<PAGE>
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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 MARCH 31, 1995 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
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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
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(Address of principal executive offices) (Zip Code)
(303) 452-5603
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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 ________
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On May 1, 1995, there were 25,750,674 shares of the registrant's Common Stock
outstanding.
Reference is made to the listing beginning on page 16 of all exhibits filed as a
part of this report.
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1 of 42
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WESTERN GAS RESOURCES, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - Financial Information Page
- ------------------------------ ----
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet - March 31, 1995 and December 31, 1994................ 3
Consolidated Statement of Cash Flows - Three months ended March 31, 1995
and 1994......................................................................... 4
Consolidated Statement of Operations - Three months ended March 31, 1995 and 1994 5
Consolidated Statement of Changes in Stockholders' Equity - Three months ended
March 31, 1995................................................................... 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................................................................ 15
Item 6. Exhibits and Reports on Form 8-K................................................. 16
Signatures...................................................................................... 17
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
WESTERN GAS RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
(000s, except share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
----------- ------------
ASSETS (unaudited)
------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................. $ 7,115 $ 8,708
Trade accounts receivable, net........................................ 115,124 134,444
Product inventory..................................................... 34,566 51,139
Parts inventory....................................................... 2,282 2,291
Other................................................................. 3,096 1,367
------------ ------------
Total current assets................................................. 162,183 197,949
------------ ------------
Property and equipment, at cost:
Gas gathering, processing, storage and transmission................... 894,586 881,569
Oil and gas properties and equipment.................................. 141,559 140,601
Construction in progress.............................................. 38,759 40,076
------------ ------------
1,074,904 1,062,246
Less: Accumulated depreciation, depletion and amortization............ (194,975) (179,537)
------------ ------------
Total property and equipment, net.................................... 879,929 882,709
------------ ------------
Other assets:
Gas purchase contracts (net of accumulated amortization of $15,822 and
$14,872, respectively)............................................... 41,650 40,958
Other................................................................. 45,469 45,746
------------ ------------
Total other assets................................................... 87,119 86,704
------------ ------------
Total assets............................................................ $ 1,129,231 $ 1,167,362
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable...................................................... $ 126,973 $ 145,244
Short-term debt....................................................... 75,000 75,000
Accrued expenses...................................................... 17,095 13,448
Dividends payable..................................................... 3,897 3,895
Income taxes payable.................................................. 283 843
------------ ------------
Total current liabilities............................................ 223,248 238,430
Long-term debt.......................................................... 402,000 418,000
Deferred income taxes payable........................................... 69,346 68,727
Other long-term liabilities............................................. 616 5,522
------------ ------------
Total liabilities.................................................... 695,210 730,679
------------ ------------
Commitments and contingent liabilities.................................. - -
Stockholders' equity:
Common stock, par value $.10; 100,000,000 shares authorized;
25,750,186 and 25,712,301 shares issued and outstanding, respectively 2,578 2,574
Treasury stock, at cost, 25,016 shares in treasury.................... (788) (788)
Preferred Stock, par value $.10; 10,000,000 shares authorized:
$2.625 cumulative convertible preferred stock; 2,760,000 shares
issued and outstanding ($138,000 aggregate liquidation preference).. 276 276
$2.28 cumulative preferred stock; 1,400,000 shares issued and
outstanding ($35,000 aggregate liquidation preference).............. 140 140
7.25% cumulative senior perpetual convertible preferred stock;
400,000 shares issued and outstanding ($40,000 aggregate liquidation
preference)........................................................ 40 40
Additional paid-in capital............................................ 339,309 338,926
Notes receivable from key employees secured by common stock........... (1,893) (1,525)
Retained earnings..................................................... 94,359 97,040
------------ ------------
Total stockholders' equity........................................... 434,021 436,683
------------ ------------
Total liabilities and stockholders' equity.............................. $ 1,129,231 $ 1,167,362
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
WESTERN GAS RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(000s)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1995 1994
-------- ---------
<S> <C> <C>
Reconciliation of net income to net cash provided by operating activities:
Net income................................................................... $ 1,941 $ 1,011
Add income items that do not affect working capital:
Depreciation, depletion and amortization.................................... 17,204 16,626
Deferred income taxes....................................................... 619 372
Other non-cash items........................................................ 342 (123)
-------- ---------
20,106 17,886
-------- ---------
Adjustments to working capital to arrive at net cash provided by
operating activities:
Decrease in trade accounts receivable....................................... 19,320 19,354
Decrease in product inventory............................................... 16,573 11,515
(Increase) decrease in parts inventory...................................... 9 (35)
Increase in other current assets............................................ (1,729) (1,973)
Increase in other assets and liabilities, net............................... (17) (91)
Decrease in accounts payable................................................ (18,271) (24,674)
Increase (decrease) in accrued expenses..................................... 3,147 (40)
Increase (decrease) in income taxes payable................................. (560) 177
-------- ---------
Total adjustments......................................................... 18,472 4,233
-------- ---------
Net cash provided by operating activities.................................... 38,578 22,119
-------- ---------
Cash flows from investing activities:
Payments for business acquisitions.......................................... (25) (59)
Payments for additions to property and equipment............................ (17,606) (22,373)
Proceeds from dispositions of property and equipment........................ 94 1,389
Distributions from (contributions to) investments for capital expenditures.. (391) 3,022
Gas purchase contracts acquired............................................. (1,641) -
-------- ---------
Net cash used in investing activities........................................ (19,569) (18,021)
-------- ---------
Cash flows from financing activities:
Net proceeds from issuance of preferred stock............................... - 133,016
Net proceeds from exercise of common stock options.......................... 387 498
Notes receivable from key employees secured by common stock................. (368) (282)
Net payments under revolving credit facility................................ (16,000) (134,300)
Dividends paid to holders of common stock................................... (1,286) (1,282)
Dividends paid to holders of preferred stock................................ (3,335) (1,523)
-------- ---------
Net cash used in financing activities........................................ (20,602) (3,873)
-------- ---------
Net increase (decrease) in cash.............................................. (1,593) 225
Cash and cash equivalents at beginning of period............................. 8,708 4,666
-------- ---------
Cash and cash equivalents at end of period................................... $ 7,115 $ 4,891
======== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
WESTERN GAS RESOURCES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(000s, except share and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Revenues:
Sale of residue gas................................ $ 207,989 $ 191,374
Sale of natural gas liquids......................... 84,251 72,837
Processing and transportation revenue............... 10,429 7,278
Other, net.......................................... 1,032 4,215
----------- -----------
Total revenues.................................... 303,701 275,704
----------- -----------
Costs and expenses:
Product purchases................................... 248,313 223,680
Plant operating expense............................. 18,179 17,564
Oil and gas exploration and production costs........ 1,561 1,272
Selling and administrative expense.................. 6,404 7,108
Depreciation, depletion and amortization............ 17,204 16,626
Interest expense.................................... 8,983 7,880
----------- -----------
Total costs and expenses.......................... 300,644 274,130
----------- -----------
Income before taxes.................................. 3,057 1,574
Provision for income taxes:
Current............................................. 497 191
Deferred............................................ 619 372
----------- -----------
1,116 563
----------- -----------
Net income........................................... $ 1,941 $ 1,011
=========== ===========
Weighted average shares of common stock outstanding.. 25,737,777 25,687,707
=========== ===========
Earnings (loss) per share of common stock............ $ (.05) $ (.05)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
WESTERN GAS RESOURCES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(000s, except share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,1995
--------------------------
Shares Amount
----------- --------
<S> <C> <C>
COMMON STOCK; Par Value $.10 Per Share; 100,000,000 Shares Authorized:
Balance at December 31, 1994......................................... 25,712,301 $ 2,574
Common stock options exercised....................................... 37,885 4
----------- --------
Balance at March 31, 1995.......................................... 25,750,186 $ 2,578
=========== ========
COMMON STOCK IN TREASURY, AT COST;
Balance at December 31, 1994......................................... 25,016 $ (788)
----------- --------
Balance at March 31, 1995.......................................... 25,016 $ (788)
=========== ========
PREFERRED STOCK; Par Value $.10; 10,000,000 Shares Authorized:
7.25% Cumulative Senior Perpetual Convertible Preferred Stock;
Balance at December 31, 1994......................................... 400,000 $ 40
----------- --------
Balance at March 31, 1995.......................................... 400,000 $ 40
=========== ========
$2.28 Cumulative Preferred Stock;
Balance at December 31, 1994......................................... 1,400,000 $ 140
----------- --------
Balance at March 31, 1995.......................................... 1,400,000 $ 140
=========== ========
$2.625 Cumulative Convertible Preferred Stock;
Balance at December 31, 1994......................................... 2,760,000 $ 276
----------- --------
Balance at March 31, 1995.......................................... 2,760,000 $ 276
=========== ========
ADDITIONAL PAID-IN CAPITAL;
Balance at December 31, 1994......................................... $338,926
Common stock options exercised....................................... 383
--------
Balance at March 31, 1995.......................................... $339,309
========
NOTES RECEIVABLE FROM KEY EMPLOYEES SECURED BY
COMMON STOCK;
Balance at December 31, 1994......................................... $ (1,525)
Loans related to common stock options exercised...................... (368)
--------
Balance at March 31, 1995.......................................... $ (1,893)
========
RETAINED EARNINGS;
Balance at December 31, 1994......................................... $ 97,040
Net income for the three months ended March 31, 1995................. 1,941
Dividends declared on common stock................................... (1,288)
Dividends declared on 7.25% Cumulative Senior Perpetual Convertible
Preferred Stock.................................................... (725)
Dividends declared on $2.28 Cumulative Preferred Stock............... (798)
Dividends declared on $2.625 Cumulative Convertible Preferred Stock.. (1,811)
--------
Balance at March 31, 1995.......................................... $ 94,359
========
TOTAL STOCKHOLDERS' EQUITY AT MARCH 31, 1995 $434,021
========
</TABLE>
6
<PAGE>
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, 1994. The
interim consolidated financial statements as of March 31, 1995 and for the three
months ended March 31, 1995 and 1994 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.
Certain prior years' amounts in the Consolidated Financial Statements and Notes
have been reclassified to conform to the presentation used in 1995.
EARNINGS PER SHARE OF COMMON STOCK
Earnings per share of common stock is computed by dividing net income available
to shares of common stock by the weighted average number of shares of common
stock outstanding. Net income available to shares of common stock is net income
less dividends declared on the 7.25% Cumulative Senior Perpetual Convertible
Preferred Stock, $2.28 Cumulative Preferred Stock and $2.625 Cumulative
Convertible Preferred Stock . The computation of fully diluted earnings per
share of common stock for the three months ended March 31, 1995 was not
dilutive; therefore, only primary earnings per share of common stock is
presented.
INVENTORIES
Product inventory includes $30.3 million and $47.5 million of residue gas and
$4.3 million and $3.5 million of NGLs at March 31, 1995 and December 31, 1994,
respectively.
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid was $8.9 million and $8.4 million, respectively, for the three
months ended March 31, 1995 and 1994.
Income taxes paid were $900,000 and $15,000, respectively, for the three months
ended March 31, 1995 and 1994.
