Item 1.01
Entry into a Material
Definitive Agreement.
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1.
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The Swap Facility with Macquarie Bank Limited.
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On December 28, 2012, we and our direct,
first-tier wholly-owned subsidiary, AMZG, Inc., entered into a prepaid swap facility (the “Swap Facility”) with Macquarie
Bank Limited (“MBL”).
Pursuant to the terms of the Swap Facility,
MBL agreed to advance to us up to $18 million and we agreed to tender funds to MBL on a monthly basis, through the sale of approximately
212,000 barrels of oil over the five-year period from January 2013 to December 2017, based upon a prepay swap volumes schedule,
with a final balloon of $2 million on December 31, 2017. The monthly volumes of oil production to be used to calculate the amounts
of such tenders are less than 25% of our current net production. The cost to us of the Swap Facility is based upon an equivalent
annual interest rate of LIBOR plus 650 basis points, which is approximately 7.2%.
On December 28, 2012, we received $16 million
of the total to be advanced to us under the Swap Facility. We expect MBL to advance to us the remaining $2 million within 30 days
following the closing of two of our acquisitions of oil and gas interests located in Divide County, North Dakota, one of which
is also the subject of this Current Report and the other of which has not been publicly announced.
To effect the Swap Facility, we, our subsidiary,
and MBL entered into an ISDA Master Agreement and related Schedule and Confirmation thereto, each dated December 27, 2012 (collectively,
the “Swap Agreement”). Pursuant to and in connection with the Swap Agreement, we and our subsidiary entered into various
agreements for the benefit of MBL, each of which was dated on or about December 27, 2012, and all of which are intended (a) to
evidence MBL’s continuing security interest in certain of our assets and those of our subsidiary that relate, or are attributable,
directly or indirectly, to certain of our collective oil and gas properties, including, without limitation, hydrocarbons produced
from such properties and the proceeds of the sale of such hydrocarbons and (b) to secure our collective obligations under the Swap
Agreement (all of such agreements, including, the Swap Agreement, are referred to as the “Swap Documents”): (i) (North
Dakota) Mortgage, Security Agreement, Fixture Filing, Financing Statement and Assignment of Production and Revenue, (ii) Security
Agreement, (iii) Deposit Account Control Agreement, (iv)Three Party Lockbox Agreement, (v) Cash Management Terms and Conditions,
(vi) Lockbox Management Agreement, (vii) Letter in Lieu, and (viii) Notice of Assignment of Proceeds.
The Swap Documents contain customary affirmative
and negative covenants for swap facilities of this type, including limitations on us and our subsidiary with respect to transactions
with affiliates, hedging agreements, dividends and distributions, operations in respect of the property that secures our collective
obligations under the Swap Facility, liens and encumbrances in respect of the property that secures our collective obligations
under the Swap Facility, subsidiaries and divestitures, indebtedness, investments, and changes in business. The Swap Documents
provide for customary events of default with corresponding grace periods, including failure to tender any amount when due to MBL
under the Swap Agreement, failure to comply with or perform any other agreement or obligation under any of the Swap Documents,
misrepresentation, certain cross-defaults, and bankruptcy. In the event of a default by us or our subsidiary, MBL, among other
remedies, may terminate its obligations under the Swap Agreement, declare all of our collective obligations thereunder, including
all of our future tender obligations, immediately due, and enforce any and all of its rights under the Swap Documents. For certain
events of default related to bankruptcy, insolvency, and receivership of ours or of our subsidiary, MBL’s obligations would
be automatically terminated and all of our collective outstanding obligations in favor of MBL would become immediately due. We
and our subsidiary have agreed to use the advances only for: (i) development of our Spyglass Property in North Dakota to increase
production of hydrocarbons, (ii) acquisition of new oil and gas properties within the Spyglass Property, and (iii) general corporate
purposes that are usual and customary in the oil and gas exploration and production business.
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2.
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The Spyglass Property area acquisition.
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On December 31, 2012, we acquired additional
working interests and net revenue interests (collectively, the “Interests”) in several non-operated spacing units in
the Spyglass Property area (the “Acquisition”).
The purchase price for the Interests is
$8 million (the “Purchase Price”), of which 30% was paid by us on December 31, utilizing a portion of the advance that
we had received under the Swap Facility described above in this Current Report. The balance of the Purchase Price is payable by
June 28, 2013. We will receive the net revenues generated by the Interests relating back to November 1, 2012, which will reduce
our effective price. The amount of such net revenues is not known as of the date of this Current Report.
We purchased the Interests from an affiliate
of one of our non-operating partners (the “Seller”) in the Spyglass Property area. To effect the Acquisition, we and
the Seller entered into a Purchase and Sale Agreement (the “PSA”), pursuant to which we acquired all of the Seller’s
right, title, and interest in and to the Property, which resulted in the Interests becoming vested in us. The “Property”
included all of the Seller’s right, title, and interest in and to (i) the oil, gas, and mineral leases and all other leases
owned by the Seller (the “Leases”) covering any of the lands (the “Lands”) within the Nomad and Thomte
Spacing and Drilling Units located in Divide County, North Dakota, (ii) all oil, gas, and condensate wells, and all water source,
water injection, and other injection and disposal wells and systems located on the Leases or the Lands (collectively, the “Wells”),
together with all equipment, facilities, and fixtures located on or used in developing or operating the Leases, the Lands, or the
Wells, or producing, storing, treating, or transporting oil, gas, water, or other products or byproducts (collectively, the “Lease
Property and Equipment”), (iii) permits, easements, and similar rights and interests applicable to or used in operating the
Leases, the Lands, the Wells, or the Lease Property and Equipment (collectively, the “Permits and Easements”), (iv)
all contracts and contractual rights and obligations that relate to the Leases, the Lands, the Wells, the Lease Property and Equipment,
or the Permits and Easements (collectively, the “Related Contracts”), and (v) all other tangibles, miscellaneous interests,
and other assets on, used in connection with, or that relate to the Leases, the Lands, the Wells, the Lease Property and Equipment,
the Permits and Easements, or the Related Contracts, including records, files, and other data.
In connection with the Acquisition, we granted
a third-party entity (the “Optionee”) the option (the “Option”) to purchase from us an amount equivalent
to 10% of the Interests on the same proportionate terms and conditions as our purchase of the Interests under the PSA, including
a pro rata exercise price of 10% of the Purchase Price.
The Option was granted under a letter agreement
between us and the Optionee. To exercise the Option, the Optionee must (i) provide notice of its exercise to us by March 22, 2013
and (ii) pay the exercise price to us by March 29, 2013.
Copies of our press releases dated January
2, 2013 (related to the Swap Facility with Macquarie Bank Limited), and January 3, 2013 (related to the Spyglass Property area
acquisition), are furnished and attached to this Current Report as Exhibits 99.1 and 99.2, respectively.