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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO __________
COMMISSION FILE NUMBER 1-11566
MARKWEST HYDROCARBON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 84-1352233
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5613 DTC PARKWAY, ENGLEWOOD, COLORADO 80111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 303-290-8700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports)
Yes X No
-- --, and
(2) has been subject to such filing requirements for the past 90 days,
Yes No X
-- --
The registrant had 8,485,000 shares of common stock, $.01 per share par
value, outstanding as of October 31, 1996.
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MARKWEST HYDROCARBON, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS **
Consolidated Balance Sheets at September 30, 1996
and December 31, 1995................................... 1
Consolidated Statements of Income for the Three Months
and Nine Months ended September 30, 1996
and September 30, 1995.................................. 2
Consolidated Statements of Cash Flows for the Nine
Months ended September 30, 1996 and September
30, 1995................................................ 3
Notes to Consolidated Financial Statements...................... 4
** The financial statements presented are those of MarkWest
Hydrocarbon Partners, Ltd., the predecessor to the Registrant.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS....................................... 5
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................ 11
SIGNATURES............................................................... 12
<PAGE>
PART I - FINANCIAL INFORMATION
MARKWEST HYDROCARBON PARTNERS, LTD.
( PREDECESSOR TO MARKWEST HYDROCARBON, INC. )
CONSOLIDATED BALANCE SHEET
($000S)
<TABLE>
<CAPTION>
December 31, September 30,
ASSETS 1995 1996
------------- -------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................... $ 761 $ 2,256
Trade receivables................................... 5,735 5,223
Short-term advances (Note 6)........................ 3,174 -
Product inventory (Note 3).......................... 2,718 6,729
Materials and supplies inventory.................... 112 275
Prepaid expenses and other assets................... 375 725
Prepaid feedstock (Note 4)......................... 1,729 3,114
------ ------
Total current assets............................ 14,604 18,322
Property, plant and equipment, at cost, net of
accumulated depreciation, depletion and
amortization of $9,568 and $11,541, respectively.... 31,947 32,896
Intangible assets, net of accumulated amortization
of $152 and $ 271 respectively...................... 320 712
Investment in West Shore Processing (Note 5).......... - 1,969
Other assets.......................................... 25 -
------ ------
Total Assets.......................................... $46,896 $53,899
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Trade accounts payable.............................. $ 3,283 $ 4,259
Accrued liabilities................................. 404 600
Interest payable.................................... 147 226
Accrued bonus and profit sharing.................... 401 278
Current portion of long-term debt................... - -
------ ------
Total current liabilities....................... 4,235 5,363
Long-term debt........................................ 17,500 21,140
------ ------
Total Liabilities............................... 21,735 26,503
Partners' capital..................................... 25,161 27,396
------ ------
Total liabilities and partners' capital.............. $46,896 $53,899
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
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MARKWEST HYDROCARBON PARTNERS, LTD.
( PREDECESSOR TO MARKWEST HYDROCARBON, INC. )
CONSOLIDATED STATEMENT OF OPERATIONS
($000S)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1996 1995 1996
---------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Plant revenue.......................................... $ 6,076 $10,543 $23,302 $28,582
Terminal and marketing revenue......................... 2,341 3,976 7,540 13,805
Oil and gas and other revenue.......................... 248 416 749 1,146
---------- -------- --------- --------
Total revenue.......................................... 8,665 14,935 31,591 43,533
Costs and Expenses
Plant feedstock purchases.............................. 3,327 5.882 11,935 14,417
Terminal and marketing purchases....................... 2,133 3,372 6,960 12,055
Operating expenses..................................... 1,203 1,365 3,210 4,344
General and administrative expenses.................... 1,124 1,238 3,187 3.377
Depreciation, depletion and amortization............... 437 783 1,290 2,109
---------- -------- --------- -------
Total costs and expenses............................... 8,224 12,640 26,582 36,302
---------- -------- --------- -------
Earnings from operations................................. 441 2,295 5,009 7,231
Other income (expense)
Interest expense, net of interest income............... 127 (352) (173) (804)
---------- -------- --------- -------
Total other income (expense)........................... 127 (352) (173) (804)
Income before extraordinary item......................... 568 1,943 4,836 6,427
Extraordinary loss on extinguishment of debt............. (1,750) -- (1,750) --
---------- -------- --------- -------
Net Income............................................... $(1,182) $ 1,943 $ 3,086 $ 6,427
========== ======== ========= =======
Pro forma information (unaudited) (Note 7):
Historical income before extraordinary item............. $ 568 $ 1,943 $ 4,836 $ 6,427
Pro forma provision for income taxes (Note 8)........... 216 738 1,838 2,442
---------- -------- --------- -------
Pro forma net income.................................... $ 352 $ 1,205 $ 2,998 $ 3,985
========== ======== ========= =======
Pro forma net income per share.......................... $ 0.04 $ 0.14 $ 0.35 $ 0.46
========== ======== ========= =======
Pro forma weighted average number of shares
outstanding........................................... 8,649 8,649 8,649 8,649
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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MARKWEST HYDROCARBON PARTNERS, LTD.
( PREDECESSOR TO MARKWEST HYDROCARBON, INC. )
CONSOLIDATED STATEMENT OF CASH FLOWS
($000S)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1996
---------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income............................................... $ 3,086 $ 6,427
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization........... 1,290 2,109
(Increase) decrease in accounts receivable......... 2,017 3,647
(Increase) decrease in inventories................. (1,372) (5,560)
(Increase) decrease in prepaids.................... (135) (317)
Increase (decrease) in accounts payable and
accrued liabilities............................. 1,060 1,503
---------- --------
Net cash flow provided by operating activitieS........... 5,946 7,809
Cash Flows From Investing Activities:
Capital expenditures..................................... (9,467) (4,993)
Decrease (increase) in intangible and other assets....... (224) (392)
---------- --------
Net cash used in investing activities.................... (9,691) (5,385)
Cash Flows From Financing Activities:
Proceeds from issuance of long-term debt................. 12,950 12,290
Repayments of long-term debt............................. (10,387) (8,650)
Partners' distributions.................................. (2,979) (4,192)
Other.................................................... 4 (377)
---------- --------
Net cash used in financing activities.................... (412) (929)
Net increase (decrease) in cash and cash equivalents..... (4,157) 1,495
Cash and cash equivalents at beginning of period.............. 5,468 761
---------- --------
Cash and cash equivalents at end of period.................... $ 1,311 $ 2,256
========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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MARKWEST HYDROCARBON PARTNERS. LTD.
( PREDECESSOR TO MARKWEST HYDROCARBON, INC. )
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: General
- -----------------
The consolidated financial statements include the accounts of MarkWest
Hydrocarbon Partners, Ltd. ("Partnership"), the predecessor to MarkWest
Hydrocarbon, Inc. (the "Company" or "MarkWest"), and its wholly-owned
subsidiaries, MarkWest Resources, Inc. and MarkWest Michigan, LLC.
The interim consolidated financial statements presented herein should be
read in conjunction with the Consolidated Financial Statements and Notes thereto
for the period ended June 30, 1996 included in the Company's Registration
Statement on Form S-1, as filed with the Securities and Exchange Commission.
The interim consolidated financial statements as of September 30, 1996 and 1995
are unaudited, but reflect, in the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to fairly present the
results for such periods. All material intercompany transactions have been
eliminated.
Note 2: Reorganization
- ------------------------
Effective October 8, 1996, the Partnership reorganized and the existing
general and limited partners exchanged 100% of their interests in the
Partnership for 5,725,000 common shares of MarkWest Hydrocarbon, Inc., a
corporation formed to be the successor to the Partnership. An additional
2,400,000 shares of common stock were offered for public sale, totaling
8,125,000 shares outstanding as of October 15, 1996. The over-allotment of
360,000 shares was also exercised during October, resulting in a total of
8,485,000 shares outstanding at October 31, 1996. Since this transaction
represents a reorganization of entities under common control, it will be
accounted for at historical cost.
Note 3: Inventory
- -------------------
Product inventory consists primarily of finished goods (propane, butane,
isobutane and natural gasoline) and is valued at the lower of cost, using the
first-in, first-out method, or market. Market value of the Partnership's
inventory was $3.9 million and $9.8 million at December 31, 1995 and September
30, 1996, respectively.
Note 4: Prepaid Feedstock
- ---------------------------
Prepaid feedstock consists of natural gas purchased in advance of its
actual use. It is valued on a first-in, first-out method.
Note 5: Investment in West Shore
- -----------------------------------
Effective May 6, 1996, the Partnership acquired the right to earn up to a
60% interest for $16.8 million in a newly formed venture, West Shore
Processing, LLC ("West Shore"). The most significant asset of West Shore is
Basin Pipeline, LLC, which was contributed by the Partnership's venture partner,
Michigan Energy Company, LLC. The West Shore agreement is structured so that
the Partnership's ownership interest increases as capital expenditures for the
benefit of West Shore are made by the Partnership. As of September 30, 1996,
the Partnership has recorded a net investment in West Shore of $1,969,000
representing a 11.26% ownership interest. The Partnership is committed to make
capital expenditures of approximately $10.0 million through early 1997 in
conjunction with the first phase of the agreement.
Note 6: Short Term Advances
- -----------------------------
During the fourth quarter of 1995, the Partnership made several short term
advances totaling $3,174,000 as part of the West Shore agreement. In accordance
with the terms of the agreement, the Partnership was reimbursed for the full
amount of the advances at the closing date of May 6, 1996.
Note 7: Pro Forma Earnings per Share of Common Stock
- -------------------------------------------------------
Pro Forma earnings per share has been presented for all periods as if the
Partnership had been a publicly-held entity for all periods presented. The
weighted average number of shares includes the outstanding number of shares at
October 31, 1996 and shares issuable upon exercise of stock options effective
as of October 31, 1996
4
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Note 8: Income Taxes
- ----------------------
The Partnership has not been subject to federal and most state income tax,
and its income was taxed directly to its respective partners. Since MarkWest
Hydrocarbon, Inc. is a taxable entity, a pro forma provision for income taxes is
presented in the financial statements, using a combined effective tax rate of 38
%, as if the Company had been taxed as a Subchapter C corporation under the
Internal Revenue Code, for all periods presented.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
MarkWest Hydrocarbon, Inc. ( "MarkWest" ) provides compression, gathering,
treatment, processing and NGL extraction services to natural gas producers and
pipeline companies and fractionates NGLs into marketable products for sale to
third parties. The Company also purchases, stores and markets natural gas and
NGLs. The majority of the Company's operating income is derived from gas
processing and NGL fractionation. NGL prices and the volume of liquids
extracted, fractionated, and sold are the primary determinants of revenues.
Prices of NGLs typically do not vary directly with natural gas prices, but more
closely follow the prices of crude oil. In addition to sales of NGLs processed
by the Company, the Company generates income from the purchase and resale of
NGLs as part of its terminal and marketing activities, and provides marketing
activities in support of its company-owned facilities and production. The
Company also currently operates two propane terminals.
The Company's results of operations fluctuate substantially from quarter to
quarter as a result of changes in availability of, and prices for, natural gas,
and changes in demand for gas and NGLs because of weather and variability in
demand for NGLs used as feedstocks in petrochemical and other industries. The
Company's principal NGL product, propane, is used primarily as home heating
fuel. Sales volume and prices of propane usually increase during the winter
season and decrease during the summer season. However, demand for, and prices
of, propane also depend, to a large extent, upon the severity of the weather in
the Company's operating areas during the winter months. To meet the needs of the
marketplace, the Company seasonally stores product to meet anticipated winter
demand and also increases its third party purchases to meet wintertime needs. As
a result, the Company recognizes the greatest proportion of its operating income
during the first and fourth quarters of the year. Because of the foregoing
factors, the Company's operating results for any particular quarterly period may
not be indicative of results for future periods.
Management's Discussion and Analysis of Financial Condition and Results of
Operations include forward-looking statements (within the meaning of Section 21E
of the Securities Exchange Act of 1934) reflecting the expectations, plans and
objectives of management for operations of the Company. Such statements are
based on current expectations that involve numerous risks and uncertainties.
Assumptions relating to these expectations involve judgments with respect to,
among other things, future economic, competitive and market conditions,
including the price of natural gas, all of which are difficult or impossible to
predict accurately and many of which are beyond the control of the Company.
Accordingly, there can be no assurance that the forward looking statements
included in the Form 10-Q will prove to be accurate. Inclusion of such
information should not be regarded by the Company as a representation by the
Company or any other person that the expectations, plans and objectives of the
Company will be realized. It is important to note that the Company's actual
results could differ materially from those in such forward looking statements.
Among the factors that could cause actual results to differ are those risks
discussed in the "Risk Factors" section included in the Company's Registration
Statement on Form S-1, as declared effective by the Securities and Exchange
Commission on October 7, 1996 (Reg No. 333-09513).
5
<PAGE>
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1995 1996 % Change 1995 1996 % Change
---------------------------------- -----------------------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Financial Results:
- ------------------
Plant revenues........................ $6,076 $10,543 74% $23,302 $28,582 23%
Plant feedstock purchases............. 3,327 5,882 77% 11,935 14,417 21%
Terminal & marketing revenues......... $2,341 $ 3,976 70% $ 7,540 $13,805 83%
Terminal & marketing purchases........ 2,133 3,372 58% 6,960 12,055 73%
Income before extraordinary
items and taxes...................... $ 568 $ 1,943 242% $ 4,836 $ 6,427 33%
</TABLE>
Revenues
The Company's third quarter 1996 plant revenues increased $ 4.5 million, or
74%, to $10.5 million, compared to $6.1 million for third quarter 1995. An
increase in NGLs sold of 26% accounted for approximately $1.5 million of the
revenue increase, with higher selling prices per gallon for all NGL products
accounting for approximately $ 2.1 million increase. An additional $ 851,000 of
revenue was generated by the Company's new Kenova processing plant for third
quarter 1996. The Company's new Kenova plant, which became operational in
January 1996, also accounted for all of the Company's increased NGL production
by supplying greater raw NGL volumes to the Company's Siloam plant.
Plant revenue for the nine months ended September 30, 1996 increased $5.3
million, or 23%, to $28.6 million compared to the nine months ended September
30, 1996. Revenue generated by the new Kenova facility resulted in $2.4 million
of the increase. Pricing increases accounted for $ 2.9 million of the increase,
offset by a decrease in volumes fractionated at the Siloam plant of 3% for the
nine month period ending September 1996. The volume decrease at the Siloam
plant, which receives approximately 70% of its raw NGL mix from the Kenova
plant, was primarily due to normal start-up delays in the transition from an
older processing facility at Kenova to the Company's new plant during the first
quarter of 1996.
Terminal and marketing revenue for third quarter 1996 increased $1.6
million, or 70%, to $3.9 million, compared to revenue for the third quarter 1995
of $2.3 million. Of the $1.6 million increase, $1.0 million was related to an
increase in volume and $600,000 was related to an increase in price. Revenue
from the West Memphis terminal accounted for approximately $880,000 of the
volume-related increase and the Company's terminal in Church Hill, Tennessee,
which became operational in October 1995, accounted for approximately $120,000
of the volume-related increase for third quarter 1996.
For the nine months ended September 30, 1996, terminal and marketing
revenue increased $6.3 million, or 83%, to $13.8 million, compared to $7.5
million for the nine months ended September 30,
6
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1995. Sales volumes increased 52% for the nine months ended September 30, 1996,
compared to nine months ended September 30, 1995, accounting for $3.8 million of
the $6.3 million increase. The Church Hill terminal contributed 29% of the
volume, for $1.1 million of the volume increase. Volume increases from the West
Memphis terminal were principally due to the colder temperatures during the
first half of 1996, resulting in an increased demand for propane. Price-related
increases accounted for the remaining $2.5 million of increased revenues for
nine months ended September 30, 1996.
Oil and gas and other revenue increased to $416,000 from $248,000 for the
third quarter 1996 as compared to the third quarter 1995, an increase of
$168,000, or 68%. This increase was due principally to production from certain
of the Company's oil and gas properties, which began producing in the fourth
quarter of 1995. Other revenue consists of income received from the leasing of
Company-owned railcars to third parties.
For the nine months ended September 30, 1996, oil and gas and other revenue
increased from $749,000 to $1.1 million, or 53%, as compared to the nine months
ended September 30, 1995. This increase was due principally to a full nine
months of production in 1996 for certain of the Company's oil and gas
properties, which began producing in late 1995.
Costs and expenses
Plant feedstock costs increased for third quarter 1996, to $5.9 million
compared to $3.3 million for the third quarter 1995, an increase of $2.6
million, of 77%. Of this $2.6 million increase in feedstock costs, $1.0
million was attributable to NGL production volumes, and $1.6 million was due to
increased pricing.
Plant feedstock costs also increased for the nine months ended September 30,
1996 compared to the nine months ended September 30, 1995 by $ 2.5 million, or
21%, as a result of decreased volumes of $ 200,000 and price increases of $2.7
million.
Terminal and marketing purchases increased $1.2 million, from $2.1 million in
third quarter 1995, to $3.3 million for third quarter 1996, an increase of 58%,
as a result of both increased volumes and pricing.
Terminal and marketing purchases also increased for the nine months ended
September 30, 1996 compared to the nine months ended September 30, 1995 by $5.1
million, or 73%, to $12 million. Approximately $3.6 million was related to an
increase in volume and $1.5 million was related to an increase in price.
Operating expenses increased $162,000, from $1.2 million to $1.4 million for
the third quarter 1996, as compared to third quarter 1995. For the nine months
ended September 30, 1996, operating expenses increased $1.1 million, or 35%, to
$4.3 million from $3.2 million for the nine month period ended September 30,
1995. The increase was due principally to new operations at both the Kenova and
Church Hill facilities, which commenced operations in the first quarter of 1996
and the fourth quarter of 1995, respectively.
General and administrative expenses increased $114,000, to $1.2 million for
the three months ended September 30, 1996 from $1.1 million for the three months
ended September 30, 1995. For the nine months ended September 30, 1996, general
and administrative expenses increased $ 190,000, or 6%, to $3.4 million from
$3.2 million for the nine month period ended September 30, 1995. The increases
are attributable to administrative support activities related to the West Shore
acquisition in Michigan and the new Kenova and Church Hill facilities.
Depreciation and amortization increased to $783,000 from $437,000 for the
third quarter 1996 compared to the third quarter 1995, an increase of $346,000,
or 79%. For the nine months ended September 30, 1996, depreciation and
amortization increased from $1.3 million to $ 2.1 million, or 57%, as compared
to the nine months ended September 30, 1995. These increases are principally due
to increased depreciation attributable to the Company's new Kenova plant.
Net interest expense
Net interest expense increased $479,000, from interest income of $127,000
for the third quarter of 1995 to $352,000 interest expense for the third quarter
of 1996. This increase resulted primarily from an increase in outstanding long-
term debt of $ 13.5 million at September 30, 1995 to $21.1 million at September
30, 1996, offset by a decrease in interest rates from 8.125% to 7.5%.
Net interest expense for the nine months ended September 30, 1996 increased
$631,000, to $804,000 from $173,000 for the nine months ended September 30,
1995. This increase was due to the capitalization of interest in 1995 in
connection with construction of the Kenova plant, and an increase in
7
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average outstanding long-term debt for the nine month period ended September 30,
1996 of approximately $ 13 million compared to the average outstanding long-term
debt for the nine month period ended September 30, 1995 of approximately $ 5
million partially offset by a decrease in interest rates in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's sources of liquidity and capital resources historically have
been net cash provided by operating activities and proceeds from borrowed,
long-term debt. The Company's principal uses of cash have been to fund
operations and acquisitions.
For the nine months ended September 30, 1996, net cash provided by operating
activities increased by $1.6 million over the nine months ended September 30,
1995. This increase resulted primarily from an increase in revenue of $11.9
million, which was offset by a $8.9 million increase in feedstock purchases,
terminal and marketing purchases, operating expenses and general and
administrative expenses. Cash flow from operations was further reduced by an
increase in working capital requirements. For the nine months ended September
30, 1996, accounts receivable decreased by $3.6 million primarily due to
repayment of a short-term advance of $3.2 million made in conjunction with the
West Shore agreement. Inventories and feedstocks increased $5.6 million for the
nine months ended September 30, 1996, as a result of the Company building
inventory levels for the fourth quarter demands and increasing prepaid feedstock
accounts with lower-priced inventory. Accounts payable increased while costs and
expenses decreased due to the timing of the payments for prepaid feedstock.
Cash used in investing activities decreased $4.6 million for the nine month
period ended September 30, 1996, as compared to the nine month period endeds
September 30, 1995, mainly due to the completion of the Kenova facility under
construction during the prior year, offset by investments in West Shore. Cash
used in investing activities in 1995 was principally due to the expenditures
resulting from the construction of the Kenova facility.
Financing activities during the nine months ended September 30, 1995 and 1996
principally consisted of payments on long-term debt.
In October 1996, the Company completed an initial public offering of its
common stock, which generated $ 25.0 MM in net proceeds to the Company, after
deducting estimated expenses of the offering. The Company believes that the net
proceeds from its October 1996 public offering, together with its current credit
facilities and cash flows generated by its operations, will be sufficient to
meet its anticipated cash needs for working capital and capital expenditures for
at least the next twelve months. Thereafter, if cash generated from operations
is insufficient to satisfy the Company's liquidity requirements, the Company may
seek to sell additional equity or debt securities, obtain additional credit
facilities or adjust the level of its operating and capital expenditures. The
sale of additional equity securities could result in dilution to the Company's
stockholders.
Financing Facilities.
- ---------------------
Revolver Loan
The Company currently has a financing agreement with Norwest Bank Denver,
N.A. as agent, First American National Bank of Nashville, Tennessee, N M
Rothschild and Sons Limited and First Chicago/ NBD (collectively, the
"Lenders"). The agreement is structured as a revolving facility with a maximum
borrowing base of $40 million. Interest rates are based on either the agent
bank's prime plus 1/4% or the London Interbank Offered Rate (LIBOR) plus 2%.
The repayment period begins on September 30, 1998, continuing for 16 equal
quarterly installments until June 30, 2002. Outstanding borrowings at September
30, 1996 were $13 million. After application of the net proceeds of the
Company's October offering, no
8
<PAGE>
amounts were outstanding under this facility as of November 11, 1996. This
facility is secured by substantially all of the Company's assets.
Working Capital Loan
The Company has a working capital line of credit with a maximum borrowing
base of $7.5 million as of September 30, 1996. Interest rates are based on
prime plus 1/4%, with maturity on July 1, 1998. Outstanding borrowings at
September 30, 1996 were $7.3 million. Upon application of the net proceeds of
the Offering, $ 4.2 million is outstanding under this facility as of October 31,
1996. The working capital is secured by the Company's inventory, receivables
and cash.
Subsidiary's Revolver Loan
The Company's MarkWest Resources subsidiary has a revolving facility with
Colorado National Bank ( "CNB " ) with a maximum borrowing base of $ 5.8 MM as
of September 30, 1996. Interest is based on CNB's bank rate plus 1/2%. The
facility has a maturity date of April 2003. This facility is restricted for the
exploration and development of oil and gas properties and as of September 30,
1996, $ 790,000 was outstanding. This facility is secured by substantially all
of MarkWest Resources' assets. The Company has guaranteed $ 1 million of this
facility.
The loan agreements contain affirmative and negative covenants customary in
commercial lending transactions, including restrictions on the incurrence of
additional debt, restrictions on the payment of dividends that would cause the
Company to violate the financial covenants contained in the loan agreements,
maintenance of a specified tangible net worth, current ratio, ratio of funded
debt to total capitalization and fixed charge coverage ratio.
Capital Investment Program
During 1996, the Company expects to make approximately $10 million in capital
investments. The Company expects to invest approximately $4 million in the
Company's subsidiary, MarkWest Michigan, Inc. ("MW Michigan"), for activities in
the Michigan area. Through MW Michigan, the Company is committed to make
certain capital contributions to West Shore, a venture dedicated to natural gas
gathering, treatment, processing and NGL marketing in western Michigan. The
Company has committed to fund up to $1.2 million of West Shore's construction of
a two-mile gathering pipeline and up to $10.0 million for a 30-mile extension of
the Basin Pipeline. In addition, the Company has committed to fund 60% of the
costs in excess of such amounts if necessary to complete these projects. The
Company also expects to invest approximately $5.0 million in the Company's
exploration and production subsidiary, MarkWest Resources Inc. ("MarkWest
Resources"). For the nine months ended September 30, 1996, the Company made
capital expenditures totaling $ 5.0 million, including $1.9 million for MW
Michigan and $ 1.8 million for MarkWest Resources.
RISK MANAGEMENT ACTIVITIES
The Company's policy is to utilize risk management tools primarily to reduce
commodity price risk for its natural gas shrink replacement purchases. This
effectively allows the Company to fix a portion of its margin because gains or
losses in the physical market are offset by corresponding losses or gains in the
financial instruments market. The Company's hedging activities generally fall
into three categories - contracting for future purchases of natural gas at a
predetermined BTU differential based upon a basket of Gulf Coast NGL prices, the
fixing of margins between propane sales prices and natural gas reimbursement
costs by purchasing natural gas contracts and simultaneously selling propane
contracts (or a substitute for propane such as crude oil) of approximately the
same BTU value, and the purchase of propane futures contracts to hedge future
sales of propane at the Company's terminals or gas plants.
The Company maintains a three-person committee that oversees all hedging
activity of the Company. This committee reports monthly to management regarding
recommended hedging transactions and positions. Gains and losses related to
qualifying hedges, as defined by SFAS No. 80,
9
<PAGE>
"Accounting for Futures Contracts", of firm commitments or anticipated
transactions are recognized in plant revenue and feedstock purchases upon
execution of the hedged physical transaction.
As of September 30, 1996, the Company did not hold any material notional
quantities of natural gas, NGL, or crude oil futures, swaps or options.
10
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Change in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Amended and Restated Loan Agreement made as of , among MarkWest
Hydrocarbon, Inc. and Norwest Bank Colorado, N.A., First
American National Bank, NM Rothschild and Sons Limited and First
Chicago, NBD
10.2 Amended and Restated Working Capital Loan Agreement made as of
October 8, 1996, among MarkWest Hydrocarbon, Inc. and Norwest
Bank Colorado, N.A., First American National Bank, NM Rothschild
and Sons Limited and First Chicago, N.B.D.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
MarkWest Hydrocarbon, Inc.
(Registrant)
Date: November 21, 1996 BY: /s/ Brian T. O'Neill
---------------------------------
Brian T. O'Neill
President and
Chief Executive Officer
BY: /s/ Faye E. McGuar
---------------------------------
Faye E. McGuar
Chief Accounting Officer
12
<PAGE>
Exhibit 10.1
AMENDED AND RESTATED
LOAN AGREEMENT
Among
MARKWEST HYDROCARBON, INC.
and
NORWEST BANK COLORADO, NATIONAL ASSOCIATION,
individually and as Agent,
and
FIRST AMERICAN NATIONAL BANK,
N M ROTHSCHILD AND SONS LIMITED
and
THE FIRST NATIONAL BANK OF CHICAGO
October 8, 1996
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C> <C>
Page
----
SECTION 1. DEFINITIONS........................................................................................................... 1
SECTION 2. THE LOANS.............................................................................................................11
(a) The Revolver Loan...................................................................................................11
(b) The Loan Date.......................................................................................................15
(c) Computation and Payment of Interest; Late Payment Rate..............................................................15
(d) Payments by Borrower................................................................................................15
(e) Payments to Lenders.................................................................................................16
(f) Mandatory Payments..................................................................................................16
(g) Fees................................................................................................................16
(h) Adjustments.........................................................................................................17
(i) Increased Capital...................................................................................................17
SECTION 3. CONDITIONS TO EFFECTIVENESS; CONDITIONS OF LENDING....................................................................17
(a) Conditions to Effectiveness.........................................................................................17
(b) Initial Advance.....................................................................................................20
(c) Subsequent Advances.................................................................................................22
SECTION 4. TAXES, YIELD PROTECTION AND ILLEGALITY................................................................................23
(a) Taxes...............................................................................................................23
(b) Illegality..........................................................................................................24
(c) Increased Costs and Reduction of Return.............................................................................25
(d) Funding Losses......................................................................................................26
(e) Inability to Determine Rates........................................................................................26
(f) Certificate of Lender...............................................................................................27
(g) Survival............................................................................................................27
SECTION 5. BORROWING BASE........................................................................................................27
(a) Initial Borrowing Base..............................................................................................27
(b) Information.........................................................................................................27
(c) Subsequent Determinations of Borrowing Base.........................................................................27
(d) Notification of Borrowing Base......................................................................................28
SECTION 6. BORROWING BASE DEFICIENCY.............................................................................................28
(a) Repay Excess Debt...................................................................................................28
(b) Installment Payments................................................................................................28
SECTION 7. SECURITY..............................................................................................................29
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 8. REPRESENTATIONS AND WARRANTIES........................................................................................29
(a) Existence...........................................................................................................29
(b) Non-Contravention...................................................................................................29
(c) Third Party Authorization...........................................................................................30
(d) Authorization; Binding Effect.......................................................................................30
(e) Litigation..........................................................................................................30
(f) Taxes...............................................................................................................30
(g) Liens...............................................................................................................31
(h) Names and Places of Business........................................................................................31
(i) Use of Proceeds.....................................................................................................31
(j) Other Obligations...................................................................................................31
(k) Full Disclosure.....................................................................................................31
(l) Margin Stock........................................................................................................31
(m) ERISA...............................................................................................................32
(n) Security Documents..................................................................................................32
(o) Compliance with Laws................................................................................................32
(p) Financial Condition.................................................................................................32
(q) Environmental Matters...............................................................................................32
(r) Investment Company Act..............................................................................................33
(s) Public Utility Holding Company Act..................................................................................33
(t) Title to Properties; First Priority Security Interest..............................................................33
(u) Subsidiaries of Borrower and of Related Persons....................................................................33
(v) Location of Inventory...............................................................................................33
Reorganization...............................................................................................................33
SECTION 9. AFFIRMATIVE COVENANTS.................................................................................................35
(a) Payment and Performance of Loans....................................................................................35
(b) Financial Statements................................................................................................35
(c) Preservation of Existence, Etc. ....................................................................................37
(d) Maintenance of Property.............................................................................................37
(e) Payment of Other Obligations........................................................................................37
(f) Insurance...........................................................................................................38
(g) Inspection of Property, Books and Records; Confidentiality Agreement................................................38
(h) Notices.............................................................................................................39
(i) Compliance with Laws................................................................................................40
(j) Further Assurances..................................................................................................40
(k) Current Ratio.......................................................................................................40
(l) Funded Debt to Total Capitalization.................................................................................41
(m) Tangible Net Worth..................................................................................................41
(n) Fixed Charge Coverage Ratio.........................................................................................41
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(o) Environmental Matters...............................................................................................41
(p) Additional Title Requirements.......................................................................................41
(q) Capital Expenditure Review..........................................................................................42
(r) ....................................................................................................................42
SECTION 10. NEGATIVE COVENANTS...................................................................................................42
(a) Debt................................................................................................................42
(b) Liens...............................................................................................................43
(c) Guaranty Obligations................................................................................................43
(d) Loans and Advances..................................................................................................44
(e) Limitation on Investments and New Businesses........................................................................44
(f) Mergers and Consolidations..........................................................................................44
(g) Location of Inventory...............................................................................................45
(h) Burdensome Undertakings.............................................................................................45
(i) Change in Location of Business......................................................................................45
(j) Restricted Distributions............................................................................................45
(k) Disposition of Assets...............................................................................................46
(l) ERISA...............................................................................................................46
(m) Use of Proceeds.....................................................................................................46
(n) Transactions with Affiliates........................................................................................46
(o) Contracts; Take-or-Pay Agreements...................................................................................46
(p) Amendments to Organizational Documents..............................................................................47
SECTION 11. EVENTS OF DEFAULT....................................................................................................47
(a) Non-Payment.........................................................................................................47
(b) Certain Defaults....................................................................................................47
(c) Other Defaults......................................................................................................47
(d) Representation or Warranty..........................................................................................48
(e) Security Documents..................................................................................................48
(f) Judgments...........................................................................................................48
(g) Insolvency..........................................................................................................48
(h) Bankruptcy, Etc.....................................................................................................48
(i) Cross-Default.......................................................................................................49
(j) ERISA...............................................................................................................49
(k) Loan Documents......................................................................................................49
(l) Material Adverse Change.............................................................................................49
(m) Change in Control...................................................................................................49
(n) Columbia Contracts..................................................................................................50
(o) Regulatory Change...................................................................................................50
SECTION 12. REMEDIES............................................................................................................50
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(a) Automatic Acceleration of Loan.......................................................................................50
(b) Optional Acceleration of Loan........................................................................................50
(c) Setoff...............................................................................................................51
SECTION 13. THE AGENT............................................................................................................51
(a) Appointment..........................................................................................................51
(b) Delegation of Duties.................................................................................................51
(c) Exculpatory Provisions...............................................................................................51
(d) Reliance by Agent....................................................................................................52
(e) Notice of Default....................................................................................................52
(f) Non-Reliance on Agent and Other Lenders..............................................................................52
(g) Indemnification......................................................................................................53
(h) Agent and Lenders in Their Individual Capacity.......................................................................53
(i) Successor Agent......................................................................................................54
(j) Agent's Fee..........................................................................................................54
(k) Borrower Entitled to Rely on Agent...................................................................................54
SECTION 14. MISCELLANEOUS........................................................................................................54
(a) No Waiver; Cumulative Remedies.......................................................................................54
(b) Notices..............................................................................................................54
(c) Counterpart Execution................................................................................................56
(d) Governing Law; Entire Agreement......................................................................................56
(e) Amendments and Waivers...............................................................................................56
(f) Costs, Expenses and Indemnity........................................................................................57
(g) Inconsistent Provisions; Severability................................................................................58
(h) Incorporation of Exhibits and Schedules..............................................................................58
(i) Amendment of Defined Instruments.....................................................................................58
(j) References and Titles................................................................................................58
(k) Calculations and Determinations......................................................................................59
(l) Usury................................................................................................................59
(m) Waiver of Right to Trial by Jury.....................................................................................59
(n) Successors and Assigns...............................................................................................59
(o) Term of Agreement....................................................................................................59
(p) Jurisdiction.........................................................................................................60
</TABLE>
iv
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit Title
------- -----
A Revolver Note
B Request for Advance
C Borrower's Counsel Opinion
D Litigation
E Subsidiaries of Borrower
F Location of Borrower's Inventory
G Compliance Certificate
H Loans and Advances to Officers and Employees
I Notice of Conversion/Continuation
v
<PAGE>
AMENDED AND RESTATED
---------------------
LOAN AGREEMENT
--------------
THIS LOAN AGREEMENT (this "Agreement"), dated as of October 8, 1996, is
---------
among MARKWEST HYDROCARBON, INC., a Delaware corporation ("Borrower"), the
--------
successor to MarkWest Hydrocarbon Partners, Ltd., a Colorado limited partnership
(the "Partnership"), NORWEST BANK COLORADO, NATIONAL ASSOCIATION (successor to
-----------
Norwest Bank Denver, National Association), a national banking association
("Norwest"), FIRST AMERICAN NATIONAL BANK, a national banking association
- ---------
("First American"), N M ROTHSCHILD AND SONS LIMITED, a company organized under
- -----------------
the laws of England ("Rothschild") and THE FIRST NATIONAL BANK OF CHICAGO, a
----------
national banking association ("First Chicago") (Norwest, First American,
-------------
Rothschild and First Chicago are referred to individually as a "Lender" and
------
collectively as the "Lenders"), and NORWEST, AS AGENT FOR THE BANKS (in such
-------
capacity, the "Agent").
-----
Borrower desires to borrow from the Lenders to provide funds for the
purposes set forth below, and the Lenders are willing to lend such funds to
Borrower to accomplish those purposes, subject to the terms and conditions
contained or referred to herein. Accordingly, in consideration of the mutual
agreements, provisions and covenants contained herein, the parties agree as
follows:
SECTION 1. DEFINITIONS. As used herein, each of the following capitalized
-----------
terms shall have the meaning given it in this Section 1:
"Advance" shall mean a Revolver Advance.
-------
"Affiliate" shall mean as to any Person, each other Person which, directly
---------
or indirectly (through one or more intermediaries or otherwise), is in control
of, is controlled by, or is under common control with, such Person.
"Amendment to Security Agreement" shall refer to the Amendment to Security
-------------------------------
Agreement dated as of May 31, 1996, executed by the Partnership and Agent in
connection with an amendment dated as of May 31, 1996 to the Existing Revolver
Agreement, covering Borrower's interest in the Church Hill Facility, Hawkins
County, Tennessee and all leasehold rights, equipment, inventory, accounts,
contracts, contract rights, documents, instruments, general intangibles, and all
other personal property and proceeds related thereto.
"Applicable Margin" shall mean:
-----------------
<PAGE>
(a) for Base Rate Loans: (i) 0.25 percentage points if Borrower's total
Debt is less than or equal to 40 percent of Borrower's Total Capitalization or
(ii) 0.50 percentage points if Borrower's total Debt is greater than 40 percent
of Borrower's Total Capitalization; and
(b) for LIBOR Rate Loans: (i) 2.0 percentage points if Borrower's total
debt is less than or equal to 40 percent or (ii) 2.25 percentage points if
Borrower's total debt is greater than 40 percent.
"Base Rate" shall mean an annual rate of interest which equals the floating
---------
commercial loan rate of Agent announced from time to time as its "prime rate,"
which rate is used as a reference point for pricing certain loans, which may not
be the lowest interest rate charged by Agent, adjusted in each case as of the
banking day in which a change in the "prime rate" occurs.
"Base Rate Loan" shall mean a Revolver Loan that bears interest based on
--------------
the Base Rate.
"Borrowing Base" shall mean, at the particular time in question, either the
--------------
amount provided for in Section 5(a) or the amount determined by the Lenders in
accordance with the provisions of Section 5(c); provided however, that in no
-------- -------
event shall the Borrowing Base exceed the Maximum Principal Amount.
"Borrowing Base Deficiency" shall have the meaning set forth in Section 6.
-------------------------
"Business Day" shall mean a day other than Saturdays or Sundays on which
------------
commercial banks are open for business with the public in Chicago, Denver,
London and Memphis.
"Capital Adequacy Regulation" means any guideline, request or directive of
---------------------------
any central bank or other governmental authority, or any other law, rule, or
regulation, whether or not having the force of law, in each case regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Code" means the Internal Revenue Code of 1986, as amended, together with
----
the regulations promulgated thereunder.
"Collateral" shall mean all tangible or intangible, real or personal
----------
property subject to any of the Security Documents.
"Columbia Contracts" shall mean (a) Natural Gas Liquids Purchase Agreement
------------------
dated as of April 26, 1988 between Columbia Gas Transmission Corporation
("Columbia") and the Partnership as amended November 4, 1988, July 31, 1989,
December 24, 1990 and January 28, 1991 (Siloam); (b) the Natural Gas Liquids
Purchase Agreement dated as of December 24, 1990, between Columbia and Borrower
as amended January 28, 1991 (Boldman); and (c) the Contract
2
<PAGE>
for Construction and Lease of Boldman Plant dated December 24, 1990 between
Columbia and the Partnership; (d) Letter Agreement dated March 9, 1995 between
Columbia and the Partnership; and (e) the following agreements relating to the
Kenova Processing Plant: (i) Agreement to Design and Construct New Facilities
(the "Construction Agreement"), (ii) Purchase and Demolition Agreement-
----------------------
Construction Premises (the "Demolition Agreement"), (iii) Purchase and
--------------------
Demolition Agreement-Remaining Premises (the "Purchase Agreement"), and (iv)
------------------
Processing Agreement-Kenova Processing Plant (the "Processing Agreement"), all
--------------------
dated March 15, 1995 between Columbia and the Partnership, together with any and
all amendments now existing or hereafter created to any of the foregoing to the
extent such amendments are otherwise permitted hereunder, and together with any
gas processing contracts between the Partnership and any shippers on Columbia's
system covering processing of such shippers' gas at the Kenova Processing Plant.
All of the Columbia Contracts have been assigned to and assumed by Borrower
pursuant to the Reorganization.
"Consolidated" refers to the consolidation of any Person, in accordance
------------
with GAAP, with its properly consolidated Subsidiaries. Reference herein to
Borrower's financial statements, financial position, financial condition,
liabilities, etc. refer to the consolidated financial statements, position,
condition, liabilities, etc. of Borrower and its properly consolidated
Subsidiaries.
"Consolidating", when reference is made herein to Borrower's financial
-------------
statements, financial condition, liabilities, etc., shall mean a presentation of
such information in accordance with GAAP that sets forth separately the
financial statements, etc. for each of Borrower and its properly consolidated
Subsidiaries.
"Controlled Group" means the Borrower and all Persons under common control
----------------
or treated as a single employer with the Borrower pursuant to Section 414(b),
(c), (n) or (o) of the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
"Conversion Date" means any date on which Borrower converts a Base Rate
---------------
Loan to a LIBOR Rate Loan, or a LIBOR Rate Loan to a Base Rate Loan.
"Current Ratio" shall mean the ratio of Borrower's current assets to
-------------
current liabilities, both determined in accordance with GAAP.
"Debt" shall mean as to any Person, at a particular date, the sum (without
----
duplication) of (a) all indebtedness of such Person for borrowed money or for
the deferred purchase price of property or services, (b) all obligations of such
Person in respect of surety bonds, letters of credit, bankers' acceptances, or
similar obligations issued or created for the account of such Person, (c) all
capitalized lease obligations of such Person, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement, (e) open
lines of credit to finance futures
3
<PAGE>
contracts, commodities and/or options contracts, (f) all indebtedness referred
to in clauses (a) through (e) above secured by a lien, encumbrance or security
interest on or in property owned by such Person, even though such Person has not
assumed or become liable for the payment of such indebtedness, and (g) all
guaranties in respect of indebtedness or obligations of other Persons of the
kinds referred to in clauses (a) through (f) above.
"Determination Date" has the meaning given it in Section 4(c)(ii).
------------------
"Distribution Advance" shall mean the $10,000,000 advance under the
--------------------
Existing Revolver Loan used to fund the Partnership Distribution (as defined in
Section 3(a)(viii).
"Employee Option Agreement" shall mean the 1996 Stock Incentive Plan of
-------------------------
Borrower, as the same may be amended by Borrower from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Plan" shall mean any pension benefit plan subject to Section 302 of
----------
ERISA or Title IV of ERISA maintained by Borrower or any member of a controlled
group (as defined in Section 4001 (a)(14) of ERISA).
"Eurocurrency Liabilities" has the meaning specified in Regulation D of the
------------------------
Board of Governors of the Federal Reserve System, as in effect from time to
time.
"Eurodollar Reserve Percentage" shall mean, for any Interest Period, the
-----------------------------
reserve percentage applicable two Business Days before the first day of such
Interest Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for Lenders with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities (or
with respect to any other category of liabilities that includes deposits by
reference to which the interest rate on LIBOR Rate Loans is determined) having a
term equal to such Interest Period.
"Evaluation Date" shall mean the date of this Agreement and June 30 and
---------------
December 31 of each year, commencing December 31, 1996.
"Event of Default" shall have the meaning set forth in Section 11.
----------------
"Existing Loan Agreements" shall mean Existing Revolver Agreement and that
------------------------
certain Working Capital Loan Agreement dated as of November 20, 1992, among the
Partnership, Agent
4
<PAGE>
and Norwest and First American, as lenders, and all amendments thereto executed
prior to the date hereof by the Partnership, Agent and any of the Lenders.
"Existing Revolver Agreement" shall mean that certain Loan Agreement dated
---------------------------
as of November 30, 1992, among the Partnership, Agent and the Lenders, as
amended by a First Amendment to Loan Agreement dated as of September 14, 1993, a
Second Amendment to Loan Agreement dated as of March 23, 1994, a Third Amendment
to Loan Agreement dated as of September 8, 1995, and a Fourth Amendment to Loan
Agreement dated as of May 31, 1996.
"First Mortgage Amendments" shall refer to the amendments dated as of
-------------------------
September 14, 1993, to each of the mortgages and deeds of trust executed by the
Partnership in connection with an amendment to the Existing Revolver Agreement
dated as of September 14, 1993, and described as follows: (i) First Amendment
to Arkansas Leasehold Deed of Trust with Security Agreement, Assignment of Rents
and Leases and Financing Statement (Revolving Credit); (ii) First Amendment to
Mortgage, Security Agreement, Assignment of Profits and Proceeds and Financing
Statement relating to Siloam; (iii) First Amendment to Mortgage, Security
Agreement, Assignment of Profits and Proceeds and Financing Statement (Boldman);
and (iv) First Amendment to A Credit Line Deed of Trust with Security Agreement,
Assignment of Profits and Proceeds and Financing Statement relating to West
Virginia property.
"Fiscal Quarter" shall mean a three-month period ending on the last day of
--------------
each March, June, September and December of any year.
"Fiscal Year" shall mean a twelve-month period ending on December 31 of any
-----------
year.
"Fixed Charge Coverage Ratio" shall mean for the 12 most recent consecutive
---------------------------
months, the ratio for such period of (a) the sum of net income (or net loss)
plus interest expense and non-cash charges included in determining net income
(or net loss), all as determined in accordance with GAAP, to (b) the sum of
interest expense included in calculating (a).
"Fourth Mortgage Amendments" shall refer to the amendments dated as of the
--------------------------
date hereof, executed by the Borrower in connection with this Agreement, to each
of the mortgages and deeds of trust executed by the Partnership in connection
with the Existing Loan Agreements and described as follows: (i) Fourth
Amendment to Arkansas Leasehold Deed of Trust with Security Agreement,
Assignment of Rents and Leases and Financing Statement (Revolving Credit); (ii)
Fourth Amendment to Mortgage, Security Agreement, Assignment of Profits and
Proceeds and Financing Statement relating to Siloam; (iii) Fourth Amendment to
Mortgage, Security Agreement, Assignment of Profits and Proceeds and Financing
Statement (Boldman); and (iv) Fourth Amendment to A Credit Line Deed of Trust
with Security Agreement, Assignment of Profits and Proceeds and Financing
Statement relating to West Virginia Property,
5
<PAGE>
covering Borrower's Kenova Processing Plant, all personal property, inventory
and equipment related thereto, and all processing contracts related thereto.
