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Exhibit 10.1
 
 
Agreement

Executed in Petach Tikvah, this 31st day of December, 2007

BETWEEN:   Isramco Inc., a company incorporated according to the laws of
Delaware
whose address for the purpose of this Agreement is:
Isramco Inc., Israeli branch, 8 Granite St., P.O.B. 10188,
Petach Tikvah 49002
(hereinafter: "Isramco”)
 
of the one part
 
AND:
I.O.C - Israel Oil Company Ltd., a company incorporated according to the laws of
the State of Israel whose address for the purpose of this Agreement is: 8
Granite St., P.O.B. 10188, Petach Tikvah 49002

(hereinafter: "IOC”)
of the other part

WHEREAS:

 
(1)
IOC and Isramco are subsidiaries of Naphtha Israel Oil Company Ltd.,
(hereinafter: “Naphtha”) that holds some 99.99% of the paid-up share capital of
IOC and some 48.4% of the paid-up capital of Isramco;
       
(2)
Isramco is an American company whose shares are traded on the Nasdaq and whose
principal activity is exploration, development and production of oil and gas in
the United States;
       
(3)
Isramco is also active in oil and gas exploration in Israel, that is carried out
through Isramco’s Israeli branch (hereinafter: “the Branch”) and also holds
rights and assets in Israel;
       
(4)
IOC similarly has activity in the field of oil and gas exploration in Israel and
real estate and acts as the executive arm of Naphtha’s activity in Israel;
       
(5)
Due to a significant increase in 2007 in Isramco’s activity in the field of oil
and gas in the United States with the completion of the acquisition of some 650
oil and gas wells in the United States (hereinafter: “the Five States
Transaction”), the volume of its activity in Israel is currently minor compared
with that of its activity in the United States;
       
(6)
In order to finance the Five States Transaction Isramco took various loans
including inter alia, a loan in the sum of $12 million from IOC that was
intended to be secured by a charge over Jay Petroleum’s assets, a subsidiary of
Isramco in the United States (hereinafter: “the IOC Loan”) and also a loan in
the sum of $30 million from Naphtha (hereinafter: “the Naphtha Loan”);
       
(7)
Following the significant growth mentioned that occurred in Isramco’s activity
in the United States and the minor volume of its current activity in Israel,
Isramco wishes to concentrate its activity in the United States, including the
purchase of further oil and gas assets in respect of which it will require
further financing and to charge Jay Petroleum’s assets in order to liquidate its
activity in Israel and sell and transfer to IOC the Branch activity, including
its rights, obligations and assets, including real estate, as set out below in
this Agreement (hereinafter: “the Activity, Assets, Obligations and Rights
Transferred”), in a manner whereby the proceeds of the sale thereof will be
applied to fully repay the IOC Loan and the interest accrued thereon, and to
partially pay the interest that has accrued in respect of the Naphtha Loan, as
more particularly set out in this Agreement;

 
 
 

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(8)
IOC wishes to acquire and take by transfer from Isramco the Activity, Assets,
Obligations and Rights Transferred in a manner whereby the entire activity of
the Naphtha Group in Israel will be concentrated through it, as more
particularly set out below in this Agreement.

It is therefore declared, stipulated and agreed between the parties as follows:

1.
General
       
1.1
The preamble to this Agreement and the Appendices thereto constitute an integral
part thereof.
       
1.2
The headings to the clauses contained in this Agreement are designed for ease of
reference and be of no significance in the interpretation thereof.
     
2.
The Activity, Assets, Obligations and Rights Transferred from Isramco to IOC and
the consideration payable in respect thereof
       
Isramco hereby sells, transfers and assigns to IOC the Activity, Assets,
Obligations and Rights Transferred on the conditions and for the consideration
hereinafter set forth:
       
Participation units in the limited oil partnerships - Isramco Negev 2 (some
8.12%), IOC Dead Sea (some 24.97%) and Naphtha Exploration (some 0.12%)
(hereinafter: the “Participation Certificates”). The Participation Certificates
will be transferred to IOC on December 31, 2007 by an off-the-exchange sale for
an aggregate consideration of NIS 47,846,832 that sum having been fixed
according to the stock exchange value thereof on December 30, 2007 at a 10%
discount with respect to the IOC Dead Sea Participation Units, a 7% discount
with respect to the Isramco Negev 2 Participation Units and with no discount
with respect to the Naphtha Exploration Participation Units. These discounts
were fixed based on an independent appraiser’s evaluation, a copy of which is
attached as Appendix 2.1 (hereinafter: “the Appraiser’s Evaluation”).
       
