DEF 14A 1 def14a0419_zionoilgas.htm DEFINITIVE PROXY STATEMENT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

__________________________________

SCHEDULE 14A

(Rule 14a-101)
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

__________________________________

Filed by Registrant  S

Filed by Party other than Registrant  £

Check the appropriate box:

£

 

Preliminary Proxy Statement

£

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

S

 

Definitive Proxy Statement

£

 

Definitive Additional Materials

£

 

Soliciting Materials Pursuant to §240.14a-12

ZION OIL & GAS, INC.

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

S

 

No fee required.

£

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

   

(1)

 

Title of each class of securities to which transaction applies:

       

 

   

(2)

 

Aggregate number of securities to which transaction applies:

       

 

   

(3)

 

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is calculated and state how it was determined):

       

 

   

(4)

 

Proposed maximum aggregate value of transaction:

       

 

   

(5)

 

Total fee paid:

       

 

£

 

Fee paid previously with preliminary materials.

£

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

   

(1)

 

Amount previously paid:

       

 

   

(2)

 

Form, Schedule or Registration Statement No.:

       

 

   

(3)

 

Filing Party:

       

 

   

(4)

 

Date Filed:

       

 

 

ZION OIL & GAS, INC.
12655 North Central Expressway, Suite 1000
Dallas, Texas 75243
(214) 221-4610

To the Stockholders of Zion Oil & Gas, Inc.:

We are pleased to invite you to attend the Annual Meeting of Stockholders of Zion Oil & Gas, Inc. The meeting will be held at 2:00 p.m., local time, on Wednesday, June 12, 2019, at Three Forest Plaza, 12221 Merit Drive, 2nd Floor Conference Room, Dallas, Texas 75251. Our Board of Directors and management look forward to greeting those of you who are able to attend the meeting in person. Following the formal meeting, we will hold a reception for the opportunity for all stockholders to visit informally with and ask questions of our Board and management.

At this Annual Meeting, you will be asked to vote on a couple of important proposals that include: (1) electing four directors, and (2) ratifying the appointment of our independent public accountants, RBSM, LLP.

The Annual Meeting also provides us the opportunity to present a review of our current exploration activities in Israel and our plans for future operations.

If you are not able to attend the Annual Meeting in person, our Board of Directors is soliciting proxies, so each stockholder has the opportunity to vote their shares. You may vote your shares by Internet, by telephone, or by mail from the proxy information received. We are providing an interactive digital proxy statement for online viewing and voting. It is very important for you to vote, to help prevent your shares from possibly being forfeited by a state government (“escheatment”) due to dormancy or lack of company contact.

On behalf of the Board of Directors and management, thank you for your cooperation and continued support for Zion Oil & Gas, Inc. and the mission to help make Israel energy independent. Your vote is very important to us.

Sincerely,

John M. Brown

Executive Chairman of the Board

 

ZION OIL & GAS, INC.
12655 North Central Expressway, SUITE 1000
DALLAS, TEXAS 75243

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

NOTICE IS HEREBY GIVEN that the 2019 Annual Meeting (the “Annual Meeting”) of the Stockholders of ZION OIL & GAS, INC. (the “Company”) will be held at 2:00 P.M (local time) on June 12, 2019 at the Three Forest Plaza, 12221 Merit Drive, 2nd Floor Conference Room, Dallas, Texas 75251 to:

1.      Elect four directors of the Company as Class II directors to serve for a term of three years;

2.      Ratify the appointment of RBSM, LLP, as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019; and

3.      Conduct such other business as may properly come before the Annual Meeting and any adjournment(s) thereof.

The foregoing items of business are more fully described in the Proxy Statement that accompanies this Notice. The Board of Directors has fixed the close of business on April 15, 2019 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting or any adjournment thereof. Only stockholders of record at the close of business on the record date are entitled to notice of, and to vote at, the Annual Meeting.

Regardless of whether you plan to attend the Annual Meeting, please vote your shares as soon as possible so that we may have a quorum at the Annual Meeting, and your shares will be voted in accordance with your instructions. For specific voting instructions, please refer to the instructions on the proxy card or on the Notice of Internet Availability of Proxy Materials that was mailed to you. If you attend the Annual Meeting, you will have the right to revoke the proxy and vote your shares in person.

We look forward to seeing you at the Annual Meeting.

 

By Order of the Board of Directors

     
   

   

John M. Brown

   

Executive Chairman of the Board

April 18, 2019

 

IMPORTANT NOTICE REGARDING INTERNET AVAILABILITY OF
PROXY MATERIALS FOR THE ANNUAL MEETING AND ANNUAL REPORT

The Company’s proxy materials and Annual Report on Form 10-K are available at:
http://www.astproxyportal.com/ast/ZionOil/

 

ZION OIL & GAS, INC.
12655 North Central Expressway, Suite 1000
DALLAS, TEXAS 75243

PROXY STATEMENT

For the Annual Meeting of Stockholders
To be held on Wednesday, June 12, 2019

This Proxy Statement is being furnished in connection with the solicitation by the Board of Directors (the “Board of Directors” or the “Board”) of Zion Oil & Gas, Inc., a Delaware corporation (“Zion”, “Zion Oil” or the “Company”), of proxies to be voted at the 2019 Annual Meeting (the “Annual Meeting”) of the Company’s stockholders to be held at the Three Forest Plaza, 12221 Merit Drive, 2nd Floor Conference Room, Dallas, Texas 75251 on Wednesday, June 12, 2019, at 2:00 p.m. (CST) and any adjournment(s) thereof.

Pursuant to rules adopted by the U.S. Securities and Exchange Commission (“SEC”), we are providing stockholders of record as of the Record Date (defined below) with Internet access to our proxy materials. Our Board has made these proxy materials available to you on the Internet on or about April 25, 2019 at www.astproxyportal.com/ast/ZionOil/, which is the website described in the Notice of Internet Availability of Proxy Materials (the “Notice”), mailed to stockholders of record. We are sending the Notice to our stockholders of record as of the Record Date of April 15, 2019, and filing the Notice with the SEC, on or about April 18, 2019. In addition to our proxy materials being available for review, the website contains instructions on how to access the proxy materials over the Internet or to request a printed copy, free of charge. In addition, stockholders may request proxy materials in printed form by mail or electronically by e-mail on an ongoing basis by contacting our Investor Relations Department at our principal executive offices in Dallas, Texas. Upon request and at no cost, we will also provide stockholders a copy of our Form10-K for the year ended December 31, 2018 filed with the SEC on March 8, 2019.

At the Annual Meeting, the stockholders will be asked to:

1.      Elect four directors of the Company as Class II directors to serve for a term of three years;

2.      Ratify the appointment of RBSM, LLP, as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019; and

3.      Conduct such other business as may properly come before the Annual Meeting and any adjournment(s) thereof.

To have a valid meeting of the stockholders, a quorum of the Company’s stockholders is necessary. A quorum shall consist of a majority of the shares of the Common Stock issued and outstanding and entitled to vote on the Record Date present in person or by proxy at the Annual Meeting. Abstentions and broker non-votes shall be counted as present for the purpose of determining the presence of a quorum. Stockholders who execute proxies retain the right to revoke them at any time by notice in writing to the Company’s Secretary, by revocation in person at the Annual Meeting or by presenting a later-dated proxy. Unless so revoked, the shares represented by proxies will be voted at the Annual Meeting. The shares represented by the proxies solicited by the Board will be voted in accordance with the directions given therein, but if no direction is given, such shares unless otherwise restricted by law will be voted:

(i)     FOR the election as directors of the nominees of the Board named below;

(ii)    FOR the proposal to ratify the appointment of RBSM, LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019; and

(iii)   unless otherwise restricted by law, in the discretion of the proxies named in the proxy on any other proposals to properly come before the Annual Meeting or any adjournment(s) thereof.

