Exhibit 10.1


 





 


MEMORANDUM OF UNDERSTANDING 


 


This Memorandum of
Understanding (“MOU”) is executed as of June 4, 2012 between Zion Oil & Gas, Inc., a corporation duly organized
and existing under the laws of Delaware having an office at 6510 Abrams Road, Suite 300, Dallas, Texas, 75231 (“Zion Oil”)
and Lapidoth Israel Oil Prospectors Corp. Ltd., a corporation duly organized and existing under the laws of Israel having an office
at 19 Brodetsky Street, Tel-Aviv 69051, Israel (“Lapidoth”). Zion Oil and Lapidoth may be referred to individually
as a “Party” or collectively as the “Parties”.


 


1.Purpose:
The Parties acknowledge and agree that the purpose of this MOU is to provide a mutually acceptable framework for the good faith
negotiation and consummation of the transactions and agreements described in Section 2 below.


 


2.Business Relationship:
The Parties contemplate a business relationship that is intended to establish a private company to be organized under the laws
of the State of Israel (“Zion-Lapidoth Drilling”), wherein Zion Oil and Lapidoth will both hold equal amounts (i.e.
50% each) of the shareholding of Zion-Lapidoth Drilling. Funded in equal amounts by Zion Oil and Lapidoth, Zion-Lapidoth Drilling
will acquire and hold title to a drilling rig. Zion-Lapidoth Drilling’s stated business purpose will be to conduct drilling
on Zion Oil’s oil & gas interests within the State of Israel and to the extent not so utilized, to be leased out for
hire to other drilling projects in Israel. The arrangement between the Parties will include the following terms:


 


(i)A rig, suitable
and fit for drilling wells to a depth of up to 25,000 feet and costing up to a maximum of $15 Million shall be purchased by Zion
Drilling (“RIG”);


 


(ii)Zion Oil shall
retain Zion-Lapidoth Drilling to drill wells, as needed in accordance with Zion Oil’s work program. When not needed by Zion
Oil, others may retain the Rig. At all times, Zion-Lapidoth Drilling will be compensated, by Zion Oil or others, at market rates
for drilling activities;


 


(iii)The Parties will consult with
their respective accounting and other specialists as to the best way to facilitate the establishment of Zion-Lapidoth Drilling
so as to minimize the tax consequences to each of them. The parties agree that Zion-Lapidoth Drilling may be a foreign entity if
in the best interest of the Parties pursuant to accounting advice;


 


(iv)The Parties will enter into
legally binding agreements relating to the establishment and administration of Zion-Lapidoth Drilling including, without limitation,
a shareholders’ agreement defining their respective rights in Zion-Lapidoth Drilling, the composition and makeup of the board
of directors and management of Zion-Lapidoth Drilling and other related matters.


 


3.Conditions:


 


(i)Financing:
The Parties understand that the effectuation of the terms specified above is subject to the raising by Zion Oil, within 12 months
from date of this MOU, at least $10 Million in gross proceeds.


 


(ii)Inspection
& Repairs: Before purchase, the Parties shall retain an independent 3rd party expert to inspect
the Rig and provide a fitness report for the Rig and each Party shall pay one half of the inspection and report costs. Prior to
closing of the transaction the Parties shall agree on any required upgrades and repairs to cause the Rig to be fit for the purpose
for which it is to be used and the amount which each Party shall contribute for the same.


 






    	



    	 	



    



 


4.
Definitive Agreements: Upon execution of this MOU, the Parties will enter into good faith negotiation of the terms
and conditions of one or more definitive agreements to govern the business relationships described in Section 2 above (the “Definitive
Agreements”). Without limitation, the Definitive Agreements will also include the business items below and such other standard
terms and conditions for agreements of this type including appropriate legal opinions. 


 


		a)	Financing



 


		i)	Each Party provides equal shares of future money requirements
of Zion-Lapidoth Drilling.



 


		ii)	Bank Account – to require signature of representatives
of both Parties.



