EXHIBIT 10.20

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                                 LOAN AGREEMENT

                                   ----------

                           WESTERN GAS RESOURCES, INC.

                                       and

                                NATIONSBANK, N.A.

                                    as Agent

                      NATIONSBANC MONTGOMERY SECURITIES LLC

                                as Lead Arranger

                                SOCIETE GENERALE

                              as Syndication Agent

                               ABN AMRO BANK N.V.

                             as Documentation Agent

                                and certain banks

                                   as Lenders

                                   ----------

                                  $300,000,000

                                 April 29, 1999

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                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

ARTICLE I. - Definitions and References........................................1
     Section 1.1.    Defined Terms.............................................1
     Section 1.2.    Exhibits and Schedules; Additional Definitions...........19
     Section 1.3.    Amendment of Defined Instruments.........................20
     Section 1.4.    References and Titles....................................20
     Section 1.5.    Calculations and Determinations..........................20

ARTICLE II. - The Loans.......................................................20
     Section 2.1.    Committed Loans..........................................20
     Section 2.2.    Requests for New Loans...................................22
     Section 2.3.    Continuations and Conversions of Existing Committed 
                     Loans ...................................................23
     Section 2.4.    Competitive Bid Loans....................................24
     Section 2.5.    Use of Proceeds..........................................26
     Section 2.6.    Optional Prepayments.....................................27
     Section 2.7.    Mandatory Prepayments....................................27
     Section 2.8.    Payments to Lenders......................................29
     Section 2.9.    Facility Fees............................................30
     Section 2.10.   Increased Cost and Reduced Return........................30
     Section 2.11.   Limitation on Types of Loans.............................31
     Section 2.12.   Illegality...............................................32
     Section 2.13.   Treatment of Affected Loans..............................32
     Section 2.14.   Compensation.............................................33
     Section 2.15.   Taxes....................................................33
     Section 2.16.   Compensation Procedure...................................35
     Section 2.17.   Interest Rate Changes....................................35

ARTICLE III. - Letters of Credit..............................................36
     Section 3.1.    LCs......................................................36
     Section 3.2.    Reimbursement of LCs.....................................36
     Section 3.3.    Transferees of LCs.......................................38
     Section 3.4.    Extension of Maturity of LCs.............................38
     Section 3.5.    Restriction on Liability.................................38
     Section 3.6.    No Duty to Inquire.......................................39
     Section 3.7.    LC Fees..................................................39

ARTICLE IV. - Conditions Precedent to Lending.................................39
     Section 4.1.    Documents to be Delivered................................39
     Section 4.2.    Additional Conditions Precedent..........................40


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ARTICLE V. - Representations and Warranties...................................41
     Section 5.1.    Borrower's Representations and Warranties................41
     Section 5.2.    Representation by Lenders................................46

ARTICLE VI. - Covenants of Borrower...........................................46
     Section 6.1.    Affirmative Covenants....................................46
     Section 6.2.    Negative Covenants.......................................52

ARTICLE VII. - Security.......................................................58
     Section 7.1.    The Security.............................................58
     Section 7.2.    Offset...................................................58
     Section 7.3.    Guaranties of Borrower's Subsidiaries....................58
     Section 7.4.    Deposits.................................................59

ARTICLE VIII. - Events of Default and Remedies................................60
     Section 8.1.    Events of Default........................................60
     Section 8.2.    Remedies.................................................63
     Section 8.3.    Indemnity................................................63

ARTICLE IX. - Agent...........................................................64
     Section 9.1.    Appointment, Powers, and Immunities......................64
     Section 9.2.    Reliance by Agent........................................64
     Section 9.3.    Defaults.................................................64
     Section 9.4.    Rights as Lender.........................................65
     Section 9.5.    Indemnification..........................................65
     Section 9.6.    Non-Reliance on Agent and Other Lenders..................65
     Section 9.7.    Resignation of Agent.....................................66
     Section 9.8.    Appointment and Authority................................66
     Section 9.9.    Exculpation, Agent's Reliance, Etc.......................67
     Section 9.10.   Lenders' Credit Decisions................................67
     Section 9.11.   Expenses; Indemnification................................67
     Section 9.12.   Rights as Lender.........................................68
     Section 9.13.   Adjustments..............................................68
     Section 9.14.   Benefit of Article IX....................................69
     Section 9.15.   Agency/Administrative Fee................................69

ARTICLE X. - Miscellaneous....................................................69
     Section 10.1.   Waivers and Amendments; Acknowledgments..................69
     Section 10.2.   Survival of Agreements; Cumulative Nature................71
     Section 10.3.   Notices..................................................71
     Section 10.4.   Joint and Several Liability; Parties in Interest.........72
     Section 10.5.   Assignments and Participations...........................72
     Section 10.6.   Governing Law; Submission to Process.....................74
     Section 10.7.   Limitation on Interest...................................74


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     Section 10.8.   Termination; Limited Survival............................75
     Section 10.9.   Severability.............................................76
     Section 10.10.  Confidentiality..........................................76
     Section 10.11.  Counterparts.............................................76
     Section 10.12.  Waiver of Jury Trial, Punitive Damages, Etc..............76
     Section 10.13.  Restatement..............................................77


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SCHEDULE 1  -  Disclosure Schedule
SCHEDULE 2  -  Security Schedule
SCHEDULE 3  -  Lenders
SCHEDULE 4  -  Joint Ventures

EXHIBIT A   -  Tranche A Note
EXHIBIT B   -  Tranche B Note
EXHIBIT C   -  Borrowing Notice
EXHIBIT D   -  Letter of Credit Application
EXHIBIT E   -  Continuation/Conversion Notice
EXHIBIT F   -  Officer's Certificate
EXHIBIT G   -  Assignment and Acceptance
EXHIBIT H   -  Form of Opinion of Borrower's General Counsel
EXHIBIT I   -  Form of Cash Flow Projections
EXHIBIT J   -  Competitive Bid Request
EXHIBIT K   -  Invitation to Bid
EXHIBIT L   -  Competitive Bid
EXHIBIT M   -  Competitive Bid Accept/Reject Letter
EXHIBIT N   -  Competitive Bid Note
EXHIBIT O   -  Notice of Final Agreement
EXHIBIT P   -  Risk Management Policy


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                                 LOAN AGREEMENT

      THIS LOAN AGREEMENT is made as of April 29,1999 and shall be effective for
all purposes as of the Effective Date, by and among Western Gas Resources, Inc.,
a Delaware corporation (herein called "Borrower"), NationsBank, N.A., a national
banking association (herein called "Agent") and Lenders referred to below. In
consideration of the mutual covenants and agreements contained herein the
parties hereto agree as follows:

                    ARTICLE I. - Definitions and References

      Section I.1. Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:

      "Affiliate" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power

            (a) to vote 15% or more of the securities (on a fully diluted basis)
      having ordinary voting power for the election of directors or managing
      general partners; or

            (b) to direct or cause the direction of the management and policies
      of such Person whether by contract or otherwise.

      "Agent" means NationsBank, as Agent hereunder, and its successors in such
capacity.

      "Agreement" means this Loan Agreement.

      "American General Group" means, collectively, The Variable Annuity Life
Insurance Company, American General Life Insurance Company, American General
Life and Accident Insurance Company (successor in interest to Gulf Life
Insurance Company), First Allmerica Financial Life Insurance Company, and
Allmerica Financial Life Insurance and Annuity Company.

      "Applicable Lending Office" means, for each Lender and for each Type of
Committed Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan on Schedule 3 or such other office of
such Lender (or an affiliate of such Lender) as such Lender may from time to
time specify to Agent and Borrower by written notice in accordance with the
terms hereof as the office by which its Committed Loans of such Type are to be
made and maintained.

      "Asset Sale" means each sale of an asset or group of assets by a Related
Person for a purchase price of $1,000,000 or more.
<PAGE>

      "Asset Sale Proceeds" means with respect to each Asset Sale, all proceeds
from the sale of such asset or group of assets, net of reasonable out-of-pocket
expenses of sales and associated cash taxes, if any, incurred by such Related
Person.

      "At Risk Position" has the meaning given it in Section 6.2(k).

      "Authorized Officer" means, with respect to any act to be performed or
duty to be discharged by or on behalf of any Person who is not an individual,
any officer, agent or representative thereof who is at the time in question
authorized to perform such act or discharge such duty on behalf of such Person.

      "Base Rate" means the per annum rate of interest equal to the sum of (i)
the greater of (A) the Prime Rate from time to time in effect or (B) the Federal
Funds Rate from time to time in effect plus one-half of one percent (.50%), plus
(ii) the Base Rate Spread, plus (iii) the Senior Cap Spread, if any, and (iv)
the Issuance Spread, if any. If the Prime Rate or the Federal Funds Rate, as the
case may be, changes after the date hereof the Base Rate shall be automatically
increased or decreased, as the case may be, without notice to Borrower from time
to time as of the effective time of each such change. The Base Rate shall in no
event, however, exceed the Highest Lawful Rate.

      "Base Rate Payment Date" means (i) the first day of each January, April,
July and October beginning on and including July 1, 1999, and (ii) any day on
which past due interest or principal is owed hereunder and is unpaid. If the
terms hereof provide that payments of interest or principal hereon shall be
deferred from one Base Rate Payment Date to another day, such other day shall
also be a Base Rate Payment Date.

      "Base Rate Spread" means:

            (a) for each period in which the Debt to Capitalization Ratio in
      effect pursuant to Section 2.17 is less than or equal to 0.50 to 1.0,
      0.00%;

            (b) for each period in which the Debt to Capitalization Ratio in
      effect pursuant to Section 2.17 is greater than 0.50 to 1.0 but less than
      or equal to 0.55 to 1.0, 0.25%; and

            (c) for each period in which the Debt to Capitalization Ratio in
      effect pursuant to Section 2.17 is greater than 0.55 to 1.0, 0.50%.

      "Borrower" means Western Gas Resources, Inc., a Delaware corporation.

      "Borrowing" means any of the following: (i) a borrowing of new Committed
Loans of a single Type pursuant to Section 2.2; (ii) a continuation or
conversion of existing Committed Loans into a single Type (and, in the case of
Committed Eurodollar Loans, with the same Interest Period) pursuant to Section
2.3; and (iii) a combination of new Committed Loans and a


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continuation or conversion of existing Committed Loans in a single Type (and, in
the case of Committed Eurodollar Loans, with the same Interest Period).

      "Borrowing Notice" means a request for a Borrowing made by Borrower either
(i) in writing in the form and substance of the "Borrowing Notice" attached
hereto as Exhibit C, duly completed, or (ii) by telephone providing the same
information to Agent.

      "Bridge Facility" means that certain Loan Agreement among Borrower, as
borrower, and NationsBank, N.A., as lender, dated as of February 17, 1999.

      "Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Dallas, Texas and New
York City, New York. Any Business Day in any way relating to Committed
Eurodollar Loans (such as the day on which an Interest Period begins or ends)
must also be a day on which, in the judgment of Agent, significant transactions
in dollars are carried out in the interbank eurocurrency market.

      "Change in Control" means any of the following:

      (a) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of more than 25% of the
total Voting Shares of Borrower after the date hereof; or

      (b) Borrower is merged with or into or consolidated with another Person
and immediately after giving effect to the merger or consolidation, (i) less
than 50% of the total voting power of the outstanding Voting Shares of the
surviving or resulting Person is then "beneficially owned" (within the meaning
of Rule 13d-3 under the Exchange Act) in the aggregate by the stockholders of
Borrower immediately prior to such merger or consolidation, and (ii) any
"person" or "group" (as defined in Section 13(d)(3) or 14(d)(2) of the Exchange
Act) has become the direct or indirect "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than 50% of the total voting power of the
Voting Shares of the surviving or resulting Person; or

      (c) Borrower, either individually or in conjunction with one or more
Subsidiaries, sells, assigns, conveys, transfers, leases or otherwise disposes
of, or the Subsidiaries sell, assign, convey, transfer, lease or otherwise
dispose of, all or substantially all of the properties of Borrower and the
Subsidiaries, taken as a whole (either in one transaction or a series of related
transactions) including capital stock of the Subsidiaries, to any Person (other
than Borrower or a wholly owned Subsidiary); or

      (d) during any consecutive two-year period, individuals who at the
beginning of such period constituted the board of directors of Borrower
(together with any new directors whose election by such board of directors or
whose nomination for election by the stockholders of Borrower was approved by a
vote of a majority of the directors then still in office who were


                                      -3-
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either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the board of directors of Borrower then in office; or

      (e) the liquidation or dissolution of Borrower.

      "Collateral" means all property of any kind which is subject to a Lien in
favor of Lenders (or in favor of Agent for the benefit of Lenders) or which,
under the terms of any Security Document, is purported to be subject to such a
Lien, in each case granted or created to secure all or part of the Obligations.

      "Commitment" means the aggregate amount of the Tranche A Commitment and
the Tranche B Commitment as reduced from time to time pursuant to Section 2.7.

      "Committed Base Rate Loans" means all Tranche A Base Rate Loans and all
Tranche B Base Rate Loans.

      "Committed Eurodollar Loans" means all Tranche A Eurodollar Loans and all
Tranche B Eurodollar Loans.

      "Committed Loans" means all Tranche A Loans and all Tranche B Loans.

      "Committed Notes" means all Tranche A Notes and all Tranche B Notes.

      "Competitive Bid" means a response from any Lender to an Invitation to
Bid, substantially in the form of Exhibit L.

      "Competitive Bid Accept/Reject Letter" means a notice sent by Borrower to
Agent, substantially in the form of Exhibit M, indicating its acceptance or
rejection of Competitive Bids from various Lenders.

      "Competitive Bid Interest Period" means, with respect to a Competitive Bid
Loan, a period from one day to fifty-nine days as specified in the Competitive
Bid applicable thereto.

      "Competitive Bid Loan" means a loan from a Lender to Borrower pursuant to
the bidding procedure described in Section 2.4.

      "Competitive Bid Note" has the meaning given it in Section 2.4(f).

      "Competitive Bid Rate" means, for any Competitive Bid Loan, the fixed rate
at which such Lender is willing to make such Competitive Bid Loan indicated in
its Competitive Bid. The Competitive Bid Rate shall in no event, however, exceed
the Highest Lawful Rate.


                                      -4-
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      "Competitive Bid Request" means a request by Borrower in the form of
Exhibit J for Lenders to submit Competitive Bids.

      "Consolidated" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.

      "Continuation/Conversion Notice" means a request for a continuation or
conversion of existing Committed Loans made by Borrower pursuant to Section 2.3
either (i) in writing in the form and substance of the "Continuation/Conversion
Notice" attached hereto as Exhibit E, duly completed, or (ii) by telephone
providing the same information to Agent.

      "Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 2.3 of a Committed Eurodollar Loan of one Type
as a Committed Eurodollar Loan of the same Type from one Interest Period to the
next Interest Period.

      "Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 2.3 of one Type of Loan into another Type of Loan.

      "Debt" of any Person means the sum of the following indebtedness,
liabilities and obligations of such Person (without duplication), whether
matured or unmatured, liquidated or unliquidated, primary or secondary:

      (a) obligations for borrowed money,

      (b) obligations to pay the deferred purchase price of property or
services,

      (c) obligations evidenced by a bond, debenture, note or similar financial
instrument,

      (d) obligations which (i) would under GAAP be shown on such Person's
balance sheet as a liability, and (ii) are payable more than one year from the
date of creation thereof (other than reserves for taxes and reserves for
contingent obligations),

      (e) obligations arising under Hedging Contracts to which such Person is a
party,

      (f) obligations arising under leases, whether or not the payments
thereunder are capitalized in accordance with GAAP,

      (g) obligations arising under conditional sales or other title retention
agreements,

      (h) obligations owing under direct or indirect guaranties of Debt of any
other Person or constituting obligations to purchase or acquire or to otherwise
protect or insure a creditor


                                      -5-
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against loss in respect of Debt of any other Person (such as obligations under
working capital maintenance agreements, agreements to keep-well, or agreements
to purchase Debt, assets, goods, securities or services),

      (i) obligations (for example, repurchase agreements) to purchase
securities or other property, if such obligations arise out of or in connection
with the sale of the same or similar securities or property,

      (j) obligations with respect to letters of credit or reimbursement
agreements therefor,

      (k) obligations with respect to payments received in consideration of oil,
gas, or other minerals yet to be acquired or produced at the time of payment
(including obligations under "take-or-pay" contracts to deliver gas in return
for payments already received and the undischarged balance of any production
payment created by such Person or for the creation of which such Person directly
or indirectly received payment), or

      (l) obligations to deliver goods or services in consideration of advance
payments therefor;

provided, however, that the "Debt" of any Person shall not include Debt that was
incurred by such Person on ordinary trade terms to vendors, suppliers, or other
Persons providing goods and services for use by such Person in the ordinary
course of its business, unless and until such Debt is outstanding more than
ninety (90) days past the original invoice or billing date therefor.

      "Debt to Capitalization Ratio" means, at the time of determination, the
ratio of (a) Funded Debt to (b) the sum of the Funded Debt plus Shareholders'
Equity. (Determination will be made in connection with the delivery of the
officer's certificate pursuant to Section 6.1(b)(iii) and may be made pursuant
to Section 2.17 from time to time.)

      "Debt Securities" means collectively, (i) those senior notes dated October
27, 1992, September 22, 1993, December 27, 1993, October 27, 1994 and July 28,
1995 issued by Borrower pursuant to that certain Master Shelf Agreement dated as
of December 19, 1991 between Borrower and the Prudential Insurance Company of
America (as amended and restated from time to time, the "Shelf Agreement") and
(ii) the 8.02% senior notes due December 1, 2005 in the aggregate principal
amount of $42,000,000 issued by Borrower pursuant to a note purchase agreement
among Borrower and the members of the American General Group (as amended and
restated from time to time, the "American General Agreement").

      "Default" means any Event of Default and any default, event or condition
which would, with the giving of any requisite notices and the passage of any
requisite periods of time, constitute an Event of Default.

      "Default Rate" means, at the time in question, (i) with respect to any
Committed Base Rate Loan, two percent (2.0%) per annum plus the Base Rate then
in effect; (ii) with respect to


                                      -6-
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any Committed Eurodollar Loan, two percent (2.0%) per annum plus (A) with
respect to Tranche A Eurodollar Loans, the Tranche A Fixed Rate, or (B) with
respect to Tranche B Eurodollar Loans, the Tranche B Fixed Rate; and (iii) with
respect to any Competitive Bid Loan, two percent (2.0%) per annum plus the
applicable Competitive Bid Rate, unless otherwise agreed to by Borrower and the
applicable Lender, and (iv) with respect to any Obligation other than a Loan
(including but not limited to Matured LC Obligations), two percent (2.0%) per
annum plus the Base Rate then in effect. The Default Rate shall in no event,
however, exceed the Highest Lawful Rate.

      "Disclosure Report" means either a notice given by Borrower under Section
6.1(d) or a certificate given by Borrower's chief financial officer, treasurer,
executive vice president or president under Section 6.1(b)(iii).

      "Disclosure Schedule" means Schedule 1 hereto.

      "EBITDA" means with respect to any Person, for any period, the sum
(determined without duplication on a Consolidated basis and in accordance with
GAAP) of (a) such Person's net income (or net loss), and (b) such Person's
Consolidated taxes, interest, depreciation, amortization and depletion expenses
taken into account in determining such net income (or net loss) for such period.

      "Effective Date" means the date of the first Borrowing hereunder.

      "Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a Lender; and
(iii) any other Person approved by Agent and, unless an Event of Default has
occurred and is continuing at the time any assignment is effected in accordance
with Section 10.5; Borrower, such approval not to be unreasonably withheld or
delayed by Borrower and such approval to be deemed given by Borrower if no
objection is received by the assigning Lender and Agent from Borrower within two
Business Days after notice of such proposed assignment has been provided by the
assigning Lender to Borrower; provided, however, that any such Eligible Assignee
shall have capital and surplus in excess of $1,000,000,000 and, in Agent's
reasonable opinion, has experience in lending to companies in the oil and gas
business and provided further that neither Borrower nor an Affiliate of Borrower
(excluding the members of the Board of Directors of Borrower and their
Affiliates) shall qualify as an Eligible Assignee.

      "Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment including ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes.


                                      -7-
<PAGE>

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.

      "ERISA Plan" means any employee pension benefit plan subject to Title IV
of ERISA maintained by any Related Person or any Affiliate thereof with respect
to which any Related Person has a fixed or contingent liability.

      "Eurodollar Rate" means, for any Committed Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) appearing on Dow Jones Market Service (formerly
Telerate Access Service) Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period. If for any reason such rate is
not available, the term "Eurodollar Rate" shall mean, for any Committed
Eurodollar Loan for any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen
LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates (rounded upwards,
if necessary, to the nearest 1/100 of 1%).

      "Event of Default" has the meaning given it in Section 8.1.

      "Exchange Act" means the Securities Exchange Act of 1934, as amended.

      "Existing Agreement" means that certain Loan Agreement dated as of May 30,
1997 among Borrower, Agent and the lenders named therein, as amended to the date
hereof.

      "Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (a) if such day is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate charged to Agent (in its
individual capacity) on such day on such transactions as determined by Agent.

      "Fiscal Quarter" means a three-month period ending on March 31, June 30,
September 30 or December 31 of any year.

      "Fiscal Year" means a twelve-month period ending on December 31 of any
year.


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      "Fixed Rate Payment Date" means, with respect to any Committed Eurodollar
Loan: (i) the day on which the related Interest Period ends and, if such
Eurodollar Interest Period is six months in length, the date specified by Agent
which is approximately three months after such Eurodollar Interest Period begins
and (ii) any day on which past due interest or past due principal is owed
hereunder with respect to such Committed Eurodollar Loan and is unpaid. If the
terms hereof provide that payments of interest or principal with respect to such
Committed Eurodollar Loan shall be deferred from one Fixed Rate Payment Date to
another day, such other day shall also be a Fixed Rate Payment Date.

      "Funded Debt" means the aggregate of the following Debt of Borrower and
its Subsidiaries, after elimination of intercompany items and other
Consolidation in accordance with GAAP: (a) Debt (including the Obligations) for
borrowed money, regardless of maturity, (b) Debt constituting an obligation to
pay the deferred purchase price of property, (c) Debt evidenced by a bond,
debenture, note or similar instrument, and (d) Debt which is due and payable at
the time in question, with respect to letters of credit or reimbursement
agreements therefor.

      "GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Borrower and its
Consolidated subsidiaries, are applied for all periods after the date hereof in
a manner consistent with the manner in which such principles and practices were
applied to the audited Initial Financial Statements. If any change in any
accounting principle or practice is required by the Financial Accounting
Standards Board (or any such successor) in order for such principle or practice
to continue as a generally accepted accounting principle or practice, all
reports and financial statements required hereunder with respect to Borrower or
with respect to Borrower and its Consolidated subsidiaries may be prepared in
accordance with such change but, if such change is material, all calculations
and determinations to be made hereunder may be made in accordance with such
change only after notice of such change is given to each Lender and Majority
Lenders agree to such change insofar as it affects the accounting of Borrower or
of Borrower and its Consolidated subsidiaries.

      "Guarantor" means MIGC, MGR, MGTC, PGT, WGRC, WGRO, WGRT, WGW, and Lance
and any other Person who has guaranteed some or all of the Obligations pursuant
to a guaranty listed on the Security Schedule or any other Person who has
guaranteed some or all of the Obligations and who has been accepted by Agent as
a Guarantor or any Subsidiary of Borrower which now or hereafter executes and
delivers a guaranty to Agent pursuant to Section 7.3.

      "Hazardous Materials" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.

      "Hedging Contracts" means futures contracts, forward contracts, swap, cap
or collar contracts, option contracts, hedging contracts, other derivative
contracts, or similar agreements.


                                      -9-
<PAGE>

      "Highest Lawful Rate" means, with respect to each Lender, the maximum
nonusurious rate of interest that such Lender is permitted under applicable law
to contract for, take, charge, or receive with respect to its Loan. All
determinations herein of the Highest Lawful Rate, or of any interest rate
determined by reference to the Highest Lawful Rate, shall be made separately for
each Lender as appropriate to assure that the Loan Documents are not construed
to obligate any Person to pay interest to any Lender at a rate in excess of the
Highest Lawful Rate applicable to such Lender.

      "Initial Financial Statements" means the audited annual Consolidated
financial statements of Borrower dated as of December 31, 1998.

