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EXHIBIT 1.1
FORM OF SOLICITING DEALERS AGREEMENT
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WOLVERINE ENERGY 1998-1999 DEVELOPMENT PROGRAM
SOLICITING DEALER AGREEMENT
____________________, 2001
[Soliciting Dealer]
Attention: Mr.
Dear Sirs:
You shall be referred to herein as "Soliciting Dealer" or "you", unless
the context otherwise requires.
Wolverine Energy 1998-1999 Development Program is a series of one or
more limited liability companies (the "Companies") to be formed pursuant to the
Michigan Limited Liability Company Act (the "Michigan Act") by Wolverine Energy,
L.L.C., a Michigan limited liability company (the "Manager"), and one or more
initial Investor Interest holders for the purpose of offering and selling, on a
preformation basis, membership interests ("Interests") in the Companies that
will be formed to engage in the acquisition, development, drilling, completion,
ownership and management of interests in developmental natural gas properties. A
total of 15,000 Interests is now being offered to prospective investors on a
preformation basis at a price of $1,000 each (subject in certain circumstances
to volume discounts). Wolverine 1998-1999(A) has previously been activated and a
total of $2,968,250 in Interests were sold, leaving a balance of $12,031,750 to
be sold. Wolverine Energy 2001(B) Development Company, L.L.C. and each
subsequent Company (the "Subsequent Companies") will be activated with a minimum
subscription of 1,000 Interests ($1,000,000). To the extent that subscriptions
to all Companies do not equal the maximum number of Interests, the remaining
unsubscribed Interests may be offered in Subsequent Companies. Each potential
investor must purchase a minimum of five Interests ($5,000). An investor may
purchase additional Interests in multiples of one Interest ($1,000). The minimum
purchase amount and multiples may be waived in the sole discretion of the
Manager
The Manager has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (No. 33-95156), including a
prospectus, for the registration of the Interests under the Securities Act of
1933, as amended (the "1933 Act"). The registration statement as amended at the
time it was declared effective (including the financial statements, exhibits and
all other documents which are a part thereof or incorporated by reference
therein) by the Commission and at the time any post-effective amendment thereto
becomes effective is hereinafter referred to as the "Registration Statement" and
the final prospectus included therein and as supplemented or amended by any
supplements or amendments thereto included in any such post-effective amendment
is hereinafter referred to as the "Prospectus," except that if any prospectus
filed by the Manager pursuant to either Rule 424(b) or 424(c) under the 1933 Act
differs from the prospectus on file at the time the Registration Statement or
any post-effective amendment thereto becomes effective, the term "Prospectus"
shall refer to the Rule 424(b) or 424(c) prospectus from and after the time it
is mailed or delivered to the Commission for filing.
Capitalized terms herein, unless otherwise indicated, shall have the
meanings attributed to them in the Prospectus.
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l. ACTIVITIES OF SOLICITING DEALER.
(a) On the basis of the representations, warranties and covenants
herein contained, but subject to the terms and conditions herein set forth, you
are hereby appointed a Soliciting Dealer for the offering, on a preformation
basis, of Interests in the Companies. You may solicit subscriptions for up to
the maximum number of Interests.
You, as a Soliciting Dealer also agree to serve as a non-exclusive
agent for the Manager and each of the Companies for the purpose of serving as
independent contractors soliciting subscriptions for Interests in the Companies
for the account of the Manager and each of the Companies on the terms and
conditions set forth in the Prospectus. During the term of this Agreement,
neither the Manager nor the Companies will sell or agree to sell any Interests
otherwise than through the Soliciting Dealers pursuant to Soliciting Dealer
Agreements substantially identical to this Agreement. You represent and warrant
that you are a member of the National Association of Securities Dealers, Inc.
(the "NASD"). The allocation of Interests among you and the other Soliciting
Dealers shall, subject to the terms and conditions herein set forth, be made by
the Manager. You hereby (i) agree to observe your representations and warranties
as set forth in Section 4 hereof, and (ii) agree that the terms, conditions,
representations and warranties contained in this Soliciting Dealer Agreement
will inure to the benefit of the Manager and the Companies. Subject to the
performance by the Manager and the Companies of all of their respective
obligations to be performed hereunder and to the completeness and accuracy of
all the representations, warranties and covenants contained herein, you hereby
accept such non-exclusive agency and agree on the terms and conditions herein
set forth to use your reasonable efforts (in accordance with NASD Rule 2810 and
accepted industry practice for direct participation programs) to find
subscribers for the Interests.
(b) You agree that no reference to any specific Property (unless such
Property is described in the Prospectus or any amendment or supplement thereto)
reviewed as part of your due diligence procedure will appear in any analysis or
report on the Companies prepared by you for distribution to the prospective
investors or their representatives, nor will you permit prospective investors or
their representatives to examine any data relating to any prospect or Property
inventory which is not described in the Prospectus or any amendment or
supplement thereto.
(c) You will not make any offer or sale of the Interests unless such
offer or sale is made in compliance with the 1933 Act, the rules and regulations
promulgated by the Commission under the 1933 Act (the "1933 Act Regulations"),
the Securities Exchange Act of 1934, as amended (the "1934 Act") and the
applicable securities laws of the jurisdictions in which offers or sales are
made and the rules and regulations thereunder including, but not limited to, any
applicable prospectus delivery requirements.
(d) You will not make use of any Sales Material (as hereinafter
defined)to be distributed to the public in connection with the offering which
has not been approved by the Manager.
(e) You are aware of your obligations pursuant to NASD Rule 2810(b)(2)
requiring you, in recommending to any person the purchase of the Interests,
whether in connection with this offering or a secondary transfer of Interests,
to have reasonable grounds to believe, on the basis of information obtained from
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such person concerning his investment objectives, other investments, financial
situation and needs, and any other information known to you, that (i) the person
is or will be in a financial position appropriate to enable that person to
realize to a significant extent the benefits described in the Prospectus,
including tax benefits; (ii) the person has a fair market net worth sufficient
to sustain the risks inherent in the program, including loss of investment and
lack of liquidity; and (iii) the program is otherwise suitable for the person.
You will inform your sales personnel that, except as to those investors
domiciled in certain states specified in the Prospectus, the execution of a
Subscription Agreement or an order ticket will constitute a written record of
their affirmative determination that (i) such suitability requirements have been
satisfied and (ii) your sales personnel have orally informed the investor of all
pertinent facts relating to the liquidity and marketability of the Interests.
You further agree to maintain in your files and make available to the Manager
for a period of at least six (6) years following the closing date for each of
the Companies for which you sell Interests ("Closing Date"), copies of such
documentation concerning the basis upon which suitability has been determined
for each potential Purchaser. You shall not execute any purchase of Interests in
a discretionary account without prior written approval of the customer.
(f) As set forth in the Prospectus, except as described below, every
person desiring to purchase Interests will be required to subscribe therefor by
completing and signing or by authorizing the completing and signing of the
Subscription Agreement (herein so called) - the form of which is attached to the
Prospectus, and by delivering such Subscription Agreement, together with a check
payable as provided in the Prospectus to his registered representatives.
(g) Any prospective investor wishing to purchase Interests through you
must either currently maintain an account with you or open such account. Each
prospective investor domiciled in certain states delineated in the Prospectus
(in which prospective investors are required to complete and sign Subscription
Agreements) shall complete and sign the Subscription Agreement and shall deliver
such Subscription Agreement to his or her registered representative at the
Soliciting Dealer and shall either (i) authorize his or her registered
representative to debit his or her account with the Soliciting Dealer in the
amount of $1,000 for each Interest the prospective investor wishes to purchase,
or (ii) provide other means of payment in conjunction therewith. You shall
forward the full amount of the subscription payment and all subscription
documents to the Escrow Agent on the next business day following the day of
receipt. The Subscription Agreement will be forwarded to the Manager's office,
which will determine whether each such Subscription Agreement appears to be
appropriately completed and transfer such payment to Franklin Bank, N.A., (the
"Escrow Agent"), at its offices in Southfield, Michigan, for deposit in a
separate escrow account (the "Escrow Account") maintained with the Escrow Agent
pursuant to the terms of the Escrow Deposit Agreement, as amended.