The Company is unaware of any additional matters not set forth in the Notice that will be presented for consideration at the Annual Meeting.

1

VOTING RIGHTS

All voting rights are vested exclusively in the holders of Common Stock. Only holders of Common Stock of record at the close of business on April 15, 2019 (the “Record Date”) are entitled to receive notice of and to vote at the Annual Meeting. As of the Record Date, there were a total of approximately 71,057,000 shares of Common Stock outstanding. Each holder of Common Stock entitled to vote at the Annual Meeting is entitled to one vote for each share held.

Stockholders holding a majority of the Common Stock issued and outstanding as of the Record Date, present in person or by proxy at the Annual Meeting, will constitute a quorum for the transaction of business at the Annual Meeting or any adjournment(s) thereof.

Assuming a quorum is present at the Annual Meeting, the affirmative vote of a plurality of the shares having voting power present in person or by proxy is required for approval of Proposal No. 1 (election of directors).

If you hold shares in a brokerage account, brokers are not entitled to vote on Proposal No. 1 in the absence of specific client instructions. Stockholders who hold shares in a brokerage account are encouraged to provide voting instructions to their broker. To vote shares held in “street name” at the Annual Meeting, you should contact your broker before the Annual Meeting to obtain a proxy form in your name. Broker non-votes and abstentions are counted as shares present at the Annual Meeting for purposes of determining a quorum.

Under the rules that govern brokers who have record ownership of shares that are held in “street name” for their clients, who are the beneficial owners of the shares, brokers have discretion to vote these shares on “routine” matters, but not on non-routine matters. The proposal to elect four Class II directors (Proposal No. 1) is considered a non-routine matter on which banks, brokers and other nominees are not allowed to vote unless they have received voting instructions from the beneficial owner of the shares. Your bank, broker or other nominee will send you instructions on how you can instruct them to vote on these proposals. If you do not provide voting instructions, your bank, broker or other nominee will not vote your shares on this proposal. Therefore, your broker will not have discretionary authority to vote your shares with respect to Proposal No. 1.

A “broker non-vote” occurs when the broker does not receive voting instructions from the beneficial owner with respect to a non-routine matter and therefore the broker expressly indicates on a proxy card that it is not voting on a matter. Abstentions will have the effect of a negative vote.

The proposal to ratify the appointment of RBSM, LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019 (Proposal No. 2) is considered a routine matter on which banks, brokers and other nominees may vote in their discretion on behalf of beneficial owners who have not provided voting instructions. Your bank, broker or other nominee will send you instructions on how you can instruct them to vote on these proposals. If you do not provide voting instructions, your bank, broker or other nominee will have discretionary authority to vote your shares with respect to these proposals.

How Can I Vote Without Attending the Annual Meeting?

There are three convenient methods for registered stockholders to direct their vote by proxy without attending the Annual Meeting:

•        Vote by Internet.    You can vote via the Internet. The website address for Internet voting is provided on your Notice or proxy card (www.voteproxy.com). You will need to use the control number appearing on your Notice or proxy card to vote via the Internet. You can use the Internet to transmit your voting instructions up until 11:59 P.M. Eastern Time on June 11, 2019. Internet voting is available 24 hours a day. If you vote via the Internet, you do NOT need to vote by telephone or return a proxy card.

•        Vote by Telephone.    You can also vote by telephone by calling the toll-free telephone number provided on the Internet link on your Notice or on your proxy card [1-800-PROXIES (1-800-776-9437) in the United States and Canada or 1-718-921-8500 from other countries]. You will need to use the control number appearing on your Notice or proxy card to vote by telephone. You may transmit your voting instructions from any touch-tone telephone up until 11:59 P.M. Eastern Time on June 11, 2019. Telephone voting is available 24 hours a day. If you vote by telephone, you do NOT need to vote over the Internet or return a proxy card.

2

•        Vote by Mail.    If you received a printed copy of the proxy card, you can vote by marking, dating and signing it, and returning it in the postage-paid envelope provided. Please promptly mail your proxy card to ensure that it is received prior to the closing of the polls at the Annual Meeting.

Notice & Access — Request Paper Copies:

Telephone: 888-Proxy-NA (888-776-9962); 718-921-8562 (for international callers)

E-MAIL: info@astfinancial.com

WEBSITE: https://us.astfinancial.com/proxyservices/requestmaterials.asp

Webhosting site address: http://www.astproxyportal.com/ast/ZionOil/

3

STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL HOLDERS

The following table sets forth information as of the Record Date concerning shares of our Common Stock beneficially owned by: (i) each director; (ii) each nominee for director, (iii) each Named Executive Officer (defined below); (iv) all directors and executive officers as a group; and (v) each person or group known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock.

In accordance with SEC rules, the table considers all shares of Common Stock that could be issued upon the exercise of outstanding options and warrants within 60 days of the Record Date to be outstanding for the purpose of computing the percentage ownership of the person holding those securities, but does not consider those securities to be outstanding for computing the percentage ownership of any other person. We have chosen to include the effect of the shares of Common Stock that could be issued upon the exercise of outstanding options and warrants through June 14, 2019. Unless otherwise noted in the footnotes to the table and subject to community property laws where applicable, the following individuals have sole voting and investment control with respect to the shares beneficially owned by them. Except as noted above, we have calculated the percentages of shares beneficially owned based on approximately 71,057,000 shares of Common Stock outstanding on the Record Date.

The address of John M. Brown, Michael B. Croswell, Paul Oroian, Forrest A. Garb, William H. Avery, Martin M. van Brauman, Gene Scammahorn, Dr. Lee Russell, John Seery, Virginia Prodan and Kent Siegel is 12655 North Central Expressway, Suite 1000, Dallas, TX 75243.

Name of Beneficial Owner

 

Amount and
Nature of
Beneficial
Ownership

 

Percent
of Class

John M. Brown

 

1,115,000

(4)

 

1.6

John Seery(1)(2)

 

38,000

(5)

   

Michael B. Croswell Jr.

 

427,000

(6)

   

Forrest A. Garb

 

229,147

(7)

   

William H. Avery

 

690,000

(8)

 

1.0

Paul Oroian

 

296,160

(9)

   

Virginia Prodan(3)

 

25,000

(10)

   

Martin M. van Brauman(1)

 

432,521

(11)

   

Gene Scammahorn(1)

 

141,111

(12)

   

Kent Siegel

 

231,000

(13)

   

Dr. Lee Russell(1)

 

295,000

(14)

   

Group Total*

 

3,919,939

 

 

5.5

____________

*        Based on estimated 71,057,000 outstanding shares at Record Date

(1)      Nominees for Class II Directors.

(2)      Mr. Seery was appointed to the Board on September 1, 2018.

(3)      Ms. Prodan was appointed to the Board on July 1, 2018.

(4)      Comprised of (a) 375,000 shares of Common Stock owned by Mr. Brown, (b) 100,000 shares of Common Stock owned by Mr. Brown’s wife and (c) 640,000 shares of Common Stock issuable upon exercise of stock options awarded under the stock option plans (the “Plans”) which are currently exercisable or that become exercisable within 60 days following the Record Date.

(5)      Comprised of (a) 13,000 shares of Common Stock owned by Mr. Seery and (b) 25,000 shares of Common Stock issuable upon exercise of options awarded under the Plans which are currently exercisable or that become exercisable within 60 days following the Record Date.

(6)      Comprised of (a) 57,000 shares of Common Stock owned by Mr. Croswell and (b) 370,000 shares of Common Stock issuable upon exercise of stock options awarded under the Plans, which are currently exercisable.