In February 1994, the President and Chief Operating Officer of the Company,
surrendered 25,016 shares of the Company's common stock, which were valued at
$31.50 per share based upon the February 22, 1994 closing price, as repayment of
a loan and accrued interest of approximately $788,000.
NEW ACCOUNTING REGULATION
In March 1995, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No. 121
is effective for financial statements for fiscal years beginning after December
15, 1995, and will be adopted by the Company when required. The Company has not
completed its evaluation and is unable to determine what impact, if any, this
pronouncement will have upon adoption.
LEGAL PROCEEDINGS
Reference is made to Item 1. Legal Proceedings of Part II Other Information of
this Form 10-Q.
7
<PAGE>
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 months ended March 31, 1995 and 1994. Certain prior year amounts have
been reclassified to conform to the presentation used in 1995. Reference should
also be made to the Company's Consolidated Financial Statements and Notes
thereto included elsewhere in this document.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED MARCH 31, 1994
(000S, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA).
<TABLE>
<CAPTION>
Three Months Ended
March 31, Percent
---------------------
1995 1994 Change
---------- --------- ------
<S> <C> <C> <C>
FINANCIAL RESULTS:
Revenues................................... $303,701 $275,704 10.2
Gross profit............................... 18,444 16,562 11.4
Net income................................. 1,941 1,011 92.0
Earnings (loss) per share of common stock.. (.05) (.05) -
Net cash provided by operating activities.. 38,578 22,119 74.4
OPERATING DATA:
Average gas sales (MMcf/D)................. 1,578.1 1,002.1 57.5
Average NGL sales (MGal/D)................. 3,012.7 3,052.7 (1.3)
Average gas prices ($/Mcf)................. $ 1.46 $ 2.12 (31.1)
Average NGL prices ($/Gal)................. $ .31 $ .26 19.2
</TABLE>
Net income increased $930,000 and net cash provided by operating activities
increased $16.5 million for the three months ended March 31, 1995 compared to
the same period in 1994. Overall, throughput and sales volumes at the Company's
facilities have remained comparable to historical levels. The Company's
increase in net income and net cash provided by operating activities is
primarily attributable to the increase in gas sales volumes and average NGL
prices.
Revenues from the sale of residue gas increased approximately $16.6 million for
the three months ended March 31, 1995 compared to the same period in 1994.
Average gas sales volumes increased 576 MMcf per day to 1,578 MMcf per day for
the three months ended March 31, 1995 compared to the same period in 1994,
largely as a result of an increase of approximately 520 MMcf per day in the sale
of residue gas purchased from third parties. Average gas prices decreased $.66
per Mcf to $1.46 per Mcf for the three months ended March 31, 1995 compared to
the same period in 1994. Mild winter weather during the three months ended
March 31, 1995 contributed to the lower gas prices. These lower prices resulted
in reduced third party trading margins and limited physical sales from the
Company's Katy gas storage facility. The decrease in natural gas prices was
partially offset by the Company's futures positions, as the Company realized
approximately $2.02 per Mcf for the forward sale of approximately 70 MMcf per
day of its equity gas. Similar forward sales of equity gas are in place for the
remainder of 1995.
Revenues from the sale of NGLs increased approximately $11.4 million for the
three months ended March 31, 1995 compared to the same period in 1994. Average
NGL sales volumes decreased 40 MGal per day to 3,013 MGal per day for the three
months ended March 31, 1995 compared to the same period in 1994. Average NGL
prices increased $.05 per gallon to $.31 per gallon for the three months ended
March 31, 1995 compared to the same period in 1994. Currently, the Company has
hedged approximately 335,000 barrels of condensate and crude production for the
remainder of 1995 at an average price of $18.16 per barrel.
Processing and transportation revenues increased $3.2 million for the three
months ended March, 31, 1995 compared to the same period in 1994. The increase
is due to an increase in liquid revenues from the Company's Giddings system,
increased treating revenue primarily from the Company's Pecos System (which was
acquired in December 1994) and the recognition of demand fees associated with a
winter-peaking gas purchase and sales contract at the Katy facility.
8
<PAGE>
Other net revenue decreased $3.2 million for the three months ended March 31,
1995 compared to the same period in 1994. The decrease is primarily
attributable to the accrual of approximately $1.7 million to be recovered under
its business interruption insurance policy for business losses associated with
the December 1993 fire at the Company's Granger facility and a gain recognized
on the sale of idle equipment during the three months ended March 31, 1994.
Historically, product purchases as a percentage of residue gas and NGL sales
from the Company's plant production have approximated 70%. Product purchases as
a percentage of residue gas and NGL sales from third-party purchases are
substantially higher and approximate 95%. Combined product purchases as a
percentage of residue gas and NGL sales remained comparable at 85% for the three
months ended March 31, 1995 compared to the same period in 1994.
As comparable facilities were operated by the Company in each period, plant
operating expense, oil and gas exploration and production costs, selling and
administrative expense and depreciation, depletion and amortization expense
remained relatively unchanged for the three months ended March 31, 1995 compared
to the same period in 1994.
Interest expense increased approximately $1.1 million for the three months ended
March 31, 1995 compared to the same period in 1994, primarily due to a reduction
in the amount of interest capitalized to the Company's internal development and
construction projects and an increase in the Company's variable borrowing rate
which was somewhat offset by a decrease in the total average debt outstanding.
BUSINESS OUTLOOK
The Company cannot accurately predict future hydrocarbon prices and in order to
minimize the impact of price fluctuations on the Company's operating results,
the Company has entered into futures contracts for a majority of the Company's
equity natural gas production for the remainder of 1995 totaling approximately
70 MMcf per day, at an average price of approximately $2.02 per Mcf.
Additionally, the Company has entered into futures contracts totaling
approximately 335,000 barrels of crude oil at an average price of $18.16 per
barrel to hedge a portion of its share of the remainder of 1995 condensate and
crude oil production. The Company has, and will, continue to enter into futures
contracts for certain purchase and sales transactions as they occur.
The Company continually monitors the economic performance of each operating
facility to see that it meets a desired cash flow objective. 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. In 1994, the Company sold its Sligo plant, swapped its Pyote
treating facilities for gathering assets in Kansas, consolidated assets in the
Powder River Basin and sold its Walnut Bend gathering system. In 1995, the
Company expects to consolidate the Lamont gathering system with the Chaney Dell
system and salvage the Lamont and Walnut Bend processing plants. In addition, on
May 1, 1995, the Company sold other Pyote assets, which were recently acquired
in the Oasis acquisition for $5 million. The difference between the sales price
and carrying value of these assets will be accounted for as an adjustment to the
purchase price of the remaining Oasis assets.
In May 1995, the Company implemented a cost reduction program which will reduce
operating and selling and administrative expenses by approximately $8.0 million
on an annualized pre-tax basis. During the remainder of 1995, the benefit of
these reductions, net of a one-time pre-tax charge of approximately $1.7 million
in the second quarter of 1995 which is largely related to the severance of
approximately 35 employees, will be approximately $3.0 million on a pre-tax
basis. Although the Company is reducing costs, the reduction is not expected to
impact the Company's goals of increasing the volumes of natural gas and NGLs
marketed by the Company and pursuing growth opportunities in the gas processing
business.
The oil and gas industry has experienced an increasing incidence of mergers,
acquisitions and combinations in recent years. The Company has evaluated, and
will continue to evaluate, any such opportunities, including smaller
consolidating acquisitions, that it identifies as offering an opportunity to
enhance the Company's operational and industry position.
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 the 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
9
<PAGE>
and may require the Company to investigate alternative financing sources. Net
cash provided by operating activities has been primarily affected by product
prices, the Company's success in increasing the number and efficiency of its
facilities and the volumes of natural gas processed by such facilities, and the
margin on third-party residue gas purchased for resale. The Company's continued
growth will be dependent upon success in the areas of additions to dedicated
plant reserves, acquisitions, new project development and marketing.
For the three months ended March 31, 1995, the Company's total sources of funds
aggregated $38.7 million and was primarily comprised of net cash provided by
operating activities of $38.6 million. During the same period, the Company's use
of such funds aggregated $40.3 million which were used primarily to make
payments of $16.0 million under its revolving credit facility, to make capital
investments of $19.7 million, to pay dividends to holders of 7.25% Convertible
Preferred Stock, $2.28 Cumulative Preferred Stock and $2.625 Convertible
Preferred Stock of $3.3 million and to pay dividends to holders of Common Stock
of $1.3 million.
An additional source of liquidity to the Company is volumes of residue gas and
NGLs in storage facilities. The Company stores volumes of residue gas and NGLs
primarily to assure an adequate supply for long-term sales contracts and for
resale during periods when prices are favorable. At March 31, 1995, the Company
held in storage approximately 13.9 million gallons of NGLs at an average cost of
$.31 per gallon and 17.9 Bcf of residue gas at an average cost of $1.70 per Mcf
($1.53 per MMBtu) primarily at the Katy Facility.
The Company called for the redemption of its 7.25% Cumulative Senior Perpetual
Convertible Preferred Stock (liquidation preference of $40 million) on October
31, 1994, at an aggregate redemption price of $42 million plus accrued
dividends. After two previous extensions, the Company and holder agreed to
extend the redemption date to May 31, 1995. The holder has the right on or
prior to the redemption date to convert the preferred stock into an aggregate of
2,090,000 shares of the Company's common stock. The Company is unable to
predict whether redemption or conversion will occur.
The Company has Shelf Registrations available which provide for the sale of up
to $200 million of debt securities and preferred stock and up to four million
shares of Common Stock.
Hedging Activities
The Company enters into futures, swaps and option contracts to hedge against a
portion of the price risk associated with natural gas and NGLs. Gains and
losses on hedges of product inventory are included in the carrying amount of the
inventory and are ultimately recognized in residue and NGL purchases or sales
when the related inventory is sold. Gains and losses related to qualifying
hedges of firm commitments or anticipated transactions also are deferred and are
recognized in residue and NGL sales when the hedged transaction occurs. Margins
from the Company's forward fixed price hedges and physical sales for the
remainder of 1995 are expected to more than offset the related $330,000 of
losses deferred at March 31, 1995.
At March 31, 1995, 2,406 contracts (net) (10,000 Mcf per contract) for the sale
of residue gas in May 1995 through February 1996 at prices ranging from $1.44
per Mcf to $2.34 per Mcf were outstanding. At March 31, 1995, 115 contracts
(net) (1,000 gallons per contract) for the sale of light crude in May 1995
through January 1996 at prices ranging from $17.77 per barrel to $19.22 per
barrel were outstanding.
Capital Investment Program
In order to maintain the volumes of natural gas dedicated to or processed by the
Company's existing facilities, future capital expenditures for gathering systems
needed to connect new reserves and acquire consolidating assets are anticipated
to be approximately $51.5 million for 1995 and capital expenditures to maintain
existing facilities are expected to approximate $16.5 for 1995. For the three
months ended March 31, 1995, the Company has expended approximately $19.7
million on expansion and maintenance capital. The availability of new reserves
at existing facilities is somewhat affected by the price of crude oil or natural
gas (depending on whether the natural gas is associated gas or gas well gas)
which in turn stimulates new drilling at higher price levels.