(h) A prospective investor domiciled in any other jurisdiction (other
than those referred to in (g) above) who meets the suitability standards set
forth under "Summary of the Offering -- Suitability Requirements" in the
Prospectus and any applicable Supplement thereto, can subscribe by contacting
his or her registered representative at the Soliciting Dealer and indicating the
amount of his or her desired investment in Interests. The registered
representative will then complete and sign either a Subscription Agreement or an
order ticket, or both. The information contained in such Subscription Agreement
or order ticket will be conveyed to the Manager's office, together with all
other information regarding such subscription which is required to be provided
in the Subscription Agreement as it appears in the Prospectus; provided,
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however, that certain of such information may be omitted by mutual consent of
all parties hereto. You will determine whether the necessary information appears
to have been provided and will forward, a copy of the Prospectus to the
prospective investor. Thereafter, such prospective investor's subscription shall
be treated as provided in (g) above.
(i) You shall have no reason to believe that any person executing or
authorizing the execution of a Subscription Agreement does not have the
qualifications set forth therein. All subscriptions shall be subject to
acceptance by the Manager and the Manager reserves the right to reject the
tender of any subscription, in whole or in part, in its sole discretion.
2. OFFERING.
(a) On the basis of the representations, warranties and covenants
herein contained, but subject to the terms and conditions herein set forth, the
Interests shall be sold to and paid for by the purchasers of such Interests (the
"Interest Holders"). The offering of the Interests shall be at the offering
price and upon the terms and conditions set forth in the Prospectus and the
Subscription Agreement. With respect to each Company, all proceeds received from
subscriptions to purchase the Interests will be deposited and held in the Escrow
Account. The Interests (i) shall comply in all material respects, as to form,
with the requirements of the 1933 Act and the 1933 Act Regulations; and (ii)
shall not contain any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading and neither the Prospectus nor any supplemental written,
audio or audio-visual material supplied to you or any other Soliciting Dealer by
the Manager or the Companies pursuant to Section 6(m) hereof (the "Sales
Material") (when read in conjunction with the Prospectus) contains or will
contain an untrue statement of a material fact or omits or will omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the representation or warranties
contained in this subsection shall not apply to statements or omissions from the
Registration Statement, the Prospectus or any Sales Material (when read in
conjunction with the Prospectus) made in reliance upon and in conformity with
written information furnished to the Manager with respect to you by you
expressly for use in the Registration Statement, the Prospectus, or any
amendment thereof or supplement thereto or in any Sales Material.
(b) The Manager shall cause to be prepared on behalf of the Companies
such applications and other documents as may be necessary and advisable to
qualify the Interests for sale in such states as you may request. Such
applications and other documents shall be in compliance with the securities laws
and the rules and regulations of each such state.
(c) All Sales Material has not been and will not be distributed by the
Manager or the Companies unless such Sales Material (i) is in full compliance
with the requirements of the 1933 Act and the 1933 Act Regulations (including,
without limitation, the requirement that such Sales Material not be delivered to
any prospective purchaser unless accompanied or preceded by a Prospectus) and
all applicable state securities and "blue sky" laws and the rules and
regulations thereunder, and (ii) when read in conjunction with the Prospectus,
do not contain any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
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(d) Each of the Companies, upon formation, will be duly organized and
validly existing as a limited liability company under the Michigan Act. Each of
the Companies will, prior to transacting business in any jurisdiction, take such
actions as may be necessary to enable it to conduct its business as described in
the Registration Statement and will take such other action as is necessary in
any jurisdiction subscribed for on or prior to each of the Closing Dates.
Interests will be authorized and registered in the names of the subscribers
accepted by the Manager on behalf of the respective Companies. The Closing Date
for each Company will be as decided by the Manager in its sole discretion after
15 days' prior written notice to you.
(e) A Company will not be funded unless minimum aggregate subscriptions
for 1,000 Interests ($1,000,000) are received and accepted by the Manager. If
minimum subscriptions of 1,000 Interests ($1,000,000) are not received and
accepted by the Manager by the deadline stated in the Prospectus, all
subscriptions for Interests in the respective Company will be void, all
subscription proceeds (except any attributable to Companies that have been
funded) will be refunded in full, together with interest earned thereon
(calculated as set forth in the Prospectus), and no sales commissions with
respect to such Company will be paid hereunder.
3. REPRESENTATIONS AND WARRANTIES OF THE MANAGER AND THE COMPANIES.
The Manager and each of the Companies jointly and severally represent
and warrant to you and all Soliciting Dealers that each of the statements
contained in this Section 3 is true and correct and will be true and correct as
of the initial offering date and the Closing Dates.
(a) The Manager has caused to be prepared on behalf of the Companies
the Registration Statement on Form SB-2 for registration of the
Interests under the 1933 Act and has caused such Registration Statement
to be filed with the Commission. The Manager will promptly cause to be
filed on behalf of the Companies such further amendments or supplements
to the Registration Statement as may from time to time be required.
(b) The Registration Statement and the Prospectus contain all
statements which are required to be stated therein in accordance with
the provisions of the 1933 Act and the 1933 Act Regulations.
(c) The Prospectus discloses all material facts, including all
pertinent facts relating to the liquidity and marketability of the
Interests.
(d) Each Company Operating Agreement, as such agreement may be amended
from time to time (the "Company Operating Agreement"), governing a
Company shall provide for the subscription for and sale of the
Interests. All action required to be taken by the Manager and the
Companies as a condition to the subscription for and sale of Interests
has been or, prior to each of the Closing Dates, will have been taken.
Upon the issuance of the Interests in accordance with the terms of the
Company Operating Agreement, the subscribers will become owners of
membership interests represented by the Interests and evidenced by
registration upon the books and records of the Manager and the Company,
and each subscriber will be entitled to all of the rights of an owner
under the Company Operating Agreement and Michigan Act.
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(e) The execution and delivery of this Agreement, each Subscription
Agreement accepted by the Manager, each Company Operating Agreement and
the Escrow Deposit Agreement, the incurrence of the obligations herein
and therein set forth, and the consummation of the transactions
described or contemplated herein, therein and in the Prospectus will
not result in a material breach or violation of any of the terms and
provisions of, or constitute a default under, any statute (except
federal and state securities laws, compliance with which is elsewhere
provided for in particular detail) or any bond, debenture, note or
other evidence of indebtedness or in any material contract, indenture,
mortgage, deed of trust, loan agreement, lease, joint venture,
partnership or other agreement or instrument to which the Manager or
the Companies are or will become a party or by which they or any of
their properties will be bound, or any order, rule or regulation
directed to the Manager or a Company by any court or governmental
agency or body having jurisdiction over him or it; and no other
consent, approval, authorization or action is required for the
consummation of the transactions described or contemplated herein,
therein and in the Prospectus other than such as have been obtained or
are described in the Registration Statement or the Prospectus, or any
amendment or supplement thereof.
(f) None of the Companies will be an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended, or the
general rules and regulations thereunder.
(g) On the date hereof and at all times through each Closing Date, the
Manager is and will be duly and validly organized, validly existing and
in good standing as a limited liability company under the laws of the
State of Michigan, and at each Closing Date it will be duly qualified
to do business as a foreign limited liability company in each other
jurisdiction in which such qualification is necessary in order to
enable it to act as a Manager of the Companies, or the failure to
qualify in any such other jurisdiction will not affect in any material
way its ability to act as a Manager of the Companies.
(h) The Manager has all the requisite power and authority and all
necessary authorizations, approvals and orders of and from all
governmental regulatory officials and bodies to own its properties and
conduct its business as described in the Registration Statement, and
has all such power, authority, authorizations, approvals and orders to
enter into this Agreement and to become a Manager of each of the
Companies and to carry out the provisions and conditions as set forth
in the Prospectus and this Agreement.
(i) The financial statements of the Manager included as a part of the
Registration Statement fairly present the financial position of the
Manager at the dates to which they apply; such financial statements
have been prepared in conformity with generally accepted accounting
principles, consistently applied throughout the periods involved; and
since the respective dates of such financial statements through the
date hereof there has not been, and through each Closing Date there
will not have been any material adverse change in the financial
position of the Manager. The term "financial statements" as used in
this Agreement shall include the balance sheets and any of the
accompanying notes and schedules thereto.
