DEF 14A 1 def14a0423_zionoilandgas.htm 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

 

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))

 

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):

 

No fee required

 

Fee paid previously with preliminary materials.

 

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

 

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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 9:00 a.m., Central Time (“CT”), on Wednesday, June 7, 2023, via live webinar. The in-person meeting will be held at 9:00 a.m. (“CT”) at the offices of Zion Oil & Gas, Inc. Holders of the common stock of Zion Oil & Gas, Inc. as of the close of business on the Record Date of April 10, 2023, are entitled to vote before and at the Annual Meeting via www.voteproxy.com, or calling toll free 1-800-776-9437, or by in-person attendance. You are encouraged to vote prior to the meeting, since this internet site and this phone number are the only ways to vote during the Annual Meeting webinar, except for in-person attendance at the meeting. The Annual Meeting webinar provides us the opportunity to present a review of our current exploration activities in Israel and our plans for future operations to more of our shareholders than those attending the in-person meeting.

To register and participate in the Annual Meeting via live webinar, you will need your control number, which can be found on your Notice, on your proxy card, and on the instructions that accompany your proxy materials. Please register for the webinar at https://www.zionoil.com/2023AMS by June 2, 2023. When registering, shareholders may submit questions for the Q & A portion of the Meeting. The webinar details will be emailed to registered shareholders prior to the Annual Meeting. The Annual Meeting will begin promptly at 9:00 a.m. CT on June 7, 2023. A recorded presentation of the meeting will be available on our website later.

You are asked to vote on a couple of important proposals that include: (1) electing four directors, (2) ratifying the appointment of our independent public accountants, RBSM, LLP, (3) approving, in a nonbinding advisory vote, the compensation of the Company’s Named Executive Officers, (4) approving to implement Delaware statutory changes closing the gap between directors and officers liability and (5) increasing the number of shares of common stock from 800 million to 1,200 million.

You may vote your shares by Internet, by telephone, or by mail from the proxy information received. It is very important for you to vote, but also 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 and your engagement with our company are very important to us.

Sincerely,

/s/ JOHN M. BROWN

   

John M. Brown

   

Executive Chairman of the Board

   

 

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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 2023 Annual Meeting (the “Annual Meeting”) of the Stockholders of ZION OIL & GAS, INC. (the “Company”) will be held at 9:00 A.M. (CT) and 5:00 p.m. (Israel) on June 7, 2023 via live webinar and the in-person meeting will be held at the offices of the Company:

1.      Elect four directors of the Company as Class III 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, 2023;

3.      Approve, in a nonbinding advisory vote, the compensation of the Company’s Named Executive Officers;

4.      Amend the Company’s Amended and Restated Certificate of Incorporation to expand exculpation provision to limit liability of certain officers;

5.      Amend the Company’s Amended and Restated Certificate of Incorporation to increase the number of shares of common stock, par value $0.01 (“Common Stock”), that the Company is authorized to issue from 800 million to 1,200 million; and

6.      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 10, 2023 as the Record Date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting or any adjournment thereof via www.voteproxy.com, or by calling toll free 1-800-776-9437. 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 log into the Annual Meeting webinar or attend in-person, 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.

 

By Order of the Board of Directors

   

/s/ JOHN M. BROWN

   

John M. Brown

   

Executive Chairman of the Board

April 13, 2023

_____________________________________________________________________________________________

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/

_____________________________________________________________________________________________

     

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

PROXY STATEMENT

For the Annual Meeting of Stockholders
to be held via webinar on Wednesday, June 7, 2023 and in-person in Dallas, Texas.

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 2023 Annual Meeting (the “Annual Meeting”) of the Company’s stockholders via live webinar on Wednesday, June 7, 2023, at 9:00 a.m. (“CT”) and in-person at the offices of the Company and any adjournment(s) thereof.

Holders of the common stock of Zion Oil & Gas, Inc. as of the close of business on the Record Date of April 10, 2023, are entitled to vote before and at the Annual Meeting via www.voteproxy.com, or calling toll free 1-800-776-9437, but you are encouraged to vote prior to the meeting, since this internet site and this phone number are the only ways to vote during the Annual Meeting webinar, except in-person. The Annual Meeting webinar provides us the opportunity to present a review of our current exploration activities in Israel and our plans for future operations to more of our shareholders than those attending the in-person meeting.

To register and participate in the Annual Meeting via live webinar, you will need your control number, which can be found on your Notice, on your proxy card, and on the instructions that accompany your proxy materials. Please register for the webinar at https://www.zionoil.com/2023AMS by June 2, 2023. When registering, shareholders may submit questions for the Q & A portion of the Meeting. During the Meeting, a chat room will be available for questions during the Meeting with webinar participants. The webinar details will be emailed to registered shareholders prior to the Annual Meeting. The Annual Meeting will begin promptly at 9:00 a.m. CT on June 7, 2023 and in-person at 9:00 a.m. (Dallas). A recorded presentation of the meeting will be available on our website later.

If you are a stockholder of record as of April 10, 2023, the Record Date for the annual meeting, you may vote at any time during the meeting prior to the closing of the polls by voting online at www.voteproxy.com, or by calling toll free 1-800-776-9437. This is not necessary, if you have previously voted your shares.

If your shares are held in “street name” through a broker, bank or other nominee, in order to participate in the virtual annual meeting you must first obtain a legal proxy from your broker, bank or other nominee reflecting the number of shares of Zion Oil & Gas Inc. common stock you held as of the Record Date, your name and email address. You then must submit a copy of the legal proxy and a request for registration to American Stock Transfer & Trust Company, LLC: (1) by email to proxy@astfinancial.com; (2) by facsimile to 718-765-8730 or (3) by mail to American Stock Transfer & Trust Company, LLC, Attn: Proxy Tabulation Department, 6201 15th Avenue, Brooklyn, NY 11219. Requests for registration must be labeled as “Legal Proxy” and be received by American Stock Transfer & Trust Company, LLC no later than 5:00 p.m. Eastern time on May 31, 2023. We will then send the holder back via email the necessary information (company number and control number) that will allow you to vote at the AST site.

