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Signing of a Contingent Sale Agreement for the Transfer of Interests in the Tamar and Dalit leases
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Tel Aviv, July 5, 2017. Delek Group (TASE: DLEKG, US ADR: DGRLY) (“the Company”) announces that attached is an Immediate Report published on July 5, 2017 by Delek Drilling Limited Partnership ("the Partnership") regarding the signing of a contingent sale agreement for the transfer of rights in the Tamar and Dalit leases.

Further to the provisions of the Partnership’s immediate reports of April 25, 2017, June 21, 2017, June 27, 2017 and July 3, 2017 (ref. no.: 2017-01-035008, 2017-01-05039, 2017-01-053740 and 2017-01-056272, respectively) regarding a framework for the sale of participation interests at the rate of 9.25% (out of 100%) in the I/12 Tamar and I/13 Dalit leases, respectively (the “Leases” or the “Tamar and Dalit Leases”), subject to the existing liabilities for payment of overriding royalties to affiliates and to third parties, regarding the summoning of a general meeting for approval of the Sale Framework (as defined below), and regarding the release of public drafts of a prospectus for supplementation by Tamar Petroleum Ltd., a wholly-owned (100%) subsidiary of the Partnership (“Tamar Petroleum” or the “Company”), the Partnership hereby respectfully announces as follows:

The sale of the interests in the Leases shall be performed through a raising of debt and capital in the framework of an offering, to local and foreign investors, of shares and bonds of Tamar Petroleum on the Tel Aviv Stock Exchange Ltd. (the “Offering” and “TASE”, respectively), with the issue proceeds, as specified below, being used by the Company for the purchase of the Object of Sale (as defined below) from the Partnership, in cash, subject to the provisions below (the “Consideration for the Object of Sale”). If there is insufficient demand for the entire capital layer of the Company, the Consideration for the Object of Sale shall be made up by way of an allotment to the Partnership of the remaining shares of the Company which were not sold in the Offering (at a rate that shall not exceed 40% of the Company’s capital) (the “Sale Framework”).

Completion of the Offering will be contingent, inter alia, on a minimal raising of 60% of the public capital raising.

In this context, on July 2, 2017, a contingent sale agreement (the “Sale Agreement” or the “Agreement”) was signed between the Partnership, as the seller, of the first part, and Tamar Petroleum, as the buyer, of the second part, the main principles of which are as follows:

  1. The Partnership has undertaken, subject to fulfillment of the conditions precedent, to sell and transfer to Tamar Petroleum participation interests at a rate of 9.25% (out of 100%) in the Tamar and Dalit Leases, subject to the existing liabilities for payment of overriding royalties to affiliates and third parties, and the proportionate share (9.25%) of the interests and undertakings according to the Joint Operating Agreement, the agreements for the sale of the gas from the Tamar lease, the agreement for the use of the Yam Tethys facilities, shares of Tamar 10 Inch Ltd., approval for operation of the Tamar platform and the export approvals from Tamar (above and below: the “Object of Sale”).
  2. The Consideration for the Object of Sale which Tamar Petroleum has undertaken to pay to the Partnership is all of the amounts that shall be raised in the raising of the debt and the capital, with the exception of amounts that shall be raised in the framework of the debt offering that exceed $650 million which will be deposited in a safety cushion in favor of collateral for payment of the bonds. Insofar as not all of the shares of Tamar Petroleum that are offered thereby in the Company’s capital raising are sold to the public, the Consideration for the Object of Sale shall be made up by way of an allotment to the Partnership of the remaining shares of Tamar Petroleum which are not sold in the Offering, at a rate that shall not exceed 40% of the Company’s capital. If offers are received for less than 60% of the Company’s shares that are offered in the Offering, shares will not be issued to the public, the Sale Agreement will be terminated and the Object of Sale shall remain in the possession of the Partnership.
  3. If the remaining shares of the Company are allotted to the Partnership, as stated in Section 2 above, and the Partnership shall seek to sell the Company’s shares to the public, the Company shall act to allow the Partnership to perform a shelf (sale) offering, subject to certain qualifications and restrictions, including a lock-up period which shall apply to the shares by virtue of the TASE rules, and at the very least a full lock-up of 6 months.
  4. Out of the sum of the consideration in cash due to the Partnership, the Company will be entitled to retain a sum of up to $40 million, as a loan which shall bear interest at a rate of 3% per annum.
  5. The effective date for calculation of the sum of the consideration and the transfer of the interests and the debts in respect of the Object of Sale to Tamar Petroleum is July 1, 2017 (the “Effective Date”).
  6. The Agreement determines that the Partnership shall continue to be responsible with respect to the following issues also after the date of the closing of the transaction: the arbitration in respect of the production component tariff , the appeal regarding the royalties in relation to the sale of the gas from the Tamar project to customers of the Yam Tethys project, including in relation to any liability in connection with these proceedings that shall be caused in the period after the Effective Date; the class certification motion that was filed by a consumer of the IEC against the Tamar partners, as specified in Section 7.29.2 of the Periodic Report, in relation to amounts received by the Partnership in the period before the Effective Date; liability in respect of taxes and royalties to the state with respect to the period before the Effective Date or with respect to any profit, income or revenue of the Partnership in connection with the Object of Sale (including if the tax assessment as aforesaid was performed after the Effective Date), with the exception of taxes relating to reports submitted before the Effective Date to the tax authorities in connection with the Taxation of Profits from Natural Resources Law, 5771-2011); taxes that apply to the Partnership in connection with the transfer of the Object of Sale to the Company ; liabilities to suppliers or customers of the Partnership in respect of the Object of Sale which relate to the period until the Effective Date, unless provisions in respect of such liabilities were made in the Company’s financial statements; and liabilities, if any, in connection with Delek & Avner (Tamar Bond) Ltd.
  7. Performance of the transaction contemplated in the Sale Agreement is contingent on fulfillment of all of the conditions precedent specified below by the transaction closing date (the “Conditions Precedent”):
    1. Receipt of the approval of the supervisor on behalf of the holders of the participation units of the Partnership for the transfer of the Object of Sale in accordance with the provisions of the Sale Agreement .
    2. Receipt of the approval of the Petroleum Commissioner at the Ministry of National Infrastructures, Energy and Water Resources (the “Commissioner”) for the transfer of the interests in the Tamar and Dalit Leases, in the operation approval and in the export approvals.
    3. Receipt of approvals from the parties to the Joint Operating Agreement, from the parties to the agreement for use of the facilities of the Yam Tethys project, and from the parties to the MOU between the partners in the Tamar and Dalit Leases and the partners in the Yam Tethys project for the assignment of 9.25% of the interests in the said agreements according to the Sale Agreement .
    4. Receipt of approvals from most of the consumers under the agreements for the sale of natural gas and condensate from the Tamar and Dalit Leases (consumers who, in the aggregate, purchased at least 75% of the total quantity of the gas sold from the Tamar and Dalit Leases during the 12 months ended March 31, 2017) for the assignment of 9.25% of the interests in the said agreements according to the Sale Agreement (insofar as the approvals from the said consumers are required) . The approvals as aforesaid will be unconditional, or subject to conditions which are not burdensome on the parties to the Sale Agreement. The parties have undertaken to notify the consumers under the agreements for the sale of natural gas and condensate from the Tamar and Dalit Leases of the assignment of 9.25% of the interests in the said agreements according to the Sale Agreement, and to act for receipt of their approval (insofar as required) for the assignment of the interests as aforesaid.
    5. Removal of the pledges registered on the interests in Tamar and Dalit in favor of the holders of the royalties and in favor of the trustee for the bonds of Delek & Avner (Tamar Bond) Ltd.
    6. Completion of the offering of the bonds of the Company according to a prospectus released thereby and the listing of the bonds.
    7. Receipt of the results of the offering of the shares according to a shelf offering report that shall be released by the Company, according to which the Company shall succeed in raising the minimum amount determined in the Offering.
  8. Until the date of the closing of the transaction, each party will be entitled to terminate the Agreement by written notice to the other party.
  9. The Company shall bear any and all payments, expenses and fees to be paid to the state (with the exception of taxes as aforesaid) for the transfer of the Object of Sale to the Company and receipt of the approvals specified in Section 7 above. In addition, the Company shall bear any and all expenses and costs relating to the offering of the bonds. The Partnership shall bear the expenses and costs of the consultants and experts in connection with the prospectus and any and all expenses in connection with the offering of the Company’s shares.
  10. In the Sale Agreement, various representations are made by the Partnership, as is accepted in transactions of this type, including an undertaking for indemnification in respect of a breach of representations. In addition, additional provisions are determined, as is standard in agreements of this type, including with respect to a dispute resolution mechanism, interpretation and delivery of notices.
  11. It was further determined in the Sale Agreement that insofar as the Partnership holds shares of the Company after the share offering is completed, then the Partnership unilaterally waives any and all voting rights attached to all of the shares held thereby over and above shares in a number equaling 12% of the Company’s shares after completion of the Offering. For the avoidance of doubt, it is clarified that any and all equity rights attached to the shares held by the Partnership shall remain in full force and effect, including the right to receive dividends, stock dividends, rights, and the right to receive surplus assets upon dissolution of the Company. The said surplus shares above 12% (the “Surplus Shares”) shall be deposited thereby with a trustee who shall act according to an irrevocable letter of instructions which shall determine, inter alia, as follows: The Surplus Shares shall also include stock dividends or rights, or shares deriving from such rights, that shall be allotted to the Partnership in respect of the Surplus Shares as part of an issue of stock dividends and/or rights to all of the Company’s shareholders. In terms of a rights offering, if any is made in the future, the trustee shall receive an instruction from the Partnership as to whether to exercise or sell the right. The trustee shall transfer to the Partnership any dividend he receives in respect of the Surplus Shares. Whenever the Partnership shall seek to sell the Surplus Shares, in whole or in part, to a third party, the trustee shall transfer the said shares to whomever the Partnership instructs him in writing, against receipt of the full consideration therefor (unless the Partnership shall have instructed him on the transfer of the shares prior to receipt of the consideration), provided that the Partnership notifies the trustee in writing of the details of the transferee and signs any document required for such transfer. Upon the sale or transfer of the Surplus Shares from the Partnership to a third party as aforesaid, they shall be eligible for all of the rights attached to ordinary shares in the Company.