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(j) Xxxxxx & Xxxxx, LLP, which has audited the financial statements of
the Manager as part of the Registration Statement, are independent
accountants as defined by the 1933 Act and the 1933 Act Regulations.
(k) There is no litigation or governmental proceeding pending or
threatened against, or involving the properties or business of, the
Manager or the Companies which might adversely affect the value or the
operation of any such properties or the business of the Manager or the
Companies, other than as disclosed in the Prospectus.
(l) There has been no adverse change in the condition, business,
properties or prospects of the Manager or the Companies, financial or
otherwise, from that on the latest dates as of which such condition,
business, properties or prospects are set forth in the Prospectus,
except as referred to therein, and the outstanding debt, properties and
business of the Manager and the Companies conform to the descriptions
thereof contained in the Prospectus.
(m) No defaults exist in the due performance and observance of any
material obligation, term, covenant or condition of any agreement,
contract or instrument to which the Manager or the Companies are a
party or by which they are bound.
(n) This Agreement and the Escrow Deposit Agreement have been duly and
validly authorized, executed and delivered by the Manager and are
legal, valid and binding agreements, enforceable in accordance with
their terms, except to the extent that the enforceability thereof may
be limited by (i) bankruptcy, insolvency, reorganization, moratorium or
similar laws from time to time in effect and affecting the rights of
creditors generally, (ii) limitations upon the power of a court to
grant specific performance or any other equitable remedy with respect
to the enforcement of this Agreement, and (iii) the fact that the
indemnification provisions of this Agreement are or may be held to be
violative of public policy (under either state or federal securities
law) in the context of the offer, offer for sale or sale of the
Interests.
(o) Neither the Manager nor the Companies, nor any affiliates,
associates, employees or agents of the Manager or the Companies, has
paid or awarded, directly or indirectly, any compensation to any person
engaged to render investment advice to a potential purchaser of the
Interests as an inducement to advise the purchase of Interests except
for sales commissions and due diligence fees (as described in the
Prospectus) to be paid to you as Soliciting Dealers pursuant to this
Agreement.
(p) The Manager has, and each of the Companies upon formation will
have, timely (giving effect to permitted extensions) and properly
prepared and filed all necessary federal, state and foreign income and
franchise tax returns and will have paid all taxes shown as due
thereon; and the Manager has no knowledge of a tax deficiency which has
been or might be asserted against the Manager or any of the Companies
which would materially and adversely affect the business or operations
of the Manager or the Companies.
(q) There is no material information relating to any oil and gas
program of which the Manager or any of its Affiliates serve as a
general partner or managing trustee (the "Prior Programs") which has
not been included in the Prospectus or disclosed to you in writing,
including, without
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limitation, information relating to: (1) liabilities or obligations,
direct or contingent; (2) adverse financial or business changes; (3)
litigation or government proceedings; (4) losses or damage (whether or
not insured) to physical property; and (5) activities, status and
performance of Prior Programs.
(r) All contracts and other documents of the Companies which are
required under the 1933 Act Regulations to be filed as exhibits to the
Registration Statement have been so filed.
(s) Neither the Manager nor the Companies have at any time (i) made any
contributions to any candidate for political office in violation of
law, or failed to disclose fully any such contribution, or (ii) made
any payment to any state, federal or foreign government officer or
official, or other person charged with similar public or quasi-public
duties, other than payments required or allowed by applicable law.
(t) No authorization, approval or consent of any governmental authority
or agency is necessary in connection with the offer or sale of the
Interests, except such as may be required under state or federal
securities or "blue sky" laws and as have already been received.
(u) The Company Operating Agreement of each Company, on or before the
Closing Date, will be duly and validly authorized, executed, and
delivered by the Manager and will constitute the valid and binding
agreement of each of them, enforceable in accordance with their terms,
except to the extent that the enforceability thereof maybe limited by
(i) bankruptcy, insolvency, reorganization, moratorium, or other
similar laws from time to time in effect and affecting creditors'
rights generally, (ii) limitations upon the power of a court to grant
specific performance or any other equitable remedy with respect to
enforcement thereof, and (iii) the fact that the indemnification
provisions contained therein are or may be held to be violative of
public policy (under either federal or state securities law).
4. REPRESENTATIONS AND WARRANTIES OF THE DEALER-MANAGER AND THE SOLICITING
DEALERS.
The Soliciting Dealer individually and severally represents and
warrants to the Manager and each of the Companies that, as of the date hereof,
such Soliciting Dealer is and, as of each of the Closing Dates will be, a member
in good standing of the NASD and duly registered as a broker-dealer under the
1934 Act and under the laws of each state in which it proposes to offer the
Interests, except where such registration is not required by law.
5. COMMISSIONS.
(a) Each Company will pay to you by check on its Closing Date a sales
commission in an amount equal to 9.5% of the aggregate amount of all
subscriptions for Interests accepted by the Manager in each such Company and
sold by you (other than Interests purchased by the Manager, its affiliates,
their respective employees, or spouses or children of their employees under the
age of 21), provided that the Manager, in its sole discretion, accepts the
minimum amount of subscriptions that are required to fund each of the Companies
pursuant to Subsection 2(e) hereof.
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(b) All proceeds received from the sale of the Interests will be
deposited and held in the Escrow Account. All payments of, from or on
account of proceeds received from subscribers shall be made only
pursuant to the Escrow Deposit Agreement. If the minimum of 1,000
Interests ($1,000,000) is not subscribed before the end of the offering
period described in the Prospectus, all proceeds from the sale of
Interests in a Company shall be promptly returned, or caused to be
returned, by the Manager to the subscribers for the Interests, together
with the interest actually earned (except for amounts required to be
withheld under federal income tax provisions governing backup
withholding) on subscription proceeds deposited in escrow at least 15
business days prior to the closing of the subscription period, such
interest accruing from the date such proceeds clear to the date of the
return of such funds.
(c) Each Company will pay to you as invoiced on or after its Closing
Date an accountable due diligence expense reimbursement in an amount up
to 0.5% of the aggregate amount of all subscriptions for Interests
accepted by the Manager in each such Company and sold by you (other
than Interests purchased by the Manager, its affiliates, their
respective employees, or spouses or children under the age of 21 of the
employees), provided that the Manager, in its sole discretion, accepts
the minimum amount of subscriptions that are required to fund each of
the Companies pursuant to Subsection 2(e) hereof, and subject to
reduction as necessary to keep all due diligence expenses paid by each
Company at or below 0.5% of the aggregate amount of all subscriptions
for Interests accepted by the Manager in the Company.
(d) Whether or not any of the Companies are activated or any
commissions are paid pursuant to this Agreement, the Companies and the
Manager will, as described in the Prospectus and the Company Operating
Agreement, pay the following expenses:
(i) All of the Manager's costs and expenses as well as any
incurred by the Companies, including, but not limited to, accountants'
fees and attorneys' fees relating to the offering.
(ii) All expenses and fees in connection with the preparation,
printing, filing, delivery and shipping of the Registration Statement
and all amendments or supplements thereto, the Prospectuses and all
"blue sky" materials, including a "Blue Sky Memorandum" and any
supplements thereto.
(iii) All filing fees, attorneys' fees and expenses incurred
in connection with the qualification of the Interests for offering and
sale under the "blue sky" and other securities laws of the
jurisdictions designated by you.
(iv) All fees and expenses incurred in connection with review
of the Registration Statement by the NASD.
(v) All expenses relating to the preparation, printing,
filing, delivery and shipment of the Sales Material prepared by the
Manager, the Companies or you as approved by the Manager, except
expenses of any "Tombstone" advertisements, which expenses will be
borne by you.
(vi) All charges, expenses and fees of the Escrow Agent in
excess of interest earned on the amounts in escrow.
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6. COVENANTS OF THE MANAGER.
The Manager covenants and agrees with you that:
(a) The Manager shall immediately notify you and your legal counsel and
confirm such notice in writing:
(i) when the Registration Statement (and any post-effective
amendment thereof) is declared effective by the Commission or
any applicable state authority;
(ii) of the receipt of any written or oral communications from
the Commission or any state securities administrator or their
staff with respect to the Registration Statement; and
(iii) of the suspension of the qualification of the offering
in any jurisdiction, or of the institution of any proceedings
for such purposes.
