EX-10.1






Exhibit 10.1




Third Amendment to Amended and Restated Credit Agreement




     This Third Amendment to Amended and Restated Credit Agreement (this “Third
Amendment”) executed effective as of the 2nd of June, 2009 (the “Third 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 and the Second Amendment dated as of December 31, 2008 (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 Third Amendment to permit the sale of certain assets.



     C. The Lenders have redetermined the Borrowing Base in the amount set forth herein.



     D. 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 Third Amendment, shall have the meaning ascribed such
term in the Credit Agreement. Unless otherwise indicated, all section references in this Third
Amendment refer to the Credit Agreement.



     Section 2. Amendments to Credit Agreement.



     2.1 Amendments to Section 1.01.



     (a) Section 1.01 is hereby amended by deleting the defined terms “Conforming Borrowing Base,”
“Conforming Borrowing Base Usage” and “Initial Conforming Borrowing Base.”



     (b) Effective concurrently with the Closing, Section 1.01 is hereby amended by deleting the
defined terms “Additional Pipeline Mortgages,” “Closed-Access Pipeline Properties,” “NGAS Gathering
Pipeline Properties,” “NGAS Gathering Pipeline Property Acquisition Agreements,” “Open-Access
Pipeline Properties,” “Pipeline Mortgages,” “Pipeline Properties” and “Supplemental Pipeline
Mortgage.”



     (c) Section 1.01 is hereby amended by deleting the following defined terms “Applicable Margin”
and “Defaulting Lender” in their entirety and replacing them with the following:




     “‘Applicable Margin’ means, for any day, with respect to any Type of
Loan, or with respect to Unused Commitment Fees payable under this Agreement, as the
case may be, the applicable rate per annum set forth below under the column heading
“Applicable Margin for Eurodollar Loans,” “Applicable Margin for ABR Loans,” or
“Unused Commitment Fee Rate,” as the case may be, based upon Borrowing Base Usage in
effect on such date:



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	 	 	Applicable Margin	 	Unused	 	 
	 	 	for Eurodollar	 	Commitment	 	Applicable Margin
	Borrowing Base Usage	 	Loans	 	Fee Rate	 	for Base Rate Loans
	 
	<40%
	 	2.50%
	 	0.500%
	 	1.50%
	>40%<75%
	 	2.75%
	 	0.500%
	 	1.75%
	>75%<90%
	 	3.00%
	 	0.500%
	 	2.00%
	>90%<100%
	 	3.50%
	 	0.500%
	 	2.25%







     Each change in the Applicable Margin for Eurodollar Loans, the Applicable
Margin for ABR Loans, and the Unused Commitment Fee Rate shall apply during the
period commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next change. If an Event of Default
exists, the Applicable Margin and the Unused Commitment Fee Rate shall be at the
rates set forth for Borrowing Base Usage greater than or equal to 90%.




     ‘Defaulting Lender’ shall mean any Lender, as reasonably determined by
the Administrative Agent, that has (a) failed to fund any portion of its Loans or
participations in Letters of Credit within three Business Days of the date required
to be funded by it hereunder, (b) notified the Borrower, the Administrative Agent or
any Lender in writing that it does not intend to comply with any of its funding
obligations under this Agreement or has made a public statement to the effect that
it does not intend to comply with its funding obligations under this Agreement, (c)
failed, within five Business Days after request by the Administrative Agent, to
confirm that it will comply with the terms of this Agreement relating to its
obligations to fund prospective Loans and participations in then outstanding Letters
of Credit, (d) otherwise failed to pay over to the Administrative Agent or any other
Lender any other amount required to be paid by it hereunder within three Business
Days of the date when due, unless the subject of a good faith dispute or (e) (i)
become or is insolvent or has a parent company that has become or is insolvent or
(ii) become the subject of an Insolvency Proceeding, or has had a receiver,
conservator, trustee or custodian appointed for it, acquiescence in any such
Insolvency Proceeding or appointment or has a parent company that has become the
subject of an Insolvency Proceeding, or has had a receiver, conservator, trustee or
custodian appointed for it; provided that a Lender shall not become a
Defaulting Lender solely as the result of the acquisition or maintenance of an
ownership interest in such Lender or Person controlling such Lender or the exercise
of control over a Lender or Person controlling such Lender by a Governmental
Authority or an instrumentality thereof.”