The Partnership has undertaken to first sell the Surplus Shares (following the sale of which, they shall grant the buyer all of the rights attached thereto, including voting and equity rights as aforesaid), and has further undertaken that so long as it has not sold the Surplus Shares, it shall not buy additional shares of the Company. It is clarified for this purpose that shares to be allotted to the Partnership in the context of an issue of stock dividends and/or a rights issue shall not be deemed as a purchase for purposes of this undertaking.
The Partnership has further undertaken not to propose more than one director at the general meetings convening for the appointment of directors. The Company’s Articles of Association set forth instructions establishing the Partnership’s said waiver of voting rights that are attached to shares it shall hold at a rate exceeding 12% of the issued capital. The Company’s Articles of Association also set forth several instructions that shall apply so long as the Partnership holds 25% or more of the Company’s issued and paid-up share capital, including provisions on an appointments committee that shall be set up insofar as the Company wishes to propose to the shareholders meeting candidates for the office of directors in the Company; limitations on director eligibility, whereby all of the directors apart from one, shall have no link to the Partnership; and a limitation on the manner of approval of irregular transactions with Delek Group Ltd. or a corporation controlled thereby.
For this purpose “irregular transaction” – within the meaning thereof in the Companies Law, 5759-1999, apart from: (a) An irregular transaction with Delek Group Ltd. or a corporation controlled thereby, to which the Company is a party together with all of the partners in the Tamar lease or with all of the partners in the Dalit lease, as the case may be, such that the terms and conditions of the Company are similar to those of the other partners, considering its proportionate share; (b) A transaction of the type of transactions included in the Companies Regulations (Relaxations in Transactions with Interested Parties), 5760-2000.
In accordance with the terms and conditions of the Sale Framework, the closing of the transaction will be made within a period of 60 days, although in the Partnership’s estimation, the closing of the transaction is expected to be carried out by the end of July 2017.

