Exhibit 10.4
Fourth Amendment to Amended and Restated Credit Agreement
     This Fourth Amendment to Amended and Restated Credit Agreement (this
“Fourth Amendment”) executed effective as of the 11th day of January, 2010 (the
“Fourth Amendment Effective Date”) is among NGAS Resources, Inc., a corporation
formed under the laws of the Province of British Columbia (“Holdings”),
Daugherty Petroleum, Inc., a corporation formed under the laws of the
Commonwealth of Kentucky (the “Borrower”); KeyBank National Association, as
administrative agent for the Lenders (in such capacity, together with its
successors, the “Administrative Agent”), and the Lenders signatory hereto.
Recitals
     A. Holdings, the Borrower, the Administrative Agent and the Lenders are
parties to that certain Amended and Restated Credit Agreement dated as of
May 30, 2008, as amended by that First Amendment dated as of June 30, 2008, the
Second Amendment dated as of December 31, 2008 and the Third Amendment dated as
of June 2, 2009 (the “Credit Agreement”), pursuant to which the Lenders have
made certain credit available to and on behalf of the Borrower.
     B. Holdings and the Borrower have requested, and the Administrative Agent
and the Lenders have agreed to amend certain provisions of the Credit Agreement
subject to compliance with the terms and conditions of this Fourth Amendment to
permit the Borrower to make certain distributions to Holdings to be used by
Holdings to redeem all or a portion of the NGAS Convertible Notes.
     C. NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
     Section 1. Defined Terms. Each capitalized term which is defined in the
Credit Agreement, but which is not defined in this Fourth Amendment, shall have
the meaning ascribed such term in the Credit Agreement. Unless otherwise
indicated, all section references in this Fourth Amendment refer to the Credit
Agreement.
     Section 2. Amendments to Credit Agreement.
     2.1 Amendments to Section 1.01. Section 1.01 is hereby amended by
(a) deleting the defined term “NGAS Registration Rights Agreement” in its
entirety, (b) deleting the defined terms “NGAS Convertible Notes”, “NGAS
Securities Purchase Agreement” and NGAS Securities Purchase Documents” in their
entirety and replacing them with the following and (c) adding the definitions
“Fourth Amendment Effective Date” and “NGAS Convertible Note Dividend” in the
appropriate alphabetical order:
     “‘NGAS Convertible Notes’ means the 6% Amortizing Convertible Notes due
May 1, 2012 to be issued by Holdings in the aggregate original principal amount
of $28,700,000, together with certain additional consideration, in exchange for
6% Convertible Notes due December 15, 2010 issued by Holdings pursuant to the
NGAS Securities Purchase Agreement, as amended and in effect on the Fourth
Amendment Effective Date.
     ‘NGAS Securities Purchase Agreement’ means the Securities Purchase
Agreement dated as of December 13, 2005, among Holdings and the investors
specified therein, as amended and superseded by a separate Exchange Agreement
among Holdings and the investors named therein in connection with the exchange
of NGAS Convertible Notes, each as in effect on the Fourth Amendment Effective
Date.
     ‘NGAS Securities Purchase Documents’ means the NGAS Securities Purchase
Agreement, the NGAS Convertible Notes to be issued by Holdings on the Fourth
Amendment Effective Date, and all other agreements, instruments and documents
relating to any of the foregoing, each as in effect on the Fourth Amendment
Effective Date.

 