     (d) Effective concurrently with the Closing, Section 1.01 is hereby amended by deleting the
following defined terms “Borrowing Base,” “Borrowing Base Properties,” “Mortgages,” “Oil and Gas
Mortgages,” and “Oil and Gas Properties” in their entirety and replacing them with the following:




     “‘Borrowing Base’ means at any particular time, the Dollar amount
determined in accordance with Section 2.02 on account of (a) Proved Properties owned
by the Borrower or any Restricted Subsidiary that are subject to Acceptable Liens
created pursuant to Oil and Gas Mortgages and other applicable Security Documents in
favor of the Administrative Agent, for the benefit of the Secured Parties, and that
are described in the most recent Engineering Report delivered to the Administrative
Agent and the Lenders pursuant to Section 2.02, (b) Approved Farmout Properties
owned by the Borrower or any Restricted Subsidiary that are subject to Acceptable
Liens created pursuant to Oil and Gas Mortgages and other applicable Security
Documents in favor of the Administrative Agent, for the benefit of the Secured
Parties, and that are described in the most recent Engineering Report and
Farmout/Participation Property Certificate delivered to the Administrative Agent and
the Lenders pursuant to Section 2.02, and (c) Approved Participation Properties
owned by the Borrower or any Restricted Subsidiary that are subject to Acceptable
Liens created pursuant to Oil and Gas Mortgages and other applicable Security
Documents in favor of the Administrative Agent for the benefit of the Secured
Parties and that are described in the most recent Engineering Report and
Farmout/Participation Property Certificate delivered to the Administrative Agent and
the Lenders pursuant to Section 2.02.



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     ‘Borrowing Base Properties’ means, at any time, all Proved Properties,
all Approved Farmout Properties, and all Approved Participation Properties, in each
case as and to the extent included in the Borrowing Base at such time in accordance
with Section 2.02.




     ‘Mortgages’ means all Oil and Gas Mortgages.




     ‘Oil and Gas Mortgages’ means the collective reference to all Existing
Oil and Gas Mortgages, all New Oil and Gas Mortgages, all Additional Oil and Gas
Mortgages, all Supplemental Oil and Gas Mortgages and all other mortgages, deeds of
trust, and other documents made by the Borrower or any Restricted Subsidiary in
favor of, or for the benefit of, the Administrative Agent, for the benefit of the
Secured Parties, substantially in the form of Exhibit C-1 (with such changes
thereto as shall be advisable under the law of the jurisdiction in which such
mortgage, deed of trust, assignment of production or other document is to be
recorded) or in such other form as may be reasonably acceptable to the
Administrative Agent, which creates a Lien on any Proved Properties, Farmout
Properties, Participation Properties or other Oil and Gas Properties from time to
time.




     ‘Oil and Gas Properties” means (a) all Hydrocarbon Interests (including
all Proved Properties); (b) all Properties now or hereafter pooled or unitized with
any Hydrocarbon Interests; (c) all Farmout Properties and all Participation
Properties; (d) all operating agreements, assignments and other contracts, including
production sharing contracts and agreements, which relate to any of the Hydrocarbon
Interests or the production, sale, purchase, exchange or processing of Hydrocarbons
from or attributable to such Hydrocarbon Interests; (e) all existing and future
unitization, pooling agreements and declarations of pooled units and the units
created thereby (including, without limitation, all units created under orders,
regulations and rules of any Governmental Authority) which may affect all or any
portion of the Hydrocarbon Interests; (f) all oil wells, gas wells, water well,
injection wells, platforms, spars or other offshore facilities, casings, rods,
tubing, pumping units and engines, christmas trees, derricks, separators, gun
barrels, flow lines, gas systems (for gathering, treating and compression), and
water systems (for treating, disposal and injection); (g) all interests held in
royalty trusts whether presently existing or hereafter created; (h) all Hydrocarbons
in and under and which may be produced, saved, processed or attributable to the
Hydrocarbon Interests, including all lands covered thereby, including all
Hydrocarbons in pipelines, gathering lines, tanks and processing plants and all
rents, issues, profits, proceeds, products, revenues and other incomes from or
attributable to the Hydrocarbon Interests; (i) all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests; (j) all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereafter acquired and situated upon, used,
held for use or useful in connection with the operating, working or development of
any of such Hydrocarbon Interests or Property (excluding any drilling rigs,
automotive equipment, rental equipment or other Property that may be located on such
premises for the purpose of drilling a well or for other temporary uses) and
including all oil wells, gas wells, injection wells and other wells, buildings,
structures, fuel separators, liquid extraction plants, plant compressors, pumps,
pumping units, field gathering systems, tanks and tank batteries, fixtures, valves,
fittings, machinery and parts, engines, boilers, meters, apparatus, equipment,
appliances, tools, implements, cables, wires, towers, casing, tubing and rods,
surface leases, rights-of-way, easements and servitudes together with all additions,
substitutions, replacements, accessions and attachments to any and all of the
foregoing together with all additions, substitutions, replacements, accessions and
attachments to any of the foregoing; and (k) all oil, gas and mineral leasehold, fee
and term interests, overriding royalty interests, mineral interests, royalty
interests, net profits interests, net revenue interests, oil payments, production
payments, carried interests, leases, subleases, farm-outs and all other interests in
Hydrocarbons; in each case for any Property described in clauses (a) through (j)
above, whether now owned or hereafter acquired directly or indirectly.”



