UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): December 23,
2010
NGAS
Resources, Inc.
(Exact
name of registrant as specified in its charter)
Province
of British Columbia
|
0-12185
|
Not
Applicable
|
(State
or other jurisdiction of incorporation)
|
Commission
File Number
|
(I.R.S.
Employer Identification
No.)
|
120
Prosperous Place, Suite 201
|
|
Lexington,
Kentucky
|
40509-1844
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s telephone number,
including area code:
(859) 263-3948
None
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2 below):
¨
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
x
Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2b)
¨
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4c)
Item
1.01 Entry
into a Material Definitive Agreement
Arrangement
Agreement and Plan of Arrangement
On
December 23, 2010, NGAS Resources, Inc., a British Columbia corporation (the
“Company”), entered into an Arrangement Agreement (the “Arrangement Agreement”)
with Magnum Hunter Resources Corporation, a Delaware corporation (“Magnum
Hunter”), providing for the acquisition of the Company by Magnum Hunter in an
all-stock transaction.
Under the
terms of the Arrangement Agreement, each common share of the Company will be
transferred to Magnum Hunter for the right to receive 0.0846 of a share of
Magnum Hunter common stock. The exchange ratio for the transaction, which will
not be adjusted for subsequent changes in market prices, was established based
on an intra-day price of $6.50 for Magnum Hunter stock, representing a value to
the Company's shareholders of $0.55 per share, a 41% premium to the Company's
closing price on December 23, 2010.
The
Company and Magnum Hunter have made representations and warranties and covenants
in the Arrangement Agreement, including covenants that (i) the Company may
not solicit alternative transactions, (ii) the Company will use reasonable best
efforts to extend the deadline for completing a qualifying transaction under its
previously reported credit agreement waiver and amendment from March 31 to
April 15, 2011 (the “Extension Date”), and (iii) each party will use
reasonable commercial efforts to cause the transaction to be consummated by
March 31, 2011 or the Extension Date. The transaction will be
implemented by way of a court-approved plan of arrangement under the laws of
British Columbia, where the Company is organized.
The
consummation of the transaction is subject to certain closing conditions
including, among other things, (i) receipt of Canadian court approval and
the affirmative vote of two-thirds of the votes cast by the holders of common
stock of the Company; (ii) the full payment by Magnum Hunter of the Company's 6%
amortizing convertible notes that have not been converted before the closing;
(iii) the full payment of all outstanding amounts owed by the Company under
its credit agreement, (iv) entry into an agreement with Seminole
Energy Services, LLC (“Seminole”), on substantially the terms set forth in a
letter of intent among Magnum Hunter, a subsidiary of the Company and Seminole,
to restructure the Company's gas transportation arrangements with
Seminole and (v) the absence of injunctions or restraints
imposed by governmental entities. The consummation of the transaction
is also conditioned on the reduction in change of control severance benefits by
the Company’s executive officers and the payment of Magnum Hunter common stock
instead of cash in satisfaction of the reduced severance
benefits.
The
Arrangement Agreement contains certain customary termination rights for both the
Company and Magnum Hunter, including a termination right for either party if the
transaction is not consummated by March 31, 2011 or the Extension
Date. In addition, upon termination of the Arrangement Agreement
under specified circumstances, including a change in the recommendation of the
Company’s board of directors, the Company will owe Magnum Hunter a cash
termination fee equal to $4 million. Upon any termination of the
Arrangement Agreement because the Company shareholders do not approve the
transaction, the Company will owe Magnum Hunter reimbursement of its expenses
not to exceed $4 million.
Concurrently,
and in connection with entering into the Arrangement Agreement, certain
shareholders of the Company entered into support agreements (the “Support
Agreements”) with Magnum Hunter pursuant to which, subject to the conditions set
forth therein, the shareholders agree (i) to vote all voting securities of the
Company beneficially owned by them in favor of the approval and adoption of the
Arrangement Agreement and the transactions contemplated therein and (ii) to
support actions necessary to consummate the Arrangement Agreement.
The
foregoing summary of the Arrangement Agreement and the Support Agreement 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 2.1 and incorporated herein by reference, and
the foregoing summary of the Support Agreements is subject to, and qualified in
its entirety by, the full text of the Support Agreements, a form of which is
attached as Exhibit 10.1 and incorporated herein by reference.
Item
5.02 Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangement of Certain Officers.
Amendments
to the Long-Term Incentive Agreements and Change of Control
Agreements
On December 23, 2010, the Company
entered into separate Amendments (the “Amendments”) to its Long-Term Incentive
Agreements and its Change of Control Agreements (the “Agreements”) with each of
its executive officers. The Amendments provide that all payments and
benefits under the Agreements shall be in full compliance with Section 409A of
the Internal Revenue Code of 1986.
The foregoing summary of the Amendments
does not purport to be complete and is subject to, and qualified in its entirety
by, the full text of the Amendments, forms of which are attached as Exhibit 10.2
and Exhibit 10.3 and incorporated herein by reference.
Item
8.01 Other
Events.
On
December 27, 2010, the Company issued a press release announcing the execution
of the Arrangement Agreement. A copy of the press release is attached
hereto as Exhibit 99.1.
