Exhibit
10.5


 


LETTER AMENDMENT NO. 1


TO


THIRD AMENDED AND RESTATED MASTER SHELF AGREEMENT


 


As of April 24, 2003


 


The Prudential Insurance
Company of America.


Pruco Life Insurance
Company


Prudential Investment
Management, Inc.


ING Life Insurance &
Annuity Company


c/o Prudential Capital
Group


2200 Ross Avenue, Suite
4200E


Dallas, Texas 75201


 


Ladies and Gentlemen:


 


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


 


The Company has
requested and, subject to the terms and conditions specified herein, the
undersigned holders of the Notes are willing to make, certain amendments to the
Agreement, all as more particularly set forth herein.


 


1.             Amendments to the Agreement.  Subject to the accuracy of the
representations and warranties set forth in paragraph 2 hereof and satisfaction
of the conditions set forth in paragraph 3(c) hereof, the undersigned holders
of the Notes hereby agree with the Company to amend, effective as of the date
first above written, the Agreement as follows:


 


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


 


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


 


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


 


(b)           Paragraph 5.  Affirmative Covenants.


 


(I)            Paragraph
5A of the Agreement is amended to (A) delete the word “and” from the end of the
existing clause (vii), (B) renumber the existing clause (viii) to become clause
(xi), and (C) insert new clauses (viii), (ix) and (x) that read as follows:


 


“(viii)      by January 30th of
each year after the occurrence of a Debt Rating Downgrade, an Engineering
Report concerning the oil and gas reserves of the Company and its Subsidiaries
as of the preceding December 31st, which report shall (A) be prepared by
independent petroleum engineers chosen by the Company and acceptable to
Prudential, (B) contain sufficient information to enable the Company to meet
the reporting requirements concerning oil and gas reserves contained in
Regulations S-K and S-X promulgated by the Securities and Exchange Commission,
(C) distinguish (or be delivered together with a certificate from an
appropriate officer of the Company which distinguishes) those properties
covered by the report which are Collateral from those properties covered by the
report which are not Collateral, and (D) otherwise be in form satisfactory to
Prudential;


 


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


 


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


 


(II)           Paragraph
5E of the Agreement is amended to add a new sentence to the end thereof that
reads as follows:


 


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


 


(III)         Paragraph
5 of the Agreement is amended to add new paragraphs 5P, 5Q, 5R, 5S, 5T, 5U and
5V that read as follows:


 


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“5P. Covenant to Pledge Stock. The Company shall, and shall cause
its Subsidiaries to (i) promptly (and in any event within 30 days after
acquiring such equity interests) pledge to the Collateral Agent the equity
interests in each Domestic Subsidiary Guarantor that is now owned or hereafter
acquired by it, in each case pursuant to such documents as the Collateral Agent
shall deem appropriate for such purpose and (ii) concurrently with each such
pledge, deliver to the Collateral Agent documents of the types referred to in
clauses (ii) through (vii) of paragraph 3A(1) and favorable opinions of counsel
to such Person (which shall cover, among other things, the legality, validity,
binding effect and enforceability of the documentation referred to in clause
(i) above), all in form, content and scope reasonably satisfactory to the
Collateral Agent; provided, that, no PUC Subsidiary shall be required to
execute and deliver any Security Document pursuant to this paragraph 5P or
paragraph 5Q unless all required regulatory approvals shall have been obtained
for such Security Document from each applicable PUC and, to the extent
applicable, FERC.  The Company shall
cause each PUC Subsidiary required to deliver a Security Document pursuant to
paragraph 5P or paragraph 5Q to use its best efforts to obtain the approval of
the applicable PUC and, to the extent applicable, FERC for such Security
Document.  In the event that the any PUC
or FERC shall require that the equity interests of a PUC Subsidiary be released
from the Lien in favor of the Collateral Agent, the Collateral Agent shall so
release such equity interests; provided that all equity interests of a
replacement Subsidiary acceptable to Prudential shall have been pledged to
Collateral Agent for the benefit of the holders of the Notes unless all
potential replacement Subsidiaries are PUC Subsidiaries and are prohibited by
the applicable PUCs or FERC from having their equity interests pledged to the
Collateral Agent.”