(b) The Manager shall make every reasonable effort to prevent the
issuance by the Commission of any stop order and, if any such stop
order shall at any time be issued, to obtain the lifting thereof at the
earliest possible time.
(c) The Manager shall deliver to you, without charge as soon as
available, two executed copies and such number of conformed copies as
originally filed of the Registration Statement and of each amendment
thereto, with all exhibits thereto, and such number of Prospectuses or
any amendment or supplement thereto as you may reasonably request. The
Manager shall, at its own expense, make available to you from time to
time during the period when the Prospectus is required to be delivered
under the Securities Act of 1933, as amended (the "1933 Act"), a
sufficient quantity of Prospectuses and any Sales Material as is
necessary to permit the continuance of offers and sales of Interests in
accordance with the provisions hereof and the Prospectus.
(d) The Manager will cause each of the Companies, upon formation, to
comply with all requirements imposed upon them by the 1933 Act and the
regulations promulgated thereunder (the "1933 Act Regulations") from
time to time in force and by all applicable state securities or "blue
sky" laws and rules and regulations thereunder to permit the
continuance of offers and sales of Interests in accordance with the
provisions hereof and of the Prospectus. During such period, the
Manager will amend or supplement the Prospectus (in form satisfactory
to you) in order to make such Prospectus comply with the requirements
of the 1933 Act and the 1933 Act Regulations and all applicable state
securities or "blue sky" laws and rules and regulations thereunder.
(e) If at any time any event occurs as a result of which the Prospectus
(or any Sales Material when read in conjunction with the Prospectus)
would include any untrue statements of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements contained therein not misleading, the Manager will
notify you thereof (unless the information shall have been received
from you) and will forthwith prepare a post-effective amendment to the
Registration Statement containing an amended Prospectus (or Sales
Material) which will correct such statement or omission. The Manager
will deliver to you as many copies of such amended Prospectus (or Sales
Material) as you may reasonably request.
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(f) Upon your reasonable request, the Manager will prepare an amended
or supplemented Prospectus and take any other action which, in the
opinion of your legal counsel, may be necessary or advisable in
connection with the offer and sale of the Interests.
(g) At each of the Closing Dates, the respective Company shall promptly
evidence the holdings of the Interest Holders by duly registering such
holdings on its books and records.
(h) Each of the Companies shall furnish to the Interest Holders the
reports described in the Prospectus. For a period of six (6) years from
the date hereof, each of the Companies shall deliver to each of you and
your legal counsel one copy of each such report, no later than the time
that such reports are first furnished to the Interest Holders, and such
other information concerning each of the Companies as you may
reasonably request, and shall furnish one copy of each such report, at
the time that such reports are furnished to the Interest Holders, to
each of your agents as designated by you on or prior to each of the
Closing Dates.
(i) The Manager shall endeavor in good faith, in cooperation with you,
prior to the effective date of the Registration Statement (the
"Effective Date"), to qualify the Interests for offer and sale under
the securities laws of such jurisdictions and in such amounts as you
shall request and shall maintain such qualifications in effect for as
long as may be required for the distribution of the Interests; and in
each jurisdiction where such qualification shall be effected, the
Manager and the Companies shall file and make such statements or
reports at such times as are or may be required by the laws of each
such jurisdiction.
(j) Each of the Companies shall, prior to transacting business in any
jurisdiction, be duly qualified and in good standing in each
jurisdiction in which its ownership or leasing of any properties or the
character of its operations makes such qualification necessary to
assure limited liability for the Interest Holders, and will have taken
such other action as is necessary in any jurisdiction where a Company
engages in business or owns or leases property to assure limited
liability to the Interest Holders in those jurisdictions to the extent
permitted under the laws of those jurisdictions.
(k) The Manager will cause each of the Companies to apply the net
proceeds from the offering received by them in the manner set forth
under "APPLICATION OF PROCEEDS" in the Prospectus.
(l) The Manager will not file any amendments to the Registration
Statement or any amendment or supplement to the Prospectus (including a
prospectus filed pursuant to Rule 424(b) or 424(c) of the 1933 Act
which differs from the prospectus on file at the time the Registration
Statement becomes effective) to which you or your counsel shall
reasonably object. The Manager will not prepare or distribute any
amendment or supplement to the Prospectus to which you or your legal
counsel shall reasonably object in writing after being furnished, at
least three (3) business days prior to the date upon which such
amendment or supplement shall be filed with the Securities and Exchange
Commission (the "Commission"), a copy thereof.
13
(m) Any Sales Material prepared by the Manager or the Companies for use
in conjunction with the offer or sale of the Interests has not been and
shall not be distributed by the Manager or a Company unless such Sales
Material (i) is in full compliance with the requirements of the 1933
Act and the 1933 Act Regulations (including, without limitation, the
requirement that such Sales Material not be delivered to any
prospective purchaser unless accompanied or preceded by a Prospectus)
and all applicable state securities and "blue sky" laws and the rules
and regulations thereunder, (ii) has been, where required by applicable
state securities or "blue sky" laws and rules and regulations
thereunder, and any applicable rules and regulations of the NASD, filed
with and/or approved by the NASD and each applicable state securities
examiner, and (iii) when read in conjunction with the Prospectus, does
not contain any untrue statements of material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they are made, not misleading. Each Company and the Manager shall
deliver to the Dealer-Manager, from time to time, all such Sales
Material (whether designated solely for broker-dealer use or otherwise)
proposed to be used or delivered by a Company and the Manager in
connection with the offering of Interests at least three (3) business
days prior to the use or delivery to third parties of such Sales
Material.
(n) The Manager shall furnish you with all information necessary in
your judgment, or in the judgment of your legal counsel, to keep the
Prospectus fair, accurate and complete in all material respects during
the term of this Agreement.
(o) Until the termination of this Agreement, the Manager will notify
you of any material information relating to the Manager, to the
Companies or to any Prior Programs subsequent to the date of this
Agreement, if such information is not contained in the Prospectus,
including, without limitation, information relating to:
(i) liabilities or obligations, direct or contingent;
(ii) adverse financial or business changes;
(iii) litigation or government proceedings;
(iv) losses or damage (whether or not insured) to physical
properties; and
(v) activities, status and performance of Prior Programs.
(p) The Manager will make available to Interest Holders of each of the
Companies as soon as practicable, but not later than 120 days after the
close of the period covered thereby, audited financial statements of
each Company including an earnings statement (in the form complying
with the provisions of Section 11(a) of the 0000 Xxx) covering a period
of 12 months beginning with the year following the fiscal year in which
a Company's Capital Contributions (as defined in the Prospectus) have
been fully expended.
(q) Neither the Manager nor the Companies nor any of their Affiliates
shall contact, either directly or indirectly, any person who executes a
Subscription Agreement to purchase Interests at any time regarding an
14
investment by such person in any other investment vehicle with which
the Manager or the Companies or any person with which they are
affiliated, unless such person is independently introduced by another
person. If the Manager or their Affiliates knowingly engage in an
activity prohibited by the preceding sentence and a sale of a security
sponsored by the Manager or its Affiliates results to one of your
clients, the Manager agree to pay you an amount equal to 9.5% of the
gross proceeds of the sale of such security.
(r) The Manager will deliver to you, as soon as reasonably practicable
after the date of this Agreement, a "Blue Sky Memorandum" (herein so
called), relating to the securities or "blue sky" laws of the
jurisdictions designated by you pursuant to Section 6(i) above and in
which the offering of Interests has been qualified, indicating that the
offering of the Interests is in compliance with such securities laws
and advising that appropriate action, if any, was taken in each of such
jurisdictions so as to permit the offering by you of the Interests to
the persons resident in the jurisdictions indicated in such survey.
Such Blue Sky Memorandum may be based upon qualification of the
Interests as necessary with appropriate persons in such jurisdictions
and an examination of the statutes and regulations, if any, of such
jurisdictions as reported in standard compilations and upon
interpretive advice obtained from representatives of the securities
commissions of such jurisdictions.
(s) The Manager will maintain and keep all books and records of the
Companies and the Interest Holders, including information relating to
the sale by the Manager or its Affiliates of goods or services to the
Companies, a list of the names and addresses and the number of
Interests owned by the Interest Holders, at the principal office of the
Companies for a period of six (6) years following the close of the
fiscal year in which each Company is funded, and will provide copies of
such records to any Soliciting Dealer upon a reasonable request.