     (e) Section 1.01 is hereby amended by adding the following defined terms in their proper
alphabetical order:



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     “‘Borrowing Base Usage’ means, as of any date and for all purposes, the
quotient, expressed as a percentage of (a) the Aggregate Outstanding Credit as of
such date, divided by (b) the Borrowing Base as of such date.”



     (f) Effective concurrently with the Closing, Section 1.01 is hereby amended by adding the
following defined terms in their proper alphabetical order:




     “‘Ancillary Agreements’ has the meaning specified in the Seminole
Agreement.




     ‘Buyer’ means Seminole Gas Company, an Oklahoma corporation.




     ‘Closing’ has the meaning specified in the Seminole Agreement.




     ‘Buyer Note’ has the meaning specified in the Seminole Agreement.




     ‘Buyer Secured Obligations’ has the meaning specified in the Seminole
Agreement.




     ‘NGAS Mortgages’ has the meaning specified in the Seminole Agreement.




     ‘Seller Parent Guaranty’ has the meaning specified in the Seminole
Agreement.




     ‘Seminole Agreement’ means that certain Asset Purchase Agreement by and
among NGAS Gathering, LLC, the Borrower, NGAS Gathering II, LLC and Buyer dated as
of May 11, 2009.




     ‘Seminole Assets’ means all of the Borrower’s and its Subsidiaries
pipeline assets described on Annex II hereto.




     ‘Seminole Mortgages’ has the meaning specified in the Seminole
Agreement.




     ‘Seminole Sale’ means the sale of (a) an undivided 50% of the Seminole
Assets, (b) an option to purchase the remaining 50% of the Seminole Assets and (c) a
right of first refusal to purchase the Kay Jay ROFR Assets (as such term is defined
in the Seminole Agreement).




     ‘Seminole Sale Documents’ means (a) the Seminole Agreement, (b) the
Ancillary Agreements and (c) any other bills of sale, assignments, agreements,
instruments, mortgages and other documents executed and delivered in connection
therewith, as amended.”



     2.2 Amendment to Section 2.02(d)(i). Effective concurrently with the Closing, Section
2.02(d)(i) is hereby amended in its entirety by replacing it with the following:




     “(i) Each redetermination of the Borrowing Base by the Administrative Agent and
the Lenders pursuant to this Section 2.02 shall be made (A) in the sole discretion
of the Administrative Agent and the Lenders (but in accordance with the other
provisions of this Section 2.02(d)), (B) in accordance with the Administrative
Agent’s and the Lenders’ customary internal standards and practices for valuing and
redetermining the value of Oil and Gas Properties in connection with reserve-based
oil and gas loan transactions, (C) in conjunction with the most recent Independent
Engineering Report or Internal Engineering Report, as applicable, the most recent
Oil and Gas Property Certificate, Farmout/Participation Property Certificate, or
other information received by the Administrative Agent and the Lenders relating to
the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries, (D)
based upon the discounted present value of the estimated net cash flows to be
realized from the production of Hydrocarbons from Proved Reserves attributable to
Proved Properties, Farmout Properties and Participation Properties owned by the
Borrower and its Restricted Subsidiaries, as determined by the Administrative Agent
and the Lenders, and/or (E) such other factors as the Administrative Agent and the
Lenders may consider in their sole discretion. In valuing and redetermining the
Borrowing Base, the



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Administrative Agent and the Lenders may (but shall not under any circumstances be
required to) also consider other assets, liabilities, cash flows, business,
properties, prospects, and management of the Borrower and its Restricted
Subsidiaries and such other factors as the Administrative Agent and the Lenders
reasonably deem appropriate.”



     2.3 Amendment to Section 2.02(d)(ii). Effective concurrently with the Closing,
Section 2.02(d)(ii) is hereby amended in its entirety by replacing it with the following:




     “(ii) No Proved Properties, Farmout Properties or Participation Properties of
the Borrower or any of its Restricted Subsidiaries shall be included or considered
for inclusion in the Borrowing Base unless the Administrative Agent and the Lenders
shall have received, at the Borrower’s sole cost and expense, Oil and Gas Property
Title Information and Oil and Gas Property Description Information, in form and
substance satisfactory to the Administrative Agent and the Lenders, and evidence
satisfactory to the Administrative Agent that the Administrative Agent has an
Acceptable Lien in such Oil and Gas Properties relating thereto for the benefit of
the Secured Parties pursuant to the Security Documents.”