All the operating activity of the Israeli Branch, including receiving the sums
payable to the Branch by the operator of the Med Yavneh holding, the amounts
payable to the Branch in respect of the provision of the management services to
the General Partner of the Isramco Negev 2 partnership, the amounts due to the
Branch as operator of the Samson licence and the preliminary Hof permit and
provision of all the services in respect thereof (hereinafter: “the Operation”).
The Operation will be transferred to IOC in consideration of the sum of NIS
1,580,000, as fixed according to the Appraiser’s Evaluation (Appendix 2.1).
       
Participation rights at the rate of 1% of the Marine 332/Samson Licence (“Samson
Licence”) that will be transferred to IOC against IOC’s undertaking to bear its
proportionate share of the geological and geophysical costs that were expended
in the area of the Samson Licence in the sum of NIS 4,358 ($1,130 out of the sum
of $113,000) and the expenses that will apply in the future in the field of the
Samson Licence or any other oil asset that will replace the same. This
consideration is the same as that at which Isramco transferred rights in the
Samson Licence to third parties (including to the oil partnerships, Isramco
Negev 2, IOC Dead Sea and Naphtha Exploration).
       
Participation rights at the rate of 1% in the preliminary marine permit 189/Hof
(“Hof Permit”) that will be transferred to IOC against IOC’s undertaking to bear
1.25% of the geological and geophysical costs that were made in the area of the
Hof Permit, in the sum of NIS 6,750 ($1,750 out of the sum of $140,000) and also
1.25% of the exploration and development expenses that will apply in the future
in the field of the Hof Permit or any other oil asset that will replace the
same, up to an aggregate amount of $4 million, following which the Partners in
the Hof Permit will bear the exploration and development costs in accordance
with the percentage of their rights in the permit (the foregoing reflecting
bearing Isramco Inc’s share in the Hof Permit by the remaining partners to the
permit, including amongst them IOC). The consideration is the same as that at
which Isramco transferred rights in the Hof Permit to third parties (including
to the oil partnerships: Isramco Negev 2, IOC Dead Sea and Naphtha Exploration).
       
All the holdings (100%) of Isramco in Oil and Gas, that will be sold to IOC
according to the market value of the Oil and Gas assets in the sum of NIS
290,242. The parties will sign on the execution of this Agreement a share
transfer instrument in Oil and Gas from Isramco to IOC, in the form attached
hereto as Appendix 2.5.

 
 
 

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Furniture, equipment and vehicles of the Branch described in Appendix 2.6 hereto
(hereinafter: “the Fixed Assets”) that are being purchased at the price of
amortized cost, in the sum of NIS 360,940.
       
The remaining liabilities in respect of auditing, legal and general services as
of December 31, 2007, described in Appendix 2.7 hereof (hereinafter:
“Outstanding Liabilities”) that will be transferred to IOC according to the
value thereof as of the date of the execution of this Agreement in the sum of
NIS 721,067.

 
The capital note in the sum of NIS 722,300 that bears no interest and/or linkage
and is payable on call, that was issued by Oil and Gas to Isramco in respect of
a loan advanced by Isramco to Oil and Gas (hereinafter: “the Capital Note”) that
will be transferred to IOC against the face value thereof. Isramco assigns and
transfers to IOC on the execution of this Agreement all of its rights in the
Capital Note.
       
Tradable securities that are held by the Branch as listed in Appendix 2.9
attached hereto (hereinafter: “Tradable Securities”) that are transferred to IOC
according to market value as of the execution date of this Agreement, in the
aggregate sum of NIS 3,110,500.
       
Two loans taken by the Branch from Bank Leumi le-Israel B.M. in the aggregate
amount of NIS 3,403,072 repayable on January 2, 2008 and January 23, 2008
(hereinafter: “the Loans”) that will be repaid by IOC.
       
Undertakings in the sum of NIS 434,873 in connection with the Branch employees
enumerated in Appendix 2.11 (hereinafter: “the Employees”) that will be employed
by IOC as from January 1, 2008 while retaining continuity of rights, as set out
in clause 4 below.
       
