-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KWy5jNBBdCRxmbtLpFJOYOD4wRA65DeFlNfl+s6Q82CMAgVyMaiEXZDTYSHAq/uE dq0VDE4buocLyz+85gpXWg== 0000927356-98-001358.txt : 19980817 0000927356-98-001358.hdr.sgml : 19980817 ACCESSION NUMBER: 0000927356-98-001358 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERN GAS RESOURCES INC CENTRAL INDEX KEY: 0000856716 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION [4922] IRS NUMBER: 841127613 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10389 FILM NUMBER: 98687334 BUSINESS ADDRESS: STREET 1: 12200 N PECOS ST CITY: DENVER STATE: CO ZIP: 80234-3439 BUSINESS PHONE: 3034525603 MAIL ADDRESS: STREET 1: 12200 NORTH PECOS ST CITY: DENVER STATE: CO ZIP: 80234 10-Q 1 FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO_________ Commission file number 1-10389 ------- WESTERN GAS RESOURCES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 84-1127613 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 12200 N. Pecos Street, Denver, Colorado 80234-3439 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (303) 452-5603 - -------------------------------------------------------------------------------- Registrant's telephone number, including area code No Changes - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report). Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- On August 1, 1998, there were 32,147,993 shares of the registrant's Common Stock outstanding. ================================================================================ 1 WESTERN GAS RESOURCES, INC. FORM 10-Q TABLE OF CONTENTS
PART I - Financial Information Page - ------------------------------ ---- Item 1. Financial Statements (Unaudited) Consolidated Balance Sheet - June 30, 1998 and December 31, 1997................ 3 Consolidated Statement of Cash Flows - Six months ended June 30, 1998 and 1997........................................................................ 4 Consolidated Statement of Operations - Three and Six months ended June 30, 1998 and 1997.......................................................... 5 Consolidated Statement of Changes in Stockholders' Equity - Six months ended June 30, 1998................................................................... 6 Notes to Consolidated Financial Statements...................................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................................... 8 PART II - Other Information - --------------------------- Item 1. Legal Proceedings.............................................................. 16 Item 4. Submission of Matters to a Vote of Security Holders............................ 17 Item 6. Exhibits and Reports on Form 8-K............................................... 17 Signatures................................................................................ 18
2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements -------------------- WESTERN GAS RESOURCES, INC. CONSOLIDATED BALANCE SHEET (000s, except share data)
June 30, December 31, 1998 1997 ----------- ------------- ASSETS (Unaudited) ------ Current assets: Cash and cash equivalents.................................................... $ 10,018 $ 19,777 Trade accounts receivable, net............................................... 207,984 258,791 Product inventory............................................................ 53,159 17,261 Parts inventory.............................................................. 9,672 9,405 Other........................................................................ 2,943 2,364 ---------- ---------- Total current assets....................................................... 283,776 307,598 ---------- ---------- Property and equipment: Gas gathering, processing, storage and transmission.......................... 1,062,024 1,050,676 Oil and gas properties and equipment......................................... 146,983 136,129 Construction in progress..................................................... 72,107 64,268 ---------- ---------- 1,281,114 1,251,073 Less: Accumulated depreciation, depletion and amortization.................. (307,052) (294,350) ---------- ---------- Total property and equipment, net.......................................... 974,062 956,723 ---------- ---------- Other assets: Gas purchase contracts (net of accumulated amortization of $28,766 and $27,554, respectively)..................................................... 42,475 43,687 Other........................................................................ 39,539 40,268 ---------- ---------- Total other assets......................................................... 82,014 83,955 ---------- ---------- Total assets................................................................... $1,339,852 $1,348,276 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable............................................................. $ 232,386 $ 326,696 Accrued expenses............................................................. 20,471 27,151 Dividends payable............................................................ 4,217 4,217 ---------- ---------- Total current liabilities................................................ 257,074 358,064 Long-term debt................................................................. 521,914 441,357 Deferred income taxes payable.................................................. 90,423 80,743 ---------- ---------- Total liabilities.......................................................... 869,411 880,164 ---------- ---------- Commitments and contingent liabilities......................................... - - Stockholders' equity: Preferred stock, par value $.10; 10,000,000 shares authorized: $2.28 cumulative preferred stock; 1,400,000 shares issued and outstanding ($35,000,000 aggregate liquidation preference)........................... 140 140 $2.625 cumulative convertible preferred stock; 2,760,000 shares issued and outstanding ($138,000,000 aggregate liquidation preference).............. 276 276 Common stock, par value $.10; 100,000,000 shares authorized; 32,173,009 and 32,171,453 shares issued, respectively..................................... 3,217 3,217 Treasury stock, at cost, 25,016 shares....................................... (788) (788) Additional paid-in capital................................................... 399,577 399,554 Retained earnings............................................................ 69,104 66,999 Notes receivable from key employees secured by common stock.................. (1,085) (1,286) ---------- ---------- Total stockholders' equity................................................. 470,441 468,112 ---------- ---------- Total liabilities and stockholders' equity..................................... $1,339,852 $1,348,276 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 3 WESTERN GAS RESOURCES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (000s)
Six Months Ended June 30, ----------------------------- 1998 1997 ----------- --------- Reconciliation of net income to net cash (used in) provided by operating activities: Net income................................................................... $ 10,540 $ 11,486 Add income items that do not affect working capital: Depreciation, depletion and amortization................................... 29,328 30,570 Deferred income taxes...................................................... 9,680 5,121 (Gain) loss on the sale of property and equipment.......................... (14,813) 71 Other non-cash items, net.................................................. 778 1,799 Adjustments to working capital to arrive at net cash (used in) provided by operating activities: Decrease in trade accounts receivable...................................... 50,907 141,609 Increase in product inventory.............................................. (36,457) (11,416) (Increase) decrease in parts inventory..................................... (267) 277 Increase in other current assets........................................... (579) (2,785) Decrease in other assets and liabilities, net.............................. 558 3 Decrease in accounts payable............................................... (94,310) (126,273) Decrease in accrued expenses............................................... (6,950) (7,093) ----------- --------- Net cash (used in) provided by operating activities.......................... (51,585) 43,369 ----------- --------- Cash flows from investing activities: Purchase of property and equipment......................................... (51,838) (117,691) Proceeds from the dispositions of property and equipment................... 22,250 4,946 Contributions to equity investees.......................................... (729) (2,436) ----------- --------- Net cash used in investing activities........................................ (30,317) (115,181) ----------- --------- Cash flows from financing activities: Net proceeds from exercise of common stock options......................... 23 161 Debt issue costs paid...................................................... (2) (659) Payments on revolving credit facility...................................... (1,355,500) (439,650) Borrowings under revolving credit facility................................. 1,443,200 568,150 Payments on long-term debt................................................. (7,143) (82,143) Dividends paid............................................................. (8,435) (8,433) ----------- --------- Net cash provided by financing activities.................................... 72,143 37,426 ----------- --------- Net decrease in cash and cash equivalents.................................... (9,759) (34,386) Cash and cash equivalents at beginning of period............................. 19,777 39,504 ----------- --------- Cash and cash equivalents at end of period................................... $ 10,018 $ 5,118 =========== =========
The accompanying notes are an integral part of the consolidated financial statements. 4 WESTERN GAS RESOURCES, INC. CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (000s, except share and per share amounts)
Three Months Ended Six Months Ended June 30, June 30, -------------------------- ------------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ----------------- Revenues: Sale of residue gas................................... $ 378,345 $ 307,019 $ 804,972 $ 736,201 Sale of natural gas liquids........................... 108,866 131,643 232,624 300,742 Processing, transportation and storage revenue........ 10,656 9,603 21,991 19,872 Sale of electric power................................ - 13,310 20 37,416 Other, net............................................ 2,904 2,000 21,619 4,882 ----------- ----------- ----------- ----------- Total revenues..................................... 500,771 463,575 1,081,226 1,099,113 ---------- ----------- ----------- ----------- Costs and expenses: Product purchases..................................... 453,181 412,152 960,468 982,517 Plant operating expense............................... 20,406 18,522 40,661 36,507 Oil and gas exploration and production expense........ 1,603 1,997 2,995 3,164 Depreciation, depletion and amortization.............. 14,826 15,396 29,328 30,570 Selling and administrative expense.................... 6,783 7,944 14,907 15,678 Interest expense...................................... 8,140 6,302 16,296 12,729 ----------- ----------- ----------- ----------- Total costs and expenses........................... 504,939 462,313 1,064,655 1,081,165 ----------- ----------- ----------- ----------- Income (loss) before taxes.............................. (4,168) 1,262 16,571 17,948 Provision (benefit) for income taxes: Current............................................... (860) (79) (3,649) 1,341 Deferred.............................................. (663) 463 9,680 5,121 ----------- ----------- ----------- ----------- Total provision (benefit) for income taxes......... (1,523) 384 6,031 6,462 ----------- ----------- ----------- ----------- Net income (loss)....................................... (2,645) 878 10,540 11,486 Preferred stock requirements............................ (2,610) (2,610) (5,220) (5,220) ----------- ----------- ----------- ----------- Income (loss) attributable to common stock.............. $ (5,255) $ (1,732) $ 5,320 $ 6,266 =========== =========== =========== =========== Income (loss) per share of common stock................. $(.16) $(.05) $.17 $.20 =========== =========== =========== =========== Weighted average shares of common stock outstanding..... 32,147,499 32,135,992 32,147,035 32,123,844 =========== =========== =========== =========== Income (loss) per share of common stock - assuming dilution...................................... $(.16) $(.05) $.17 $.20 =========== =========== =========== =========== Weighted average shares of common stock outstanding - assuming dilution...................................... 32,149,859 32,138,792 32,149,885 32,127,074 =========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 5 WESTERN GAS RESOURCES, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) (000s, except share amounts)
Shares of Shares of $2.625 $2.625 $2.28 Cumulative Shares $2.28 Cumulative Cumulative Convertible Shares of Common Cumulative Convertible Preferred Preferred of Common Stock Preferred Preferred Stock Stock Stock in Treasury Stock Stock ---------- ----------- ----------- ----------- ---------- ----------- Balance at December 31, 1997 1,400,000 2,760,000 32,146,437 25,016 $ 140 $ 276 Net income............................. - - - - - - Stock options exercised................ - - 1,556 - - - Loans forgiven......................... - - - - - - Dividends declared on common stock..... - - - - - - Dividends declared on $2.28 cumulative preferred stock...................... - - - - - - Dividends declared on $2.625 cumulative convertible preferred stock.......... - - - - - - ---------- --------- ----------- --------- --------- ---------- Balance at June 30, 1998 1,400,000 2,760,000 32,147,993 25,016 $ 140 $ 276 ========== ========= =========== ========= ========= ========== Notes Total Additional Receivable Stock- Common Treasury Paid-In Retained from Key holders' Stock Stock Capital Earnings Employees Equity ---------- ----------- ----------- ----------- ---------- ---------- Balance at December 31, 1997 $3,217 $(788) $399,554 $66,999 $(1,286) $468,112 Net income............................. - - - 10,540 - 10,540 Stock options exercised................ - - 23 - - 23 Loans forgiven......................... - - - - 201 201 Dividends declared on common stock..... - - - (3,215) - (3,215) Dividends declared on $2.28 cumulative preferred stock...................... - - - (1,597) - (1,597) Dividends declared on $2.625 cumulative convertible preferred stock.......... - - - (3,623) - (3,623) ---------- ----------- ----------- ----------- ---------- ----------- Balance at June 30, 1998 $3,217 $(788) $399,577 $69,104 $(1,085) $470,441 ========== =========== =========== =========== ========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 6 WESTERN GAS RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) GENERAL The interim consolidated financial statements presented herein should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's Form 10-K for the year ended December 31, 1997. The interim consolidated financial statements as of June 30, 1998 and for the three and six month periods ended June 30, 1998 and 1997 included herein are unaudited but reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly present the results for such periods. The results of operations for the three and six months ended June 30, 1998 are not necessarily indicative of the results of operations expected for the year ended December 31, 1998. Certain prior year amounts in the Consolidated Financial Statements and Notes have been reclassified to conform to the presentation used in 1998. EARNINGS (LOSS) PER SHARE OF COMMON STOCK Earnings per share of common stock is computed by dividing income attributable to common stock by the weighted average shares of common stock outstanding. In addition, earnings per share of common stock - assuming dilution is computed by dividing income attributable to common stock by the weighted average shares of common stock outstanding as adjusted for potential common shares. Income attributable to common stock is income less preferred stock dividends. The Company declared preferred stock dividends of $2.6 million and $5.2 million, respectively, for both of the three and six month periods ended June 30, 1998 and 1997. Common stock options, which are potential common shares, had a dilutive effect on earnings per share and increased the weighted average shares of common stock outstanding by 2,360 and 2,800 shares for the three month periods ended June 30, 1998 and 1997, respectively. Common stock options had a dilutive effect on earnings per share and increased the weighted average shares of common stock outstanding by 2,850 and 3,230 shares for the six month periods ended June 30, 1998 and 1997, respectively. The numerators and the denominators for the three and six month periods ended June 30, 1998 and 1997 are not adjusted to reflect the Company's $2.625 Cumulative Convertible Preferred Stock outstanding. These shares are antidilutive as the incremental shares result in an increase in earnings per share after giving effect to the dividend requirements. SUPPLEMENTARY CASH FLOW INFORMATION Interest paid was $20.5 million and $15.4 million, respectively, for the six months ended June 30, 1998 and 1997. Income taxes paid were $2.6 million for the six months ended June 30, 1997. No such taxes were paid for the six months ended June 30, 1998. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS No. 133") with an effective date for fiscal years beginning after June 15, 1999. The Company will comply with the accounting and reporting requirements of SFAS No. 133 when required. The Company has not yet completed its evaluation of the impact that SFAS No. 133 will have upon its financial statements. LEGAL PROCEEDINGS Reference is made to "Part II - Other Information - Item 1. Legal Proceedings," of this Form 10-Q. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS ------------- The following discussion and analysis relates to factors which have affected the consolidated financial condition and results of operations of the Company for the three and six month periods ended June 30, 1998 and 1997. Certain prior year amounts have been reclassified to conform to the presentation used in 1998. Reference should also be made to the Company's Consolidated Financial Statements and Notes thereto included elsewhere in this document. This section, as well as other sections in this Form 10-Q, contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by the use of forward-looking terminology, such as "may," "intend," "will," "expect," "anticipate," "estimate," or "continue" or the negative thereof or other variations thereon or comparable terminology. In addition to the important factors referred to herein, numerous factors affecting the gas processing industry generally and in the markets for gas and NGLs in which the Company operates, could cause actual results to differ materially from those in such forward-looking statements. RESULTS OF OPERATIONS THREE AND SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 (000S, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA).
