Document:

ex10_17.htm

    
      

    

    Exhibit
10.17

    

    SN-<Number>

    CICERO,
INC.

    SECURED
PROMISSORY NOTE

    

    Cary,
North Carolina

    March 31,
2009

    

    <$Amount>

    

    Cicero, Inc., a Delaware corporation
(the “Company”), for value received, promises to pay to <Payee>, or order,
the principal sum of <$Amount> on January 31, 2012 and to pay interest
(computed on the basis of a 360-day year of 30-day months) on the unpaid balance
of such principal amount from the date hereof until paid at the rate of fifteen
percent (15%) per annum.  Such interest shall be payable each March
31, June 30, September 30 and December 31, commencing June 30,
2009.

     

    This Note is one of a series of Secured
Promissory Notes of the Company (collectively, the “Notes”), all of which are
secured by a certain account payable to the Company in February 2010 (the
“Collateral”) pursuant to that certain contract between Merrill Lynch, Pierce
Fenner and Smith and the Company dated December 21, 2007 (the “Merrill Lynch
Contract”).  These Notes are issued in the aggregate principal amount
of $________ on or about March 31, 2009, all of which are identical in all
respects except for the principal amount, payee and the date of issue thereof,
and all of which are also secured by the Collateral.  In connection
with the issuance of the Notes, the holder of each Note shall also be issued a
Warrant to purchase shares of Common Stock of the Company at the rate of one
share per $1.00 of principal amount thereof at the purchase price of $0.20 per
share. The Notes shall rank pari passu with each other in
all respects and shall be considered a single series for all purposes,
including, but not limited to, making a demand for payment, electing to
accelerate payment, amending the Notes, and foreclosing or otherwise pursuing
remedies against Collateral securing the Notes, except that each Note shall be
considered separate with respect to the date from which interest shall
accrue.

     

    The following is a statement of the
rights of the holder of this Note and the conditions to which this Note is
subject, to which the holder hereof, by the acceptance of this Note,
agrees:

    

    1.      
      Prepayment.  The
Company may prepay this Note in whole or in part at any time or from time to
time without premium or penalty; provided that all Notes shall then be prepaid
pro rata among all the outstanding Notes on the basis of the then outstanding
principal.  Each prepayment shall be accompanied by accrued interest
on the amount to be prepaid.

     

    *[The
Company shall, the extent it earns and is paid the February 2010 installment of
$1,250,000 under the Merrill Lynch Contract, utilize those proceeds to discharge
first any interest due and owing on the Notes through the date of payment and
second a portion of the principal amount of the Notes, pro rata among all the
outstanding Notes on the basis of the then outstanding
principal.]*

    
      
         

      

      
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    Exhibit
10.17

     

    2.       
     Use of
Proceeds.  The
proceeds of the Notes will be used by the Company for working capital
purposes.

     

    3.    
        Security
Interest.

     

    3.1           Grant of Security
Interest

     

    .  The
Company hereby unconditionally grants to the holders of the Notes a continuing
security interest (hereinafter the “Security Interest”) in and to the
Collateral.  This Note and the Security Interest created hereby secure
the payment and performance of all the Notes pari passu.

     

    3.2           Holders’
Duties.  The powers conferred on holders of the Notes hereunder
are solely to protect their interest in the Collateral, and shall not impose any
duty upon them to exercise any such powers.  Except for the accounting
for moneys actually received by it hereunder, the holder of this Note shall have
no duty as to the Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to the
Collateral.  The holder of this Note shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its actual
possession if such Collateral is accorded treatment substantially equal to that
which it accords its own property.

     

    4.        
    Events of
Default.  If any of the following events (“Events of Default”)
shall occur:

     

    4.1           if
the Company shall default in the payment of any part of the principal of or
interest on any Note for more than 10 days after the same shall have become due
and payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or

     

    4.2           if
the Company shall default in the performance of or compliance with any term
contained herein or in any agreement or instrument securing this Note and such
default shall not have been remedied within 20 days after written notice thereof
shall have been given to the Company by the holders, in the aggregate, of a
majority of the outstanding principal amount of the Notes; or

     

    4.3           if
the Company shall default (as principal or guarantor or other surety) in the
payment of any principal of or premium, if any, or interest on any indebtedness
for borrowed money (other than the Notes) or with respect to any of the terms of
any evidence of such indebtedness or of any mortgage, indenture or other
agreement relating thereto which default accelerates the maturity of such
indebtedness, and such default shall continue for more than the period of grace,
if any, provided therein without being consented to or waived by such lender;
or

     

    4.4           if
the Company shall make an assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts as they become due, or shall
file a voluntary petition in bankruptcy, or shall be adjudicated a bankrupt or
insolvent, or shall file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future statute, law or regulation, or
shall file any answer admitting or not contesting the material allegations of a
petition filed against the Company in any such proceeding, or shall seek or
consent to or acquiesce in the appointment of any trustee, receiver or
liquidator of the Company or of all or any substantial part of the properties of
the Company, or the Company shall take any corporate action looking to the
dissolution or liquidation of the Company; or

     

    
      
         

      

      
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    Exhibit
10.17

     

    4.5           if,
within 30 days after the commencement of an action against the Company seeking
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been dismissed or all orders or
proceedings thereunder affecting the operations or the business of the Company
stayed, or if the stay of any such order or proceeding shall thereafter be set
aside, or if, within 30 days after the appointment without the consent or
acquiescence of the Company or any trustee, receiver or liquidator of the
Company or of all or any substantial part of the properties of the Company, such
appointment shall not have been vacated;

     

    4.6           if
any material portion of the Company’s or any subsidiary of the Company’s assets
is attached, seized, subjected to a writ or distress warrant, levied upon, or
comes into the possession of any third person;

     

    4.7           if
the Company or any subsidiary is enjoined, restrained, or in any way prevented
by court or regulatory agency order from continuing to conduct all or any
material part of its business affairs;