     2.4 Amendment to Section 2.02(e). Section 2.02(e) is hereby amended by deleting such
Section in its entirety.



     2.5 Addition of New Section 2.21. A new Section 2.21 is hereby added as follows:




               “Section 2.21 Defaulting Lenders. Notwithstanding any provision of
this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the
following provisions shall apply for so long as such Lender is a Defaulting Lender:




(a) solely for purposes of Sections 2.13(a) and (b), the Aggregate Exposure
Percentage of a Defaulting Lender shall be excluded and the Aggregate Exposure
Percentage of each non-Defaulting Lender shall be the ratio of the Aggregate
Exposure of such non-Defaulting Lender to the sum of the Aggregate Exposures of all
non-Defaulting Lenders;




(b) fees shall cease to accrue on the unused portion of the Commitment of such
Defaulting Lender pursuant to Section 2.04(a) if such Lender is a Defaulting Lender
pursuant to clause (a) or clause (b) of the definition of Defaulting Lender;




(c) if any L/C Obligation exists at the time a Lender becomes a Defaulting Lender
then:




	 	(i)	 	the Borrower shall, within one Business Day following
notice by the Agent, Cash Collateralize the L/C Obligation allocable to
such Defaulting Lender for so long as such L/C Obligation is
outstanding; and
	 
	 	(ii)	 	if the Borrower Cash Collateralizes any portion of the
L/C Obligation allocable to such Defaulting Lender pursuant to clause
(i) immediately above, the Borrower shall not be required to pay any
fees to such Defaulting Lender pursuant to Section 3.03 with respect to
the L/C Obligation allocable to such Defaulting Lender during the
period such portion of the L/C Obligation is Cash Collateralized.






(d) so long as any Lender is a Defaulting Lender, the Administrative Agent shall not
be required to issue, amend or increase any Letter of Credit, unless it is satisfied
that the L/C Obligation allocable to such Defaulting Lender will be one-hundred
percent (100%) Cash Collateralized by the Borrower in accordance with clause (c)
immediately above; and




(f) in the event that the Administrative Agent and the Borrower each agree that a
Defaulting Lender has adequately remedied all matters that caused such Lender to be
a Defaulting Lender, then the L/C Obligations of the Lenders shall be readjusted to
reflect the inclusion of such



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Lender’s Aggregate Exposure Percentage of the Total Commitment and on such date such
Lender shall purchase at par such of the Loans and L/C Obligations of the other
Lenders as the Agent shall determine may be necessary in order for such Lender to
hold such Loans in accordance with its Aggregate Exposure Percentage.”



     2.6 Amendment to Section 3.01(e)(iv). Section 3.01(e)(iv) is hereby amended by
deleting such Section in its entirety and replacing it with the following:




     “(iv) any Lender is at such time a Defaulting Lender hereunder, unless the
provisions of Section 2.21 are complied with.”



     2.7 Amendment to Section 5.18(b). Effective concurrently with the Closing, Section
5.18(b) is hereby amended by deleting the last sentence thereof and replacing it with the
following:




     “All wells, gas processing plants, platforms and other material improvements,
fixtures and equipment owned in whole or in part by the Borrower or any of its
Restricted Subsidiaries are being maintained in a state adequate to conduct normal
operations, and with respect to such of the foregoing which are operated by the
Borrower or any of its Restricted Subsidiaries, in a manner consistent with the
Borrower’s or such Restricted Subsidiary’s past practices and prudent industry
standards and in compliance with all applicable Requirements of Law.”



     2.8 Amendment to Section 5.18(f). Effective concurrently with the Closing, Section
5.18(f) is hereby amended by deleting such Section in its entirety.



     2.9 Amendment to Section 5.19(c). Effective concurrently with the Closing, Section
5.19(c) is hereby amended by deleting such Section in its entirety and replacing it with the
following:




     “(c) Intentionally omitted.”



     2.10 Amendment to Section 5.21. Effective concurrently with the Closing, Section 5.21
is hereby amended by deleting such Section in its entirety and replacing it with the following:




     “Section 5.21 Delivery of Certain Agreements and Documents. The
Borrower has delivered to the Administrative Agent complete and correct executed
copies of each of (a) the NGAS Securities Purchase Documents, including any
amendments, supplements or modifications with respect to any of the foregoing, (b)
each Lease creating Proved Properties that has been requested by the Administrative
Agent, (c)(i) each Farmout Agreement and (ii) each related Farmout Property
Assignment creating Farmout Properties that are owned by the Borrower or any
Restricted Subsidiary that has been requested by the Administrative Agent, (d)(i)
each Participation Agreement and (ii) each Participation Property Assignment
creating Participation Properties that are owned by the Borrower or any Restricted
Subsidiary that has been requested by the Administrative Agent and (e) each Existing
Oil and Gas Mortgage; provided, however, that with respect to each
Participation Agreement and Participation Property Assignment, this Section 5.21
shall apply only on and after the date which is thirty (30) days following the
Closing Date.”