Three Months Ended Six Months Ended June 30, June 30, -------------------- Percent ---------------------------- Percent 1998 1997 Change 1998 1997 Change --------- --------- --------- ---------- ---------------- -------- FINANCIAL RESULTS: Revenues................................... $500,771 $463,575 8 $1,081,226 $1,099,113 2 Gross profit............................... 10,755 15,508 (31) 47,774 46,355 3 Net income................................. (2,645) 878 - 10,540 11,486 (8) Income (loss) per share of common stock.... (.16) (.05) (220) .17 .20 (15) Income (loss) per share of common stock - assuming dilution....................... (.16) (.05) (220) .17 .20 (15) Net cash (used in) provided by operating activities..................... $(35,269) $(21,641) (63) $ (51,585) $ 43,369 - OPERATING DATA: Average gas sales (MMcf/D)................. 2,010 1,765 14 2,145 1,795 19 Average NGL sales (MGal/D)................. 4,620 4,440 4 4,640 4,360 6 Average gas prices ($/Mcf)................. $ 2.07 $ 1.90 9 $ 2.07 $ 2.26 (8) Average NGL prices ($/Gal)................. $ .26 $ .32 (19) $ .27 $ .38 (29)
Revenues from the sale of residue gas increased approximately $71.3 million to $378.3 million for the quarter ended June 30, 1998 compared to the same period in 1997. Average gas sales volumes increased 245 MMcf per day to 2,010 MMcf per day for the quarter ended June 30, 1998 compared to the same period in 1997, primarily as a result of an increase in the sale of residue gas purchased from third parties. Average gas prices increased $.17 per Mcf to $2.07 per Mcf for the three months ended June 30, 1998 compared to the same period in 1997. Revenues from the sale of residue gas increased approximately $68.8 million to $805.0 million for the six months ended June 30, 1998 compared to the same period in 1997. Average gas sales volumes increased 350 MMcf per day to 2,145 MMcf per day for the six months ended June 30, 1998 compared to the same period in 1997, primarily due to an increase in the sale of residue gas purchased from third parties. Average gas prices decreased $.19 per Mcf to $2.07 per Mcf for the six months ended June 30, 1998 compared to the same period in 1997. Included in the average gas price was approximately $668,000 of loss and $218,000 of gain, respectively, recognized for the three and six months ended June 30, 1998 related to futures positions on equity gas volumes. The Company has entered into futures positions for a portion of its equity gas for the remainder of 1998. See further discussion in "Liquidity and Capital Resources - Risk Management Activities." Revenues from the sale of NGLs decreased approximately $22.8 million to $108.9 million for the quarter ended June 30, 1998 compared to 1997. Average NGL sales volumes increased 180 MGal per day to 4,620 MGal per day, primarily due to an increase in the sale of NGLs purchased from third parties. Average NGL prices decreased $.06 per gallon to $.26 per gallon for the quarter ended June 30, 1998 compared to 1997. Revenues from the sale of NGLs decreased approximately $68.1 million 8 to $232.6 million for the six months ended June 30, 1998 compared to 1997. Average NGL sales volumes increased 280 MGal per day to 4,640 MGal per day, primarily due to an increase in the sale of NGLs purchased from third parties. Average NGL prices decreased $.11 per gallon to $.27 per gallon for the six months ended June 30, 1998 compared to 1997. Included in the average NGL price was approximately $1.4 million and $3.6 million, respectively, of gain recognized for the three and six months ended June 30, 1998 related to futures positions on equity volumes. The Company has entered into futures positions for a portion of its equity production for the remainder of 1998. See further discussion in "Liquidity and Capital Resources -Risk Management Activities." Revenue associated with the sale of electric power decreased $13.3 million and $37.4 million, respectively, for the three and six months ended June 30, 1998 compared to the same periods in 1997, primarily because the Company had minimal transactions in this market during 1998. During the second half of 1997, the Company elected to discontinue wholesale trading of electric power, due to a lack of profitability. Other net revenue remained relatively constant and increased $16.7 million, respectively, for the three and six months ended June 30, 1998 compared to the same periods in 1997. The increase for the six month ended June 30, 1998 is primarily due to a $14.9 million gain on the sale of the Company's Perkins facility, and the Company recognized $1 million of revenue related to an option payment received from RIS Resources (USA) Inc. ("RIS"). The option payment is associated with the potential sale of a portion of certain of the Company's assets in Southwest Wyoming. See further discussion at "Liquidity and Capital Resources - Capital Investment Program - Southwest Wyoming." Product purchases increased $41.0 million and decreased $22.0 million, respectively, for the three and six months ended June 30, 1998 compared to the same periods in 1997. The increase in product purchases for the three months ended June 30, 1998 is due primarily to increased purchases from third parties. The decrease in product purchases for the six month period ended June 30, 1998 is primarily due to the decrease in commodity prices which was somewhat offset by an increase in volumes sold. Included in product purchases were lower of cost or market write-downs of NGL inventory of $194,000 and $465,000, respectively, for the three months ended June 30, 1998 and 1997, and of $522,000 and $963,000, respectively, for the six months ended June 30, 1998 and 1997. Combined product purchases as a percentage of residue gas, NGL and electric power sales increased from 91% to 93% for both the three and six month periods ended June 30, 1998 compared to the same periods in 1997. Over the past several years, the Company has experienced narrowing margins in its third-party sales related to the increasing competitiveness of the natural gas marketing industry. During the six months ended June 30, 1998, margins on the sale of third-party gas declined and averaged approximately $.02 per Mcf compared to approximately $.03 for the same period in 1997. Contributing to the increase in the product purchase percentage for the six months ended June 30, 1998 were higher payments related to the Company's "keepwhole" contracts at its Granger facility. Under a "keepwhole" contract, the Company's margin is reduced when the value of NGLs declines relative to the value of residue gas. Plant operating expense increased $1.9 million and $4.2 million, respectively, for the three and six months ended June 30, 1998 compared to the same periods in 1997. The increase is primarily due to additional compression costs associated with the increased Coal Bed Methane production activities and expenses incurred at the Bethel Treating facility, which became partially operational during the third quarter of 1997. Interest expense increased $1.8 million and $3.6 million, respectively, for the three and six months ended June 30, 1998 compared to the same periods in 1997. The increase is due to less interest being capitalized related to capital projects, primarily the Bethel facility, and larger debt balances outstanding during the three and six month periods ended June 30, 1998 compared to the corresponding periods in 1997. The larger debt balances resulted primarily from higher product inventory positions and capital expenditures. LIQUIDITY AND CAPITAL RESOURCES The Company's sources of liquidity and capital resources historically have been net cash provided by operating activities, funds available under its financing facilities and proceeds from offerings of equity securities. In the past, these sources have been sufficient to meet its needs and finance the growth of the Company's business. The Company can give no assurance that the historical sources of liquidity and capital resources will be available for future development and acquisition projects, and it may be required to seek alternative financing sources. Net cash provided by operating activities is primarily affected by product prices and sales of inventory, the Company's success in increasing the number and efficiency of its facilities and the volumes of natural gas processed by such facilities, as well as the margin on third-party product purchased for resale. The Company's continued growth will be dependent upon success in the areas of marketing, additions to dedicated plant reserves, acquisitions and new project development. Historically, oil prices have been volative and subject to rapid price fluctuations. The oil and gas industry is currently experiencing significantly declining oil prices. Such prices have declined approximately 30% during the first half of 1998 to approximately $12.71 per barrel as of August 12, 1998. In addition, the start-up volumes associated with the Bethel Treating facility have been lower than anticipated. If the current pricing of oil and associated NGLs continues or declines and volumes associated with the Bethel Treating facility do not increase, the Company is uncertain as to its ability to satisfy its interest coverage covenants under certain of its debt agreements during 1999. However, the Company believes it can obtain amendments or waivers from the necessary lenders. The Company believes that the amounts available to be borrowed under the Revolving Credit Facility, together with cash provided by operating activities, will provide it with sufficient funds to connect new reserves, maintain its existing facilities and complete its current capital expenditure program. Depending on the timing and the amount of the Company's future projects, it may be required to seek additional sources of capital. The Company's ability to secure such capital is restricted by its credit facilities, although it may request additional borrowing capacity from its lenders, seek waivers from its lenders to permit it to borrow funds from third parties, seek replacement credit facilities from other lenders, use stock as a currency for an acquisition, sell existing assets or a combination of such alternatives. While the Company believes that it would be able to secure additional financing, if required, no assurance can be given that it will be able to do so or as to the terms of any such financing. Despite the declining oil prices experienced in the first half of 1998, the Company also believes that cash provided by operating activities will be sufficient to meet its debt service and preferred stock dividend requirements in 1998. 9 The Company's sources and uses of funds for the six months ended June 30, 1998 are summarized as follows (000s): SOURCES OF FUNDS: Borrowings on Revolving Credit Facility................... $1,443,200 Proceeds from the dispositions of property and equipment.. 22,250 Proceeds from exercise of common stock options............ 23 ---------- Total sources of funds.................................... $1,465,473 ========== USES OF FUNDS: Payments related to long-term debt........................ $1,362,645 Net cash used in operating activities..................... 51,585 Capital expenditures...................................... 52,567 Dividends paid............................................ 8,435 ---------- Total uses of funds..................................... $1,475,232 ========== Additional sources of liquidity available to the Company are volumes of gas and NGLs in storage facilities. The Company stores gas and NGLs primarily to ensure an adequate supply for long-term sales contracts and for resale during periods when prices are favorable. The Company held gas in storage and held imbalances for such purposes of approximately 18.5 Bcf at an average cost of $2.10 per Mcf at June 30, 1998 compared to 6.0 Bcf at an average cost of $1.97 per Mcf at December 31, 1997, at various storage facilities, including the Katy Facility. At June 30, 1998, the Company had hedging contracts in place for anticipated sales of approximately 17.4 Bcf of stored gas at a weighted average price of $2.36 per Mcf. The Company held NGLs in storage of 50,000 MGal, consisting primarily of propane, at an average cost of $.28 per gallon, and 14,400 MGal, at an average cost of $.37 per gallon, at June 30, 1998 and December 31, 1997, respectively, at various third-party storage facilities. At June 30, 1998, the Company had hedging contracts in place for anticipated sales of approximately 5,200 MGal of stored NGLs at a weighted average price of $.25 per gallon, consisting primarily of propane. Risk Management Activities The Company enters into futures transactions on the New York Mercantile Exchange ("NYMEX") and the Kansas City Board of Trade and OTC swaps and options with counterparties it considers to be creditworthy consisting primarily of financial institutions and other natural gas companies. Using these tools, as well as physical forward transactions, the Company has hedged a portion of its equity volumes of gas and NGLs in 1998 at pricing levels in excess of its 1998 operating budget. The Company's 1998 hedging strategy established a minimum and maximum price to the Company while allowing market participation between these levels. As of August 3, 1998, the Company had hedged approximately 75% of its anticipated equity gas for the remainder of 1998 at a weighted average NYMEX- equivalent minimum price of $2.21 per Mcf. Additionally, the Company has hedged approximately 25% of its anticipated equity NGLs, primarily crude oil, for the remainder of 1998 at a weighted average composite Mont Belvieu and West Texas Intermediate Crude-equivalent minimum price of $.36 per gallon. Capital Investment Program Capital expenditures related to existing operations are expected to be approximately $122.8 million during 1998, consisting of the following: capital expenditures related to gathering, processing and pipeline assets are expected to be approximately $74.1 million, of which approximately $64.1 million is budgeted to be used for new connects, system expansions and asset consolidations and approximately $10.0 million for maintaining existing facilities. The Company expects capital expenditures on exploration and production activities and other miscellaneous items to be approximately $44.3 million and $4.4 million, respectively. These capital expenditures represent anticipated expenditures, and to a certain extent, are subject to adjustment in response to present or forecasted market conditions. The Company is currently re-evaluating the level of capital expenditures at its processing facilities to reflect reductions in certain producers' drilling plans and capital expenditures related to its exploration and production activities pending the completion of its analysis of the impact of the Southern Ute Litigation. See further discussion at "Coal Bed Methane." As of June 30, 1998, the Company had expended $52.6 million, consisting of the following: (i) $25.7 million for new connects, system expansions and asset consolidations; (ii) $4.2 million for maintaining existing facilities; (iii) $21.3 for exploration and production activities; and (iv) $1.4 million related to other miscellaneous items. 10 Coal Bed Methane. The Company is expanding its Powder River Basin coal bed methane natural gas gathering system and developing its own coal seam gas reserves in Wyoming. The Company's revised capital budget provides for expenditures of approximately $51.4 million during 1998. This capital budget includes approximately $28.2 million for drilling costs, production equipment and purchase of operating wells and undeveloped acreage. The remainder is to be used primarily for compression equipment. On July 20, 1998, the United States Court of Appeals, Tenth Circuit, ruled in favor of the Southern Ute Indian Tribe in a case entitled Southern Ute Indian Tribe v. Amoco Production Company, et --------------------------------------------------------- al., ("Southern Ute Litigation") and found that coal bed methane was reserved - ---- under patents issued pursuant to the 1909 and 1910 Coal Land Acts to the United States government, and subsequently transferred to a Native American tribe, along with the coal. As of August 1998, approximately 31% of the Company's leases in the Powder River coal bed are from landowners whose title was derived under those acts and under which the federal government may have retained the rights to the coal bed methane. In July 1998, approximately 17 MMcf per day of gas, net to the Company, was produced from those leases. In response to this decision, the Company will curtail drilling on affected lands pending resolution of the Southern Ute Litigation. As a result, the Company is currently re- evaluating the level of capital expenditures related to its exploration and production activities in this area pending the completion of its analysis of the impact of the Southern Ute Litigation. The Company is currently evaluating its legal position and seeking legislative solutions to the issue. Depending upon future drilling success, additional capital expenditures will be required to continue expansion in this basin. However, because of drilling and other uncertainties, beyond the Company's control, including potential litigation, there can be no assurance that this level of capital expenditures will be incurred or that future capital expenditures will be made. See further discussion at "Part II - Other Information - Item 1. Legal Proceedings," of this Form 10-Q. On July 10, 1998 MIGC received approval from the Federal Energy Regulatory Commission ("FERC") to increase its pipeline capacity from 90 MMcf per day to 130 MMcf per day. The Company plans to expand the pipeline to approximately 110 MMcf per day to meet current capacity requirements and anticipates that construction will be completed by December 31, 1998. This portion of the construction is expected to cost approximately $4.0 million and is included in the $51.4 million capital budget. Further expansion of the pipeline will be contingent upon the Company's completion of its analysis of the impact of the Southern Ute Litigation. Southwest Wyoming. The Company began to expand its gas gathering and exploration and production activities in Southwest Wyoming during 1997. The Company's capital budget provides for expenditures of approximately $14.6 million during 1998. This capital budget includes approximately $4.6 million for drilling costs and production equipment and approximately $10.0 million related to gathering, transportation and expansion of the Granger facility. During 1997, the Company entered into two separate agreements with RIS to sell RIS undivided interests in certain assets. Under the first agreement, in February 1998, the Company sold RIS a 50% undivided interest in a portion of the Granger gathering system servicing a large area of mutual interest (the "Bird Canyon Line") for approximately $4.0 million. This amount approximated the Company's cost in such facilities. RIS and the Company expect to install jointly additional gathering assets in this area as needed. Under the second agreement, as amended, RIS exercised an option to purchase 50% of the Granger processing facility and its remaining gathering system and a 50% interest in the Company's 72% ownership interest in the Lincoln Road facility (collectively the "Granger Complex") for $105 million. Pursuant to the agreement with RIS, the Company will remain the operator of the Bird Canyon Line and the Granger Complex. The purchase price will be further increased by a pro-rata share of capital expenditures incurred at the Granger Complex from November 1997 until closing. The sale is subject to various regulatory approvals and third- party purchase preferential rights. The transaction is expected to close on August 31, 1998. As a component of RIS's financing, the Company has entered into a letter of intent with RIS to purchase $14 million of 9.5% preferred stock. The preferred stock will be issued by RIS and will be redeemable at RIS's option during the initial three years after issuance at varying premiums. If the preferred stock is not redeemed during the initial three year period, the preferred stock is convertible into shares of RIS Resources International Corp., RIS's parent company and a Vancover Stock Exchange listed Company. Bethel Treating Facility. In March 1998, the Company completed the construction of a 60-ton sulfur recovery plant to accommodate wells which contain greater concentrations of hydrogen sulfide. The Bethel Treating facility averaged gas throughput of approximately 65 MMcf per day and 67 MMcf per day for the three and six months ended June 30, 1998, respectively. The Company anticipates that in order to cover controllable plant operating costs, the Bethel Treating facility would need to average approximately 40 MMcf per day of throughput for 1998. The Bethel Treating facility is not expected to contribute to profitability during 1998. However, because of uncertainties related to third-party drilling programs, declines in volumes produced at certain wells and other conditions outside of the Company's control, the Company is currently unable to predict future throughput volumes associated with the Bethel Treating facility, which may be lower or higher than current throughput levels. 11 Long-term gathering and treating agreements have been signed with several producers, including Sonat Exploration Company ("Sonat"), UMC Petroleum Corporation, Broughton Associates Joint Venture and Union Pacific Resources Company ("UPRC"), relating to their interests in the Cotton Valley Pinnacle Reef trend. These agreements, in addition to other agreements, cover specified areas of dedication aggregating approximately 650,000 acres of previously undedicated interests and other individual wellsites. Pursuant to its agreement with Sonat, the Company will begin treating additional volumes in May 1999 which are currently being treated by a competitor. This production volume has declined from that previously reported in the Company's Annual Report on Form 10-K of 100 MMcf per day to approximately 25 MMcf per day. In addition, Sonat announced plans to reduce its drilling program in the Cotton Valley Pinnacle Reef. UPRC announced that it intended to divest certain assets, including some of its acreage in the Cotton Valley Pinnacle Reef. Any purchaser of UPRC's dedicated leases will continue to be subject to the Company's gathering and treating agreement. Other. The Company continually monitors the economic performance of each of its operating facilities to ensure that a desired cash flow objective is achieved. If an operating facility is not generating desired cash flows or does not fit in with the Company's strategic plans, the Company will explore various options, such as consolidation with other Company-owned facilities, dismantlement, asset swap or outright sale. Financing Facilities Revolving Credit Facility. The Company's unsecured variable rate Revolving Credit Facility was restated and amended on May 30, 1997. The Revolving Credit Facility is with a syndicate of nine banks and provides for a maximum borrowing commitment of $300 million, $241 million of which was outstanding at June 30, 1998. The Revolving Credit Facility's commitment period will terminate on March 31, 2002. At that time, any amounts outstanding on the Revolving Credit Facility will become due and payable. The Revolving Credit Facility bears interest at certain spreads over the Eurodollar rate, at the Federal Funds rate plus .50% or at the agent bank's prime rate. The Company has the option to determine which rate will be used. The Company also pays a facility fee on the commitment. The interest rate spreads and facility fee are adjusted based on the Company's debt to capitalization ratio. At June 30, 1998, the spread was .35% over the Eurodollar rate and the facility fee was .175%. The rate payable, including the facility fee, on the Revolving Credit Facility at June 30, 1998 was 6.412%. Beginning August 1998, the spread over the Eurodollar rate increased to .425% and the facility fee increased to .25%. Pursuant to the Revolving Credit Facility, the Company is required to maintain a debt to capitalization ratio (as defined therein) of not more than 60% as of the end of any fiscal quarter and a ratio of EBITDA (as defined therein) to interest and dividends on preferred stock as of the end of any fiscal quarter of not less than 2.75 to 1.0 through December 31, 1998, 3.0 to 1.0 from January 1, 1999 through December 31, 1999 and 3.25 to 1.0 thereafter. The Company generally utilizes excess daily funds to reduce any outstanding balances on the Revolving Credit Facility and associated interest expense and it intends to continue such practice. Master Shelf Agreement. In December 1991, the Company entered into a Master Shelf Agreement (as amended and restated, the "Master Shelf") with The Prudential Insurance Company of America ("Prudential"). The Master Shelf Agreement, as further restated and amended, is fully utilized, as indicated in the following table (000s):
Interest Final Issue Date Amount Rate Maturity Principal Payments Due - ------------------ -------- -------- ------------------ ----------------------------------------------- October 27, 1992 $ 25,000 7.51% October 27, 2000 $8,333 on each of October 27, 1998 through 2000 October 27, 1992 25,000 7.99% October 27, 2003 $8,333 on each of October 27, 2001 through 2003 September 22, 1993 25,000 6.77% September 22, 2003 single payment at maturity December 27, 1993 25,000 7.23% December 27, 2003 single payment at maturity October 27, 1994 25,000 9.05% October 27, 2001 single payment at maturity October 27, 1994 25,000 9.24% October 27, 2004 single payment at maturity July 28, 1995 50,000 7.61% July 28, 2007 $10,000 on each of July 28, 2003 through 2007 -------- $200,000 ========
Pursuant to the Master Shelf Agreement, the Company is required to maintain a current ratio (as defined therein) of at least 1.0 to 1.0, a minimum tangible net worth equal to the sum of $345 million plus 50% of consolidated net earnings earned from June 30, 1995 plus 75% of the net proceeds of any equity offerings after June 30, 1995, a debt to capitalization ratio (as defined therein) of no more than 55%, and an EBITDA (as defined 12 therein) to interest ratio of not less than 3.25 to 1.0 through October 31, 1997 and 3.75 to 1.0 thereafter. The Company is prohibited from declaring or paying dividends on any capital stock on or after June 30, 1995, that in the aggregate exceed the sum of $50 million plus 50% of consolidated net earnings earned after June 30, 1995, plus the cumulative net proceeds received by the Company after June 30, 1995 from the sale of any equity securities. At June 30, 1998, $115.4 million was available under this limitation. The Company presently intends to finance the $8.3 million payment due on October 27, 1998 with amounts available under the Revolving Credit Facility. 1993 Senior Notes. On April 28, 1993, the Company sold $50 million of 7.65% Senior Notes ("1993 Senior Notes") due 2003 to a group of insurance companies. Annual principal payments of $7.1 million on the 1993 Senior Notes were and are due on April 30 of each year from 1997 through 2002, with any remaining principal and interest outstanding due on April 30, 2003. The Company financed the $7.1 million payment paid on April 30, 1998 with amounts available under the Revolving Credit Facility. The Company presently intends to finance the $7.1 million payment due on April 30, 1999 with amounts available under the Revolving Credit Facility. The 1993 Senior Notes are unsecured and contain certain financial covenants that substantially conform with those contained in the Master Shelf Agreement. 1995 Senior Notes. The Company sold $42 million of 1995 Senior Notes to a group of insurance companies in the fourth quarter of 1995, with an interest rate of 8.16% per annum and principal due in a single payment in December 2005. The 1995 Senior Notes are unsecured and contain certain financial covenants that conform with those contained in the Master Shelf Agreement. Covenant Compliance. At June 30, 1998, the Company was in compliance with all covenants in its loan agreements. Taking into account all the covenants contained in the Company's financing facilities and maturities of long-term debt during 1998, the Company had approximately $49 million of available borrowing capacity at June 30, 1998. Historically, oil prices have been volatile and subject to rapid price fluctuations. The oil and gas industry is currently experiencing significantly declining oil prices. Such prices have declined approximately 30% during the first half of 1998 to approximately $12.71 per barrel as of August 12, 1998. In addition, the start-up volumes associated with the Bethel Treating facility have been lower than anticipated. If the current pricing of oil and associated NGLs continues or declines and volumes associated with the Bethel Treating facility do not increase, the Company is uncertain as to its ability to satisfy its interest coverage covenants under certain of its debt agreements during 1999. However, the Company believes it can obtain amendments or waivers from the necessary lenders. 13 PRINCIPAL FACILITIES The following table provides information concerning the Company's principal facilities. The Company also owns and operates several smaller treating and processing facilities located in the same areas as its other facilities.