(t) The Manager will notify you promptly of any change in the location
of its principal offices.
(u) When the offering is terminated, the Manager shall file a
post-effective amendment to the Registration Statement de-registering
any of the Interests remaining unsold.
(v) The Manager shall provide or cause to be provided to you a letter,
dated the Effective Date, addressed to you, from Xxxxxx & Xxxxx, LLP,
stating that:
(i) they are a firm of independent public accountants with
respect to The Manager, within the meaning of the 1933 Act and
the 1933 Act Regulations;
(ii) in their opinion, the audited balance sheets, including
notes applicable thereto, covered by their reports in the
Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the
1933 Act and the 1933 Act Regulations;
(iii) on the basis of reading the interim financial statements
of the Manager from the date of the most recent audited
financial statements of the Manager included in the
Registration Statement to
15
the date of the latest available interim financial statements,
consultation with and inquiries of the officials and personnel
of the Manager responsible for financial and accounting
matters, reading the operating agreement of the Manager and
such other inquiries and procedures as may be specified in
such letter, nothing has come to their attention which causes
them to believe that (A) the unaudited balance sheet,
including notes applicable thereto, of the Manager included in
the Registration Statement were not fairly presented in
conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the
audited balance sheets of the Manager included in the
Registration Statement or that such unaudited balance sheet,
including the notes applicable thereto, failed to comply as to
form in any material respect with the applicable accounting
requirements of the 1933 Act and the 1933 Act Regulations, and
(B) during the period from the date of the most recent audited
financial statements of the Manager included in the
Registration Statement to a specified date not more than five
(5) days prior to the date of delivery of such letter, there
was not any material change in the member's equity of the
Manager or any material decrease in net current assets, , as
compared with the amounts shown in such audited balance sheet
of the Manager included in the Registration Statement, except
in all instances for changes or decreases which the
Registration Statement discloses have occurred or may occur;
and
(iv) they have compared specific dollar amounts pertaining to
the Manager and its Affiliates contained in the Registration
Statement and set forth under the captions "Management" and
"Prior Activities," to the extent that such information may be
derived from the general accounting records of the Manager and
its Affiliates and excluding any questions requiring an
interpretation by legal counsel, with the results obtained
from the application of specified readings, inquiries and
other appropriate procedures (which procedures do not
constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter, and
found them to be in agreement.
7. CONDITIONS OF CLOSING.
The purchase of, and payment for, the Interests on each of the Closing
Dates, including the release of the proceeds held in the Escrow Account, shall
be subject to the continuing accuracy of the representations and warranties of
the Manager as of the date hereof and as of each Closing Date, to the
performance by the Manager, the Companies and you of their respective covenants
and obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have been made effective under the
1933 Act and no stop order suspending such effectiveness shall have
been issued and no proceedings therefor shall be pending or threatened
by the Commission.
(b) As of each Closing Date, you shall have received the opinion of
counsel to the Manager and the Companies, dated as of the Closing Date,
addressed to you, and in a form satisfactory to you and your legal
counsel, to the effect that:
16
(i) The Registration Statement has been made effective under
the Act and no stop order suspending such effectiveness has
been issued and no proceedings therefor are pending or
threatened by the Commission.
(ii) The Registration Statement and the Prospectus (except as
to the financial statements, other financial information and
any geological information and other technical data contained
therein, as to which such counsel need not express an opinion)
comply as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations, and
nothing has come to counsel's attention that would lead
counsel to believe that either the Registration Statement or
the Prospectus or any amendment or supplement thereto, as of
the Closing Date, contains any untrue statement of material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements contained therein,
in light of the circumstances under which they were made, not
misleading.
(iii) Counsel has reviewed all Sales Material furnished to
counsel and prepared by or on behalf of the Companies or the
Manager for use in conjunction with the offer and sale of the
Interests and all such Sales Material complies as to form and
content with the requirements of the 1933 Act and the 1933 Act
Regulations, applicable state securities or "blue sky" laws
and rules and regulations thereunder, and any applicable rules
and regulations of the NASD, and to the best of counsel's
knowledge, after due inquiry, none of such Sales Material,
when read in conjunction with the Prospectus, contains any
untrue statements of material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
(iv) To counsel's knowledge, after reasonable investigation,
no action, suit or proceeding is pending, threatened or
contemplated before or by any court or other governmental body
to which any of the Manager or the Prior Programs are or may
be a party, which is not referred to in the Prospectus and
which, in counsel's opinion, might result in any material
adverse change in the condition, business, prospects,
properties or assets of the Manager, the Prior Programs or the
Companies.
(v) Counsel has examined all contracts and agreements to which
the Companies and the Manager are parties referred to in the
Registration Statement and Prospectus, and the statements made
in the Registration Statement and Prospectus with respect
thereto fairly present the information called for by the 1933
Act and the 1933 Act Regulations; and counsel does not know of
any contracts or other documents to which the Companies or the
Manager are parties which, in counsel's opinion, are required
to be filed with the Registration Statement that were not
filed, nor of any litigation or governmental proceedings that,
in counsel's opinion, are required to be described or referred
to in the Registration Statement or Prospectus that are not so
described or referred to.
(vi) To counsel's knowledge, after reasonable investigation,
no defaults exist in the due performance and observance of any
material
17
obligation, term, covenant or condition of any agreement or
instrument to which the Manager is a party or by which it is
bound.
(vii) No approval or consent of any governmental authority or
agency is required for the issuance or sale of the Interests
(other than registration under the 1933 Act or registration or
qualification under state securities laws).
(viii) Upon its formation, the Company (with respect to which
the Closing is then occurring) will not be an "investment
company" as such term is defined in the Investment Company Act
of 1940, as amended, or the general rules and regulations
thereunder.
(ix) The statements contained in the Prospectus under the
caption "SUMMARY OF COMPANY OPERATING AGREEMENT", insofar as
such statements constitute a summary of the documents or
proceedings referred to therein, fairly present the
information called for with respect to such documents and
proceedings.
(x) Such other matters as you or your legal counsel may
reasonably request.
(c) As of each Closing Date, you shall have received the opinion of
Michigan counsel to the Companies, addressed to you, and in a form
satisfactory to you and your legal counsel, to the effect that:
(i) The Company Operating Agreement provides that Interests
sold to subscribers shall be evidenced by registration on the
books and records of the Manager. Assuming the Manager has
duly registered this information as required by Section 1.6 of
the Company Operating Agreement, each subscriber will become a
Interest Holder entitled to exercise all of the rights and
privileges of a beneficial owner as set forth in the Company
Operating Agreement.
(ii) Pursuant to the provisions of the Michigan Act, an
Interest Holder will not become legally obligated for
liabilities of the Company unless the Investor elects to be a
participating investor Interest Holder.
(iii) The Company (with respect to which the Closing is then
occurring) is a business Company duly organized pursuant to
the Company Operating Agreement and subject to the Michigan
Act and existing under the laws of the State of Michigan, with
full power and authority to conduct the business in which it
is engaged or proposes to engage, as described in the
Prospectus.
(iv) This Agreement and the Escrow Deposit Agreement have been
duly authorized, executed and delivered by the Manager and are
legal, valid and binding obligations of the Manager,
enforceable against it in accordance with their terms except
as enforceability hereof and thereof may be limited by (1)
bankruptcy, insolvency, reorganization, moratorium or similar
laws from time to time in effect and affecting the rights of
creditors generally, (2) limitations upon the power of a court
to grant specific performance or any other remedy with respect
to the enforcement of such agreements and (3) except that the
indemnification provisions of such agreements are or may be
held to be violative of public policy
18
(under either state or federal law) in the context of the
offer, offer for sale or sale of the Interests. All actions on
the part of the Manager necessary for the performance of such
agreements have been taken, and the terms of such agreements
and the Registration Statement will not result in a breach or
a violation of any of the terms or provisions of, or
constitute a default under, any agreement or instrument known
to them by which the Manager or the Companies is a party or by
which they are bound or any provision of law or any order,
rule or regulation of any court or governmental agency or body
having jurisdiction over them or any of their properties.