Depending on the timing 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 the banks, seek waivers from the banks to
permit it to borrow funds from third parties, seek replacement credit
10
<PAGE>
facilities from other lenders or issue additional equity securities. 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.
Financing Facilities
REVOLVING CREDIT FACILITY. The Company's variable rate Revolving Credit
Facility, as restated on September 2, 1994, and subsequently amended, with a
syndicate of eight banks, provides for a maximum borrowing base of $300 million,
of which $152 million was outstanding at March 31, 1995. If the facility is not
renewed on January 1, 1997, any outstanding balance thereunder converts to a
four-year term loan during which such balance will be repaid in equal quarterly
installments. The Revolving Credit Facility bears interest, at the Company's
option, at certain spreads over the Eurodollar rate, the Federal Funds rate plus
.50% or at the agent bank's prime rate. The interest rate spreads are adjusted
based on the Company's debt to capitalization ratio. At December 31, 1994, the
spread was 1.0% for the Eurodollar rate, resulting in an interest rate of 7.13%
for the three months ended March 31, 1995. Beginning with the second quarter of
1995, the spread is 1.25%.
The Company pays a commitment fee on the unused commitment ranging from .15% to
.375% based on the debt to capitalization ratio. At December 31, 1994 and March
31, 1995, the Company's debt to capitalization ratio was in the range of .50 to
1.0 resulting in a commitment fee rate of .375%.
TERM LOAN FACILITY. The Company also has a Term Loan Facility with four banks
for $50 million which bears interest at 9.87%. Payments on the Term Loan
Facility of $25 million, $12.5 million and $12.5 million are due in September
1995, 1996 and 1997, respectively. The $25 million payment due on the Term Note
in September 1995 has been classified as long-term debt because the Company
intends to fund this payment from amounts available under the Revolving Credit
Facility.
The agreement governing the Company's Revolving Credit and Term Loan Facilities
(the "Credit Facilities Agreement") is subject to certain mandatory prepayment
terms. If funded debt of the Company exceeds five times the sum of the
Company's last four quarters' cash flow (as defined in the agreement) less
preferred stock dividends, the overage must be repaid in no more than six
monthly payments commencing 90 days from notification. This mandatory
prepayment threshold will be reduced to 4.0 to 1.0 at September 1, 1995 and 3.50
to 1.0 at September 1, 1998. At March 31, 1995, the Company had approximately
$117.2 million of available borrowing capacity.
The Term Loan and Revolving Credit Facilities are unsecured. The Company is
required to maintain a current ratio of at least 1.0 to 1.0 (as defined in the
Credit Facilities Agreement), a tangible net worth at March 31, 1995 of at least
$404.1 million, a debt to capitalization ratio of no more than 60% through
October 31, 1995 and 55% thereafter and an EBITDA to interest ratio of not less
than 3.25 to 1.0 through October 31, 1995 and 3.75 to 1.0 thereafter. The
Company is prohibited from declaring or paying dividends that exceed the sum of
$35 million plus 50% of consolidated net income earned after March 31, 1994 plus
50% of the cumulative net proceeds in excess of the Redemption Limit (as defined
in the Credit Facilities Agreement) received from the sale of any equity
securities sold after March 31, 1994. At March 31, 1995, this threshold amounted
to approximately $39.1 million. The Company generally utilizes excess daily
funds to reduce any outstanding revolving credit balances to minimize interest
expense and intends to continue such practice. The $7.1 million cash balance at
March 31, 1995 is an overnight investment necessitated by the timing of cash
receipts.
MASTER SHELF AGREEMENT. In December 1991, the Company entered into a Master
Shelf Agreement (the "Master Shelf") with The Prudential Insurance Company of
America ("Prudential") pursuant to which Prudential agreed to quote, from time-
to-time, an interest rate at which Prudential or its nominee would be willing to
purchase up to $100 million of the Company's senior promissory notes (the
"Master Notes"). Any such Master Notes must mature in no more than 12 years,
with an average life not in excess of 10 years, and will be unsecured. On
October 27, 1992, the Company sold $25 million of 7.51% Master Notes due 2000
and $25 million of 7.99% Master Notes due 2003. Principal payments on the $50
million of Master Notes of $8.3 million will be due on October 27 of each year
from 1998 through 2003. On September 22, 1993, the Company sold $25 million of
6.77% Master Notes due in a single payment on September 22, 2003 and on December
27, 1993, the Company sold $25 million of 7.23% Master Notes due in a single
payment on December 27, 2003. The Master Shelf contains certain financial
covenants which conform with those contained in the Credit Facilities Agreement,
as restated. In July 1993, Prudential and the Company amended the Master Shelf
to provide for an additional $50 million of borrowing capacity (for a total
borrowing capacity of $150 million) and to extend the term of the Master Shelf
to October 31, 1995. On October 27, 1994, the Company sold $25 million of 9.05%
Master Notes due in a single payment on October 27, 2001 and $25 million
11
<PAGE>
of 9.24% Senior Notes due in a single payment on October 27, 2004. At March 31,
1995, the Master Shelf Agreement, as amended, was fully utilized.
SENIOR NOTES. On April 28, 1993 the Company sold $50 million of 7.65% Senior
Notes due 2003 to a group of insurance companies led by Connecticut General Life
Insurance Company. Principal payments on the $50 million of Senior Notes of
$7.1 million will be due on April 30th of each year from 1997 through 2002, with
any remaining principal and interest outstanding due on April 30, 2003. The
Senior Notes contain certain financial covenants which conform with those
contained in the Credit Facilities Agreement, as restated.
ADDITIONAL BORROWINGS. In April, 1995, the Company entered into a Receivables
Purchase Agreement (the "Receivables Facility") with Receivables Capital
Corporation, as purchaser ("RCC"), and Bank of America National Trust and
Savings Association ("BA"), as agent, pursuant to which the Company will sell to
RCC at face value on a revolving basis an undivided interest in certain of the
Company's trade receivables. As part of the sale, the Company has granted to
RCC a security interest in such receivables. The Company may sell up to $75
million of trade receivables under the Receivables Facility, at a rate equal to
RCC's commercial paper rate plus .375%, of which $60 million was funded
initially at an initial rate of 6.48%. The Receivables Facility has a 364 day
term and contains financial covenants similar to those in the Credit Facilities
Agreement, along with certain covenants regarding the quality of the trade
receivables pool.
On September 2, 1994, in anticipation of entering into the Receivables Facility,
BA entered into a Master Note Agreement (the "Short-Term Note") with the Company
and advanced the Company $75 million at the Eurodollar rate plus .50%, which
resulted in an interest rate of 6.625% per annum at March 31, 1995. The Company
used the $60 million drawn on the Receivables Facility to pay down a portion of
the Short-Term Note, which remains in effect for the remaining $15 million until
July 28, 1995.
COVENANT COMPLIANCE. At March 31, 1995, the Company was in compliance with all
covenants in its loan agreements.
INTEREST RATE SWAP AGREEMENTS. The Company has entered into various interest
rate swap agreements to manage exposure to changes in interest rates. The
transactions generally involve the exchange of fixed and floating interest
payment obligations, without the exchange of the underlying principal amounts.
The net effect of interest rate swap activity is reflected as an increase or
decrease in interest expense. For the three months ended March 31, 1995 the net
decrease to interest expense was approximately $270,000. Any gains on
termination of interest rate swap agreements are included in other income. At
March 31, 1995, the total notional principal amount of outstanding interest rate
swap agreements was $50 million. In addition to the financial risk that will
vary during the life of these swap agreements in relation to the maturity of the
underlying debt and market interest rates, the Company is subject to credit risk
exposure from nonperformance of the counterparties to the swap agreements. The
Company does not anticipate nonperformance by the counterparties.
The Company believes that the amounts available to be borrowed under the
Revolving Credit Facility together with cash provided from operations, will
provide it with sufficient financing to connect new reserves, maintain its
existing facilities and complete its current capital improvement projects. The
Company also believes that cash provided from operations will be sufficient to
meet its debt service and preferred stock dividend requirements and redemption
requirements, if any.
12
<PAGE>
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.
<TABLE>
<CAPTION>
Average for the three months ended
Gas Gas March 31, 1995
----------------------------------------------
Gathering Throughput Gas Gas NGL
Year Placed Systems Capacity Throughput Production Production
Facility (1) In Service Miles(2) (MMcf/D)(2) (MMcf/D)(3) (MMcf/D)(4) (MGal/D)(4)
- ---------------------------- ---------- ----------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
SOUTHERN REGION:
Texas
Midkiff and Benedum........ 1955 2,016 135 127.4 85.6 810.5
Giddings Gathering System.. 1979 643 80 73.1 63.0 118.4
Edgewood(5)................ 1964 85 65 30.6 12.2 82.1
Perkins.................... 1975 2,545 55 21.2 12.2 139.4
Pecos System(6)............ 1973 443 85 102.4 96.7 -
Crockett System(6)......... 1973 136 - 33.5 33.8 .6
Katy(7).................... 1994 17 - - - -
MID-CONTINENT REGION:
Louisiana
Black Lake................. 1966 55 180 63.7 42.8 133.5
Toca(8)(9)................. 1958 - 160 74.2 - 49.7
Oklahoma
Chaney Dell/Lamont......... 1966 1,999 158 84.4 65.0 281.5
Westana(10)................ 1986 244 37 56.6 49.0 52.4
ROCKY MOUNTAIN REGION:
Wyoming
Granger(9)................. 1987 230 230 140.0 128.4 213.1
Red Desert................. 1979 108 40 32.0 29.0 43.9
Lincoln Road............... 1988 144 50 40.0 37.0 46.4
Hilight Complex(9)......... 1969 614 80 33.4 15.2 83.8
Kitty(9)................... 1969 304 17 11.5 8.5 46.5
Newcastle(9)............... 1981 144 5 2.5 1.5 18.3
Reno Junction(11).......... 1991 - - - - 40.5
New Mexico
San Juan River(5).......... 1955 125 60 32.1 28.9 1.2
North Dakota
Williston(12).............. 1981 381 - 8.5 6.1 29.3
Temple(5).................. 1984 65 7 2.8 1.7 8.8
Teddy Roosevelt(12)........ 1979 332 - 3.2 2.0 13.8
Utah
Four Corners............... 1988 95 15 4.9 4.0 11.7
Montana
Baker(5)(9)................ 1981 8 3 1.5 .6 11.6
------ ----- ----- ----- -------
Total..................... 10,733 1,462 979.5 723.2 2,237.0
====== ===== ===== ===== =======
</TABLE>
_____________________________
Footnotes on following page
13
<PAGE>
(1) The Company's interest in all facilities is 100% except for Midkiff and
Benedum (74%); Black Lake (69%); Lincoln Road (72%); Williston (50%);
Westana (Chester) (50%) and Newcastle (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 and gas throughput capacity are as of March 31,
1995.
(3) Aggregate wellhead natural gas volumes collected by a gathering system.
(4) Volumes of residue gas and NGLs are allocated to a facility when a well is
dedicated to that facility; volumes exclude NGLs fractionated for third
parties.
