Document:

ZION

 

 

 

 

 

 

 

 

EXHIBIT 10.2

 

FORM OF PLACEMENT AGENT AGREEMENT

ZION OIL & GAS, INC.

6510 Abrams Rd. Suite 300

Dallas, TX 75231

Phone: 214.221.4610 Fax: 214.221.6510

Email: bill@zionoil.com Website: www.zionoil.com

 

_______________, 2003

___________________________

___________________________

___________________________

 

                    Re:          Placement Agent Agreement

Gentlemen:

Zion Oil & Gas, Inc. (the "Company"), a Delaware corporation, proposes to issue and sell through you and other broker-dealers ("Placement Agents") up to 5,000,000 shares of the Company's $.01 par value common stock for $5.00 per share (the "Shares").  The offering of the Shares is further described in the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission (the "Commission").

	Representations and Warranties of the Company.  In order to induce the Placement Agents to enter into this Agreement, the Company represents and warrants as follows:

	The Company has filed a Registration Statement (No. 333-107042) on Form SB-2 relating to the Shares with the Commission pursuant to the Securities Act of 1933, as amended (the "Act").  As used in this Agreement, the term "Registration Statement" means the Registration Statement, including the Prospectus, the exhibits, and all amendments including any amendments after the effective date of the Registration Statement.  The term "Prospectus" means the prospectus filed as a part of Part I of the Registration Statement, including all pre-effective and post-effective amendments and supplements thereto.

	The Registration Statement and all other documents previously filed or filed after the date hereof with the Commission conform and will comply with all of the requirements of the Act in all material respects.  Neither the Registration Statement, the Prospectus nor the other material filed or to be filed with the Commission contains nor will contain any untrue statements of material facts nor are there or will there be any omissions of material facts required to be stated therein or that are necessary to make the statements therein not misleading, except that this warranty does not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by and with respect to you or another Placement Agent expressly for use in the Registration Statement or Prospectus or any amendment or supplement thereto.

	The Company has obtained a CUSIP number for its common stock and the Company has used its best efforts to qualify the Shares for offering in every state in which it plans to offer the Shares for sale.  The materials filed or to be filed with any state do not and will not contain any untrue statements of material fact nor are there or will there be any omissions of material facts required to be stated therein or that are necessary to make the statements therein not misleading.

	The outstanding capital stock of the Company has been duly and validly authorized, issued and is fully paid and non-assessable and conforms to all statements made in the Registration Statement and Prospectus with respect thereto.  The Shares have been duly and validly authorized and, when issued and delivered against payment as provided in this Agreement, will be validly issued, fully paid and non-assessable.  The Shares, upon issue, will not be subject to the preemptive rights of any shareholders of the Company and will conform to all statements in the Registration Statement and Prospectus.

	The Company has been legally incorporated and is now, and always during the period of the offering will be, a validly existing corporation under the laws of the State of Delaware, lawfully qualified to conduct the business for which is was organized and which it proposes to conduct.  The Company will always during the period of the offering be qualified to conduct business as a foreign corporation in each jurisdiction where the nature of its business requires such qualification.

	The Company's certificate of incorporation provides for the authorization of 20,000,000 shares of common stock ($.01 par value).  There are no outstanding options, warrants or other rights to purchase securities of the Company except as described in the Registration Statement.

	The Company has no subsidiaries nor contemplates acquiring subsidiaries or engaging in mergers with or the acquisition of any companies.

	The financial statements, together with related schedules and notes, included in the Prospectus present fairly the financial condition of the Company and are reported upon by independent public accountants according to generally accepted accounting principles and as required by the rules and regulations of the Commission.

	The Company's securities are not subject to preemptive rights.

	The Company has the legal right and authority to enter into this Placement Agent Agreement, to effect the proposed sale of the Shares, and to effect all other transactions contemplated by this Agreement.

	The Company is eligible to use Form SB-2 for the offering of the Shares.

	The Company possesses adequate certificates and permits issued by the appropriate federal, state and local regulatory authorities necessary to conduct its business and to retain possession of its properties.  The Company has not received any notice of any proceeding relating to the revocation or modification of any of these certificates or permits.

	The Company has filed all tax returns required to be filed and is not in default in the payment of any taxes which have become due pursuant to any law or any assessment.