"Funded Debt" shall mean the aggregate amount of Debt for borrowed money
-----------
with a maturity in excess of one year (including guarantees of such Debt) and
capitalized leases, minus the outstanding principal balance, if any, under the
Working Capital Facility.
"GAAP" shall mean generally accepted accounting principles and practices as
----
consistently applied (except as otherwise required due to changes in GAAP) by
Borrower and certified to by the firm of independent certified public
accountants regularly employed as Borrower's auditors, such principles and
practices at all times being consistent with requirements of the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants in effect from time to time, as applicable to the nature of the
business conducted by Borrower; provided however, if any change in any
-------- -------
accounting principle or practice is required by the Financial Accounting
Standards Board (or any such successor), all financial covenants provided for
herein may be prepared in accordance with such change only after notice of such
change is given to the Agent, and the Lenders agree to such change insofar as it
affects the financial covenants.
"Initial Financial Statements" shall mean the audited financial
----------------------------
statements of the Partnership for the Fiscal Year ending December 31, 1995, and
the unaudited quarterly financial statements (consisting of a current balance
sheet and profit and loss statement) for the Partnership as of June 30, 1996.
"Interest Payment Date" means, with respect to any LIBOR Rate Loan, the
---------------------
last day of each Interest Period applicable to such Loan and, with respect to
Base Rate Loans, the last Business Day of each Fiscal Quarter; provided that, if
--------
any Interest Period for a LIBOR Rate Loan exceeds three months, the date which
falls three months after the beginning of such Interest Period shall also be an
Interest Payment Date.
"Interest Period" means, with respect to any LIBOR Rate Loan, the period
---------------
commencing on the Business Day the Loan is disbursed or continued or on the
Conversion Date on which the Loan is converted to the LIBOR Rate Loan and ending
on the date one, two, three or six months thereafter, as selected by Borrower in
its Request for Advance or Notice of Conversion/Continuation; provided that:
--------
(a) if any Interest Period would otherwise end on a day which is not a
Business Day, that Interest Period shall be extended to the next succeeding
Business Day unless the result of such extension would be to carry such Interest
Period into another calendar month, in which event such Interest Period shall
end on the immediately preceding Business Day;
6
<PAGE>
(b) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest Period; and
(c) no Interest Period may be selected by Borrower which would extend
beyond the last day of the Revolver Commitment Period.
"Late Payment Rate" shall have the meaning set forth in Section 2(c)(ii).
-----------------
"LIBOR Rate" shall mean, for any Interest Period, an interest rate per
----------
annum (rounded up to the nearest one-sixteenth of one percent) equal to the rate
per annum obtained by dividing (i) the rate per annum at which deposits in U.S.
dollars are offered by funding sources acceptable to Agent to leading banks in
the London interbank market at 11:00 a.m. (London time) two Business Days before
the first day of such Interest Period in an amount substantially equal to the
amounts of the applicable LIBOR Rate Loan and for a period equal to such
Interest Period by (ii) a percentage equal to 100 percent minus the Eurodollar
Reserve Percentage for such Interest Period. The LIBOR Rate for each Interest
Period shall be determined by Agent two Business Days before the first day of
such Interest Period.
"Loans" shall mean the Revolver Loans.
-----
"Loan Date" shall have the meaning set forth in Section 2(b).
---------
"Loan Documents" means this Agreement, the Notes, the Security Documents
--------------
and all other documents executed and delivered by or on behalf of Borrower to
the Agent or the Lenders in connection herewith or therewith.
"Loan Share" means with respect to each of Norwest, First American,
----------
Rothschild and First Chicago, twenty-five percent.
"Maximum Principal Amount" shall be $40,000,000.
------------------------
"Mortgages" shall mean one or more mortgages, deeds of trust, collateral
---------
mortgages, acts of collateral mortgage, security agreements and assignments of
proceeds dated as of November 20, 1992, in favor of the Agent on behalf of the
Lenders, covering certain properties of Borrower and related interests as
described therein, including, without limitation, (a) Borrower's leasehold
interest in the West Memphis Terminal facility it operates in West Memphis,
Arkansas, (b) Borrower's Siloam fractionating facility in Greenup County,
Kentucky, (c) a 38 mile long natural gas liquids pipeline which commences at the
point called the Kenova Extraction Plant in Wayne County, West Virginia, runs
through Boyd and Greenup Counties,
7
<PAGE>
Kentucky and connects to Borrower's Siloam facility described in (b) above, (d)
Borrower's interest in the truck loading facility at the Cobb Extraction Plant
in Kanawha County, West Virginia, and (e) Borrower's interest in the natural gas
liquids extraction plant known as the Boldman Extraction Plant and the related
truck loading facility, both of which are located in Pike County, Kentucky as
amended by the First, Second, Third and Fourth Mortgage Amendments.
"Note" shall mean a Revolver Note; all of which together shall be
----
collectively referred as the "Notes."
-----
"Notice of Conversion/Continuation" means a notice given by Borrower to
---------------------------------
Agent pursuant to Section 2(a)(ii) in substantially the form of Exhibit I.
---------------- ---------
"Obligations" means all Debt from time to time owing by Borrower to the
-----------
Lenders under or pursuant to any of the Loan Documents, including without
limitation the Revolver Loan.
"Ordinary Course of Business" shall mean, in respect of any transaction,
---------------------------
the ordinary course of such Person's business, substantially as conducted by
such Person prior to or as of the date hereof, and undertaken by such Person in
good faith and not for purposes of evading any covenant or restriction in any
Loan Document.
"Partnership" shall mean MarkWest Hydrocarbon Partners, Ltd., a Colorado
-----------
limited partnership.
"Person" shall mean an individual, partnership, corporation, association,
------
business trust, joint stock company, trust or trustee thereof, unincorporated
association, joint venture, governmental unit or any agency or subdivision
thereof, or any other legally recognizable entity.
"Pledge Agreement" shall mean the General Security Agreement and Pledge (MW
----------------
Michigan Stock) dated as of the date hereof from the Borrower to Agent for the
benefit of Lenders, in form acceptable to Agent, granting a first priority
security interest in 100 percent of the issued and outstanding capitol stock of
MW Michigan, Inc. to secure the Obligations.
"Related Person" shall mean any of Borrower and each Subsidiary of
--------------
Borrower, except for Restricted Subsidiaries.
"Reorganization" shall mean the reorganization and initial public offering
--------------
pursuant to which the Partnership has been dissolved and all of the assets and
liabilities of the Partnership have been assigned to and assumed by Borrower, as
more fully described in the Registration Statement, Form S-1, filed by Borrower
with the Securities and Exchange Commission.
8
<PAGE>
"Request for Advance" shall mean a request for Advance meeting the
-------------------
requirements of Section 2(a)(i) hereof.
"Required Lenders" shall mean at any time Lenders, the Loan Shares of which
----------------
aggregate 100 percent.
"Responsible Person" shall mean any officer of the Borrower or any other
------------------
Person employed by either a Related Person or the Borrower and who should be
aware of the terms of this Agreement.
"Restricted Subsidiaries" shall mean the following Subsidiaries of
-----------------------
Borrower: MarkWest Resources, Inc., a Colorado corporation.
"Revolver Advances" has the meaning given it in Section 2(a).
-----------------
"Revolver Commitment" means the amount of the Borrowing Base then in
-------------------
effect; provided that in no event shall the Revolver Commitment exceed the
--------
Maximum Principal Amount at any time from the date hereof through and including
the last day of the Revolver Commitment Period, and thereafter, the amount of
the Revolver Commitment shall be reduced in accordance with the scheduled
amortization set forth in Section 2(a)(ii).
"Revolver Commitment Period" shall mean the period from the date of this
--------------------------
Agreement to and including June 30, 1998, or such earlier date as designated by
Borrower (upon thirty days prior notice to Agent) on which the Revolver Notes
become due and payable or such earlier date on which the Revolver Notes become
due and payable under the terms hereof, by acceleration or otherwise.
"Revolver Loan" shall mean the loan to Borrower by the Lenders provided for
-------------
in Section 2(b) hereof, the maximum principal amount of which shall never exceed
the Revolver Commitment.
"Revolver Note" shall mean a Substitute Revolver Note dated as of the date
-------------
hereof, substantially in the form of Exhibits A-1, A-2, A-3 and A-4 attached
hereto, made by Borrower and payable to the order of Norwest, First American,
Rothschild or First Chicago, as appropriate, with appropriate insertions, issued
in connection with the assumption by Borrower of the Partnership's obligations
pursuant to the Reorganization and the assignment by Norwest, First American and
Rothschild to First Chicago of a portion of their interests in the Loan, in
substitution and replacement of the Replacement Revolver Notes, as amended,
issued in connection with the Third Amendment to Loan Agreement dated as of
September 8, 1995, together with any and all renewals, extensions, amendments
and changes of, or substitutions for said note; collectively, the "Revolver
--------
Notes."
- -----
9
<PAGE>
"Second Amendment to Security Agreement" shall refer to the Second
--------------------------------------
Amendment to Security Agreement dated as of the date hereof, executed by
Borrower and Agent in connection with this Agreement.
"Second Mortgage Amendments" shall refer to the amendments dated as of
--------------------------
September 8, 1995, to each of the mortgages and deeds of trust executed by the
Partnership in connection with an amendment to the Existing Revolver Agreement
dated as of September 8, 1995, and described as follows: (i) Second Amendment
to Arkansas Leasehold Deed of Trust with Security Agreement, Assignment of Rents
and Leases and Financing Statement (Revolving Credit); (ii) Second Amendment to
Mortgage, Security Agreement, Assignment of Profits and Proceeds and Financing
Statement relating to Siloam; (iii) Second Amendment to Mortgage, Security
Agreement, Assignment of Profits and Proceeds and Financing Statement (Boldman);
and (iv) Second Amendment to A Credit Line Deed of Trust with Security
Agreement, Assignment of Profits and Proceeds and Financing Statement relating
to West Virginia property.
"Security Agreement" shall mean that certain Security Agreement dated as of
------------------
November 20, 1992, by the Partnership in favor of the Agent covering and
relating to Borrower's inventory, receivables, contract rights, Cash Collateral
Instruments, proceeds and certain other personal property, as amended by the
Amendment to Security Agreement and the Second Amendment to Security Agreement.
"Security Documents" means the Mortgages, the Security Agreement, the
------------------
Pledge Agreement, and all other security agreements, deeds of trust, mortgages,
chattel mortgages, assignments, pledges, guaranties, financing statements,
continuation statements, extension agreements and other agreements or
instruments now or hereafter delivered by Borrower to the Agent on behalf of the
Lenders or to the Lenders in connection with this Agreement or any transaction
contemplated hereby to secure or guarantee the payment of any part of the
Obligations or the performance of any other duties and obligations of Borrower
under the Loan Documents, whenever made or delivered, and shall also include all
of the "Security Documents" as defined in the Working Capital Facility.
"Stockholders' Equity" shall mean the stockholders' equity in the Borrower,
--------------------
determined in accordance with GAAP.
"Subsidiary" means, with respect to any Person, any corporation,
----------
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty-one percent or more by such Person.
"Tangible Net Worth" shall mean the Stockholders' Equity of Borrower less
------------------
intangible assets.
10
<PAGE>
"Third Mortgage Amendments" shall refer to the amendments dated as of May
-------------------------
31, 1996, to each of the mortgages and deeds of trust executed by the
Partnership in connection with an amendment to the Existing Revolver Agreement
dated as of May 31, 1996, and described as follows: (i) Third Amendment to
Arkansas Leasehold Deed of Trust with Security Agreement, Assignment of Rents
and Leases and Financing Statement (Revolving Credit); (ii) Third Amendment to
Mortgage, Security Agreement, Assignment of Profits and Proceeds and Financing
Statement relating to Siloam; (iii) Third Amendment to Mortgage, Security
Agreement, Assignment of Profits and Proceeds and Financing Statement (Boldman);
and (iv) Third Amendment to A Credit Line Deed of Trust with Security Agreement,
Assignment of Profits and Proceeds and Financing Statement relating to West
Virginia property, covering Borrower's Kenova Processing Plant, all personal
property, inventory and equipment related thereto, and all processing contracts
related thereto.
"Total Capitalization" means the sum of Funded Debt plus Stockholders'
--------------------
Equity.
"Unmatured Event of Default" shall mean any event that with the passage of
--------------------------
time or giving of notice, or both, would constitute an Event of Default under
Section 11.
"Working Capital Facility" shall mean the loan provided for pursuant to
------------------------
that certain Amended and Restated Working Capital Loan Agreement of even date
herewith between Borrower, the Lenders and the Agent in the maximum principal
amount of $7,500,000 and which loan is secured by various "Security Documents"
(as such term is defined therein).
SECTION 2. THE LOANS.
---------
(a) The Revolver Loan. Subject to the terms and conditions of this
-----------------
Agreement, each Lender agrees to make advances to Borrower (such advances are
called the "Revolver Advances") from time to time during the Revolver Commitment
-----------------
Period, in an aggregate principal amount not to exceed its Loan Share of the
Revolver Commitment. Revolver Advances shall be evidenced by the Revolver
Notes. So long as an Event of Default or an Unmatured Event of Default has not
occurred, during the Revolver Commitment Period, Borrower may borrow, repay and
reborrow under the Revolver Notes in accordance with this Section 2.
(i) Request for Advance Under the Revolver Loan.
-------------------------------------------
(A) Each Request for Advance under the Revolver Loan shall be
irrevocable and shall be in the form of Exhibit B on or before 11:00 a.m.
---------
Denver, Colorado time (x) three Business Days immediately preceding the day
such Revolver Advance is requested to be made in case of LIBOR Rate Loans,
and (y) on the Business
11
<PAGE>
Day immediately preceding the day such Revolver Advance is requested to be
made in case of Base Rate Loans.
(B) Each request for Advance shall specify:
(1) the amount of the requested Advance, which shall be
in an aggregate minimum principal amount of $100,000 or an integral
multiple thereof for both LIBOR Rate Loans and Base Rate Loans, or such
lesser amount equal to the unadvanced portion of the Revolver Loan;
(2) the requested date of the Revolver Advance, which
shall be a Business Day;
(3) whether the Revolver Advance is to be comprised of
LIBOR Rate Loans or Base Rate Loans; and
(4) the duration of the Interest Period applicable to
LIBOR Rate Loans included in such notice. If the Request for Advance shall
fail to specify the duration of the Interest Period for any LIBOR Rate
Loan, such Interest Period shall be three months.
(C) After giving effect to any LIBOR Rate Loan, there shall
not be more than six different Interest Periods in effect.
(D) Upon receipt of a Request for Advance, Agent shall
promptly notify each Lender thereof. Not later than 11:00 a.m. Denver time
on the date requested, each Lender shall make available to Agent the amount
of such Lender's Loan Share of the amount specified in the Request for
Advance in immediately available funds; provided, however, that Lenders
------------------
shall not be obligated to make any Revolver Advance to Borrower that would
result in the aggregate unpaid principal balance outstanding under the
Revolver Notes exceeding the Revolver Commitment. If all conditions
precedent to such Revolver Advance have been met, Agent will on the date
requested make such Revolver Advance available to Borrower in immediately
available funds at Agent's office in Denver, Colorado.
(E) All Revolver Advances requested by Borrower shall be made
pro rata by each Lender in proportion to such Lender's Loan Share.
(ii) Conversion and Continuation Elections.
-------------------------------------
12
<PAGE>
(A) Upon irrevocable written notice to the Agent, Borrower may:
(1) elect to convert on any Business Day any Base Rate Loan (or
any part thereof) in an amount not less than $100,000 or an integral
multiple thereof into a LIBOR Rate Loan or;
(2) elect to convert on any Interest Payment Date any LIBOR Rate
Loan maturing on such Interest Payment Date (or any part thereof) in an
amount not less than $100,000 or an integral multiple thereof into a Base
Rate Loan; or
(3) elect to renew on any Interest Payment Date any LIBOR Rate
Loan maturing on such Interest Payment Date (or any part thereof) in an
amount not less than $100,000 or an integral multiple thereof;
(B) Borrower shall deliver a Notice of Conversion/Continuation
to be received by Agent not later than 2:00 p.m. Denver, Colorado time at
least (x) three Business Days in advance of the Conversion Date or
continuation date, if a Loan is to be converted into or continued as a
LIBOR Rate Loan; and (y) the Business Day immediately preceding the
Conversion Date, if the Loan is to be converted into a Base Rate Loan;
specifying:
(1) the proposed Conversion Date or continuation date, which
shall be a Business Day;
(2) the aggregate amount of the Revolver Loan(s) to be converted
or renewed;
(3) the nature of the proposed conversion or continuation; and
(4) the duration of the requested Interest Period, if applicable.
(C) If upon the expiration of any Interest Period applicable to
any LIBOR Rate Loan, Borrower has failed to select timely a new Interest
Period to be applicable to such LIBOR Rate Loan, or if any Unmatured Event
of Default or Event of Default shall then exist, Borrower shall be deemed
to have elected to convert such LIBOR Rate Loan into a Base Rate Loan
effective as of the expiration date of such current Interest Period.
13
<PAGE>
(D) Notwithstanding any other provision contained in this
Agreement, after giving effect to any conversion or continuation of any
LIBOR Rate Loans, there shall not be more than six different Interest
Periods in effect.
(iii) Scheduled Amortization of the Revolver Loan. On the last
-------------------------------------------
day of the Revolver Commitment Period, the commitment of the Lenders to
make Revolver Advances shall terminate and the aggregate principal balance
outstanding on such date under the Revolver Loan shall be due and payable
in sixteen equal quarterly payments (the amount of such principal payments
to be determined by dividing the amount of the outstanding principal
balance of the Revolver Loan on the last day of the Revolver Commitment
Period by sixteen) payable on the last day of each Fiscal Quarter,
commencing September 30, 1998, with the final payment due on or before June
30, 2002, together with interest on the Revolver Loan, calculated and
payable as set forth in Section 2 (d).
(iv) Optional Payments. Borrower may make optional payments on
-----------------
the outstanding principal balance of the Base Rate Loan without penalty or
premium, at any time, and from time to time, in integral multiples of
$100,000 or such lesser amount equal to the then outstanding principal
balance, together with accrued and unpaid interest on the principal amount
so paid. LIBOR Rate Loans may not be prepaid, except if it is necessary so
that Borrower can be in compliance with Section 2(f). Borrower shall give
Agent one Business Day's notice in advance of any optional payment on the
Base Rate Loan, and three Business Day's notice in advance of any
prepayment on the LIBOR Rate Loan required pursuant to Section 2(f). Such
notices shall specify which Revolver Loans (or portion thereof) are to be
prepaid and the date of prepayment. Such notices shall not be revocable by
Borrower. Upon the termination of the Revolver Commitment Period, all
prepayments of principal thereafter received under this Subsection shall
first be applied to the payment of principal indebtedness due on any Base
Rate Loan then outstanding and then to LIBOR Rate Loans with the shortest
Interest Periods remaining.
(v) Distribution Advance. Notwithstanding any other provisions in
--------------------
this Section 2, the Distribution Advance shall be repaid together with all
interest due thereon within thirty days after the Loan Date.
(b) The Loan Date. The initial Revolver Advances shall be made on a
--------------
date and at a time (the "Loan Date") selected by Borrower, but in no event
----------
earlier than the time all conditions of lending described in Section 3(a) and
3(b) below have been satisfied or waived by the Lenders.
14
<PAGE>
(c) Computation and Payment of Interest; Late Payment Rate.
-------------------------------------------------------
(i) Each Revolver Loan shall bear interest on the outstanding
principal amount thereof from the date when made at a rate per annum equal
to the LIBOR Rate or the Base Rate, as specified in the applicable Request
for Advance or Notice of Conversion/Continuation, plus the Applicable
----
Margin. After termination of the Revolver Commitment Period, the Revolver
Loan shall bear interest on the outstanding principal amount thereof at the
Base Rate plus the Applicable Margin for Base Rate Loans, and interest
shall be payable on the Interest Payment Date for Base Rate Loans.
(ii) Interest on the Loans shall accrue daily and shall be
computed on the basis of a year of 365 or 366 days, as appropriate, for
Base Rate Loans, and a year of 360 days for LIBOR Rate Loans. Interest on
the Loans shall be payable in arrears on the Interest Payment Date.
(iii) Notwithstanding anything to the contrary contained in this
Agreement, overdue principal, and (to the extent permitted under applicable
law) overdue interest, whether caused by acceleration of maturity or
otherwise, shall bear interest at a fluctuating rate, adjustable the day of
any change in such rate, equal to three percentage points above the Base
Rate (the "Late Payment Rate"), until paid, and shall be due and payable
-----------------
immediately.
(d) Payments by Borrower. All payments of principal and interest
---------------------
hereunder shall be made at the Agent's offices at 1740 Broadway, Denver,
Colorado 80274-8699 (or at such other place as the Agent shall have designated
to Borrower in writing at least one Business Day prior to the due date or
prepayment date, as the case may be) by 12:00 noon Denver time on the date due
or the date of prepayment (as the case may be) in immediately available funds
free and clear of any and all taxes and without set-off or counterclaim or
deduction of any kind. If any payment to be made by Borrower hereunder or under
the Notes shall become due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of time
shall be included in computing any interest and fees in respect of such payment,
unless the result of such extension would be to carry any Interest Period
relating to a LIBOR Rate Loan into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day.
(e) Payments to Lenders. Each payment by Borrower to the Agent on
--------------------
account of principal of and interest on the Loans or otherwise hereunder shall
be distributed the same day in like funds as received from Borrower by Agent pro
rata according to the Loan Share of each Lender in like funds; provided that in
-------- ----
the event Agent receives less than the aggregate amount due to all Lenders on
any day, Agent shall distribute ratably to each Lender in the case of any
15
<PAGE>
payment, the portion of the aggregate amount received by Agent on such day
multiplied by the Loan Share of such Lender.
(f) Mandatory Payments. If at any time, or from time to time, a
-------------------
Borrowing Base Deficiency exists, Borrower shall, within thirty Business Days
after the Agent, on behalf of Lenders, gives written notice of such fact to
Borrower pursuant to Section 6 hereof, make one or more mandatory prepayments to
Agent for distribution to the Lenders in the principal amount determined in
accordance with Section 6(a) or (b). If the Borrower elects, pursuant to
Section 6(b), to repay the Borrowing Base Deficiency in six equal monthly
installments, then the payments shall be due and payable exactly one calendar
month apart, with the first one due and payable as set forth above in this
Section 2(f). Each prepayment of principal shall be accompanied by the amount
of accrued and unpaid interest on, and fees related to, the principal amount so
prepaid. Any such prepayment of principal under this Section 2 shall be applied
pro rata in accordance with each Lender's Loan Share, first to any Base Rate
Loans then outstanding and then to LIBOR Rate Loans with the shortest Interest
Periods remaining.
(g) Fees.
-----
(i) During the Revolver Commitment Period, Borrower shall pay to
the Lenders an unused commitment fee on the average daily difference
between the Revolver Commitment and the aggregate outstanding principal
amount under the Revolver Notes, at an annual rate of one-half of one
percent (0.5%), payable quarterly in arrears, with the first such payment
due December 31, 1996 (for the period from the date hereof through December
31, 1996) and ending on the last day of the Revolver Commitment Period.
(ii) Borrower shall pay to the Lenders on the Loan Date a one-
time commitment fee of one-quarter of one percent (0.25%) of the Maximum
Principal Amount.
(h) Adjustments. If any Lender (a "benefitted Lender") shall at any
------------ -----------------
time receive any payment of all or part of its Loans, or interest thereon, or
receive any collateral in respect thereof (whether voluntarily or involuntarily,
by set-off, pursuant to events or proceedings of the nature referred to in
Section 12(c), or otherwise), in a greater proportion than its Loan Share, such
benefitted Lender shall purchase for cash from the other Lenders such portion of
such other Lenders' Loans, or shall provide such other Lenders with the benefits
of any such collateral, or the proceeds thereof, as shall be necessary to cause
such benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with the other Lenders; provided however, that if
-------- -------
all or any portion of such excess payment or benefits is thereafter recovered
from such benefitted Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest. Borrower agrees that
16
<PAGE>
any Lender so purchasing a portion of another Lender's Loans may exercise all
rights of payment (including, without limitation, rights of set-off) with
respect to such portion as fully as if such Lender were the direct holder of
such portion.
(i) Increased Capital. If either (A) the introduction of or any
------------------
change in or in the interpretation of any law or regulation after the date
hereof (and excluding any new laws or changes presently known to Agent even if
they have not yet become effective) or (B) compliance by any Lender with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by any Lender or any corporation
controlling any Lender and such Lender determines that the amount of such
capital is increased by or based upon the existence of the Revolver Commitment
and other commitments of this type then, upon demand by such Lender, Borrower
shall immediately pay to such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender in light of such
circumstances, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the issuance or maintenance of the
Revolver Commitment. Such Lender claiming compensation under this Section 2(i)
shall provide Borrower with a certificate setting forth in reasonable detail the
amount payable to such Lender, the reason for the additional compensation and
the calculation of the additional compensation.
SECTION 3. CONDITIONS TO EFFECTIVENESS; CONDITIONS OF LENDING.
--------------------------------------------------
(a) Conditions to Effectiveness. This Agreement shall become
----------------------------
effective on the date that each of the following conditions shall have been
satisfied (or waived in accordance with Section 14(e)):
(i) The Reorganization shall have occurred;
(ii) Borrower shall have executed and delivered to Agent an
Assumption Agreement (the "Assumption Agreement") containing an express
--------------------
assumption by Borrower of the Partnership's obligations under the Existing
Loan Agreements, the Security Documents executed prior to the date hereof
and all other agreements and instruments executed in connection with the
Existing Loan Agreements;
(iii) Prior to and at the consummation of the Reorganization
Borrower shall not have granted, and there shall not exist against Borrower
or its assets any judgment, lien, encumbrance, burden or claim of any kind
that would attach to the assets of the Partnership that are assigned to the
Company in connection with the Reorganization except liens and encumbrances
existing as a result of the Existing Loan Agreements, and except those
liens and encumbrances permitted by Section 10(b) hereof;
17
<PAGE>
(iv) Prior to consummation of the Reorganization, Borrower shall
have executed and delivered to Agent UCC financing statements (the "Company
-------
Financing Statements") covering all of the assets of the Partnership that
--------------------
are assigned to Borrower and that are covered by financing statements
executed by the Partnership in connection with the Existing Loan
Agreements, and the Company Financing Statements shall have been properly
filed in all appropriate jurisdictions designated by Agent;
(v) Results of UCC lien searches as to Borrower for the States
of Arkansas, Colorado, Kansas, Kentucky, Tennessee and West Virginia and
for the following counties: Crittenden County, Arkansas; Boyd, Greenup and
Pike Counties, Kentucky; Hawkins County, Tennessee; and Wayne and Kanawha
Counties, West Virginia, shall have been received by, and shall be
satisfactory to, Agent, and Agent shall be satisfied in its sole discretion
and shall have received an opinion of counsel for Borrower that upon
consummation of the Reorganization the Lenders will have a perfected first
priority lien and security interest in the assets assigned to Borrower by
the Partnership;
(vi) Prior to consummation of the Reorganization, Borrower shall
have obtained all necessary consents, permissions and approvals by third
parties or governmental authorities in connection with the transfer of the
assets of the Partnership to Borrower and the transfer of all governmental
permits and licenses held by the Partnership in connection with the
operation of its business, except to the extent that the failure to obtain
any such consent, permission or approval would not have a material adverse
effect on the business, assets or financial condition of Borrower, and
Borrower shall have obtained all necessary waivers of preferential and
similar rights of third parties to purchase any portion of such assets;
(vii) No event or other circumstance shall have occurred or
exist that would cause the financial condition of Borrower upon
consummation of the Reorganization to be materially and adversely different
from the pro forma financial statements for Borrower set forth in the
Registration Statement;
(viii) Except for the Partnership Distribution (as defined in
the Modification Agreement referenced below) and the other elements of the
Reorganization that would violate the terms of the Existing Loan Agreements
but for the consent set forth in Section 1 of the Modification Agreement
dated as of July 31, 1996 among the Partnership, Borrower, Agent and the
Lenders (the "Modification Agreement"), no Event of Default or Unmatured
Event of Default under the Existing Loan Agreements shall have occurred or
be continuing, all representations and warranties contained in Section 7 of
the Existing Revolver Agreement shall be true in all material respects
(except those affected by the occurrence of the Reorganization), and
Borrower and the Partnership shall have
18
<PAGE>
satisfied in all material respects their covenants and obligations under
the Modification Agreement;
(ix) No order shall have been entered by any court or
governmental agency having jurisdiction over the parties or the subject
matter of this Agreement that restrains or prohibits the Reorganization or
the other transactions contemplated by this Agreement and which remains in
effect at the time of the Reorganization and the other transactions
contemplated hereby;
(x) The Lenders shall be satisfied in their sole discretion that
net proceeds form Borrower's public offering will be sufficient to repay
the Distribution Advance within thirty days after the Loan Date; and
(xi) Lenders shall have received an opinion of Dorsey & Whitney,
LLP, counsel for Borrower, addressed to Lenders and Agent, in form and
substance satisfactory to Agent, concerning the following matters:
(A) The Reorganization, the conveyance of all of the
Partnership's assets to Borrower, the execution and delivery of the
Assumption Agreement, and all other actions necessary to consummate
the Reorganization have been duly authorized by all necessary
corporate, partner and shareholder actions required on behalf of
Borrower and the Partnership, and the Assumption Agreement and all
other documents executed in connection with the Reorganization
constitute the legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms, except as such
enforcement may be limited by bankruptcy, insolvency or similar laws
of general application relating to the enforcement of creditors'
rights;
(B) Borrower has obtained all necessary consents, permissions and
approvals by third parties or governmental authorities in connection
with the transfer of the assets of the Partnership to Borrower and the
transfer of all governmental permits and licenses held by the
Partnership in connection with the operation of its business, except
to the extent that the failure to obtain any such consent, permission
or approval would not have a material adverse effect on the business,
assets or financial condition of Borrower;
(C) No order has been entered by any court or governmental agency
having jurisdiction over the parties or the subject matter of this
Agreement or the Modification Agreement that restrains or prohibits
the Reorganization or the other transactions contemplated by the
Modification Agreement and which remains in
19
<PAGE>
effect at the time of the Reorganization and the other transactions
contemplated hereby.
From and after the Loan Date: (x) the Existing Revolver Agreement will be
automatically amended and restated to read as this Agreement reads, without
further action by any party, (y) Loans under (and as defined in) the Existing
Revolver Agreement outstanding on the Loan Date shall continue under this
Agreement, and (z) the rights and obligations of the parties hereto shall be
governed by the provisions hereof, and the rights and obligations of the parties
to the Existing Revolver Agreement with respect to the period prior to the Loan
Date shall continue to be governed by the provisions thereof as in effect prior
to the Loan Date, except that fees accrued under the Existing Revolver Agreement
to the Loan Date shall be paid on the Loan Date.
(b) Initial Advance.
----------------
(i) Assuming the conditions for the effectiveness of this
Agreement set forth in Section 3(a) are satisfied, the initial Advance
hereunder shall be deemed to be the Advances made under the Existing
Revolver Agreement to the Partnership that are outstanding and assumed by
Borrower pursuant to the Reorganization. In addition to the conditions in
Section 3(a), the Lenders shall have no obligation to make the initial
Advance under the Loans unless the Agent shall have received all of the
following, at the Agent's office in Denver, Colorado, duly executed and
delivered and in form and substance satisfactory to the Agent and its
counsel:
(A) This Agreement, executed by Borrower, the Agent and the
Lenders;
(B) The Notes;
(C) Counterparts of the Fourth Mortgage Amendments and the
Second Amendment to Security Agreement, duly executed and acknowledged by
Borrower, together with the appropriate financing statements, amendments to
financing statements and continuation statements for existing financing
statements, as may be necessary or advisable under applicable law in order
to perfect and maintain, to the full extent permitted by applicable law,
the first priority liens and security interests created thereby;
(D) The Pledge Agreement;
(E) Evidence that Agent has been named as mortgagee/loss
payee under all policies of casualty insurance, and as an additional
insured under all policies of liability insurance, as required by Section
9(f).
20
<PAGE>
(F) A certificate, dated the Loan Date and executed by the
president or a vice president of the Borrower, stating the substance of
Subsections 3(b)(ii)(A), (C) and (D);
(G) A certificate, dated the Loan Date and executed by the
Secretary or assistant Secretary of the Borrower, which shall contain the
names and signature of the officers of the Borrower authorized to execute
the Loan Documents on behalf of the Borrower, and which shall certify to
the correctness and completeness of the following exhibits attached
thereto: copies of the articles of incorporation and bylaws of the
Borrower and all amendments thereto, and copies of the resolutions duly
adopted by the Board of Directors of the Borrower authorizing the execution
of the Loan Documents and the consummation of the transactions contemplated
herein and therein;
(H) Certificates from the Delaware Secretary of State as to the
good standing of Borrower and from the Secretary of State of Colorado,
Borrower's principal place of business, as to Borrower's qualification to
do business in such state; and
(I) All other documents and assurances which the Agent reasonably
requires or which it may reasonably request in connection with the
transactions contemplated by this Agreement, and such documents shall be
certified, when appropriate, by proper authorities.
(ii) The Lenders shall have no obligation to make any Advances
hereunder unless the following shall be true and correct on and as of the
date of such Advance:
(A) All representations and warranties contained in Section 8
and in the Security Documents shall be true on the Loan Date as if then
given, and Borrower and the Partnership (as to times prior to the date of
the Reorganization) shall have performed or observed all terms, agreements,
conditions and obligations hereunder and under the Security Documents to be
performed or observed on or prior to the Loan Date;
(B) All legal matters incident to the Loans shall be
satisfactory to counsel to the Agent, and the Agent shall have received on
the Loan Date favorable opinions addressed to the Agent and the Lenders of
Dorsey & Whitney LLP and Barry Spector, Esq., co-counsel for Borrower,
substantially in the form set forth in Exhibit C, together with the
---------
certificate provided for in such Exhibit, which opinions collectively shall
cover the matters set forth in Sections 8(a)(i), (ii) and (iii), (b), (c),
(d), (e), (r) and (s), and such other matters as the Agent or its counsel
may reasonably request;
21
<PAGE>
(C) No Event of Default or Unmatured Event of Default shall have
occurred and be continuing or would result from the making of the requested
Advance; and
(D) Since December 31, 1995, there has been no material adverse
change in the business, financial position or results of operations of the
Partnership, as assigned to and assumed by Borrower pursuant to the
Reorganization.
(c) Subsequent Advances. The obligation of the Lenders to make
--------------------
subsequent Advances under the Revolver Commitment, all as set forth in Section
2, is subject to satisfaction of the conditions set forth in such Section and
the following conditions precedent:
(i) The Agent shall have received (with an executed copy for each
of the Lenders) a certificate, dated the date of the requested Advance and
executed on behalf of Borrower by the president or a vice president of the
Borrower, stating the substance of Subsections 3(b)(ii)(A), (C) and (D);
(ii) All representations and warranties contained in Section 8
hereof and in the Security Documents shall be true on the date of such
requested Advance as if then given, and Borrower shall have performed or
observed all terms, agreements, conditions and obligations hereunder and
under the Security Documents to be performed or observed on or prior to the
date of such requested Advance;
(iii) No Event of Default or Unmatured Event of Default shall
have occurred and be continuing or would result from the making of the
requested Advance;
(iv) Since December 31, 1995, there has been no material adverse
change in the business, financial position or results of operations of
Borrower, as assigned by the Partnership to and assumed by Borrower
pursuant to the Reorganization;
(v) All legal matters relating to the Loan Documents, such
Advance and the consummation of the transactions contemplated thereby shall
be reasonably satisfactory to the Agent's counsel; and
(vi) Such Advance shall not be prohibited by any laws or any
regulation or order of any court or governmental authority or agency and
shall not subject the Lender to any penalty or other onerous condition
under or pursuant to any such law, regulation or order.
22
<PAGE>
SECTION 4. TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
(a) Taxes.
------
(i) Any and all payments by Borrower to the Lenders under this
Agreement shall be made free and clear of, and without deduction or
withholding for, any and all future taxes, levies, imposts, deductions,
charges or withholdings, and any stamp or documentary taxes or any other
excise or property taxes, charges or similar levies which arise from any
payment made hereunder or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any other Loan Documents
and all liabilities with respect thereof, excluding such taxes (including
income taxes or franchise taxes) as are imposed on or measured by Lender's
net income by the jurisdiction under the laws of which Lender is organized
or any political subdivision thereof (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes").
-----
(ii) Borrower shall indemnify Lenders and hold Lenders harmless
for the full amount of Taxes (including any Taxes imposed by any
jurisdiction on amounts payable under this Section 4(a)) paid by Lenders
------------
and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such
Taxes were correctly or legally asserted; provided that Lenders shall pay
--------
over to Borrower the amount of any tax refunds received by Lenders with
respect to any such Taxes (net of any tax detriment resulting from receipt
of such tax refunds to the extent not offset by payment over of such
amount) solely to the extent that (A) such tax refunds are fairly allocable
to such Taxes and (B) Borrower actually paid such Taxes. Payment under
this indemnification shall be made within 30 days from the date Lenders
make written demand therefor.
(iii) If Borrower shall be required by law to deduct or
withhold any Taxes from or in respect of any sum payable hereunder to
Lenders, then:
(A) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 4(a)) Lenders receive an amount
equal to the sum they would have received had no such deductions been made;
(B) Borrower shall make such deductions, and
(C) Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law.
23
<PAGE>
(iv) Within thirty days after the date of any payment by
Borrower of Taxes Borrower shall furnish to Lenders the original or a
certified copy of a receipt evidencing payment thereof, or other evidence
of payment satisfactory to Lenders.
(b) Illegality.
-----------
(i) If Lenders shall determine that the introduction of any law,
rule or regulation, or any change in any law, rule or regulation or in the
interpretation or administration thereof, has made it unlawful, or that any
central bank or other governmental authority has asserted that it is
unlawful, for Lenders to make LIBOR Rate Loans, then, on notice thereof by
Lenders to Borrower, the obligation of Lenders to make LIBOR Rate Loans
shall be suspended until Lenders shall have notified Borrower that the
circumstances giving rise to such determination no longer exist.
(ii) If Lenders shall determine that it is unlawful to maintain
any LIBOR Rate Loan, and, if any LIBOR Rate Loans are then outstanding,
Agent shall give notice thereof to Borrower, and within three Business Days
after receipt of such notice Borrower shall elect either (A) to prepay in
full all LIBOR Rate Loans of Lenders then outstanding, together with
interest accrued thereon, either on the last day of the Interest Period
thereof if Lenders may lawfully continue to maintain such LIBOR Rate Loans
to such day, or immediately, if Lenders may not lawfully continue to
maintain such LIBOR Rate Loans, together with any amounts required to be
paid in connection therewith pursuant to Section 4(c), or (B) to
immediately convert such LIBOR Rate Loans to Base Rate Loans in accordance
with Section 2(b)(ii).
(iii) If the obligation of Lenders to make or maintain LIBOR
Rate Loans has been terminated, Borrower may elect, by giving notice to
Lenders that all Revolver Loans which would otherwise be made by Lenders as
LIBOR Rate Loans shall be instead Base Rate Loans.
(c) Increased Costs and Reduction of Return.
----------------------------------------
(i) If Lenders shall determine that, due to either (A) the
introduction of or any change (other than any change by way of imposition
of or increase in reserve requirements included in the calculation of the
LIBOR Rate) in or in the interpretation of any law or regulation or (B) the
compliance with any guideline, or request from any central bank or other
governmental authority (whether or not having the force of law) issued
after the date of this Agreement, there shall be any increase in the cost
to Lenders of agreeing to make or making, funding or maintaining any LIBOR
Rate Loans (other than changes in the rate of taxes on the overall net
income of Lender), then Agent shall give notice of such determination to
Borrower, and Borrower shall have the option either
24
<PAGE>
(X) to immediately convert all outstanding LIBOR Rate Loans to Base Rate
Loans in accordance with Section 2(a)(ii) or (Y) Borrower shall be liable
for, and shall from time to time, upon demand therefor by Lenders, pay to
Lenders additional amounts as are sufficient to compensate Lenders for such
increased costs. If Borrower elects to convert to Base Rate Loans, it shall
nevertheless be liable for any increased costs incurred by Lenders
regarding LIBOR Rate Loans accrued prior to the date of conversion.
(ii) If Lenders shall have determined that (A) the introduction
of any Capital Adequacy Regulation, (B) any change in any Capital Adequacy
Regulation, (C) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other governmental
authority charged with the interpretation or administration thereof, or (D)
compliance by Lenders or any corporation controlling any of Lenders, with
any Capital Adequacy Regulation; affects or would affect the amount of
capital required or expected to be maintained by Lenders or any corporation
controlling any of Lenders and (taking into consideration Lenders' or such
corporations' policies with respect to capital adequacy and Lenders'
desired return on capital) determines that the amount of such capital is
increased as a consequence of its commitment to make LIBOR Rate Loans under
this Agreement, then, Agent shall give notice of such determination to
Borrower, and Borrower shall have the option either (X) to immediately
convert all outstanding LIBOR Rate Loans to Base Rate Loans in accordance
with Section 2(a)(ii) or (Y) upon demand of Lenders, Borrower shall upon
demand pay to Lenders, from time to time as specified by Lenders,
additional amounts sufficient to compensate Lenders for such increase.
(d) Funding Losses. Borrower agrees to reimburse Lenders and to hold
---------------
Lenders harmless from any loss or expense which Lenders may sustain or incur as
a consequence of:
(i) the failure of Borrower to make any payment or mandatory
prepayment of principal of any LIBOR Rate Loan (including payments made
after any acceleration thereof);
(ii) the failure of Borrower to borrow, continue or convert a
Revolver Loan after Borrower has given (or is deemed to have given) a
Request for Advance or a Notice of Conversion/Continuation;
(iii) the failure of Borrower to make any prepayment after
Borrower has given a notice in accordance with Section 2(a)(iv);
----------------
25
<PAGE>
(iv) the prepayment (including pursuant to Section 2(a)(iv)) of a
----------------
LIBOR Rate Loan on a day which is not the last day of the Interest Period
with respect thereto; or
(v) the conversion pursuant to Section 2(a)(ii) of any LIBOR Rate
----------------
Loan to a Base Rate Loan on a day that is not the last day of the
respective Interest Period;
including any such loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain its LIBOR Rate Loans
hereunder or from fees payable to terminate the deposits from which such
funds were obtained.
(e) Inability to Determine Rates. If Agent shall have determined
-----------------------------
that for any reason adequate and reasonable means do not exist for ascertaining
the LIBOR Rate for any requested Interest Period with respect to a proposed
LIBOR Rate Loan or that the LIBOR Rate applicable for any requested Interest
Period with respect to a proposed LIBOR Rate Loan does not adequately and fairly
reflect, in Agent's reasonable judgment, the cost to Lenders of funding such
Loan, Agent will forthwith give notice of such determination to Borrower.
Thereafter, the obligation of Lenders to make or maintain LIBOR Rate Loans, as
the case may be, hereunder shall be suspended until Agent revokes such notice in
writing, unless means exist for ascertaining the LIBOR Rate and Borrower agrees
to pay such amount as Agent determines in its sole and absolute discretion is
necessary to reflect the cost to Lenders of funding such Revolver Loan. Upon
receipt of such notice, Borrower may revoke any Request for Advance or Notice of
Conversion/Continuation then submitted by it. If Borrower does not revoke such
request or notice prior to the time that such Revolver Loan is made, Lenders
shall make, convert or continue the Revolver Loans, as proposed by Borrower in
the amount specified in the applicable request or notice submitted by Borrower,
but such Revolver Loans shall be made, converted or continued as Base Rate Loans
instead of LIBOR Rate Loans.
(f) Certificate of Lender. If Lenders claim reimbursement or
----------------------
compensation pursuant to this Section 4, Agent shall deliver to Borrower a
certificate setting forth in reasonable detail the amount payable to Lenders
hereunder and such certificate shall be binding on Borrower unless Borrower
objects to the contents of such certificate within five Business Days after
receipt thereof. If Borrower objects, Agent and Borrower shall attempt to
resolve their differences within 10 days, and if agreement is not reached within
such period then all LIBOR Rate Loans shall be immediately converted to Base
Rate Loans.
(g) Survival. The agreements and obligations of Borrower in this
---------
Section 4 shall survive the payment of all other Obligations.
SECTION 5. BORROWING BASE.
--------------
26
<PAGE>
(a) Initial Borrowing Base. During the period from the date hereof
-----------------------
to the first Determination Date (as defined in Subsection 5(c)(ii) below), the
Borrowing Base shall be the Maximum Principal Amount.
(b) Information. At least 45 days prior to each Evaluation Date,
------------
Borrower shall furnish to Agent all information, reports and data which the
Agent or any Lender has then requested concerning the business and properties of
Borrower (which properties are included, at the time, in the calculation of the
Borrowing Base), and its Subsidiaries, dated as of such Evaluation Date and
including information concerning the oil and gas reserves owned by Borrower or
its Subsidiaries and the production from acreage dedicated to gas processing
plants and pipelines owned or operated by Borrower or its Subsidiaries.
(c) Subsequent Determinations of Borrowing Base. (i) The Lenders
--------------------------------------------
shall determine the Borrowing Base (which shall never exceed the Maximum
Principal Amount) semi-annually, as of June 30 and December 31 of each year that
this Agreement is in effect, commencing December 31, 1996, based upon the
Obligations then outstanding, the value and associated cash flow available for
debt service which the Lenders assign, in their sole discretion, to Borrower's
natural gas liquids processing plants, fractionator, propane terminals and any
other assets of Borrower now subject to the Security Documents or as may become
subject thereto in the future, but only to the extent each of the same are
subject to a perfected first priority lien in favor of the Agent for the benefit
of the Lenders, and based upon such other factors, assumptions, criteria and
general credit considerations as the Lenders in their sole discretion deem
appropriate.
(ii) The Borrowing Base as so designated shall be effective on
and including the date on which the Agent sends the notice provided in
Section 5(d) (herein called a "Determination Date") and, until the next
------------------
date on which the Borrowing Base is redesignated by the Lenders. A
Determination Date may occur during the period between the date on which a
Request for Revolver Advance is submitted and the day on which such
Revolver Advance is to be made.
