magnum_sc13d.htm

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GnMb0GO8Sr0J7Ssnr2jZF4oAfc/5ND16WWmYAHYxwbX2YzmIE92gz1sh3awJWw2M OIxqbR7OrM4Ly+YloQjB8w== 0001019687-11-000064.txt : 20110107 0001019687-11-000064.hdr.sgml : 20110107 20110107163307 ACCESSION NUMBER: 0001019687-11-000064 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20110107 DATE AS OF CHANGE: 20110107 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NGAS Resources Inc CENTRAL INDEX KEY: 0000746834 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 920075461 STATE OF INCORPORATION: A1 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-50813 FILM NUMBER: 11517907 BUSINESS ADDRESS: STREET 1: 120 PROSPEROUS PLACE STREET 2: SUITE 201 CITY: LEXINGTON STATE: KY ZIP: 40509 BUSINESS PHONE: 8592633948 MAIL ADDRESS: STREET 1: 120 PROSPEROUS PL STREET 2: SUITE 201 CITY: LEXINGTON STATE: KY ZIP: 40509 FORMER COMPANY: FORMER CONFORMED NAME: DAUGHERTY RESOURCES INC DATE OF NAME CHANGE: 19980710 FORMER COMPANY: FORMER CONFORMED NAME: ALASKA APOLLO RESOURCES INC DATE OF NAME CHANGE: 19930505 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MAGNUM HUNTER RESOURCES CORP CENTRAL INDEX KEY: 0001335190 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 860879278 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 777 POST OAK BLVD #910 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 832-369-6986 MAIL ADDRESS: STREET 1: 777 POST OAK BLVD #910 CITY: HOUSTON STATE: TX ZIP: 77056 FORMER COMPANY: FORMER CONFORMED NAME: PETRO RESOURCES CORP DATE OF NAME CHANGE: 20050803 SC 13D 1 magnum_sc13d.htm MAGNUM HUNTER RESOURCES CORPORATION magnum_sc13d.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

(Amendment No. )*

Under the Securities Exchange Act of 1934

NGAS Resources, Inc.

(Name of Issuer)

Common Stock

(Title of Class of Securities)

62912T103

(CUSIP Number)

Paul M. Johnston, Esq.

Senior Vice President and General Counsel

Magnum Hunter Resources Corporation

777 Post Oak Blvd, Suite 910

Houston, Texas 77056

(832) 369-6992

Copy To:

David E. Morrison, Esq.

Fulbright & Jaworski L.L.P.

2200 Ross Avenue, Suite 2800

Dallas, Texas 75201-2784

(214) 855-8000

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

December 23, 2010

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent.

*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 62912T103
1. Names of Reporting Persons. Magnum Hunter Resources Corporation Tax I.D. No.: 86-0879278
2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) o (b) o
3. SEC Use Only
4. Source of Funds (See Instructions) OO
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) ¨
6. Citizenship or Place of Organization Delaware
Number of Shares Beneficially Owned by Each Reporting Person With:	7. Sole Voting Power 0
	8. Shared Voting Power 2,856,849*
	9. Sole Dispositive Power 0
	10. Shared Dispositive Power 2,856,849*
11. Aggregate Amount Beneficially Owned by Each Reporting Person 2,856,849*
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o
13. Percent of Class Represented by Amount in Row (11) 5.7%*Æ
14. Type of Reporting Person (See Instructions) CO

* Beneficial ownership of the above referenced securities is being reported hereunder solely because the reporting person may be deemed to have beneficial ownership of such securities as a result of a Support Agreement (as defined in Item 4 below) entered into with beneficial owners of such securities as described herein. Neither the filing of this statement on Schedule 13D nor any of its contents shall be deemed to constitute an admission by the reporting person that it is the beneficial owner of any of the common stock referred to herein for purposes of Section 13(d) of the Securities Exchange Act of 1934, or for any other purpose, and such beneficial ownership is expressly disclaimed.

Æ Based on 49,918,230 shares of common stock outstanding as of December 23, 2010, as represented in the Arrangement Agreement (as defined below).

Item 1. Security and Issuer

The class of equity securities to which this statement relates is common stock, no par value, of NGAS Resources, Inc., a British Columbia corporation (“NGAS”). The principal executive offices of NGAS are located at 120 Prosperous Place, Suite 201 Lexington, Kentucky 40509.

Item 2. Identity and Background

(a) The name of the person filing this statement is Magnum Hunter Resources Corporation, a Delaware corporation (“MHR” or the “Reporting Person”).

(b) The business address of the Reporting Person is 777 Post Oak Boulevard, Suite 910, Houston, Texas 77056.

(c) The Reporting Person is an independent oil and gas company engaged in the acquisition, development and production of oil and natural gas, primarily in West Virginia, North Dakota, Texas and Louisiana. MHR is presently active in three of the most prolific shale resource plays in the United States, namely the Marcellus Shale, Eagle Ford Shale and Williston Basin/Bakken Shale. MHR is a Delaware corporation and was incorporated in 1997.