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     ‘Fourth Amendment Effective Date’ has the meaning specified in the Fourth
Amendment to the Credit Agreement dated as of January 11, 2010.
     ‘NGAS Convertible Note Dividends’ has the meaning specified in Section
7.06(c).”
     2.2 Amendment to Section 7.06(b). Section 7.06(b) is hereby amended in its
entirety by replacing it with the following:
     “(b) so long as no Default or Event of Default shall have occurred and be
continuing or would result therefrom, the Borrower may pay dividends to Holdings
to be used by Holdings solely to make regularly scheduled interest payments on
(i) the NGAS Convertible Notes, provided that such dividends for payment of
regularly scheduled interest on the NGAS Convertible Notes shall not exceed
$2,220,000 in the aggregate per calendar year from and after the Fourth
Amendment Effective Date, and (ii) any other unsecured Indebtedness incurred by
Holdings after the date hereof (A) no part of the principal of which is required
to be paid or prepaid prior to the date occurring three (3) months after the
Termination Date and (B) that has been approved in writing by the Required
Lenders prior to the incurrence of such Indebtedness.”
     2.3 Amendment to Section 7.06. Section 7.06 is hereby amended by adding the
following subsections (c), (d) and (e):
     “(c) so long as no Default or Event of Default shall have occurred and be
continuing or would result therefrom, the Borrower may pay dividends to Holdings
to be used by Holdings solely to redeem certain of the NGAS Convertible Notes,
which amount shall solely be payable during the time frames specified below and
subject to the limitations specified therewith (the “NGAS Convertible Note
Dividends”):
          (i) on or before March 31, 2010, the Borrower may pay NGAS Convertible
Note Dividends up to a maximum amount not to exceed $3,000,000;
          (ii) beginning June 1, 2010, the Borrower may pay NGAS Convertible
Note Dividends, provided that Holdings has on or before such date made a
distribution or distributions to the Borrower in an amount equal to such NGAS
Convertible Note Dividend and the sum of all previous NGAS Convertible Note
Dividends;
     (d) notwithstanding anything to the contrary in this Section 7.06, no
distribution shall be made in accordance with Sections 7.06 (b) or (c) if before
or after such distribution the Aggregate Outstanding Credit would exceed 80% of
the lesser of (i) the Borrowing Base or (ii) the Total Commitment, each as then
in effect.”
          2.4 Amendment to Section 7.08. Section 7.08 is hereby amended in its
entirety by replacing it with the following:
     “Section 7.08 Optional Payments and Modifications of Certain Instruments;
Synthetic Debt. Except as provided in the NGAS Securities Documents, (a) make or
offer to make any optional or voluntary payment, prepayment, repurchase or
redemption of or otherwise optionally or voluntarily defease or segregate funds
with respect to the NGAS Convertible Notes, (b) make any payment, repurchase or
redemption with respect to the NGAS Convertible Notes, (c) amend, modify, waive
or otherwise change, or consent or agree to any amendment, modification, waiver
or other change to, any of the terms of the NGAS Securities Purchase Documents
(other than any such amendment, modification, waiver or other change that
(i) would extend the maturity or reduce the amount of any payment of principal
thereof or reduce the rate or extend any date for payment of interest thereon
and (ii) does not involve the payment of a consent fee), or (d) incur or be
obligated under, or make any payment under, any Synthetic Debt;”
     2.5 Amendment to Section 8.01(m). Section 8.01(m) is hereby amended in its
entirety by replacing it with the following:

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     “(m) except pursuant to the NGAS Securities Documents, (i) any “person” or
“group” (as such terms are used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), shall become, or obtain
rights (whether by means or warrants, options or otherwise) to become, the
“beneficial owner” (as defined in Rules 13(d) 3 and 13(d) 5 under the Exchange
Act), directly or indirectly, of more than 30% of any outstanding class of
Equity Interests of Holdings having ordinary voting power for the election of
directors of Holdings; (ii) the board of directors of Holdings shall cease to
consist of a majority of Continuing Directors; and (iii) Holdings shall cease to
own and control, of record and beneficially, directly, 100% of each class of
outstanding Equity Interests of the Borrower free and clear of all Liens (except
Liens created by the Security Documents); or
     Section 3. Borrowing Base.
     3.1 Reduction. The Borrowing Base shall be reduced by $1,000,000 on the
first day of each calendar month, beginning on February 1, 2010, until the next
redetermination of the Borrowing Base in accordance with Section 2.02(b).
     3.2 Repayment of Distribution. On June 30, 2010, the Borrowing Base shall
be reduced by an amount equal to the excess on such date, if any, of the NGAS
Convertible Note Dividend paid by the Borrower pursuant to Section 7.06(c)(i) of
the Credit Agreement over any distributions from Holdings to the Borrower after
the payment of such NGAS Convertible Note Dividend.
     Section 4 Conditions Precedent. The effectiveness of this Fourth Amendment
is subject to the receipt by the Administrative Agent of the following documents
and satisfaction of the other conditions provided in this Section 4, each of
which shall be reasonably satisfactory to the Administrative Agent in form and
substance:
     4.1 Fourth Amendment. The Administrative Agent shall have received multiple
counterparts as requested of this Fourth Amendment from the Borrower and the
Required Lenders.
     4.2 Payment of Outstanding Invoices. Payment by the Borrower to the
Administrative Agent of (a) an amendment fee to the Administrative Agent for
each Lender approving this Fourth Amendment in an amount equal to 25 bps times
the Commitment of each such Lender and (b) all other fees and other amounts due
and payable on or prior to the Fourth Amendment Effective Date, including, to
the extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower (including, without
limitation, the fees and expenses of Vinson & Elkins L.L.P., counsel to the
Administrative Agent).
     4.3 No Default. No Default or Event of Default shall have occurred and be
continuing as of the Fourth Amendment Effective Date.
     Section 5. Representations and Warranties; Etc. Each of Holdings, the
Borrower and the other Loan Parties hereby represents and warrants that:
     5.1 The execution, delivery and performance by Holdings, the Borrower and
each Loan Party of this Fourth Amendment have been duly authorized by all
necessary corporate, limited partnership or limited liability company action, as
appropriate, including, without limitation, where a Party is a limited
partnership, all necessary action by its general and limited partners, and that
this Amendment is a legal, valid and binding obligation of Holding, the Borrower
and each Loan Party enforceable against it in accordance with its terms, except
as the enforcement hereof may be subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar law affecting
creditors’ rights generally or to general principles of equity.
     5.2 The execution, delivery and performance of this Amendment by Holdings,
the Borrower and each Loan Party does not, and will not, contravene or conflict
with any provision of (a) law, (b) any judgment, decree or order, or (c) the
certificate of incorporation or formation or bylaws, limited liability company
agreement or limited partnership agreement of Holdings, the Borrower or any Loan
Party, as applicable, and does not, and will not, contravene or conflict with,
or cause any Lien to arise under, any provision of any agreement, mortgage,
lease, instrument or other document binding upon or otherwise affecting the
Borrower, any Loan Party or any property of the Borrower, any Loan Party or any
Subsidiary thereof.