Average for the Six Months Ended June 30, 1998 Gas Gas ----------------------------------------- Gathering Throughput Gas Gas NGL Year Placed Systems Capacity Throughput Production Production Plant Facilities (1) In Service Miles(2) (MMcf/D)(3) (MMcf/D)(4) (MMcf/D)(5) (MGal/D)(5) - --------------------------------- ----------- ---------------- --------------- ------------- ----------- ------------- SOUTHERN REGION: Texas Bethel Treating (6)............ 1997 86 350 67 63 - Edgewood (6)(7)................ 1964 89 65 23 7 55 Giddings Gathering............. 1979 660 80 52 44 79 Gomez Treating................. 1971 384 280 123 117 - Midkiff/Benedum................ 1955 2,133 165 153 102 979 Mitchell Puckett Gathering..... 1972 86 85 69 46 - MiVida Treating (6)............ 1972 289 150 66 63 - Rosita Treating................ 1973 - 60 49 49 - Louisiana Black Lake..................... 1966 56 75 13 8 36 Toca (7)(8).................... 1958 - 160 71 67 53 NORTHERN REGION: Wyoming Coal Bed Methane Gathering..................... 1990 213 62 62 57 - Granger (7)(9)(10)(11)......... 1987 389 235 149 136 200 Hilight Complex (7)............ 1969 622 80 41 36 95 Kitty/Amos Draw (7)............ 1969 307 17 10 7 45 Lincoln Road (11).............. 1988 149 50 30 27 28 Newcastle (7).................. 1981 146 5 2 2 17 Red Desert (7)................. 1979 111 42 20 18 35 Reno Junction (9).............. 1991 - - - - 51 Oklahoma Arkoma......................... 1985 64 8 4 4 - Chaney Dell.................... 1966 2,047 180 68 54 220 Westana........................ 1986 744 45 59 51 78 New Mexico San Juan River (6)............. 1955 134 60 28 24 1 Utah Four Corners Gathering......... 1988 104 15 4 3 4 ----- ----- ----- --- ----- Total......................... 8,813 2,269 1,163 985 1,976 ===== ===== ===== === ===== . Average for the Six Months Ended June 30, 1998 Interconnect ---------------- and Gas Storage Pipeline Gas Storage and Year Placed Transmission Capacity Capacity Throughput Transmission Facilities (1) In Service Miles(2) (Bcf)(2) (MMcf/D)(2) (MMcf/D)(3) - --------------------------------- ----------- ------------- ------------ ------------- ---------------- Katy Facility (12)............... 1994 17 20 - 237 MIGC (13)........................ 1970 245 - 90 86 MGTC (14)........................ 1963 252 - 18 9 ----- ----- ----- ----- Total.......................... 514 20 108 332 ===== ===== ===== =====
____________________________ Footnotes on following page. 14 (1) The Company's interest in all facilities is 100% except for Midkiff/Benedum (73%); Black Lake (69%); Lincoln Road (72%); Westana Gathering Company ("Westana") (50%); Newcastle (50%) and Coal Bed Methane Gathering (50%). All facilities are operated by the Company, and all data include interests of the Company, other joint interest owners and producers of gas volumes dedicated to the facility. (2) Gas gathering systems miles, interconnect and transmission miles, gas storage capacity and pipeline capacity are as of June 30, 1998. On July 10, 1998, MIGC received approval from the FERC to increase its pipeline capacity from 90 MMcf per day to 130 MMcf per day. (3) Gas throughput capacity is as of June 30, 1998 and represents capacity in accordance with design specifications unless other constraints exist, including permitting or field compression limits. (4) Aggregate wellhead natural gas volumes collected by a gathering system, aggregate volumes delivered over the header at the Katy Hub and Gas Storage Facility ("Katy Facility") or volumes transported by a pipeline. (5) Volumes of gas and NGLs are allocated to a facility when a well is connected to that facility; volumes exclude NGLs fractionated for third parties. (6) Sour gas facility (capable of processing or treating gas containing hydrogen sulfide and/or carbon dioxide). (7) Fractionation facility (capable of fractionating raw NGLs into end-use products). (8) Straddle plant (a plant located near a transmission pipeline that processes gas dedicated to or gathered by a pipeline company or another third party). (9) NGL production includes conversion of third-party feedstock to iso-butane. (10) In February 1998, the Company sold a 50% undivided interest in a portion of the Granger gathering system for approximately $4.0 million. This amount approximated the Company's cost in such facilities. (11) The Company and its joint venture partner at the Lincoln Road facility have agreed to process such gas at the Company's Granger facility as long as there is available capacity at the Granger facility. As a result, a periodic election is made as to whether or not gas will be processed at the Lincoln Road facility. Accordingly, operations at the Lincoln Road facility were temporarily suspended for the period between February 1998 and June 1998. (12) Hub and gas storage facility. (13) MIGC is an interstate pipeline located in Wyoming and is regulated by the FERC. (14) MGTC is a public utility located in Wyoming and is regulated by the Wyoming Public Service Commission. PART II - OTHER INFORMATION Item 1. Legal Proceedings ----------------- JN Exploration and Production Litigation JN Exploration and Production ("JN") is a producer of oil and natural gas that sold unprocessed natural gas to the Company on a percentage-of-proceeds basis. The Company processed the natural gas at its Teddy Roosevelt Plant, which is no longer in operation. In JN Exploration and Production v. Western Gas Resources, ------------------------------------------------------- Inc. United States District Court for the District of North Dakota, - ---- Southwestern Division, Civil Action Nos. A1-93-53 and 903-CV-60, JN sued the Company, alleging that JN was entitled to a portion of a $15 million amendment fee the Company received in the years 1987 through 1989 from Williston Basin Interstate Pipeline Company ("WBI"), which had an agreement with the Company to purchase natural gas. On April 15, 1996, the Court issued a Memorandum and Order granting JN's summary judgment motion on the issue of liability. On July 11, 1996, the Court issued a Memorandum and Order setting forth the manner in which damages are to be calculated. On September 17, 1996, the Court entered a final judgment against the Company in the amount of $421,000 (including pre- judgment interest). The Company has filed a Notice of Appeal with the United States Court of Appeals for the Eighth Circuit, and an order granting a stay of execution of the judgment until the appeal is resolved was granted by the Court on November 29, 1996. The case has been briefed and argued to the Court and the Company is presently awaiting the Court's decision. The Company believes that there are meritorious grounds to reverse the trial court's decision. One other producer has filed a similar claim. If JN were to prevail on appeal, other producers who sold natural gas which was processed at the Teddy Roosevelt Plant during the time period in question may be able to assert similar claims. The Company believes that it has meritorious defenses to such claims and, if sued, the Company would defend vigorously against any such claims. At the present time, it is not possible to predict the outcome of this litigation or any other producer litigation that might raise similar issues or to estimate the amount of potential damages. 15 Southern Ute Indian Tribe The Company is producing and gathering natural gas from the coal bed methane play in the Powder River Basin of Wyoming. On July 20, 1998, the United States Court of Appeals, Tenth Circuit, ruled in favor of the Southern Ute Indian Tribe in a case entitled Southern Ute Indian Tribe v. Amoco Production Company, et --------------------------------------------------------- al., No. 94-1579 and found that coal bed methane was reserved under patents - --- issued pursuant to the 1909 and 1910 Coal Land Acts to the United States government, and subsequently transferred to a Native American tribe, along with the coal. As of August 1998, approximately 31% of the Company's leases in the Powder River coal bed are from landowners whose title was derived under those acts and under which the federal government may have retained the rights to the coal bed methane. In July 1998, approximately 17 MMcf per day of gas, net to the Company, was produced from those leases. In addition, this Court of Appeals ruled against the claim of the lessees that owned natural gas rights but not coal rights. There is no assurance that the United States government, as the owner of the coal rights, will not assert a similar claim to the coal bed methane rights that the Company believes it owns as owner of the natural gas rights. Internal Revenue Service The Internal Revenue Service ("IRS") has completed its examination of the Company's tax returns for the years 1990 and 1991 and has proposed adjustments to taxable income reflected in such tax returns that would shift the recognition of certain items of income and expense from one year to another ("Timing Adjustments"). To the extent taxable income in a prior year is increased by proposed Timing Adjustments, taxable income may be reduced by a corresponding amount in other years. However, the Company would incur an interest charge as a result of such adjustment. The Company currently is protesting certain of these proposed adjustments. In the opinion of management, any proposed adjustments for the additional income taxes and interest that may result would not be material. However, it is reasonably possible that the ultimate resolution could result in an amount which differs materially from management's estimates. Other The Company is involved in various other litigation and administrative proceedings arising in the normal course of business. In the opinion of management, any liabilities that may result from these claims, will not, individually or in the aggregate, have a material adverse effect on the Company's financial position or results of operations. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- The following matter was voted on at the Company's Annual Meeting of Stockholders held on May 22, 1998: Walter L. Stonehocker, Dean Phillips, Bill M. Sanderson and James A. Senty were elected as Class Three Directors to serve until their terms expire in 2001 and until their successors have been elected. 28,882,954, 28,881,952, 28,883,182 and 28,881,925 shares, respectively, were voted for and 373,241, 374,243, 373,013 and 374,270 shares, respectively, were withheld for Walter L. Stonehocker, Dean Phillips, Bill M. Sanderson and James A. Senty. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: 10.21 Amendment No. 6 to Note Purchase Agreements as of January 15, 1998 by and among Western Gas Resources, Inc. and the Purchasers. 10.22 First Amendment to Credit Agreement dated July 8, 1998 by and among Western Gas Resources, Inc. and NationsBank, N.A. as agent, and the Lenders (Revolver). 10.23 Letter Amendment No. 1 to Senior Note Purchase Agreement dated November 29, 1995 by and among Western Gas Resources, Inc. and the Purchasers identified therein. 10.24 Letter Amendment No. 1 to Second Amended and Restated Master Shelf Agreement effective January 31, 1996 by and among Western Gas Resources, Inc. and Prudential Company of America. (b) Reports on Form 8-K: A report on Form 8-K was filed on July 1, 1998 with the Securities and Exchange Commission to notify the Company's stockholders of the extension of the closing date of the transactions between the Company and Ultra Resources, Inc. and RIS Resources (USA) Inc. 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WESTERN GAS RESOURCES, INC. --------------------------- (Registrant) Date: August 14, 1998 By: /s/ LANNY F. OUTLAW ------------------- Lanny F. Outlaw President and Chief Operating Officer Date: August 14, 1998 By: /s/WILLIAM J. KRYSIAK --------------------- William J. Krysiak Vice President - Finance (Principal Financial and Accounting Officer) 17 EX-10.21 2 AMENDMENT NO. 6 TO NOTE PURCHASE AGREEMENT EXHIBIT 10.21 AMENDMENT NO. 6 TO NOTE PURCHASE AGREEMENT AMENDMENT NO. 6 TO NOTE PURCHASE AGREEMENTS (this "AMENDMENT") dated as of January 15, 1998, by and among Western Gas Resources, Inc., a Delaware corporation (together with its successors and assigns, the "COMPANY"), each of the Guarantors signatory hereto and each of the Purchasers of Notes listed on Attachment 1 (collectively, the "EXISTING NOTEHOLDERS") who become signatories to this Amendment (collectively, the "CONSENTING NOTEHOLDERS"). WITNESSETH: ----------- WHEREAS, the Company, the Guarantors and the Existing Noteholders have entered into those separate Note Purchase Agreements, each dated as of April 1, 1993, (as amended and as in effect prior to the effectiveness of this Amendment, collectively the "EXISTING NOTE AGREEMENT," and, as amended by this Amendment, collectively the "AMENDED NOTE AGREEMENT") pursuant to which the Company sold its 7.65% Senior Notes due April 30, 2003 (the "NOTES"), in the aggregate principal amount of Fifty Million Dollars ($50,000,000); WHEREAS, the Company, the Guarantors and the Required Holders desire to amend and restate certain provisions of the Existing Note Agreement; WHEREAS, following the effectiveness of this Amendment, Amendment No. 1 to the Note Purchase Agreement dated as of August 31, 1993, Amendment No. 2 to the Note Purchase Agreement dated as of August 31, 1994, Amendment No. 3 to the Note Purchase Agreement dated as of March 22, 1995, Amendment No. 4 to the Note Purchase Agreement dated as of July 14, 1995 and Amendment No. 5 to the Note Purchase Agreement dated as of December 1, 1997, are superseded by the amendments and restatements provided herein; WHEREAS, in consideration for and as a condition precedent to this Amendment, the Company has agreed to pay to the Existing Noteholders a fee (the "AMENDMENT FEE") equal to 0.1% of the principal amount of the Notes outstanding as of May 1, 1998; and WHEREAS, the capitalized terms used herein and not defined herein shall have the respective meanings ascribed to them in the Existing Note Agreement. NOW THEREFORE, upon the full and complete satisfaction of the conditions precedent to the effectiveness of this Amendment set forth in Section 3 hereof, and for good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENTS. Upon the effectiveness of this Amendment, the Existing Note Agreement shall be amended as set forth in this Section 1. 1.1 AMENDMENT TO SECTION 7 OF THE EXISTING NOTE AGREEMENT. Section 7 of the Existing Note Agreement is hereby amended and restated in its entirety to read as follows: 7. COMPANY BUSINESS COVENANTS The Company covenants that so long as you shall have any obligation to purchase any Notes hereunder or any of the Notes shall be outstanding: 7.1 PAYMENT OF TAXES AND CLAIMS. The Company will, and will cause each Subsidiary to, pay before they become delinquent, (a) all taxes, assessments and governmental charges or levies imposed upon it or its Property, and (b) all claims or demands of materialmen, mechanics, carriers, warehousemen, vendors, landlords and other like Persons that, if unpaid, might result in the creation of a Lien upon its Property, provided, that items of the foregoing description need not be paid (i) while being contested in good faith and by appropriate proceedings as long as adequate book reserves (if required by GAAP) have been established and maintained and exist with respect thereto, and (ii) so long as the title of the Company or the Subsidiary, as the case may be, to, and its right to use, such Property, is not materially adversely affected thereby. 7.2 MAINTENANCE OF PROPERTIES; INSURANCE; CORPORATE EXISTENCE, ETC. The Company will, and will cause each Subsidiary to, (A) PROPERTY -- maintain its Property in good condition, ordinary wear and tear excepted, and make all renewals, replacements, additions, betterments and improvements thereto deemed necessary in the reasonable judgment of the management of the Company; (B) INSURANCE -- maintain, with Lloyds of London, or financially sound and reputable insurers accorded a rating by A.M. Best Company of "A-" or better and a size rating of "X" or better (or a comparable rating by any comparable successor rating agency), insurance with respect to its Property and business against such casualties and contingencies, of such types (including, without limitation, insurance with respect to losses arising out of Property loss or damage, public liability, business interruption, larceny, workers' 2 compensation, embezzlement or other criminal misappropriation) and in such amounts as is customary in the case of corporations of established reputations engaged in the same or a similar business and similarly situated; (C) FINANCIAL RECORDS -- keep true books of records and accounts in which full and correct entries shall be made of all its business transactions and which will permit the provision of accurate and complete financial statements in accordance with GAAP; (D) CORPORATE EXISTENCE AND RIGHTS -- do or cause to be done all things necessary (i) to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises, subject to Section 7.4 hereof, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, and (ii) to maintain each Restricted Subsidiary as a Restricted Subsidiary, except as otherwise permitted by Section 7.4 or Section 12.1 hereof; and (E) COMPLIANCE WITH LAW -- not be in violation of any law, ordinance or governmental rule or regulation to which it is subject (including, without limitation, any Environmental Protection Law) and not fail to obtain any license, certificate, permit, franchise or other governmental authorization necessary to the ownership of its Properties or to the conduct of its business if such violation or failure to obtain could be reasonably expected to have a Material Adverse Effect. 7.3 PAYMENT OF NOTES AND MAINTENANCE OF OFFICE. The Company will punctually pay, or cause to be paid, the principal of and interest (and Make-Whole Amount, if any) on, the Notes, as and when the same shall become due according to the terms hereof and of the Notes, and will maintain an office at the address of the Company set forth in Section 12.2 hereof where notices, presentations and demands in respect hereof or the Notes may be made upon it. Such office will be maintained at such address until such time as the Company shall notify the holders of the Notes of any change of location of such office, which will in any event be located within the United States of America. 