(v) The Manager has been duly and validly organized and (1) is
validly existing and in good standing as a limited liability
company under the laws of the state of Michigan, (2) is duly
qualified to do business and in good standing as a foreign
limited liability company in each other jurisdiction in which
such qualification is necessary in order to enable it to act
as the Manager of the Companies, or the failure to so qualify
in any such other jurisdiction will not affect in any material
way its ability to act as the Manager of the Companies, (3)
has all the requisite power and authority, and all necessary
authorizations, approvals and orders of and from all
governmental regulatory officials and bodies to own its
properties and conduct its business as described in the
Prospectus, and (4) has all such power, authority,
authorizations, approvals and orders to become the Manager of
the Companies and to enter into this Agreement ad to carry out
the provisions and conditions hereof.
(vi) The Company Operating Agreement (with respect to which
the Closing is then occurring) has been duly authorized,
executed and delivered by the Manager; is a legal, valid and
binding agreement of the Manager; and (subject to bankruptcy
and other laws affecting the rights and remedies of creditors)
is enforceable according to its terms.
(vii) To such counsel's knowledge, no action, suit or
proceeding is pending, threatened or contemplated before or by
any court or other governmental body to which the Manager or
the Prior Programs are or may be a party, which is not
referred to in the Prospectus and which, in their opinion,
might result in any material adverse change in the condition,
business, prospects, properties or assets of the Manager, the
Prior Programs or the Companies.
(viii) Counsel does not know of any contracts or other
documents to which the Companies or the Manager are parties
and which, in Counsel's opinion, are required to be filed with
the Registration Statement which were not filed, nor of any
litigation or governmental proceedings which, in counsel's
opinion, are required to be described or referred to in the
Registration Statement or Prospectus which were not so
described or referred to.
(ix) To counsel's knowledge, no defaults exist in the due
performance and observance of any material obligation, term,
covenant or condition of any agreement or instrument to which
the Manager is a party or by which it is bound.
19
(x) The statements contained in the Prospectus under the
caption "SUMMARY OF COMPANY OPERATING AGREEMENT", insofar as
such statements constitute a summary of the documents or
proceedings referred to therein, fairly present the
information called for with respect to such document and
proceedings.
(xi) The Company (with respect to which the Closing is then
occurring) is a limited liability company duly organized
pursuant to the Company Operating Agreement and subject
to Michigan Act and existing under the laws of the State of
Michigan with full power and authority to conduct the
business in which it is engaged or proposes to engage, as
described in the Prospectus.
(xii) Such other matters as you or your counsel may reasonably
request.
(d) As of each Closing Date, you shall have received the opinion of
special tax counsel to the Companies, addressed to you and in a form
satisfactory to you and your legal counsel, to the effect that:
(i) Assuming the Company (with respect to which the Closing is
then occurring) is operated as set forth in the Prospectus,
the Company Operating Agreement and any other arrangement in
which such Company participates, such Company will be treated
as a partnership for federal income tax purposes and not as an
association taxable as a corporation. This opinion shall be
based upon counsel's understanding that (a) such Company shall
be operated according to a Company Operating Agreement
substantially identical to the Company Operating Agreement
referred to in the Prospectus and (b) such Company's Articles
of Association were properly recorded under Michigan Act.
(ii) The statements contained in the Prospectus under the
caption "TAX ASPECTS", as well as all other statements in the
Prospectus with respect to federal, state and foreign tax
matters, have been reviewed by counsel and as to matters of
law and legal conclusions, are correct and complete, and the
Prospectus and exhibit thereto discuss and disclose all
material federal income tax aspects of the offering and sale
of the Interests.
(e) On each of the Closing Dates, you shall receive from counsel to the
Companies a final Blue Sky Memorandum dated as of that date and
relating to the securities or "blue sky" laws of the jurisdictions
designated by you in accordance with the provisions of Section 6(i),
advising that the appropriate "blue sky" action, if any, was taken in
each of such jurisdictions. Such survey (which shall be understood not
to constitute an opinion of law) may be based upon an examination of
the statutes and regulations, if any, of such jurisdictions as reported
in standard compilations and upon interpretive advice obtained from
representatives of certain securities commissions.
(f) As of each Closing Date, your legal counsel shall be furnished with
such documents or certificates from officers of the Manager in form and
substance reasonably satisfactory to your legal counsel for the
purposes of enabling your legal counsel to pass upon the legality of
the Interests, the Companies and the related proceedings and in order
to evidence the
20
accuracy and completeness of any of the representations and warranties
or the fulfillment of any of the conditions herein contained.
(g) You shall receive from Xxxxxx & Xxxxx, LLP letters dated as of each
of the Closing Dates, addressed to you and satisfactory in substance,
form and scope to you and your legal counsel to the effect that:
(i) they are independent public accountants within the meaning
of the 1933 Act and the 1933 Act Regulations and that the
information set forth under the heading "EXPERTS" in the
Registration Statement is correct insofar as it relates to
them;
(ii) in their opinion, the financial statements and schedules,
including notes applicable thereto, if any, of the Manager
examined by them and included in the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and of the applicable
1933 Act Regulations;
(iii) on the basis of inquiries of management of the Manager
responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such
letter (which inquiries and procedures it is understood do not
constitute an examination in accordance with generally
accepted auditing standards), nothing has come to their
attention which, in their judgment, would cause them to
believe that, during the period from the date of the most
recent audited financial statements of the Manager included in
the Registration Statement to the date of the latest available
interim financial statement and from that date to a specified
date not more than five (5) business days prior to the date of
such letter, there has not been any change in or incurrence of
long-term debt of the Manager, any decrease in consolidated
net current assets or net assets as compared with amounts
shown in the audited consolidated balance sheet included in
the Registration Statement, or any material change in the
member's equity of the Manager, except in all cases for
changes or decreases which the Registration Statement
discloses have occurred or may occur and such other changes or
decreases as set forth in such letter; and
(iv) they have compared the information expressed in amounts,
dollar amounts or percentages derived therefrom pertaining to
the Manager and its Affiliates set forth in the Registration
Statement as you or your legal counsel may reasonably request
with the results obtained from a reading of the general
accounting and company records (including worksheets) of the
Manager and its Affiliates and excluding any information
requiring an interpretation by legal counsel with the results
obtained from the application of specific readings, inquiries
and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally
accepted auditing standards) set forth in such letter and
found them to be in agreement, it being expressly understood
that such review shall encompass all financial information set
forth under the captions "Management" and "Prior Activities"
in the Registration Statement.
(h) Prior to each of the Closing Dates, (1) there shall have been no
material adverse change in the condition of the Manager or the
Companies or their business activities from the latest date as of which
such
21
conditions are described in the Registration Statement; (2) there shall
have been no material transaction, not in the ordinary course of
business, entered into by the Manager or the Companies from the latest
dates as of which their financial conditions are described in the
Registration Statement, other than transactions referred to or
contemplated herein or to which you have given your written consent;
(3) neither the Manager nor the Companies shall be in default under any
provisions of any instruments relating to any material outstanding
indebtedness; (4) no material amount of the assets of the Manager shall
have been pledged or mortgaged, except as set forth in the Registration
Statement; and (5) no action, suit or proceeding, at law or in equity,
shall have been pending or to their knowledge threatened against the
Manager or the Companies or affecting any of their properties or
business before or by any court or federal or state commission, board
or other administrative agency wherein an unfavorable decision, ruling
or finding would adversely affect the offering of the Interests,
business, operations, prospects or financial condition or income of the
Manager or the Companies except as set forth in the Registration
Statement.
(i) At each Closing Date, you shall have received separate certificates
from the Manager and the Company, dated the Closing Date, to the effect
that the conditions set forth in Section 7(h) above have been satisfied
as to each of them and as to the accuracy, as of the Closing Date, of
their representations and warranties set forth in Section 3 hereof.
(j) At each Closing Date, you shall have received a certificate of the
Manager and the Company, dated as of the Closing Date, in a form
satisfactory to you, indicating all persons to whom the Interests have
been sold and stating that, in connection with the offering of
Interests, they did not prepare, utilize or distribute any Sales
Material other than that attached to such certificate as an Exhibit.