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 19, 2023 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 10, 2023, and filing the Notice with the SEC, on or about April 13, 2023. 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, 2022 filed with the SEC on March 27, 2023.

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

1.      Elect four directors of the Company as Class III 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, 2023;

3.      Approve, in a nonbinding advisory vote, the compensation of the Company’s Named Executive Officers;

4.      Amend the Company’s Amended and Restated Certificate of Incorporation to expand exculpation provision to limit liability of certain officers;

5.      Amend the Company’s Amended and Restated Certificate of Incorporation to increase the number of shares of common stock, par value $0.01 (“Common Stock”), that the Company is authorized to issue from 800 million to 1,200 million; and

6.      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 time. 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, 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, 2023;

(iii)   FOR the proposal to approve, in a nonbinding advisory vote, the compensation of the Company’s Named Executive Officers;

(iv)   FOR the proposal to Amend the Company’s Amended and Restated Certificate of Incorporation to expand exculpation provision to limit liability of certain officers;

(v)    FOR the proposal to Amend the Company’s Amended and Restated Certificate of Incorporation to increase the number of shares of common stock, par value $0.01 (“Common Stock”), that the Company is authorized to issue from 800 million to 1,200 million; and

(vi)   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.

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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 10, 2023 (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 533,861,347 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 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. Broker non-votes and abstentions are counted as shares present at the Annual Meeting for purposes of determining a quorum. 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.

For Proposal No. 1 (Election of Directors), each nominee for election as a director must receive the affirmative vote of a majority of the votes cast by the holders of our common stock, present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal. Votes may be cast in favor of or against the election of each nominee. Broker non-votes and abstentions will not be counted as votes cast and will have no effect on the outcome of the vote for directors.

For Proposal No. 2 (Ratification of RBSM, LLP), ratification of the appointment of RBSM LLP as our independent registered public accounting for the year ending December 31, 2023 requires the affirmative vote of a majority of the voting power of the outstanding common stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon. Abstentions will not be counted as a vote “AGAINST” this proposal. Broker non-votes will not affect the outcome of this proposal. 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, 2023 (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.

For Proposal No. 3 (Compensation Advisory Vote), approval of the Compensation Advisory Vote requires the affirmative vote of a majority of the voting power of the outstanding common stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon. Abstentions will not be counted as a vote “AGAINST” this proposal. Broker non-votes will not affect the outcome of this proposal. While the law requires this vote, the vote will not be binding on either our company or the Board nor will it create or imply any change in the fiduciary duty of, or impose any additional fiduciary duty on, our company or the Board. However, the views of our stockholders are important to us, and our Compensation Committee will take into account the outcome of the vote when considering future executive compensation decisions. We urge you to read the section entitled “Compensation Discussion and Analysis,” which discusses how our executive compensation program is structured.

For Proposal No. 4 (Amendment to the Amended and Restated Certificate of Incorporation for the Director and Officer Liability Gap), approval of the implementation of Delaware statutory changes closing the gap between directors and officers liability requires the affirmative vote of a majority of the voting power of the outstanding common stock entitled to vote thereon. Closing the gap between director and officer liability per the Delaware statutory changes would provide the ability to attract and retain key Company officers, possibly lower insurance costs and the potential to reduce litigation costs associated with frivolous lawsuits. If you hold shares in a brokerage account, you must give voting instructions to your record holder to vote your shares with respect to Proposal No. 4.

For Proposal No. 5 (Amendment to the Amended and Restated Certificate of Incorporation for increase in authorized shares), approval requires the affirmative vote of a majority of the voting power of the outstanding common stock entitled to vote thereon. If your shares are held in street name and you do not give voting instructions, the record holder may nevertheless be entitled to vote your shares with respect to Proposal No. 5.

If you hold shares in a brokerage account, brokers are not entitled to vote on Proposals No. 1, 3 and 4 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. 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,

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brokers have discretion to vote these shares on “routine” matters, but not on non-routine matters. Proposals No. 1, 3 and 4 are 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 these proposals. Therefore, your broker will not have discretionary authority to vote your shares with respect to Proposals No. 1, 3 and 4. The vote regarding compensation of the Company’s Named Executive Officers (Proposal No. 3) is advisory and nonbinding in nature, but our Compensation Committee will take into account the outcome of the votes when considering future executive compensation arrangements.

If your shares are held in street name and you do not give voting instructions, the record holder may nevertheless be entitled to vote your shares with respect to Proposal No. 5 in the discretion of the record holder as a routine matter. The increase in the number of shares of authorized common stock would be used to meet the ongoing capital requirements, finance future acquisition opportunities through issuance or sale of common stock and ensure availability of shares, as needed, for issuance in connection with equity compensation plans, stock splits, stock dividends, options, warrants, rights, acquisitions and other general corporate purposes.

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, 2023 (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 the Proposal No. 2.

How Can I Vote?

There are three convenient methods for registered stockholders to direct their vote by proxy:

        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 the closing of the polls during the Annual Meeting webinar around 9:00 A.M. CT on June 7, 2023. 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 the closing of the polls during the Annual Meeting webinar around 9:00 A.M. CT on June 7, 2023. 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.

        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 webinar.

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

BOARD STRUCTURE AND RISK OVERSIGHT

Although we began trading on OTCQX on September 2, 2020 after being traded on the NASDAQ, we continue to be an SEC Reporting Company and maintain the required level of Board and Committee independence as require by the OTCQX Rules for U.S. Companies. In addition, we continue to maintain the independence requirement standards

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of NASDAQ. The Board of Directors has established guidelines requiring a majority of directors to be independent, as determined in accordance with the Bylaws of the Company and applicable rules of the NASDAQ and OTCQX. With the election of the Class III directors on June 7, 2023, of the 13 members of our Board of Directors 10 (Paul Oroian, Virginia Prodan, Javier Mazón, Kent Siegel, Brad Dacus, Amotz Agnon, Sarah Caygill, John Seery, Gene Scammahorn and Pandji Putra) will meet the criteria of independence set by the NASDAQ and OTCQX for membership on the board of a NASDAQ listed company (“NASDAQ independence criteria”) and trading on the OTCQX. Each of these ten directors have certified their belief that they met such independence standards. In addition, all of the members of the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee are independent under applicable SEC, NASDAQ and OTCQX rules and regulations.

