**Exhibit10.5**

 

**LETTER AMENDMENT NO. 1**

**TO**

**THIRD AMENDED AND RESTATED MASTER SHELF AGREEMENT**

 

As of April 24, 2003

 

The Prudential InsuranceCompany of America.

Pruco Life InsuranceCompany

Prudential InvestmentManagement, Inc.

ING Life Insurance &Annuity Company

c/o Prudential CapitalGroup

2200 Ross Avenue, Suite4200E

Dallas, Texas 75201

 

Ladies and Gentlemen:

 

We refer to theThird Amended and Restated Master Shelf Agreement dated as of December 19, 1991(Effective as of January 13, 2003) (the “**Agreement**”), among you and Western GasResources, Inc., a Delaware corporation (the “**Company**”).  Unless otherwise defined in this LetterAmendment No. 1 to Third Amended and Restated Master Shelf Agreement (this “**Amendment**”),the terms defined in the Agreement shall be used herein as therein defined.

 

The Company hasrequested and, subject to the terms and conditions specified herein, theundersigned holders of the Notes are willing to make, certain amendments to theAgreement, all as more particularly set forth herein.

 

**1.             Amendments to the Agreement.**  Subject to the accuracy of therepresentations and warranties set forth in paragraph 2 hereof and satisfactionof the conditions set forth in paragraph 3(c) hereof, the undersigned holdersof the Notes hereby agree with the Company to amend, effective as of the datefirst above written, the Agreement as follows:

 

(a)           **Paragraph 3A.  Conditions of Closing.**  Paragraph 3A(6) of the Agreement is deleted in its entirety andthe following is inserted in lieu thereof:

 

“3A(6).  **Amendment of Credit Agreements.**  The NCNBAgreement shall not require (or if so required, such conditions shallsimultaneously terminate) (i) the grant of a Lien on any property of theCompany or any Subsidiary (other than, so long as the Intercreditor Agreementis in effect, the Collateral) or (ii) the delivery of any securityagreement (other than, so long as the Intercreditor Agreement is in effect, theSecurity Documents) or the guaranty or agreement to provide guaranties of theobligations of the Company under such agreements other than any Bank Guarantywhich is subject to the Intercreditor Agreement and for which the Purchasershall have received a Guaranty from such Guarantor.  In addition,

 

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such agreementsshall not require that any lenders party thereto, or an agent or representativethereof (other than, so long as the Intercreditor Agreement is in effect, theCollateral Agent), be named as beneficiary or loss payee on any insurancepolicy and no insurance policy of the Company or any Subsidiary shall so nameany lender or agent (other than, so long as the Intercreditor Agreement is ineffect, the Collateral Agent) as beneficiary or loss payee.”

 

(b)           **Paragraph 5.  Affirmative Covenants**.

 

## **(I)            Paragraph5A of the Agreement is amended to (A) delete the word “and” from the end of theexisting clause (vii), (B) renumber the existing clause (viii) to become clause(xi), and (C) insert new clauses (viii), (ix) and (x) that read as follows:**

 

“(viii)      by January 30th ofeach year after the occurrence of a Debt Rating Downgrade, an EngineeringReport concerning the oil and gas reserves of the Company and its Subsidiariesas of the preceding December 31st, which report shall (A) be prepared byindependent petroleum engineers chosen by the Company and acceptable toPrudential, (B) contain sufficient information to enable the Company to meetthe reporting requirements concerning oil and gas reserves contained inRegulations S-K and S-X promulgated by the Securities and Exchange Commission,(C) distinguish (or be delivered together with a certificate from anappropriate officer of the Company which distinguishes) those propertiescovered by the report which are Collateral from those properties covered by thereport which are not Collateral, and (D) otherwise be in form satisfactory toPrudential;

 

(ix)           by August 31 ofeach year after the occurrence of a Debt Rating Downgrade, an EngineeringReport prepared as of the preceding July 1 by petroleum engineers who are employeesof the Company (or by the independent engineers named above), together with anaccompanying report on property sales, property purchases and changes incategories, both of which reports shall be in the same form and scope as thereports described in clause (viii) above;

 

(x)            concurrently withthe reports described in clauses (viii) and (ix), a report describing materialgas imbalances and curtailments of production for the Oil and Gas Collateral;and”

 

## **(II)           Paragraph5E of the Agreement is amended to add a new sentence to the end thereof thatreads as follows:**

 

“The Company shall also notify Prudential immediately of anyannouncement by Moody’s or S&P of any downward change or possible downwardchange in a Debt Rating of which any officer has knowledge.”