      "Interest Period" means, with respect to each particular Committed
Eurodollar Loan, a period of 1, 2, 3 or 6 months, as specified in the Borrowing
Notice or Continuation/Conversion Notice applicable thereto, beginning on and
including the date specified in such Borrowing Notice or Continuation/Conversion
Notice (which must be a Business Day), and ending on but not including the same
day of the month as the day on which it began (e.g., a period beginning on the
third day of one month shall end on but not include the third day of another
month), provided that each Interest Period which would otherwise end on a day
which is not a Business Day shall end on the next succeeding Business Day
(unless such next succeeding Business Day is the first Business Day of a
calendar month, in which case such Interest Period shall end on the immediately
preceding Business Day). No Interest Period may be elected, which would extend
past the date on which the associated Note is due and payable in full.

      "Invitation to Bid" means an invitation by Agent to Lender, substantially
in the form of Exhibit K, inviting each Lender to submit Competitive Bids in
response to a Competitive Bid Request.

      "Issuance Date" means the first date after the date hereof on which
Borrower has issued at least $150,000,000 of Subordinated Debt.

      "Issuance Spread" means, only if the Issuance Date has not occurred on or
before June 30, 1999, one-fourth of one percent (0.25%) during the period from
and after July 1, 1999 until the Issuance Date.

      "Issuing Bank" shall mean NationsBank, N.A., in its capacity as the issuer
of LCs hereunder, and its successors in such capacity.

      "Lance" means Lance Oil & Gas Company, Inc., a Delaware corporation.

      "LC" has the meaning given it in Section 3.1.

      "LC Obligations" means, at the time in question, the sum of all Matured LC
Obligations plus the maximum amounts which Issuing Bank might then or thereafter
be called upon to advance under all LCs then outstanding.


                                      -10-
<PAGE>

      "LC Sublimit" means $25,000,000.

      "Lenders" means each signatory hereto (other than Borrower), including
NationsBank, N.A. in its capacity as a lender hereunder rather than as Agent,
and the successors of each as holder of a Note.

      "Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Debt owed to him or any other
arrangement with such creditor which provides for the payment of such Debt out
of such property or assets or which allows him to have such Debt satisfied out
of such property or assets prior to the general creditors of any owner thereof,
including any lien, mortgage, security interest, pledge, deposit, production
payment, rights of a vendor under any title retention or conditional sale
agreement or lease substantially equivalent thereto, tax lien, mechanic's or
materialman's lien, or any other charge or encumbrance for security purposes,
whether arising by law or agreement or otherwise, but excluding any right of
offset which arises without agreement in the ordinary course of business. "Lien"
also means any filed financing statement, any registration of a pledge (such as
with an issuer of uncertificated securities), or any other arrangement or action
which would serve to perfect a Lien described in the preceding sentence,
regardless of whether such financing statement is filed, such registration is
made, or such arrangement or action is undertaken before or after such Lien
exists.

      "Loan" means a Committed Loan or a Competitive Bid Loan, as applicable.
"Loans" means all Committed Loans and Competitive Bid Loans.

      "Loan Documents" means this Agreement, the Notes, the LCs, the Security
Documents and all other agreements, certificates, documents, instruments and
writings at any time delivered in connection herewith or therewith (excluding
term sheets, commitment letters, correspondence and similar documents used in
the negotiation hereof, except to the extent the same contain information about
Borrower or its Affiliates, properties, business or prospects, and further
excluding all offering memorandums prepared by NationsBanc Montgomery Securities
LLC, for use in connection with the Loans).

      "Majority Lenders" shall mean at the time in question two or more Lenders
collectively having at least a 66-2/3% Percentage Share; provided, however, that
in the event the obligation of Lenders to make Committed Loans hereunder has
been terminated or the Obligations have been accelerated at the time in
question, "Majority Lenders" shall mean two or more Lenders whose aggregate
ratable share of the sum of the aggregate unpaid principal balance of all Loans
at the time in question and the aggregate unpaid Matured LC Obligations at such
time is at least 66 2/3%.

      "Material Adverse Effect" shall mean a material, adverse effect on the
businesses, properties, prospects, operations, or financial condition of
Borrower on a Consolidated basis or on the right or ability of any Related
Person to consummate the transactions contemplated by the Loan Documents or to
perform its obligations thereunder.


                                      -11-
<PAGE>

      "Matured LC Obligations" has the meaning given it in Section 3.2.

      "MGR" means Mountain Gas Resources, Inc., a Delaware corporation.

      "MGTC" means MGTC, Inc., a Wyoming corporation.

      "MIGC" means MIGC, Inc., a Delaware corporation.

      "NationsBank" means NationsBank, N.A., in its individual capacity.

      "Note" means a Committed Note or a Competitive Bid Note, as appropriate.

      "Obligations" means all Debt from time to time owing by any of the Related
Persons to Agent or any Lender under or pursuant to any of the Loan Documents.
"Obligation" means any part of the Obligations.

      "Percentage Share" means, with respect to any Lender (a) when used in
Sections 2.1 or 2.9, in any Notice of Borrowing or when no Committed Loans are
outstanding hereunder, the percentage set forth opposite such Lender's name on
the Schedule 3 attached hereto, and (b) when used otherwise, the percentage
equal to the percentage obtained by dividing (i) the sum of the unpaid principal
balance of such Lender's Committed Loans at the time in question plus the
Matured LC Obligations which such Lender has funded pursuant to Section 3.2(b)
plus that portion of the amount which Lenders might be called upon to advance
under all LCs then outstanding that such Lender would be obligated to fund under
Section 3.2(b), by (ii) the aggregate unpaid principal balance of all Committed
Loans at such time plus the aggregate amount of LC Obligations outstanding at
such time.

      "Person" means an individual, corporation, partnership, limited liability
company, association, joint stock company, trust or trustee thereof, estate or
executor thereof, unincorporated organization or joint venture, court or
governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.

      "PGT" means Pinnacle Gas Treating, Inc., a Texas corporation and
wholly-owned subsidiary of Borrower.

      "Preferred Stock" means all issued and outstanding preferred stock of
Borrower, as the same may change from time to time, including but not limited to
(i) the 1,400,000 shares of $2.28 Cumulative Preferred Stock of Borrower and
(ii) the 2,760,000 shares of $2.625 Cumulative Convertible Preferred Stock of
Borrower.

      "Prime Rate" means the per annum rate of interest established from time to
time by NationsBank as its prime rate, which rate may not be the lowest rate of
interest charged by NationsBank to its customers.


                                      -12-
<PAGE>

      "Prohibited Lien" means any Lien not expressly allowed under Section
6.2(b).

      "Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect.

      "Related Person" means any of Borrower, each Guarantor, and each other
Subsidiary of Borrower with the exception of Westana, Williston Gas Company, and
Sandia.

      "Reserve Requirement" means, on any day with respect to each particular
Committed Eurodollar Loan, the maximum rate at which reserves (including,
without limitation, any marginal, special, supplemental, or emergency reserves)
are required to be maintained under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) by member
banks of the Federal Reserve System against "Eurocurrency liabilities" (as such
term is used in Regulation D). Without limiting the effect of the foregoing, the
Reserve Requirement shall reflect any other reserves required to be maintained
by such member banks with respect to (i) any category of liabilities which
includes deposits by reference to which the Tranche A Fixed Rate or the Tranche
B Fixed Rate is to be determined, or (ii) any category of extensions of credit
or other assets which include Eurodollar Loans. The Tranche A Fixed Rate and the
Tranche B Fixed Rate shall be adjusted automatically on and as of the effective
date of any change in the Reserve Requirement.

      "Right" has the meaning given it in the definition of "Shareholder Rights
Plan" set forth in Section 1.1.

      "Rights Plan Preferred Stock" shall mean preferred stock of Borrower
issued in connection with the exercise of a Right that: (a) is economically
comparable to Borrower's common stock (including dividend rights), (b) contains
no financial or operating covenants; (c) does not require Borrower to make any
sinking fund or similar mandatory prepayments and is not otherwise subject to
redemption at the option of the holder thereof; and (d) is not convertible or
exchangeable into Debt of Borrower.

      "Risk Management Policy" means that certain WGR Commodity Price Risk
Management Policy of Borrower effective as of January 24, 1997, a true and
correct copy of which is attached hereto as Exhibit P.

      "Sandia" means Sandia Energy Resources Joint Venture.

      "Security Documents" means the instruments listed in the Security Schedule
and all other security agreements, deeds of trust, mortgages, chattel mortgages,
pledges, guaranties, financing statements, continuation statements, extension
agreements and other agreements or instruments now, heretofore, or hereafter
delivered by any Related Person to Agent in connection with this Agreement or
any transaction contemplated hereby to secure or guarantee the payment of any
part of the Obligations or the performance of any Related Person's other duties
and obligations under the Loan Documents.


                                      -13-
<PAGE>

      "Security Schedule" means Schedule 2 hereto.

      "Senior Cap Spread" means with respect to any Fiscal Quarter, one-fourth
of one percent (0.25%) only if the Senior Debt to Capitalization Ratio in effect
pursuant to Section 2.17 as of the immediately preceding Fiscal Quarter is
greater than 0.40 to 1.0.

      "Senior Debt" means all of the Obligations and all indebtedness owing by
the Related Persons under the Debt Securities.

      "Senior Debt to Capitalization Ratio" means, at the time of determination,
the ratio of (a) the Senior Debt to (b) the sum of the Funded Debt plus
Shareholders' Equity. (Determination will be made in connection with the
delivery of the officer's certificate pursuant to Section 6.1(b)(iii) and may be
made pursuant to Section 2.17 from time to time.)

      "Shareholder Rights Plan" means a plan containing terms that are usual and
customary pursuant to which: (i) holders of Borrower's common stock at the time
of adoption of the plan (and any common stock of Borrower issued thereafter)
receive by way of a dividend a right (a "Right") to purchase shares of either
common stock or Rights Plan Preferred Stock of Borrower or shares of common
stock of an acquiring Person, which Rights are not exercisable until a
Triggering Event (as hereinafter defined) occurs: (ii) prior to a Triggering
Event, the Rights may be transferred only as a right attaching to Borrower's
common stock; (iii) the Rights to purchase shares are not exercisable until a
Triggering Event occurs; (iv) the Person or group of Persons that cause the
Triggering Event shall not be permitted to exercise any Rights; and (v) Borrower
may redeem the Rights for nominal consideration under certain conditions which
shall not exceed an aggregate amount of $1,000,000. For purposes of this
definition, the term "Triggering Event" means the acquisition by a Person or
group of Persons of a certain percentage (as set forth in the respective
Shareholder Rights Plan) of the shares of common stock of Borrower or the
announcement by a Person or group of Persons of a tender offer or exchange offer
for such percentage of the common stock of Borrower.

      "Shareholders' Equity" means the remainder of (i) Borrower's Consolidated
assets minus (ii) the sum of (x) Borrower's Consolidated liabilities plus (y)
all treasury stock of Borrower and its Subsidiaries plus (z) all intangible
assets of Borrower and its Subsidiaries (including without limitation all
patents, copyrights, licenses, franchises, goodwill, trade names and trade
secrets); provided that the term "Shareholder's Equity" shall include the book
value of long-term gas contracts with producers that Borrower assumes in
connection with acquisitions that are reflected on the books of Borrower as
assets.

      "Stock Option Agreements" means, collectively, those certain Agreements to
Provide Loan(s) to enable certain employees to exercise stock options by and
among Borrower and certain of its key employees.

      "Subsidiary" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or


                                      -14-
<PAGE>

effectively through one or more intermediaries, controlled by or owned fifty-one
percent or more by such Person, provided that associations, joint ventures or
other relationships (a) which are established pursuant to a standard form
operating agreement or similar agreement or which are partnerships for purposes
of federal income taxation only, (b) which are not corporations or partnerships
(or subject to the Uniform Partnership Act) under applicable state law, and (c)
whose businesses are limited to the exploration, development and operation of
oil, gas, mineral, gas gathering or gas processing properties and interests
owned directly by the parties in such associations, joint ventures or
relationships, shall not be deemed to be "Subsidiaries" of such Person.

      "Subordinated Debt" means unsecured Debt issued by Borrower that is
subordinated to the Obligations and the Debt Securities on terms acceptable to
Majority Lenders and guarantees thereof by Borrower's Subsidiaries each of which
is subordinated to the Obligations and the Debt Securities on terms acceptable
to Majority Lenders.

      "Subordinated Debt Proceeds" has the meaning given it in Section 2.7.

      "Termination Event" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA
or (ii) any other reportable event described in Section 4043(b) of ERISA other
than a reportable event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation
under Section 4043(a) of ERISA, or (b) the withdrawal of any Related Person or
of any Affiliate of any Related Person from an ERISA Plan during a plan year in
which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA,
or (c) the filing of a notice of intent to terminate any ERISA Plan or the
treatment of any ERISA Plan amendment as a termination under Section 4041 of
ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the
Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (e) any
other event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
ERISA Plan.

      "Tranche A Base Rate Loan" means a Tranche A Loan which does not bear
interest at the Tranche A Fixed Rate.

      "Tranche A Commitment" means $100,000,000 as reduced from time to time
pursuant to Section 2.7.

      "Tranche A Commitment Period" means the period from and including the
until and including the earlier of the Tranche A Maturity Date or the day on
which the Tranche A Notes become due and payable in full.

      "Tranche A Eurodollar Loan" means a Tranche A Loan which is properly
designated to bear interest at the Tranche A Fixed Rate pursuant to Section 2.2
or 2.3.

      "Tranche A Eurodollar Spread" means, with respect to each Tranche A
Eurodollar Loan:


                                      -15-
<PAGE>

      (a) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is less than or equal to 0.35 to 1.0, 0.625%;

      (b) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.35 to 1.0 but less than or equal to
0.45 to 1.0, 0.825%;

      (c) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.45 to 1.0 but less than or equal to
0.50 to 1.0, 1.025%;

      (d) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.50 to 1.0 but less than or equal to
0.55 to 1.0, 1.25%; and

      (e) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.55 to 1.0, 1.30%.

      "Tranche A Facility Fee Rate" means:

      (a) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is less than or equal to 0.35 to 1.0, 0.125% per annum;

      (b) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.35 to 1.0 but less than or equal to
0.45 to 1.0, 0.175% per annum;

      (c) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.45 to 1.0 but less than or equal to
0.50 to 1.0, 0.225% per annum;

      (d) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.50 to 1.0 but less than or equal to
0.55 to 1.0, 0.250% per annum; and

      (e) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.55 to 1.0, 0.450% per annum,

      "Tranche A Fixed Rate" means, with respect to each particular Tranche A
Eurodollar Loan and the associated Eurodollar Rate and Reserve Requirement, the
rate per annum calculated by Agent (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined on a daily basis pursuant to the following
formula:

Tranche A Fixed Rate  =

Eurodollar Rate                        +        Tranche A Spread
-------------------------------
100.0% - Reserve Requirement

The Tranche A Fixed Rate for any Tranche A Eurodollar Loan shall change whenever
the Tranche A Eurodollar Spread changes, whenever the Senior Cap Spread changes,
whenever the 


                                      -16-
<PAGE>

Issuance Spread changes, and whenever the Reserve Requirement changes. The
Tranche A Fixed Rate shall in no event, however, exceed the Highest Lawful Rate.

      "Tranche A Loan" has the meaning given it Section 2.1(a).

      "Tranche A Maturity Date" means the date which is 364 days after the date
hereof.

      "Tranche A Note" has the meaning given it in Section 2.1(a).

      "Tranche A Spread" means, at the time of determination, the sum of the
Tranche A Eurodollar Spread, the Issuance Spread, if any, and the Senior Cap
Spread, if any, then in effect.

      "Tranche B Base Rate Loan" means a Tranche B Loan which does not bear
interest at the Tranche B Fixed Rate.

      "Tranche B Commitment" means $200,000,000, as reduced from time to time
pursuant to Section 2.7.

      "Tranche B Commitment Period" means the period from and including the
until and including the earlier of the Tranche B Maturity Date or the day on
which the Tranche B Notes become due and payable in full.

      "Tranche B Eurodollar Loan" means a Tranche B Loan which is properly
designated to bear interest at the Tranche B Fixed Rate pursuant to Section 2.2
or 2.3.

      "Tranche B Eurodollar Spread" means, with respect to each Tranche B
Eurodollar Loan:

      (a) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is less than or equal to 0.35 to 1.0, 0.60%;

      (b) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.35 to 1.0 but less than or equal to
0.45 to 1.0, 0.80%;

      (c) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.45 to 1.0 but less than or equal to
0.50 to 1.0, 1.00%;

      (d) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.50 to 1.0 but less than or equal to
0.55 to 1.0, 1.20%; and

      (e) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.55 to 1.0, 1.25%.

      "Tranche B Facility Fee Rate" means:


                                      -17-
<PAGE>

      (a) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is less than or equal to 0.35 to 1.0, 0.15% per annum;

      (b) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.35 to 1.0 but less than or equal to
0.45 to 1.0, 0.20% per annum;

      (c) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.45 to 1.0 but less than or equal to
0.50 to 1.0, 0.25% per annum;

      (d) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.50 to 1.0 but less than or equal to
0.55 to 1.0, 0.30% per annum; and

      (e) for each period in which the Debt to Capitalization Ratio in effect
pursuant to Section 2.17 is greater than 0.55 to 1.0, 0.50% per annum.

      "Tranche B Fixed Rate" means, with respect to each particular Tranche B
Eurodollar Loan and the associated Eurodollar Rate and Reserve Requirement, the
rate per annum calculated by Agent (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined on a daily basis pursuant to the following
formula:

Tranche B Fixed Rate =

Eurodollar Rate                       +        Tranche B Spread
------------------------------
100.0% - Reserve Requirement

The Tranche B Fixed Rate for any Tranche B Eurodollar Loan shall change whenever
the Tranche B Eurodollar Spread changes, whenever the Senior Cap Spread changes,
whenever the Issuance Spread changes, and whenever the Reserve Requirement
changes. The Tranche B Fixed Rate shall in no event, however, exceed the Highest
Lawful Rate.

      "Tranche B Loan" has the meaning given it Section 2.1(b).

      "Tranche B Maturity Date" means March 31, 2004.

      "Tranche B Note" has the meaning given it in Section 2.1(b).

      "Tranche B Spread" means, at the time of determination, the sum of the
Tranche B Eurodollar Spread, the Issuance Spread, if any, and the Senior Cap
Spread, if any, then in effect.

      "Type" means, with respect to any Committed Loan, the characterization of
such Committed Loan as either a Committed Base Rate Loan or Committed Eurodollar
Loan.

      "Voting Shares" means at the time in question, the sum of (a) all
outstanding shares of common stock of Borrower, (b) all other securities issued
by Borrower which entitle the holder


                                      -18-
<PAGE>

thereof to voting rights with respect to Borrower at such time (as used in this
definition, the shares described in the immediately preceding clauses (a) and
(b) are collectively called ("Shares")), and (c) the amount of additional Shares
(not including any share or security included in the preceding clauses (a) and
(b)) which may be obtained by converting outstanding shares of capital stock of
Borrower or rights under other outstanding instruments into Shares.

      "Westana" means the general partnership formed between WGRO and Panhandle
Gathering Company, a wholly-owned subsidiary of Panhandle Eastern Pipeline
Company.

      "WGRC" means WGR Canada, Inc., a New Brunswick corporation and
wholly-owned subsidiary of Borrower.

      "WGRO" means Western Gas Resources - Oklahoma, Inc., a Delaware
corporation and wholly-owned subsidiary of Borrower.

      "WGRS" means Western Gas Resources Storage, Inc., a Texas corporation and
wholly-owned subsidiary of Borrower.

      "WGRT" means Western Gas Resources Texas, Inc., a Texas corporation and
wholly-owned subsidiary of Borrower.

      "WGW" means Western Gas Wyoming, L.L.C., a Wyoming limited liability
company.

      "Williston Gas Company" means the joint venture formed pursuant to that
certain Amended and Restated Joint Venture Agreement dated August 1, 1990
between Borrower (as successor in interest) and Enron Gas Processing, as amended
to the date hereof.

      "WPS" means Western Power Services, Inc., a Delaware corporation and
wholly-owned subsidiary of Borrower.

      Section I.2. Exhibits and Schedules; Additional Definitions. All Exhibits
and Schedules attached to this Agreement are a part hereof for all purposes.
Reference is hereby made to the Security Schedule for the meaning of certain
terms defined therein and used but not defined herein, which definitions are
incorporated herein by reference.

      Section I.3. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement.

      Section I.4. References and Titles. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules,


                                      -19-
<PAGE>

articles, sections, subsections and other subdivisions of this Agreement unless
expressly provided otherwise. Titles appearing at the beginning of any
subdivisions are for convenience only and do not constitute any part of such
subdivisions and shall be disregarded in construing the language contained in
such subdivisions. The words "this Agreement", "this instrument", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited. The phrases "this section" and "this subsection" and similar phrases
refer only to the sections or subsections hereof in which such phrases occur.
The word "or" is not exclusive, and the word "including" (in its various forms)
means "including without limitation". Pronouns in masculine, feminine and neuter
genders shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice versa, unless
the context otherwise requires.

      Section I.5. Calculations and Determinations. All calculations under the
Loan Documents with respect to the Federal Funds Rate, Fixed Rate Portions or
the interest chargeable with respect thereto shall be made on the basis of
actual days elapsed (including the first day but excluding the last) and a year
of 360 days. All calculations under the Loan Documents which are unrelated to
the Federal Funds Rate, Committed Eurodollar Loans and the interest chargeable
with respect thereto shall be made on the basis of actual days elapsed
(including the first day but excluding the last) and a year of 365 or 366 days,
as appropriate. Each determination by Agent or a Lender as to any Eurodollar
Rate, Fixed Rate, Business Day, Interest Period, Reserve Requirement or similar
matters shall be conclusive and binding for all purposes, provided that such
determinations and allocations are made on a reasonable basis. Unless otherwise
expressly provided herein or unless Majority Lenders otherwise consent all
financial statements and reports furnished to Agent or any Lender hereunder
shall be prepared and all financial computations and determinations pursuant
hereto shall be made in accordance with GAAP (except for financial projections).

                            ARTICLE II. - The Loans

      II.1. Committed Loans.


                                      -20-
<PAGE>

      (a) Tranche A Loans. Subject to the terms and conditions hereof, Lenders
agree to make loans to Borrower (herein called such Lender's "Tranche A Loans")
from time to time during the Tranche A Commitment Period so long as (i) all
Lenders are requested to make Tranche A Committed Loans of the same Type in
accordance with their respective Percentage Shares and as part of the same
Borrowing, (ii) the aggregate amount of all Tranche A Committed Loans
outstanding does not exceed the Tranche A Commitment at any time and (iii) the
aggregate amount of all Loans (including Committed Loans and Competitive Bid
Loans) and all LC Obligations does not exceed the Commitment. The aggregate
amount of all Tranche A Loans in any Borrowing must be greater than or equal to
$250,000 and must be an integral multiple of $250,000 for requests of $1,000,000
or less and an integral multiple of $100,000 for requests over $1,000,000 or
must equal the unadvanced portion of the Tranche A Commitment. The obligation of
Borrower to repay to each Lender the aggregate amount of all Tranche A Loans
made by such Lender, together with interest accruing in connection therewith,
shall be evidenced by a single promissory note made by Borrower payable to the
order of such Lender (herein called such Lender's "Tranche A Note") in the form
of Exhibit A with appropriate insertions. The amount of principal owing on any
Lender's Tranche A Note at any given time shall be the aggregate amount of all
Tranche A Loans theretofore by such Lender made minus all payments of principal
theretofore received by such Lender on its Tranche A Note. Principal paid or
prepaid on the Tranche A Notes may, subject to the terms and conditions hereof,
be reborrowed during the Tranche A Commitment Period. Interest on each Tranche A
Note shall accrue and be payable as provided herein and therein.

