EXHIBIT 10.4

 

[EXECUTION]

 

FOREIGN SUBSIDIARY STOCK PLEDGE AGREEMENT

 

THIS FOREIGN SUBSIDIARY STOCK PLEDGE AGREEMENT (this “Agreement”) is made as of
November 22, 2005, by Western Power Services, Inc., a Delaware corporation
(herein called “Debtor”), in favor of Bank of America, N.A., as Administrative
Agent for the Lenders (herein called “Secured Party”).

 

RECITALS:

 

1.                                       Western Gas Resources, Inc. (“Parent”)
and Bank of America, N.A., as Administrative Agent, and certain financial
institutions (collectively, the “Lenders”) are parties to that certain Amended
and Restated Credit Agreement dated as of June 29, 2004 (as from time to time
amended, supplemented, or restated, the “Credit Agreement”) pursuant to which
Parent has executed in favor of each Lender a promissory note (such promissory
notes, as from time to time supplemented or amended and all promissory notes
given in renewal and extension thereof are collectively referred to herein as
the “Notes”).

 

2.                                       Parent has executed those certain
senior notes pursuant to that certain Third Amended and Restated Master Shelf
Agreement among Debtor, The Prudential Insurance Company of America (“PICA”),
Prudential Investment Management, Inc. (“PIMI”), Pruco Life Insurance Company
(“Pruco”), Pruco Life Insurance Company of New Jersey (“Pruco NJ”), Gibraltar
Life Insurance Co., Ltd. (“Gibralter”), RGA Reinsurance Company (“RGA”),
American Bankers Life Assurance Company of Florida, Inc. (“American”), Fortis
Benefits Insurance Company (“Fortis”), Connecticut General Life Insurance
Company (“Connecticut”) and certain Prudential Affiliates, as therein defined
(PICA, PIMI, Pruco, Pruco NJ, Gibralter, RGA, American, Fortis, Connecticut and
such Prudential Affiliates collectively herein called “Prudential”) dated as of
December 19, 1991, (effective January 13, 2003), as from time to time
supplemented or amended.

 

3.                                       Parent and one or more of the Lenders
may, from time to time, enter into interest rate swap agreements with respect to
various obligations of Parent (such agreements, as from time to time amended,
are collectively referred to herein as the “Swap Agreements”).

 

4.                                       It is a condition precedent to Lenders’
obligation to advance funds to Parent pursuant to the Credit Agreement that
Debtor shall execute and deliver this Agreement to Secured Party.

 

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5.                                       Parent owns all of the issued and
outstanding stock of Debtor and the board of directors of Debtor has determined
that Debtor’s execution, delivery and performance of this Agreement may
reasonably be expected to benefit Debtor, directly or indirectly, and are in the
best interests of Debtor.

 

NOW, THEREFORE, in consideration of the premises, of the benefits which will
inure to Debtor and Parent from Lenders’ extensions of credit under the Credit
Agreement, and of Ten Dollars and other good and valuable consideration, the
receipt and sufficiency of all of which are hereby acknowledged, Debtor hereby
agrees with Secured Party, for the benefit of each Lender, as follows:

 

AGREEMENTS:

 

ARTICLE I — Definitions and References

 

Section 1.1.                                   General Definitions.  As used
herein, the terms “Domestic Subsidiary Pledge Agreement”, “Credit Agreement”,
“Debtor”, “Parent”, “Secured Party”, “Lenders”, “Notes”, “Prudential” and “Swap
Agreements” shall have the meanings indicated above, and the following terms
shall have the following meanings:

 

“Collateral” means all property, of whatever type, which is described in
Section 2.1 as being at any time subject to a security interest granted
hereunder to Secured Party.

 

“Commitment” means the agreement or commitment by Lenders to make loans or
otherwise extend credit to Debtor under the Credit Agreement, and any other
agreement, commitment, statement of terms or other document contemplating the
making of loans or advances or other extension of credit by Lenders to or for
the account of Debtor which is now or at any time hereafter intended to be
secured by the Collateral under this Agreement.

 

“Event of Default” means the occurrence of any “Event of Default” as such term
is defined in the Credit Agreement.

 

“Enforcement Action” means any exercise by Secured Party of any rights or
remedies against any Collateral, whether hereunder or otherwise, in order to
foreclose upon, collect, take possession of, sell, lease, dispose of, or
otherwise realize upon Collateral.

 

“Foreign Subsidiary” means any Subsidiary of Debtor that is not a Domestic
Subsidiary.

 

“Intercreditor Agreement” means that certain Intercreditor Agreement of even
date herewith among Lenders and Prudential, as from time to time amended.

 

“Issuer” means any issuer of Pledged Shares and any successor of such Issuer.

 

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“Obligation Documents” means the Credit Agreement, the Notes, the Security
Documents and all other documents and instruments under, by reason of which, or
pursuant to which any or all of the indebtedness and obligations arising under
or pursuant to the Credit Agreement are evidenced, governed, secured,
guarantied, or otherwise dealt with, and all other agreements, certificates, and
other documents, instruments and writings heretofore or hereafter delivered in
connection herewith or therewith.

 

“Other Liable Party” means any Person, other than Debtor, who may now or may at
any time hereafter be primarily or secondarily liable for any of the Secured
Obligations or who may now or may at any time hereafter have granted to Secured
Party a Lien upon any property as security for the Secured Obligations.

 

“Pledged Shares” has the meaning given it in Section 2.1(a).

