FIRST AMENDMENT TO PARTICIPATION, OWNERSHIP AND
OPERATING AGREEMENT FOR WEST SHORE PROCESSING COMPANY, LLC
This First Amendment to Participation, Ownership and Operating
Agreement ("Amendment") is made and entered into this 1/st/ day of October,
1996, by and among MarkWest Michigan, Inc. (herein referred to as "MarkWest")
and Michigan Energy Company, L.L.C. (herein referred to as "MEC").
RECITALS:
A. The parties entered into that certain Participation, Ownership and
Operating Agreement for West Shore Processing Company LLC, ("West Shore") dated
May 2, 1996 (the "Participation Agreement").
B. Among the activities to be undertaken by MarkWest under the
Participation Agreement and as a portion of MarkWest's initial contributions to
West Shore, MarkWest was to provide an extension of the pipeline owned by Basin
Pipeline, L.L.C. ("Basin") from its current configuration to a delivery point at
the gathering lateral of the existing Slocum No. 1-21 well, which well is owned
by Michigan Production Company, L.L.C. ("MPC").
C. The parties have agreed among themselves and with MPC that the
extension of the Basin Pipeline to the Slocum No. l-21 well will be initially
owned and constructed by MPC.
D. MPC will acquire the funding necessary to install that pipeline
extension from the proceeds of a loan entered into between West Shore and MPC
pursuant to a Loan Agreement of even date herewith.
E. MEC and MarkWest have agreed that MarkWest's obligation to pay for
that pipeline extension under the terms of the Participation Agreement shall be
fully satisfied and credited to MarkWest by having MarkWest provide the funds to
West Shore necessary for West Shore to loan those amounts to MPC for MPC's
construction of the pipeline extension; all in accordance with the terms hereof
and in accordance with the terms of the Loan Agreement, the Construction and
Operating Agreement between West Shore and MPC, and the Option and Agreement to
Purchase and Sell Pipeline Agreement between West Shore and MPC, all of even
date herewith.
Now, therefore, in consideration of the mutual covenants and
agreements, the parties agree as follows:
1. Section 2.1. MarkWest's Initial Contributions and Obligations,
-------------------------------------------------
shall be amended by deleting subparagraph (a)(i) thereof in its entirety and
replacing it with the following revised subparagraph (a)(i):
"(i) Provide the funding to the Company, at times and in amounts, as
necessary to permit the Company to make advances to Michigan Production Company,
L.L.C. ("MPC") under that certain Non-Recourse Loan Agreement between the
Company and MPC dated October 1, 1996 (the "Loan"); which loan advances shall be
used by MPC to construct and install a nominal 10-inch diameter pipeline
extension of the Basin pipeline (subject to acquisition by the Company, or its
designee, under an Option and Agreement to Purchase and Sell Pipeline dated
October 1, 1996) from the existing terminus of the Basin pipeline located in
Section 32, Township 19 North, Range 17 West, Victory Township, Mason County,
Michigan, along the right of way of Consumers Power to the delivery point at the
gathering lateral of the existing Slocum No. 1-21 well (which well is located in
Section 21, Township 15 North, Range 16 West, Elbridge Township, Oceana County,
Michigan), and which delivery point is anticipated to be located in the
northwest quarter of Section 30, Township 15 North, Range 16 West, Elbridge
Township, Oceana County, Michigan, (as approximately depicted on the map
attached hereto as Exhibit N), including all matters related to the acquisition
of requisite permits (for which permits MarkWest shall diligently apply for and
use its reasonable efforts to acquire in the name of MPC), installation,
construction, and acquisition of necessary easements and rights of way ("Basin
Extension"). MarkWest will perform the installation, construction and operation
of the Basin Extension in a good and workmanlike manner consistent with prudent
industry standards in its capacity as Operator of the Company and pursuant to a
Pipeline Construction and Operating Agreement between the Company and MPC dated
October 1, 1996 (the "Construction and Operating Agreement"). Should the amount
required for the Company to advance to MPC under the Loan to enable MPC to
complete that extension exceed $10,000,000, then MEC shall be obligated to
provide the Company 80% of all funding to advance amounts to MPC, under the
Loan, in excess of $10,000,000, and MarkWest shall be obligated to provide the
Company 20% of all such excess amounts to be advanced, under the Loan, to MPC;
which excess amounts shall not be utilized in calculating Ownership Interests
hereunder. MarkWest will, under the Construction and Operating Agreement
commence activities related to this installation promptly following the
Effective Date. MarkWest will, as Operator of the Company and pursuant to the
Construction and Operating Agreement, undertake planning aimed at completing the
Basin Extension by December 31, 1996, and, in any event, will use its reasonable
efforts to complete the Basin Extension, subject to conditions not within
MarkWest's reasonable control, by March 31, 1997. Additionally, MarkWest will
reimburse MEC for costs related to the Basin Extension and which were incurred
before the Effective Date to the extent those costs are specified on Exhibit D,
attached hereto."