 


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


 


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


 


5R.          Title Review.  After a Debt Rating Downgrade and from time
to time when additional Oil and Gas Collateral is required to be delivered
pursuant to paragraph 5Q, the Company agrees that the Collateral Agent’s
counsel shall be entitled to review the lease files and existing title reports
and title opinions covering such additional Oil and Gas Collateral.  Based upon such review and in order to
confirm title of the Company and its Subsidiaries to such Oil and Gas
Collateral, the Collateral Agent may request, and the Company agrees to
deliver, within 90 days after any Debt Ratings Downgrade, such additional
favorable reports and/or title opinions which either the Collateral Agent or
Prudential determines in their reasonable judgments are necessary from Persons
acceptable to the Collateral Agent and Prudential with respect to any such Oil
and Gas Collateral to confirm that the Company and/or its Subsidiaries own such
Oil and Gas Collateral free and clear of all Liens except Liens permitted by
paragraph 6C(1).


 


5S.           Perfection and Protection of Security
Interests and Liens.  The
Company will from time to time deliver, and will cause each of its Subsidiaries
from time to time to deliver, to the Collateral Agent any authorizations to file
financing statements, extension agreements and other documents, properly
completed and executed (and acknowledged when required) in form and substance
reasonably satisfactory to the Collateral Agent, which the Collateral Agent
requests for the purpose of perfecting, confirming, or protecting any Liens or
other rights in Collateral securing the Notes and other obligations hereunder.


 


5T.          Production Proceeds.  Notwithstanding that, by the terms of the
Security Documents which may be delivered to the Collateral Agent pursuant to
paragraph 5Q, one or more Subsidiaries of the Company will, after a Debt Rating
Downgrade, assign the Collateral Agent all of the “Production Proceeds” (as
defined in Exhibit I attached hereto) accruing to the property covered
thereby, so long as no Default has occurred such Subsidiaries may continue to
receive from the purchases of production all such Production Proceeds, subject,
however, to the Liens created under the Security Documents, which Liens are
hereby affirmed and ratified.  Upon the
occurrence of a Default, the Collateral Agent may exercise all rights and
remedies granted under the Security Documents, including the right to obtain
possession of all Production Proceeds then held by the Subsidiaries or to
receive directly from the purchasers of production all other Production
Proceeds.


 


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


 


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


 


5V.          Limitation on Effectiveness.  Notwithstanding anything to the contrary
contained herein or in any Mortgage, none of the Mortgages will be effective or
enforceable in any manner whatsoever at any time prior to the occurrence of a
Debt Rating Downgrade.  Without
limitation of the foregoing, the Collateral Agent shall not be entitled to any
of the rights or remedies available to it solely under the Mortgages prior to
the occurrence of a Debt Rating Downgrade. 
It is not the intent of the parties hereto that the provisions of this
paragraph 5V violate any applicable law regarding the rule against
perpetuities, the suspension of the absolute power of alienation, or other
rules regarding the vesting or duration of estates.  The provisions of this paragraph 5V shall be construed as not
violating any such rule to the extent the same can be so construed consistent
with the intent of the parties.  In the
event that the provisions of this paragraph 5V are determined to violate any
such rule, then this paragraph 5V shall nevertheless be effective only for the
maximum period (but not longer than the maximum period) permitted by such rule
that will result in no violation.  At
such time as this paragraph 5V is no longer effective, neither will the
Mortgage be effective or enforceable. 
To the extent the maximum period is permitted to be determined by
reference to “lives in being,” the parties hereto agree that “lives in being”
shall refer to the lifetime of the last to die of the living lineal descendants
of the late Joseph P. Kennedy (father of the late President of the United States
of America).”


 


(c)           Negative Covenants.