 

## **(III)         Paragraph5 of the Agreement is amended to add new paragraphs 5P, 5Q, 5R, 5S, 5T, 5U and5V that read as follows:**

 

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“5P. **Covenant to Pledge Stock**. The Company shall, and shall causeits Subsidiaries to (i) promptly (and in any event within 30 days afteracquiring such equity interests) pledge to the Collateral Agent the equityinterests in each Domestic Subsidiary Guarantor that is now owned or hereafteracquired by it, in each case pursuant to such documents as the Collateral Agentshall deem appropriate for such purpose and (ii) concurrently with each suchpledge, deliver to the Collateral Agent documents of the types referred to inclauses (ii) through (vii) of paragraph 3A(1) and favorable opinions of counselto such Person (which shall cover, among other things, the legality, validity,binding effect and enforceability of the documentation referred to in clause(i) above), all in form, content and scope reasonably satisfactory to theCollateral Agent; provided, that, no PUC Subsidiary shall be required toexecute and deliver any Security Document pursuant to this paragraph 5P orparagraph 5Q unless all required regulatory approvals shall have been obtainedfor such Security Document from each applicable PUC and, to the extentapplicable, FERC.  The Company shallcause each PUC Subsidiary required to deliver a Security Document pursuant toparagraph 5P or paragraph 5Q to use its best efforts to obtain the approval ofthe applicable PUC and, to the extent applicable, FERC for such SecurityDocument.  In the event that the any PUCor FERC shall require that the equity interests of a PUC Subsidiary be releasedfrom the Lien in favor of the Collateral Agent, the Collateral Agent shall sorelease such equity interests; provided that all equity interests of areplacement Subsidiary acceptable to Prudential shall have been pledged toCollateral Agent for the benefit of the holders of the Notes unless allpotential replacement Subsidiaries are PUC Subsidiaries and are prohibited bythe applicable PUCs or FERC from having their equity interests pledged to theCollateral Agent.”

 

5Q.          **Agreement to Deliver Mortgages**.  At all times after a Debt Rating Downgrade,the Notes and other obligations under this Agreement shall be secured by firstand prior Liens (subject only to Liens permitted by paragraph 6C(1)) coveringand encumbering 75% of the total present value (utilizing the CollateralAgent’s usual and customary pricing and discount rates for oil and gas loans,as in effect from time to time) of all oil and gas properties covered by thereserve reports most recently delivered to the Collateral Agent (the “**Oil and GasCollateral**”).  Subject to thelimitations in paragraph 5P, the Company agrees to deliver and to cause each ofits Subsidiaries, to the extent the Company or such Subsidiary, as the case maybe, owns Oil and Gas Collateral, to deliver to secure the Notes and otherobligations under this Agreement, deeds of trust, mortgages, chattel mortgages,security agreements and other Security Documents, which shall be insubstantially the form of Exhibit I attached hereto, for thepurpose of granting, confirming, and perfecting first and prior liens orsecurity interests in the Oil and Gas Collateral.  Such Security Documents shall be delivered to the CollateralAgent****onor before July 23, 2003, but shall not be recorded until a Debt RatingDowngrade occurs.  To the extentnecessary to comply with the requirements of the first sentence of thisparagraph 5Q, within 60 days after the delivery of each Engineering Reportpursuant to clause (viii) or (ix) of paragraph

 

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5A, the Companyshall, and shall cause its Subsidiaries that own Oil and Gas Collateral to,execute and deliver to the Collateral Agent, for the ratable benefit of eachholder of the Notes, supplements to the Security Documents or new SecurityDocuments substantially in the form of Exhibit I hereto, duly executedby the Company and any such Subsidiary (as applicable), together with suchother assignments conveyances, amendments, agreements and other writings (eachduly authorized and executed) as the Collateral Agent or Prudential shall deemreasonably necessary to grant, evidence and perfect the Liens required by thisparagraph 5Q.

 

5R.          **Title Review**.  After a Debt Rating Downgrade and from timeto time when additional Oil and Gas Collateral is required to be deliveredpursuant to paragraph 5Q, the Company agrees that the Collateral Agent’scounsel shall be entitled to review the lease files and existing title reportsand title opinions covering such additional Oil and Gas Collateral.  Based upon such review and in order toconfirm title of the Company and its Subsidiaries to such Oil and GasCollateral, the Collateral Agent may request, and the Company agrees todeliver, within 90 days after any Debt Ratings Downgrade, such additionalfavorable reports and/or title opinions which either the Collateral Agent orPrudential determines in their reasonable judgments are necessary from Personsacceptable to the Collateral Agent and Prudential with respect to any such Oiland Gas Collateral to confirm that the Company and/or its Subsidiaries own suchOil and Gas Collateral free and clear of all Liens except Liens permitted byparagraph 6C(1).