(k) No order suspending the sale of the Interests prior to the Closing
Date in any jurisdiction designated by you pursuant to Section 6(i)
hereof, in which such Interests have been qualified for sale, shall
have been issued and be effective on the Closing Date, and no
proceedings for that purpose shall have been instituted or to your
knowledge or to the knowledge of the Manager, the Companies or their
Affiliates shall be contemplated.
(l) On the Closing Date you shall have received a certificate from the
Manager in form and substance satisfactory to your counsel, stating
that:
(i) the Manager requests release of all funds held in the
Escrow Account in respect of each investor whom the Manager
proposes to include as an Interest Holder in the applicable
Company;
(ii) the requirements of Section 2(e) hereof have been met;
and
(iii) the Manager and the Companies have complied with the
terms of Section 6 hereof.
(m) All proceeds received by the Manager in respect of subscriptions
for Interests in a Company shall be deposited in the Escrow Account.
(n) Upon compliance with the other conditions set forth in this Section
7, you shall direct the Escrow Agent in writing to release all funds
22
specified by the Manager in accordance with Section 2 hereof to the
applicable Company.
(o) All conditions contained in this section 7 shall have been met to
the reasonable satisfaction of your legal counsel.
Any certificate signed by the Manager, as Manager of the Companies, and
delivered to you or to your legal counsel shall be deemed a representation and
warranty by each of the Companies to you as to the statements made therein. If
any condition to your obligations hereunder to be fulfilled prior to or at the
Closing Date is not so fulfilled, you may terminate this Agreement or, if you so
elect, waive any such conditions that have been unfulfilled or extend the time
for their fulfillment.
8. INDEMNIFICATION.
(a) The Manager agrees to indemnify and hold harmless you or each
person, if any, who controls you within the meaning of the 1933 Act or
the 1934 Act and any successor to such persons, as follows:
(i) Against any and all loss, liability, claim, damage and
expense whatsoever (including, but not limited to, attorneys'
fees and expenses) arising out of and based upon (A) any
untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, the Prospectus,
any preliminary prospectus, any Sales Material (or any
amendment or supplement thereto), or in any application or
other document (in this section 8 collectively called
"Application") executed by the Manager or the Companies or
based upon information furnished by the Manager or the
Companies filed in any jurisdiction in order to qualify the
Interests under the securities laws thereof unless such untrue
statement or omission was made in reliance upon and in
conformity with written information with respect to you
furnished to the Manager by you expressly for use in the
Registration Statement, the Prospectus, any preliminary
prospectus, any Sales Material (or any amendment or supplement
thereto) or any Application; (B) the omission or alleged
omission from the Registration Statement, the Prospectus, any
preliminary prospectus, any Sales Material (or any amendment
or supplement thereto) or any Application of any material fact
required to be stated therein or necessary in order to make
the statements contained therein, in light of the
circumstances under which they were made, not misleading,
unless such untrue statement or omission was made in reliance
upon and in conformity with information with respect to terms
and conditions of this Agreement furnished to the Manager by
you expressly for use in the Registration Statement, the
Prospectus, any preliminary prospectus, any Sales Material (or
any amendment or supplement thereto) or any Application; (C)
the failure of any of the Companies or the Manager to comply
with any of the applicable provisions of the 1933 Act or the
1933 Act Regulations, including, without limitation, any
actions, direct or indirect, by the Manager or any of its
Affiliates which arise out of or are based upon integration,
as defined in Securities Act Release No. 33-4552, November 6,
1962 ("Integration"), of this offering with any offer to sell,
offer for sale or sale of securities by or on behalf of the
Manager or any of its Affiliates, including the offering for
sale or the sale of securities in other Companies, limited
liability companies, limited partnerships and/or joint
ventures formed or to
23
be formed, in whole or in part, for the purpose of acquiring,
owning and managing interests in producing oil and gas
properties ("Other Securities Offerings"); or (D) any
unauthorized verbal or written representations in connection
with the offering and sale of the Interests made by the
Companies or the Manager or the employees, Affiliates or
agents of such persons (other than by you or your agents,
employees or Affiliates).
(ii) Against any and all loss, liability, claim, damage and
expense whatsoever (including, but not limited to, attorneys'
fees and expenses) to the extent of the aggregate amount paid
in settlement of any litigation, commenced or threatened, or
of any claim whatsoever, except a claim based on written
information with respect to you furnished to the Manager by
you expressly for use in the Registration Statement, the
Prospectus, any preliminary prospectus, any Sales Material (or
any amendment or supplement thereto) or any Application based
upon any such untrue statement or omission or any such alleged
untrue statement or omission, if such settlement is effected
with the written consent of the Manager.
(iii) Against any and all expenses whatsoever (including, but
not limited to, attorneys' fees and expenses) reasonably
incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever
except a claim based on written information with respect to
you furnished to the Manager by you expressly for use in the
Registration Statement, the Prospectus, any preliminary
prospectus, any Sales Material (or any amendment or supplement
thereto) or any Application based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid
under Sections 8(a)(i) and (ii) above.
(b) If any action is brought against you or any Person who controls you
within the meaning of the 1933 Act or the 1934 Act and any successor to
such Person in respect of which indemnity may be sought under this
Section 8 (each, an "Indemnitee"), the Indemnitee(s) shall notify the
Manager in writing of the nature of the claim within a reasonable time
after the assertion thereof. The appropriate Company and the Manager
shall be entitled to participate at their own expense in the defense of
any suit so brought, which defense shall be conducted by counsel chosen
by it or them and satisfactory to the Indemnitee(s). In the event that
the appropriate Company and/or the Manager elect to assume the defense
of any such suit and retain such counsel, the Indemnitee(s) shall bear
the fees and expenses of any additional counsel thereafter retained by
such Indemnitee(s). If the Indemnitee(s) are advised by counsel that
there may be one or more legal defenses available to it or them which
are different from or additional to those available to the appropriate
Company and/or the Manager, the appropriate Company and/or Manager
shall not have the right to assume the defense of such action on behalf
of the Indemnitee(s) and the appropriate Company and/or the Manager
will reimburse the Indemnitee(s) for the reasonable fees and expenses
of any counsel retained by it or them. The Companies and the Manager
agree to notify each of you within a reasonable time of the assertion
of any claim in connection with the sale of the Interests against it or
any of them, any of their officers or directors or any Person who
controls the Companies or the Manager within the meaning of the 1933
Act or the 1934 Act.
24
(c) You agree to indemnify and hold harmless the Manager, each of the
officers of the Manager who sign the Registration Statement, each of
the Manager's directors, each person, if any, who controls the Manager
within the meaning of the 1933 Act or the 1934 Act and any successor to
such persons to the same extent as the foregoing indemnity from the
Manager and the Companies, but only with respect to written information
with respect to you furnished by you to the Manager expressly for use
in the Registration Statement, the Prospectus, any preliminary
prospectus, any Sales Material(or any amendment or supplement thereto)
or any Application.
(d) Notwithstanding anything to the contrary provided in this Section
8, an indemnifying party shall not be obligated to pay legal expenses
and fees to more than one law firm in connection with the defense of
similar claims arising out of substantially the same alleged acts or
omissions giving rise to such claims, notwithstanding that such actions
or claims are alleged or brought by one or more parties against more
than one Indemnitee. In each case such claims or actions are alleged or
brought against more then one Indemnitee, then the indemnifying party
shall only be obligated to reimburse the expenses and fees of the one
law firm which has been selected by a majority of the Indemnitees
against which such action is finally brought. In the event a majority
of such Indemnitees are unable to agree on which law firm for which
expenses or fees will be reimbursable by the indemnifying party, then
payment shall be made to the first law firm of record representing an
Indemnitee against the action or claim. Such law firm shall be paid
only to the extent of services performed by such law firm, and no
reimbursement shall be payable to such law firm on account of legal
services performed by another law firm. Notwithstanding anything
contained herein to the contrary, an Indemnitee may not, without the
prior consent of the indemnifying party, settle or compromise any
action brought against such Indemnitee.