(5) Sour gas facility (capable of processing gas containing hydrogen sulfide).
(6) West Texas gathering and treating assets of Oasis Pipe Line Company
("Oasis") acquired effective December 1, 1994.
(7) Hub and gas storage facility.
(8) Straddle plant (a plant located near a transmission pipeline which
processes gas dedicated to or gathered by the pipeline company or another
third-party).
(9) Fractionation facility (capable of fractionating raw NGLs).
(10) Gas throughput in excess of gas throughput capacity is unprocessed gas
transported directly to an unaffiliated pipeline.
(11) NGL production represents conversion of third-party feedstock to iso-
butane.
(12) Processing facility has been shut-in since August 1993. The gas dedicated
to these facilities is processed by a third-party under a contractual
arrangement.
Capital expenditures to connect new reserves and to acquire consolidating assets
are anticipated to be approximately $51.5 million for 1995 and capital
expenditures to maintain existing facilities are expected to approximate $16.5
million for 1995. The Company does not anticipate any significant capital
expenditures for improvements to its existing processing and gathering
facilities in 1995.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Mountain Gas
On July 28, 1994, the Company and its wholly-owned subsidiary Mountain Gas
Resources, Inc. ("Mountain Gas") filed a complaint in United States District
Court, Denver, Colorado, against Morgan Stanley Leveraged Equity Fund II, L.P.,
Morgan Stanley Leveraged Equity Fund II, Inc., Morgan Stanley & Co.,
Incorporated and certain former directors and officers of Mountain Gas seeking
monetary damages. The complaint alleges certain acts and omissions that
violated federal and state securities laws by the defendants in connection with
the Company's July 1993 purchase of the stock of Mountain Gas from Morgan
Stanley Leveraged Equity Fund II, L.P. The acts and omissions set forth in the
complaint relate primarily to defendants' failure to disclose adequately the
nature and scope of a dispute between Mountain Gas and a major producer in the
Green River Basin. In addition, the Company and Mountain Gas have raised fraud,
misrepresentation and breach of contract claims against certain of the
defendants.
Katy Condemnation
Commencing in March 1993 and continuing through July 1993, Western Gas Resources
Storage, Inc. ("Storage"), a wholly-owned subsidiary of the Company, filed a
total of 165 condemnation actions in the County Court at Law No. 1 and No. 2 of
Fort Bend County, Texas, to obtain certain storage rights and rights-of-way
relating to its Katy Gas Storage Facility and the related underground reservoir
("Katy"). The County Court appointed panels of Special Commissioners which
awarded compensation to the owners whose rights were condemned. Condemnation
awards are a capital cost of the Katy project.
A majority of the land and mineral owners involved in the condemnation
proceedings appealed to County Court, seeking a declaration that Storage did not
possess the right to condemn or, in the alternative, that they should be awarded
more compensation than previously awarded by the Special Commissioners. In all
of those appeals, the right to condemn issue has now been resolved in favor of
Storage, although factual issues in individual cases remain as to whether that
right was exercised properly.
Trials in four of the appeals to County Court have now been concluded. The
first trial involved a parcel adjacent to the 82 acre site where the compression
facilities are located, the second trial involved a parcel within 1,000 feet of
the 82 acre site, and the third and fourth trials involved parcels further than
one mile from the 82 acre site. The jury verdicts compared with the awards of
the Special Commissioners were, respectively, as follows: $214,000 versus
$2,000; $38,000 versus $600; $553 versus $553; and $1,000 versus $500. The
Company believes that several reversible errors were committed in the first two
trials and appeals of those cases are now pending in the Texas Court of Appeals.
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, as well as the
specific claims discussed above, will not, individually or in the aggregate,
have a material adverse effect on the Company's financial position or results of
operations.
15
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
10.36 Second Amendment to First Restated Loan Agreement (Revolver) as of
February 23, 1995 among Western Gas Resources, Inc. and NationsBank of
Texas, N.A. as Agent and Certain Banks as Lenders (see page 18).
10.37 Fourth Amendment to Third Restated Loan Agreement (Term) as of February
23, 1995 among Western Gas Resources, Inc. and NationsBank of Texas,
N.A. as Agent and Certain Banks as Lenders (see page 24).
10.38 Amendment No. 3 to Note Purchase Agreements as of March 22, 1995 by and
among Western Gas Resources, Inc. and the Purchasers (see page 29).
10.39 Letter Amendment No. 3 to the Amended and Restated Master Shelf
Agreement effective as of April 1, 1995 by and between Western Gas
Resources, Inc. and Prudential Insurance Company of America (see page
33).
10.40 Form of Employment Agreement by and between Western Gas Resources, Inc.
and certain Executive Officers (see page 37).
(b) Reports on Form 8-K:
None
16
<PAGE>
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: May 12, 1995 By: /s/BILL M. SANDERSON
--------------------------------------
Bill M. Sanderson
President, Chief Operating Officer and
Director
Date: May 12, 1995 By: /s/WILLIAM J. KRYSIAK
--------------------------------------
William J. Krysiak
Vice President - Finance
(Principal Financial and Accounting
Officer)
17
<PAGE>
SECOND AMENDMENT TO FIRST RESTATED LOAN AGREEMENT (REVOLVER)
THIS SECOND AMENDMENT TO FIRST RESTATED LOAN AGREEMENT (REVOLVER) (herein
called the "Amendment") made as of the 23rd day of February, 1995, by and among
Western Gas Resources, Inc., a Delaware corporation ("Borrower"), NationsBank of
Texas, N.A., a national banking association, as Agent ("Agent"), and NationsBank
of Texas, N.A., Bank of Montreal, CIBC Inc., Societe Generale, Southwest Agency,
The First National Bank of Boston, Colorado National Bank, Bank of America
National Trust and Savings Association and Credit Lyonnais Cayman Island Branch,
(herein, collectively referred to as "Lenders").
W I T N E S S E T H:
WHEREAS, Borrower, Agent and Lenders have entered into that certain First
Restated Loan Agreement (Revolver) dated as of September 2, 1994, as amended by
that certain First Amendment to First Restated Loan Agreement (Revolver) dated
as of December 2, 1994 (as amended to the date hereof, the "Original Agreement")
for the purpose and consideration therein expressed, whereby Lenders became
obligated to make loans to Borrower as therein provided; and
WHEREAS, Borrower, Agent and Lenders desire to amend the Original
Agreement as expressly set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Agreement and 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
--------------------------
Section 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.
Section 1.2. Other Defined Terms. Unless the context otherwise requires,
-------------------
the following terms when used in this Amendment shall have the meanings assigned
to them in this Section 1.2.
"Loan Agreement" shall mean the Original Agreement as amended hereby.
18 Exhibit No. 10.36
<PAGE>
ARTICLE II.
Amendments
----------
Section 2.1. Amendment to Defined Terms.
--------------------------
The following definition of "Permitted Receivables Purchase Facility" is
hereby added to Section 2.2 of the Original Agreement immediately following the
definition of "Partnership":
"'Permitted Receivables Purchase Facility' means the sale by Borrower
---------------------------------------
and/or any of its Subsidiaries of any of their receivables pursuant to a
receivables purchase facility (in this definition "Western Receivables"),
including but not limited to a receivables purchase facility with Bank of
America National Trust and Savings Association as agent, whereby (A) the
aggregate amount of all purchasers' investments in any and all pools of
Western Receivables shall not exceed seventy-five million dollars
($75,000,000) in the aggregate at any time outstanding, (B) any reserves
required to be maintained with respect to the Western Receivables in any
such pool that constitute eligible receivables after taking into account
concentration limits shall not exceed ten percent (10%) of the aggregate
amount of such purchasers' investments, (C) recourse is provided for
losses based on historical losses and other bad debt experience and for
indemnities and fees, (D) the Western Receivables and other rights to
payment associated with the Western Receivables and the proceeds thereof
(including, without limitation, deposit accounts established in connection
with the Western Receivables and agreements, merchandise, books, records,
security interests, liens, guarantees and other collateral support
relating to the Western Receivables) shall secure the obligations of
Borrower and its Subsidiaries arising under such receivables purchase
facility and (E) such receivables purchase facility shall be terminable at
the sole discretion of Borrower."
Section 2.2. Amendment to Covenant Regarding Limitation on Indebtedness.
----------------------------------------------------------
Section 6.2(b)(ix) of the Original Agreement is hereby amended in its
entirety to read as follows:
"(ix) Indebtedness arising in connection with a Permitted Receivables
Purchase Facility an aggregate outstanding amount not to exceed
seventy-five million dollars ($75,000,000) plus associated fees and
expenses."
Section 2.3. Amendment to Covenant Regarding Limitation on Sales of
------------------------------------------------------
Property.
Sections 6.2(e)(iii) and 6.2(e)(iv) of the Original Agreement are hereby
amended in their entirety to read as follows:
"(iii) so long as no Default or Event of Default has occurred, assets or
property which are sold for fair consideration in arm's length
transactions to third parties that are not Affiliates of Borrower;
provided that if during any Fiscal Quarter assets and property with an
aggregate gross book value in excess of $20,000,000 are sold or if during
--
the period beginning on the date
of the Original Agreement and continuing until all of the Obligations are
paid in full assets and property with an aggregate gross book value in
excess of $40,000,000 are sold, Lenders shall have the right to require a
recalculation of the Mandatory Prepayment Ratio in accordance with the
provisions of Section 2.7(b) which ratio shall become effective at the
time of such sale; provided further, that the sale of receivables pursuant
to a Permitted Receivables Purchase Facility shall not be included in the
calculation of clause (iii) of this subsection; and
(iv) sales of receivables pursuant to a Permitted Receivables Purchase
Facility."
ARTICLE III.
Conditions of Effectiveness
---------------------------
Section 3.1. Effective Date. This Amendment shall become effective as of
the date first above written when, and only when, (i) Agent shall have received,
at Agent's office, a counterpart of this Amendment executed and delivered by
Borrower and Majority Lenders and (ii) Agent shall have additionally received
each of the following, each document (unless otherwise indicated) being dated
the date of receipt thereof by Agent, duly authorized, executed and delivered,
and in form and substance satisfactory to Agent:
19
<PAGE>
(a) a certificate of the Secretary of Borrower dated the date of this
Amendment certifying that: (A) the resolutions adopted by the Board of
Directors of Borrower attached as Exhibit 1 to the Omnibus Certificate of
Borrower dated September 2, 1994 (the "Original Certificate") have not
been amended or revoked, and continue in full force and effect, (B) the
incumbency and authorization of the officers of Borrower authorized to
sign Loan Documents, with signature specimens of such officers, contained
in the Original Certificate has not been amended and continues in full
force and effect, (C) copies of the certified charter documents of
Borrower (including by-laws), attached as Exhibits H and O to the Original
Certificate have not been amended or revoked since the date of the
Original Certificate, and continue in full force and effect, (D) no
Default that has not been expressly waived by Lenders exists on and as of
the date hereof and (E) all of the representations and warranties set
forth in Article IV hereof and Article V of the Original Agreement are
true and correct at and as of their respective times of effectiveness;
(b) a favorable opinion from Messr. John Walter, Esq., counsel for
Borrower in a form acceptable to Lender; and
(c) such supporting documents as Agent may reasonably request.