 

5S.           **Perfection and Protection of SecurityInterests and Liens**.  TheCompany will from time to time deliver, and will cause each of its Subsidiariesfrom time to time to deliver, to the Collateral Agent any authorizations to filefinancing statements, extension agreements and other documents, properlycompleted and executed (and acknowledged when required) in form and substancereasonably satisfactory to the Collateral Agent, which the Collateral Agentrequests for the purpose of perfecting, confirming, or protecting any Liens orother rights in Collateral securing the Notes and other obligations hereunder.

 

5T.          **Production Proceeds**.  Notwithstanding that, by the terms of theSecurity Documents which may be delivered to the Collateral Agent pursuant toparagraph 5Q, one or more Subsidiaries of the Company will, after a Debt RatingDowngrade, assign the Collateral Agent all of the “Production Proceeds” (asdefined in Exhibit I attached hereto) accruing to the property coveredthereby, so long as no Default has occurred such Subsidiaries may continue toreceive from the purchases of production all such Production Proceeds, subject,however, to the Liens created under the Security Documents, which Liens arehereby affirmed and ratified.  Upon theoccurrence of a Default, the Collateral Agent may exercise all rights andremedies granted under the Security Documents, including the right to obtainpossession of all Production Proceeds then held by the Subsidiaries or toreceive directly from the purchasers of production all other ProductionProceeds.

 

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In no case shallany failure, whether intentional or inadvertent, by the Collateral Agent tocollect directly any such Production Proceeds constitute in any way a waiver,remission or release of any of rights hereunder or under the SecurityDocuments, nor shall any release of any Production Proceeds by the CollateralAgent to the Subsidiaries constitute a waiver, remission, or release of any otherProduction Proceeds or of any rights of the Collateral Agent to collect otherProduction Proceeds thereafter.

 

5U.          **Sale or Disposal or Property**.  Notwithstanding that dispositions of Oil andGas Collateral may be prohibited by the terms of the Security Documents, solong as no Default has occurred, the Subsidiaries that are parties to theSecurity Documents may make dispositions of Oil and Gas Collateral that arepermitted by paragraph 6C(5).

 

5V.          **Limitation on Effectiveness**.  Notwithstanding anything to the contrarycontained herein or in any Mortgage, none of the Mortgages will be effective orenforceable in any manner whatsoever at any time prior to the occurrence of aDebt Rating Downgrade.  Withoutlimitation of the foregoing, the Collateral Agent shall not be entitled to anyof the rights or remedies available to it solely under the Mortgages prior tothe occurrence of a Debt Rating Downgrade. It is not the intent of the parties hereto that the provisions of thisparagraph 5V violate any applicable law regarding the rule againstperpetuities, the suspension of the absolute power of alienation, or otherrules regarding the vesting or duration of estates.  The provisions of this paragraph 5V shall be construed as notviolating any such rule to the extent the same can be so construed consistentwith the intent of the parties.  In theevent that the provisions of this paragraph 5V are determined to violate anysuch rule, then this paragraph 5V shall nevertheless be effective only for themaximum period (but not longer than the maximum period) permitted by such rulethat will result in no violation.  Atsuch time as this paragraph 5V is no longer effective, neither will theMortgage be effective or enforceable. To the extent the maximum period is permitted to be determined byreference to “lives in being,” the parties hereto agree that “lives in being”shall refer to the lifetime of the last to die of the living lineal descendantsof the late Joseph P. Kennedy (father of the late President of the United Statesof America).”

 

(c)           **Negative Covenants.**

 

(I)            Paragraph6A(3) of the Agreement is amended by deleting the percentage “35%” in suchparagraph and inserting the percentage “40%” in lieu thereof; provided,that, if the NCNB Agreement is subsequently amended to decrease the percentagecontained in a covenant similar to paragraph 6A(3), the Company shall promptlynotify Prudential of such amendment and promptly enter into an amendment to theAgreement to decrease the percentage in paragraph 6A(3) to the percentagecontained in the NCNB Agreement.

