July 20, 1999
MCNIC Pipeline & Processing Company
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Re: Crown Asphalt Ridge, L.L.C.
Crown Asphalt Distribution Two, L.L.C.
Ladies and Gentlemen:
This letter is written to evidence our agreement made in conjunction
with the Loan Agreement and Promissory Note (the "FINANCING DOCUMENTS") entered
into today between Crown Asphalt Corporation ("CAC") and MCNIC Pipeline &
Processing Company ("MCNIC").
1. The Financing Documents and subject loan transaction were entered into such
that the loan proceeds will be used to satisfy the Secondary Capital
Contributions required, as of the date of the Financing Documents, of CAC under
Section 3.3 of the Operating Agreement (the "CAR OPERATING AGREEMENT") for Crown
Asphalt Ridge, L.L.C. ("CAR") dated as of September 1, 1997. The net cash
proceeds of the loan made under the Financing Documents ($1,891,650.50), after
deduction of amounts previously paid by MCNIC to creditors of CAR and less
certain amounts owed by CAR and/or CAC to MCNIC, shall be paid by MCNIC directly
to CAR. The gross proceeds of the loan ($2,991,868.66) made under the Financing
Documents shall be deemed the contribution by CAC to CAR, following which CAC
shall have a 25% Sharing Ratio and MCNIC shall have a 75% Sharing Ratio in CAR.
Of course, additional capital contributions may be required in the future as
otherwise provided under the CAR Operating Agreement.
2. We have been negotiating the terms of a Contribution Agreement between Crown
Asphalt Products Company ("CAPCO") and MCNIC (the "CONTRIBUTION AGREEMENT," the
most recent draft of which is attached hereto as EXHIBIT A). The Contribution
Agreement sets forth, among other things, the manner in which
(a) Crown Asphalt Distribution Two, L.L.C. ("CAD TWO") will be formed,
(b) CAD Two will acquire the Laurel, Montana asphalt terminal and the Williston,
North Dakota asphalt terminal (collectively, the "ASA TERMINALS") pursuant to
the terms of the existing Asphalt Supply Agreement (as defined in such
Contribution Agreement), AND
(c) MCNIC will make its required capital contributions related to the ASA
Terminals under such Contribution Agreement.
When each of the actions or events specified in Section 2, subsections (a), (b)
and (c), have been completed, the ASA Terminals will have been acquired by CAD
Two as contemplated by the Contribution Agreement and for, convenience of
reference, we will refer to this CAD Two acquisition as the "ORIGINAL ASPHALT
SUPPLY ARRANGEMENT."
If the terms of the Asphalt Supply Agreement are materially changed or
modified in order to finally complete (including payment of the purchase price
to the seller) the Asphalt Supply Agreement, we will refer to these amended
acquisition terms as a "REVISED ASPHALT SUPPLY ARRANGEMENT."
3. This letter further evidences our agreements regarding the performance of the
Contribution Agreement depending on if, how and when the Asphalt Supply
Agreement is completed:
(a) If the acquisition of the ASA Terminals is completed under the
Original Asphalt Supply Arrangement on or before August 20, 1999, the
Contribution Agreement shall be performed in accordance with its terms.
(b) If the acquisition of the ASA Terminals is completed under the
Original Asphalt Supply Arrangement after August 20, 1999, the ASA Terminals
business deal shall constitute an "additional opportunity" under Section 6.3 of
the initial Operating Agreement (prior to and excluding any amendment on or
after the date hereof) of Crown Asphalt Distribution, L.L.C. ("CAD").
(c) If the acquisition of the ASA Terminals is completed under a
Revised Asphalt Supply Arrangement, the ASA Terminals business deal shall
constitute an "additional opportunity" under amended Section 6.3 of the CAD
Operating Agreement (as amended pursuant to a First Amendment to Operating
Agreement executed in connection with this letter agreement).
4. Notwithstanding anything to the contrary in Section 6.3 of the initial CAD
Operating Agreement (prior to and excluding any amendment on or after the date
hereof), if the acquisition of the ASA Terminals is completed under the Original
Asphalt Supply Arrangement (and, after August 20, 1999, if MCNIC elects to
participate), then the Contribution Agreement, an Operating Agreement in
substantially the same form attached hereto as EXHIBIT B and an Operating and
Management Agreement substantially similar to that executed in connection with
CAD (collectively referred to as the "CAD TWO AGREEMENTS") shall be executed and
delivered by the parties AND CAPCO will further secure the loan evidenced by the
Financing Documents with its interests in CAD by causing the execution of a
Guaranty and Security Agreement in substantially the same form as those
attached, respectively, as EXHIBITS C AND D.
5. Conversely, if the ASA Terminals are acquired under a Revised Asphalt Supply
Arrangement and MCNIC elects to participate in the "additional opportunity" in
accordance requirements of Section 3(c) above, then either:
(a) if CAPCO and MCNIC mutually agree, in their respective and sole
discretion, upon amended terms to acquire the ASA Terminals and the revised
structure of their respective contributions to CAD Two with respect to the ASA
Terminals and the Rawlins, Wyoming
terminal which was acquired by CAPCO pursuant to the S&L Agreement (as defined
in the Contribution Agreement), then (i) the Contribution Agreement and the CAD
Two Agreements shall be revised to reflect such amended terms and the Revised
Asphalt Supply Arrangement and (ii) MCNIC and CAPCO shall execute and deliver
such agreements; OR
(b) if CAPCO and MCNIC do not mutually agree as described in Section 5(a) above,
either CAPCO or MCNIC may provide a written request for final determination to
the other party and, if CAPCO and MCNIC do not then mutually agree within ten
(10) days after the date of such request, then (i) CAPCO will contribute to CAD
Two only the Rawlins, Wyoming terminal pursuant to the S & L Agreement (as
defined in the Contribution Agreement), (ii) the Contribution Agreement and the
CAD Two Agreements shall be revised to delete all terms directly related to the
assignment, assumption, funding or other performance of the Asphalt Supply
Agreement and MCNIC and CAPCO shall execute, deliver and perform such
agreements, and (iii) upon contribution of the Rawlins, Wyoming terminal to CAD
Two pursuant to the Contribution Agreement, MCNIC shall unconditionally
guarantee and be liable for one-half of all obligations, debt and other
liabilities of CAPCO and Crown Energy Corporation arising from the original
acquisition under the S & L Agreement and shall execute and deliver such further
agreements or instruments as may be reasonable required to confirm the same.
Please indicate your agreement with the foregoing terms by executing a copy of
this letter in the space indicated below.
Very truly yours,
CROWN ASPHALT CORPORATION
By:
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Xxx Xxxxxx, President
CROWN ASPHALT PRODUCTS COMPANY
By:
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Xxx Xxxxxx, President
Accepted and agreed to this 20th day of July, 1999.
MCNIC PIPELINE & PROCESSING COMPANY
By:
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Xxxxxxx X. Xxxxxxx, Vice President