7.4 MERGER; ACQUISITION. (A) MERGER AND CONSOLIDATION. The Company will not, nor will it permit any Restricted Subsidiary to, merge into, consolidate with, or sell, lease, transfer or otherwise dispose of all or substantially all of its Property to, any other Person or permit any other Person to consolidate with or merge into it (except that a Restricted Subsidiary may merge into, consolidate with, or sell, 3 lease, transfer or otherwise dispose of all or substantially all of its assets to, the Company or another Restricted Subsidiary); provided that the foregoing restriction does not apply to: I. A merger or consolidation in which the Company is the surviving corporation, provided that immediately prior to and immediately after the consummation of such transaction, and after giving effect thereto, no Default or Event of Default exists or would exist under any provision of this Agreement. II. The merger or consolidation of the Company with, or the sale, lease, transfer or other disposition by the Company of all or substantially all of its Property to, another corporation, if: (i) the corporation that results from such merger or consolidation or that purchases, leases, or acquires all or substantially all of such Property (the "SURVIVING CORPORATION") is organized under the laws of the United States of America or any jurisdiction thereof; (ii) the due and punctual payment of the principal of and Make-Whole Amount, if any, and interest on all of the Notes, according to their tenor, and the due and punctual performance and observance of all the covenants in the Notes and this Agreement to be performed or observed by the Company, are expressly assumed by the Surviving Corporation pursuant to agreements and instruments reasonably acceptable to the Required Holders, and the Company will cause to be delivered to each holder of Notes an opinion of independent counsel to the effect that such agreements and instruments are enforceable in accordance with their terms; (iii) after giving effect to the proposed merger or consolidation the Surviving Corporation will be engaged in substantially the same lines of business referred to in Section 2.1 hereof; (iv) the Notes are not junior in right of payment or performance to any other Debt of the Surviving Corporation; and (v) immediately prior to, and immediately after the consummation of, the transaction, and after giving effect thereto, no Default or Event of Default exists or would exist under any provision of this Agreement. III. The merger or consolidation of a Restricted Subsidiary, if: (i) such Restricted Subsidiary is the surviving corporation and remains a Restricted Subsidiary, and 4 (ii) immediately prior to, and immediately after the consummation of, the proposed transaction, and after giving effect thereto, no Default or Event of Default exists or would exist under any provision of this Agreement. (B) SALE OF ASSETS. The Company will not at any time, and will not at any time permit any Restricted Subsidiary to, sell, lease, transfer or otherwise dispose of assets, except (1) sales of inventory and sales or other dispositions of obsolete or worn-out equipment or delinquent receivables, in each case in the ordinary course of business, (2) sales, leases, transfers or other dispositions to the Company or a Wholly-Owned Restricted Subsidiary, (3) sales permitted by Section 7.4(a) hereof, (4) in any year, sales or other dispositions of Surplus Equipment having an aggregate book value of less than Two Million Dollars ($2,000,000), (5) the Panhandle Transaction and (6) sales of receivables pursuant to Section 7.15 hereof (all sales, leases, transfers and other dispositions referred to in the foregoing clauses (1) through (6) are hereinafter referred to as "Excluded Transfers"); provided that the foregoing shall not apply to the sale of an asset for a cash consideration to any Person other than an Affiliate if all of the following conditions are met (collectively, the "Initial Basket"): (i) the book value of such asset and the aggregate book value of each other asset sold (other than in Excluded Transfers) during the period of three hundred sixty-five (365) consecutive days immediately preceding the consummation of such sale does not exceed fifteen percent (15%) of Consolidated Net Tangible Capitalization measured as of the end of the fiscal quarter of the Company immediately preceding such sale; (ii) in the good faith opinion of the Board of Directors (or management of the Company if the Board of Directors has authorized management to make such determination, either generally or in the specific instance), the sale is for Fair Market Value and is in the best interests of the Company; and (iii) immediately after the consummation of such sale, and after giving effect thereto, no Default or Event of Default exists or would exist under any provision of this Agreement; provided further, that, in the event that the first exercisable option to purchase certain assets (the "Option") from the Company or its Restricted Subsidiaries as defined in and pursuant to that certain Option and Asset Purchase Agreement dated November 14, 1997, by and between Mountain Gas Resources, Inc. and the Company and RIS Resources (USA) Inc. ("Option Agreement") is exercised pursuant to the terms of the Option Agreement, then, from and after the effective date of the sale of assets resulting from the exercise of the Option, the Initial Basket shall not apply to the sale of an asset for a cash consideration to 5 any Person other than an Affiliate, which sale occurs on or before December 31, 1998, if all of the following conditions are met (collectively the "Revised Basket"): (i) the book value of such asset and the aggregate book value of each other asset sold (other than in Excluded Transfers) does not exceed either of (x) twenty-five percent (25%) of Consolidated Net Tangible Capitalization during the period of 730 consecutive days immediately preceding the consummation of such sale, or (y) twenty percent (20%) of Consolidated Net Tangible Capitalization during the period of 365 consecutive days immediately preceding the consummation of such sale, measured, in each case, as of the end of the fiscal quarter of the Company immediately preceding such sale; (ii) in the good faith opinion of the Board of Directors (or management of the Company if the Board of Directors has authorized management to make such determination, either generally or in the specific instance), the sale is for Fair Market Value and is in the best interests of the Company; and (iii) immediately after the consummation of such sale, and after giving effect thereto, no Default or Event of Default exists or would exist under any provision of this Agreement. The Revised Basket shall not apply to any sale of an asset occurring on and after January 1, 1999 or to any sale of an asset at any time in the event the Option is not exercised, in either of which cases the Initial Basket shall apply. For purposes of determining the book value of assets constituting Restricted Subsidiary Stock being sold as provided in each clause (i) above, such book value shall be deemed to be the net book value of the Restricted Subsidiary which shall have issued such Restricted Subsidiary Stock. (C) DISPOSAL OF OWNERSHIP OF A SUBSIDIARY. The Company will not at any time, and will not at any time permit any Restricted Subsidiary to, sell or otherwise dispose of any shares of the stock (or any options or warrants to purchase stock or other Securities exchangeable for or convertible into stock) of a Restricted Subsidiary (said stock, options, warrants and other Securities herein called "Restricted Subsidiary Stock"), nor will any Restricted Subsidiary issue, sell or otherwise dispose of any shares of its own Restricted Subsidiary Stock, if the effect of the transaction would be to reduce the direct or indirect proportionate interest of the Company or its other Subsidiaries in the outstanding Restricted Subsidiary Stock of the Restricted Subsidiary whose shares are the subject of the transaction, provided that the foregoing restrictions do not apply to: 6 (i) the issue of directors' qualifying shares; and (ii) the sale for a cash consideration to a Person (other than directly or indirectly to an Affiliate) of the entire Investment (whether represented by stock, debt, claims or otherwise) of the Company and its other Restricted Subsidiaries in such Restricted Subsidiary, if all of the following conditions are met: (A) such sale satisfies the requirements of clause (i) of Section 7.4(b) of this Agreement; (B) in the good faith opinion of the Board of Directors of the Company, the sale is for Fair Market Value and is in the best interests of the Company; (C) the Subsidiary being disposed of has no continuing Investment in any other Subsidiary not being simultaneously disposed of or in the Company; and (D) immediately after the consummation of such sale, and after giving effect thereto, no Default or Event of Default would exist. 7.5 LIENS. (A) NEGATIVE PLEDGE. The Company will not, nor will it permit any Restricted Subsidiary to, cause or permit to exist or agree or consent to cause or permit to exist in the future (upon the happening of a contingency or otherwise) any of its Property, whether now owned or hereafter acquired, to be subject to a Lien except: (i) Liens securing taxes, assessments or governmental charges or levies or the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons, provided that the payment thereof is not at the time required by Section 7.1 hereof; (ii) Liens incurred or deposits made in the ordinary course of business (A) in connection with worker's compensation, unemployment insurance, social security and other like laws, or (B) to secure the performance of letters of credit, bids, tenders, sales contracts, leases, statutory obligations, surety and performance bonds (of a type other than set forth in Section 7.5(a)(iii)) hereof) and other similar obligations not incurred in connection with the borrowing of money, the obtaining of 7 advances, the payment of the deferred purchase price of Property, or a Guaranty; (iii) Liens on Natural Gas Inventory securing obligations of the Company, provided that the aggregate amount of Debt secured by such Liens shall not at any time exceed $35,000,000; (iv) Liens on Property of a Restricted Subsidiary, provided that such Liens secure only obligations owing to the Company or a Wholly-Owned Restricted Subsidiary; (v) Liens in the nature of reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other similar title exceptions or encumbrances affecting real property, provided that such exceptions and encumbrances do not in the aggregate materially detract from the value of such Properties or materially interfere with the use of such Property in the ordinary conduct of the business of the Company and the Restricted Subsidiaries; (vi) (A) Liens listed in Paragraph V of Annex 3 hereto, and (B) Liens securing renewals, extensions (as to time) and refinancings of Debt secured by the Liens listed on Annex 3 hereto, provided that the amount of Debt secured by each of such Liens is not increased in excess of the amount of Debt outstanding on the date of such renewal, extension or refinancing, and none of such Liens is extended to include any additional Property of the Company or any Restricted Subsidiary; (vii) Purchase Money Liens; (viii) Liens on deposit and other bank accounts of the Company created by the right of a lender under any of the Company's bank agreements to offset obligations of the Company owing under such agreement against such accounts, provided, however, that such Liens shall be permitted hereunder if, and only if, there is no agreement (other than of the type contemplated by clause (ix) below) between such lender and the Company which requires the Company to maintain funds in any account with such lender; (ix) Liens on deposits securing the face amount of outstanding letters of credit issued pursuant to any of the Company's bank agreements; (x) Liens securing sales or transfers of receivables permitted pursuant to Section 7.15 hereof; and 8 (xi) other Liens; provided that the aggregate amount of Debt of the Company secured by Liens permitted by any one or more of clauses (vi), (vii) and (xi) above, together with the face amount of undrawn letters of credit with respect to which the Company is obligated to provide deposits referred to in clause (ix) above (whether or not such deposits have been provided) together with Permitted Restricted Subsidiary Debt shall not at any time exceed an amount in excess of five percent (5.0%) of Consolidated Tangible Net Worth. (B) EQUAL AND RATABLE LIEN; EQUITABLE LIEN. In case any Property shall be subjected to a Lien in violation of this Section 7.5, the Company will forthwith make or cause to be made, to the fullest extent permitted by applicable law, provision whereby the Notes will be secured equally and ratably with all other obligations secured thereby pursuant to such agreements and instruments as shall be approved by the Required Holders, and the Company will cause to be delivered to each holder of a Note an opinion of independent counsel to the effect that such agreements and instruments are enforceable in accordance with their terms, and in any such case the Notes shall have the benefit, to the full extent that, and with such priority as, the holders of Notes may be entitled under applicable law, of an equitable Lien on such Property securing the Notes. Such violation of this Section 7.5 will constitute an Event of Default hereunder, whether or not any such provision is made pursuant to this Section 7.5(b). (C) FINANCING STATEMENTS. The Company will not, and will not permit any Restricted Subsidiary to, sign or file a financing statement under the Uniform Commercial Code of any jurisdiction that names the Company or such Restricted Subsidiary as debtor, or sign any security agreement authorizing any secured party thereunder to file any such financing statement, except, in any such case, a financing statement filed or to be filed to perfect or protect a security interest that the Company or such Restricted Subsidiary is entitled to create, assume or incur, or permit to exist, under the foregoing provisions of this Section 7.5 or to evidence for informational purposes a lessor's interest in Property leased to the Company or any such Restricted Subsidiary. (D) LIENS OF SUBSIDIARIES. Each Person that becomes a Subsidiary after the Closing Date will be deemed to have granted on the date such Person becomes a Subsidiary all the Liens in existence on its Property on such date. 7.6 MAINTENANCE OF CONSOLIDATED TANGIBLE NET WORTH. Consolidated Tangible Net Worth as of the end of each and every fiscal quarter shall be not less than the sum of (a) Two Hundred Ten Million Dollars ($210,000,000), plus 9 (b) fifty percent (50%) of Consolidated Adjusted Net Income for each and every fiscal year of the Company, ending after December 31, 1992, in which Consolidated Adjusted Net Income is greater than zero. 7.7 LEVERAGE RATIO. The Company shall not allow Consolidated Debt to exceed: (i) from April 30, 1993 through August 30, 1993, sixty percent (60%) of Consolidated Net Tangible Capitalization; (ii) from August 31, 1993 through March 31, 1994, sixty-five percent (65%) of Consolidated Net Tangible Capitalization; and (iii) at any time after March 31, 1994, sixty percent (60%) of Consolidated Net Tangible Capitalization. 7.8 RESTRICTED SUBSIDIARY DEBT. Neither the Panhandle Joint Venture nor any Restricted Subsidiary will incur or in any manner become liable in respect of any Debt, provided that Permitted Restricted Subsidiary Debt may be incurred if, after giving effect thereto and to any concurrent transactions, no Default or Event of Default would exist and the aggregate amount of: (a) Debt of the Company secured by Liens permitted by any one or more of clauses (vi), (vii) and (xi) of Section 7.5(a) of this Agreement, (b) the face amount of undrawn letters of credit with respect to which the Company is obligated to provide the deposits referred to in Section 7.5(a)(ix) of this Agreement (whether or not such deposits have been provided), and (c) Permitted Restricted Subsidiary Debt, would not exceed five percent (5%) of Consolidated Tangible Net Worth. Nothing in this Section 7.8 shall be deemed to limit the ability of any Restricted Subsidiary to (i) incur Debt in favor of the Company or a Wholly-Owned Restricted Subsidiary or (ii) guaranty Debt of the Company owed to a lender which has entered into an intercreditor agreement with the holders of the Notes to the effect and substantially in the form of Exhibit E hereto. 7.9 DISTRIBUTIONS; RESTRICTED INVESTMENTS. The Company will not, nor will it permit any Restricted Subsidiary to, declare or make or incur any liability to declare or make any Distribution (other than Distributions payable solely to the Company or another Restricted Subsidiary) or make any Restricted Investment unless, immediately after giving effect to the proposed Distribution or Restricted Investment, (a) the aggregate amount of Distributions in respect of the capital stock of the Company and the Restricted Subsidiaries (other than Distributions payable to the Company or another Restricted Subsidiary) and Restricted 10 Investments made during the period commencing on October 1, 1992 and ending on the date of such proposed Distribution or Restricted Investment would not exceed the sum of: (i) an amount equal to the net proceeds received by the Company from the sale of its capital stock during the period subsequent to September 30, 1992, plus, (ii) fifty percent (50%) of the aggregate of Consolidated Adjusted Net Income (or, if such Consolidated Adjusted Net Income shall be a deficit for any fiscal year during such period, minus one hundred percent (100%) of such deficit) earned on a cumulative basis during the period commencing on October 1, 1992 and ending on the last day of the fiscal quarter of the Company most recently ended prior to the declaration of such Distribution or the making of such Restricted Investment, plus, (iii) Ten Million Dollars ($10,000,000), and (b) no Default or Event of Default would exist. For purposes of this Section 7.9 the amount involved in any Distribution made in Property shall be the greater of the Fair Market Value of such Property (as determined in good faith by the Board of Directors) and the net book value thereof on the books of the Company (determined in accordance with GAAP) on the date on which such Distribution is made. The Company will not declare any Distribution which (A) is payable more than ninety (90) days after the date of declaration thereof or (B) would not be permitted to be paid on the date of declaration thereof pursuant to this Section 7.9. 7.10 GUARANTIES. The Company will not and will not permit any Restricted Subsidiary to enter into or be party to: (a) any contract for the purchase of materials, supplies or other property or services if such contract (or any related document) requires that payment for such materials, supplies or other property or services shall be made regardless of whether or not delivery of such materials, supplies or other property or services is ever made or tendered, or (b) any contract to rent or lease (as lessee) any real or personal property if such contract (or any related document) provides that the obligation to make payments thereunder is absolute and unconditional under conditions not customarily found in commercial leases then in general use or requires that the lessee purchase or otherwise acquire securities or obligations of the lessor, or 11 (c) any contract for the sale or use of materials, supplies or other property, or the rendering of services, if such contract (or any related document) requires that the payment obligation to the Company or a Restricted Subsidiary for such materials, supplies or other property, or the use thereof, or the payment obligation to the Company or a Restricted Subsidiary for such services, shall be subordinate in right of payment to any obligation owed or to be owed to any Person, or (d) any Guaranty other than Guaranties by Restricted Subsidiaries of the Debt of the Company permitted by Section 7.8 of this Agreement; provided, that, notwithstanding the foregoing provisions of this Section 7.10, the Company may enter into any such contract (i) if the obligations of the Company thereunder are quantifiable as to maximum amount, (ii) the obligations guarantied constitute indebtedness of the primary obligor for borrowed money or payments under a Capital Lease owed by the primary obligor, and (iii) after giving effect to such contract no Default or Event of Default would exist. 7.11 FIXED CHARGE COVERAGE As at the end of each fiscal quarter of the Company, Income Available for Fixed Charges shall be at least three hundred twenty-five percent (325%) of Fixed Charges for the period of four consecutive fiscal quarters of the Company then most recently ended; provided however, that for the period of four consecutive fiscal quarters ended on each of September 30, 1998 and December 31, 1998, Income Available For Fixed Charges shall be at least three hundred percent (300%) of Fixed Charges. 