(iii) If Borrower does not furnish to the Agent the information
required by Section 5(b) by the date specified therein, the Agent may
designate the Borrowing Base at any amount which the Lenders determine
based on the relevant information then available to the Lenders and the
Agent. The Agent may redesignate the Borrowing Base from time to time
thereafter until the Lenders receive the required information, whereupon a
new Borrowing Base shall be determined as described above.
(iv) No increase in the Borrowing Base shall be made at any time
unless the amount of such increase is agreed to by all Lenders.
27
<PAGE>
(d) Notification of Borrowing Base. The Agent shall give written
-------------------------------
notice to Borrower of the amount determined pursuant to Section 5(c) as the
Borrowing Base for such period as soon as possible after the Lenders have made
such determination. Until the Agent has notified Borrower of the Borrowing Base
for such period pursuant to this Section 5(d), the Borrowing Base shall be the
amount determined pursuant to this Section 5 for the immediately preceding
period.
SECTION 6. BORROWING BASE DEFICIENCY. If the aggregate unpaid principal
-------------------------
amount outstanding under the Notes exceeds the Borrowing Base then in effect
(the "Borrowing Base Deficiency"), Borrower shall take one of the following
-------------------------
actions following receipt of notice from the Agent of the existence of such
Borrowing Base Deficiency:
(a) Repay Excess Debt. Within 30 calendar days following receipt of
------------------
such notice from the Agent, make a mandatory prepayment on the Loans in
accordance with Section 2(f) in an amount equal to the Borrowing Base
Deficiency; or
(b) Installment Payments. Make mandatory prepayments of the Loans in
---------------------
an aggregate amount equal to the Borrowing Base Deficiency, payable in six equal
monthly installments, with the first installment due within 30 calendar days
following receipt of such notice from the Agent; such mandatory prepayments to
be made in accordance with Section 2(f) hereof.
Failure of Borrower to comply with this Section 6 shall be an immediate Event of
Default.
SECTION 7. SECURITY. The repayment of the Loans and the Notes and all
--------
extensions and renewals thereof, and the performance of all obligations of
Borrower hereunder, shall be secured by the Security Documents.
SECTION 8. REPRESENTATIONS AND WARRANTIES. Borrower represents and
------------------------------
warrants to the Agent and each Lender that:
(a) Existence.
----------
(i) Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is
qualified to do business in Arkansas, Colorado, Kentucky, Tennessee, Texas
and West Virginia and in every other jurisdiction in which the nature of
its business or the ownership of its assets requires such qualification and
failure to so qualify could have a material adverse effect on Borrower, its
business, operations, assets, property, prospects or condition (financial
or otherwise);
28
<PAGE>
(ii) Each of the Restricted Subsidiaries and the Related Persons
other than Borrower is duly organized, validly existing and in good
standing under the laws of the state of its incorporation or formation and
is qualified to do business in every jurisdiction in which the nature of
its business or the ownership of its assets requires such qualification and
failure to so qualify could have a material adverse effect on Borrower or
such Person, its business, operations, assets, property, prospects or
condition (financial or otherwise);
(iii) Each Related Person and Restricted Subsidiary has the
power and authority to own the property which it owns and to carry on its
business as such business is now conducted; and
(iv) Each Related Person and Restricted Subsidiary has all
franchises, permits, licenses and similar agreements necessary to carry on
its business as now conducted, and has not received any notices of default
or termination under any of such agreements.
(b) Non-Contravention. The execution, delivery and performance by
------------------
the Borrower of this Agreement, and the other Loan Documents and the borrowings
hereunder, and the consummation of the transactions contemplated herein and
therein will not conflict with the limited partnership agreement or other
organizational or governing documents of any Related Person and Restricted
Subsidiary, or conflict with or result in any breach of any mortgage, lien,
lease, agreement, instrument, order, judgment, decree, law, rule, regulation or
any other restriction of any kind or character to which any Related Person or
Restricted Subsidiary is a party or is subject or by which any Related Person or
Restricted Subsidiary or its properties are bound or affected or result in the
creation or imposition of any lien, charge or encumbrance upon any property of
any Related Person or Restricted Subsidiary.
(c) Third Party Authorization. No consent, approval, exemption,
--------------------------
authorization or order of or other action by, and no notice to or filing with,
any court or governmental authority or third party is required by any Related
Person or Restricted Subsidiary in connection with the execution, delivery or
performance by Borrower of this Agreement, or any other Loan Document or to
consummate any transactions contemplated hereby or thereby.
(d) Authorization; Binding Effect. Borrower has full power and
------------------------------
authority to enter into this Agreement and the other Loan Documents. The
execution and delivery of this Agreement, and the other Loan Documents, and the
performance and observance of their terms, conditions and obligations, have been
duly authorized by all necessary action by Borrower. This Agreement and the
Notes are, and the other Loan Documents when duly executed and delivered will
be, legal, valid and binding obligations of Borrower, enforceable in accordance
with their
29
<PAGE>
respective terms, except as such enforcement may be limited by bankruptcy,
insolvency or similar laws of general application relating to the enforcement of
creditors' rights.
(e) Litigation. Except as disclosed in Exhibit D attached hereto,
----------- ---------
there are no actions, suits, proceedings or claims against any Related Person or
Restricted Subsidiary or any of their respective properties pending or, to the
knowledge of Borrower, threatened before any court or by or before any
governmental instrumentality, which could have a material adverse effect on the
business, operations, property, prospects or condition (financial or otherwise)
of any Related Person or Restricted Subsidiary or the ability of Borrower to
perform its obligations under this Agreement, or any of the other Loan
Documents. There exists no default or breach by any Related Person or
Restricted Subsidiary with respect to any order, writ, injunction, decree or
demand of any court or governmental instrumentality, nor does the execution,
delivery or performance by Borrower of this Agreement or any of the other Loan
Documents result in any such default or breach.
(f) Taxes. Each Related Person or Restricted Subsidiary has filed
------
all required tax returns and paid all taxes and other governmental charges or
levies imposed upon or against it or its properties, including the Mortgages and
the Collateral, or profits before the same became in default, except those being
contested in good faith and by appropriate proceedings, for which adequate
reserves have been set up by such Person, and for which there is no risk of loss
of any of the Collateral.
(g) Liens. All property and assets of Borrower are free and clear of
------
all liens and encumbrances except (i) the liens permitted by Section 10(b)
hereof, and (ii) the liens in connection with the litigation described in
Exhibit D attached hereto.
- ---------
(h) Names and Places of Business. No Related Person or Restricted
-----------------------------
Subsidiary has been known by, or used any other corporate, partnership, trade,
or fictitious name. The chief executive office and principal place of business
of Borrower (and, prior to the Reorganization, of the Partnership) have been
located at the address of Borrower set out in Section 14(b) for at least the
four months immediately preceding the date hereof. The place where Borrower
keeps its books and records concerning the Collateral is at Borrower's address
for notices set forth in Section 14(b), and has been there for at least the four
months immediately preceding the date hereof.
(i) Use of Proceeds. The proceeds of the Revolver Loan shall be used
----------------
solely for general business or commercial purposes, including capital
expenditures and acquisition of natural gas processing and natural gas liquids
related facilities. In no event shall funds from any Advance be used directly
or indirectly by any Person for personal, family, household or agricultural
purposes.
30
<PAGE>
(j) Other Obligations. No Related Person or Restricted Subsidiary
------------------
has any outstanding Debt of any kind (including contingent obligations, tax
assessments, and unusual forward or long-term commitments) which is, in the
aggregate, material to such Person or material with respect to Borrower's
Consolidated financial condition and not shown in the Initial Financial
Statements.
(k) Full Disclosure. No certificate, statement, report or other
----------------
information delivered herewith or heretofore by any Related Person or Restricted
Subsidiary to Agent or the Lenders in connection with the negotiation of this
Agreement or in connection with any transaction contemplated hereby contains any
untrue statement of a material fact or omits to state any material fact known to
such Person necessary to make the statements contained herein or therein not
materially misleading as of the date made or deemed made. There is no fact
known to any Related Person or Restricted Subsidiary that has not been disclosed
to the Agent or the Lenders in writing that could materially and adversely
affect Borrower's properties, business, prospects or condition (financial or
otherwise).
(l) Margin Stock. No Related Person or Restricted Subsidiary is
-------------
engaged principally, or as one of its important activities, in the business of
extending credit to others for the purpose of purchasing or carrying any "margin
stock" or any "margin securities" (as such terms are defined respectively in
Regulation U and Regulation G promulgated by the Board of Governors of the
Federal Reserve System).
(m) ERISA. Neither Borrower nor any member of its Controlled Group
------
maintains, or has ever maintained any ERISA Plan. Borrower and the members of
its Controlled Group are in compliance with ERISA and the Code in all material
respects as to all employee benefit plans maintained by Borrower and the members
of its Controlled Group. Neither Borrower nor any member of its Controlled
Group is, or has ever been, required to contribute to, or has, or has ever had,
any other absolute or contingent liability in respect of, any "multiemployer
plan" as defined in Section 4001 of ERISA. Neither the Borrower nor any member
of its Controlled Group has ever represented, promised, or contracted (whether
in oral or written form) to any current or former employee (either individually
or as a group) that such current or former employee(s) would be provided, at any
cost to any member of the Controlled Group, with any employee welfare benefits
(within the meaning of Section 3(1) of ERISA) following retirement or
termination of employment. All members of the Controlled Group have complied in
all material respects with the notice and continuation coverage requirements of
Section 4980B of the Code.
(n) Security Documents. The warranties and representations contained
-------------------
in the Security Documents are true and correct in all material respects.
31
<PAGE>
(o) Compliance with Laws. Each Related Person and Restricted
---------------------
Subsidiary is in material compliance with all laws, rules and regulations, and
determination of any arbitrator or governmental authority applicable to or
binding upon it or any of its property or to which it or any of its property is
subject.
(p) Financial Condition. The Initial Financial Statements fairly
--------------------
present the Partnership's financial position at the date thereof and the results
of the Partnership's operations and cash flows for the period thereof. Since
December 31, 1995, there has been no material adverse change in the business,
financial position or results of operations of the Partnership, as assigned to
and assumed by Borrower pursuant to the Reorganization.
(q) Environmental Matters. (i) The operations of each Related Person
----------------------
comply in all material respects with all federal, state or local laws, statutes,
rules, regulations, and all administrative orders, licenses, authorizations and
permits of any governmental authority, relating to environmental or public
health and safety; (ii) none of the operations of any Related Person or
Restricted Subsidiary is the subject of federal, state or local investigation
evaluating whether any material remedial action is needed to respond to a
release of any hazardous or toxic waste, substance or constituent into the
environment; (iii) no Related Person or Restricted Subsidiary has (and to the
best knowledge of Borrower, nor has any other person) filed any notice under any
federal, state or local law indicating that such Person is responsible for the
release into the environment, or the improper storage, of any material amount of
any hazardous or toxic waste, substance or constituent or that any such waste,
substance or constituent has been released, or is improperly stored, upon any
property of such Person; and (iv) no Related Person or Restricted Subsidiary
otherwise has any known material contingent liability in connection with the
release into the environment, or the improper storage, of any such waste,
substance or constituent.
(r) Investment Company Act. No Related Person or Restricted
-----------------------
Subsidiary is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
(s) Public Utility Holding Company Act. No Related Person or
-----------------------------------
Restricted Subsidiary is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(t) Title to Properties; First Priority Security Interest. Each
-------------------------------------------------------
Related Person or Restricted Subsidiary has good and indefeasible title to all
of their respective material properties and assets, free and clear of all liens
except those permitted by Section 10(b) hereof. As of the date hereof, the
Agent, on behalf of the Lenders has a perfected first priority lien or security
interest in all of the Collateral.
32
<PAGE>
(u) Subsidiaries of Borrower and of Related Persons. Borrower does
-------------------------------------------------
not presently have any Subsidiaries or own any stock or equity interest in any
corporation, partnership, joint venture or association, except as set forth in
Exhibit E hereto.
- ---------
(v) Location of Inventory. The location of all of Borrower's
----------------------
inventory is set forth in Exhibit F hereto.
---------
(w) Reorganization. Borrower represents and warrants to the Agent
---------------
and each Lender that:
(i) The execution, delivery and performance by the Partnership
and Borrower of all documents executed in connection with the
Reorganization and the consummation of the transactions contemplated
by the Reorganization will not conflict with the articles of
incorporation, bylaws or other organizational or governing documents
of any Related Person or Restricted Subsidiary, or conflict with or
result in any breach of any mortgage, lien, lease, agreement,
instrument, order, judgment, decree, law, rule, regulation or any
other restriction of any kind or character to which any Related Person
or Restricted Subsidiary is a party or is subject or by which any
Related Person or Restricted Subsidiary or its properties are bound or
affected or result in the creation or imposition of any lien, charge
or encumbrance upon any property of any Related Person or Restricted
Subsidiary.
(ii) No consent, approval, exemption, authorization or order of
or other action by, and no notice to or filing with, any court or
governmental authority or third party is required by any Related
Person or Restricted Subsidiary in connection with the execution,
delivery or performance by the Partnership and Borrower of the
documents executed in connection with the Reorganization or to
consummate any transactions contemplated by the Reorganization, except
such consents, approvals, exemptions, authorizations, orders or
actions the failure of which to obtain or take would not have a
material adverse effect on the transactions contemplated by the
Reorganization, or subsequent to consummation thereof, the business,
assets or financial condition of Borrower;
(iii) Borrower and the Partnership have full power and authority
to enter into all of the documents executed in connection with the
Reorganization. The execution and delivery of such documents, and the
performance and observance of their terms, conditions and obligations,
have been duly authorized by all necessary action by Borrower and the
Partnership. All such documents have been duly executed and delivered
and constitute the legal, valid and binding obligations of Borrower
and the Partnership, enforceable in accordance with their respective
terms, except as such enforcement may be limited by bankruptcy,
33
<PAGE>
insolvency or similar laws of general application relating to the
enforcement of creditors' rights;
(iv) At the consummation of the Reorganization and as of the date
hereof, there does not exist against the Partnership or its assets any
judgment, lien, encumbrance, burden or claim of any kind that attached
to the assets of the Partnership assigned to Borrower in connection
with the Reorganization except liens and encumbrances existing as a
result of the Existing Loan Agreements, and except liens and
encumbrances permitted by Section 10(b) hereof;
(v) Upon consummation of the Reorganization the Lenders received
and continue to have a perfected first priority lien and security
interest in the assets assigned to Borrower by the Partnership;
(vi) Prior to consummation of the Reorganization, the Partnership
obtained all necessary consents, permissions and approvals by third
parties or governmental authorities in connection with the transfer of
the assets of the Partnership to Borrower and the transfer of all
governmental permits and licenses held by the Partnership in
connection with the operation of its business, except to the extent
that the failure to obtain any such consent, permission or approval
would not have a material adverse effect on the business, assets or
financial condition of Borrower; and the Partnership obtained all
necessary waivers of preferential and similar rights of third parties
to purchase any portion of such assets;
(vii) Except for the Partnership Distribution and the other
elements of the Reorganization that would violate the terms of the
Existing Loan Agreements but for the consent set forth in Section 1 of
the Modification Agreement, no Event of Default or Unmatured Event of
Default under the Existing Loan Agreements has occurred or is
continuing, all representations and warranties contained in Section 7
of the Existing Revolver Loan Agreement are true in all material
respects (except those affected by the occurrence of the
Reorganization), and Borrower and the Partnership have satisfied in
all material respects their covenants and obligations under the
Modification Agreement; and
(viii) No order has been entered by any court or governmental
agency having jurisdiction over the parties or the subject matter of
the Modification Agreement that restrains or prohibits the
Reorganization or which remained in effect at the time of the
Reorganization and the other transactions contemplated by the
Modification Agreement.
34
<PAGE>
SECTION 9. AFFIRMATIVE COVENANTS. Until payment in full of the Loans and
---------------------------------
termination of all commitments by the Lenders to make Advances hereunder,
without the prior written consent of the Required Lenders:
(a) Payment and Performance of Loans. Borrower shall duly and
---------------------------------
punctually pay or cause to be paid in lawful money of the United States, the
principal and interest on the Loans upon the dates, at the place and in the
manner set forth in Section 2 hereof, and perform and observe all other
obligations of Borrower under this Agreement and the other Loan Documents.
(b) Financial Statements. Each of the Related Persons and Restricted
---------------------
Subsidiaries shall keep proper books of record and account in which full, true
and correct entries will be made of all business, dealings and affairs in
accordance with GAAP, and Borrower shall deliver to the Agent sufficient copies
for each Lender, at Borrower's expense and in an acceptable format:
(i) Within 120 calendar days after the end of each Fiscal Year,
complete audited annual financial statements of Borrower together with all
notes thereto, prepared in reasonable detail in accordance with GAAP and
presented on both a Consolidated and a Consolidating basis, together with
an unqualified opinion, based on an audit conducted by Price Waterhouse or
other independent certified public accountants selected by Borrower and
acceptable to the Lenders, stating that such financial statements present
fairly the financial position for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years (except as otherwise
required due to changes in GAAP) and similar audited annual financial
statements and an opinion of independent certified public accountants
acceptable to the Lenders with regard to MarkWest Michigan L.L.C.;
(ii) Within 45 calendar days after the end of each calendar
month, an unaudited monthly income statement, balance sheet and statement
of cash flows for the subject month, prepared in reasonable detail and in
accordance with GAAP, on both a Consolidated and Consolidating basis
together with a report describing for each natural gas liquids processing
or distribution facility the revenue and expenses (including capital
expenditures) relating thereto, the "throughput" figures for such
facilities for such calendar month, and a list of the prices, capital
expenditures, new material contracts and amendments to existing material
contracts relating thereto. For purposes of this Subsection 9(b)(ii),
"material contract" shall mean any contract with a term exceeding one year
or a value exceeding $1,000,000.
(iii) Together with delivery of each of the financial statements
described in Subsection (i) and (ii) above, a certificate signed by the
president or chief
35
<PAGE>
financial officer of Borrower in the form of Exhibit G attached hereto,
---------
stating that he or she has read this Agreement and made all other necessary
investigations, attesting to the authenticity of such financial statements,
showing the calculation of and compliance with the financial covenants
contained in this Agreement, and stating that in making the examination and
reporting on such financial statements, he or she concluded that there did
not exist any condition or event at the end of such Fiscal Year or at the
time of such certificate which constituted an Event of Default or an
Unmatured Event of Default, or, if such condition or event existed,
specifying the nature and period of existence of any such condition or
event;
(iv) Within 30 days after the same are filed, copies of all
financial statements, registration statements and regular, periodical or
special reports that any Related Person or Restricted Subsidiary may make
to, or file with, the Securities and Exchange Commission or any stock
exchange;
(v) Within 30 days, such additional financial and other
information as any of the Agent or either of the Lenders may from time to
time reasonably request, including without limitation reasonable detail
with respect to the information provided on an aggregate basis pursuant to
Subsection (ii) above; and
(vi) On or before December 1 of each year an annual budget for
Borrower's operations for the next calendar year.
(c) Preservation of Existence, Etc. (i) Borrower shall maintain in
--------------------------------
full force and effect Borrower's existence as a corporation and its good
standing under the laws of the State of Delaware and its right to transact
business in the States of Arkansas, Colorado, Kentucky, Tennessee, Texas and
West Virginia; and (ii) each Related Person and Restricted Subsidiary shall
maintain its good standing under the laws of the state of its formation and its
right to transact business in all states where its activities and ownership of
assets are such that qualification to transact business is necessary under the
laws of such states and failure to so qualify could have a material adverse
effect on such Person or on Borrower, or on Borrower's business, property,
prospects, assets, operations or condition (financial or otherwise).
(d) Maintenance of Property . Borrower shall maintain, preserve,
------------------------
protect and keep in good repair and in good working order and condition the
Collateral; and each Related Person and Restricted Subsidiary shall maintain all
other properties, real or personal, used or useful in its business in good
repair and in good working order and condition.
(e) Payment of Other Obligations .
-----------------------------
36
<PAGE>
(i) Each Related Person and Restricted Subsidiary shall duly and
punctually pay and discharge (A) all taxes, assessments and other
governmental charges assessed against or imposed upon or with respect to
such Person or its properties or assets prior to the date when they shall
become delinquent unless the same are being contested in good faith and by
appropriate proceedings and appropriate reserves have been established in
accordance with GAAP and there is no risk of loss of any of the Collateral;
(B) all charges for labor, materials and supplies which if unpaid might
become a lien against any part of the property of such Person unless the
same are being contested in good faith and by appropriate proceedings and
appropriate reserves have been established in accordance with GAAP and
there is no risk of loss of any of the Collateral; and (C) all federal and
state social security, worker's compensation and similar taxes, payments
and contributions for which such Person may be liable, before the same
become delinquent unless the same are being contested in good faith and by
appropriate proceedings and appropriate reserves have been established in
accordance with GAAP and there is no risk of loss of any of the Collateral;
and
(ii) duly and punctually pay all Debt obligations (principal and
interest), including without limitation, accounts payable and lease
obligations, unless the same are being contested in good faith and by
appropriate proceedings and appropriate reserves have been established in
accordance with GAAP.
(f) Insurance. Each Related Person and Restricted Subsidiary shall
----------
keep all of its insurable property, real and personal, adequately insured at all
times against fire and against such other risks as are customarily insured
against by similar businesses of a comparable size, and fully insure against its
employer's and public liability risks in financially sound and reputable
insurance companies, all in such amounts and upon such terms and conditions,
including deductibles, consistent with industry standards. Each insurance
policy covering Collateral shall be endorsed (i) to provide for payment of
losses to the Agent, for the benefit of the Lenders, as its interests may
appear, (ii) to provide that such policies may not be canceled, reduced or
affected in any manner for any reason without fifteen days prior notice to the
Agent, (iii) to provide for any other matters specified in any applicable
Security Document or which the Lenders or the Agent may reasonably require; (iv)
to provide for insurance against fire, casualty and any other hazards normally
insured against, in the amount of the full value (less a reasonable deductible
not to exceed amounts customary in the industry for similarly situated
businesses and properties) of the property insured, and (v) business
interruption insurance in an amount equal to the cost of operating Borrower's
business as reasonably determined by Borrower for a six-month period, which may
change from time to time depending upon Borrower's costs of operation at the
time in question. Each Related Person shall at all times maintain adequate
insurance against its liability for injury to persons or property, which
insurance shall be by financially sound and reputable insurers. A true and
complete list of all currently existing insurance of Borrower has been
37
<PAGE>
furnished to the Agent prior to the date hereof. It is understood, and Agent and
Lenders agree, that based on existing circumstances Borrower has no obligation
to insure inventory.
(g) Inspection of Property, Books and Records; Confidentiality
----------------------------------------------------------
Agreement. Borrower shall permit the Agent's and any Lender's duly authorized
- ----------
officers, employees and agents to inspect (and make copies of or abstracts
therefrom) the Collateral and the other property, books and records of Borrower
and to discuss Borrower's affairs, finances and accounts with Borrower's
officers and its independent accountants, and furnish any other data which the
Agent or any Lender may reasonably request, all at the expense of Borrower and
at any reasonable time and as often as the Agent or any Lender may reasonably
request; provided that Borrower shall not be liable for expenses arising out of
-------- ----
the gross negligence or willful misconduct of the inspecting party; provided,
--------
further, that Borrower shall not be required to give access to any party
- -------
inspecting the property subject to any of the Mortgages, if such inspecting
party refuses or is unwilling or unable to comply with the reasonable safety
requirements of Borrower relating to the property to be inspected. Each Lender
agrees that, until the occurrence of an Event of Default, it will take all
reasonable steps to keep confidential any proprietary information given to it by
any Related Person and Restricted Subsidiary including without limitation any
environmental information or reports pertaining to the property subject to the
Mortgages, provided, however, that this restriction shall not apply to
-------- -------
information which (i) has at the time in question entered the public domain,
(ii) is required to be disclosed by law or by any order, rule or regulation
(whether valid or invalid) of any court or governmental agency, or authority,
(iii) is disclosed to such Lender's external auditors, (iv) is disclosed to such
Lender's affiliates', agents or attorneys, or (v) is furnished to purchasers or
prospective purchasers of participations or other interests in the Loans or the
Notes; provided that before making the disclosures described in the immediately
preceding clauses (iv) and (v), such Lender shall direct in writing the Persons
to whom such proprietary information is to be disclosed to comply with the
confidentiality provisions set forth in this Section 9(g). Borrower agrees that
if either Lender breaches its confidentiality agreement contained in this
Section 9(g), Borrower's exclusive remedy shall be an action for actual damages
and such breach shall not be asserted in any action for payment hereunder or
under the Notes or in a foreclosure of any of the Security Documents.
(h) Notices. Borrower shall give written notice to the Agent within
--------
three days after a Responsible Person becomes aware of any of the following:
(i) Any material adverse change in the business, property,
prospects, assets, operations or condition (financial or otherwise), of
Borrower, any other Related Person or any Restricted Subsidiary;
(ii) Any Event of Default or Unmatured Event of Default;
38
<PAGE>
(iii) The institution of any litigation or other proceeding
before any governmental body or official against any Related Person or any
Restricted Subsidiary or any of their respective assets and any
developments in any pending litigation or other proceeding before any
governmental body or official that could materially affect Borrower, such
Related Person or such Restricted Subsidiary, its business, property,
prospects, assets, operations or condition (financial or otherwise);
(iv) Any existing or pending investigation or inquiry by any
governmental authority in connection with any applicable Environmental Laws
(as such term is defined in the Mortgages);
(v) The institution of, or material development in, any
litigation affecting any of the Collateral, or any other dispute or claim
that could have a material adverse effect on any of the Collateral or the
calculation of the Borrowing Base;
(vi) Any fact that causes or may cause the Agent, on behalf of
the Lenders, or the Lenders to fail to have a valid, enforceable and
perfected first priority lien on or security interest in any of the
Collateral, except as expressly permitted by this Agreement or the Security
Documents and except as a result of the acts or omissions of the Agent or
either Lender; or
(vii) The shut-down of any natural gas liquids processing
facility owned or leased by Borrower for a period of 48 consecutive hours
or more or of any planned shut-down of any such facility that is expected
to be in effect for a period of 48 consecutive hours or more (notice of any
actual shut-down shall be given to Agent within 24 hours after the
occurrence thereof and notice of any such planned shut-down shall be given
to Agent in advance).
(i) Compliance with Laws . Each Related Person and Restricted
---------------------
Subsidiary shall comply in all material respects with all applicable laws,
statutes, rules and regulations of the United States and of any state or
municipality, and of any official, arbitrator or governmental authority, in
respect of the conduct of business and ownership of property by such Person.
(j) Further Assurances . Borrower shall promptly and, insofar as not
-------------------
contrary to applicable law, at Borrower's own expense, (i) file and refile in
such offices, at such times and as often as may be reasonably necessary, every
instrument and every amendment thereto, and take such other action, as may be
reasonably necessary or desirable to create, perfect, maintain and preserve all
liens and security interests intended to be created by Borrower under the
Security Documents in favor of the Agent for the benefit of the Lenders or in
favor of the Lenders and to protect and preserve the rights and remedies of the
Agent and the Lenders thereunder, (ii) furnish to the Agent evidence reasonably
satisfactory to the Agent of all such filings and refilings, (iii)
39
<PAGE>
otherwise do all things necessary or expedient to be done to effectively create,
perfect, maintain and preserve the liens and security interests intended to be
created by the Security Documents as a lien on real property and fixtures and a
security interest in personal property and fixtures, and (iv) pay all fees and
expenses (including counsel fees) incident to this Agreement and in compliance
with this Section. In addition, Borrower covenants and agrees that if all or any
part of the Loans become subject to the provisions of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989, as it may be amended from time to
time, or other governmental regulation requiring appraisals, surveys or similar
requirements as to all or any part of the Collateral, Borrower shall promptly
provide the Agent and the Lenders with any appraisals, surveys or other items
required to have the Loans be in compliance with all applicable state and
federal laws, at its sole cost and expense.
(k) Current Ratio. Borrower (excluding Restricted Subsidiaries)
--------------
shall maintain a Current Ratio of not less than 1.1 to 1.0.
(l) Funded Debt to Total Capitalization. Borrower's Funded Debt
------------------------------------
(excluding Restricted Subsidiaries) shall not exceed 60% of its Total
Capitalization.
(m) Tangible Net Worth. Borrower (excluding Restricted Subsidiaries)
-------------------
shall maintain a Tangible Net Worth equal to or greater than $38,000,000, plus
50 percent of consolidated net income determined in accordance with GAAP and
earned by Borrower after September 30, 1996 (but excluding any net losses).
(n) Fixed Charge Coverage Ratio. Borrower (excluding Restricted
----------------------------
Subsidiaries) shall maintain a Fixed Charge Coverage Ratio, determined as of the
end of any month, commencing with the month ending October 31, 1996, calculated
on a rolling twelve-month basis, of not less than 1.5.
(o) Environmental Matters. No Related Person or Restricted
----------------------
Subsidiary shall cause or permit the use or storage of Hazardous Substances or
Solid Waste (as such terms are defined in the Mortgages) on, in or in connection
with such Persons's properties or disposal of Hazardous Substances or Solid
Waste from such Person's properties, except in full compliance with all
Environmental Laws (as such term is defined in the Mortgages), or make any use
of such Person's properties that results in any requirement that such Person
apply for or obtain a permit under RCRA (as such term is defined in the
Mortgages) or other Environmental Law for the treatment, storage or disposal of
Hazardous Substances or Solid Waste. Borrower covenants and agrees to keep or
cause each Related Person's properties to be kept free of any Hazardous
Substances or Solid Waste except in full compliance with all Environmental Laws,
and, promptly upon the discovery that the presence of any such substance on any
of their respective properties is not in full compliance, to remove the same (or
if removal is prohibited by law, to take whatever action is required by law) at
Borrower's sole expense.
40
<PAGE>
(p) Additional Title Requirements.
------------------------------
(i) If Borrower's operations, plant or equipment on its Siloam
facility are to be expanded beyond the 190-acre area it presently occupies and
which is described in the Mortgagee's title insurance policy delivered to the
Agent pursuant to Subsection 3(a)(i)(D), Borrower will furnish the Agent with an
updated ACTA Form B mortgage title policy (or such other form as is acceptable
to the Agent) showing a first lien in favor of the Agent, for the benefit of the
Lenders, on such expanded area.
(ii) Within 45 days after the receipt of FERC approval to the
closure of the old Columbia Kenova Plant and the transfer of its site to
Borrower, Borrower shall provide Agent with evidence acceptable to Agent that
Borrower has marketable title to the Construction Premises as defined in the
Demolition Agreement together with an ALTA form B (or other form acceptable to
the Agent), mortgagee title insurance or a binder issued by a title insurance
company satisfactory to the Agent, insuring or undertaking to insure, in the
case of a binder, that the applicable Third Mortgage Amendment creates and
constitutes a valid first lien against such collateral in favor of the Agent,
subject only to permitted exceptions, with such endorsements and affirmative
insurance as the Agent may reasonably request.
(q) Capital Expenditure Review. Borrower shall consult with Lenders
---------------------------
concerning (i) the details of any single project with estimated capital
expenditures in excess of $10,000,000 or (ii) any capital contribution to any
Subsidiary in excess of $10,000,000. Not less than 45 days prior to entering
into a binding commitment to make such expenditure, Borrower will provide a
complete description of the proposed capital expenditure, the economic analysis
of the project and the projected impact on Borrower's financial condition and
business.
(r) Consent and Approvals. After consummation of the Reorganization,
---------------------
Borrower shall use reasonable, diligent, business efforts to obtain in a timely
fashion (to the extent not obtained prior to the Reorganization) all necessary
consents, permissions, and approvals by third parties or governmental
authorities in connection with the transfer of the Partnership's assets to
Borrower and the transfer of all governmental permits and licenses held by the
Partnership in connection with the operation of its business.
SECTION 10. NEGATIVE COVENANTS. Until payment in full of the Loans and
------------------
termination of all commitments by the Lenders to make Advances hereunder,
neither Borrower, any Restricted Subsidiary nor any of the other Related Persons
shall, without the prior written consent of the Required Lenders:
(a) Debt. Create, incur, assume or permit to exist any Debt, except:
-----
(i) The Loans and the Working Capital Facility;
41
<PAGE>
(ii) Debt incurred to finance the acquisition or construction by
Borrower of one or more projects consistent with Borrower's covenant
contained in Section 10(e) hereof and for which recourse is limited to the
property included in the project and is non-recourse to Borrower and the
Collateral;
(iii) Obligations under leases, whether capital or operating
leases, provided that the obligations payable in any one year do not, in
-------- ----
the aggregate, exceed $2,000,000;
(iv) Debt incurred pursuant to Borrower's, any Restricted
Subsidiary's or any Related Person's hedging activities related to such
Person's line of business in the futures or commodities market such that
(A) the liability under open lines of credit to finance futures contracts,
commodities and/or option contracts does not exceed $1,000,000 in the
aggregate at any one time outstanding, and (B) recourse is limited to
Borrower's, any Restricted Subsidiary's or such Related Person's position
in futures contracts;
(v) Current accounts and charges, payable or accrued, incurred
in the ordinary course of Borrower's, any Restricted Subsidiary's or any
Related Person's business; and
(vi) Debt incurred by MarkWest Resources, Inc. to Colorado
National Bank, a national banking association, for borrowed money.
(b) Liens . Create, assume or permit to exist any mortgage, pledge,
------
security interest, lien or other encumbrance upon any Restricted Subsidiary's or
Related Person's properties or assets, whether now owned or hereafter acquired,
real or personal, except:
(i) The Security Documents;
(ii) Liens for taxes not delinquent or being contested in good
faith and by appropriate proceedings and for which adequate reserves have
been set aside on such Person's books;
(iii) Operator's, mechanic's, workmen's, materialmen's and
other like liens arising in the Ordinary Course of Business in respect of
obligations not overdue or which are being contested in good faith and by
appropriate proceedings and for which adequate reserves have been set aside
on such Person's books and for which there is no risk of loss of any of the
Collateral;
42
<PAGE>
(iv) Liens or encumbrances, if any, permitted by the Security
Documents; and
(v) Liens securing Debt permitted by Section 10(a) above.
(c) Guaranty Obligations. Assume, guarantee, endorse or otherwise
---------------------
become or be contingently liable upon (by direct or indirect agreement,
contingent or otherwise, or by operation of law, to provide funds for payment,
to supply funds to, or otherwise invest in, a debtor, or otherwise assure a
creditor against loss) for the Debt, obligation, undertaking or other liability
of any other Person, or otherwise become or be responsible in any manner
(whether by agreement to purchase any obligations, stock, assets, goods or
services, or to supply or advance any funds, assets, goods or services, or
otherwise) with respect to any undertaking of any other Person, except (i)
guarantees by Borrower of Debt incurred by MarkWest Resources, Inc. in
connection with San Juan and Piceance Basin projects, so long as such guarantees
do not exceed $1,000,000 in the aggregate at any one time (copies of each such
guarantee shall be provided to Agent within ten days after execution), (ii) the
guarantee by Borrower contained in Section 2.5 of the Participation, Ownership
and Operating Agreement for West Shore Processing Company, LLC dated May 2,
1996, (iii) the Secured Guarantees dated May 2, 1996 executed by MarkWest
Michigan, L.L.C. as Manager of West Shore Processing Company LLC and Basin
Pipeline, L.L.C. in favor of Bank of America Illinois, and (iv) endorsements of
negotiable instruments for deposit or collection and similar transactions in the
ordinary course of its business.
(d) Loans and Advances. Make any loans or advances to any Person,
-------------------
except for (i) accounts receivable or notes receivable arising from the sale or
lease of goods or services in the Ordinary Course of Business; (ii) as part
payment in the Ordinary Course of Business on its ordinary equipment rental,
repair, replacement and operating needs, or (iii) loans and advances to officers
and employees of Borrower to the extent and in the amount reflected on in
Exhibit J.
- ---------
(e) Limitation on Investments and New Businesses. (i) Make any
---------------------------------------------
expenditure or commitment or incur any obligation or enter into or engage in any
transaction except in the Ordinary Course of Business, (ii) engage directly or
indirectly in any business or conduct any operations except in connection with
gas processing and gathering, gas liquids fractionation, gas and gas liquids
marketing, MTBE manufacturing, refining and marketing and gasoline blending and
oil and gas production, (iii) make any capital contributions to Restricted
Subsidiaries in excess of $5,000,000, (iv) make any acquisitions of or capital
contributions to or other investments in any Person other than Restricted
Subsidiaries unless the following conditions are satisfied: (A) the investment
is in a Person engaged in any of the businesses described in (e)(ii) above, and
(B) Agent has received 10 days' advance notice of such investment.
Notwithstanding the foregoing, the Related Persons may make (1) investments in
open market commercial paper, maturing within 365 days after acquisition
thereof, which has a credit rating of at least A-2 or P-2 by either Standard &
Poor's Corporation or Moody's Investors Service, Inc., (2) marketable
43
<PAGE>
obligations issued or unconditionally guaranteed by the United States of America
or an instrumentality or agency thereof and entitled to the full faith and
credit of the United States of America, and (3) demand deposits, time deposits
(including certificates of deposit), repurchase agreements, Eurodollar time
deposits or bankers' acceptances, maturing in each case within 12 months from
the date of deposit thereof, with a domestic office of any Lender.
(f) Mergers and Consolidations. Merge or consolidate into or with
---------------------------
any Person, or sell, lease, convey, transfer or otherwise dispose of all or a
substantial part of its assets to or with any Person, except: (i) a merger or
consolidation in connection with the acquisition by Borrower of property or
facilities as a result of a stock or equity transaction in the ordinary course
of its business and after the consummation of which Borrower is the surviving
entity; (ii) a merger or consolidation of any Consolidated Subsidiary of the
Borrower with or into the Borrower, provided that the Borrower shall be the
--------
continuing or surviving corporation; in both cases, so long as no Event of
Default or Unmatured Event of Default has occurred or is continuing or would be
caused by the consummation of such merger or consolidation and Agent shall have
received within 10 days after such merger or consolidation a certificate from
the chief financial officer or any Vice President of Borrower that Borrower is
in compliance with the provisions of this Agreement.
(g) Location of Inventory. Borrower shall not store any of its
----------------------
products or inventory except at the locations described in Exhibit F hereto
---------
without giving the Agent notice of a change within 30 days thereof and the
execution of any and all Security Documents the Agent and its counsel deem
necessary or desirable to grant a perfected first priority lien in favor of
Agent for the benefit of the Lenders in such products or inventory;
notwithstanding the foregoing, Borrower shall not, under any circumstances,
store any of its products or inventory in a location outside of the United
States.
(h) Burdensome Undertakings. Undertake, or become contractually
------------------------
bound to undertake, any action not in the Ordinary Course of Business that could
materially adversely affect Borrower or its business, properties, prospects,
assets, operations or condition (financial or otherwise).
(i) Change in Location of Business. Move its place of business or
-------------------------------
chief executive office or the place where Borrower keeps its books and records
concerning the Collateral (including, without limitation, the records with
respect to its accounts and contract rights), from one state to another without
giving the Agent 45 days' prior written notice of the proposed new location
thereof.
(j) Restricted Distributions. (i) Make any dividends or
-------------------------
distributions of assets, or (ii) declare or pay any cash or liquidating
distribution dividends or (iii) make any other distribution to any of its
shareholders, or (iv) redeem, purchase or otherwise acquire any shares of
44
<PAGE>
the capital stock of the Borrower, or (v) prepay, purchase or redeem, any
subordinated indebtedness of Borrower, or (vi) issue any securities or capital
stock or any options, warrants, rights or other agreements to issue any such
securities, other than the following:
(x) Dividends paid in common stock of Borrower;
(y) As to any Subsidiary of Borrower, the foregoing restrictions
of this Section 10(j) shall not apply.
(k) Disposition of Assets. Sell, transfer, lease, exchange or
----------------------
otherwise dispose of any of its assets, real or personal, except as follows:
(i) sales, transfers, leases, exchanges or other dispositions of
assets by Borrower or any other Related Person or Restricted Subsidiary in
the Ordinary Course of Business; and
(ii) sales, transfers, leases, exchanges or other dispositions
of assets by Borrower and the other Related Persons or Restricted
Subsidiaries not in the Ordinary Course of Business, so long as such
transaction is on fair and reasonable terms and the proceeds from all such
transactions do not exceed $250,000 in the aggregate in any calendar year.
(l) ERISA. Establish, maintain or contribute to any ERISA Plans or
------
incur any obligation to contribute to any "multiemployer plan" as defined in
Section 4001 of ERISA or represent, promise, or contract (in oral or written
form) to any current or former employee (individually or as a group) that such
current or former employee(s) would be provided, at any cost to any member of
the Controlled Group, with any employee welfare benefits (as defined in Section
3(1) of ERISA) following retirement or termination of employment.
(m) Use of Proceeds. Use any funds from the Loans directly or
----------------
indirectly for the purpose, whether immediate, incidental or ultimate, of
purchasing, acquiring or carrying any "margin stock" or any "margin securities"
(as such terms are defined respectively in Regulation U and Regulation G
promulgated by the Board of Governors of the Federal Reserve System) or to
extend credit to others directly or indirectly for the purpose of purchasing or
carrying any such margin stock or margin securities.
(n) Transactions with Affiliates. Enter into any transaction with
-----------------------------
any Affiliate, except any transaction that is in the ordinary course of such
Person's business and that is upon fair and reasonable terms no less favorable
to such Person than would obtain in a comparable arm's-length transaction with a
Person not an Affiliate of such Person.
45
<PAGE>
(o) Contracts; Take-or-Pay Agreements. Amend, modify or terminate
----------------------------------
the Columbia Contracts in any manner or permit any of them to be amended or
modified or any term waived by any party thereto or assign any of its rights
thereunder, unless: (x) the Agent and the Lenders have been notified by the
Borrower of such proposed amendment, modification or termination, (y) the
Lenders had an opportunity to review such proposed amendment, modification or
termination, and (z) the Lenders have consented to such amendment, modification
or termination, which consent shall not be unreasonably withheld. Enter into
any "take-or-pay" contract or other contract which requires it to pay for oil,
gas, other hydrocarbons or other minerals prior to taking delivery thereof,
provided that Borrower may enter into such contracts so long as the term thereof
- --------
does not exceed one year, and provided further that Borrower may enter into such
-------- -------
contracts if the products purchased thereunder are needed by the associated
facility at the time of delivery thereof. Examples of permitted contracts
include (i) futures contracts to hedge (but not speculate) against future
changes in prices and (ii) reciprocal exchange agreements or back to back
contracts in which Borrower avoids the cost of all or a portion of the cost of
transportation of natural gas or natural gas liquids (in this subsection called
"gas and liquids") processed by it by exchanging such gas and liquids for gas
and liquids processed by others which are closer in location to Borrower's
ultimate purchaser. Examples of prohibited contracts include: (1) essentially
speculative contracts entered into primarily in hopes of benefitting from price
changes and (i) providing for the purchase of gas and liquids not covered by a
back to back contract permitting an exchange or sale thereof within 180 days
after the date of purchase or (ii) providing for the purchase of gas and liquids
that will not be consumed in Borrower's operations within 180 days after the
purchase thereof; and (2) contracts for the future sale or purchase of gas or
liquids that are not for the purpose of facilitating the ultimate sale of gas or
liquids owned, distributed or processed by Borrower. Notwithstanding the
foregoing provisions of this section, Borrower may enter into speculative
contracts not related to Borrower's operations primarily in hopes of benefitting
from price changes so long as the aggregate liability (including contingent or
potential liability) and costs of Borrower thereunder do not exceed $1,250,000
at any time.
(p) Amendments to Organizational Documents. Amend the articles and
---------------------------------------
by laws of Borrower or any other organizational document of any Related Person
or Restricted Subsidiary.
SECTION 11. EVENTS OF DEFAULT. The occurrence of any of the following
-----------------
shall constitute an event of default ("Event of Default") hereunder:
----------------
(a) Non-Payment. Failure by Borrower to (i) pay any installment of
------------
principal of, or interest on, the Notes, any fees or other amounts payable
hereunder or under the Notes or any of the Security Documents within three
Business Days after its due date, or (ii) comply with the provisions of Section
5 within the 30-day period set forth therein.
46
<PAGE>
(b) Certain Defaults. Failure by Borrower to perform or observe any
-----------------
term, covenant, agreement, condition or provision contained in any of Sections
2(a)(ii), 9(c)(ii), (g), (h), (k), (l), (m) or (n), or Sections 10(a) through
(p), inclusive.
(c) Other Defaults. Failure by Borrower to perform or observe any
---------------
other covenant, agreement, condition or provision contained in this Agreement or
in the Notes (which covenant, agreement, condition or provision is not included
in Subsection 11(a) or (b)), and such failure continues unremedied for a period
of 30 days.
(d) Representation or Warranty. Any representation or warranty of
---------------------------
the Borrower, whether contained in this Agreement or in any certificate or other
writing required or contemplated by this Agreement or in the Security Agreement,
or any representation or warranty of any party to a Covenant Agreement shall be
false or misleading in any material respect as of the date made or deemed made.
(e) Security Documents.
-------------------
(i) Occurrence of any of the events of default defined in any of
the Security Documents.
(ii) Any of the Security Documents shall for any reason (other
than pursuant to the terms thereof or as a direct result of any act or
omission of Lenders or Agent) cease to create a valid security interest in
the collateral purported to be covered thereby or such security interest
shall for any reason cease to be a perfected and first priority lien and
security interest, subject only to those matters expressly permitted by
Section 10(b) hereof or by the applicable Security Document.
(iii) Failure by Borrower to perform or observe any term,
covenant, agreement, condition or provision contained in the Security
Agreement.
(f) Judgments. Any money judgment, writ or warrant of attachment, or
----------
similar process in an amount of $250,000 (in the aggregate) or more shall be
entered or filed against any Related Person or Restricted Subsidiary or any of
its assets and shall remain unvacated, unbonded or unstayed for a period of 30
calendar days, or in any event later than five calendar days prior to the date
of any proposed sale thereunder.
(g) Insolvency. Any Related Person or Restricted Subsidiary shall
-----------
become insolvent, admit in writing its inability to pay its debts as they
mature, or make an assignment for the benefit of creditors; or apply for or
consent to the appointment of a receiver or trustee for it or for a substantial
part of its property or business; or such a receiver or trustee otherwise shall
be appointed and shall not be discharged within 30 calendar days after such
appointment.