	All of the contracts, leases, licenses, permits and agreements under which the Company operates as described in the Registration Statement are in full force and effect.  The Company is not in default under any of the material terms or provisions of any such contracts, leases, licenses, permits or agreements.

	All original documents and other information relating to the Company's business has and will continue to be made available upon request to the Placement Agents and their counsel at the offices of the Company, and copies of any such documents will be furnished upon request to the Placement Agent or its counsel.

	The Company has appointed Registrar and Transfer Company, Cranford, NJ, as the Company's transfer agent.  The Company will continue to retain a transfer agent reasonably satisfactory to the Placement Agent for so long as the Company is subject to the reporting requirements under Section 12(g) or Section 15(d) of the Securities Exchange Act of 1934.  The Company will make arrangements to have available at the office of the transfer agent sufficient quantities of the Company's common stock certificates as may be needed for the quick and efficient transfer of the Shares.

	The Company will use the proceeds from the sale of the Shares as set forth in the Registration Statement and Prospectus.

	There are no contracts or other documents required to be described in the Registration Statement or to be filed as exhibits to the Registration Statement that have not been described or filed as required.

All of the above representations and warranties shall survive the performance or termination of this Agreement.

	Representations and Warranties of the Placement Agent.  The Placement Agent represents and warrants as follows:

	It is registered as a broker-dealer with the Commission, and is registered to the extent registration is required with the appropriate governmental agency in each state in which it offers or sells the Shares, and is a member of the National Association of Securities Dealers, Inc. ("NASD") and will use its best efforts to maintain such registrations, qualifications and memberships throughout the term of the offering.

	To the knowledge of the Placement Agent, no action or proceeding is pending against the Placement Agent or any of its officers or directors concerning the Placement Agent's activities as a broker or dealer that would affect the Company's offering of the Shares.

	The Placement Agent will offer the Shares only in those states and in the quantities that are identified in the Blue Sky Memoranda from the Company's counsel to the Placement Agent that the offering of the Shares has been qualified for sale under the applicable state statutes and regulations.  The Placement Agent, however, may offer the Shares in other states if (i) the transaction is exempt from the registration requirements in that state, (ii) the Company's counsel has received notice ten days prior to the proposed sale, and (iii) the Company's counsel does not object within such ten-day period.

	The Placement Agent, in connection with the offer and sale of the Shares and in the performance of its duties and obligations under this Agreement, agrees to use its best efforts to comply with all applicable federal laws; the laws of the states or other jurisdictions in which the Shares are offered and sole; and the Rules and Regulations of the NASD.

	The Placement Agent is a corporation duly organized, validly existing and in good standing under the laws of the State of ___________ with all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder.

	This Agreement has been duly authorized, executed and delivered by the Placement Agent and is a valid agreement on the part of the Placement Agent.

	Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will result in any breach of any of the terms or conditions of, or constitute a default under, the articles of incorporation or bylaws of the Placement Agent or any indenture, agreement or other instrument to which the Placement Agent is a party or violate any order directed to the Placement Agent of any court or any federal or state regulatory body or administrative agency having jurisdiction over the Placement Agent or its affiliates.

	No person acting by, through or under the Placement Agent will be entitled to receive from the Placement Agent or from the Company and finder's fees or similar payments.

	The Placement Agent will, reasonably promptly after the closing date, supply the Company with all information required from the Placement Agent for the completion of Form SR and such additional information as the Company may reasonably request to be supplied to the securities commissions of such states in which the Shares have been qualified for sale.

All of the above representations and warranties shall survive the performance or termination of this Agreement.

	Employment of the Placement Agent.  In reliance upon the representations and warranties and subject to the terms and conditions of this Agreement:

	The Company employs the Placement Agent as its agent to sell for the Company's account the Shares, on a cash basis only, at a price of $5.00 per Share.  The Placement Agent agrees to use its best efforts, as agent for the Company, to sell the Shares subject to the terms and conditions set forth in this Agreement.  It is understood between the parties that there is no firm commitment by the Placement Agent to purchase any or all of the Shares.

	The obligation of the Placement Agent to offer the Shares is subject to receipt by it of written advice from the Commission that the Registration Statement is effective, is subject to the Shares being qualified for offering under applicable laws in the states as may be reasonably designated, is subject to the absence of any prohibitory action by any governmental body, agency or official, and is subject to the terms and conditions contained in this Agreement and in the Registration Statement.