Land in the area of some 31 dunams in Petach Tikvah known as Parcel 2, in Block
6350 (hereinafter: “the Land”) that is sold to IOC at the price of NIS 3,702,720
as set out in the sale agreement of even date, signed contemporaneously with the
execution of this Agreement, a copy of which is attached as Appendix 2.12. The
consideration in respect of the Land was fixed based on the appraisal of an
independent land appraiser, a copy of which appraisal is attached as Appendix
2.12(1).0
       
Value Added Tax,  to the extent it applies in respect of the Activity, Assets,
Obligations and Rights Transferred or any part thereof will be borne and paid by
IOC.
     
3.
Declarations of the parties
       
Isramco declares and warrants as follows:
       
The Activity, Assets, Obligations and Rights Transferred will be transferred to
IOC free and clear of all and any attachments, mortgages, charges or other right
intended to secure payment.
       
Isramco’s board of directors has approved its entering under this Agreement.
       
There is nothing by law or agreement to prevent it from entering into this
Agreement.
       
IOC declares and warrants as follows:
       
That it is well acquainted with the Activity, Assets, Obligations and Rights
Transferred, that all the factual, legal, accounting and professional data
relating to the transaction to which this Agreement relates are known and
familiar to it, and has found them to be suitable for its needs and purposes,
and subject to the truthfulness of Isramco’s declarations above, it is
purchasing the Activity, Assets, Obligations and Rights Transferred “as is” on
the date of the execution of this Agreement, and subject as provided in this
Agreement, it neither has nor will have any claims and/or demands in connection
with the Activity, Assets, Obligations and Rights Transferred.
       
There is nothing by law or agreement to prevent it from entering into this
Agreement.
       
IOC’s board of directors as well as the Board of Naphtha has approved its
entering into this Agreement.

 
 
 

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4.
Employees
       
4.1
In consequence of the transfer of Isramco’s activity and assets to IOC as set
out in this Agreement, it is agreed between the parties that from January 1,
2008 onwards, all the Employees (set out in Appendix 2.11) will be employed by
IOC.
 
4.2
The Employees will continue to carry out their duties on the same terms and
continuity of their rights will be preserved.
       
4.3
IOC hereby undertakes that all the terms of their employment and the Employees’
remaining rights will be fully preserved in a manner whereby IOC will enter into
Isramco’s shoes as employer in all respects.

 
4.4
Isramco will transfer managers insurance policy(ies) of the Employees (to the
extent they exist) to IOC’s ownership. Isramco will pay IOC the amount of the
liability for severance pay, recreation allowance and accrued vacation in
respect of the Employees for the period culminating on December 31, 2007 that is
not covered by deposits made in severance pay funds - see also clause 2.11
above.
       
4.5
The parties undertake to sign any document and make any report that will be
required in order to preserve continuity of the Employees’ rights and the terms
of their employment.
     
5.
The Consideration and method of payment thereof
       
5.1
As set out in clause 2 above, in consideration of the Activity, Assets,
Obligations and Rights Transferred, IOC will pay Isramco the following amounts:

Asset
Consideration (in
NIS )
Participation Units (clause 2.1 above)
47,846,832
Operation (clause 2.2 above)
1,580,000
Participation rights (1%) in the Samson Licence (clause 2.3 above)
4,358
Participation rights (1%) in the Hof Permit (clause 2.4 above)
6,750
Holdings in Isramco Oil and Gas Ltd., (clause 2.5 above)
 (290,242 )
The Fixed Assets (clause 2.6 above)
360,940
The Outstanding Liabilities (clause 2.7 above)
(721,067 )
The Capital Note (clause 2.8 above)
722,300
Tradable Securities (clause 2.9 above)
3,110,500
Loans (clause 2.10 above)
 (3,403,072)
Liabilities to the Employees (clause 2.11 above)
(434,873 )
The Land (clause 2.12 above)
3,702,720
Total
52,485,146

 
 
(hereinafter: “the Consideration”)

 
5.2
The Consideration will be paid as follows:
           
5.2.1
The sum of NIS 49,781,045 ($12,906,675), will be deemed to be full repayment of
the IOC Loan (including accrued interest) in a manner whereby the IOC Loan will
be fully repaid on December 31, 2007.
           