      (b) Tranche B Loans. Subject to the terms and conditions hereof, Lenders
agree to make loans to Borrower (herein called such Lender's "Tranche B Loans")
from time to time during the Tranche B Commitment Period so long as (i) all
Lenders are requested to make Tranche B Committed Loans of the same Type in
accordance with their respective Percentage Shares and as part of the same
Borrowing, (ii) the sum of (a) the aggregate amount of all Tranche B Loans
outstanding plus (b) the LC Obligations outstanding does not exceed the Tranche
B Commitment at any time and (iii) the aggregate amount of all Loans (including
Committed Loans and Competitive Bid Loans) and all LC Obligations does not
exceed the Commitment. The aggregate amount of all Tranche B Loans in any
Borrowing must be greater than or equal to $250,000 and must be an integral
multiple of $250,000 for requests of $1,000,000 or less and an integral multiple
of $100,000 for requests over $1,000,000 or must equal the unadvanced portion of
the Tranche B Commitment. In addition to the foregoing, upon the making of each
payment by the Issuing Bank pursuant to any LC, Borrower shall be deemed to have
requested each Lender to, and such Lender shall, make a Tranche B Loan in the
amount of such Lender's Percentage Share of Borrower's consequent reimbursement
obligation and apply the proceeds thereof to the payment of such reimbursement
obligation. When any Matured LC Obligations is repaid with proceeds of a
Borrowing, such Matured LC Obligations so repaid shall be extinguished and such
Borrowing shall be governed by the terms of this Agreement applicable to all
other Borrowings. Any such Borrowings are Borrowings of Committed Base Rate
Loans unless otherwise designated by Borrower in compliance with the notice
requirements set forth in Section 2.2. The obligation of Borrower to repay to
each Lender the aggregate amount of all Tranche B Loans made by such Lender,
together with interest accruing in connection therewith, 


                                      -21-
<PAGE>

shall be evidenced by a single promissory note made by Borrower payable to the
order of such Lender (herein called such Lender's "Tranche B Note") in the form
of Exhibit B with appropriate insertions. The amount of principal owing on any
Lender's Tranche B Note at any given time shall be the aggregate amount of all
Tranche B Loans theretofore by such Lender made minus all payments of principal
theretofore received by such Lender on its Tranche B Note. Principal paid or
prepaid on the Tranche B Notes may, subject to the terms and conditions hereof,
be reborrowed during the Tranche B Commitment Period. Interest on each Tranche B
Note shall accrue and be payable as provided herein and therein.

      Section II.2. Requests for New Loans. Borrower must give to Agent a
Borrowing Notice for any requested Borrowing of new Committed Loans to be
advanced by Lenders (i) by telephone (which telephonic notice shall be confirmed
in writing by Agent) or (ii) if Agent so requests, in writing. Each Borrowing
Notice must:

      (a specify (i) the aggregate amount of any such Borrowing of new Committed
Base Rate Loans and the date on which such Committed Base Rate Loans are to be
advanced, or (ii) the aggregate amount of any such Borrowing of new Committed
Eurodollar Loans, the date on which such Committed Eurodollar Loans are to be
advanced (which shall be the first day of the Interest Period which is to apply
thereto), and the length of the applicable Interest Period, or (iii) if such new
Committed Eurodollar Loans are to be combined with existing Committed Loans in a
new Borrowing, the foregoing information with respect to such combined
Borrowing; and

      (b be received by Agent not later than 10:00 a.m., Dallas, Texas time, on
(i) the day on which any such Committed Base Rate Loans are to be made, or (ii)
if Committed Eurodollar Loans are to be made, the third Business Day preceding
the day on which such Committed Eurodollar Loans are to be made.

Each telephonic Borrowing Notice shall be deemed a representation, warranty,
acknowledgment and agreement by Borrower as to the matters which are required to
be set out in a written Borrowing Notice. Upon receipt of any Borrowing Notice,
Agent shall give each Lender prompt notice of the terms thereof. If all
conditions precedent to such new Committed Loans have been met, each Lender will
on the date requested promptly remit to Agent at Agent's office in Dallas, Texas
the amount of such Lender's new Committed Loan in immediately available funds,
and upon receipt of such funds, unless to its actual knowledge any conditions
precedent to such Committed Loans have been neither met nor waived as provided
herein, Agent shall promptly make such Committed Loans available to Borrower.
Unless Agent shall have received prompt notice from a Lender that such Lender
will not make available to Agent such Lender's new Committed Loan, Agent may in
its discretion assume that such Lender has made such Committed Loan available to
Agent in accordance with this section and Agent may if it chooses, in reliance
upon such assumption, make such Committed Loan available to Borrower. If and to
the extent such Lender shall not so make its new Committed Loan available to
Agent, such Lender and Borrower severally agree to pay or repay to Agent within
three days after demand the amount of such Loan together with interest thereon,
for each day from the date such amount was 


                                      -22-
<PAGE>

made available to Borrower until the date such amount is paid or repaid to
Agent, with interest at (i) the Federal Funds Rate, if such Lender is making
such payment and (ii) the interest rate applicable at the time to the other new
Committed Loans made on such date, if Borrower is making such repayment. If
neither such Lender nor Borrower pay or repay to Agent such amount within such
three-day period, Agent shall in addition to such amount be entitled to recover
from such Lender and from Borrower, on demand, interest thereon at the Default
Rate, calculated from the date such amount was made available to Borrower. The
failure of any Lender to make any new Committed Loan to be made by it hereunder
shall not relieve any other Lender of its obligation hereunder, if any, to make
its new Committed Loan, but no Lender shall be responsible for the failure of
any other Lender to make any new Committed Loan to be made by such other Lender.

      Section II.3. Continuations and Conversions of Existing Committed Loans.
Borrower may make the following elections with respect to Committed Loans
already outstanding: to Convert Committed Base Rate Loans to Committed
Eurodollar Loans, to Convert Committed Eurodollar Loans to Committed Base Rate
Loans on the last day of the Interest Period applicable thereto, or to continue
Committed Eurodollar Loans beyond the expiration of such Interest Period by
designating a new Interest Period to take effect at the time of such expiration.
In making such elections, Borrower may combine existing Committed Loans made
pursuant to separate Borrowings into one new Borrowing or divide existing
Committed Loans made pursuant to one Borrowing into separate new Borrowings or
combine existing Committed Loans with new Committed Loans. To make any such
election, Borrower must give to Agent a Continuation/Conversion Notice for any
such conversion or continuation of existing Committed Loans, with a separate
notice given for each new Borrowing (i) by telephone (which telephonic notice
shall be confirmed in writing by Agent) or (ii) if Agent so requests, in
writing. Each such Continuation/Conversion Notice must:

      (a specify the existing Committed Loans which are to be Continued or
Converted, and if such existing Committed Loans are to be combined with new
Committed Loans, specify such new Committed Loans;

      (b specify (i) the aggregate amount of any Borrowing of Committed Base
Rate Loans into which such existing Committed Loans are to be continued or
converted and the date on which such Continuation or Conversion is to occur, or
(ii) the aggregate amount of any Borrowing of Committed Eurodollar Loans into
which such existing Committed Loans are to be continued, converted or combined,
the date on which such Continuation, Conversion or combination is to occur
(which shall be the first day of the Interest Period which is to apply to such
Committed Eurodollar Loans), and the length of the applicable Interest Period;
and

      (c be received by Agent not later than 10:00 a.m., Dallas, Texas time, on
(i) the day on which any such continuation or conversion to Committed Base Rate
Loans is to occur, or (ii) the third Business Day preceding the day on which any
such Continuation or Conversion to Committed Eurodollar Loans is to occur.


                                      -23-
<PAGE>

Each telephonic Continuation/Conversion Notice shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in the written Continuation/Conversion Notice. Upon
receipt of any Continuation/Conversion Notice, Agent shall give each Lender
prompt notice of the terms thereof. Each Continuation/Conversion Notice shall be
irrevocable and binding on Borrower. During the continuance of any Default,
Borrower may not make any election to convert existing Committed Loans into
Committed Eurodollar Loans or continue existing Committed Loans as Committed
Eurodollar Loans. If (due to the existence of a Default or for any other reason)
Borrower fails to timely and properly give any notice of continuation or
conversion with respect to a Borrowing of existing Committed Eurodollar Loans at
least three days prior to the end of the Interest Period applicable thereto,
such Committed Eurodollar Loans shall automatically be converted into Committed
Base Rate Loans at the end of such Interest Period. No new funds shall be repaid
by Borrower or advanced by any Lender in connection with any continuation or
conversion of existing Loans pursuant to this section, and no such continuation
or conversion shall be deemed to be a new advance of funds for any purpose; such
continuations and conversions merely constitute a change in the interest rate
applicable to already outstanding Committed Loans.

      Section II.4. Competitive Bid Loans. (a) Borrower may request that each
Lender submit Competitive Bids (on a several basis) to Borrower on any Business
Day during the Tranche B Commitment Period, provided that all Lenders are
requested to make a Competitive Bid on the same basis at the same time. In order
to request Competitive Bids, Borrower shall deliver by hand or telecopy to Agent
a Competitive Bid Request, to be received by Agent not later than 9:00 a.m.,
Dallas time one Business Day before the date specified for a proposed
Competitive Bid Loan. A Competitive Bid Request that does not conform
substantially to the format of Exhibit J may be rejected in Agent's sole
discretion, and Agent shall promptly notify Borrower of such rejection by
telecopier. After receiving an acceptable Competitive Bid Request, Agent shall
no later than 12:00 noon, Dallas time on the date such Competitive Bid Request
is received by Agent, by telecopier deliver to Lenders an Invitation to Bid
substantially in the form of Exhibit K with respect thereto.

      (b Each Lender may, in its sole discretion, make one or more Competitive
Bids to Agent responsive to each Competitive Bid Request given by Borrower. Each
Competitive Bid by a Lender must be received by Agent by telecopier not later
than 9:00 a.m., Dallas time on the date specified for a proposed Competitive Bid
Loan. Multiple bids may be accepted by Agent. Competitive Bids that do not
conform substantially to the format of Exhibit L may be rejected by Agent after
conferring with, and upon the instruction of, Borrower, and Agent shall notify
the bidding Lender of such rejection as soon as practicable. If any Lender shall
elect not to make a Competitive Bid, such Lender shall so notify Agent by
telecopier not later than 9:00 a.m., Dallas time, on the date specified for a
Competitive Bid Loan; provided, however, that failure by any Lender to give such
notice shall not cause such Lender to be obligated to make any Competitive Bid
Loan. A Competitive Bid submitted by a Lender shall be irrevocable.

      (c Promptly, and in no event later than 9:30 a.m., Dallas time, on the
date specified for a proposed Competitive Bid Loan, Agent shall notify Borrower
by telecopier of all the


                                      -24-
<PAGE>

Competitive Bids made, the Competitive Bid Rate and the principal amount of each
Competitive Bid Loan in respect of which a Competitive Bid was made, and the
identity of each Lender that made each Competitive Bid. Agent shall send a copy
of all Competitive Bids to Borrower for its records as soon as practicable after
completion of the bidding process.

      (d Borrower may, subject only to the provisions hereof, accept or reject
any Competitive Bid. Borrower shall notify Agent by telecopier pursuant to a
Competitive Bid Accept/Reject Letter whether and to what extent Borrower has
decided to accept or reject any or all of the Competitive Bids, not later than
10:30 a.m., Dallas time, on the date specified for a proposed Competitive Bid
Loan; provided, however, that:

            (i) the failure by Borrower to accept or reject any Competitive Bid
      within the time period specified herein shall be deemed to be a rejection
      of such Competitive Bid,

            (ii) the aggregate amount of the Competitive Bids accepted by
      Borrower shall not exceed the principal amount specified in the
      Competitive Bid Request,

            (iii) the aggregate amount of all Lenders' Competitive Bid Loans
      outstanding at any time shall not exceed $100,000,000 and the aggregate
      amount of all Loans (including all Competitive Bid Loans and all Committed
      Loans) and all LC Obligations shall not exceed the Commitment,

            (iv) if Borrower shall accept a Competitive Bid or Competitive Bids
      made at a particular Competitive Bid Rate, but the amount of such
      Competitive Bid or Competitive Bids shall cause the total amount of
      Competitive Bids to be accepted by Borrower to exceed the amount specified
      in the Competitive Bid Request, then Borrower shall accept a portion of
      such Competitive Bid or Competitive Bids in an amount equal to the amount
      specified in the Competitive Bid Request less the amount of all other
      Competitive Bids accepted with respect to such Competitive Bid Request,
      which acceptance, in the case of multiple Competitive Bids at such
      Competitive Bid Rate, shall be made pro rata in accordance with the amount
      of each such Competitive Bid at such Competitive Bid Rate, and

            (v) no Competitive Bid shall be accepted for a Competitive Bid Loan
      unless such Competitive Bid Loan is in a minimum principal amount of
      $1,000,000 and an integral multiple of $500,000 and is part of a
      Competitive Bid Loan in a minimum principal amount of $5,000,000; provided
      further, however, that if a Competitive Bid Loan must be in an amount less
      than $1,000,000 because of the provisions of clause (v) above, such
      Competitive Bid Loan may be for a minimum of $500,000 or any integral
      multiple thereof, and in calculating the pro rata allocation of
      acceptances or portions of multiple bids at a particular Competitive Bid
      Rate pursuant to clause (v), the amounts shall be rounded to integral
      multiples of $500,000 in a manner which shall be in the sole and absolute
      discretion of Borrower.


                                      -25-
<PAGE>

      (e Promptly on each date Borrower accepts a Competitive Bid, Agent shall
notify each Lender whether or not its Competitive Bid has been accepted (and if
so, in what amount and at what Competitive Bid Rate) by telecopier transmission
sent by Agent, and each successful bidder will thereupon become bound, subject
to the other applicable conditions hereof, to make the Competitive Bid Loan in
respect of which its Competitive Bid has been accepted. After completing the
notifications referred to in the immediately preceding sentence, Agent shall
notify each Lender of the aggregate principal amount of all Competitive Bids
accepted. Each Lender which is to make a Competitive Bid Loan shall, before
11:00 a.m., Dallas time, on the borrowing date specified in the Competitive Bid
Request applicable thereto, make available to Agent in immediately available
funds the amount of each Competitive Bid Loan to be made by such Lender, and
Agent shall promptly deposit such funds to an account designated by Borrower. As
soon as practicable thereafter, Agent shall notify each Lender of the aggregate
amount of Competitive Bid Loans advanced, the respective Competitive Bid
Interest Periods thereof and Competitive Bid Rate applicable thereto.

      (f The obligation of Borrower to repay to each Lender the aggregate amount
of all Competitive Bid Loans made by such Lender, together with interest
accruing in connection therewith, shall be evidenced by promissory notes
(respectively, such Lender's "Competitive Bid Note") made by Borrower payable to
the order of such Lender in the form of Exhibit N, with appropriate insertions.
The amount of principal owing on any Lender's Competitive Bid Note at any given
time shall be the aggregate amount of all Competitive Bid Loans theretofore made
by such Lender thereunder minus all payments of principal theretofore received
by such Lender thereon. Interest on each Competitive Bid Note shall accrue and
be due and payable as provided herein and therein. Borrower shall repay on the
final day of the Competitive Bid Interest Period of each Competitive Bid Loan
(such date being that specified by Borrower for repayment of such Competitive
Bid Loan in the related Competitive Bid Request and such date being no later
than six months after the date of the Competitive Bid Loan) the then unpaid
principal amount of such Competitive Bid Loan. Subject to Section 2.6 and the
payment of amounts described in Section 2.14, Borrower shall have the right to
prepay any principal amount of any Competitive Bid Loan.

      (g) No Competitive Bid Loan shall be made within five Business Days after
the date of any other Competitive Bid Loan, unless Borrower and Agent shall
mutually agree otherwise. If Agent shall at any time elect to submit a
Competitive Bid in its capacity as a Lender, it shall submit such bid directly
to Borrower requesting such Competitive Bid one quarter of an hour earlier than
the latest time at which the other Lenders are required to submit their bids to
Agent.

      Section II.5. Use of Proceeds. Borrower shall use all funds from the
Borrowings under the Loans (i) first, to repay in full all existing outstanding
indebtedness owing under the Existing Agreement, and (ii) thereafter, to make
capital expenditures and provide working capital for its operations, to meet its
reimbursement obligations under LCs, and for other general business purposes. In
no event shall any LC or any Borrowing be used directly or indirectly for the
purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or
carrying any "margin stock" or any "margin securities" (as such terms are
defined respectively in Regulation U promulgated by the Board of Governors of
the Federal Reserve System) or to extend credit to 


                                      -26-
<PAGE>

others directly or indirectly for the purpose of purchasing or carrying any such
margin stock or margin securities. Borrower represents and warrants to Lenders
that it is not engaged principally, or as one of its important activities, in
the business of extending credit to others for the purpose of purchasing or
carrying such margin stock or margin securities.

      Section II.6. Optional Prepayments.

      (a) Subject to the provisions of this Section 2.6, Borrower may from time
to time prepay the Notes, including Competitive Bid Notes, in whole or in part,
so long as (A) Borrower so notifies Agent by 10:00 a.m. Dallas, Texas time on
the date such prepayment is to be made, which date must be a Business Day, and
(B) the aggregate amount of all partial prepayments of principal concurrently
paid on any category of Notes is greater than or equal to $250,000 and is an
integral multiple of $250,000 for prepayments of $1,000,000 or less and an
integral multiple of $100,000 for prepayments over $1,000,000, provided that any
prepayment of any Committed Eurodollar Loan or Competitive Bid Loan shall be
accompanied by all reimbursement amounts payable pursuant to Section 2.14.
Unless otherwise designated by Borrower, any prepayment of Competitive Bid Loans
shall be applied to the outstanding Competitive Bid Loans in order of shortest
maturity. Agent shall give each Lender prompt notice of any notice of prepayment
it receives from Borrower.

      (b) Each prepayment of principal under this Section 2.6, shall be
accompanied by all interest accrued at the interest rate applicable to the
principal amount being prepaid through the date of such prepayment and unpaid on
such Notes. Each principal payment of a Committed Loan made under this Section
2.6 shall be apportioned and applied to each Lender's Committed Note in
accordance with such Lender's Percentage Share of such payment. Any principal or
interest prepaid pursuant to this Section 2.6 shall be in addition to, and not
in lieu of, all payments otherwise required to be paid under the Loan Documents
at the time of such prepayment.

      Section II.7. Mandatory Prepayments.

      (a) Tranche A Loans. If the aggregate unpaid principal balance of the
Tranche A Loans ever exceeds the Tranche A Commitment, Borrower shall,
immediately after Agent on behalf of Majority Lenders gives written notice of
such fact to Borrower, make a prepayment to Agent for distribution to Lenders in
the amount of such excess on the Tranche A Loans in accordance with Lenders'
Percentage Shares.

      (b) Tranche B Loans. If the sum of (i) the aggregate unpaid principal
balance of the Tranche B Loans and (ii) the LC Obligations outstanding ever
exceeds the Tranche B Commitment, Borrower shall, immediately after Agent on
behalf of Majority Lenders gives written notice of such fact to Borrower, make a
prepayment to Agent for distribution to Lenders in the amount of such excess on
the Tranche B Loans in accordance with Lenders' Percentage Shares.


                                      -27-
<PAGE>

      (c) Proceeds of Asset Sales and Related Reduction of Commitment. Until the
Issuance Date:

            (i) Ninety percent (90%) of the Asset Sale Proceeds arising from
      each Asset Sale shall be delivered by Borrower, first, to NationsBank to
      pay the outstanding principal balance of, and accrued and unpaid interest
      on, the Debt outstanding under the Bridge Facility until such Debt is
      reduced to zero and, second, to Agent to pay the unpaid principal balance
      of, and accrued and unpaid interest on, the Tranche A Loans until the
      aggregate unpaid principal balance of the Tranche A Loans does not exceed
      the Tranche A Commitment and to pay the Tranche B Loans until the sum of
      the aggregate unpaid principal balance of the Tranche B Loans and the LC
      Obligations does not exceed the Tranche B Commitment, in each case after
      the reductions described in the immediately following subsection (ii);

            (ii) In connection with each Asset Sale for which all Asset Sale
      Proceeds are not applied to the Bridge Facility, each of the Tranche A
      Commitment and the Tranche B Commitment shall be reduced, pro rata, so as
      to represent the same proportion of the Commitment after such reduction as
      it represented before such reduction, by an amount equal to fifty percent
      (50%) of the Asset Sale Proceeds arising from such Asset Sale which are
      not applied to the Bridge Facility, such reduction to be effective on the
      date of receipt thereof by any Related Person.

      (d) Proceeds of Issuance of Subordinated Debt and Related Reduction of
Commitment. The proceeds from the issuance of Subordinated Debt, net of
reasonable out-of-pocket costs of issuance incurred by Borrower ("Subordinated
Debt Proceeds") shall be applied as follows:

            (i) First, the Subordinated Debt Proceeds shall be delivered by
      Borrower to NationsBank to pay the outstanding principal balance of, and
      accrued and unpaid interest on, the Debt outstanding under the Bridge
      Facility until such Debt is reduced to zero.

            (ii) Second, until the aggregate amount of the Tranche A Commitment
      and the Tranche B Commitment is equal to $250,000,000:

                  (A) Each of the Tranche A Commitment and the Tranche B
            Commitment shall be reduced, pro rata, so as to represent the same
            proportion of the Commitment after such reduction as it represented
            before such reduction, by an amount equal to fifty percent (50%) of
            the Subordinated Debt Proceeds remaining after the Debt under the
            Bridge Facility has been paid in full, such reduction to be
            effective on the date of receipt thereof by any Related Person; and

                  (B) Borrower shall deliver to Agent Subordinated Debt Proceeds
            in the amount necessary to pay the unpaid principal balance of, and
            accrued and unpaid interest on, the Tranche A Loans until the
            aggregate unpaid principal balance of 


                                      -28-
<PAGE>

            the Tranche A Loans does not exceed the Tranche A Commitment and to
            pay the Tranche B Loans until the sum of the aggregate unpaid
            principal balance of the Tranche B Loans and the LC Obligations does
            not exceed the Tranche B Commitment, in each case after the
            reductions described in subsection immediately above.

      (e) Reduction in Commitment on September 30,1999. If the Commitment has
not been reduced to $250,000,000 pursuant to Section 2.7(c) or Section 2.7(d) by
September 30, 1999, on such date the Commitment shall be reduced automatically
to $250,000,000, and each of the Tranche A Commitment and the Tranche B
Commitment shall be reduced automatically on such date, pro rata, so as to
represent the same proportion of the Commitment after such reduction as it
represented before such reduction, by the amount necessary to reduce the
aggregate amount of the Commitment to $250,000,000.

      (f) Prepayment Procedures. Each prepayment of principal on a Committed
Note made under this Section 2.7 shall be accompanied by all interest then
accrued at the interest rate applicable to the principal amount being prepaid
and unpaid on such Committed Note; provided that any prepayment under a
Committed Note must be accompanied by any amounts due under Section 2.14 as a
result of such prepayments.

      Section II.8. Payments to Lenders. Borrower will make each payment which
it owes under the Loan Documents (whether under any of Sections 2.6, 2.7, 3.2,
or otherwise) to Agent for the account of Lender to whom such payment is owed
not later than noon, Dallas time, in lawful money of the United States of
America and in immediately available funds. Any payment received by Agent after
such time will be deemed to have been made on the next following Business Day.
Should any such payment become due and payable on a day other than a Business
Day, the maturity of such payment shall be extended to the next succeeding
Business Day, and, in the case of a payment of principal or past due interest,
interest shall accrue and be payable thereon for the period of such extension as
provided in the Loan Document under which such payment is due. Each payment
under a Loan Document shall be payable at the place provided therein and, if no
specific place of payment is provided, shall be payable at the place of payment
of the Notes. When Agent collects or receives money on account of the
Obligations, Agent shall distribute all money so collected or received, and
Agent and Lenders shall apply all such money so distributed, as follows:

      (a) first, for the payment of all Obligations other than Swap Obligations
(as defined below) which are then due, and if such money is insufficient to pay
all such Obligations, first to any reimbursements due Agent or any Lender under
Section 6.1(i) or 9.11 and then to the partial payment of all other Obligations
then due in proportion to the amounts thereof, or as Lenders shall otherwise
agree;

      (b) then for the prepayment of amounts owing under the Loan Documents
(other than Swap Obligations and principal on the Notes) if so specified by
Borrower;


                                      -29-
<PAGE>

      (c) then for the prepayment of principal on the Notes, together with
accrued and unpaid interest on the principal so prepaid; and

      (d) last, for the payment or prepayment of any other Obligations.

All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Sections
2.6 and 2.7. All distributions of amounts described in any of subsections (b),
(c) or (d) above shall be made by Agent pro rata to Agent and each Lender then
owed Obligations described in such subsection in proportion to all amounts owed
to all Lenders which are described in such subsection. As used in this Section
2.8, the term "Swap Obligations" means the Obligations described in clause (ii)
of Section 2(a) of each Guaranty described in the Security Schedule.