(7)      Comprised of (a) 3,147 shares of Common Stock owned by Mr. Garb and (b) 226,000 shares of Common Stock issuable upon exercise of stock options awarded under the Plans which are currently exercisable or that become exercisable within 60 days following the Record Date.

(8)      Comprised of (a) 350,000 shares of Common Stock owned by Mr. Avery and (b) 340,000 shares of Common Stock issuable upon exercise of stock options awarded under the Plans which are currently exercisable or that become exercisable within 60 days following the Record Date.

(9)      Comprised of (a) 15,160 shares of Common Stock owned by Mr. Oroian and (b) 281,000 shares of Common Stock issuable upon exercise of options awarded under the Plans which are currently exercisable or that become exercisable within 60 days following the Record Date.

4

(10)    Comprised of 25,000 shares of Common Stock issuable upon exercise of options awarded under the Plans which are currently exercisable or that become exercisable within 60 days following the Record Date.

(11)    Comprised of (a) 299,934 shares of Common Stock owned by Mr. van Brauman, plus 2,587 shares jointly held with his wife and (b) 130,000 shares of Common Stock issuable upon exercise of stock options awarded under the Plans, which are currently exercisable.

(12)    Comprised of (a) 1,600 shares of Common Stock owned by Mr. Scammahorn and (b) 195,000 shares of Common Stock issuable upon exercise of options awarded to Mr. Scammahorn under the Plans which are currently exercisable or that become exercisable within 60 days following the Record Date.

(13)    Comprised of (a) 5,000 shares of Common Stock owned by Mr. Siegel and (b) 226,000 shares of Common Stock issuable upon exercise of options awarded to Mr. Siegel under the Plans which are currently exercisable or that become exercisable within 60 days following the Record Date.

(14)    Comprised of (a) 40,000 shares of Common Stock owned by Dr. Russell and (b) 255,000 shares of Common Stock issuable upon exercise of stock options awarded under the Plans, which are currently exercisable.

5

COMPENSATION DISCUSSION AND ANALYSIS

Zion Oil and Gas, Inc., a Delaware corporation, is an initial stage oil and gas exploration company with a history of over 19 years of oil and gas exploration in Israel. Zion currently holds one active petroleum exploration license onshore Israel, the Megiddo-Jezreel License (“MJL”), comprising approximately 99,000 acres. Under Israeli law, Zion has the exclusive right to oil and gas exploration within its license area in that no other company is authorized to drill or explore there.

The Megiddo Jezreel #1 (“MJ #1”) well site was completed in early March 2017, after which the drilling rig and associated equipment were mobilized to the site. Performance and endurance tests were completed, and the MJ #1 exploratory well was spud on June 5, 2017 and drilled to a total depth (“TD”) of 5,060 meters (approximately 16,600 feet). Thereafter, the Company obtained three open-hole wireline log suites (including a formation image log) and the well was successfully cased and cemented. The Ministry of Energy approved the well testing protocol on April 29, 2018.

During the fourth quarter of 2018, the Company testing protocol was concluded at the Megiddo Jezreel #1 (“MJ #1”) well. The test results confirmed that the MJ #1 well does not contain hydrocarbons in commercial quantities in the zones tested. While the well was not commercially viable, Zion has learned a great deal from the drilling and testing of this well. We believe that the drilling and testing of this well carried out the testing objectives which may support further evaluation and potential further exploration efforts within our License area.

As a result of these unanswered questions and with the information gained drilling the MJ#1 well, Zion now believes it is prudent and consistent with good industry practice to try and answer some of these questions with a focused 3D seismic imaging shoot of approximately 60 square kilometers surrounding the MJ#1 well.

The Company has commenced preliminary scouting and survey design to help identify the geologic boundaries of the proposed 3D seismic survey. Additionally, Zion held initial meetings with potential vendors to aid in the 3D seismic planning and acquisition process. Once the survey design and surface layout are completed, Zion intends to acquire the necessary government permits and negotiate potential surface damages to crops, irrigation piping, and other surface features. Zion believes it will be necessary to import seismic source equipment and autonomous wireless geophones (to record the signal) to acquire the 3D data. Once data acquisition is completed, interpretation is the final step and will involve integration with, and modification of, previous work by Zion technical staff. Zion’s ability to fully undertake all of these aforementioned activities is subject to raising the needed capital, of which no assurance can be provided.

As of June 30, 2017, we became an “accelerated filer reporting company” for purposes of the SEC’s executive compensation and other disclosure rules. Throughout calendar year 2018, the Company remained an accelerated filer reporting company. The executive compensation disclosures that follow are compliant with the SEC’s executive compensation disclosure rules for accelerated filer reporting companies. On August 31, 2018, Mr. Victor G. Carrillo resigned as CEO and director from the Company and Mr. Dustin L. Guinn replaced Mr. Carrillo as CEO and retained his position as Executive Vice Chairman, President and Chief Operating Officer. On April 12, 2019, Mr. Guinn resigned as CEO and Executive Vice Chairman and Mr. John Brown was appointed by the Board to assume the position of CEO, effective April 12, 2019. Robert W.A. Dunn, effective May 1, 2019, is joining the Company as Director of Operations, a non-executive position, to assume exploration responsibilities and activities formerly held by Mr. Guinn.

Our “Named Executive Officers” as of December 31, 2018 were:

•        John M. Brown — Executive Board Chairman (EC);

•        Dustin L. Guinn — Executive Vice Chairman, Chief Executive Officer (CEO) (President/COO);

•        Michael B. Croswell Jr. — Chief Financial Officer (CFO).

This section describes the principles, policies, and practices that formed the foundation of our compensation program in calendar year 2018 and explains how they applied to our Named Executive Officers for calendar year 2018, who are included in the Summary Compensation Table provided below.

Our Board of Directors has overall responsibility for establishing compensation for our directors and executive officers. Our Board has delegated to the Compensation Committee of the Board the responsibility for establishing, implementing and monitoring adherence with our compensation philosophy with respect to our executive officers. The Compensation Committee ensures that the total compensation paid to our executive officers is fair, reasonable and competitive.

6

Our Executive Compensation Philosophy and Objectives

We have been engaged in the exploration of oil and gas in onshore Israel since 2000 and continue to face a very challenging environment. Our ultimate success will depend, in part, upon our talented employees and the leadership provided by our Named Executive Officers. We have designed our executive compensation program to achieve the following objectives:

•        Attract and retain highly qualified talent.    We need to attract, motivate, and retain management talent of high quality in a competitive market.

•        Align the interests of our executives with stockholders.    We should align the interests of Zion’s management and stockholders, towards the Company’s overall success, by planning and working towards multi-well, long-term exploration and drilling programs in Israel, aimed at discovering and producing commercial quantities of oil and gas.

•        Manage resources efficiently.    Employee compensation is a significant expense for us. We strive to manage our compensation programs so as to balance our need to reward and retain executives with our goal of preserving stockholder value. In addition, given the importance of preserving cash reserves for our exploration program, we seek to provide executives with significant equity compensation in order to encourage them to accept lower cash compensation than they might be able to receive elsewhere

Zion’s executive compensation programs are designed to compensate individual management personnel based on a number of factors, including:

•        the individual’s position and responsibilities within the Company;

•        the overall importance of the individual’s responsibilities in helping the Company achieve success:

•        specific tasks that the individual may be required to perform during a particular time period;

•        the individual’s skill set, experience and education;

•        market conditions, as measured by (among other things) feedback from recruiters and the Company’s knowledge of peer company compensation policies;

•        geographical considerations, including the cost of living associated with the USA and Israel, where the Company’s offices are located;

•        advice from third party economic consulting and compensation firms;

•        the Company’s performance in areas for which the individual has responsibility; and

•        the Company’s overall performance in its mission.