     2.11 Amendment to Section 6.08. Effective concurrently with the Closing, Section 6.08
is hereby amended by deleting the “and” at the end of Section 6.08(h), renumbering the existing
Section 6.08(i) as 6.08(j), and adding a new Section 6.08(i) as follows:




     “(i) the occurrence of any default or event of default by Borrower or any of
its Affiliates under any Seminole Sale Document; and”



     2.12 Amendment to Section 6.10(f). Effective concurrently with the Closing, Section
6.10(f) is hereby amended by deleting such Section in its entirety.




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     2.13 Amendment to Section 6.11(b)(i). Effective concurrently with the Closing,
Section 6.11(b)(i) is hereby amended by deleting such Section in its entirety and replacing it with
the following:




     “(i) without limiting clause (a) above, with respect to any Proved Properties,
Farmout Properties, Participation Properties, and other Oil and Gas Properties (or
any rights, title or interests therein) acquired by, or otherwise assigned,
transferred or conveyed to, or drilled, developed or operated by, the Borrower or
any of its Restricted Subsidiaries after the Closing Date that are included or are
expressly requested by the Borrower to be included in the Borrowing Base
(collectively, “After-Acquired Oil and Gas Properties”), (A) copies of (or,
in the discretion of the Administrative Agent, access of the Administrative Agent
and its counsel and engineers to) any and all Oil and Gas Title Information covering
or relating to such After-Acquired Oil and Gas Properties and received or obtained
by or provided to the Borrower or any of its Restricted Subsidiaries in connection
with such acquisition, assignment, transfer, conveyance, drilling, development or
operation (it being further understood and agreed that if the Borrower or any of its
Restricted Subsidiaries is entitled to receive or will receive any title opinions
covering or relating to any such After-Acquired Oil and Gas Properties, the Borrower
or such Restricted Subsidiary shall cause the Administrative Agent and the Secured
Parties to be named as addressees of such title opinions), and (B) without limiting
clause (b)(ii)(A) above, if the Borrower or the Administrative Agent determines that
any such After-Acquired Oil and Gas Properties (1) has an aggregate value in excess
of 10% of the aggregate value of all Oil and Gas Properties of the Borrower and its
Restricted Subsidiaries included in the Borrowing Base (as determined by the
Administrative Agent and the Lenders in connection with determination of the Initial
Borrowing Base or the most recently redetermined Borrowing Base immediately
preceding the date of such acquisition, assignment, transfer or conveyance, or date
of commencement of such drilling (as applicable)), or (2) is located in a
Non-Appalachian State, the Borrower or relevant Restricted Subsidiary shall provide
(or cause to be provided) title opinions naming the Administrative Agent and the
Lenders as addressees thereof and other Oil and Gas Title Information covering or
relating to such After-Acquired Oil and Gas Properties, in each case as requested by
and in form and substance satisfactory to the Administrative Agent; and”



     2.14 Amendment to Section 6.19(c). Effective concurrently with the Closing, Section
6.19(c) is hereby amended by deleting such Section in its entirety and replacing it with the
following:




     “(c) Deliver to the Administrative Agent (i) on or before the date which is
ninety (90) days following the Closing Date (the “Post-Closing Date”) (which
date may be extended, if such extension is requested by the Borrower, for an
additional thirty (30) days by the Administrative Agent in its sole discretion), all
Oil and Gas Property Description Information and all Oil and Gas Property Title
Information reasonably requested by the Administrative Agent or any Lender, in each
case pertaining to all Proved Properties, all Farmout Properties and all
Participation Properties described in Section 6.19(d) then owned by the Borrower or
any of its Restricted Subsidiaries and (ii) thereafter from time to time all Oil and
Gas Property Description Information and all Oil and Gas Property Title Information
pertaining to all After-Acquired Oil and Gas Properties of the Borrower and its
Restricted Subsidiaries, in each case to the extent reasonably requested by the
Administrative Agent.”



     2.15 Amendment to Section 6.19(e). Effective concurrently with the Closing, Section
6.19(e) is hereby amended by replacing such Section in its entirety and replacing it with the
following:




     “(e) Intentionally omitted.”