47
<PAGE>
(h) Bankruptcy, Etc.. Bankruptcy, insolvency, reorganization or
-----------------
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any other law for the relief of debtors shall be instituted by or against any
Related Person or Restricted Subsidiary (except for an involuntary petition
against any Related Person or Restricted Subsidiary, which shall not constitute
an Event of Default if such petition is vacated or dismissed within 15 Business
Days after the filing thereof), or any order, judgment or decree shall be
entered against any Related Person or Restricted Subsidiary decreeing its
dissolution or division.
(i) Cross-Default. Any event of default shall occur as to any other
--------------
agreement now or hereafter existing relating to extensions of credit to any
Related Person or Restricted Subsidiary by the Lenders or any of them, including
without limitation the Working Capital Facility, or by any third party,
including without limitation, any extensions of credit to MW Michigan, Inc. or
its Subsidiaries, or any event which with the passage of time or giving of
notice, or both, would permit the holder or holders of such indebtedness to
cause such indebtedness to be declared to be due and payable prior to its stated
maturity.
(j) ERISA. An employee benefit plan that is intended to be qualified
------
under the Code shall lose its qualification, and the loss can reasonably be
expected to impose on the Controlled Group liability (for additional taxes to
Plan participants, or otherwise) in the aggregate amount of $250,000 or more;
any member of the Controlled Group engages in or becomes liable for a non-exempt
prohibited transaction and the initial tax or additional tax under Section 4975
of the Code might reasonably be expected to exceed $100,000; a violation of
Section 404 or 405 of ERISA or Section 401(a)(2) of the Code that can be
reasonably expected to expose the Controlled Group to liability in excess of
$250,000; any member of the Controlled Group is assessed a tax under Section
4980B of the Code or is liable for failure to comply with the Section 4980B
notice and continuation coverage requirements that can be reasonably expected to
result in liability to the Controlled Group in excess of $250,000; any member of
the Controlled Group is assessed a penalty under Section 502(c)(2) of ERISA or
Section 6652(e) of the Code that can be reasonably expected to expose the
Controlled Group to liability in excess of $250,000; or any combination of the
foregoing events that involves potential liability in excess of $250,000.
(k) Loan Documents. This Agreement, the Notes, any of the other Loan
---------------
Documents shall for any reason be revoked or invalidated, or otherwise cease to
be in full force and effect, except as a direct result of the acts or omissions
of the Agent or the Lenders.
(l) Material Adverse Change. Any material adverse change occurs in
------------------------
Borrower's financial condition or business or operations (including, without
limitation, any material adverse change caused by Borrower becoming subject to
any statute, regulation or order of any governmental authority after the date
hereof).
48
<PAGE>
(m) Change in Control. John M. Fox and the members of his immediate
------------------
family cease to own collectively at least twenty-five percent (25%) of the
issued and outstanding voting stock of Borrower.
(n) Columbia Contracts. Any of the Columbia Contracts shall cease to
-------------------
be in full force and effect for any reason except in conformity with Section
10(o) hereof.
(o) Regulatory Change. There shall be any legislative action by any
------------------
local, state or federal agency or other governmental entity resulting in any
regulatory control of Borrower's operations, the result of which has or could
have, in Lenders' reasonable opinion, a significant financial impact on, or
control of, its financial condition.
SECTION 12. REMEDIES.
--------
(a) Automatic Acceleration of Loan. Upon the occurrence of any Event
-------------------------------
of Default specified in Section 11(g) or (h), the obligation of the Lenders to
make Advances under the Loans shall automatically terminate and the unpaid
principal amount of the Loans and all interest and other amounts payable
hereunder, under the Notes or any of the Security Documents, shall automatically
become due and payable without further act of the Agent or the Lenders.
(b) Optional Acceleration of Loan. Upon the occurrence of any Event
------------------------------
of Default (other than those specified in Section 12(a) above), the Agent, at
the direction of Lenders whose Loan Shares aggregate 66-2/3 percent, may, from
time to time, do any or all of the following:
(i) Declare all or any part of the Loans to be forthwith due and
payable, together with all accrued and unpaid interest thereon and all
other amounts payable hereunder or under any of the other Loan Documents,
without presentment, demand, protest or other notice of any kind, all of
which are expressly waived by Borrower;
(ii) Declare the Commitments terminated;
(iii) With respect to any and all contingent, unmatured or
unliquidated obligations of Borrower hereunder, declare and require that
cash in an amount equal to the aggregate outstanding amount of all such
obligations be immediately paid over, pledged and delivered to the Agent on
behalf of the Lenders to be held as cash collateral for such obligations;
and
(iv) Proceed with every remedy provided for herein or in the
Notes, the Security Documents or any contract, agreement or undertaking
supplemental hereto and
49
<PAGE>
the Lenders shall have, without limitation, all of the rights of a secured
party under the Uniform Commercial Codes as then in effect with respect to
any security then held for the Loans.
The enforcement of any rights of the Agent and the Lenders as to the
security for the Loans shall not affect the rights of the Agent or the Lenders
to enforce payment of the Loans against Borrower and to recover judgment against
Borrower for any portion thereof remaining unpaid.
(c) Setoff. Upon the occurrence of any Event of Default, each Lender
-------
shall have the right at any time and from time to time, without prior notice to
Borrower (which notice is hereby waived by Borrower to the fullest extent
permitted by law), to setoff and apply any debt owing to Borrower by such
Lender, including without limitation, any deposits (general or special, time or
demand, provisional or final) now or hereafter maintained by Borrower with such
Lender, against any and all obligations of Borrower now or hereafter existing
under this Agreement or any of the other Loan Documents, although such
obligations may be contingent or unmatured, and for such purpose Borrower hereby
grants a security interest in and assigns to each Lender all such deposit
accounts.
SECTION 13. THE AGENT.
---------
(a) Appointment. Each Lender hereby irrevocably designates and
------------
appoints Norwest as the Agent of such Lender under this Agreement and the other
Loan Documents, and each such Lender irrevocably authorizes Norwest as the Agent
for such Lender, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
(b) Delegation of Duties. The Agent may execute any of its duties
---------------------
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible to the
Lenders for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
(c) Exculpatory Provisions. Neither the Agent nor any of its
-----------------------
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action
50
<PAGE>
lawfully taken or omitted to be taken by it or such Person or entity under or in
connection with this Agreement or any other Loan Document (except for its or
such Person's or entity's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or any representative thereof
contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Agent under or in connection with, this Agreement or any other Loan
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or the Notes or any other Loan Document or for
any failure of the Borrower to perform its obligations hereunder or thereunder.
The Agent shall not be under any obligation to any Lender to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, this Agreement or any other Loan Document, or to inspect
the properties, books or records of the Borrower.
(d) Reliance by Agent. The Agent shall be entitled to rely, and
------------------
shall be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, telecopy or telex message, statement,
order or other document or conversation believed by it to be genuine and correct
and to have been signed, sent or made by the proper person or persons and upon
advice and statements of legal counsel (including, without limitation, counsel
to the Borrower), independent accountants and other experts selected by the
Agent. The Agent may deem and treat the payee of any Note as the owner thereof
for all purposes unless a written notice of assignment, negotiation or transfer
thereof shall have been filed with the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate or it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the Notes and the other Loan Documents in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Notes.
(e) Notice of Default. The Agent shall not be deemed to have
------------------
knowledge or notice of the occurrence of any Unmatured Event of Default or Event
of Default hereunder unless the Agent has received notice from a Lender or the
Borrower referring to this Agreement, describing such Unmatured Event of Default
or Event of Default and stating that such notice is a "notice of default." In
the event that the Agent receives such a notice, the Agent shall give notice
thereof to the Lenders.
(f) Non-Reliance on Agent and Other Lenders. Each Lender expressly
----------------------------------------
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents,
51
<PAGE>
attorneys-in-fact or affiliates has made any representations or warranties to it
and that no act by the Agent hereinafter taken, including any review of the
affairs of the Borrower, shall be deemed to constitute any representation or
warranty by the Agent to any Lender. Each Lender represents to the Agent that it
has, independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower and made its
own decision to make its Loans hereunder and enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon the
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Borrower. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Borrower which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
(g) Indemnification. The Lenders agree to indemnify the Agent in its
----------------
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to the
respective amounts of their original Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of this Agreement, any of the other Loan Documents or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Agent under or in connection with any of the foregoing; provided that no
--------
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Agent's gross negligence or
willful misconduct. The agreements in this subsection shall survive the payment
of the Notes and all other amounts payable hereunder.
(h) Agent and Lenders in Their Individual Capacity. Each of the
-----------------------------------------------
Agent, the Lenders and their respective affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower as
though such Person was not the Agent and/or a Lender, as the case may be,
hereunder and under the other Loan Documents. With respect to Advances made by
it and any Note issued to it, the Agent shall have the same rights and powers
under this Agreement and the other Loan Documents as any Lender and may exercise
52
<PAGE>
the same as though it were not the Agent, and the terms "Lender" and "Lenders"
shall include the Agent in its individual capacity.
(i) Successor Agent. The Agent may resign as Agent upon 10 days'
----------------
notice to the Lenders. If the Agent shall resign as Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent shall be
approved by the Borrower, whereupon such successor agent shall succeed to the
rights, powers and duties of the Agent, and the term "Agent" shall mean such
successor agent effective upon its appointment, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further act
or deed on the part of such former Agent or any of the parties to this Agreement
or any holders of the Notes, other than to give notice of the appointment of
such successor agent to Borrower. Borrower is entitled to rely upon the
existing Agent until Borrower has received notice of the appointment of a
successor agent. After any retiring Agent's resignation as Agent, the
provisions of this subsection shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement and the
other Loan Documents.
(j) Agent's Fee. To compensate Agent for performing its duties under
------------
the Loan Documents and for expenses incurred by Agent in connection with such
performance, Borrower shall pay to Agent an agent's fee in an amount mutually
agreed upon by Borrower and Agent.
(k) Borrower Entitled to Rely on Agent. Borrower shall be entitled
-----------------------------------
to rely upon the Agent's written actions and representations.
SECTION 14. MISCELLANEOUS.
-------------
(a) No Waiver; Cumulative Remedies. No delay on the part of the
-------------------------------
Agent or any Lender in exercising any right, power, privilege or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise or waiver of any right, power, privilege, or remedy hereunder preclude
any other or further exercise of such right, power, privilege, or remedy
hereunder or the exercise of any other right, power or privilege or remedy. The
rights and remedies of the Agent and the Lenders contained herein are cumulative
and not exclusive of any right or remedy which the Agent and the Lenders shall
otherwise have pursuant to the Security Documents, the Notes or applicable law.
The obligations of Borrower contained herein are cumulative, and compliance by
Borrower with any covenant shall not excuse compliance by Borrower with any
other covenant.
(b) Notices. All notices given hereunder shall be in writing, shall
--------
be given by certified mail, return receipt requested, overnight courier service,
telecopy, facsimile or copy delivered by hand, and, (i) if mailed, shall be
deemed received three Business Days after having
53
<PAGE>
been deposited in a receptacle for United States mail, postage prepaid, (ii) if
delivered by overnight air courier service, shall be deemed received one
Business Day after having been deposited with such overnight air courier
service, postage prepaid, and (iii) if delivered by telex, telecopy or hand
delivery, shall be deemed received on the day the notice is sent, in each case
addressed as follows:
If to Borrower, to:
MarkWest Hydrocarbon, Inc.
5613 DTC Parkway, Suite 400
Englewood, Colorado 80111
Attention: Finance Department
Fax. No.: (303) 290-8769
If to the Lenders, to:
Norwest Bank Colorado, National Association
1740 Broadway
Denver, Colorado 80274-8699
Attention: Energy and Minerals Group
Fax. No.: (303) 863-5196
First American National Bank
6000 Poplar Avenue
Memphis, TN 38119
Attention: National Accounts
Fax. No.: (901) 762-5665
N M Rothschild and Sons Limited
New Court, St. Swithin's Lane
London, England EC4 P 4DU
Fax No.: 071-280-5139
With a copy to:
Rothschild Denver Inc.
3020 Republic Plaza
370 Seventeenth Street
Denver, Colorado 80202
Fax No.: (303) 607-0998
54
<PAGE>
The First National Bank of Chicago
One First National Plaza
Mail Suite 0363
Chicago, IL 60670
Attention: William J. Clifford, Jr.
Fax No.: (312) 732-3055
If to the Agent, to:
Norwest Bank Colorado, National Association
1740 Broadway
Denver, Colorado 80274-8699
Attention: Energy and Minerals Group
Fax. No.: (303) 863-5196
Any party may, by written notice so delivered to the others, change the address
or facsimile number to which delivery shall thereafter be made.
(c) Counterpart Execution. This Agreement may be executed in any
----------------------
number of counterparts which together will be but one and the same instrument.
This Agreement shall become effective whenever each party shall have signed at
least one counterpart.
(d) Governing Law; Entire Agreement. THIS AGREEMENT AND THE NOTES
--------------------------------
SHALL BE DEEMED TO BE CONTRACTS UNDER THE LAWS OF COLORADO AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE. Such documents
and any other Loan Documents, together with the Security Documents, constitute
and incorporate the entire agreement between the Agent, the Lenders and Borrower
concerning the subject matter hereof and thereof, and supersede and cancel any
prior or contemporaneous agreements, verbal or written, between the Agent, the
Lenders and Borrower concerning the subject matter hereof and thereof.
(e) Amendments and Waivers. No waiver of any provision of this
-----------------------
Agreement, the Notes, or any of the Security Documents, and no consent with
respect to any departure by Borrower therefrom or by the respective parties to
the Covenant Agreements, shall be effective unless the same shall be in writing
and signed by the Agent, at the direction of the Required Lenders. No amendment
of any provision of this Agreement shall be effective unless the same shall be
in writing and signed by the Agent and the Required Lenders. All consents,
waivers and other action to be taken by the Lenders hereunder shall only be
taken upon approval of the Required Lenders. Any waiver shall be effective only
in the specific instance and for the specific purpose for which given. Any
consent or approval contemplated herein by , the Required Lenders or the Lenders
may be granted or withheld in the sole discretion of such Persons.
55
<PAGE>
(f) Costs, Expenses and Indemnity. Borrower shall reimburse and pay
------------------------------
the Agent, the Issuer and the Lenders for all fees, costs and expenses
(including, without limitation, attorneys' fees, court costs and legal expenses
and consultants' and experts' fees and expenses, the costs of the Agent's
inspection of the Collateral and the costs and expenses of title or lien
searches and filing and recording fees and expenses), reasonably incurred or
expended in connection with (i) the preparation, execution and delivery of this
Agreement, the Notes and the other Loan Documents, (ii) the enforcement of this
Agreement, the Notes and the other Loan Documents and any amendments, waivers or
modifications of such documents, (iii) the breach by Borrower of any
representation or warranty contained in this Agreement, the Security Documents
or any other Loan Document, (iv) the failure by Borrower to perform any
agreement, covenant, condition, indemnity or obligation contained in this
Agreement, the Security Documents or any other Loan Document, (v) the Agent's or
the Lenders' exercise of any of their rights and remedies under this Agreement,
the Security Documents and the other Loan Documents, or (vi) the protection of
the Collateral and the liens thereon and security interests therein. Borrower
shall indemnify, defend and hold harmless the Agent, the Issuer and each Lender
and persons or entities owned or controlled by or affiliated with such Persons
and their respective directors, officers, shareholders, partners, employees,
consultants and agents (herein individually called an "Indemnified Party," and
-----------------
collectively called "Indemnified Parties") from and against, and reimburse and
-------------------
pay Indemnified Parties with respect to, any and all claims, demands,
liabilities, losses, damages (including, without limitation, actual,
consequential, exemplary and punitive damages), causes of action, judgments,
penalties, fees, costs and expenses (including, without limitation, attorneys'
fees, court costs and legal expenses and consultants' and experts' fees and
expenses), of any and every kind or character, known or unknown, fixed or
contingent, that may be imposed upon, asserted against or incurred or paid by or
on behalf of any Indemnified Party on account of, in connection with, or arising
out of (a) any bodily injury or death or property damage occurring in or upon or
in the vicinity of the Collateral through any cause whatsoever, (b) any act
performed or omitted to be performed hereunder or the breach of or failure to
perform any warranty, representation, indemnity, covenant, agreement or
condition contained in this Agreement, the Security Documents or any other Loan
Documents, (c) any transaction, act, omission, event or circumstance arising out
of or in any way connected with the Collateral or with this Agreement, the
Security Documents or any other Loan Documents, and (d) subject to the
exceptions and limitations contained in the Mortgages, the violation of or
failure to comply with any statute, law, rule, regulation or order now existing
or hereafter occurring, including without limitation, "Environmental Laws" (as
defined in the Mortgages) and statutes, laws, rules, regulations and orders
relating to "Hazardous Substances" (as defined in the Mortgages). The foregoing
indemnities shall not apply to any Indemnified Party to the extent the subject
of the indemnification is caused by or arises out of the gross negligence or
willful misconduct of that or another Indemnified Party or a successful suit by
Borrower against such Indemnified Party. If Borrower and the Indemnified Party
are jointly named in any action covered by this Section 13, the Indemnified
Party shall cooperate in the defense of such action to the extent its own rights
or defenses are not compromised thereby. Subject to the exceptions and
limitations contained in the
56
<PAGE>
Mortgages, the foregoing indemnities shall not terminate upon release,
foreclosure or other termination of this Agreement or the Security Documents,
but shall survive such release, foreclosure or termination and the repayment of
the Loans. Any amount to be paid hereunder by Borrower to the Agent, the Issuer
or any Lender or for which Borrower has indemnified an Indemnified Party shall
be a demand obligation owing by Borrower to the Agent, the Issuer or such Lender
and shall bear interest at the Late Payment Rate until paid, and shall
constitute a part of the Loans and be indebtedness secured by the Security
Documents.
(g) Inconsistent Provisions; Severability. In case of any
--------------------------------------
irreconcilable conflict between the provisions of this Agreement and those of
the Security Documents and the Notes, the provisions of this Agreement shall
govern. The invalidity, illegality or unenforceability of any provision of any
of the Loan Documents shall not in any way affect or impair the legality or
enforceability of the remaining provisions of each of the Loan Documents.
(h) Incorporation of Exhibits and Schedules. All Exhibits and
----------------------------------------
Schedules attached to this Agreement are a part hereof and are incorporated
herein for all purposes.
(i) Amendment of Defined Instruments. Unless the context otherwise
---------------------------------
requires or unless otherwise provided herein the terms defined in this Agreement
which refer to a particular agreement, instrument or document also refer to and
include all renewals, extensions and modifications of such agreement, instrument
or document, provided that nothing contained in this section shall be construed
to authorize any such renewal, extension or modification.
(j) References and Titles. All references in this Agreement to
----------------------
Exhibits, Schedules, Sections and Subsections and other subdivisions refer to
the Exhibits, Schedules, Sections and Subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Headings are for convenience
only and do not constitute any part of such subdivisions and shall be
disregarded in construing the language contained in such subdivisions. The
words "this Agreement", "this instrument", "herein", "hereof", "hereby",
"hereunder" and words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited. Pronouns in
masculine, feminine and neuter genders shall be construed to include any other
gender, and words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires.
(k) Calculations and Determinations. Unless otherwise expressly
--------------------------------
provided herein or unless the Lenders otherwise consent, all financial
statements and reports furnished to the Agent or the Lenders hereunder shall be
prepared and all financial computations and determinations pursuant hereto shall
be made in accordance with GAAP.
(l) Usury. It is not intended hereby to charge interest at a rate in
------
excess of the maximum rate of interest that the Agent and the Lenders may charge
to Borrower under
57
<PAGE>
applicable usury and other laws, but if, notwithstanding, interest in excess of
such rate shall be paid hereunder, the interest rates provided for herein shall
be adjusted to the maximum permitted under applicable law during the period or
periods that any of the interest rates otherwise provided herein would exceed
such rate and any excess amount applied at the Lenders' option to reduce the
outstanding principal balance of the Loans or to be returned to Borrower.
(m) Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT
---------------------------------
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION (a) ARISING UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING; AND EACH PARTY HEREBY AGREES AND CONSENTS
THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(n) Successors and Assigns. This Agreement shall be binding upon and
-----------------------
shall inure to the benefit of the parties hereto and their respective successors
and assigns, except that Borrower may not transfer or assign any of its rights
or obligations hereunder without the Agent's, the Issuer's and each of the
Lenders' prior written consent. The Notes, this Agreement and any other Loan
Document may be endorsed, assigned, or transferred in whole or in part by any
Lender, and any subsequent holder and assignee of same shall succeed to and be
possessed of the rights of such Lender under such documents to the extent
transferred and assigned; provided however, that such endorsement, assignment or
-------- -------
transfer shall not be binding upon Borrower until Borrower has received written
notice of such endorsement, assignment or transfer.
(o) Term of Agreement. Except as set forth in Section 14(f), this
------------------
Agreement shall continue in full force and effect so long as any indebtedness or
other obligation of Borrower to the Lenders remains unpaid or outstanding or
Borrower has any right to Advances hereunder.
(p) Jurisdiction. At the option of the Agent or the Lenders, an
-------------
action may be brought to enforce this Agreement in the District Court in and for
the City and County of Denver, State of Colorado, in the United States District
Court for the District of Colorado or in any other court in which venue and
jurisdiction are proper. Borrower and all guarantors hereof consent to venue
and jurisdiction in the District Court in and for the City and County of Denver,
State of Colorado and in the United States District Court for the District of
Colorado and to jurisdiction and service of process under Sections 13-1-
124(1)(a) and 13-1-125, Colorado Revised Statutes (1973), as amended, in any
action commenced to enforce this Agreement.
58
<PAGE>
(q) Assignment. Norwest, First American and Rothschild hereby assign
----------
and transfer to First Chicago, without any warranties either express or implied,
a sufficient part of all their rights, title and interest in, to and under the
Existing Revolver Agreement, the Loans, the Revolver Notes and all other Loan
Documents, so that all such rights shall be owned and held by Lenders on the
date hereof in the following percentages:
Norwest 25%
First American 25%
Rothschild 25%
First Chicago 25%
EXECUTED to be effective as of the day and year first above written.
MARKWEST HYDROCARBON, INC.
By:
-------------------------------------
John M. Fox,
President
By:
-------------------------------------
Rita E. Harvey,
Director of Finance and Treasurer
59
<PAGE>
NORWEST BANK COLORADO,
NATIONAL ASSOCIATION,
individually and as Agent
By:
--------------------------------
Thomas M. Foncannon,
Vice President
FIRST AMERICAN NATIONAL BANK
By:
--------------------------------
David C. May,
Executive Vice President
N M ROTHSCHILD AND SONS LIMITED,
a company organized and existing under
the laws of England
By:___________________________ By:______________________________
Name: ________________________ Name: ___________________________
Title: _______________________ Title: __________________________
THE FIRST NATIONAL BANK OF CHICAGO
By:______________________________
Name: ___________________________
Title: __________________________
60
<PAGE>
Exhibit A-1
-----------
FORM OF
SUBSTITUTE REVOLVER NOTE
------------------------
$10,000,000.00 Denver, Colorado
October __, 1996
MARKWEST HYDROCARBON, INC., a Delaware corporation ("Borrower"), the successor
--------
to MarkWest Hydrocarbon Partners, Ltd., a Colorado limited partnership (the
"Partnership"), with an address of 5613 DTC Parkway, Suite 400, Englewood, CO
- ------------
80111, for value received, hereby promises to pay to the order of Norwest Bank
Colorado, National Association (successor to Norwest Bank Denver, National
Association), a national banking association ("Lender"), on or before June 30,
------
2002, the principal sum of Ten Million Dollars ($10,000,000.00), or so much
thereof as may be advanced by Lender pursuant to the Amended and Restated Loan
Agreement of even date herewith, between Borrower, Norwest Bank Colorado,
National Association, individually and as agent, First American National Bank, N
M Rothschild and Sons Limited and [First Chicago NBD] (the "Loan Agreement"),
--------------
together with interest on the outstanding unpaid principal amount at a rate
equal to the LIBOR Rate or the Base Rate, plus the Applicable Margin, as
provided in the Loan Agreement.
This Note is one of the notes referred to in the Loan Agreement as the
Revolver Notes, and is issued pursuant to, and is subject to the terms and
provisions of, the Loan Agreement. This Note is issued in substitution,
replacement and rearrangement, but not in extinguishment or discharge, of the
Replacement Revolver Note dated September 8, 1995, as amended by the First
Allonge to Replacement Revolver Note dated as of May 31, 1996, in connection
with the assumption by Borrower of all of the obligations and business of the
Partnership and the assignment by Norwest, First American and Rothschild to
First Chicago of a portion of their interests in the Loans. All capitalized
terms used herein but not otherwise defined shall have the meanings set forth in
the Loan Agreement. All references herein to the "Loan Agreement" refer to such
agreement as it may be amended from time to time.
As of June 30, 1998, the aggregate unpaid principal amount outstanding under
this Note shall be repaid to Lender in sixteen equal quarterly installments,
commencing September 30, 1998, as more fully provided in the Loan Agreement,
together with accrued and unpaid interest thereon. All remaining outstanding
principal of and interest on this Note shall be due and payable no later than
June 30, 2002.
A-1-1
<PAGE>
Interest shall accrue daily, shall be payable in arrears on the Interest
Payment Date, commencing October 31, 1996 and at the maturity of this Note, and
shall be calculated on the basis of a 365 or 366-day year, as appropriate for
Base Rate Loans, and a year of 360 days for LIBOR Rate Loans. All payments of
principal and interest hereof shall be made as provided in the Loan Agreement in
immediately available funds and without set-off or counterclaim or deduction of
any kind.
Notwithstanding anything to the contrary contained in this Note, overdue
principal, and (to the extent permitted under applicable law) overdue interest,
whether caused by acceleration of maturity or otherwise, shall bear interest at
the Late Payment Rate and shall be immediately due and payable.
It is not intended hereby to charge interest at a rate in excess of the
maximum rate of interest that Lender may charge to Borrower under applicable
usury and other laws, but if, notwithstanding, interest in excess of such rate
shall be paid hereunder, the interest rate on this Note shall be adjusted to the
maximum permitted under applicable law during the period or periods that the
interest rate otherwise provided herein would exceed such rate and any excess
amount applied at Lender's option to reduce the outstanding principal balance of
this Note or to be returned to Borrower.
This Note is secured by, and the holder of this Note is entitled to the
benefits of the Security Documents described in the Loan Agreement, and the
liens and security interests under the Security Documents that secure the
obligations under this Note are hereby ratified and confirmed in all respects
and remain in full force and effect. Reference is made to the Security
Documents for a description of the property covered thereby and the rights,
remedies and obligations of the holder hereof in respect thereto.
Lender shall maintain a record of all advances hereunder and all payments made
on this Note until Lender has been repaid in full; provided, however that the
-----------------
failure, error or omission by Lender to maintain such a record shall not
diminish or otherwise affect the obligation of Borrower to repay the amount
outstanding hereunder and any other amounts due to Lender.
If Borrower fails to pay any amount due under this Note and Lender has to take
any action to collect the amount due or to exercise its rights under this Note
or the Security Documents, including without limitation retaining attorneys for
collection of this Note, or if any suit or proceeding is brought for the
recovery of all or any part of or for protection of the Obligations or to
foreclose the Security Documents or to enforce Lender's rights under the
Security Documents, then Borrower agrees to pay on demand all costs and expenses
of any such action to collect, suit or proceeding, or any appeal of any such
suit or proceeding, incurred by the holder hereof, including without limitation
the fees and disbursements of attorneys for the holder hereof.
A-1-2
<PAGE>
Borrower, and all endorsers, sureties and guarantors of this Note, hereby
severally waive demand, presentment for payment, notice of dishonor, notice of
acceleration or intent to accelerate, protest, notice of protest, diligence in
collecting and assents to any extension of time with respect to any payment due
under this Note, to any substitution or release of collateral and to the
addition or release of any party. No waiver by Lender of any payment or other
right under this Note shall operate as a waiver of any other payment or right.
If any provision in this Note shall be held invalid, illegal or unenforceable
in any jurisdiction, the validity, legality or enforceability of any defective
provisions shall not be in any way affected or impaired in any other
jurisdiction, nor shall the invalid, illegal or unenforceable provision affect
or impair any other provision of this Note.
No delay or failure of the holder of this Note in the exercise of any right or
remedy provided for hereunder shall be deemed a waiver of such right or remedy
by the holder hereof, and no exercise of any right or remedy shall be deemed a
waiver of any other right or remedy that the holder may have.
Any notices given hereunder shall be in writing and shall be given as provided
in the Loan Agreement.
At the option of Lender, an action may be brought to enforce this Note in the
District Court in and for the City and County of Denver, State of Colorado, in
the United States District Court for the District of Colorado or in any other
court in which venue and jurisdiction are proper. Borrower and all endorsers,
sureties and guarantors hereof consent to venue and jurisdiction in the District
Court in and for the City and County of Denver, State of Colorado and in the
United States District Court for the District of Colorado and to jurisdiction
and service of process under Sections 13-1-124(1)(a) and 13-1-125, Colorado
Revised Statutes (1973), as amended, in any action commenced to enforce this
Agreement.
THIS NOTE IS TO BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS OF THE
STATE OF COLORADO.
MARKWEST HYDROCARBON, INC.
By:
---------------------------------------
John M. Fox, President
By:
---------------------------------------
A-1-3
<PAGE>
Rita E. Harvey, Director of Finance
and Treasurer
A-1-4
<PAGE>
Exhibit A-2
-----------
FORM OF
SUBSTITUTE REVOLVER NOTE
------------------------
$10,000,000.00 Denver, Colorado
October __, 1996
MARKWEST HYDROCARBON, INC., a Delaware corporation ("Borrower"), the successor
--------
to MarkWest Hydrocarbon Partners, Ltd., a Colorado limited partnership (the
"Partnership"), with an address of 5613 DTC Parkway, Suite 400, Englewood, CO
- ------------
80111, for value received, hereby promises to pay to the order of First American
National Bank, a national banking association ("Lender"), on or before June 30,
------
2002, the principal sum of Ten Million Dollars ($10,000,000.00), or so much
thereof as may be advanced by Lender pursuant to the Amended and Restated Loan
Agreement of even date herewith, between Borrower, Norwest Bank Colorado,
National Association, individually and as agent, First American National Bank, N
M Rothschild and Sons Limited and [First Chicago NBD] (the "Loan Agreement"),
--------------
together with interest on the outstanding unpaid principal amount at a rate
equal to the LIBOR Rate or the Base Rate, plus the Applicable Margin, as
provided in the Loan Agreement.
This Note is one of the notes referred to in the Loan Agreement as the
Revolver Notes, and is issued pursuant to, and is subject to the terms and
provisions of, the Loan Agreement. This Note is issued in substitution,
replacement and rearrangement, but not in extinguishment or discharge, of the
Replacement Revolver Note dated September 8, 1995, as amended by the First
Allonge to Replacement Revolver Note dated as of May 31, 1996, in connection
with the assumption by Borrower of all of the obligations and business of the
Partnership and the assignment by Norwest, First American and Rothschild to
First Chicago of a portion of their interests in the Loans. All capitalized
terms used herein but not otherwise defined shall have the meanings set forth in
the Loan Agreement. All references herein to the "Loan Agreement" refer to such
agreement as it may be amended from time to time.
As of June 30, 1998, the aggregate unpaid principal amount outstanding under
this Note shall be repaid to Lender in sixteen equal quarterly installments,
commencing September 30, 1998, as more fully provided in the Loan Agreement,
together with accrued and unpaid interest thereon. All remaining outstanding
principal of and interest on this Note shall be due and payable no later than
June 30, 2002.
A-2-1
<PAGE>
Interest shall accrue daily, shall be payable in arrears on the Interest
Payment Date, commencing October 31, 1996 and at the maturity of this Note, and
shall be calculated on the basis of a 365 or 366-day year, as appropriate for
Base Rate Loans, and a year of 360 days for LIBOR Rate Loans. All payments of
principal and interest hereof shall be made as provided in the Loan Agreement in
immediately available funds and without set-off or counterclaim or deduction of
any kind.
Notwithstanding anything to the contrary contained in this Note, overdue
principal, and (to the extent permitted under applicable law) overdue interest,
whether caused by acceleration of maturity or otherwise, shall bear interest at
the Late Payment Rate and shall be immediately due and payable.
It is not intended hereby to charge interest at a rate in excess of the
maximum rate of interest that Lender may charge to Borrower under applicable
usury and other laws, but if, notwithstanding, interest in excess of such rate
shall be paid hereunder, the interest rate on this Note shall be adjusted to the
maximum permitted under applicable law during the period or periods that the
interest rate otherwise provided herein would exceed such rate and any excess
amount applied at Lender's option to reduce the outstanding principal balance of
this Note or to be returned to Borrower.
This Note is secured by, and the holder of this Note is entitled to the
benefits of the Security Documents described in the Loan Agreement, and the
liens and security interests under the Security Documents that secure the
obligations under this Note are hereby ratified and confirmed in all respects
and remain in full force and effect. Reference is made to the Security
Documents for a description of the property covered thereby and the rights,
remedies and obligations of the holder hereof in respect thereto.
Lender shall maintain a record of all advances hereunder and all payments made
on this Note until Lender has been repaid in full; provided, however that the
-----------------
failure, error or omission by Lender to maintain such a record shall not
diminish or otherwise affect the obligation of Borrower to repay the amount
outstanding hereunder and any other amounts due to Lender.
If Borrower fails to pay any amount due under this Note and Lender has to take
any action to collect the amount due or to exercise its rights under this Note
or the Security Documents, including without limitation retaining attorneys for
collection of this Note, or if any suit or proceeding is brought for the
recovery of all or any part of or for protection of the Obligations or to
foreclose the Security Documents or to enforce Lender's rights under the
Security Documents, then Borrower agrees to pay on demand all costs and expenses
of any such action to collect, suit or proceeding, or any appeal of any such
suit or proceeding, incurred by the holder hereof, including without limitation
the fees and disbursements of attorneys for the holder hereof.
A-2-2
<PAGE>
Borrower, and all endorsers, sureties and guarantors of this Note, hereby
severally waive demand, presentment for payment, notice of dishonor, notice of
acceleration or intent to accelerate, protest, notice of protest, diligence in
collecting and assents to any extension of time with respect to any payment due
under this Note, to any substitution or release of collateral and to the
addition or release of any party. No waiver by Lender of any payment or other
right under this Note shall operate as a waiver of any other payment or right.
If any provision in this Note shall be held invalid, illegal or unenforceable
in any jurisdiction, the validity, legality or enforceability of any defective
provisions shall not be in any way affected or impaired in any other
jurisdiction, nor shall the invalid, illegal or unenforceable provision affect
or impair any other provision of this Note.
No delay or failure of the holder of this Note in the exercise of any right or
remedy provided for hereunder shall be deemed a waiver of such right or remedy
by the holder hereof, and no exercise of any right or remedy shall be deemed a
waiver of any other right or remedy that the holder may have.
Any notices given hereunder shall be in writing and shall be given as provided
in the Loan Agreement.
At the option of Lender, an action may be brought to enforce this Note in the
District Court in and for the City and County of Denver, State of Colorado, in
the United States District Court for the District of Colorado or in any other
court in which venue and jurisdiction are proper. Borrower and all endorsers,
sureties and guarantors hereof consent to venue and jurisdiction in the District
Court in and for the City and County of Denver, State of Colorado and in the
United States District Court for the District of Colorado and to jurisdiction
and service of process under Sections 13-1-124(1)(a) and 13-1-125, Colorado
Revised Statutes (1973), as amended, in any action commenced to enforce this
Agreement.
THIS NOTE IS TO BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS OF THE
STATE OF COLORADO.
MARKWEST HYDROCARBON, INC.
By:_______________________________
John M. Fox, President
By:_______________________________
A-2-3
<PAGE>
Rita E. Harvey, Director of Finance
and Treasurer
A-2-4
<PAGE>
Exhibit A-3
-----------
FORM OF
SUBSTITUTE REVOLVER NOTE
------------------------
$10,000,000.00 Denver, Colorado
October __, 1996
MARKWEST HYDROCARBON, INC., a Delaware corporation ("Borrower"), the successor
--------
to MarkWest Hydrocarbon Partners, Ltd., a Colorado limited partnership (the
"Partnership"), with an address of 5613 DTC Parkway, Suite 400, Englewood, CO
- ------------
80111, for value received, hereby promises to pay to the order of NM Rothschild
and Sons Limited, a company organized under the laws of England ("Lender"), on
------
or before June 30, 2002, the principal sum of Ten Million Dollars
($10,000,000.00), or so much thereof as may be advanced by Lender pursuant to
the Amended and Restated Loan Agreement of even date herewith, between Borrower,
Norwest Bank Colorado, National Association, individually and as agent, First
American National Bank, N M Rothschild and Sons Limited and [First Chicago NBD]
(the "Loan Agreement"), together with interest on the outstanding unpaid
--------------
principal amount at a rate equal to the LIBOR Rate or the Base Rate, plus the
Applicable Margin, as provided in the Loan Agreement.
This Note is one of the notes referred to in the Loan Agreement as the
Revolver Notes, and is issued pursuant to, and is subject to the terms and
provisions of, the Loan Agreement. This Note is issued in substitution,
replacement and rearrangement, but not in extinguishment or discharge, of the
Replacement Revolver Note dated September 8, 1995, as amended by the First
Allonge to Replacement Revolver Note dated as of May 31, 1996, in connection
with the assumption by Borrower of all of the obligations and business of the
Partnership and the assignment by Norwest, First American and Rothschild to
First Chicago of a portion of their interests in the Loans. All capitalized
terms used herein but not otherwise defined shall have the meanings set forth in
the Loan Agreement. All references herein to the "Loan Agreement" refer to such
agreement as it may be amended from time to time.
As of June 30, 1998, the aggregate unpaid principal amount outstanding under
this Note shall be repaid to Lender in sixteen equal quarterly installments,
commencing September 30, 1998, as more fully provided in the Loan Agreement,
together with accrued and unpaid interest thereon. All remaining outstanding
principal of and interest on this Note shall be due and payable no later than
June 30, 2002.
A-3-1
<PAGE>
Interest shall accrue daily, shall be payable in arrears on the Interest
Payment Date, commencing October 31, 1996 and at the maturity of this Note, and
shall be calculated on the basis of a 365 or 366-day year, as appropriate for
Base Rate Loans, and a year of 360 days for LIBOR Rate Loans. All payments of
principal and interest hereof shall be made as provided in the Loan Agreement in
immediately available funds and without set-off or counterclaim or deduction of
any kind.
Notwithstanding anything to the contrary contained in this Note, overdue
principal, and (to the extent permitted under applicable law) overdue interest,
whether caused by acceleration of maturity or otherwise, shall bear interest at
the Late Payment Rate and shall be immediately due and payable.
It is not intended hereby to charge interest at a rate in excess of the
maximum rate of interest that Lender may charge to Borrower under applicable
usury and other laws, but if, notwithstanding, interest in excess of such rate
shall be paid hereunder, the interest rate on this Note shall be adjusted to the
maximum permitted under applicable law during the period or periods that the
interest rate otherwise provided herein would exceed such rate and any excess
amount applied at Lender's option to reduce the outstanding principal balance of
this Note or to be returned to Borrower.
This Note is secured by, and the holder of this Note is entitled to the
benefits of the Security Documents described in the Loan Agreement, and the
liens and security interests under the Security Documents that secure the
obligations under this Note are hereby ratified and confirmed in all respects
and remain in full force and effect. Reference is made to the Security
Documents for a description of the property covered thereby and the rights,
remedies and obligations of the holder hereof in respect thereto.
Lender shall maintain a record of all advances hereunder and all payments made
on this Note until Lender has been repaid in full; provided, however that the
-----------------
failure, error or omission by Lender to maintain such a record shall not
diminish or otherwise affect the obligation of Borrower to repay the amount
outstanding hereunder and any other amounts due to Lender.
If Borrower fails to pay any amount due under this Note and Lender has to take
any action to collect the amount due or to exercise its rights under this Note
or the Security Documents, including without limitation retaining attorneys for
collection of this Note, or if any suit or proceeding is brought for the
recovery of all or any part of or for protection of the Obligations or to
foreclose the Security Documents or to enforce Lender's rights under the
Security Documents, then Borrower agrees to pay on demand all costs and expenses
of any such action to collect, suit or proceeding, or any appeal of any such
suit or proceeding, incurred by the holder hereof, including without limitation
the fees and disbursements of attorneys for the holder hereof.
A-3-2
<PAGE>
Borrower, and all endorsers, sureties and guarantors of this Note, hereby
severally waive demand, presentment for payment, notice of dishonor, notice of
acceleration or intent to accelerate, protest, notice of protest, diligence in
collecting and assents to any extension of time with respect to any payment due
under this Note, to any substitution or release of collateral and to the
addition or release of any party. No waiver by Lender of any payment or other
right under this Note shall operate as a waiver of any other payment or right.
If any provision in this Note shall be held invalid, illegal or unenforceable
in any jurisdiction, the validity, legality or enforceability of any defective
provisions shall not be in any way affected or impaired in any other
jurisdiction, nor shall the invalid, illegal or unenforceable provision affect
or impair any other provision of this Note.
No delay or failure of the holder of this Note in the exercise of any right or
remedy provided for hereunder shall be deemed a waiver of such right or remedy
by the holder hereof, and no exercise of any right or remedy shall be deemed a
waiver of any other right or remedy that the holder may have.
Any notices given hereunder shall be in writing and shall be given as provided
in the Loan Agreement.
At the option of Lender, an action may be brought to enforce this Note in the
District Court in and for the City and County of Denver, State of Colorado, in
the United States District Court for the District of Colorado or in any other
court in which venue and jurisdiction are proper. Borrower and all endorsers,
sureties and guarantors hereof consent to venue and jurisdiction in the District
Court in and for the City and County of Denver, State of Colorado and in the
United States District Court for the District of Colorado and to jurisdiction
and service of process under Sections 13-1-124(1)(a) and 13-1-125, Colorado
Revised Statutes (1973), as amended, in any action commenced to enforce this
Agreement.
THIS NOTE IS TO BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS OF THE
STATE OF COLORADO.
MARKWEST HYDROCARBON, INC.
By:____________________________
John M. Fox, President
By:____________________________
A-3-3
<PAGE>
Rita E. Harvey, Director of Finance
and Treasurer
A-3-4
<PAGE>
Exhibit A-4
-----------
FORM OF
SUBSTITUTE REVOLVER NOTE
------------------------
$10,000,000.00 Denver, Colorado
October __, 1996
MARKWEST HYDROCARBON, INC., a Delaware corporation ("Borrower"), the successor
--------
to MarkWest Hydrocarbon Partners, Ltd., a Colorado limited partnership (the
"Partnership"), with an address of 5613 DTC Parkway, Suite 400, Englewood, CO
- ------------
80111, for value received, hereby promises to pay to the order of [First
Chicago], a national banking association ("Lender"), on or before June 30, 2002,
------
the principal sum of Ten Million Dollars ($10,000,000.00), or so much thereof as
may be advanced by Lender pursuant to the Amended and Restated Loan Agreement of
even date herewith, between Borrower, Norwest Bank Colorado, National
Association, individually and as agent, First American National Bank, N M
Rothschild and Sons Limited and [First Chicago NBD] (the "Loan Agreement"),
--------------
together with interest on the outstanding unpaid principal amount at a rate
equal to the LIBOR Rate or the Base Rate, plus the Applicable Margin, as
provided in the Loan Agreement.
This Note is one of the notes referred to in the Loan Agreement as the
Revolver Notes, and is issued pursuant to, and is subject to the terms and
provisions of, the Loan Agreement. This Note is issued in substitution,
replacement and rearrangement, but not in extinguishment or discharge, of the
Replacement Revolver Note dated September 8, 1995, as amended by the First
Allonge to Replacement Revolver Note dated as of May 31, 1996, in connection
with the assumption by Borrower of all of the obligations and business of the
Parntership and the assignment by Norwest, First American and Rothschild to
First Chicago of a portion of their interests in the Loans. All capitalized
terms used herein but not otherwise defined shall have the meanings set forth in
the Loan Agreement. All references herein to the "Loan Agreement" refer to such
agreement as it may be amended from time to time.
As of June 30, 1998, the aggregate unpaid principal amount outstanding under
this Note shall be repaid to Lender in sixteen equal quarterly installments,
commencing September 30, 1998, as more fully provided in the Loan Agreement,
together with accrued and unpaid interest thereon. All remaining outstanding
principal of and interest on this Note shall be due and payable no later than
June 30, 2002.
A-4-1
<PAGE>
Interest shall accrue daily, shall be payable in arrears on the Interest
Payment Date, commencing October 31, 1996 and at the maturity of this Note, and
shall be calculated on the basis of a 365 or 366-day year, as appropriate for
Base Rate Loans, and a year of 360 days for LIBOR Rate Loans. All payments of
principal and interest hereof shall be made as provided in the Loan Agreement in
immediately available funds and without set-off or counterclaim or deduction of
any kind.
Notwithstanding anything to the contrary contained in this Note, overdue
principal, and (to the extent permitted under applicable law) overdue interest,
whether caused by acceleration of maturity or otherwise, shall bear interest at
the Late Payment Rate and shall be immediately due and payable.
It is not intended hereby to charge interest at a rate in excess of the
maximum rate of interest that Lender may charge to Borrower under applicable
usury and other laws, but if, notwithstanding, interest in excess of such rate
shall be paid hereunder, the interest rate on this Note shall be adjusted to the
maximum permitted under applicable law during the period or periods that the
interest rate otherwise provided herein would exceed such rate and any excess
amount applied at Lender's option to reduce the outstanding principal balance of
this Note or to be returned to Borrower.
This Note is secured by, and the holder of this Note is entitled to the
benefits of the Security Documents described in the Loan Agreement, and the
liens and security interests under the Security Documents that secure the
obligations under this Note are hereby ratified and confirmed in all respects
and remain in full force and effect. Reference is made to the Security
Documents for a description of the property covered thereby and the rights,
remedies and obligations of the holder hereof in respect thereto.
Lender shall maintain a record of all advances hereunder and all payments made
on this Note until Lender has been repaid in full; provided, however that the
-----------------
failure, error or omission by Lender to maintain such a record shall not
diminish or otherwise affect the obligation of Borrower to repay the amount
outstanding hereunder and any other amounts due to Lender.
