Document:

EXHIBIT 10.3

FORM OF ESCROW AGREEMENT

THIS ESCROW AGREEMENT, dated as of _________ between Zion Oil & Gas, Inc., a Delaware Corporation (the "Company") and _______________, a Banking Corporation organized and existing under the laws of the United States of America (the "Escrow Agent").

WITNESSETH:

The Company, pursuant to a registration statement and preliminary prospectus filed with the Securities and Exchange Commission ("SEC") on Form SB-2A dated as of January 25, 2006 (the "Prospectus") is offering securities (the "Offering") to certain qualified subscribers (the "Subscribers") consisting of shares of the Company's common stock (the "Shares"), for a purchase price of $7.00 per Share.  The aggregate subscriptions that must be received before any subscription payments will be released to the Company from the escrow created pursuant to the terms and conditions contained therein is 350,000 Shares, or $2.450,000 (the "Minimum Subscriptions Amount").  Thereafter, subscription payments will be released to the Company upon written request by the Company to the Escrow Agent.

The offering will be made on a "best efforts minimum/maximum" basis directly by the Company, and by some placement agents who hold NASD broker-dealer licenses, beginning on a day (the "Effective Date") designated by the Company promptly after being notified by the SEC that the Prospectus is effective. If the Minimum Subscriptions Amount is not received by 120 days following the Effective Date (or 120 days later if extended by the Company) the offering and sale of the Shares will terminate on such date (the "Minimum Offering Termination Date").  If the minimum is reached, then the maximum of 2,000,000 Shares or $14,000,000 may be accepted by the Company before 180 days following the Effective Date (or 60 days later if extended by the Company) (the "Maximum Offering Termination Date").  The minimum subscription is 100 Shares ($700) and all subscriptions that comply with the terms of the prospectus will be denominated in $700 increments.

NOW, THEREFORE, the Company and the Escrow Agent agree as follows:

1.  Deposits.  The Company agrees to provide the Escrow Agent, in writing, with the Effective Date promptly upon its determination.  Pursuant to the terms of the Offering, the Company will deliver to the Escrow Agent each subscription payment (a "Subscription Payment") received by the Company from a subscriber. The Subscription Payment of such subscriber will be collectively held in one escrow account by the Escrow Agent on the terms and conditions hereinafter set forth.  The Company will maintain all subscriber records and at least bi-weekly supply the Escrow Agent with a list showing each new subscriber not on any previous list with the subscriber's name, address and amount of Subscription Payment.  Each Subscription Payment received by the Company from a subscriber shall be forwarded to the Escrow Agent along with a copy of the subscription agreement signed by the subscriber, substantially in the form of Annex A hereto, (the "Subscription Agreement") setting forth the name, address, social security number and telephone number of such subscriber, the number of Shares being purchased and the purchase price being paid for same.  If the Subscription Payment is in the form of a check, it shall be enclosed with the Subscription Agreement.  

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If the Subscription Payment is to be made by wire transfer, the Subscription Agreement shall also state the name, address and telephone number of the financial institution that will be wiring such Subscription Payment.

 

Each Subscription Payment received by the Escrow Agent from the Company will be deposited and held in accordance with Section 6(a) below.  Such account will be held in the name of Zion Oil & Gas, Inc., Escrow (the "Escrow").  It is understood that all checks received by Escrow Agent are subject to clearance time and the funds represented thereby cannot be drawn upon or invested until such time as the same constitute good and collected funds.  It is additionally understood that should any checks be returned to the Escrow Agent as uncollectible, or returned because of insufficient funds, the Escrow Agent is authorized and instructed to charge expenses incurred by the Escrow Agent on such uncollected checks to the Escrow.  The Escrow Agent shall redeposit such check(s) for collection only upon the verbal instruction of the Company; however, in no instance shall the check(s) be presented for collection more than two (2) times.  Should the check(s) be uncollectible after the second presentation, the Escrow Agent, shall promptly notify the Company and hold said check(s) until the subscriber has replaced the same with a cashier's check or such other form of draft that the Company and Escrow Agent approve, at which time the Escrow Agent shall as soon as practicable return said uncollectible check(s) to the subscriber.  In the event the subscriber does not replace said check(s) with a cashier's check or such other form or draft acceptable to Escrow Agent and the Company, the Escrow Agent shall as soon as practicable return the uncollectible check to such subscriber.

2.  Acceptance or Rejection of Subscription Payment.  The Company hereby certifies that the Subscription Agreement provides that the purchase of any Shares is subject to the approval of the Company.  The Company agrees to notify the Escrow Agent in writing or telephonically with written confirmation as to which Subscriptions are being accepted and which rejected.  Subscription Payments for rejected subscriptions shall be refunded to the respective subscribers at the close of the Escrow pursuant to the procedure described in Paragraph 4 hereof, as applicable, or as otherwise directed in writing by the company.

3.  Release of Escrow Funds on Closing.  If on a Closing Date (as defined in the Prospectus) the Escrow Agent (a) holds Subscription Payments, representing subscriptions as to which the Company has notified the Escrow Agent, pursuant to paragraph 2 hereof, that the Company has accepted, and (b) has received from the Company a certificate stating that all conditions to such Closing have been met, (i.e. specifically, in the case of the Initial Closing, that the Minimum Subscription Amount has been accepted), then the Escrow Agent is authorized and instructed to make the following payments: (i) all principal amounts, and accumulated interest thereon, held by the Escrow Agent in the Escrow representing subscriptions as to which the Company has notified the Escrow Agent, pursuant to Paragraph 2 hereof, that the Company has accepted, shall be paid to the Company; (ii) all principal amounts held by the Escrow Agent in the Escrow, representing subscriptions as to which the Company has notified the Escrow Agent, pursuant to paragraph 2 hereof, that the Company has rejected, shall be paid to the subscriber.  All payments to be made by the Escrow Agent to a subscriber shall be forwarded to the last known address of the subscriber, as communicated in writing to the Escrow Agent by the Company, mailed by first class mail. All payments to be made by the Escrow Agent to the Company shall be forwarded to the Company at 6510 Abrams Road, Suite 300, Dallas, Texas 75231, or transmitted by wire transfer to such account as the Company shall direct.  

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Upon release of any funds pursuant to this Paragraph 3, the Escrow shall be closed as to the funds released; provided, however, that this Agreement shall remain in effect for further Subscription Payments received by the Escrow Agent from subscribers which shall be placed in Escrow and held by the Escrow Agent in accordance with the terms of this Agreement.

4.  Other Refunds.  If the Escrow Agent has received from the Company a certificate stating that the Offering is being terminated without the Minimum Subscription Amount having been received, then the Escrow Agent is authorized and instructed to make the following payments: (i) all principal amounts held by the Escrow Agent in the Escrow shall be paid to the subscribers of the Company; (ii) All earnings, less the expenses incurred by the Escrow Agent for uncollected checks, if any, shall be paid to the Company.  All payments to be made by the Escrow Agent to a subscriber, as communicated in writing to the Escrow Agent by the Company, will be mailed by first class mail.  All payments to be made by the Escrow Agent to the Company shall be forwarded to the Company at 6510 Abrams Road, Suite 300, Dallas, TX 75231 or transmitted by wire transfer to such account as the Company may direct.  Upon release of the funds pursuant to this Paragraph 4, the Escrow Agent's duties as Escrow Agent will cease and the Escrow shall be closed.

5.  Fees.  The Company hereby agrees that the Escrow Agent shall be entitled to an acceptance fee of  $_____ (the "Acceptance Fee"), and an annual administration fee of $_____ plus all out of pocket expenses (approved by the Company) incurred by the Escrow Agent, (the "Escrow Fee"). The Acceptance Fee is due and payable by upon execution of the Escrow Agreement. The first year's annual administration fee is due and payable ten business days after the Effective Date.  If any fee is not so paid, it shall become a charge upon the Escrowed Funds.  The Escrow Agent agrees that in the event that a subsidiary company to the Company is formed to facilitate investment in the Company, the Escrow Fee shall include services to the subsidiary Company which are the same as the services set forth herein to the Company and the Escrow Fee shall be prorated between the two companies

6. Rights, Liabilities and Indemnification of the Escrow Agent.

(a) The Escrowed Funds shall be invested by the Escrow Agent in accordance with the signed, written instructions of chairman, the President, any executive vice-president or the Vice President of Finance of the Company (the "Authorized Officers").  In the absence of written instructions from the above-named party, the Escrow Agent shall invest the Escrowed Funds in the money market mutual funds customarily utilized by the Escrow Agent's corporate trust department in the ordinary course of its corporate trust and escrow agent duties.  Such money market mutual fund is the Commerce Capital Treasury Obligations Money Market Fund. In investing the Escrowed Funds, the Escrow Agent shall rely upon the written instructions of an Authorized Officer  and the Escrow Agent shall be and hereby is relieved of all liability with respect to making, holding, redeeming or selling such investments in accordance with such instructions.  In the absence of the written investment instructions contemplated herein, for any reason whatsoever, the Escrow Agent shall be and hereby is relieved of all liability with respect to making, holding, redeeming or selling investments made in accordance with the preceding paragraph which prescribes the permissible investment vehicles for the Escrowed Funds absent written instructions from an Authorized Officer.

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Escrow Agent is and shall be under no duty to enforce the obligation of the Company to furnish written investment instructions..

(b) The Escrow Agent shall not be responsible for or be required to enforce any of the terms or conditions of any agreement between the Company and its placement agents.

(c) The parties hereto represent to the Escrow Agent that they are authorized to enter into the Escrow Agreement by their duly authorized representatives and that the Escrow Agent is entitled to rely on this representation without the need to confirm the authority of the representatives.

(d) The duties and obligations of the Escrow Agent shall be limited to and determined solely by the express provisions of this Escrow Agreement and no implied duties or obligations shall be read into this Escrow Agreement against the Escrow Agent.

(e) The Escrow Agent is not bound by and is under no duty to inquire into the terms or validity of any other agreements or documents, including any agreements or documents which may be related to, referred to in or deposited with the Escrow Agent in connection with this Escrow Agreement.

(f) The Escrow Agent shall be entitled to rely upon and shall be protected in acting in reliance upon any instruction, notice, information, certificate, instrument or other document which is submitted to it in connection with its duties under this Escrow Agreement and which the Escrow Agent in good faith believes to have been signed or presented by the proper party or parties.  The Escrow Agent shall have no liability with respect to the form, execution, validity or authenticity thereof.

 

(g) The Escrow Agent shall not be liable for any act which the Escrow Agent may do or omit to do hereunder, or for any mistake of fact or law, or for any error of judgment, or for the misconduct of any employee, agent or attorney appointed by it, while acting in good faith, unless caused by or arising from its own gross negligence or willful misconduct.

(h) The Escrow Agent shall be entitled to consult with counsel of its own selection and the opinion of such counsel shall be full and complete authorization and protection to the Escrow Agent in respect of any action taken or omitted by the Escrow Agent hereunder in good faith and in accordance with the opinion of such counsel.

(i) The Escrow Agent shall have the right at any time to resign for cause  and be discharged of its duties as Escrow Agent hereunder by giving written notice of its resignation to the parties hereto at least sixty days prior to the date specified for such resignation to take effect. Such "cause" permitting the Escrow Agent to resign shall occur upon (i) the non-payment of any fees due from the Company hereunder for thirty (30) days after written notification such non-payment from Escrow Agent; and (ii) the Company's receipt of a final, non-appealable cease and desist order from the SEC terminating the purchase and sale of the Shares in the public market place.  In addition to the forgoing, the Company shall have the right to terminate this Agreement for any reason or for no reason upon thirty (30) days written notice to the Escrow Agent.  

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All obligations of the Escrow Agent hereunder shall cease and terminate on the effective date of its resignation and its sole responsibility thereafter shall be to hold the Escrowed Funds (including accrued interest thereon), etc. for a period of thirty days following the effective date of resignation, at which time,

(j)  If a successor escrow agent shall have been appointed and written notice thereof shall have been given to the resigning Escrow Agent by parties hereto and the successor escrow agent, then the resigning Escrow Agent shall deliver the Escrowed Funds (including accrued interest thereon), etc. to the successor escrow agent; or

(k) If a successor escrow agent shall not have been appointed, for any reason whatsoever, the resigning Escrow Agent shall deliver the Escrowed Funds (including accrued interest thereon), etc. to a court of competent jurisdiction and give written notice of the same to the parties hereto. The resigning Escrow Agent shall be entitled to be reimbursed by the Company for any reasonable expenses incurred in connection with its resignation and transfer of the Escrowed Funds, etc., pursuant to and in accordance with the provisions of this section.

(l) The Company agrees to indemnify and hold the Escrow Agent harmless from and against any and all liabilities, causes of action, claims, demands, judgments, damages, costs and expenses (including reasonable attorneys fees and expenses) that may arise out of or in connection with the Escrow Agent's good faith acceptance of or performance of its duties and obligations under this Escrow Agreement.

(m)  In the event that the Escrow Agent shall be uncertain as to its duties or rights hereunder or shall receive instructions with respect to the Escrow Fund which, in its sole discretion, are in conflict either with other instructions received by it or with any provision of this Agreement, the Escrow Agent shall have the absolute right to suspend all further performance under this Escrow Agreement (except for the safekeeping of the Escrow Fund) until the resolution of such uncertainty or conflicting instructions to the Escrow Agent's sole satisfaction by final judgment of a court of competent jurisdiction, joint written instructions from all of the other parties hereto, or otherwise.

(n) In the event that any controversy arises between one or more of the parties hereto or any other party with respect to this Escrow Agreement or the Escrow Fund, the Escrow Agent shall not be required to determine the proper disposition of such controversy or the proper disposition of the Escrow Fund and shall have the absolute right, in its sole discretion, to deposit the Escrow Fund with the Clerk of a court of competent jurisdiction, file a suit in interpleader and obtain an order from the court requiring all parties involved to litigate in such court their respective claims arising out of or in connection with the Escrow Fund.  Upon the deposit by the Escrow Agent of the Escrow Fund with the Clerk of a court of competent jurisdiction in accordance with this provision, the Escrow Agent shall be relieved of all further obligations and released from all liability hereunder.  

(o) Neither this Escrow Agreement, nor any other agreement between the Company and the Escrow Agent shall be deemed to create a joint venture between the Escrow Agent and the Company.  Nor shall the Escrow Agent be considered the alter ego of the Company by virtue of this Agreement, or any other agreement.

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7.  Modification, Amendment, Rescission.  No rescission, modification, amendment, supplement or change of this Escrow Agreement shall be valid or in effect unless notice thereof is given to the Escrow Agent in writing by the Company and accepted by the Escrow Agent.

8.  Successors and Assigns.  The provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors or assigns.

9.  Copies.  This Escrow Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

10.  Notices.  All notices, instructions and other communications under this Escrow Agreement shall be in writing except as otherwise specified herein and shall be deemed duly given if sent by (i) confirmed facsimile transmission or (ii) certified or registered mail, postage prepaid, return receipt requested and addressed as follows:

(a)  If to the Escrow Agent:
_______________

_______________

_______________

_______________

Fax Number:  

(b) If to the Company:
Zion Oil & Gas, Inc.

Attn:  Vice-President of Finance

6510 Abrams Road, Suite 300

Dallas, TX 75231  

Fax Number: 214-221-6510

11.Applicable Law.  This Escrow Agreement shall be governed by and construed in accordance with the laws of the United State of America.

IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement on the day and year first above written.

 

ZION OIL & GAS, INC.                                                       

By:                                                  

Title:                                                

____________________

By:                                              

Title: 

6

ANNEX A

Zion Oil & Gas, Inc.

SUBSCRIPTION AGREEMENT

 

The Investor named below, by payment of a wire transfer or check payable to ZION OIL & GAS, INC.  ESCROW ACCOUNT, hereby subscribes for shares of common stock, $.01 par value ("the Shares") indicated below (minimum purchase of 100 shares at a purchase price of $7.00 per Share) of Zion Oil & Gas, Inc. Shares must be purchased in increments of $700. By such payment, the named Investor acknowledges receipt of the Prospectus and any amendment, the terms of which govern the investment in the Shares. 