The following graphs provide summary information about the makeup of our Board as of June 7, 2023 with the election and reelection of the nominees. The Board Tenure graph excludes the founder and Chairman, John Brown. The Board’s role in risk oversight recognizes the multidimensional environment of risk management as a control and compliance task. Risk oversight involves strategic considerations in normal business decisions, finance, security, cybersecurity, safety, health and environmental concerns. The Board has empowered its Committees with risk oversight responsibilities. The Committees meet with management to review, as appropriate, compliance with existing policies and procedures and to discuss change or improvements that may be required or desirable.

Committee Responsibilities:

Audit Committee

The principal function of the Audit Committee is to assist the Board in monitoring (i) the integrity of the Company’s financial statements, (ii) Company compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence, (iv) performance of the Company’s independent auditors, (v) the Company’s business practices and ethical standards and (vi) related party transactions. The Audit Committee is also directly responsible for the appointment, compensation, retention and oversight of the work of the Company’s independent auditors. The Audit Committee is currently comprised of Paul Oroian (Chairman), Kent Siegel, Brad Dacus and Sarah Caygill.

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The Board has determined that Mr. Oroian and Mr. Siegel of the Audit Committee are “independent directors” as defined by NASDAQ regulations and also meets the additional criteria for independence of Audit Committee members set forth in Rule 10A-3(b)(l) under the Exchange Act. Also, the Board has determined that Mr. Oroian and Mr. Siegel each qualify as an “audit committee financial expert” as defined by the SEC. Security holders should understand that this designation is a disclosure requirement of the SEC relating to Mr. Oroian’s and Mr. Siegel’s experience and understanding with respect to certain accounting and auditing matters.

Compensation Committee

The current members of our Compensation Committee are Ms. Caygill (Chairperson), Mr. Seery, Mr. Mazón and Mr. Siegel. All four current members of the Compensation Committee satisfy the SEC independence criteria and the NASDAQ and OTCQX independence criteria. The Compensation Committee establishes our Company’s policies and administers our compensation program with respect to our executive officers. Based on periodic evaluation, the Compensation Committee also makes recommendations to the Board regarding director compensation and our Company’s employee benefits program.

Pursuant to its charter, the functions and responsibilities of the Compensation Committee include: (1) determining compensation for the Company’s executive officers; (2) assisting in developing and reviewing the annual performance goals and objectives of our executive officers; (3) assessing the adequacy and competitiveness of our executive compensation program; (4) administering our incentive compensation program and other equity-based compensation plans; (5) reviewing and recommending compensation for our non-employee directors; and (6) reviewing and evaluating the adequacy of the Compensation Committee charter on an annual basis.

Nominating and Corporate Governance Committee

The current members of our Nominating and Corporate Governance Committee are Kent Siegel (Co-chairman), Brad Dacus (Co-chairman), Gene Scammahorn, Paul Oroian and Virginia Prodan. The Nominating and Corporate Governance Committee is charged with selecting and recommending for the approval of the Board nominees to be submitted to the stockholders for election.

The primary responsibility of the Committee include identifying, evaluating and recommending, for the approval of the entire Board, potential candidates to become members of the Board, recommending membership of standing committees of the Board, developing and recommending to the entire Board corporate governance principles and practices for our Company and assisting in the implementation of such policies, and assisting in the identification, evaluation and recommendation of potential candidates to become officers of our Company. The Committee reviews our Code of Business Conduct and Ethics and its enforcement, and reviews and makes recommendations to our Board.

In addition, the Nominating and Corporate Governance Committee has adopted a formal written policy respecting the standards and qualifications to be used in identifying director nominees, including the consideration of director nominees presented by the Company’s stockholders. A copy of the director nominee policy is available on our website at www.zionoil.com/investor-center/corporate-governance.

Investment Committee

The current members of the Committee are Kent Siegel (Chairman), Sarah Caygill, Gene Scammahorn, Martin van Brauman and Mike Croswell. The primary purposes of the Investment Committee are to assist the Board in reviewing the Company’s investment policies, strategies, transactions and performance and in overseeing the Company’s capital and financial resources. The Committee has the authority to establish with Board approval an Investment Policy Statement for the Company with the goals (1) to set out the parameters for asset and investment management and oversight, (2) to insure the presence of operating funds, (3) to define policies for asset growth and protection and (4) to provide for scheduled, periodic reports and notifications to the Board and the Investment Committee.

Tax Benefits Preservation Committee

The current members of the Committee are Gene Scammahorn (Chairman), Kent Siegel and Martin van Brauman. The Tax Benefits Preservation Committee shall discharge the Board’s responsibilities with respect to (i) protecting the Company’s net operating losses (NOLs), (ii) the evaluation of a possible Tax Benefits Preservation Plan every year with recommendations to the Board, (iii) the implementation of the Plan (either “on-the-shelf” or “short-term” and until the

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exhaustion of the NOLs), (iv) the triggering of the Plan and its administration when in effect, (v) recommendations to the Board regarding ongoing features and any and all recommended changes and modifications to the Plan; and (vi) performing such other duties and responsibilities as may be consistent with and carrying out the provisions of their charter. Notwithstanding the foregoing, the Board shall retain the right to act on all such matters without limiting the Committee’s authority.

Technical, Reserves and Environmental, Health & Safety (EHS) Committee

The current members of the Committee are Robert Dunn (Chairman), Monty Kness, Jeffrey Moskowitz, Dr. Amotz Agnon and Dr. Lee Russell. The primary purposes of the Reserves and Environmental Health & Safety Committee are to: (1) approve the appointment of, and any proposed change in, the independent engineering consultants retained to assist us in the annual review of our reserves; (2) approve the scope of and oversee an annual review or audit of our reserves by the independent engineering consultants, having regard to industry practices and all applicable laws and regulations; (3) review the qualifications and independence of our independent engineering consultants and monitor their performance; (4) approve the independent engineering consultants’ engagement fees and terms of service; (5) review the integrity of our reserves evaluation process and reporting system; (6) review any material reserves adjustments; (7) review variances between the Company’s and the independent engineering consultant’s estimates of reserves; (8) review the Company’s environmental, health and safety policies, practices and procedures; and (9) review EHS results, near misses, actions undertaken, and the Company’s efforts associated with the Company’s EHS culture.