The
information provided pursuant to this Item 8.01, including Exhibit 99.1 in Item
9.01, is “furnished” and shall not be deemed to be “filed” with the Securities
and Exchange Commission or incorporated by reference in any filing under the
Securities Exchange Act of 1934, as amended or the Securities Act of 1933, as
amended, except as shall be expressly set forth by specific reference in any
such filings.
Forward-Looking
Statements
Except for historical information
contained herein, the statements in this release are forward-looking and made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and may involve a number of risks and uncertainties.
Forward-looking statements are based on information available to management at
the time, and such forward-looking statements involve judgments. Such
forward-looking statements include, but are not limited to, statements regarding
the expected timing of the completion of the transaction; the ability to
complete the transaction considering the various closing conditions; the
benefits of such transaction and its impact on NGAS Resources’ business; the
oversupply of, or lack of demand for, NGAS Resources’ production; various events
which could disrupt NGAS Resources’ drilling schedule or operations; any
projections of economic prospects, earnings, revenues or other financial items;
any statements regarding the plans, strategies and objectives of management for
future operations; any statements of expectation or belief; any statements
regarding general industry conditions and competition; any statements regarding
economic conditions, such as interest rate, commodity prices and currency
exchange rate fluctuations; any statements regarding timing of development or
potential expansion or improvements; any statements regarding quantity or
magnitude of oil and gas reserves; and any statements of assumptions underlying
any of the foregoing. In addition, if and when the transaction is consummated,
there will be risks and uncertainties related to Magnum Hunter’s ability to
successfully integrate the operations and employees of Magnum Hunter and NGAS
Resources as well as the ability to ensure continued performance or market
growth of NGAS Resources’ oil and natural gas production. Forward-looking
statements include expressions such as “believe,” “anticipate,” “expect,”
“estimate,” “intend,” “may,” “plan,” “predict,” “will,” and similar terms and
expressions. These forward-looking statements are made based on expectations and
beliefs concerning future events affecting the company and are subject to
various risks, uncertainties and other factors relating to operations and
business environment, all of which are difficult to predict and many of which
are beyond management’s control, that could cause actual results to differ
materially from estimated results expressed in or implied by these
forward-looking statements. Such risks and uncertainties include, but are not
limited to, the risks to both companies that the acquisition of the company will
not be consummated; market demand for oil and natural gas as well as changes in
pricing and costs; the availability of labor, equipment and
transportation; changes in weather, geologic conditions or oil or natural gas
deposits; changes in economic conditions or financial markets; changes in prices
for the company’s products or increases in input or extraction costs; changes in
pricing and assumptions and projections concerning reserves in our drilling
operations; changes in plans with respect to exploration, development projects
or capital expenditures; litigation, legislative, health, environmental and
other judicial, regulatory, political and competitive developments; changes in
customer orders; pricing actions by our competitors, customers, suppliers and
contractors; availability and costs of credit, surety bonds and letters of
credit; technological and operational difficulties or inability to obtain
permits encountered in connection with exploration and development activities;
labor relations matters; and changing foreign exchange rates, all of which are
described more fully in the company’s filings with the Securities and Exchange
Commission and on EDGAR and SEDAR. Forward-looking statements made in this
release, or elsewhere, speak only as of the date on which the statements were
made. New risks and uncertainties arise from time to time, and it is impossible
for management to predict these events or how they may affect anticipated
results. All forward-looking statements are qualified in their entirety by this
cautionary statement. In light of these risks and uncertainties, readers should
keep in mind that any forward-looking statement made in this press release may
not occur. The company has no duty or obligation to, and does not intend to,
update or otherwise revise any forward-looking statements, whether as a result
of new information, future events or other factors, except as may be required by
law. Readers are cautioned not to place undue reliance on forward-looking
statements.
No Offer or
Solicitation
.
This
communication shall not constitute an offer to sell or the solicitation of an
offer to buy any securities, nor shall there by any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such
jurisdiction.
Item
9.01
Financial Statements and Exhibits.
(d)
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Exhibits
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Exhibit No.
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|
Description
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2.1
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Arrangement
Agreement, dated as of December 23, 2010, between the Company and
Magnum Hunter Resources Corporation
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|
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10.1
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Form
of Support Agreement, dated as of December 23, 2010, between certain
Company shareholders and Magnum Hunter Resources
Corporation
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10.2
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Form
of Amendment to Long-Term Incentive Agreement, dated as of December 23,
2010
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10.3
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Form
of Change of Control Agreement, dated as of December 23,
2010
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99.1
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Press
Release of the Company dated December 27,
2010
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, hereunto
duly authorized.
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NGAS
RESOURCES, INC.
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By:
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/s/
William S. Daugherty
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|
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William
S. Daugherty,
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President
and Chief Executive Officer
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Date:
December 27, 2010
EXHIBIT
INDEX
Exhibit No.
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|
Description
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2.1
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Arrangement
Agreement, dated as of December 23, 2010, between the Company and
Magnum Hunter Resources Corporation
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|
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10.1
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|
Form
of Support Agreement, dated as of December 23, 2010, between certain
Company shareholders and Magnum Hunter Resources
Corporation
|
|
|
|
10.2
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|
Form
of Amendment to Long-Term Incentive Agreement, dated as of December 23,
2010
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|
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10.3
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Form
of Change of Control Agreement, dated as of December 23,
2010
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|
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99.1
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|
Press
Release of the Company dated December 27,
2010
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