     

    4.8           if
one or more final judgments in excess of the amount covered by insurance,
becomes a lien or encumbrance upon any of the Company’s or any subsidiary’s
assets;

     

    4.9           if
any document or instrument that purports to create a lien on or with respect to
the Collateral shall, for any reason, fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority lien on and security interest in the Collateral covered thereby;
or

     

    4.10         any
provision of a Note or any document or instrument securing a Note shall at any
time for any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by the Company or any subsidiary of
the Company, or a proceeding shall be commenced by the Company or any subsidiary
of the Company, or by any governmental authority having jurisdiction over the
Company or any subsidiary, seeking to establish the invalidity or
unenforceability thereof, or the Company or any subsidiary of the Company shall
deny that it has nay liability or obligation purported to be created
thereunder;

     

    then and
in any such event any holder or holders of a majority in principal amount of the
Notes at any time outstanding, voting or consenting together as a single series
for purposes of such determination, may at any time (unless all defaults shall
have theretofore been remedied) at its or their option, (i) by written notice or
notices to the Company, declare all the Notes to be due and payable, whereupon
the same shall forthwith mature and become due and payable together with
interest accrued thereon, without presentment, demand, protest or notice, all of
which are hereby waived; and (ii) exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein, or otherwise
available to it or them, all the rights and remedies of a secured party on
default under the Uniform Commercial Code or any other applicable law. Without
limiting the generality of the foregoing, the Company expressly agrees that, in
any such event, the holders of the Notes may notify Merrill Lynch, Pierce Fenner
and Smith that the Collateral has been assigned to the holders of the Notes and
that they have a security interest therein.

    
      
         

      

      
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    Exhibit 10.17

     

    In case any one or more Events of
Default shall occur and be continuing, the holders of the Notes may proceed to
protect and enforce the rights of such holders by an action at law, suit in
equity or other appropriate proceeding, whether for the specific performance of
any agreement contained herein, or for an injunction against a violation of any
of the terms hereof, or in aid of the exercise of any power granted hereby or by
law.  In case of a default in the payment of any principal of or
interest on any Note, the Company will pay to the holder thereof such further
amount as shall be sufficient to cover the cost and expenses of collection,
including (without limitation) reasonable attorneys' fees, expenses and
disbursements.  No course of dealing and no delay on the part of the
holder of this Note in exercising any right, power or remedy shall operate as a
waiver thereof or otherwise prejudice such holder's rights, powers and
remedies.  No right, power or remedy conferred hereby upon any holder
hereof shall be exclusive of any other right, power or remedy referred to herein
or now or hereafter available at law, in equity, by statute or
otherwise.

    

    5.        
    Representations of the
Holder.

     

    5.1           Access

     

    .  The
holder of this Note has conducted its own independent review and analysis of the
business, operations, technology, assets, liabilities, results of operations,
financial condition and prospects of the Company and its subsidiaries, and
acknowledges that the Company has provided the holder of this Note access to the
personnel, properties, premises and books and records of the Company and its
subsidiaries for this purpose, and the holder of this Note has had an
opportunity to ask questions of and receive responses from management of the
Company. 

     

    5.2           Investment
Intent.  The holder of this Note is making the loan evidenced
by this Note and acquiring the Warrant solely for the purpose of investment and
not with a view to, or for resale in connection with, any distribution thereof
in violation of the Securities Act of 1933, as amended.

     

    5.3           Accredited
Investor.  The holder of this Note has the financial ability to
bear the economic risk of such holder’s investment, has adequate means for
providing for such holder’s current needs and personal contingencies and has no
need for liquidity with respect to such holder’s investment in the
Company.  The holder of this Note has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of the prospective investment.  If other than an individual, the
holder of this Note also represents (A) it has not been organized for the
purpose of acquiring the Note or (B) it is an entity in which each of the equity
owners is an accredited investor as defined in Rule 501(a) promulgated under the
Securities Act of 1933, as amended.  If the holder of this Note is an
individual, such holder represents he or she is an accredited investor as
defined in such Rule 501(a).

     

    
      
         

      

      
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    Exhibit 10.17

     

    6.        
    Covenants.

     

    6.1           Reports.  (a)  So
long as this Note remains outstanding, the Company shall have its annual
consolidated financial statements audited by a nationally recognized firm of
independent registered accountants and its interim consolidated financial
statements reviewed by a nationally recognized firm of independent registered
accountants in accordance with Statement on Auditing Standards 101 issued by the
American Institute of Certified Public Accountants (or any similar replacement
standard).  In addition, so long as this Note is outstanding, the
Company shall furnish to the holder of this Note all annual and quarterly
reports on Forms 10-K and 10-Q, respectively, and all current reports on Form
8-K, in each case filed by it with the Securities and Exchange Commission
(“SEC”).  If the Company shall not be subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), it shall nevertheless furnish the holder of this
Note with (a) the financial information that would be required to be contained
in a filing on such annual or quarterly report, including a “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and
(b) all information that would be required to be contained in filings with the
SEC on Form 8-K.  All such annual reports shall be furnished within
120 days after the end of the fiscal year to which they relate, and all such
quarterly reports shall be furnished within 45 days after the end of the fiscal
quarter to which they relate.  All such current reports shall be
furnished within the time periods specified in the SEC’s rules and regulations
for reporting companies under the Exchange Act.

     

    (b)    At
the Company’s option, the Company shall either (i) distribute such information
and such reports (as well as the details regarding the conference call described
below) electronically to the holder of this Note, and/or (ii) make available
such information to such holder by posting such information on the Internet
(which may be its own site, IntraLinks or any comparable password protected
online data system which will require a confidentiality acknowledgement or
otherwise, and the Company shall provide such password thereto to the holder of
this Note and make such information readily available to such holder, who agrees
to treat such information as confidential).