If Borrower fails to pay any amount due under this Note and Lender has to take
any action to collect the amount due or to exercise its rights under this Note
or the Security Documents, including without limitation retaining attorneys for
collection of this Note, or if any suit or proceeding is brought for the
recovery of all or any part of or for protection of the Obligations or to
foreclose the Security Documents or to enforce Lender's rights under the
Security Documents, then Borrower agrees to pay on demand all costs and expenses
of any such action to collect, suit or proceeding, or any appeal of any such
suit or proceeding, incurred by the holder hereof, including without limitation
the fees and disbursements of attorneys for the holder hereof.
A-4-2
<PAGE>
Borrower, and all endorsers, sureties and guarantors of this Note, hereby
severally waive demand, presentment for payment, notice of dishonor, notice of
acceleration or intent to accelerate, protest, notice of protest, diligence in
collecting and assents to any extension of time with respect to any payment due
under this Note, to any substitution or release of collateral and to the
addition or release of any party. No waiver by Lender of any payment or other
right under this Note shall operate as a waiver of any other payment or right.
If any provision in this Note shall be held invalid, illegal or unenforceable
in any jurisdiction, the validity, legality or enforceability of any defective
provisions shall not be in any way affected or impaired in any other
jurisdiction, nor shall the invalid, illegal or unenforceable provision affect
or impair any other provision of this Note.
No delay or failure of the holder of this Note in the exercise of any right or
remedy provided for hereunder shall be deemed a waiver of such right or remedy
by the holder hereof, and no exercise of any right or remedy shall be deemed a
waiver of any other right or remedy that the holder may have.
Any notices given hereunder shall be in writing and shall be given as provided
in the Loan Agreement.
At the option of Lender, an action may be brought to enforce this Note in the
District Court in and for the City and County of Denver, State of Colorado, in
the United States District Court for the District of Colorado or in any other
court in which venue and jurisdiction are proper. Borrower and all endorsers,
sureties and guarantors hereof consent to venue and jurisdiction in the District
Court in and for the City and County of Denver, State of Colorado and in the
United States District Court for the District of Colorado and to jurisdiction
and service of process under Sections 13-1-124(1)(a) and 13-1-125, Colorado
Revised Statutes (1973), as amended, in any action commenced to enforce this
Agreement.
THIS NOTE IS TO BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS OF THE
STATE OF COLORADO.
MARKWEST HYDROCARBON, INC.
By:__________________________________
John M. Fox, President
By:__________________________________
A-4-3
<PAGE>
Rita E. Harvey, Director of Finance
and Treasurer
A-4-4
<PAGE>
Exhibit B
---------
MARKWEST HYDROCARBON, INC.
REQUEST FOR ADVANCE UNDER THE
-----------------------------
REVOLVER LOAN
-------------
Reference is made to that certain Amended and Restated Loan Agreement dated as
of October __, 1996 (as from time to time amended, the "Agreement"), among
---------
MarkWest Hydrocarbon, Inc. ("Borrower"), Norwest Bank Colorado, National
--------
Association, individually and as agent, and First American National Bank, N M
Rothschild and Sons Limited and [First Chicago NBD] (collectively, the
"Lenders"). Capitalized terms not otherwise defined herein shall have the
meaning assigned to them in the Agreement. Pursuant to the terms of the
Agreement, Borrower hereby requests the Lenders to make an advance to Borrower
under the Agreement as follows:
1. Date of Advance. The requested date of the proposed Advance is
______________, 19__, which is a Business Day.
2. Details of Advance.
------------------
(a) Amounts of Advance. The requested aggregate amount of the proposed
Advance is $______________.
(b) Type of Advance and Interest Period. The requested type of Loan
and Interest Period (if applicable) for the proposed Advance is (check (A) or
(B) as applicable):
[ ] (A) A LIBOR Rate Loan for an Interest Period of
(check one, as applicable):
[ ] One month
[ ] Two months
[ ] Three months
[ ] Six months
[ ] (B) A Base Rate Loan.
B-1
<PAGE>
Borrower and the officer of Borrower signing this instrument hereby certify
that:
(a) Such officer is the duly elected, qualified and acting officer of Borrower
as indicated below such officer's signature hereto.
(b) The representations and warranties of Borrower set forth in Section 8 of
the Agreement and in the Security Documents are true and correct on and as of
the date hereof, with the same effect as though such representations and
warranties had been made on and as of the date hereof.
(c) Borrower has performed or observed all terms, agreements, conditions and
obligations in the Agreement and under the Security Documents required to be
performed or observed by Borrower on or prior to the date hereof (except those
waived in writing by the Lenders), and each of the conditions precedent to
Advances contained in the Agreement remains satisfied in all respects.
(d) No Event of Default or Unmatured Event of Default has occurred and is
continuing, or would result from the making of the requested Advance. Borrower
will use the advance hereby requested in compliance with the Agreement.
IN WITNESS WHEREOF, this instrument is executed as of _________, 199_.
MARKWEST HYDROCARBON, INC.
By:___________________________________
Name:______________________________
Title:_____________________________
B-2
<PAGE>
Exhibit D
---------
LITIGATION
----------
1. Alloyd Insulation Company Inc. v. MarkWest Hydrocarbon Partners, Ltd. d/b/a
---------------------------------------------------------------------------
MarkWest Hydrocarbon Partners, a Limited Partnership, Civil Action No. 96-
----------------------------------------------------
C-214, Circuit Court of Wayne County, West Virginia, relating to a
mechanic's lien filed by a subcontractor on the Kenova Plant in an amount
of approximately $111,500 in connection with a dispute between Alloyd
Insulation Company Inc. and the general contractor and/or subcontractors on
the plant.
D-1
<PAGE>
Exhibit E
---------
SUBSIDIARIES OF BORROWER
------------------------
MW Michigan, Inc.
MarkWest Resources, Inc.
E-1
<PAGE>
Exhibit F
---------
LOCATION OF BORROWER'S INVENTORY
--------------------------------
at October 1, 996
MarkWest Hydrocarbon (Siloam plant)
U.S. Route 23
P.O. Box 575
South Shore, Kentucky 41175
MarkWest Hydrocarbon
West Memphis LPG Terminal
1282 South Eighth Street
P.O. Box 367
West Memphis, Arkansas 72302
MarkWest Hydrocarbon
Church Hill LPG Terminal
Church Hill, Tennessee
38-mile pipeline from Kenova, West Virginia to
South Shore, Kentucky
Mapco/Hutchinson, Kansas (a.k.a. Conway)
Mount Belvieu, Texas
Hattiesburg, Mississippi
F-1
<PAGE>
Exhibit G
---------
MARKWEST HYDROCARBON, INC.
COMPLIANCE CERTIFICATE
----------------------
(REVOLVER LOAN)
(Capitalized terms not otherwise defined herein
shall have the meaning assigned to them in
the Loan Agreement)
The undersigned officer of MARKWEST HYDROCARBON, INC., ("Borrower") pursuant to
--------
Section 9(b)(iii) of the Amended and Restated Loan Agreement dated as of October
-----------------------------------
__, 1996 (the "Loan Agreement") among Borrower, Norwest Bank Colorado, National
Association, individually and as agent, and First American National Bank, N M
Rothschild and Sons, Limited and [First Chicago NBD], hereby certifies as
follows:
Computations showing compliance as of _________, 199_ with:
All computations exclude Restricted Subsidiaries.
-------
1. SECTION 9(k): CURRENT RATIO
(a) Current assets $________
(b) Current liabilities $________
(c) Actual ratio _______________
(d) Minimum per agreement 1.1 to 1.0
2. SECTION 9(l): RATIO OF FUNDED DEBT TO TOTAL
CAPITALIZATION
(a) Funded Debt (including Guarantees) $________
(b) Guarantees $________
(c) Stockholders' equity $________
(d) Total capitalization $________
(a) + (c)
(e) Actual ratio _______________%
(f) Maximum per agreement 60%
G-1
<PAGE>
3. SECTION 9(m): TANGIBLE NET WORTH
(a) $38,000,000 PLUS $________
(b) 50% of consolidated net $________
income earned by Borrower
after September 30, 1996
(excluding net losses)
(c) Required: (a) + (b) $______________
(d) Actual $______________
4. SECTION 9(n): FIXED COVERAGE RATIO, AS OF THE END
OF ANY MONTH COMMENCING WITH THE MONTH
ENDING OCTOBER 31, 1996, CALCULATED ON A
ROLLING TWELVE MONTH BASIS
(a) Cash flow from operations $________
DIVIDED BY
(b) Debt (Interest + Principal) $________
included in (a) (& required
to be repaid) EQUALS
(c) Actual ratio ______________
(d) Minimum per agreement 1.5
5. The undersigned hereby certifies to the authenticity of the financial
statements and that the attached financial statements present fairly the
financial condition of Borrower as of the date hereof to the best of
his/her knowledge and belief after due inquiry.
6. The undersigned has read the covenants and conditions of the Loan
Agreement; this Certificate is based upon an examination of the Loan
Agreement and of the accounts and other pertinent records of Borrower.
7. In the opinion of the undersigned, he/she has made such examination and
investigations as is necessary to enable him/her to express an informed
opinion as to whether or not the covenants and conditions of the Loan
Agreement have been complied with, and, to the best of his/her knowledge:
(check either (a) or (b))
( ) (a) There exists no Unmatured Event of Default or Event of Default
on the date hereof.
( ) (b) There exists no Unmatured Event of Default or Event of
Default on the date hereof except for the following matters:
(Describe all such matters,
G-2
<PAGE>
specifying the nature, duration and status thereof and what
action Borrower has taken or proposes to take with respect
thereto).
BORROWER:
MARKWEST HYDROCARBON, INC.
By:______________________
Name:_________________
Title:________________
Date:_________________
G-3
<PAGE>
Exhibit H
---------
SCHEDULE OF NOTES RECEIVABLE FROM OFFICERS, EMPLOYEES
-----------------------------------------------------
at October 7, 1996
Officers and Directors:
John Fox $ -
Brian O'Neill $ -
Art Denney $ -
Bob Garvin $ 6,056.62
Rita Harvey $ 19,381.49
Employees:
William Adkins, Jr. $ 20,466.59
Dan Brown $ 17,352.87
Kathy Holland $ 27,942.80
Michael LaRue $ 97,474.06
Dan O'Meara $ 37,169.59
Henry Nickel $ 15,041.22
Randy Nickerson $ 54,907.81
Fred Shato $ -
Ronald Smith $ 10,258.58
Warren Warner $ 56,452.74
______________
$ 362,504.37
==============
H-1
<PAGE>
Exhibit I
---------
MARKWEST HYDROCARBON, INC.
Notice of Conversion/Continuation
To Norwest Bank Colorado, National Association:
This Notice of Conversion/Continuation is given pursuant to Section 2(a)(ii) of
that certain Amended and Restated Loan Agreement, dated as of October __, 1996
as the same may have been amended to the date hereof (the "Loan Agreement"),
between MarkWest Hydrocarbon, Inc. ("Borrower"), Norwest Bank Colorado, National
Association ("Norwest"), First American National Bank ("First American"), N M
Rothschild and Sons Limited ("Rothschild") and [First Chicago NBD ("First
Chicago")] (Norwest, First American, Rothschild and First Chicago being referred
to as "Lenders"), and Norwest, as Agent on behalf of Lenders. Terms defined in
the Loan Agreement are used herein with the same meanings.
The undersigned hereby gives Agent irrevocable notice that Borrower requests a
Revolver Advance under the Loan Agreement as follows:
1. Date of Conversion/Continuation. The requested date of the
proposed conversion/continuation of Loan(s) is _____________, 19__, which is a
Business Day.
2. Details of Conversion/Continuation (check and complete (A), (B),
or (C) as applicable):
[ ] (A) Convert $____________ in principal amount of Base
Rate Loans to a LIBOR Rate Loan; with an interest period of ____
months to expire on _______________, 19__;
[ ] (B) Convert $____________ in principal amount of
LIBOR Rate Loans (with the Interest Period presently ending on
_______________, 19__) to a Base Rate Loan;
I-1
<PAGE>
[ ] (C) Continue $___________ in principal amount of
presently outstanding LIBOR Rate Loans (with the Interest Period
presently ending on _______________, 19__), as a LIBOR Rate Loan with
an interest period of ___ months to expire on _______________, 19__.
Dated: _______________, 19__.
MARKWEST HYDROCARBON, INC.
By:________________________________
Title:_____________________________
I-2
<PAGE>
Exhibit 10.2
AMENDED AND RESTATED
WORKING CAPITAL
LOAN AGREEMENT
Among
MARKWEST HYDROCARBON, INC.
and
NORWEST BANK COLORADO, NATIONAL ASSOCIATION,
individually and as Agent,
and
FIRST AMERICAN NATIONAL BANK,
N M ROTHSCHILD AND SONS LIMITED
and
THE FIRST NATIONAL BANK OF CHICAGO
October 8, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS................................... 1
SECTION 2. THE WORKING CAPITAL LOAN...................... 12
(a) Terms of the Working Capital Loan............. 12
(b) Borrowing Procedures.......................... 12
(c) The Loan Date................................. 13
(d) Computation and Payment of Interest; Lat...... 13
(e) Payments by Borrower.......................... 13
(f) Payments to Lenders........................... 13
(g) Optional Payments............................. 14
(h) Mandatory Payments............................ 14
(i) Fees.......................................... 14
(j) Adjustments................................... 15
(k) Increased Capital............................. 15
SECTION 3. LETTERS OF CREDIT............................. 15
(a) Issuance of Standby Letters of Credit......... 15
(b) Payments Treated as an Advance................ 16
(c) Restriction on Liability...................... 16
(d) No Duty to Inquire............................ 17
(e) Reimbursement by Lenders...................... 17
SECTION 4. CONDITIONS TO EFFECTIVENESS; CONDITIONS OF
LENDING...................................... 17
(b) Initial Advance............................... 18
(c) Subsequent Advances........................... 20
SECTION 5. BORROWING BASE................................ 21
(a) Initial Borrowing Base........................ 21
(b) Information................................... 21
(c) Subsequent Determinations of Borrowing Base... 21
SECTION 6. BORROWING BASE DEFICIENCY..................... 23
(a) Add Additional Collateral..................... 23
(b) Repay Excess Debt............................. 23
SECTION 7. SECURITY...................................... 23
SECTION 8. REPRESENTATIONS AND WARRANTIES................ 23
(a) Existence..................................... 23
(b) Non-Contravention............................. 24
(c) Third Party Authorization..................... 24
(d) Authorization; Binding Effect................. 24
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(e) Litigation 25
(f) Taxes 25
(g) Liens 25
(h) Names and Places of Business............25
(i) Use of Proceeds.........................25
(j) Other Obligations.......................25
(k) Full Disclosure.........................26
(l) Margin Stock............................26
(m) ERISA 26
(n) Security Documents......................26
(o) Compliance with Laws....................26
(p) Financial Condition.....................26
(q) Environmental Matters...................27
(r) Investment Company Act..................27
(s) Public Utility Holding Company Act......27
(t) Title to Properties; First Priority
Security Interest.......................27
(u) Subsidiaries of Borrower and of
Related Persons.........................27
(v) Location of Inventory...................27
(w) Eligibility of Items Included in
Borrowing Base..........................28
(x) Reorganization..........................28
SECTION 9. AFFIRMATIVE COVENANTS................30
(a) Payment and Performance of Working
Capital Loan............................30
(b) Financial Statements....................30
(c) Preservation of Existence, Etc..........31
(d) Maintenance of Property.................31
(e) Payment of Other Obligations............31
(f) Insurance...............................32
(g) Inspection of Property, Books and
Records; Confidentiality Agreement
(h) Notices.................................33
(i) Compliance with Laws....................34
(j) Further Assurances......................34
(k) Current Ratio...........................35
(l) Funded Debt to Total Capitalization.....35
(m) Tangible Net Worth......................35
(n) Fixed Charge Coverage Ratio.............35
(o) Environmental Matters...................35
SECTION 10. NEGATIVE COVENANTS
(a) Debt 36
(b) Liens 36
(c) Guaranty Obligations....................37
(d) Loans and Advances......................37
(e) Limitation on Investments and New
Businesses..............................37
</TABLE>
ii
<PAGE>
(f) Mergers and Consolidations..............38
(g) Location of Inventory...................38
(h) Burdensome Undertakings.................38
(i) Change in Location of Business..........38
(j) Restricted Distributions................39
(k) Disposition of Assets...................39
(l) ERISA...................................39
(m) Use of Proceeds.........................39
(n) Transactions with Affiliates............39
(o) Contracts; Take-or-Pay Agreements.......40
(p) Amendments to Organizational Documents..40
SECTION 11. EVENTS OF DEFAULT.......................40
(a) Non-Payment.............................40
(b) Certain Defaults........................41
(c) Other Defaults..........................41
(d) Representation or Warranty..............41
(e) Security Documents......................41
(f) Judgments...............................41
(g) Insolvency..............................41
(h) Bankruptcy, Etc.........................42
(i) Cross-Default...........................42
(j) ERISA...................................42
(k) Loan Documents..........................42
(l) Material Adverse Change.................43
(m) ........................................43
Change in Control................................43
(n) ........................................43
Columbia Contracts...............................43
(o) Regulatory Change.......................43
SECTION 12. REMEDIES................................43
(a) Automatic Acceleration of Loan..........43
(b) Optional Acceleration of Loan...........43
(c) Setoff..................................44
SECTION 13. THE AGENT...............................44
(a) Appointment.............................44
(b) Delegation of Duties....................45
(c) Exculpatory Provisions..................45
(d) Reliance by Agent.......................45
(e) Notice of Default.......................46
(f) Non-Reliance on Agent and Other Lenders.46
(g) Indemnification.........................46
iii
<PAGE>
(h) Agent and Lenders in Their Individual
Capacity................................47
(i) Successor Agent.........................47
(j) Borrower Entitled to Rely on Agent......47
SECTION 14. MISCELLANEOUS...........................47
(a) No Waiver; Cumulative Remedies..........47
(b) Notices.................................48
(c) Counterpart Execution...................49
(d) Governing Law; Entire Agreement.........49
(e) Amendments and Waivers..................50
(f) Costs, Expenses and Indemnity...........50
(g) Inconsistent Provisions; Severability...51
(h) Incorporation of Exhibits and Schedules.51
(i) Amendment of Defined Instruments........51
(j) References and Titles...................52
(k) Calculations and Determinations.........52
(l) Usury...................................52
(m) Waiver of Right to Trial by Jury........52
(n) Successors and Assigns..................53
(o) Term of Agreement.......................53
(p) Jurisdiction............................53
iv
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit Title
- ------- -----
A Form of Working Capital Note
B Credit and Collection Policy of Borrower
C Request for Advance
D Borrower's Counsel Opinion
E Borrowing Base Certification
F Litigation
G Subsidiaries of Borrower
H Location of Borrower's Products and Inventory
I Compliance Certificate
J Loans and Advances to Officers and Employees
K Letter of Credit Application Form
v
<PAGE>
AMENDED AND RESTATED
--------------------
WORKING CAPITAL LOAN AGREEMENT
------------------------------
THIS WORKING CAPITAL LOAN AGREEMENT (this "Agreement"), dated as of October
---------
8, 1996, is among MARKWEST HYDROCARBON INC., a Delaware corporation,
("Borrower"), the successor to MarkWest Hydrocarbon Partners, Ltd., a Colorado
--------
limited partnership (the "Partnership"), NORWEST BANK COLORADO, NATIONAL
-----------
ASSOCIATION (successor to Norwest Bank Denver National Association), a national
banking association ("Norwest"), FIRST AMERICAN NATIONAL BANK, a national
-------
banking association ("First American"), N M ROTHSCHILD AND SONS LIMITED, a
--------------
company organized under the laws of England ("Rothschild"), and THE FIRST
----------
NATIONAL BANK OF CHICAGO, a national banking association ("First Chicago"),
-------------
(Norwest, First American, Rothschild and First Chicago are referred to
individually as a "Lender" and collectively as the "Lenders"), and NORWEST, AS
------ -------
AGENT FOR THE BANKS (in such capacity, the "Agent").
-----
Borrower desires to borrow from the Lenders to provide funds for the
purposes set forth below, and the Lenders are willing to lend such funds to
Borrower to accomplish those purposes, subject to the terms and conditions
contained or referred to herein. Accordingly, in consideration of the mutual
agreements, provisions and covenants contained herein, the parties agree as
follows:
SECTION 1. DEFINITIONS. As used herein, each of the following capitalized
-----------
terms shall have the meaning given it in this Section 1:
"Adjusted Prime Rate" shall mean an annual rate which equals the sum of the
-------------------
floating commercial loan rate of the Agent announced from time to time as its
prime rate but which may not be the lowest or best rate charged by the Agent to
any customer (the "Prime Rate") plus one-quarter percentage point per year,
----------
adjusted in each case as of the banking day in which a change in the Prime Rate
occurs.
"Advances" shall have the meaning given it in Section 2(a).
--------
"Affiliate" shall mean as to any Person, each other Person which, directly
---------
or indirectly (through one or more intermediaries or otherwise), is in control
of, is controlled by, or is under common control with, such Person.
"Borrowing Base" shall mean, at the particular time in question, either the
--------------
amount provided for in Section 5(a) or the amount determined by the Lenders in
accordance with the provisions of Section 5(c); provided, however, that in no
-------- -------
event shall the Borrowing Base exceed $7,500,000.
"Borrowing Base Certification" shall have the meaning set forth in Section
----------------------------
5(b).
<PAGE>
"Borrowing Base Deficiency" shall have the meaning set forth in Section 6.
-------------------------
"Business Day" shall mean a day other than Saturdays or Sundays on which
------------
commercial banks are open for business with the public in Chicago, Denver,
London and Memphis.
"Cash Collateral" means Cash Collateral Instruments pledged by Borrower to
---------------
the Agent on behalf of the Lenders in which the Agent has a perfected, first
priority security interest, together with any funds on deposit in, or otherwise
to the credit of, any deposit account of Borrower with the Agent, to the extent
such deposit account is pledged as collateral to the Agent on behalf of the
Lenders.
"Cash Collateral Instruments" means, collectively, (a) open market
---------------------------
commercial paper maturing within 120 days after acquisition thereof, which has
the highest credit rating of either Standard & Poor's Corporation or Moody's
Investors Service, Inc., (b) certificates of deposit maturing within six (6)
months from the date thereof issued by the Agent, (c) direct obligations of the
United States Government or any agency thereof maturing within one hundred
eighty (180) days after the acquisition thereof, and (d) other instruments that
have been previously approved by the Lenders in writing for inclusion as Cash
Collateral Instruments.
"Code" means the Internal Revenue Code of 1986, as amended, together with
----
the regulations promulgated thereunder.
"Collateral" shall mean all tangible or intangible, real or personal
----------
property subject to any of the Security Agreements, including without
limitation, all right, title and interest of Borrower in and to its Receivables,
Products, inventory, Eligible Product Inventory, Exchange Balances, contract
rights (including the Contracts), general intangibles and Cash Collateral.
"Columbia Contracts" shall mean (a) Natural Gas Liquids Purchase Agreement
------------------
dated as of April 26, 1988 between Columbia Gas Transmission Corporation
("Columbia") and the Partnership as amended November 4, 1988, July 31, 1989,
December 24, 1990 and January 28, 1991 (Siloam); (b) the Natural Gas Liquids
Purchase Agreement dated as of December 24, 1990, between Columbia and Borrower
as amended January 28, 1991 (Boldman); and (c) the Contract for Construction and
Lease of Boldman Plant dated December 24, 1990 between Columbia and the
Partnership; (d) Letter Agreement dated March 9, 1995 between Columbia and the
Partnership; and (e) the following agreements relating to the Kenova Processing
Plant: (i) Agreement to Design and Construct New Facilities (the "Construction
------------
Agreement"), (ii) Purchase and Demolition Agreement-Construction Premises (the
- ---------
"Demolition Agreement"), (iii) Purchase and Demolition Agreement-Remaining
- ---------------------
Premises (the "Purchase Agreement"), and (iv) Processing Agreement-Kenova
------------------
Processing Plant (the "Processing Agreement"), all dated March 15, 1995 between
--------------------
Columbia and the Partnership, together with any and all amendments now existing
or hereafter created to any of the foregoing to the extent such amendments are
otherwise permitted hereunder, and together with any gas processing contracts
between the Partnership or Borrower and any shippers on Columbia's system
covering processing of such
2
<PAGE>
shippers' gas at the Kenova Processing Plant. All of the Columbia Contracts have
been assigned to and assumed by Borrower pursuant to the Reorganization.
"Commitment" means the amount of the Borrowing Base at the time in question
----------
minus the aggregate face amount of all outstanding Letters of Credit at the time
in question; provided that in no event shall the Commitment exceed $7,500,000 at
-------------
any time from the date hereof until and including June 30, 1998.
"Commitment Period" shall mean the period from the date of this Agreement
-----------------
to and including June 30, 1998, or such earlier date as described by Borrower
(upon thirty days prior notice to the Agent) on which the Working Capital Notes
become due and payable or such earlier date on which the Working Capital Notes
become due and payable under the terms hereof, by acceleration or otherwise.
"Consolidated" refers to the consolidation of any Person, in accordance
------------
with GAAP, with its properly consolidated Subsidiaries. Reference herein to
Borrower's financial statements, financial position, financial condition,
liabilities, etc. refer to the consolidated financial statements, position,
condition, liabilities, etc. of Borrower and its properly consolidated
Subsidiaries.
"Consolidating", when reference is made herein to Borrower's financial
-------------
statements, financial condition, liabilities, etc., shall mean a presentation of
such information in accordance with GAAP that sets forth separately the
financial statements, etc. for each of Borrower and its properly consolidated
Subsidiaries.
"Contract" means a contract or contractual arrangement, whether oral or
--------
written (or both), between Borrower and an Obligor evidencing a valid and
binding obligation of such Obligor to pay for Products purchased from, or
services rendered by, Borrower.
"Controlled Group" means the Borrower and all Persons under common control
----------------
or treated as a single employer with the Borrower pursuant to Section 414(b),
(c), (n) or (o) of the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
"Credit and Collection Policy" means those credit and collection policies
----------------------------
and practices of Borrower in effect on the date hereof relating to Borrower's
Receivables, except for modifications that would not impair the collectability
of any Eligible Receivable of Borrower and modifications consented to by Agent.
The Credit and Collection Policy of Borrower is described in Exhibit B hereto.
---------
"Current Ratio" shall mean the ratio of Borrower's current assets to
-------------
current liabilities, both determined in accordance with GAAP.
"Debt" shall mean as to any Person, at a particular date, the sum (without
----
duplication) of (a) all indebtedness of such Person for borrowed money or for
the deferred purchase price of
3
<PAGE>
property or services, (b) all obligations of such Person in respect of surety
bonds, letters of credit, bankers' acceptances, or similar obligations issued or
created for the account of such Person, (c) all capitalized lease obligations of
such Person, (d) all indebtedness created or arising under any conditional sale
or other title retention agreement, (e) open lines of credit to finance futures
contracts, commodities and/or options contracts, (f) all indebtedness referred
to in clauses (a) through (e) above secured by a lien, encumbrance or security
interest on or in property owned by such Person, even though such Person has not
assumed or become liable for the payment of such indebtedness, and (g) all
guaranties in respect of indebtedness or obligations of other Persons of the
kinds referred to in clauses (a) through (f) above.
"Delinquent Receivable" means a Receivable of Borrower:
---------------------
(i) as to which any payment, or part thereof, remains unpaid for
45 days from the original invoice date for such payment; or
(ii) which, consistent with the Credit and Collection Policy of
Borrower, would otherwise be classified as delinquent by Borrower.
"Designated Obligor" means, at any time, all Obligors; provided, however,
------------------ -------- -------
that any Obligor shall cease to be a Designated Obligor with respect to
receivables or Exchange Balances upon five (5) Business Days' notice thereof by
Agent to Borrower, which notice shall set forth the reason for such cessation.
"Determination Date" has the meaning given it in Section 5(c)(ii).
------------------
"Eligible Exchange Balances" means an Exchange Balance which:
--------------------------
(i) arises under a Products Agreement;
(ii) arises with a customer located in the United States and
relates to refined petroleum products in good and salable condition
located in the United States;
(iii) is not in dispute in any material respect;
(iv) is not owed by an Obligor who is generally unable to
fulfill its obligations;
(v) with respect to which the likelihood of payment or
performance thereof is not impaired by virtue of three-party exchange
or circumstances whereby the Obligor might satisfy its obligations by
means of satisfying an obligation of Borrower to a third party;
(vi) the Obligor of which is a Designated Obligor; and
4
<PAGE>
(vii) has been previously approved in writing by the Lenders
for inclusion in Eligible Exchange Balances.
"Eligible Product Inventory" means any Products:
--------------------------
(i) to which Borrower has title and which are stored in
(ii) in which the Agent on behalf of the Lenders has a
perfected, first priority security interest; and
(iii) as to which Borrower has furnished to Agent reasonably
detailed information in a Borrowing Base Certification;
reduced by all charges of all kinds against such Products, and transportation,
processing and other handling charges for such Products.
"Eligible Product Inventory Value" means as of any Determination Date an
--------------------------------
amount equal to the market value of the Products comprising the Eligible Product
Inventory. The market value of the Products comprising the Eligible Product
Inventory for any Determination Date shall be the price determined by reference
to a published index, such price to be adjusted for transportation, and market
differential; which determination, including the index and the adjustments, must
be acceptable to Lenders. Oil Price Information Service is acceptable to all
parties hereto.
"Eligible Receivable" means a Receivable of Borrower:
-------------------
(i) the Obligor of which is a United States resident, is
not an Affiliate of any of the parties to this Agreement, and is not a
government or a governmental subdivision or agency;
(ii) the Obligor of which is a Designated Obligor;
(iii) the Obligor of which is not the Obligor of any Delinquent
Receivables;
(iv) which is not a Delinquent Receivable;
(v) the Products for which such Receivable represents the
right to payment have been delivered to the purchaser thereof;
5
<PAGE>
(vi) in which Lender has a perfected, first priority security
interest prior to all other Liens;
(vii) which is denominated and payable only in United States
dollars in the United States;
(viii) which arises under a Contract which has been duly
authorized and which, together with the Receivable, is in full force
and effect and constitutes the legal, valid and binding obligation of
the Obligor of such receivable enforceable in accordance with its
terms and is not subject to any dispute, offset, counterclaim or
defense whatsoever;
(ix) which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which no party to the
Contract related thereto is in violation of any such law, rule or
regulation in any material respect;
(x) which satisfies all applicable requirements of the Credit
and Collection Policy; and
(xi) as to which the Agent has not notified Borrower that the
Lenders have determined, in their sole discretion, that such
Receivable (or class of Receivables) is not acceptable collateral.
"Employee Option Agreement" shall mean the 1996 Stock Incentive Plan of
-------------------------
Borrower, as the same may be amended by Borrower from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Plan" shall mean any pension benefit plan subject to Section 302 of
----------
ERISA or Title IV of ERISA maintained by Borrower or any member of a controlled
group (as defined in Section 4001 (a)(14) of ERISA).
"Event of Default" shall have the meaning set forth in Section 11.
----------------
"Exchange Balance" means a right of Borrower to the delivery of refined
----------------
petroleum products created as a result of a Products Agreement between Borrower
and a customer.
"Existing Loan Agreements" shall mean the Existing Working Capital
------------------------
Agreement and that certain Loan Agreement dated as of November 20, 1992, among
the Partnership, Agent,
6
<PAGE>
Norwest and First American, as lenders, and all amendments thereto executed
prior to the date hereof by the Partnership, Agent and any of the Lenders.
"Existing Working Capital Agreement" shall mean that certain Working
----------------------------------
Capital Loan Agreement dated as of November 30, 1992, among the Partnership,
Agent and Norwest and First American, as lenders, as amended by a First
Amendment to Working Capital Loan Agreement dated as of March 23, 1994, a Second
Amendment to Working Capital Loan Agreement dated as of September 8, 1995, and a
Third Amendment to Working Capital Loan Agreement dated as of May 31, 1996.
"Fiscal Quarter" shall mean a three-month period ending on the last day of
--------------
each March, June, September and December of any year.
"Fiscal Year" shall mean a twelve-month period ending on December 31 of any
-----------
year.
"Fixed Charge Coverage Ratio" shall mean for the 12 most recent consecutive
---------------------------
months, the ratio for such period of (a) the sum of net income (or net loss)
plus interest expense and non-cash charges included in determining net income
(or net loss), all as determined in accordance with GAAP, to (b) the sum of
interest expense included in calculating (a).
"Funded Debt" shall mean the aggregate amount of Debt for borrowed money
-----------
with a maturity in excess of one year (including guarantees of such Debt) and
capitalized leases, minus the outstanding principal balance, if any, under this
Working Capital Loan.
"GAAP" shall mean generally accepted accounting principles and practices as
----
consistently applied (except as otherwise required due to changes in GAAP) by
Borrower and certified to by the firm of independent certified public
accountants regularly employed as Borrower's auditors, such principles and
practices at all times being consistent with requirements of the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants in effect from time to time, as applicable to the nature of the
business conducted by Borrower; provided, however, if any change in any
-------- -------
accounting principle or practice is required by the Financial Accounting
Standards Board (or any such successor), all financial covenants provided for
herein may be prepared in accordance with such change only after notice of such
change is given to the Agent, and the Lenders agree to such change insofar as it
affects the financial covenants.
"Initial Financial Statements" shall mean the audited financial statements
----------------------------
of the Partnership for the Fiscal Year ending December 31, 1995, and the
unaudited quarterly financial statements (consisting of a current balance sheet
and profit and loss statement) for the Partnership as of June 30, 1996.
"Issuer" shall mean Norwest, in its capacity as the issuer of Letters of
------
Credit hereunder, and its successors in such capacity.
7
<PAGE>
"Late Payment Rate" shall have the meaning set forth in Section 2(d)(ii).
-----------------
"Letter of Credit" shall mean any standby letter of credit issued by the
----------------
Issuer pursuant to Section 3, and all letters of credit so issued shall be
collectively referred to as the "Letters of Credit."
-----------------
"Letter of Credit Balance" shall mean the Lenders' maximum aggregate
------------------------
liability under all Letters of Credit outstanding at the time in question.
"Loan Date" shall have the meaning set forth in Section 2(c).
---------
"Loan Documents" means this Agreement, the Working Capital Notes, the
--------------
Letters of Credit, the Security Documents and all other documents executed and
delivered by or on behalf of Borrower to the Agent or the Lenders in connection
herewith or therewith.
"Loan Share" means with respect to each of Norwest, First American,
----------
Rothschild and First Chicago, twenty-five percent.
"Mortgages" shall have the meaning set forth in the Revolver/Term Facility.
---------
"Net Eligible Exchange Balance" means an amount as of any Determination
-----------------------------
Date determined as the difference between (i) the aggregate amount presently due
to Borrower under all Eligible Exchange Balances (such amount to be determined
by multiplying the quantities of Products due Borrower in accordance with the
terms of the Products Agreement giving rise to such Eligible Exchange Balances
times the then applicable Mt. Belvieu price for such Products; provided that
--------
such amounts shall be included only to the extent they satisfy all applicable
requirements of the Credit and Collection Policy), and (ii) the aggregate amount
owed by Borrower under all Eligible Exchange Balances (such amount to be
determined by multiplying the quantities of Products Borrower owes to third
parties in accordance with the terms of the Products Agreement giving rise to
such Eligible Exchange Balance times the then applicable Mt. Belvieu price for
such Products).
"Obligations" means all Debt from time to time owing by Borrower to the
-----------
Lenders under or pursuant to any of the Loan Documents.
"Obligor" shall mean when used with respect to Receivables, a Person party
-------
to a Contract and obligated to make payments pursuant thereto and when used with
respect to Exchange Balances, the party obligated to Borrower pursuant to a
Products Agreement.
"Ordinary Course of Business" shall mean, in respect of any transaction,
---------------------------
the ordinary course of such Person's business, substantially as conducted by
such Person prior to or as of the date hereof, and undertaken by such Person in
good faith and not for purposes of evading any covenant or restriction in any
Loan Document.
8
<PAGE>
"Person" shall mean an individual, partnership, corporation, association,
------
business trust, joint stock company, trust or trustee thereof, unincorporated
association, joint venture, governmental unit or any agency or subdivision
thereof, or any other legally recognizable entity.
"Prepaid Natural Gas" shall mean the volume of natural gas in MMBTU's
-------------------
delivered to Columbia Gas Transmission Corporation pursuant to Paragraph 2 of
the letter agreement dated March 9, 1995 in excess of the volumes required to be
delivered for BTU reimbursement as described in such letter agreement times the
-----
month-end Gulf Coast price per MMBTU for such calendar month (as quoted in
Inside FERC's Gas Market Report or a mutually acceptable successor publication
if it ceases publication) plus $0.18; provided that any volumes of such over-
delivered natural gas in excess of two billion cubic feet shall not qualify as
Prepaid Natural Gas.
"Products" shall mean all oil, natural gas, unprocessed natural gas,
--------
natural gas liquids, gaseous or liquid hydrocarbons, processed natural gas,
butane, isobutane, propane, natural gasoline, gasoline, MTBE, other products
obtained from the processing of natural gas or fractionating or processing of
natural gas liquids, now or hereafter located in or on, transported through,
processed in or otherwise related to the Collateral subject to any of the
Mortgages including, without limitation, any and all of the same held as
inventory.
"Products Agreement" shall mean a standard written refined petroleum
------------------
products reciprocal exchange agreement.
"Receivable" means the indebtedness of any Obligor under a Contract arising
----------
from a sale of Products by Borrower or from services rendered by Borrower, and
includes the right to payment of any interest or finance charges and other
obligations of such Obligor with respect thereto.
"Related Person" shall mean any of Borrower and each Subsidiary of
--------------
Borrower, except for Restricted Subsidiaries.
"Reorganization" shall mean the reorganization and initial public offering
--------------
pursuant to which the Partnership has been dissolved and all of the assets and
liabilities of the Partnership have been assigned to and assumed by Borrower, as
more fully described in the Registration Statement, Form S-1, filed by Borrower
with the Securities and Exchange Commission.
"Request for Advance" shall mean a request for Advance meeting the
-------------------
requirements of Section 2(b) hereof.
"Required Lenders" shall mean at any time Lenders, the Loan Shares of which
----------------
aggregate 100 percent.
"Responsible Person" shall mean any officer of Borrower and any other
------------------
Person employed by a Related Person and who should be aware of the terms of
this Agreement.
9
<PAGE>
"Restricted Subsidiaries" shall mean the following Subsidiaries of
-----------------------
Borrower: MarkWest Resources, Inc., a Colorado corporation.
"Revolver/Term Facility" shall mean the loans provided for pursuant to that
----------------------
certain Amended and Restated Loan Agreement dated as of the date hereof between
Borrower, the Lenders and the Agent, providing for a revolving loan, the
principal balance of which at the termination of the revolving period on June
30, 1998 shall be amortized over sixteen equal quarterly principal payments;
which loans shall not exceed $40,000,000 in the aggregate principal amount
outstanding at any one time, as such Agreement may be amended from time to time,
and which loans are secured by various "Security Documents" (as such term is
defined therein).
"Security Agreements" shall mean one or more chattel mortgages, acts of
-------------------
collateral mortgage, security agreements and assignments of proceeds of even
date herewith, in favor of the Agent on behalf of the Lenders, covering all or
any part of the Collateral, and shall also include the "Security Agreement" as
defined in the Revolver/Term Facility.
"Security Documents" means the Mortgages and Security Agreements and all
------------------
other security agreements, deeds of trust, mortgages, chattel mortgages,
assignments, pledges, guaranties, financing statements, continuation statements,
extension agreements and other agreements or instruments now or hereafter
delivered by Borrower to the Agent on behalf of the Lenders or to the Lenders in
connection with this Agreement or any transaction contemplated hereby to secure
or guarantee the payment of any part of the Obligations or the performance of
any other duties and obligations of Borrower under the Loan Documents, whenever
made or delivered, and shall also include all of the "Security Documents" as
defined in the Revolver/Term Facility.
"Stockholders' Equity" shall mean the stockholders' equity in Borrower,
--------------------
determined in accordance with GAAP.
"Subsidiary" means, with respect to any Person, any corporation,
----------
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty-one percent or more by such Person.
"Tangible Net Worth" shall mean the Stockholders' Equity of Borrower less
------------------
intangible assets.
"Total Capitalization" means the sum of Funded Debt plus Stockholders'
--------------------
Equity.
"Unmatured Event of Default" shall mean any event that with the passage of
--------------------------
time or giving of notice, or both, would constitute an Event of Default under
Section 11.
10
<PAGE>
"Working Capital Loan" or "Loan" shall mean the loan provided for in
------------------------------
Section 2(a) hereof, together with each additional loan, if any, made to
Borrower by the Lenders, at the option of the Lenders, existing as well as
contemplated, excluding the Revolver/Term Facility.
"Working Capital Note" shall mean a Substitute Working Capital Note dated
--------------------
as of the date hereof, substantially in the form of Exhibit A-1, A-2, A-3 or A-4
attached hereto, made by Borrower and payable to the order of Norwest, First
American, Rothschild or First Chicago, as appropriate, with appropriate
insertions, issued in connection with the assumption by Borrower of the
Partnership's obligations pursuant to the Reorganization and the assignment by
Norwest, First American and Rothschild to First Chicago of a portion of their
interests in the Working Capital Loans, in substitution and replacement of the
Replacement Working Capital Notes, as amended, issued in connection with the
Second Amendment to Working Capital Loan Agreement dated as of September 8,
1995, together with any and all renewals, extensions, amendments and changes of,
or substitutions for, said note; collectively, the "Working Capital Notes."
---------------------
SECTION 2. THE WORKING CAPITAL LOAN.
------------------------
(a) Terms of the Working Capital Loan. Subject to the terms and
----------------------------------
conditions of this Agreement, each Lender agrees to make advances to Borrower
(such advances are called the "Advances") from time to time during the
--------
Commitment Period, in an aggregate principal amount not to exceed its Loan Share
of the Commitment. Advances under the Working Capital Loan shall be evidenced
by the Working Capital Notes. So long as an Event of Default or an Unmatured
Event of Default has not occurred, during the Commitment Period Borrower may
borrow, repay and reborrow under the Working Capital Notes in accordance with
Section 2(b) below. The entire outstanding principal balance of, together with
accrued interest on, the Working Capital Loan shall be due and payable on June
30, 1998.
(b) Borrowing Procedures.
---------------------
(i) Each Request for Advance under the Working Capital Loan
shall be in the form of Exhibit C attached hereto and shall be
---------
submitted to the Agent on or before 11:00 a.m. Denver, Colorado time
on the Business Day immediately preceding the day such Advance is
requested to be made. Upon receipt of a Request for Advance, the
Agent shall promptly notify each Lender thereof. Not later than 11:00
a.m. Denver time on the next Business Day, each Lender shall make
available to the Agent the amount of such Lender's Loan Share of the
amount specified in the Request for Advance in immediately available
funds; provided, however, that the Lenders shall not be obligated to
-----------------
make any Advance to Borrower that would result in the aggregate unpaid
principal balance outstanding under the Working Capital Notes
exceeding the Commitment. If all conditions precedent to such Advance
have been met, Agent will on the date requested make such Advance
available to Borrower in immediately available funds at Agent's office
in Denver, Colorado.
11
<PAGE>
(ii) Each Advance under the Working Capital Loan shall be in an
amount of at least $100,000 or such lesser amount equal to the
unadvanced portion of the Working Capital Loan. Each Advance shall be
evidenced by the Working Capital Notes.
(iii) All Advances requested by Borrower shall be made pro rata
by each Lender in proportion to such Lender's Loan Share.
(c) The Loan Date. The initial Advance under the Working Capital
--------------
Loan shall be made on a date and at a time (the "Loan Date") selected by
---------
Borrower, but in no event earlier than the time all conditions of lending
described in Sections 4(a) and 4(b) below have been satisfied or waived by the
Lenders.
(d) Computation and Payment of Interest; Late Payment Rate.
-------------------------------------------------------
(i) Interest on the Working Capital Loan shall accrue daily and
shall be computed on the basis of a year of 365 or 366 days, as
appropriate. Interest on the Working Capital Loan shall be payable in
arrears on the last day of each Fiscal Quarter, beginning December 31,
1996.
(ii) Notwithstanding anything to the contrary contained in this
Agreement, overdue principal, and (to the extent permitted under
applicable law) overdue interest, whether caused by acceleration of
maturity or otherwise, shall bear interest at a fluctuating rate,
adjustable the day of any change in such rate, equal to three
percentage points above the Adjusted Prime Rate (the "Late Payment
------------
Rate)", until paid, and shall be due and payable immediately.
----
(e) Payments by Borrower. All payments of principal and interest
---------------------
hereunder shall be made at the Agent's offices at 1740 Broadway, Denver,
Colorado 80274-8699 (or at such other place as the Agent shall have designated
to Borrower in writing at least one Business Day prior to the due date or
prepayment date, as the case may be) by 12:00 noon Denver time on the date due
or the date of prepayment (as the case may be) in immediately available funds
and without set-off or counterclaim or deduction of any kind. If any payment to
be made by Borrower hereunder or under the Working Capital Notes shall become
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in
computing any interest and fees in respect of such payment.
(f) Payments to Lenders. Each payment by Borrower to the Agent on
--------------------
account of principal of and interest on the Working Capital Loan or otherwise
hereunder shall be distributed the same day in like funds as received from
Borrower by Agent pro rata according to the Loan Share of each Lender in like
funds; provided that in the event Agent receives less than the aggregate amount
-------- ----
due to all Lenders on any day, Agent shall distribute ratably to each Lender
12
<PAGE>
in the case of any payment, the portion of the aggregate amount received by
Agent on such day multiplied by the Loan Share of such Lender.
(g) Optional Payments.
------------------
During the Commitment Period, Borrower may make optional payments on
the outstanding principal balance of the Working Capital Loan without penalty or
premium, at any time, and from time to time, in integral multiples of $100,000,
or such lesser amount equal to the then outstanding principal balance, together
with accrued interest on the principal amount so paid. Borrower shall give the
Agent one Business Day's notice in advance of any optional payment on the
Working Capital Loan.
(h) Mandatory Payments. If at any time, or from time to time, a
-------------------
Borrowing Base Deficiency exists, Borrower shall, within three Business Days
after Agent on behalf of Lenders gives written notice of such fact to Borrower
pursuant to Section 6 hereof, make a mandatory prepayment to Agent for
distribution to Lenders in the principal amount of such Borrowing Base
Deficiency, together with all accrued and unpaid interest on, and fees related
to, the principal amount so prepaid, unless Borrower has satisfied the condition
set out in Section 6(a) hereof. Any such prepayment of principal under this
Section 2 shall be applied pro rata in accordance with each Lender's Loan Share
to the unpaid principal balance of the Working Capital Loan thereof until the
Working Capital Loan is paid in full.