Components of Compensation

In an effort to meet these objectives, our executive compensation program consists of the following components:

•        Base Salary.    The Compensation Committee believes that base salary should provide executives with a predictable income sufficient to attract and retain strong talent in a competitive marketplace. We generally strive to set executive base salaries at levels that we believe enable us to hire and retain individuals in a competitive environment.

•        Equity Award.    The Compensation Committee believes that long-term equity incentives, such as stock options, focus executives on increasing long-term shareholder value.

•        Discretionary Cash Bonus Award.    The Compensation Committee has historically awarded cash bonuses on occasion to reward significant individual contributions or to act as an incentive.

•        General Benefits.    We provide generally competitive benefits packages, such as medical, life and disability insurance, to our executives on the same terms as our other employees.

7

Our Process of Establishing Executive Compensation

The Compensation Committee typically reviews our executive officers’ compensation on an annual basis. Our EC recommends to the Compensation Committee the goals, objectives and compensation for all executive officers, except himself, and responds to requests for information from the Compensation Committee. Except for these roles, Zion’s executive officers do not have a role in approving goals and objectives or in determining compensation of executive officers or non-employee directors. Our CEO has no role in approving his own compensation. The Compensation Committee periodically reviews the compensation of non-employee directors, primarily by reference to the compensation of non-employee directors at similarly situated companies.

Consistent with its charter, the Compensation Committee has utilized the services of an independent outside corporate consultant company to provide assistance with regard to reasonable compensation ranges. For our Company, the most relevant comparison metric was market capitalization (“market cap”), and the Compensation Committee identified 15 companies beginning in early 2018 in the oil and gas exploration and production field that had an average market cap of between $5.5 and $719 million to compare to Zion’s average closing market cap during most of 2018 of $166 million.

Market capitalization was used as the most relevant comparison metric, since Zion was a development stage company with neither production nor revenue and had no additional operating metrics to use for comparison purposes.

Compensation Analysis

For purposes of the analysis, in order to make an assessment for our named executive officers, data on comparable companies (the “Peer Group”) was selected based on their size, industry segment, and stage of development. The group was selected from a list of all companies that are part of the oil and gas drilling and exploration industry. We used the Global Industry Classification Standard (“GICS”) to assess industry proximity with respect to the industry group and sub-industry. We identified similar companies within our sub-industry for possible peer relationships, and we compared company size with regards to market cap. The Peer Group was approved by the Compensation Committee as representative of the sector in which we operate. This criterion was effective in yielding an appropriate survey and benchmark group.

With respect to general compensation comparisons for 2018, the selected Peer Group constituted for early 2018 were the following 15 companies:

1.      Approach Resources Inc.

2.      Bill Barrett Corporation

3.      Cobalt International Energy, Inc.

4.      Comstock Resources, Inc.

5.      Contango Oil & Gas Company

6.      Evolution Petroleum Corporation

7.      EXCO Resources, Inc.

8.      Gastar Exploration, Inc.

9.      Jones Energy, Inc.

10.    Legacy Reserves LP

11.    Lilis Energy, Inc.

12.    Northern Oil and Gas, Inc.

13.    PetroQuest Energy, Inc.

14.    Prime Energy Corporation

15.    VAALCO Energy, Inc.

8

Using the market capitalization range based upon the Company’s market capitalization within the appropriate peer connections in the GICS industry group, the Peer Group was determined. Then, compensation ranges of each specified executive position within the Peer Group were determined and compared with the actual and projected compensation numbers from the Company. Thus, compensation information on the Peer Group was collected and statistically analyzed relative to Zion’s market capitalization, and then the Compensation Committee reached conclusions with regard to the compensation range of Zion’s senior officer management team for 2018.

The analysis focuses on three key officer positions regarding the proposed compensation paid by Zion for all officers as a whole and for the individual positions as compared to the Peer Group. The three key officer positions were the Executive Chairman, Chief Executive Officer and the Chief Financial Officer. The CEO held the positions also of President and Chief Operating Officer.

Total compensation for executives generally consisted of the following five categories: (1) Cash salaries; (2) Cash bonuses; (3) Stock awards; (4) Stock options; and (5) Other. Although some of the total pay amounts may represent actual dollars paid to the CEO, other amounts are estimates based on certain assumptions or they may represent dollar amounts recognized for financial statement reporting purposes in accordance with accounting rules, but do not represent actual dollars received (e.g., dollar values of stock awards).

With respect to a three-year performance and pay rankings for Zion and the peer companies, Zion was at the lower range of relative pay and performance rank compared to the Peer Group. Also, Table I illustrates over a three-, two-, and one-year period that the compensation of CEOs from the Peer Group was higher when petroleum prices were higher than the compensation for Zion’s CEO. Further, the absolute pay packages of the Peer Group were much greater than Zion’s pay package over each year. The below compensation amounts are based upon the 2018 proxy statements subsequently filed by the peer companies, which reported total compensation for 2017, 2016 and 2015.

Table 1: Total Annual CEO Compensation Averages

COMPANY

 

TOTAL PAY
2015

 

TOTAL PAY
2016

 

TOTAL PAY
2017

Zion Oil & Gas, Inc.

 

463,850

 

438,775

 

447,902

Approach Resources, Inc.

 

2,662,616

 

1,581,333

 

2,377,286

Bill Barrett Corp.(HighPoint Resources Corp.

 

9,996,796

 

3,776,409

 

3,978,015

Cobalt International Energy, Inc.

 

8,714,357

 

7,478,275

 

5,730,745

Comstock Resources, Inc.

 

3,138,686

 

2,847,771

 

5,906,437

Contango Oil & Gas Company

 

1,715,151

 

3,367,587

 

2,320,526

Evolution Petroleum Corporation (fiscal year 6/30/18)

 

1,248,491

 

1,055,919

 

1,072,954

EXCO Resources, Inc.

 

3,421,654

 

4,327,631

 

4,507,000

Gastar Exploration, Inc.

 

2,373,875

 

2,026,998

 

4,203,674

Jones Energy, Inc.

 

2,898,052

 

2,485,433

 

2,602,355

Legacy Reserves LP

 

2,081,660

 

3,553,552

 

4,262,013

Lilis Energy, Inc.

 

1,944,691

 

2,627,594

 

3,529,955

Northern Oil and Gas, Inc.

 

2,572,029

 

4,000,114

 

982,434

PetroQuest Energy, Inc.

 

856,810

 

1,317,008

 

1,661,477

PrimeEnergy Corporation

 

578,334

 

581,493

 

3,085,649

VAALCO Energy, Inc.

 

478,308

 

1,261,565

 

908,661

The Peer Group was large enough to make the comparison about Zion’s compensation relative to the Named Executive Officers’ (“NEO’s”) compensation packages of companies in the Peer Group. Also, the percentage of total NEO’s compensation to Zion’s market capitalization is one of the variables of interest, which shows Zion’s compensation packages very much below the average of the Peer Group. There were a few peer companies that did not file 2018 proxy statements, because of bankruptcies and reorganizations. For those peer companies, there was no information reported. The Company used an average of its daily closing market caps over the majority of 2018, along with average market caps of its peer group.

9

Table 2: Total NEO Compensation to Market Cap

Company

 

Total NEO
Compensation

 

Market Cap
(millions)

 

Percentage

Zion Oil & Gas, Inc.

 

1,472,898

 

166

 

0.89

Approach Resources, Inc.

 

6,358,133

 

272

 

2.34

Bill Barrett Corp.(now HighPoint Resources Corp.)

 

N/A

       

Cobalt International Energy, Inc.(bankruptcy)

 

N/A

       

Comstock Resources, Inc.

 

13,937,265

 

178

 

7.83

Contango Oil & Gas Company

 

6,546,894

 

112

 

5.84

Evolution Petroleum Corporation

 

1,619,686

 

331

 

0.49

EXCO Resources, Inc.(bankruptcy)

 

N/A

       

Gastar Exploration, Inc.