    

    6.2           Taxes.  The
Company shall, and shall cause each of its subsidiaries to, pay prior to
delinquency all material taxes, assessments, and governmental levies except as
contested in good faith and by appropriate proceedings.

     

    6.3           Limitations on
Liens.  The
Company shall not create, incur, assume or permit or suffer to exist any lien,
claim or encumbrance of any nature whatsoever against any of the Collateral,
unless contemporaneously therewith, such lien is subordinated in right of
payment to the Notes to the extent reasonably acceptable to holders of a
majority in principal amount of the Notes.

     

    6.4           Conduct of
Business.  The
Company shall not, and shall not permit any subsidiary to, engage in any
business other than the business of providing business integration software and
related services.  The Company will not change its name, FEIN, state
of organization or organizational identity; provided that the Company may change
its name upon at least thirty (30) days prior written notice to the holder of
this Note and so long as, at the time of such written notification, the Company
provides any financing statements necessary to perfect and continue perfected
the Security Interest in the Collateral.

     

    
      
         

      

      
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    Exhibit 10.17

     

    6.5           Maintenance of Properties;
Insurance; Compliance with Law.

     

    (a)           The
Company shall, and shall cause each of its subsidiaries to, at all times cause
all properties used or useful in the conduct of their business to be maintained
and kept in good condition, repair and working order (reasonable wear and tear
excepted) and supplied with all necessary equipment, and shall cause to be made
all necessary repairs, renewals, replacements, necessary betterments and
necessary improvements thereto.

    

    (b)           The
Company shall maintain, and shall cause to be maintained for each of its
subsidiaries, insurance covering such risks as are usually and customarily
insured against by corporations similarly situated in the markets where the
Company and its subsidiaries conduct homebuilding operations, in such amounts as
shall be customary for corporations similarly situated and with such deductibles
and by such methods as shall be customary and reasonably consistent with past
practice.

    

    (c)           The
Company shall, and shall cause each of its subsidiaries to, comply with all
statutes, laws, ordinances or government rules and regulations to which they are
subject, non compliance with which would materially adversely affect the
business, earnings, properties, assets or financial condition of the Company and
its subsidiaries taken as a whole.

    

    6.6           Legal
Existence.  Subject
to Section 6.7, the Company shall do or cause to be done all things necessary to
preserve and keep in full force and effect its legal existence, in accordance
with its organizational documents (as the same may be amended from time to
time).  The Company shall not be required to preserve any such right,
license or franchise, or the corporate, partnership or other existence of any of
its subsidiaries if the Board of Directors of the Company shall determine that
the preservation thereof is no longer desirable in the conduct of the business
of the Company and its subsidiaries, taken as a whole, and that the loss thereof
is not adverse in any material respect to the holders of the Notes.

     

    6.7           Limitations on Mergers,
Consolidations, etc.  (a)
The Company shall not, directly or indirectly, in a single transaction or a
series of related transactions, (i) consolidate or merge with or into another
person, or sell, lease, transfer, convey or otherwise dispose of or assign all
or substantially all of the assets of the Company and its subsidiaries (taken as
a whole) or (ii) adopt a plan of liquidation unless, in either
case:

     

    (A)           the
Company will be the surviving or continuing person; or

    

    (B)           the
person formed by or surviving such consolidation or merger or to which such
sale, lease, conveyance or other disposition shall be made (or, in the case of a
plan of liquidation, any person to which assets are transferred) (collectively,
the “Successor”) is a corporation, limited liability company or limited
partnership organized and existing under the laws of any State of the United
States of America or the District of Columbia, and the Successor expressly
assumes, by agreements in form and substance reasonably satisfactory to the
holders of a majority in principal amount of the Notes, all of the obligations
of the Company under this Note and the other Notes.

    
      
         

      

      
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    Exhibit 10.17

     

    (b)           Upon
any consolidation, combination or merger of the Company or any transfer of all
or substantially all of the assets of the Company in accordance with the
foregoing, in which the Company is not the continuing obligor under the Notes,
the surviving entity formed by such consolidation or into which the Company is
merged or the person to which the conveyance, lease or transfer is made will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Notes, with the same effect as if such surviving entity
had been named therein as the Company and, except in the case of a lease, the
Company will be released from the obligation to pay the principal of and
interest on the Notes and all of the Company’s other obligations and covenants
under the Notes.

    

    (c)           Notwithstanding
the foregoing, any subsidiary may consolidate with, merge with or into or
convey, transfer or lease, in one transaction or a series of transactions, all
or substantially all of its assets to the Company or another
subsidiary.

    

    7.           Miscellaneous.

     

    7.1           Savings
Clause.  In no event shall the interest rate or rates payable
under this Note, plus
any other amounts paid in connection herewith, exceed the highest rate
permissible under any law that a court of competent jurisdiction shall, in a
final determination, deem applicable.  The Company, in executing and
delivering this Note, and the holder of this Note in accepting it, intend
legally to agree upon the rate or rates of interest and manner of payment stated
herein; provided,
however, that, anything contained herein to the contrary notwithstanding,
if said rate or rates of interest or manner of payment exceeds the maximum
allowable under applicable law, then, ipso facto, as of the date of this
Note, the Company is and shall be liable only for the payment of such maximum as
allowed by law, and payment received from the Company in excess of such legal
maximum, whenever received, shall be applied to reduce the principal balance of
this Note to the extent of such excess.

     

    7.2           Governing Law;
Venue.  This Note shall be governed by and construed in
accordance with the laws of the State of North Carolina.

     

    ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS NOTE SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN WAKE COUNTY, STATE OF
NORTH CAROLINA; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
PROPERTY MAY BE BROUGHT, AT THE HOLDER OF THIS NOTE’S OPTION, IN THE COURTS OF
ANY JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND.  THE COMPANY AND
HOLDERS OF THIS NOTE WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
7.2.