 

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(II)           Paragraph6A(4) of the Agreement is deleted in its entirety and the following is insertedin lieu thereof:

 

“6A(4).  **Total Fixed Charge Coverage Ratio**.  For each fiscal quarter of the Company, theratio of (i) the sum of (a) the Consolidated Net Earnings of the Company forthe four immediately preceding fiscal quarters of the Company, plus (b)the Company’s consolidated interest expense and provision for income taxes,depreciation and amortization for the four immediately preceding fiscalquarters of the Company that were taken into account for determining suchConsolidated Net Earnings to (ii) the Company’s consolidated accruedinterest expense for the four immediately preceding fiscal quarters to be lessthan the ratio set forth below opposite such fiscal quarter:

 
| **Four Fiscal Quarters Ending**              |   | **Minimum  Ratio** |
|----------------------------------------------|--------|--------------------|
| Effective Date through  December 30, 2002    |   | 2.50 to 1.00       |
| December 31, 2002  through December 31, 2003 |   | 3.25 to 1.00       |
| March 31, 2004 through  December 31, 2004    |   | 3.75 to 1.00       |
| March 31, 2005 and  thereafter               |   | 4.25 to 1.0        |

 

(III)         Paragraph6C(1) of the Agreement is amended by deleting the existing clause (viii) andinserting the following in lieu thereof:

 

“(viii) Liens created by the Security Documents and, if theIntercreditor Agreement is in effect, Liens created by the Bank PledgeAgreements (as defined in the Intercreditor Agreement), and”

 

(IV)         Paragraph6F is amended by deleting the existing definition of “Hedging Transactions” setforth therein and inserting the following in lieu thereof:

 

“**HedgingTransactions**” shall mean, with respect to the Company and itsSubsidiaries, any commodity basis swap, forward commodity transaction,commodity swap, commodity option, commodity index swap, commodity captransaction, commodity floor transaction, commodity collar transaction, and anysimilar transaction that relate to commodities (including any option withrespect to the foregoing transactions but excluding any commodity floortransactions with regard to which the Company and its Subsidiaries do not haveany liabilities (whether contingent, matured or otherwise) to third partiesother than the initial purchase price paid by the Company or such Subsidiarywith respect to the acquisition of such commodity floor transaction) or anycombination of the foregoing transactions.

 

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(d)           **Events of Default**.

 

(I)            Paragraph 7A of theAgreement is amended by deleting the existing clauses (iv), (v), (xvi) and(xvii) and inserting the following in lieu thereof:

 

“(iv)  any representation orwarranty made by the Company herein or in any Security Document to which it isa party, by any Guarantor in any Guaranty or in any Security Document to whichit is a party, or by the Company, any Guarantor or any of their respectiveofficers in any writing furnished in connection with or pursuant to thisAgreement, any Guaranty or any Security Document shall be false in any materialrespect on the date as of which made; or

 

(v)  the Company fails toperform or observe any term, covenant or agreement contained in (x) thefinal sentence of paragraph 5E (y) paragraph 5M, 5N, 5P or 5Q or(z) paragraph 6; or

 

(xvi)  any Guaranty, for anyreason other than as specified therein or, with regard to PUC Subsidiaries, inaccordance with the limitations set forth in paragraph 5P, ceases to be in fullforce and effect or is declared null and void, or the validity orenforceability thereof is contested or the Guarantor denies that it has anyfurther liability under the Guaranty, or the Guarantor shall default in theperformance or observance of any of its obligations under the Guaranty, andsuch default shall not have been remedied within 30 days; or

 

(xvii)  any Security Document,for any reason other than as specified therein or, with regard to PUCSubsidiaries, in accordance with the limitations set forth in paragraph 5P,ceases to be in full force and effect or is declared null and void or shallcease to create a valid first priority mortgage or deed of trust lien, asapplicable, on any of the collateral purported to be covered thereby thatconstitutes real property of fixtures or shall cease to create a valid andperfected first priority security interest in any of collateral purported to becovered thereby, or the validity or enforceability thereof is contested or theCompany or the Guarantor party thereto or if any such Person denies that it hasany further liability thereunder, or if any such Person shall default in theperformance or observance of any of its obligations thereunder and such defaultshall not have been remedied within 30 days;”

 

(II)           Paragraph 7D of theAgreement is amended by adding the following to the end thereof:

 

“All amountsrecovered as the result of the exercise of such remedies or from distributionsor other payments under the Intercreditor Agreement shall be applied inaccordance with the following priorities (with all partial payments of amountsowing within each category being allocated ratably in accordance with theamounts so owing to each holder of Notes): first, to the payment of allfees,

 

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indemnities, costsand expenses then owing under this Agreement, the Notes, the Guaranties, the SecurityDocuments and any other instruments or agreements executed in connectionherewith or therewith; second, after payment in full of the amounts setforth in clause first above, to the payment of the Make-Whole Amount, ifany, then owing; third, after payment in full of the amounts set forthin clause second above, to the payment of all accrued and unpaidinterest then owing under the Notes; fourth, after payment in full ofthe amounts set forth in clause third above, to the payment of principalthen outstanding under the Notes; and fifth, after payment in full ofthe amounts set forth in clause fourth above, to the Company orwhomsoever shall be lawfully entitled to receive the same or as a court ofcompetent jurisdiction shall direct.”