(d) Neither the Reporting Person nor, to the knowledge of the Reporting Person, any person identified on Schedule A attached hereto during the last five years has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

(e) Neither the Reporting Person nor, to the knowledge of the Reporting Person, any person identified on Schedule A attached hereto during the last five years has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f) All of the directors and executive officers of the Reporting Person named in Schedule A attached hereto are citizens of the United States.

Set forth on Schedule A is the name and present principal occupation or employment, and the name, principal business and address of any corporation or other organization in which such employment is conducted, of each of the directors and executive officers of the Reporting Person as of the date hereof.

Item 3. Source and Amount of Funds and Other Considerations

The Support Agreement (as defined in Item 4 below) was entered into among MHR and the following directors and executive officers of NGAS who are also shareholders of NGAS: William S. Daugherty, President and Chief Executive Officer of NGAS, William G. Barr III, Executive Vice President of NGAS, D. Michael Wallen, Executive Vice President of NGAS, Michael P. Windisch, Chief Financial Officer of NGAS, Thomas F. Miller, director of NGAS, James K. Klyman, director of NGAS, Steve U. Morgan, director of NGAS, Paul R. Ferretti, director of NGAS, and B. Allen Connell, director of NGAS (collectively, the “Shareholders”). The Shareholders entered into the Support Agreement as a condition and an inducement to MHR to enter into the Arrangement Agreement (as defined in Item 4 below). M HR did not pay any additional consideration to the Shareholders in connection with the execution and delivery of the Support Agreement, and thus no funds were used for such purpose.

Item 4. Purpose of Transaction

(a)-(b) On December 23, 2010, MHR and NGAS, entered into an Arrangement Agreement (the “Arrangement Agreement”), pursuant to which MHR will acquire all of the issued and outstanding equity of NGAS. The proposed transaction will be implemented by way of a court-approved plan of arrangement under British Columbia law (the “Arrangement”). Under the Arrangement, each common share of NGAS will be transferred to MHR for the right to receive 0.0846 shares of MHR’s common stock. The exchange ratio for the proposed transaction was established based on an agreed stock price of MHR of $6.50, representing a value to NGAS’ shareholders of $0.55 per share. The exchange ratio will not be adjusted for subsequent changes in market prices of MHR’s or NGAS’ common stock prior to the closing of the proposed transaction (the “Closing”).

The Closing is subject to various conditions, including, among others: (i) the approval of the Arrangement Agreement and the Arrangement by two-thirds of the votes cast by NGAS’ shareholders present in person or represented by proxy at NGAS’ special meeting of shareholders, (ii) the receipt of an interim and final order from the Supreme Court of British Columbia pursuant to Section 291 of the Business Corporation Act (British Columbia), (iii) in the case of NGAS’ obligation to close, the full payment of all outstanding amounts owed by NGAS under its existing credit agreement and the full payment of the NGAS 6% amortizing convertible notes that have not been converted into NGAS common shares before the Closing, (iv) in the case of MHR’s obligation to close, (a) the entry into a definitive agree ment with a third party to restructure an “out-of-market” gas gathering and transportation agreement on substantially the terms set forth in a letter of intent (the “Letter of Intent”) between MHR, NGAS and such third party, (b) the reduction of change of control, severance and retention benefits payable to NGAS’ officers and employees to an amount not to exceed $5,000,000, and (c) no amendment or rescission prior to the Closing of the fairness opinion delivered to NGAS by NGAS’ financial advisor, (v) the absence of injunctions or restraints imposed by governmental entities, (vi) the accuracy of the representations and warranties of the other party and (vii) compliance by the other party with its obligations under the Arrangement Agreement. In connection with the condition relating to the restructuring of the “out-of-market” gas gathering and transportation agreement, the Letter of Intent provides that (i) MHR would pay $10 million in cash or restric ted shares of MHR’s common stock to the third party referred to above and provide such third party with the right to acquire a 50% interest in MHR’s Marcellus gas processing plant, and (ii) NGAS would cancel approximately $7 million in note installments from the third party’s purchase of NGAS’ Appalachian gathering system in August 2009. The Closing is currently expected to occur in the first quarter of 2011.

The Arrangement Agreement includes customary representations, warranties and covenants by the parties, including among other things a “no-solicitation” covenant that restricts NGAS’ ability to solicit third party proposals relating to alternative transactions or to provide information or enter into discussions in connection with alternative transactions, subject to certain limited exceptions to permit NGAS’ Board of Directors to comply with its fiduciary duties. The Arrangement Agreement also contains a covenant that NGAS will use its reasonable best efforts to extend the deadline for completing a qualifying transaction under its previously reported credit agreement waiver and amendment from March 31, 2011 to April 15, 2011 (the “Extension Date”).