 

“Prudential Pledge Agreement” means that certain Pledge Agreement dated as of
April 29, 1999, as amended by Amendment No. 2 to Pledge Agreement dated as of
April 24, 2003 appointing Bank of America, N.A. as collateral agent thereunder,
pursuant to which Western Gas Resources, Inc. granted to Bank of America, N.A.,
as collateral agent, a security interest in the collateral described therein.

 

“Related Person” means Debtor, each Subsidiary of Debtor, and each Other Liable
Party.

 

“Secured Obligations” shall have the meaning given it in Section 2.2.

 

“Subsidiary” shall have the meaning as defined in the Credit Agreement.

 

“UCC” means the Uniform Commercial Code in effect in the State of Texas on the
date hereof.

 

Section 1.2.                                   Incorporation of Other
Definitions.  Reference is hereby made to the Credit Agreement for a statement
of the terms thereof.  All capitalized terms used in this Agreement which are
defined in the Credit Agreement and not otherwise defined herein shall have the
same meanings herein as set forth therein.  All terms used in this Agreement
which are defined in the UCC and not otherwise defined herein shall have the
same meanings herein as set forth therein, except where the context otherwise
requires.

 

Section 1.3.                                   Attachments.  All exhibits or
schedules which may be attached to this Agreement are a part hereof for all
purposes.

 

Section 1.4.                                   Amendment of Defined
Instruments.  Unless the context otherwise requires or unless otherwise provided
herein, references in this Agreement to a particular agreement, instrument or
document (including, but not limited to, references in Section 2.1) also refer
to and include all renewals, extensions, amendments, modifications, supplements
or restatements of any such agreement, instrument or document, provided that
nothing contained in this Section shall be

 

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construed to authorize any Person to execute or enter into any such renewal,
extension, amendment, modification, supplement or restatement.

 

Section 1.5.                                   References and Titles.  All
references in this Agreement to Exhibits, Articles, Sections, subsections, and
other subdivisions refer to the Exhibits, Articles, Sections, subsections and
other subdivisions of this Agreement unless expressly provided otherwise. 
Titles appearing at the beginning of any subdivision are for convenience only
and do not constitute any part of any such subdivision and shall be disregarded
in construing the language contained in this Agreement.  The words “this
Agreement”, “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.  The phrases “this Section” and “this subsection”
and similar phrases refer only to the Sections or subsections hereof in which
the phrase occurs.  The word “or” is not exclusive, and the word “including” (in
all of its forms) means “including without limitation”.  Pronouns in masculine,
feminine and neuter gender 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.

 

ARTICLE II — Security Interest

 

Section 2.1.                                   Grant of Security Interest.  As
collateral security for all of the Secured Obligations, Debtor hereby pledges
and assigns to Secured Party and grants to Secured Party for the benefit of each
Lender a continuing security interest in and to all right, title and interest of
the following:

 

(a)                        Pledged Shares.  All of the following, whether now or
hereafter existing, which are owned by Debtor or in which Debtor otherwise has
any rights: the shares of stock of the Subsidiaries of Debtor described in
Exhibit A hereto and all certificates representing such shares, all options and
other rights, contractual or otherwise, at any time existing with respect to
such shares, and all dividends, cash, instruments and other property now or
hereafter received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares (any and all such shares, certificates,
options, rights, dividends, cash, instruments and other property being herein
called the “Pledged Shares”).

 

(b)                       Proceeds.  All proceeds of any and all of the
foregoing Collateral.

 

In each case, the foregoing shall be covered by this Agreement, whether Debtor’s
ownership or other rights therein are presently held or hereafter acquired and
however Debtor’s interests therein may arise or appear (whether by ownership,
security interest, claim or otherwise).

 

Section 2.2.                                   Secured Obligations.  The
security interest created hereby in the Collateral constitutes continuing
collateral security for all of the following obligations, indebtedness and
liabilities, whether now existing or hereafter incurred or arising:

 

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(a)                        Credit Agreement Indebtedness.  The payment by
Debtor, as and when due and payable, of all amounts from time to time owing by
Debtor under or in respect of the Credit Agreement, each Note, and any of the
other Obligation Documents, and the due performance by Debtor of all of its
other obligations under or in respect of the various Obligation Documents.

 

(b)                       Renewals.  All renewals, extensions, amendments,
modifications, supplements, or restatements of or substitutions for any of the
foregoing.

 

(c)                        Swap Obligations.  All obligations of any Related
Person to any Lender or any Affiliate of any Lender under or pursuant to a Swap
Agreement between any Related Person and such Lender or any Affiliate of such
Lender.

 

As used herein, the term “Secured Obligations” refers to all present and future
indebtedness, obligations, and liabilities of whatever type which are described
above in this section, including any interest which accrues after the
commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of the Debtor.  It is the intention of
the Debtor and Secured Party that this Agreement not constitute a fraudulent
transfer or fraudulent conveyance under any state or federal law that may be
applied hereto.  Debtor hereby agrees that its obligations hereunder shall be
limited to an aggregate amount equal to the largest amount that would not render
its obligations hereunder subject to avoidance under Section 548 of the
Bankruptcy Code (Title 11, United States Code) or any comparable provisions of
any applicable state law.