ENVIRONMENTAL AND SOCIAL (E&S) POLICIES AND PRACTICES

We are committed to operating in an environmentally responsible manner and in compliance with all applicable foreign, federal, state and local environmental laws in the United States and Israel, including laws regulating emissions of greenhouse gases. We strive to meet the environmental expectations of key stakeholders, including foreign and domestic regulatory agencies, the communities in which we operate, landowners, employees and investors. We understand the importance of conducting our business in the right manner and are dedicated to employing best practices with respect to our sustainability efforts. The safety of our employees, contractors, and anyone impacted by our operations is a core value of the Company.

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 7, 2023. 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 533,861,347 shares of Common Stock outstanding on the Record Date.

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The address of John M. Brown, Robert Dunn, Michael B. Croswell Jr, Paul Oroian, William H. Avery, Martin M. van Brauman, Gene Scammahorn, Frank Starr, John Seery, Virginia Prodan, Brad Dacus Sarah Caygill, Javier Mazón and Kent Siegel is 12655 North Central Expressway, Suite 1000, Dallas, TX 75243 and the address for Dr. Amotz Agnon and Jeffrey Moskowitz is 9 Halamish Street, Caesarea, 3088900 Israel.

Name of Beneficial Owner

 

Amount and
Nature of
Beneficial
Ownership

 

Percent
of Class

John M. Brown

 

2,065,000

(4)

   

John Seery

 

988,000

(5)

   

Michael B. Croswell Jr.

 

1,475,000

(6)

   

Sarah Caygill

 

925,000

(7)

   

William H. Avery

 

1,840,000

(8)

   

Paul Oroian(1)

 

1,230,160

(9)

   

Virginia Prodan(1)

 

975,000

(10)

   

Martin M. van Brauman

 

1,507,521

(11)

   

Gene Scammahorn

 

1,195,006

(12)

   

Kent Siegel

 

1,190,000

(13)

   

Frank F. Starr II

 

31,973

(14)

   

Dr. Amotz Agnon

 

975,000

(2)

   

Jeffrey Moskowitz

 

1,205,000

(3)

   

Brad Dacus

 

976,000

(15)

   

Robert Dunn(1)

 

1,225,000

(16)

   

Javier Mazón

 

425,000

(17)

   

Group Total*

 

18,228,660

 

 

3.4

Unvested options beyond the June 7, 2023 date with the above directors and management would add 4,800,000 stock options for a Group Total 23,028,660, or 4.3%

____________

*        Based on an estimated 533,861,347 outstanding shares at Record Date

(1)      Nominees for Class III Directors.

(2)      Comprised of 975,000 shares of Common Stock issuable upon exercise of stock options awarded under the stock option plan, which are currently exercisable or that become exercisable within 60 days following the Record Date.

(3)      Comprised of 1,530,000 shares of Common Stock issuable upon exercise of stock options awarded under the stock option plan, which are currently exercisable or that become exercisable within 60 days following the Record Date.

(4)      Comprised of (a) 740,000 shares of Common Stock owned by Mr. Brown, (b) 100,000 shares of Common Stock owned by Mr. Brown’s wife and (c) 1,225,000 shares of Common Stock issuable upon exercise of stock options awarded under the stock option plan, 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) 975,000 shares of Common Stock issuable upon exercise of options awarded under the Plan, which are currently exercisable or that become exercisable within 60 days following the Record Date.

(6)      Comprised of (a) 375,000 shares of Common Stock owned by Mr. Croswell and (b) 1,100,000 shares of Common Stock issuable upon exercise of stock options awarded under the Plan, which are currently exercisable.

(7)      Comprised of 925,000 shares of Common Stock issuable upon exercise of stock options awarded under the Plan, which are currently exercisable or that become exercisable within 60 days following the Record Date.

(8)      Comprised of (a) 825,000 shares of Common Stock owned by Mr. Avery and (b) 1,015,000 shares of Common Stock issuable upon exercise of stock options awarded under the Plan, 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) 1,215,000 shares of Common Stock issuable upon exercise of options awarded under the Plan, which are currently exercisable or that become exercisable within 60 days following the Record Date.

(10)    Comprised of 975,000 shares of Common Stock issuable to Ms. Prodan upon exercise of options awarded under the Plan, which are currently exercisable or that become exercisable within 60 days following the Record Date.

(11)    Comprised of (a) 349,934 shares of Common Stock owned by Mr. van Brauman, plus 2,587 shares jointly held with his wife and (b) 1,155,000 shares of Common Stock issuable upon exercise of stock options awarded under the Plan, which are currently exercisable.

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(12)    Comprised of (a) 10,006 shares of Common Stock owned by Mr. Scammahorn and (b) 1,185,000 shares of Common Stock issuable upon exercise of options awarded to Mr. Scammahorn under the Plan, 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) 1,185,000 shares of Common Stock issuable upon exercise of options awarded to Mr. Siegel under the Plan which are currently exercisable or that become exercisable within 60 days following the Record Date.

(14)    Comprised of (a) 6,973 shares of Common Stock owned by Frank F. Starr II and (b) 25,000 shares of Common Stock issuable upon exercise of stock options awarded under the Plan, which are currently exercisable. Mr. Starr was voted by the board to fill a temporary vacancy on August 1, 2022.

(15)    Comprised of 975,000 shares of Common Stock issuable upon exercise of stock options awarded under the stock option plan, which are currently exercisable or that become exercisable within 60 days following the Record Date. Mr. Dacus with his wife jointly hold 1,000 shares of Common Stock.

(16)    Comprised of (a) 225,000 shares of Common Stock owned by Mr. Dunn and (b) 1,000,000shares of Common Stock issuable upon exercise of stock options awarded under the stock option plan, which are currently exercisable or that become exercisable within 60 days following the Record Date.