7.12 ERISA. (A) COMPLIANCE. The Company will, and will cause each ERISA Affiliate to, at all times with respect to each Pension Plan, make timely payment of contributions required to meet the minimum funding standard set forth in ERISA or the IRC with respect thereto, and to comply with all other applicable provisions of ERISA. (B) RELATIONSHIP OF VESTED BENEFITS TO PENSION PLAN ASSETS. The Company will not at any time permit the present value of all employee benefits vested under each Pension Plan to exceed the assets of such Pension Plan allocable to such vested benefits at such time, in each case determined pursuant to Section 7.12(c) hereof. (C) VALUATIONS. All assumptions and methods used to determine the actuarial valuation of vested employee benefits under Pension Plans and the present value of assets of Pension Plans will be reasonable in the good faith judgment of the Company and will comply with all requirements of law. 12 (D) PROHIBITED ACTIONS. The Company will not, and will not permit any ERISA Affiliate to: (i) engage in any "prohibited transaction" (as such term is defined in section 406 of ERISA or section 4975 of the IRC) that would result in the imposition of a material tax or penalty; (ii) incur with respect to any Pension Plan any "accumulated funding deficiency" (as such term is defined in section 302 of ERISA), whether or not waived; (iii) terminate any Pension Plan in a manner that could result in (A) the imposition of a Lien on the Property of the Company or any Subsidiary pursuant to section 4068 of ERISA or (B) the creation of any liability under section 4062 of ERISA; (iv) fail to make any payment required by section 515 of ERISA; or (v) except as disclosed on Annex 3 hereto, be an "employer" (as such term is defined in section 3 of ERISA) required to contribute to any Multiemployer Plan or a "substantial employer" (as such term is defined in section 4001 of ERISA) required to contribute to any Multiple Employer Pension Plan. 7.13 LINE OF BUSINESS. Neither the Company nor any Restricted Subsidiary will engage in any business if, as a result thereof, the business of the Company and its Restricted Subsidiaries, taken as a whole, would not be substantially the same as on the date of this Agreement. 7.14 TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any Restricted Subsidiary to, enter into any transaction, including, without limitation, the purchase, sale or exchange of Property or the rendering of any service, with any Affiliate, except in the ordinary course of and pursuant to the reasonable requirements of the Company's or such Restricted Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than would obtain in a comparable arm's-length transaction with a Person not an Affiliate. 13 7.15 SALE OR DISCOUNT OF RECEIVABLES. Notwithstanding anything else contained in this Note Purchase Agreement to the contrary, the Company shall be permitted to grant a security interest in the accounts receivable of the Company and the Subsidiaries in connection with a Permitted Securitization Program, provided, however, that the Company and the Subsidiaries may not have more than one Permitted Securitization Program outstanding at any time. 7.16 OFFERS TO ACQUIRE NOTES. The Company will not, and will not permit any Restricted Subsidiary, any Affiliate or any Person, acting on behalf of the Company to, directly or indirectly, acquire or make any offer to acquire any Notes unless the Company or such Restricted Subsidiary, Affiliate or other Person shall have offered to acquire Notes, pro rata, from all holders of the Notes and upon the same terms. In case the Company acquires any Notes, such Notes will immediately thereafter be cancelled and no Notes will be issued in substitution therefor. 7.17 PRIVATE OFFERING. The Company will not, and will not permit any Person acting on its behalf to, offer the Notes or any part thereof or any similar Securities for issuance or sale to, or solicit any offer to acquire any of the same from, any Person so as to bring the issuance and sale of the Notes within the provisions of section 5 of the Securities Act. 7.18 NEW GUARANTORS. The Company shall cause each corporation which becomes a Restricted Subsidiary after the date of this Agreement (and which on a pro forma basis accounts for more than ten percent (10%) of Consolidated Adjusted Tangible Assets) to guaranty the payment and performance of the Notes pursuant to a guaranty agreement (acceptable to the Required Holders) to the effect and substantially in the form of Section 10 to this Agreement. 1.2 AMENDMENT TO SECTION 8.2 OF THE EXISTING NOTE AGREEMENT. Section 8.2 of the Existing Note Agreement is hereby amended and restated in its entirety to read as follows: 8.2 OFFICERS' CERTIFICATES. Each set of financial statements delivered to each holder of Notes pursuant to Section (a) or Section (b) hereof shall be accompanied by a certificate of the President, the Vice President - Chief Financial Officer or the Treasurer of the Company setting forth: 14 (A) COVENANT COMPLIANCE -- the information (including reasonably detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Section 7.4 through Section 7.11 hereof, inclusive, during the period covered by the income statement then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amounts, ratios or percentages, as the case may be, permissible under the terms of such Sections, and the calculation of the amounts, ratios or percentages then in existence); and (B) EVENT OF DEFAULT -- a statement that the signers have reviewed the relevant terms hereof and have made, or caused to be made, under their supervision, a review of the transactions and conditions of the Company and the Subsidiaries from the beginning of the accounting period covered by the income statements being delivered therewith to the date of the certificate and that such review has not disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action the Company has taken or proposes to take with respect thereto. 1.3 AMENDMENTS TO SECTION 11.1 OF THE EXISTING NOTE AGREEMENT. Section 11.1 of the Existing Note Agreement is hereby amended and restated in its entirety to read as follows: 11. INTERPRETATION OF THIS AGREEMENT 11.1 TERMS DEFINED. As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: ADJUSTED FUNDED DEBT -- means, at any time, with respect to any Person, without duplication, (a) its liabilities for borrowed money, other than Current Debt; (b) liabilities secured by any Lien existing on Property owned by such Person (whether or not such liabilities have been assumed) other than Current Debt; (c) its liabilities in respect of Capital Leases; (d) its liabilities under Guaranties other than Guaranties of Current Debt; and 15 (e) any other obligations (other than deferred taxes) that are required to be shown as liabilities on its balance sheet and that are payable or remain unpaid more than one (1) year from the creation thereof; at such time. ADJUSTED TANGIBLE ASSETS -- in respect of any Person at any time means all assets (including, without duplication, the capitalized value of any leasehold interest under any Capital Lease and all Asset Agreements) of such Person except: (a) deferred assets, other than (i) prepaid insurance, (ii) prepaid taxes and (iii) prepaid items the benefits of which will be realized by such Person within three hundred and sixty-five (365) days of such time; (b) patents, copyrights, trademarks, trade names, franchises, goodwill, experimental expense and other similar intangible assets; (c) unamortized debt discount and expense; and (d) assets located, and notes and receivables due from obligors domiciled, outside the United States of America, Puerto Rico or Canada. AFFILIATE -- means, at any time, a Person (other than a Restricted Subsidiary) (a) that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common Control with, the Company, (b) that beneficially owns or holds five percent (5%) or more of any class of the Voting Stock of the Company, or (c) five percent (5%) or more of the Voting Stock (or in the case of a Person that is not a corporation, five percent (5%) or more of the equity interest) of which is beneficially owned or held by the Company or a Subsidiary, at such time. 16 As used in this definition, Control -- means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. AGREEMENT, THIS -- means this agreement, as it may be amended and restated from time to time. APPLICABLE H.15 -- means, at any time, United States Federal Reserve Statistical Release H.15(519) or its successor publication most recently published and available to the public at such time, or if no such successor publication is available, then any other source of current information in respect of interest rates on securities of the United States of America that is generally available and, in the judgment of the Required Holders, provides information reasonably comparable to the H.15(519) report. ASSET AGREEMENTS -- of any Person means all oil and gas leases, mineral leases and gas purchase contracts which have been assumed by such Person in connection with any acquisition of any other Person and which would be shown as assets on a consolidated balance sheet of such Person prepared in accordance with GAAP. BANKRUPTCY LAW -- means any bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law, whether now or hereafter in effect, of any jurisdiction. BOARD OF DIRECTORS -- means, at any time, the board of directors of the Company or any committee thereof which, in the instance, shall have the lawful power to exercise the power and authority of such board of directors. BUSINESS DAY -- means, at any time, a day other than a Saturday, a Sunday or, in the case of any Note with respect to which the provisions of Section 4.1 hereof are applicable, a day on which the bank designated (by the holder of such Note) to receive (for such holder's account) payments on such Note is required by law (other than a general banking moratorium or holiday for a period exceeding four (4) consecutive days) to be closed. CAPITAL LEASE -- means any lease with respect to which GAAP requires the lessee to recognize the acquisition of an asset and the incurrence of a liability. CLOSING -- Section 1.2. CLOSING DATE -- Section 1.2. 17 COMPANY -- has the meaning specified in the introductory sentence hereof. CONFIDENTIAL INFORMATION -- means any material non-public information regarding the Company and its Subsidiaries that is provided to any holder of any Note or any offeree of a Note pursuant to this Agreement, other than information (a) which was publicly known or otherwise known to such holder or such offeree at the time of disclosure, (b) which subsequently becomes publicly known through no act or omission of such holder or such offeree or (c) which otherwise becomes known to such holder or such offeree, other than through disclosure by the Company or any Subsidiary. CONSOLIDATED ADJUSTED FUNDED DEBT -- at any time, means the Adjusted Funded Debt of the Company and its Restricted Subsidiaries at such time on a consolidated basis. CONSOLIDATED ADJUSTED NET INCOME -- for any fiscal period means net earnings after income taxes of the Company and the Restricted Subsidiaries determined on a consolidated basis, but excluding: (a) any gain or loss arising from the sale of capital assets; (b) any gain arising from any write-up of assets; (c) earnings of any Restricted Subsidiary accrued prior to the date it became a Restricted Subsidiary; (d) earnings of any Person, substantially all the assets of which have been acquired in any manner, realized by such other Person prior to the date of such acquisition; (e) net earnings of any Person (other than a Restricted Subsidiary) in which the Company or any Restricted Subsidiary shall have an ownership interest unless such net earnings shall have actually been received by the Company or such Restricted Subsidiary in the form of cash distributions; (f) any portion of the net earnings of any Restricted Subsidiary that for any reason is unavailable for payment of dividends to the Company or any other Restricted Subsidiary; 18 (g) the earnings of any Person to which assets of the Company shall have been sold, transferred or disposed of after the date of such transaction; (h) any gain arising from the acquisition of any Securities of the Company or any Restricted Subsidiary; and (i) any portion of the net earnings of the Company that cannot be freely converted into United States dollars. CONSOLIDATED ADJUSTED TANGIBLE ASSETS -- means at any time the net book value (after deducting related depreciation, obsolescence, amortization, valuation and other proper reserves) at which the Adjusted Tangible Assets of the Company and the Restricted Subsidiaries would be shown on a consolidated balance sheet of such Persons at such time, but excluding any amount on account of write-ups of assets after December 31, 1992. CONSOLIDATED DEBT -- means, at any time, the Debt of the Company and its Restricted Subsidiaries on a consolidated basis at such time. CONSOLIDATED NET TANGIBLE CAPITALIZATION -- means, at any time, (i) Consolidated Adjusted Tangible Assets, less (ii) Restricted Investments, less (iii) all items which would appear on the liability side of a balance sheet (other than deferred liabilities, shareholders' equity, minority interests in Subsidiaries and Adjusted Funded Debt) in each case as such items would be shown on a consolidated balance sheet of the Company and its Restricted Subsidiaries at such time. CONSOLIDATED TANGIBLE NET WORTH -- means, at any time, Consolidated Net Tangible Capitalization less (to the extent included in the computation ---- of Consolidated Net Tangible Capitalization) deferred liabilities and Consolidated Adjusted Funded Debt at such time. CURRENT DEBT -- means, at any time, with respect to any Person (i) all liabilities for borrowed money and all liabilities secured by any Lien existing on Property owned by such Person whether or not such liabilities have been assumed, that, in either case are payable on demand or within one (1) year from such time, except: (a) any such liabilities which are renewable or extendible at the option of such Person to a date more than one (1) year from such time, and (b) any such liabilities that, although payable within one (1) year, constitute payments required to be made on 19 account of principal of indebtedness expressed to mature more than one (1) year from such time, and (ii) its liabilities under Guaranties of obligations described in (i) above. DEBT -- means, with respect to any Person, at any time, without duplication, all Adjusted Funded Debt and Current Debt of such Person at such time. DEFAULT -- means an event or condition the occurrence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. DISTRIBUTION -- means, in respect of any corporation: (a) dividends or other distributions in respect of the capital stock, or any rights or warrants to purchase such stock, of such corporation (except distributions in such stock, or rights or warrants pertaining thereto); and (b) the redemption or acquisition of such stock or of warrants, rights or other options to purchase such stock (except when solely in exchange for stock whether pursuant to a conversion right or otherwise) unless made, contemporaneously, from the net proceeds of a sale of such stock. ENVIRONMENTAL PROTECTION LAW -- means any federal, state, county, regional or local law, statute, or regulation (including, without limitation, CERCLA, RCRA and SARA) enacted in connection with or relating to the protection or regulation of the environment, including, without limitation, those laws, statutes, and regulations regulating the disposal, removal, production, storing, refining, handling, transferring, processing, or transporting of Hazardous Substances, and any regulations, issued or promulgated in connection with such statutes by any Governmental Authority and any orders, decrees or judgments issued by any court of competent jurisdiction in connection with any of the foregoing. As used in this definition: CERCLA -- means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended from time to time (by SARA or otherwise), and all rules and regulations promulgated in connection therewith; 20 RCRA -- means the Resource Conservation and Recovery Act of 1976, as amended from time to time, and any rules and regulations issued in connection therewith; and SARA -- means the Superfund Amendments and Reauthorization Act of 1986, as amended from time to time, and all rules and regulations promulgated in connection therewith. ERISA -- means the Employee Retirement Income Security Act of 1974, as amended from time to time. ERISA AFFILIATE -- means any corporation or trade or business that (i) is a member of the same controlled group of corporations (within the meaning of section 414(b) of the IRC) as the Company, or (ii) is under common control (within the meaning of section 414(c) of the IRC) with the Company. EVENT OF DEFAULT -- Section 9.1. EXCHANGE ACT -- shall mean the Securities Exchange Act of 1934, as amended. FAIR MARKET VALUE -- means, at any time with respect to any Property, the sale value of such Property that would be realized in an arm's-length sale at such time between an informed and willing buyer, and an informed and willing seller, under no compulsion to buy or sell, respectively. FIXED CHARGES -- for any period shall mean, the sum of (i) all interest on Debt paid or payable during such period (including the portion of rent under Capital Leases which is allocable to interest), and (ii) all debt discount and expense amortized or required to be amortized during such period, in each case by the Company and its Restricted Subsidiaries on a consolidated basis during such period. FOREIGN PENSION PLAN -- means any plan, fund or other similar program (a) established or maintained outside of the United States of America by any one or more of the Company or the Subsidiaries primarily for the benefit of the employees (substantially all of whom are aliens not residing in the United States of America) of the Company or such Subsidiaries which plan, fund or other similar program provides for retirement income for such employees or results in a deferral of income for such employees in contemplation of retirement and (b) not otherwise subject to ERISA. 