The Arrangement Agreement contains certain termination rights for both MHR and NGAS, including if (a) a governmental entity issues an order prohibiting the consummation of the transactions contemplated by the Arrangement Agreement, (b) the Closing has not occurred on or before March 31, 2011 or the Extension Date, or (c) NGAS’ shareholders do not approve the terms of the Arrangement Agreement and the Arrangement. The Arrangement Agreement provides that MHR will be entitled to a termination fee of $4,000,000 if the Arrangement Agreement is terminated upon certain specified events, including in the event NGAS accepts a “Superior Proposal” (as defined in the Arrangement Agreement) or a change in recommendation of NGAS’ Board of Directors, which could result from, among other things, an “Intervening Event” (as defined in the Arrangement Agreement). If the Arrangement Agreement is terminated due to a failure of NGAS’ shareholders to approve the proposed transaction, NGAS will reimburse MHR for all of its reasonable expenses incurred in connection with the proposed transaction up to $4,000,000.

Concurrently, and in connection with entering into the Arrangement Agreement, the Shareholders entered into a support agreement (the “Support Agreement”) with MHR pursuant to which, subject to the conditions set forth therein, the Shareholders have agreed to vote all voting securities of NGAS beneficially owned by them, as well as any additional shares which they may acquire or own before the NGAS shareholder vote, in favor of the approval and adoption of the Arrangement Agreement and the transactions contemplated therein and to support actions necessary to consummate the Arrangement Agreement. In addition, the Shareholders have agreed not to take any action, in their capacity as shareholders of NGAS, that NGAS is prohibited from taking under the “no-solicitation” restrictions inclu ded in the Arrangement Agreement.

In connection with the Arrangement, MHR has agreed to satisfy certain liabilities of NGAS and its subsidiaries, which are expected to include: (i) approximately $35.2 million under NGAS’ senior credit facility, and (ii) approximately $14.7 million in remaining NGAS 6% amortizing convertible notes that have not been converted into NGAS common shares before the Closing (collectively, the “Assumed Liabilities”). The Assumed Liabilities are expected to be refinanced under MHR’s new senior credit facility with an initial borrowing base of $120 million, to be provided by BMO Capital Markets Corp. (“BMO”) pursuant to the terms of a debt commitment letter by and among BMO and MHR, dated December 22, 2010 (the “Debt Commitment Letter”).

The foregoing summary of the Arrangement Agreement, the Support Agreement, and the Debt Commitment Letter and the transactions contemplated thereby does not purport to be complete. Additionally, the foregoing summary of the Arrangement Agreement is subject to, and qualified in its entirety by, the full text of the Arrangement Agreement, which is attached as Exhibit 7.1 and incorporated herein by reference, the foregoing summary of the Support Agreement is subject to, and qualified in its entirety by, the full text of the Support Agreement, a form of which is attached as Exhibit 7.2 and incorporated herein by reference, and the foregoing summary of the Debt Commitment Letter is subject to, and qualified in its entirety by, the full text of the Debt Commitment Letter, which is attached as Exhibit 7.3 and inc orporated herein by reference.

(d) The Arrangement Agreement requires that the board of directors of NGAS: (i) determine that the Arrangement Agreement and the Arrangement are in the best interest of NGAS and its shareholders; (ii) adopt a resolution approving the Arrangement Agreement and declaring its advisability; and (iii) recommend that the shareholders of NGAS approve the Arrangement Agreement and vote in favor of the Arrangement.

The Arrangement Agreement provides that concurrently with completion of the Arrangement (i) all of the directors of NGAS shall resign and be replaced with Gary C. Evans and Ronald D. Ormand and (ii) all of the officers of NGAS shall resign and be replaced with MHR’s designees. At such time, NGAS will be considered a wholly owned subsidiary of MHR.

(e) Under the terms of the Arrangement Agreement, NGAS may not (except for shares of NGAS’ common stock issued as payment for principal and upon conversion at the default reset rate on NGAS’ 6% Amortizing Convertible Notes): (i) declare or pay any dividends on or make other distributions in respect of any of NGAS’ capital stock; (ii) split, combine or reclassify any of NGAS’ capital stock or issue or authorize or propose the issuance or authorization of any other securities in respect of, in lieu of or in substitution for, shares of NGAS’ capital stock; or (iii) repurchase, redeem or otherwise acquire, or permit any of its subsidiaries to redeem, purchase or otherwise acquire, any shares of NGAS’ capital stock or any securities convertible into or exercisable for any shares of NGAS ’ capital stock, except under limited circumstances as set forth in the Arrangement Agreement.

(f) If the transactions contemplated by the Arrangement Agreement are consummated, the surviving corporation of the Arrangement will be a wholly owned subsidiary of MHR.

(g) The Arrangement Agreement contains provisions that limit the ability of NGAS and specified representatives of NGAS to engage in a transaction that would effect a change of control of NGAS (other than the transactions contemplated by the Arrangement Agreement) during the pendency of the transactions contemplated by the Arrangement Agreement.

(h) Not applicable.

(i) Not applicable.

(j) Other than as described above, the Reporting Person currently has no plan or proposal which relates to, or may result in, any of the matters described in Items 4(a)-(i) of this Schedule 13D (although the Reporting Person reserve the right to develop such plans).