The rate of holdings in the Tamar and Dalit Leases prior to the closing of the transaction contemplated in the Agreement is as follows:

Noble Energy Mediterranean Ltd.
Delek Drilling - Limited Partnership
Isramco Negev-2 Limited Partnership
Dor Gas Exploration Limited Partnership
Everest Infrastructures Limited Partnership

32.50%
31.25%
28.75%
4.00%
3.50%

Total

100%

The rate of holdings in the Tamar and Dalit Leases after the closing of the transaction contemplated in the Agreement is as follows:

Noble Energy Mediterranean Ltd.
Isramco Negev-2 Limited Partnership
Delek Drilling - Limited Partnership
Tamar Petroleum Ltd.
Dor Gas Exploration Limited Partnership
Everest Infrastructures Limited Partnership

32.50%
28.75%
22.00%
9.25%
4.00%
3.50%

Total

100%

Warning regarding forward-looking information – The information specified above, including with respect to the main commercial terms and conditions in the Agreement, the rights transferred by virtue thereof, the fulfillment of the Conditions Precedent therein, and the possibility of closing the transaction contemplated in the Agreement and the date thereof, constitute forward-looking information, within the meaning thereof in the Securities Law, 5728-1968. There is no certainty that it will materialize, in whole or in part, in the said manner or in any other manner and there is particularly no certainty that the Conditions Precedent therein, in whole or in part, will be fulfilled and there is no certainty that the transaction will be closed. The said information may materialize in a materiality different manner, due to various factors including non-fulfillment of the Conditions Precedent, in whole or in part, delays in the timetables for receipt thereof, etc.

 

This is a convenience translation of the original HEBREW immediate report issued to the Tel Aviv Stock Exchange by the Company on July 4, 2017.

About The Delek Group

Delek Group is an independent E&P and the pioneering visionary behind the development of the East Med. With eight consecutive finds in the Levant Basin, Delek is leading the region’s development into a major natural gas export hub. In addition, Delek has embarked on an international expansion with a focus on high-potential opportunities in the North Sea and North America. Delek Group is one of Israel’s largest and most prominent companies with a consistent track record of growth. Its shares are traded on the Tel Aviv Stock Exchange (TASE:DLEKG) and are part of the TA 35 Index.
For more information on Delek Group please visit www.delek-group.com

 

Contact

Investors

Dina Vince
Head of Investor Relations
Delek Group Ltd.
Tel: +972 9 863 8444
investor@delek-group.com

Media

Nilly Richman
Head of Communications
Delek Group Ltd.
Tel : +972 9 863 8444
media@delek-group.com

 

 

1 On July 3, 2017, a final prospectus was released of Tamar Petroleum. For further details, see: http://maya.tase.co.il/reports/details/1108070.

2 For details, see Section 7.13.4(a)(1) of the Partnership’s periodic report for 2016, as released on March 23, 2017 (ref. no.: 2017-01-023917) (the “Periodic Report”).

3 In May 2017, the Partnership submitted an application to the Tax Authority regarding the determination of the tax arrangement that shall apply thereto incidentally to the sale of the sold interests. The tax arrangement, if granted, will determine the manner of calculation of the part of the sale proceeds which is expected to be received in the form of the allotment of shares of Tamar Petroleum and the date of payment of the tax in respect thereof. The Partnership is in discussions with the Tax Authority for the granting of a tax arrangement.

4 For details regarding a special general meeting of the holders of participation units of the Partnership to be convened on July 5, 2017, on whose agenda is a resolution to approve the Sale Framework stated in the prospectus, including an immaterial modification thereof, insofar as shall be required for the performance thereof, and to authorize the supervisor to approve the transfer of the interests for the purpose of the Sale Framework, and to give any approval that is required of him in accordance with the Partnership’s partnership agreement for approval of the Sale Framework, including an immaterial modification of the Sale Framework insofar as shall be required for performance thereof, see the immediate report released by the Partnership on June 27, 2017 (ref. no.: 2017-01-053740). The supervisor’s approval shall be given after the approval of the general meeting is given as aforesaid.

5 As of the date of the prospectus, all of the approvals have been received from the parties to the Joint Operating Agreement (JOA) between the partners in the Tamar and Dalit Leases, from the parties to the agreement for receipt of usage rights in the facilities of the Yam Tethys project, and from the parties to the MOU between the partners in the Tamar and Dalit Leases and the partners in the Tam Tethys project for the assignment of 9.25% of the interests in the said agreements according to the Sale Agreement.

6 By the date of completion of the transfer of the Object of Sale, the approvals of most of the consumers under the agreements for the sale of natural gas and condensate from the Tamar and Dalit Leases for the assignment of the agreements to the Company (in relation to the Object of Sale) will be received.

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