 

A.  INVESTMENT:

(1) No. of Shares purchased _________.  Dollar Amount: $___________ 

(2) [  ]Initial Purchase; or[  ]Additional Purchase

(3) [  ]Check Payment Enclosed:  Number:_________ Date:___/___/____; or

(4) [  ]Wire Transfer:  Sending Bank:______________________Wire #:_________ Date:___/___/____

Address_____________________________________Phone #_______________

 

B.  REGISTRATION: 

(1)  Registered Owner:[  ]Mr. [  ]Mrs.[  ]Ms.  ]Dr. [  ]Other _______________________________

 

Name:_______________________________________________________________________________

 

(2)  Co-owner: [  ]Mr. [  ]Mrs.[  ]Ms.[  ]Dr. [  ]Other _____________________________________

 

Name:_______________________________________________________________________________

 

(3)  Mailing Address: __________________________________________________________________

 

(4)  Residence Address (if different from above):_____________________________________________ 

 

(5)  Telephone#:(Home)(_____) _____ - ________ (Office) (_____) _____ - ________________

 

(6) Email Address:_____________________________________________________________________

 

(7)  Birth Date:______ /______ /____(8)Birth Date Co-Owner_____/_____/________

 

(9)  Please indicate Citizenship Status: [  ]U.S. Citizen[  ]Other_________________________

 

(10)Social Security (National Identity) Number:___________________________________________

 

(11) Co-Owner:_______________________________________________________________________

 

Corporate or Custodial Taxpayer ID#: __________________________________________________

 

C.  OWNERSHIP:[  ]Individual Ownership  [  ]IRA or Keogh  [  ]Joint Tenants with Rights of Survivorship  [  ]Trust/Date of Trust Established Pension/Trust  ___ / ___ / ___  (S.E.P.)

[  ]Tenants in Common   [  ]Tenants by the Entirety  [  ]Corporate Ownership  [  ]Partnership

[  ]Other _____________________________________________________________________________ 

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Zion Oil & Gas, Inc.--Subscription Agreement, page 2

D.  SIGNATURES: By signing below, I/we represent that I/we have relied on the information set forth in the Prospectus, as and if amended, and on no other statement whatever, whether written or oral. 

 

Signatures - Registered Owner: _______-____________Co-Owner: _____________________________

 

	Print Names of Custodian or Trustee:

 

_____________________________________________________________  Date:__________________ 

 

Authorized Signature: ________________________Witness Signature:  __________________________

 

F.  RETURN OF PAYMENT SHOULD BE SENT TO (IF DIFFERENT FROM REGISTERED OWNER):

Name: _________________________________c/o: __________________________________________

 

Address: _____________________________________________________________________________

Account #___________________________Phone: (_____) ______ - _____________

 

G.  BENEFICIAL OWNER(S): All reports and financial statements will normally be sent to the registered owner at the address in Section B. If reports and financial statements are to be sent to the Beneficial Owner of an IRA or Keogh, insert name of the Beneficial Owner. 

 

Name of Beneficial Owner Only: _______________________________Phone: (___)___- ___________

 

Address: _____________________________________________________________________________

 

H.   BROKER-DEALER/REGISTERED REPRESENTATIVE DATA (broker-dealer use only): 

 

Broker-Dealer NASD Firm Name: ________________________Telephone Number: (___)___- _______

 

Main Office Address: __________________________________________________________________

 

Authorized Signature: ______________________________________________Date: ______________

 

Print or Type Name of Registered Representative:____________________________________________

 

Signature: _________________________________________________Phone: (__)______- _________

 

Branch Office Address: _________________________________________________________________

SEND TO:Network 1 Financial Securities, Inc.ACCEPTED:

Attn:  Corporate SecuritiesZION OIL & GAS, INC.

2 Bridge Avenue, Penthouse Suite

Red Bank, NJ  07701By:_______________________

Phone (800) 886-7007       Fax (732) 758-6671Title:Date:

 

8EXHIBIT10-5_EMPAGRS

 

 

 

 

 

 

 

EXHIBIT 10.5

EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS

 

 

	
(i)
	
Employment Agreement dated as of January 1, 2004, between Zion Oil & Gas, Inc. and John M. Brown

	
(ii)
	
Employment Agreement dated as of January 1, 2004, between Zion Oil & Gas, Inc. and Eugene A. Soltero, as supplemented October 1, 2004

	
(iii)
	
Employment Agreement dated as of January 1, 2004, between Zion Oil & Gas, Inc. and Glen H. Perry

	
(iv)
	
Retention Agreement dated as of January 1, 2004, between Zion Oil & Gas, Inc. and Philip L. Mandelker

	
(v)
	
Employment Agreement dated as of October 1, 2005, between Zion Oil & Gas, Inc. and David Patir

 

exhibit 10.5 (i)

Personal Employment Agreement (John Brown)

This Personal Employment Agreement (the "Agreement") is entered into as of the 1st day of January 2004 (the "Effective Date"), by and among Zion Oil & Gas, Inc., a Delaware corporation with offices at 6510 Abrams Road, Suite 300, Dallas, Texas, (in its own name and as successor in interest of Zion Oil & Gas, Inc., a Florida Corporation, the "Company") and John M. Brown of 600 St. Emelion Ct., Irving, Texas, (the "Employee").

WHEREAS, the Company was established in April 2000 by the Employee for the purpose of engaging in oil and gas exploration and production in Israel; and

WHEREAS, since its establishment, the Employee has been serving as Chairman and Chief Executive Officer of the Company at the pleasure of the Board of Directors of the Company (the "Board") and on terms set from time to time by resolution of the Board; and

WHEREAS, the terms of retention of the Employee for the five-year period commencing on the effective date hereof were incorporated in a letter of intent dated September 2, 2003 and ratified by the Board on November 10, 2003; and

WHEREAS, the Company and Employee desire to regularize their relationship and, in that context, the Company desires to continue to engage the Employee and the Employee desires to continue to serve the Company in the capacity of Chairman and Chief Executive Officer in accordance with the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises, covenants, conditions, representations and warranties set forth herein, and intending to be legally bound hereby, the parties agree as follows:

1.  Appointment; Extent and Nature of Duties

1.1  Appointment and Duties. The Employee shall be employed as Chairman and Chief Executive Officer of the Company. The Employee shall perform the duties, undertake the responsibilities and exercise the authority customarily performed, undertaken and exercised by persons situated in a similar capacity. The Employee shall be under the direct supervision, and comply with the directives, of the Board of the Company.

1.2  Extent of Services. The Employee shall be employed on a full-time basis and shall devote his entire business time, attention and efforts to the performance of his duties and responsibilities under this Agreement and the business and affairs of the Company. 

1.3  Charitable Trusts. The Company has initiated the establishment of two charitable trusts or equivalent not-for-profit entities, one to be established in Israel and one to be established in the United States or such other jurisdiction as may be determined by the Board (the "Charitable Trusts"), to each of which the Company intends to assign or transfer the equivalent of a 3% overriding royalty or equivalent net profits interest. The Employee shall bear direct executive responsibility for and represent the Company in all matters concerning the establishment and organization of the Charitable Trusts. In establishing the Charitable Trusts, the Company shall take all steps necessary to appoint the Employee as the Chairman of the board of trustees or board of directors or equivalent governing body as may be established to supervise the activities of the Charitable Trusts (the "Governing Bodies"). Nothing in the Agreement shall be deemed to estop the Employee from receiving compensation from either or both of the Charitable Trusts in such manner and amounts as shall be determined in accordance with the organizational documentation of each of the Charitable Trusts. The Employee's term as Chairman of the Governing Bodies shall not be coextensive with the Term of this Agreement, as defined below, and the Company shall take all steps in connection with establishing the Charitable Trusts to provide in their organizational documents that the Employee's appointment as Chairman of the Governing Bodies shall be for such 

period as he is competent, physically and mentally, to serve as Chairman, and is not guilty of willful misconduct of any nature that would disqualify him to serve in the capacity of chairman or a member of the governing body of a not-for-profit, charitable organization.

2.  Term and Termination

2.1  Term. The initial term of employment under this Agreement shall be for the period commencing on the Effective Date and ending on December 31, 2008 (the "Initial Term"). Thereafter, the term of Employee's employment under this Agreement shall automatically be extended for additional periods of one (1) year (each an "Additional Term") at the end of the Initial Term and of each Additional Term, unless either party has given notice to the other of its intention not to extend at least one hundred eighty (180) days prior to the expiration of the Initial Term or any Additional Term; provided, however, that following the Employee's having attained the age of seventy (70), the Term of this Agreement, if still in effect, shall not be automatically extended upon the expiration of the applicable Additional Term, but shall be extended for additional one year terms only upon the mutual agreement of the Company and the Employee annually no later than ninety (90) days prior to the end of the Additional Term then in effect. (The Initial Term and, if the Initial Term is extended, any and all Additional Terms, the "Term").

2.2  Termination by the Company. Notwithstanding the aforesaid, the Employee's employment may be terminated under the following circumstances:

2.2.1  For Disability. The Company may, upon ninety (90) days prior written notice, terminate Employee's employment after having established the Employee's Disability. For purposes of this Agreement, "Disability" means a physical or mental infirmity which impairs the Employee's ability to substantially perform his duties pursuant to this Agreement which infirmity continues for a period of at least 120 days in any 365 day period. Upon termination for disability, the Company shall continue to pay Employee all salary and benefits hereunder for the remainder of the Term, less any disability insurance payments received by Employee.

2.2.2.    For  Cause. The Company may terminate the Employee's employment for Cause upon written notice to the Employee in which notice the basis for termination shall be set forth. A termination for "Cause" is a termination due to a serious breach of trust, including, but not limited to, theft, embezzlement, self-dealing, prohibited disclosure to unauthorized persons or entities of confidential or propriety information of or relating to the Company or the engaging by Employee in any prohibited business competitive with the business of the Company and its subsidiaries, affiliates or associated entities. No termination for Cause shall be effective except subject to the final, non-appealable judgment of a court of competent jurisdiction to the effect that Employee has committed a serious breach of trust as aforesaid. Except if and to the extent otherwise determined by a court of competent jurisdiction, the Employee shall be entitled to the compensation and benefits provided for under this Agreement for the period prior to the termination of the Employee's employment under this section.

2.2.3  Termination Other Than For Cause. The Company may terminate the employment of the Employee other than for Cause at its discretion and at any time on ninety (90) days prior written notice.

2.3  Termination by Employee. Employee may terminate this Agreement and his employment relationship with the Company at his discretion and at any time on ninety (90) days prior written notice.

2.4  Relationship during Notice Period

2.4.1  For purposes hereof, the term "Notice Period" shall mean the period between the giving of any Notice of Termination and the effective date of such notice as provided by sections 2.2 and 2.3 above or between the date of notice of intent not to extend the Term and the date of termination of the Term as provided for in section 2.1 above.

2.4.2  During any Notice Period pursuant to section 2.2.3 above, the Employee shall continue to work and fulfill his duties, hereunder, as an Employee of the Company; provided, however, that the Company shall 

have the right in its discretion to ask the Employee to cease working at the premises of the Company or to cease to work during all or any part of the Notice Period, in which case and without derogating from the Employee's right to Compensation pursuant to sections 2.5.1 and 2.5.2 below to the extent applicable, the Company shall redeem such portion of the Notice Period for which the Company shall have waived its right to the services of the Employee (the "Waived Period") by payment to Employee of an amount equal to Employee's Salary for the Waived Period, plus such amounts to which the Company is obligated pursuant to sections 4 and 5 below.

2.4.3  In the event Employee continues to work during the Notice Period, he shall cooperate with the Company to ensure an orderly transfer of his responsibilities.

2.4.4  In the event the Employee gives notice of termination pursuant to section 2.3 above or of his intention not to extend the Term pursuant to section 2.1 above, and does not continue to work during all or any part of the Notice Period, the Employee shall forfeit his salary for said portions of the Notice Period during which he does not work. The Company shall have the right to deduct such amount from all and any monies due and owing the Employee from the Company.

2.5  Compensation in the Event of Termination

2.5.1  Termination Other Than for Cause or Disability. Without derogating from the rights of the Employee to compensation during the Notice Period as provided in section 2.4 above, the Employee shall be entitled to compensation in the event of (a) termination or of (b) failure to extend the Term of this Agreement by the Company prior to the Employee's attaining the age of seventy (70), other than for Cause or due to Disability, in an amount equal to:

(a)  all sums, including Salary pursuant to section 3 below and  Employee Benefits as provided in section 4.1 below, to which Employee would otherwise have been entitled if he had remained in the employ of the Company for the portion of the Term during which this Agreement would have remained in effect but for its termination as aforesaid, and 

(b)  an amount equal to six (6) monthly Base Salaries, as defined in section 3 below.

2.5.2  Change of Control. In the event of (a) termination or of (b) failure to extend the Term of this Agreement prior to the Employee's attaining the age of seventy (70), other than for Cause or due to Disability, within one (1) year of the completion of a Business Combination as defined in Article Tenth of the Company's Amended and Restated Certificate of Incorporation, then in addition to any rights of the Employee during the Notice Period as provided in section 2.4 and pursuant to section 2.5.1 above, the Employee shall be entitled to compensation in an amount equal to thirty six (36) monthly Base Salaries.

3.  Salary

As compensation for the Employee's services hereunder, the Company shall pay the Employee a monthly gross salary (the "Salary") of US $10,000 (US $120,000 annually) (as such may be increased from time to time by decision of the Board, the "Base Salary"), payable to Employee on the first business day of each month during the term of the Employee's engagement hereunder in arrears for the month just ended.

4.  Employee Benefits

4.1  Insurance. Commencing January 1, 2004, the Company shall purchase or participate in the purchase for the benefit of the Employee an insurance package consisting of medical insurance, life insurance and long term disability insurance of such nature and providing such coverage as the Employee may request, provided that in no event shall the cost to the Company of the premiums for such insurance exceed US $2,000 per month. Except if the Employee specifically requests otherwise, the Company may fulfill its obligations hereunder by providing insurance coverage of the Employee in any group life or group health plan maintained by the Company for its employees based in the United States.

4.2  Vacation. The Employee shall be entitled to an annual vacation of twenty three (23) working days at full pay. Vacation days may be accumulated for two (2) years, after which they must be used or redeemed; provided that accumulation of vacation days in excess of forty six  (46) days may be approved by the Board in its discretion.

4.3  Sick Pay

(a)  The Employee shall be entitled to up to thirty (30) days per year of fully paid sick leave, against a doctor's confirmation, which leave can be accumulated for a period of up to a maximum of five (5) years; provided, however, that the Employee shall not be entitled to sick leave payment to the extent already covered by any insurance component of any plan established by or for the benefit of the Employee pursuant to section 4.1 above. 

(b)  The Employee shall not for any reason or in any circumstances be entitled to redeem any accumulated but unused sick leave upon termination of his employment under this Agreement.

5.  Additional Benefits

5.1  Cellular Phone. Commencing January 1, 2004, the Company shall provide Employee with a Company cellular phone for Company business. Until such time as the Company purchases or leases cellular phones on its own account, the Company shall reimburse the Employee his expenses in maintaining and using one cellular phone (one number). 

5.2  Organizational Dues. Commencing January 1, 2004, the Company shall reimburse Employee periodic membership dues for the professional and other organizations and societies the maintenance of which is hereby acknowledged to be connected with and necessary for the proper performance of the Employee's duties under this Agreement, including: 

(a)  One businessman's luncheon club

(b)  One golf or fitness club

(c)  The Dallas International Chamber of Commerce

(d)  additional as may from time to time be approved by the Board.

 

5.3  Expenses. The Employee shall be entitled to be reimbursed for all reasonable expenses incurred by him in connection with the performance of his duties hereunder in accordance with the expense reimbursement policy adopted by the Board or with the prior approval of the Company's Management Executive Committee.

6.  Long-Term Management Incentive Plan

The Company has resolved to establish a long-term management incentive plan, which may be structured as an employee's royalty pool, to be funded by the equivalent of a 1.5% overriding royalty or equivalent net profits interest (after pay-out calculated on a well by well basis) (the "Plan"). Upon its establishment, the Employee shall be granted a 10% (ten percent) interest in Plan income attributable to wells drilled (no matter when drilled) on any oil and gas property acquired by the Company prior to the end of the Term, or earlier termination of this Agreement, subject to the terms and conditions of the Plan.  To the extent less than 100% of the interests in the Plan with respect to a single well have been awarded at the time the well is spudded, Employee shall share pro-rata with the other Plan participants in the excess unawarded amounts.

7.  Propriety Information

7.1  The Employee acknowledges and agrees that, in the course of his employment by the Company, he will have access to confidential and propriety information of the Company regarding, without limitation, the business, financial, research, exploratory, engineering, production, marketing and sales activities of the 

Company. Such information, whether documentary, written, oral or computer generated, shall be deemed to be and referred to as "Proprietary Information".

7.2  Proprietary Information shall be deemed to include any and all proprietary information disclosed by or on behalf of the Company and irrespective of form, but excluding information that: (i) was known to the Employee prior to his association with the Company and can be so proven; (ii) shall have appeared in any printed publication or patent or shall have become a part of the public knowledge except as a result of a breach of this Agreement by the Employee; (iii) shall have been received by the Employee from a third party having no obligation to the Company; (iv) reflects general skills and experience gained during the Employee's engagement by the Company; or (v) reflects information and data generally known within the industries or trades in which the Company transacts business.