5.2.2
The balance of the Consideration in the sum of NIS 2,704,101 ($701,089), will be
transferred at Isramco’s instruction, on December 31, 2007, to partially repay
the interest that has accrued in respect of the Naphtha Loan.

 
 
 

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5.3
Out of each amount paid according to this Agreement as repayment on account of
interest in respect of loans that were taken by Isramco, tax at source will be
deducted (if and to the extent it is required).
       
6.
Assets and Rights not Transferred to IOC

 
For the avoidance of any doubt, it is hereby agreed and declared that the
following assets/rights are not included within the scope of the Activity,
Assets, Obligations and Rights Transferred to IOC covered by this Agreement and
which will remain the exclusive property of Isramco:
 
1.
Isramco’s rights of participation in the Med Yavneh holding at the rate of
0.4584%.
 
2.
Right to receive a royalty at the rate of 5% in relation to the container
licences and grant of the Samson Licence which, as of the execution of this
Agreement, has been assigned by Oil and Gas by complete and irrevocable final
assignment to Isramco Inc.
 
3.
All the royalties of all and any kind whatsoever to which Isramco is entitled
from various oil assets in Israel.

7.
Assignment of Isramco’s undertaking in connection with the provision of a bank
guaranty:
       
Isramco declares and acknowledges that in its capacity of operator of the “Gad
1” Drill, it imported tools and parts for the purpose of the drill free of
customs duty and that it provided to Customs Collection Jaffa, a bank guaranty
of Bank Leumi le-Israel B.M. (hereinafter: “the Bank”), in the sum of NIS 1
million (hereinafter: “the Bank Guaranty”) to secure payments of customs duties
in respect of those tools and parts, if and to the extent it transpires that no
use will have been made thereof for purposes of the drilling and they will not
be re-exported. Isramco is proceeding to file the necessary reports with the
customs authorities in order to enable them to provide a release and cancel the
Bank Guaranty, and to the best of its estimation, the Bank Guaranty will be
returned and cancelled during a period not exceeding 12 months from the date of
the execution of this Agreement.
       
Within the framework of the transaction to which this Agreement relates and in
order to enable Isramco to conclude its activity in Israel and close its bank
accounts, it has been agreed between the parties that Isramco will assign to IOC
and IOC will assume Isramco’s liabilities towards the Bank in connection with
the Bank Guaranty and will sign any document that will be required for that
purpose, subject to Isramco’s indemnity undertaking set out in clause 7.3
hereof.
       
Isramco hereby finally and irrevocably undertakes to IOC to indemnify IOC in
respect of any sum or expense that IOC will be liable for in connection with the
Bank Guaranty, and the same to be paid by Isramco to IOC within 7 days of the
date of IOC’s first demand.
     
8.
Miscellaneous
       
8.1
The parties undertake to sign any document that will be required, make any
report to any competent authority and act to the extent necessary as required by
law for the purpose of performing this Agreement and transferring the Assets
Transferred from Isramco to IOC, including to the Register of Companies.
       
8.2
This Agreement encompasses everything that has been agreed between the parties
and the parties hereby acknowledge that save as herein provided, nothing has
been verbally agreed between them.
       
8.3
No amendment, modification, addition or supplement will be made to this
Agreement nor any waiver in relation to anything mentioned herein will be of any
effect unless made in writing and signed by the parties.
       
8.4
No extension and/or concession and/or waiver will affect any of the rights of
any of the parties nor will any waiver be deemed to be acquiescence or admission
nor constitute any impediment to the exercise of any rights.
       
8.5
Each party will bear the taxes and/or payments applicable to it, (to the extent
they apply by law) in respect of this Agreement.
       
8.6
The addresses of the parties for the purpose of this Agreement are as set out at
the head of this Agreement. Any notice sent by one party to the other by
registered mail will be deemed to have been received after 72 hours have elapsed
from the date of dispatch. Notices sent by fax or by messenger will be deemed to
have been received upon the transfer or delivery thereof.