(17)    Comprised of 425,000 shares of Common Stock issuable upon exercise of stock options awarded under the stock option plan, which are currently exercisable or that become exercisable within 60 days following the Record Date. On April 1, 2022, Mr. Javier Mazón was appointed by the Board of Directors to fill a vacancy on the Board as recommended by the Nominating and Corporate Governance Committee as a Class I director and to serve on the Compensation Committee.

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COMPENSATION DISCUSSION AND ANALYSIS

Zion Oil and Gas, Inc., a Delaware corporation, is an oil and gas exploration company with a history of 23 years of oil and gas exploration in Israel. We were incorporated in Florida on April 6, 2000 and reincorporated in Delaware on July 9, 2003. We completed our initial public offering in January 2007. Our common stock, par value $0.01 per share (the “Common Stock”) currently trades on the OTCQX Market under the symbol “ZNOG” and our Common Stock warrant under the symbol “ZNOGW.”

The Megiddo Jezreel License 401 was awarded on December 3, 2013, for a three year primary term through December 2, 2016, with the possibility of up to four one-year extensions up to a maximum of seven years to December 3, 2020.

The Megiddo Jezreel #1 (“MJ-01”, “MJ-1” or “MJ #1”) pad 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 MJ #1 well. The test results confirmed that the MJ #1 well did not contain hydrocarbons in commercial quantities in the zones tested. As a result, in the year ended December 31, 2018, the Company recorded a non-cash impairment charge to its unproved oil and gas properties of $30,906,000.

While the MJ #1 well was not commercially viable at the time, Zion learned a great deal from the drilling and testing of this well. We believed that the drilling and testing of this well carried out the testing objectives, which would support further evaluation and potential further exploration efforts within our License area. Zion believed it was prudent and consistent with good industry practice to examine further these questions with a focused 3-D seismic imaging shoot of approximately 72 square kilometers surrounding the MJ#1 well. Zion completed all of the acquisition, processing and interpretation of the 3-D data and incorporated its expanded knowledge base into the drilling of our Megiddo Jezreel #2 (“MJ-02”, “MJ-2” or “MJ #2”) exploratory well.

On March 12, 2020, Zion entered into a Purchase and Sale Agreement with Central European Drilling kft, a Hungarian corporation, to purchase an onshore oil and gas drilling rig, drilling pipe, related equipment and spare parts for a purchase price of $5.6 million in cash, subject to acceptance testing and potential downward adjustment. We remitted to the Seller $250,000 on February 6, 2020 as earnest money towards the Purchase Price. The Closing anticipated by the Agreement took place on March 12, 2020 by the Seller’s execution and delivery of a Bill of Sale to us. On March 13, 2020, the Seller retained the earnest money deposit, and the Company remitted $4,350,000 to the seller towards the purchase price, and $1,000,000 (the “Holdback Amount”) was deposited in escrow with American Stock Transfer and Trust Company LLC. On January 6, 2021, Zion completed its acceptance testing of the I-35 drilling rig and the Holdback Amount was remitted to Central European Drilling.

The New Megiddo License 428 (“NML 428”) was awarded on December 3, 2020 for a six-month term with the possibility of an additional six-month extension. On April 29, 2021, Zion submitted a request to the Ministry of Energy for a six-month extension to December 2, 2021. On May 30, 2021, the Ministry of Energy approved our request for extension to December 2, 2021. On November 29, 2021, the Ministry of Energy approved our request for extension to August 1, 2022. On July 25, 2022, Zion submitted a request to the Ministry of Energy for a six-month extension to February 1, 2023. On July 31, 2022, the Ministry of Energy approved our request for extension to February 1, 2023. The NML 428 expired on February 1, 2023, but the Company applied for a replacement license prior to such expiration.

The MJ-2 drilling plan had been approved by the Ministry of Energy on July 29, 2020. On January 6, 2021, Zion officially spudded its MJ-02 exploratory well. On November 23, 2021, Zion announced via a press release that it completed drilling the MJ-02 well to a total depth of 5,531 meters (~18,141 feet) with a 6-inch open hole at that depth.

A full set of detailed and comprehensive tests including neutron-density, sonic, gamma, and resistivity logs were acquired in December 2021, as a result of which we identified encouraging zones of interest.

During the third quarter of 2022, Zion perforated and stimulated two deep zones.

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On October 3, 2022, Zion sent a database email update to its supporters announcing the following: (1) We were encouraged by the results of our recent testing operations, especially the lower zone (approximately 20 meters in thickness), which was our primary zone of interest, (2) we were facing a downhole obstacle in the form of heavy water influx from the upper zone inhibiting the potential flow of hydrocarbons from the lower zone and (3) after consultation with outside experts, we planned to isolate and neutralize the heavy water influx by procuring a 4.5” packer and installing it below the heavy water zone and above our primary zone.

Zion suspended its operations at the MJ-02 pad site during October 2022 due to several Jewish holidays during the month. Beginning in early November 2022, Zion resumed its testing operations after procuring the necessary equipment and personnel.

On December 9, 2022, Zion sent a database email update to its supporters announcing the following: (1) after a thorough analysis of the results by Zion and third party experts, Zion determined that the well will not currently produce hydrocarbons in commercial quantities, (2) although logs strongly indicate the presence of hydrocarbons, we have determined the zone does not have sufficient permeability to be productive, (3) we will set a temporary plug in the wellbore to preserve its integrity and the opportunity to make future use of it, should circumstances and technological innovations warrant that, (4) based on what we learned about the characteristics of this deep Mohilla zone in the MJ-2 well, we are aggressively re-analyzing our logs and other data from the MJ-1 well, which was drilled on the same pad site. Knowing this zone is structurally higher than the equivalent zone in MJ-2, we are diligently evaluating whether this zone was adequately tested in the MJ-1 well, (5) once we have completed that analysis, we may re-enter the MJ-1 wellbore, which is cased to the bottom, and attempt a re-completion in the Mohilla zones, and (6) we will continue to explore the Megiddo-Jezreel license area as we are confident that we are in an active petroleum system.

As a result, in the year ended December 31, 2022, the Company recorded a non-cash impairment charge to its unproved oil and gas properties of $45,615,000. During the year ended December 31, 2021, the Company did not record any non-cash impairment charge.