 

ARTICLE III — Representations, Warranties and Covenants

 

Section 3.1.                                   Representations and Warranties. 
Debtor hereby represents and warrants to Secured Party and the Lenders as
follows:

 

(a)                        Ownership Free of Liens.  Debtor has good and
marketable title to the Collateral free and clear of all Liens, encumbrances or
adverse claims, except for the security interest created by this Agreement and
the security interest in favor of Bank of America, N.A., as collateral agent,
pursuant to the Prudential Pledge Agreement.  No dispute, right of setoff,
counterclaim or defense exists with respect to all or any part of the
Collateral.  No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office except any which have been filed in favor of Secured Party relating to
this Agreement and any which have been filed in favor of Bank of America, N.A.,
as collateral agent, relating to the Prudential Pledge Agreement.

 

(b)                       No Conflicts or Consents.  Neither the ownership or
the intended use of the Collateral by Debtor, nor the grant of the security
interest by Debtor to Secured Party

 

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herein, nor the exercise by Secured Party of its rights or remedies hereunder,
will (i) conflict with any provision of (a) the articles or certificate of
incorporation or bylaws of Debtor or any similar charter documents of any
Issuer, or (b) any agreement, judgment, license, order or permit applicable to
or binding upon Debtor or any Issuer, or (ii) result in or require the creation
of any Lien, charge or encumbrance upon any material assets or properties of
Debtor or of any Issuer or Related Person except as expressly contemplated in
the Obligation Documents.  Except as expressly contemplated in the Obligation
Documents (including, without limitation, Section 6.13 of the Credit Agreement),
no consent, approval, authorization or order of, and no notice to or filing
with, any court, governmental authority, Issuer or third party is required in
connection with the grant by Debtor of the security interest herein, or the
exercise by Secured Party of its rights and remedies hereunder.

 

(c)                        Security Interest.  Debtor has and will have at all
times full right, power and authority to grant a security interest in the
Collateral to Secured Party as provided herein, free and clear of any Lien,
adverse claim, or encumbrance except for the Liens in favor of Bank of America,
N.A., as collateral agent, pursuant to the Prudential Pledge Agreement.

 

(d)                       Perfection.  The taking possession by Secured Party of
all certificates, instruments and cash constituting Collateral from time to time
and the filing of financing statements with the Secretary of State (or
equivalent governmental official) of the State in which Debtor is organized will
perfect, and establish the first priority of (subject only to any Liens in favor
of Prudential in accordance with and subject to the terms of the Intercreditor
Agreement), Secured Party’s security interest hereunder in the Collateral
securing the Secured Obligations.  No further or subsequent filing, recording,
registration, other public notice or other action is necessary or desirable to
perfect or otherwise continue, preserve or protect such security interest except
(i) for continuation statements described in UCC Section 9.515(d), (ii) for
filings required to be filed in the event of a change in the name, identity, or
corporate structure of Debtor, or (iii) in the event any financing statement
filed by Secured Party relating hereto otherwise becomes inaccurate or
incomplete.

 

(e)                        Location of Debtor and Records.  Debtor’s chief
executive office and principal place of business and the office where the
records concerning the Collateral are kept is located at 1099 18th Street,
Suite 1200, Denver, Colorado 80202.

 

(f)                          Pledged Shares.  Debtor has delivered to Secured
Party all certificates evidencing Pledged Shares.  All such certificates are
valid and genuine and have not been altered.  All shares and other securities
constituting the Pledged Shares have been duly authorized and validly issued,
are fully paid and non-assessable, and were not issued in violation of the
preemptive rights of any Person or of any agreement by which Debtor or the
Issuer thereof is bound.  All documentary, stamp or other taxes or fees owing in
connection with the issuance, transfer or pledge of Pledged Shares (or rights in
respect thereof) have been paid.  No restrictions or conditions exist with
respect to the transfer,

 

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voting or capital of any Pledged Shares under the documentation governing such
Pledged Shares.  The Pledged Shares constitute sixty-five percent (65%) of the
shares of capital stock of each Issuer that is a corporation.  No Issuer of any
Pledged Shares has any outstanding stock rights, rights to subscribe, options,
warrants or convertible securities outstanding or any other rights outstanding
whereby any Person would be entitled to have issued to him capital stock of such
Issuer.  The Pledged Shares do not constitute “margin stock” as such term is
defined in Regulation U promulgated by the Board of Governors of the Federal
Reserve System.

 

Section 3.2.                                   Affirmative Covenants.  Unless
Secured Party shall otherwise consent in writing after having received the
consent of the Required Lenders, Debtor will at all times comply with the
covenants contained in this Section 3.2 from the date hereof and so long as any
part of the Secured Obligations or the Commitment is outstanding.

 

(a)                        Ownership and Liens.  Debtor will maintain good and
marketable title to all Collateral free and clear of all Liens, encumbrances or
adverse claims, except for the security interest created by this Agreement and
the security interest created by the Prudential Pledge Agreement.  Debtor will
defend Secured Party’s right, title and special property and security interest
in and to the Collateral against the claims of any Person.

 

(b)                       Further Assurances.  Debtor will, at its reasonable
expense and at any time and from time to time, promptly execute and deliver all
further instruments and documents and take all further action that may be
reasonably necessary or that Secured Party may reasonably request in order
(i) to perfect and protect the security interest created or purported to be
created hereby and the priority of such security interest as stated herein;
(ii) to enable Secured Party to exercise and enforce its rights and remedies
hereunder in respect of the Collateral; or (iii) to otherwise effect the
purposes of this Agreement, including but not limited to: (A) executing and
filing such financing or continuation statements, or amendments thereto, as may
be reasonably necessary or desirable or that Secured Party may request in order
to perfect and preserve the security interest created or purported to be created
hereby; and (B) furnishing to Secured Party from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party may reasonably
request, all in reasonable detail.