 


		b)	Board - Zion Oil and Lapidoth shall be entitled to
appoint equal numbers of directors. The board shall be responsible for all company operations, including hiring of staff to
operate the Rig.



 


		c)	Dividends – distributions shall be on an equal
basis.



 


		d)	Transfer of Interest



 


		i)	A Party may not transfer or otherwise dispose of its
interest in Zion Drilling, including granting a lien or pledge therein, without the prior written consent of other
Party.



 


		ii)	If a Party enters into bankruptcy or receivership
or liquidation proceeding, then the other Party shall have the first right of refusal to purchase such Party’s shares
in Zion Drilling.



  


		e)	Arbitration if dispute.



 


		f)	Zion Oil shall retain Zion-Lapidoth Drilling to drill
not less than three deep wells, which shall be the first three wells which Zion Oil drills in the State of Israel following execution
of the Definitive Agreement.



 


5. Expenses. Unless otherwise
expressly agreed in writing in each instance, each Party shall bear its own costs in connection with the preparation, negotiation
and finalization of the Definitive Agreements.


 


6.Timing. The Parties agree
to use their best efforts to enter into the Definitive Agreements by no later than 12 months from signing this MOU.


 


7.Zion Oil hereby
grants Lapidoth first rights of refusal to act as drilling contractor for any wells which Zion Oil shall drill in the State of
Israel during the period ending 12 months after the date of signature of this MOU, in accordance with Lapidoth’s 2012 price
list that was provided to Zion Oil. For the avoidance of doubt, upon purchase of the Rig, if and when concluded, this first right
of refusal shall cease.


 


8.Conditions
to close include (i) satisfaction with the results of legal, accounting, business and other due diligence investigations to be
performed by each Party and its respective advisors, including accountants, attorneys and other representatives with respect to
the other Party; (ii) negotiation and execution of a satisfactory commercial agreements which shall include the principal business
terms set out herein; (iii) the absence of any material adverse change in either Party’s condition or assets; (iv) obtaining
all necessary consents or approvals from third parties and directors and stockholders if required; and (v) fulfillment of the terms
of Section 3 above.


 






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9.Neither this
MOU nor any discussions or disclosures hereunder shall (a) be deemed a commitment to any business relationship, contract or future
dealing with the other party, or (b) prevent either party from conducting similar discussions to those hereunder; or (c) constitute,
in any way, a binding agreement or impose any legal obligation or duty. Notwithstanding the foregoing, the parties intend to be
legally bound by the terms of Sections 5, 7 - 11.


 


10.In consideration
for the considerable expenditures of time, effort and expense to be undertaken in connection with the transactions contemplated
herein documentation, neither Zion Oil nor Lapidoth will, after the date of the signing of this MOU and before the earlier of (i)
12 months from the date of this MOU or (ii) termination of this MOU by mutual agreement, (a) solicit, initiate or encourage any
new inquiries or discussions or proposals for, (b) continue, propose or enter into negotiations or discussions with respect to,
or (c) enter into any agreement or understanding providing for, establishment of a business with a third party to purchase a drilling
rig to operate within the State of Israel, without the prior written consent of the other party to this MOU (i.e. Zion Oil or Lapidoth).


 


11.In no event shall either Party
have any liability to the other with respect to claims arising out of or in connection with or resulting from this MOU whether
in contract, tort or otherwise.


 


12.Applicable Law.
This MOU and the performance hereof shall be construed and governed in accordance with the internal laws of Israel, without
reference to principles of conflict of laws. All disputes shall be settled in Israel by arbitration upon the terms to be detailed
in the Definitive Agreement.


 


In witness whereof,
the parties have executed this MOU as of the date first mentioned above.


 


 


	Zion Oil & Gas, Inc.	 	Lapidoth Israel Oil Prospectors Corp. Ltd.
	 	 	 
	/s/ Richard Rinberg	 	/s/ Jacob Luxenburg & /s/ Eli Kamar
	Richard Rinberg, CEO	 	Jacob Luxenburg, Chairman
	 	 	Eli Kamar, CEO


 






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