 

(e)           **Covenants.**Paragraphs 9C(1), 9(C)(2) and 9C(3) of the Agreement are deleted in theirentirety and the following are inserted in lieu thereof:

 

“9(C)(1).  **Appointment of****CollateralAgent**.  Each holder of anyNote that is not a signatory to the Intercreditor Agreement, by acceptance of aNote, hereby irrevocably appoints and authorizes NCNB, together with itssuccessors in such capacity under the Intercreditor Agreement, to act asCollateral Agent with such powers and discretions as are specifically delegatedto the Collateral Agent under the Intercreditor Agreement.  Promptly upon the request of Prudential,each such holder shall execute and deliver a counterpart of the IntercreditorAgreement or a joinder agreement in form and substance satisfactory toPrudential in order to further evidence such appointment.

 

9(C)(2).  **Acceptance of Intercreditor Provisions**.  Each holder of any Note that is not asignatory to the Intercreditor Agreement, by its acceptance of a Note, agreesto all of the terms, covenants, agreements and indemnifications that arebinding on the holders of the “Prudential Notes” under the IntercreditorAgreement.  Promptly upon the request ofPrudential, each such holder shall execute and deliver a counterpart of theIntercreditor Agreement or a joinder agreement in form and substancesatisfactory to Prudential in order to further evidence such agreement.

 

9(C)(3)      **[Intentionally Deleted]**.”

 

(f)            Definitions.

 

(I)            Paragraph10B of the Agreement is amended by deleting the existing definitions of“Collateral”, “Collateral Agent”, “Intercreditor Agreement”, “NCNB Agreement”and “Prudential” and inserting the following definitions in lieu thereof:

 

“**Collateral**”shall mean (i) all of the “Collateral” as defined in each Pledge Agreement, and(ii) all of the other real or personal property of the Company, MIGC or anyother Person in which a lien or security interest is granted pursuant to theMortgages or any other Security Document.

 

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“**CollateralAgent**” shall mean NCNB, in its capacity as Collateral Agent underthe Intercreditor Agreement and any successors thereunder.

 

“**IntercreditorAgreement**” shall mean the Intercreditor dated as of April 24, 2003,among Prudential, the holders of the Notes, the banks party to the NCNBAgreement, and Bank of America, as collateral agent, as the provisions thereofmay from time to time be amended or waived in compliance with the termsthereof.

 

“**NCNBAgreement**” shall mean that certain Credit Agreement dated as ofApril 24, 2003, among the Company, Bank of America, as Administrative Agent andL/C Issuer, Bank One, NA and Fleet National Bank, as Co-Syndication Agents, TheRoyal Bank of Scotland plc and Wachovia Bank, National Association, asCo-Documentation Agents, and the lenders party thereto, as the provisionsthereof may from time to time be amended or waived in compliance with paragraph6E.

 

“**Prudential**”shall mean Prudential Investment Management, Inc.

 

(II)           Thefollowing definitions are inserted in paragraph 10B in the appropriatealphabetical positions therein:

 

“**DebtRating**” shall mean, as of any date of determination, the rating asdetermined by either S&P or Moody’s of the Company’s Debt under the NCNBAgreement or any replacement credit facility therefor; provided that ifa Debt Rating is issued by each of the foregoing rating agencies, then thelower of such Debt Ratings shall apply.

 

“**DebtRating Downgrade**” shall mean that (i) a Debt Rating is not issued byS&P on or before September 30, 2003, or (ii) a Debt Rating is not issued byMoody’s on or before September 30, 2003, or (iii) the Debt Rating by S & Pis issued at a rating less than BB or is subsequently reduced to BB – or lower,or (iv) the Debt Rating by Moody’s is issued at a rating less than Ba2 or issubsequently reduced to Ba3 or lower, or (v) either the Debt Rating by S&Por the Debt Rating by Moody’s is withdrawn; provided that if either ofsuch Debt Ratings is withdrawn due to a condition or event that is not causedby or attributable to Company or Company’s financial condition and/oroperations, such withdrawal shall not constitute a Debt Rating Downgrade if (A)within 90 days after the date on which such Debt Rating is withdrawn, theRequired Holder(s) have approved a Replacement Rating Agency selected by Companyand Prudential****in accordance with the terms of paragraph 11R, and (B) suchReplacement Rating Agency has issued a Debt Rating acceptable to RequiredHolder(s) within a reasonable period of time after such Replacement RatingAgency is approved by Required Holder(s), such reasonable time period to bedetermined by Required Holder(s).

 

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“**DomesticSubsidiary Guarantor**” means any Subsidiary that is (i) organizedunder the laws of any political subdivision of the United States, and (ii)required to execute and deliver a Guaranty pursuant to paragraph 5M of thisAgreement.