 

(c)                        Inspection and Information.  Debtor will furnish to
Secured Party and each Lender any information which Secured Party may from time
to time reasonably request on behalf of itself or any Lender concerning the
Collateral, any covenant, provision or condition of this Agreement, or any
matter in connection with Debtor’s businesses and operations.  Debtor shall
permit representatives and independent contractors of the Secured Party to make
such visitations and inspections on the terms as provided in Section 6.10 of the
Credit Agreement.  Secured party and each Lender hereby agree that it will, at
all times, abide by the terms of Section 10.08 of the Credit Agreement regarding
treatment of confidential information.

 

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(d)                       Delivery of Pledged Shares.  All instruments,
certificates and writings evidencing the Pledged Shares shall be delivered to
Secured Party on or prior to the execution and delivery of this Agreement,
together with a true and correct copy of the articles of incorporation, and
bylaws or other organizational documents of each Issuer and all amendments and
supplements thereto.  All other instruments, certificates and writings hereafter
evidencing or constituting Pledged Shares and all amendments or supplements to
the articles of incorporation, or bylaws (whether or not authorized hereunder)
shall be delivered to Secured Party promptly upon the receipt thereof by or on
behalf of Debtor.  All such Pledged Shares shall be held by or on behalf of
Secured Party pursuant hereto and shall be delivered in suitable form for
transfer by delivery with any necessary endorsement or shall be accompanied by
fully executed instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to Secured Party.

 

(e)                        Proceeds of Pledged Shares.  If Debtor shall receive,
by virtue of its being or having been an owner of any Pledged Shares, any
(i) certificate evidencing shares of stock (including any certificate
representing a stock dividend or distribution in connection with any increase or
reduction of capital, reorganization, reclassification, merger, consolidation,
sale of assets, combination of shares, stock split, spinoff or split-off),
promissory note or other instrument or writing; (ii) option or right, whether as
an addition to, substitution for, or in exchange for, any Pledged Shares, or
otherwise; (iii) dividends payable in cash (except such dividends permitted to
be retained by Debtor pursuant to Section 4.8 hereof) or in securities or other
property, or (iv) dividends or other distributions in connection with a partial
or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, if an Event of Default shall have
occurred and be continuing, Debtor shall receive the same in trust for the
benefit of Secured Party, shall segregate it from Debtor’s other property, and
shall promptly deliver it to Secured Party in the exact form received, with any
necessary endorsement or appropriate stock powers duly executed in blank, to be
held by Secured Party as Collateral.

 

(f)                          Status of Pledged Shares.  The certificates
evidencing the Pledged Shares shall at all times be valid and genuine and shall
not be altered.  The Pledged Shares at all times shall be duly authorized,
validly issued, fully paid, and non-assessable, and shall not be issued in
violation of the pre-emptive rights of any Person or of any agreement by which
Debtor or the Issuer thereof is bound and shall not be subject to any
restrictions, other than as may be imposed by the laws or regulations of the
province of Nova Scotia, if applicable, with respect to transfer, voting or
capital of such Pledged Shares.

 

(g)                       Notices from Issuer.  Debtor will promptly deliver to
Secured Party a copy of each notice or other communication received by Debtor
from any Issuer in respect of any Pledged Shares.

 

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Section 3.3.                                   Negative Covenants.  Unless
Secured Party shall otherwise consent in writing after having received the
consent of the Required Lenders, Debtor will at all times comply with the
covenants contained in the Credit Agreement and in this Section 3.3 from the
date hereof and so long as any part of the Secured Obligations or the Commitment
is outstanding.

 

(a)                        Transfer or Encumbrance.  Except as expressly allowed
under the Credit Agreement, without the prior written consent of Required
Lenders, Debtor will not sell, assign (by operation of law or otherwise),
transfer, exchange or otherwise dispose of any of the Collateral, nor will
Debtor grant a Lien upon or execute, file or record any financing statement or
other registration with respect to the Collateral, nor will Debtor allow any
such Lien, financing statement, or other registration to exist or deliver actual
or constructive possession of the Collateral to any other Person, other than
Liens, financing statements or other registrations in favor of Secured Party and
Bank of America, N.A., as collateral agent, pursuant to the Prudential Pledge
Agreement.

 

(b)                       Financing Statement Filings.  Debtor recognizes that
financing statements pertaining to the Collateral have been or may be filed with
the secretary of state (or equivalent governmental official) of the state in
which Debtor is organized.  Without limitation of any other covenant herein,
Debtor will not cause or permit any change to be made in its name identity or
corporate structure, or any change to be made to its jurisdiction of
organization, unless Debtor shall have notified Secured Party of such change at
least thirty (30) days prior to the effective date of such change, and shall
have first taken all action reasonably required by Secured Party for the purpose
of further perfecting or protecting the security interest in favor of Secured
Party in the Collateral.  In any notice furnished pursuant to this subsection,
Debtor will expressly state that the notice is required by this Agreement and
contains facts that may require additional filings of financing statements or
other notices for the purposes of continuing perfection of Secured Party’s
security interest in the Collateral.