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     5.3 All of the representations and warranties contained in the Credit
Agreement and each other Loan Document are true and correct in all material
respects on and as of the date hereof as if made on the date hereof and no
Default or Event of Default exists under the Credit Agreement or any other Loan
Document or will exist after or be triggered by the execution and delivery of
this Amendment. In addition, Holdings, the Borrower and each Loan Party hereby
represent and warrant that the Credit Agreement and each of the other Loan
Documents remain in full force and effect.
     5.4 No consent or authorization of, filing with, notice to or other act by
or in respect of, any governmental authority or any other Person is required to
be obtained by Holdings, the Borrower or any other Loan Party in connection with
the execution, delivery, performance, validity or enforceability of this
Amendment.
     5.5 There are no liquidation or dissolution proceedings pending or to the
knowledge of Holdings, the Borrower or any other Loan Party threatened against
Holdings, the Borrower or any other Loan Party, nor has any other event occurred
adversely affecting or threatening the continued limited partnership, limited
liability company or corporate existence, as appropriate, of Holdings, the
Borrower or any other Loan Party.
     Section 6. Miscellaneous.
     6.1 Confirmation. The provisions of the Credit Agreement (as amended by
this Fourth Amendment) shall remain in full force and effect in accordance with
its terms following the effectiveness of this Fourth Amendment.
     6.2 Ratification and Affirmation of the Borrower. The Borrower hereby
expressly (a) acknowledges the terms of this Fourth Amendment, (b) ratifies and
affirms its obligations under the Credit Agreement and the other Security
Instruments to which it is a party, (c) acknowledges its continued liability
under the Credit Agreement and the other Security Instruments to which it is a
party remains in full force and effect with respect to the Indebtedness, as
renewed and extended hereby.
     6.3 Counterparts. This Fourth Amendment may be executed by one or more of
the parties hereto in any number of separate counterparts, and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument.
     6.4 No Oral Agreement. This written Fourth Amendment, the Credit Agreement
and the other Loan Documents executed in connection herewith and therewith
represent the final agreement between the parties and may not be contradicted by
evidence of prior, contemporaneous, or unwritten oral agreements of the parties.
There are no subsequent oral agreements between the parties as of the Fourth
Amendment Effective Date.
     6.5 Governing Law. This Fourth Amendment (including, but not limited to,
the validity and enforceability hereof) shall be governed by, and construed in
accordance with, the laws of the State of Texas.
     6.6 Release of Lenders. IN CONSIDERATION OF THIS FOURTH AMENDMENT AND,
SUBJECT TO THE CONDITIONS STATED HEREIN, EACH OF HOLDINGS, THE BORROWER AND THE
GUARANTORS HEREBY RELEASES, ACQUITS, FOREVER DISCHARGES, AND COVENANTS NOT TO
SUE, THE ADMINISTRATIVE AGENT AND EACH OF THE LENDERS, ALONG WITH ALL OF THEIR
BENEFICIARIES, OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SERVANTS, ATTORNEYS AND
REPRESENTATIVES, AS WELL AS THEIR RESPECTIVE HEIRS, EXECUTORS, LEGAL
REPRESENTATIVES, ADMINISTRATORS, PREDECESSORS IN INTEREST, SUCCESSORS AND
ASSIGNS (EACH INDIVIDUALLY, A “RELEASED PARTY” AND COLLECTIVELY, THE “RELEASED
PARTIES”) FROM ANY AND ALL CLAIMS, DEMANDS, DEBTS, LIABILITIES, SUITS, OFFSETS
AGAINST THE INDEBTEDNESS EVIDENCED BY THE LOAN DOCUMENTS AND ACTIONS, CAUSES OF
ACTION OR CLAIMS FOR RELIEF OF WHATEVER KIND OR NATURE, WHETHER KNOWN OR
UNKNOWN, SUSPECTED OR UNSUSPECTED BY BORROWER OR ANY OBLIGOR, WHICH HOLDINGS,
THE BORROWER, ANY GUARANTOR, ANY OBLIGOR, OR ANY SUBSIDIARY MAY HAVE OR WHICH
MAY HEREAFTER ACCRUE RELATED TO ANY ACTIONS

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OR FACTS OCCURRING PRIOR TO THE FOURTH AMENDMENT EFFECTIVE DATE AGAINST ANY
RELEASED PARTY, FOR OR BY REASON OF ANY MATTER, CAUSE OR THING WHATSOEVER
OCCURRING ON OR PRIOR TO THE FOURTH AMENDMENT EFFECTIVE DATE, WHICH RELATE TO,
IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY THE CREDIT AGREEMENT, ANY HEDGE
AGREEMENT, ANY NOTE, ANY SECURITY DOCUMENT, ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS EVIDENCED THEREBY, INCLUDING, WITHOUT LIMITATION, ANY DISBURSEMENTS
UNDER THE CREDIT AGREEMENT, ANY HEDGE AGREEMENT, ANY NOTES, THE NEGOTIATION OF
ANY OF THE CREDIT AGREEMENT, THE HEDGE AGREEMENTS, THE NOTES, OR THE OTHER LOAN
DOCUMENTS, THE TERMS THEREOF, OR THE APPROVAL, ADMINISTRATION, ENFORCEMENT OR
SERVICING THEREOF.
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     IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to
be duly executed effective as of the Fourth Amendment Effective Date.

          HOLDINGS:  NGAS RESOURCES, INC.,
a British Columbia corporation
      By:   /s/ Michael P. Windisch         Title: Chief Financial Officer     
  Date: January 11, 2010     BORROWER: 
a Kentucky corporation DAUGHERTY PETROLEUM, INC.,

      By:   /s/ Michael P. Windisch         Title: Chief Financial Officer     
  Date: January 11, 2010     

Fourth Amendment
Signature Page — 6

 

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          ADMINISTRATIVE AGENT:  KEYBANK NATIONAL ASSOCIATION,
as Administrative Agent and Lender
      By:   /s/ Thomas Rajan         Title: Senior Vice President        Date:
January 11, 2010     

Fourth Amendment
Signature Page — 7