7.3  The Employee agrees and declares that all Proprietary Information, patents and other rights in connection therewith shall be the sole property of the Company and its assigns. At all times, both during his engagement by the Company and for a period of five (5) years after its termination, the Employee will keep in confidence and trust all Proprietary Information, and the Employee will not use or disclose any Proprietary Information or anything relating to it without the written consent of the Company, except as may be necessary in the ordinary course of performing the Employee's duties hereunder and in the best interests of the Company.

7.4  Upon termination of his employment with the Company, the Employee will promptly deliver to the Company all documents and materials of any nature pertaining to his work with the Company, and he will not take with him any documents or materials or copies thereof containing any Proprietary Information.

7.5  The Employee recognizes that the Company received and will receive confidential or proprietary information from third parties subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. At all times, both during his employment and after its termination, the Employee undertakes to keep and hold all such information in strict confidence and trust, and he will not use or disclose any of such information without the prior written consent of the Company, except as may be necessary to perform his duties as an employee of the Company and consistent with the Company's agreement with such third party. Upon termination of his employment with the Company, Employee shall act with respect to such information as set forth in Section 7.4 mutatis mutandis.

7.6  The Employee's undertakings in this section 7 shall remain in full force and effect in accordance with their terms after termination of this Agreement or any renewal thereof.

8.  Non-Competition

8.1  The Employee agrees and undertakes that he will not, so long as he is employed by the Company and for a period of six (6)  months following termination of his employment for whatever reason, directly or indirectly, as owner, partner, joint venturer, stockholder, employee, broker, agent, principal, corporate officer, director, licensor or in any other capacity whatever engage in, become financially interested in, be employed by, or have any connection with any business or venture that is engaged in any activities competing with the Company in the field of petroleum exploration, production and marketing in Israel or any other region or territory in which the Company is conducting petroleum exploration, production or marketing activities; provided, however, that the Employee may own securities of any corporation or other entity which is engaged in such business and is publicly owned and traded but in an amount not to exceed at any one time one percent (1%) of any class of stock or securities of such entity so long as he has no active role therein as director, employee, consultant or otherwise, unless otherwise specifically approved by the Board.

8.2  The Employee agrees and undertakes that during the period of his employment and for a period of twelve (12) months following termination, he will not, directly or indirectly, including personally or in any business in which he is an officer, director or shareholder, for any purpose or in any place, employ any 

person employed by the Company or retained by the Company as a consultant on the date of such termination or during the preceding six (6) months.

8.3  If any one or more of the terms contained in this section 8 shall for any reason be held to be excessively broad with regard to time, geographic scope or activity, the term shall be construed in a manner to enable it to be enforced to the extent compatible with applicable law.

9.  Indemnification and Insurance

9.1  The Company shall indemnify the Employee against, and hold him harmless, from any and all judgments, penalties (including excise and similar taxes), fines, settlements and expenses (including attorney's fees and court costs) actually and reasonably incurred by him in connection with any action, suit or proceeding whether civil, criminal, administrative, arbitrative or investigative, any appeal in such an action, suit or proceeding whether or not by or in the right of the Company to which Employee is or may be made a party or is or shall be threatened to be made a party by reason of the fact that the Employee is an officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another corporation, partnership, joint venture, sole proprietorship, trust, nonprofit entity, employee benefit plan or other enterprise, to the fullest extent permitted by any applicable law, and such indemnity shall inure to the benefit of the heirs, executors and administrators of the Employee.

9.2  The right to indemnification under this section 9 shall include the Employee's right to be paid by the Company the expenses incurred in defending any such proceeding in advance of its disposition; provided, however, that, if the applicable law requires, the payment of such expenses incurred by the Employee in advance of the final disposition of a proceeding shall be made only upon delivery to the Company of an undertaking, by or on behalf of the Employee, to repay all amounts so advanced if it shall ultimately be determined that the Employee is not entitled to be indemnified under this section 9 or otherwise.

9.3  The Company shall purchase and maintain insurance coverage in an amount to be determined from time to time by the Board taking into account the nature and extent of the Company's activities and the cost of coverage, but in no event less than that maintained by the Company for any other director or executive officer of the Company, on behalf of the Employee both in his capacity as an officer, director and employee of the Company and, if he so serves at the request of the Company, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any legally insurable liability asserted against the Employee and incurred by the Employee in any such capacity, or arising out of the Employee's status as such.

10.  Taxes

Any and all taxes, fees and other liabilities (as may apply from time to time) in connection with the Salary (section 3 above) or with Employee Benefits (section 4 above) or with the Additional Benefits (section 5 above) or with any other payment to which the Employee is entitled under this Agreement will be borne by the Employee and, except as otherwise expressly set out in this Agreement, the Employee shall be solely liable for all such taxes, fees and other liabilities.

11.  Mutual Representations

11.1  The Employee represents and warrants to the Company that the execution and delivery of this Agreement and the fulfillment of the terms hereof (i) will not constitute a default under or conflict with any agreement or other instrument to which he is a party or by which he is bound, and (ii) do not require the consent of any person or entity.

11.2  The Company represents and warrants to the Employee that this Agreement has been duly authorized, executed and delivered by the Company and that the fulfillment of the terms hereof (i) will not 

constitute a default under or conflict with any agreement or other instrument to which it is a party or by which it is bound, and (ii) do not require the consent of any person or entity.

11.3  Each party hereto warrants and represents to the other that this Agreement constitutes the valid and binding obligation of such party enforceable against such party in accordance with its terms subject to applicable bankruptcy, insolvency, moratorium and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless if enforcement is sought in proceeding in equity or at law).

12.  Notice; Addresses

12.1  The addresses of the parties for purposes of this Agreement shall be the addresses set forth above, or any other address which shall be provided by due notice given in accordance with the provisions of section 12.2 below.

12.2  All notices in connection with this Agreement shall be sent by registered mail or delivered by hand or courier service to the addresses set forth above, and shall be deemed to have been delivered to the other party at the earlier of the following two dates: (a) if sent by registered mail or courier service, as aforesaid, three (3) business days from the date of mailing; and (b) if delivered by hand - upon actual delivery or proffer of delivery (in the event of a refusal to accept it) at the address of the addressee. Delivery by cable, telex, facsimile or other electronic communication shall be sufficient and be deemed to have occurred upon electronic confirmation of receipt, with copy sent by first class mail.

13.  Miscellaneous

13.1  Headings are included for reference purposes only and are not to be used in interpreting this Agreement.

13.2  No failure, delay or forbearance of either party in exercising any power or right hereunder shall in any way restrict or diminish such party's rights and powers under this Agreement, or operate as a waiver of any breach or nonperformance by either party of any terms or conditions hereof.

13.3  No determination of the invalidity or unenforceability of any provision of this Agreement shall affect the remaining provisions hereof unless the business purpose of this Agreement is substantially frustrated thereby.

13.4  This Agreement is personal and non-assignable by the Employee. It shall inure to the benefit of any corporation or other entity with which the Company shall merge or consolidate or to which the Company shall lease, sell or otherwise transfer all or substantially all of its assets, and may be assigned by the Company to any affiliate of the Company or to any corporation or entity with which such affiliate shall merge or consolidate or which shall lease or acquire all or substantially all of the assets of such affiliate. Any assignee must assume all the obligations of the Company hereunder, but such assignment and assumption shall not serve as a release of the Company.

13.5  This Agreement is the only agreement between the parties on the subject matter of this Agreement and supersedes and replaces all other agreements, whether written or oral, between the parties, concerning the subject matter of this Agreement, including without limitation that certain letter dated September 2, 2003 from the Company to the Employee "Re. "Executive Employment Agreement"; provided, however, that nothing herein shall be deemed to affect the rights of either of the parties hereto with respect to the services rendered by the Employee to or on behalf of the Company during any period prior to the Effective Date.

13.6    It is hereby agreed between the parties that the laws of the State of Texas shall apply to this Agreement and that the sole and exclusive place of jurisdiction in any matter arising out of or in connection with this Agreement shall be in the courts of appropriate jurisdiction in the County of Dallas, Texas.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

	
ZION OIL & GAS, INC.
	
	

	
	
	
/s/ John M. Brown

	
By:
	
/s/ E A Soltero
	
	
John M. Brown

	
Name:
	
Eugene Soltero
	
	

	
Title:
	
President
	
	

 

EXHIBIT 10.5 (ii)

Personal Employment Agreement (Eugene Soltero)

This Personal Employment Agreement (the "Agreement") is entered into as of the 1st day of January 2004 (the "Effective Date"), by and among Zion Oil & Gas, Inc., a Delaware corporation with offices at 6510 Abrams Road, Suite 300, Dallas, Texas, U.S.A. (in its own name and as successor in interest of Zion Oil & Gas, Inc., a Florida Corporation, the "Company") and Eugene A. Soltero of 7127 Hillgreen Dr., Dallas, Texas, U.S.A. (the "Employee").

WHEREAS, the Company was established in April 2000 for the purpose of engaging in oil and gas exploration and production in Israel; and

WHEREAS, since October 2001, the Employee has been serving as President and Chief Operating Officer of the Company at the pleasure of the Board of Directors of the Company (the "Board") and on terms set from time to time by resolution of the Board; and

WHEREAS, the terms of retention of the Employee for the five-year period commencing on the effective date hereof were incorporated in a letter of intent dated September 2, 2003 and ratified by the Board on November 10, 2003; and 

WHEREAS, the Company and Employee desire to regularize their relationship and, in that context, the Company desires to continue to engage the Employee and the Employee desires to continue to serve the Company in the capacity of President, Chief Operating Officer and, on an interim basis, Chief Financial Officer in accordance with the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises, covenants, conditions, representations and warranties set forth herein, and intending to be legally bound hereby, the parties agree as follows:

1.  Appointment; Extent and Nature of Duties

1.1  Appointment and Duties. The Employee shall be employed as President and Chief Operating Officer of the Company. Until such time as the Company retains the services of a Chief Financial Officer, the Employee shall also serve in such capacity. The Employee shall perform the duties, undertake the responsibilities and exercise the authority customarily performed, undertaken and exercised by persons situated in a similar capacity and as may be further defined from time to time by the Board or Chief Executive Officer. The Employee shall be under the direct supervision, and comply with the directives of, the Chief Executive Officer and the Board of the Company.

1.2  Extent of Services. The Employee shall be employed on a full-time basis and shall devote his entire business time, attention and efforts to the performance of his duties and responsibilities under this Agreement and the business and affairs of the Company. 

2.  Term and Termination

2.1  Term. The initial term of employment under this Agreement shall be for the period commencing on the Effective Date and ending on December 31, 2008 (the "Initial Term"). Thereafter, the term of Employee's employment under this Agreement shall automatically be extended for additional periods of one (1) year (each an "Additional Term") at the end of the Initial Term and of each Additional Term, unless either party has given notice to the other of its intention not to extend at least one hundred eighty (180) days prior to the expiration of the Initial Term or any Additional Term; provided, however, that following the Employee's having attained the age of seventy (70), the Term of this Agreement, if still in effect, shall not be automatically extended upon the expiration of the then applicable Additional Term, but shall be extended for additional one (1) year terms only upon the mutual agreement of the Company and the Employee annually no later than ninety (90) days prior to the end of the Additional Term then in effect. (The Initial Term and, if the Initial Term is extended, any and all Additional Terms,  the "Term").

2.2  Termination by the Company. Notwithstanding the aforesaid, the Employee's employment may be terminated under the following circumstances:

2.2.1  For Disability. The Company may, upon ninety (90) days prior written notice, terminate Employee's employment after having established the Employee's Disability. For purposes of this Agreement, "Disability" means a physical or mental infirmity which impairs the Employee's ability to substantially perform his duties pursuant to this Agreement which infirmity continues for a period of at least 120 days in any 365 day period.  Upon termination for disability, the Company shall continue to pay Employee all salary and benefits hereunder for the remainder of the Term, less any disability insurance payments received by Employee.

2.2.2  For  Cause. The Company may terminate the Employee's employment for Cause upon written notice to the Employee in which notice the basis for termination shall be set forth. A termination for "Cause" is a termination due to a serious breach of trust, including, but not limited to, theft, embezzlement, self-dealing, prohibited disclosure to unauthorized persons or entities of confidential or propriety information of or relating to the Company or the engaging by Employee in any prohibited business competitive with the business of the Company and its subsidiaries, affiliates or associated entities. No termination for Cause shall be effective except subject to the final, non-appealable judgment of a court of competent jurisdiction to the effect that Employee has committed a serious breach of trust as aforesaid. Except if and to the extent otherwise determined by a court of competent jurisdiction, the Employee shall be entitled to the compensation and benefits provided for under this Agreement for the period prior to the termination of the Employee's employment under this section.

2.2.3  Termination Other Than For Cause. The Company may terminate the employment of the Employee other than for Cause at its discretion and at any time on ninety (90) days prior written notice.

2.3  Termination by Employee. Employee may terminate this Agreement and his employment relationship with the Company at his discretion and at any time on ninety (90) days prior written notice.

2.4  Relationship during Notice Period

2.4.1  For purposes hereof, the term "Notice Period" shall mean the period between the giving of any Notice of Termination and the effective date of such notice as provided by sections 2.2 and 2.3 above or between the date of notice of intent not to extend the Term and the date of termination of the Term as provided for in section 2.1 above.

2.4.2  During any Notice Period pursuant to section 2.2.3 above, the Employee shall continue to work and fulfill his duties, hereunder, as an Employee of the Company; provided, however, that the Company shall have the right in its discretion to ask the Employee to cease working at the premises of the Company or to cease to work during all or any part of the Notice Period, in which case and without derogating from the Employee's right to Compensation pursuant to sections 2.5.1 and 2.5.2 below to the extent applicable, the Company shall redeem such portion of the Notice Period for which the Company shall have waived its right to the services of the Employee (the "Waived Period") by payment to Employee of an amount equal to Employee's Salary for the Waived Period, plus such amounts to which the Company is obligated pursuant to sections 4 and 5 below.

2.4.3  In the event Employee continues to work during the Notice Period, he shall cooperate with the Company to ensure an orderly transfer of his responsibilities.

2.4.4  In the event the Employee gives notice of termination pursuant to section 2.3 above or of his intention not to extend the Term pursuant to section 2.1 above, and does not continue to work during all or any part of the Notice Period, the Employee shall forfeit his salary for said portions of the Notice Period during which he does not work. The Company shall have the right to deduct such amount from all and any monies due and owing the Employee from the Company.

2.5  Compensation in the Event of Termination

2.5.1  Termination Other Than for Cause or Disability. Without derogating from the rights of the Employee to compensation during the Notice Period as provided in section 2.4 above, the Employee shall be entitled to compensation in the event of (a) termination or of (b) failure to extend the Term of this Agreement by the Company prior to the Employee's attaining the age of seventy (70), other than for Cause or due to Disability, in an amount equal to:

(a)  all sums, including Salary pursuant to section 3 below and  Employee Benefits as provided in section 4.1 below, to which Employee would otherwise have been entitled if he had remained in the employ of the Company for the portion of the Term during which this Agreement would have remained in effect but for its termination as aforesaid, and 

(b)  an amount equal to six (6) monthly Base Salaries, as defined in section 3 below.

2.5.2  Change of Control. In the event of (a) termination or of (b) failure to extend the Term of this Agreement prior to the Employee's attaining the age of seventy (70), other than for Cause or due to Disability within one (1) year of the completion of a Business Combination as defined in Article Tenth of the Company's Amended and Restated Certificate of Incorporation, then in addition to any rights of the Employee during the Notice Period as provided in section 2.4 and pursuant to section 2.5.1 above, the Employee shall be entitled to compensation in an amount equal to thirty six (36) monthly Base Salaries.  

3.  Salary

As compensation for the Employee's services hereunder, the Company shall pay the Employee a monthly gross salary (the "Salary") of US $16,667 (US $200,000 annually) (as such may be increased from time to time by decision of the Board, the "Base Salary"), payable to Employee on the first business day of each month during the term of the Employee's engagement hereunder in arrears for the month just ended.

4.  Employee Benefits

4.1  Insurance. Commencing January 1, 2004, the Company shall purchase or participate in the purchase for the benefit of the Employee an insurance package consisting of medical insurance, life insurance and long term disability insurance of such nature and providing such coverage as the Employee may request, provided that in no event shall the cost to the Company of the premiums for such insurance exceed US $2,000 per month. Except if the Employee specifically requests otherwise, the Company may fulfill its obligations hereunder by providing insurance coverage of the Employee in any group life or group health plan maintained by the Company for its employees based in the United States.