ARTICLE IV.
Representations and Warranties
------------------------------
Section 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 each subsection of
Section 5.1 of the Original Agreement are true and correct at and as of
the time of the effectiveness hereof.
(b) Borrower is duly authorized to execute and deliver this Amendment
and is and will continue to be duly authorized to borrow monies and to
perform its obligations under the Loan Agreement. Borrower has duly taken
all corporate action necessary to authorize the execution and delivery of
this Amendment and to authorize the performance of the obligations of
Borrower hereunder and thereunder.
(c) The execution and delivery by Borrower of this Amendment, the
performance by Borrower of its obligations hereunder 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 articles 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 of this Amendment or to consummate the
transactions contemplated hereby.
(d) When duly executed and delivered, this Amendment and the Loan
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 audited annual Consolidated financial statements of Borrower
dated as of December 31, 1993 and the unaudited quarterly Consolidated
financial statements of Borrower dated as of September 30, 1994 fairly
present Borrower's Consolidated financial position at such dates and the
Consolidated results of Borrower's operations and changes in Borrower's
Consolidated cash flow for the respective periods thereof. Copies of such
financial statements have heretofore been delivered to each Lender. Since
September 30, 1994, no material adverse change has occurred in the
financial condition or businesses or in the Consolidated financial
condition or businesses of Borrower.
20
<PAGE>
ARTICLE V.
Miscellaneous
-------------
Section 5.1. Ratification of Agreements. The Original Agreement as
--------------------------
hereby amended and each other Loan Document affected hereby are ratified and
confirmed in all respects. Any reference to the Loan Agreement in any Loan
Document shall be deemed to be a reference to the Original Agreement as hereby
amended. The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of Agent or Lenders under the Loan Agreement or any other Loan Document
nor constitute a waiver of any provision of the Loan Agreement or any other Loan
Document.
Section 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 or any Related
Person hereunder or under the Loan 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 Loan Agreement.
Section 5.3. Loan Documents. This Amendment is a Loan Document, and all
--------------
provisions in the Loan Agreement pertaining to Loan Documents apply hereto.
Section 5.4. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance with 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.
Section 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.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above by their duly authorized officers.
WESTERN GAS RESOURCES, INC.
By: _______________________________________
Name:
Title:
NATIONSBANK OF TEXAS, N.A., as Agent,
Issuing Bank and Lender
By: _______________________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By: _______________________________________
Name:
Title:
21
<PAGE>
BANK OF MONTREAL
By: _______________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON
By: _______________________________________
Name:
Title:
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: _______________________________________
Name:
Title:
CIBC INC.
By: _______________________________________
Name:
Title:
COLORADO NATIONAL BANK
By: _______________________________________
Name:
Title:
SOCIETE GENERALE, SOUTHWEST AGENCY
By: _______________________________________
Name:
TITLE:
22
<PAGE>
CONFIRMATION, ACKNOWLEDGEMENT AND CONSENT OF GUARANTORS
Each of the undersigned (collectively "Guarantors") hereby (i)
acknowledges and consents to the foregoing Second Amendment to First Restated
Loan Agreement (Revolver); (ii) confirms the Restated Guaranty dated as of
September 2, 1994 executed by such Guarantor in favor of Agent and the Lenders
pursuant to the Original Agreement; and (iii) agrees that each of such
Guarantor's obligations and covenants with respect to such Restated Guaranty
shall remain in full force and effect after the execution of such Amendment.
William J. Krysiak, Vice President-Finance of Western Gas Resources
Oklahoma, Inc., Western Gas Resources Texas, Inc., Western Gas Resources
Storage, Inc., Mountain Gas Resources, Inc., MGTC, Inc. and MIGC, Inc., is
executing this Confirmation, Acknowledgment and Consent of Guarantors in his
capacity of officer of each such corporation.
Dated as of the 23rd day of February, 1995.
WESTERN GAS RESOURCES OKLAHOMA, INC.
WESTERN GAS RESOURCES TEXAS, INC.
WESTERN GAS RESOURCES STORAGE, INC.
MOUNTAIN GAS RESOURCES, INC.
MGTC, INC.
MIGC, INC.
By: _______________________________________
William J. Krysiak,
Vice President-Finance
23
<PAGE>
FOURTH AMENDMENT TO THIRD RESTATED LOAN AGREEMENT (TERM)
THIS FOURTH AMENDMENT TO THIRD RESTATED LOAN AGREEMENT (TERM) (herein
called the "Amendment") made as of the 23rd day of February 1995, by and among
Western Gas Resources, Inc., a Delaware corporation ("Borrower"), NationsBank of
Texas, N.A., a national banking association, as Agent ("Agent"), and NationsBank
of Texas, N.A., Bankers Trust Company, Bank of Montreal and CIBC Inc. (herein,
collectively referred to as "Lenders"),
W I T N E S S E T H:
WHEREAS, Borrower, Agent and Lenders have entered into that certain Third
Restated Loan Agreement (Term) dated as of August 31, 1993, as amended by that
certain First Amendment to Third Restated Loan Agreement (Term) dated as of
December 31, 1993, that certain Second Amendment to Third Restated Loan
Agreement (Term) dated as of September 2, 1994, and that certain Third Amendment
to Third Restated Loan Agreement (Term) dated as of December 2, 1994, among
Borrower, Agent and Lenders (as amended to the date hereof, the "Original
Agreement") for the purpose and consideration therein expressed, whereby Lenders
made loans to Borrower as therein provided; and
WHEREAS, Borrower, Agent and Lenders desire to amend the Original
Agreement as expressly set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Agreement and 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
--------------------------
Section 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.
Section 1.2. Other Defined Terms. Unless the context otherwise requires,
-------------------
the following terms when used in this Amendment shall have the meanings assigned
to them in this Section 1.2.
"Loan Agreement" shall mean the Original Agreement as amended hereby.
ARTICLE II.
Amendments
----------
Section 2.1. Amendment to Defined Terms.
--------------------------
The following definition of "Permitted Receivables Purchase Facility" is
hereby added to Section 1.1 of the Original Agreement immediately following the
definition of "Partnership":
"'Permitted Receivables Purchase Facility' means the sale by Borrower
---------------------------------------
and/or any of its Subsidiaries of any of their receivables pursuant to a
receivables purchase facility (in this definition "Western Receivables"),
including but not limited to a receivables purchase facility with Bank of
America National Trust and Savings Association as agent, whereby (A) the
aggregate amount of all purchasers' investments in any and all pools of
Western Receivables shall not exceed seventy-five million dollars
($75,000,000) in the aggregate at any time outstanding, (B) any reserves
required to be maintained with respect to the Western Receivables in any
such pool that constitute eligible receivables after taking into account
concentration limits shall not exceed ten percent (10%) of the aggregate
amount of such purchasers' investments, (C) recourse is provided for
losses based on historical losses and other bad debt experience and for
indemnities and fees, (D) the Western Receivables and other rights to
payment associated with the Western Receivables
Exhibit No. 10.37
24
<PAGE>
and the proceeds thereof (including, without limitation, deposit accounts
established in connection with the Western Receivables and agreements,
merchandise, books, records, security interests, liens, guarantees and
other collateral support relating to the Western Receivables) shall secure
the obligations of Borrower and its Subsidiaries arising under such
receivables purchase facility and (E) such receivables purchase facility
shall be terminable at the sole discretion of Borrower."
Section 2.2. Amendment to Covenant Regarding Limitation on Indebtedness.
----------------------------------------------------------
Section 5.2(b)(ix) of the Original Agreement is hereby amended in its
entirety to read as follows:
"(ix) Indebtedness arising in connection with a Permitted Receivables
Purchase Facility an aggregate outstanding amount not to exceed seventy-
five million dollars ($75,000,000) plus associated fees and expenses."
Section 2.3. Amendment to Covenant Regarding Limitation on Sales of
------------------------------------------------------
Property.
Sections 5.2(e)(iii) and 5.2(e)(iv) of the Original Agreement are hereby
amended in their entirety to read as follows:
"(iii) so long as no Default or Event of Default has occurred, assets or
property which are sold for fair consideration in arm's length
transactions to third parties that are not Affiliates of Borrower;
provided that if during any Fiscal Quarter assets and property with an
aggregate gross book value in excess of $20,000,000 are sold or if during
--
the period beginning on the date
of the Original Agreement and continuing until all of the Obligations are
paid in full assets and property with an aggregate gross book value in
excess of $40,000,000 are sold, Lenders shall have the right to require a
recalculation of the Mandatory Prepayment Ratio in accordance with the
provisions of Section 2.5(a) which ratio shall become effective at the
time of such sale; provided further, that the sale of receivables pursuant
to a Permitted Receivables Purchase Facility shall not be included in the
calculation of clause (iii) of this subsection; and
(iv) sales of receivables pursuant to a Permitted Receivables Purchase
Facility."
ARTICLE III.
Conditions of Effectiveness
---------------------------
Section 3.1. Effective Date. This Amendment shall become effective as of
--------------
the date first above written when, and only when, (i) Agent shall have received,
at Agent's office, a counterpart of this Amendment executed and delivered by
Borrower and Majority Lenders, and (ii) Agent shall have additionally received
each of the following, each document (unless otherwise indicated) being dated
the date of receipt thereof by Agent, duly authorized, executed and delivered,
and in form and substance satisfactory to Agent:
(a) a certificate of the Secretary of Borrower dated the date of this
Amendment certifying that: (A) the resolutions adopted by the Board of
Directors of Borrower attached as Exhibit 1 to the Omnibus Certificate of
Borrower dated September 2, 1994 (the "Original Certificate") have not
been amended or revoked, and continue in full force and effect, (B) the
incumbency and authorization of the officers of Borrower authorized to
sign Loan Documents, with signature specimens of such officers, contained
in the Original Certificate has not been amended and continues in full
force and effect, (C) copies of the certified charter documents of
Borrower (including by-laws), attached as Exhibits H and O to the Original
Certificate have not been amended or revoked since the date of the
Original Certificate, and continue in full force and effect, (D) no
Default that has not been expressly waived by Lenders exists on and as of
the date hereof and (E) all of the representations and warranties set
forth in Article IV hereof and Article V of the Original Agreement are
true and correct at and as of their respective times of effectiveness;
(b) a favorable opinion from Messr. John Walter, Esq., counsel for
Borrower in a form acceptable to Lender; and
(c) such supporting documents as Agent may reasonably request.
25
<PAGE>
ARTICLE IV.
Representations and Warranties
------------------------------
Section 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 each subsection of
Section 4.1 of the Original Agreement are true and correct at and as of
the time of the effectiveness hereof.
(b) Borrower is duly authorized to execute and deliver this Amendment
and is and will continue to be duly authorized to borrow monies and to
perform its obligations under the Loan Agreement. Borrower has duly taken
all corporate action necessary to authorize the execution and delivery of
this Amendment and to authorize the performance of the obligations of
Borrower hereunder and thereunder.