 

(c)                        Dilution of Shareholdings.  Debtor will not permit
the issuance of (i) any additional shares of any class of capital stock of any
Issuer (unless immediately upon issuance the same are pledged and delivered to
Secured Party pursuant to the terms hereof to the extent necessary to give
Secured Party a first priority security interest (subject only to any security
interest in favor of Prudential in accordance with and subject to the terms of
the Intercreditor Agreement) after such issue in at least the same percentage of
such Issuer’s outstanding shares as Debtor had before such issue), (ii) any
securities convertible voluntarily by the holder thereof or automatically upon
the occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such shares of capital stock, or (iii) any warrants, options, contracts
or other commitments entitling any Person to purchase or otherwise acquire any
such shares of capital stock not outstanding as of the date of this Agreement.

 

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(d)                       Restrictions on Pledged Shares.  Debtor will not enter
into any agreement creating, or otherwise permit to exist, any restriction or
condition upon the transfer, voting or control of any Pledged Shares except
under the Debt Securities.

 

ARTICLE IV — Remedies, Powers and Authorizations

 

Section 4.1.                                   Provisions Concerning the
Collateral.

 

(a)                        Additional Filings.  Debtor hereby authorizes Secured
Party to file, without the signature of Debtor where permitted by law, one or
more financing or continuation statements, and amendments thereto, relating to
the Collateral.  Debtor further agrees that a carbon, photographic or other
reproduction of this Agreement or of any financing statement describing any
Collateral is sufficient as a financing statement and may be filed in any
jurisdiction by Secured Party as it may deem appropriate.

 

(b)                       Power of Attorney.  Debtor hereby irrevocably appoints
Secured Party as Debtor’s attorney-in-fact and proxy, with full authority in the
place and stead of Debtor and in the name of Debtor or otherwise, from time to
time in Secured Party’s discretion, upon the occurrence and during the
continuance of an Event of Default, to take any action, and to execute or
indorse any instrument, certificate or notice, which Secured Party may deem
necessary or advisable to accomplish the purposes of this Agreement including
any action or instrument: (i) to request or instruct each Issuer (and any
registrar, transfer agent, or similar Person acting on behalf of each Issuer) to
register the pledge or transfer of the Collateral to Secured Party; (ii) to
otherwise give notification to any Issuer (or any such registrar, transfer
agent, financial intermediary, or other Person) of Secured Party’s security
interests hereunder; (iii) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral; (iv) to receive, indorse and collect any
drafts or other instruments or documents; (v) to enforce any obligations
included among the Collateral; and (vi) to file any claims or take any action or
institute any proceedings which Secured Party may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce, perfect, or
establish the priority of the rights of Secured Party with respect to any of the
Collateral.  Debtor hereby acknowledges that such power of attorney and proxy
are coupled with an interest, and are irrevocable.

 

(c)                        Performance by Secured Party.  If Debtor fails to
perform any agreement or obligation contained herein, Secured Party may itself
perform, or cause performance of, such agreement or obligation, and the
reasonable expenses of Secured Party incurred in connection therewith shall be
payable by Debtor under Section 4.5.

 

Section 4.2.                                   Remedies.  If an Event of Default
shall have occurred and be continuing, Secured Party may from time to time in
its discretion, except as limited by any regulatory

 

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approvals, requests or requirements, without limitation and without notice
except as expressly provided below (in each case subject to the Intercreditor
Agreement):

 

(a)                        exercise in respect of the Collateral, in addition to
any other rights and remedies provided for herein, under the other Obligation
Documents or otherwise available to it, all the rights and remedies of a secured
party on default under the UCC (whether or not the UCC applies to the affected
Collateral);

 

(b)                       require Debtor to, and Debtor hereby agrees that it
will at its expense and upon request of Secured Party, promptly assemble all or
part of the Collateral as directed by Secured Party and make it (together with
all books, records and information of Debtor relating thereto) available to
Secured Party at a place to be designated by Secured Party which is reasonably
convenient to both parties;

 

(c)                        reduce its claim to judgment or foreclose or
otherwise enforce, in whole or in part, the security interest created hereby by
any available judicial procedure;

 

(d)                       dispose of, at its office, on the premises of Debtor
or elsewhere, all or any part of the Collateral, as a unit or in parcels, by
public or private proceedings, and by way of one or more contracts (it being
agreed that the sale of any part of the Collateral shall not exhaust Secured
Party’s power of sale, but sales may be made from time to time, and at any time,
until all of the Collateral has been sold or until the Secured Obligations have
been paid and performed in full), and at any such sale it shall not be necessary
to exhibit any of the Collateral;

 

(e)                        buy (or allow one or more of the Lenders to buy) the
Collateral, or any part thereof, at any public sale;

 

(f)                          buy (or allow one or more of the Lenders to buy)
the Collateral, or any part thereof, at any private sale if the Collateral is of
a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations;

 

(g)                       apply by appropriate judicial proceedings for
appointment of a receiver for the Collateral, or any part thereof, and Debtor
hereby consents to any such appointment;

 

(h)                       at its discretion, retain the Collateral in
satisfaction of the Secured Obligations whenever the circumstances are such that
Secured Party is entitled to do so under the UCC or otherwise (provided that
Secured Party shall in no circumstances be deemed to have retained the
Collateral in satisfaction of the Secured Obligations in the absence of an
express notice by Secured Party to Debtor that Secured Party has either done so
or intends to do so); and

 

(i)                           take any other Enforcement Action.

 

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Debtor agrees that, to the extent notice of sale shall be required by law, at
least ten (10) days’ notice to Debtor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification.  Secured Party shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given.  Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.