	The Company and the Placement Agent agree that unless a minimum of 1,200,000 of the Shares to be offered are sold on or before March 1, 2004(which period may be extended for an additional period of sixty days), the agency between the Company and the Placement Agent will terminate.  In such an event, the full proceeds which have been paid for the Shares shall be returned to the purchasers within ten (10) business days.  Prior to the sale of all of the Shares to be offered, all proceeds received from the sale of the Shares will be deposited into an escrow account entitled "Zion Oil & Gas, Inc. Escrow Account" with Commerce Bank, NA, Cherry Hill, NJ.  

	The Company and Commerce Bank, NA will, prior to the beginning of the offering of the Shares, enter into a fund escrow agreement ("Escrow Agreement").  The parties mutually agree to faithfully perform their obligations under the Escrow Agreement.  The Placement Agent will promptly deliver the funds into the escrow account in accordance with Rule 15(c)2-4 of the Securities Exchange Act of 1934, as amended, but in any event not later than five (5) business days after receipt of such funds.  The Placement Agent will promptly deliver a copy of each subscription agreement received to the executive offices of the Company, attention VP-Finance.

	Subject to the sale by the Company of a minimum of 1,200,000 of the Shares to be offered, the Company agrees to pay to the Placement Agent a commission equal to 6% of the public offering price for the Shares sold by the Placement Agent.  This commission shall be payable upon the release of the funds which have been deposited into the escrow account.

	Further Agreements of the Company.  The Company further agrees with the Placement Agent as follows:

	The Company will use its best efforts to qualify the sale of the Shares in such states as shall be reasonably requested by the Placement Agent.

	The Company will deliver to the Placement Agent as many copies of the preliminary Prospectus as the Placement Agent may reasonably request during the period following Amendment No. 1 to the Registration Statement.  The Company will deliver to the Placement Agent as many copies of the final Prospectus as the Placement Agent may reasonably request during the period of the offering and for 90 days after the effective date.

	The Company agrees to notify the Placement Agent immediately during the period of the offering and within the 90 day period after the effective date of any event that materially affects the Company or its securities and that should be set forth in an amendment or supplement to the Prospectus in order to make the statements made therein not misleading.  Similarly, the Company agrees to as soon as possible thereafter prepare and furnish to the Placement Agent as many copies of an amended Prospectus or a supplement to the Prospectus in order that the Prospectus as amended or supplemented will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or that is necessary in order to make the statements made therein not misleading.

	The Company will file with the Commission the required reports on Form SR and will file with the appropriate state securities commissioners any sales and other reports required by the rules and regulations of such agencies and will supply copies to the Placement Agent, if requested.

	Indemnification.

	The Company agrees to indemnify, defend and hold harmless the Placement Agent from and against any and all losses, claims, damages, liabilities and expenses (including reasonable legal or other expenses) incurred by the Placement Agent in connection with defending or investigating any such or liabilities that the Placement Agent may incur under the federal or state securities laws and regulations, state statutes or at common law or otherwise, but only to the extent that such losses, claims, damages, liabilities and expenses shall arise out of or be based upon a violation or alleged violation of the federal or state securities laws or regulations, a state statute or the common law resulting from any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or in any application or other papers filed with the various state securities authorities ("Blue Sky Applications") or shall arise out of or be based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading.

	The foregoing indemnity of the Company in favor of the Placement Agent shall not be deemed to protect the Placement Agent against any liability to which the Placement Agent would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of the Placement Agent's duties, or by reason of the Placement Agent's reckless disregard of the Placement Agent's obligations and duties under the Act or this Agreement.

	The Placement Agent agrees to give the Company an opportunity to participate in the defense or preparation of the defense of any action brought against the Placement Agent to enforce any such claim or liability and the Company shall have the right so to participate.  The agreement of the Company under the foregoing indemnity is expressly conditioned upon notice of any such action having been sent by the Placement Agent to the Company in writing, addressed as provided in this Agreement, promptly after the receipt of a written notice of such action against the Placement Agent.  Such notice shall be accompanied by copies of papers served or filed in connection with such action or by a statement of the nature of the action to the extent known to the Placement Agent. 