Zion Oil & Gas, Inc. filed an amended application with the Israel Ministry of Energy for a new exploratory license on January 24, 2023 covering the same area as its License No. 428, which expired on February 1, 2023. However, its original application to replace License No. 428 was filed on May 11, 2022, and a revised application was filed on August 29, 2022.

With a third parliamentary election in Israel since March 2, 2020, on November 1, 2022, review of Zion’s new license application was delayed. After the election, an ongoing transition period has taken place. A new Minister of Energy took office on January 1, 2023 and appointed a new Director General of the Ministry.

As previously reported, Zion has re-examined the logs and other data from its MJ-01 well in preparation for a planned re-entry. Zion’s license application was therefore amended to address the planned re-entry, requiring a change in the workplan portion of the application, and then re-submitted on January 24, 2023.

Since May of 2022, Zion has worked closely with all the necessary Ministry officials to address questions and resolve any issues raised by its application. Zion therefore believes it has met all of the preliminary license requirements. Although no assurances can be made, Zion anticipates its license application will be favorably considered by the Ministry and other necessary regulatory agencies.

In the interim, Zion plans to leave its I-35 drilling rig and all related components on its current pad site and perform necessary rig maintenance, engineering and design for the planned re-entry.

At present, we have no revenues or operating income. Our ability to generate future revenues and operating cash flow will depend on the successful exploration and exploitation of our current and any future petroleum rights or the acquisition of oil and/or gas producing properties, and the volume and timing of such production. In addition, even if we are successful in producing oil and gas in commercial quantities, our results will depend upon commodity prices for oil and gas, as well as operating expenses including taxes and royalties.

Our executive offices are located at 12655 North Central Expressway, Suite 1000, Dallas, Texas 75243, and our telephone number is (214) 221-4610. Our branch office’s address in Israel is 9 Halamish Street, North Industrial Park, Caesarea 3088900, and the telephone number is +972-4-623-8500. Our website address is: www.zionoil.com.

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On June 30, 2018, we become a smaller reporting company. On August 31, 2020, the Company transitioned from the NASDAQ Capital Market to the OTC Markets. Along with the required letter to NASDAQ informing them of the requested delisting and transition to OTCQX, the Company sent a letter to the Hearings Advisor, Office of the General Counsel, requesting that the Company delist from the Capital Market and the Company withdrew its appeal of the Staff’s delist determination in order to move to OTCQX. As a result, the Company’s shares were suspended at the open of business on Wednesday, September 2, 2020 on NASDAQ and began trading on OTCQX on Wednesday, September 2, 2020 under the symbol “ZNOG.” The Company warrant “ZNWAA” is traded under the symbol “ZNOGW” on the OTCQX.

Robert W.A. Dunn, effective May 1, 2019, joined the Company and assumed the duties on June 13, 2019 as the Chief Operations Officer and the exploration responsibilities and activities. On June 11, 2020, he assumed the duties of the Chief Executive Officer, while retaining the position of Chief Operations Officer. Mr. John Brown remained as Executive Chairman, but stepped down from the position of CEO on June 11, 2020.

Our “Named Executive Officers” as of December 31, 2022 were:

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

        Robert W.A. Dunn — Chief Executive Officer (CEO);

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

        William H. Avery — General Counsel, President.

This section describes the principles, policies, and practices that formed the foundation of our compensation program early in calendar year 2022 by the Compensation Committee and explains how such applied to our Named Executive Officers for calendar year 2022, 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.

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 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;

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        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.

Our Process of Establishing Executive Compensation

The Compensation Committee typically reviews our executive officers’ compensation on an annual basis. Our CEO 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 corporate consultant company to provide assistance with regard to reasonable compensation ranges and to suggest peer companies for review. For our Company, the most relevant comparison metric was market capitalization (“market cap”), and the Compensation Committee identified 18 companies beginning in early 2022 in the oil and gas exploration and production field that had an average market cap of between $79 and $369 million to compare to Zion’s market cap during the first half in 2022 of $164 million, in which the Compensation Committee took into consideration the average Company market cap based upon the recommendations of the independent corporate consultant company of possible “Peer Group” companies.

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

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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 2022, the selected Peer Group constituted for second quarter of 2022 were the below 18 companies, based upon a re-evaluation by the Compensation Committee. The Committee re-evaluation was based upon an independent advisory firm, in which the Company set the market cap at $164 million. The Committee selected the final 18 Peer Companies on the bases of availability of compensation data. There are 5 continuing peer companies from 2021 and 13 new peer companies for the 2022 compensation year.

1.      Forum Energy Technologies, Inc.

2.      Evolution Petroleum

3.      Nine Energy Service

4.      Natural Gas Service Group

5.      Forza Petroleum

6.      TransGlobe Energy Corporation

7.      Trecora Resources

8.      Geospace Technologies

9.      Graham Corporation

10.    Amplify Energy Corporation

11.    Mammoth Energy Services, Inc.

12.    NCS Multistage Holdings, Inc.

13.    Seacor Marine Holdings Inc.

14.    Advanced Emissions Solutions, Inc.

15.    Flotek Industries

16.    Ranger Energy Services, Inc.

17.    Smart Sand, Inc.

18.    Agrofresh Solutions, Inc.

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 2022.

The analysis focuses on four 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 four key officer positions were the Executive Board Chairman, the Chief Executive Officer, the Chief Financial Officer and the President.

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 and other key officers, 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).

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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 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 2021 proxy statements subsequently filed by the peer companies, which reported total compensation for 2021, 2020 and 2019.

Table 1: Total Annual CEO Compensation Averages

COMPANY

 

TOTAL PAY
2019

 

TOTAL PAY
2020

 

TOTAL PAY
2021

Zion Oil & Gas, Inc.*

 

267,422

(2020)

 

493,135

(2021)

 

448,165

(2022)

Evolution Petroleum Corp

 

N/A

 

 

1,131,566

 

 

1,386,724

 

Forum Energy Technologies, Inc.