     

    7.3           Financing Statements.
The Company authorizes the filing by the holders of the Notes of financing or
continuation statements. or amendments thereto, and the Company will execute and
deliver to holders of the Notes such other instruments or notices, as may be
necessary or as the holders of the Notes may reasonably request, in order to
perfect and preserve the Security Interest granted or purported to be granted
hereby.  The Company acknowledges that it is not authorized to file
any financing statement or amendment or termination statement with respect to
any financing statement filed in connection with this Note without the prior
written consent of holders of the Notes, subject to the Company’s rights under
Section 9-509(d)(2) of the Uniform Commercial Code.

     

    
      
         

      

      
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    Exhibit 10.17

     

    7.4           Attorney-in-Fact.  The
Company hereby irrevocably appoints the holders of the Notes its
attorney-in-fact, with full authority in the place and stead of the Company and
in the name of the Company or otherwise, at such time as an Event of Default has
occurred and is continuing under this Note to take any action and to execute any
instrument which the holders of the Notes may reasonably deem necessary or
advisable to accomplish the purposes of this Note and the other Notes
including:

     

    (a)           to
ask, demand, collect, sue for, recover, compromise, receive and give acquittance
and receipts for moneys due and to become due under or in connection with the
Collateral;

    

    (b)           to
file any claims or take any action or institute any proceedings which the
holders of the Notes may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of holders of the Notes
with respect to any of the Collateral; and

    

    (c)           to
bring suit in its own name to enforce the Collateral and, if the holders of the
Notes shall commence any such suit, the Company shall, at the request of the
holders of the Notes, do any and all lawful acts and execute any and all proper
documents reasonably required by the holders of the Notes in aid of such
enforcement.

    

    To the
extent permitted by law, the Company hereby ratifies all that such
attorney-in-fact shall lawfully do or cause to be done by virtue hereof. This
power of attorney is coupled with an interest and shall be irrevocable until
this Note paid in full.

     

    7.5           Remedies
Cumulative.  The
rights and remedies of holders of the Notes under the Notes, shall be
cumulative.  The holders of the Notes shall have all other rights and
remedies not inconsistent herewith as provided under the Uniform Commercial
Code, by law, or in equity.  No exercise by the holders of the Notes
of one right or remedy shall be deemed an election, and no waiver by the holders
of the Notes of any Event of Default shall be deemed a continuing
waiver.  No delay by the holders of the Notes shall constitute a
waiver, election, or acquiescence by it.

     

    7.6           Amendment.  This
Note and its terms may be changed, waived or amended only by the written consent
of the Company and the holders of a majority in principal amount of the Notes
outstanding, voting or consenting together for purposes of such
determination.

     

    7.7           Severability.   In
case any provision contained herein (or part thereof) shall for any reason be
held to be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or other unenforceability shall not affect any other provision (or
the remaining part of the affected provision) hereof, but this Note shall be
construed as if such invalid, illegal, or unenforceable provision (or part
thereof) had never been contained herein, but only to the extent that such
provision is invalid, illegal, or unenforceable.

     

    
      
         

      

      
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    Exhibit 10.17

     

    7.8           Assignment.  This
Note and Warrant will be made and issued as a unit, and neither may be detached
or ownership separated from the other, except to the extent this Note shall be
in excess of $_________.  The holders of the this Note may assign to
one or more assignees (each an “Assignee”) all, or any ratable part of all, of
this Note and the other rights and obligations of such holder hereunder; provided, however, that simultaneously
with and as part of any such assignment it assigns a pro rata amount of the
Warrant based on the aggregate number of shares issuable upon the exercise
thereof; except that the holder of a Note may assign the Note and Warrant
separately to the extent that the principal amount of the Note exceeds
$_______and, provided,
further, that the Company may continue to deal solely and directly with
the holder of this Note in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses, and related information with respect to the Assignee,
have been given to the Company by the holders and the Assignee, and (ii) the
holder and its Assignee have delivered to the Company a document reflecting such
assignment and acceptance reasonably acceptable to the Company.

     

    7.9           Headings.  Headings
and numbers have been set forth herein for convenience only.  Unless
the contrary is compelled by the context, everything contained in each Section
applies equally to this entire Note.

     

    

    [signature
on next page]

    
      
         

      

      
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    Exhibit 10.17

     

    IN WITNESS WHEREOF, the Company has
caused this Note to be signed in its name as of the date above
written.

    

    
      
        
          	 	
                  CICERO,
      I NC.

                
	 	 
      	 
      
	 	 
      	 
      
	 	
                  By:

                	
                   

                
	 	
                  Name:
      John Broderick

                
	 	
                  Title:
      Chief Executive Officer

                

        

      

    

     

     

     9Unassociated Document

     

    EXHIBIT
10.7

     

    SETTLEMENT
AGREEMENT

    

    SETTLEMENT
AGREEMENT made as of the
6th  day of January 2009 (the
"Effective Date"), by and between Zion Oil & Gas,
Inc., a Delaware
corporation with its principal executive offices at 6510 Abrams Rd., Suite 300,
Dallas, Texas 75231 and the offices of its registered Israeli branch at 15
Bareket St., North Industrial Park, Caesarea 38900 (the "Company") and
Philip
Mandelker residing 44
Tagore Street, Tel Aviv, 69341, Israel ("PM").

     

    WITNESSETH

     

    WHEREAS, until December 31,
2008, PM held with the Company the position of Executive Vice President under a
certain personal employment agreement between the Company and PM, dated as of
June 1, 2007 (hereinafter, the "Employment Agreement");

     

    WHEREAS, the term of
employment under the Employment Agreement expired on the close of business on
December 31, 2008;

     

    WHEREAS, commencing January 1,
2004 and continuing through May 31, 2007, PM's services were retained by the
Company under a certain retention agreement dated as of February 29, 2004 (the
“Retention Agreement”);

     

    WHEREAS, along with other
officers of the Company, PM agreed to defer part of the salary payments due to
him under the Employment Agreement and, prior to the effectiveness of the
Employment Agreement, part of the periodic payments due to him under the
Retention Agreement, which agreement to defer terminated on July 1, 2008;
and

     

    WHEREAS, the Company and PM
desire to address the payment to PM of the unpaid deferred amounts, as well as
other related matters, all on the terms and conditions set forth
herein.