 

“**FERC**”shall mean the Federal Energy Regulatory Commission and successor or successorsto all or any part of its functions or jurisdictions.

 

“**Mortgage**”shall mean, collectively, any Mortgage, Assignment, Security Agreement, FixtureFiling, and Financing Statement or similar agreement delivered by any one ormore Subsidiary of the Company with regard to the Oil and Gas Collateralpursuant to paragraph 5Q.

 

“**Oiland Gas Collateral**” shall have the meaning specified in paragraph5Q.

 

“**PUC**”shall mean any applicable public utilities commission for any state or otherjurisdiction in which the Company or any Subsidiary conducts business and anysuccessor or successors to all or any part of its functions or jurisdictions.

 

“**PUCSubsidiary**” shall mean any Subsidiary that is required to beregulated as a public utility or a natural gas company under applicable law andthat is prohibited under such applicable law from incurring a Guaranty and/orgranting Liens or security interests in any Collateral, in each case withoutthe approval of the applicable public utility commission having regulatoryauthority over such PUC Subsidiary or FERC (to the extent regulated by FERC).

 

“**ReplacementRatings Agency**” shall have the meaning specified in paragraph 11R.

 

“**SecurityDocuments**” shall mean all security agreements, deeds of trust,mortgages, chattel mortgages, pledges, guaranties, financing statements,continuation statements, extension agreements and other agreements orinstruments now, heretofore, or hereafter delivered by the Company or anySubsidiary to Prudential, the holders of the Notes or the Collateral Agent inconnection with this Agreement or any transaction contemplated hereby to secureor guarantee the payment of any part of the obligations hereunder or under theNotes or the performance of the other duties and obligations of the Company orany Subsidiary under this Agreement, including, without limitation, theMortgages and the Pledge Agreements.

 

## **(g)          **Miscellaneous. The Agreement is amended to add a new paragraph11R that reads as follows:

 

“11R.      **ReplacementRating Agency**.  If a DebtRating Downgrade occurs under clause (v) of the definition of Debt RatingDowngrade due to a condition or event that is not caused by or attributable toCompany or Company’s financial condition and/or

 

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operations, Prudential and the Company shall select a proposedreplacement for the rating agency that has withdrawn its Debt Rating.  Promptly thereafter, Prudential shall submitthe name of such proposed replacement rating agency to the holders of the Notesfor approval, together with such information regarding such rating agency as itdeems necessary.  Within 10 BusinessDays of its receipt of such notice, each holder shall advise Prudential inwriting as to whether it approves such proposed replacement rating agency.  If any holder does not respond in writing toPrudential within such 10-Business Day period, such holder shall be deemed tohave approved the proposed replacement rating agency.  If such proposed replacement rating agency is approved (or deemedapproved) by Required Holder(s), it shall be the “Replacement Rating Agency.”

 

## **(h)          **ExhibitI.  Anew Exhibit I is added to the Agreement in the form attached as ExhibitI hereto.

 

**3.             Representations and Warranties**.In order to induce each of you to enter into this Amendment, the IntercreditorAgreement (as defined in paragraph 1(f)(I) hereof) and the Pledge AgreementAmendments (as defined in paragraph 4(c)(IV) hereof), the Company herebyrepresents and warrants as follows:

 

## **(a)          **DueAuthorization; Noncontravention.  The execution, delivery and performance bythe Company and each Guarantor of this Amendment, the Intercreditor Agreementand the Pledge Agreement Amendments have been duly authorized by all necessarycorporate or limited liability company action, as applicable, and do not andwill not (i) contravene the terms of the charter and by-laws or otherorganizational documents of the Company or any Guarantor, (ii) conflictwith or result in any breach or contravention of, or the creation of any Lien(other than the Liens created by the Security Documents) under, any documentevidencing any contractual obligation to which any such Person is a party orany order, injunction, writ or decree of any governmental authority binding onany such Person or its property, or (iii) violate any applicable lawbinding on or affecting any such Person.

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## **(b)          **BindingEffect. This Amendment, the Intercreditor Agreement and the Security Documents(as defined in paragraph 1(f)(II)), as amended by the Pledge AgreementAmendments, constitute the legal, valid and binding obligations of the Company andthe Guarantors, enforceable against such Persons in accordance with theirrespective terms, except as enforceability may be limited by applicablebankruptcy, insolvency, or similar laws affecting the enforcement of creditors’rights generally or by equitable principles of general applicability.