 
 
 

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In witness whereof the parties have set their hands:

 
______________________
____________________________
Isramco Inc.
I.O.C - Israel Oil Company Ltd.

 

 
 
 

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Addendum

Executed in Petach Tikvah, this 1st day of January, 2008

BETWEEN:  I.O.C - Israel Oil Company Ltd.,
 
of 8 Granite St., P.O.B. 10188,

 
Petach Tikvah 49002

 
(hereinafter: "IOC”)

of the one part

AND:             Isramco Inc.,
whose address for the purpose of this Agreement is:
c/o Naphtha, at 8 Granite St., P.O.B. 10188,
Petach Tikvah 49002
 
(hereinafter: "Isramco”)

of the other part

 
WHEREAS:

 
(1)
IOC and Isramco are consolidated companies of Naphtha;
       
(2)
An agreement was signed between the parties on December 31, 2007 whereby Isramco
sold and transferred to IOC the activity in the assets, obligations and rights
of Isramco’s Israeli branch (hereinafter: “the Principal Agreement”) the
original of such Agreement being attached hereto as Appendix A.
       
(3)
Following the signature of the Principal Agreement it transpired that an error
had occurred in the method in which (in the sixth recital) it had been noted
that the IOC Loan as defined in the Principal Agreement was meant to be secured
by a charge over Jay Petroleum’s assets (hereinafter: “Jay”) whereas in practice
it was the loan that had been advanced by IOC’s parent company,  Naphtha Israel
Oil Company Ltd., (hereinafter: “Naphtha”) to Isramco that was meant to be
secured by a charge over Jay’s assets.
       
(4)
In consequence of the foregoing, the parties wish to amend the Principal
Agreement as hereinafter set forth in this Addendum to the Agreement;
       
It is therefore declared, stipulated and agreed between the parties as follows:

1.
The preamble to the Addendum to this Agreement and the Appendices thereto
constitute an integral part thereof.
     
2.
The sixth recital contained in the Principal Agreement will be replaced by the
following:  “ For the purpose of financing the Five States Transaction Isramco
took various loans including inter alia, a loan in the sum of $12 million from
IOC (hereinafter: “the IOC Loan”) and a loan in the sum of $18.5 million from
Naphtha that is meant to be secured by a charge over Jay Petroleum’s assets, a
subsidiary of Isramco in the United States (hereinafter: “the Naphtha Loan”).
3.
The seventh recital contained in the Principal Agreement will be amended in a
manner whereby the sentence: “In a manner whereby the proceeds in respect
thereof will be applied in fully repaying the IOC Loan and the interest accrued
thereon, and to partially repay the interest that has accrued in respect of the
Naphtha Loan”, will be replaced by: “In a manner whereby the proceeds in respect
thereof will be applied in partially repaying the Naphtha Loan and the interest
that has accrued in respect thereof”.
     
4.
Clause 5.2 of the Principal Agreement will be replaced by the following:
 
5.2
The Consideration will be paid as follows:

 
 
 

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The full amount of the Consideration in its dollar value ($13,865.89) will be
deemed to be partial repayment of the Naphtha Loan (including accrued interest)
in a manner whereby the amount of the Consideration mentioned will be reduced on
December 31, 2007 from the sum of the Naphtha Loan as of December 31, 2007.
     
5.
Following clause 5.3 will be added clause 5.4, as follows:
 
“5.4
IOC declares and acknowledges that it received the consent of Naphtha to that
stated in clause 5.2 above and to Isramco being released from the undertaking to
charge the Jay Assets in respect of the Naphtha Loan.”
     
6.
All the remaining terms and conditions of the Principal Agreement will remain in
full force and effect.

 
In witness whereof the parties have set their hands:
 
______________________
____________________________
Isramco Inc.
I.O.C - Israel Oil Company Ltd.

We, the undersigned, Naphtha Oil Company Ltd., hereby confirm our consent to
that stated in clause 5.2 of the Addendum to the above Agreement and hereby
finally and irrevocably acknowledge our agreement to release Isramco from the
undertaking to charge the Jay Assets in respect of the Naphtha Loan (as defined
above) in a manner whereby to the extent the charge has yet to be registered
over the Jay Assets pursuant to the loan agreement that was signed between us
and Isramco in respect of the Naphtha Loan, Isramco is hereby released from the
undertaking to register the same and if the charge has been registered, we will
sign any document that will be required to cancel and remove the same.

__________________________
Naphtha Israel Oil Company Ltd.