 

8,354,707

 

145

 

5.76

Jones Energy, Inc.

 

5,874,993

 

48

 

12.24

Legacy Reserves LP

 

11,778,277

 

436

 

2.70

Lilis Energy, Inc.

 

25,520,005

 

333

 

7.66

Northern Oil and Gas, Inc.

 

1,955,196

 

719

 

0.27

PetroQuest Energy, Inc.

 

4,267,501

 

5.5

 

77.59

PrimeEnergy Corporation

 

4,651,519

 

136

 

3.42

VAALCO Energy, Inc.

 

1,694,726

 

134

 

1.26

As part of the total compensation review process, each company in the Peer Group along with the mix of compensation that comprises the total executive compensation package was compared to the company. The final process compared relative data for the total compensation and individual executive positions to similar data for Zion’s executives. Compensation paid to the executive officers in a company should be aligned with the company’s performance on both a short-term and long-term basis, while remaining competitive. Zion is competing for executive talent with that of its Peer Group.

Zion’s actual individual compensation levels and total compensation levels were below the average when compared with the Peer Group. Also, using a statistical method of functional relationship with the total compensation amounts as a percentage of market capitalization adjusted by the total officer count, Zion’s Officer Compensation falls within the predicted range of the comparable companies in the Peer Group.

CEO Pay Ratio

We are providing, on a voluntary basis, the information about the relationship of the annual total compensation of our employees and consultants and the annual total compensation of our CEO.

Scope of All Employees and Independent Contractors

Pursuant to Item 402(u)(3), the term “employee” means an individual employed by the company or any of its consolidated subsidiaries, whether as a full-time, part-time, seasonal, or temporary worker, whether located in the U.S. or in a foreign country and without regard to whether they are salaried. Pursuant to Item 402(u)(3), individuals who provide services to the company or any of its consolidated subsidiaries as independent contractors or leased workers are considered “employees” for purposes of the pay ratio, if they are employed and their compensation is determined by the company and such is not determined by an unaffiliated third party.

Compensation Measure for Identifying the Medium Employee

We believe the executive compensation program must be consistent and internally equitable to motivate our employees to perform in ways that enhance the company and shareholder value. The Compensation Committee monitors the relationship between the pay of our executive officers and the pay of our non-executive employees. The Compensation Committee reviewed a comparison of our CEO’s annual total compensation in 2018 to that of all other Company employees for the same period. The calculation of annual total compensation of all employees was determined in the same manner as the “Total Compensation” shown for our CEO in the “Executive Compensation” table on page 16 of this Proxy Statement. Pay elements that were included in the annual total compensation for each employee are: (1) salary received in 2018; (2) bonuses; (3) option awards; and (4) all other compensation that

10

includes auto related expenses, insurance related expenses, other personal benefits and Israel related social benefits. Our calculation includes all employees and consultants in both the United States and Israel as of December 31, 2018, in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K. We determined the compensation of our “median employee” by: (1) calculating the annual total compensation described above for each of our employees and consultants; (2) ranking the annual total compensation of all employees and consultants inclusive of the CEO from lowest to highest (a list of 35 employees and consultants), and (3) chose the employee or consultant ranked 19th as the “Median Employee”.

The Pay Ratio

As of December 31, 2018, Zion’s CEO, Mr. Guinn, had 2018 annual total compensation of $354,764, consisting of salary, bonuses, option awards and all other compensation, as reflected in the Executive Compensation table included in this Proxy Statement and in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K. Our median employee’s annual total compensation for 2018 was $121,000. We estimate that Mr. Guinn’s annual total compensation was approximately 2.93 times that of our median employee in 2018.

The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules, based on our internal records and the methodology described above, The SEC rules for identifying the median compensated employee allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee and consultant population and compensation practices. Accordingly, the pay ratio reported by other companies may not be comparable to the pay ratios reported above, as other companies have different employee and consultant populations and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

For the prior 2018 proxy statement, CEO Victor Carrillo’s annual total compensation was approximately 3.2 times that of our median employee in 2017. Table 3, below, discloses the pay ratio of the Company’s Proxy-Disclosed Peers, based upon the 2018 proxy statements filed by the peer companies and based upon 2017 compensation of the CEOs in 2017.

Table 3: Disclosed Pay Ratio of Proxy-Disclosed Peers

Company

 

Fiscal Year
End

 

Executive
Name

 

Total
disclosed
CEO pay

 

Median
employee
total pay

 

Disclosed
pay ratio

Zion Oil & Gas, Inc.

 

12/31/2017

 

Victor Carrillo

 

$

448,902

 

$

139,000

 

3.2

Approach Resources, Inc.

 

12/31/2017

 

J. Ross Craft

 

$

2,377,286

 

$

97,638

 

24

Cobalt International Energy, Inc.

 

N/A

     

 

   

 

     

Comstock Resources, Inc.

 

12/31/2017

 

M. Jay Allison

 

$

5,906,437

 

$

119,940

 

49

Contango Oil & Gas Co.

 

12/31/2017

 

Allan Keel

 

$

2,321,999

 

$

164,623

 

14.1

Evolution Petroleum Corp.

 

6/30/2017

 

Randall Keys

 

$

691,350

 

$

379,173

 

1.82

EXCO Resources, Inc.

 

N/A

     

 

   

 

     

Gastar Exploration, Inc.

 

12/31/2017

 

J. Russell Porter

 

$

4,203,674

 

$

159,111

 

26.4

HighPoint Resources Corp.

 

12/31/2017

 

R. Scot Woodall

 

$

3,978,015

 

$

126,194

 

31.5

Jones Energy, Inc.

 

N/A

     

 

   

 

     

Legacy Reserves LP

 

12/31/2017

 

Paul Horne

 

$

4,262,013

 

$

99,154

 

43

Lilis Energy, Inc.

 

N/A

     

 

   

 

     

Northern Oil & Gas, Inc.

 

12/31/2017

 

Thomas Stoelk

 

$

982,434

 

$

112,979

 

8.7

PetroQuest Energy, Inc.

 

12/31/2017

 

Charles Goodson

 

$

1,661,477

 

$

142,935

 

11.6

PrimeEnergy Resources Corp.

 

N/A

     

 

   

 

     

VAALCO Energy, Inc.

 

12/31/2017

 

Cary Bounds

 

$

908,661

 

$

79,336

 

11

11

Our Compensation Program Decisions

Zion’s executive compensation programs are designed to:

•        attract and retain highly qualified, talented and experienced management personnel;

•        motivate and reward members of management whose knowledge, skills, performance, and business relationships are critical to our success; and

•        align the interests of Zion’s management and stockholders in the Company’s overall success in planning and working towards multi-well, long-term exploration and drilling programs in Israel towards its mission of discovering and producing commercial quantities of oil and gas in Israel.

In this sense, having a competitive and market-based compensation program, as compared with Zion’s peer companies is very important.

Base Salary

All of our NEOs are subject to individual employment agreements with fixed base salaries. Because Zion remains in the development stage, the Compensation Committee has determined to maintain the salaries of our named executives, including our CEO at rates that are below average as compared with our peer companies.

Equity Awards

Our equity-based incentive program for the entire company, including executive officers, currently consists of stock option grants. As is the case with base salary, option grants are typically governed by each officer’s employment agreement.

Nonetheless, the Compensation Committee will from time to time grant options outside of the executive’s personal employment agreement. In determining the number of options to be granted to executive officers, the Compensation Committee takes into account the market data discussed above, internal pay fairness, the individual’s position and scope of responsibility, the executive’s ability to affect profitability and stockholder value, the individual’s historic and recent job performance and the value of stock options in relation to other elements of total compensation.