2. Section 2.2. MEC's Initial Contributions and Obligations, shall be
---------------------------------------------
amended by deleting subparagraph (d)(i) in its entirety and replacing it with
the following revised subparagraph (d)(i):
"(d)(i) Should the amount required to be loaned to MPC for MPC to complete
the Basin Extension exceed $10,000,000.00, then MEC shall be obligated to
provide the Company with 80% of all such excess amounts required to be advanced
by the Company to MPC under the Loan."
3. Section 3.3. Conveyance of Ownership Interests, shall be amended by
-----------------------------------
deleting paragraph (b) thereof in its entirety and replacing it with the
following revised paragraph (b):
"(b) The Ownership Interests shall be determined at the end of each calendar
month based upon the cumulative contributions made by MarkWest under Section 2.1
(and as paid under Section 3.1 (b), if applicable) as of the end of that month
and the deemed contribution of MEC under Section 2.2, above. Contributions by
MarkWest shall be based upon actual expenditures made on behalf of the Company
and actual funds provided to the Company for advances to MPC. The calculation of
Ownership Interests at the end of a calendar month shall be deemed effective for
all purposes under this Agreement as of the last day of that month for which the
determination was made."
4. Section 3.5. Tax Depreciation, shall be amended by deleting it in its
------------------
entirety and replacing it with the following revised Section 3.5, Tax
---
Depreciation:
- -------------
"3.5 Tax Depreciation. Tax depreciation related to the Company will be
-----------------
allocated in accordance with Exhibit E; provided, in all events, MarkWest will
be allocated 100% of depreciation attributable to the capital contributions made
by MarkWest under Section 2.1. and MEC will be allocated 100% of depreciation
attributable to the capital contributions made by MEC under Section 2.2.
Allocation of depreciation attributable to the Basin Extension shall be shared
in proportion to the amounts provided to the Company by MarkWest or MEC for
advances to MPC to construct the Basin Extension."
5. Article III shall be amended by adding the following new Sections 3.7,
Acquisition of Basin Extension and 3.8, Allocation of Interest Income:
- ------------------------------- -----------------------------
"Section 3.7. Acquisition of Basin Extension. The Company and MPC have
------------------------------
entered into that certain Option and Agreement to Purchase and Sell Pipeline
dated October 1, 1996, ("Option Agreement") under which the Company, or its
designee, will have the right to acquire the Basin Extension. The parties agree
to diligently pursue obtaining all information required to file an application
with the Michigan Public Service Commission ("MPSC") and thereafter promptly
file for and diligently pursue an application with the MPSC for certifications
and authorizations under 1929 P.A. (Act 9), M.C.L. Sec. 483.101 et seq.; M.S.A.
Sec. 22.1311 et seq., ("Act 9 Authorization") authorizing the Company, or its
designee, to acquire, own and operate the Basin Extension. The parties agree to
cause the Company to exercise its option to
acquire, or have its designee acquire the Basin Extension upon the earlier of
(i) the date upon which that Act 9 Authorization is received by the Company or
its designee, or (ii) such other date upon which the parties agree. The
acquisition of the Basin Extension shall not modify the then effective Ownership
Interests of the parties. MarkWest, as part of its contributions under Section
2.1 (a), shall provide funding to the Company for any sales, use, transfer, real
property transfer, recording, or other similar taxes and fees ("Transfer Taxes")
which arise out of or in connection with the transactions effected pursuant to
the Option Agreement, and which amounts will be included in calculating
MarkWest's Ownership Interest.
Section 3.8. Allocation of Interest Income. Any income received by West
------------------------------
Shore which is related to the capitalization of interest associated with the
construction of the Basin Extension shall be allocated to the parties in the
same proportion in which depreciation on the Basin Extension is allocated."
6. Except for the foregoing, all other terms and provisions of the
Participation Agreement shall remain in full force and effect.
In witness whereof, the parties have executed this Amendment the date first
above written.
MARKWEST MICHIGAN, INC.
/S/ ARTHUR J. DENNEY
MICHIGAN ENERGY COMPANY, L.L.C.
/S/ MICHAEL V. RONCA, MANAGER
AND
/S/ ROBERT L. ZORICH, MANAGER