief February 23, 2001
-------------------------- Executive Officer, and
George H. Arbaugh, Jr. Chief Accounting Officer
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