## ** **

## **(c)          **Representationsand Warranties.  The representations and warranties of the Company and theGuarantors set forth in the Agreement, the Guaranties and the SecurityDocuments are true and correct on and as of the date hereof, both before andafter giving effect to the effectiveness of this Amendment (except to theextent such representations and warranties expressly are limited to an earlierdate, in which such representations and warranties are true and correct on andas of such earlier date).

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## **(d)          **NoDefaults. No Default or Event of Default exists under the Agreement, the Notes,any Guaranty, any Security Document or any other agreement or instrumentexecuted in connection therewith and no default or event of default existsunder the NCNB Agreement, any

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agreement or instrumentexecuted in connection therewith or any other material contract or agreement towhich the Company or any of the Guarantors is a party, and, to the Company’sknowledge, no such default or event of default is imminent.

 

## **4.     Miscellaneous.**

 

(a)           **Effecton Agreement**.  On and afterthe effective date of this Amendment, each reference in the Agreement to “thisAgreement”, “hereunder”, “hereof”, or words of like import referring to theAgreement and each reference in the Notes and all other documents executed inconnection with the Agreement to “the Agreement”, “thereunder”, “thereof”, orwords of like import referring to the Agreement shall mean the Agreement asamended by this Amendment. The Agreement, as amended by this Amendment, is andshall continue to be in full force and effect and is hereby in all respectsratified and confirmed.

 

(b)**           Counterparts**.This Amendment may be executed in any number of counterparts (including thosetransmitted by facsimile) and by any combination of the parties hereto inseparate counterparts, each of which counterparts shall be an original and allof which taken together shall constitute one and the same Amendment.  Delivery of this Amendment may be made byfacsimile transmission of a duly executed counterpart copy hereof.

 

(c)           **Effectiveness**.This Amendment shall become effective as of the date first above written whenand if each of the conditions set forth in this subparagraph (c) shall havebeen satisfied.

 

### **(I)**            Amendment. Counterparts of this Amendment shall have been executed by the Company,each Guarantor and the Required Holder(s) and shall have been delivered toPrudential.

 

(II)           **NCNBLoan Documents**.  The LoanDocuments (as defined in the NCNB Agreement) shall have been executed by allparties thereto, a final copy and execution pages thereof shall have beendelivered to Prudential and all of such Loan Documents shall be in form andsubstance satisfactory to Prudential and in full force and effect.

 

(III)         **IntercreditorAgreement**.  The IntercreditorAgreement (as defined in paragraph 1(k)) shall have been executed by allparties thereto, a counterpart thereof shall have been delivered to Prudentialand such Intercreditor Agreement shall be in form and substance satisfactory toPrudential and in full force and effect.

 

(IV)         **PledgeAgreement Amendments**.  Eachof the Amendments No. 2 to Pledge Agreement in the forms attached as ExhibitsA-1 and A-2, respectively (collectively, the “**Pledge Agreement Amendments**”),shall have been executed by all parties thereto, a counterpart thereof shallhave been delivered to Prudential and each such Pledge Agreement Amendmentshall be in full force and effect.

 

(V)           **Representationsand Warranties**.  Each of therepresentations and warranties made in this Amendment shall be true and correcton and as of the date hereof as if made on and as of such date, both before andafter giving effect to this Amendment.

 

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(VI)         **Feesand Expenses of Counsel**.  TheCompany shall have paid the estimated fees, costs and out-of-pocket expensesincurred by external counsel to Prudential in connection with the preparation,negotiation, execution and delivery of this Amendment, the IntercreditorAgreement, the Pledge Agreement Amendments and all transaction contemplatedhereby and thereby.

 

(d)           **Expenses**.  The Company confirms its agreement, pursuantto paragraph 11B of the Agreement, to pay promptly all expenses of theundersigned holders of Notes related to the preparation, reproduction,execution and delivery of this Amendment, the Intercreditor Agreement, thePledge Agreement Amendments and all matters contemplated hereby and thereby,including without limitation all fees and expenses of counsel to such parties.

 

## **(c)**           Governing Law.   THIS AMENDMENT SHALL BE CONSTRUED ANDENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNEDBY, THE LAW OF THE STATE OF NEW YORK.

 

(f)            **Affirmationof Obligations and Liens**. Notwithstanding that such consent is not required thereunder, each ofthe Guarantors consents to the execution and delivery of this Amendment by theparties hereto, the Intercreditor Agreement by the parties thereto and thePledge Agreement Amendments by the parties thereto. As a material inducement tothe undersigned to amend the Agreement and to enter into the IntercreditorAgreement and the Pledge Agreement Amendments, each of the Guarantorsrespectively (i) acknowledges and confirms the continuing existence,validity and effectiveness of the Guaranty and Pledge Agreement, if any, towhich it is a party, and any Liens granted thereunder, and (ii) agreesthat the execution, delivery and performance of this Amendment, the IntercreditorAgreement and the Pledge Agreement Amendments shall not in any way release,diminish, impair, reduce or otherwise affect its obligations under any suchGuaranty or Pledge Agreement or any Liens granted thereunder.