      Section II.9. Facility Fees. In consideration of Lenders' commitment to
enter into this Agreement and to advance funds to Borrower hereunder, Borrower
will pay to Agent, for pro rata distribution to each Lender in accordance with
its Percentage Share, a facility fee for Tranche A Commitment determined on a
daily basis by applying the Tranche A Facility Fee Rate to the Tranche A
Commitment and a facility fee for the Tranche B Commitment determined on a daily
basis by applying the Tranche B Facility Fee Rate to the Tranche B Commitment.
Promptly at the end of each Fiscal Quarter Agent shall calculate the facility
fees then due and shall notify Borrower thereof. Borrower shall pay such
facility fee to Agent within five Business Days after receiving such notice.

      Section II.10. Increased Cost and Reduced Return.

      (a) If, after the date hereof, the adoption of any applicable law, rule,
or regulation, or any change in any applicable law, rule, or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such governmental authority, central bank, or comparable agency:

            (i) shall subject such Lender (or its Applicable Lending Office) to
      any tax, duty, or other charge with respect to any Committed Eurodollar
      Loans or Competitive Bid Loans, its Notes, or its obligation to make
      Committed Eurodollar Loans, or change the basis of taxation of any amounts
      payable to such Lender (or its Applicable Lending Office) under this
      Agreement or its Notes in respect of any Committed Eurodollar Loans or
      Competitive Bid Loans (other than taxes imposed on the overall net income
      of such Lender by the jurisdiction in which such Lender has its principal
      office or such Applicable Lending Office);

            (ii) shall impose, modify, or deem applicable any reserve, special
      deposit, assessment, or similar requirement (other than the Reserve
      Requirement utilized in the 


                                      -30-
<PAGE>

      determination of the Fixed Rate) relating to any extensions of credit or
      other assets of, or any deposits with or other liabilities or commitments
      of, such Lender (or its Applicable Lending Office), including the
      Commitment of such Lender hereunder; or

            (iii) shall impose on such Lender (or its Applicable Lending Office)
      or the London interbank market any other condition affecting this
      Agreement or its Notes or any of such extensions of credit or liabilities
      or commitments;

and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making, Converting into, Continuing, or
maintaining any Committed Eurodollar Loans or Competitive Bid Loans or to reduce
any sum received or receivable by such Lender (or its Applicable Lending Office)
under this Agreement or its Notes with respect to any Committed Eurodollar Loans
or Competitive Bid Loans, then Borrower shall pay to such Lender on demand such
amount or amounts as will compensate such Lender for such increased cost or
reduction. If any Lender requests compensation by Borrower under this Section
2.10(a), Borrower may, by notice to such Lender (with a copy to Agent), suspend
the obligation of such Lender to make or Continue Loans of the Type with respect
to which such compensation is requested, or to Convert Loans of any other Type
into Loans of such Type, until the event or condition giving rise to such
request ceases to be in effect (in which case the provisions of Section 2.13
shall be applicable); provided that such suspension shall not affect the right
of such Lender to receive the compensation so requested.

      (b) If, after the date hereof, any Lender shall have determined that the
adoption of any applicable law, rule, or regulation regarding capital adequacy
or any change therein or in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank, or comparable agency, has or would have
the effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of such Lender's
obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change, request, or
directive (taking into consideration its policies with respect to capital
adequacy), then from time to time upon demand Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender for such
reduction.

      (c) Each Lender shall promptly notify Borrower and Agent of any event of
which it has knowledge, occurring after the date hereof, which will entitle such
Lender to compensation pursuant to this Section and will designate a different
Applicable Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Lender,
be otherwise disadvantageous to it. Any Lender claiming compensation under this
Section shall furnish to Borrower and Agent a statement setting forth the
additional amount or amounts to be paid to it hereunder which shall be
conclusive in the absence of manifest error. In determining such amount, such
Lender may use any reasonable averaging and attribution methods.


                                      -31-
<PAGE>

      Section II.11. Limitation on Types of Loans. If on or prior to the first
day of any Interest Period for any Committed Eurodollar Loan:

      (a) Agent determines (which determination shall be conclusive) that by
reason of circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such Interest
Period; or

      (b) the Majority Lenders determine (which determination shall be
conclusive) and notify Agent that the Fixed Rate will not adequately and fairly
reflect the cost to Lenders of funding Committed Eurodollar Loans for such
Interest Period;

then Agent shall give Borrower prompt notice thereof specifying the relevant
Type of Loans and the relevant amounts or periods, and so long as such condition
remains in effect, Lenders shall be under no obligation to make additional Loans
of such Type, Continue Loans of such Type, or to Convert Loans of any other Type
into Loans of such Type and Borrower shall, on the last day(s) of the then
current Interest Period(s) for the outstanding Loans of the affected Type,
either prepay such Loans or Convert such Loans into another Type of Loan in
accordance with the terms of this Agreement.

      Section II.12. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to make, maintain, or fund Committed Eurodollar Loans
hereunder, then such Lender shall promptly notify Borrower thereof and such
Lender's obligation to make or Continue Eurodollar Loans and to Convert other
Types of Loans into Eurodollar Loans shall be suspended until such time as such
Lender may again make, maintain, and fund Eurodollar Loans (in which case the
provisions of Section 2.13 shall be applicable).

      Section II.13. Treatment of Affected Loans. If the obligation of any
Lender to make a particular Type of Committed Eurodollar Loan or to Continue, or
to Convert Loans of any other Type into, Loans of a particular Type shall be
suspended pursuant to Section 2.10 or 2.12 hereof (Loans of such Type being
herein called "Affected Loans" and such Type being herein called the "Affected
Type"), such Lender's Affected Loans shall be automatically Converted into Base
Rate Loans on the last day(s) of the then current Interest Period(s) for
Affected Loans (or, in the case of a Conversion required by Section 2.12 hereof,
on such earlier date as such Lender may specify to Borrower with a copy to
Agent) and, unless and until such Lender gives notice as provided below that the
circumstances specified in Section 2.10 or 2.12 hereof that gave rise to such
Conversion no longer exist:

      (a) to the extent that such Lender's Affected Loans have been so
Converted, all payments and prepayments of principal that would otherwise be
applied to such Lender's Affected Loans shall be applied instead to its Base
Rate Loans; and


                                      -32-
<PAGE>

      (b) all Loans that would otherwise be made or Continued by such Lender as
Loans of the Affected Type shall be made or Continued instead as Base Rate
Loans, and all Loans of such Lender that would otherwise be Converted into Loans
of the Affected Type shall be Converted instead into (or shall remain as) Base
Rate Loans.

If such Lender gives notice to Borrower (with a copy to Agent) that the
circumstances specified in Section 2.10 or 2.12 hereof that gave rise to the
Conversion of such Lender's Affected Loans pursuant to this Section 2.13 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Loans of the Affected Type made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Loans of the Affected Type, to the extent necessary so that,
after giving effect thereto, all Loans held by Lenders holding Loans of the
Affected Type and by such Lender are held pro rata (as to principal amounts,
Types, and Interest Periods) in accordance with their respective Commitments.

      Section II.14. Compensation. Upon the request of any Lender, Borrower
shall pay to such Lender such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost, or
expense (including loss of anticipated profits) incurred by it as a result of:

      (a) any payment, prepayment, or Conversion of a Committed Eurodollar Loan
for any reason (including, without limitation, the acceleration of the Loans
pursuant to Section 8.1) on a date other than the last day of the Interest
Period for such Loan; or

      (b) any failure by Borrower for any reason (including, without limitation,
the failure of any condition precedent specified in Article IV to be satisfied)
to borrow, Convert, Continue, or prepay a Committed Eurodollar Loan on the date
for such borrowing, Conversion, Continuation, or prepayment specified in the
relevant notice of borrowing, prepayment, Continuation, or Conversion under this
Agreement.

      Section II.15. Taxes. (a) Any and all payments by Borrower to or for the
account of any Lender or Agent hereunder or under any other Loan Document shall
be made free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges or withholdings, and
all liabilities with respect thereto, excluding, in the case of each Lender and
Agent, taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Lender (or its Applicable Lending
Office) or Agent (as the case may be) is organized or any political subdivision
thereof (all such non-excluded taxes, duties, levies, imposts, deductions,
charges, withholdings, and liabilities being hereinafter referred to as
"Taxes"). If Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable under this Agreement or any other Loan Document to
any Lender or Agent, (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.15) such Lender or Agent receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) Borrower shall make such deductions, and (iii) Borrower shall pay the


                                      -33-
<PAGE>

full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.

      (b) In addition, Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or charges or
similar levies which arise from any payment made under this Agreement or any
other Loan Document or from the execution or delivery of, or otherwise with
respect to, this Agreement or any other Loan Document (hereinafter referred to
as "Other Taxes").

      (c) Borrower agrees to indemnify each Lender and Agent for the full amount
of Taxes and Other Taxes (including, without limitation, any Taxes or Other
Taxes imposed or asserted by any jurisdiction on amounts payable under this
Section 2.15) paid by such Lender or Agent (as the case may be) and any
liability (including penalties, interest, and expenses) arising therefrom or
with respect thereto.

      (d) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender listed on the signature pages hereof and on
or prior to the date on which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by Borrower or
Agent (but only so long as such Lender remains lawfully able to do so), shall
provide Borrower and Agent with (i) Internal Revenue Service Form 1001 or 4224,
as appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Lender is entitled to benefits under an income tax
treaty to which the United States is a party which reduces the rate of
withholding tax on payments of interest or certifying that the income receivable
pursuant to this Agreement is effectively connected with the conduct of a trade
or business in the United States, (ii) Internal Revenue Service Form W-8 or W-9,
as appropriate, or any successor form prescribed by the Internal Revenue
Service, and (iii) any other form or certificate required by any taxing
authority (including any certificate required by Sections 871(h) and 881(c) of
the Internal Revenue Code), certifying that such Lender is entitled to an
exemption from or a reduced rate of tax on payments pursuant to this Agreement
or any of the other Loan Documents.

      (e) For any period with respect to which a Lender has failed to provide
Borrower and Agent with the appropriate form pursuant to Section 2.15(d) (unless
such failure is due to a change in treaty, law, or regulation occurring
subsequent to the date on which a form originally was required to be provided),
such Lender shall not be entitled to indemnification under Section 2.15(a) or
2.15(b) with respect to Taxes imposed by the United States; provided, however,
that should a Lender, which is otherwise exempt from or subject to a reduced
rate of withholding tax, become subject to Taxes because of its failure to
deliver a form required hereunder, Borrower shall take such steps as such Lender
shall reasonably request to assist such Lender to recover such Taxes.

      (f) If Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this Section 2.15, then such Lender will agree
to use reasonable efforts to 


                                      -34-
<PAGE>

change the jurisdiction of its Applicable Lending Office so as to eliminate or
reduce any such additional payment which may thereafter accrue if such change,
in the judgment of such Lender, is not otherwise disadvantageous to such Lender
and in the event Lender is reimbursed for an amount paid by Borrower pursuant to
this Section 2.15, it shall promptly return such amount to Borrower.

      (g) Within thirty (30) days after the date of any payment of Taxes,
Borrower shall furnish to Agent the original or a certified copy of a receipt
evidencing such payment.

      (h) Without prejudice to the survival of any other agreement of Borrower
hereunder, the agreements and obligations of Borrower contained in this Section
2.15 shall survive the termination of the Commitments and the payment in full of
the Notes.

      Section II.16. Compensation Procedure. Any Lender or Issuing Bank
notifying Borrower of the incurrence of additional costs under Sections 2.10
through 2.15 shall in such notice to Borrower and Agent set forth in reasonable
detail the basis and amount of its request for compensation; provided that if
such Lender or Issuing Bank fails to give notice to Borrower of any additional
costs within ninety (90) days after it has actual knowledge thereof, neither
such Lender nor Issuing Bank shall be entitled to compensation for such
additional costs incurred more than ninety (90) days prior to the date on which
notice is given by such Lender or Issuing Bank. Determinations and allocations
by each Lender or Issuing Bank for purposes of Sections 2.10 through 2.15 of the
effect of any change in applicable laws, treaties, rules or regulations or in
the interpretation or administration thereof, any losses or expenses incurred by
reason of the liquidation or reemployment of deposits or other funds, any taxes,
levies, costs and charges imposed, or the effect of capital maintained on its
costs or rate of return of maintaining Loans or its obligation to make Loans or
issue LCs, or on amounts receivable by it in respect of Loans or LCs, and of the
amounts required to compensate such Lender under Sections 2.10 through 2.15,
shall be conclusive and binding for all purposes, provided that such
determinations and allocations are made on a reasonable basis and there shall be
no demand for duplicate payments of the same additional cost. Any request for
compensation under this Section 2.16 shall be paid by Borrower within thirty
(30) Business Days of the receipt by Borrower of the notice described in this
Section 2.16.

      Section II.17. Interest Rate Changes.

      (a) Initial Debt to Capitalization Ratio and Initial Senior Debt to
Capitalization Ratio. The Debt to Capitalization Ratio in effect from the date
hereof until changed as herein provided is 0.57 to 1.0. The Senior Debt to
Capitalization Ratio in effect from the date hereof until changed as herein
provided is 0.57 to 1.0.

      (b) Decreases In Rates. Any reduction in the Base Rate, the Tranche A
Fixed Rate, the Tranche B Fixed Rate or the rate being used to determine
facility fees pursuant to Section 2.9 (in this section collectively called the
"Rates") as a result of a change in the Debt to Capitalization Ratio or Senior
Debt to Capitalization Ratio shall be requested by Borrower in a certificate
delivered to Agent in which Borrower certifies as to the Debt to Capitalization
Ratio 


                                      -35-
<PAGE>

and Senior Debt to Capitalization Ratio in effect on the date thereof. Together
with any such certificate, Borrower shall deliver to Agent true and correct
financial statements of Borrower, in form and substance satisfactory to Agent,
supporting Borrower's calculation of such Debt to Capitalization Ratio and
Senior Debt to Capitalization Ratio. If Agent determines Borrower's calculation
is correct, the reduction in the Rates shall become effective on the fifth
Business Day following the date on which such notice is given to Agent or
Lenders otherwise become aware of such a change in the Debt to Capitalization
Ratio or the Senior Debt to Capitalization Ratio; provided that with respect to
Committed Eurodollar Loans, such decrease shall apply only to Committed
Eurodollar Loans continued or converted after such effective date.

      (c) Increases In Rates. With respect to any increase in the Rates,
Borrower must notify Agent of any change in the Rates as a result of a change in
the Debt to Capitalization Ratio or Senior Debt to Capitalization Ratio. Any
such increase in the Rates shall become effective on the fifth Business Day
following the date on which such notice is given to Agent or Lenders otherwise
become aware of such a change in the Debt to Capitalization Ratio or the Senior
Debt to Capitalization Ratio; provided that with respect to Committed Eurodollar
Loans, such increase shall apply only to Committed Eurodollar Loans made,
continued or converted after such effective date.

                        ARTICLE III. - Letters of Credit

      Section III.1 LCs. From time to time during the Tranche B Commitment
Period, Borrower may request Issuing Bank to issue, in reliance on the
agreements of Lenders set forth in Section 3.2(b), letters of credit (each
herein called an "LC") by means of an application in the form of Exhibit C,
appropriately completed and with a proposed form of LC attached. Issuing Bank
shall have no obligation whatsoever to issue any such requested LC, but any such
LC which Issuing Bank does issue shall be subject to all terms and provisions
hereof relating to LCs, and shall be subject to the following restrictions: (a)
no LC issued hereunder shall have an expiration date later than the earlier of
two years after the date of issuance thereof or the end of the Tranche B
Commitment Period, without the prior written consent of all Lenders; (b) no LC
issued hereunder shall be issued in an amount greater than $10,000,000 without
the prior written consent of Majority Lenders; (c) the LC Obligations
outstanding shall at no time exceed the LC Sublimit; (d) the sum of (i) the LC
Obligations outstanding and (ii) the aggregate amount of all Tranche B Loans
does not exceed the Tranche B Commitment; and (e) the aggregate amount of all
Loans (including Committed Loans and Competitive Bid Loans) and all LC
Obligations does not exceed the Commitment.

      Section III.2. Reimbursement of LCs.

      (a) Reimbursement by Borrower. Each payment by Issuing Bank pursuant to
any LC (whether in response to a draft, a demand for payment, or otherwise),
shall constitute a loan to and an obligation of Borrower. Borrower hereby
promises to pay to Issuing Bank, or to Issuing Bank's order, at Issuing Bank's
office at 901 Main Street, Dallas, Texas, on demand, any and all 


                                      -36-
<PAGE>

amounts paid by Issuing Bank pursuant to any and all LCs (such amounts being
herein called the "Matured LC Obligations"). Section 2.1(b) describes certain
situations in which such payments may be made with funds advanced by Lenders
under the Tranche B Notes, but Borrower's obligations to pay the Matured LC
Obligations as provided in this section are absolute and not contingent upon the
conditions for such Borrowings being met. Borrower hereby promises to pay to
Issuing Bank, or to Issuing Bank's order, at Issuing Bank's office at 901 Main
Street, Dallas, Texas, on demand, interest at the Default Rate on (a) any
outstanding Matured LC Obligations and (b) any fees or other amounts due with
respect to LCs (to the extent the same can legally bear interest). Borrower
hereby promises to pay, when due, all present and future taxes, levies, costs
and charges whatsoever imposed, assessed, levied or collected on, under or in
respect of this Agreement or any LC and any payments of principal, interest or
other amounts made on or in respect of any thereof (excluding, however, any such
taxes, levies, costs and charges imposed on or measured by the overall net
income of Issuing Bank). Borrower promises to indemnify Issuing Bank against,
and to reimburse Issuing Bank on demand for, any of the foregoing taxes, levies,
costs or charges paid by Issuing Bank and any loss, liability, claim or expense,
including interest, penalties and legal fees, that Issuing Bank may incur
because of or in connection with the failure of Borrower to make any such
payment of taxes, levies, costs or charges when due or any payment of Matured LC
Obligations when due. In addition, and without limiting the generality of the
foregoing, if any law, regulation or the interpretation thereof by any court or
administrative or governmental authority shall either impose, modify or deem
applicable any capital, reserve, insurance premium or similar requirement
against letters of credit issued by Issuing Bank and the result thereof shall be
to increase the cost to Issuing Bank of issuing or maintaining any letter of
credit; then, on demand by Issuing Bank, Borrower further promises to pay to
Issuing Bank, from time to time, additional amounts which shall be sufficient to
compensate Issuing Bank for the portion of such increased costs allocable to the
LCs. A written advice(s) setting forth in reasonable detail such costs incurred
by Issuing Bank, submitted by Issuing Bank to Borrower from time to time, shall
be conclusive, absent manifest error, as to the amount thereof.

      (b) Reimbursement by Lenders. Issuing Bank irrevocably agrees to grant and
hereby grants to each Lender, and, to induce Issuing Bank to issue LCs
hereunder, each Lender irrevocably agrees to accept and purchase and hereby
accepts and purchases from Issuing Bank, on the terms and conditions hereinafter
stated, for such Lender's own account and risk an undivided interest equal to
such Lender's Percentage Share of Issuing Bank's obligations and rights under
each LC issued hereunder and the amount of each draft paid by Issuing Bank
thereunder. In the event that Borrower should fail to pay Issuing Bank on demand
the amount of any draft or other request for payment drawn under or purporting
to be drawn under a LC as provided in subsection (a) above, each Lender shall,
before 2:00 p.m. (Dallas Time) on the Business Day Issuing Bank shall have given
notice to Lenders of Borrower's failure to so pay Issuing Bank, if such notice
is given by 10:00 am., Dallas Time (or on the Business Day immediately
succeeding the day such notice is given after 10:00 am. Dallas Time), pay to
Issuing Bank at Issuing Bank's offices in Dallas, Texas, in legal tender of the
United States of America, in same day funds, such Lender's Percentage Share of
the amount of such draft or other request for payment from Borrower plus
interest on such amount from the date Issuing Bank shall have 


                                      -37-
<PAGE>

paid such draft or request for payment to the date of such payment by such
Lender at the Default Rate. Each Lender's obligation to make payment to Issuing
Bank pursuant to the terms of this Section 3.2(b) is irrevocable and
unconditional. If any such amount required to be paid by any Lender pursuant to
this Section 3.2(b) is not in fact made available by such Lender to Issuing Bank
within three Business Days after the date such payment is due, Issuing Bank
shall be entitled to recover from such Lender, on demand, such amount with
interest thereon calculated from such due date at the Default Rate. A written
advice(s) setting forth in reasonable detail the amounts owing under this
Section 3.2, submitted by Issuing Bank to Borrower from time to time, shall be
conclusive, absent manifest error, as to the amounts thereof. Whenever, at any
time after Issuing Bank has made payment under any LC, and has received from any
Lender its Percentage Share of such payment in accordance with this Section
3.2(b), Issuing Bank receives any payment related to such LC (whether directly
from Borrower or otherwise, including proceeds of collateral applied thereto by
Issuing Bank), or any payment of interest on account thereof, Issuing Bank will
distribute to such Lender its Percentage Share thereof; provided, however, that
in the event that any such payment received by Issuing Bank shall be required to
be returned by Issuing Bank, such Lender shall return to Issuing Bank the
portion thereof previously distributed by Issuing Bank to it.

      Section III.3. Transferees of LCs. Borrower agrees that if any LC provides
that it is transferable, Issuing Bank is under no duty to determine the proper
identity of anyone appearing as transferee of such LC, nor shall Issuing Bank be
charged with responsibility of any nature or character for the validity or
correctness of any transfer or successive transfers. Payment by Issuing Bank to
any purported transferee or transferees as determined by Issuing Bank is hereby
authorized and approved, and Borrower further agrees to hold Issuing Bank and
each Lender harmless and indemnified against any liability or claim in
connection with or arising out of the foregoing or the circumstances described
in Section 3.6.

      Section III.4. Extension of Maturity of LCs. Borrower agrees that in the
event of any extension of the maturity or time for presentation of drafts or
demands for payment or any other modification of the terms of any LC at the
request of Borrower or by order of any court or tribunal, with or without
notification to others, or in the event of any increase in the amount of any LC
at the request of Borrower or by order of any court or tribunal, this Agreement
shall be binding upon Borrower with respect to the LC so increased or otherwise
modified, with respect to drafts and demands for payment thereunder, and with
respect to any action taken in accordance with such extension, increase or other
modification by Issuing Bank or by any bank which is a confirming bank or an
advising bank with respect to any LC.


                                      -38-
<PAGE>

      Section III.5. Restriction on Liability. Neither Issuing Bank nor any bank
which is a confirming bank or an advising bank with respect to an LC (in this
section called a "correspondent") shall be responsible for (a) the use which may
be made of any LC or for any acts or omissions of the users of any LC; (b) the
existence or nonexistence of a default under any instrument secured or supported
by any LC or any other event which gives rise to a right to call upon any LC;
(c) the validity, sufficiency or genuineness of any document delivered in
connection with any LC, even if such documents should in fact prove to be in any
or all respects invalid, fraudulent or forged; (d) except as specifically
required by an LC, failure of any instrument to bear any reference or adequate
reference to any LC, or failure of documents to accompany any draft at
negotiation or failure of any person to note the amount of any draft on the
reverse of any LC or surrender or take up any LC; or (e) errors, omissions,
interruptions or delays in transmission or delivery of any messages by mail,
cable, telegraph, wireless or otherwise. Issuing Bank shall not be responsible
for any act, error, neglect or default, omission, insolvency or failure in the
business of any of the correspondents or any refusal by Issuing Bank or any of
the correspondents to pay or honor drafts drawn under any LC because of any
applicable law, decree or edict, legal or illegal, of any governmental agency
now or hereafter enforced or for any matter beyond the control of Issuing Bank.
The happening of any one or more of the contingencies referred to in the
preceding clauses of this paragraph shall not affect, impair or prevent the
vesting of any of the rights or powers of Issuing Bank and Lenders under this
Agreement, or the obligation of Borrower to make reimbursement. In furtherance
and extension and not in limitation of the specific provisions hereinabove set
forth Borrower agrees that any action taken or omitted to be taken by Issuing
Bank or any Lender or by any correspondent under or in connection with any LC
shall be binding on Borrower and shall not put Issuing Bank or any Lender or any
correspondent under any resulting liability to Borrower unless grossly negligent
or in breach of good faith.