(c) The execution and delivery by Borrower of this Amendment, the
performance by Borrower of its obligations hereunder 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 articles 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 of this Amendment or to consummate the
transactions contemplated hereby.
(d) When duly executed and delivered, this Amendment and the Loan
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 audited annual Consolidated financial statements of Borrower
dated as of December 31, 1993 and the unaudited quarterly Consolidated
financial statements of Borrower dated as of September 30, 1994 fairly
present Borrower's Consolidated financial position at such dates and the
Consolidated results of Borrower's operations and changes in Borrower's
Consolidated cash flow for the respective periods thereof. Copies of such
financial statements have heretofore been delivered to each Lender. Since
September 30, 1994, no material adverse change has occurred in the
financial condition or businesses or in the Consolidated financial
condition or businesses of Borrower.
ARTICLE V.
Miscellaneous
-------------
Section 5.1. Ratification of Agreements. The Original Agreement as
--------------------------
hereby amended and each other Loan Document affected hereby are ratified and
confirmed in all respects. Any reference to the Loan Agreement in any Loan
Document shall be deemed to be a reference to the Original Agreement as hereby
amended. The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of Agent or Lenders under the Loan Agreement or any other Loan Document
nor constitute a waiver of any provision of the Loan Agreement or any other Loan
Document.
Section 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 or any Related
Person hereunder or under the Loan 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 Loan Agreement.
26
<PAGE>
Section 5.3. Loan Documents. This Amendment is a Loan Document, and all
--------------
provisions in the Loan Agreement pertaining to Loan Documents apply hereto.
Section 5.4. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance with 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.
Section 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.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above by their duly authorized officers.
WESTERN GAS RESOURCES, INC.
By: _______________________________________
Name:
Title:
NATIONSBANK OF TEXAS, N.A.
By: _______________________________________
Name:
Title:
BANKERS TRUST COMPANY
By: _______________________________________
Name:
Title:
BANK OF MONTREAL
By: _______________________________________
Name:
Title:
CIBC INC.
By: _______________________________________
Name:
Title:
27
<PAGE>
CONFIRMATION, ACKNOWLEDGEMENT AND CONSENT OF GUARANTORS
Each of the undersigned (collectively "Guarantors") hereby (i)
acknowledges and consents to the foregoing Fourth Amendment to Third Restated
Loan Agreement (Term); (ii) confirms the Restated Guaranty dated as of August
31, 1993 executed by such Guarantor in favor of Agent and the Lenders pursuant
to the Original Agreement; and (iii) agrees that each of such Guarantor's
obligations and covenants with respect to such Restated Guaranty shall remain in
full force and effect after the execution of such Amendment.
William J. Krysiak, Vice President-Finance of Western Gas Resources
Oklahoma, Inc., Western Gas Resources Texas, Inc., Western Gas Resources
Storage, Inc., Mountain Gas Resources, Inc., MGTC, Inc. and MIGC, Inc., is
executing this Confirmation, Acknowledgment and Consent of Guarantors in his
capacity of officer of each such corporation.
Dated as of the 23rd day of February, 1995.
WESTERN GAS RESOURCES OKLAHOMA, INC.
WESTERN GAS RESOURCES TEXAS, INC.
WESTERN GAS RESOURCES STORAGE, INC.
MOUNTAIN GAS RESOURCES, INC.
MGTC, INC.
MIGC, INC.
By: _______________________________________
William J. Krysiak,
Vice President-Finance
28
<PAGE>
AMENDMENT NO. 3 TO NOTE PURCHASE AGREEMENTS
THIS AMENDMENT NO. 3 TO NOTE PURCHASE AGREEMENTS (this "Amendment"), by
and among Western Gas Resources, Inc., a Delaware corporation, each of the
Guarantors listed on Attachment 1 attached hereto and incorporated herein by
reference and each of the Note Holders listed on Attachment 1 attached hereto
and incorporated herein by reference, dated as of March 22, 1995.
W I T N E S S E T H:
-------------------
WHEREAS, prior hereto, the Company and the Guarantors have entered into
those certain Note Purchase Agreements dated as of April 30, 1993, as amended,
with each of the Purchasers named therein (as amended, the "Note Purchase
Agreements"), pursuant to which the Company sold its 7.65% Senior Notes due
April 30, 2003 to the Purchasers;
WHEREAS, the Company and the Guarantors have requested that Section 7.15
of the Note Purchase Agreements be amended; and
WHEREAS, the Required Holders (as that term is defined in the Note
Purchase Agreements) have agreed to amend the Note Purchase Agreements, as set
forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the parties hereto agree as follows:
Section 1. Defined Terms. Unless otherwise defined herein, the terms
-------------
used herein shall be as defined in the Note Purchase Agreements.
Section 2. Amendment Relating to Securitization of Receivables.
---------------------------------------------------
Section 7.15 of each Note Purchase Agreement is hereby deleted in its entirety
and replaced, in lieu thereof, with the following:
"Notwithstanding anything 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.
The term Permitted Securitization Program means a transaction or series of
--------------------------------
transactions pursuant to which:
(a) The Company and the 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").
29 Exhibit 10.38
<PAGE>
(ii) The Security Interest shall apply to each Pledged Accounts
Receivable in an amount not to exceed the proportion that the Recourse
Amount bears to the face value of the Pledged Accounts Receivable.
(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."
Section 3. Effectiveness. This Amendment shall be effective as March
-------------
22, 1995: provided, however, that its effectiveness is conditioned upon: (i)
-------- -------
the Company having entered into amendments to: (a) that certain First Restated
Loan Agreement (Revolver), dated as of September 2, 1994, by and among the
Company, NationsBank of Texas, N.A. ("NationsBank"), as Agent and Certain Banks,
as Lenders; (b) that certain Third Restated Loan Agreement (Term), dated as of
September 2, 1994, by and among the Company, NationsBank, as Agent and Certain
Banks, as Lenders; and (c) that certain Amended and Restated Master Shelf
between the Company and The Prudential Insurance Company of America; and (ii)
such amendments containing covenants permitting a Permitted Securitization
Program.
IN WITNESS WHEREOF, the undersigned have set their hands hereto as of this
March 22, 1995.
WESTERN GAS RESOURCES, INC.
By:___________________________________________
William J. Krysiak, Vice President-Finance
MGTC, INC.
MIGC, INC.
MOUNTAIN GAS RESOURCES, INC.
WESTERN GAS RESOURCES- OKLAHOMA, INC.
WESTERN GAS RESOURCES STORAGE, INC.
WESTERN GAS RESOURCES-TEXAS, INC.
By:___________________________________________
William J. Krysiak, Vice President-Finance
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
BY: CIGNA Investments, Inc.
By:___________________________________________
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY, on behalf of one or more separate
accounts
BY: CIGNA Investments, Inc.
By:___________________________________________
30
<PAGE>
INSURANCE COMPANY OF NORTH AMERICA
BY: CIGNA Investments, Inc.
By:___________________________________________
LIFE INSURANCE COMPANY OF NORTH AMERICA
BY: CIGNA Investments, Inc.
By:___________________________________________
31
<PAGE>
ATTACHMENT 1 TO
AMENDMENT NO. 3 TO
NOTE PURCHASE AGREEMENTS
------------------------
A. THE GUARANTORS.
MGTC, Inc.
MIGC, Inc.
Mountain Gas Resources, Inc.
Western Gas Resources-Oklahoma, Inc.
Western Gas Resources Storage, Inc.
Western Gas Resources-Texas, Inc.
B. THE NOTE HOLDERS.
Connecticut General Life Insurance Company
Connecticut General Life Insurance Company
Insurance Company of North America
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
32
<PAGE>
[Execution Copy]
LETTER AMENDMENT NO. 3
to
AMENDED AND RESTATED MASTER SHELF AGREEMENT
April 1, 1995
The Prudential Insurance Company
of America
c/o Prudential Capital Group
1201 Elm Street, Suite 4900
Dallas, Texas 75270
Ladies and Gentlemen:
We refer to the Amended and Restated Master Shelf Agreement dated as of
December 19, 1991 among the undersigned and you (such agreement, as amended,
being referred to as the "AGREEMENT"). Unless otherwise defined herein, the
terms defined in the Agreement shall be used herein as therein defined.
The Company has requested that you amend certain covenants in the
Agreement. You have indicated your willingness to so agree. Accordingly, it is
hereby agreed by you and us as follows:
The Agreement is, effective the date first above written, hereby amended
as follows:
1. PARAGRAPH 6C(1). LIENS. Paragraph 6C(1) is amended by amending
clauses (vi), (vii), (viii) and (ix) and the last proviso thereof in their
entirety to read as follows:
"(vi) Liens on deposit and other bank accounts of the Company created by
the right of a lender party to the NCNB Agreement or the Inventory Loan
Agreement to offset obligations of the Company owing under such agreements,
respectively, against such accounts if, and only if, there is no agreement
between any such lender and the Company which requires the Company to
maintain any deposit or other funds in any account with such lender other
than as provided in (vii) below,
(vii) Liens on deposits of the Company under the NCNB Agreement to secure
the face amount of outstanding letters of credit issued pursuant to the NCNB
Agreement,
(viii) Liens securing sales or transfers of accounts receivable pursuant
to the Permitted Securitization Program, and
(ix) other Liens on the property of the Company,
provided that the aggregate amount of Debt secured by Liens permitted by
--------
clauses (iv), (v), (viii) (to the extent of the Over-Collateralization
Amount) and (ix), together with the amount of undrawn letters of credit
subject to the obligation to provide deposits referred to in clause (vii),
whether or not such deposits have been provided, does not exceed at any time
an amount in excess of 5% of Consolidated Tangible Net Worth."
2. PARAGRAPH 6C(5). MERGER AND SALE OF ASSETS. Paragraph 6C(5) is
amended by amending clause (ix) thereof in its entirety to read as follows:
33 Exhibit No. 10.39
<PAGE>
"(ix) sales of accounts receivables pursuant to the Permitted
Securitization Program in an aggregate amount not to exceed $75,000,000."
3. PARAGRAPH 6C(9). SALE OR DISCOUNT OF RECEIVABLES. Paragraph 6C(9)
is amended in its entirety to read as follows:
"6C(9). SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse, or
discount (other than to the extent of finance and interest charges
included therein) or otherwise sell for less than face value thereof, any
of its notes or accounts receivable except (i) notes or accounts
------
receivable the collection of which is doubtful in accordance with general
accepted accounting principles and (ii) pursuant to the Permitted
Securitization Program; provided, however, that the Company and the
--------- -------
Subsidiaries may not have more than one Permitted Securitization Program
outstanding at any time."
4. PARAGRAPH 10B. OTHER TERMS. Paragraph 10B is amended by (I)
amending the definition of "Adjusted Consolidated Debt" as follows and (II)
inserting the following new definition in alphabetical order:
"'ADJUSTED CONSOLIDATED DEBT' shall mean Consolidated Debt (excluding
any Debt relating to the Permitted Securitization Program to the extent an
amount equal to the Receivables Investment is deducted from Consolidated
Net Tangible Assets) plus Excess Working Capital Deficit.