     2.16 Amendment to Section 6.19(f)(ii). Effective concurrently with the
Closing, Section 6.19(f)(ii) is hereby amended by deleting such Section in its entirety.



     2.17 Addition of a new Section 6.20. Effective concurrently with the Closing, a new
Section 6.20 is hereby added as follows:



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     “Section 6.20 Seminole Post Closing Items. Upon any exercise of the
NGAS Option and/or the Kay Jay ROFR (as such terms are defined in the Seminole
Agreement), the Borrower shall immediately assign all of the collateral securing the
Buyer Secured Obligations (including, but not limited to, the Seminole Mortgages) in
such manner and form deemed reasonably necessary by the Administrative Agent to
secure the Obligations.”



     2.18 Amendment to Section 7.01(a). Effective concurrently with the Closing, Section
7.01(a) is hereby amended by deleting such Section in its entirety and replacing it with the
following:




     “(a) Consolidated Leverage Ratio. Permit the ratio, determined as of the end
of any Fiscal Quarter of the Borrower, of (i) Consolidated Funded Indebtedness as of the end
of such Fiscal Quarter, to (ii) Consolidated EBITDA for the trailing period of four (4)
Fiscal Quarters of the Borrower ending with any Fiscal Quarter set forth below (the
“Maximum Consolidated Leverage Ratio”) to exceed the ratio set forth below opposite
such Fiscal Quarter:



	 	 	 
	 	 	Maximum Consolidated
	Fiscal Quarter	 	Leverage Ratio
	Ending on or before December 31, 2010
	 	4.75 to 1.00
	Ending March 31, 2011 and thereafter
	 	4.00 to 1.00






     2.19 Amendment to Section 7.01(b). Effective concurrently with the Closing, Section
7.01(b) is hereby amended by deleting such Section in its entirety and replacing it with the
following:




     “(b) Debt Service Coverage Ratio. Permit the ratio of (i) Consolidated
EBITDA to (ii) the sum of Consolidated Interest Expense and current maturities of
Consolidated Funded Indebtedness (excluding amounts due under this Agreement on the
Termination Date) for any period of four (4) consecutive Fiscal Quarters of the
Borrower ending on the last day of any Fiscal Quarter to be less than 1.25 to 1.00.”



     2.20 Amendment to Section 7.01(c). Section 7.01(c) is hereby amended by deleting such
Section in its entirety and replacing it with the following:




     “(c) Consolidated Current Ratio. Permit the ratio of Consolidated
Current Assets to Consolidated Current Liabilities as of the end of any Fiscal
Quarter of the Borrower, beginning with the Fiscal Quarter ending September 30,
2009, to be less than 1.00 to 1.00.”



     2.21 Amendment to Section 7.02. Effective concurrently with the Closing, Section 7.02
is hereby amended by deleting “; and” at the end of subsection (g), deleting the period at the end
of subsection (h) and adding “; and” thereto, and adding a new subsection (i) as follows:




     “(i) the Seller Parent Guaranty.”



     2.22 Amendment to Section 7.03(k). Effective concurrently with the Closing, Section
7.03(k) is hereby amended by deleting such Section in its entirety and replacing it with the
following:




     “(k) royalties, overriding royalties, reversionary interests, and similar
burdens not otherwise prohibited hereunder granted by the Borrower or any Restricted
Subsidiary with respect to its Oil and Gas Properties (i) to the extent such burdens
do not reduce the Borrower’s or any Restricted Subsidiary’s net rights, titles and
interests in ownership, development or production in its Oil and Gas Properties
below the interests reflected in each Engineering Report (and, as applicable, each
Farmout/Participation Property Certificate) or any applicable Mortgages, (ii) to the
extent relating to any Proved Properties, Farmout Properties or Participation
Properties, which are described as “Permitted Encumbrances” in the Mortgages
covering such Oil and Gas Properties, and (iii) which do not operate to deprive the
Borrower or any Restricted Subsidiary of any material rights, titles or interests in
respect of its assets or properties;”



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     2.23 Amendment to Section 7.03(l). Effective concurrently with the Closing, Section
7.03(l) is hereby amended by deleting such Section in its entirety and replacing it with the
following:




     “(l) easements, rights-of-way, restrictions, and other similar encumbrances,
and minor defects in the title that are customarily accepted in the oil and gas
financing industry (i) none of which interfere with the ordinary conduct of the
business of the Borrower or any Restricted Subsidiary or detract from the value or
use of, or the Borrower’s or any Restricted Subsidiary’s rights and interests in,
the property to which they apply, and (ii) to the extent relating to any Proved
Properties, Farmout Properties, or Participation Properties, which are described as
“Permitted Encumbrances” in the Mortgages covering such Oil and Gas Properties;”



     2.24 Amendment to Section 7.03. Effective concurrently with the Closing, Section 7.03
is hereby amended by deleting the period at the end of subsection (m) and adding “; and” thereto,
and adding a new subsection (n) as follows:




     “(n) the NGAS Mortgages.”