(i) Fees.
-----
(i) During the Commitment Period, Borrower shall pay to the
Lenders an unused commitment fee on the average daily difference
between the Commitment and the aggregate outstanding principal amount
under the Working Capital Notes, at an annual rate of one-half of one
percent (0.5%), payable quarterly in arrears, with the first such
payment due December 31, 1996 (for the period from the date hereof
through December 31, 1996) and ending on the last day of the
Commitment Period.
(ii) The fee for each Letter of Credit shall be an amount equal
to the greater of 1.0% per annum of the face amount of such Letter of
Credit, or $250. The Agent shall retain for its own account annually
the first $250.00 of the Letter of Credit fee for each Letter of
Credit, and shall promptly remit to each Lender pro rata according to
the Loan Share of such Lender, the Letter of Credit fee actually
received in excess of $250.00. The first year's fee shall be payable
by Borrower at the time a Letter of Credit is issued. Subsequent
annual fees shall be due and payable on the anniversary date of the
applicable Letter of Credit. Annual fees shall be prorated for any
period less than a year that any Letter of Credit remains outstanding
pursuant to the terms of such Letter of Credit other than as the
result of one or more draws thereunder.
13
<PAGE>
(j) Adjustments. If any Lender (a "benefitted Lender") shall at any
------------
time receive any payment of all or part of its Working Capital Loan, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 12(c), or otherwise), in a greater proportion than its
Loan Share, such benefitted Lender shall purchase for cash from the other Lender
such portion of such other Lender's Working Capital Loan, or shall provide such
other Lender with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such benefitted Lender to share the excess
payment or benefits of such collateral or proceeds ratably with the other
Lender; provided, however, that if all or any portion of such excess payment or
-------- -------
benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest. Borrower agrees that any Lender so
purchasing a portion of another Lender's Working Capital Loan may exercise all
rights of payment (including, without limitation, rights of set-off) with
respect to such portion as fully as if such Lender were the direct holder of
such portion.
(k) Increased Capital. If either (A) the introduction of or any
------------------
change in or in the interpretation of any law or regulation after the date
hereof (and excluding any new laws or changes presently known to Agent even if
they have not yet become effective) or (B) compliance by Issuer or any Lender
with any guideline or request from any central bank or other governmental
authority (whether or not having the force of law) affects or would affect the
amount of capital required or expected to be maintained by Issuer or any Lender
or any corporation controlling Issuer or any Lender and Issuer or such Lender
determines that the amount of such capital is increased by or based upon the
existence of the Letters of Credit or similar contingent obligations or the
existence of the Revolver Commitment and other commitments of this type then,
upon demand by Issuer or such Lender, Borrower shall immediately pay to Issuer
or such Lender, from time to time as specified by Issuer or such Lender,
additional amounts sufficient to compensate Issuer or such Lender in light of
such circumstances, to the extent that Issuer or such Lender reasonably
determines such increase in capital to be allocable to the issuance or
maintenance of Letters of Credit or the Revolver Commitment. Issuer or such
Lender claiming compensation under this Section 2(k) shall provide Borrower with
a certificate setting forth in reasonable detail the amount payable to Issuer or
such Lender, the reason for the additional compensation and the calculation of
the additional compensation.
SECTION 3. LETTERS OF CREDIT.
-----------------
(a) Issuance of Standby Letters of Credit. Each request of Borrower
--------------------------------------
for the issuance of a Letter of Credit hereunder shall be on the form of the
application for issuance of a Letter of Credit attached hereto as Exhibit L,
---------
properly completed, and shall be received by the Issuer at least three Business
Days prior to the date of proposed issuance. Upon receipt of an application for
the issuance of a Letter of Credit and upon meeting the Conditions of Lending
set forth in Section 4 hereof, the Issuer shall issue standby Letters of Credit
during the Commitment Period, and such Letters of Credit shall be issued in such
amounts and under such circumstances as the Issuer deems appropriate consistent
with its existing policies. Notwithstanding anything to
14
<PAGE>
the contrary set forth herein, the Issuer shall not be obligated to issue,
extend or amend any Letter of Credit such that the Letter of Credit (i) would
result in an aggregate unpaid principal balance outstanding under the Working
Capital Notes (including, without limitation, the face amount of any other
Letters of Credit that are still in effect) which exceeds the Commitment, or
(ii) has an expiration date later than the Commitment Period.
(b) Payments Treated as an Advance. Each payment by the Issuer under
-------------------------------
any outstanding Letter of Credit shall be deemed to be an Advance bearing
interest at the Adjusted Prime Rate from the date of such payment, shall be
entitled to all of the benefits of the Security Documents and shall be subject
to all terms of this Agreement. Each Lender, upon receipt of a written advice
of any payment under a Letter of Credit, shall make available to the Agent for
the account of the Issuer, whether or not the conditions of lending set forth in
Section 4 have been complied with, an amount in immediately available funds
equal to its Loan Share of the amount of the drawing, whereupon the Lenders
shall each be deemed to have made an Advance. A written advice(s) setting forth
in reasonable detail the amounts owing under this Section 3, submitted by Issuer
to Borrower from time to time, shall be conclusive, absent manifest error, as to
the amounts thereof.
(c) Restriction on Liability. None of the Issuer, the Agent, any of
-------------------------
the Lenders or their respective correspondents shall be responsible for:
(i) the use which may be made of any Letter of Credit or for any
actions or omissions of the beneficiary of any Letter of Credit;
(ii) the existence or nonexistence of a default under any
instrument secured or supported by any Letter of Credit or any other
event which gives rise to a right to call upon any Letter of Credit;
(iii) the validity, sufficiency or genuineness of any document
delivered in connection with any Letter of Credit, even if such
document should in fact prove to be in any or all respects invalid,
fraudulent or forged;
(iv) except as specifically required by a Letter of Credit,
failure of any instrument to bear any reference or adequate reference
to any Letter of Credit, or failure of documents to accompany any
draft at negotiation, or failure of any person to note the amount of
any draft on the reverse of any Letter of Credit or to surrender or
take up any Letter of Credit; or
(v) errors, omissions, interruptions or delays in transmission or
delivery of any messages by mail, cable, telegraph, wireless, or
otherwise.
The Issuer, the Agent and the Lenders shall not be responsible for any act,
error, neglect or default, omissions, insolvency or failure in the business of
any of the correspondents of the Issuer, for any refusal by the Issuer or any of
its correspondents to pay or honor drafts drawn
15
<PAGE>
under any Letter of Credit because of any applicable law, decree or edict, legal
or illegal, of any governmental agency now or hereafter in force, or for any
matter beyond the control of such Person. The happening of any one or more of
the contingencies referred to in the preceding clauses of this Section shall not
affect, impair or prevent the vesting of any of the rights or powers of the
Issuer, the Agent and the Lenders under this Agreement or the obligation of
Borrower to make reimbursements hereunder. In furtherance and extension and not
in limitation of the specific provisions hereinabove set forth, Borrower agrees
that any action, not contrary to the terms of any Letter of Credit, which is
taken by Issuer in issuing such Letter of Credit or by any correspondent of
Issuer under or in connection with such Letter of Credit shall be binding on
Borrower and shall not put Issuer or any of Issuer's correspondents under any
resulting liability to Borrower unless it is the result of such Person's gross
negligence or willful misconduct and Borrower makes a like agreement as to any
inaction or omission on the part of Issuer or any of its correspondents unless
it is the result of such Person's gross negligence or willful misconduct.
(d) No Duty to Inquire. Borrower agrees that Issuer is authorized
-------------------
and instructed to accept and pay drafts under any Letter of Credit without
requiring, and without responsibility for, the determination as to the existence
of any event giving rise to said draft, either at the time of acceptance of
payment or thereafter, other than obtaining any documents expressly required by
the Letter of Credit. Borrower agrees that Issuer is under no duty to ascertain
or inquire as to the validity or accuracy of any such document or the authority
of the Person executing or delivering such document or draft or making such a
demand (whether by tested telex or otherwise). Borrower agrees to hold the
Issuer, the Agent and the Lenders harmless from and indemnified against any
liability or claim in connection with or arising out of the foregoing provisions
and the subject matter of this Section 3.
(e) Reimbursement by Lenders. Issuer irrevocably agrees to grant and
-------------------------
hereby grants to each Lender, and, to induce Issuer to issue Letters of Credit
hereunder, each Lender irrevocably agrees to accept and purchase and hereby
accepts and purchases from Issuer, on the terms and conditions hereinafter
stated, for such Lender's own account and risk an undivided interest equal to
such Lender's Loan Share of Issuer's obligations and rights under each Letter of
Credit issued hereunder and the amount of each draft paid by Issuer thereunder.
SECTION 4. CONDITIONS TO EFFECTIVENESS; CONDITIONS OF LENDING.
--------------------------------------------------
(a) Conditions to Effectiveness. This Agreement shall become
---------------------------
effective on the date that each of the following conditions shall have been
satisfied (or waived in accordance with Section 14(e)):
(i) The Reorganization shall have occurred;
(ii) All conditions to the effectiveness of the Amended and
Restated Loan Agreement executed in connection with the Revolver/Term Facility,
as set forth in Section 4(a) thereof, shall have been satisfied or waived;
16
<PAGE>
(iii) Except for the Partnership Distribution (as defined in the
Modification Agreement referenced below) and the other elements of the
Reorganization that would violate the terms of the Existing Loan Agreements but
for the consent set forth in Section 1 of the Modification Agreement (the
"Modification Agreement") dated as of July 31, 1996 among the Partnership,
- -----------------------
Borrower, Agent and the Lenders, no Event of Default or Unmatured Event of
Default under the Existing Loan Agreements shall have occurred or be continuing,
all representations and warranties contained in Section 8 of the Existing
Working Capital Agreement shall be true in all material respects (except those
affected by the occurrence of the Reorganization), and Borrower and the
Partnership shall have satisfied in all material respects their covenants and
obligations under the Modification Agreement.
From and after the Loan Date: (x) the Existing Working Capital Agreement will
be automatically amended and restated to read as this Agreement reads, without
further action by any party, (y) Working Capital Loans under (and as defined in)
the Existing Working Capital Agreement outstanding on the Loan Date shall
continue under this Agreement, and (z) the rights and obligations of the parties
hereto shall be governed by the provisions hereof, and the rights and
obligations of the parties to the Existing Working Capital Agreement with
respect to the period prior to the Loan Date shall continue to be governed by
the provisions thereof as in effect prior to the Loan Date, except that fees
accrued under the Existing Working Capital Agreement to the Loan Date shall be
paid on the Loan Date.
(b) Initial Advance. (i) Assuming the conditions for the
----------------
effectiveness of this Agreement set forth in Section 4(a) are satisfied, the
initial Advance hereunder shall be deemed to be the Advances made under the
Existing Working Capital Agreement to the Partnership that are outstanding and
assumed by Borrower pursuant to the Reorganization. In addition to the
conditions in Section 4(a), the Lenders shall have no obligation to make the
initial Advance under the Working Capital Loan unless the Agent shall have
received all of the following, at the Agent's office in Denver, Colorado, duly
executed and delivered and in form and substance satisfactory to the Agent and
its counsel:
(A) This Agreement, executed by Borrower, the Agent and the
Lenders;
(B) The Working Capital Notes;
(C) Counterparts of the Security Documents, duly executed
and acknowledged by Borrower, together with the appropriate
financing statements, as may be necessary or advisable under
applicable law in order to perfect and maintain, to the full
extent permitted by applicable law, the first priority liens and
security interests created thereby;
(D) Evidence that the Agent has been named as
mortgagee/loss payee under all policies of casualty insurance,
and as an additional insured under all policies of liability
insurance, as required by Section 9(f);
17
<PAGE>
(E) A certificate, dated the Loan Date and executed by the
president or a vice president of Borrower, stating the substance
of Subsections 4(b)(ii)(A), (C) and (D);
(F) A certificate, dated the Loan Date and executed by the
Secretary or assistant Secretary of Borrower, which shall contain
the names and signature of the officers of Borrower authorized to
execute the Loan Documents on behalf of Borrower, and which shall
certify to the correctness and completeness of the articles of
incorporation and bylaws of Borrower, and the resolutions duly
adopted by the Board of Directors of Borrower authorizing the
execution of the Loan Documents and the consummation of the
transactions contemplated herein and therein;
(G) Certificates from the Delaware Secretary of State as to
the good standing of Borrower and from the Colorado Secretary of
State, Borrower's principal place of business, as to Borrower's
qualification to do business in such state; and
(H) All other documents and assurances which the Agent
reasonably requires or which it may reasonably request in
connection with the transactions contemplated by this Agreement,
and such documents shall be certified, when appropriate, by
proper authorities.
(ii) The Lenders shall have no obligation to make any Advances
hereunder unless the following shall be true and correct on and as of
the date of such Advance:
(A) All representations and warranties contained in Section
8 and in the Security Documents shall be true on the Loan Date as
if then given, and Borrower shall have performed or observed all
terms, agreements, conditions and obligations hereunder and under
the Security Documents to be performed or observed on or prior to
the Loan Date;
(B) All legal matters incident to the Working Capital Loan
shall be satisfactory to counsel to the Agent, and the Agent
shall have received on the Loan Date favorable opinions addressed
to the Agent and the Lenders of Dorsey & Whitney LLP, and Barry
Spector, Esq., co-counsel for Borrower, substantially in the form
set forth in Exhibit D, together with the certificate provided
---------
for in such Exhibit, which opinions collectively shall cover the
matters set forth in Sections 8(a)(i), (ii) and (iii), (b), (c),
(d), (e), (r) and (s), and such other matters as the Agent or its
counsel may reasonably request;
18
<PAGE>
(C) No Event of Default or Unmatured Event of Default shall
have occurred and be continuing or would result from the making
of the requested Advance; and
(D) Since December 31, 1995, there has been no material
adverse change in the business, financial position or results of
operations of the Partnership, as assigned to and assumed by
Borrower pursuant to the Reorganization.
(c) Subsequent Advances. The obligation of the Lenders to make
--------------------
subsequent Advances under the Working Capital Loan as set forth in Section 2 and
issue Letters of Credit is subject to satisfaction of the conditions set forth
in such Section and the following conditions precedent:
(i) The Agent shall have received (with an executed copy for each
of the Lenders), a certificate, dated the date of the requested
Advance or issuance of the Letter of Credit, and executed by the
president or a vice president of Borrower, stating the substance of
Subsections 4(b)(ii)(A), (C) and (D);
(ii) All representations and warranties contained in Section 8
hereof and in the Security Documents shall be true on the date of such
requested Advance as if then given, and Borrower shall have performed
or observed all terms, agreements, conditions and obligations
hereunder and under the Security Documents to be performed or observed
on or prior to the date of such requested Advance;
(iii) No Event of Default or Unmatured Event of Default shall
have occurred and be continuing or would result from the making of the
requested Advance;
(iv) Since December 31, 1995, there has been no material adverse
change in the business, financial position or results of operations of
Borrower as assigned by the Partnership to and assumed by Borrower
pursuant to the Reorganization;
(v) All legal matters relating to the Loan Documents, such
Advance and the consummation of the transactions contemplated thereby
shall be reasonably satisfactory to the Agent's counsel; and
(vi) Such Advance shall not be prohibited by any laws or any
regulation or order of any court or governmental authority or agency
and shall not subject the Lender to any penalty or other onerous
condition under or pursuant to any such law, regulation or order.
19
<PAGE>
SECTION 5. BORROWING BASE.
--------------
(a) Initial Borrowing Base. During the period from the date hereof
-----------------------
to the first Determination Date, the Borrowing Base shall be $7,500,000.
(b) Information. Within 10 days of the end of each calendar month,
------------
commencing November 10, 1996, Borrower shall submit to the Agent, a "Borrowing
---------
Base Certification," which shall be substantially in the form of Exhibit E
- ------------------ ---------
hereto, incorporating the requested information as of the end of the month for
the immediately preceding calendar month as to Borrower's Eligible Receivables,
Prepaid Natural Gas, Eligible Product Inventory Value, Net Eligible Exchange
Balances and Cash Collateral and such other information requested by the Agent,
all in form and substance acceptable to the Agent relating to the Collateral, to
be used by the Lenders in determining the Borrowing Base.
(c) Subsequent Determinations of Borrowing Base. (i) Subject to the
--------------------------------------------
other provisions of this Section 5(c), the Borrowing Base shall be designated on
each Determination Date (as defined below) as the amount equal to the sum of:
(A) eighty percent (80%) of the Eligible Receivables, plus
(B) eighty percent (80%) of the Prepaid Natural Gas, plus
(C) eighty percent (80%) of the Eligible Products Inventory
Value, plus
(D) eighty percent (80%) of the Net Eligible Exchange
Balances, plus
(E) one hundred percent (100%) of the Cash Collateral
as set forth in the Borrowing Base Certification provided to Agent
pursuant to Section 5(b); provided that if in any calendar month the
--------
Net Eligible Exchange Balances is a negative amount, then such
negative amount will be deducted from the Eligible Products Inventory
Value in determining the Borrowing Base for such calendar month.
(ii) Lenders shall have five (5) days after the receipt of a
Borrowing Base Certification to dispute the calculation of the
Borrowing Base in such Borrowing Base Certification. If either Lender
disputes the calculation it shall give Agent notice thereof within the
five-day period. If Agent has received notice from any Lender of any
dispute, it shall within the same five-day period notify Borrower of
such dispute and of the amount of the Borrowing Base as recalculated
by the Lenders. The amount of the Borrowing Base as so recalculated
by the Lenders and set forth in such notice shall take effect on the
20
<PAGE>
date specified therein which may not be earlier than the date on which
such notice is received by Borrower and shall continue in effect until
the next Determination Date. Any such recalculation shall be made by
the Lenders in good faith based on the information in such Borrowing
Base Certification and any other information available to the Lenders
at the time in question regarding the Eligible Receivables, Prepaid
Natural Gas, Eligible Product Inventory, Eligible Product Inventory
Value, Net Eligible Exchange Balances and Cash Collateral.
The date on which the Borrowing Base is so designated either by Agent
or by operation of the Borrowing Base Certification if Agent does not
give timely notice objecting thereto, shall be called a "Determination
-------------
Date". A Determination Date may occur during the period between the
----
date on which a Request for Advance is submitted and the day on which
such Advance is to be made. Until the Borrowing Base has been
determined pursuant to this Section 5(c) for any period, the Borrowing
Base shall be the amount determined pursuant to this Section 5 for the
immediately preceding period.
(iii) If Borrower does not furnish to the Agent the information
required by Section 5(b) by the date specified therein, the Agent may
designate the Borrowing Base at any amount which the Lenders determine
based on the relevant information then available to the Lenders and
the Agent. The Agent may redesignate the Borrowing Base from time to
time thereafter until the Lenders receive the required information,
whereupon a new Borrowing Base shall be determined as described above.
SECTION 6. BORROWING BASE DEFICIENCY. If the aggregate unpaid principal
-------------------------
amount outstanding under the Working Capital Notes plus the aggregate face
amount of all outstanding Letters of Credit exceeds the Borrowing Base then in
effect (the "Borrowing Base Deficiency"), Borrower shall take one of the
-------------------------
following actions following receipt of notice from the Agent of the existence of
such Borrowing Base Deficiency:
(a) Add Additional Collateral. Within 3 Business Days following
--------------------------
receipt of such notice from the Agent, provide sufficient additional collateral
or security for the Working Capital Loan, in form and substance acceptable to
the Lenders in their sole discretion; or
(b) Repay Excess Debt. Within 3 Business Days following receipt of
------------------
such notice from the Agent, make a mandatory prepayment on the Working Capital
Loan in accordance with Section 2(h) in an amount equal to the Borrowing Base
Deficiency.
Failure of Borrower to comply with this Section 6 shall be an immediate Event of
Default.
SECTION 7. SECURITY. The repayment of the Working Capital Loan and the
--------
Working Capital Notes and all extensions and renewals thereof, and the
performance of all obligations of Borrower hereunder, shall be secured by the
Security Documents.
21
<PAGE>
SECTION 8. REPRESENTATIONS AND WARRANTIES. Borrower represents and
------------------------------
warrants to the Agent and each Lender that:
(a) Existence.
----------
(i) Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is
qualified to do business in Arkansas, Colorado, Kentucky, Tennessee,
Texas and West Virginia and in every other jurisdiction in which the
nature of its business or the ownership of its assets requires such
qualification and failure to so qualify could have a material adverse
effect on Borrower, its business, operations, assets, property,
prospects or condition (financial or otherwise);
(ii) Each of the Restricted Subsidiaries and Related Persons
other than Borrower is duly organized, validly existing and in good
standing under the laws of the state of its incorporation or formation
and is qualified to do business in every jurisdiction in which the
nature of its business or the ownership of its assets requires such
qualification and failure to so qualify could have a material adverse
effect on Borrower or such Person, its business, operations, assets,
property, prospects or condition (financial or otherwise);
(iii) Each Related Person and Restricted Subsidiary has the
power and authority to own the property which it owns and to carry on
its business as such business is now conducted; and
(iv) Each Related Person and Restricted Subsidiary has all
franchises, permits, licenses and similar agreements necessary to
carry on its business as now conducted, and has not received any
notices of default or termination under any of such agreements.
(b) Non-Contravention. The execution, delivery and performance by
------------------
the Borrower of this Agreement, and the other Loan Documents and the borrowings
hereunder and the consummation of the transactions contemplated herein and
therein will not conflict with the articles of incorporation, bylaws or other
organizational or governing documents of any Related Person or Restricted
Subsidiary, or conflict with or result in any breach of any mortgage, lien,
lease, agreement, instrument, order, judgment, decree, law, rule, regulation or
any other restriction of any kind or character to which any Related Person or
Restricted Subsidiary is a party or is subject or by which any Related Person or
Restricted Subsidiary or its properties are bound or affected or result in the
creation or imposition of any lien, charge or encumbrance upon any property of
any Related Person or Restricted Subsidiary.
(c) Third Party Authorization. No consent, approval, exemption,
--------------------------
authorization or order of or other action by, and no notice to or filing with,
any court or governmental authority or third party is required by any Related
Person or Restricted Subsidiary
22
<PAGE>
in connection with the execution, delivery or performance by Borrower of this
Agreement, or any other Loan Document or to consummate any transactions
contemplated hereby or thereby.
(d) Authorization; Binding Effect. Borrower has full power and
------------------------------
authority to enter into this Agreement and the other Loan Documents. The
execution and delivery of this Agreement, and the other Loan Documents, and the
performance and observance of their terms, conditions and obligations, have been
duly authorized by all necessary action by Borrower. This Agreement and the
Working Capital Notes are, and the other Loan Documents when duly executed and
delivered will be, legal, valid and binding obligations of Borrower, enforceable
in accordance with their respective terms, except as such enforcement may be
limited by bankruptcy, insolvency or similar laws of general application
relating to the enforcement of creditors' rights.
(e) Litigation. Except as disclosed in Exhibit F attached hereto,
----------- ---------
there are no actions, suits, proceedings or claims against any Related Person or
Restricted Subsidiary or any of their respective properties pending or, to the
knowledge of Borrower, threatened before any court or by or before any
governmental instrumentality, which could have a material adverse effect on the
business, operations, property, prospects or condition (financial or otherwise)
of any Related Person or Restricted Subsidiary or the ability of Borrower to
perform its obligations under this Agreement, or any of the other Loan
Documents. There exists no default or breach by any Related Person or
Restricted Subsidiary with respect to any order, writ, injunction, decree or
demand of any court or governmental instrumentality, nor does the execution,
delivery or performance by Borrower of this Agreement or any of the other Loan
Documents result in any such default or breach.
(f) Taxes. Each Related Person and Restricted Subsidiary has filed
------
all required tax returns and paid all taxes and other governmental charges or
levies imposed upon or against it or its properties, including the Security
Agreements and the Collateral, or profits before the same became in default,
except those being contested in good faith and by appropriate proceedings, for
which adequate reserves have been set up by such Person, and for which there is
no risk of loss of any of the Collateral.
(g) Liens. All property and assets of Borrower are free and clear of
------
all liens and encumbrances except (i) the liens permitted by Section 10(b)
hereof, and (ii) the lien in connection with the litigation described in Exhibit
-------
F attached hereto.
- -
(h) Names and Places of Business. No Related Person or Restricted
-----------------------------
Subsidiary has been known by, or used any other corporate, partnership, trade,
or fictitious name. The chief executive office and principal place of business
of Borrower (and, prior to the Reorganization of the Partnership) have been
located at the address of Borrower set out in Section 14(b) for at least the
four months immediately preceding the date hereof. The places where Borrower
keeps its books and records concerning the Collateral is at Borrower's address
set forth for notices in Section 14(b), and has been there for at least the four
months immediately preceding the date hereof.
23
<PAGE>
(i) Use of Proceeds. The proceeds of the Working Capital Loan shall
----------------
be used solely for working capital purposes of Borrower and the issuance of
standby Letters of Credit pursuant to the terms of this Agreement. In no event
shall funds from any Advance be used directly or indirectly by any Person for
personal, family, household or agricultural purposes.
(j) Other Obligations. No Related Person or Restricted Subsidiary
------------------
has any outstanding Debt of any kind (including contingent obligations, tax
assessments, and unusual forward or long-term commitments) which is, in the
aggregate, material to such Person or material with respect to Borrower's
Consolidated financial condition and not shown in the Initial Financial
Statements.
(k) Full Disclosure. No certificate, statement, report or other
----------------
information delivered herewith or heretofore by any Related Person or Restricted
Subsidiary to Agent or the Lenders in connection with the negotiation of this
Agreement or in connection with any transaction contemplated hereby contains any
untrue statement of a material fact or omits to state any material fact known to
such Person necessary to make the statements contained herein or therein not
materially misleading as of the date made or deemed made. There is no fact
known to any Related Person or Restricted Subsidiary that has not been disclosed
to the Agent or the Lenders in writing that could materially and adversely
affect Borrower's properties, business, prospects or condition (financial or
otherwise).
(l) Margin Stock. No Related Person or Restricted Subsidiary is
-------------
engaged principally, or as one of its important activities, in the business of
extending credit to others for the purpose of purchasing or carrying any "margin
stock" or any "margin securities" (as such terms are defined respectively in
Regulation U and Regulation G promulgated by the Board of Governors of the
Federal Reserve System).
(m) ERISA. Neither Borrower nor any member of its Controlled Group
------
maintains, or has ever maintained any ERISA Plan. Borrower and the members of
its Controlled Group are in compliance with ERISA and the Code in all material
respects as to all employee benefit plans maintained by Borrower and the members
of its Controlled Group. Neither Borrower nor any member of its Controlled
Group is, or has ever been, required to contribute to, or has, or has ever had,
any other absolute or contingent liability in respect of, any "multiemployer
plan" as defined in Section 4001 of ERISA. Neither the Borrower nor any member
of its Controlled Group has ever represented, promised, or contracted (whether
in oral or written form) to any current or former employee (either individually
or as a group) that such current or former employee(s) would be provided, at any
cost to any member of the Controlled Group, with any employee welfare benefits
(within the meaning of Section 3(1) of ERISA) following retirement or
termination of employment. All members of the Controlled Group have complied in
all material respects with the notice and continuation coverage requirements of
Section 4980B of the Code.
(n) Security Documents. The warranties and representations contained
-------------------
in the Security Documents are true and correct in all material respects.
24
<PAGE>
(o) Compliance with Laws. Each Related Person and Restricted
---------------------
Subsidiary is in material compliance with all laws, rules and regulations, and
determination of any arbitrator or governmental authority applicable to or
binding upon it or any of its property or to which it or any of its property is
subject.
(p) Financial Condition. The Initial Financial Statements fairly
--------------------
present the Partnership's financial position at the date thereof and the results
of the Partnership's operations and cash flows for the period thereof. Since
December 31, 1995, there has been no material adverse change in the business,
financial position or results of operations of the Partnership, as assigned to
and assumed by Borrower pursuant to the Reorganization.
(q) Environmental Matters. (i) The operations of each Related Person
----------------------
and Restricted Subsidiary comply in all material respects with all federal,
state or local laws, statutes, rules, regulations, and all administrative
orders, licenses, authorizations and permits of any governmental authority,
relating to environmental or public health and safety; (ii) none of the
operations of any Related Person or Restricted Subsidiary is the subject of
federal, state or local investigation evaluating whether any material remedial
action is needed to respond to a release of any hazardous or toxic waste,
substance or constituent into the environment; (iii) no Related Person or
Restricted Subsidiary has (and to the best knowledge of Borrower, nor has any
other person) filed any notice under any federal, state or local law indicating
that such Person is responsible for the release into the environment, or the
improper storage, of any material amount of any hazardous or toxic waste,
substance or constituent or that any such waste, substance or constituent has
been released, or is improperly stored, upon any property of such Person; and
(iv) no Related Person or Restricted Subsidiary otherwise has any known material
contingent liability in connection with the release into the environment, or the
improper storage, of any such waste, substance or constituent.
(r) Investment Company Act. No Related Person or Restricted
-----------------------
Subsidiary is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
(s) Public Utility Holding Company Act. No Related Person or
-----------------------------------
Restricted Subsidiary is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(t) Title to Properties; First Priority Security Interest. Each
------------------------------------------------------
Related Person or Restricted Subsidiary has good and indefeasible title to all
of their respective material properties and assets, free and clear of all liens
except those permitted by Section 10(b) hereof. As of the date hereof, the
Agent, on behalf of the Lenders has a perfected first priority lien or security
interest in all of the Collateral.
25
<PAGE>
(u) Subsidiaries of Borrower and of Related Persons. Borrower does
------------------------------------------------
not presently have any Subsidiaries or own any stock or equity interest in any
corporation, partnership, joint venture or association, except as set forth in
Exhibit G hereto.
- ---------
(v) Location of Inventory. The location of all of Borrower's
----------------------
Products and inventory is set forth in Exhibit H hereto.
---------
(w) Eligibility of Items Included in Borrowing Base. Borrower
------------------------------------------------
represents and covenants to and with the Agent and Lenders that each item
included in a Borrowing Base Certificate at any time and from time to time is
one of the following: an Eligible Receivable, Prepaid Natural Gas, Eligible
Product Inventory, an Eligible Exchange Balance or Cash Collateral.
(x) Reorganization. Borrower represents and warrants to the Agent
---------------
and each Lender that:
(i) The execution, delivery and performance by the Partnership
and Borrower of all documents executed in connection with the
Reorganization and the consummation of the transactions contemplated
by the Reorganization will not conflict with the articles of
incorporation, bylaws or other organizational or governing documents
of any Related Person or Restricted Subsidiary, or conflict with or
result in any breach of any mortgage, lien, lease, agreement,
instrument, order, judgment, decree, law, rule, regulation or any
other restriction of any kind or character to which any Related Person
or Restricted Subsidiary is a party or is subject or by which any
Related Person or Restricted Subsidiary or its properties are bound or
affected or result in the creation or imposition of any lien, charge
or encumbrance upon any property of any Related Person or Restricted
Subsidiary.
(ii) No consent, approval, exemption, authorization or order of or
other action by, and no notice to or filing with, any court or
governmental authority or third party is required by any Related
Person or Restricted Subsidiary in connection with the execution,
delivery or performance by the Partnership and Borrower of the
documents executed in connection with the Reorganization or to
consummate any transactions contemplated by the Reorganization, except
such consents, approvals, exemptions, authorizations, orders or
actions the failure of which to obtain or take would not have a
material adverse effect on the transactions contemplated by the
Reorganization, or subsequent to consummation thereof, the business,
assets or financial condition of Borrower;
(iii) Borrower and the Partnership have full power and authority
to enter into all of the documents executed in connection with the
Reorganization. The execution and delivery of such documents, and the
performance and observance of their terms, conditions and obligations,
have been duly authorized by all necessary action by Borrower and the
Partnership. All such documents
26
<PAGE>
have been duly executed and delivered and constitute the legal, valid
and binding obligations of Borrower and the Partnership, enforceable
in accordance with their respective terms, except as such enforcement
may be limited by bankruptcy, insolvency or similar laws of general
application relating to the enforcement of creditors' rights;
(iv) At the consummation of the Reorganization and as of the date
hereof, there does not exist against the Partnership or its assets any
judgment, lien, encumbrance, burden or claim of any kind that attached
to the assets of the Partnership assigned to Borrower in connection
with the Reorganization except liens and encumbrances existing as a
result of the Existing Loan Agreements, and except liens and
encumbrances permitted by Section 10(b) hereof;
(v) Upon consummation of the Reorganization the Lenders received
and continue to have a perfected first priority lien and security
interest in the assets assigned to Borrower by the Partnership;
(vi) Prior to consummation of the Reorganization, the Partnership
obtained all necessary consents, permissions and approvals by third
parties or governmental authorities in connection with the transfer of
the assets of the Partnership to Borrower and the transfer of all
governmental permits and licenses held by the Partnership in
connection with the operation of its business, except to the extent
that the failure to obtain any such consent, permission or approval
would not have a material adverse effect on the business, assets or
financial condition of Borrower, and the Partnership obtained all
necessary waivers of preferential and similar rights of third parties
to purchase any portion of such assets;
(vii) Except for the Partnership Distribution and the other
elements of the Reorganization that would violate the terms of the
Existing Loan Agreements but for the consent set forth in Section 1 of
the Modification Agreement, no Event of Default or Unmatured Event of
Default under the Existing Loan Agreements has occurred or is
continuing, all representations and warranties contained in Section 8
of the Existing Working Capital Loan Agreement are true in all
material respects (except those affected by the occurrence of the
Reorganization), and Borrower and the Partnership have satisfied in
all material respects their covenants and obligations under the
Modification Agreement; and
(viii) No order has been entered by any court or governmental
agency having jurisdiction over the parties or the subject matter of
the Modification Agreement that restrains or prohibits the
Reorganization or which remained in effect at the time of the
Reorganization and the other transactions contemplated by the
Modification Agreement.
27
<PAGE>
SECTION 9. AFFIRMATIVE COVENANTS. Until payment in full of the Working
---------------------
Capital Loan and termination of all Commitments by the Lenders to make Advances
hereunder, without the prior written consent of the Required Lenders:
(a) Payment and Performance of Working Capital Loan. Borrower shall
------------------------------------------------
duly and punctually pay or cause to be paid in lawful money of the United
States, the principal and interest on the Working Capital Loan upon the dates,
at the place and in the manner set forth in Section 2 hereof, and perform and
observe all other obligations of Borrower under this Agreement and the other
Loan Documents.
(b) Financial Statements. Each of the Related Persons and Restricted
---------------------
Subsidiaries shall keep proper books of record and account in which full, true
and correct entries will be made of all business, dealings and affairs in
accordance with GAAP, and Borrower shall deliver to the Agent sufficient copies
for each Lender, at Borrower's expense and in an acceptable format:
(i) Within 120 calendar days after the end of each Fiscal Year,
complete audited annual financial statements of Borrower, together
with all notes thereto, prepared in reasonable detail in accordance
with GAAP, and presented on both a Consolidated and Consolidating
basis, together with an unqualified opinion, based on an audit
conducted by Price Waterhouse or other independent certified public
accountants selected by Borrower and acceptable to the Lenders,
stating that such financial statements present fairly the financial
position for the periods indicated in conformity with GAAP applied on
a basis consistent with prior years (except as otherwise required due
to changes in GAAP);
(ii) Within 45 calendar days after the end of each calendar
month, an unaudited monthly income statement, balance sheet and
statement of cash flows for the subject month, prepared in reasonable
detail and in accordance with GAAP and presented on both a
Consolidated and Consolidating basis;
(iii) Together with delivery of each of the financial statements
described in Subsection (i) and (ii) above, a certificate signed by
the president or chief financial officer of Borrower in the form of
Exhibit I attached hereto, stating that he or she has read this
---------
Agreement and made all other necessary investigations, attesting to
the authenticity of such financial statements, showing the calculation
of and compliance with the financial covenants contained in this
Agreement, and stating that in making the examination and reporting on
such financial statements, he or she concluded that there did not
exist any condition or event at the end of such Fiscal Year or at the
time of such certificate which constituted an Event of Default or an
Unmatured Event of Default, or, if such condition or event existed,
specifying the nature and period of existence of any such condition or
event;
28
<PAGE>
(iv) As soon as available, and in any event within 10 days after
the end of each month, a Borrowing Base Certification as provided in
Section 5(b);
(v) Within 30 days after the same are filed, copies of all
financial statements, registration statements and regular, periodical
or special reports that any Related Person may make to, or file with,
the Securities and Exchange Commission or any stock exchange; and
(vi) Within 30 days, such additional financial and other
information as any of the Agent or either of the Lenders may from time
to time reasonably request, including without limitation reasonable
detail with respect to the information provided on an aggregate basis.
(c) Preservation of Existence, Etc. (i) Borrower shall maintain in
--------------------------------
full force and effect Borrower's existence as a corporation and its good
standing under the laws of the State of Delaware and its right to transact
business in the States of Arkansas, Colorado, Kentucky, Tennessee, Texas and
West Virginia; and (ii) each Related Person and Restricted Subsidiary shall
maintain its good standing under the laws of the state of its formation and its
right to transact business in all states where its activities and ownership of
assets are such that qualification to transact business is necessary under the
laws of such states and failure to so qualify could have a material adverse
effect on such Person or on Borrower, or on Borrower's business, property,
prospects, assets, operations or condition (financial or otherwise).
(d) Maintenance of Property. Borrower shall maintain, preserve,
------------------------
protect and keep in good repair and in good working order and condition the
Collateral; and each Related Person and Restricted Subsidiary shall maintain all
other properties, real or personal, used or useful in its business in good
repair and in good working order and condition.
(e) Payment of Other Obligations.
-----------------------------
(i) Each Related Person and Restricted Subsidiary shall duly and
punctually pay and discharge (A) all taxes, assessments and other
governmental charges assessed against or imposed upon or with respect
to such Person or its properties or assets prior to the date when they
shall become delinquent unless the same are being contested in good
faith and by appropriate proceedings and appropriate reserves have
been established in accordance with GAAP and there is no risk of loss
of any of the Collateral; (B) all charges for labor, materials and
supplies which if unpaid might become a lien against any part of the
property of such Person unless the same are being contested in good
faith and by appropriate proceedings and appropriate reserves have
been established in accordance with GAAP and there is no risk of loss
of any of the Collateral; and (C) all federal and state social
security, worker's compensation and similar taxes, payments and
contributions for which such Person may be liable, before the same
become delinquent unless the same are being contested in good faith
and by appropriate
29
<PAGE>
proceedings and appropriate reserves have been
established in accordance with GAAP and there is no risk of loss of
any of the Collateral; and
(ii) duly and punctually pay all Debt obligations (principal and
interest), including without limitation, accounts payable and lease
obligations, unless the same are being contested in good faith and by
appropriate proceedings and appropriate reserves have been established
in accordance with GAAP.
(f) Insurance. Each Related Person and Restricted Subsidiary shall
----------
keep all of its insurable property, real and personal, adequately insured at all
times against fire and against such other risks as are customarily insured
against by similar businesses of a comparable size, and fully insure against its
employer's and public liability risks in financially sound and reputable
insurance companies, all in such amounts and upon such terms and conditions,
including deductibles, consistent with industry standards. Each insurance
policy covering Collateral shall be endorsed (i) to provide for payment of
losses to the Agent for the benefit of the Lenders as its interests may appear,
(ii) to provide that such policies may not be canceled, reduced or affected in
any manner for any reason without fifteen days prior notice to the Agent, (iii)
to provide for any other matters specified in any applicable Security Document
or which the Lenders or the Agent may reasonably require; (iv) to provide for
insurance against fire, casualty and any other hazards normally insured against,
in the amount of the full value (less a reasonable deductible not to exceed
amounts customary in the industry for similarly situated businesses and
properties) of the property insured, and (v) business interruption insurance in
an amount equal to the cost of operating Borrower's business as reasonably
determined by Borrower for a six-month period, which may change from time to
time depending upon Borrower's costs of operation at the time in question. Each
Related Person shall at all times maintain adequate insurance against its
liability for injury to persons or property, which insurance shall be by
financially sound and reputable insurers. A true and complete list of all
currently existing insurance of Borrower has been furnished to the Agent prior
to the date hereof. It is understood, and Agent and Lenders agree, that based
on existing circumstances Borrower has no obligation to insure inventory.
(g) Inspection of Property, Books and Records; Confidentiality
----------------------------------------------------------
Agreement. Borrower shall permit the Agent's and any Lender's duly authorized
- ----------
officers, employees and agents to inspect (and make copies of or abstracts
therefrom) the Collateral and the other property, books and records of Borrower
and to discuss Borrower's affairs, finances and accounts with Borrower's
officers and its independent accountants, and furnish any other data which the
Agent or any Lender may reasonably request, all at the expense of Borrower and
at any reasonable time and as often as the Agent or any Lender may reasonably
request; provided that Borrower shall not be liable for expenses arising out of
-------- ----
the gross negligence or willful misconduct of the inspecting party; provided,
--------
further, that Borrower shall not be required to give access to any party
- -------
inspecting the property subject to any of the Mortgages, if such inspecting
party refuses or is unwilling or unable to comply with the reasonable safety
requirements of Borrower relating to the property to be inspected. Each Lender
agrees that, until the occurrence of an Event of Default, it will take all
reasonable steps to keep confidential any proprietary information given to it by
any Related Person and Restricted Subsidiary, including without
30
<PAGE>
limitation any environmental information or reports pertaining to the property
subject to the Mortgages; provided, however, that this restriction shall not
-------- -------
apply to information which (i) has at the time in question entered the public
domain, (ii) is required to be disclosed by law or by any order, rule or
regulation (whether valid or invalid) of any court or governmental agency, or
authority, (iii) is disclosed to such Lender's external auditors, (iv) is
disclosed to such Lender's affiliates', agents or attorneys, or (v) is furnished
to purchasers or prospective purchasers of participations or other interests in
the Working Capital Loan or the Working Capital Notes; provided that before
-------------
making the disclosures described in the immediately preceding clauses (iv) and
(v), such Lender shall direct in writing the Persons to whom such proprietary
information is to be disclosed to comply with the confidentiality provisions set
forth in this Section 9(g). Borrower agrees that if either Lender breaches its
confidentiality agreement contained in this Section 9(g), Borrower's exclusive
remedy shall be an action for actual damages and such breach shall not be
asserted in any action for payment hereunder or under the Working Capital Notes
or in a foreclosure of any of the Security Documents.
(h) Notices. Borrower shall give written notice to the Agent within
--------
3 days after a Responsible Person becomes aware of any of the following:
(i) Any material adverse change in the business, property,
prospects, assets, operations or condition (financial or otherwise),
of Borrower, any other Related Person or any Restricted Subsidiary;
(ii) Any Event of Default or Unmatured Event of Default;
(iii) The institution of any litigation or other proceeding
before any governmental body or official against any Related Person or
any Restricted Subsidiary or any of their respective assets and any
developments in any pending litigation or other proceeding before any
governmental body or official that could materially affect Borrower,
such Related Person or such Restricted Subsidiary, its business,
property, prospects, assets, operations or condition (financial or
otherwise);
(iv) Any existing or pending investigation or inquiry by any
governmental authority in connection with any applicable Environmental
Laws (as such term is defined in the Mortgages);
(v) The institution of, or material development in, any
litigation affecting any of the Collateral, or any other dispute or
claim that could have a material adverse effect on any of the
Collateral or the calculation of the Borrowing Base;
(vi) Any fact that causes or may cause the Agent, on behalf of
the Lenders, or the Lenders to fail to have a valid, enforceable and
perfected first priority lien on or security interest in any of the
Collateral, except as expressly
31
<PAGE>
permitted by this Agreement or the Security Documents and except as a
result of the acts or omissions of the Agent or either Lender; or
(vii) The shut-down of any natural gas liquids processing
facility owned or leased by Borrower for a period of 48 consecutive
hours or more or of any planned shut-down of any such facility that is
expected to be in effect for a period of 48 consecutive hours or more
(notice of any actual shut-down shall be given to Agent within 24
hours after the occurrence thereof and notice of any such planned
shut-down shall be given to Agent in advance).
(i) Compliance with Laws. Each Related Person and Restricted
---------------------
Subsidiary shall comply in all material respects with all applicable laws,
statutes, rules and regulations of the United States and of any state or
municipality, and of any official, arbitrator or governmental authority, in
respect of the conduct of business and ownership of property by such Person.
(j) Further Assurances. Borrower shall promptly and, insofar as not
-------------------
contrary to applicable law, at Borrower's own expense, (i) file and refile in
such offices, at such times and as often as may be reasonably necessary, every
instrument and every amendment thereto, and take such other action, as may be
reasonably necessary or desirable to create, perfect, maintain and preserve all
liens and security interests intended to be created by Borrower under the
Security Documents in favor of the Agent for the benefit of the Lenders or in
favor of the Lenders and to protect and preserve the rights and remedies of the
Agent and the Lenders thereunder, (ii) furnish to the Agent evidence reasonably
satisfactory to the Agent of all such filings and refilings, (iii) otherwise do
all things necessary or expedient to be done to effectively create, perfect,
maintain and preserve the liens and security interests intended to be created by
the Security Documents as a lien on real property and fixtures and a security
interest in personal property and fixtures, and (iv) pay all fees and expenses
(including counsel fees) incident to this Agreement and in compliance with this
Section. In addition, Borrower covenants and agrees that if all or any part of
the Working Capital Loan becomes subject to the provisions of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, as it may be amended
from time to time, or other governmental regulation requiring appraisals,
surveys or similar requirements as to all or any part of the Collateral,
Borrower shall promptly provide the Agent and the Lenders with any appraisals,
surveys or other items required to have the Working Capital Loan be in
compliance with all applicable state and federal laws, at its sole cost and
expense.
(k) Current Ratio. Borrower (excluding Restricted Subsidiaries)
--------------
shall maintain a Current Ratio of not less than 1.1 to 1.0.
(l) Funded Debt to Total Capitalization. Borrower's Funded Debt
------------------------------------
(excluding Restricted Subsidiaries) shall not exceed 60% of its Total
Capitalization.