	Termination. This Agreement may be terminated by either party at any time by written notice to that effect sent to the other party at the address shown in this Agreement. An attempt to assign any rights and obligations under this Agreement shall constitute automatic termination of this Agreement.

	Notices.  All notices shall be deemed to have been duly given if mailed, or if communicated by telegraph, facsimile, electronic mail or telephone and subsequently confirmed in writing:

To the Company:

Zion Oil & Gas, Inc.

6515 Abrams Road

Suite 300

Dallas, Texas 75231

To the Placement Agent:

__________________________

__________________________

__________________________

__________________________

	Binding Effect.  This Agreement shall inure to the benefit of and be binding upon the Company and the Placement Agent and their successors.  Nothing expressed in this Agreement is intended to give any person other than the persons mentioned in the preceding sentence any legal or equitable right, remedy or claim under this Agreement.

 

	Arbitration.  The Company and the Placement Agent agree that in the event a dispute arises between the Placement Agent and the Company or any of its officers, directors, employees, agents, attorneys or accountants, arising out of, in connection with or as a result of the execution of this Agreement or as a result of any subscription tendered by any purchaser of the Shares, such dispute shall be resolved through arbitration rather than litigation.  The parties agree to submit such disputes for resolution to the NASD within five (5) days after receiving a written request from any of the aforesaid parties to do so.  The failure by the Company or Placement Agent to submit any dispute to arbitration as requested may result in the commencement of an arbitration proceeding against such party.  The parties further agree that any hearing scheduled after an arbitration proceeding is initiated by any of the aforesaid parties shall take place in Dallas County, Texas. The parties acknowledge that the result of the arbitration proceeding shall be final and binding on all of the parties to the proceeding, and by agreeing to arbitration the parties are waiving their respective rights to seek remedies in Court.

	Miscellaneous Provisions.

	This Agreement shall be construed in accordance with the laws of the State of Texas.

	The representations and warranties made in this Agreement shall survive the termination of this Agreement and shall continue in full force and effect.

	This Agreement is made solely for the benefit of the Company and its officers, directors and controlling persons within the meaning of Section 15 of the Act and of the Placement Agent and its officers, directors and controlling persons within the meaning of Section 15 of the Act, and their respective successors, heirs and personal representatives, and no other person shall acquire or have any right under or by virtue of this Agreement.  The term "successor" as used in this Agreement shall not include any purchaser, as such, of the Shares.

If this Agreement correctly sets forth our understanding, please indicate your acceptance in the space provided below for that purpose.

                                                                                                                  Sincerely,

                                                                                                                  Zion Oil & Gas, Inc.

 

                                                                                                                  By:____________________________

Confirmed and accepted as of the date

of this Agreement:

________________________________

By:_____________________________EXHBIT 10

EXHIBIT 10.3

FORM OF ESCROW AGREEMENT

THIS ESCROW AGREEMENT, dated as of September __, 2003 between Zion Oil & Gas, Inc., a Delaware Corporation (the "Company") and COMMERCE BANK, NA, 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 September 11, 2003 (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 $5.00 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 1,200,000 Shares, or $6,000,000 (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 March 1, 2004 (or 60 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 5,000,000 Shares or $25,000,000 may be accepted by the Company before December 31, 2004 (the "Maximum Offering Termination Date").  The minimum subscription is 100 Shares ($500) and all subscriptions that comply with the terms of the prospectus will be denominated in $500 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.  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.  Upon release of any funds pursuant to this Paragraph 4, 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  $1,000 (the "Acceptance Fee"), and an annual administration fee of $4,000 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.

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.  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.

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:

          Commerce Bank, NA

          Attn.: Corporate Trust Administration

          1701 Route 70 East

          Cherry Hill, NJ 08034

          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:                                                

Commerce Bank, N.A.

By:                                              

     

Title: 

ANNEX A

Zion Oil & Gas, Inc.

SUBSCRIPTION AGREEMENT

 

The Investor named below, by payment of a 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 $5.00 per Share) of Zion Oil & Gas, Inc. Shares must be purchased in increments of $500. 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:___/___/____

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 #:____/__/______ (11) Co-Owner SS#:____/__/_______

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 ____________________________ 

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: _____________________________

E.   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:       Zion Oil & Gas, Inc.,  6510 Abrams Road, Suite 300, Dallas, Texas 75231

(214) 221-4610FAX      (214) 221-6510

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