----
'PERMITTED SECURITIZATION PROGRAM' means a transaction or series of
transactions pursuant to which:
(a) the Company and the 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 $75,000,000, plus 10% of the amount sold or
transferred at such time for the purpose of providing the purchaser
with over-collateralization (the "OVER-COLLATERALIZATION AMOUNT"); 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 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
Accounts Receivable in an amount not to exceed the proportion that
the Recourse Amount bears to the 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."
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. 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.
This letter amendment 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.
34
<PAGE>
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 to the Company at its address at 12200 N. Pecos Street, Suite 230,
Denver, CO 80234, Attention of John C. Walter, Vice President-General Counsel.
This letter amendment 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, (iii) the NCNB Agreement shall been amended in a manner similar to
this letter amendment and (iv) the Note Purchase Agreements between the Company
and the purchasers relating to the Company's 7.65% Senior Notes due April 30,
2003 shall have been amended in a manner similar to this letter amendment to the
extent applicable.
Very truly yours,
WESTERN GAS RESOURCES, INC.
By: ___________________________________
Title:
Agreed as of the date first above written:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: ___________________________________
Vice President
35
<PAGE>
CONSENT TO AMENDMENT
Each of the undersigned is a Guarantor ("GUARANTOR" and, collectively,
"GUARANTORS") under separate guaranties (each being a "GUARANTY") dated as of
October 27, 1992 or August 31, 1993 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 a Master Shelf Agreement dated as of December 19, 1991, as amended (the
"ORIGINAL AGREEMENT"). The terms used herein have the meaning specified in each
Guaranty unless otherwise defined herein. Prudential and the Company entered
into an Amended and Restated Master Shelf Agreement dated as of December 19,
1991 (as subsequently amended, the "AMENDED AGREEMENT") which amended the
Original Agreement. Prudential and the Company are entering into a Letter
Amendment No. 3 to Amended and Restated Master Shelf Agreement dated as of
August 31, 1994 to which this consent is attached (the "LETTER AMENDMENT").
Each of the undersigned hereby consents to the Letter Amendment 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 Amended Agreement as amended by the Letter Amendment.
Dated as of April 1, 1995.
MGTC, INC.
WESTERN GAS RESOURCES STORAGE, INC.
MOUNTAIN GAS RESOURCES, INC.
WESTERN GAS RESOURCES - TEXAS, INC.
WESTERN GAS RESOURCES - OKLAHOMA, INC.
MIGC, INC.
By: __________________________________________
Title:
36
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter referred to as the "Agreement") is
made effective as of the ____ day of __________________, 1994, by and between
WESTERN GAS RESOURCES, INC., a Delaware corporation, (hereinafter referred to as
the "Corporation"), and _________ (hereinafter referred to as the "Employee").
R E C I T A L S:
A. The Corporation acquires, designs, constructs and operates natural gas
gathering and processing facilities, markets, stores, and transports natural gas
and natural gas liquids, and explores for, develops, and produces oil and gas
mineral deposits.
B. Employee has substantial experience in the Corporation's business and
is currently the Corporation's Vice President-
______________________________________________.
C. The Corporation desires to retain Employee on an exclusive basis to
provide services to the Corporation in connection with its business activities.
D. The parties have reached agreement with respect to the terms of such
employment.
NOW, THEREFORE, the parties agree as follows:
1. Employment. Corporation hereby employs the Employee and the
----------
Employee hereby accepts such employment with the Corporation upon the terms and
conditions hereinafter set forth. The Employee's employment shall continue
until it is terminated in accordance with the provisions of paragraph 11 hereof.
2. Powers, Duties and Responsibilities.
-----------------------------------
(a) Employee shall devote his full time , attention and effort to the
business of the Corporation (including its subsidiaries and affiliates) during
the Corporations's normal business hours and during such other times as are
reasonably necessary for the proper performance of his responsibilities
hereunder.
(b) Employee's primary duties shall be to act as Vice President-
_____________________________________. Employee shall have such powers, duties
and responsibilities, and shall perform such other functions in connection with
the Corporation's business, as may be assigned to him from time to time by the
Corporation.
3. Compensation and Bonus. For all of the services rendered by
----------------------
Employee pursuant to this Agreement, the Corporation shall pay the Employee a
minimum annual compensation of _____________________________
___________________________ Dollars ($_______________) (hereinafter referred to
as "Compensation"), payable in accordance with the Corporation's normal pay
practices during the term of Employee's employment. In addition, the
Corporation shall pay Employee such additional bonus, if any, as may be
determined appropriate by the Corporation's Board of Directors from time to time
in its sole and absolute discretion. Employee may provide a written election to
have any bonus due in December of any year paid in January of the following
year.
4. Officer Insurance Coverage -- Costs of Defense. During the term
----------------------------------------------
of Employee's employment and for two (2) years thereafter, the Corporation shall
provide to Employee officer insurance coverage to cover any claims that may be
made arising from his past, present, or future activities on behalf of the
Corporation, in the same manner as such insurance is provided to the other
officers of the Corporation, provided that such insurance coverage is available
to the Corporation at a reasonable cost. Thereafter, if the Employee wants
continuing officer insurance coverage, he shall be responsible for the cost
thereof. Employee hereby represents that to his knowledge no investigation,
claim, or litigation is currently pending or threatened against him at this time
relating to or arising out of his activities as Vice President-
__________________________________________. In the event Employee is subpoenaed
as a witness with respect to any claim, investigation, or litigation
37 Exhibit No. 10.40
<PAGE>
in which the Corporation is a party, or joined as a party to litigation arising
out of the performance of Employee's duties while employed by the Corporation,
the Corporation shall provide legal representation to the Employee at no cost to
him, provided, that in the event the Employee is a party in the action, the
Board of Directors has made a finding that the Employee has acted in good faith.
5. Cooperation With Respect to Investigations, Claims, or Litigation.
-----------------------------------------------------------------
During the term of Employee's employment and at all times thereafter, should the
Corporation become involved in any investigation, claim, or litigation relating
to or arising out of Employee's past, present, or future duties with the
Corporation or with respect to any matters which the Employee has knowledge,
Employee agrees to fully and in good faith cooperate with the Corporation with
respect to such investigation, claim, or litigation. The Corporation shall
reimburse Employee for his reasonable out-of-pocket expenses incurred to provide
such cooperation.
6. Employee Benefits. During the term of Employee's employment he shall
-----------------
be eligible to participate in all of the employee benefit plans provided by the
Corporation, from time to time, in accordance with the provisions of such plans,
including, but not limited to, the Corporation's qualified retirement plans, the
Corporation's Incentive Stock Option Plan For Key Employees, and the
Corporation's loan plan to acquire stock. The Employee hereby agrees and
acknowledges that nothing in this Agreement guarantees him the right to any
additional allocation of stock under any Stock Option Plan, or loan under the
loan plan, but that such determination is made by the Board of Directors, in its
sole and absolute discretion, in accordance with the terms of such plans.
7. Confidential Information. Employee acknowledges that in his
------------------------
employment hereunder he occupies a position of trust and confidence.
Accordingly, in order to facilitate the performance of this Agreement and the
activities contemplated by this Agreement, the Corporation may disclose to
Employee or Employee may develop or obtain certain proprietary or confidential
information of the Corporation. During Employee's employment hereunder and for
a period of three (3) years thereafter, Employee hereby agrees not to use or to
disclose to any person, other than in the discharge of his duties under this
Agreement, any "proprietary or confidential" information of the Corporation
including, but not limited to, any information concerning the business
operations, business strategies, or internal structure of the Corporation; the
customers or clients of the Corporation; the gas and other products' pricing
strategies of the Corporation; any acquisition strategies of the Corporation;
the gas and other products' marketing or transportation strategies of the
Corporation; the terms of any gas gathering, processing, marketing, or
transportation contracts entered into by the Corporation; past, present or
future research done by the Corporation respecting the business or operations of
the Corporation, or customers or clients or potential customers or clients of
the Corporation; personnel data of the Corporation, product or process
knowledge; the Employee's work performed for, or relating to or for, any
customer or client of the Corporation or the gas or other product pricing for
any customer or client of the Corporation's; any method or procedure relating or
pertaining to projects developed by the Corporation or contemplated by the
Corporation to be developed; or any gas gathering, processing, drilling,
marketing, transportation project which the Corporation is developing; or any
plans or strategy related to the foregoing which is not generally available or
disclosed to the public by the Corporation.
If the Employee violates this agreement of confidentiality, the
Corporation shall, in addition to any other remedy provided by law, be permitted
to pursue an action for injunctive relief, monetary damages, or both. The
Employee acknowledges that all such information constitutes confidential and/or
proprietary information of the Corporation and agrees that he shall keep such
information confidential; he shall use such information solely for the purpose
of performing his obligations hereunder or activities contemplated by this
Agreement; and that he shall not otherwise disclose or make use of such
information,except in response to a court order.
8. Non-Solicitation. During Employee's employment hereunder and for
-----------------
a period of three years thereafter, Employee shall not engage in any of the
following:
(a) Hire, offer to hire (or participate in the hiring or offer to hire
of) any officer or employee of the Corporation (including any subsidiary or
affiliate); or
(b) directly or indirectly, solicit, divert or take away or attempt to
solicit, divert or take away any business the Corporation had enjoyed or
solicited prior to the date hereof or at any time during Employee's term of
employment with the Corporation, including its subsidiaries and affiliates.
This provision, however, shall not be construed to require the Employee to
violate any law forbidding anti-competitive practices or any law regarding anti-
trust.
38
<PAGE>
In the event Employee violates this non-solicitation provision, the
Corporation shall, in addition to any other remedy provided by law, be permitted
to pursue an action for injunctive relief, monetary damages, or both.
9. Ownership of Documents. All information, drawings, documents and
----------------------
materials whether in writing, on computer disks, computer hard drive, on
magnetic tape or otherwise prepared by the Employee in connection with his
employment, or which Employee obtains in the course of or as result of his
employment by the Corporation shall be the sole and exclusive property of the
Corporation and will be delivered to the Corporation by the Employee on the
earlier of a demand by the Corporation or promptly after termination of his
employment hereunder, together with all written, computer, magnetic tape or
other evidence of the information, drawings, document and materials, if any,
furnished by the Corporation to the Employee in connection with the Employee's
employment.
10. Agreement Not To Compete. The parties hereto recognize that the
------------------------
Employee is retained by the Corporation as part of a professional, management
and executive staff of the Corporation whose duties include the formulation and
execution of management policy. Therefore, the Employee hereby agrees that
during the term of his employment hereunder and for a period of one (1) year
after the termination of employment, he shall not act engage in material
competition with the activities of or plans of the Corporation as they exist up
to the time of the Employee's termination of employment. Material competition
by the Employee shall mean that the Employee is involved in any business or
investment activity, in any capacity including but not limited to an employee,
consultant, advisor, agent, shareholder, independent contractor, investor,
partner, member, owner or otherwise, which activity directly competes with or
has a material adverse economic effect on any of the business activities or
business plans of the Corporation. Examples of such material competition
include, but shall not be limited to an activity involving the gathering and
processing business within 25 miles of one of the Corporation's existing or
planned gathering and processing facilities, an activity involving the storage
or hub business for natural gas or natural gas liquids within 100 miles of an
existing or planned storage facility of the Corporation, and/or an activity
involving the purchase of oil or gas leases, the farming-in of such leases or
any similar arrangement, within five (5) miles of the boundaries of an existing
oil or gas lease of the Corporation. In the event the Employee violates this
agreement not to compete, the Corporation shall, in addition to any other
remedies provided by law, be permitted to pursue an action for injunctive relief
(preliminary or permanent), monetary damages, or both.