 

4.2  Vacation. The Employee shall be entitled to an annual vacation of twenty- three (23) working days at full pay. Vacation days may be accumulated for two (2) years, after which they must be used or redeemed; provided that accumulation of vacation days in excess of forty six (46) days may be approved by the Chief Executive Officer of the Company in his discretion.

4.3  Sick Pay

(a)  The Employee shall be entitled to up to thirty (30) days per year of fully paid sick leave, against a doctor's confirmation, which leave can be accumulated for a period of up to a maximum of five (5) years; provided, however, that the Employee shall not be entitled to sick leave payment to the extent already covered by any insurance component of any plan established by or for the benefit of the Employee pursuant to section 4.1 above. 

(b)  The Employee shall not for any reason or in any circumstances be entitled to redeem any accumulated but unused sick leave upon termination of his employment under this Agreement.

5.  Additional Benefits

5.1  Cellular Phone. Commencing January 1, 2004, the Company shall provide Employee with a Company cellular phone for Company business. Until such time as the Company purchases or leases cellular phones on its own account, the Company shall reimburse the Employee his expenses in maintaining and using one cellular phone (one number). 

5.2  Professional Fees. Commencing January 1, 2004, the Company shall reimburse Employee professional license fees and periodic membership dues for the professional societies and business/social organizations the maintenance of which is hereby acknowledged to be connected with and necessary for the proper performance of the Employee's duties under this Agreement, including:

(a)  State of Texas - Registered Professional Engineer

(b)  American Society of Petroleum Engineers

(c)  Dallas Petroleum Club

(d)    One local golf or country club (e.g. Royal Oaks Country Club).

(e)  additional as may from time to time be approved by the Chief Executive Officer.

 

5.3  Expenses. The Employee shall be entitled to be reimbursed for all reasonable expenses incurred by him in connection with the performance of his duties hereunder in accordance with the expense reimbursement policy adopted by the Board or with the prior approval of the Chief Executive Officer of the Company.

6.  Long-Term Management Incentive Plan

The Company has resolved to establish a long-term management incentive plan, which may be structured as an employee's royalty pool, to be funded by the equivalent of a 1.5% overriding royalty or equivalent net profits interest (after pay-out calculated on a well by well basis) (the "Plan"). Upon its establishment, the Employee shall be granted a 10% (ten percent) interest in Plan income attributable to wells drilled (no matter when drilled) on any oil and gas property acquired by the Company prior to the end of the Term or earlier termination of this Agreement, subject to the terms and conditions of the Plan.  To the extent less than 100% of the interests in the Plan with respect to a single well have been awarded at the time the well is spudded, Employee shall share pro-rata with the other Plan participants in the excess unawarded amounts.

7.  Propriety Information

7.1  The Employee acknowledges and agrees that, in the course of his employment by the Company, he will have access to confidential and propriety information of the Company regarding, without limitation, the business, financial, research, exploratory, engineering, production, marketing and sales activities of the Company. Such information, whether documentary, written, oral or computer generated, shall be deemed to be and referred to as "Proprietary Information".

7.2  Proprietary Information shall be deemed to include any and all proprietary information disclosed by or on behalf of the Company and irrespective of form, but excluding information that: (i) was known to the Employee prior to his association with the Company and can be so proven; (ii) shall have appeared in any printed publication or patent or shall have become a part of the public knowledge except as a result of a breach of this Agreement by the Employee; (iii) shall have been received by the Employee from a third party having no obligation to the Company; (iv) reflects general skills and experience gained during the Employee's engagement by the Company; or (v) reflects information and data generally known within the industries or trades in which the Company transacts business.

7.3  The Employee agrees and declares that all Proprietary Information, patents and other rights in connection therewith shall be the sole property of the Company and its assigns. At all times, both during his engagement by the Company and for a period of five (5) years after its termination, the Employee will 

keep in confidence and trust all Proprietary Information, and the Employee will not use or disclose any Proprietary Information or anything relating to it without the written consent of the Company, except as may be necessary in the ordinary course of performing the Employee's duties hereunder and in the best interests of the Company.

7.4  Upon termination of his employment with the Company, the Employee will promptly deliver to the Company all documents and materials of any nature pertaining to his work with the Company, and he will not take with him any documents or materials or copies thereof containing any Proprietary Information.

7.5  The Employee recognizes that the Company received and will receive confidential or proprietary information from third parties subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. At all times, both during his employment and after its termination, the Employee undertakes to keep and hold all such information in strict confidence and trust, and he will not use or disclose any of such information without the prior written consent of the Company, except as may be necessary to perform his duties as an employee of the Company and consistent with the Company's agreement with such third party. Upon termination of his employment with the Company, Employee shall act with respect to such information as set forth in Section 7.4 mutatis mutandis.

7.6  The Employee's undertakings in this section 7 shall remain in full force and effect in accordance with their terms after termination of this Agreement or any renewal thereof.

8.  Non-Competition

8.1  The Employee agrees and undertakes that he will not, so long as he is employed by the Company and for a period of six (6) months following termination of his employment for whatever reason, directly or indirectly, as owner, partner, joint venturer, stockholder, employee, broker, agent, principal, corporate officer, director, licensor or in any other capacity whatever engage in, become financially interested in, be employed by, or have any connection with any business or venture that is engaged in any activities competing with the Company in the field of petroleum exploration, production and marketing in Israel or any other region or territory in which the Company is conducting petroleum exploration, production or marketing activities; provided, however, that the Employee may own securities of any corporation or other entity which is engaged in such business and is publicly owned and traded but in an amount not to exceed at any one time one percent (1%) of any class of stock or securities of such entity so long as he has no active role therein as director, employee, consultant or otherwise, unless otherwise specifically approved by the Board.

8.2  The Employee agrees and undertakes that during the period of his employment and for a period of twelve (12) months following termination, he will not, directly or indirectly, including personally or in any business in which he is an officer, director or shareholder, for any purpose or in any place, employ any person employed by the Company or retained by the Company as a consultant on the date of such termination or during the preceding six (6) months.

8.3  If any one or more of the terms contained in this section 8 shall for any reason be held to be excessively broad with regard to time, geographic scope or activity, the term shall be construed in a manner to enable it to be enforced to the extent compatible with applicable law.

9.  Indemnification and Insurance

9.1  The Company shall indemnify the Employee against, and hold him harmless, from any and all judgments, penalties (including excise and similar taxes), fines, settlements and expenses (including attorney's fees and court costs) actually and reasonably incurred by him in connection with any action, suit or proceeding whether civil, criminal, administrative, arbitrative or investigative, any appeal in such an action, suit or proceeding whether or not by or in the right of the Company to which Employee is or may be made a party or is or shall be threatened to be made a party by reason of the fact that the Employee is an officer, employee or agent of the Company or is or was serving at the request of the Company as a 

director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another corporation, partnership, joint venture, sole proprietorship, trust, nonprofit entity, employee benefit plan or other enterprise, to the fullest extent permitted by any applicable law, and such indemnity shall inure to the benefit of the heirs, executors and administrators of the Employee.

9.2  The right to indemnification under this section 9 shall include the Employee's right to be paid by the Company the expenses incurred in defending any such proceeding in advance of its disposition; provided, however, that, if the applicable law requires, the payment of such expenses incurred by the Employee in advance of the final disposition of a proceeding shall be made only upon delivery to the Company of an undertaking, by or on behalf of the Employee, to repay all amounts so advanced if it shall ultimately be determined that the Employee is not entitled to be indemnified under this section 9 or otherwise.

9.3  The Company shall purchase and maintain insurance coverage in an amount to be determined from time to time by the Board taking into account the nature and extent of the Company's activities and the cost of coverage, but in no event less than that maintained by the Company for any other director or executive officer of the Company, on behalf of the Employee, both in his capacity as an officer, director and employee of the Company and, if he so serves at the request of the Company, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any legally insurable liability asserted against the Employee and incurred by the Employee in any such capacity or arising out of Employee's status as such.

10.  Taxes

Any and all taxes, fees and other liabilities (as may apply from time to time) in connection with the Salary (section 3 above) or with Employee Benefits (section 4 above) or with the Additional Benefits (section 5 above) or with any other payment to which the Employee is entitled under this Agreement will be borne by the Employee and, except as otherwise expressly set out in this Agreement, the Employee shall be solely liable for all such taxes, fees and other liabilities.

11.  Mutual Representations

11.1  The Employee represents and warrants to the Company that the execution and delivery of this Agreement and the fulfillment of the terms hereof (i) will not constitute a default under or conflict with any agreement or other instrument to which he is a party or by which he is bound, and (ii) do not require the consent of any person or entity.

11.2  The Company represents and warrants to the Employee that this Agreement has been duly authorized, executed and delivered by the Company and that the fulfillment of the terms hereof (i) will not constitute a default under or conflict with any agreement or other instrument to which it is a party or by which it is bound, and (ii) do not require the consent of any person or entity.

11.3  Each party hereto warrants and represents to the other that this Agreement constitutes the valid and binding obligation of such party enforceable against such party in accordance with its terms subject to applicable bankruptcy, insolvency, moratorium and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless if enforcement is sought in proceeding in equity or at law).

12.  Notice; Addresses

12.1  The addresses of the parties for purposes of this Agreement shall be the addresses set forth above, or any other address which shall be provided by due notice given in accordance with the provisions of section 12.2 below.

12.2  All notices in connection with this Agreement shall be sent by registered mail or delivered by hand or courier service to the addresses set forth above, and shall be deemed to have been delivered to the 

other party at the earlier of the following two dates: (a) if sent by registered mail or courier service, as aforesaid, three (3) business days from the date of mailing; and (b) if delivered by hand - upon actual delivery or proffer of delivery (in the event of a refusal to accept it) at the address of the addressee. Delivery by cable, telex, facsimile or other electronic communication shall be sufficient and be deemed to have occurred upon electronic confirmation of receipt, with copy sent by first class mail.

13.  Miscellaneous

13.1  Headings are included for reference purposes only and are not to be used in interpreting this Agreement.

13.2  No failure, delay or forbearance of either party in exercising any power or right hereunder shall in any way restrict or diminish such party's rights and powers under this Agreement, or operate as a waiver of any breach or nonperformance by either party of any terms or conditions hereof.

13.3  No determination of the invalidity or unenforceability of any provision of this Agreement shall affect the remaining provisions hereof unless the business purpose of this Agreement is substantially frustrated thereby.

13.4  This Agreement is personal and non-assignable by the Employee. It shall inure to the benefit of any corporation or other entity with which the Company shall merge or consolidate or to which the Company shall lease, sell or otherwise transfer all or substantially all of its assets, and may be assigned by the Company to any affiliate of the Company or to any corporation or entity with which such affiliate shall merge or consolidate or which shall lease or acquire all or substantially all of the assets of such affiliate. Any assignee must assume all the obligations of the Company hereunder, but such assignment and assumption shall not serve as a release of the Company.

13.5  This Agreement is the only agreement between the parties on the subject matter of this Agreement and supersedes and replaces all other agreements, whether written or oral, between the parties, concerning the subject matter of this Agreement, including without limitation that certain letter dated September 2, 2003 from the Company to the Employee "Re: Executive Employment Agreement"; provided, however, that nothing herein shall be deemed to affect the rights of either of the parties hereto with respect to the services rendered by the Employee to or on behalf of the Company during any period prior to the Effective Date.

13.6  It is hereby agreed between the parties that the laws of the State of Texas  shall apply to this Agreement and that the sole and exclusive place of jurisdiction in any matter arising out of or in connection with this Agreement shall be in the courts of appropriate jurisdiction in the county of Dallas, Texas.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

	
ZION OIL & GAS, INC.
	
	

	
	
	
/s/ E A Soltero

	
By:
	
/s/ John Brown
	
	
Eugene A. Soltero

	
Name:
	
John Brown
	
	

	
Title:
	
Chairman & CEO
	
	

 

EXHIBIT 10.5 (iii)

Personal Employment Agreement (Glen Perry)

This Personal Employment Agreement (the "Agreement") is entered into as of the 1st day of January 2004 (the "Effective Date"), by and among Zion Oil & Gas, Inc., a Delaware corporation with offices at 6510 Abrams Road, Suite 300, Dallas, Texas, U.S.A. (in its own name and as successor in interest of Zion Oil & Gas, Inc., a Florida Corporation, the "Company") and Glen H. Perry of 3600 Rock Prairie Rd., College Station, TX. 77845, U.S.A. (the "Employee").

WHEREAS, the Company was established in April 2000 for the purpose of engaging in oil and gas exploration and production in Israel; and

WHEREAS, since its establishment, the Employee has been serving as Executive Vice President of the Company at the pleasure of the Board of Directors of the Company (the "Board") and on terms set from time to time by resolution of the Board; and

WHEREAS, the terms of retention of the Employee for the five-year period commencing on the effective date hereof were incorporated in a letter of intent dated September 2, 2003 and ratified by the Board on November 10, 2003; and 

WHEREAS, the Company and Employee desire to regularize their relationship and, in that context, the Company desires to continue to engage the Employee and the Employee desires to continue to serve the Company in the capacity of Executive Vice President in accordance with the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises, covenants, conditions, representations and warranties set forth herein, and intending to be legally bound hereby, the parties agree as follows:

1.  Appointment; Extent and Nature of Duties

1.1  Appointment and Duties. The Employee shall be employed as Executive Vice President of the Company and General Manager of Israeli Operations, with supervisory responsibility for all activities of the Israeli Branch. The Employee shall perform the duties, undertake the responsibilities and exercise the authority customarily performed, undertaken and exercised by persons situated in a similar capacity as may be further defined from time to time by the Board or Chief Executive Officer. The Employee shall serve under the direct supervision, and comply with the directives of, the Chief Operating Officer of the Company, and in his absence, of the Chief Executive Officer of the Company.

1.2  Extent of Services. The Employee shall be employed on a full-time basis and shall devote his entire business time, attention and efforts to the performance of his duties and responsibilities under this Agreement and the business and affairs of the Company. 

2.  Term and Termination

2.1  Term. The initial term of employment under this Agreement shall be for the period commencing on the Effective Date and ending on December 31, 2008 (the "Initial Term"). Thereafter, the term of Employee's employment under this Agreement shall automatically be extended for additional periods of one (1) year (each an "Additional Term") at the end of the Initial Term and of each Additional Term, unless either party has given notice to the other of its intention not to extend at least one hundred eighty (180) days prior to the expiration of the Initial Term or any Additional Term; provided, however, that following the Employee's having attained the age of seventy (70), the Term of this Agreement, if still in effect, shall not be automatically extended upon the expiration of the then applicable Additional Term, but shall be extended for additional one (1) year terms only upon the mutual agreement of the Company and the Employee annually no later than ninety (90) days prior to end of the then applicable Additional Term. (The Initial Term and, if the Initial Term is extended, any and all Additional Terms, the "Term").

2.2  Termination by the Company. Notwithstanding the aforesaid, the Employee's employment may be terminated under the following circumstances:

2.2.1  For Disability. The Company may, upon ninety (90) days prior written notice, terminate Employee's employment after having established the Employee's Disability. For purposes of this Agreement, "Disability" means a physical or mental infirmity which impairs the Employee's ability to substantially perform his duties pursuant to this Agreement which infirmity continues for a period of at least 120 days in any 365 day period. Upon termination for disability, the Company shall continue to pay Employee all salary and benefits hereunder for the remainder of the Term, less any disability insurance payments received by Employee.

2.2.2  For  Cause. The Company may terminate the Employee's employment for Cause upon written notice to the Employee in which notice the basis for termination shall be set forth. A termination for "Cause" is a termination due to a serious breach of trust, including, but not limited to, theft, embezzlement, self-dealing, prohibited disclosure to unauthorized persons or entities of confidential or propriety information of or relating to the Company or the engaging by Employee in any prohibited business competitive with the business of the Company and its subsidiaries, affiliates or associated entities. No termination for Cause shall be effective except subject to the final, non-appealable judgment of a court of competent jurisdiction to the effect that Employee has committed a serious breach of trust as aforesaid. Except if and to the extent otherwise determined by a court of competent jurisdiction, the Employee shall be entitled to the compensation and benefits provided for under this Agreement for the period prior to the termination of the Employee's employment under this section.

2.2.3  Termination Other Than For Cause. The Company may terminate the employment of the Employee other than for Cause at its discretion and at any time on ninety (90) days prior written notice.

2.3  Termination by Employee. Employee may terminate this Agreement and his employment relationship with the Company at his discretion and at any time on ninety (90) days prior written notice.

2.4  Relationship during Notice Period

2.4.1  For purposes hereof, the term "Notice Period" shall mean the period between the giving of any Notice of Termination and the effective date of such notice as provided by sections 2.2 and 2.3 above or between the date of notice of intent not to extend the Term and the date of termination of the Term as provided for in section 2.1 above.