      Section III.6. No Duty to Inquire. Borrower agrees that Issuing Bank is
authorized and instructed to accept and pay drafts and demands for payment under
the LCs without requiring, and without responsibility for, either at the time of
acceptance or payment or thereafter, the determination as to the existence of
any event giving rise thereto or the proper identity or authority of anyone
appearing on behalf of the beneficiary of any LC.

      Section III.7. LC Fees. In consideration of any issuance by Issuing Bank
of LCs hereunder and of Lender's incurrence of a reimbursement obligation with
respect to such LCs, Borrower agrees to pay (a) to Agent for pro rata
distribution to each Lender in accordance with its Percentage Share, a letter of
credit fee at a rate equal to the Tranche B Eurodollar Spread then in effect,
and (b) to such Issuing Bank for its own account, a letter of credit fronting
fee at a rate equal to one-eighth of one percent per annum. Each such fee will
be calculated on the term and face amount of such LC and the above applicable
rate and will be payable upon the issuance of such LC.

                 ARTICLE IV. - Conditions Precedent to Lending


                                      -39-
<PAGE>

      Section IV.1. Documents to be Delivered. No Lender has any obligation to
make its first Committed Loan and Issuing Bank has no obligation to issue the
first LC (whether or not otherwise agreed to by Issuing Bank) unless Agent shall
have received all of the following, at Agent's office in Dallas, Texas, duly
executed and delivered and in form, substance and date satisfactory to Agent:

      (a) This Agreement and any other documents that Lenders are to execute in
connection herewith.

      (b) Each Note.

      (c) Certain certificates of Borrower including:

            (i) An "Omnibus Certificate" of the Vice President Finance and the
      Secretary or an Assistant Secretary of Borrower, which shall contain the
      names and signatures of the officers of Borrower authorized to execute
      Loan Documents and which shall certify to the truth, correctness and
      completeness of the following exhibits attached thereto: (1) a copy of
      resolutions duly adopted by the Board of Directors of Borrower and in full
      force and effect at the time this Agreement is entered into, authorizing
      the execution of this Agreement and the other Loan Documents delivered or
      to be delivered in connection herewith and the consummation of the
      transactions contemplated herein and therein, (2) a copy of the charter
      documents of Borrower and all amendments thereto, certified by the
      appropriate official of Borrower's state of organization, and (3) a copy
      of any bylaws of Borrower; and

            (ii) A "Compliance Certificate" of the Chairman of the Board or
      President and of the chief financial officer of Borrower, of even date
      with such Loan, in which such officers certify to the satisfaction of the
      conditions set out in subsections (a), (b), (c) and (d) of Section 4.2.

      (d) A certificate (or certificates) of the due formation, valid existence
and good standing of Borrower in its state of organization, issued by the
appropriate authorities of such jurisdiction.

      (e) A favorable opinion of John Walter counsel for Borrower, substantially
in the form set forth in Exhibit H, together with the certificate provided for
in such Exhibit.

      (f) Each Security Document listed in the Security Schedule.

      (g) Documents similar to those specified in subsections (c)(i) and (d) of
this section with respect to each Guarantor and the execution by it of its
guaranty of Borrower's Obligations.

      (h) A Notice of Final Agreement in the form of the attached Exhibit O.


                                      -40-
<PAGE>

      Section IV.2. Additional Conditions Precedent. No Lender has any
obligation to make any Committed Loan (including its first) and Issuing Bank has
no obligation to issue any LC (including its first, whether or not otherwise
agreed to by Issuing Bank), unless the following conditions precedent have been
satisfied:

      (a) All representations and warranties made by any Related Person in any
Loan Document shall be true on and as of the date of such Committed Loan or
issuance of such LC (except to the extent that the facts upon which such
representations and warranties are based have been changed by the extension of
credit hereunder) as if such representations and warranties had been made as of
the date of such Committed Loan or the issuance of such LC; provided, however,
that Borrower's only representations and warranties regarding any financial
projections delivered by Borrower shall be that at the time such projections
were made, Borrower made such projections in good faith, using assumptions that
Borrower believed were reasonable at the time made.

      (b) No Default shall exist at the date of such Committed Loan or issuance
of such LC.

      (c) No material adverse change shall have occurred to Borrower's
Consolidated financial condition or businesses since the date of this Agreement.

      (d) Each Related Person shall have performed and complied with all
agreements and conditions required in the Loan Documents to be performed or
complied with by it on or prior to the date of such Committed Loan or issuance
of such LC.

      (e) The making of such Committed Loan or issuance of such LC shall not be
prohibited by any law or any regulation or order of any court or governmental
agency or authority and shall not subject any Lender to any penalty or other
onerous condition under or pursuant to any such law, regulation or order.

      (f) Agent shall have received all documents and instruments which Agent
has then requested, in addition to those described in Section 4.1 (including
opinions of legal counsel for the Related Persons and Agent; corporate documents
and records; documents evidencing governmental authorizations, consents,
approvals, licenses and exemptions; and certificates of public officials and of
officers and representatives of Borrower and other Persons), as to (i) the
accuracy and validity of or compliance with all representations, warranties and
covenants made by any of the Related Persons in this Agreement and the other
Loan Documents, (ii) the satisfaction of all conditions contained herein or
therein, and (iii) all other matters pertaining hereto and thereto. All such
additional documents and instruments shall be satisfactory to Agent in form,
substance and date.


                                      -41-
<PAGE>

                  ARTICLE V. - Representations and Warranties

      Section V.1. Borrower's Representations and Warranties. To confirm each
Lender's understanding concerning Borrower and Borrower's business, properties
and obligations and to induce Agent and each Lender to enter into this Agreement
and to make the Committed Loans and to induce the Issuing Bank to issue LCs,
Borrower represents and warrants to Agent, Issuing Bank, and each Lender that:

      (a) No Default. Borrower is not in default in the performance of any of
the covenants and agreements contained herein. No event has occurred and is
continuing which constitutes a Default.

      (b) Organization and Good Standing. Each Related Person which is a
corporation or partnership is duly organized, validly existing and in good
standing under the laws of its state of organization, having all corporate or
partnership powers required to carry on its business and enter into and carry
out the transactions contemplated hereby. Each such Related Person is duly
qualified, in good standing, and authorized to do business in all other
jurisdictions within the United States wherein the character of the properties
owned or held by it or the nature of the business transacted by it makes such
qualification necessary, except for jurisdictions in which the failure to
qualify or maintain such qualification would not have a Material Adverse Effect.
Each such Related Person has taken all actions and procedures customarily taken
in order to enter, for the purpose of conducting business or owning property,
each jurisdiction outside the United States wherein the character of the
properties owned or held by it or the nature of the business transacted by it
makes such actions and procedures desirable.

      (c) Authorization. Each Related Person which is a corporation or
partnership has duly taken all corporate or partnership action necessary to
authorize the execution and delivery by it of the Loan Documents to which it is
a party and to authorize the consummation of the transactions contemplated
thereby and the performance of its obligations thereunder. Borrower is duly
authorized to borrow funds hereunder, and Borrower is duly authorized to apply
for the issuance of any LC requested hereunder.

      (d) No Conflicts or Consents. The execution and delivery by the various
Related Persons of the Loan Documents to which each is a party, the performance
by each of its obligations under such Loan Documents, and the consummation of
the transactions contemplated by the various Loan Documents, do not and will
not, to the best of our knowledge, (i) conflict with any provision of (1) any
domestic or foreign law, statute, rule or regulation as in effect on the date
such representation and warranty is made, (2) the articles or certificate of
incorporation, bylaws, charter, or partnership agreement or certificate of any
Related Person, or (3) any agreement, judgment, license, order or permit
applicable to or binding upon any Related Person, (ii) result in the
acceleration of any Debt owed by any Related Person, or (iii) result in or
require the creation of any Lien upon any assets or properties of any Related
Person except as expressly contemplated in the Loan Documents. No consent,
approval, authorization or order of, and no notice to or filing with, any court
or governmental authority or third party is required in 


                                      -42-
<PAGE>

connection with the execution, delivery or performance by any Related Person of
any Loan Document or to consummate any transactions contemplated by the Loan
Documents.

      (e) Enforceable Obligations. This Agreement is, and the other Loan
Documents when duly executed and delivered will be, legal, valid and binding
obligations of each Related Person which is a party hereto or thereto,
enforceable in accordance with their terms except as such enforcement may be
limited by bankruptcy, insolvency or similar laws of general application
relating to the enforcement of creditors' rights and as limited by general
equitable principles.

      (f) Initial Financial Statements. The Initial Financial Statements fairly
present Borrower's Consolidated financial position at the date thereof and the
Consolidated results of Borrower's operations and Borrower's Consolidated cash
flows for the period thereof. Since the date of the Initial Financial Statements
no material adverse change has occurred in Borrower's financial condition or
businesses or in Borrower's Consolidated financial condition or businesses,
except as reflected in the Disclosure Schedule. All Initial Financial Statements
were prepared in accordance with GAAP.

      (g) Other Obligations and Restrictions. No Related Person has any
outstanding Debt of any kind (including contingent obligations, tax assessments,
and unusual forward or long-term commitments) which is, in the aggregate,
material to Borrower or material with respect to Borrower's Consolidated
financial condition and not shown in the Initial Financial Statements or
disclosed in the Disclosure Schedule or a Disclosure Report. Except as shown in
the Initial Financial Statements or disclosed in the Disclosure Schedule or a
Disclosure Report, no Related Person is subject to or restricted by any
franchise, contract, deed, charter restriction, or other instrument or
restriction which can reasonably be expected to have a Material Adverse Effect.

      (h) Full Disclosure. No certificate, statement or other information
delivered herewith or heretofore by any Related Person to Agent or any Lender in
connection with the negotiation of this Agreement or in connection with any
transaction contemplated hereby contains any untrue statement of a material fact
or omits to state any material fact known to any Related Person (other than
industry-wide risks normally associated with the types of businesses conducted
by the Related Persons) necessary to make the statements contained herein or
therein not misleading as of the date made or deemed made. There is no fact
known to any Related Person (other than industry-wide risks normally associated
with the types of businesses conducted by the Related Persons) that has not been
disclosed to Agent and each Lender in writing which can reasonably be expected
to have a Material Adverse Effect. Borrower has heretofore delivered to Agent
and each Lender true, correct and complete copies of the Initial Financial
Statements.

      (i) Litigation. Except as disclosed in the Initial Financial Statements or
in the Disclosure Schedule or a Disclosure Report: (i) there are no actions,
suits or legal, equitable, arbitrative or administrative proceedings pending, or
to the knowledge of any Related Person threatened, against any Related Person
before any federal, state, municipal or other court, department, commission,
body, board, bureau, agency, or instrumentality, domestic or foreign, 


                                      -43-
<PAGE>

which do or can reasonably be expected to have a Material Adverse Effect, and
(ii) there are no outstanding judgments, injunctions, writs, rulings or orders
by any such governmental entity against any Related Person or, to the best of
Borrower's knowledge, against any Related Person's stockholders, partners,
directors or officers which have or may reasonably be expected to have a
Material Adverse Effect.

      (j) Labor Disputes and Acts of God. Except as disclosed in the Disclosure
Schedule or a Disclosure Report, neither the business nor the properties of any
Related Person has been affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or of the public enemy or other casualty (whether or not covered by
insurance), which do or may reasonably be expected to have a Material Adverse
Effect.

      (k) ERISA Liabilities. All currently existing ERISA Plans are listed in
the Disclosure Schedule or a Disclosure Report. Except as disclosed in the
Initial Financial Statements or in the Disclosure Schedule or a Disclosure
Report, no Termination Event has occurred with respect to any ERISA Plan and the
Related Persons are in compliance with ERISA in all material respects. No
Related Person is required to contribute to, or has any other absolute or
contingent liability in respect of, any "multiemployer plan" as defined in
Section 4001 of ERISA. Except as set forth in the Disclosure Schedule or a
Disclosure Report: (i) no "accumulated funding deficiency" (as defined in
Section 412(a) of the Internal Revenue Code of 1986, as amended) exists with
respect to any ERISA Plan, whether or not waived by the Secretary of the
Treasury or his delegate, and (ii) the current value of each ERISA Plan's
benefits does not exceed the current value of such ERISA Plan's assets available
for the payment of such benefits by more than $2,500,000.

      (l) Environmental and Other Laws. Except as disclosed in the Disclosure
Schedule or a Disclosure Report: (i) the Related Persons are conducting their
businesses in material compliance with all applicable federal, state or local
laws, including Environmental Laws, and have and are in compliance with all
licenses and permits required under any such laws, in all material respects;
(ii) none of the operations or properties of any Related Person is the subject
of federal, state or local investigation evaluating whether any material
remedial action is needed to respond to a release of any Hazardous Materials
into the environment or to the improper storage or disposal (including storage
or disposal at offsite locations) of any Hazardous Materials; (iii) no Related
Person (and to the best knowledge of Borrower, no other Person) has filed any
notice under any federal, state or local law indicating that any Related Person
is responsible for the improper release into the environment, or the improper
storage or disposal, of any material amount of any Hazardous Materials or that
any Hazardous Materials have been improperly released, or are improperly stored
or disposed of, upon any property of any Related Person; (iv) no Related Person
has transported or arranged for the transportation of any Hazardous Material to
any location which is (1) listed on the National Priorities List under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, listed for possible inclusion on such National Priorities List by the
Environmental Protection Agency in its Comprehensive Environmental Response,
Compensation and Liability Information System List, or listed on any similar
state list or (2) to the best of our knowledge, the subject of 


                                      -44-
<PAGE>

federal, state or local enforcement actions or other investigations which may
lead to claims against any Related Person for clean-up costs, remedial work,
damages to natural resources or for personal injury claims (whether under
Environmental Laws or otherwise); and (v) no Related Person otherwise has any
known material contingent liability under any Environmental Laws or in
connection with the release into the environment, or the storage or disposal, of
any Hazardous Materials, except to the extent the matters described in the
foregoing clauses (i) through (v) would not have a Material Adverse Effect.

      (m) Names and Places of Business. No Related Person has, during the
preceding five years, had, been known by, or used any other corporate, trade, or
fictitious name, except as disclosed in the Disclosure Schedule. Except as
otherwise indicated in the Disclosure Schedule or a Disclosure Report, the chief
executive office and principal place of business of the Related Persons are (and
for the preceding five years have been) located at the address of Borrower set
out in Section 10.3 or (if different) the address of each such Related Person
set out in the Disclosure Schedule. Except as indicated in the Disclosure
Schedule or a Disclosure Report, no Related Person has any other principal place
of business.

      (n) Borrower's Subsidiaries. None of Borrower and its Subsidiaries
presently has any Subsidiary or owns any stock in any other corporation or
association except those listed in the Disclosure Schedule or a Disclosure
Report.

      (o) Title to Properties; Licenses. Except as disclosed in the Disclosure
Schedule, each Related Person has good and defensible title to all of its
material properties and assets, free and clear of all Prohibited Liens and of
all impediments to the use of such properties and assets in such Related
Person's business, except that (i) with regard to easements and rights-of-way
relating to any Related Person's gathering systems, to the best of such Related
Person's knowledge, there exist no Liens that a reasonable and prudent operator
in the gas processing business would consider to be a material impairment of
title and such Related Person has such title as is reasonably necessary to
permit the use and enjoyment of such gathering systems, and (ii) no
representation or warranty is made with respect to any oil, gas or mineral
property or interest to which no proved oil or gas reserves are properly
attributed. Each Related Person possesses all licenses, permits, franchises,
patents, copyrights, trademarks and trade names, and other intellectual property
(or otherwise possesses the right to use such intellectual property without
violation of the rights of any other Person) which are necessary to carry out
its business as presently conducted and as presently proposed to be conducted
hereafter, and no Related Person is in violation in any material respect of the
terms under which it possesses such intellectual property or the right to use
such intellectual property.

      (p) Government Regulation. Neither Borrower nor any other Related Person
owing Obligations except WPS is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Investment Company Act
of 1940 (as any of the preceding acts have been amended) or, to the best of our
knowledge, any other statute, law, regulation or decree which regulates the
incurring by such Person of Debt, including statutes, laws, regulations 


                                      -45-
<PAGE>

or decrees relating to common contract carriers or the sale of electricity, gas,
steam, water or other public utility services.

      (q) Insider. Neither Borrower, nor any other Related Person, nor, to the
best of our knowledge, any Person having "control" (as that term is defined in
12 U.S.C. ss. 375b(9) or in regulations promulgated pursuant thereto) of
Borrower, is a "director" or an "executive officer" or "principal shareholder"
(as those terms are defined in 12 U.S.C. ss. 375b(8) or (9) or in regulations
promulgated pursuant thereto) of Lender, of a bank holding company of which
Lender is a Subsidiary or of any Subsidiary of a bank holding company of which
Lender is a Subsidiary.

      (r) Officers and Directors. With the exception of the Senior Vice
President - Engineering, the officers and directors of Borrower are those
persons disclosed in the definitive proxy statement prepared by Borrower and
filed with the Securities and Exchange Commission in connection with Borrower's
most recent annual meeting, copies of which proxy statement have been previously
furnished in connection with the negotiation hereof, except as set forth on the
Disclosure Schedule or a Disclosure Report.

      (s) Year 2000 Compliance. Borrower has (i) initiated a review and
assessment of all areas within Related Persons' business and operations
(including those affected by suppliers and vendors) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by Related Persons may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and timeline for addressing the
Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan in
accordance with that timetable. Borrower reasonably believes that all computer
applications (including those of Related Persons' suppliers and vendors) that
are material to any of Related Persons' business and operations will on a timely
basis be able to perform properly date-sensitive functions for all dates before
and after January 1, 2000 (that is, be "Year 2000 compliant"), except to the
extent that a failure to do so could not reasonably be expected to have a
Material Adverse Effect.

      Section V.2. Representation by Lenders. Each Lender hereby represents that
it will acquire its Notes for its own account in the ordinary course of its
lending business; however, the disposition of such Lender's property shall at
all times be and remain within its control and, in particular and without
limitation, such Lender may sell or otherwise transfer its Notes, any
participation interest or other interest in its Notes, or any of its other
rights and obligations under the Loan Documents; provided that such sale or
transfer is made in substantial compliance with applicable law.


                                      -46-
<PAGE>

                      ARTICLE VI. - Covenants of Borrower

      Section VI.1. Affirmative Covenants. Borrower warrants, covenants and
agrees that until the full and final payment of the Obligations and the
termination of this Agreement, unless Majority Lenders have previously agreed
otherwise in writing:

            (a) Payment and Performance. Borrower will pay all amounts owed by
      it under the Loan Documents to which it is a party in accordance with the
      terms thereof and will observe, perform and comply with every covenant,
      term and condition expressed or implied in the Loan Documents. Borrower
      will use its best efforts to cause each other Related Person to observe,
      perform and comply with every term, covenant and condition of the Loan
      Documents applicable to it.

            (b) Books, Financial Statements and Reports. Each Related Person
      will at all times maintain full and accurate books of account and records.
      Borrower will maintain and will cause its Subsidiaries to maintain a
      standard system of accounting and will furnish the following statements
      and reports to Agent and each Lender at Borrower's expense:

                  (i) As soon as available, and in any event within 90 days
            after the end of each Fiscal Year, complete Consolidated financial
            statements of Borrower together with all notes thereto, prepared in
            reasonable detail in accordance with GAAP, together with opinions,
            based on audits using generally accepted auditing standards, by
            PricewaterhouseCoopers, or other independent certified public
            accountants selected by Borrower and acceptable to Majority Lenders,
            stating that such Consolidated financial statements have been so
            prepared. Such Consolidated financial statements shall contain a
            balance sheet as of the end of such Fiscal Year and statements of
            operations, of cash flows, and of changes in stockholders' equity
            for such Fiscal Year, each setting forth in comparative form the
            corresponding figures for the preceding Fiscal Year. In addition,
            within 90 days after the end of each Fiscal Year Borrower will
            furnish to Agent and each Lender (A) a certificate in the form of
            Exhibit F signed by the chief financial officer, treasurer or
            controller of Borrower confirming compliance (or failure to comply)
            with the requirements of Sections 6.2(a), (b), (e), (f), (k), (l),
            (m), and (n) and setting out in reasonable detail calculations
            showing such compliance, if applicable, and (B) a report signed by
            such accountants stating that they have reviewed such certificate
            and this Agreement and further stating that, in making such review
            and the examination and report on the Consolidated financial
            statements described above, they did not obtain any knowledge that
            there existed any condition or event related to the financial
            covenants set forth in such sections relating to Borrower at the end
            of such Fiscal Year or at the time of their report which constituted
            an Event of Default or a Default, or, if they did obtain any such
            knowledge, specifying the nature and period of existence of any such
            condition or event.


                                      -47-
<PAGE>

                  (ii) For each Guarantor which has EBITDA in any Fiscal Quarter
            which constitutes ten percent (10%) or more of Borrower's
            Consolidated EBITDA for such Fiscal Quarter or which has assets at
            any time with a book value equal to or exceeding ten percent (10%)
            of the book value of Borrower's Consolidated assets at such time, as
            soon as available, and in any event within 90 days after the end of
            each fiscal year of such Guarantor, complete Consolidated financial
            statements of such Guarantor, together with all notes thereto,
            prepared in reasonable detail in accordance with all regulations
            applicable to such Guarantor or in accordance with accounting
            methods acceptable to Agent. Such Consolidated financial statements
            shall contain a balance sheet as of the end of such fiscal year and
            a statement of operations for such fiscal year, each setting forth
            in comparative form the corresponding figures for the preceding
            fiscal year.

                  (iii) As soon as available, and in any event within 45 days
            after the end of each Fiscal Quarter, (A) Borrower's Consolidated
            balance sheet as of the end of such Fiscal Quarter and statements of
            operations for the period from the beginning of the then current
            Fiscal Year to the end of such Fiscal Quarter, all in reasonable
            detail in accordance with GAAP, subject to changes resulting from
            normal year-end adjustments, (B) for each Guarantor which has EBITDA
            in any Fiscal Quarter which constitutes ten percent (10%) or more of
            Borrower's Consolidated EBITDA for such Fiscal Quarter or which has
            assets at any time with a book value equal to or exceeding ten
            percent (10%) of the book value of Borrower's Consolidated assets at
            such time, such Guarantor's consolidated balance sheet as of the end
            of each fiscal quarter of such Guarantor and statements of
            operations from the beginning of its then current fiscal year to the
            end of such fiscal quarter, prepared in reasonable detail in
            accordance with all regulations applicable to such Guarantor or in
            accordance with accounting methods acceptable to Agent, subject to
            changes resulting from normal year end adjustments, and (C) a
            certificate in the form of Exhibit F signed by the chief financial
            officer, treasurer or controller of Borrower, confirming compliance
            (or failure to comply) with the requirements of Sections 6.2(a),
            (b), (e), (f), (k), (l), (m), and (n) and setting out in reasonable
            detail calculation showing such compliance, if applicable, stating
            that such financial statements are materially complete, stating that
            he has reviewed the Loan Documents and carried out or caused to be
            carried out such further review as is necessary to enable him to
            express an informed opinion as to compliance with the Loan
            Documents, and further stating that to the best of his knowledge
            there is no condition or event at the end of such Fiscal Quarter or
            at the time of such certificate which constitutes an Event of
            Default or a Default or specifying the nature and period of
            existence of any such condition or event.


                                      -48-
<PAGE>

                  (iv) Promptly upon their becoming available, copies of all
            financial statements, reports, notices and proxy statements sent by
            Borrower to its shareholders and all registration statements,
            periodic reports and other statements and schedules filed by any
            Related Person with any securities exchange or any governmental
            authority responsible for compliance with securities laws.

                  (v) By April 29 of each year, a projection of Borrower's cash
            flows for such year in form and scope substantially similar to
            Exhibit I hereto.

                  (vi) As soon as delivered to holders of the Debt Securities,
            copies of all reports, statements and notices delivered generally to
            holders of Debt Securities (excluding data which Borrower deems
            duplicative, immaterial or inapplicable for delivery to Agent and
            Lenders).