In 2018 and in the future, the Compensation Committee believes it is appropriate to place a heavier emphasis on long-term equity incentives in our executive officer compensation, as opposed to cash compensation. The Compensation Committee’s intent is to more closely align our stockholders’ interest to create long-term value with that of our executive officers through equity incentives, and to preserve cash for our exploration programs.

Executive Officer and Board Director Equity Retention Guidelines

The Board believes it is important that our executives and board members be incentivized to focus on long-term stockholder value to ensure the executives’ and board members’ interests are aligned with those of our stockholders. Best practice also dictates that non-employee directors maintain a meaningful level of share ownership by a certain time after appointment to better align their interests with those of stockholders. Accordingly, the Board adopted on March 17, 2018, Executive Officer and Board Director Equity Retention Guidelines to further align the interests of our executives and directors with the interests of our stockholders and to promote our commitment to sound corporate governance.

Under equity retention guidelines implemented by the Board, the CEO and each of the other NEOs are encouraged to accumulate, within five years from the later of the date the guidelines were implemented or the date he or she became CEO or a NEO, and thereafter to retain for the duration of employment a minimum level of company equity. The encouraged cumulative minimum level of equity for the CEO is equal to three times base salary and the cumulative minimum level of equity for the other NEOs is equal to two times base salary.

Until the minimum level of company equity is achieved, a CEO or a NEO is barred from selling or otherwise transferring beneficial ownership of more than one-half of (1) the vested after-tax shares of our common stock obtained as a result of the vesting of any restricted stock or restricted stock award made after implementation of the equity retention guidelines or (2) the shares of the Company’s common stock subject to the vested portion of any stock option award made after implementation of the equity retention guidelines, net of any shares surrendered or sold to cover exercise price and/or income tax resulting from the exercise and gifting, or net of any shares transferred to family owned trusts.

12

Directors are encouraged to achieve a level of share ownership equal to two times board fees within five years of the later of the date the guidelines were adopted or the date the person first became a Director. All other stock ownership guidelines that apply to NEOs apply to Directors.

These ownership guidelines are reviewed annually during the week of the date of the annual meeting of stockholders based on the applicable annual base salary in effect on such annual date. The value of a share will be measured on the date of our annual meeting of stockholders each year based on the average closing price over the 30 calendar days preceding the date of review. Such reviewed ownership levels will be reported to the Nominating and Corporate Governance Committee.

Consideration of Previous Shareholder Advisory Vote

In June 2017, our stockholders approved the compensation of our Named Executive Officers as described in our 2017 proxy statement, with approximately 97.6% of stockholder votes cast in favor of our 2017 “say-on-pay” resolution (excluding abstentions and broker non-votes). The Compensation Committee considered these results as evidence of support for our compensation program and responsive to shareholder concerns as described in our 2017 proxy statement, and as grounds for maintaining a similar approach for 2018. During our 2018 stockholders’ meeting, the voting results of the re-election “For” the four Class I directors showed the level of support by the stockholder of over 98%.

Hedging, Short Sales and Pledging Prohibitions

Our insider trading policy prohibits our Named Executive Officers and Directors from engaging in any speculative transactions involving our common shares including buying or selling puts or calls, pledging, short sales or purchases of securities on margin or otherwise hedging the risk of ownership of our stock. In exceptional circumstances, pledges for loan collateral (not margin debt) in a good faith and arms-length transaction may be approved, but would require the approval and authorization of both the CEO and the Chief Legal Officer or the Chief Compliance Officer as determined by them in their sole discretion.

Conclusion

We believe that the compensation provided to our executive officers is reasonable and appropriate to facilitate the achievement of our long-term objectives. The compensation programs and policies that our Compensation Committee has designed incentivize our executive officers to perform at a level necessary to achieve our desired objectives. We believe that the various elements of compensation combine to align the best interests of our executive officers with our stockholders and our company in order to maximize stockholder value.

13

ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS

Environmental Considerations

Our business in Israel is subject to regulations by the State of Israel under the Petroleum Law. The administration and implementation of the Petroleum Law are vested in the Minister of Infrastructures, Energy and Water Resources (“Energy Minister”), the Petroleum Commissioner and an advisory council. The Petroleum Law and regulations provide that the conduct of petroleum exploration and drilling operations be pursued in compliance with “good oil field practices” and that measures of due care be taken to avoid seepage of oil, gas and well fluids into the ground and from one geologic formation to another. The Petroleum Law and regulations also require that, upon the abandonment of a well, it be adequately plugged and marked. As a condition for issuing the required permit for the construction of a drilling site, the planning commissions require the submission of a site remediation plan, subject to approval of the environmental authorities. Our operations are also subject to claims for personal injury and property damage caused by the release of chemicals or petroleum substances by us or others in connection with the conduct of petroleum operations on our behalf. Various guidelines have been published in Israel by the State of Israel’s Petroleum Commissioner and Energy and Environmental Ministries as it pertains to oil and gas activities.

The Environmental Ministry has published Professional Guidelines and Standards for Remediation of Land. The guidelines clarify and define what is considered polluted land, remediation and the permitted methods to remediate polluted land, and it applies to oil and gas exploration companies including Zion. The Energy Ministry has issued guidelines for occupational health and safety practices regarding oil and gas drilling and production activities per international norms, coupled with Israeli legal safety guidelines. These regulations focus on industry best practices in the area of health, safety, and environmental (HS&E) factors as well as risk management. In addition, there is a requirement to have the Petroleum Commissioner’s approval over the safety standards when the operator seeks to apply. For the MJ #1 well, Zion formally submitted its Environmental Impact Assessment (“EIA”) document for to Israel’s Ministry of National Infrastructures, Energy and Water Resources (“Energy Ministry”) and thereafter to the Ministry of Environmental Protection (“Environmental Ministry”). Then, Zion formally submitted its EIA document for its planned Megiddo-Jezreel #1 well to the Northern District Committee in Nazareth. Next, the EIA was formally approved by Israel’s Energy and Environmental Ministries. For the final step in the process, Zion submitted the approved EIA to Israel’s Energy Ministry for their final drilling program approval. After Zion reached agreement with the local kibbutz and the Israel Land Authority and obtained a Business License for the drilling project, the Company could begin operations.

Social Considerations

If we are successful in finding commercial quantities of hydrocarbons in Israel, 6% of our gross revenues from production will go to fund two charitable foundations that we established with the purpose of donating to charities in Israel, the U.S. and elsewhere in the world. The international foundations would support worldwide charitable, educational, medical, religious and other similar non-profit organizations.

The Company has a number of Board members, who are active in charitable causes that include all areas of human rights and who influence management in the operational procedures of the Company. The Company’s Board member, Ms. Virginia Prodan is an international human rights attorney and an Allied Attorney with the Alliance Defending Freedom. Ms. Prodan is on the advisory board of Stand with Persecuted Churches, the 21st Century Wilberforce Ministry and 4word women.org. Texas Governor Greg Abbott appointed her to the Texas Holocaust and Genocide Commission in 2018.

14

COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board on April 5, 2019 that the Compensation Discussion and Analysis be included in this proxy statement.

 

The Compensation Committee

     
   

Forrest Garb (Chair)

   

Kent Siegel

   

John Seery

15

EXECUTIVE COMPENSATION

The following table sets forth the total compensation received for services rendered in all capacities to our Company for the last three fiscal years, which was awarded to, earned by, or paid to our Executive Chairman, Chief Executive Officer, Executive Vice Chairman/President/Chief Operating Officer and Chief Financial Officer.