 

N/A

 

 

3,223,143

 

 

3,216,316

 

Natural Gas Services Group Inc

 

2,443,337

 

 

3,188,949

 

 

1,749,279

 

Nine Energy Service, Inc

 

2,845,506

 

 

788,781

 

 

1,462,783

 

Forza Petroleum

 

1,600,672

 

 

1,402,930

 

 

1,406,528

 

Flotek Industries Inc

 

4,760,100

 

 

513,003

 

 

515,029

 

TransGlobe Energy Corporation

 

1,093,258

 

 

874,810

 

 

1,249,586

 

Geospace Technologies Corp

 

596,442

 

 

583,236

 

 

494,569

 

Trecora Resources

 

2,291,586

 

 

1,797,154

 

 

2,094,693

 

Graham Corporation

 

N/A

 

 

1,893,309

 

 

950,904

 

Mammoth Energy Services, Inc.

 

N/A

 

 

848,550

 

 

548,700

 

NCS Multistage Holdings, Inc.

 

N/A

 

 

1,205,642

 

 

1,318,360

 

Seacor Marine Holdings Inc.

 

N/A

 

 

1,598,677

 

 

2,602,774

 

Advanced Emissions Solutions, Inc.

 

N/A

 

 

659,324

 

 

1,001,273

 

Amplify Energy Corp.

 

975,117

 

 

828,952

 

 

979,900

 

Ranger Energy Services, Inc.

 

N/A

 

 

659,324

 

 

1,001,273

 

Smart Sand, Inc.

 

N/A

 

 

783,766

 

 

1,820,803

 

Agrofresh Solutions, Inc.

 

N/A

 

 

2,166,950

 

 

3,919,734

 

____________

*        The CEO compensation above for Zion compares the last three years [2020, 2021 and 2022] with the available compensation numbers of the peer group from their 2022 proxy statements [2019, 2020 and 2021].

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. In addition, 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 below the average of the Peer Group. The Company used an average of its daily closing market caps over the first half of 2022, along with average market caps of its peer group. In addition, the Zion Total NEO Compensation amount is based upon 2022; whereas, the peer group is based upon available 2021 amounts from 2022 proxy statements.

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Table 2: Total NEO Compensation to Market Cap

Company

 

Total NEO
Compensation

 

Market Cap
(millions)

 

Percentage

Zion Oil & Gas, Inc.

 

1,788,288

(2022)

 

164

 

1

Forum Energy Technologies, Inc.

 

6,152,223

 

 

143

 

4

Evolution Petroleum

 

2,532,826

 

 

260

 

1

Natural Gas Services Group Inc.

 

3,706,763

 

 

184

 

2

Nine Energy Service, Inc.

 

3,902,282

 

 

128

 

3

Forza Petroleum

 

2,371,277

 

 

100

 

2

Flotek Industries Inc

 

2,262,108

 

 

102

 

2

TransGlobe Energy Corporation

 

2,923,871

 

 

369

 

1

Geospace Technologies Corp

 

1,415,003

 

 

87

 

1.6

Trecora Resources

 

4,826,242

 

 

230

 

2

Graham Corporation

 

3,145,665

 

 

79

 

4

Mammoth Energy Services, Inc.

 

827,400

 

 

110

 

1

NCS Multistage Holdings, Inc.

 

2,865,111

 

 

98

 

3

Seacor Marine Holdings Inc.

 

6,712,794

 

 

247

 

3

Advanced Emissions Solutions, Inc.

 

1,999,496

 

 

95

 

2

Amplify Energy Corp

 

2,532,826

 

 

360

 

1

Ranger Energy Services, Inc.

 

3,090,949

 

 

266

 

1

Smart Sand, Inc.

 

4,103,674

 

 

153

 

3

Agrofresh Solutions, Inc.

 

7,135,201

 

 

95

 

7

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. In addition, 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 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 2022 to that of all

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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 20 of this Proxy Statement. Pay elements that were included in the annual total compensation for each employee are: (1) salary received in 2022; (2) bonuses; (3) option awards; and (4) all other compensation that 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, 2022, 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, 2022, Zion’s CEO, Mr. Dunn, had 2022 annual total compensation of $448,165 consisting of salary, option awards at fair value on the date of grant, other compensation paid directly to him, as well as various company paid benefits, 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 2022 was $119,425, which is inclusive of company paid benefits and other benefits. We estimate that Mr. Dunn’s annual total compensation was approximately 3.75 times that of our median employee in 2022.

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.

During 2022 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.

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Zero Percentage of Directors Receiving Shareholder Approval Rates Below 80%

With respect to the Shareholder Annual Meeting on June 8, 2022, none of the directors on the ballot received shareholder approval rates below the 80% level and the independent directors and all directors received greater than 94.4% approval rates.

Consideration of Previous Shareholder Advisory Vote

In June 2020, our stockholders approved the compensation of our Named Executive Officers as described in our 2020 proxy statement, with approximately 92.5% of stockholder votes cast in favor of our 2020 “say-on-pay” resolution (excluding abstentions and broker non-votes). The Compensation Committee will consider these results as evidence of support for our compensation program and responsive to shareholder concerns as described in our 2020 proxy statement, and as grounds for maintaining a similar approach for 2022. During our 2020 stockholders’ meeting, the voting results of the frequency of future nonbinding advisory votes on the compensation of the Company’s Named Executive Officers were 70.5% for every 3 years, 6.2% for every 2 years and 23.2% for every year.

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.

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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 March 20, 2023 that the Compensation Discussion and Analysis be included in this proxy statement.

 

The Compensation Committee

   

Sarah Caygill (Chair)

   

Javier Mazón

   

Kent Siegel

   

John Seery

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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, Chief Financial Officer and President.

Name and Principal Position

 

Year

 

Salary

 

Bonus

 

Option Awards(1)

 

All Other Compensation(2)

 

Total

John M. Brown,

 

2020

 

329,183

 

30,000

 

71,400

 

120,876

 

551,460

Executive Chairman,

 

2021

 

231,000

 

30,000

 

260,785

 

102,043

 

623,828

   

2022

 

231,000

 

30,000

 

146,280

 

108,162

 

515,442

Robert W.A. Dunn

 

2020

 

260,088

     

67,250

 

7,333

 

267,422

Chief Executive Officer

 

2021

 

250,000

     

225,745

 

17,390

 

493,135

   

2022

 

287,500

     

146,280

 

14,385

 

448,165

Michael B. Croswell Jr.