2.4.2  During any Notice Period pursuant to section 2.2.3 above, the Employee shall continue to work and fulfill his duties, hereunder, as an Employee of the Company; provided, however, that the Company shall have the right in its discretion to ask the Employee to cease working at the premises of the Company or to cease to work during all or any part of the Notice Period, in which case and without derogating from the Employee's right to Compensation pursuant to sections 2.5.1 and 2.5.2 below to the extent applicable, the Company shall redeem such portion of the Notice Period for which the Company shall have waived its right to the services of the Employee (the "Waived Period") by payment to Employee of an amount equal to Employee's Salary for the Waived Period, plus such amounts to which the Company is obligated pursuant to sections 4 and 5 below.

2.4.3  In the event Employee continues to work during the Notice Period, he shall cooperate with the Company to ensure an orderly transfer of his responsibilities.

2.4.4  In the event the Employee gives notice of termination pursuant to section 2.3 above or of his intention not to extend the Term pursuant to section 2.1 above, and does not continue to work during all or any part of the Notice Period, the Employee shall forfeit his salary for said portions of the Notice Period during which he does not work. The Company shall have the right to deduct such amount from all and any monies due and owing the Employee from the Company.

2.5  Compensation in the Event of Termination

2.5.1  Termination Other Than for Cause or Disability. Without derogating from the rights of the Employee to compensation during the Notice Period as provided in section 2.4 above, the Employee shall be entitled to compensation in the event of (a) termination or of (b) failure to extend the Term of the Agreement by the Company prior to the Employee's attaining the age of seventy (70), other than for Cause or due to Disability, in an amount equal to:

(a)  all sums, including Salary pursuant to section 3 below and  Employee Benefits as provided in section 4.1 below, to which Employee would otherwise have been entitled if he had remained in the employ of the Company for the portion of the Term during which this Agreement would have remained in effect but for its termination as aforesaid, and 

(b)  an amount equal to six (6) monthly Base Salaries, as defined in section 3 below.

2.5.2  Change of Control. In the event of (a) termination or of (b) failure to extend the Term of this Agreement prior to the Employee's attaining the age of seventy (70), other than for Cause or due to Disability within one (1) year of the completion of a Business Combination as defined in Article Tenth of the Company's Amended and Restated Certificate of Incorporation, then in addition to any rights of the Employee during the Notice Period as provided in section 2.4 and pursuant to section 2.5.1 above, the Employee shall be entitled to compensation in an amount equal to thirty six (36) monthly Base Salaries.

3.  Salary

As compensation for the Employee's services hereunder, the Company shall pay the Employee a monthly gross salary (the "Salary") of US $16,667 (US $200,000 annually) (as such may be increased from time to time by decision of the Board, the "Base Salary"), payable to Employee on the first business day of each month during the term of the Employee's engagement hereunder in arrears for the month just ended.

4.  Employee Benefits

4.1  Insurance. 

Commencing January 1, 2004, the Company shall purchase or participate in the purchase for the benefit of the Employee an insurance package consisting of medical insurance, life insurnace and long term disability insurance of such nature and providing such coverage as the Employee may request, provided that in no event shall the cost to the Company of the premiums for such insurance exceed US $2,000 per month. Except if the Employee specifically requests otherwise, the Company may fulfill its obligations hereunder by providing insurance coverage of the Employee in any group life or group health plan maintained by the Company for its employees based in the United States.

4.2  Vacation. The Employee shall be entitled to an annual vacation of twenty three (23) working days at full pay. Vacation days may be accummulated for two (2) years, after which they must be used or redeemed; provided that accummulation of vacation days in excess of forty six (46) days may be approved by the Chief Executive Officer of the Company in his discretion.

4.3  Sick Pay

(a)  The Employee shall be entitled to up to thirty (30) days per year of fully paid sick leave, against a doctor's confirmation, which leave can be accummulated for a period of up to a maximum of five (5) years; provided, however, that the Employee shall not be entitled to sick leave payment to the extent already covered by any insurance component of any plan established by or for the benefit of the Employee pursuant to section 4.1 above. 

(b)  The Employee shall not for any reason or in any circumstances be entitled to redeem any accumulated but unused sick leave upon termination of his employment under this Agreement.

(c)  It is agreed that payment on account of sick leave as provided herein shall be deemed in full compliance with the Company's obligations to Employee under any applicable law.

5.  Additional Benefits

5.1  Cellular Phone. Commencing January 1, 2004, the Company shall provide Employee with a Company cellular phone for Company business. Until such time as the Company purchases or leases cellular phones on its own account, the Company shall reimburse the Employee his expenses in maintaining and using one cellular phone (one number). 

5.2  Professional Fees. Commencing January 1, 2004, the Company shall reimburse Employee professional license fees and periodic membership dues for the professional societies and business/social organizations the maintenance of which is hereby acknowledged to be connected with and necessary for the proper performance of the Employee's duties under this Agreement, including:

(a)  American Society of Petroleum Engineers

(b)  One golf or fitness club

(d)  additional as may from time to time be approved by the Chief Executive Officer.

5.3  Expenses. The Employee shall be entitled to be reimbursed for all reasonable expenses incurred by him in connection with the performance of his duties hereunder in accordance with the expense reimbursement policy adopted by the Board or with the prior approval of the Chief Executive Officer or the President of the Company.

6.  Long-Term Management Incentive Plan

The Company has resolved to establish a long-term management incentive plan, which may be structured as an employee's royalty pool, to be funded by the equivalent of a 1.5% overriding royalty or equivalent net profits interest (after pay-out calculated on a well by well basis) (the "Plan"). Upon its establishment, the Employee shall be granted a 10% (ten percent) interest in Plan income attributable to wells drilled (no matter when drilled) on any oil and gas property acquired by the Company prior to the end of the Term or earlier termination of this Agreement, subject to the terms and conditions of the Plan. To the extent less than 100% of the interests in the Plan with respect to a single well have been awarded at the time the well is spudded, Employee shall share pro-rata with the other Plan participants in the excess unawarded amounts.

7.  Relocation

7.1  Obligation to Relocate. At the Company's request, which may be given in the Company's sole discretion (a "Relocation Notice"), the Employee shall relocate to Israel for such period as the Company shall deem in its best interests. 

7.2  Employee Benefits in the Event of Relocation. Upon relocation to Israel as aforesaid and during the period of Employee's employment in Israel, Employee  and Company will seek the advice of a competent tax authority to determine the best combination status and benefits for both the Employee and Company.  The total compensation cost to the Company for such package shall be equal to or less than the cost to the Company for the package of salary, benefits and other compensation set forth in Sections 7.3 through 7.5 below.

7.3  An Israeli Managers Insurance Policy ("Bituach Mnahalim") providing for:

(i)  allocation and payment by the Company to a Provident Fund ("Kupat Gemel") (as defined in Section 47 of the Israeli Income Tax Ordinance) (the "Fund") a sum equal to 131⁄3% of the Employee's Salary as it may be from time to time  (such sum, the "Company's Contribution"), to be allocated as follows" (X) 81⁄3% towards Severance Pay (Pitzuei Piturim"); and (Y) 5% to pension benefits ("Tagmulim");

(ii)  payment by the Company of an amount equal to 21/2% of the Employee's Salary towards the purchase of disability insurance for the Employee; and

(iii)  deduction by the Company of an amount equal to 5% of the Employee's Salary (the "Employee's Contribution") and deposit of such sum in the fund to be allocated to pension benefits (Tagmulim);

(iv)  in the event of the termination or failure to extend the term of this Agreement for any reason whether at the Company's or the Employee's instance, release to the Employee's benefit all funds that have accrued to the Employee's benefit; provided that in the event of termination of this Agreement by the Company for Cause or by the Employee in circumstances under which the Company would have the right to deny the Employee severance pay ("Pitzuei Piturim") pursuant to the provisions of the Israeli Severance Pay Law, 5723-1953, in whole or in part, the Employee shall be entitled to the release of only such sums as accrued in the Fund attributable to the Employee's Contribution.

(v)  That part of the Company's Contribution allocated as provided in clause (i)(X) of this Section 7.3 above, together with all income thereon of whatever nature, shall be on account of Severance Pay that shall be due, if due, to Employee pursuant to the provisions of clause (iv) of this Section 7.3 or pursuant to the Israeli Severance Pay Law, 5723-1953.

7.4  Additional Employee Benefits. Additional benefits providing for:

(a)  Recuperation Allowance ("Dmei Havra'ah") of ten (10) days per year at a rate provided from time to time by applicable Israeli law. The Recuperation Allowance shall be paid semi-annually at the rate of five (5) days per each semi-annual period together with payment of the Employee's June and December Salaries; and

(b)  provided that the Employee has a driver's license valid for driving in Israel he shall have the full-time use one four-wheel drive vehicle on a regular basis due to the 24 hour nature of his responsibilities, the expenses of which shall be paid by the Company; and

(c)  the Company shall arrange for parking for the Employee at his place of work and shall reimburse him for his parking expenses based on receipts he shall produce to the Company.

7.4  Currency and Tax Payments. Following the Employee's relocation to Israel, such part of Employee's Salary shall be paid in Israel in NIS at the Representative Rate of the U.S.Dollar as against the NIS last published by the Bank of Israel and known at the time of payment (the "Representative Rate") and such part in United States Dollars outside of Israel as Employee may request, provided that (a) the Company withhold and pay to the Israeli Income Tax, National Insurance and other relevant authorities, if any, whether in Israel or the United States, in timely manner all amounts as may be due from time to time on Employee's Salary in full and associated payments under applicable Israeli law, and (b) pursuant to section 7.3 above, the Company make payments thereunder as provided in accordance with the terms of the Manager's Insurance Policy purchased on the basis of the Employee's Salary as such may be from time to time.

8.  Propriety Information

8.1  The Employee acknowledges and agrees that, in the course of his employment by the Company, he will have access to confidential and propriety information of the Company regarding, without limitation, the business, financial, research, exploratory, engineering, production, marketing and sales activities of the Company. Such information, whether documentary, written, oral or computer generated, shall be deemed to be and referred to as "Proprietary Information".

8.2  Proprietary Information shall be deemed to include any and all proprietary information disclosed by or on behalf of the Company and irrespective of form, but excluding information that: (i) was known to the Employee prior to his association with the Company and can be so proven; (ii) shall have appeared in any printed publication or patent or shall have become a part of the public knowledge except as a result of a breach of this Agreement by the Employee; (iii) shall have been received by the Employee from a third party having no obligation to the Company; (iv) reflects general skills and experience gained during the Employee's engagement by the Company; or (v) reflects information and data generally known within the industries or trades in which the Company transacts business.

8.3  The Employee agrees and declares that all Proprietary Information, patents and other rights in connection therewith shall be the sole property of the Company and its assigns. At all times, both during his engagement by the Company and for a period of five (5) years after its termination, the Employee will keep in confidence and trust all Proprietary Information, and the Employee will not use or disclose any 

Proprietary Information or anything relating to it without the written consent of the Company, except as may be necessary in the ordinary course of performing the Employee's duties hereunder and in the best interests of the Company.

8.4  Upon termination of his employment with the Company, the Employee will promptly deliver to the Company all documents and materials of any nature pertaining to his work with the Company, and he will not take with him any documents or materials or copies thereof containing any Proprietary Information.

8.5  The Employee recognizes that the Company received and will receive confidential or proprietary information from third parties subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. At all times, both during his employment and after its termination, the Employee undertakes to keep and hold all such information in strict confidence and trust, and he will not use or disclose any of such information without the prior written consent of the Company, except as may be necessary to perform his duties as an employee of the Company and consistent with the Company's agreement with such third party. Upon termination of his employment with the Company, Employee shall act with respect to such information as set forth in Section 8.4 mutatis mutandis.

8.6  The Employee's undertakings in this section 8 shall remain in full force and effect in accordance with their terms after termination of this Agreement or any renewal thereof.

9.  Non-Competition

9.1  The Employee agrees and undertakes that he will not, so long as he is employed by the Company and for a period of six (6) months following termination of his employment for whatever reason, directly or indirectly, as owner, partner, joint venturer, stockholder, employee, broker, agent, principal, corporate officer, director, licensor or in any other capacity whatever engage in, become financially interested in, be employed by, or have any connection with any business or venture that is engaged in any activities competing with the Company in the field of petroleum exploration, production and marketing in Israel or any other region or territory in which the Company is conducting or considering the conduct of petroleum exploration, production or marketing activities; provided, however, that the Employee may own securities of any corporation or other entity which is engaged in such business and is publicly owned and traded but in an amount not to exceed at any one time one percent (1%) of any class of stock or securities of such entity so long as he has no active role therein as director, employee, consultant or otherwise, unless otherwise specifically approved by the Board.

9.2  The Employee agrees and undertakes that during the period of his employment and for a period of twelve (12) months following termination, he will not, directly or indirectly, including personally or in any business in which he is an officer, director or shareholder, for any purpose or in any place, employ any person employed by the Company or retained by the Company as a consultant on the date of such termination or during the preceding six (6) months.

9.3  If any one or more of the terms contained in this section 9 shall for any reason be held to be excessively broad with regard to time, geographic scope or activity, the term shall be construed in a manner to enable it to be enforced to the extent compatible with applicable law.

10.  Indemnification and Insurance

10.1  The Company shall indemnify the Employee against, and hold him harmless, from any and all judgments, penalties (including excise and similar taxes), fines, settlements and expenses (including attorney's fees and court costs) actually and reasonably incurred by him in connection with any action, suit or proceeding whether civil, criminal, administrative, arbitrative or investigative, any appeal in such an action, suit or proceeding whether or not by or in the right of the Company to which Employee is or may be made a party or is or shall be threatened to be made a party by reason of the fact that the Employee is an officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another corporation, partnership, joint venture, sole proprietorship, trust, nonprofit entity, employee benefit plan or 

other enterprise, to the fullest extent permitted by any applicable law, and such indemnity shall inure to the benefit of the heirs, executors and administrators of the Employee.

10.2  The right to indemnification under this section 10 shall include the Employee's right to be paid by the Company the expenses incurred in defending any such proceeding in advance of its disposition; provided, however, that, if the applicable law requires, the payment of such expenses incurred by the Employee in advance of the final disposition of a proceeding shall be made only upon delivery to the Company of an undertaking, by or on behalf of the Employee, to repay all amounts so advanced if it shall ultimately be determined that the Employee is not entitled to be indemnified under this section 9 or otherwise.

10.3  The Company shall purchase and maintin insurance coverage in an amount to be determined from time to time by the Board taking into account the nature and extent of the Company's activities and the cost of coverage, but in no event less than that maintained by the Company for any other director or executive officer of the Company, on behalf of the Employee both in his capacity as an officer, director and employee of the Company and if be so serves at the request of the Company, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterise, against any legally insurable liability asserted against the Employee and incurred by the Employee in any such capacity, or arising out of the Employee's status as such.

11.  Taxes

Any and all taxes, fees and other liabilities (as may apply from time to time) in connection with the Salary (section 3 above) or with the Social Insurance and Employee Benefits (section 4 above) or with the Additional Benefits (section 5 above) or with any other payment to which the Employee is entitled under this Agreement will be borne by the Employee and, except as otherwise expressly set out in this Agreement, the Employee shall be solely liable for all such taxes, fees and other liabilities.

12.  Mutual Representations

12.1  The Employee represents and warrants to the Company that the execution and delivery of this Agreement and the fulfillment of the terms hereof (i) will not constitute a default under or conflict with any agreement or other instrument to which he is a party or by which he is bound, and (ii) do not require the consent of any person or entity.

12.2  The Company represents and warrants to the Employee that this Agreement has been duly authorized, executed and delivered by the Company and that the fulfillment of the terms hereof (i) will not constitute a default under or conflict with any agreement or other instrument to which it is a party or by which it is bound, and (ii) do not require the consent of any person or entity.

12.3  Each party hereto warrants and represents to the other that this Agreement constitutes the valid and binding obligation of such party enforceable against such party in accordance with its terms subject to applicable bankruptcy, insolvency, moratorium and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless if enforcement is sought in proceeding in equity or at law).

13.  Notice; Addresses

13.1  The addresses of the parties for purposes of this Agreement shall be the addresses set forth above, or any other address which shall be provided by due notice given in accordance with the provisions of section 13.2 below.

13.2  All notices in connection with this Agreement shall be sent by registered mail or delivered by hand or courier service to the addresses set forth above, and shall be deemed to have been delivered to the other party at the earlier of the following two dates: (a) if sent by registered mail or courier service, as aforesaid, three (3) or, if the Employee has been relocated to Israel and changed his address for notice purposes to an address in Israel, five (5) business days from the date of mailing; and (b) if delivered by hand - upon actual delivery or proffer of delivery (in the event of a refusal to accept it) at the address of the addressee. Delivery by cable, telex, facsimile or other electronic communication shall be sufficient 

and be deemed to have occurred upon electronic confirmation of receipt, with copy sent by first class mail.