Name and Principal Position

 

Year

 

Salary

 

Bonus

 

Option
Awards
(1)

 

All Other
Compensation
(2)

 

Total

John M. Brown,

 

2016

 

249,000

 

 

65,000

 

161,817

 

99,067

 

574,884

Executive Chairman

 

2017

 

249,000

 

 

30,000

 

239,750

 

113,669

 

632,419

   

2018

 

249,000

 

 

30,000

 

56,750

 

111,513

 

447,263

         

 

               

Victor G. Carrillo,

 

2016

 

250,000

 

 

50,000

 

149,569

 

55,374

 

504,943

Chief Executive Officer

 

2017

 

250,000

 

     

137,000

 

61,542

 

448,542

   

2018

 

166,667

 

     

56,750

 

148,524

 

371,940

         

 

               

Dustin L. Guinn

 

2016

 

125,000

*

     

176,946

 

22,478

 

324,424

Executive Vice Chairman

 

2017

 

250,000

 

     

171,500

 

44,147

 

465,647

President/COO

 

2018

 

250,000

 

         

56,750

 

354,764

         

 

               

Michael B. Croswell Jr.

 

2016

 

56,250

*

     

154,062

 

25,530

 

236,869

Chief Financial Officer

 

2017

 

150,000

 

 

1,026

 

178,200

 

36,549

 

364,749

   

2018

 

175,000

 

     

80,200

 

43,731

 

298,931

____________

*        Note: Mssrs. Guinn and Croswell were appointed to their respective positions in 2016 and, therefore, the 2016 compensation represents the applicable portion for 2016. On August 31, 2018, Mr. Victor G. Carrillo resigned as CEO and director from the Company and Mr. Dustin L. Guinn replaced Mr. Carrillo as CEO and retained his position as Executive Vice Chairman, President and Chief Operating Officer. On April 12, 2019, Mr. Guinn resigned as Executive Vice Chairman, CEO, President and COO and Mr. John Brown was appointed by the Board to assume the position of CEO, effective April 12, 2019. Mr. Guinn will continue with the Company during the transition period until May 10, 2019. Robert W.A. Dunn, effective May 1, 2019, is joining the Company as Director of Operations to assume exploration responsibilities and activities from Mr. Guinn. Mr. Avery assumed the position of President, effective April 12, 2019.

(1)      In accordance with SEC rules, the amounts in this column reflect the fair value on the grant date of the option awards granted to the Named Executive, calculated in accordance with FASB ASC Topic 718. Stock options were valued using the Black-Scholes model. The grant-date fair value does not necessarily reflect the value of shares which may be received in the future with respect to these awards. The grant-date fair value of the stock options in this column is a non-cash expense for Zion that reflects the fair value of the stock options on the grant date and therefore does not affect our cash balance. The fair value of the stock options will likely vary from the actual value the holder receives because the actual value depends on the number of options exercised and the market price of our Common Stock on the date of exercise. For a discussion of the assumptions made in the valuation of the stock options, see Note 6 to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018. To see the value actually received by the Named Executive Officers in fiscal 2018, see the “Option Exercises and Stock Vested” in fiscal 2018 Table below.

(2)      For 2018, represents the compensation as described under the caption “All Other Compensation”, below.

All Other Compensation

The following table provides information regarding each component of compensation for 2018 included in the All Other Compensation column in the Summary Compensation Table above.

Name

 

Perquisites &
Other Personal
Benefits
(1)

 

Automobile
Related
Expenses
(2)

 

Insurance
Related
Expenses
(3)

 

Termination
Benefits
(4)

 

Total

John M. Brown

 

37,539

 

19,625

 

54,350

 

 

111,514

Victor G. Carrillo

 

27,893

 

7,583

 

29,714

 

83,333

 

148,523

Dustin L. Guinn

 

2,750

 

9,296

 

35,968

 

 

48,014

Mike Croswell

 

2,588

 

7,293

 

33,850

 

 

43,731

____________

(1)      Represents for Mr. Brown: office allowance ($24,000), payment of unused vacation expenses ($8,885), and cell phone expenses ($4,654); Represents for Mr. Carrillo: cell phone expenses ($1,707), payment of unused vacation ($25,326) and professional dues ($860); Represents for Mr. Guinn: cell phone expense ($2,750); Represents for Mr. Croswell: cell phone expenses ($1,822) and professional dues ($766).

16

(2)      Represents for Mr. Brown: leased automobile cost, insurance and maintenance ($19,625); Represents for Mr. Carrillo: leased automobile cost, insurance and maintenance ($7,583); Represents for Mr. Guinn: leased automobile cost and maintenance ($9,296); Represents for Mr. Croswell: insurance and maintenance ($7,293).

(3)      Represents for Messrs. Brown, Carrillo, Guinn, and Croswell: direct cash payments to providers of health, dental, life, vision, and disability insurance.

(4)      The company paid benefits to Mr. Carrillo per the terms of a separate agreement following Mr. Carrillo’s termination from Zion Oil & Gas.

Grant of Plan Based Awards in 2018

The table below sets forth information regarding grants of plan-based awards made to our Named Executive Officers during 2018. All grants were approved by the Compensation Committee.

Name

 

Approval
Date(1)

 

Grant
Date(1)

 

Option Awards:
Number of
Securities
Underlying
Options
(#)

 

Exercise or
Base Price
of Option
Awards
($/Share)

 

Grant Date
Fair Value
of Option
Awards
($)

John M. Brown

 

01/01/2018

 

01/01/2018

 

25,000

(1)

 

$

0.01

 

$

56,750

Victor G. Carrillo

 

01/05/2018

 

01/05/2018

 

25,000

(3)

 

$

0.01

 

$

56,750

Dustin Guinn

 

01/05/2018

 

01/05/2018

 

25,000

(3)

 

$

0.01

 

$

56,750

Michael Croswell

 

01/02/2018

 

01/02/2018

 

25,000

(2)

 

$

0.01

 

$

57,500

   

01/05/2018

 

01/05/2018

 

10,000

(3)

 

$

0.01

 

$

22,700

____________

(1)      Represents grant of stock options under our 2011 Stock Option Plan. Options represent the right to purchase shares of common stock at the price per share indicated in the table. Options were fully vested at the date of grant and expire on January 1, 2028.

(2)      Represents grant of stock options under our 2011 Stock Option Plan. Options represent the right to purchase shares of common stock at the price per share indicated in the table. Options were fully vested at the date of grant and expire on January 2, 2028.

(3)      Represents grant of stock options under our 2011 Stock Option Incentive Plan. Options represent the right to purchase shares of common stock at the price per share indicated in the table. Options were fully vested at the date of grant and expire on January 5, 2028.

17

Outstanding Equity Awards at Fiscal Year End — December 2018

The following table sets forth certain information with respect to restricted stock and stock options held by our Named Executive Officers as of December 31, 2018.

Name

 

Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable

 

Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable

 

Equity Incentive
Plan Awards:
Number of Securities
Underlying
Unexercised
Unearned Options
(#)

 

Option
Exercise
Price
($)

 

Option
Expiration
Date

John M. Brown

 

300,000

         

$

2.61

 

12/4/2021

   

15,000

         

$

0.01

 

3/31/2024

   

25,000

         

$

1.38

 

1/1/2025

   

25,000

         

$

0.01

 

1/1/2026

   

75,000

         

$

0.01

 

6/6/2026

   

175,000

         

$

0.01

 

1/1/2027

   

25,000

         

$

0.01

 

1/1/2028

               

 

     

Dustin Guinn

 

25,000

         

$

2.03

 

5/1/2021

   

50,000

         

$

1.55

 

6/6/2022

   

25,000

         

$

0.01

 

1/5/2028

               

 

     

Michael Croswell

 

40,000

         

$

2.61

 

12/5/2021

   

30,000

         

$

1.70

 

12/21/2022

   

1,693

         

$

1.67

 

10/1/2024

   

48,307

         

$

1.38

 

1/2/2025

   

85,000

         

$

0.01

 

6/6/2026

   

120,000

         

$

0.01

 

1/2/2027

   

10,000

         

$

0.01

 

1/5/2027

   

25,000

         

$

0.01

 

1/2/2028

   

10,000

         

$

0.01

 

1/5/2028

Option Exercises and Stock Vested in Fiscal 2018

The following table provides information about options exercised by the Named Executive Officers during the fiscal year ended December 31, 2018:

 

Option Awards

Name

 

Number of Shares
Acquired on Exercise
(#)

 

Value Realized
on Exercise(1)
($)

John M. Brown

 

 

Dustin L. Guinn

 

 

Michael Croswell

 

 

____________

(1)      Represents the amounts realized based on the difference between the market price of our stock on the date of exercise and the exercise price.