            (c) Other Information and Inspections. Each Related Person will
      furnish to Agent and each Lender any information which Agent may from time
      to time request on behalf of itself or any Lender concerning any covenant,
      provision or condition of the Loan Documents or any matter in connection
      with the Related Persons' businesses and operations. Each Related Person
      will permit representatives appointed by Agent on behalf of Lenders,
      including independent accountants, agents, attorneys, appraisers and any
      other persons, to visit and inspect any of such Related Person's property,
      including its books of account, other books and records, and any
      facilities or other business assets, and to make extra copies therefrom
      and photocopies and photographs thereof, and to write down and record any
      information such representatives obtain, and each Related Person shall
      permit Agent or its representatives, on behalf of Lenders, to investigate
      and verify the accuracy of the information furnished to Agent or any
      Lender in connection with the Loan Documents and to discuss all such
      matters with its officers, employees and representatives. Each of Agent
      and Lenders agrees that, until the occurrence of a Default, it will take
      all reasonable steps to keep confidential any proprietary information
      regarding lists of customers of Borrower and its Subsidiaries and the
      terms of contracts of Borrower and its Subsidiaries with purchasers and
      producers; provided, however, that this restriction shall not apply to
      information which (i) has at the time in question entered the public
      domain, (ii) is required to be disclosed by law or by any order, rule or
      regulation (whether valid or invalid) of any court or governmental agency,
      or (iii) is furnished to purchasers or prospective purchasers of
      participations or interests in the Loans or the Notes so long as such
      purchasers and prospective purchasers have agreed to be subject to
      restrictions identical to those imposed upon Agent and each Lender under
      this sentence.


                                      -49-
<PAGE>

            (d) Notice of Material Events. Borrower will promptly notify Agent
      and each Lender (i) of any material adverse change in Borrower's financial
      condition or Borrower's Consolidated financial condition, (ii) of the
      occurrence of a Default or Event of Default, (iii) of the acceleration of
      the maturity of any indebtedness owed by any Related Person or of any
      default by any Related Person under any indenture, mortgage, agreement,
      contract or other instrument to which any of them is a party or by which
      any of them or any of their properties is bound, if such acceleration or
      default can reasonably be expected to have a Material Adverse Effect, (iv)
      of any material adverse claim (or any claim of $10,000,000 or more)
      asserted against any Related Person or with respect to any Related
      Person's properties pursuant to which an adverse decision can reasonably
      be expected to have a Material Adverse Effect, (v) of the occurrence of
      any Termination Event or of any event or condition known to Borrower which
      can reasonably be expected to have a Material Adverse Effect, and (vi) of
      the filing of any suit or proceeding against any Related Person in which
      an adverse decision can reasonably be expected to have a Material Adverse
      Effect. Upon the occurrence of any of the foregoing the Related Persons
      will take all necessary or appropriate steps to remedy promptly any such
      material adverse change, Default, Event of Default or default, to protect
      against any such adverse claim, to defend any such suit or proceeding, to
      remedy any such Termination Event or event affecting enforceability, and
      to resolve all controversies on account of any of the foregoing. Borrower
      will also notify Agent and Agent's counsel in writing at least twenty
      Business Days prior to the date that any Related Person changes its name
      or the location of its chief executive office or principal place of
      business, furnishing with such notice any necessary financing statement
      amendments or requesting Agent and its counsel to prepare the same.
      Borrower hereby represents that the address of the chief executive office
      and principal place of business of each Related Person is the address of
      Borrower set out in Section 10.3 hereof or (if different) the address of
      each Related Person set out in the Disclosure Schedule.

            (e) Maintenance of Properties. Each Related Person will maintain,
      preserve, protect, and keep all property used or useful in the conduct of
      its business in good condition and in compliance with all applicable laws,
      rules and regulations, and will from time to time make all repairs,
      renewals and replacements needed to enable the business and operations
      carried on in connection therewith to be promptly and advantageously
      conducted at all times, except to the extent that failure to do so would
      not have a Material Adverse Effect.

            (f) Maintenance of Existence and Qualifications. Each Related Person
      which is a corporation or partnership will maintain and preserve its
      corporate or partnership existence and its rights and franchises in full
      force and effect and will qualify to do business as a foreign corporation
      or partnership in all states or jurisdictions where required by applicable
      law, except where the failure so to qualify will not have any material
      adverse effect on such Related Person.


                                      -50-
<PAGE>

            (g) Payment of Trade Debt, Taxes, etc. Each Related Person (i) will
      timely file all required tax returns; (ii) will timely pay all taxes,
      assessments and other governmental charges or levies imposed upon it or
      upon its income, profits or property; (iii) will within 90 days after the
      same becomes due pay all Debt owed by it on ordinary trade terms to
      vendors, suppliers, and other Persons providing goods and services used by
      it in the ordinary course of its business; (iv) will pay and discharge
      when due all other Debt now or hereafter owed by it; and (v) will maintain
      appropriate accruals and allowance accounts for all such liabilities in a
      timely fashion in accordance with GAAP. Each Related Person may, however,
      delay paying or discharging any such taxes, charges, claims or liabilities
      so long as the validity thereof is contested in good faith by appropriate
      proceedings and it has set aside on its books adequate allowance accounts
      therefor in accordance with GAAP.

            (h) Insurance. Borrower and the Related Persons will keep or cause
      to be kept adequately insured by financially sound and reputable insurers
      all property of a character usually insured by corporations or
      partnerships engaged in the same or similar businesses. Borrower and the
      Related Persons shall maintain business interruption insurance in an
      amount providing not less than $10,000,000 coverage for the covered
      persons, taken as a whole. At all times adequate insurance against
      liability on account of damages to Persons or property and workmen's
      compensation insurance shall be maintained covering Borrower and the
      Related Persons, which insurance shall be by financially sound and
      reputable insurers.

            (i) Payment of Expenses. Whether or not the transactions
      contemplated by this Agreement are consummated, Borrower will promptly
      (and in any event, within 30 days after any invoice or other statement or
      notice) pay all reasonable costs and expenses incurred by or on behalf of
      NationsBanc Montgomery Securities LLC (including attorneys' fees) in
      connection with the syndication of the Loans and by or on behalf of Agent
      (including attorneys' fees) in connection with (i) the preparation,
      execution and delivery of the Loan Documents, and any and all consents,
      waivers or other documents or instruments relating thereto, (ii) the
      filing, recording, refiling and re-recording of any Loan Documents and any
      other documents or instruments or further assurances required to be filed
      or recorded or refiled or re-recorded by the terms of any Loan Document,
      (iii) the borrowings hereunder and other action reasonably required in the
      course of administration hereof, and (iv) the enforcement, after the
      occurrence of a Default, of the Loan Documents. In addition to the
      foregoing, Borrower will pay the expenses of each Lender in connection
      with the events described in clause (iv) above. In no event shall Borrower
      pay any expenses incurred by Agent or any Lender in connection with the
      physical loss of any Note.

            (j) Performance on Borrower's Behalf. If any Related Person fails to
      pay any taxes, insurance premiums, costs, expenses, or other amounts it is
      required to pay under any Loan Document (including without limitation any
      amounts required to be paid under Sections 6.1(i) and 8.3 of this
      Agreement), Agent may pay the same on behalf of Lenders. 


                                      -51-
<PAGE>

      Borrower shall immediately reimburse Agent for any such payments and each
      amount paid shall constitute a part of the Obligations, shall be secured
      by the Security Documents and shall bear interest at the Default Rate from
      the date such amount is paid by Agent until the date such amount is repaid
      to Agent).

            (k) Compliance with Agreements and Law. Each Related Person will
      perform all obligations which are material to Borrower's Consolidated
      financial condition which such Related Person is required to perform under
      the terms of each indenture, mortgage, deed of trust, security agreement,
      lease, franchise, agreement, contract or other instrument or obligation to
      which it is a party or by which it or any of its properties is bound
      (subject to their rights to delay payment in the circumstances described
      in Section 6.1(g)). Each Related Person will conduct its business and
      affairs in material compliance with all laws, regulations, and orders
      applicable thereto (including those relating to pollution and other
      environmental matters) except where such failure would not have a Material
      Adverse Effect.

            (l) Evidence of Compliance. Each Related Person will furnish to each
      Lender at such Related Person's or Borrower's expense all evidence which
      Agent from time to time reasonably requests on behalf of Lenders,
      including but not limited to the forms of evidence and assurance described
      in Section 4.2(f) as to the accuracy and validity of or compliance with
      all representations, warranties and covenants made by any Related Person
      in the Loan Documents, the satisfaction of all conditions contained
      therein, and all other matters pertaining thereto.

            (m) Shareholder Rights Plan. Notwithstanding anything else contained
      in this Agreement, Borrower may dividend, issue, redeem or otherwise sell
      or acquire any Rights pursuant to a Shareholder Rights Plan.

            (n) Year 2000 Compliance. Borrower will promptly notify Agent in the
      event Borrower discovers or determines that any computer application
      (including those of its suppliers and vendors) that is material to any of
      Related Persons' business and operations will not be Year 2000 compliant
      on a timely basis, except to the extent that such failure would not
      present a material probability of having a Material Adverse Effect.

      Section VI.2. Negative Covenants. To conform with the terms and conditions
under which each Lender is willing to have credit outstanding to Borrower, and
to induce Agent and each Lender to enter into this Agreement and make the Loans,
Borrower warrants, covenants and agrees that until the full and final payment of
the Obligations and the termination of this Agreement, unless Majority Lenders
have previously agreed otherwise in writing:

      (a) Debt. No Related Person, Sandia, Westana, or Williston Gas Company
will in any manner owe or be liable for Debt except:

            (i) the Obligations;


                                      -52-
<PAGE>

            (ii) unsecured Debt among Borrower and any Guarantor;

            (iii) Obligations under leases, whether capital leases or operating
      leases, entered into in the ordinary course of business in arm's-length
      transactions at competitive market rates under competitive terms and
      conditions considering all aspects thereof, provided that the obligations
      payable over the lives of any such leases do not in the aggregate exceed
      $20,000,000, and in addition, obligations under oil and gas leases, real
      estate leases for office space used by Borrower, and leases for vehicles,
      office equipment and data processing equipment;

            (iv) Debt under the Debt Securities;

            (v) unsecured Debt of Borrower not described in subsections (i)
      through (iv) above which meets the following requirements: (A) the
      documentation evidencing such Debt shall contain no terms, conditions or
      defaults (other than pricing) which are more favorable to the third party
      creditor than those contained in this Agreement are to Lenders, as
      determined by Majority Lenders in their discretion (provided that Majority
      Lenders shall make any such determination considering any amendments or
      modifications to this Agreement existing at the time of the incurrence of
      such Debt) and shall not contain any provision which attempts to modify,
      amend or restrict any of the rights or remedies of Agent or Lenders
      hereunder or under any of the other Loan Documents, (B) such Debt shall
      have no scheduled principal payments due prior to the final maturity of
      the Obligations, (C) at the time Borrower incurs such Debt, no Default or
      Event of Default shall have occurred and be continuing hereunder and (D)
      if such Debt is to be guaranteed by any Affiliate of Borrower, then such
      third party lender(s) must enter into an inter-creditor agreement with
      Lenders, in form, scope and substance which is acceptable to Majority
      Lenders, as evidenced by their written consent;

            (vi) Debt arising under Hedging Contracts permitted under Section
      6.2(k);

            (vii) Debt outstanding under the instruments or agreements described
      on the Disclosure Schedule, excluding any renewals or extensions of such
      Debt;

            (viii) Debt under the Bridge Facility the principal amount of which
      shall not exceed $37,000,000 at any one time outstanding;

            (ix) Subordinated Debt; and

            (x) miscellaneous items of Debt not described in subsections (i)
      through (ix) of this subsection (a) which do not in the aggregate (taking
      into account all Debt of all Related Persons) exceed $5,000,000 at any one
      time outstanding.


                                      -53-
<PAGE>

      (b) Limitation on Liens. No Related Person will create, assume or permit
to exist any Lien upon any of the properties or assets which it now owns or
hereafter acquires, except, to the extent not otherwise forbidden by the
Security Documents:

            (i) Liens and security interests at any time existing in favor of
      Lenders to secure the Obligations;

            (ii) statutory Liens for taxes and other sums which are not
      delinquent or which are being contested as provided in Section 6.1(g);

            (iii) mechanics' and materialmen's and similar statutory Liens with
      respect to obligations which are not delinquent or which are being
      contested as provided in Section 6.1(g);

            (iv) minor defects and irregularities in title to any property which
      do not materially impair the value of such property or the use thereof for
      the purposes for which it is held;

            (v) Liens listed on the Disclosure Schedule;

            (vi) Liens on margin accounts established in connection with Hedging
      Contracts securing Debt permitted under Section 6.2(a)(vii);

            (vii) Liens securing capital leases permitted under Section
      6.2(a)(iii); and

            (viii) Liens securing purchase money indebtedness in an aggregate
      amount not to exceed $1,000,000 encumbering only the assets financed
      thereby.

      (c) Limitation on Mergers, Issuances of Securities. Except as expressly
provided in this subsection no Related Person will merge or consolidate with or
into any other business entity. Borrower may, however, merge or consolidate with
or into any other business entity if Borrower is the surviving business entity;
any Subsidiary of Borrower which is a Guarantor may merge or consolidate with
another Subsidiary of Borrower so long as a Guarantor is the surviving business
entity; and any Subsidiary of Borrower which is not a Guarantor may merge or
consolidate with another Subsidiary of Borrower which is not a Guarantor;
provided that the surviving entity immediately becomes a Guarantor if required
to do so pursuant to the terms of Section 7.3 hereof. No Related Person will
issue partnership interests, stock, or other securities (other than shares of
its common stock or warrants to purchase its common stock), nor will any
Subsidiary of Borrower allow any diminution of Borrower's interest (direct or
indirect) therein.

      (d) Limitation on Sales of Property. No Related Person will sell,
transfer, lease, exchange, alienate or dispose of any of its material assets or
properties or any material interest therein except:


                                      -54-
<PAGE>

            (i) equipment which is worthless or obsolete or which is replaced by
      equipment of equal suitability and value;

            (ii) inventory which is sold in the ordinary course of business;

            (iii) sales of (A) all the issued and outstanding shares of stock of
      WGRS so long as the Asset Sale Proceeds received by Borrower equal or
      exceed $80,000,000 and the portion thereof required to be delivered to
      Agent pursuant to Section 2.7 is so delivered and upon receipt thereof
      Agent shall release WGRS from its guaranty of the Obligations on behalf of
      Lenders, and (B) the Giddings Facility so long as the Asset Sale Proceeds
      received by Borrower equal or exceed $30,000,000 and the portion thereof
      required to be delivered to Agent pursuant to Section 2.7 is so delivered;
      and

            (iv) so long as no Default or Event of Default has occurred, other
      assets or property which are sold in arm's length transactions to third
      parties that are not Affiliates of Borrower and are sold for fair
      consideration not in the aggregate in excess of $20,000,000 during any
      Fiscal Year.

Neither Borrower nor any of Borrower's Subsidiaries will sell, transfer or
otherwise dispose of capital stock of any of Borrower's Subsidiaries except that
any Subsidiary of Borrower may sell or issue its own capital stock to the extent
not otherwise prohibited hereunder. No Related Person will discount, sell,
pledge or assign any notes payable to it, accounts receivable or future income
except to the extent expressly permitted under the Loan Documents.

      (e) Limitation on Dividends, Redemptions and Prepayments on Senior
Unsecured Notes. No Related Person will:

            (i) declare or pay any dividends on, or make any other distribution
      in respect of any interest in it, other than dividends and distributions
      by Borrower's Subsidiaries to Borrower if a Default has occurred and is
      continuing, or will occur as a result thereof;

            (ii) directly or indirectly make any capital contribution to or
      purchase, redeem, acquire or retire any securities in any Related Person
      (whether such interests are now or hereafter issued, outstanding or
      created) other than contributions, purchases, redemptions, acquisitions,
      retirements made by any Subsidiary with respect to any shares of its
      capital stock owned by Borrower if a Default has occurred and is
      continuing, or will occur as a result thereof;

            (iii) purchase, repurchase, defease or make any prepayments on the
      Debt Securities except (A) with proceeds from any issuance of common or
      preferred stock of Borrower in an amount not to exceed ten percent (10%)
      of such proceeds, (B) with Asset Sale Proceeds from any Asset Sale in an
      amount not to exceed ten percent (10%) of the Asset Sale Proceeds arising
      from such Asset Sale and (C) any such purchase, repurchase, defeasance or
      prepayment (not described in (a) or (b) above) if at the time thereof the
      Commitment is equal to or less than $250,000,000, the outstanding
      principal balance of 


                                      -55-
<PAGE>

      the Committed Loans is equal to or less than $150,000,000, and no Default
      has occurred and is continuing, or will occur as a result thereof.

      (f) Limitation on Investments and New Businesses. No Related Person will:

            (i) make any expenditure or commitment or incur any obligation or
      enter into or engage in any transaction except in the ordinary course of
      business, which shall be deemed to include expenditures, commitments,
      obligations and transactions permitted by clause (iii) or (iv) of this
      Section 6.2(f);

            (ii) engage directly or indirectly in any business or conduct any
      operations except in connection with or incidental to its present
      businesses and operations, which shall be deemed to include expenditures,
      commitments, obligations and transactions permitted by clause (iii) or
      (iv) of this Section 6.2(f);

            (iii) make any acquisitions of or capital contributions to or other
      investments except (A) capital contributions to and investments in
      Williston Gas Company and Subsidiaries already wholly owned by such
      Related Person and the joint ventures described on Schedule 4 hereto, (B)
      deposits with any Lender, investments in obligations of any Lender or any
      of such Lender's Affiliates, time deposits in other banking institutions
      which, at the time such deposit is made, are rated "C" by Thomson
      BankWatch, Inc. and investments maturing within one year from the date of
      acquisition in direct obligations of or obligations supported by, the full
      faith and credit of, the United States of America, or (C) purchases of
      open market commercial paper, maturing within 270 days after acquisition
      thereof, with the highest or second highest credit rating given by either
      Standard & Poor's Rating Services (a division of The McGraw-Hill
      Companies, Inc.) or Moody's Investors Service, Inc. and investments in
      money market mutual funds with equivalent ratings; or

            (iv) make any significant acquisitions or investments in any
      properties other than gas processing, treating, fractionation,
      transmission, gathering and storage facilities, power generation
      facilities, and domestic oil and gas properties and an office building
      located in the State of Colorado and primarily used by the Related
      Persons.

      (g) Limitation on Credit Extensions. Except for investments permitted
under Section 6.2(f), no Related Person will extend credit, make advances or
make loans other than (i) normal and prudent extensions of credit to customers
buying goods and services in the ordinary course of business, which extensions
shall not be for longer periods than those extended by similar businesses
operated in a normal and prudent manner, and (ii) loans to Borrower or to any
Guarantor made in the ordinary course of business and (iii) loans made by
Borrower to its employees pursuant to the Stock Option Agreements; provided that
the aggregate outstanding amount of all such loans so made shall not exceed
$10,000,000, and (iv) to finance the purchase 


                                      -56-
<PAGE>

by Borrower's employees of certain real property, provided that the aggregate
outstanding amount of such loans shall not exceed $500,000.

      (h) Transactions with Affiliates. Neither Borrower nor any of its
Subsidiaries will engage in any material transaction with any of its Affiliates
on terms which are less favorable to it than those which would have been
obtainable at the time in arm's-length dealing with Persons other than such
Affiliates, provided that such restriction shall not apply to transactions among
Borrower and its wholly owned Subsidiaries.

      (i) Certain Contracts; Amendments; Multiemployer ERISA Plans. Except as
expressly provided for in the Loan Documents, no Related Person will, directly
or indirectly, enter into, create, or otherwise allow to exist any contract or
other consensual restriction on the ability of any Subsidiary of Borrower to:
(i) pay dividends or make other distributions to Borrower, (ii) to redeem equity
interests held in it by Borrower, (iii) to repay loans and other indebtedness
owing by it to Borrower, or (iv) to transfer any of its assets to Borrower,
provided that nothing contained in this sentence is intended to prohibit
Borrower's execution and delivery of the Debt Securities, as is in existence on
the date hereof, and the documents and instruments executed in connection
therewith. No Related Person will enter into, or amend or permit any amendment
to, any contract which releases, qualifies, limits, makes contingent or
otherwise detrimentally affects the rights of any Related Person in any joint
venture or partnership if such contract or amendment would have a Material
Adverse Effect. No Related Person will enter into, or amend or permit any
amendment to, any contract which releases, qualifies, limits, makes contingent
or otherwise detrimentally affects Agent or any Lender or the rights and
benefits of Agent or any Lender under or acquired pursuant to any Loan
Documents.

      (j) Fiscal Year. No Related Person will change its fiscal year.

      (k) Limitation for Net Products Exposure. No Related Person will enter
into, or otherwise be a party to) any Hedging Contract that does not comply with
the Risk Management Policy. Furthermore, the aggregate Net Product Exposure at
any time shall not exceed $10,000,000. "Net Products Exposure" means at the
close of any Business Day the sum of the following:

            (i) the Related Persons' mark-to-market exposure of At Risk
      Positions under the "Strategic Marketing Initiative" section of the Risk
      Management Policy.

            (ii) the Related Persons' mark-to-market exposure of At Risk
      Positions under the "Risk Management Trading Program" section of the Risk
      Management Policy.

            (iii) the Related Persons' mark-to-market exposure of At Risk
      Positions specifically approved by Borrower's Board of Directors which are
      not covered by the Risk Management Policy.


                                      -57-
<PAGE>

            (iv) the Related Persons' mark-to-market net exposure under fixed
      price sales contracts with terms in excess of 30 days and fixed price
      purchase contracts with terms in excess of 30 days.

As used in this section, "At Risk Position" means net long or short position for
contracts purchased or sold in financial markets or over the counter.

      (l) Debt to Capitalization Ratio. Borrower's Debt to Capitalization Ratio
will never be greater than 0.60 to 1.00 as of the end of any Fiscal Quarter
until and including December 31, 2000, and thereafter Borrower's Debt to
Capitalization Ratio will never be greater than 0.55 to 1.00 as of the end of
any Fiscal Quarter.

      (m) Senior Debt to Capitalization Ratio. Borrower's Senior Debt to
Capitalization Ratio will never be greater than 0.40 to 1.00 as of the end of
any Fiscal Quarter, beginning with the Fiscal Quarter ending on September 30,
1999 until and including the Fiscal Quarter ending on December 31, 2001, and
thereafter Borrower's Senior Debt to Capitalization Ratio will never be greater
than 0.35 to 1.00 as of the end of any Fiscal Quarter.

      (n) Fixed Charge Coverage Ratio. As of the end of each Fiscal Quarter,
Borrower's Fixed Charge Coverage Ratio for the four immediately preceding
consecutive Fiscal Quarters shall never be less than (i) 1.35 to 1.00 during the
period from and including June 30, 1999 until and including December 30, 1999,
(ii) 1.50 to 1.00 during the period from and including December 31, 1999 until
and including December 30, 2000, (iii) 1.80 to 1.00 during the period from and
including December 31, 2000 until and including December 30, 2001, (iv) 2.50 to
1.00 during the period from and including December 31, 2001 until and including
December 30, 2002 and (v) 3.25 to 1.0 at any time thereafter. For purposes of
this subsection, the term "Borrower's Fixed Charge Coverage Ratio" means for any
period, the ratio of (A) EBITDA, calculated excluding gains and losses on asset
sales and other extraordinary items, to (B) the sum of (1) the aggregate amount
of interest for such period treated as an expense or capitalized on Borrower's
consolidated financial statements plus (2) the aggregate amount of dividends
paid or declared by Borrower for such period in respect of the Preferred Stock,
not to exceed four regularly scheduled dividends and all special dividends.

                            ARTICLE VII. - Security

      Section VII.1. The Security. The Obligations will be secured by the
Security Documents listed in the Security Schedule and any additional Security
Documents hereafter delivered by any Related Person and accepted by Agent.

      Section VII.2. Offset. Borrower hereby grants to Agent and each Lender a
right of offset to secure the repayment of the Obligations, which right of
offset shall be upon and against (a) any and all moneys, securities or other
property (and the proceeds therefrom) of Borrower now or hereafter held or
received by or in transit to Agent or any Lender from or for the account 


                                      -58-
<PAGE>

of Borrower, whether for safekeeping, custody, pledge, transmission, collection
or otherwise, (b) any and all deposits (general or special, time or demand,
provisional or final) of Borrower with Agent or any Lender, and (c) any other
credits and claims of Borrower at any time existing against Agent or any Lender,
including claims under certificates of deposit. Upon the occurrence of any
Default, each of Agent and Lenders is hereby authorized to offset appropriate,
and apply, at any time and from time to time, without notice to Borrower, any
and all items hereinabove referred to against the Obligations.