21 GAAP -- means accounting principles as promulgated from time to time in statements, opinions and pronouncements by the American Institute of Certified Public Accountants and the Financial Accounting Standards Board and in such statements, opinions and pronouncements of such other entities with respect to financial accounting of for-profit entities as shall be accepted by a substantial segment of the accounting profession in the United States. GOVERNMENTAL AUTHORITY -- means (a) the government of (i) the United States of America and any State or other political subdivision thereof, or (ii) any jurisdiction in which the Company or any Restricted Subsidiary conducts all or any part of its business, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. GUARANTORS -- means, individually and collectively, Western Gas Resources Storage, Inc., a Texas corporation, Western Gas Resources-Texas, Inc., a Texas corporation, Western Gas Resources-Oklahoma, a Delaware corporation, MGTC, Inc., a Wyoming corporation, MIGC, Inc., a Delaware corporation, Mountain Gas Resources, Inc., a Delaware corporation any other Persons who may from time to time become guarantors pursuant to Section 7.18 of this Agreement. GUARANTIED OBLIGATIONS -- Section 10.1(a). GUARANTY -- means with respect to any Person (for the purposes of this definition, the "Guarantor") any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person (the "Primary Obligor") in any manner, whether directly or indirectly, including (without limitation) obligations incurred as a partner or joint venturer, or through an agreement, contingent or otherwise, by the Guarantor: (a) to purchase such indebtedness or obligation or any Property or assets constituting security therefor; (b) to advance or supply funds 22 (i) for the purpose of payment of such indebtedness or obligation, or (ii) to maintain working capital or other balance sheet condition or any income statement condition of the Primary Obligor or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation; (c) to lease Property or to purchase Securities or other Property or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of the Primary Obligor to make payment of the indebtedness or obligation; or (d) otherwise to assure the owner of the indebtedness or obligation of the Primary Obligor against loss in respect thereof. For purposes of computing the amount of any Guaranty, in connection with any computation of indebtedness or other liability, it shall be assumed that the indebtedness or other liabilities that are the subject of such Guaranty are direct obligations of the issuer of such Guaranty. HAZARDOUS SUBSTANCES -- means any and all pollutants, contaminants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls). INCOME AVAILABLE FOR FIXED CHARGES -- for any period shall mean, Consolidated Adjusted Net Income for such period plus (to the extent deducted in computing Consolidated Adjusted Net Income for such period) income taxes, Fixed Charges, depreciation and amortization. INSTITUTIONAL INVESTOR -- means the Purchasers, any affiliate of any of the Purchasers, and any holder of Notes that is an "accredited investor" as defined in section 2(15) of the Securities Act. IRC -- means the Internal Revenue Code of 1986, together with all rules and regulations promulgated pursuant thereto, as amended from time to time. IRS -- means the Internal Revenue Service and any successor agency. LIEN -- means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and including but not 23 limited to the security interest lien arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes, and the filing of any financing statement under the Uniform Commercial Code of any jurisdiction, or an agreement to give any of the foregoing. The term "Lien" includes reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting real property and includes, with respect to stock, stockholder agreements, voting trust agreements, buy-back agreements and all similar arrangements. For the purposes hereof, the Company and each Subsidiary is deemed to be the owner of any Property that it shall have acquired or holds subject to a conditional sale agreement, Capital Lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes, and such retention or vesting is deemed a Lien. The term "Lien" does not include negative pledge clauses in agreements relating to the borrowing of money. For purposes of clarification, the Option does not constitute a Lien. MAKE-WHOLE AMOUNT -- means, at any time with respect to a principal amount of Notes becoming due in whole or in part, and whether by prepayment, acceleration or otherwise, the greater of (a) Zero Dollars ($0), if the Make-Whole Discount Rate equals or exceeds 7.65% per annum, or (b) if the Make-Whole Discount Rate is less than 7.65% per annum, then (i) the sum of the present values of the then remaining scheduled payments of principal and interest that would be payable in respect of such principal amount but for such prepayment or acceleration, minus (ii) such principal amount and the amount of interest accrued on such principal amount since the then most nearly preceding scheduled interest payment date. In determining such present values, a discount rate equal to the Make-Whole Discount Rate divided by two (2), and a discount period of six (6) months of thirty (30) days each, shall be used. As used in this definition, Applicable H.15 -- means, at any time, United States Federal Reserve Statistical Release H.15(519) or its successor publication most recently published and available to the public at such time, or if no such successor publication is available, then any other source of current information in respect of interest rates on securities of the United States of America that is generally available and, in the judgment of the 24 Required Holders, provides information reasonably comparable to the H.15(519) report. Make-Whole Discount Rate -- means, at any time, with respect to a principal amount of Debt being prepaid or accelerated: (a) the per annum percentage rate (rounded to the nearest three decimal places) equal to the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the date two Business Days prior to the date of such prepayment or acceleration, as the case may be, (as reported on the Telerate Service, the Bloomberg Financial Markets System or any other nationally recognized trading screen, reasonably selected by the Required Holders, reporting on-line intraday trading in United States government Securities) for actively traded U.S. Treasury securities having a maturity equal to the Weighted Average Life to Maturity of the principal amount of the Debt then being prepaid or accelerated, or, if such yields shall not be reported as of such time or the yields reported as of such time shall not be ascertainable, (ii) the annual yield to maturity at such time of the United States Treasury obligation listed in the then most recently available Applicable H.15 for the then most recent available day in such Applicable H.15 with a Treasury Constant Maturity (as such term is defined in such Applicable H.15) equal to the Weighted Average Life to Maturity of the principal amount of the Debt then being prepaid or accelerated, plus (b) one-half of one percent (0.50%) per annum. For purposes of clause (a)(i) and clause (a)(ii) of the preceding sentence, if no United States Treasury obligation with a maturity corresponding exactly to the Weighted Average Life of the Debt being prepaid or accelerated is listed, yields for the two (2) published maturities most closely corresponding to such scheduled maturity shall be calculated pursuant to the immediately preceding sentence and the Make-Whole Discount Rate shall be linearly interpolated from such yields. 25 Remaining Dollar-Years -- means, at any time, with respect to a principal amount of indebtedness being prepaid or accelerated, the result obtained by (a) multiplying (i) an amount equal to the then remaining scheduled payments of principal (including payment at maturity) that would be payable in respect of the principal amount of the indebtedness being so prepaid or accelerated but for such prepayment or acceleration, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such time and the date each such required principal payment would be due if such prepayment or acceleration had not occurred, and (b) calculating the sum of each of the products obtained in the preceding subsection (a). Weighted Average Life to Maturity -- means, at any time, with respect to a principal amount of Debt being prepaid or accelerated, the number of years obtained by dividing the Remaining Dollar-Years of such principal amount, determined at such time, by such principal amount. MARGIN SECURITY -- means "margin stock" and "margin security" within the meaning of Regulations U, T, and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II, as amended from time to time. MATERIAL ADVERSE EFFECT -- shall mean a material adverse effect on the ability of the Company to perform its obligations under this Agreement or the Notes, or a material adverse effect upon the business, properties, prospects, profits or condition (financial or otherwise) of the Company and the Restricted Subsidiaries, taken as a whole. MULTIEMPLOYER PLAN -- means any multiemployer plan (as defined in section 3(37) of ERISA) in respect of which the Company or any ERISA Affiliate is an "employer" (as such term is defined in section 3 of ERISA). MULTIPLE EMPLOYER PENSION PLAN -- means any employee benefit plan within the meaning of section 3(3) of ERISA (other than a Multiemployer Plan), subject to Title IV of ERISA, to which the Company or any ERISA Affiliate and an employer (as such term is defined in section 3 of ERISA) other than an ERISA Affiliate or the Company contribute. 26 NATURAL GAS INVENTORY -- means, at any time, the natural gas owned by the Company and its Restricted Subsidiaries and held in storage at such time. NOTE -- Section 1.1. NOTE PURCHASE AGREEMENT -- Section 1.2. OPTION -- Section 7.4(b). OPTION AGREEMENT -- Section 7.4(b). OTHER PURCHASER -- Section 1.2. PANHANDLE JOINT VENTURE -- shall mean the joint venture formed as a result of the Panhandle Transaction. PANHANDLE TRANSACTION -- shall mean the Company's initial investment in a joint venture to be formed between the Company and Panhandle Eastern Pipe Line Company or an affiliate thereof ("PEPL"), which will consist of: (i) the contribution by the Company of its Chester Gas Plant and related Vega, Fisher, Longdale and Bouse gathering systems, which collectively have a book value of $13,871,891 as of February 28, 1993; and (ii) the construction by the Company of certain pipeline and compression facilities for the joint venture and the modification of certain assets to be contributed by PEPL, at an aggregate cost estimated at $9,000,000. PEPL will contribute its Avard/Waynoka, NE Seiling and Canton/Cedardale gathering systems to the joint venture. The Company and PEPL will each have a fifty percent (50.0%) ownership interest in the joint venture. PBGC -- means the Pension Benefit Guaranty Corporation and any successor corporation or governmental agency. PENSION PLAN -- means, at any time, any "employee pension benefit plan" (as such term is defined in section 3 of ERISA) maintained at such time by the Company or any ERISA Affiliate for employees of the Company or such ERISA Affiliate, excluding any Multiemployer Plan, but including, without limitation any Multiple Employer Pension Plan. PERMITTED RESTRICTED SUBSIDIARY DEBT -- means (a) unsecured Debt of a Restricted Subsidiary other than (i) Debt in favor of the Company or a Wholly-Owned Restricted Subsidiary or (ii) any Guaranty of Debt of the Company owed to a lender which has entered into an intercreditor agreement with the holders of the Notes to the effect and substantially in the form of Exhibit E hereto, and 27 (b) Debt of a Restricted Subsidiary secured by a lien permitted by any one or more of clauses (vi)B, (vii), (ix) and (xi) of Section 7.5(a) of this Agreement. PERMITTED SECURITIZATION PROGRAM -- means a transaction or series of transactions pursuant to which: (a) The Company and Subsidiaries sell, transfer or otherwise dispose of, at not less than face value, on a revolving basis, an undivided interest in a pool of the Company's and the Subsidiaries' accounts receivable to a special purpose entity, in an amount not to exceed, at any time Seventy-Five Million Dollars ($75,000,000), plus ten percent (10%) of the amount sold or transferred at such time for the purpose of providing the purchaser with over-collateralization; and (b) The Company and the Subsidiaries grant a security interest (the "Security Interest") in all or a portion of their accounts receivable (the "Pledged Accounts Receivable") to a special purpose entity (the "Special Purpose Entity") for the purpose of providing the Special Purpose Entity with a basis of recourse for its investment in the Pledged Accounts Receivable (the "Receivables Investment"), provided that: (i) the maximum recourse to the Pledged Accounts Receivable shall be equal to the purchase price of the Receivables Investment plus ten percent (10%), in an aggregate amount not to exceed Eighty-Two Million Five Hundred Thousand Dollars ($82,500,000) (the "Recourse Amount"); (ii) the Security Interest shall apply to each Pledged Account Receivable in an amount not to exceed the proportion that the Recourse Amount bears to the aggregate face value of the Pledged Accounts Receivable; and (iii) the Company and the Subsidiaries shall be entitled to share (with the Special Purpose Entity), on a pari passu and pro rata basis (based upon the purchaser's share described in clause (ii)), all proceeds (if any) derived from each Pledged Accounts Receivable. PERSON -- means an individual, partnership, corporation, trust, unincorporated organization, or a government or agency or political subdivision thereof. PLACEMENT MEMORANDUM -- Section 2.1. PROPERTY -- means any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. 28 PURCHASE MONEY LIEN -- means (a) a Lien held by any Person (whether or not the seller of such assets) on tangible Property (or a group of related items of Property the substantial portion of which are tangible) acquired or constructed by the Company or any Subsidiary, which Lien secures all or a portion of the related purchase price or construction costs of such Property, provided that such Purchase Money Lien (i) encumbers only Property acquired after the Closing Date and acquired with the proceeds of the Debt secured thereby, and (ii) attaches to such Property within six months of the date such property is first acquired, and (iii) does not encumber any other Property, and (iv) does not secure an amount of Debt greater than the cost or Fair Market Value (whichever is less) of the encumbered Property; and (b) any Lien existing on real Property of any corporation at the time it becomes a Subsidiary, or any Lien on Property acquired by the Company or a Subsidiary which was in existence prior to the time such Property was so acquired, provided that (i) no such Lien shall extend to or cover any Property other than the Property subject to such Lien at the time of any such transaction, and (ii) such Lien was not created in contemplation of any such transaction. PURCHASER -- means the Persons listed as purchasers of Notes on Annex 1 hereto. REQUIRED HOLDERS -- means, at any time, the holders of at least sixty- six and two-thirds percent (66 2/3%) in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by any one or more of the Company, any Restricted Subsidiary, any Affiliate and any officer or director of any thereof). RESPONSIBLE OFFICER -- shall mean the chief executive officer, chief financial officer, president, general counsel or treasurer of the Company. 29 RESTRICTED INVESTMENTS -- means at any time all investments, made in cash or by delivery of Property or otherwise, by the Company and the Restricted Subsidiaries (x) in any Person, whether by acquisition of stock, indebtedness or other obligation or Security, or by loan, Guaranty, advance or capital contribution, or otherwise, or (y) in any Property (items (x) and (y) herein called "Investments"), except the following: (a) Investments in one or more Restricted Subsidiaries or any corporation that becomes a Restricted Subsidiary concurrently with such Investment; (b) Investments in Property used or to be used in the ordinary course of business of the Company and the Restricted Subsidiaries as referred to in Section 2.1 of this Agreement; (c) Investments in current assets arising from the sale of goods and services in the ordinary course of business of the Company and the Restricted Subsidiaries; (d) Investments in direct obligations of the United States of America, or any agency thereof or obligations guaranteed by the United States of America, provided that such obligations mature within three (3) years from the date of acquisition thereof; (e) Investments in certificates of deposit and/or bankers' acceptances, in each case maturing within three hundred sixty-five (365) days from the date of acquisition and issued by a bank or trust company organized under the laws of the United States of America, Canada, Japan or a nation which is a member of the European Economic Community, which bank at the time of the acquisition such Investment shall be rated B or better by IBCA or B or better by Thompson Bank Watch; (f) Investments in commercial paper rated A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc. and maturing not more than two hundred seventy (270) days from the date of acquisition thereof; (g) Investments in readily marketable and tax-exempt direct obligations of any State of the United States of America or a Governmental Authority located in the United States of America having at all times a credit rating of at least Aa by Moody's Investors Service, Inc. or AA or SP-2 by Standard and Poor's Corporation, in each case due within three years from the making of such Investment; (h) Investments in money market investment programs which are classified as current assets in accordance with GAAP and which are 30 administered by a financial institution having capital, surplus and undivided profits of at least One Hundred Million Dollars ($100,000,000), provided that each such program invests solely in Investments of the types described in clause (d), clause (e), clause (f), and clause (g) above and has assets in excess of One Hundred Million Dollars ($100,000,000); (i) Investments in money market or auction rate preferred stock rated A or better by Standard and Poor's Corporation or a or better by Moody's Investors Service; (j) Investments in the equity of corporations or partnerships which have as their principal business (i) gas gathering, processing and transmission, (ii) oil and gas production and storage, or (iii) gas marketing and related activities, provided that the aggregate amount of Investments made pursuant to this clause (j) (other than investments allowed by clause (a) above) shall not at any time exceed ten percent (10%) of Consolidated Net Tangible Capitalization; (k) Loans to officers and other key employees of the Company or a Restricted Subsidiary to enable such individuals to exercise options to purchase capital stock of the Company; and (l) the Panhandle Transaction. Investments shall be valued at cost less any net return of capital through the sale or liquidation thereof or other return of capital thereon. RESTRICTED SUBSIDIARY -- means a corporation, (a) organized under the laws of the United States, Puerto Rico or Canada or a jurisdiction thereof, (b) that conducts substantially all of its business and has substantially all of its Property within the United States, Puerto Rico and Canada, and (c) at least eighty percent (80%) (by number of votes) of each class of Voting Stock of which and one hundred percent (100%) of all other equity Securities and all other Securities convertible into, exchangeable for, or representing the right to purchase, Voting Stock, of which are legally and beneficially owned by the Company and its Wholly-Owned Restricted Subsidiaries. RESTRICTED SUBSIDIARY STOCK -- Section 7.4(c). SECURITIES ACT -- means the Securities Act of 1933, as amended. 