 

Section 4.3.                                   Application of Proceeds. Whenever
Secured Party applies any cash held by Secured Party as Collateral, or any cash
proceeds received by Secured Party in respect of any sale of, collection from,
or other realization upon all or any part of the Collateral, the same shall be
applied in the following order (subject to the rights of Lenders under the
Credit Agreement and subject to the terms of the Intercreditor Agreement):

 

(a)                        To the repayment of all costs and expenses, including
reasonable attorneys’ fees and legal expenses, incurred by Secured Party in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral, (iii) the exercise or enforcement of any of
the rights of Secured Party hereunder, or (iv) the failure of Debtor to perform
or observe any of the provisions hereof;

 

(b)                       To the payment or other satisfaction of any Liens,
encumbrances, or adverse claims upon or against any of the Collateral (other
than those arising pursuant to the Prudential Pledge Agreement);

 

(c)                        To the reimbursement of Secured Party for the amount
of any obligations of Debtor or any Other Liable Party paid or discharged by
Secured Party (other than amounts for principal and interest under the Notes)
pursuant to the provisions of this Agreement or the other Obligation Documents,
and of any expenses of Secured Party payable by Debtor hereunder or under the
other Obligation Documents;

 

(d)                       To the satisfaction of any other Secured Obligations
to each Lender and Prudential in accordance with its Proportionate Share (as
defined in the Intercreditor Agreement);

 

(e)                        By holding the same as Collateral;

 

(f)                          To the payment of any other amounts required by
applicable law (including any provision of the UCC); and

 

(g)                       By delivery to Debtor or to whomever shall be lawfully
entitled to receive the same or as a court of competent jurisdiction shall
direct.

 

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Each Lender hereby authorizes the Secured Party to remit to Prudential any cash
held as Collateral or cash proceeds at any time due to Prudential pursuant to
clause (d) above and the terms of the Intercreditor Agreement.

 

Section 4.4.                                   Deficiency.  In the event that
the proceeds of any sale, collection or realization of or upon Collateral by
Secured Party are insufficient to pay all Secured Obligations and any other
amounts to which Secured Party and Lenders are legally entitled, Debtor shall be
liable for the deficiency, together with interest thereon as provided in the
governing Obligation Documents or (if no interest is so provided) at such other
rate as shall be fixed by applicable law, together with the costs of collection
and the reasonable fees of any attorneys employed by Secured Party to collect
such deficiency.

 

Section 4.5.                                   Indemnity and Expenses.  In
addition to, but not in qualification or limitation of, any similar obligations
under other Obligation Documents:

 

(a)                        Debtor will indemnify Secured Party and each Lender
from and against any and all claims, losses and liabilities growing out of or
resulting from this Agreement (including enforcement of this Agreement), WHETHER
OR NOT SUCH CLAIMS, LOSSES AND LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT OWED,
IN WHOLE IN OR PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE
CAUSED BY OR ARISE OUT OF SUCH INDEMNIFIED PARTY’S OWN NEGLIGENCE, except to the
extent such claims, losses or liabilities are proximately caused by the
indemnified party’s  individual gross negligence or willful misconduct.  As used
in this Section 4.5, the terms “Secured Party” and “Lender” shall include each
director, officer, agent, attorney, employee, representative and Affiliate of
such Person.

 

(b)                       Debtor will upon demand pay to Secured Party the
amount of any and all reasonable costs and expenses, including the reasonable
fees and disbursements of Secured Party’s counsel and of any experts and agents,
which Secured Party may incur in connection with (i) the transactions which give
rise to this Agreement, (ii) the preparation of this Agreement and the
perfection and preservation of this security interest created under this
Agreement, (iii) the administration of this Agreement; (iv) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral; (v) the exercise or enforcement of any of the
rights of Secured Party hereunder; or (vi) the failure by Debtor to perform or
observe any of the provisions hereof, except expenses resulting from Secured
Party’s gross negligence or willful misconduct.

 

Section 4.6.                                   Non-Judicial Remedies.  In
granting to Secured Party the power to enforce its rights hereunder without
prior judicial process or judicial hearing, Debtor expressly waives, renounces
and knowingly relinquishes any legal right which might otherwise require Secured
Party to enforce its rights by judicial process.  In so providing for
non-judicial remedies, Debtor recognizes and concedes that such remedies are
consistent with the usage of trade, are responsive

 

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to commercial necessity, and are the result of a bargain at arm’s length. 
Nothing herein is intended, however, to prevent Secured Party or Debtor from
resorting to judicial process at its option.

 