     

    NOW, THEREFORE, in
consideration of the terms and conditions hereafter set forth the adequacy and
sufficiency of which are hereby acknowledged, the parties agree hereafter as
follows:

     

    1. Financial
Terms.

     

    (i) Amount Owed. By their
signature below, each of the Company and PM agree that the sum total of the
deferred salary payments under the Employment Agreement and the amount deferred
under the Retention Agreement that is owed to PM as of the Effective Date is
$283,385 (such sum total
of deferred amounts under Employment Agreement and the Retention Agreement
hereinafter referred to collectively as the “Deferred Amount”).

     

    (ii)
Scheduled Payment of
the Deferred Amount. Subject to the terms and conditions set forth herein
and in consideration of the releases contained herein, the Company hereby agrees
to pay to PM as follows:

     

    
      	
               
      

            	
              (a)

            	
              Within
      three (3) business days following the execution and delivery by PM of this
      Agreement but in any event no later than January 9, 2009, the Company
      shall remit to PM, on account of the Deferred Amount and against a
      properly authorized VAT invoice to be issued within 5 business days
      of  receipt of payment, the sum of $43,385, plus value added tax
      (“VAT”) required under Israeli law (currently 15.5%), for a total payment
      of $50,110;
      and

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (b)

            	
              Commencing
      on February 5, 2009, and thereafter on the 5th  day
      of each succeeding calendar month until the balance of the Deferred Amount
      (such balance being $240,000 immediately following the payment specified
      in Section 1(ii)(a) above) is paid out, the Company shall remit to PM on
      account of the Deferred Amount and against a properly authorized VAT
      invoice to be issued within 5 business days of receipt of payment (each
      monthly payment being referred to as the “Monthly Amount”) $10,000, plus VAT  for
      a total monthly payment of $11,550.

            

    

     

    All
payments above shall be made in New Israeli Shekels at the US Dollar
representative rate quoted by the Bank of Israel on the trading day immediately
preceding payment. In the event that the day of payment of the amounts above is
a bank holiday in Israel, then payment shall be due on the next succeeding
business day.

     

    (iii) Indemnification by
PM. PM agrees to hold harmless and indemnify the Company,  its
affiliates, their respective past, present and future officers, directors,
shareholders, employees, agents, attorneys, successors and assigns for the
reasonable costs of defense and any and all losses, claims, damages, liabilities
or expenses, including, without limitation, reasonable attorneys' fees,
judgments, fines, excise taxes or penalties, amounts paid in settlement and
other expenses incurred in connection with any proceeding by the Israeli tax
authorities, the value added authorities or any other regulatory agency in
respect of amounts paid to PM under Section 1(ii) above. PM expressly agrees
that any amounts that may be due and payable to the Company under this provision
shall be offset against payments payable to PM under Section 1(ii) of this
Agreement.

     

    (iv)
Increase in Scheduled
Monthly Amount. The parties acknowledge that the basis for the
determination of the Monthly Amount in Section 1(ii)(b) above is the current
maximum monthly draw by Company officers of salaries due to them, with the
balance of such salaries being deferred. Consistent with Company policy, the
maximum amount of their respective salaries that officers have drawn per month
(in each case the “Officer’s Monthly Draw”) does not exceed
$10,000.

     

    Accordingly,
the parties agree that until such time as the Deferred Amount shall have been
paid in full and while this agreement continues in effect, to the extent that
the Officer’s Monthly Draw of any Company officer shall exceed $12,500, then,
commencing with the Monthly Amount due in the next succeeding calendar month and
continuing until the Deferred Amount shall have paid in full, PM’s Monthly
Amount shall be increased by an amount equal to the Monthly Draw above $12,500
(plus VAT thereon); provided,
that, if at any such time a Company’s Officer’s Monthly Draw shall
thereafter be decreased to $12,500 or lower, commencing on the scheduled payment
date in the next succeeding calendar month, PM’s Monthly Amount shall be reduced
to $10,000 (plus VAT).

     

    By way of
illustration and not limitation, in the event that a Company Officer’s Monthly
Draw shall during January  2009 be increased to $14,000, then,
commencing with the Monthly Amount due in February 2009, the Monthly Amount
payable to PM shall be adjusted to $11,500 (plus VAT). If subsequently such
Officer’s draw shall be reduced to $12,500, then, commencing with the Monthly
Amount due on the next succeeding month, PM's Monthly Amount shall be adjusted
to $10,000 (plus VAT). In each case, these amounts will be paid until the
balance of the unpaid Deferred Amount shall have been paid in full.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    A
statement as to whether or not any Officer’s Monthly Draw exceeds $12,500 shall
be included in the Quarterly Certificate to be provided pursuant to Section 1(v)
below. If any Officer's Monthly Draw exceeds $12,500, the amount of that
Officer's draw and the date on which that draw commenced shall be set forth in
the Quarterly Certificate.