     2.25 Amendment to Section 7.05. Effective concurrently with the Closing, Section 7.05
is hereby amended by deleting “; and” at the end of subsection (e), the period at the end of
subsection (f) and adding “; and” thereto, and adding a new subsection (g) as follows:




     “(g) the Seminole Sale.”



     2.26 Amendment to Section 7.12. Effective concurrently with the Closing, Section 7.12
is hereby amended by deleting such Section in its entirety and replacing it with the following:




     “Section 7.12. Negative Pledge Clauses. Enter into or permit to exist
or become effective any agreement or other arrangement that prohibits, limits or
imposes any condition on the ability of any Loan Party to create, incur, assume or
suffer to exist any Lien upon any of its Property or revenues, whether now owned or
hereafter acquired, other than (a) this Agreement and the other Loan Documents, (b)
any agreements governing any purchase money Liens or Capital Lease Obligations
otherwise permitted hereby (in which case, any prohibition or limitation shall only
be effective against the assets financed thereby) and (c) the Seminole Sale
Documents.”



     2.27 Amendment to Section8.01. Effective concurrently with the Closing, Section 8.01
is hereby amended by deleting the “or” at the end of Section 8.01(m), renumbering the existing
Section 8.01(n) as 8.01(o), and adding a new Section 8.01(n) as follows:




     “(n) a default or event of default by Borrower or any of its Affiliates shall
have occurred under any Seminole Sale Document.”



     2.28 Amendment to Schedules. Effective concurrently with the Closing, Schedules
5.18(f) and 5.19(c) are hereby amended by deleting such Schedules in their entirety.



     2.29 Amendment to Exhibits. Effective concurrently with the Closing, Exhibits C-2 and
T are hereby amended by deleting such Exhibits in their entirety.




     Section 3. Borrowing Base.



     3.1 New Borrowing Base. Pursuant to Section 2.02 of the Credit Agreement, the
Borrowing Base is hereby redetermined at $65,000,000, until the next Redetermination Date (subject
to further adjustments from time to time pursuant to Section 2.02(b) or Section 2.02(c)).
Notwithstanding the provisions of Section 2.07(a) of the Credit Agreement and solely with respect
to the foregoing redetermination, to the extent the Aggregate Outstanding Credit on the Third
Amendment Effective Date exceeds the forgoing redetermined Borrowing Base the Borrower shall have
until July 1, 2009, subject to extension as provided in the following sentence, to prepay the Loans
such that the resulting Aggregate Outstanding Credit does not exceed such redetermined Borrowing
Base. The failure of the Borrower to eliminate such excess of the Aggregate Outstanding Credit
over such redetermined Borrowing Base



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on or before July 1, 2009 shall constitute an Event of Default; provided that such date may be
extended, if such extension is requested by the Borrower to accommodate the Closing, for an
additional 15 days by the Administrative Agent in its sole discretion.



     3.2 Borrowing Base at Closing. Effective concurrently with the Closing, the Borrowing
Base is hereby redetermined at $55,000,000 until the next Redetermination Date (subject to further
adjustments from time to time pursuant to Section 2.02(b) or Section 2.02(c)).



     3.3 Redetermination. The Administrative Agent will redetermine the Borrowing Base
based upon the Independent Engineering Report dated as of January 1, 2009 in accordance with the
procedures set forth in Section 2.02 on July 15, 2009.



     Section 4. Conditions Precedent. The effectiveness of this Third 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 Third Amendment. The Administrative Agent shall have received multiple
counterparts as requested of this Third Amendment from the Borrower and each Lender.



     4.2 Payment of Outstanding Invoices. Payment by the Borrower to the Administrative
Agent of (a) an amendment fee of $200,000 for the ratable benefit of the Lenders, (b) the fees set
forth in the fee letter among Holdings, the Borrower and the Administrative Agent dated as of June
2, 2009, and (c) all other fees and other amounts due and payable on or prior to the Third
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 Third Amendment Effective Date.



     Section 5. Additional Conditions Precedent. The effectiveness of the amendments in
Sections 2.1(b), 2.1(d), 2.1(f), 2.2, 2.3, 2.7 through 2.19, and 2.21 through 2.29 of this Third
Amendment are further conditioned upon receipt by the Administrative Agent of the following
documents and satisfaction of the other conditions provided in this Section 5, each of which shall
be reasonably satisfactory to the Administrative Agent in form and substance:



     5.1 Principal Payment. Payment by the Borrower to the Administrative Agent at the
Funding Office , in Dollars and in immediately available funds, of $28,000,000 to be paid to the
Lenders pro rata according to the outstanding principal amounts of the Loans then held by each
Lender by wire transfer to the account specified by the Administrative Agent.