(m) Tangible Net Worth. Borrower (excluding Restricted Subsidiaries)
-------------------
shall maintain a Tangible Net Worth equal to or greater than the sum of
$38,000,000 plus 50 percent
32
<PAGE>
of consolidated net income determined in accordance with GAAP and earned by
Borrower after September 30, 1996 (but excluding any net losses).
(n) Fixed Charge Coverage Ratio. Borrower (excluding Restricted
----------------------------
Subsidiaries) shall maintain a Fixed Charge Coverage Ratio, determined as of the
end of any month commencing with October 31, 1996, calculated on a rolling
twelve month basis, of not less than 1.5.
(o) Environmental Matters. No Related Person or Restricted
----------------------
Subsidiary shall cause or permit the use or storage of Hazardous Substances or
Solid Waste (as such terms are defined in the Mortgages) on, in or in connection
with such Persons's properties or disposal of Hazardous Substances or Solid
Waste from such Person's properties, except in full compliance with all
Environmental Laws (as such term is defined in the Mortgages), or make any use
of such Person's properties that results in any requirement that such Person
apply for or obtain a permit under RCRA (as such term is defined in the
Mortgages) or other Environmental Law for the treatment, storage or disposal of
Hazardous Substances or Solid Waste. Borrower covenants and agrees to keep or
cause each Related Person's properties to be kept free of any Hazardous
Substances or Solid Waste except in full compliance with all Environmental Laws,
and, promptly upon the discovery that the presence of any such substance on any
of their respective properties is not in full compliance, to remove the same (or
if removal is prohibited by law, to take whatever action is required by law) at
Borrower's sole expense.
SECTION 10. NEGATIVE COVENANTS. Until payment in full of the Working
------------------
Capital Loan and termination of all Commitments by the Lenders to make advances
hereunder, neither Borrower, any Restricted Subsidiary nor any of the other
Related Persons shall, without the prior written consent of the Required
Lenders:
(a) Debt. Create, incur, assume or permit to exist any Debt, except:
-----
(i) The Working Capital Loan and the Revolver/Term Facility;
(ii) Debt incurred to finance the acquisition or construction by
Borrower of one or more projects consistent with Borrower's covenant
contained in Section 10(e) hereof and for which recourse is limited to
the property included in the project and is non-recourse to Borrower
and the Collateral;
(iii) Obligations under leases, whether capital or operating
leases, provided that the obligations payable in any one year do not,
-------- ----
in the aggregate, exceed $2,000,000;
(iv) Debt incurred pursuant to Borrower's or any Related
Person's hedging activities related to such Person's line of business
in the futures or commodities market such that (A) the liability under
open lines of credit to finance futures contracts, commodities and/or
options contracts does not exceed
33
<PAGE>
$1,000,000 in the aggregate at any one time outstanding, and (B)
recourse is limited to Borrower's or any Related Person's position in
futures contracts; and
(v) Current accounts and charges, payable or accrued, incurred
in the ordinary course of Borrower's or any Related Person's business.
(b) Liens. Create, assume or permit to exist any mortgage, pledge,
------
security interest, lien or other encumbrance upon any Related Person's
properties or assets, whether now owned or hereafter acquired, real or personal,
except:
(i) The Security Documents;
(ii) Liens for taxes not delinquent or being contested in good
faith and by appropriate proceedings and for which adequate reserves
have been set aside on such Person's books;
(iii) Operator's, mechanic's, workmen's, materialmen's and
other like liens arising in the Ordinary Course of Business in respect
of obligations not overdue or which are being contested in good faith
and by appropriate proceedings and for which adequate reserves have
been set aside on such Person's books and for which there is no risk
of loss of any of the Collateral;
(iv) Liens or encumbrances, if any, permitted by the Security
Documents;
(v) Liens securing Debt permitted by Section 10(a) above; and
(vi) Debt incurred by MarkWest Resources, Inc. to Colorado
National Bank, a national banking association, for borrowed money.
(c) Guaranty Obligations. Assume, guarantee, endorse or otherwise
---------------------
become or be contingently liable (by direct or indirect agreement, contingent or
otherwise, or by operation of law, to provide funds for payment, to supply funds
to, or otherwise invest in, a debtor, or otherwise assure a creditor against
loss) for the Debt, obligation, undertaking or other liability of any other
Person, or otherwise become or be responsible in any manner (whether by
agreement to purchase any obligations, stock, assets, goods or services, or to
supply or advance any funds, assets, goods or services, or otherwise) with
respect to any undertaking of any other Person, except (i) guarantees by
Borrower of Debt incurred by MarkWest Resources, Inc. in connection with San
Juan and Piceance Basin projects, so long as such guarantees do not exceed
$1,000,000 in the aggregate at any one time (copies of each such guarantee shall
be provided to Agent within ten days after execution), (ii) the guarantee by
Borrower contained in Section 2.5 of the Participation, Ownership and Operating
Agreement for West Shore Processing Company, LLC dated May 2, 1996, (iii) the
Secured Guarantees dated May 2, 1996 executed by MarkWest Michigan, L.L.C. as
Manager of West Shore Processing Company LLC and Basin Pipeline,
34
<PAGE>
L.L.C. in favor of Bank of America Illinois, and (iv) endorsements of negotiable
instruments for deposit or collection and similar transactions in the ordinary
course of its business.
(d) Loans and Advances. Make any loans or advances to any Person,
-------------------
except for (i) accounts receivable or notes receivable arising from the sale or
lease of goods or services in the Ordinary Course of Business; (ii) as part
payment in the Ordinary Course of Business on its ordinary equipment rental,
repair, replacement and operating needs, or (iii) loans and advances to officers
and employees of Borrower to the extent and in the amount reflected in
Exhibit J.
- ---------
(e) Limitation on Investments and New Businesses. (i) Make any
---------------------------------------------
expenditure or commitment or incur any obligation or enter into or engage in any
transaction except in the Ordinary Course of Business, (ii) engage directly or
indirectly in any business or conduct any operations except in connection with
gas processing and gathering, gas liquids fractionation, gas and gas liquids
marketing, MTBE manufacturing, refining and marketing and gasoline blending and
oil and gas exploration and production, (iii) make any capital contributions to
Restricted Subsidiaries in excess of $5,000,000, (iv) make any acquisitions of
or capital contributions to or other investments in any Person other than
Restricted Subsidiaries unless the following conditions are satisfied: (A) the
investment is in a Person engaged in any of the businesses described in (e)(ii)
above, and (B) Agent has received 10 days' advance notice of such investment.
Notwithstanding the foregoing, the Related Persons may make (1) investments in
open market commercial paper, maturing within 365 days after acquisition
thereof, which has a credit rating of at least A-2 or P-2 by either Standard &
Poor's Corporation or Moody's Investors Service, Inc., (2) marketable
obligations issued or unconditionally guaranteed by the United States of America
or an instrumentality or agency thereof and entitled to the full faith and
credit of the United States of America, and (3) demand deposits, time deposits
(including certificates of deposit), repurchase agreements, Eurodollar time
deposits or bankers' acceptances, maturing in each case within 12 months from
the date of deposit thereof, with a domestic office of any Lender.
(f) Mergers and Consolidations. Merge or consolidate into or with
---------------------------
any Person, or sell, lease, convey, transfer or otherwise dispose of all or a
substantial part of its assets to or with any Person, except: (i) a merger or
consolidation in connection with the acquisition by Borrower of property or
facilities as a result of a stock or equity transaction in the ordinary course
of its business and after the consummation of which Borrower is the surviving
entity; (ii) a merger or consolidation of any Consolidated Subsidiary of the
Borrower with or into the Borrower, provided that the Borrower shall be the
--------
continuing or surviving corporation; in both cases, so long as no Event of
Default or Unmatured Event of Default has occurred or is continuing or would be
caused by the consummation of such merger or consolidation and Agent receives
within 10 days after such merger or consolidation a certificate from the chief
financial officer or any Vice President of Borrower that Borrower is in
compliance with the provisions of this Agreement.
(g) Location of Inventory. Borrower shall not store any of its
----------------------
Products or inventory except at the locations described in Exhibit H hereto
---------
without giving the Agent notice of
35
<PAGE>
a change within 30 days thereof and the execution of any and all Security
Documents the Agent and its counsel deem necessary or desirable to grant a
perfected first priority lien in favor of Agent for the benefit of the Lenders
in such Products or inventory; notwithstanding the foregoing, Borrower shall
not, under any circumstances, store any of its Products or inventory in a
location outside of the United States.
(h) Burdensome Undertakings. Undertake, or become contractually
------------------------
bound to undertake, any action not in the Ordinary Course of Business that could
materially adversely affect Borrower or its business, properties, prospects,
assets, operations or condition (financial or otherwise).
(i) Change in Location of Business. Move its place of business or
-------------------------------
chief executive office or the place where Borrower keeps its books and records
concerning the Collateral (including, without limitation, the records with
respect to its accounts and contract rights), from one state to another without
giving the Agent 45 days' prior written notice of the proposed new location
thereof.
(j) Restricted Distributions. (i) Make any dividends or
-------------------------
distributions of assets, or (ii) declare or pay any cash or liquidating
distribution or dividends or (iii) make any other distribution to any of its
shareholders, or (iv) redeem, purchase or otherwise acquire any shares of the
capital stock of the Borrower, or (v) prepay, purchase or redeem, any
subordinated indebtedness of Borrower, or (vi) issue any securities or capital
stock or any options, warrants, rights or other agreements to issue any such
securities other than the following:
(x) Dividends paid in common stock of Borrower; and
(y) As to any Subsidiary of Borrower, the foregoing restrictions
of this Section 10(j) shall not apply.
(k) Disposition of Assets. Sell, transfer, lease, exchange or
----------------------
otherwise dispose of any of its assets, real or personal, except as follows:
(i) sales, transfers, leases, exchanges or other dispositions of
assets by Borrower or any other Related Person or Restricted
Subsidiary in the Ordinary Course of Business; and
(ii) sales, transfers, leases, exchanges or other dispositions
of assets by Borrower and the other Related Persons or Restricted
Subsidiaries not in the Ordinary Course of Business, so long as such
transaction is on fair and reasonable terms and the proceeds from all
such transactions do not exceed $250,000 in the aggregate in any
calendar year.
(l) ERISA. Establish, maintain or contribute to any ERISA Plans or
------
incur any obligation to contribute to any "multiemployer plan" as defined in
Section 4001 of ERISA or
36
<PAGE>
represent, promise, or contract (in oral or written form) to any current or
former employee (individually or as a group) that such current or former
employee(s) would be provided, at any cost to any member of the Controlled
Group, with any employee welfare benefits (as defined in Section 3(1) of ERISA)
following retirement or termination of employment.
(m) Use of Proceeds. Use any funds from the Working Capital Loan
----------------
directly or indirectly for the purpose, whether immediate, incidental or
ultimate, of purchasing, acquiring or carrying any "margin stock" or any "margin
securities" (as such terms are defined respectively in Regulation U and
Regulation G promulgated by the Board of Governors of the Federal Reserve
System) or to extend credit to others directly or indirectly for the purpose of
purchasing or carrying any such margin stock or margin securities.
(n) Transactions with Affiliates. Enter into any transaction with
-----------------------------
any Affiliate, except any transaction that is in the ordinary course of such
Person's business and that is upon fair and reasonable terms no less favorable
to such Person than would obtain in a comparable arm's-length transaction with a
Person not an Affiliate of such Person.
(o) Contracts; Take-or-Pay Agreements. Amend, modify or terminate
----------------------------------
the Columbia Contracts in any manner or permit any of them to be amended or
modified or any term waived by any party thereto or assign any of its rights
thereunder, unless: (x) the Agent and the Lenders have been notified by the
Borrower of such proposed amendment, modification or termiation, (y) the Lenders
had an opportunity to review such proposed amendment, modification or
termination and (z) the Lenders have consented to such amendment, modification
or termination, which consent shall not be unreasonably wihtheld. Enter into
any "take-or-pay" contract or other contract which requires it to pay for oil,
gas, other hydrocarbons or other minerals prior to taking delivery thereof,
provided that Borrower may enter into such contracts so long as the term thereof
- --------
does not exceed one year, and provided further that Borrower may enter into such
-------- -------
contracts if the products purchased thereunder are needed by the associated
facility at the time of delivery thereof. Examples of permitted contracts
include (i) futures contracts to hedge (but not speculate) against future
changes in prices and (ii) reciprocal exchange agreements or back to back
contracts in which Borrower avoids the cost of all or a portion of the cost of
transportation of natural gas or natural gas liquids (in this subsection called
"gas and liquids") processed by it by exchanging such gas and liquids for gas
and liquids processed by others which are closer in location to Borrower's
ultimate purchaser. Examples of prohibited contracts include: (1) essentially
speculative contracts entered into primarily in hopes of benefitting from price
changes and (i) providing for the purchase of gas and liquids not covered by a
back to back contract permitting an exchange or sale thereof within 180 days
after the date of purchase or (ii) providing for the purchase of gas and liquids
that will not be consumed in Borrower's operations within 180 days after the
purchase thereof; and (2) contracts for the future sale or purchase of gas or
liquids that are not for the purpose of facilitating the ultimate sale of gas or
liquids owned, distributed or processed by Borrower. Notwithstanding the
foregoing provisions of this section, Borrower may enter into speculative
contracts not related to Borrower's operations primarily in hopes of benefitting
from price changes so long as the
37
<PAGE>
aggregate liability (including contingent or potential liability) and costs of
Borrower thereunder do not exceed $1,250,000 at any time.
(p) Amendments to Organizational Documents. Amend the articles and
---------------------------------------
by-laws of Borrower or any other organizational documents of any Related Person
or Restricted Subsidiary.
SECTION 11. EVENTS OF DEFAULT. The occurrence of any of the following
-----------------
shall constitute an event of default ("Event of Default") hereunder:
----------------
(a) Non-Payment. Failure by Borrower to (i) pay any installment of
------------
principal of, or interest on, the Working Capital Notes, any fees or other
amounts payable hereunder or under the Working Capital Notes or any of the
Security Documents within three Business Days after its due date, or (ii) comply
with the provisions of Section 6 within the 3-day period set forth therein.
(b) Certain Defaults. Failure by Borrower to perform or observe any
-----------------
term, covenant, agreement, condition or provision contained in any of Sections
9(c)(ii), (g), (h), (k), (l), (m) or (n), or Sections 10(a) through (p),
inclusive.
(c) Other Defaults. Failure by Borrower to perform or observe any
---------------
other covenant, agreement, condition or provision contained in this Agreement or
in the Working Capital Notes (which covenant, agreement, condition or provision
is not included in Subsection 11(a) or (b)) and such failure continues
unremedied for a period of 30 days.
(d) Representation or Warranty. Any representation or warranty of
---------------------------
the Borrower, whether contained in this Agreement or in any certificate or other
writing required or contemplated by this Agreement or in the Security Agreement,
shall be false or misleading in any material respect as of the date made or
deemed made.
(e) Security Documents.
-------------------
(i) Occurrence of any of the events of default defined in any of
the Security Documents.
(ii) Any of the Security Documents shall for any reason (other
than pursuant to the terms thereof or as a direct result of any act or
omission of Lenders or Agent) cease to create a valid security
interest in the collateral purported to be covered thereby or such
security interest shall for any reason cease to be a perfected and
first priority lien and security interest, subject only to those
matters expressly permitted by Section 10(b) hereof or by the
applicable Security Document.
38
<PAGE>
(iii) Failure by Borrower to perform or observe any term,
covenant, agreement, condition or provision contained in the Security
Agreement.
(f) Judgments. Any money judgment, writ or warrant of attachment, or
----------
similar process in an amount of $250,000 (in the aggregate) or more shall be
entered or filed against any Related Person or Restricted Subsidiary or any of
its assets and shall remain unvacated, unbonded or unstayed for a period of 30
calendar days, or in any event later than five calendar days prior to the date
of any proposed sale thereunder.
(g) Insolvency. Any Related Person or Restricted Subsidiary shall
-----------
become insolvent, admit in writing its inability to pay its debts as they
mature, or make an assignment for the benefit of creditors; or apply for or
consent to the appointment of a receiver or trustee for it or for a substantial
part of its property or business; or such a receiver or trustee otherwise shall
be appointed and shall not be discharged within 30 calendar days after such
appointment.
(h) Bankruptcy, Etc.. Bankruptcy, insolvency, reorganization or
-----------------
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any other law for the relief of debtors shall be instituted by or against any
Related Person or Restricted Subsidiary (except for an involuntary petition
against any Related Person or Restricted Subsidiary, which shall not constitute
an Event of Default if such petition is vacated or dismissed within 15 Business
Days after the filing thereof), or any order, judgment or decree shall be
entered against any Related Person or Restricted Subsidiary decreeing its
dissolution or division.
(i) Cross-Default. Any event of default shall occur as to any other
--------------
agreement now or hereafter existing relating to extensions of credit to any
Related Person or Restricted Subsidiary by the Lenders or any of them, including
without limitation the Revolver/Term Facility, or by any third party, including
without limitation, any extension of credit to MW Michigan, Inc. or its
Subsidiaries, or any event which with the passage of time or giving of notice,
or both, would permit the holder or holders of such indebtedness to cause such
indebtedness to be declared to be due and payable prior to its stated maturity.
(j) ERISA. An employee benefit plan that is intended to be qualified
------
under the Code shall lose its qualification, and the loss can reasonably be
expected to impose on the Controlled Group liability (for additional taxes to
Plan participants, or otherwise) in the aggregate amount of $250,000 or more;
any member of the Controlled Group engages in or becomes liable for a non-exempt
prohibited transaction and the initial tax or additional tax under Section 4975
of the Code might reasonably be expected to exceed $100,000; a violation of
Section 404 or 405 of ERISA or Section 401(a)(2) of the Code that can be
reasonably expected to expose the Controlled Group to liability in excess of
$250,000; any member of the Controlled Group is assessed a tax under Section
4980B of the Code or is liable for failure to comply with the Section 4980B
notice and continuation coverage requirements that can be reasonably expected to
result in liability to the Controlled Group in excess of $250,000; any member of
the Controlled Group is assessed a penalty under Section 502(c)(2) of ERISA or
Section 6652(e) of the Code that can be reasonably expected to expose the
Controlled Group to liability in excess of
39
<PAGE>
$250,000; or any combination of the foregoing events that involves potential
liability in excess of $250,000.
(k) Loan Documents. This Agreement, the Working Capital Notes, or
---------------
any of the other Loan Documents shall for any reason be revoked or invalidated,
or otherwise cease to be in full force and effect, except as a direct result of
the acts or omissions of the Agent or the Lenders.
(l) Material Adverse Change. Any material adverse change occurs in
------------------------
Borrower's financial condition or business or operations (including, without
limitation, any material adverse change caused by Borrower becoming subject to
any statute, regulation or order of any governmental authority after the date
hereof).
(m) Change in Control. John Fox and the members of his immediate
------------------
family cease to own collectively at least twenty-five percent (25%) of the
issued and outstanding voting stock of Borrower.
(n) Columbia Contracts. Any of the Columbia Contracts shall cease to
-------------------
be in full force and effect for any reason except in conformity with Section
10(o) hereof.
(o) Regulatory Change. There shall be any legislative action by any
------------------
local, state or federal agency or other governmental entity resulting in any
regulatory control of Borrower's operations, the result of which has or could
have, in Lenders' reasonable opinion, a significant financial impact on, or
control of, its financial condition.
SECTION 12. REMEDIES.
--------
(a) Automatic Acceleration of Loan. Upon the occurrence of any Event
-------------------------------
of Default specified in Section 11(g) or (h), the obligation of the Lenders to
make Advances under the Working Capital Loan shall automatically terminate and
the unpaid principal amount of the Working Capital Loan and all interest and
other amounts payable hereunder, under the Working Capital Notes or any of the
Security Documents, shall automatically become due and payable without further
act of the Agent or the Lenders.
(b) Optional Acceleration of Loan. Upon the occurrence of any Event
------------------------------
of Default (other than those specified in Section 12(a) above), the Agent, at
the direction of Lenders whose Loan Shares aggregate 66-2/3 percent, may, from
time to time, do any or all of the following:
(i) Declare all or any part of the Working Capital Loan to be
forthwith due and payable, together with all accrued and unpaid
interest thereon and all other amounts payable hereunder or under any
of the other Loan Documents, without presentment, demand, protest or
other notice of any kind, all of which are expressly waived by
Borrower;
40
<PAGE>
(ii) Declare the Commitments terminated;
(iii) With respect to any and all contingent, unmatured or
unliquidated obligations of Borrower hereunder, including without
limitation any and all outstanding Letters of Credit, declare and
require that cash in an amount equal to the aggregate outstanding
amount of all such obligations be immediately paid over, pledged and
delivered to the Agent on behalf of the Lenders to be held as Cash
Collateral for such obligations; and
(iv) Proceed with every remedy provided for herein or in the
Working Capital Notes, the Security Documents or any contract,
agreement or undertaking supplemental hereto and the Lenders shall
have, without limitation, all of the rights of a secured party under
the Uniform Commercial Codes as then in effect with respect to any
security then held for the Loans.
The enforcement of any rights of the Agent and the Lenders as to the
security for the Loans shall not affect the rights of the Agent or the Lenders
to enforce payment of the Working Capital Loan against Borrower and to recover
judgment against Borrower for any portion thereof remaining unpaid.
(c) Setoff. Upon the occurrence of any Event of Default, each Lender
-------
shall have the right at any time and from time to time, without prior notice to
Borrower (which notice is hereby waived by Borrower to the fullest extent
permitted by law), to setoff and apply any debt owing to Borrower by such
Lender, including without limitation, any deposits (general or special, time or
demand, provisional or final) now or hereafter maintained by Borrower with such
Lender, against any and all obligations of Borrower now or hereafter existing
under this Agreement or any of the other Loan Documents, although such
obligations may be contingent or unmatured, and for such purpose Borrower hereby
grants a security interest in and assigns to each Lender all such deposit
accounts.
SECTION 13. THE AGENT.
---------
(a) Appointment. Each Lender hereby irrevocably designates and
------------
appoints Norwest as the Agent of such Lender under this Agreement and the other
Loan Documents, and each such Lender irrevocably authorizes Norwest as the Agent
for such Lender, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
41
<PAGE>
(b) Delegation of Duties. The Agent may execute any of its duties
---------------------
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible to the
Lenders for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
(c) Exculpatory Provisions. Neither the Agent nor any of its
-----------------------
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person or entity under or in connection with this Agreement or any other Loan
Document (except for its or such Person's or entity's own gross negligence or
willful misconduct), or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrower or
any representative thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the Working
Capital Notes or any other Loan Document or for any failure of the Borrower to
perform its obligations hereunder or thereunder. The Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Borrower.
(d) Reliance by Agent. The Agent shall be entitled to rely, and
------------------
shall be fully protected in relying, upon any Working Capital Note, writing,
resolution, notice, consent, certificate, affidavit, letter, telecopy or telex
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper person
or persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Agent. The Agent may deem and treat the payee of any Working
Capital Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
and the Working Capital Notes and the other Loan Documents in accordance with a
request of the Required Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Working Capital Notes.
(e) Notice of Default. The Agent shall not be deemed to have
------------------
knowledge or notice of the occurrence of any Unmatured Event of Default or Event
of Default hereunder unless the Agent has received notice from a Lender or the
Borrower referring to this Agreement,
42
<PAGE>
describing such Unmatured Event of Default or Event of Default and stating that
such notice is a "notice of default." In the event that the Agent receives such
a notice, the Agent shall give notice thereof to the Lenders.
(f) Non-Reliance on Agent and Other Lenders. Each Lender expressly
----------------------------------------
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents
to the Agent that it has, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and made its own decision to make its Working Capital Loan hereunder
and enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
(g) Indemnification. The Lenders agree to indemnify the Agent in its
----------------
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to the
respective amounts of their original Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Working
Capital Notes) be imposed on, incurred by or asserted against the Agent in any
way relating to or arising out of this Agreement, any of the other Loan
Documents or the transactions contemplated hereby or thereby or any action taken
or omitted by the Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
- --------
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Agent's gross
negligence or willful misconduct. The agreements in this subsection shall
survive the payment of the Working Capital Notes and all other amounts payable
hereunder.
(h) Agent and Lenders in Their Individual Capacity. Each of the
-----------------------------------------------
Agent, the Lenders and their respective affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower as
though such Person was not the Agent
43
<PAGE>
and/or Lender, as the case may be, hereunder and under the other Loan Documents.
With respect to Advances made by it and any Working Capital Note issued to it,
the Agent shall have the same rights and powers under this Agreement and the
other Loan Documents as any Lender and may exercise the same as though it were
not the Agent, and the terms "Lender" and "Lenders" shall include the Agent in
its individual capacity.
(i) Successor Agent. The Agent may resign as Agent upon 10 days'
----------------
notice to the Lenders. If the Agent shall resign as Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent shall be
approved by the Borrower, whereupon such successor agent shall succeed to the
rights, powers and duties of the Agent, and the term "Agent" shall mean such
successor agent effective upon its appointment, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further act
or deed on the part of such former Agent or any of the parties to this Agreement
or any holders of the Working Capital Notes, other than to give notice of the
appointment of such successor agent to Borrower. Borrower is entitled to rely
upon the existing Agent until Borrower has received notice of the appointment of
a successor agent. After any retiring Agent's resignation as Agent, the
provisions of this subsection shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement and the
other Loan Documents.
(j) Borrower Entitled to Rely on Agent. Borrower shall be entitled
-----------------------------------
to rely upon the Agent's written actions and representations.
SECTION 14. MISCELLANEOUS.
-------------
(a) No Waiver; Cumulative Remedies. No delay on the part of the
-------------------------------
Agent or any Lender in exercising any right, power, privilege or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise or waiver of any right, power, privilege, or remedy hereunder preclude
any other or further exercise of such right, power, privilege, or remedy
hereunder or the exercise of any other right, power or privilege or remedy. The
rights and remedies of the Agent and the Lenders contained herein are cumulative
and not exclusive of any right or remedy which the Agent and the Lenders shall
otherwise have pursuant to the Security Documents, the Working Capital Notes or
applicable law. The obligations of Borrower contained herein are cumulative,
and compliance by Borrower with any covenant shall not excuse compliance by
Borrower with any other covenant.
(b) Notices. All notices given hereunder shall be in writing, shall
--------
be given by certified mail, return receipt requested, overnight courier service,
telecopy, facsimile or copy delivered by hand, and, (i) if mailed, shall be
deemed received three Business Days after having been deposited in a receptacle
for United States mail, postage prepaid, (ii) if delivered by overnight air
courier service, shall be deemed received one Business Day after having been
deposited with such overnight air courier service, postage prepaid, and (iii) if
delivered by telex, telecopy or hand delivery, shall be deemed received on the
day the notice is sent, in each case addressed as follows:
44
<PAGE>
If to Borrower, to:
MarkWest Hydrocarbon, Inc.
5613 DTC Parkway, Suite 400
Englewood, Colorado 80111
Attention: Finance Department
Fax. No.: (303) 290-8769
If to the Lenders, to:
Norwest Bank Colorado, National Association
1740 Broadway
Denver, Colorado 80274-8699
Attention: Energy and Minerals Group
Fax. No.: (303) 863-5196
First American National Bank
6000 Poplar Avenue
Memphis, Tennessee 38119
Attention: National Accounts
Fax. No.: (901) 762-5665
N M Rothschild and Sons Limited
New Court, St. Swithin's Lane
London, England EC4 P 4DU
Fax No.: 071-280-5139
With a copy to:
Rothschild Denver Inc.
3020 Republic Plaza
370 Seventeenth Street
Denver, CO 80202
Fax No.: (303) 607-0998
The First National Bank of Chicago
One First National Plaza
Mail Suite 0363
Chicago, IL 60670
Attention: William J. Clifford, Jr.
Fax No.: (312) 732-3055
45
<PAGE>
If to the Agent, to:
Norwest Bank Denver, National Association
1700 Broadway
Denver, Colorado 80274-8699
Attention: Energy and Minerals Group
Fax. No.: (303) 863-5196
Any party may, by written notice so delivered to the others, change the address
or facsimile number to which delivery shall thereafter be made.
(c) Counterpart Execution. This Agreement may be executed in any
----------------------
number of counterparts which together will be but one and the same instrument.
This Agreement shall become effective whenever each party shall have signed at
least one counterpart.
(d) Governing Law; Entire Agreement. THIS AGREEMENT AND THE WORKING
--------------------------------
CAPITAL NOTES SHALL BE DEEMED TO BE CONTRACTS UNDER THE LAWS OF COLORADO AND FOR
ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE. Such
documents and any other Loan Documents, together with the Security Documents,
constitute and incorporate the entire agreement between the Agent, the Lenders
and Borrower concerning the subject matter hereof and thereof, and supersede and
cancel any prior or contemporaneous agreements, verbal or written, between the
Agent, the Lenders and Borrower concerning the subject matter hereof and
thereof.
(e) Amendments and Waivers. No waiver of any provision of this
-----------------------
Agreement, the Working Capital Notes, or any of the Security Documents, and no
consent with respect to any departure by Borrower therefrom, shall be in writing
and signed by the Agent, at the direction of the Required Lenders. No amendment
of any provision of this Agreement shall be effective unless the same shall be
in writing and signed by the Agent and the Required Lenders. All consents,
waivers and other action to be taken by the Lenders hereunder shall only be
taken upon approval of the Required Lenders. Any waiver shall be effective only
in the specific instance and for the specific purpose for which given. Any
consent or approval contemplated herein by the Required Lenders or the Lenders
may be granted or withheld in the sole discretion of such Persons.
(f) Costs, Expenses and Indemnity. Borrower shall reimburse and pay
------------------------------
the Agent, the Issuer and the Lenders for all fees, costs and expenses
(including, without limitation, attorneys' fees, court costs and legal expenses
and consultants' and experts' fees and expenses, the costs of the Agent's
inspection of the Collateral and the costs and expenses of title or lien
searches and filing and recording fees and expenses), reasonably incurred or
expended in connection with (i) the preparation, execution and delivery of this
Agreement, the Working Capital Notes and the other Loan Documents, (ii) the
enforcement of this Agreement, the Working Capital Notes and the other Loan
Documents and any amendments, waivers or
46
<PAGE>
modifications of such documents, (iii) the breach by Borrower of any
representation or warranty contained in this Agreement, the Security Documents
or any other Loan Document, (iv) the failure by Borrower to perform any
agreement, covenant, condition, indemnity or obligation contained in this
Agreement, the Security Documents or any other Loan Document, (v) the Agent's or
the Lenders' exercise of any of their rights and remedies under this Agreement,
the Security Documents and the other Loan Documents, or (vi) the protection of
the Collateral and the liens thereon and security interests therein. Borrower
shall indemnify, defend and hold harmless the Agent, the Issuer and each Lender
and persons or entities owned or controlled by or affiliated with such Persons
and their respective directors, officers, shareholders, partners, employees,
consultants and agents (herein individually called an "Indemnified Party," and
-----------------
collectively called "Indemnified Parties") from and against, and reimburse and
-------------------
pay Indemnified Parties with respect to, any and all claims, demands,
liabilities, losses, damages (including, without limitation, actual,
consequential, exemplary and punitive damages), causes of action, judgments,
penalties, fees, costs and expenses (including, without limitation, attorneys'
fees, court costs and legal expenses and consultants' and experts' fees and
expenses), of any and every kind or character, known or unknown, fixed or
contingent, that may be imposed upon, asserted against or incurred or paid by or
on behalf of any Indemnified Party on account of, in connection with, or arising
out of (a) any bodily injury or death or property damage occurring in or upon or
in the vicinity of the Collateral through any cause whatsoever, (b) any act
performed or omitted to be performed hereunder or the breach of or failure to
perform any warranty, representation, indemnity, covenant, agreement or
condition contained in this Agreement, the Security Documents or any other Loan
Documents, (c) any transaction, act, omission, event or circumstance arising out
of or in any way connected with the Collateral or with this Agreement, the
Security Documents or any other Loan Documents, and (d) subject to the
exceptions and limitations contained in the Security Agreements, the violation
of or failure to comply with any statute, law, rule, regulation or order now
existing or hereafter occurring, including without limitation, "Environmental
Laws" (as defined in the Security Agreements) and statutes, laws, rules,
regulations and orders relating to "Hazardous Substances" (as defined in the
Security Agreements). The foregoing indemnities shall not apply to any
Indemnified Party to the extent the subject of the indemnification is caused by
or arises out of the gross negligence or willful misconduct of that or another
Indemnified Party or a successful suit by Borrower against such Indemnified
Party. If Borrower and the Indemnified Party are jointly named in any action
covered by this Section 14, the Indemnified Party shall cooperate in the defense
of such action to the extent its own rights or defenses are not compromised
thereby. Subject to the exceptions and limitations contained in the Security
Agreements, the foregoing indemnities shall not terminate upon release,
foreclosure or other termination of this Agreement or the Security Documents,
but shall survive such release, foreclosure or termination and the repayment of
the Loans. Any amount to be paid hereunder by Borrower to the Agent, the Issuer
or any Lender or for which Borrower has indemnified an Indemnified Party shall
be a demand obligation owing by Borrower to the Agent, the Issuer or such Lender
and shall bear interest at the Late Payment Rate until paid, and shall
constitute a part of the Working Capital Loan and be indebtedness secured by the
Security Documents.
47
<PAGE>
(g) Inconsistent Provisions; Severability. In case of any
--------------------------------------
irreconcilable conflict between the provisions of this Agreement and those of
the Security Documents and the Working Capital Notes, the provisions of this
Agreement shall govern. The invalidity, illegality or unenforceability of any
provision of any of the Loan Documents shall not in any way affect or impair the
legality or enforceability of the remaining provisions of each of the Loan
Documents.
(h) Incorporation of Exhibits and Schedules. All Exhibits and
----------------------------------------
Schedules attached to this Agreement are a part hereof and are incorporated
herein for all purposes.
(i) Amendment of Defined Instruments. Unless the context otherwise
---------------------------------
requires or unless otherwise provided herein the terms defined in this Agreement
which refer to a particular agreement, instrument or document also refer to and
include all renewals, extensions and modifications of such agreement, instrument
or document, provided that nothing contained in this section shall be construed
to authorize any such renewal, extension or modification.
(j) References and Titles. All references in this Agreement to
----------------------
Exhibits, Schedules, Sections and Subsections and other subdivisions refer to
the Exhibits, Schedules, Sections and Subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Headings are for convenience
only and do not constitute any part of such subdivisions and shall be
disregarded in construing the language contained in such subdivisions. The
words "this Agreement", "this instrument", "herein", "hereof", "hereby",
"hereunder" and words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited. Pronouns in
masculine, feminine and neuter genders shall be construed to include any other
gender, and words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires.
(k) Calculations and Determinations. Unless otherwise expressly
--------------------------------
provided herein or unless the Lenders otherwise consent, all financial
statements and reports furnished to the Agent or the Lenders hereunder shall be
prepared and all financial computations and determinations pursuant hereto shall
be made in accordance with GAAP.
(l) Usury. It is not intended hereby to charge interest at a rate in
------
excess of the maximum rate of interest that the Agent and the Lenders may charge
to Borrower under applicable usury and other laws, but if, notwithstanding,
interest in excess of such rate shall be paid hereunder, the interest rates
provided for herein shall be adjusted to the maximum permitted under applicable
law during the period or periods that any of the interest rates otherwise
provided herein would exceed such rate and any excess amount applied at the
Lenders' option to reduce the outstanding principal balance of the Working
Capital Loans or to be returned to Borrower.
(m) Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT
---------------------------------
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION (a) ARISING UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
OR (b) IN ANY WAY CONNECTED WITH OR RELATED TO INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO
48
<PAGE>
OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER
OF THEIR RIGHT TO TRIAL BY JURY.
(n) Successors and Assigns. This Agreement shall be binding upon and
-----------------------
shall inure to the benefit of the parties hereto and their respective successors
and assigns, except that Borrower may not transfer or assign any of its rights
or obligations hereunder without the Agent's, the Issuer's and each of the
Lenders' prior written consent. The Working Capital Note, this Agreement and
any other Loan Document may be endorsed, assigned, or transferred in whole or in
part by any Lender, and any subsequent holder and assignee of same shall succeed
to and be possessed of the rights of such Lender under such documents to the
extent transferred and assigned; provided however, that such endorsement,
-------- -------
assignment or transfer shall not be binding upon Borrower until Borrower has
received written notice of such endorsement, assignment or transfer.
(o) Term of Agreement. Except as set forth in Section 14(f), this
------------------
Agreement shall continue in full force and effect so long as any indebtedness or
other obligation of Borrower to the Lenders remains unpaid or outstanding or
Borrower has any right to Advances hereunder.
(p) Jurisdiction. At the option of the Agent or the Lenders, an
-------------
action may be brought to enforce this Agreement in the District Court in and for
the City and County of Denver, State of Colorado, in the United States District
Court for the District of Colorado or in any other court in which venue and
jurisdiction are proper. Borrower and all guarantors hereof consent to venue
and jurisdiction in the District Court in and for the City and County of Denver,
State of Colorado and in the United States District Court for the District of
Colorado and to jurisdiction and service of process under Sections 13-1-
124(1)(a) and 13-1-125, Colorado Revised Statutes (1973), as amended, in any
action commenced to enforce this Agreement.
(q) Assignment. Norwest, First American and Rothschild hereby assign
-----------
and transfer to First Chicago, without any warranties either express or implied,
a sufficient part of all their rights, title and interest in, to and under the
Existing Working Capital Agreement, the Loans, the Working Capital Notes and all
other Loan Documents, so that all such rights shall be owned and held by Lenders
on the date hereof in the following percentages:
Norwest 25%
First American 25%
Rothschild 25%
First Chicago 25%
49
<PAGE>
EXECUTED to be effective as of the day and year first above written.
MARKWEST HYDROCARBON, INC.
By:
---------------------------------------
John M. Fox,
President
By:
---------------------------------------
Rita E. Harvey,
Director of Finance and Treasurer
NORWEST BANK COLORADO,
NATIONAL ASSOCIATION,
individually and as Agent
By:
---------------------------------------
Thomas M. Foncannon,
Vice President
50
<PAGE>
FIRST AMERICAN NATIONAL BANK
By:
--------------------------------
David C. May,
Executive Vice President
N M ROTHSCHILD AND SONS LIMITED,
a company organized and existing under
the laws of England
By:______________________________
Name: ________________________
Title: _________________________
By:______________________________
Name: ________________________
Title: __________________________
THE FIRST NATIONAL BANK OF CHICAGO
By:______________________________
Name: ________________________
Title: _________________________
51
<PAGE>
Exhibit A-1
-----------
SUBSTITUTE WORKING CAPITAL NOTE
-------------------------------
$1,875,000.00 Denver, Colorado
October __, 1996
MARKWEST HYDROCARBON, INC., a Delaware corporation ("Borrower"), the successor
--------
to MarkWest Hydrocarbon Partners, Ltd., a Colorado limited partnership (the
"Partnership"), with an address of 5613 DTC Parkway, Suite 400, Englewood, CO
- ------------
80111, for value received, hereby promises to pay to the order of Norwest Bank
Colorado, National Association (successor to Norwest Bank Denver, National
Association), a national banking association ("Lender"), on or before June 30,
------
1998, the principal sum of One Million Eight Hundred Seventy-Five Thousand
Dollars ($1,875,000.00), or so much thereof as may be advanced by Lender
pursuant to the Amended and Restated Working Capital Loan Agreement of even
date, between Borrower, Norwest Bank Colorado, National Association,
individually and as agent, First American National Bank, N M Rothschild and Sons
Limited and The First National Bank of Chicago (the "Loan Agreement"), together
--------------
with interest on the outstanding unpaid principal amount at the Adjusted Prime
Rate, as provided in the Loan Agreement.
This Note is one of the notes referred to in the Loan Agreement as the Working
Capital Notes, and is issued pursuant to, and is subject to the terms and
provisions of, the Loan Agreement. This Note is issued in substitution,
replacement and rearrangement, but not in extinguishment or discharge, of the
Replacement Working Capital Notes dated September 8, 1995, as amended by the
First Allonge to Working Capital Note dated as of May 31, 1996, in connection
with the assumption by Borrower of all of the obligations and business of the
Partnership and the assignment by Norwest, First American and Rothschild to
First Chicago of a portion of their interests in the Loan. All capitalized
terms used herein but not otherwise defined shall have the meanings set forth in
the Loan Agreement. All references herein to the "Loan Agreement" refer to such
agreement as such agreement may be amended from time to time.
The entire outstanding principal balance of this Note shall be due and payable
on or before June 30, 1998 (unless payable sooner pursuant to the terms of the
Loan Agreement) together with accrued and unpaid interest thereon. Interest
shall accrue daily, shall be payable on the last day of each calendar quarter,
commencing September 30, 1995 and at the maturity of this Note, and shall be
calculated on the basis of a 365 or 366-day year, as appropriate. All payments
of principal and interest hereof shall be made as provided in the Loan Agreement
in immediately available funds and without set-off or counterclaim or deduction
of any kind.
Notwithstanding anything to the contrary contained in this Note, overdue
principal, and (to the extent permitted under applicable law) overdue interest,
whether caused by acceleration of maturity or otherwise, shall bear interest at
the Late Payment Rate and shall be immediately due and payable.
A-1-1
<PAGE>
It is not intended hereby to charge interest at a rate in excess of the
maximum rate of interest that Lender may charge to Borrower under applicable
usury and other laws, but if, notwithstanding, interest in excess of such rate
shall be paid hereunder, the interest rate on this Note shall be adjusted to the
maximum permitted under applicable law during the period or periods that the
interest rate otherwise provided herein would exceed such rate and any excess
amount applied at Lender's option to reduce the outstanding principal balance of
this Note or to be returned to Borrower.
This Note is secured by, and the holder of this Note is entitled to the
benefits of the Security Documents described in the Loan Agreement, and the
liens and security interests under the Security Documents that secure the
obligations under this Note are hereby ratified and confirmed in all respects
and remain in full force and effect. Reference is made to the Security
Documents for a description of the property covered thereby and the rights,
remedies and obligations of the holder hereof in respect thereto.
Lender shall maintain a record of all advances hereunder and all payments made
on this Note and letters of credit issued under this Note until Lender has been
repaid in full; provided, however that the failure, error or omission by Lender
-----------------
to maintain such a record shall not diminish or otherwise affect the obligation
of Borrower to repay the amount outstanding hereunder and any other amounts due
to Lender.
If Borrower fails to pay any amount due under this Note and Lender has to take
any action to collect the amount due or to exercise its rights under this Note
or the Security Documents, including without limitation retaining attorneys for
collection of this Note, or if any suit or proceeding is brought for the
recovery of all or any part of or for protection of the Obligations or to
foreclose the Security Documents or to enforce Lender's rights under the
Security Documents, then Borrower agrees to pay on demand all costs and expenses
of any such action to collect, suit or proceeding, or any appeal of any such
suit or proceeding, incurred by the holder hereof, including without limitation
the fees and disbursements of attorneys for the holder hereof.
Borrower, and all endorsers, sureties and guarantors of this Note, hereby
severally waive demand, presentment for payment, notice of dishonor, notice of
acceleration or intent to accelerate, protest, notice of protest, diligence in
collecting and assents to any extension of time with respect to any payment due
under this Note, to any substitution or release of collateral and to the
addition or release of any party. No waiver by Lender of any payment or other
right under this Note shall operate as a waiver of any other payment or right.
If any provision in this Note shall be held invalid, illegal or unenforceable
in any jurisdiction, the validity, legality or enforceability of any defective
provisions shall not be in any way affected or impaired in any other
jurisdiction, nor shall the invalid, illegal or unenforceable provision affect
or impair any other provision of this Note.
No delay or failure of the holder of this Note in the exercise of any right or
remedy provided for hereunder shall be deemed a waiver of such right or remedy
by the holder hereof, and no
A-1-2
<PAGE>
exercise of any right or remedy shall be deemed a waiver of any other right or
remedy that the holder may have.
Any notices given hereunder shall be in writing and shall be given as provided
in the Loan Agreement.
At the option of Lender, an action may be brought to enforce this Note in the
District Court in and for the City and County of Denver, State of Colorado, in
the United States District Court for the District of Colorado or in any other
court in which venue and jurisdiction are proper. Borrower and all endorsers,
sureties and guarantors hereof consent to venue and jurisdiction in the District
Court in and for the City and County of Denver, State of Colorado and in the
United States District Court for the District of Colorado and to jurisdiction
and service of process under Sections 13-1-124(1)(a) and 13-1-125, Colorado
Revised Statutes (1973), as amended, in any action commenced to enforce this
Agreement.
THIS NOTE IS TO BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS OF THE STATE
OF COLORADO.
MARKWEST HYDROCARBON, INC.
By:
------------------------------------
John M. Fox, President
By:
------------------------------------
Rita E. Harvey, Director of Finance and
Treasurer
A-1-3
<PAGE>
Exhibit A-2
-----------
SUBSTITUTE WORKING CAPITAL NOTE
-------------------------------
$1,875,000.00 Denver, Colorado
October __, 1996
MARKWEST HYDROCARBON, INC., a Delaware corporation ("Borrower"), the successor
--------
to MarkWest Hydrocarbon Partners, Ltd., a Colorado limited partnership (the
"Partnership"), with an address of 5613 DTC Parkway, Suite 400, Englewood, CO
- ------------
80111, for value received, hereby promises to pay to the order of First American
National Bank, a national banking association ("Lender"), on or before June 30,
------
1998, the principal sum of One Million Eight Hundred Seventy-Five Thousand
Dollars ($1,875,000.00), or so much thereof as may be advanced by Lender
pursuant to the Amended and Restated Working Capital Loan Agreement of even
date, between Borrower, Norwest Bank Colorado, National Association,
individually and as agent, First American National Bank, N M Rothschild and Sons
Limited and The First National Bank of Chicago (the "Loan Agreement"), together
--------------
with interest on the outstanding unpaid principal amount at the Adjusted Prime
Rate, as provided in the Loan Agreement.
This Note is one of the notes referred to in the Loan Agreement as the Working
Capital Notes, and is issued pursuant to, and is subject to the terms and
provisions of, the Loan Agreement. This Note is issued in substitution,
replacement and rearrangement, but not in extinguishment or discharge, of the
Replacement Working Capital Notes dated September 8, 1995, as amended by the
First Allonge to Working Capital Note dated as of May 31, 1996, in connection
with the assumption by Borrower of all of the obligations and business of the
Partnership and the assignment by Norwest, First American and Rothschild to
First Chicago of a portion of their interests in the Loan. All capitalized
terms used herein but not otherwise defined shall have the meanings set forth in
the Loan Agreement. All references herein to the "Loan Agreement" refer to such
agreement as such agreement may be amended from time to time.