Item 5. Interest in Securities of the Issuer

(a)-(b) As described in Item 4(a)-(b) of this Schedule 13D, as a result of the Support Agreement, the Reporting Person shares the power to vote or to direct the vote of the securities subject to the Support Agreement with respect to certain matters as set forth therein. In addition, as a result of the Support Agreement, the Reporting Person has the right to control the Shareholder’s disposition with respect to the securities subject to the Support Agreement and as a result may be deemed to share the power to dispose or to direct the disposition with respect to such securities. As of December 23, 2010, the number of issued and outstanding shares of common stock of NGAS subject to the Support Agreement represented in the aggregate approximately 5.7% of the issued and outstanding shares of co mmon stock of NGAS (based on the total number of shares of common stock issued and outstanding as represented by NGAS in the Arrangement Agreement). The Reporting Person, however, hereby disclaims beneficial ownership of such shares and this Schedule 13D shall not be construed as an admission that the Reporting Person is, for any or all purposes, the beneficial owner of the securities covered by this Schedule 13D. Except as set forth in this Schedule 13D, no shares of common stock are beneficially owned by the Reporting Person or, to the knowledge of the Reporting Person, any person listed on Schedule A to this Schedule 13D. The description contained in this Item 5 of the transactions contemplated by the Support Agreement is qualified in its entirety by reference to the full text of the Support Agreement, a copy of the form of which is included with this Schedule 13D as Exhibit 7.2 and is incorporated herein by reference.

Schedule B to this Schedule 13D sets forth, to the knowledge of the Reporting Person, the following information for those natural persons with whom the Reporting Person shares the power to vote or to direct the vote or to dispose or to direct the disposition of the securities subject to the Support Agreement: the name, present principal occupation or employment, and the name, principal business and address of any corporation or other organization in which such employment is conducted, of such persons. To the knowledge of the Reporting Person, all of such natural persons listed on Schedule B to this Schedule 13D are citizens of the United States.

The Reporting Person has no knowledge that any person listed on Schedule B to this Schedule 13D during the last five years has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). The Reporting Person has no knowledge that any person listed on Schedule B to this Schedule 13D during the last five years has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with res pect to such laws.

(c) Except as disclosed herein, neither the Reporting Person nor, to the knowledge of the Reporting Person, any person named in Schedule A to this Schedule 13D, has effected any transaction in shares of common stock of NGAS during the past 60 days.

(d) To the knowledge of the Reporting Person, no other person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the securities subject to the Support Agreement.

(e) Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

Other than as described in Items 4 and 5 above, the Reporting Person is not a party to any contracts, arrangements, understandings or relationships (legal or otherwise) with respect to any securities of NGAS, including but not limited to transfer or voting of any of the securities, finder’s fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profit, division of profits or losses, or the giving or withholding of proxies.

Item 7. Material to be Filed as Exhibits

Exhibit No.	Document

7.1	Arrangement Agreement, dated as of December 23, 2010, by and among Magnum Hunter Resources Corporation and NGAS Resources, Inc.*

7.2	Form of Support Agreement, dated as of December 23, 2010, between Magnum Hunter Resources Corporation and certain NGAS shareholders*

7.3	Debt Commitment Letter, dated as of December 22, 2010, by and among Magnum Hunter Resources Corporation and the Bank of Montreal

____________

*	Incorporated by reference to the Current Report on Form 8-K filed by Magnum Hunter Resources Corporation with the Securities and Exchange Commission on December 30, 2010.

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

	MAGNUM HUNTER RESOURCES CORPORATION

Dated: January 7, 2011	By:	/s/ Gary C. Evans
		Name: Gary C. Evans
		Title: Chairman and Chief Executive Officer

SCHEDULE A

EXECUTIVE OFFICERS AND DIRECTORS OF

MAGNUM HUNTER RESOURCES CORPORATION

Executive Officers of Magnum Hunter Resources Corporation

Name	Position
Gary C. Evans	Chairman and Chief Executive Officer
Ronald D. Ormand	Executive Vice President, Chief Financial Officer
Jim Denny	Executive Vice President of Operations
H.C. “Kip” Ferguson, III	Executive Vice President of Exploration
M. Bradley Davis	Senior Vice President of Capital Markets
Brian Burgher	Vice President of Land
Don Kirkendall	Senior Vice President of Administration and Product Marketing
David S. Krueger	Senior Vice President and Chief Accounting Officer

All individuals named in the table above are employed by Magnum Hunter Resources Corporation. The address of Magnum Hunter Resources Corporation’s principal executive offices is 777 Post Oak Boulevard, Suite 910 Houston, Texas 77056.