 

## **(g)**           FINAL AGREEMENT.  THIS AMENDMENT, TOGETHER WITH THEINTERCREDITOR AGREEMENT, THE AGREEMENT, THE PLEDGE AGREEMENTS AND THE PLEDGEAGREEMENT AMENDMENTS, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAYNOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORALAGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THEPARTIES.

 

***[Remainder of page is intentionally left blank; signaturepages follow]***

 

13

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If you agree to the termsand provisions hereof, please evidence your agreement by executing andreturning a counterpart of this Amendment to Western Gas Resources, Inc., 109918th Street, Suite 1200, Denver, CO 80202, Attention: General Counsel.

 

 
|                                            | Very truly  yours,              |
|-------------------------------------------------|---------------------------------|
|                                            |                            |   |
|                                            |                            |   |
|                                            | **WESTERN GAS RESOURCES, INC.** |
|                                            |                            |   |
|                                            |                            |   |
|                                            | By:                             | /s/ William J.  Krysiak |
|                                            |                            | William J. Krysiak |
|                                            |                            | Executive Vice President- CFO |
|                                            |                            |   |
|                                            |                            |   |
| Agreed as of the date  first above written:     |                            |   |
|                                            |                            |   |
| **THE PRUDENTIAL INSURANCE COMPANY OF AMERICA** |
|                                            |                            |   |
|                                            |                            |   |
| By:                                             | /s/ Ric E. Abel                 |   |
|                                            | Ric E. Abel                     |   |
|                                            | Vice President                  |   |
|                                            |                            |   |
|                                            |                            |   |
| **PRUCO LIFE INSURANCE COMPANY**                |
|                                            |
|                                            |                            |   |
| By:                                             | /s/ Ric E. Abel                 |   |
|                                            | Ric E. Abel                     |   |
|                                            | Vice President                  |   |
|                                            |                            |   |
|                                            |                            |   |
| **PRUDENTIAL INVESTMENT MANAGEMENT, INC.**      |
|                                            |                            |   |
|                                            |                            |   |
| By:                                             | /s/ Ric E. Abel                 |   |
|                                            | Ric E. Abel                     |   |
|                                            | Vice President                  |   |
|                                                 |                                 |  |  |  |  |

 

14

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| **ING LIFE INSURANCE & ANNUITY COMPANY** |
|----------------------------------------------|
|                                         |   |   |
| By:                                          | Prudential Private Placement Investors, L.P. (as  Investment Advisor) |   |
|                                         |   |   |
|                                         | By: | Prudential Private Placement Investors, Inc.,  General Partner |   |
|                                         |   |   |
|                                         |   | By: | /s/ Ric E. Abel |   |   |
|                                         |   | Ric E. Abel |   |   |
|                                         |   | Vice President |   |   |
|                                              |  |  |  |  |  |  |

 

15

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Agreed and acknowledgedby each of the undersigned for

the purposes set forth inparagraph 4(f).

 

 
|   | **MIGC, INC.**                        |
|--------|---------------------------------------|
|   | **MGTC, INC.**                        |
|   | **WESTERN GAS RESOURCES-TEXAS, INC.** |
|   | **MOUNTAIN GAS RESOURCES, INC.**      |
|   | **LANCE OIL & GAS COMPANY, INC.** |
|   |                                  |   |
|   | By:                                   | /s/ William J. Krysiak |   |
|   |                                  | William J. Krysiak |
|   |                                  | Executive Vice President- CFO |
|   |                                  |   |
|   |                                  |   |
|   | **WESTERN GAS WYOMING, L.L.C.**       |
|   |                                  |   |
|   |                                  |   |
|   | By:                                   | Western Gas Resources, Inc., its sole member |
|   |                                  |   |   |
|   | By:                                   | /s/ William J. Krysiak |   |
|   |                                  | William J. Krysiak |
|   |                                  | Executive Vice President- CFO |
|        |                                       |  |  |  |  |  |  |

 

16

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**EXHIBIT A-1**

 

**[FORM OF AMENDMENT NO. 2 TO PLEDGE AGREEMENT]**

 

To be attached.

 

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**EXHIBIT A-2**

 

**[FORM OF AMENDMENT NO. 2 TO PLEDGE AGREEMENT]**

 

To be attached.

 

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**EXHIBIT I**

 

**[FORM OF MORTGAGE]**

 

To be attached.

 

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