 


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


 


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(II)           Paragraph
6A(4) of the Agreement is deleted in its entirety and the following is inserted
in lieu thereof:


 


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


 


	
  Four Fiscal Quarters Ending

  	
   

  	
  Minimum
  Ratio

  
	
  Effective Date through
  December 30, 2002

  	
   

  	
  2.50 to 1.00

  
	
  December 31, 2002
  through December 31, 2003

  	
   

  	
  3.25 to 1.00

  
	
  March 31, 2004 through
  December 31, 2004

  	
   

  	
  3.75 to 1.00

  
	
  March 31, 2005 and
  thereafter

  	
   

  	
  4.25 to 1.0

  



 


(III)         Paragraph
6C(1) of the Agreement is amended by deleting the existing clause (viii) and
inserting the following in lieu thereof:


 


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


 


(IV)         Paragraph
6F is amended by deleting the existing definition of “Hedging Transactions” set
forth therein and inserting the following in lieu thereof:


 


“Hedging
Transactions” shall mean, with respect to the Company and its
Subsidiaries, any commodity basis swap, forward commodity transaction,
commodity swap, commodity option, commodity index swap, commodity cap
transaction, commodity floor transaction, commodity collar transaction, and any
similar transaction that relate to commodities (including any option with
respect to the foregoing transactions but excluding any commodity floor
transactions with regard to which the Company and its Subsidiaries do not have
any liabilities (whether contingent, matured or otherwise) to third parties
other than the initial purchase price paid by the Company or such Subsidiary
with respect to the acquisition of such commodity floor transaction) or any
combination of the foregoing transactions.


 


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(d)           Events of Default.


 


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


 


“(iv)  any representation or
warranty made by the Company herein or in any Security Document to which it is
a party, by any Guarantor in any Guaranty or in any Security Document to which
it is a party, or by the Company, any Guarantor or any of their respective
officers in any writing furnished in connection with or pursuant to this
Agreement, any Guaranty or any Security Document shall be false in any material
respect on the date as of which made; or


 


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


 


(xvi)  any Guaranty, for any
reason other than as specified therein or, with regard to PUC Subsidiaries, in
accordance with the limitations set forth in paragraph 5P, ceases to be in full
force and effect or is declared null and void, or the validity or
enforceability thereof is contested or the Guarantor denies that it has any
further liability under the Guaranty, or the Guarantor shall default in the
performance or observance of any of its obligations under the Guaranty, and
such default shall not have been remedied within 30 days; or


 


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


 


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


 


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


 


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indemnities, costs
and expenses then owing under this Agreement, the Notes, the Guaranties, the Security
Documents and any other instruments or agreements executed in connection
herewith or therewith; second, after payment in full of the amounts set
forth in clause first above, to the payment of the Make-Whole Amount, if
any, then owing; third, after payment in full of the amounts set forth
in clause second above, to the payment of all accrued and unpaid
interest then owing under the Notes; fourth, after payment in full of
the amounts set forth in clause third above, to the payment of principal
then outstanding under the Notes; and fifth, after payment in full of
the amounts set forth in clause fourth above, to the Company or
whomsoever shall be lawfully entitled to receive the same or as a court of
competent jurisdiction shall direct.”


 


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


 


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


 


9(C)(2).  Acceptance of Intercreditor Provisions.  Each holder of any Note that is not a
signatory to the Intercreditor Agreement, by its acceptance of a Note, agrees
to all of the terms, covenants, agreements and indemnifications that are
binding on the holders of the “Prudential Notes” under the Intercreditor
Agreement.  Promptly upon the request of
Prudential, each such holder shall execute and deliver a counterpart of the
Intercreditor Agreement or a joinder agreement in form and substance
satisfactory to Prudential in order to further evidence such agreement.


 


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


 


(f)            Definitions.


 


(I)            Paragraph
10B of the Agreement is amended by deleting the existing definitions of
“Collateral”, “Collateral Agent”, “Intercreditor Agreement”, “NCNB Agreement”
and “Prudential” and inserting the following definitions in lieu thereof:


 


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


 


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“Collateral
Agent” shall mean NCNB, in its capacity as Collateral Agent under
the Intercreditor Agreement and any successors thereunder.


 


“Intercreditor
Agreement” shall mean the Intercreditor dated as of April 24, 2003,
among Prudential, the holders of the Notes, the banks party to the NCNB
Agreement, and Bank of America, as collateral agent, as the provisions thereof
may from time to time be amended or waived in compliance with the terms
thereof.


 


“NCNB
Agreement” shall mean that certain Credit Agreement dated as of
April 24, 2003, among the Company, Bank of America, as Administrative Agent and
L/C Issuer, Bank One, NA and Fleet National Bank, as Co-Syndication Agents, The
Royal Bank of Scotland plc and Wachovia Bank, National Association, as
Co-Documentation Agents, and the lenders party thereto, as the provisions
thereof may from time to time be amended or waived in compliance with paragraph
6E.