Directors of Magnum Hunter Resources Corporation

Name	Present Principal Occupation or Employment	Name, Principal Business and Address of Organization in which Employed
Gary C. Evans	Chairman and Chief Executive Officer, Magnum Hunter Resources Corporation	c/o Magnum Hunter Resources Corporation 777 Post Oak Boulevard, Suite 910 Houston, Texas 77056
Brad Bynum	Chief Financial Officer, Hall-Houston Exploration Partners, L.L.C.	c/o Hall-Houston Exploration Partners, L.L.C. 4605 Post Oak Place Drive #100 Houston, Texas 77027
Ronald D. Ormand	Executive Vice President and Chief Financial Officer, Magnum Hunter Resources Corporation	c/o Magnum Hunter Resources Corporation 777 Post Oak Boulevard, Suite 910 Houston, Texas 77056
Gary L. Hall	President, Hall-Houston Exploration Partners, L.L.C.	c/o Hall-Houston Exploration Partners, L.L.C. 4605 Post Oak Place Drive #100 Houston, Texas 77027
Joe L. McClaugherty	Senior Partner of McClaugherty & Silver, P.C.	c/o McClaugherty & Silver, P.C. 55 Old Santa Fe Trail Santa Fe, New Mexico 87501
Steven Pfeifer	Managing Member, P.O.&G Resources – Texas, LLC	c/o P.O.&G Resources – Texas, LLC 5847 San Felipe Street #940 Houston, Texas 77057
Jeff Swanson	Chairman, Chief Executive Officer and President, GrailQuest Corporation	c/o GrailQuest Corporation 1160 Dairy Ashford, Suite 160 Houston, Texas 77079
J. Raleigh Bailes	Certified Public Accountant, Bailes Bates & Associates, LLP	c/o Bailes Bates & Associates, LLP 1650 Highway 6, Suite 470 Sugar Land, Texas 77478
Victor G. Carrillo	Director, Magnum Hunter Resources Corporation	c/o Magnum Hunter Resources Corporation 777 Post Oak Boulevard, Suite 910 Houston, Texas 77056

SCHEDULE B

NATURAL PERSONS WITH WHOM

MAGNUM HUNTER RESOURCES CORPORATION

SHARES VOTING AND DISPOSITIVE POWER

Name	Present Principal Occupation or Employment	Name, Principal Business and Address of Organization in which Employed
William S. Daugherty	President and Chief Executive Officer, NGAS Resources, Inc.	NGAS Resources, Inc. 120 Prosperous Place, Suite 201 Lexington, Kentucky 40509
William G. Barr III	Executive Vice President, NGAS Resources, Inc.	NGAS Resources, Inc. 120 Prosperous Place, Suite 201 Lexington, Kentucky 40509
D. Michael Wallen	Executive Vice President, NGAS Resources, Inc.	NGAS Resources, Inc. 120 Prosperous Place, Suite 201 Lexington, Kentucky 40509
Michael P. Windisch	Chief Financial Officer, NGAS Resources, Inc.	NGAS Resources, Inc. 120 Prosperous Place, Suite 201 Lexington, Kentucky 40509
Thomas F. Miller	Director, NGAS Resources, Inc.	NGAS Resources, Inc. 120 Prosperous Place, Suite 201 Lexington, Kentucky 40509
James K. Klyman	Director, NGAS Resources, Inc.	NGAS Resources, Inc. 120 Prosperous Place, Suite 201 Lexington, Kentucky 40509
Steve U. Morgan	Director, NGAS Resources, Inc.	NGAS Resources, Inc. 120 Prosperous Place, Suite 201 Lexington, Kentucky 40509
Paul R. Ferretti	Director, NGAS Resources, Inc.	NGAS Resources, Inc. 120 Prosperous Place, Suite 201 Lexington, Kentucky 40509
B. Allen Connell	Director, NGAS Resources, Inc.	NGAS Resources, Inc. 120 Prosperous Place, Suite 201 Lexington, Kentucky 40509

EX-7.3 2 magnum_ex703.htm DEBT COMMITMENT LETTER magnum_ex703.htm

Exhibit 7.3

December 22, 2010

Magnum Hunter Resources Corporation

777 Post Oak Blvd., Suite 910

Houston, Texas 77056

Attention: Ronald D. Ormand

CONFIDENTIAL

Re: Commitment Letter for Senior Credit Facility

Dear Ron:

Magnum Hunter Resources Corporation (the “Borrower”) has requested that BMO Capital Markets (“BMOCM”) agree to structure, arrange and syndicate a senior credit facility (the “Senior Credit Facility”) comprising a five-year senior secured revolving loan of up to $250,000,000 (the “Aggregate Commitment Amount”) with an initial borrowing base availability of up to $120,000,000 (the “Initial Borrowing Base”), and that Bank of Montreal (“ ;BMO”, and together with BMOCM, collectively in the capacity required by the context, “us”, “our” or “we”) commit to provide the Senior Credit Facility and serve as administrative agent and issuing bank for the Senior Credit Facility.