The entire outstanding principal balance of this Note shall be due and payable
on or before June 30, 1998 (unless payable sooner pursuant to the terms of the
Loan Agreement) together with accrued and unpaid interest thereon. Interest
shall accrue daily, shall be payable on the last day of each calendar quarter,
commencing September 30, 1995 and at the maturity of this Note, and shall be
calculated on the basis of a 365 or 366-day year, as appropriate. All payments
of principal and interest hereof shall be made as provided in the Loan Agreement
in immediately available funds and without set-off or counterclaim or deduction
of any kind.
Notwithstanding anything to the contrary contained in this Note, overdue
principal, and (to the extent permitted under applicable law) overdue interest,
whether caused by acceleration of maturity or otherwise, shall bear interest at
the Late Payment Rate and shall be immediately due and payable.
A-2-1
<PAGE>
It is not intended hereby to charge interest at a rate in excess of the
maximum rate of interest that Lender may charge to Borrower under applicable
usury and other laws, but if, notwithstanding, interest in excess of such rate
shall be paid hereunder, the interest rate on this Note shall be adjusted to the
maximum permitted under applicable law during the period or periods that the
interest rate otherwise provided herein would exceed such rate and any excess
amount applied at Lender's option to reduce the outstanding principal balance of
this Note or to be returned to Borrower.
This Note is secured by, and the holder of this Note is entitled to the
benefits of the Security Documents described in the Loan Agreement, and the
liens and security interests under the Security Documents that secure the
obligations under this Note are hereby ratified and confirmed in all respects
and remain in full force and effect. Reference is made to the Security
Documents for a description of the property covered thereby and the rights,
remedies and obligations of the holder hereof in respect thereto.
Lender shall maintain a record of all advances hereunder and all payments made
on this Note and letters of credit issued under this Note until Lender has been
repaid in full; provided, however that the failure, error or omission by Lender
-----------------
to maintain such a record shall not diminish or otherwise affect the obligation
of Borrower to repay the amount outstanding hereunder and any other amounts due
to Lender.
If Borrower fails to pay any amount due under this Note and Lender has to take
any action to collect the amount due or to exercise its rights under this Note
or the Security Documents, including without limitation retaining attorneys for
collection of this Note, or if any suit or proceeding is brought for the
recovery of all or any part of or for protection of the Obligations or to
foreclose the Security Documents or to enforce Lender's rights under the
Security Documents, then Borrower agrees to pay on demand all costs and expenses
of any such action to collect, suit or proceeding, or any appeal of any such
suit or proceeding, incurred by the holder hereof, including without limitation
the fees and disbursements of attorneys for the holder hereof.
Borrower, and all endorsers, sureties and guarantors of this Note, hereby
severally waive demand, presentment for payment, notice of dishonor, notice of
acceleration or intent to accelerate, protest, notice of protest, diligence in
collecting and assents to any extension of time with respect to any payment due
under this Note, to any substitution or release of collateral and to the
addition or release of any party. No waiver by Lender of any payment or other
right under this Note shall operate as a waiver of any other payment or right.
If any provision in this Note shall be held invalid, illegal or unenforceable
in any jurisdiction, the validity, legality or enforceability of any defective
provisions shall not be in any way affected or impaired in any other
jurisdiction, nor shall the invalid, illegal or unenforceable provision affect
or impair any other provision of this Note.
No delay or failure of the holder of this Note in the exercise of any right or
remedy provided for hereunder shall be deemed a waiver of such right or remedy
by the holder hereof, and no
A-2-2
<PAGE>
exercise of any right or remedy shall be deemed a waiver of any other right or
remedy that the holder may have.
Any notices given hereunder shall be in writing and shall be given as provided
in the Loan Agreement.
At the option of Lender, an action may be brought to enforce this Note in the
District Court in and for the City and County of Denver, State of Colorado, in
the United States District Court for the District of Colorado or in any other
court in which venue and jurisdiction are proper. Borrower and all endorsers,
sureties and guarantors hereof consent to venue and jurisdiction in the District
Court in and for the City and County of Denver, State of Colorado and in the
United States District Court for the District of Colorado and to jurisdiction
and service of process under Sections 13-1-124(1)(a) and 13-1-125, Colorado
Revised Statutes (1973), as amended, in any action commenced to enforce this
Agreement.
THIS NOTE IS TO BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS OF THE STATE
OF COLORADO.
MARKWEST HYDROCARBON, INC.
By:
-----------------------------------
John M. Fox, President
By:
___________________________________
Rita E. Harvey, Director of
Finance and Treasurer
A-2-3
<PAGE>
Exhibit A-3
-----------
SUBSTITUTE WORKING CAPITAL NOTE
-------------------------------
$1,875,000.00 Denver, Colorado
October __, 1996
MARKWEST HYDROCARBON, INC., a Delaware corporation ("Borrower"), the successor
--------
to MarkWest Hydrocarbon Partners, Ltd., a Colorado limited partnership (the
"Partnership"), with an address of 5613 DTC Parkway, Suite 400, Englewood, CO
- ------------
80111, for value received, hereby promises to pay to the order of N M Rothschild
and Sons Limited, a company organized and existing under the laws of England,
("Lender"), on or before June 30, 1998, the principal sum of One Million Eight
- --------
Hundred Seventy-Five Thousand Dollars ($1,875,000.00), or so much thereof as may
be advanced by Lender pursuant to the Amended and Restated Working Capital Loan
Agreement of even date, between Borrower, Norwest Bank Colorado, National
Association, individually and as agent, First American National Bank, N M
Rothschild and Sons Limited and The First National Bank of Chicago (the "Loan
----
Agreement"), together with interest on the outstanding unpaid principal amount
- ---------
at the Adjusted Prime Rate, as provided in the Loan Agreement.
This Note is one of the notes referred to in the Loan Agreement as the Working
Capital Notes, and is issued pursuant to, and is subject to the terms and
provisions of, the Loan Agreement. This Note is issued in substitution,
replacement and rearrangement, but not in extinguishment or discharge, of the
Replacement Working Capital Notes dated September 8, 1995, as amended by the
First Allonge to Working Capital Note dated as of May 31, 1996, in connection
with the assumption by Borrower of all of the obligations and business of the
Partnership and the assignment by Norwest, First American and Rothschild to
First Chicago of a portion of their interests in the Loan. All capitalized
terms used herein but not otherwise defined shall have the meanings set forth in
the Loan Agreement. All references herein to the "Loan Agreement" refer to such
agreement as such agreement may be amended from time to time.
The entire outstanding principal balance of this Note shall be due and payable
on or before June 30, 1998 (unless payable sooner pursuant to the terms of the
Loan Agreement) together with accrued and unpaid interest thereon. Interest
shall accrue daily, shall be payable on the last day of each calendar quarter,
commencing September 30, 1995 and at the maturity of this Note, and shall be
calculated on the basis of a 365 or 366-day year, as appropriate. All payments
of principal and interest hereof shall be made as provided in the Loan Agreement
in immediately available funds and without set-off or counterclaim or deduction
of any kind.
Notwithstanding anything to the contrary contained in this Note, overdue
principal, and (to the extent permitted under applicable law) overdue interest,
whether caused by acceleration of maturity or otherwise, shall bear interest at
the Late Payment Rate and shall be immediately due and payable.
A-3-1
<PAGE>
It is not intended hereby to charge interest at a rate in excess of the
maximum rate of interest that Lender may charge to Borrower under applicable
usury and other laws, but if, notwithstanding, interest in excess of such rate
shall be paid hereunder, the interest rate on this Note shall be adjusted to the
maximum permitted under applicable law during the period or periods that the
interest rate otherwise provided herein would exceed such rate and any excess
amount applied at Lender's option to reduce the outstanding principal balance of
this Note or to be returned to Borrower.
This Note is secured by, and the holder of this Note is entitled to the
benefits of the Security Documents described in the Loan Agreement, and the
liens and security interests under the Security Documents that secure the
obligations under this Note are hereby ratified and confirmed in all respects
and remain in full force and effect. Reference is made to the Security
Documents for a description of the property covered thereby and the rights,
remedies and obligations of the holder hereof in respect thereto.
Lender shall maintain a record of all advances hereunder and all payments made
on this Note and letters of credit issued under this Note until Lender has been
repaid in full; provided, however that the failure, error or omission by Lender
-----------------
to maintain such a record shall not diminish or otherwise affect the obligation
of Borrower to repay the amount outstanding hereunder and any other amounts due
to Lender.
If Borrower fails to pay any amount due under this Note and Lender has to take
any action to collect the amount due or to exercise its rights under this Note
or the Security Documents, including without limitation retaining attorneys for
collection of this Note, or if any suit or proceeding is brought for the
recovery of all or any part of or for protection of the Obligations or to
foreclose the Security Documents or to enforce Lender's rights under the
Security Documents, then Borrower agrees to pay on demand all costs and expenses
of any such action to collect, suit or proceeding, or any appeal of any such
suit or proceeding, incurred by the holder hereof, including without limitation
the fees and disbursements of attorneys for the holder hereof.
Borrower, and all endorsers, sureties and guarantors of this Note, hereby
severally waive demand, presentment for payment, notice of dishonor, notice of
acceleration or intent to accelerate, protest, notice of protest, diligence in
collecting and assents to any extension of time with respect to any payment due
under this Note, to any substitution or release of collateral and to the
addition or release of any party. No waiver by Lender of any payment or other
right under this Note shall operate as a waiver of any other payment or right.
If any provision in this Note shall be held invalid, illegal or unenforceable
in any jurisdiction, the validity, legality or enforceability of any defective
provisions shall not be in any way affected or impaired in any other
jurisdiction, nor shall the invalid, illegal or unenforceable provision affect
or impair any other provision of this Note.
No delay or failure of the holder of this Note in the exercise of any right or
remedy provided for hereunder shall be deemed a waiver of such right or remedy
by the holder hereof, and no
A-3-2
<PAGE>
exercise of any right or remedy shall be deemed a waiver of any other right or
remedy that the holder may have.
Any notices given hereunder shall be in writing and shall be given as provided
in the Loan Agreement.
At the option of Lender, an action may be brought to enforce this Note in the
District Court in and for the City and County of Denver, State of Colorado, in
the United States District Court for the District of Colorado or in any other
court in which venue and jurisdiction are proper. Borrower and all endorsers,
sureties and guarantors hereof consent to venue and jurisdiction in the District
Court in and for the City and County of Denver, State of Colorado and in the
United States District Court for the District of Colorado and to jurisdiction
and service of process under Sections 13-1-124(1)(a) and 13-1-125, Colorado
Revised Statutes (1973), as amended, in any action commenced to enforce this
Agreement.
THIS NOTE IS TO BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS OF THE STATE
OF COLORADO.
MARKWEST HYDROCARBON, INC.
By:
-----------------------------
John M. Fox, President
By:
_____________________________
Rita E. Harvey, Director of Finance
and Treasurer
A-3-3
<PAGE>
Exhibit A-4
-----------
SUBSTITUTE WORKING CAPITAL NOTE
-------------------------------
$1,875,000.00 Denver, Colorado
October __, 1996
MARKWEST HYDROCARBON, INC., a Delaware corporation ("Borrower"), the successor
--------
to MarkWest Hydrocarbon Partners, Ltd., a Colorado limited partnership (the
"Partnership"), with an address of 5613 DTC Parkway, Suite 400, Englewood, CO
- ------------
80111, for value received, hereby promises to pay to the order of The First
National Bank of Chicago, a national banking association ("Lender"), on or
------
before June 30, 1998, the principal sum of One Million Eight Hundred Seventy-
Five Thousand Dollars ($1,875,000.00), or so much thereof as may be advanced by
Lender pursuant to the Amended and Restated Working Capital Loan Agreement of
even date, between Borrower, Norwest Bank Colorado, National Association,
individually and as agent, First American National Bank, N M Rothschild and Sons
Limited and The First National Bank of Chicago (the "Loan Agreement"), together
--------------
with interest on the outstanding unpaid principal amount at the Adjusted Prime
Rate, as provided in the Loan Agreement.
This Note is one of the notes referred to in the Loan Agreement as the Working
Capital Notes, and is issued pursuant to, and is subject to the terms and
provisions of, the Loan Agreement. This Note is issued in substitution,
replacement and rearrangement, but not in extinguishment or discharge, of the
Replacement Working Capital Notes dated September 8, 1995, as amended by the
First Allonge to Working Capital Note dated as of May 31, 1996, in connection
with the assumption by Borrower of all of the obligations and business of the
Partnership and the assignment by Norwest, First American and Rothschild to
First Chicago of a portion of their interests in the Loan. All capitalized
terms used herein but not otherwise defined shall have the meanings set forth in
the Loan Agreement. All references herein to the "Loan Agreement" refer to such
agreement as such agreement may be amended from time to time.
The entire outstanding principal balance of this Note shall be due and payable
on or before June 30, 1998 (unless payable sooner pursuant to the terms of the
Loan Agreement) together with accrued and unpaid interest thereon. Interest
shall accrue daily, shall be payable on the last day of each calendar quarter,
commencing September 30, 1995 and at the maturity of this Note, and shall be
calculated on the basis of a 365 or 366-day year, as appropriate. All payments
of principal and interest hereof shall be made as provided in the Loan Agreement
in immediately available funds and without set-off or counterclaim or deduction
of any kind.
Notwithstanding anything to the contrary contained in this Note, overdue
principal, and (to the extent permitted under applicable law) overdue interest,
whether caused by acceleration of maturity or otherwise, shall bear interest at
the Late Payment Rate and shall be immediately due and payable.
A-4-1
<PAGE>
It is not intended hereby to charge interest at a rate in excess of the
maximum rate of interest that Lender may charge to Borrower under applicable
usury and other laws, but if, notwithstanding, interest in excess of such rate
shall be paid hereunder, the interest rate on this Note shall be adjusted to the
maximum permitted under applicable law during the period or periods that the
interest rate otherwise provided herein would exceed such rate and any excess
amount applied at Lender's option to reduce the outstanding principal balance of
this Note or to be returned to Borrower.
This Note is secured by, and the holder of this Note is entitled to the
benefits of the Security Documents described in the Loan Agreement, and the
liens and security interests under the Security Documents that secure the
obligations under this Note are hereby ratified and confirmed in all respects
and remain in full force and effect. Reference is made to the Security
Documents for a description of the property covered thereby and the rights,
remedies and obligations of the holder hereof in respect thereto.
Lender shall maintain a record of all advances hereunder and all payments made
on this Note and letters of credit issued under this Note until Lender has been
repaid in full; provided, however that the failure, error or omission by Lender
-----------------
to maintain such a record shall not diminish or otherwise affect the obligation
of Borrower to repay the amount outstanding hereunder and any other amounts due
to Lender.
If Borrower fails to pay any amount due under this Note and Lender has to take
any action to collect the amount due or to exercise its rights under this Note
or the Security Documents, including without limitation retaining attorneys for
collection of this Note, or if any suit or proceeding is brought for the
recovery of all or any part of or for protection of the Obligations or to
foreclose the Security Documents or to enforce Lender's rights under the
Security Documents, then Borrower agrees to pay on demand all costs and expenses
of any such action to collect, suit or proceeding, or any appeal of any such
suit or proceeding, incurred by the holder hereof, including without limitation
the fees and disbursements of attorneys for the holder hereof.
Borrower, and all endorsers, sureties and guarantors of this Note, hereby
severally waive demand, presentment for payment, notice of dishonor, notice of
acceleration or intent to accelerate, protest, notice of protest, diligence in
collecting and assents to any extension of time with respect to any payment due
under this Note, to any substitution or release of collateral and to the
addition or release of any party. No waiver by Lender of any payment or other
right under this Note shall operate as a waiver of any other payment or right.
If any provision in this Note shall be held invalid, illegal or unenforceable
in any jurisdiction, the validity, legality or enforceability of any defective
provisions shall not be in any way affected or impaired in any other
jurisdiction, nor shall the invalid, illegal or unenforceable provision affect
or impair any other provision of this Note.
No delay or failure of the holder of this Note in the exercise of any right or
remedy provided for hereunder shall be deemed a waiver of such right or remedy
by the holder hereof, and no
A-4-2
<PAGE>
exercise of any right or remedy shall be deemed a waiver of any other right or
remedy that the holder may have.
Any notices given hereunder shall be in writing and shall be given as provided
in the Loan Agreement.
At the option of Lender, an action may be brought to enforce this Note in the
District Court in and for the City and County of Denver, State of Colorado, in
the United States District Court for the District of Colorado or in any other
court in which venue and jurisdiction are proper. Borrower and all endorsers,
sureties and guarantors hereof consent to venue and jurisdiction in the District
Court in and for the City and County of Denver, State of Colorado and in the
United States District Court for the District of Colorado and to jurisdiction
and service of process under Sections 13-1-124(1)(a) and 13-1-125, Colorado
Revised Statutes (1973), as amended, in any action commenced to enforce this
Agreement.
THIS NOTE IS TO BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS OF THE STATE
OF COLORADO.
MARKWEST HYDROCARBON, INC.
By:
----------------------------------
John M. Fox, President
By:
__________________________________
Rita E. Harvey, Director of
Finance and Treasurer
A-4-3
<PAGE>
EXHIBIT B
CREDIT AND COLLECTION POLICY
MARKWEST HYDROCARBON, INC.
CREDIT POLICY
- -------------
Customers requesting credit must provide current financial statements and
estimated monthly purchases. Bank and trade references are requested if the
financial statements are incomplete and/or weak for additional information on
the company's ability to pay. Dunn & Bradstreet reports are run to review the
customer's payment history and history on the company and its officers.
The following financial ratios are calculated:
Current Ratio less than 1.1 to 1
Total Liabilities to Tangible Net Worth greater than 4.0 to 1
Cash Flow Coverage of Current Debt less than 1.5 to 1
Tangible Net Worth less than $500,000
The customer must meet these criteria to establish a line of credit. However,
if the customer does not meet some of these criteria, the credit committee can
still elect to grant an amount of credit in line with the company's ability to
pay. If no credit is extended, or if the credit limit is insufficient for the
customer's needs, we will require a higher level of security such as a letter of
credit or a prepayment (in the form of a certified check or wire transfer) prior
to delivery of product to the customer. The plan and the terminal are notified
as to which customers must prepay or who cannot pull product out.
COLLECTION POLICY
- -----------------
MarkWest's standard terms are net 10 days. Aged account receivable listings are
prepared a minimum of once a week. Large invoices are called prior to the due
date. If any invoices are outstanding longer than terms plus mail time, the
customer is placed on a priority list. They are then called to determine the
reason for the delay, immediate payment is requested and date of anticipated
payment is noted. Calls are made twice weekly until these payments are
received. For invoices outstanding past 30 days, delivery of additional product
is stopped until all payments are received. Extension of credit to these
customers is re-evaluated prior to delivery of new product. At 45 days past
due, the collection of the account is turned over to our attorney, unless other
arrangements with the customer have been made.
B-1
<PAGE>
Exhibit C
---------
MARKWEST HYDROCARBON, INC.
REQUEST FOR ADVANCE UNDER THE
-----------------------------
WORKING CAPITAL LOAN
--------------------
Reference is made to that certain Amended and Restated Working Capital Loan
Agreement dated as of October __, 1996 (as from time to time amended, the
"Agreement"), among MarkWest Hydrocarbon, Inc. ("Borrower"), Norwest Bank
- ---------- --------
Colorado, National Association, individually and as agent, and First American
National Bank, N M Rothschild and Sons Limited and The First National Bank of
Chicago (collectively, the "Lenders"). Capitalized terms not otherwise defined
herein shall have the meaning assigned to them in the Agreement. Pursuant to
the terms of the Agreement, Borrower hereby requests the Lenders to make an
advance to Borrower in the amount of $_______, such advance being evidenced by
the Revolver Notes, and specifies ___________, 199_, as the date Borrower
desires for the Lenders to make such advance.
Borrower and the officer of Borrower signing this instrument hereby certify
that:
(a) Such officer is the duly elected, qualified and acting officer of
Borrower as indicated below such officer's signature hereto.
(b) The representations and warranties of Borrower set forth in Section 8
of the Agreement and in the Security Documents are true and correct on and as of
the date hereof, with the same effect as though such representations and
warranties had been made on and as of the date hereof.
(c) Borrower has performed or observed all terms, agreements, conditions
and obligations in the Agreement and under the Security Documents required to be
performed or observed by Borrower on or prior to the date hereof (except those
waived in writing by the Lenders), and each of the conditions precedent to
Advances contained in the Agreement remains satisfied in all respects.
(d) No Event of Default or Unmatured Event of Default has occurred and is
continuing, or would result from the making of the requested Advance. Borrower
will use the advance hereby requested in compliance with the Agreement.
C-1
<PAGE>
IN WITNESS WHEREOF, this instrument is executed as of _________, 199_.
MARKWEST HYDROCARBON, INC.
By: ________________________________
Name: __________________________
Title: ___________________________
C-2
<PAGE>
EXHIBIT D
---------
FORM OF BORROWER'S COUNSEL OPINION
----------------------------------
D-1
<PAGE>
EXHIBIT E
---------
MARKWEST HYDROCARBON, INC.
BORROWING BASE CERTIFICATION
Reference is made to that certain Amended and Restated Working Capital Loan
Agreement dated as of October ___, 1996 (as from time to time amended,
supplemented or restated, the "Loan Agreement") between MarkWest Hydrocarbon,
Inc. ("Borrower"), Norwest Bank Colorado, National Association, individually and
as agent, and First American National Bank, N M Rothschild and Sons Limited and
The First National Bank of Chicago (collectively, "Lender"). Terms used but not
defined herein shall have the meanings given them in the Loan Agreement.
The undersigned ______________________ does hereby certify that he/she is
the duly elected qualified and acting ____________________ of Borrower and that
the following information is true, correct and complete.
1. CALCULATION OF ELIGIBLE RECEIVABLES:
a. Receivables, LESS $________
b. Receivables over 45 days $________
from invoice date, LESS
c. Other ineligible Receivables, $________
EQUALS
d. Eligible Receivables $________
e. Eighty percent (80%) of $________
Eligible Receivables
2. CALCULATION OF PREPAID NATURAL GAS:
a. Volume of natural gas (in MMBTU's)
delivered to Columbia Gas Transmission
Corporation pursuant to paragraph 2 of
letter agreement dated March 9, 1995, LESS _____________ (MMBTU's)
b. Volumes required to be delivered for
BTU reimbursement under said letter
agreement, EQUALS _____________ (MMBTU's)
E-1
<PAGE>
c. Excess Volumes _____________ (MMBTU's)
[but Excess Volumes shall not exceed
two billion cubic feet]
d. Excess Volumes times [Gulf Coast
month-end natural gas price (as per
Loan Agreement) PLUS $0.18]
EQUALS
e. Prepaid Natural Gas $________
3. CALCULATION OF ELIGIBLE PRODUCT INVENTORY VALUE:
a. Borrower's Product (gallons) _________
b. Market Price per Gallon $________
c. Eligible Product Inventory Value $________
d. Eighty percent (80%) of Eligible $________
Product Inventory Value
4. CALCULATION OF NET ELIGIBLE EXCHANGE BALANCES:
a. Amount due Borrower under $________
Eligible Exchange Balances
(quantities of Products X
Mt. Belvieu price) LESS
b. Exchange Balances that do not $________
satisfy Credit and Collection
Policy LESS
c. Amount Borrower owes under $________
Eligible Exchange Balances
(quantities of Products X
Mt. Belvieu price)
d. Net Eligible Exchange Balances $________
e. Eighty percent (80%) of Net $________
Eligible Exchange Balances.
5. Cash Collateral (100%) $________
E-2
<PAGE>
6. Total of (1) through (5) $________
7. BORROWING BASE (lesser of line (6) $________
or $7,500,000)
8. Attached are the following schedules supporting each of the Borrowing Base
components:
a. Receivables aging
b. Other ineligible Receivables
c. Accounts payable aging
d. Product listing by product and location with supporting market value
information
e. Data re Exchange Balances as requested by Agent
f. Data re Prepaid Natural Gas amounts as requested by Agent
9. Borrower represents that its products and inventory are located only at
locations listed on Exhibit H to the Loan Agreement (although it may not
currently be using all places listed on Exhibit H) except as set forth below:
IN WITNESS WHEREOF, this instrument is executed by the undersigned as of
_______________ ____, 199__.
MARKWEST HYDROCARBON, INC.
By:_____________________________
Name:________________________
Title:_________________________
E-3
<PAGE>
Exhibit F
---------
LITIGATION
----------
1. Alloyd Insulation Company Inc. v. MarkWest Hydrocarbon Partners, Ltd. d/b/a
---------------------------------------------------------------------------
MarkWest Hydrocarbon Partners, a Limited Partnership, Civil Action No. 96-
----------------------------------------------------
C-214, Circuit Court of Wayne County, West Virginia, relating to a
mechanic's lien filed by a subcontractor on the Kenova Plant in an amount
of approximately $111,500 in connection with a dispute between Alloyd
Insulation Company Inc. and the general contractor and/or subcontractors on
the plant.
F-1
<PAGE>
Exhibit G
---------
SUBSIDIARIES OF BORROWER
------------------------
MW Michigan, Inc.
MarkWest Resources, Inc.
G-1
<PAGE>
Exhibit H
---------
LOCATION OF BORROWER'S INVENTORY
--------------------------------
at October 1, 996
MarkWest Hydrocarbon (Siloam plant)
U.S. Route 23
P.O. Box 575
South Shore, Kentucky 41175
MarkWest Hydrocarbon
West Memphis LPG Terminal
1282 South Eighth Street
P.O. Box 367
West Memphis, Arkansas 72302
MarkWest Hydrocarbon
Church Hill LPG Terminal
Church Hill, Tennessee
38-mile pipeline from Kenova, West Virginia to
South Shore, Kentucky
Mapco/Hutchinson, Kansas (a.k.a. Conway)
Mount Belvieu, Texas
Hattiesburg, Mississippi
H-1
<PAGE>
Exhibit I
---------
MARKWEST HYDROCARBON, INC.
COMPLIANCE CERTIFICATE
----------------------
(WORKING CAPITAL LOAN)
(Capitalized terms not otherwise defined herein
shall have the meaning assigned to them in
the Loan Agreement)
The undersigned officer of MARKWEST HYDROCARBON, INC., ("Borrower") pursuant to
--------
Section 9(b)(iii) of the Amended and Restated Working Capital Loan Agreement
---------------------------------------------------
dated as of October __, 1996 (the "Loan Agreement") among Borrower, Norwest Bank
Colorado, National Association, individually and as agent, and First American
National Bank, N M Rothschild and Sons, Limited and The First National Bank of
Chicago, hereby certifies as follows:
Computations showing compliance as of _________, 199_ with:
All computations exclude Restricted Subsidiaries.
1. SECTION 9(k): CURRENT RATIO
(a) Current assets $________
(b) Current liabilities $________
(c) Actual ratio _______________
(d) Minimum per agreement 1.1 to 1.0
2. SECTION 9(l): RATIO OF FUNDED DEBT TO TOTAL
CAPITALIZATION
(a) Funded Debt (including Guarantees) $________
(b) Guarantees $________
(c) Stockholders' equity $________
(d) Total capitalization $________
(a) + (c)
(e) Actual ratio _______________%
(f) Maximum per agreement 60%
I-1
<PAGE>
3. SECTION 9(m): TANGIBLE NET WORTH
(a) $38,000,000 PLUS $________
(b) 50% of consolidated net $________
income earned by Borrower
after September 30, 1996
(excluding net losses)
(c) Required: (a) + (b) $______________
(d) Actual $______________
4. SECTION 9(n): FIXED COVERAGE RATIO, AS OF THE END
OF ANY MONTH COMMENCING WITH OCTOBER 31, 1996,
CALCULATED ON A ROLLING TWELVE MONTH BASIS
(a) Cash flow from operations $________
DIVIDED BY
(b) Debt (Interest + Principal) $________
included in (a) (& required
to be repaid) EQUALS
(c) Actual ratio ______________
(d) Minimum per agreement 1.5
5. The undersigned hereby certifies to the authenticity of the financial
statements and that the attached financial statements present fairly the
financial condition of Borrower as of the date hereof to the best of his/her
knowledge and belief after due inquiry.
6. The undersigned has read the covenants and conditions of the Loan Agreement;
this Certificate is based upon an examination of the Loan Agreement and of
the accounts and other pertinent records of Borrower.
7. In the opinion of the undersigned, he/she has made such examination and
investigations as is necessary to enable him/her to express an informed
opinion as to whether or not the covenants and conditions of the Loan
Agreement have been complied with, and, to the best of his/her knowledge:
(check either (a) or (b))
( ) (a) There exists no Unmatured Event of Default or Event of Default on
the date hereof.
( ) (b) There exists no Unmatured Event of Default or Event of Default on
the date hereof except for the following matters: (Describe all
such matters, specifying the nature, duration and status thereof
and what action Borrower has taken or proposes to take with
respect thereto).
BORROWER:
I-2
<PAGE>
MARKWEST HYDROCARBON, INC.
By: __________________________
Name:_____________________
Title:______________________
Date:______________________
I-3
<PAGE>
Exhibit J
---------
SCHEDULE OF NOTES RECEIVABLE FROM OFFICERS, EMPLOYEES
-----------------------------------------------------
at October 7, 1996
Officers and Directors:
John Fox $ -
Brian O'Neill $ -
Art Denney $ -
Bob Garvin $ 6,056.62
Rita Harvey $ 19,381.49
Employees:
William Adkins, Jr. $ 20,466.59
Dan Brown $ 17,352.87
Kathy Holland $ 27,942.80
Michael LaRue $ 97,474.06
Dan O'Meara $ 37,169.59
Henry Nickel $ 15,041.22
Randy Nickerson $ 54,907.81
Fred Shato $ -
Ronald Smith $ 10,258.58
Warren Warner $ 56,452.74
--------------
$ 362,504.37
==============
J-1
<PAGE>
J-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT K
- ------------------------------------------------------------------------------------------------------------------------------------
Application and Agreement For
Irrevocable Standby Letter of Credit
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
To: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION NORWEST AFFILIATE as indicated on the Date
Investors Building, Third Floor reverse page hereof. -------------------------------
733 Marquette Avenue South
Minneapolis, Minnesota 55479-0093 L/C number (for Bank use only)
Attention: International Letters of Credit
- ------------------------------------------------------------------------------------------------------------------------------------
Please issue an Irrevocable Documentary Standby Credit substantially in accordance with this application and transmit it as
indicated below (by "X"). In issuing the Credit you are expressly authorized to make such changes from the terms herein below set
forth as you, in your sole discretion, may deem advisable provided that no such changes shall vary the principal terms herof.
- ------------------------------------------------------------------------------------------------------------------------------------
Transmission by:
[ ] Cable (teletransmission) full details [ ] Short Cable - full details to follow by courier [ ] Courier [ ] Other
- ------------------------------------------------------------------------------------------------------------------------------------
THIS SECTION FOR BANK USE ONLY UNLESS YOU DESIGNATE ADVISING BANK APPLICANT (FULL NAME AND ADDRESS)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
BENEFICIARY (FULL NAME AND ADDRESS) AMOUNT (UP TO)
-------------------------------------------------------------------
In figures USD unless otherwise specified
--------------------------------------------------------------------
In words:
--------------------------------------------------------------------
Expiry date At your counters
(months in words, day, year) unless otherwise
indicated
-------------------------------------------------------------------
For presentation of documents to you unless otherwise indicated:
-------------------------------------------------------------------
FOR:
[ ] Sight Payment [ ] Negotiation
- -----------------------------------------------------------------------------------------------------------------------------------
Draft(s) at sight to be drawn on you or (specify any other drawee) and accompanied by the original Letter of Credit for endorsement
and documents as specified below:
[ ] Issue as per attached example.
[ ] Clean Letter of Credit.
[ ] Beneficiary's signed Statement of Reading:"
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER DOCUMENTS/CONDITIONS
- -----------------------------------------------------------------------------------------------------------------------------------
This credit is subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), the International Chamber
of Commerce Publication 500 No. ("UCP").
- -----------------------------------------------------------------------------------------------------------------------------------
(COMPLETE ONLY WHEN THE BENEFICIARY BANK IS TO ISSUE ITS UNDERTAKING BASED ON THE ISSUED STANDBY LETTER OF CREDIT)
[ ] Request beneficiary bank to issue and deliver their (Specify type of undertaking)
in favor of ____________________________________________________________________
for an amount not exceeding the amount specified above, effective immediately and
expiring at their office on ____________________________________________________
relative to (Specify contract number or other pertinent reference)______________
- -------------------------------------------------------------------------------------------------------------------------------
Partial drawings permitted if not checked as [ ] Prohibited
- ------------------------------------------------------------------------------------------------------------------------------
Should there be a need to clarify our above instructions, please contact:
- ------------------------------------------------------------------------------------------------------------------------------
Name Telephone number
( )
</TABLE>
<PAGE>
AGREEMENT
In consideration of your ("you" "your") issuing or amending the standby letter
of credit applied for on the other side of this form (herein called the
"Credit"), we hereby agree as follows:
1. We agree to pay to you on demand, at your above address and in United
States currency, the amount of each draft payable in United States
currency and drawn under the Credit, or purporting to be so drawn.
2. We agree to pay to you on demand, at your above address and in United
States currency, the equivalent (at your then selling rate for cable
transfers to the place where and in the currency in which such draft or
instrument is payable) of the amount of each draft payable in other than
United States currency and drawn under the Credit, or purporting to be so
drawn.
3. We agree to pay to you on demand a commission for the Credit at such rate
as you have quoted to us, together with the amount of any and all charges
and expenses paid or incurred by you or by any of your agents or
correspondents in connection with the Credit. In addition to such
commission and any such charges and expenses, we agree that if at any time
any applicable law, rule or regulation or the interpretation or
administration thereof by any governmental authority:
A. shall subject you to any tax, duty or other charge with respect to this
Agreement, or shall materially change the basis of taxation of payments
to you of the principal of or interest on any amounts payable by us under
this Agreement (except for the imposition of or change in respect of the
rate of tax on your overall net income); or
B. shall impose or deem applicable or increase any reserve, special deposit
or similar requirement against assets of, deposits with or for the
account of, or Credit extended by you because of this Agreement or the
Credit; or
C. shall require you to include the Credit in your calculations relating to
your capitalization,
and the result is to increase the cost to you to maintain the Credit, or to
reduce the amount of any sum received or receivable by you under this
Agreement, then within 30 days after demand we agree to pay you such
additional amount or amounts as will compensate you for such increased cost
or reduction. Your certificate in reasonable detail setting forth the basis
for the determination of such additional amount or amounts shall be
conclusive evidence of such amount or amounts.
4. All amounts payable by us under any provision of this Agreement, except
this paragraph 4, shall, if unpaid, bear interest from the date you are
first entitled to demand payment thereof, regardless of whether you
actually do make demand. In all cases, we agree to pay you interest at an
annual rate equal to ________% in excess of the Base Rate in effect from
time to time (if left blank, then 2.0% in excess of the Base Rate), to
change when and as the Base Rate changes. "Base Rate" means the "base" or
"prime" rate of interest as announced from time to time by
__________________ ___________________ (if left blank, then Norwest Bank
Minnesota, National Association).
5. Except to the extent we may hereafter give you contrary instructions in
writing, which instructions you may, at your sole discretion, accept or
reject:
A. Your duty and that of your correspondents to examine certificates and
other documents received by you or them under, or purporting to be under,
the Credit, shall be fully discharged if you or they exercise reasonable
care to ascertain that they appear on their face to be in accordance with
the terms of the Credit;
B. Your liabilities and responsibilities and those of your correspondents
shall be strictly limited in accordance with the most current revision of
the Uniform Customs and Practice for Documentary Credits -- 1993
Revision, ICC Publication No. 500, effective January 1, 1994;
C. You and your correspondents may receive and accept or pay as complying
with the terms of the Credit any drafts, documents or statements,
otherwise in order, which may be signed by the administrator, executor,
trustee in bankruptcy of or receiver of any of the property of (or any
similar representative or trustee for), the person in whose name the
credit provides that any such drafts, documents or statements must be
drawn or issued.
6. You shall assume no liability or responsibility:
A. For the form, sufficiency, accuracy, genuineness, falsification or legal
effect of any documents or statement;
B. For the consequences arising out of any delay and/or loss in transit of
any messages, letters or documents, or the delay, mutilation or other
errors arising from the transmission of cables, telegrams or telex; or
C. For consequences arising out of the interruption of your business by acts
of God, riots, civil commotions, insurrections, wars or other causes
beyond your control or by any strikes or walkouts.
None of the foregoing acts or things shall in any way affect or impair any
of our obligations or any of your rights and powers specified in or arising
under this Agreement. In furtherance and extension and not in limitation of
the specific provisions set forth above, we agree that any action taken or
omitted by you or by your correspondents under or in connection with the
Credit, if taken or omitted with honesty in fact, shall be binding on us and
shall not put you or your correspondents under any resulting liability to
us. We further agree that we will indemnify you and your correspondents, and
also your and their officers, employees and agents, and hold you and all of
them harmless from and against each and every claim, demand, action or suit
which may arise against you or them by reason of any action taken or omitted
pursuant to this Agreement. In no event shall you be liable for incidental,
consequential or special damages.
7. We agree to pay to you on demand any and all expenses, including
reasonable attorneys' fees and legal expenses, incurred or paid by you
in protecting or collecting our indebtedness to you under this Agreement
or in protecting, exercising or enforcing any or all of your rights and
remedies against us.
<PAGE>
8. Should any of the following events occur, and if at the time of any such
event there remains any portion of the Credit undisbursed, we shall, upon
your demand, pledge as collateral security for all of our obligations
under this Agreement, cash in an amount equal to the entire amount
remaining undrawn under the Credit: (i) we default in the payment when due
of any amount due you under this Agreement; (ii) a default occurs under
any agreement between you and us; (iii) any credit agreement made between
you and us expires or is terminated; (iv) we default in the payment of any
indebtedness which we may have for the repayment of borrowed monies; (v)
we become insolvent, fail to pay our debts generally as they become due,
make any assignment for the benefit of creditors, file or suffer the
filing of any petition or action for relief under the provisions of the
United States Bankruptcy Code or other similar laws for the relief of or
relating to, debtors; (vi) there is a voluntary or involuntary appointment
of a receiver, trustee, custodian or similar official to take possession
of any of our property; (vii) there is an attachment of any material
involuntary lien of any kind to our property or assets; or (viii) any
representation made in any financial statement or in any other statement
or document presented to you by us or on our behalf is, in any material
respect, false or misleading when made; or (ix) you believe in good faith
that we may be unwilling or unable to pay our obligations to you when they
come due.
9. We authorize you to charge any of our accounts or other funds in your
possession for the payment of our obligations to you under this
Agreement. We further authorize you to debit any of our accounts or other
funds in the possession of your agents, correspondents or affiliates for
the payment of our obligations to you under this Agreement and hereby
hold you, your agents, correspondents and affiliates and all officers
thereof, harmless from the consequences or results of such debit.
10. We further agree that:
A. This Agreement and your rights hereunder shall continue unimpaired and
shall be binding upon us notwithstanding any delay, extension of time,
increase in amount, renewal, compromise or other indulgence or
modification granted or agreed to by you, with or without notice to or
approval by us (or any of us) in respect of the credit or any of our
indebtedness to you under this Agreement;
B. You shall not be deemed to have waived or released any of your rights or
remedies (whether specified in or arising under this Agreement or
otherwise available to you by law or agreement) unless you have signed a
written waiver or release. Delay or failure to act on your part shall not
constitute a waiver of or otherwise preclude enforcement of any of your
rights and remedies. All of your rights and remedies shall be cumulative
and may be exercised singularly or concurrently. You need not resort to
any particular right or remedy before exercising or enforcing any other,
and your resort to any right or remedy shall not preclude the exercise or
enforcement of each other right and remedy;
C. This Agreement shall be governed by the laws of the state where your main
banking office is located;
D. If any provision or clause of this Agreement or the application thereof to
any person or circumstance is invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect
other provisions, clauses or applications of this Agreement which can be
given effect, and this Agreement shall be construed as if the invalid or
illegal or unenforceable provision, clause or application has never been
contained herein;
E. If the application for the Credit is signed by or on behalf of several of
us, this Agreement shall be construed and interpreted so as to establish
in all instances the joint and several obligations of each of us and this
Agreement shall be fully binding upon and enforceable against either, any
or all of us. Each of us shall be deemed to be the agent of all others,
and except as expressly provided otherwise herein, you may act at the
direction or request of any one or more of us and you may give a notice or
notices (whether or not required to be given), to any one or more of us,
all as you may from time to time elect, without notice to or approval by
the others. You may terminate this Agreement with respect to, or release
or discharge, any one or more of us without affecting or impairing the
obligations of the rest of us. The death, incompetence or dissolution of
any of us or any change in the composition of any partnership or any other
firm which may be a party hereto shall not affect in any way the Credit or
any rights with respect to indebtedness incurred under this Agreement or
with respect to transactions theretofore initiated. In this Agreement, the
terms "we", "us" and "our" refer to any one or more applicants and
correspondent banks that have executed the application for the Credit, and
the terms "you" and "your" refer to the bank to which such application is
directed.
F. This Agreement is without limitation as to duration or amount and shall be
binding upon our respective heirs, legal representatives, successors and
assigns and shall inure to the benefit of and be enforceable by you, your
successors and assigns. You may assign or transfer this Agreement and you
shall thereafter be forever relieved and fully discharged from any
liability or responsibility with respect thereto, but you shall retain all
of your rights and remedies specified in or arising under this Agreement
with respect to any and all instruments and rights not so assigned or
transferred.
G. If one of the applicants for Credit is your correspondent/affiliate, the
applicant(s) who is not a correspondent/affiliate hereby agrees to
reimburse the correspondent/affiliate for all amounts such
corespondent/affiliate may pay you in connection with this Agreement. Such
party further agrees to execute any documents and provide such security as
the correspondent/affiliate may request to evidence and support its co-
applicant's obligation of reimbursement.
H. Unless you agree otherwise, the Credit shall be subject to Uniform Customs
and Practice for Documentary Credits - 1993 revision, ICC Publication No.
500 effective January 1, 1994, or any successor publication, but all of
your rights arising under said Customs and Practice shall be in addition
to, and not in limitation of, your rights under this Agreement.
If the Bank is located in Nebraska: A credit agreement must be in writing to be
enforceable under Nebraska law. To protect you and us from any misunderstandings
or disappointments, any contract, promise, undertaking or offer to forebear
repayment of money or to make any other financial accommodation in connection
with this loan of money or grant or extension of credit, or any amendment of,
cancellation of, waiver of, or substitution for any or all of the terms or
provisions of any instrument or document executed in connection with this loan
of money or grant or extension of credit, must be in writing to be effective.
<PAGE>
If the Bank is located in Iowa: IMPORTANT: READ BEFORE SIGNING. THE TERMS OF
THIS AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE
ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN
CONTRACT MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS OF THIS AGREEMENT
ONLY BY ANOTHER WRITTEN AGREEMENT. THIS NOTICE ALSO APPLIES TO ANY OTHER CREDIT
AGREEMENTS (EXCEPT CONSUMER LOANS OR OTHER EXEMPT TRANSACTIONS) NOW IN EFFECT
BETWEEN YOU AND THIS LENDER. BY SIGNING THIS AGREEMENT, THE UNDERSIGNED
ACKNOWLEDGES RECEIPT OF A COPY OF THIS AGREEMENT.
We waive notice of your acceptance of this Agreement.
<PAGE>
===============================================================================
This Agreement is binding upon Applicant and Joint Applicant and, if applicable,
upon Correspondent Bank.
Dated, this ______ day of ______________________________, 19_______.
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------- ---------------------------------------------------------------
APPLICANT (Full name) (Party that is to be named in JOINT APPLICANT (Full name) (Party, if any, co-signing with the
the Credit as "Applicant.") Applicant.) Correspondent banks and/or Norwest affiliates do not
sign here, but complete Section "A" below.
By: ________________________________________________ By: ___________________________________________________________
Individual Name/Aughorized Signature/Title Individual Name/Authorized Signature/Title
By: ________________________________________________ By: ___________________________________________________________
Individual Name/Aughorized Signature/Title Individual Name/Authorized Signature/Title
</TABLE>
SECTION A
FOR CORRESPONDENT BANK AND/OR NORWEST AFFILIATE BANK USE ONLY
We hereby appoint you as our agent to establish and issue in your name the
Credit pursuant to this Agreement. We acknowledge that we are primarily liable
and in consideration thereof, we agree to act and assume the duties of all
parties hereto including their respective legal representatives, including
without limitation any executor, trustee or guardian, heirs, successors and
assigns. We agree to reimburse you for any and all amounts paid by you in
connection with the Credit and any and all costs and expenses of every kind and
nature incurred by you with respect to the Credit and the transaction(s) to
which they relate. We shall pay to you charges, commissions and interest due and
owing to you pursuant to the terms of this Agreement. You are hereby expressly
authorized to immediately charge our account with you for any amoaunts as
described herein which are owed to you by us.
______________________________________________________
NORWEST BANK AFFILIATE NAME OR CORRESPONDENT BANK NAME
By:__________________________________________________
Individual Name/Authorized Signature/Title
- --------------------------------------------------------------------------------
FOR BANK USE ONLY:
- --------------------------------------------------------------------------------
Date Risk Rating:
- --------------------------------------------------------------------------------
LDA APPROVAL
- --------------------------------------------------------------------------------
Signature (stamp)
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,256
<SECURITIES> 0
<RECEIVABLES> 5,223
<ALLOWANCES> 0
<INVENTORY> 10,118
<CURRENT-ASSETS> 18,322
<PP&E> 44,437
<DEPRECIATION> 11,541
<TOTAL-ASSETS> 53,899
<CURRENT-LIABILITIES> 5,363
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 27,396
<TOTAL-LIABILITY-AND-EQUITY> 53,899
<SALES> 42,387
<TOTAL-REVENUES> 43,533
<CGS> 26,472
<TOTAL-COSTS> 36,302
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 804
<INCOME-PRETAX> 6,427
<INCOME-TAX> 2,442
<INCOME-CONTINUING> 3,985
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,985
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0
</TABLE>