14.  Miscellaneous

14.1  Headings are included for reference purposes only and are not to be used in interpreting this Agreement.

14.2  The provisions of this Agreement are in lieu of the provisions of any collective bargaining agreement or arrangement and, therefore, no collective bargaining agreement or arrangement shall apply with respect to the relationship between the parties hereto (subject to the applicable provisions of law).

14.3  No failure, delay or forbearance of either party in exercising any power or right hereunder shall in any way restrict or diminish such party's rights and powers under this Agreement, or operate as a waiver of any breach or nonperformance by either party of any terms or conditions hereof.

14.4  No determination of the invalidity or unenforceability of any provision of this Agreement shall affect the remaining provisions hereof unless the business purpose of this Agreement is substantially frustrated thereby.

14.5  This Agreement is personal and non-assignable by the Employee. It shall inure to the benefit of any corporation or other entity with which the Company shall merge or consolidate or to which the Company shall lease, sell or otherwise transfer all or substantially all of its assets, and may be assigned by the Company to any affiliate of the Company or to any corporation or entity with which such affiliate shall merge or consolidate or which shall lease or acquire all or substantially all of the assets of such affiliate. Any assignee must assume all the obligations of the Company hereunder, but such assignment and assumption shall not serve as a release of the Company.

14.6  This Agreement is the only agreement between the parties on the subject matter of this Agreement and supersedes and replaces all other agreements, whether written or oral, between the parties, concerning the subject matter of this Agreement, including without limitation that certain letter dated September 2, 2003 from the Company to the Employee "Re: Executive Employment Agreement"; provided, however, that nothing herein shall be deemed to affect the rights of either of the parties hereto with respect to the services rendered by the Employee to or on behalf of the Company during any period prior to the Effective Date.

14.7  It is hereby agreed between the parties that the laws of the State of Texas shall apply to this Agreement and that the sole and exclusive place of jurisdiction in any matter arising out of or in connection with this Agreement shall be in the courts of appropriate jurisdiction in the County of Dallas, Texas.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

	
ZION OIL & GAS, INC.
	
	

	
	
	
/s/ Glen H. Perry

	
By:
	
/s/ John Brown
	
	
Glen H. Perry

	
Name:
	
John Brown
	
	

	
Title:
	
Chairman & CEO
	
	

EXHIBIT 10.5 (iv)

RETENTION AGREEMENT (MANDELKER)

ZION OIL & GAS, INC.

6510 Abrams Road, Dallas, TX 75231

214-221-4610

 

As of January 1, 2004

Mr. Philip Mandelker,

44 Tagore Street

Tel Aviv, Israel

Re: Retention Agreement

Dear Mr. Mandelker,

This letter serves to confirm our agreement with you to retain your services as outside General Counsel and Corporate Secretary of Zion Oil & Gas, Inc. (the "Company").  Such services shall include: (i) oversight responsibility for administrative and financial matters of the Company's Israeli Branch, reporting to the Executive Vice-President and General Manager of Israeli Operations; and (ii) legal oversight responsibility for the corporation, reporting to the President and Chief Operating Officer.   In consideration for your services, you shall receive a monthly retainer as follows:

  

During the period commencing January 1, 2004 the NIS equivalent of $12,500 per month, plus out of pocket disbursements, plus VAT. 

In addition, the Company shall pay the law firm with which you are associated a monthly office services fee of the NIS equivalent $2,000, plus VAT.  Commencing January 1, 2004, the Company shall also bear the cost of a cell phone (one line) and your professional fees and insurance related to the performance of your duties.

As soon as practicable following the date upon which the Company shall have closed $8,000,000 in subscriptions of its initial public offering as currently on file with the U.S. Securities and Exchange Commission, the Company shall employ you as its Executive Vice President and General Counsel pursuant to the attached Executive Employment Agreement.  

Very truly yours,

ZION OIL & GAS, INC.

/s/ John M. Brown

John M. Brown, Chairman and CEO

 

ACCEPTED AND AGREED:

_/s/ Philip Mandelker

Philip Mandelker

Personal Employment Agreement

(Attached to and made a part of that certain Retention Agreement dated as of January 1, 2004)

This Personal Employment Agreement (the "Agreement") is entered into as of the ___ day of _______ 2004 (the "Effective Date"), by and among Zion Oil & Gas, Inc., a Delaware corporation with offices at 6510 Abrams Road, Suite 300, Dallas, Texas, U.S.A. (in its own name and as successor in interest of Zion Oil & Gas, Inc., a Florida Corporation, the "Company") and Philip Mandelker of 44 Tagore St., Tel-Aviv, 69341, Israel (the "Employee").

WHEREAS, the Company was established in April 2000 for the purpose of engaging in oil and gas exploration and production in Israel; and

WHEREAS, since the establishment of the Company, the Employee, an attorney in private legal practice, has been serving as General Counsel of the Company and, since 2002 as the corporate Secretary of the Company at the pleasure of the Board of Directors of the Company (the "Board") and on terms set from time to time by resolution of the Board; and

WHEREAS, the terms of retention of the Employee's services for the period commencing January 1, 2004 were fixed in a written retention agreement effective as of January 1, 2004 (the "Retention Agreement"); and 

WHEREAS, the Company and Employee desire to restructure their relationship so that the Employee join the Company as a full time employee and continue to serve the Company in the capacity of Executive Vice President and General Counsel of the Company in accordance with the terms and conditions set forth in this Agreement

NOW, THEREFORE, in consideration of the mutual promises, covenants, conditions, representations and warranties set forth herein, and intending to be legally bound hereby, the parties agree as follows:

1.  Appointment; Extent and Nature of Duties; Termination of Retainer Agreement

1.1  Appointment and Duties. The Employee shall be employed as Executive Vice President and General Counsel of the Company. Until such time as the Board shall appoint another person to serve as Secretary of the Company, the Employee shall also fill the duties of Secretary of the Company. The Employee shall perform the duties, undertake the responsibilities and exercise the authority customarily performed, undertaken and exercised by persons situated in a similar Employee capacity, with such responsibilities to include those of Chief Compliance Officer of the Company and officer with executive oversight responsibilities for administrative, financial and legal activities of the Company's Israeli Branch, and as may be further defined by the Board. Insofar as his executive oversight responsibilities for administrative, financial and legal activities of the Company's Israeli Branch are concerned, Employee shall be under supervision of the General Manager of Israeli Operations.  Insofar as all his other responsibilities are concerned, including (but not limited to) responsibilities of General Counsel and Chief Compliance Officer, Employee shall be under the direct supervision of the President and Chief Operating Officer. Nothing herein shall derogate from Employee's obligations in fulfilling his duties as General Counsel and Chief Compliance Officer to the Board and any committee thereof.

1.2  Extent of Services. The Employee shall be employed on a full-time basis and shall devote his entire business time, attention and efforts to the performance of his duties and responsibilities under this Agreement and the business and affairs of the Company. The Employee acknowledges hereby that the terms of his employment, the circumstances thereof, and the nature of his work require an unusual amount of personal trust as set out in the Israeli Hours of Employment and Rest Law, 5711-1951, and therefore, the said law shall not apply to the Employee's employment with the Company.

1.3  Termination of Retainer Agreement and Ancillary Arrangements

1.3.1  As of the Effective Date, the Retainer Agreement shall terminate.

1.3.2  Upon the termination of the Retainer Agreement and the entry into effect of this Agreement, the Company shall pay (a) to the Employee all monies, including Value Added Tax ("VAT"), at the applicable rate due and owing to the Employee on account of services rendered and disbursements incurred on behalf of the Company and (b) to the law firms with which the Employee was associated during the period commencing January 1, 2003 and through the Effective Date all monies, including VAT thereon, due and owing to the said law firms for the services, including office support services, rendered by those law firms as provided by the Retainer Agreement.

 1.3.3  If the Effective Date is after January 1, 2004 (such period between January 1, 2004 and the Effective Date, the "Benefits Compensation Period"), then, at the Employee's option, notified to the Company no later than fifteen (15) days following the Effective Date, the Company shall:

	in the context of the manager's insurance plan ("Bituach Menahalim") to be established for the Employee pursuant to section 4.1 below, purchase on behalf of the Employee coverage for the Benefits Compensation Period at rates  calculated on the basis of the Base Salary, as defined below, to the same extent as if the Effective Date were January 1, 2004; or

(b)  pay to Employee a cash payment in the amount of 131⁄3% plus an additional 21/2% (in total 155/6%) of the total retainer payments to which Employee was entitled pursuant to the Retainer Agreement for the Benefits Compensation Period, plus VAT thereon. If Employee shall choose this option (b), the Company shall pay to Employee the amounts due hereunder no later than thirty (30) days following the Effective Date against receipt of a VAT tax invoice and receipt from Employee

2.  Term and Termination

2.1  Term. The initial term of employment under this Agreement shall be for the period commencing on the Effective Date and ending on December 31, 2008 (the "Initial Term"). Thereafter, the term of Employee's employment under the Agreement shall automatically be extended for additional periods of one (1) year (each an "Additional Term") at the end of the Initial Term and of each Additional Term unless either party has given notice to the other of its intention not to extend at least one hundred eighty (180) days prior to the expiration of the Initial Term or any Additional Term; provided, however, that following the Employee's having attained the age of seventy (70), the Term of the Agreement, if still in effect, shall not be automatically extended upon the expiration of the then applicable Additional Term, but shall be extended only upon the mutual agreement of the Company and the Employee annually no later than ninety (90) days prior to the end of the applicable Additional Term. (The Initial Term and, if the Initial Term is extended, any and all Additional Terms, the "Term").

2.2  Termination by the Company. Notwithstanding the aforesaid, the Employee's employment may be terminated under the following circumstances:

2.2.1  For Disability. The Company may, upon ninety (90) days prior written notice, terminate Employee's employment after having established the Employee's Disability. For purposes of this Agreement, "Disability" means a physical or mental infirmity which impairs the Employee's ability to substantially perform his duties pursuant to this Agreement which infirmity continues for a period of at least 120 days in any 365 day period. Upon termination for disability, the Company shall continue to pay Employee all salary and benefits hereunder for the remainder of the Term, less any disability insurance payments received by Employee.

2.2.2  For  Cause. The Company may terminate the Employee's employment for Cause upon written notice to the Employee in which notice the basis for termination shall be set forth.  A termination for "Cause" is a termination due to a serious breach of trust, including, but not limited to, theft, embezzlement, self-dealing, prohibited disclosure to unauthorized persons or entities of confidential or propriety information of or relating to the Company or the engaging by Employee in any prohibited business competitive with the business of the Company and its subsidiaries, affiliates or associated entities. No termination for Cause shall be effective except subject to the final, non-appealable judgment of a court of competent jurisdiction 

to the effect that Employee has committed a serious breach of trust as aforesaid. Except if and to the extent otherwise determined by a court of competent jurisdiction, the Employee shall be entitled to the compensation and benefits provided for under this Agreement for the period prior to the termination of the Employee's employment under this section.

2.2.3  Termination Other Than For Cause. The Company may terminate the employment of the Employee other than for Cause at its discretion and at any time on ninety (90) days prior written notice.

2.3  Termination by Employee. Employee may terminate this Agreement and his employment relationship with the Company at his discretion and at any time on ninety (90) days prior written notice.

2.4  Relationship during Notice Period

2.4.1  For purposes hereof, the term "Notice Period" shall mean the period between the giving of any Notice of Termination and the effective date of such notice as provided in sections 2.2 and 2.3 above or between the date of the notice of intent not to extend the Term and the date of the termination of the Term as provided for in section 2.1 above.

2.4.2  During any Notice Period pursuant to section 2.2.3 or 2.3 above, the Employee shall continue to work and fulfill his duties, hereunder, as an employee of the Company; provided, however, that the Company shall have the right in its discretion to ask the Employee to cease working at the premises of the Company or to cease to work during all or any part of the Notice Period, in which case and without derogating from the Employee's right to Compensation pursuant to sections 2.5.1 - 2.5.3 below to the extent applicable, the Company shall redeem such portion of the Notice Period for which the Company shall have waived its right to the services of the Employee (the "Waived Period") by payment to Employee of an amount equal to Employee's Salary for the Waived Period, plus such amounts to which the Company is obligated pursuant to sections 4 and 5 below.

2.4.3  In the event Employee continues to work during the Notice Period, he shall cooperate with the Company to ensure an orderly transfer of his responsibilities.

2.4.4  In the event the Employee gives notice of termination pursuant to section 2.3 above or of his intention not to extend the Term pursuant to section 2.1 above, and does not continue to work during all or any part of the Notice Period, the Employee shall pay to the Company as liquidated damages an amount equal to his salary for said portions of the Notice Period during which he does not work. The Company shall have the right to deduct such amount from all and any monies due and owing the Employee from the Company.

2.5  Compensation in the Event of Termination

2.5.1  Termination Other Than for Cause or Disability. Without derogating from the rights of the Employee to compensation during the Notice Period as provided in section 2.4 above, the Employee shall be entitled to compensation in the event of (a) termination or of (b) failure to extend the Term of the Agreement by the Company prior to the Employee's attaining the age of seventy (70), other than for Cause or due to Disability, in an amount equal to:

	all sums, including Salary pursuant to section 3 below, Social Insurance and Employee Benefits as provided in section 4.1 - 4.3 below, to which Employee would otherwise have been entitled if he had remained in the employ of the Company for the portion of the Term during which this Agreement would have remained in effect but for its termination as aforesaid, and 

	an amount equal to six (6) monthly Base Salaries, as defined in section 3 below.

2.5.2  Change of Control. In the event of (a) termination or of (b) failure to extend the Term of this Agreement prior to the Employee's attaining the age of seventy (70), other than for Cause or due to Disability, within one (1) year of the completion of a Business Combination as defined in Article Tenth of 

the Company's Amended and Restated Certificate of Incorporation, then in addition to any rights of the Employee during the Notice Period as provided in section 2.4 above, and pursuant to section 2.5.1 above and to section 2.5.3  below, the Employee shall be entitled to compensation in an amount equal to thirty six (36) monthly Base Salaries.

2.5.3  Release of Social Benefit Funds. In the event of the termination or the failure to extend the term of this Agreement for any reason whether at the Company's or the Employee's instance, the Company shall release to the benefit of the Employee all funds that have accrued to the Employee's benefit in the severance pay and pension funds established pursuant to section 4.1 below; provided that in the event of termination of this Agreement by the Company for Cause or by the Employee in circumstances under which the Company has the right to deny the Employee severance pay ("Pitzuei Piturim") pursuant to the provisions of the Israeli Severance Pay Law, 5723-1953 ("Severance Pay"), in whole or in part, the Employee shall be entitled to the release only of such sums as accrued in the funds attributable to the Employee's Contributions pursuant to section 4.1(d) below.

3.  Salary

As compensation for the Employee's services hereunder, the Company shall pay the Employee a monthly gross salary (the "Salary") in an amount in New Israeli Shekelim (NIS) as follows:

for the period commencing the Effective Date, US $16,667 (US $200,000 annually) (as such may be increased from time to time by decision of the Board, the "Base Salary"),

calculated at the representative rate of the US Dollar as against the NIS, last published by the Bank of Israel and known at the time of payment (the "Representative Rate"), payable to Employee in NIS on the first business day of each month during the term of the Employee's engagement hereunder in arrears for the month just ended.

4.  Social Insurance and Employee Benefits

4.1  Severance Pay and Pension Benefits. 

	The Company shall allocate and pay to a Provident Fund ("Kupat Gemel") (as defined in Section 47 of the Israeli Income Tax Ordinance) (such Provident Fund, the "Fund") in the framework of a manager's insurance plan ("Bituach Mnahalim") or in such other framework, at the option of the Employee and subject to the consent of the Company, a sum equal to 131⁄3% of the Employee's Salary as it may be from time to time (such sum, the "Company's Contribution").

	The Company's Contribution shall be allocated as follows:

	81⁄3% towards Severance Pay; and

	5% to pension benefits ("Tagmulim").

	The Company shall also pay an amount equal to 21/2% of Employee's Salary towards the purchase of disability insurance for the Employee.

	The Company shall deduct from the Employee's Salary as it may be from time to time an amount equal to 5% of the Salary (the "Employee's Contribution") and deposit such sum in the Fund. The Employee's Contribution shall be allocated in full to pension benefits (Tagmulim).

	That part of the Company's Contribution allocated as provided in clause (b)(i) of this section 4.1 above, together with all income thereon of whatever nature, shall be on account of Severance Pay  that shall be due, if due, to Employee pursuant to the provisions of section 2.5.3 above or pursuant to the Israeli Severance Pay Law, 5723-1953.

