Avner Oil - Annual Report 2011 - Delek Energy Systems

Contingent agreements for the sale of oil rights7.26.9 Agreements for the sale of rights in the Ruth D and Alon E licensesOn February 23, 2011, the partners in the 361/D Ruth and 368/E Alon licenses ("the Ruth D andAlon E Licenses") signed contingent agreements with third parties for the sale of part of their oilrights in the Ruth D and Alon E licenses (in this section: “agreements for sale of the rights”).According to these agreements, the partners in the Ruth D and Alon E licenses will transfer (eachaccording to their proportionate share in the licenses), 50% of the participation rights (out of 100%)in each of the Ruth D and Alon E licenses, subject to fulfillment of the preconditions.The buyers of the rights in Ruth D and Alon E licenses, and their proportionate share in each ofthem (after transfer of the rights, to the extent that this is completed) are as follows:17.5% Israel Land Development Co. – Energy Ltd. (“ILDC – Energy”) (in the Alon E license, 5% ofthe rights were acquired by Israel Land Development Co. Ltd.– “ILDC”) 191 .17.5% ProSeed Venture Capital Management (1999) Ltd. 19215% - Ellomay Capital Ltd. 193According to the sales agreement, the consideration for the rights in the Ruth D and Alon Elicenses is as follows:(A)(B)(C)(D)At the completion date of the transaction: (1) reimbursement of USD 588,000 to thePartnership and Delek Drilling for prior expenses in the Ruth D and Alon E licenses; (2)reimbursement of expenses covered by the Partnership for its proportionate share inpurchase of the rights in the Ruth D and Alon E licenses, from the signing date through tothe completion date.For the first drilling in the Ruth D and Alon E licenses (“the first drilling”), to the extent that itis drilled: the Partnership and Delek Drilling will be entitled to creditor’s rights for 30% of theirrights, so that the buyers will cover, in addition, their proportionate share in the expenses ofthe first drilling, an additional share equivalent to 7.5% of the cost of the first drilling up to thetotal cost (100%) of USD 50 million (“the creditor’s rights”).Overriding royalties of 3% of the rights transferred by the Partnership in the Ruth D and AlonE licenses for all oil and gas produced.The Partnership and Delek Drilling may convert, up to the start date of the first drilling, thebalance of their partnership rights to overriding royalties of 3% of the transferred rights.It is clarified that the rights transfer agreements are subject to approvals, including approvals thatare required according to the Limited Partnership's agreements and the Partnership’s escrowagreements, approvals of the certified organs of the buyers and the Commissioner of PetroleumAffairs’ approval to transfer the transferred rights in the Ruth D and Alon E licenses, at the datesset out in the agreements. After approval of the transfer of the transferred rights to the buyers, thePartnership will own 12.5% of the rights in the Ruth D and Alon E licenses.Furthermore, the arrangement applicable to the holders of royalty rights with respect to thetransferred rights in the Ruth D and Alon E licenses is described in section ‎7.26.11 below.On November 29, 2011, the Commissioner of Petroleum Affairs announced that since theapplication for the transfer of rights which was required in the Ruth D and Alon E licenses was notcompleted, these licenses will not be extended. According to the Partnership's position, all theconditions for obtaining the Commissioner's approval for the transfer of rights in the Ruth D andAlon E licenses were fulfilled and therefore the Partnership intends taking steps to transfer therights in these licenses and examining the legal options available to exercise its rights in theselicenses, including the option of filing an appeal.191192193To the best of the partnership’s knowledge, ILDC – Energy Ltd. is controlled by ILDC, which owns 69.69% of itsshares. ILDC is a public company traded in Israel, controlled by Yaakov Nimrodi, who owns 42.45% of its shares andOfer Nimrodi, who owns 28.43% of its shares.To the best of the partnership’s knowledge, ProSeed Venture Capital Management (1999) Ltd. is a private companyregistered in Israel. The company is fully controlled by Landlan Investments Ltd., which is controlled by LigadRotlevy, Yair Rotlevy and Yeshayahu Landau through a private company.To the best of the partnership’s knowledge, Ellomay Capital Ltd.is an Israeli company traded on the NASDAQ. Thecontrolling shareholders are Shlomo Nehama, who holds 37.3% of its shares and Kanir Joint Investments (2005)Limited, holding 33.3% of its shares.A-183