BMO is pleased to confirm that, subject to the terms and conditions set forth herein and the Summary of Terms and Conditions attached hereto as Exhibit A (the “Term Sheet” and together with this letter, the “Commitment Letter”), it hereby commits to (i) provide an amount equal to the Aggregate Commitment Amount of the Senior Credit Facility, which will be governed by the Initial Borrowing Base, and (ii) act as sole Administrative Agent (in such capacity, the “Administrative Agent”) for a syndicate of lenders that will partici pate in the Senior Credit Facility and to act as Issuing Bank (in such capacity, the “Issuing Bank”). BMOCM is pleased to confirm that it will act as Lead Arranger (in such capacity, the “Arranger”). The Arranger may syndicate a portion of its commitment to a syndicate of lenders, each of which shall be a reputable fund or financial institution selected by the Arranger and agreed to by the Borrower (together with BMO, the “Lenders”).

The Senior Credit Facility will be provided pursuant to the terms and conditions of, and shall become effective only upon the execution and delivery of, a mutually satisfactory credit agreement and other definitive loan documentation incorporating the terms and conditions set forth in the Term Sheet, your payment of certain fees to the Arranger and the Administrative Agent agreed among the parties hereto and other terms and conditions customarily included in credit facilities of this type, amount and purpose. These terms and conditions will necessarily be further developed during the course of preparing and negotiating the loan documentation. Please note that those matters that are not covered or made clear in this Commitment Letter or in any related fee letter of even date herewith (any “ ;Fee Letter”) are subject to mutual agreement of the parties hereto. The terms and conditions of this Commitment Letter may be modified only in a written agreement signed by each of the parties hereto.

The proceeds of the Senior Credit Facility shall be used (i) to refinance on the Closing Date (as defined in the Term Sheet) certain existing indebtedness of the Borrower, (ii) to fund a portion of the acquisition of NGAS Resources, Inc. and (iii) for general corporate purposes, including the issuance of Letters of Credit.

It is understood and agreed that the Arranger, after consultation with you, will manage and control all aspects of the syndication, including decisions as to the selection of proposed Lenders, when commitments will be accepted and the final allocations of the commitments among the Lenders. Except as expressly agreed in writing between you and the Arranger, no other agents, co-agents or arrangers will be appointed, no other titles will be awarded and no other compensation shall be paid in connection with the Senior Credit Facility. In consideration of BMO’s commitment and its and BMOCM’s other undertakings hereunder, the Borrower agrees to pay the fees specified in any Fee Letter. In acting as the Arranger, BMOCM will have no responsibility other than to arrange the syndic ation as set forth herein and shall in no event be subject to any fiduciary or other implied duties.

You agree to actively assist the Arranger in achieving a successful syndication of the Senior Credit Facility that is satisfactory to you and the Arranger. Such assistance shall include, without limitation: (a) your providing and causing your advisors to provide to the Arranger and the Lenders, upon request, all information reasonably deemed necessary by the Arranger to complete such syndication; (b) your assistance in the preparation of an information package for delivery to potential syndication members and participants; (c) your using commercially reasonable efforts to ensure that such syndication efforts benefit materially from your existing lending and investment banking relationships; and (d) your additional assistance in such syndication efforts, including by making available from time to time repr esentatives and senior management and advisors of the Borrower and any indirect or direct subsidiaries, if any, of the Borrower (such subsidiaries together, the “Guarantors”), to attend and make presentations regarding the business and prospects of the Borrower and the Guarantors, as appropriate, at one or more meetings of prospective Lenders, in each case upon reasonable prior notice and at reasonably convenient times and locations. You and the Guarantors each agree to refrain from any other debt, equity or other financings (including refinancings and renewals of debt) during the syndication process, unless otherwise agreed to by the Administrative Agent and the Arranger, which agreement will not be unreasonably withheld; provided, however, it is agreed that the Borrower may (i) engage in a pu blic or private offering of its preferred stock and (ii) sell its common or preferred stock in “at the market” offerings.

The commitments of BMO and BMOCM hereunder are further subject to the satisfaction of each of the following conditions precedent in a manner acceptable to us in our sole discretion unless otherwise noted herein: (a) the completion of all due diligence, including but not limited to business, engineering, legal, environmental, tax, financial and accounting due diligence in connection with the Senior Credit Facility or with respect to the Borrower and the Guarantors, in scope and with results satisfactory to us in our sole discretion; (b) the absence of a breach of any representation, warranty or agreement of the Borrower set forth herein in any material respect and the accuracy and the completeness in all material respects of all representations and warranties taken as a whole and all information that you furnish to u s in connection with this commitment and your compliance with this Commitment Letter; (c) the absence of any material adverse conditions in the loan syndication market or in the financial or capital markets generally that, in our reasonable judgment, would impair the successful syndication of the Senior Credit Facility; (d) the absence of any change, occurrence or development that could, in our opinion, have a material adverse effect on the business, property, assets, nature of assets, operations, liabilities, condition (financial or otherwise) of the Borrower or the Guarantors, or on the ability of the Borrower to perform its obligations under the Senior Credit Facility or the loan documents evidencing the Senior Credit Facility; (e) our not becoming aware after the date hereof of any information or other matter that, in our judgment, is inconsistent in a material and adverse manner with any information or other matter disclosed to us prior to the date hereof (in which case we may, in our sole dis cretion, suggest alternative financing amounts or structures that ensure adequate protection for the Lenders or terminate this Commitment Letter and any commitment or undertaking hereunder); (f) our reasonable satisfaction that, prior to and until the completion of the successful syndication of the Senior Credit Facility, there shall be no competing offering, placement or arrangement of any debt securities or bank financing by or on behalf of the Borrower; and (g) the other conditions set forth or referred to herein or in the Term Sheet.