4.2  Vacation. The Employee shall be entitled to an annual vacation of twenty three (23) working days at full pay. Vacation days may be accummulated for two years, after which they must be used or redeemed; provided that accummulation of vacation days in excess of forty six (46) days may be approved by the Chief Executive Officer of the Company in his discretion.

4.3  Recuperation Allowance. Employee shall be entitled to Recuperation Allowance ("Dmei Havra'ah") of ten (10) days per year at the rate provided from time to time by applicable law. The Recuperation Allowance shall be paid semi-annually at the rate of five (5) days per each semi-annual period  together with payment of the Employee's June and December Salaries.

4.4  Sick Pay

	The Employee shall be entitled to up to thirty (30) days per year of fully paid sick leave, against a doctor's confirmation, which leave can be accummulated for a period of up to a maximum of five (5) years; provided, however, that the Employee shall not be entitled to sick leave payment to the extent already covered by any insurance component of any plan purchased by or for the benefit of the Employee pursuant to section 4.1 above. 

	The Employee shall not for any reason or in any circumstances be entitled to redeem any accumulated but unused sick leave upon termination of his employment under this Agreement.

	It is agreed that payment on account of sick leave as provided herein shall be deemed in full compliance with the Company's obligations to Employee under the Israeli Sick Pay Law, 5736-1976.

5.  Additional Benefits

5.1  Vehicle Expenses and Parking. 

	Commencing January 1, 2004 and provided that the Employee has a valid driver's license and valid vehicle license, the Company shall pay the Employee monthly a vehicle maintenance allowance in an amount in NIS equal to US $150 (US Dollars One Hundred and Fifty)  (calculated at the Representative Rate). This amount shall be paid as the Company's participation in the Employee's expenses in maintaining his vehicle so that it is available for use by the Employee in connection with Company business, including travel between his residence and his place of work. 

	The Company shall arrange for parking for the Employee at his place of work and shall reimburse him for his parking expenses based on receipts he shall produce to the Company.

5.2  Cellular Phone. Commencing January 1, 2004, the Company shall provide Employee with a Company cellular phone for Company business. Until such time as the Company purchases or leases cellular phones on its own account, the Company shall reimburse the Employee his expenses in maintaining and using one cellular phone (one number). 

5.3  Professional Fees. Commencing for calendar year 2004, the Company shall reimburse Employee professional license and professional liability fees and periodic membership dues for the professional societies and social/business organizations the maintenance of which is hereby acknowledged to be connected with and necessary for the proper performance of the Employee's duties under this Agreement, including:

	Israel Chamber of Advocates (National and District Committees).

	State of New York Attorney Registration Fee.

	American Bar Association.

	Professional Liability Insurance as provided by the Israel Chamber of Advocates in connection with its annual license/membership fee.

	One golf, boating or fitness club

	Additional as may from time to time be approved by the Chief Executive Officer

5.4  Expenses. The Employee shall be entitled to be reimbursed for all reasonable expenses incurred by him in connection with the performance of his duties hereunder in accordance with the expense reimbursement policy adopted by the Board or with the prior approval of the Chief Executive Officer or the President of the Company.

6.  Long-Term Management Incentive Plan

The Company has resolved to establish a long-term management incentive plan, which may be structured as an employee's royalty pool, to be funded by the equivalent of a 1.5% overriding royalty or net profits interest (after pay-out calculated on a well by well basis) (the "Plan"). Upon its establishment, the Employee shall be granted a 10% (ten percent) interest in Plan income attributable to wells drilled on any oil and gas property acquired by the Company prior to the end of the Term or earlier termination of this Agreement, subject to the terms and conditions of the Plan.  To the extent less than 100% of the interests in the Plan with respect to a single well have been awarded at the time the well is spudded, Employee shall share pro-rata with the other Plan participants in the excess unawarded amounts.

7.  Propriety Information

7.1  The Employee acknowledges and agrees that, in the course of his employment by the Company, he will have access to confidential and propriety information of the Company regarding, without limitation, the business, financial, research, exploratory, engineering, production, marketing and sales activities of the Company. Such information, whether documentary, written, oral or computer generated, shall be deemed to be and referred to as "Proprietary Information".

7.2  Proprietary Information shall be deemed to include any and all proprietary information disclosed by or on behalf of the Company and irrespective of form, but excluding information that: (i) was known to the Employee prior to his association with the Company and can be so proven; (ii) shall have appeared in any printed publication or patent or shall have become a part of the public knowledge except as a result of a breach of this Agreement by the Employee; (iii) shall have been received by the Employee from a third party having no obligation to the Company; (iv) reflects general skills and experience gained during the Employee's engagement by the Company; or (v) reflects information and data generally known within the industries or trades in which the Company transacts business.

7.3  The Employee agrees and declares that all Proprietary Information, patents and other rights in connection therewith shall be the sole property of the Company and its assigns. At all times, both during his engagement by the Company and for a period of five (5) years after its termination, the Employee will keep in confidence and trust all Proprietary Information, and the Employee will not use or disclose any Proprietary Information or anything relating to it without the written consent of the Company, except as may be necessary in the ordinary course of performing the Employee's duties hereunder and in the best interests of the Company.

7.4  Upon termination of his employment with the Company, the Employee will promptly deliver to the Company all documents and materials of any nature pertaining to his work with the Company, and he will not take with him any documents or materials or copies thereof containing any Proprietary Information.

7.5  The Employee recognizes that the Company received and will receive confidential or proprietary information from third parties subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. At all times, both during his employment and after its termination, the Employee undertakes to keep and hold all such information in strict confidence and trust, and he will not use or disclose any of such information without the prior written consent of the Company, except as may be necessary to perform his duties as an employee of the Company and consistent with the Company's agreement with such third party. Upon termination of his employment with the Company, Employee shall act with respect to such information as set forth in Section 7.4 mutatis mutandis.

7.6  The Employee's undertakings in this section 7 shall remain in full force and effect in accordance with their terms after termination of this Agreement or any renewal thereof.

8.  Non-Competition

8.1  The Employee agrees and undertakes that he will not, so long as he is employed by the Company and for a period of six (6)  months following termination of his employment for whatever reason, directly or indirectly, as owner, partner, joint venturer, stockholder, employee, broker, agent, principal, corporate officer, director, licensor or in any other capacity whatever engage in, become financially interested in, be employed by, or have any connection with any business or venture that is engaged in any activities competing with the Company in the field of petroleum exploration, production and marketing in Israel or any other region or territory in which the Company is conducting or considering the conduct of petroleum exploration, production or marketing activities; provided, however, that the Employee may own securities of any corporation or other entity which is engaged in such business and is publicly owned and traded but in an amount not to exceed at any one time one percent (1%) of any class of stock or securities of such entity so long as he has no active role therein as director, employee, consultant or otherwise, unless otherwise specifically approved by the Board.

8.2  The Employee agrees and undertakes that during the period of his employment and for a period of twelve (12) months following termination, he will not, directly or indirectly, including personally or in any business in which he is an officer, director or shareholder, for any purpose or in any place, employ any person employed by the Company or retained by the Company as a consultant on the date of such termination or during the preceding six (6) months.

8.3  If any one or more of the terms contained in this section 8 shall for any reason be held to be excessively broad with regard to time, geographic scope or activity, the term shall be construed in a manner to enable it to be enforced to the extent compatible with applicable law.

9.  Indemnification and Insurance

9.1  The Company shall indemnify the Employee against, and hold him harmless, from any and all judgments, penalties (including excise and similar taxes), fines, settlements and expenses (including attorney's fees and court costs) actually and reasonably incurred by him in connection with any action, suit or proceeding whether civil, criminal, administrative, arbitrative or investigative, any appeal in such an action, suit or proceeding whether or not by or in the right of the Company to which Employee is or may be made a party or is or shall be threatened to be made a party by reason of the fact that the Employee is an officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another corporation, partnership, joint venture, sole proprietorship, trust, nonprofit entity, employee benefit plan or other enterprise, to the fullest extent permitted by any applicable law, and such indemnity shall inure to the benefit of the heirs, executors and administrators of the Employee.

9.2  The right to indemnification under this section 9 shall include the Employee's right to be paid by the Company the expenses incurred in defending any such proceeding in advance of its disposition; provided, however, that, if the applicable law requires, the payment of such expenses incurred by the Employee in advance of the final disposition of a proceeding shall be made only upon delivery to the Company of an undertaking, by or on behalf of the Employee, to repay all amounts so advanced if it shall ultimately be determined that the Employee is not entitled to be indemnified under this section 9 or otherwise.

9.3  The Company shall purchase and maintain insurance coverage in an amount to be determined from time to time by the Board taking into account the nature and extent of the Company's activities and the cost of coverage, but in no event less than that maintained by the Company for any other director or executive officer of the Company, on behalf of the Employee, both in his capacity as an officer, director and employer of the Company and, if he so serves at the request of the Company, as a director, officer, 

employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any legally insurable liability asserted against the Employee and incurred by the Employee in any such capacity or arising out of Employee's status as such.

10.  Taxes

Any and all taxes, fees and other liabilities (as may apply from time to time) in connection with the Salary (section 3 above) or with the Social Insurance and Employee Benefits (section 4 above) or with the Additional Benefits (section 5 above) or with any other payment to which the Employee is entitled under this Agreement will be borne by the Employee and, except as otherwise expressly set out in this Agreement, the Employee shall be solely liable for all such taxes, fees and other liabilities.

11.  Mutual Representations

11.1  The Employee represents and warrants to the Company that the execution and delivery of this Agreement and the fulfillment of the terms hereof (i) will not constitute a default under or conflict with any agreement or other instrument to which he is a party or by which he is bound, and (ii) do not require the consent of any person or entity.

11.2  The Company represents and warrants to the Employee that this Agreement has been duly authorized, executed and delivered by the Company and that the fulfillment of the terms hereof (i) will not constitute a default under or conflict with any agreement or other instrument to which it is a party or by which it is bound, and (ii) do not require the consent of any person or entity.

11.3  Each party hereto warrants and represents to the other that this Agreement constitutes the valid and binding obligation of such party enforceable against such party in accordance with its terms subject to applicable bankruptcy, insolvency, moratorium and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless if enforcement is sought in proceeding in equity or at law).

12.  Notice; Addresses

12.1  The addresses of the parties for purposes of this Agreement shall be the addresses set forth above, or any other address which shall be provided by due notice given in accordance with the provisions of section 12.2 below.

12.2  All notices in connection with this Agreement shall be sent by registered airmail or delivered by hand or international courier service to the addresses set forth above, and shall be deemed to have been delivered to the other party at the earlier of the following two dates: (a) if sent by registered airmail or international courier service, as aforesaid, five (5) business days from the date of mailing; and (b) if delivered by hand - upon actual delivery or proffer of delivery (in the event of a refusal to accept it) at the address of the addressee. Delivery by cable, telex, facsimile or other electronic communication shall be sufficient and be deemed to have occurred upon electronic confirmation of receipt, with copy sent by first class airmail.

13.  Miscellaneous

13.1  The preamble to this Agreement constitutes an integral part hereof. 

	Headings are included for reference purposes only and are not to be used in interpreting this Agreement.

13.3  The provisions of this Agreement are in lieu of the provisions of any collective bargaining agreement or arrangement and, therefore, no collective bargaining agreement or arrangement shall apply with respect to the relationship between the parties hereto (subject to the applicable provisions of law).

13.4  No failure, delay or forbearance of either party in exercising any power or right hereunder shall in any way restrict or diminish such party's rights and powers under this Agreement, or operate as a waiver of any breach or nonperformance by either party of any terms or conditions hereof.

13.5  No determination of the invalidity or unenforceability of any provision of this Agreement shall affect the remaining provisions hereof unless the business purpose of this Agreement is substantially frustrated thereby.

13.6  This Agreement is personal and non-assignable by the Employee. It shall inure to the benefit of any corporation or other entity with which the Company shall merge or consolidate or to which the Company shall lease, sell or otherwise transfer all or substantially all of its assets, and may be assigned by the Company to any affiliate of the Company or to any corporation or entity with which such affiliate shall merge or consolidate or which shall lease or acquire all or substantially all of the assets of such affiliate. Any assignee must assume all the obligations of the Company hereunder, but such assignment and assumption shall not serve as a release of the Company.

13.7  This Agreement is the only agreement between the parties on the subject matter of this Agreement and supersedes and replaces all other agreements, whether written or oral, between the parties, concerning the subject matter of this Agreement, including that certain letter dated September 2, 2003 from the Company to Employee "Re: Executive Employment Agreement"; provided, however, that nothing herein shall be deemed to affect the rights of either of the parties hereto with respect to the services rendered by the Employee to or on behalf of the Company during any period prior to the Effective Date, including without limitation those services rendered prior to the Effective Date pursuant to the Retainer Agreement.

13.8  It is hereby agreed between the parties that the laws of the State of Israel shall apply to this Agreement and that the sole and exclusive place of jurisdiction in any matter arising out of or in connection with the Agreement shall be the courts of appropriate jurisdiction in Tel Aviv - Jaffa.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

	
ZION OIL & GAS, INC.
	
	

	
	
	

	
By:
	
	
	
Philip Mandelker

	
Name:
	
	
	

	
Title:
	
	
	

 

EXHIBIT 10.5 (v) 

Personal Employment Agreement, David Patir

This Personal Employment Agreement (the "Agreement") is entered into as of the 1st day of October 2005 (the "Effective Date"), by and among Zion Oil & Gas, Inc., a Delaware corporation with offices at 6510 Abrams Road, Suite 300, Dallas, Texas, U.S.A. (in its own name and as successor in interest of Zion Oil & Gas, Inc., a Florida Corporation, the "Company") and David Patir of 5630 Avalon Way, Houston, Texas, 77057. (the "Employee").

WHEREAS, the Company was established in April 2000 for the purpose of engaging in oil and gas exploration and production in Israel; and

WHEREAS, since July 2005, the Employee has been serving as acting chief financial officer of the Company at the pleasure of chief executive officer and the Board of Directors of the Company (the "Board"); and

WHEREAS, the terms of retention of the Employee for the three-year, three-month period commencing on the effective date hereof were approved by the Board on October 27, 2005; and 

WHEREAS, the Company and Employee desire to regularize their relationship and, in that context, the Company desires to continue to engage the Employee and the Employee desires to continue to serve the Company in the capacity of Senior Vice-President and Chief Financial Officer in accordance with the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises, covenants, conditions, representations and warranties set forth herein, and intending to be legally bound hereby, the parties agree as follows:

1.Appointment; Extent and Nature of Duties

1.1Appointment and Duties. The Employee shall be employed as Senior Vice-President and Chief Financial Officer of the Company. The Employee shall perform the duties, undertake the responsibilities and exercise the authority customarily performed, undertaken and exercised by persons situated in a similar capacity and as may be further defined from time to time by the Board, the President or Chief Executive Officer. The Employee shall be under the direct supervision, and comply with the directives of, the President and, in his absence, the Chief Executive Officer of the Company.

1.2Extent of Services. Effective January 1, 2006, the Employee shall be employed on a full-time basis and shall devote his entire business time, attention and efforts to the performance of his duties and responsibilities under this Agreement and the business and affairs of the Company; except until such time as the financial conditions of the Company permit the continuous and prospectively continuous payment of full compensation (without need of compensation deferral by executives), Employee may maintain supplemental income through his current consulting group.  Between the Effective Date and January 1, 2006, Employee shall be employed as a consultant, providing the Company on a part-time basis with his services as Senior Vice-President and Chief Financial Officer. 

2.Term and Termination

2.1Term. The initial term of employment under this Agreement shall be for the period commencing on the Effective Date and ending on December 31, 2008 (the "Initial Term"). Thereafter, the term of Employee's employment under this Agreement shall automatically be extended for additional periods of one (1) year (each an "Additional Term") at the end of the Initial Term and of each Additional Term, unless either party has given notice to the other 

of its intention not to extend at least one hundred eighty (180) days prior to the expiration of the Initial Term or any Additional Term; provided, however, that following the Employee's having attained the age of seventy (70), the Term of this Agreement, if still in effect, shall not be automatically extended upon the expiration of the then applicable Additional Term, but shall be extended for additional one (1) year terms only upon the mutual agreement of the Company and the Employee annually no later than ninety (90) days prior to the end of the Additional Term then in effect. (The Initial Term and, if the Initial Term is extended, any and all Additional Terms,  the "Term").

2.2Termination by the Company. Notwithstanding the aforesaid, the Employee's employment may be terminated under the following circumstances:

2.2.1For Disability. The Company may, upon ninety (90) days prior written notice, terminate Employee's employment after having established the Employee's Disability. For purposes of this Agreement, "Disability" means a physical or mental infirmity which impairs the Employee's ability to substantially perform his duties pursuant to this Agreement which infirmity continues for a period of at least 120 days in any 365 day period.  Upon termination for disability, the Company shall continue to pay Employee all salary and benefits hereunder for the remainder of the Term, less any disability insurance payments received by Employee.