     

     (v)
Pre-Payment of
Deferred Amount.  As of the Effective Date, the parties agree
that the aggregate amount due to Company officers, as a class (except for PM),
in respect of deferred salaries is equal to $1,344,935  and said
amount is hereinafter referred to, on a collective basis, as the “Officers’
Deferred Amount”). It is the parties intention that at all times after the
Effective Date, the remaining unpaid balance of the Deferred Amount owing to PM
at any time under Section 1 (ii) (b) above shall not be, on a pro-rata percentage basis, more than
the unpaid balance owed to the officers of the Company (other than PM), as a
class, in respect of the Officers' Deferred Amount. The Company will track all
payments made to such Company officers in respect of Officers’ Deferred Amount
to confirm compliance with this provision. To the extent that any payment (a
“Deferred Payment Amount”) shall  be made in respect of the Officers’
Deferred Amount, above the amount provided for under this Section 1(v), then the
Company shall remit, within 5 business days’ of such payment, to PM a sum (plus
VAT thereon) in an amount (such amount being the “Shortfall Payment”) necessary
to ensure that the remaining unpaid balance of the Deferred Amount owed to PM
following the payment of any Deferred Payment Amount shall not be, on a pro-rata percentage basis,
more than the remaining unpaid balance of the Officers' Deferred Amount.
Shortfall Payments shall be made on more than one occasion if and when
appropriate.

     

    By way of
illustration and not limitation, if on or after such time as the Company shall
have made payments to PM in respect of the Deferred Amount in accordance with
the terms of this Agreement such that the total unpaid balance of the Deferred
Amount owed to PM shall have been reduced by 50% (i.e., the Company shall have
made payments in the total amount of $120,000), then assuming that the Company
shall have not made any payments in respect of the Officers’ Deferred Amounts,
if the Company elects to make payments in respect of Officers’ Deferred Amount
in excess of $672,468, it shall make a Shortfall Payment to PM as provided for
hereunder

     

    Following
the payment of the Shortfall Payment, the Monthly Amount due shall continue to
be paid each month as provided under Section 1(ii)(b) until the payment in full
of the Deferred Amount.

     

     In
order to ensure compliance with this provision, the Company shall provide to PM,
on a quarterly basis beginning with the quarter ended March 31, 2009 and
thereafter with respect to each succeeding quarter until the Deferred Amount
shall have been paid in full, a written sworn statement (the "Quarterly
Certificate") signed by the Company's Chief Executive Officer and by the
Company’s authorized representative in Israel (to the extent that such
authorized representative is not also the Chief Executive Officer), to be
furnished within 10 business days following such quarter end, setting forth the
following:

     

    
      	
               
      

            	
              (i)

            	
              Deferred
      Payment Amounts, if any, made in respect of the Officers' Deferred Amount
      during the preceding quarter,  the date on which any such
      payment was made, the Company officer to whom or for whose account any
      payment was made; and

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (ii)

            	
              a
      statement as to whether or not any Officer’s Monthly Draw exceeds $12,500
      and, if so, the name of the officer, the date on which the increase in
      such officer’s monthly draw commenced  and the current monthly
      draw of the officer at the end of the
quarter.

            

    

     

    PM shall
bear the full cost of the preparation and delivery of the sworn Quarterly
Certificate, which the parties agree shall be $100 per certificate. The parties
agree that such cost shall be offset against the next succeeding Monthly Amount
payable under Section 1(ii)(b). To avoid any confusion,
the parties hereby agree that the conversion by a Company Officer of that
Officer's Deferred Amount into equity or equity linked securities of the Company
shall not be deemed to trigger the provisions of this Section 1(v); provided,
however, that in the event that the entire unpaid balance of the Officers'
Deferred Amount is paid in full prior to the payment in full of PM's Deferred
Amount, whether such payment be by way of equity conversion or cash payment, any
remaining Deferred Amount due PM shall become due and payable within 5 business
days following the date on which the Officers Deferred Amount is paid in
full.

     

     (vi)
Acceleration of the
Deferred Amount. In the event that the Company fails to pay a required
Monthly Amount by the 10th
business day of the next succeeding calendar month, then, the remaining unpaid
balance of the Deferred Amount shall be due and payable if the Company fails to
pay said delinquent Monthly Amount by the expiration of 5 business days after
receipt by the Company of written notice from PM demanding payment. The right of
PM to accelerate the payment of the Deferred Amount shall expire upon the
remittance by the Company of the late payment by the date provided above. Late
payments shall bear interest at the rate of Bank Hapoalim Prime + 2% per
annum.

     

     (vii)
Bituach Menahalim and
Keren Hishtalmut. Upon execution and delivery by PM of this Agreement,
the Company shall take all reasonable steps to assist with the release and
transfer to PM or redemption of all amounts accumulated in PM's current Bituach
Menahalim and Keren Histalmut policies, in accordance with such policies terms
and conditions and applicable law. Such assistance shall include the provision
by the Company to PM of an appropriate executed Form (Tofes) 161.

     

    By his
signature below and in consideration of the performance of the Company's
undertakings under this Agreement, PM agrees as follows:

     

    (1) THAT,
SUBJECT TO THE COMPANY'S MAKING THE REQUIRED PAYMENTS INTO THE POLICIES IN
CONNECTION WITH PM'S DECEMBER SALARY, THE TRANSFER TO HIM OF SUCH POLICIES IS
BEING MADE IN FULL SATISFACTION OF ALL CLAIMS BY PM AGAINST THE COMPANY FOR
SEVERANCE PAY AND ANY SIMILAR PAYMENTS THAT MAY BE DUE PM UNDER THE EMPLOYMENT
AGREEMENT OR APPLICABLE LAW, AND PM HEREBY WAIVES ANY RIGHTS HE MAY HAVE UNDER
APPLICABLE LAW OR THE EMPLOYMENT AGREEMENT TO ANY ADDITIONAL AMOUNTS THAT THE
COMPANY MAY BE REQUIRED TO PAY  FOR SEVERANCE  OR SIMILAR
PAYMENTS UNDER ISRAELI LAW OR FURTHER PAYMENTS INTO SUCH POLICIES, AND FURTHER
AGREES THAT HE SHALL HAVE NO RIGHT OR REMEDY AGAINST THE COMPANY FOR ANY SUCH
PAYMENTS OR SHORTFALL;