Section 4.7.                                   Other Recourse.  Debtor waives
any right to require Secured Party or any Lender to proceed against any other
Person, to exhaust any Collateral or other security for the Secured Obligations,
or to have any Other Liable Party joined with Debtor in any suit arising out of
the Secured Obligations or this Agreement, or pursue any other remedy in Secured
Party’s power.  Debtor further waives any and all notice of acceptance of this
Agreement and of the creation, modification, rearrangement, renewal or extension
for any period of any of the Secured Obligations of any Other Liable Party from
time to time.  Debtor further waives any defense arising by reason of any
disability or other defense of any Other Liable Party or by reason of the
cessation from any cause whatsoever of the liability of any Other Liable Party. 
This Agreement shall continue irrespective of the fact that the liability of any
Other Liable Party may have ceased and irrespective of the validity or
enforceability of any other Obligation Document to which Debtor or any Other
Liable Party may be a party, and notwithstanding any death, incapacity,
reorganization, or bankruptcy of any Other Liable Party or any other event or
proceeding affecting any Other Liable Party.  Until all of the Secured
Obligations shall have been paid in full, Debtor shall have no right to
subrogation and Debtor waives the right to enforce any remedy which Secured
Party or any Lender has or may hereafter have against any Other Liable Party,
and waives any benefit of and any right to participate in any other security
whatsoever now or hereafter held by Secured Party and each Lender.  Debtor
authorizes Secured Party, without notice or demand, without any reservation of
rights against Debtor, and without in any way affecting Debtor’s liability
hereunder or on the Secured Obligations, from time to time to (a) take or hold
any other property of any type from any other Person as security for the Secured
Obligations, and exchange, enforce, waive and release any or all of such other
property, (b) apply the Collateral or such other property and direct the order
or manner of sale thereof as Secured Party may in its discretion determine,
subject to the Intercreditor Agreement, (c) renew, extend for any period,
accelerate, modify, compromise, settle or release any of the obligations of any
Other Liable Party in respect to any or all of the Secured Obligations or other
security for the Secured Obligations, (d) waive, enforce, modify, amend, restate
or supplement any of the provisions of any Obligation Document with any Person
other than Debtor, and (e) release or substitute any Other Liable Party.  Any
action described in this Section 4.7 may be taken by Secured Party only in
accordance with the Intercreditor Agreement.

 

Section 4.8.                                   Voting Rights, Dividends, Etc. in
Respect of Pledged Shares

 

(a)                        So long as no Event of Default shall have occurred
and be continuing Debtor may receive and retain any and all dividends or
interest paid in respect of the Pledged Shares; provided, however, that any and
all

 

(i)             dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or otherwise
distributed in respect of or in exchange for, any Pledged Shares,

 

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(ii)          dividends and other distributions paid or payable in cash in
respect of any Pledged Shares in connection with a partial or total liquidation
or dissolution or in connection with a reduction of capital, capital surplus or
paid-in surplus, and

 

(iii)       cash paid, payable or otherwise distributed in redemption of, or in
exchange for, any Pledged Shares,

 

shall be, and shall forthwith be delivered to Secured Party to hold as, Pledged
Shares and shall, if received by Debtor, be received in trust for the benefit of
Secured Party, be segregated from the other property or funds of Debtor, and be
forthwith delivered to Secured Party in the exact form received with any
necessary indorsement or appropriate stock powers duly executed in blank, to be
held by Secured Party as Collateral.

 

(b)                       Upon the occurrence and during the continuance of an
Event of Default:

 

(i)             all rights of Debtor to receive and retain the dividends and
interest payments which it would otherwise be authorized to receive and retain
pursuant to subsection (a) of this section shall automatically cease, and all
such rights shall thereupon become vested in Secured Party which shall thereupon
have the sole right to receive and hold as Pledged Shares such dividends and
interest payments;

 

(ii)          without limiting the generality of the foregoing, Secured Party
may at its option (subject to the Intercreditor Agreement) exercise any and all
rights of conversion, exchange, subscription or any other rights, privileges or
options pertaining to any of the Pledged Shares as if it were the absolute owner
thereof, including, without limitation, the right to exchange, in its
discretion, any and all of the Pledged Shares upon the merger, consolidation,
reorganization, recapitalization or other adjustment of any Issuer, or upon the
exercise by any Issuer of any right, privilege or option pertaining to any
Pledged Shares, and, in connection therewith, to deposit and deliver any and all
of the Pledged Shares with any committee, depository, transfer, agent, registrar
or other designated agent upon such terms and conditions as it may determine;
and

 

(iii)       all dividends and interest payments which are received by Debtor
contrary to the provisions of subsection (b)(i) of this section shall be
received in trust for the benefit of Secured Party, shall be segregated from
other funds of Debtor, and shall be forthwith paid over to Secured Party as
Pledged Shares in the exact form received, to be held by Secured Party as
Collateral.

 

Section 4.9.                                   Private Sale of Pledged Shares. 
Debtor recognizes that Secured Party may deem it impracticable to effect a
public sale of all or any part of the Pledged Shares and that Secured Party may,
therefore, determine to make one or more private sales of any such securities to
a restricted group of purchasers who will be obligated to agree, among other
things, to acquire

 

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such securities for their own account, for investment and not with a view to the
distribution or resale thereof.  Debtor acknowledges that any such private sale
may be at prices and on terms less favorable to the seller than the prices and
other terms which might have been obtained at a public sale and, notwithstanding
the foregoing, agrees that such private sales shall be deemed to have been made
in a commercially reasonable manner and that Secured Party shall have no
obligation to delay sale of any such securities for the period of time necessary
to permit the Issuer of such securities to register such securities for public
sale under the Securities Act of 1933, as amended.  Debtor further acknowledges
and agrees that any offer to sell such securities which has been (a) publicly
advertised on a bona fide basis in a newspaper or other publication of general
circulation in the financial community of Denver, Colorado (to the extent that
such an offer may be so advertised without prior registration under the
Securities Act), or (b) made privately in the manner described above to not less
than fifteen (15) bona fide offerees shall be deemed to involve a “public
disposition” for the purposes of Section 9.610(c) of the UCC (or any successor
or similar, applicable statutory provision) as then in effect in the State of
Texas, notwithstanding that such sale may not constitute a “public offering”
under the Securities Act of 1933, as amended, and that Secured Party may, in
such event, bid for the purchase of such securities.