      Section VII.3. Guaranties of Borrower's Subsidiaries. Borrower shall
require each of the following Subsidiaries to immediately execute and deliver to
Agent an absolute and unconditional guaranty of the timely repayment of the
Obligations and the due and punctual performance of the obligations of Borrower
hereunder, which guaranty shall be satisfactory to Agent in form and substance:

      (a) Each Subsidiary of Borrower which has EBITDA in any Fiscal Quarter
which constitutes ten percent (10%) or more of Borrower's Consolidated EBITDA
for such Fiscal Quarter or which has assets at any time with a book value equal
to or exceeding ten percent (10%) of the book value of Borrower's Consolidated
assets at such time;

      (b) If the aggregate amount of Borrower's unconsolidated EBITDA for any
Fiscal Quarter plus the aggregate EBITDA of Guarantors during such Fiscal
Quarter does not constitute eighty- five percent (85%) or more of Borrower's
Consolidated EBITDA for such Fiscal Quarter or if the book value of Borrower's
individual assets at any time plus the aggregate book value of the assets of
Guarantors at such time does not exceed eight-five percent (85%) of the book
value of Borrower's Consolidated assets at such time, then Subsidiaries of
Borrower with aggregate assets and/or EBITDA necessary to comply with the
eighty-five percent (85%) tests contained in this subsection; and

      (c) Upon request by Agent on behalf of Majority Lenders, any other
Subsidiary of Borrower.

Borrower will cause each of its Subsidiaries to deliver to Agent, simultaneously
with its delivery of such a guaranty, written evidence satisfactory to Agent and
its counsel that such Subsidiary has taken all corporate or partnership action
necessary to duly approve and authorize its execution, delivery and performance
of such guaranty and any other documents which it is required to execute.

      Section VII.4. Deposits


                                      -59-
<PAGE>

      (a) During the continuance of any Event of Default or if upon the Tranche
B Maturity Date any LC remains outstanding, Agent may, on behalf of Majority
Lenders, require Borrower to deposit funds with Agent under this section in an
amount up to the aggregate amount which Lenders might then or thereafter be
called upon to advance under all LCs then outstanding. Any funds deposited under
this section shall be held by Agent for the benefit of Lenders as collateral,
and Borrower will in connection therewith execute and deliver such Security
Documents as Majority Lenders may in their discretion require. As drafts or
demands for payment are presented under any LCs, Agent shall apply such funds to
satisfy Borrower's reimbursement obligations with respect thereto. Pending such
application Agent shall invest such funds as mutually agreed upon by Majority
Lenders and Borrower and, if no such agreement is made, in overnight eurodollar
deposits or time deposits with or certificates of deposit issued by Agent, with
maturities from one to sixty days as chosen by Agent and upon such other terms
and conditions as Agent chooses. All interest on such investments shall be
reinvested or applied to LC reimbursement obligations in the same manner as
funds originally deposited by Borrower or, if Borrower requests, released to
Borrower so long as no Default or Event of Default exists. When all LCs have
expired and Borrower's reimbursement obligations in connection therewith have
been satisfied, Agent shall, provided no Default or Event of Default then
exists, release to Borrower any remaining funds and interest deposited under
this section. Borrower shall in no event be obligated to make deposits under
this Section 7.4 whenever the funds and interest already deposited equal or
exceed the aggregate amount which Lenders might then or thereafter be called
upon to advance under all LCs then outstanding.

      (b) Whenever Borrower is required to make deposits under this section and
fails to do so on the day such deposit is due, Agent and Lenders may without
notice to Borrower make such deposit (whether by transfers from other accounts
maintained with Lenders, or otherwise) using any funds then available to Agent
or any Lender of Borrower, any Guarantor, or any other person liable for all or
any part of Borrower's obligations hereunder or with respect to the LCs. Any
amounts which are required hereunder to be deposited pursuant to this section
and which are not deposited on the date due shall, for the purposes of each
Security Document, be considered past due debts owing hereunder, and Agent is
hereby authorized to exercise its rights under each Security Document to obtain
funds for deposit as contemplated in this section.

                 ARTICLE VIII. - Events of Default and Remedies

      Section VIII.1. Events of Default. Each of the following events
constitutes an Event of Default under this Agreement:


                                      -60-
<PAGE>

            (a) (i) Any Related Person fails to pay any principal when due and
      payable, whether at a date for the payment of a fixed installment or
      contingent or other payment to Agent, Issuing Bank or any Lender or as a
      result of acceleration or otherwise, or (ii) any Related Person fails to
      pay any interest or other Obligation other than principal when due and
      payable, whether at a date for the payment of a fixed installment or
      contingent or other payment to Agent, Issuing Bank or any Lender or as a
      result of acceleration or otherwise, and such failure continues for ten
      (10) Business Days after such payment is due; or

            (b) Any default occurs under any Loan Document, any document
      governing or evidencing the Debt Securities, or evidencing any interest
      therein, or any event of default or termination event occurs under any
      Hedging Contract to which a Lender is a party, and such default, event of
      default or termination event is not remedied within the applicable period
      of grace (if any) provided for in such document or an Event of Default
      occurs under the Bridge Loan Agreement; or

            (c) Any Related Person fails to duly observe, perform or comply with
      any provision of Section 6.2, provided that no grace period shall be
      applicable to such failure, or any Related Person fails to duly observe,
      perform or comply with any other covenant, agreement, condition or
      provision (except those referred to above in this subsection and in
      subsections (a) and (b) above) of any Loan Document in any material
      respect, and such failure is not remedied within thirty (30) days; or

            (d) Any representation or warranty previously, presently or
      hereafter made in writing by or on behalf of any Related Person in
      connection with any Loan Document shall prove to have been false or
      incorrect in any material respect on any date on or as of which made, and
      such representation or warranty does not become true and correct within
      thirty days; or

            (e) Any Related Person fails to duly observe, perform or comply with
      any agreement with any Person or any term or condition of any instrument,
      if such agreement or instrument is materially significant to Borrower and
      its Subsidiaries on a Consolidated basis, and such failure is not remedied
      within the applicable period of grace (if any) provided in such agreement
      or instrument; or

            (f) Any Related Person (i) fails to duly pay any Debt constituting
      principal or interest owed by it to any Person other than Agent, Issuing
      Bank or any Lender with respect to borrowed money or money otherwise owed
      under any note, bond, or similar instrument (including, but not limited
      to, the Debt under the Debt Securities, the Bridge Loan Agreement or the
      Subordinated Debt) unless such Related Person is contesting the validity
      of such Debt by appropriate proceedings and has set aside on its books
      adequate allowance accounts therefor in accordance with GAAP or (ii)
      breaches or defaults in the performance of any agreement or instrument by
      which any Debt described in the 


                                      -61-
<PAGE>

      preceding clause (i) is issued, evidenced, governed, or secured, and any
      such failure, breach or default continues beyond any applicable period of
      grace provided therefor; or

            (g) Either (i) any "accumulated funding deficiency" (as defined in
      Section 412(a) of the Internal Revenue Code of 1986, as amended) in excess
      of $10,000,000 exists with respect to any ERISA Plan, whether or not
      waived by the Secretary of the Treasury or his delegate, or (ii) any
      Termination Event occurs with respect to any ERISA Plan and the then
      current value of such ERISA Plan's benefits guaranteed under Title IV of
      ERISA exceeds the then current value of such ERISA Plan's assets available
      for the payment of such benefits by more than $1,000,000 (or in the case
      of a Termination Event involving the withdrawal of a substantial employer,
      the withdrawing employer's proportionate share of such excess exceeds such
      amount); or

            (h) Any Related Person:

                  (i) suffers the entry against it of a judgment, decree or
            order for relief by a court of competent jurisdiction in an
            involuntary proceeding commenced under any applicable bankruptcy,
            insolvency or other similar law of any jurisdiction now or hereafter
            in effect, including the federal Bankruptcy Code, as from time to
            time amended, or has any such proceeding commenced against it which
            remains undismissed for a period of sixty days; or

                  (ii) commences a voluntary case under any applicable
            bankruptcy, insolvency or similar law now or hereafter in effect,
            including the federal Bankruptcy Code, as from time to time amended;
            or applies for or consents to the entry of an order for relief in an
            involuntary case under any such law; or makes a general assignment
            for the benefit of creditors; or fails generally to pay (or admits
            in writing its inability to pay) its debts as such debts become due;
            or takes corporate or other action to authorize any of the
            foregoing; or

                  (iii) suffers the appointment of or taking possession by a
            receiver, liquidator, assignee, custodian, trustee, sequestrator or
            similar official of all or a substantial part of its assets in a
            proceeding brought against or initiated by it, and such appointment
            or taking possession is neither made ineffective nor discharged
            within thirty days after the making thereof, or such appointment or
            taking possession is at any time consented to, requested by, or
            acquiesced to by it; or

                  (iv) suffers the entry against it of a final judgment for the
            payment of money in excess of $ 5,000,000 (not covered by effective
            insurance), unless the same is discharged within sixty days after
            the date of entry thereof or an appeal or appropriate proceeding for
            review thereof is taken within such period and a stay of execution
            pending such appeal is obtained; or


                                      -62-
<PAGE>

                  (v) suffers a writ or warrant of attachment or any similar
            process to be issued by any court against all or any substantial
            part of its assets or any part of the collateral subject to a
            Security Document, and such writ or warrant of attachment or any
            similar process is not stayed or released within thirty days after
            the entry or levy thereof or after any stay is vacated or set aside;
            or

            (i) Without the express prior written consent of Majority Lenders,
      Borrower amends or modifies the terms of any of the documents or
      instruments governing, or otherwise executed in connection with, any of
      the Debt Securities including but not limited to, an amendment or
      modification to (a) shorten the maturity of the Debt Securities, or (b)
      increase the maximum principal amount of the Debt Securities; provided,
      however, that Borrower may increase the interest rate or fees payable
      under or with respect to the Debt Securities without the consent of any
      Lender; or

            (j) Without the express prior written consent of Majority Lenders,
      Borrower amends or modifies the terms of any of the documents or
      instruments governing, or otherwise executed in connection with, the
      Subordinated Debt, including but not limited to, an amendment or
      modification to (a) shorten the maturity of the Subordinated Debt, (b)
      increase the maximum principal amount of the Subordinated Debt, or (c)
      modify the terms of the subordination of the Subordinated Debt to the
      Senior Debt; or

            (k) Without the express prior written consent of Majority Lenders,
      Borrower amends or modifies any term of the Preferred Stock; or

            (l) A Change in Control occurs.

Upon the occurrence of an Event of Default described in subsection (h)(i),
(h)(ii) or (h)(iii) of this section with respect to Borrower, all of the
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Related Person who at any time
ratifies or approves this Agreement. Upon any such acceleration, any obligation
of any Lender to make any further Committed Loan or of Issuing Bank to issue LCs
shall be permanently terminated. During the continuance of any other Event of
Default, Agent at any time and from time to time may (and upon written
instructions from Majority Lenders, Agent shall), without notice to Borrower or
any other Related Person, do either or both of the following: (1) terminate any
obligation of Lenders to make the Committed Loans hereunder, (2) terminate any
obligation of Issuing Bank to issue LCs, and (3) declare any or all of the
Obligations immediately due and payable, and all such Obligations shall
thereupon be immediately due and payable, without demand, presentment, notice of
demand or of dishonor and nonpayment, protest, notice of protest, notice of
intention to accelerate, declaration or notice of acceleration, or any other
notice or declaration of any kind, all of which are hereby expressly waived by
Borrower and each Related Person who at any time ratifies or approves this
Agreement.


                                      -63-
<PAGE>

      Section VIII.2. Remedies. If any Default shall occur and be continuing,
each Lender may protect and enforce its rights under the Loan Documents by any
appropriate proceedings, including proceedings for specific performance of any
covenant or agreement contained in any Loan Document, and each Lender may
enforce the payment of any Obligations due it or enforce any other legal or
equitable right which it may have. All rights, remedies and powers conferred
upon Agent and Lenders under the Loan Documents shall be deemed cumulative and
not exclusive of any other rights, remedies or powers available under the Loan
Documents or at law or in equity.

      Section VIII.3. Indemnity. Borrower agrees to indemnify Agent, Issuing
Bank and each Lender, upon demand, from and against any and all liabilities,
obligations, claims, losses, damages, penalties, fines, actions, judgments,
suits, settlements, costs, expenses or disbursements (including reasonable fees
of attorneys, accountants, experts and advisors) of any kind or nature
whatsoever (in this section collectively called "liabilities and costs") which
to any extent (in whole or in part) may be imposed on, incurred by, or asserted
against Agent, Issuing Bank or such Lender growing out of, resulting from or in
any other way associated with the Loan Documents, any LC issued by Issuing Bank
and the transactions and events (including the enforcement or defense thereof)
at any time associated therewith or contemplated therein (including any
violation or noncompliance with any Environmental Laws by any Related Person or
any liabilities or duties of any Related Person, Agent, Issuing Bank or any
Lender with respect to Hazardous Materials found in or released into the
environment).

THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT, ISSUING BANK OR ANY LENDER.

Notwithstanding anything else contained in this Agreement, neither Agent,
Issuing Bank nor any Lender shall be entitled under this section to receive
indemnification for that portion, if any, of any liabilities and costs which is
proximately caused by its own individual gross negligence or willful misconduct,
as determined in a final judgment. If any Person (including Borrower or any of
its Affiliates) ever alleges such gross negligence or willful misconduct by
Agent, Issuing Bank or any Lender, the indemnification provided for in this
section shall nonetheless be paid upon demand, subject to later adjustment or
reimbursement, until such time as a court of competent jurisdiction enters a
final judgment as to the extent and effect of the alleged gross negligence or
willful misconduct. As used in this section the terms "Agent," "Issuing Bank"
and "Lender" shall refer not only to the Persons designated as such in Section
1.1 but also to each director, officer, agent, attorney, employee,
representative and Affiliate of such Person.


                                      -64-
<PAGE>

                              ARTICLE IX. - Agent

      Section IX.1. Appointment, Powers, and Immunities. Each Lender hereby
irrevocably appoints and authorizes Agent to act as its agent under this
Agreement and the other Loan Documents with such powers and discretion as are
specifically delegated to Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. Agent (which term as used in this sentence and in Section 9.5 and the
first sentence of Section 9.6 hereof shall include its affiliates and its own
and its affiliates' officers, directors, employees, and agents): (a) shall not
have any duties or responsibilities except those expressly set forth in this
Agreement and shall not be a trustee or fiduciary for any Lender; (b) shall not
be responsible to Lenders for any recital, statement, representation, or
warranty (whether written or oral) made in or in connection with any Loan
Document or any certificate or other document referred to or provided for in, or
received by any of them under, any Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability, or sufficiency of any Loan Document,
or any other document referred to or provided for therein or for any failure by
any Related Person or any other Person to perform any of its obligations
thereunder; (c) shall not be responsible for or have any duty to ascertain,
inquire into, or verify the performance or observance of any covenants or
agreements by any Related Person or the satisfaction of any condition or to
inspect the property (including the books and records) of any Related Person or
any of its Subsidiaries or affiliates; (d) shall not be required to initiate or
conduct any litigation or collection proceedings under any Loan Document; and
(e) shall not be responsible for any action taken or omitted to be taken by it
under or in connection with any Loan Document, except for its own gross
negligence or willful misconduct. Agent may employ agents and attorneys-in-fact
and shall not be responsible for the negligence or misconduct of any such agents
or attorneys-in-fact selected by it with reasonable care.

      Section IX.2. Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice, instrument, writing, or other communication (including,
without limitation, any thereof by telephone or telecopy) believed by it to be
genuine and correct and to have been signed, sent or made by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel
(including counsel for any Related Person), independent accountants, and other
experts selected by Agent. Agent may deem and treat the payee of any Note as the
holder thereof for all purposes hereof unless and until Agent receives and
accepts an Assignment and Acceptance executed in accordance with Section 10.5
hereof. As to any matters not expressly provided for by this Agreement, Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Majority Lenders,
and such instructions shall be binding on all of Lenders; provided, however,
that Agent shall not be required to take any action that exposes Agent to
personal liability or that is contrary to any Loan Document or applicable law or
unless it shall first be indemnified to its satisfaction by Lenders against any
and all liability and expense which may be incurred by it by reason of taking
any such action.

      Section IX.3. Defaults. Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default or Event of Default unless Agent has
received written notice from a 


                                      -65-
<PAGE>

Lender or Borrower specifying such Default or Event of Default and stating that
such notice is a "Notice of Default". In the event that Agent receives such a
notice of the occurrence of a Default or Event of Default, Agent shall give
prompt notice thereof to Lenders. Agent shall (subject to Section 9.2 hereof)
take such action with respect to such Default or Event of Default as shall
reasonably be directed by the Majority Lenders, provided that, unless and until
Agent shall have received such directions, Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interest of
Lenders.

      Section IX.4. Rights as Lender. With respect to its Commitment and the
Loans made by it, NationsBank (and any successor acting as Agent) in its
capacity as a Lender hereunder shall have the same rights and powers hereunder
as any other Lender and may exercise the same as though it were not acting as
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include Agent in its individual capacity. NationsBank (and any
successor acting as Agent) and its affiliates may (without having to account
therefor to any Lender) accept deposits from, lend money to, make investments
in, provide services to, and generally engage in any kind of lending, trust, or
other business with any Related Person or any of its Subsidiaries or affiliates
as if it were not acting as Agent, and NationsBank (and any successor acting as
Agent) and its affiliates may accept fees and other consideration from any
Related Person or any of its Subsidiaries or affiliates for services in
connection with this Agreement or otherwise without having to account for the
same to Lenders.

      Section IX.5. Indemnification. Lenders agree to indemnify Agent (to the
extent not reimbursed under Section 8.3 hereof, but without limiting the
obligations of Borrower under such Section) ratably in accordance with their
respective Commitments, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including
attorneys' fees), or disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against Agent (including by any Lender) in
any way relating to or arising out of any Loan Document or the transactions
contemplated thereby or any action taken or omitted by Agent under any Loan
Document (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF AGENT);
provided that no Lender shall be liable for any of the foregoing to the extent
they arise from the gross negligence or willful misconduct of the Person to be
indemnified. Without limitation of the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share of any costs or
expenses payable by Borrower under Section 8.3, to the extent that Agent is not
promptly reimbursed for such costs and expenses by Borrower. The agreements
contained in this Section shall survive payment in full of the Loans and all
other amounts payable under this Agreement.

      Section IX.6. Non-Reliance on Agent and Other Lenders. Each Lender agrees
that it has, independently and without reliance on Agent or any other Lender,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Related Persons and their Subsidiaries and
decision to enter into this Agreement and that it will, independently and
without reliance upon Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own


                                      -66-
<PAGE>

analysis and decisions in taking or not taking action under the Loan Documents.
Except for notices, reports, and other documents and information expressly
required to be furnished to Lenders by Agent hereunder, Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition, or business of any
Related Person or any of its Subsidiaries or affiliates that may come into the
possession of Agent or any of its affiliates.

      Section IX.7. Resignation of Agent. Agent may resign at any time by giving
notice thereof to Lenders and Borrower. Upon any such resignation, the Majority
Lenders shall have the right to appoint a successor Agent with the consent of
Borrower, which consent shall not be unreasonably withheld. If no successor
Agent shall have been so appointed by the Majority Lenders and shall have
accepted such appointment within thirty (30) days after the retiring Agent's
giving of notice of resignation, then the retiring Agent may, on behalf of
Lenders, appoint a successor Agent which shall be a commercial bank organized
under the laws of the United States of America having combined capital and
surplus of at least $1,000,000,000 and which shall have experience lending to
oil and gas companies. Upon the acceptance of any appointment as Agent hereunder
by a successor, such successor shall thereupon succeed to and become vested with
all the rights, powers, discretion, privileges, and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article IX shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.

      Section IX.8. Appointment and Authority. Each Lender hereby irrevocably
authorizes Agent, and Agent hereby undertakes, to receive payments of principal,
interest and other amounts due hereunder as specified herein and to take all
other actions and to exercise such powers under the Loan Documents as are
specifically delegated to Agent by the terms hereof or thereof, together with
all other powers reasonably incidental thereto. The relationship of Agent to
Lenders is only that of one commercial bank acting as administrative agent for
others, and nothing in the Loan Documents shall be construed to constitute Agent
a trustee or other fiduciary for any holder of any of the Notes or of any
participation therein nor to impose on Agent duties and obligations other than
those expressly provided for in the Loan Documents. With respect to any matters
not expressly provided for in the Loan Documents and any matters which the Loan
Documents place within the discretion of Agent, Agent shall not be required to
exercise any discretion or take any action, and it may request instructions from
Lenders with respect to any such matter, in which case it shall be required to
act or to refrain from acting (and shall be fully protected and free from
liability to all Lenders in so acting or refraining from acting) upon the
instructions of Majority Lenders (including itself), provided, however, that
Agent shall not be required to take any action which exposes it to a risk of
personal liability that it considers unreasonable or which is contrary to the
Loan Documents or to applicable law. Upon receipt by Agent from Borrower of any
communication calling for action on the part of Lenders or upon notice from any
Lender to Agent of any Default or Event of Default, Agent shall promptly notify
each Lender thereof.


                                      -67-
<PAGE>

      Section IX.9. Exculpation, Agent's Reliance, Etc. Neither Agent nor any of
its directors, officers, agents, attorneys, or employees shall be liable for any
action taken or omitted to be taken by any of them under or in connection with
the Loan Documents, INCLUDING THEIR NEGLIGENCE OF ANY KIND, except that each
shall be liable for its own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, Agent (a) may treat the payee of any
Note as the holder thereof until Agent receives written notice of the assignment
or transfer thereof in accordance with this Agreement, signed by such payee and
in form satisfactory to Agent; (b) may consult with legal counsel (including
counsel for Borrower), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or
experts; (c) makes no warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties or representations made
in or in connection with the Loan Documents; (d) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of the Loan Documents on the part of any Related Person
or to inspect the property (including the books and records) of any Related
Person; (e) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Loan Document or any instrument or document furnished in connection therewith;
(f) may rely upon the representations and warranties of the Related Persons and
Lenders in exercising its powers hereunder; and (g) shall incur no liability
under or in respect of the Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (including any telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
Person or Persons.

      Section IX.10. Lenders' Credit Decisions. Each Lender acknowledges that it
has, independently and without reliance upon Agent or any other Lender, made its
own analysis of Borrower and the transactions contemplated hereby and its own
independent decision to enter into this Agreement and the other Loan Documents.
Each Lender also acknowledges that it will, independently and without reliance
upon Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Documents.

      Section IX.11. Expenses; Indemnification.

      (a) Borrower agrees to pay on demand all reasonable costs and expenses of
Agent in connection with the syndication, preparation, execution, delivery,
administration, modification, and amendment of this Agreement, the other Loan
Documents, and the other documents to be delivered hereunder, including, without
limitation, the reasonable fees and expenses of counsel for Agent (including the
cost of internal counsel) with respect thereto and with respect to advising
Agent as to its rights and responsibilities under the Loan Documents. Borrower
further agrees to pay on demand all costs and expenses of Agent and Lenders, if
any (including, without limitation, reasonable attorneys' fees and expenses and
the cost of internal counsel), in connection with the enforcement (whether
through negotiations, legal proceedings, or otherwise) of the Loan Documents and
the other documents to be delivered hereunder.


                                      -68-
<PAGE>

      (b) Borrower agrees to indemnify and hold harmless Agent and each Lender
and each of their affiliates and their respective officers, directors,
employees, agents, and advisors (each, an "Indemnified Party") from and against
any and all claims, damages, losses, liabilities, costs, and expenses
(including, without limitation, reasonable attorneys' fees) that may be incurred
by or asserted or awarded against any Indemnified Party, in each case arising
out of or in connection with or by reason of (including, without limitation, in
connection with any investigation, litigation, or proceeding or preparation of
defense in connection therewith) the Loan Documents, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of the Loans
(INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF THE INDEMNIFIED
PARTY), except to the extent such claim, damage, loss, liability, cost, or
expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct and except to the extent that such claim, damage, loss,
liability, cost, or expense arises in a suit by one Lender against another
Lender in each case solely in its capacity as a "Lender" hereunder and not in
its capacity as Agent or Issuing Bank. In the case of an investigation,
litigation or other proceeding to which the indemnity in this Section 9.11
applies, such indemnity shall be effective whether or not such investigation,
litigation or proceeding is brought by Borrower, its directors, shareholders or
creditors or an Indemnified Party or any other Person or any Indemnified Party
is otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated.

      (c) Without prejudice to the survival of any other agreement of Borrower
hereunder, the agreements and obligations of Borrower contained in this Section
9.11 shall survive the payment in full of the Loans and all other amounts
payable under this Agreement.