 


“Prudential”
shall mean Prudential Investment Management, Inc.


 


(II)           The
following definitions are inserted in paragraph 10B in the appropriate
alphabetical positions therein:


 


“Debt
Rating” shall mean, as of any date of determination, the rating as
determined by either S&P or Moody’s of the Company’s Debt under the NCNB
Agreement or any replacement credit facility therefor; provided that if
a Debt Rating is issued by each of the foregoing rating agencies, then the
lower of such Debt Ratings shall apply.


 


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


 


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“Domestic
Subsidiary Guarantor” means any Subsidiary that is (i) organized
under the laws of any political subdivision of the United States, and (ii)
required to execute and deliver a Guaranty pursuant to paragraph 5M of this
Agreement.


 


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


 


“Mortgage”
shall mean, collectively, any Mortgage, Assignment, Security Agreement, Fixture
Filing, and Financing Statement or similar agreement delivered by any one or
more Subsidiary of the Company with regard to the Oil and Gas Collateral
pursuant to paragraph 5Q.


 


“Oil
and Gas Collateral” shall have the meaning specified in paragraph
5Q.


 


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


 


“PUC
Subsidiary” shall mean any Subsidiary that is required to be
regulated as a public utility or a natural gas company under applicable law and
that is prohibited under such applicable law from incurring a Guaranty and/or
granting Liens or security interests in any Collateral, in each case without
the approval of the applicable public utility commission having regulatory
authority over such PUC Subsidiary or FERC (to the extent regulated by FERC).


 


“Replacement
Ratings Agency” shall have the meaning specified in paragraph 11R.


 


“Security
Documents” shall mean all 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 the Company or any
Subsidiary to Prudential, the holders of the Notes or the Collateral Agent in
connection with this Agreement or any transaction contemplated hereby to secure
or guarantee the payment of any part of the obligations hereunder or under the
Notes or the performance of the other duties and obligations of the Company or
any Subsidiary under this Agreement, including, without limitation, the
Mortgages and the Pledge Agreements.


 


(g)           Miscellaneous. The Agreement is amended to add a new paragraph
11R that reads as follows:


 


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


 


10

















 


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


 


(h)           Exhibit
I.  A
new Exhibit I is added to the Agreement in the form attached as Exhibit
I hereto.


 


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


 


(a)           Due
Authorization; Noncontravention.  The execution, delivery and performance by
the Company and each Guarantor of this Amendment, the Intercreditor Agreement
and the Pledge Agreement Amendments have been duly authorized by all necessary
corporate or limited liability company action, as applicable, and do not and
will not (i) contravene the terms of the charter and by-laws or other
organizational documents of the Company or any Guarantor, (ii) conflict
with or result in any breach or contravention of, or the creation of any Lien
(other than the Liens created by the Security Documents) under, any document
evidencing any contractual obligation to which any such Person is a party or
any order, injunction, writ or decree of any governmental authority binding on
any such Person or its property, or (iii) violate any applicable law
binding on or affecting any such Person.


 


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


 


(c)           Representations
and Warranties.  The representations and warranties of the Company and the
Guarantors set forth in the Agreement, the Guaranties and the Security
Documents are true and correct on and as of the date hereof, both before and
after giving effect to the effectiveness of this Amendment (except to the
extent such representations and warranties expressly are limited to an earlier
date, in which such representations and warranties are true and correct on and
as of such earlier date).


 


(d)           No
Defaults. 
No Default or Event of Default exists under the Agreement, the Notes,
any Guaranty, any Security Document or any other agreement or instrument
executed in connection therewith and no default or event of default exists
under the NCNB Agreement, any


 


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agreement or instrument
executed in connection therewith or any other material contract or agreement to
which the Company or any of the Guarantors is a party, and, to the Company’s
knowledge, no such default or event of default is imminent.


 


4.     Miscellaneous.


 


(a)           Effect
on Agreement.  On and after
the effective date of this Amendment, each reference in the Agreement to “this
Agreement”, “hereunder”, “hereof”, or words of like import referring to the
Agreement and each reference in the Notes and all other documents executed in
connection with the Agreement to “the Agreement”, “thereunder”, “thereof”, or
words of like import referring to the Agreement shall mean the Agreement as
amended by this Amendment. The Agreement, as amended by this Amendment, is and
shall continue to be in full force and effect and is hereby in all respects
ratified and confirmed.