 

ARTICLE V — Miscellaneous

 

Section 5.1.                                   Notices.  Any notice or
communication required or permitted hereunder shall be given as provided in the
Credit Agreement.

 

Section 5.2.                                   Amendments.  No amendment of any
provision of this Agreement shall be effective unless it is in writing and
signed by Debtor, Secured Party, and Required Lenders (or Debtor and Secured
Party with the prior written consent of Required Lenders) and no waiver of any
provision of this Agreement, and no consent to any departure by Debtor
therefrom, shall be effective unless it is in writing and signed by Secured
Party with the prior written consent of Required Lenders, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given and to the extent specified in such writing.

 

Section 5.3.                                   Preservation of Rights.  No
failure on the part of Secured Party or any Lender to exercise, and no delay in
exercising, any right hereunder or under any other Obligation Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right.  Neither the execution nor the delivery of this Agreement shall in
any manner impair or affect any other security for the Secured Obligations.  The
rights and remedies of Secured Party and each Lender provided herein and in the
other Obligation Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law.  The rights of Secured
Party and each Lender under any Obligation Document against any party thereto
are not conditional or contingent on any attempt by Secured Party or such Lender
to exercise any of its rights under any other Obligation Document against such
party or against any other Person.

 

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Section 5.4.                                   Unenforceability.  Any provision
of this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or invalidity without invalidating the remaining portions hereof or thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.

 

Section 5.5.                                   Survival of Agreements.  All
representations and warranties of Debtor herein, and all covenants and
agreements herein shall survive the execution and delivery of this Agreement,
the execution and delivery of any other Obligation Documents and the creation of
the Secured Obligations.

 

Section 5.6.                                   Other Liable Party.  Neither this
Agreement nor the exercise by Secured Party or the failure of Secured Party to
exercise any right, power or remedy conferred herein or by law shall be
construed as relieving any Other Liable Party from liability on the Secured
Obligations or any deficiency thereon.  This Agreement shall continue
irrespective of the fact that the liability of any Other Liable Party may have
ceased or irrespective of the validity or enforceability of any other Obligation
Document to which Debtor or any Other Liable Party may be a party, and
notwithstanding the reorganization, death, incapacity or bankruptcy of any Other
Liable Party, and notwithstanding the reorganization or bankruptcy or other
event or proceeding affecting any Other Liable Party.

 

Section 5.7.                                   Binding Effect and Assignment. 
This Agreement creates a continuing security interest in the Collateral and
(a) shall be binding on Debtor and its successors and permitted assigns and
(b) shall inure, together with all rights and remedies of Secured Party
hereunder, to the benefit of Secured Party that inure to the benefit of such
Lender, and their respective successors, transferees and assigns.  Without
limiting the generality of the foregoing, each Lender may (except as otherwise
provided in and subject to the Credit Agreement and the Intercreditor Agreement)
pledge, assign or otherwise transfer any or all of its rights under any or all
of the Obligation Documents to any other Person, and such other Person shall
thereupon become vested with all of the benefits in respect thereof, herein or
otherwise in accordance with the Credit Agreement.  None of the rights or duties
of Debtor hereunder may be assigned or otherwise transferred without the prior
written consent of Secured Party.

 

Section 5.8.                                   Termination.  It is contemplated
by the parties hereto that there may be times when no Secured Obligations are
outstanding, but notwithstanding such occurrences, this Agreement shall remain
valid and shall be in full force and effect as to subsequent outstanding Secured
Obligations.  Upon the satisfaction in full of the Secured Obligations, upon the
termination or expiration of the Credit Agreement and the Commitment, and upon
written request for the termination hereof delivered by Debtor to Secured Party,
this Agreement and the security interest created hereby shall terminate and all
rights to the Collateral shall revert to Debtor.  Secured Party will, upon
Debtor’s request and at Debtor’s reasonable expense, (a) return to Debtor such
of the Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof; and (b) execute and deliver to Debtor such
documents as Debtor shall reasonably request to evidence such termination.

 

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SECTION 5.9.      FINAL AGREEMENT.  THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES HERETO.

 

Section 5.10.                             Loan Document.  This Agreement is a
“Loan Document”, as defined in the Credit Agreement, and, except as expressly
provided herein to the contrary, this Agreement is subject to all provisions of
the Credit Agreement governing such Loan Documents.

 

Section 5.11.                             Governing Law.  This Agreement shall
be governed by and construed in accordance with the laws of the State of Texas
applicable to contracts made and to be performed entirely within such State,
except as required by mandatory provisions of law and except to the extent that
the perfection and the effect of perfection or non-perfection of the security
interest created hereunder, in respect of any particular collateral, are
governed by the laws of a jurisdiction other than such State.

 

Section 5.12.                             Counterparts.  This Agreement may be
separately executed in any number of counterparts, all of which when so executed
shall be deemed to constitute one and the same Agreement.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, Debtor, has caused this Agreement to be executed and
delivered by its duly authorized officer, as of the date first above written.

 

 

 

WESTERN POWER SERVICES, INC., as Debtor

 

 

 

 

 

By:

/s/ William J. Krysiak

 

 

 

William J. Krysiak

 

 

Executive Vice President and

 

 

Chief Financial Officer

 

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EXHIBIT A

 

Corporations

 

Issuer

 

Certificate No.

 

No. of Shares

 

Class

 

 

 

 

 

 

 

Western Gas Resources Canada Company

 

4

 

65

 

Common

 

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