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (2) TO
INDEMNIFY AND HOLD HARMLESS THE COMPANY, ITS AFFILIATES, THEIR RESPECTIVE PAST,
PRESENT AND FUTURE OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS,
ATTORNEYS, SUCCESSORS AND ASSIGNS, AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES,
LIABILITIES OR EXPENSES THAT MAY BE INCURRED BY SUCH PERSONS WITH RESPECT TO
SEVERANCE PAY ACCRUED UNDER SUCH POLICIES; and

     

    (3) THAT
THIS AGREEMENT WILL BE DEEMED AS A FINAL SETTLEMENT AND ADMISSION PURSUANT TO
CLAUSE 29 OF THE SEVERANCE  PAY LAW, 1963. IN CONNECTION WITH THE
ABOVE WAIVER, PM FURTHER REPRESENTS THAT HE IS AN ATTORNEY AND HAS CONSULTED
WITH AN ATTORNEY EXPERIENCED IN LABOR LAW MATTERS IN ISRAEL AND UNDERSTANDS THE
CONSEQUENCES OF THIS WAIVER.

     

    (viii)
Disbursements.
The Company shall pay PM disbursements for the month of December 2008 and
unbilled disbursements for previous periods within 5 business days of the
receipt of PM's disbursements statement together with supporting documentation
in accordance with standard practice.

     

    All
taxes, withholdings and deductions payable or due in respect of PM's receipt of
the Deferred Amount, or any component thereof, if any, will be borne by PM.
 On the execution
of this Agreement, PM shall provide to the Company a copy of  a
current confirmation from the Israel Income Tax authorities setting forth PM's
applicable withholding rate and the Company shall act accordingly. Upon
expiration of PM's current confirmation, PM shall provide the Company with a
copy of a replacement confirmation.

     

    2. Return of Company
Property. On or before January 12, 2009, PM shall return to Company all
Company property then in his possession, provided that with respect to a Company
desk top computer in PM's possession, PM shall purchase it from the Company for
1,000 NIS  which amount shall be set off against the monies due PM
pursuant to Section 1(viii) above. The Company shall have an opportunity to make
a back-up or copy of the database PM's personal laptop as well as the desktop,
except for PM's files of a personal nature. Under all circumstances, by his
signature below, PM represents that he has destroyed all Company files or other
database on the desktop or PM’s laptop that contain (in whole or in part) any
Company information or material. The Company property includes the items listed
on Schedule I attached
hereto.

     

    3. Continuing Obligations of
PM. Notwithstanding anything else contained herein, PM hereby
acknowledges and agrees that the provisions of Article 7 and Article 8 of the
Employment Agreement shall continue in full force and effect after the Effective
Date of this Agreement, in accordance with their terms and for the duration
specified therein. Nothing contained in this Agreement shall be construed or
interpreted as a waiver by the Company or any of its affiliates of any right or
remedy available under Article 7 and/or 8 of the Employment Agreement in the
event of a breach occurring after the Effective Date of this
Agreement.

    

    4. Undertakings.

    

    4.1
   PM acknowledges that it is the Company's position that,
through December 31, 2008, PM is an "affiliate" and represents and warrants that
as to any sales of his shares in the Company through March 31, 2009 he will
comply with all the requirements of Rule 144 ("Rule 144") promulgated under the
Securities Act of 1933, as amended.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    4.2    The
Company represents and warrants that at all times through March 31, 2009, it
shall comply with all requirements of Rule 144 necessary to enable PM to sell
shares of the Company under Rule 144. To the extent reasonably required by PM's
broker, the Company shall confirm in writing the Company's compliance with the
said Rule 144 requirements within 3 business days of receipt of the broker's
request.

    

    4.3. 
(a)   Upon the provision of appropriate Rule 144 documentation,
the Company shall no later than one business day following the Effective Date,
deliver to PM and the to Company's transfer agent an opinion of its counsel in
such form as shall be acceptable to the Company's transfer agent and PM's broker
and addressed to the Company's transfer agent, for purposes of facilitating open
market sales by PM (including members of his household) under Rule 144 for the
period through March 31, 2009.

    

    (b)   Upon
PM’s compliance with the provisions of Rule 144 and upon PM’s or PM's broker's
written request to the Company, the Company shall cause its counsel to issue to
him and to the Company's transfer agent on (or after) April 1, 2009, a legal
opinion in form acceptable to the Company's transfer agent for purposes of
releasing for open market sales all shares held by PM (including members of his
household and the Philip Mandelker Irrevocable Trust) including shares which
might have been sold under Rule 144 commencing on April 1, 2009.

     

     (c)   If
additional opinions and confirmations of Company counsel and of the Company
(including any Company officer) are necessary from time to time or at any time
by the Company's transfer agent or PM's broker (including responses to inquiries
by or on behalf of PM's broker in connection with its Rule 144 due diligence) in
order to accomplish the purposes above stated, the Company shall deliver such
opinions and confirmations within two (2) business days of receipt of request
therefor.

     

    5. Releases.

    