 

2020

 

255,904

         

8,735

 

264,639

Chief Financial Officer

 

2021

 

220,000

     

235,633

 

8,786

 

464,418

   

2022

 

240,000

     

153,330

 

8,951

 

402,281

Avery, William

 

2020

 

305,325

     

21,600

 

15,930

 

342,232

President

 

2021

 

250,000

     

225,745

 

21,420

 

497,165

   

2022

 

250,000

     

150,980

 

21,420

 

422,400

____________

*        Robert W.A. Dunn, effective May 1, 2019, joined the Company and on June 13, 2019 assumed the position of Chief Operations Officer to assume exploration responsibilities and activities from Mr. Guinn. Mr. Avery assumed the position of President, effective April 12, 2019. On June 11, 2020, Mr. Dunn assumed the position of Chief Executive Officer while retaining the position of Chief Operations Officer. Mr. John Brown stepped down from the position of Chief Executive Officer and remained in the position of Executive Chairman.

(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, 2022. To see the value actually received by the Named Executive Officers in fiscal 2022, see the “Option Exercises and Stock Vested” in fiscal 2022 Table below.

(2)      For 2022, represents the compensation as described under the caption “All Other Compensation”, below.

All Other Compensation

“All Other Compensation” includes various perquisites and other benefits, including, but not limited to, coverage for medical, dental, vision, disability and life insurance and vehicle allowances.

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Table of Contents

Grant of Plan Based Awards in 2022

The table below sets forth information regarding grants of plan-based awards made to our Named Executive Officers during 2022. All grants were approved by the Compensation Committee.

Name

 

Approval
Date

 

Grant
Date

 

Option
Awards:
Number of
Securities
Underlying
Options
(#)

 

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

 

Grant Date
Fair Value of
Option
Awards
($)

Robert W.A. Dunn

 

1/4/2022

 

1/4/22

 

25,000

 

$

0.1500

 

$

3,750

   

1/5/2022

 

1/5/22

 

200,000

 

$

0.1529

 

$

30,580

   

4/15/2022

 

4/15/22

 

400,000

 

$

0.1451

 

$

58,040

   

9/23/2022

 

9/23/22

 

300,000

 

$

0.1797

 

$

53,910

               

 

   

$

146,280

               

 

   

 

 

William H. Avery

 

1/4/2022

 

1/4/22

 

25,000

 

$

0.1500

 

$

3,750

   

1/5/2022

 

1/5/22

 

200,000

 

$

0.1529

 

$

30,580

   

4/15/2022

 

4/15/22

 

400,000

 

$

0.1451

 

$

58,040

   

8/12/2022

 

8/12/22

 

20,000

 

$

0.2350

 

$

4,700

   

9/23/2022

 

9/23/22

 

300,000

 

 

0.1797

 

$

53,910

               

 

   

$

150,980

               

 

   

 

 

John M. Brown

 

1/4/2022

 

1/4/22

 

25,000

 

$

0.1500

 

$

3,750

   

1/5/2022

 

1/5/22

 

200,000

 

$

0.1529

 

$

30,580

   

4/15/2022

 

4/15/22

 

400,000

 

$

0.1451

 

$

58,040

   

9/23/2022

 

9/23/22

 

300,000

 

$

0.1797

 

$

53,910

               

 

   

$

146,280

               

 

   

 

 

Michael B. Croswell Jr

 

1/4/2022

 

1/4/21

 

25,000

 

$

0.1500

 

$

3,750

   

1/5/2022

 

1/4/21

 

200,000

 

$

0.1529

 

$

30,580

   

4/15/2022

 

5/21/21

 

400,000

 

$

0.1451

 

$

58,040

   

8/12/2022

 

8/12/22

 

30,000

 

$

0.2350

 

$

7,050

   

9/23/22

 

9/23/22

 

300,000

 

$

0.2472

 

$

53,910

               

 

   

$

153,330

____________

          Represents grants of stock options under our 2021 Omnibus Incentive Plan. Options represent the right to purchase shares of common stock at the price per share indicated in the table. Options fully vest one year from the Grant Date and expire 10 years from the Grant Date.

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Table of Contents

Outstanding Equity Awards at Fiscal Year End — December 2022

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, 2022.

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

 

25,000

         

$

1.38

 

1/1/2025

   

75,000

         

$

.915

 

1/4/2031

   

200,000

         

$

.59

 

5/21/2031

   

300,000

         

$

.2472

 

9/1/2031

   

25,000

         

$

.15

 

1/4/2032

       

200,000

     

$

.1529

 

1/4/2032

       

400,000

     

$

.1451

 

4/15/2032

       

300,000

     

$

.1797

 

9/23/2032

William H. Avery

             

 

     
   

75,000

         

$

.915

 

1/4/2031

   

200,000

         

$

.59

 

5/21/2031

   

95,000

         

$

.3912

 

7/9/2031

   

25,000

         

$

.15

 

1/4/2032

       

200,000

     

$

.1529

 

1/4/2032

       

400,000

     

$

.1451

 

4/15/2032

       

20,000

     

$

.2350

 

8/15/2032

       

300,000

     

$

.1797

 

9/23/2032

Robert W.A. Dunn

 

75,000

         

$

.915

 

1/4/2031

   

200,000

         

$

.59

 

5/21/2031

   

100,000

         

$

.3912

 

7/9/2031

   

25,000

         

$

.15

 

1/4/2032

       

200,000

     

$

.1529

 

1/4/2032

       

400,000

     

$

.1451

 

4/15/2032

       

300,000

     

$

.1797

 

9/23/2032

Michael B. Croswell Jr.

             

 

     
   

1,693

         

$

1.67

 

10/1/2024

   

48,307

         

$

1.38

 

1/2/2025

   

10,000

         

$

.01

 

1/6/2030

   

75,000

         

$

.915

 

1/4/2031

   

200,000

         

$

.59

 

5/21/2031

   

100,000

         

$

.3912

 

7/9/2031