You hereby represent, warrant and covenant that: (a) all information that has been or is hereafter made available to us or the Lenders by you or any of your representatives in connection with the transactions contemplated hereby (the “Information”) is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading (including, without limitation, financial information prepared on a pro forma basis) and (b) all financial projections, if any, that have been or are hereafter made available to the Arranger or any Lender by yo u or any of your representatives (the “Projections”) have been or will be prepared in good faith based upon reasonable assumptions (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond the Borrower’s control, and that no assurances can be given that the projections will be realized). You agree to furnish us with such Information and Projections as we may reasonably request and to supplement the Information and the Projections from time to time until the Closing Date so that the representations, warranties and covenants in the preceding sentence are correct on such Closing Date. You understand that in arranging and syndicating the Senior Credit Facility, the Arranger will be using and relying on the Information and the Projections without independent verification thereof.

By acceptance of this commitment and to induce us to issue this Commitment Letter and to proceed with the documentation of the proposed financing, you agree to reimburse us on the Closing Date, an amount not to exceed $150,000 without prior approval which shall not be unreasonably withheld, for all reasonable costs and expenses (including reasonable legal fees and expenses to the extent invoiced) that we have incurred in conjunction with the negotiation, preparation, syndication, execution and delivery of the Senior Credit Facility, and all reasonable costs and expenses incurred by us in connection with performing due diligence in connection with the Senior Credit Facility; provided, however, that in the event that definitive credit documentation is no t executed or the Senior Credit Facility fails to close as the result of any action, or failure to take any action, by the Borrower in violation of this Commitment Letter, then you hereby agree that all such costs and expenses shall be for your account and agree to reimburse us from time to time upon demand for all reasonable costs and expenses (including reasonable legal fees and expenses) incurred in conjunction with the negotiation, preparation and syndication of the Senior Credit Facility, and all reasonable costs and expenses incurred by us in connection with performing due diligence in connection with the Senior Credit Facility.

In addition, to further induce the Arranger and the Administrative Agent to issue this Commitment Letter and to proceed with the documentation of the proposed financing, you agree to indemnify and hold harmless the Administrative Agent, the Arranger and any other agent or co-agent designated by the Administrative Agent and/or the Arranger with respect to the Senior Credit Facility (collectively, the “Agents” and each, an “Agent”), each Lender and, in the case of the Agents and the Lenders, their respective affiliates and each director, officer, employee, representative, advisor and agent thereof (each, an “indemnified person”) from and against any and all actions, suits, proceedings (including any investigations or inquiries), claims, losses, damages, liabilities or expenses of any kind or nature whatsoever (INCLUDING ANY LOSS, CLAIM, DAMAGE, EXPENSE, OR LIABILITY ARISING OUT OF, IN ANY WAY RELATING TO, OR RESULTING FROM A CLAIM IN RESPECT OF THE ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY) that may be incurred by or asserted against or involve any Agent or Lender or any other such indemnified person (as a result of or arising out of or in any way related to or resulting from this Commitment Letter, any Fee Letter or the engagement of any indemnified person of the services contemplated hereby and, upon demand, to pay and reimburse each Agent, each Lender and each other indemnified person for any reasonable legal or other out-of-pocket expenses incurred in connection with investigating, defending or preparing to defend any such action, s uit, proceeding (including any inquiry or investigation) or claim (whether or not any Agent or Lender or any other such person is a party to any action or proceeding out of which any such expenses arise); provided, however, that you shall not have to indemnify any indemnified person against any loss, claim, damage, expense or liability to the extent the same resulted from the gross negligence or willful misconduct of the respective indemnified person (as determined by a court of competent jurisdiction in a final and nonappealable judgment). This Commitment Letter is issued for your benefit only and no other person or entity may rely thereon. None of the Arranger, the Administrative Agent, any Lender or any other indemnified person shall be responsible or liable to you or any other person for (x) any determination made by the Arranger, the Administrative Agent, any Lender or any other indemnified person pursuant to this Commitment Letter in the absence of gross negligence or willful misconduct on the part of the Arranger, the Administrative Agent, any Lender or such other indemnified person (as determined by a court of competent jurisdiction in a final and nonappealable judgment), including any damages arising from the use by others of Information, Projections or other materials obtained through the internet, Intralinks or other similar information transmission systems in connection with the Senior Credit Facility, provided that the Arranger, the Administrative Agent, such Lender or other indemnified person has taken and maintains commercially reasonable efforts and controls to safeguard the use and access of such Information and materials or (y) any indirect or consequential damages that may be alleged as a result of this Commitm ent Letter or the financing contemplated hereby.