      Section IX.12. Rights as Lender. In its capacity as a Lender, Agent shall
have the same rights and obligations as any Lender and may exercise such rights
as though it were not Agent. Agent may accept deposits from, lend money to, act
as Trustee under indentures of, and generally engage in any kind of business
with any of the Related Persons or their Affiliates, all as if it were not Agent
hereunder and without any duty to account therefor to any other Lender.

      Section IX.13. Adjustments.

      (a) If any Lender (a "benefitted Lender") shall at any time receive any
payment of all or part of the Loans owing to it, or interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender's Loans owing to it, or interest thereon, such benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loans owing to it, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such benefitted Lender to share the excess
payment or benefits of such collateral or proceeds ratably with each of Lenders;
provided, however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits 


                                      -69-
<PAGE>

returned, to the extent of such recovery, but without interest. The Borrower
agrees that any Lender so purchasing a participation from a Lender pursuant to
this Section 9.13 may, to the fullest extent permitted by law, exercise all of
its rights of payment (including the right of set-off) with respect to such
participation as fully as if such Person were the direct creditor of the
Borrower in the amount of such participation.

      Section IX.14. Benefit of Article IX. The provisions of this Article
(other than Section 9.7) are intended solely for the benefit of Agent and
Lenders, and no Related Person shall be entitled to rely on any such provision
or assert any such provision in a claim or defense against Agent or any Lender.
Agent and Lenders may waive or amend such provisions as they desire without any
notice to or consent of Borrower or any Related Person.

      Section IX.15. Agency/Administrative Fee. To compensate Agent for
performing its duties under the Loan Documents and for expenses incurred by
Agent in connection with such performance, Borrower shall pay to Agent an agency
and administrative fee in an amount mutually agreed upon by Borrower and Agent.

      Section 9.16. Syndication Agent and Documentation Agent. The Lenders
identified on the facing page of this Agreement as "Syndication Agent" and
"Documentation Agent", respectively, have no right, power, obligation,
liability, responsibility, or duty under this Agreement other than those
applicable to all Lenders as such. Without limiting the foregoing, the Lenders
so identified as "Syndication Agent" and "Documentation Agent", respectively,
shall not have and shall not be deemed to have any fiduciary relationship with
any Lender. Each Lender acknowledges that it has not relied, and will not rely,
on taking or not taking action hereunder.

                           ARTICLE X. - Miscellaneous

      Section X.1. Waivers and Amendments; Acknowledgments.


                                      -70-
<PAGE>

      (a) Waivers and Amendments. No failure or delay (whether by course of
conduct or otherwise) by Agent, Issuing Bank or any Lender in exercising any
right, power or remedy which Agent, Issuing Bank or such Lender may have under
any of the Loan Documents shall operate as a waiver thereof or of any other
right, power or remedy, nor shall any single or partial exercise by Agent,
Issuing Bank or such Lender of any such right, power or remedy preclude any
other or further exercise thereof or of any other right, power or remedy. No
failure or delay (whether by course of conduct or otherwise) by Borrower in
exercising any right, power or remedy which Borrower may have under any of the
Loan Documents shall operate as a waiver thereof or of any other right, power or
remedy, nor shall any single or partial exercise by Borrower of any such right,
power or remedy preclude any other or further exercise thereof or of any other
right, power or remedy. No waiver of any provision of any Loan Document and no
consent to any departure therefrom shall ever be effective unless it is in
writing and signed as provided below in this section, and then such waiver or
consent shall be effective only in the specific instances and for the purposes
for which given and to the extent specified in such writing. No notice to or
demand on any Related Person shall in any case of itself entitle any Related
Person to any other or further notice or demand in similar or other
circumstances.

      (b) No waiver or supplement to this Agreement or the other Loan Documents
shall be valid or effective against any party hereto unless the same is in
writing and signed by (i) if such party is Borrower, by Borrower, (ii) if such
party is Agent, by Agent, (iii) if such party is Issuing Bank, by Issuing Bank,
and (iv) if such party is a Lender, by Majority Lenders or by Agent on behalf of
Lenders with the written consent of Majority Lenders (which consent has already
been given as to the termination of the Loan Documents as provided in Section
10.8). Notwithstanding the foregoing or anything to the contrary herein, no such
amendment or waiver shall, unless signed by all Lenders or by Agent on behalf of
all Lenders with the prior consent of each individual Lender, (1) waive any of
the conditions specified in Article IV (provided that Agent may in its
discretion withdraw any request it has made under Section 4.2(f)), (2) increase
the Percentage Share or Commitment of such Lender or subject such Lender to any
additional obligations, (3) reduce any fees hereunder, or the principal of, or
interest on, such Lender's Note, (4) postpone any date fixed for any payment of
any fees hereunder, or principal of, or interest on, such Lender's Note, (5)
amend the definition herein of "Majority Lenders" or otherwise change the
aggregate amount of Percentage Shares which is required for Agent, Lenders or
any of them to take any particular action under the Loan Documents, (6) release
Borrower from its obligation to pay such Lender's Note or any Guarantor from its
guaranty of such payment, or (7) release any Collateral except in accordance
with the express terms of any Loan Document.

      (c) Acknowledgments and Admissions. Borrower hereby represents, warrants,
acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Agent, Issuing Bank or any
Lender, whether written, oral or implicit, other than as expressly set out in
this Agreement or in another Loan Document delivered on or after the date
hereof, (iii) there are no representations, warranties, covenants, undertakings
or agreements by Agent, Issuing Bank or any Lender as to 


                                      -71-
<PAGE>

the Loan Documents except as expressly set out in this Agreement or in another
Loan Document delivered on or after the date hereof, (iv) neither Agent, Issuing
Bank nor any Lender has any fiduciary obligation toward Borrower with respect to
any Loan Document or the transactions contemplated thereby, (v) the relationship
pursuant to the Loan Documents between Borrower, on one hand, and Agent, Issuing
Bank and each Lender, on the other hand, is and shall be solely that of debtor
and creditor, respectively, (vi) no partnership or joint venture exists with
respect to the Loan Documents between any of Borrower, Agent, Issuing Bank and
Lenders, (vii) Agent is not Borrower's Agent, but Agent for Lenders, (viii)
should an Event of Default or Default occur or exist Agent and each Lender will
determine in its sole discretion and for its own reasons what remedies and
actions it will or will not exercise or take at that time, (ix) without limiting
any of the foregoing, Borrower is not relying upon any representation or
covenant by Agent or any Lender, or any representative thereof, and no such
representation or covenant has been made, that Agent or any Lender will, at the
time of an Event of Default or Default, or at any other time, waive, negotiate,
discuss, or take or refrain from taking any action permitted under the Loan
Documents with respect to any such Event of Default or Default or any other
provision of the Loan Documents, and (x) Agent and all Lenders have relied upon
the truthfulness of the acknowledgments in this section in deciding to execute
and deliver this Agreement and to make their Loans.

      THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

      THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

      Section X.2. Survival of Agreements; Cumulative Nature. All of the Related
Persons' various representations, warranties, covenants and agreements in the
Loan Documents shall survive the execution and delivery of this Agreement and
the other Loan Documents and the performance hereof and thereof, including the
making or granting of the Loans and the delivery of the Notes and the other Loan
Documents, and shall further survive until all of the Obligations are paid in
full and all of Agent's, Issuing Bank's and Lenders' obligations to Borrower are
terminated. All statements and agreements contained in any certificate or other
instrument delivered by any Related Person to Agent, Issuing Bank or any Lender
under any Loan Document shall be deemed representations and warranties by
Borrower or agreements and covenants of Borrower under this Agreement. The
representations, warranties, indemnities, and covenants made by the Related
Persons in the Loan Documents, and the rights, powers, and privileges granted to
Agent, Issuing Bank and Lenders in the Loan Documents, are cumulative, and,
except for expressly specified waivers and consents, no Loan Document shall be
construed in the context of another to diminish, nullify, or otherwise reduce
the benefit to Agent, Issuing Bank or any Lender of any such representation,
warranty, indemnity, covenant, right, power or privilege. In particular and
without limitation, no exception set out in this Agreement to any
representation, warranty, indemnity, or covenant herein contained shall apply to
any similar 


                                      -72-
<PAGE>

representation, warranty, indemnity, or covenant contained in any other Loan
Document, and each such similar representation, warranty, indemnity, or covenant
shall be subject only to those exceptions which are expressly made applicable to
it by the terms of the various Loan Documents.

      Section X.3. Notices. All notices, requests, consents, demands and other
communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Agent may give telephonic notices to Lenders), and shall be deemed
sufficiently given or furnished if delivered by personal delivery, by telecopy
or telex, by delivery service with proof of delivery, or by registered or
certified United States mail, postage prepaid, to Borrower and the Related
Persons at the address of Borrower specified on the signature pages hereto and
to Agent, Issuing Bank and the other Lenders at their addresses specified on the
signature pages hereto (unless changed by similar notice in writing given by the
particular Person whose address is to be changed). Any such notice or
communication shall be deemed to have been given (a) in the case of personal
delivery or delivery service, as of the date of first attempted delivery at the
address provided herein, (b) in the case of telecopy or telex, upon receipt, or
(c) in the case of registered or certified United States mail, three days after
deposit in the mail; provided, however, that no Borrowing Notice shall become
effective until actually received by Agent.

      Section X.4. Joint and Several Liability; Parties in Interest;
Assignments. All Obligations which are incurred by two or more Related Persons
shall be their joint and several obligations and liabilities. All grants,
covenants and agreements contained in the Loan Documents shall bind and inure to
the benefit of the parties thereto and their respective successors and assigns;
provided, however, that no Related Person may assign or transfer any of its
rights or delegate any of its duties or obligations under any Loan Document
without the prior consent of Majority Lenders. Neither Borrower nor any
Affiliates of Borrower shall directly or indirectly purchase or otherwise retire
any Obligations owed to any Lender nor will any Lender accept any offer to do
so, unless each Lender shall have received substantially the same offer with
respect to the same Percentage Share of the Obligations owed to it. If Borrower
or any Affiliate (excluding members of Borrower's Board of Directors or
Affiliates of such members) of Borrower at any time purchases some but less than
all of the Obligations owed to Agent, Issuing Bank and all Lenders, such
purchaser shall not be entitled to any rights under the Loan Documents unless
and until Borrower or its Affiliates have purchased all of the Obligations.

      Section X.5. Assignments and Participations.

      (a) Each Lender may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Loans, its Note, and its Commitment);
provided, however, that

            (i) each such assignment shall be to an Eligible Assignee;


                                      -73-
<PAGE>

            (ii) except in the case of an assignment to another Lender or an
      assignment of all of a Lender's rights and obligations under this
      Agreement, any such partial assignment shall be in an amount at least
      equal to $10,000,000 or an integral multiple of $5,000,000 in excess
      thereof;

            (iii) except in the case of an assignment to another Lender or an
      assignment of all of a Lender's rights and obligations under this
      Agreement, each Lender's Percentage Share of the Commitments shall not be
      less than the lesser of $10,000,000 or 5% of the aggregate amount of such
      Commitments then outstanding;

            (iv) each such assignment by a Lender shall be of a constant, and
      not varying, percentage of all of its rights and obligations under this
      Agreement and the Note; and

            (v) the parties to such assignment shall execute and deliver to
      Agent for its acceptance (A) an Assignment and Acceptance in the form of
      Exhibit G hereto, together with any Note subject to such assignment and a
      processing fee of $3,500 and (B) each such assignee shall agree in writing
      to be bound to the terms and conditions of that certain Intercreditor
      Agreement of even date herewith by and among Agent, Lenders, The
      Prudential Insurance Company of America, the American General Group, and
      other Persons that are or become parties thereto from time to time as the
      same may be supplemented, amended or restated from time to time.

Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender hereunder and
the assigning Lender shall, to the extent of such assignment, relinquish its
rights and be released from its obligations under this Agreement. Upon the
consummation of any assignment pursuant to this Section, the assignor, Agent and
Borrower shall make appropriate arrangements so that, if required, new Notes are
issued to the assignor and the assignee. If the assignee is not incorporated
under the laws of the United States of America or a state thereof, it shall
deliver to Borrower and Agent certification as to exemption from deduction or
withholding of Taxes in accordance with Section 2.15(d).

      (b) Agent shall maintain at its address set forth on its signature page
hereto a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of Lenders and the
Commitment of, and principal amount of the Loans owing to, each Lender from time
to time (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and Borrower, Agent and Lenders
may treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.

      (c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such assignment and payment
of the processing fee, Agent 


                                      -74-
<PAGE>

shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit G hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the parties thereto.

      (d) Each Lender may sell participations to one or more Persons in all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and its Loans); provided, however, that (i) such
participant shall be an Eligible Assignee, (ii) such Lender's obligations under
this Agreement shall remain unchanged, (iii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iv) the participant shall be entitled to the benefit of the yield protection
provisions contained in Article II and the right of set-off contained in Section
7.2, and (v) Borrower shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement, and such Lender shall retain the sole right to enforce the
obligations of Borrower relating to its Loans and its Note and to approve any
amendment, modification, or waiver of any provision of this Agreement (other
than amendments, modifications, or waivers decreasing the amount of principal of
or the rate at which interest is payable on such Loans or Note, extending any
scheduled principal payment date or date fixed for the payment of interest on
such Loans or Note, or extending its Commitment).

      (e) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time assign and pledge all or any portion of its Loans and its
Note to any Federal Reserve Bank as collateral security pursuant to Regulation A
and any Operating Circular issued by such Federal Reserve Bank. No such
assignment shall release the assigning Lender from its obligations hereunder.

      (f) Any Lender may furnish any information concerning Borrower or any of
its Subsidiaries in the possession of such Lender from time to time to assignees
and participants (including prospective assignees and participants), subject,
however, to the provisions of Section 6.1(c) hereof.

      (g) No Lender will request that a rating agency prepare a credit rating
for Borrower without giving prior notice to Borrower.

      Section X.6. Governing Law; Submission to Process. Except to the extent
that the law of another jurisdiction is expressly elected in a Loan Document,
the Loan Documents shall be deemed contracts and instruments made under the laws
of the State of Texas and shall be construed and enforced in accordance with and
governed by the laws of the State of Texas and the laws of the United States of
America, without regard to principles of conflicts of law. Chapter 346 of the
Texas Finance Code (the "Texas Finance Code") as amended (which regulates
certain revolving credit loan accounts and revolving tri-party accounts) does
not apply to this Agreement or to the Notes. Borrower hereby irrevocably submits
itself and each other Related Person to the non-exclusive jurisdiction of the
state and federal courts sitting in the State of Texas and agrees and consents
that service of process may be made upon it or any of the 


                                      -75-
<PAGE>

Related Persons in any legal proceeding relating to the Loan Documents or the
Obligations by any means allowed under Texas or federal law.

      Section X.7. Limitation on Interest. Agent, Issuing Bank, Lenders, the
Related Persons and any other parties to the Loan Documents intend to contract
in strict compliance with applicable usury law from time to time in effect. In
furtherance thereof such Persons stipulate and agree that none of the terms and
provisions contained in the Loan Documents shall ever be construed to create a
contract to pay, for the use, forbearance or detention of money, interest in
excess of the maximum amount of interest permitted to be charged by applicable
law from time to time in effect. Neither any Related Person nor any present or
future guarantors, endorsers, or other Persons hereafter becoming liable for
payment of any Obligation shall ever be liable for unearned interest thereon or
shall ever be required to pay interest thereon in excess of the maximum amount
that may be lawfully charged under applicable law from time to time in effect,
and the provisions of this section shall control over all other provisions of
the Loan Documents which may be in conflict or apparent conflict herewith.
Agent, Issuing Bank and Lenders expressly disavow any intention to charge or
collect excessive unearned interest or finance charges in the event the maturity
of any Obligation is accelerated. If (a) the maturity of any Obligation is
accelerated for any reason, (b) any Obligation is prepaid and as a result any
amounts held to constitute interest are determined to be in excess of the legal
maximum, or (c) Agent, Issuing Bank or any Lender or any other holder of any or
all of the Obligations shall otherwise collect moneys which are determined to
constitute interest which would otherwise increase the interest on any or all of
the Obligations to an amount in excess of that permitted to be charged by
applicable law then in effect, then all sums determined to constitute interest
in excess of such legal limit shall, without penalty, be promptly applied to
reduce the then outstanding principal of the related Obligations or, at Agent's,
Issuing Bank's or such Lender's or holder's option, promptly returned to
Borrower or the other payor thereof upon such determination. In determining
whether or not the interest paid or payable, under any specific circumstance,
exceeds the maximum amount permitted under applicable law, Agent, Issuing Bank,
Lenders and the Related Persons (and any other payors thereof) shall to the
greatest extent permitted under applicable law, (i) characterize any
non-principal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the instruments evidencing the Obligations in accordance
with the amounts outstanding from time to time thereunder and the maximum legal
rate of interest from time to time in effect under applicable law in order to
lawfully charge the maximum amount of interest permitted under applicable law.
In the event applicable law provides for an interest ceiling under Chapter 303
of the Texas Finance Code, as amended, for that day, the ceiling shall be the
"weekly ceiling" as defined in the Texas Finance Code, provided that if any
applicable law permits greater interest, the law permitting the greatest
interest shall apply and shall be used when appropriate in determining the
Highest Lawful Rate. As used in this section the term "applicable law" means the
laws of the State of Texas or the laws of the United States of America,
whichever laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.


                                      -76-
<PAGE>

      Section X.8. Termination; Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
written notice delivered to Agent to terminate this Agreement. Upon receipt by
Agent of such a notice, if no Obligations are then owing this Agreement and all
other Loan Documents shall thereupon be terminated and the parties thereto
released from all prospective obligations thereunder. Notwithstanding the
foregoing or anything herein to the contrary, any waivers or admissions made by
any Related Person in any Loan Document, any Obligations under Sections 2.10
through 2.14, and any obligations which any Person may have to indemnify or
compensate Agent, Issuing Bank or any Lender shall survive any termination of
this Agreement or any other Loan Document. At the request and expense of
Borrower, Agent shall prepare and execute all necessary instruments to reflect
and effect such termination of the Loan Documents. Agent is hereby authorized to
execute all such instruments on behalf of all Lenders, without the joinder of or
further action by any Lender.

      Section X.9. Severability. If any term or provision of any Loan Document
shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.

      Section X.10. Confidentiality. Agent and each Lender (each, a "Lending
Party") agree to keep confidential any information furnished or made available
to it by Borrower pursuant to this Agreement that is marked confidential;
provided that nothing herein shall prevent any Lending Party from disclosing
such information (a) to any other Lending Party or any affiliate of any Lending
Party, or any officer, director, employee, agent, or advisor of any Lending
Party or affiliate of any Lending Party, (b) to any other Person if reasonably
incidental to the administration of the credit facility provided herein, (c) as
required by any law, rule, or regulation, (d) upon the order of any court or
administrative agency, (e) upon the request or demand of any regulatory agency
or authority, (f) that is or becomes available to the public or that is or
becomes available to any Lending Party other than as a result of a disclosure by
any Lending Party prohibited by this Agreement, (g) in connection with any
litigation to which such Lending Party or any of its affiliates may be a party,
(h) to the extent necessary in connection with the exercise of any remedy under
this Agreement or any other Loan Document, and (i) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed participant or assignee.

      With respect to clause (a) and (b) of this Section 10.10, the Lending
Party disclosing such confidential information shall advise the Person to whom
the information is disclosed of the confidential nature of such information and
that the Lending Party making such disclosure shall be responsible for any
violation of this Section 10.10 by any such Person, and with respect to clauses
(c), (d), (e) and (g) of this Section 10.10, prior to any such disclosure, the
Lending Party shall (unless such Lending Party is unable because of requirements
of law or the exigency of the request for such disclosure): (i) promptly notify
Borrower thereof; (ii) consult with Borrower on the advisability of taking steps
to resist or narrow such request; and (iii) cooperate with Borrower in any
attempt it may make to obtain a protective order or other appropriate remedy to
assure that 


                                      -77-
<PAGE>

confidential treatment will be afforded such confidential information. In the
event such protective order or other appropriate remedy is not obtained, the
Lending Party agrees to furnish only that portion of such confidential
information which the Lending Party is advised by its counsel is legally
required to be disclosed.

      Section X.11. Counterparts. This Agreement may be separately executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.

      SECTION X.12. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF
BORROWER, ISSUING BANK, AGENT AND LENDERS HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, AND IRREVOCABLY (a) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED
BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN
CONNECTION WITH THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR
ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (b) WAIVES, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (c) CERTIFIES THAT NO
PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (d)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.

      Section X.13. Restatement. This Agreement restates and amends the Existing
Agreement in its entirety, and all of the terms and provisions hereof shall
supersede the terms and provisions thereof.


                                      -78-
<PAGE>

      IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.

                                             WESTERN GAS RESOURCES, INC.
                                             Borrower


                                             By:
                                                 -------------------------------
                                                 William J. Krysiak
                                                 Vice President - Finance

                                             Address:
                                             12200 N. Pecos Street
                                             Denver, Colorado  80234
                                             Attention: General Counsel
                                             Telephone: 03/452-5603
                                             Telecopy: 303/254-9794
<PAGE>

                                             NATIONSBANK, N.A., as
                                             Agent, Issuing Bank and Lender


                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:

                                             Address:
                                             NationsBank Plaza
                                             901 Main Street
                                             Dallas, Texas
                                             Tel: 214/209-9452
                                             Fax: 214/209-2881

                                             with a copy to:
                                             David C. Rubenking
                                             NationsBank, N.A.
                                             370 17th Street, Suite 3250
                                             Denver, Colorado
                                             Tel: 303/629-6969
                                             Fax: 303/629-6303
<PAGE>

                                             SOCIETE GENERALE SOUTHWEST AGENCY, 
                                             as a Lender


                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:

                                             Address:

                                             2001 Ross Avenue, Suite 4800
                                             Dallas, Texas 75201
                                             Attention: Loan Administration
                                             Tel: 214/754-0171
                                             Fax: 214/979-2792

                                             with a copy to:
                                             1111 Bagby, Suite 2020
                                             Houston, Texas 77002
                                             Attention: Richard Erbert
                                             Tel: 713/650-0824
                                             Fax: 713/759-6318
<PAGE>

                                             ABN AMRO BANK N.V., as a Lender


                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:


                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:

                                             Address:
                                             208 S. LaSalle Street
                                             Chicago, Illinois 60604
                                             Tel: 312/992-5110
                                             Fax: 312/992-5111

                                             with a copy to:
                                             3 Riverway, Suite 1700
                                             Houston, Texas 77056
                                             Attention: Robert Cunningham
                                             Tel: 713/964-3351
                                             Fax: 713/961-1699
<PAGE>

                                             CREDIT LYONNAIS, as a Lender


                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:

                                             Address:
                                             1000 Louisiana Street, Suite 5360
                                             Houston, Texas 77002
                                             Attention: Darryl Stanley
                                             Tel: 713/753-8734
                                             Fax: 713/751-0307
<PAGE>

                                             BANKBOSTON, N.A., as a Lender


                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:

                                             Address:
                                             100 Federal Street
                                             Boston, Massachusetts 02110
                                             Attention: Terrence Ronan
                                             Tel: 617/434-5472
                                             Fax: 617/434-3652
<PAGE>

                                             UNION BANK OF CALIFORNIA, N.A., as 
                                             a Lender


                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:


                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:

                                             Address:
                                             500 N. Akard, Suite 4200
                                             Dallas, Texas 75201
                                             Attention: Gary Shekerjian
                                             Tel: 214/922-4213
                                             Fax: 214/922-4209
<PAGE>

                                             THE FIRST NATIONAL BANK OF CHICAGO,
                                             as a Lender


                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:

                                             Address:
                                             One First National Plaza
                                             Chicago, Illinois 60670
                                             Tel: 312/732-3659
                                             Fax: 312/732-4840

                                             with a copy to:

                                             Bank One Texas, N.A.
                                             910 Travis Street
                                             Houston, Texas 77002
                                             Attention: Dixon Schultz
                                             Tel: 713/751-3741
                                             Fax: 713/751-3760
<PAGE>

                                             U.S. BANK NATIONAL ASSOCIATION, as
                                             a Lender


                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:

                                             Address:
                                             918 17th Street
                                             Denver, Colorado 80202
                                             Attention: Monte Deckerd
                                             Tel: 303/585-4212
                                             Fax: 303/585-4362