(e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section
8 is for any reason held by a court of competent jurisdiction to be
unenforceable as to a Company, the Manager or you although applicable
in accordance with its terms, the Manager and you shall contribute to
the aggregate losses, claims, damages and liabilities (including any
investigation, legal and other expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceedings
or any claims asserted which settlement has been consented to by the
party whose contribution is being sought) to which the Manager and you
may be subject in such proportion so that you shall be responsible for
that portion represented by the percentage that the aggregate
compensation received by you pursuant to Section 5 of this Agreement
bears to the aggregate price of the Interests as to which you received
such commissions, as set forth in the Prospectus, and the Manager shall
be responsible for the balance; provided, however, that in no case
shall you be responsible for any amount in excess of the compensation
actually received by you pursuant to section 5 of this Agreement. The
Manager shall not be entitled to contribution from you with regard to
any liability arising from the failure of the Manager or a Company to
comply with any of the applicable provisions of the 1933 Act or the
1933 Act Regulations resulting in the Integration of this offering with
any offer to sell, offer for sale or sale of securities by or on behalf
of the Manager or any Affiliates of the Manager, including Other
Securities Offerings. No person guilty of fraudulent misrepresentation
(within the meaning of Subsection 11(f) of the 0000 Xxx) or guilty of
misstating or misrepresenting a material fact or failing to
25
state a material fact shall be entitled to contribution, as to any
liability arising from such fraudulent misrepresentation or other
misstatement, misrepresentation or omission, from any person who was
not guilty of such fraudulent or any other misrepresentation or
omission. For purposes of this Section 8, each person, if any, who
controls another person within the meaning of the 1933 Act or the 1934
Act shall have the same rights to contribution as the controlled
person. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against
such party in respect of which a claim for contribution may be made
against another party or parties under this Section 8(e), notify such
party or parties from whom contributions may be sought, but the
omission so to notify such party or parties shall not relieve the party
or parties from whom contribution may be sought from any other
obligation it or they may have otherwise than under this Section 8(e).
(f) The foregoing indemnity agreements of Sections 8(a), (b), (d) and
(e) shall extend upon the same terms and conditions to and shall inure
to the benefit of, each Soliciting Dealer and each person, if any, who
controls such Soliciting Dealer within the meaning of Section 15 of the
1933 Act.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE SALE AND PAYMENT.
Except as the context otherwise requires, all representations,
warranties and covenants contained in this Agreement shall be deemed to
be representations, warranties and covenants at each of the Closing
Dates; and such representations, warranties and covenants of you and
the Manager (individually or on behalf of the Companies), including the
indemnity agreements contained in Section 8 hereof, shall remain
operative and in full force and effect regardless of any investigation
made by you or on your behalf, or any controlling person, or by or on
behalf of the Manager or the Companies or any controlling person of the
Manager and shall survive the sale of, and payment for, the Interests.
10. TERMINATION OF THIS AGREEMENT.
(a) You shall have the right to terminate this Agreement at any time
prior to a Closing Date, if:
(i) any representations, warranties or covenants hereunder
shall be found to be incorrect or misleading in any material
respect when made;
(ii) there shall have been, since the dates as of which
information is given in the Registration Statement and the
Prospectus, any material adverse change in the condition of
the Manager, the Prior Programs or the Companies, whether or
not arising in the ordinary course of business;
(iii) trading on the New York and American Stock Exchanges
shall have been suspended or a banking moratorium shall have
been declared by either federal or New York authorities;
(iv) there shall have occurred any change or any development
involving a prospective change in or affecting the gas
business or the prospective business and operations of the
Manager, the Prior
26
Programs or the Companies or in the conditions of the
securities markets generally which, in any party's judgment,
would make it inadvisable to proceed with the offering;
(v) there shall have been federal legislation, Internal
Revenue Service ruling changes or proposed changes in Internal
Revenue Service or court decisions which in the reasonable
judgment of any party has a material adverse effect on the tax
consequences to Interest Holders; or
(vi) the non-terminating party shall have breached the terms
of this Agreement in any material respect or shall have failed
to fulfill a condition of this Agreement.
(b) If you elect to terminate this Agreement, the Manager shall be
notified promptly by you pursuant to Section 12 of this Agreement. If
the Manager elects to terminate this Agreement as provided in this
Section 10, you shall be notified promptly by the Manager pursuant to
Section 12 of this Agreement.
(c) The Manager may terminate this Agreement in the Manager's sole
discretion, by providing written notice to you as described in Section
12 of this Agreement. Termination shall be prospective only, and you
will be entitled to be paid any compensation earned under Section 5 of
this Agreement for sales of Interests you have previously made that are
accepted by the Manager and released from escrow. If the Manager
terminates this Agreement, no Interests may be offered or sold by the
Manager or the Companies to any prospective purchaser of the Interests
who has been previously been contacted by you in connection with the
offering and sale thereof.
(d) If you or the Manager shall terminate this Agreement, no
terminating party shall have any liability to any other party, other
than for obligations, if any, pursuant to Sections 5 and 8 of this
Agreement.
Notwithstanding any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Section 9 shall not be in any way affected by such election or
termination pursuant to this Section 10 or failure to carry out the terms of
this Agreement or any part hereof.
11. RELATIONSHIP OF PARTIES.
Nothing contained in this Agreement shall constitute the Companies, the
Manager, you or any other Soliciting Dealer, or any of them, an association,
partnership, unincorporated business or other separate entity, nor shall you or
any other Soliciting Dealer be deemed to be a beneficial owner of the Companies.
Neither you nor any other Soliciting Dealer shall be deemed for any reason to
have any future duty or obligation to the Manager or any Interest Holder as a
consequence of your right to receive selling commissions, or due diligence
reimbursement . Neither you nor any other Soliciting Dealer has assumed, or will
assume any responsibility with respect to the Companies or will be permitted by
the Manager to assume any duties, responsibilities or obligations regarding the
management, operations or any of the business affairs of the Companies after the
Closing Dates.
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12. NOTICES.
All notices provided for by this Agreement shall be made in writing
either (i) by actual delivery of the notice into the hands of the parties
thereto entitled or (ii) by the mailing of the notice in the United States mails
to the address, as stated below (or at such other address as may have been
designated by written notice), of the party entitled thereto, by certified or
registered mail, return receipt requested. The notice shall be deemed to be
received in case (i) on the date of its actual receipt by the party entitled
thereto and in case (ii) on the date of deposit in the United States mails.
All communications shall be mailed or delivered at the following
addresses:
If to the Companies and the Manager:
Wolverine Energy, L.L.C.
0000 Xxxxx Xxxxxxxx Xxxx Xxxxx 000
Xxxx Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Xx.
If to you:
Attn:
13. GOVERNING LAW.
This Agreement shall be governed by, subject to and construed in
accordance with the laws of the State of Michigan.
14. SEVERABILITY.
If any portion of this Agreement shall be held invalid or inoperative,
then, so far as is reasonable and possible (i) the remainder of this Agreement
shall be considered valid and operative and (ii) effect shall be given to the
intent manifested by the portion held invalid or inoperative.
15. MULTIPLE COUNTERPARTS.
This Agreement may be executed in a number of identical counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute, collectively, one and the same Agreement.
16. MODIFICATION OR AMENDMENT.
This Agreement may not be modified or amended except by written
agreement executed by the parties hereto.
17. NUMBER AND GENDER OF WORDS.
Whenever the context so requires, the masculine shall include the
feminine and neuter, and the singular shall include the plural, and conversely.
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18. OTHER INSTRUMENTS.
The parties hereto covenant and agree that they will execute such other
and further instruments and documents as are or may become necessary or
convenient to effectuate and carry out this Agreement.
19. CAPTIONS.
The captions used in this Agreement are for convenience only and shall
not be construed in interpreting this Agreement.
20. PARTIES.
This Agreement shall be binding upon and inure solely to the benefit of
the parties hereto, the controlling persons thereof and their respective
successors, legal representatives, heirs and assigns, and no other person shall
have or be construed to have any legal or equitable right, remedy or claim under
or in respect of or by virtue of this Agreement or any provision herein
contained.
21. ENTIRE AGREEMENT.
This Agreement contains the entire understanding between the parties
and supersedes any prior understandings or written or oral agreements between
them respecting the subject matter hereof.
If the foregoing correctly sets forth the understanding between you and
the Manager, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
WOLVERINE ENERGY, L.L.C.
By:
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Its:
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Accepted as of the date first above written:
[Soliciting Dealer]
By:
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Its:
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