31 SECURITY -- means "security" as defined by section 2(1) of the Securities Act. SUBSIDIARY -- means, at any time, a corporation of which the Company owns, directly or indirectly, more than fifty percent (50%) (by number of votes) of each class of Voting Stock at such time. SURPLUS EQUIPMENT -- means equipment of the Company or a Restricted Subsidiary which equipment is (i) similar to other equipment of the Company or such Restricted Subsidiary and (ii) not used or useful in the ongoing operation of the Company and its Restricted Subsidiaries. SURVIVING CORPORATION -- Section 7.4(a). UNCONDITIONAL GUARANTY -- Section 10.1(a). UNRESTRICTED SUBSIDIARY -- means any Subsidiary which (a) as of the Closing Date is not a Restricted Subsidiary, (b) after the Closing Date is designated as an Unrestricted Subsidiary pursuant to Section 12.1 hereof, or (c) otherwise does not satisfy the criteria for a Restricted Subsidiary set forth in the definition of "Restricted Subsidiary." VOTING STOCK -- means capital stock of any class or classes of a corpora tion the holders of which are ordinarily, in the absence of contingencies, entitled to elect corporate directors (or Persons performing similar functions). WHOLLY-OWNED RESTRICTED SUBSIDIARY -- means, at any time, any Restricted Subsidiary one hundred percent (100%) of all of the equity Securities (except directors' qualifying shares) and voting Securities of which are owned by any one or more of the Company and the Company's other wholly-owned Subsidiaries at such time. 2. WARRANTIES AND REPRESENTATIONS. To induce the Existing Noteholders to enter into this Amendment, the Company and the Guarantors represent and warrant as follows: 2.1 DUE AUTHORIZATION, EXECUTION AND DELIVERY; OBLIGATIONS ENFORCEABLE. This Amendment has been duly authorized by all necessary corporate action on the part of the Company and each Guarantor, has been executed and delivered by a duly authorized officer of the Company and each Guarantor, and constitutes a legal, valid and binding obligation of each such corporation, enforceable against each such corporation in accordance with its terms. 2.2 NO EVENTS OF DEFAULT. 32 Immediately prior to, and immediately after giving effect to, this Amendment, no Default or Event of Default will exist. 2.3 OTHER CREDITORS. Since January 1, 1998, other than the Amendment Fee paid to the Existing Noteholders, the Company has not paid or agreed to pay to any creditor of the Company any fee or other compensation in consideration for amending any term of any indebtedness of the Company. 3. EFFECTIVENESS. The provisions of Section 1 of this Amendment shall become effective and binding upon the Company, the Guarantors and the Existing Noteholders as of January 15, 1998 when all of the conditions set forth in this Section 3 are satisfied. 3.1 EXECUTION AND DELIVERY. The Company and the holders of at least sixty-six and two-thirds percent (66 2/3%) of the outstanding principal amount of the Notes shall have executed and delivered to Hebb & Gitlin, special counsel to the Existing Noteholders, a counterpart of this Amendment. 3.2 PAYMENT OF AMENDMENT FEE AND EXPENSES. The Company shall have paid the Amendment Fee to each of the Existing Noteholders and shall have paid all costs, expenses and charges (including, without limitation, all fees and out-of-pocket expenses of Hebb & Gitlin, special counsel to the Existing Noteholders) incurred on or prior to the date hereof, directly or indirectly, by each Existing Noteholder in connection with the preparation, review and implementation of this Amendment. 4. MISCELLANEOUS. 4.1 EFFECT OF AMENDMENT. Upon the effectiveness of this Amendment, each reference in the Existing Note Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import, and each such reference in the Notes, shall mean and be a reference to the Existing Note Agreement as amended hereby. 4.2 DUPLICATE ORIGINALS; EXECUTION IN COUNTERPART. Two or more duplicate originals of this Amendment may be signed by the parties hereto, each of which shall be an original but all of which together shall constitute one and the same instrument. This Amendment may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by the Company and the holders of at least sixty-six and two-thirds percent (66 2/3%) of the outstanding principal 33 amount of the Notes, and each set of counterparts which, collectively, shows execution by the Company and such Noteholders shall constitute one duplicate original. 4.3 LIMITATION OF AMENDMENT. Except as expressly provided herein, (a) no terms or provisions of the Existing Note Agreement are modified or changed by this Amendment, and (b) the terms and provisions of the Existing Note Agreement shall continue in full force and effect. The Company and each of the Guarantors hereby acknowledges, confirms, reaffirms and ratifies all of its obligations and duties under the Amended Note Agreement and the Notes. 4.4 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT. [Remainder of page intentionally blank. Next page is signature page.] 34 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their authorized officers as of the date first above written. WESTERN GAS RESOURCES, INC. By /s/ William J. Krysiak ------------------------------------------ Name: William J. Krysiak Title: Vice President - Finance LANCE OIL & GAS COMPANY, INC. MGTC, INC. MIGC, INC. MOUNTAIN GAS RESOURCES, INC. PINNACLE GAS TREATING, INC. WESTERN POWER SERVICES, INC. WESTERN GAS RESOURCES- OKLAHOMA, INC. WESTERN GAS RESOURCES STORAGE, INC. WESTERN GAS RESOURCES-TEXAS, INC. WGR CANADA, INC. By /s/ William J. Krysiak ------------------------------------------ Name: William J. Krysiak Title: Vice President - Finance ACCEPTED: CONNECTICUT GENERAL LIFE INSURANCE COMPANY* CIGNA PROPERTY AND CASUALTY INSURANCE COMPANY* CENTURY INDEMNITY COMPANY* LIFE INSURANCE COMPANY OF NORTH AMERICA* By: Cigna Investments, Inc. By: /s/ James G. Schelling -------------------------- Name: James G. Schelling Title: Managing Director * This entity is either the registered owner of one or more of the securities pertaining hereto or is a beneficial owner of one or more of such securities owned by and registered in the name of a nominee for that entity. 35 ATTACHMENT 1 Guarantors - ---------- Lance Oil & Gas Company, Inc. MGTC, Inc. MIGC, Inc. Mountain Gas Resources, Inc. Pinnacle Gas Treating, Inc. Western Power Services, Inc. Western Gas Resources-Oklahoma, Inc. Western Gas Resources Storage, Inc. Western Gas Resources-Texas, Inc. WGR Canada, Inc. Existing Noteholders - -------------------- Connecticut General Life Insurance Company Century Indemnity Company CIGNA Property and Casualty Company Life Insurance Company of North America The Canada Life Assurance Company Canada Life Insurance Company of America Canada Life Insurance Company of New York The Franklin Life Insurance Company Royal Maccabees Life Insurance Company Attachment 1-1 EX-10.22 3 FIRST AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.22 Execution FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT (herein called this "Amendment") is made as of the 8th day of July, 1998 by and among Western Gas Resources, Inc. ("Borrower") and NationsBank, N.A., successor by merger to NationsBank of Texas, N.A., as Agent ("Agent"), and the Lenders referred to in the Original Agreement (as defined below). W I T N E S S E T H: WHEREAS, Borrower, Agent and Lenders have entered into that certain Credit Agreement dated as of May 30, 1997 (as amended, restated, or supplemented to the date hereof, the "Original Agreement"), for the purposes and consideration therein expressed, pursuant to which Lenders made and became obligated to make loans to Borrower as therein provided; and WHEREAS, Borrower, Agent and Lenders desire to amend the Original Agreement to for the purposes set forth herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Original Agreement, in consideration of the loans which may hereafter be made by Lenders to Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I. Definitions and References -------------------------- (S) 1.1 Terms Defined in the Original Agreement. Unless the context --------------------------------------- otherwise requires or unless otherwise expressly defined herein, the terms defined in the Original Agreement shall have the same meanings whenever used in this Amendment. ARTICLE II. Amendments ---------- (S) 2.2 Defined Terms. Section 1.1 of the Original Agreement is hereby ------------- amended by adding the following defined terms: "'Granger Complex' means those certain gas processing facilities and ---------------- associated gas gathering systems (with all related assets) to be sold by Borrower to RIS Resources (USA) Inc. pursuant to the Granger Option and Asset Purchase Agreement." "'Granger Option and Asset Purchase Agreement' means that certain ------------------------------------------- Option and Asset Purchase Agreement dated November 14, 1997 by and between Mountain Gas Resources, Inc., Borrower and RIS Resources (USA) Inc., as amended. (S) 2.2 Limitation on Sales of Property. Section 6.2(d) of the Original ------------------------------- Agreement is hereby amended to read in its entirety as follows: "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: (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 receivables pursuant to a Permitted Receivables Purchase Facility; (iv) the sale of up to an undivided fifty percent (50%) interest in the Granger Complex pursuant to the Granger Option and Asset Purchase Agreement; and (v) 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; provided that the sale of the Granger Complex and related assets pursuant to the Granger Option and Asset Purchase Agreement shall not be included in the calculation of this clause (v). 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." (S) 2.3 Limitation on Investments and New Businesses Section 6.2(f)(iii) -------------------------------------------- of the Original Agreement is hereby amended to read in its entirety as follows: "(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 -2- 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, (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 Group (a division of McGraw-Hill, Inc.) or Moody's Investors Services, Inc. and investments in money market mutual funds with equivalent ratings, or (D) preferred stock of RIS Resources (USA) Inc. in an amount not to exceed $14,000,000 received in connection with the sale of the Granger Complex and related assets described in Section 6.2;" ARTICLE III. Conditions of Effectiveness --------------------------- (S) 3.1. Effective Date. This Amendment shall become effective as of the -------------- date first above written when, and only when, Agent shall have received all of the following documents: (a) This Amendment, duly authorized, executed and delivered, and in form and substance satisfactory to Agent. (b) A certificate of a duly authorized officer of Borrower to the effect that all of the representations and warranties set forth in Article IV hereof are true and correct at and as of the time of such effectiveness. (c) A certificate of the Secretary of Borrower dated the date of this Amendment certifying that attached thereto is a true and complete copy of resolutions adopted by the Board of Directors of Borrower authorizing the execution, delivery and performance of this Amendment and certifying the names and true signatures of the officers of Borrower authorized to sign this Amendment. (d) Such supporting documents as Agent may reasonably request. ARTICLE IV. Representations and Warranties ------------------------------ (S) 4.1. Representations and Warranties of Borrower. In order to induce ------------------------------------------ each Lender to enter into this Amendment, Borrower represents and warrants to each Lender that: (a) The representations and warranties contained in Section 5.1 of the Original Agreement are true and correct at and as of the time of the effectiveness hereof (except as -3- such representations and warranties have been modified by the transactions contemplated herein). (b) Borrower is duly authorized to execute and deliver this Amendment and Borrower is and will continue to be duly authorized to borrow monies and to perform its obligations under the Credit Agreement. Borrower has duly taken all corporate and action necessary to authorize the execution and delivery of this Amendment. (c) The execution and delivery by Borrower of this Amendment, the performance of its obligations thereunder and the consummation of the transactions contemplated hereby do not and will not conflict with any provision of law, statute, rule or regulation or of the certificate of incorporation and bylaws of Borrower or of any material agreement, judgment, license, order or permit applicable to or binding upon Borrower or result in the creation of any lien, charge or encumbrance upon any assets or properties of Borrower. Except for those which have been obtained, no consent, approval, authorization or order of any court or governmental authority or third party is required in connection with the execution and delivery by Borrower and of this Amendment. (d) When duly executed and delivered, this Amendment and the Credit Agreement will be a legal and binding obligation of Borrower enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors' rights and by equitable principles of general application. (e) The unaudited Consolidated quarterly financial statements of Borrower dated as of March 31, 1998 fairly present the Consolidated financial position at such date and the Consolidated statement of operations and the changes in Consolidated financial position for the periods ending on such date for Borrower. Copies of such financial statements have heretofore been delivered to Agent. Since March 31, 1998, no material adverse change has occurred in the financial condition or business or in the Consolidated financial condition or business of Borrower. ARTICLE V. Miscellaneous ------------- (S) 5.1. Ratification of Agreements. The Original Agreement as hereby -------------------------- amended is hereby ratified and confirmed in all respects. Any reference to the Credit Agreement in any Loan Document shall be deemed to be a reference to the Original Agreement as hereby amended. The Loan Documents, as they may be amended or affected by the various Amendment Documents, are hereby ratified and confirmed in all respects. The execution, delivery and effectiveness of this Amendment and the other Amendment Documents shall not, except as expressly provided herein or therein, operate as a waiver of any right, power or remedy of Lenders under the Credit -4- Agreement, the Notes, or any other Loan Document nor constitute a waiver of any provision of the Credit Agreement, the Notes or any other Loan Document. (S) 5.2. Survival of Agreements. All representations, warranties, ---------------------- covenants and agreements of Borrower herein shall survive the execution and delivery of this Amendment and the performance hereof, including without limitation the making or granting of the Loans, and shall further survive until all of the Obligations are paid in full. All statements and agreements contained in any certificate or instrument delivered by Borrower hereunder or under the Credit Agreement to any Lender shall be deemed to constitute representations and warranties by, and/or agreements and covenants of, Borrower under this Amendment and under the Credit Agreement. (S) 5.3. Loan Documents. This Amendment and each other Amendment Document -------------- is a Loan Document, and all provisions in the Credit Agreement pertaining to Loan Documents apply hereto and thereto. (S) 5.4. Governing Law. This Amendment shall be governed by and construed ------------- in accordance the laws of the State of Texas and any applicable laws of the United States of America in all respects, including construction, validity and performance. (S) 5.5. Counterparts. This Amendment may be separately executed in ------------ counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Amendment. THIS AMENDMENT 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 OF THE PARTIES. -5- IN WITNESS WHEREOF, this Amendment is executed as of the date first above written. WESTERN GAS RESOURCES, INC. By: /s/ William J. Krysiak --------------------------------------- Name: William J. Krysiak Title: Vice President - Finance NATIONSBANK, N.A. By: /s/ David C. Rubinking --------------------------------------- Name: David C. Rubinking Title: Senior Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ Paul Colon --------------------------------------- Name: Paul Colon Title: Vice President BANK OF MONTREAL By: /s/ Cahal B. Carmody --------------------------------------- Name: Cahal B. Carmody Title: Director BANKBOSTON, N.A. By: /s/ Terrance Ronon --------------------------------------- Name: Terrance Ronon Title: Vice President CREDIT LYONNAIS NEW YORK BRANCH By: /s/ Philippe Soustra ---------------------------------------- Name: Philippe Soustra Title: Senior Vice President CIBC INC. By: /s/ M.A. G. Corkum ---------------------------------------- Name: Michael A. G. Corkum Title: Authorized Signatory U.S. BANK NATIONAL ASSOCIATION By: /s/ Monte E. Deckerd ---------------------------------------- Name: Monte E. Deckerd Title: Vice President SOCIETE GENERALE, SOUTHWEST AGENCY By: /s/ R.A. Erbert ---------------------------------------- Name: Richard A. Erbert Title: Vice President ABN AMRO BANK N.V. By: /s/ Scott Albert ---------------------------------------- Name: Scott Albert Title: Vice President By: /s/ Darin P. Fischer ---------------------------------------- Name: Darin P. Fischer Title Assistant Vice President EX-10.23 4 AMENDMENT TO NOTE PURCHASE AGREEMENT EXHIBIT 10.23 LETTER AMENDMENT NO.1 TO THAT CERTAIN NOTE PURCHASE AGREEMENT December 15, 1997 To Each of the Purchasers: Ladies and Gentlemen: We refer to that certain Note Purchase Agreement dated as of November 29, 1995, by and among the undersigned, Western Gas Resources, Inc. (the "Company") and the Purchasers relating to the purchase and sale of the Company's 8.02% Senior Notes (the "Agreement"). Unless otherwise defined herein, the terms defined in the Agreement shall be used herein as therein defined. The Company has requested that each of you amend Sections 6C(4) and 6C(5)(v) relating to, among other things, sales of stock or assets by the Company or any Subsidiary. The Required Holders have indicated their willingness to so amend the Agreement. Accordingly, it is hereby agreed by the parties hereto as follows: I. AMENDMENTS TO THE AGREEMENT. The Agreement is, effective the date first --------------------------- above written, hereby amended as follows: A. Paragraph 6C(4) is hereby deleted in its entirety and replaced, in lieu thereof, with the following: "6C(4) SALE OF STOCK AND DEBT OF SUBSIDIARIES. (i) Sell or otherwise dispose of, or part with control of, any shares of stock or Debt of any Subsidiary, except to the Company or another Wholly Owned Subsidiary, and except that all shares of stock and Debt of any Subsidiary at the time owned by or owed to the Company and all Subsidiaries may be sold as an entirety for a cash consideration which represents the fair value (as determined in good faith by the Board of Directors of the Company) at the time of sale of the shares of stock and Debt so sold (the "Stock Sale Restriction"), provided that (i) the assets of such Subsidiary together -------- with (ii) the assets of all other Subsidiaries the stock or Debt of which was sold or otherwise disposed of in the preceding 12-month period and (iii) the assets of the Company and its Subsidiaries sold, leased, transferred or otherwise disposed of pursuant to clause (v) of paragraph 6C(5) in the preceding 12-month period (in each transaction measured by the greater of book value or Fair Market Value), do not represent more than 15% of Consolidated Net Tangible Assets as reflected on the most recent annual or quarterly consolidated balance sheet To Each of the Purchasers December 15, 1997 Page 2 (the "Initial Basket"); and provided further that, at the time of such sale, such Subsidiary shall not ---------------- own, directly or indirectly, any shares of stock or Debt of, or any other continuing investment in, any other Subsidiary (unless all of the shares of stock and Debt of such other Subsidiary owned, directly or indirectly, by the Company and all Subsidiaries are simultaneously being sold as