 


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


 


(c)           Effectiveness.
This Amendment shall become effective as of the date first above written when
and if each of the conditions set forth in this subparagraph (c) shall have
been satisfied.


 


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


 


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


 


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


 


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


 


(V)           Representations
and Warranties.  Each of the
representations and warranties made in this Amendment shall be true and correct
on and as of the date hereof as if made on and as of such date, both before and
after giving effect to this Amendment.


 


12

















 


(VI)         Fees
and Expenses of Counsel.  The
Company shall have paid the estimated fees, costs and out-of-pocket expenses
incurred by external counsel to Prudential in connection with the preparation,
negotiation, execution and delivery of this Amendment, the Intercreditor
Agreement, the Pledge Agreement Amendments and all transaction contemplated
hereby and thereby.


 


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


 


(c)           Governing Law.   THIS AMENDMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAW OF THE STATE OF NEW YORK.


 


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


 


(g)           FINAL AGREEMENT.  THIS AMENDMENT, TOGETHER WITH THE
INTERCREDITOR AGREEMENT, THE AGREEMENT, THE PLEDGE AGREEMENTS AND THE PLEDGE
AGREEMENT AMENDMENTS, 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.


 


[Remainder of page is intentionally left blank; signature
pages follow]


 


13

















 


If you agree to the terms
and provisions hereof, please evidence your agreement by executing and
returning a counterpart of this Amendment to Western Gas Resources, Inc., 1099
18th Street, Suite 1200, Denver, CO 80202, Attention: General Counsel.


 


 


	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WESTERN GAS RESOURCES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William J.
  Krysiak

  
	
   

  	
   

  	
  William J. Krysiak

  
	
   

  	
   

  	
  Executive Vice President- CFO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Agreed as of the date
  first above written:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Ric E. Abel

  	
   

  
	
   

  	
  Ric E. Abel

  	
   

  
	
   

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PRUCO LIFE INSURANCE COMPANY

  
	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Ric E. Abel

  	
   

  
	
   

  	
  Ric E. Abel

  	
   

  
	
   

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PRUDENTIAL INVESTMENT MANAGEMENT, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Ric E. Abel

  	
   

  
	
   

  	
  Ric E. Abel

  	
   

  
	
   

  	
  Vice President

  	
   

  
						



 


14

















 


	
  ING LIFE INSURANCE & ANNUITY COMPANY

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Prudential Private Placement Investors, L.P. (as
  Investment Advisor)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Prudential Private Placement Investors, Inc.,
  General Partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Ric E. Abel

  	
   

  	
   

  
	
   

  	
   

  	
  Ric E. Abel

  	
   

  	
   

  
	
   

  	
   

  	
  Vice President

  	
   

  	
   

  
							



 


15

















 


Agreed and acknowledged
by each of the undersigned for


the purposes set forth in
paragraph 4(f).


 


 


	
   

  	
  MIGC, INC.

  
	
   

  	
  MGTC, INC.

  
	
   

  	
  WESTERN GAS RESOURCES-TEXAS, INC.

  
	
   

  	
  MOUNTAIN GAS RESOURCES, INC.

  
	
   

  	
  LANCE OIL & GAS COMPANY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William J. Krysiak

  	
   

  
	
   

  	
   

  	
  William J. Krysiak

  
	
   

  	
   

  	
  Executive Vice President- CFO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WESTERN GAS WYOMING, L.L.C.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Western Gas Resources, Inc., its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William J. Krysiak

  	
   

  
	
   

  	
   

  	
  William J. Krysiak

  
	
   

  	
   

  	
  Executive Vice President- CFO

  
								



 


16

















 


EXHIBIT A-1


 


[FORM OF AMENDMENT NO. 2 TO PLEDGE AGREEMENT]


 


To be attached.


 

















 


EXHIBIT A-2


 


[FORM OF AMENDMENT NO. 2 TO PLEDGE AGREEMENT]


 


To be attached.


 

















 


EXHIBIT I


 


[FORM OF MORTGAGE]


 


To be attached.