2.2.2For  Cause. The Company may terminate the Employee's employment for Cause upon written notice to the Employee in which notice the basis for termination shall be set forth. A termination for "Cause" is a termination due to a serious breach of trust, including, but not limited to, theft, embezzlement, self-dealing, prohibited disclosure to unauthorized persons or entities of confidential or propriety information of or relating to the Company or the engaging by Employee in any prohibited business competitive with the business of the Company and its subsidiaries, affiliates or associated entities. No termination for Cause shall be effective except subject to the final, non-appealable judgment of a court of competent jurisdiction to the effect that Employee has committed a serious breach of trust as aforesaid. Except if and to the extent otherwise determined by a court of competent jurisdiction, the Employee shall be entitled to the compensation and benefits provided for under this Agreement for the period prior to the termination of the Employee's employment under this section.

2.2.3Termination Other Than For Cause. The Company may terminate the employment of the Employee other than for Cause at its discretion and at any time on ninety (90) days prior written notice.

2.3Termination by Employee. Employee may terminate this Agreement and his employment relationship with the Company at his discretion and at any time on ninety (90) days prior written notice.

2.4Relationship during Notice Period

2.4.1For purposes hereof, the term "Notice Period" shall mean the period between the giving of any Notice of Termination and the effective date of such notice as provided by sections 2.2 and 2.3 above or between the date of notice of intent not to extend the Term and the date of termination of the Term as provided for in section 2.1 above.

2.4.2During any Notice Period pursuant to section 2.2.3 above, the Employee shall continue to work and fulfill his duties, hereunder, as an Employee of the Company; provided, however, that the Company shall have the right in its discretion to ask the Employee to cease working at the premises of the Company or to cease to work during all or any part of the Notice Period, in which case and without derogating from the Employee's right to Compensation pursuant to sections 2.5.1 and 2.5.2 below to 

the extent applicable, the Company shall redeem such portion of the Notice Period for which the Company shall have waived its right to the services of the Employee (the "Waived Period") by payment to Employee of an amount equal to Employee's Salary for the Waived Period, plus such amounts to which the Company is obligated pursuant to sections 4 and 5 below.

2.4.3In the event Employee continues to work during the Notice Period, he shall cooperate with the Company to ensure an orderly transfer of his responsibilities.

2.4.4In the event the Employee gives notice of termination pursuant to section 2.3 above or of his intention not to extend the Term pursuant to section 2.1 above, and does not continue to work during all or any part of the Notice Period, the Employee shall forfeit his salary for said portions of the Notice Period during which he does not work. The Company shall have the right to deduct such amount from all and any monies due and owing the Employee from the Company.

2.5Compensation in the Event of Termination

2.5.1Termination Other Than for Cause or Disability. Without derogating from the rights of the Employee to compensation during the Notice Period as provided in section 2.4 above, the Employee shall be entitled to compensation in the event of (a) termination or of (b) failure to extend the Term of this Agreement by the Company prior to the Employee's attaining the age of seventy (70), other than for Cause or due to Disability, in an amount equal to all sums, including Salary pursuant to section 3 below and Employee Benefits as provided in section 4.1 below, to which Employee would otherwise have been entitled if he had remained in the employ of the Company for the portion of the Term during which this Agreement would have remained in effect but for its termination as aforesaid, plus, in the event termination occurs after one year of service, 1/6 of one month's Base Salary (as defined below) for each month of full-time service. 

2.5.2Change of Control. In the event of (a) termination or of (b) failure to extend the Term of this Agreement prior to the Employee's attaining the age of seventy (70), other than for Cause or due to Disability within one (1) year of the completion of a Business Combination as defined in Article Tenth of the Company's Amended and Restated Certificate of Incorporation, then in addition to any rights of the Employee during the Notice Period as provided in section 2.4 and pursuant to section 2.5.1 above, the Employee shall be entitled to compensation in an amount equal to thirty six (36) monthly Base Salaries.  

3.Compensation

As compensation for the Employee's services hereunder for the period October 1, 2005 through December 31, 2005, the Company shall pay the Employee a consulting fee of $10,000 per month.  As compensation for the Employee's services hereunder for the period commencing January 1, 2006 the Company shall pay the Employee a monthly gross salary (the "Salary") of US $14,583 (US $175,000 annually) (as such may be increased from time to time by decision of the Board, the "Base Salary"), payable to Employee on the first business day of each month during the term of the Employee's engagement hereunder in arrears for the month just ended.

As additional compensation hereunder, Employee shall be awarded a 5-year option to purchase 80,000 shares of the Company's common stock at $5.00 per share, vesting one-third at the end of each year of full-time employment.  In case of termination other than for cause or disability, 100% of the shares will be vested.

4.Employee Benefits

4.1Insurance. Commencing January 1, 2006, the Company shall purchase or participate in the purchase for the benefit of the Employee an insurance package consisting of medical insurance, life insurance and long term disability insurance of such nature and providing such coverage as the Employee may request, provided that in no event shall the cost to the Company of the premiums for such insurance exceed US $2,000 per month. Except if the Employee specifically requests otherwise, the Company may fulfill its obligations hereunder by providing insurance coverage of the Employee in any group life or group health plan maintained by the Company for its employees based in the United States.

 

4.2Vacation. The Employee shall be entitled to an annual vacation of twenty-three (23) working days at full pay. Vacation days may be accumulated for two (2) years, after which they must be used or redeemed; provided that accumulation of vacation days in excess of forty-six (46) days may be approved by the Chief Executive Officer of the Company in his discretion.

4.3Sick Pay

(a)The Employee shall be entitled to up to thirty (30) days per year of fully paid sick leave, against a doctor's confirmation, which leave can be accumulated for a period of up to a maximum of five (5) years; provided, however, that the Employee shall not be entitled to sick leave payment to the extent already covered by any insurance component of any plan established by or for the benefit of the Employee pursuant to section 4.1 above. 

(b)The Employee shall not for any reason or in any circumstances be entitled to redeem any accumulated but unused sick leave upon termination of his employment under this Agreement.

5.Additional Benefits

5.1Cellular Phone. Commencing January 1, 2006, the Company shall provide Employee with a Company cellular phone for Company business. Until such time as the Company purchases or leases cellular phones on its own account, the Company shall reimburse the Employee his expenses in maintaining and using one cellular phone (one number). 

5.2Professional Fees. Commencing January 1, 2006, the Company shall reimburse Employee professional license fees and periodic membership dues for the professional societies and business/social organizations the maintenance of which is hereby acknowledged to be connected with and necessary for the proper performance of the Employee's duties under this Agreement, including:

(a)State of Texas, State of Israel--registration fees as a Certified Public Accountant

(b)One luncheon club

	One athletic/sports club

	Continue education to maintain license in the State of Texas

	Participate in the yearly C.P.A. conference organized by the Institute of C.P.A. in Israel

(f)additional as may from time to time be approved by the Chief Executive Officer.

 

5.3Expenses. The Employee shall be entitled to be reimbursed for all reasonable expenses incurred by him in connection with the performance of his duties hereunder in accordance with the expense reimbursement policy adopted by the Board or with the prior approval of the President of the Company.

6.Long-Term Management Incentive Plan

The Company has resolved to establish a long-term management incentive plan, which may be structured as an employee's royalty pool, to be funded by the equivalent of a 1.5% overriding royalty or equivalent net profits interest (after pay-out calculated on a well by well basis) (the "Plan"). Upon its establishment, the Employee shall be eligible to be granted an in interest in Plan income attributable to wells drilled subsequent to the Ma'anit #1 (no matter when drilled) on any oil and gas property acquired by the Company prior to the end of the Term or earlier termination of this Agreement, subject to the terms and conditions of the Plan.  Grant of any interest in the Plan is strictly discretionary by the Company and is based on recommendations of Employee's immediate supervisor (the President of the Company) and the approval of the Plan's management committee and the Board's Compensation Committee.

7.Propriety Information

7.1The Employee acknowledges and agrees that, in the course of his employment by the Company, he will have access to confidential and propriety information of the Company regarding, without limitation, the business, financial, research, exploratory, engineering, production, marketing and sales activities of the Company. Such information, whether documentary, written, oral or computer generated, shall be deemed to be and referred to as "Proprietary Information".

7.2Proprietary Information shall be deemed to include any and all proprietary information disclosed by or on behalf of the Company and irrespective of form, but excluding information that: (i) was known to the Employee prior to his association with the Company and can be so proven; (ii) shall have appeared in any printed publication or patent or shall have become a part of the public knowledge except as a result of a breach of this Agreement by the Employee; (iii) shall have been received by the Employee from a third party having no obligation to the Company; (iv) reflects general skills and experience gained during the Employee's engagement by the Company; or (v) reflects information and data generally known within the industries or trades in which the Company transacts business.

7.3The Employee agrees and declares that all Proprietary Information, patents and other rights in connection therewith shall be the sole property of the Company and its assigns. At all times, both during his engagement by the Company and for a period of five (5) years after its termination, the Employee will keep in confidence and trust all Proprietary Information, and the Employee will not use or disclose any Proprietary Information or anything relating to it without the written consent of the Company, except as may be necessary in the ordinary course of performing the Employee's duties hereunder and in the best interests of the Company.

7.4Upon termination of his employment with the Company, the Employee will promptly deliver to the Company all documents and materials of any nature pertaining to his work with the Company, and he will not take with him any documents or materials or copies thereof containing any Proprietary Information.

7.5The Employee recognizes that the Company received and will receive confidential or proprietary information from third parties subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. At all times, both during his employment and after its termination, the Employee undertakes to keep and hold all such information in strict confidence and trust, and he will not use or disclose any of such information without the prior written consent of the Company, except as may be necessary to perform his duties as an employee of the Company and consistent with the Company's agreement with such third party. Upon termination of his employment with the Company, Employee shall act with respect to such information as set forth in Section 7.4 mutatis mutandis.

7.6The Employee's undertakings in this section 7 shall remain in full force and effect in accordance with their terms after termination of this Agreement or any renewal thereof.

8.Non-Competition

8.1The Employee agrees and undertakes that he will not, so long as he is employed by the Company and for a period of six (6) months following termination of his employment for whatever reason, directly or indirectly, as owner, partner, joint venturer, stockholder, employee, broker, agent, principal, corporate officer, director, licensor or in any other capacity whatever engage in, become financially interested in, be employed by, or have any connection with any business or venture that is engaged in any activities competing with the Company in the field of petroleum exploration, production and marketing in Israel or any other region or territory in which the Company is conducting petroleum exploration, production or marketing activities; provided, however, that the Employee may own securities of any corporation or other entity which is engaged in such business and is publicly owned and traded but in an amount not to exceed at any one time one percent (1%) of any class of stock or securities of such entity so long as he has no active role therein as director, employee, consultant or otherwise, unless otherwise specifically approved by the Board.

8.2The Employee agrees and undertakes that during the period of his employment and for a period of twelve (12) months following termination, he will not, directly or indirectly, including personally or in any business in which he is an officer, director or shareholder, for any purpose or in any place, employ any person employed by the Company or retained by the Company as a consultant on the date of such termination or during the preceding six (6) months.

8.3If any one or more of the terms contained in this section 8 shall for any reason be held to be excessively broad with regard to time, geographic scope or activity, the term shall be construed in a manner to enable it to be enforced to the extent compatible with applicable law.

9.Indemnification and Insurance

9.1The Company shall indemnify the Employee against, and hold him harmless, from any and all judgments, penalties (including excise and similar taxes), fines, settlements and expenses (including attorney's fees and court costs) actually and reasonably incurred by him in connection with any action, suit or proceeding whether civil, criminal, administrative, arbitrative or investigative, any appeal in such an action, suit or proceeding whether or not by or in the right of the Company to which Employee is or may be made a party or is or shall be threatened to be made a party by reason of the fact that the Employee is an officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another corporation, partnership, joint venture, sole proprietorship, trust, nonprofit entity, employee benefit plan or other enterprise, to the fullest extent permitted by any applicable law, and such indemnity shall inure to the benefit of the heirs, executors and administrators of the Employee.

9.2The right to indemnification under this section 9 shall include the Employee's right to be paid by the Company the expenses incurred in defending any such proceeding in advance of its disposition; provided, however, that, if the applicable law requires, the payment of such expenses incurred by the Employee in advance of the final disposition of a proceeding shall be made only upon delivery to the Company of an undertaking, by or on behalf of the Employee, to repay all amounts so advanced if it shall ultimately be determined that the Employee is not entitled to be indemnified under this section 9 or otherwise.

9.3The Company shall purchase and maintain insurance coverage in an amount to be determined from time to time by the Board taking into account the nature and extent of the Company's activities and the cost of coverage, but in no event less than that maintained by the Company for any other director or executive officer of the Company, on behalf of the Employee, both in his capacity as an officer, director and employee of the Company and, if he so serves at the request of the Company, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any legally insurable liability asserted against the Employee and incurred by the Employee in any such capacity or arising out of Employee's status as such.

10.Taxes

Any and all taxes, fees and other liabilities (as may apply from time to time) in connection with the Salary (section 3 above) or with Employee Benefits (section 4 above) or with the Additional Benefits (section 5 above) or with any other payment to which the Employee is entitled under this Agreement will be borne by the Employee and, except as otherwise expressly set out in this Agreement, the Employee shall be solely liable for all such taxes, fees and other liabilities.

11.Mutual Representations

11.1The Employee represents and warrants to the Company that the execution and delivery of this Agreement and the fulfillment of the terms hereof (i) will not constitute a default under or conflict with any agreement or other instrument to which he is a party or by which he is bound, and (ii) do not require the consent of any person or entity.

11.2The Company represents and warrants to the Employee that this Agreement has been duly authorized, executed and delivered by the Company and that the fulfillment of the terms hereof (i) will not constitute a default under or conflict with any agreement or other instrument to which it is a party or by which it is bound, and (ii) do not require the consent of any person or entity.

11.3Each party hereto warrants and represents to the other that this Agreement constitutes the valid and binding obligation of such party enforceable against such party in accordance with its terms subject to applicable bankruptcy, insolvency, moratorium and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless if enforcement is sought in proceeding in equity or at law).

12.Notice; Addresses

12.1The addresses of the parties for purposes of this Agreement shall be the addresses set forth above, or any other address which shall be provided by due notice given in accordance with the provisions of section 12.2 below.

12.2All notices in connection with this Agreement shall be sent by registered mail or delivered by hand or courier service to the addresses set forth above, and shall be deemed to have been delivered to the other party at the earlier of the following two dates: (a) if sent by registered mail or courier service, as aforesaid, three (3) business days from the date of mailing; and (b) if delivered by hand - upon actual delivery or proffer of delivery (in the event of a refusal to accept it) at the address of the addressee. Delivery by cable, telex, facsimile or other electronic communication shall be sufficient and be deemed to have occurred upon electronic confirmation of receipt, with copy sent by first class mail.

13.Miscellaneous

13.1Headings are included for reference purposes only and are not to be used in interpreting this Agreement.

13.2No failure, delay or forbearance of either party in exercising any power or right hereunder shall in any way restrict or diminish such party's rights and powers under this Agreement, or operate as a waiver of any breach or nonperformance by either party of any terms or conditions hereof.

13.3No determination of the invalidity or unenforceability of any provision of this Agreement shall affect the remaining provisions hereof unless the business purpose of this Agreement is substantially frustrated thereby.

13.4This Agreement is personal and non-assignable by the Employee. It shall inure to the benefit of any corporation or other entity with which the Company shall merge or consolidate or to which the Company shall lease, sell or otherwise transfer all or substantially all of its assets, and may be assigned by the Company to any affiliate of the Company or to any corporation or entity with which such affiliate shall merge or consolidate or which shall lease or acquire all or substantially all of the assets of such affiliate. Any assignee must assume all the obligations of the Company hereunder, but such assignment and assumption shall not serve as a release of the Company.

13.5This Agreement is the only agreement between the parties on the subject matter of this Agreement and supersedes and replaces all other agreements, whether written or oral, between the parties, concerning the subject matter of this Agreement.

13.6It is hereby agreed between the parties that the laws of the State of Texas  shall apply to this Agreement and that the sole and exclusive place of jurisdiction in any matter arising out of or in connection with this Agreement shall be in the courts of appropriate jurisdiction in the county of Dallas, Texas.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

	
ZION OIL & GAS, INC.
	
	

	
	
	
/s/ David Patir

	
By:
	
/s/  E. A. Soltero
	
	
David Patir

	
Name:
	
Eugene A. Soltero
	
	

	
Title:
	
President

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