permitted by this paragraph 6C(4)), or any shares of stock or Debt of the Company. (ii) Notwithstanding anything else contained in paragraph 6C(4)(i), in the event that the Option (as hereinafter defined) is exercised in accordance with the terms of the Option Agreement (as hereinafter defined) , then during the 12-month period following the end of the month in which the Option is exercised, the Company will not and will not permit any Subsidiary to (i) Sell or otherwise dispose of, or part with control of, any shares of stock of any Subsidiary, except to the Company or another Wholly Owned Subsidiary, and except that all shares of stock of any Subsidiary at the time owned by the Company and all Subsidiaries may be sold as an entirety for a cash consideration which represents the fair value (as determined in good faith by the Board of Directors of the Company) at the time of sale of the shares of stock so sold (the "Stock Sale Restriction"), provided that (I) the assets of such Subsidiary -------- together with (ii) the assets of all other Subsidiaries the stock of which was sold or otherwise disposed of in the preceding 24-month period and (iii) the assets of the Company and its Subsidiaries sold, leased, transferred or otherwise disposed of pursuant to clause (v) of paragraph 6C(5) in the preceding 24-month period (in each transaction measured by the greater of book value or Fair Market Value), do not represent more than 25% of Consolidated Net Tangible Assets (the "Increased Basket") as reflected on the most recent annual or quarterly consolidated balance sheet, and provided further that, at the time of such sale, such Subsidiary shall not ---------------- own, directly or indirectly, any shares of stock of, or any other continuing investment in, any other Subsidiary (unless all of the shares of stock of such other Subsidiary owned, directly or indirectly, by the Company and all Subsidiaries are simultaneously being sold as permitted by this paragraph 6C(4)), or any shares of stock of the Company. The Increased Basket for the Stock Sale Restriction shall apply during the 12- month period following the month in which the Option is exercised. Thereafter, the Initial Basket shall apply. B. Paragraph 6C(5)(v) is hereby deleted in its entirety and replaced, in lieu thereof, with the following: To Each of the Purchasers December 15, 1997 Page 3 "6C(5)(v) The Company or any Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to any Person (the "Asset Sale Restriction"), provided, that: (a) such assets together with (b) all other -------- assets of the Company and its Subsidiaries sold, leased, transferred or otherwise disposed of during the preceding 12-month period, and (c) the assets of all Subsidiaries the stock or Debt of which has been sold or otherwise disposed of during the preceding 12-month period pursuant to the first proviso of paragraph 6C(4) (in each transaction measured by the greater of book value or Fair Market Value), does not represent more than the Initial Basket as reflected on the most recent annual or quarterly consolidated balance sheet; provided further, that, in the event that the ---------------- first option to purchase certain assets (the "Option") from the Company or its Subsidiaries as defined in and pursuant to that certain Option and Asset Purchase Agreement dated November 14, 1997, by and between Mountain Gas Resources, Inc. and the Company and RIS Resources (USA) Inc. ("Option Agreement") is exercised in accordance with the Option Agreement by July 1, 1998, then for any sales, leases, transfers or other dispositions (including any sale pursuant to the Option Agreement) of any of the assets of Company or any Subsidiary during the 12-month period following the end of the month in which the Option is exercised, the Company or any Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to any Person, provided, that: (a) such assets together with (b) all -------- other assets of the Company and its Subsidiaries sold, leased, transferred or otherwise disposed of during the preceding 24-month period, and (c) the assets of all Subsidiaries the stock of which has been sold or otherwise disposed of during the preceding 24-month period pursuant to paragraph 6C(4)(ii) (in each transaction measured by the greater of book value or Fair Market Value), does not represent more than the Increased Basket. The Increased Basket for the Asset Sale Restriction shall apply during the 12- month period following the month in which the Option is exercised. Thereafter, the Initial Basket for the Asset Sale Restriction shall apply. II. THE OPTION IS NOT A LIEN. ------------------------ A. For the purpose of clarification, the parties hereto agree that the Option does not constitute a Lien. III. MISCELLANEOUS; EFFECTIVENESS. ----------------------------- To Each of the Purchasers December 15, 1997 Page 4 A. On and after the effective date of this letter 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 to "the Agreement", "thereunder", "thereof", or words of like import referring to the Agreement, shall mean the Agreement as amended by this Letter Amendment No. 1. The Agreement, as amended by this letter amendment, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. The execution, delivery and effectiveness of this letter amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy under the Agreement nor constitute a waiver of any provision of the Agreement. B. This Letter Amendment No. 1 may be executed in any number of counterparts 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 letter amendment. C. If you agree to the terms and provisions hereof, please evidence your agreement by executing and returning at least a counterpart of this Letter Amendment No. 1 to the Company at its address at 12200 N. Pecos Street, Denver, CO 80234, Attention: Vice President-Finance. D. This Letter Amendment No. 1 shall become effective as of the date first above written when and if counterparts of this letter Amendment No. 1 shall have been executed by us and the Required Holders. Very truly yours, WESTERN GAS RESOURCES, INC. By: /s/ William J. Krysiak ---------------------------- William J. Krysiak, Vice President-Finance Agreed as of the date first above written: To Each of the Purchasers December 15, 1997 Page 5 THE VARIABLE ANNUITY LIFE INSURANCE COMPANY By: /s/ Julia S. Tucker --------------------------------- Julia S. Tucker Investment Officer AMERICAN GENERAL LIFE INSURANCE COMPANY By: --------------------------------- GULF LIFE INSURANCE COMPANY By: --------------------------------- FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY By: /s/ Scott Hyney --------------------------------- ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY By: /s/ Scott Hyney --------------------------------- To Each of the Purchasers December 15, 1997 Page 6 J. ROMEO & CO., as nominee for THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK By: /s/ Raouf Khanil -------------------------------- Raouf Khanil EX-10.24 5 LTR. AMEND. #1 TO 2ND AMEND./RESTATED MASTER EXHIBIT 10.24 LETTER AMENDMENT NO. 1 TO SECOND AMENDMENT AND RESTATED MASTER SHELF AGREEMENT November 21, 1997 The Prudential Insurance Company of America Pruco Life Insurance Company c/o Prudential Capital Group 2200 Ross Avenue, Suite 4200E Dallas, Texas 75201 Ladies and Gentlemen: We refer to the Second Amended and Restated Master Shelf Agreement dated as of December 19, 1991 (effective as of January 31, 1996) (the "AGREEMENT") by and among the undersigned, Western Gas Resources, Inc. (the "COMPANY"), The Prudential Insurance Company of America ("PRUDENTIAL") and Pruco Life Insurance Company ("PRUCO"). Unless otherwise defined herein, the terms defined in the Agreement shall be used herein as therein defined. The Company and Mountain Gas Resources, Inc., a wholly-owned Subsidiary of the Company, have entered into an Option and Asset Purchase Agreement dated November 14, 1997 with RIS (the "OPTION AGREEMENT"). The Option Agreement grants RIS an option to purchase a portion (up to 50%) of the Company's interests in Granger/Lincoln Road Complex (such portion of such assets being the "Option Assets"). The unadjusted option price of the Option Assets is approximately $110,000,000. The Company has requested that you amend paragraphs 6C(4) and 6C(5)(v) relating to, among other things, sales of assets by the Company or any Subsidiary. You have indicated your willingness to so amend the Agreement. Accordingly, it is hereby agreed by the parties hereto as follows: 1. AMENDMENTS TO THE AGREEMENT. The Agreement is, effective the date first --------------------------- above written, hereby amended as follows: A. PARAGRAPH 6C(4). SALE OF STOCK AND DEBT OF SUBSIDIARIES. Paragraph 6C(4) is hereby deleted in its entirety and replaced, in lieu thereof, with the following: The Prudential Insurance Company of America Pruco Life Insurance Company November 21, 1997 Page 2 "6C(4). SALE OF STOCK AND DEBT OF SUBSIDIARIES. (i) Sell or otherwise dispose of, or part with control of, any shares of stock or Debt of any Subsidiary, except to the Company or another Wholly Owned Subsidiary, and except that all shares of stock and Debt of any Subsidiary at the time owned by or owed to the Company and all Subsidiaries may be sold as an entirety for a cash consideration which represents the fair value (as determined in good faith by the Board of Directors of the Company) at the time of sale of the shares of stock and Debt so sold, provided that (i) the assets of such Subsidiary -------- together with (ii) the assets of all other Subsidiaries the stock or Debt of which was sold or otherwise disposed of in the preceding 12- month period and (iii) the assets of the Company and its Subsidiaries sold, leased, transferred or otherwise disposed of pursuant to clause (v) of paragraph 6C(5) in the preceding 12-month period (in each transaction measured by the greater of book value or Fair Market Value), do not represent more than 15% of Consolidated Net Tangible Assets as reflected on the most recent annual or quarterly consolidated balance sheet, and provided further that, at the time of -------- ------- such sale, such Subsidiary shall not own, directly or indirectly, any shares of stock or Debt of, or any other continuing investment in any other Subsidiary (unless all of the shares of stock and Debt of such other Subsidiary owned, directly or indirectly, by the Company and all Subsidiaries are simultaneously being sold as permitted by this paragraph 6C(4)), or any shares of stock or Debt of the Company. (ii) Notwithstanding anything else contained in this paragraph 6C(4), in the event that the Option (as hereinafter defined) is exercised, then during the 12-month period following the end of the calendar month in which the Option is exercised the Company shall be permitted to sell or otherwise dispose of, or part with control of, any shares of stock or Debt of any Subsidiary, provided that all -------- shares of stock and Debt of any Subsidiary at the time owned by or owed to the Company and all Subsidiaries may be sold as an entirety for a cash consideration which represents the fair value (as determined in good faith by the Board of Directors of the Company) at the time of sale of the shares of stock and Debt so sold, provided -------- that (i) the assets of such Subsidiary together with (ii) the assets of all other Subsidiaries the stock or Debt of which was sold or otherwise disposed of in the preceding 24-month period and (iii) the assets of the Company and its Subsidiaries sold, leased, transferred of pursuant to clause (v) of paragraph 6C(5) in the preceding 24-month period (in each transaction measured by the greater of book value or Fair Market Value), do not represent more than 25% of Consolidated Net Tangible Assets as reflected on the most recent annual or The Prudential Insurance Company of America Pruco Life Insurance Company November 21, 1997 Page 3 quarterly consolidated balance sheet, and provided further that, at -------- ------- the time of such sale, such Subsidiary shall not own, directly or indirectly, any shares of stock or Debt of, or any other continuing investment in, any other Subsidiary (unless all of the shares of stock and Debt of such other Subsidiary owned, directly or indirectly, by the Company and all Subsidiaries are simultaneously being sold as permitted by this paragraph 6C(4)), or any shares of stock or Debt of the Company." B. PARAGRAPH 6C(5). MERGER AND SALE OF ASSETS. Clause (v) of paragraph 6C(5) is hereby deleted in its entirety and replaced, in lieu thereof, with the following: "(v) the Company or any Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to any Person, provided, that -------- (a) such assets together with (b) all other assets of the Company and its Subsidiaries sold, leased, transferred or otherwise disposed of during the preceding 12-month period, and (c) the assets of all Subsidiaries the stock or Debt of which has been sold or otherwise disposed of during the preceding 12-month period pursuant to the first proviso of paragraph 6C(4)(i) (in each transaction measured by the greater of book value or Fair Market Value), do not represent more that 15% of Consolidated Net Tangible Assets as reflected on the most recent annual or quarterly consolidated balance sheet; provided -------- further, that, in the event that the first option to purchase certain ------- assets (the "OPTION") from the Company or its Subsidiaries as defined in and pursuant to that certain Option and Asset Purchase Agreement dated November 14, 1997, by and between Mountain Gas Resources, Inc. and the Company and RIS (the "OPTION AGREEMENT") is exercised, then for any sales, leases, transfers or other dispositions (including any sale pursuant to the Option Agreement) of any of the assets of Company or any Subsidiary during the 12-month period following the end of the calendar month in which the option is exercised, the Company or any Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to any Person, provided that (a) such assets together with -------- (b) all other assets of the Company and its Subsidiaries sold, leased, transferred or otherwise disposed of during the preceding 24-month period, and (c) the assets of all Subsidiaries the stock or Debt of which has been sold or otherwise disposed of during the preceding 24- month period pursuant to paragraph 6C(4)(iii) (in each transaction measured by the greater of book value or Fair Market Value), does not represent more than 25% of Consolidated Net Tangible Assets as reflected on the most recent annual or quarterly consolidated balance sheet." The Prudential Insurance Company of America Pruco Life Insurance Company November 21, 1997 Page 4 II. WAIVERS UNDER THE AGREEMENT. To the extent that granting the option to RIS --------------------------- pursuant to the Option Agreement would be granting a "Lien" on property of the Company and its Subsidiaries in violation of paragraph 6C(1) of the Agreement, the Company has requested that you waive such violation. Prudential and Pruco agree to waive any such violation of paragraph 6C(1) to the extent that granting the option to purchase properties to RIS pursuant to the Option Agreement constitutes a "Lien" provided the option granted to RIS expires, or the option of RIS is exercised, on or before (a) July 1, 1998 with respect to at least one-half of the Option Assets and (b) if the purchase pursuant to the preceding clause, (a) is not for the entire amount of the Option Assets, July 1, 1999 for the remaining one-half of the Option Assets. III. MISCELLANEOUS; EFFECTIVENESS. ---------------------------- A. On and after the effective date of this letter 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 to "the Agreement," "thereunder," "thereof," or words of like import referring to the Agreement, shall mean the Agreement as emended by this Letter Amendment No. 1. The Agreement, as amended by this letter agreement, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. The execution, delivery and effectiveness of this letter amendment shall note except as expressly provided herein, operate as a waiver of any right, power or remedy under the Agreement nor constitute a waiver of any provision of the Agreement. B. This Letter Amendment No. 1 may be executed in any number of counterparts, and by any combination of the parties hereto in separate counterparts, each of which counterpart shall be an original and all of which taken together shall constitute one and the same letter amendment. C. If you agree to the terms and provisions hereof, please evidence your agreement by executing and returning at least a counterpart of this Letter Amendment No. 1 to the Company at its address at 12200 N. Pecos Street, Denver, CO 80234, Attention: Vice President-Finance. The Prudential Insurance Company of America Pruco Life Insurance Company November 21, 1997 Page 5 D. This Letter Amendment No. 1 shall become effective as of the date first above written when and if (i) counterparts of this letter amendment shall have been executed by us and you, (ii) the consent attached hereto shall have been executed by each Guarantor, and (iii) Lance Oil & Gas Company, Inc. shall have delivered to you a Guaranty. Very truly yours, WESTERN GAS RESOURCES, INC. By: /s/ William J. Krysiak ------------------------------ William J. Krysiak Vice President-Finance Agreed as of the date first above written: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ Randy Cobb ------------------------------------ Vice President PRUCO LIFE INSURANCE COMPANY By: /s/ Randy Cobb ------------------------------------ Vice President CONSENT TO AMENDMENT Each of the undersigned is a Guarantor ("GUARANTOR" and, collectively, "GUARANTORS") under separate guaranties (each being a "GUARANTY") in favor of The Prudential Insurance Company of America ("PRUDENTIAL"), for itself and on behalf of affiliates of Prudential with respect to the obligations of Western Gas Resources, Inc. (the "COMPANY") under that certain Second Amended and Restated Master Shelf Agreement dated as of December 19, 1991 (effective as of January 31, 1996) (the "AGREEMENT"). The terms used herein have the meaning specified in each Guaranty unless otherwise defined herein. Prudential, Pruco Life Insurance Company and the Company are entering into that certain Letter Amendment No. 1 dated as of November 21, 1997 to the Agreement to which this consent is attached ("LETTER AMENDMENT NO. 1"). Each of the undersigned hereby consents to Letter Amendment No. 1 and each hereby confirms and agrees that its Guaranty is, and shall continue to be, in full force and effect and is hereby confirmed and ratified in all respects except that, upon the effectiveness of, and on and after the date of this consent, all references in the Guaranty of the undersigned to the "Shelf Agreement," "thereunder," "thereof," or words of like import referring to the Shelf Agreement shall mean the Agreement as amended by the Letter Amendment No. 1. Dated as of November 21, 1997. LANCE OIL & GAS COMPANY, INC. MGTC, INC. MIGC, INC. MOUNTAIN GAS RESOURCES, INC. PINNACLE GAS TREATING, INC. WESTERN GAS RESOURCES STORAGE, INC. WESTERN GAS RESOURCES - TEXAS, INC. WESTERN GAS RESOURCES OKLAHOMA, INC. WESTERN POWER SERVICES, INC. WGR CANADA, INC. By: /s/ William J. Krysiak ----------------------------------- William J. Krysiak, as Vice President- Finance of each of the above-named companies. EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1998 JUN-30-1998 10,018 0 207,984 0 62,831 283,776 1,281,114 (307,052) 1,339,852 257,074 521,914 416 0 3,217 466,808 1,339,852 1,059,607 1,081,226 963,463 963,463 84,896 0 16,296 16,571 6,031 10,540 0 0 0 10,540 .17 .17
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