     5.2 No Default. No Default or Event of Default shall have occurred and be continuing
as of the Closing Date (as such term is defined in the Seminole Agreement).



     5.3 New Guarantor. The Administrative Agent shall have received multiple counterparts
as requested of the Assumption Agreement (as such term is defined in the Guarantee and Collateral
Agreement) executed by NGAS Gathering II, LLC.



     5.4 Seminole Sale Documents. The Administrative Agent shall be reasonably satisfied
with the terms, conditions and documentation of the Seminole Sale and the Seminole Sale Documents.



     5.5 Sale of Seminole Assets. The
Administrative Agent shall have received (a) a
certificate of a Responsible Officer of the Borrower
certifying: (i) that the Borrower is concurrently
consummating the Seminole Sale in accordance with the
terms of the Seminole Sale Documents (with all of the
material conditions precedent thereto having been
satisfied in all material respects by the parties
thereto) and selling the Seminole Assets contemplated
by the Seminole Sale Documents; and (ii) as to the
final sale price for the Seminole Assets after giving
effect to all adjustments as of the closing date
contemplated by the Seminole Sale Documents and
specifying, by




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category, the amount of such adjustment; (b) a true and complete executed copy of each of the
Seminole Sale Documents; and (c) such other related documents and information as the Administrative
Agent shall have reasonably requested.




     5.6 Pledge of Additional Collateral. The Administrative Agent shall have received
such assignments of the collateral securing the Buyer Secured Obligations (including, but not
limited to, the Seminole Mortgages) in such manner and form deemed reasonably necessary by the
Administrative Agent to secure the Obligations.



     Section 6. Representations and Warranties; Etc. Each of Holdings, the Borrower and
the other Loan Parties hereby represents and warrants that:



     6.1 The execution, delivery and performance by Holdings, the Borrower and each Loan Party of
this Third 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.



     6.2 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.



     6.3 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 that no Default or Event of Default exists under the Credit Agreement or any
other Loan Document (other than the Credit Agreement Defaults) 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.



     6.4 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.



     6.5 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 7. Miscellaneous.



     7.1 Confirmation. The provisions of the Credit Agreement (as amended by this Third
Amendment) shall remain in full force and effect in accordance with its terms following the
effectiveness of this Third Amendment.



     7.2 Ratification and Affirmation of the Borrower. The Borrower hereby expressly (a)
acknowledges the terms of this Third 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.



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     7.3 Counterparts. This Third 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.



     7.4 No Oral Agreement. This written Third 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 Third Amendment Effective Date.



     7.5 Governing Law. This Third 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.



     7.6 Release of Lenders. IN CONSIDERATION OF THIS THIRD 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 OR FACTS OCCURRING PRIOR TO THE THIRD AMENDMENT EFFECTIVE DATE AGAINST ANY
RELEASED PARTY, FOR OR BY REASON OF ANY MATTER, CAUSE OR THING WHATSOEVER OCCURRING ON OR PRIOR TO
THE THIRD 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 Third Amendment to be duly executed
this 2nd day of June, 2009, effective as of the Third Amendment Effective Date.



	 	 	 	 	 
	HOLDINGS:  	NGAS RESOURCES, INC.,

 	 
	 	By:  	/s/ Michael P. Windisch
 	 
	 	 	Name:  	Michael P. Windisch, 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	BORROWER:  	DAUGHERTY PETROLEUM, INC.,

 	 
	 	By:  	/s/ Michael P. Windisch
 	 
	 	 	Name:  	Michael P. Windisch, 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	ADMINISTRATIVE AGENT:  	KEYBANK NATIONAL ASSOCIATION,

as Administrative Agent and Lender

 	 
	 	By:  	/s/ Todd Coker
 	 
	 	 	Name:  	Todd Coker 	 
	 	 	Title:  	Assistant Vice President 	 
	 
	LENDERS:  	BMO CAPITAL MARKETS FINANCING, INC.

 	 
	 	By:  	/s/ James Whitmore
 	 
	 	 	Name:  	James Whitmore, 	 
	 	 	Title:  	Managing Director 	 
	 
	 	ROYAL BANK OF CANADA

 	 
	 	By:  	/s/ Don J. McKinnerney
 	 
	 	 	Name:  	Don J. McKinnerney, 	 
	 	 	Title:  	Authorized Signatory 	 
	 




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