Employment Agreements as of December 31, 2018

John M. Brown.    Mr. Brown has continuously served as Chairman of the Board since the Company’s establishment in April of 2000 but was appointed Executive Chairman in January 2010. On January 1, 2014, the Company and Mr. Brown, the Chairman of the Company’s board of directors, entered into an Employment Agreement (the “Chairman Agreement”) covering Mr. Brown’s service as the Executive Chairman of the Company’s Board of Directors, which has been amended by a First Amendment dated March 31, 2014 and a Second Amendment dated December 19, 2016. On April 12, 2019, Mr. Brown was elected by the Board to serve as the CEO upon Mr. Guinn’s resignation with no change to his Chairman Agreement.

18

The Chairman Agreement had an initial term that extended through December 31, 2016 and then automatically renewed for successive two-year terms unless either party shall advise the other 90 days before expiration of the initial or renewed term of its intention to not renew the agreement beyond its then scheduled expiration date. Under the agreement, Mr. Brown is paid an annual salary of $249,000, payable monthly. Mr. Brown will receive an annual bonus of $30,000 and 25,000 stock options. Mr. Brown can terminate the Chairman Agreement and the relationship thereunder at any time upon 60 business days’ notice. If the Company were not to renew the term of the agreement or were to terminate the agreement during any renewal term, for any reason other than “Just Cause” (as defined the Agreement), then the Company is to pay to Mr. Brown an amount equal to the base salary, then payable to him for a period of twelve months as if the Agreement had not been so terminated or had been renewed. Mr. Brown may also terminate the agreement for “Good Reason” (as defined in the Agreement), whereupon he will be entitled to the same benefits as if the Company had terminated the agreement for any reason other than Just Cause. The Chairman Agreement provides for customary protections of the Company’s confidential information and intellectual property.

Dustin L. Guinn.    Mr. Guinn was appointed a director on May 1, 2015 and served as the Executive Vice Chairman since July 1, 2016, the Chief Executive Officer since August 31, 2018 and as President and Chief Operating Officer since September 13, 2016. Mr. Guinn entered into an employment agreement for an initial term until December 31, 2017 and automatically renewed for successive one-year terms unless the Company or Employee indicates in writing, more than 30 days prior to the termination of this initial term or any renewal term that it does not intend to renew this agreement. Under the agreement, Mr. Guinn is to be paid an annual salary of $250,000, subject to annual review and adjustments. Mr. Guinn continued to serve as Executive Vice Chairman, CEO and President and Chief Operating Officer under the same Employment Agreement until April 12, 2019.

Mr. Guinn was granted a one-time fully vested option to purchase up to 100,000 shares of common stock of the Company at a per share exercise price of $0.01. The Company shall also grant to Employee fully vested options to purchase 25,000 shares of common stock at a per share exercise price of $.01 commencing January 5, 2017 and continuing on the 5th day of January of each successive renewal term, which ended April 12, 2019.

If the Company were to terminate the agreement during a renewal term for any reason other than “Just Cause” (as defined in the employment agreement), then Mr. Guinn is entitled to 12 month’s salary, as well as all benefits earned and accrued through such date. The employment agreement provides for customary protections of the Company’s confidential information and intellectual property.

Michael B. Croswell Jr.    Mr. Croswell was appointed by the Board as Chief Financial Officer on August 15, 2016. Mr. Croswell entered into an employment agreement for an initial term until December 31, 2017 and automatically renewed for successive one-year terms unless the Company or Employee indicates in writing, more than 30 days prior to the termination of this initial term or any renewal term that it does not intend to renew this agreement. Under the agreement, Mr. Croswell is to be paid an annual salary of $150,000, subject to annual review and adjustments. On January 9, 2018, the Compensation Committee approved the recommendation from the CEO and the Chairman and Vice Chairman of the Board to increase the annual salary to $175,000 beginning January 1, 2018.

The Company shall also grant to Employee fully vested options to purchase 10,000 shares of common stock at a per share exercise price of $.01 commencing January 5, 2017 and continuing on the 5th day of January of each successive renewal term.

If the Company were to terminate the agreement during a renewal term for any reason other than “Just Cause” (as defined in the employment agreement), then Mr. Croswell is entitled to 12 month’s salary, as well as all benefits earned and accrued through such date. The employment agreement provides for customary protections of the Company’s confidential information and intellectual property.

Potential Payments upon Change of Control or Termination following a Change of Control

Our employment agreements with our Named Executive Officers provide incremental compensation in the event of termination, as described herein. Generally, we currently do not provide any severance specifically upon a change in control nor do we provide for accelerated vesting upon change in control. Termination of employment also impacts outstanding stock options.

19

Due to the factors that may affect the amount of any benefits provided upon the events described below, any actual amounts paid or payable may be different than those shown in this table. Factors that could affect these amounts include the basis for the termination, the date the termination event occurs, the base salary of an executive on the date of termination of employment and the price of our Common Stock when the termination event occurs.

The following table sets forth the compensation that would have been received by each of the Company’s Named Executive Officers had they been terminated as of December 31, 2018.

Name

 

Salary
Continuation(1)

 

Bonus

 

Accrued
Vacation Pay

 

Total Value

John M. Brown

 

249,000

 

 

11,550

 

260,550

Dustin L. Guinn

 

250,000

 

 

11,526

 

261,526

Michael B. Croswell

 

175,000

 

 

25,858

 

200,858

____________

(1)      Represents for Messrs. Brown, Guinn, and Croswell: 12 months of 2018 base salary.

20

DIRECTOR COMPENSATION

Our non-employee director compensation program in 2018 consisted of two principal elements: (1) board fees ($1,500 per month) and, if applicable, committee chairmanship fees ($1,000 per month) and (2) grants of stock options. Pursuant to the monthly board fees described above, non-employee directors received an annual payment of $18,000 in 2018 and each chairman or co-chairman of a committee received an additional $12,000 in annual payments. We also reimburse directors for travel, lodging and related expenses they incur in attending Board and committee meetings.

The following table summarizes compensation paid to our non-management directors during the fiscal year ended December 31, 2018.

Name

 

Fees Earned
or Paid in
Cash

 

Stock
Awards

 

Option
Awards
(1)

 

All Other
Compensation

 

Total

Forrest A. Garb

 

52,500

     

53,500

(2)

 

 

 

106,000

Paul Oroian

 

42,000

     

53,500

(2)

 

465

(5)

 

95,965

William H. Avery

 

18,000

     

57,500

(3)

 

164,596

(6)

 

240,096

Dr. Yehezkel Druckman

 

10,000

     

53,500

(2)

 

23,588

(7)

 

87,088

Dr. Lee Russell

 

25,000

     

53,500

(2)

 

96,000

(7)

 

174,500

Justin Furnace

 

20,000

     

53,500

(2)(9)

 

 

 

73,500

Gene Scammahorn

 

34,000

     

53,500

(2)

 

58

(5)

 

87,558

Kent S. Siegel

 

34,000

     

53,500

(2)

 

813

(5)

 

88,313

Ralph F. DeVore(4)