    5.1 In
consideration of the promises, covenants and releases contained herein, the
adequacy of which is hereby acknowledged, PM (individually and in any
representative capacity and on behalf of each of his respective agents,
attorneys, heirs, successors, executors, personal representatives and assigns)
does hereby absolutely and unconditionally waive, release and forever discharge
the Company, its affiliates and subsidiaries, their respective past, present and
future officers, directors, shareholders, employees, agents, attorneys,
successors and assigns (hereinafter, the "Company Released Parties"), from any
and all claims, demands, obligations, liabilities, rights, causes of action and
damages, whether liquidated or unliquidated, absolute or contingent, known or
unknown, from the beginning of time to the Effective Date of this Agreement,
including, without limitation, those that may arise under the Employment
Agreement or the Retention Agreement or that may arise under any body of labor
or contract law, including any claims under Israeli labor laws and regulations,
or any claim for wrongful termination, or claims with respect to any other
payment required under Israeli law or otherwise. Notwithstanding the
foregoing and any other provision to the contrary, (i) the rights and
obligations set forth in this Agreement shall remain in full force and effect;
(ii) no release hereunder shall be construed to release any of PM's rights under
this Agreement or under any officer and director liability insurance coverage or
any errors and omissions coverage; and (iii) no release hereunder shall waive
any indemnification rights previously granted to PM.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    5.2 In
consideration of the promises, covenants and releases contained herein, the
adequacy of which is hereby acknowledged, the Company (on its behalf and on
behalf of its affiliates and subsidiaries and each of their respective, past,
present and future officers, directors, employees, attorneys, agents,
successors, executors, and assigns) does hereby absolutely and unconditionally
waive, release and forever discharge PM (and his agents, attorneys, heirs,
successors, executors, personal representatives and assigns), from any claims,
demands, obligations, liabilities, rights, causes of action and damages whether
liquidated or unliquidated, absolute or contingent, known or unknown, from the
beginning of time to the Effective Date; provided,
that, this release shall not apply to any derivative claim or suit
brought or maintained by a shareholder of the Company who is not an officer or
director of the Company and who does not bring or maintain the claim or action
with the solicitation of such officer or director. Additionally, the foregoing
release shall not be construed as a waiver of future claims by the Company
arising from PM's conduct after the Effective Date of this Agreement with
respect to PM's continuing obligations to the Company under the Employment
Agreement and any undertakings of PM pursuant to this Agreement.

     

    6. Non-Disparagement. PM
(on behalf of his heirs and personal representatives), agrees not to make
disparaging remarks concerning the Company or its businesses or any of their
respective employees, consultants, stockholders, directors, affiliates,
subsidiaries or representatives. The Company agrees not to make disparaging
remarks concerning PM. Nothing herein shall be interpreted as affecting either
of the parties' obligations to comply with the specific terms of any valid and
effective subpoena, oral questions, interrogatories, requests for information,
civil investigative demand or order issued by a court of competent jurisdiction
or by a governmental body.

     

    7. Reliance. The parties
acknowledge and agree that in the execution of this Agreement, neither has
relied upon any representation by any party or attorney, except as expressly
stated or referred to herein.

     

    8. Headings. Section and
subsection headings are not to be considered part of this Agreement and are
included solely for convenience and are not intended to be full or accurate
descriptions of the content thereof.

     

    9. Successors and
Assigns. Except as otherwise provided in this Agreement, all the terms
and provisions of this Agreement shall bind, and shall inure to the benefit of,
the parties hereto and their respective heirs, personal representatives,
successors and assigns.

     

    10. Non-Assignment. By
his signature below, PM represents and warrants that he has not assigned or
otherwise conveyed to any third party any claim against the Company. By its
signature below, the Company represents and warrants that it has not assigned or
otherwise conveyed to any third party any claim against PM.

     

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

     

    12. Entire Agreement.
This Agreement constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof and supersedes any prior or contemporaneous
understanding or agreement or letters, written or verbal, among the parties with
respect to the subject matter hereof other than as expressly referenced herein.
No supplement, modification or waiver or termination of this Agreement or any
provision hereof shall be binding unless executed in writing by the parties to
be bound thereby.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    13. Representation. Each
of PM and the Company acknowledges that they have had the opportunity to consult
with legal counsel respecting this Agreement. Each person executing this
Agreement on behalf of a corporation hereby represents and warrants that he has
been authorized to do so by all necessary corporate action.

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    IN WITNESS WHEREOF, each of
the parties has set forth its/his signature as of the date first written
above.

    

    ZION OIL
& GAS, INC.

    
      
        
          	 
      	 
      
	
                  By:

                	/s/
      Richard Rinberg	 
      	      
                  /s/
      Philip Mandelker 

                
	 	
                  PHILIP
      MANDELKER  

                
	
                  Title:
      Chief Executive Officer

                	 
      
	
                  Name:
      Richard Rinberg

                	 
      

        

      

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
I

    

    COMPANY PROPERTY TO BE RETURNED TO
ZION OIL & GAS, INC.

    

    PM shall
return to the Company the following items currently in his possession in
accordance with the provisions of section 2 of the Agreement to which this
Schedule I is attached:

     

    
      	
               
      

            	
              1.

            	
              Desktop
      computer (at PM's home) – to be purchased by PM as provided in section 2
      of the Agreement

            

    

    
      	
               
      

            	
              2.

            	
              Original
      of Rabbi Berland's blessing (and another piece of paper with Rabbi
      Berland's handwriting penned at the meeting during which the Rabbi gave
      his blessing)

            

    

    
      	
               
      

            	
              3.

            	
              John
      Brown' Vision Book – 21 copies

            

    

    
      	
               
      

            	
              4.

            	
              Reprints
      of the July 5, 2004 Oil & Gas Journal article – 2
    packets

            

    

    
      	
               
      

            	
              5.

            	
              Reprints
      of the February 18, 2002 Oil & Gas Journal article – 1
      packet

            

    

    
      	
               
      

            	
              6.

            	
              5
      blue Zion baseball caps

            

    

    
      	
               
      

            	
              7.

            	
              9
      white Zion baseball caps

            

    

    
      	
               
      

            	
              8.

            	
              1
      blue Zion windbreaker

            

    

    
      	
               
      

            	
              9.

            	
              1
      Zion fleece jacket

            

    

    
      	
            	
              10.

            	
              2
      annotated maps of the 12 tribes – mounted on Styrofoam backing (used in
      the 2005 dedication ceremony)

            

    

    
      	
            	
              11.

            	
              2
      annotated geological maps – mounted on Styrofoam backing (used in the 2005
      dedication ceremony)

            

    

    
      	
            	
              12.

            	
              Zion
      CDs distributed at the 2005 well
dedication

            

    

    
      	
            	
              13.

            	
              files

            

    

     

    
      
        
        

      

      
        10

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