11. Termination of Employment. Employee's employment pursuant to this
-------------------------
Agreement shall terminate upon the first to occur of the following events:
(a) The Employee's death.
(b) The Employee's disability as that term is defined pursuant to the
Corporation's disability insurance plan covering its officers.
(c) The Employee's written election to terminate his employment to be
effective ninety (90) days thereafter unless an earlier effective date is
specified by the Corporation.
(d) The Corporation's written election to terminate Employee's
employment without "cause."
(e) The Corporation's written election to terminate the Employee's
employment "for cause."
For purposes of this Agreement, the Corporation may elect to terminate
Employee's employment "for cause" if: (1) Employee shall have committed any of
the following: a felony, fraud, theft or embezzlement involving the assets of
the Corporation (including its subsidiaries or affiliates); a violation in any
material respect of any statute, law, ordinance, rule or regulation relating to
the Corporation's business; (2) Employee engages in any activity which is
outside the scope of the Employee's authority and detrimental to the
Corporation's business or Employee fails to comply with the provisions of this
Agreement; and Employee has not diligently commenced to correct such detrimental
activity or failure to comply after ten (10) days' written notice from the
Corporation, which notice provides a detailed description thereof; or (3) the
intentional failure or refusal of the Employee to perform his obligations or
responsibilities hereunder, or to carry out any reasonable and lawful direction
of the Corporation with respect to such obligations or responsibilities.
12. Employee's Rights and Obligations Upon Death or Disability. If the
----------------------------------------------------------
Employee's employment is terminated as a result of death or disability, then the
Employee shall be entitled to the following in full satisfaction of all of his
rights under this Agreement or at law:
39
<PAGE>
(a) Employee's Right to Compensation and Benefits. Employee shall be
---------------------------------------------
entitled to the pro-rata share of Compensation and employee benefits, if any,
which have been earned but not paid through the date of Employee's death or
disability. Employee shall only be entitled to such additional bonus, if any,
which has been previously authorized by the Board of Directors, but has not been
paid as of the date of Employee's death or disability.
(b) Employee's Obligations. Notwithstanding such termination of
----------------------
employment, Employee shall remain bound by the provisions of paragraphs 5, 7,
8, 9 and 10 hereof.
13. Employee's Rights and Obligations Upon Termination of Employment
----------------------------------------------------------------
By the Corporation Without Cause. If Employee's employment is terminated by the
- --------------------------------
Corporation Without Cause pursuant to paragraph 11(d) herein, then Employee
shall be entitled to the following in full satisfaction of his rights under this
Agreement or at law:
(a) Severance Pay. Employee shall be entitled to severance pay in an
--------------
amount equal to the Compensation payable to the Employee pursuant to paragraph 3
of this Contract. Such severance pay will be payable in accordance with the
Corporation's normal pay practices over the 12 months following such termination
of employment. Notwithstanding the foregoing, in the event Employee's
employment is terminated without cause within one year of a change of control of
the Corporation or within one year after the sale of substantially all the
assets of the Corporation, then the severance pay provided for herein shall be
increased to two (2) times the Compensation, less the Compensation paid to the
Employee between the time the change of control occurred and the termination of
employment. Severance pay payable after a change of control shall be payable to
the Employee in monthly installments commencing the first day of the calendar
month following termination and continuing on the first day of each consecutive
calendar month thereafter until the expiration of the said two (2) year period.
In the event that severance pay is increased as provided in this paragraph, the
Agreement Not to Compete provided for in paragraph 10 shall apply for two (2)
years following the change of control. For purposes of this agreement, change
of control means the acquisition by any person or persons acting in concert
(including corporations, partnerships, associations or unincorporated
organizations), of legal ownership or beneficial ownership (within the meaning
of Rule 13d-3, promulgated by the Securities and Exchange Commission and now in
effect under the Securities Exchange Act of 1934, as amended) of a number of
voting shares of capital stock of the Corporation greater than the number of
voting shares of capital stock of the Corporation which are then owned, both
legally and beneficially (as defined above), by Brion G. Wise, Bill M.
Sanderson, Walter L. Stonehocker, Dean Phillips, Ward Sauvage, their immediate
families and the companies through which they hold ownership in the Corporation
("the Founders"). None of the Founders shall be counted among those persons
acting in concert to acquire ownership unless such Founder, acting in concert
with an acquiring person or group, votes against the other Founders in an
election for the Board of Directors or the modification of the Corporation's
charter or by-laws. Such Founders shares shall be counted in the acquiring
group's shares and not in the Founder's. In the event of a change of control of
the Corporation which is not followed by a termination of the Employee, Employee
shall continue to serve the Corporation by the performance of the job and duties
described in paragraph 2 hereof, and the Employee shall be employed in the
Corporation's offices in Denver, Colorado.
(b) Employee's Right to Compensation and Benefits. Employee shall be
---------------------------------------------
entitled to the pro-rata share of Compensation and employee benefits, if any,
which have been earned but not paid through the date of termination of
employment. Employee shall only be entitled to such additional bonus, if any,
which has been previously authorized by the Board of Directors, but has not been
paid as of the date of termination of employment.
(c) Employee's Obligations. Notwithstanding such termination of
----------------------
employment, Employee shall remain bound by the provisions of paragraphs 5, 7, 8,
9 and 10 hereof.
14. Employee's Rights and Obligations Upon Termination of Employment
----------------------------------------------------------------
by the Corporation With Cause. If Employee's employment is terminated by the
- -----------------------------
Corporation with cause pursuant to paragraph 11(e) herein, then the Employee
shall be entitled to the following in full satisfaction of all of his rights
under this Agreement or at law:
(a) Severance Pay. Employee shall not be entitled to any severance
-------------
pay.
(b) Employee's Right to Compensation and Benefits. Employee shall
---------------------------------------------
only be entitled to the pro-rata share of Compensation and employee benefits, if
any, earned but not paid through the date of termination of employment. Employee
shall only be entitled to such additional bonus, if any, which has been
previously authorized by the Board of Directors, but has not been paid as of the
date of termination of employment.
40
<PAGE>
(c) Employee's Obligations. Notwithstanding such termination of
----------------------
employment, Employee shall remain bound by the provisions of paragraphs 5, 7, 8,
9 and 10 hereof.
15. Employee's Rights and Obligations Upon Termination of Employment
----------------------------------------------------------------
By Employee. If Employee's employment is terminated by the Employee pursuant to
- -----------
paragraph 11(c) herein, then the Employee shall be entitled to the following in
full satisfaction of all of his rights under this Agreement or at law:
(a) Severance Pay. Employee shall be entitled to no severance pay.
-------------
(b) Employee's Rights to Compensation and Benefits. Employee shall be
----------------------------------------------
entitled to the pro-rata share of Compensation and Employee Benefits, if any,
which have been earned but not paid through the effective date of such
termination of employment. Employee shall only be entitled to such additional
bonus, if any, which has been previously authorized by the Board of Directors,
but has not been paid as of the date of termination of employment.
(c) Employee's Obligations. Notwithstanding such termination of
----------------------
employment, Employee shall remain bound by the provisions of paragraphs 5, 7, 8,
9 and 10 hereof.
16. Benefit. This Agreement shall inure to the benefit of and be binding
-------
upon the Corporation, its successors and assigns, including, but not limited to
(i) any corporation which may acquire all or substantially all of the
Corporation's assets and business, (ii) any corporation with or into which the
Corporation may be consolidated or merged, or (iii) any corporation that is the
successor corporation in a share exchange, and the Employee, his heirs,
guardians and personal and legal representatives.
17. Notices. All notices and communications hereunder shall be in writing
-------
and shall be deemed given when sent postage prepaid by registered or certified
mail, return receipt requested, and, if intended for the Corporation, shall be
addressed to it, to the attention of its President, at:
Western Gas Resources, Inc.
12200 North Pecos Street
Denver, Colorado 80234
or at such other address which the Corporation shall have given notice to the
Employee in the manner herein provided, and if intended for the Employee, shall
be addressed to him at his last known residence, or at such other address at
which the Employee shall have given notice to the Corporation in the manner
provided herein:
____________________________
____________________________
____________________________
18. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Colorado.
19. Severability. In the event one or more of the provisions contained in
------------
this Agreement, or any application thereof, shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein or any other application or modification
thereof, shall not in any way be affected or impaired thereunder, and the
invalid provision shall be enforceable to the maximum extent permitted by law.
20. Miscellaneous.
-------------
(a) Counterparts. This Agreement may be executed in more than one
------------
copy, each copy of which shall serve as an original for all purposes, but all
copies shall constitute but one and the same Agreement.
41
<PAGE>
(b) Assignment. Except as provided in paragraph 16, this Agreement is
----------
personal to each of the parties hereto, and neither party may assign nor
delegate any of such party's rights or obligations hereunder without first
obtaining the written consent of the other party.
(c) Headings. All headings set forth in this Agreement are intended
--------
for convenience only and shall not control or affect the meaning, construction
or effect of this Agreement or of any of the provisions hereof.
(d) Gender, Plurals and Pronouns. Throughout this Agreement, the
----------------------------
masculine gender shall include the feminine and neuter, and the singular shall
include the plural and vice versa, wherever the context and facts require such
construction.
(e) Binding Arbitration, Attorney's Fees, and Expenses. If any
--------------------------------------------------
dispute arises between the parties to this Agreement with respect to any amounts
due to any one of the parties, then both parties shall submit the dispute to
binding arbitration. Both parties agree to be bound by the decision of such
arbitration. The obligation to submit to binding arbitration shall not prevent
either party from seeking a court order or an injunction enforcing the term of
this Agreement. In the event of any binding arbitration between the parties, or
any litigation to enforce any provision of this Agreement or any right of either
party, the unsuccessful party to such arbitration or litigation shall pay the
successful party all costs and expenses, including reasonable attorneys' fees,
incurred.
(f) Waiver of Breach. The waiver by any party hereto of any
----------------
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any party.
(g) Time of the Essence. Time is of the essence with respect to this
-------------------
Agreement.
(h) Entire Agreement. This Agreement contains all agreements,
----------------
understandings, and arrangements between the parties hereto and no other exists.
All previous agreements, understandings, and arrangements between the parties
are terminated by this Agreement. This Agreement may be amended, waived,
changed, modified, extended or rescinded only by a writing signed by the party
against whom such amendment, waiver, change, modification, extension or
rescission is sought.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as
of the date first written above.
WESTERN GAS RESOURCES, INC.,
a Delaware corporation
By:___________________________________________
Bill M. Sanderson, President
______________________________________________
____________________________________, Employee
42
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