We reserve the right to employ the services of our respective affiliates in providing services contemplated by this Commitment Letter and to allocate, in whole or in part, to our respective affiliates certain fees payable to the Administrative Agent and the Arranger in such manner as we and our affiliates may agree in our sole discretion. You also agree that each of BMO and BMOCM may at any time and from time to time assign all or any portion of its respective commitment or undertakings hereunder to one or more affiliates of BMO or BMOCM, as applicable. You further acknowledge that the Administrative Agent and the Arranger may share with any of their respective affiliates, and such affiliates may share with the Administrative Agent and the Arranger, any information related to the Senior Credit Facility, the Borrower or any of the matters contemplated hereby. We agree to treat, and cause any of our respective affiliates to treat, all nonpublic information provided to us by the Borrower and the Guarantors as confidential information in accordance with customary banking industry practices.

The terms of this Commitment Letter and any Fee Letter among you and us are confidential and, except for disclosure on a confidential basis to your accountants, attorneys and other professional advisors retained by you in connection with the Senior Credit Facility or as may be required by law, such terms may not be disclosed in whole or in part to any other person or entity without our prior written consent. Notwithstanding the foregoing, following your acceptance of the provisions hereof and your return of an executed counterpart of this Commitment Letter and any Fee Letter, (i) you may make public disclosure of the existence and amount of the commitments hereunder and of the identity of the Administrative Agent and the Arranger and (ii) you may file a copy of this Commitment Letter (but not any Fee Letter) in any public record in which it is required by law to be filed (including the filing of a Form 8-K or other filing with the Securities and Exchange Commission appending or describing the Commitment Letter). Further, the Arranger and the Administrative Agent shall, upon written request and approval by the Borrower, be permitted to use information related to the syndication and arrangement of the Senior Credit Facility in connection with marketing, press releases or other transactional announcements or updates provided to investor or trade publications.

The Arranger and the Administrative Agent hereby notify you that, pursuant to the requirements of the USA Patriot Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “Act”), each of them is required to obtain, verify and record information that identifies you, which information includes your name and address and other information that will allow the Arranger and the Administrative Agent, as applicable, to identify you in accordance with the Act.

This Commitment Letter and any Fee Letter (and your rights and obligations hereunder and thereunder) shall not be assignable by you to any person or entity without our prior written consent (and any purported assignment without such consent shall be null and void). This Commitment Letter and any Fee Letter may not be amended or waived except by an instrument in writing signed by you and us. Each of this Commitment Letter and any Fee Letter may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Commitment Letter or any Fee Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof or thereof, as the case may be.

EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR CONTEMPLATED BY THIS COMMITMENT LETTER OR ANY FEE LETTER. ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS COMMITMENT LETTER OR ANY FEE LETTER OR ANY STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE PARTIES MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF TEXAS OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS. YOU AND WE HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. YOU AND WE FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF TEXAS. YOU AND WE HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT YOU OR WE MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

THIS COMMITMENT LETTER AND ANY FEE LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICT OF LAW). THIS COMMITMENT LETTER AND ANY FEE LETTER SET FORTH THE ENTIRE AGREEMENT BETWEEN THE PARTIES AS TO THE MATTERS SET FORTH HEREIN AND SUPERSEDE ALL PRIOR COMMUNICATIONS, WRITTEN OR ORAL, WITH RESPECT TO THE MATTERS HEREIN. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES WITH RESPECT TO THE TRANSACTIONS DESCRIBED HEREIN.

The provisions of the eight (8) immediately preceding paragraphs shall survive any termination of this Commitment Letter.

The commitments of BMO and the agreements of BMO and BMOCM with respect to the Senior Credit Facility as set forth above, will terminate (other than with respect to ongoing indemnities, confidentiality provisions and similar provisions) on April 30, 2011, unless on or prior to such date a definitive credit agreement evidencing the Senior Credit Facility, satisfactory in form and substance to the Administrative Agent and its counsel (the “Credit Agreement”) shall have been entered into and the initial borrowings shall have occurred thereunder.

* * *

If you are in agreement with the foregoing, please sign and return to BMO and BMOCM the enclosed copy of this Commitment Letter, together with a copy of the enclosed Fee Letter, no later than 12:00 p.m., Houston time, on December 24, 2010. Unless this Commitment Letter and the Fee Letter are signed and returned by the time and date provided in the immediately preceding sentence, this Commitment Letter shall terminate at such time and date.

Very truly yours,

BANK OF MONTREAL

By: /s/ Gumaro Tijerina

Gumaro Tijerina

Director

BMO CAPITAL MARKETS

By: /s/ Jon R. Marinelli

Jon R. Marinelli

Managing Director

Accepted and Agreed to this

22nd day of December, 2010

MAGNUM HUNTER RESOURCES CORPORATION

By: /s/ Ronald D. Ormand

Ronald D. Ormand

Executive Vice President and Chief Financial Officer

-----END PRIVACY-ENHANCED MESSAGE-----