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
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Filed
by Party other than Registrant ☐
Check
the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive Additional Materials
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Soliciting
Materials Pursuant to §240.14a-12
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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)
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Payment
of Filing Fee (Check the appropriate box):
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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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):
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Proposed
maximum aggregate value of transaction:
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Total
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Fee
paid previously with preliminary materials.
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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.
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(1)
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Amount
previously paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
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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
2:00 p.m., local time, on Tuesday, June 5, 2018, at the Westin Dallas Park Central in Dallas, Texas, which is two blocks from
our corporate offices. 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, Malone Bailey 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.
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Sincerely,
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John
M. Brown
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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 2018 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 5, 2018 at the Westin Dallas Park Central
in Dallas, Texas to:
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1.
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Elect four directors of the Company as Class I directors
to serve for a term of three years;
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2.
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Ratify the appointment of MaloneBailey, LLP, as the
Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018; and
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3.
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Conduct such other business as may properly come before
the Annual Meeting and any adjournment(s) thereof.
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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, 2018 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.
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By
Order of the Board of Directors
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/s/
VICTOR G. CARRILLO
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Victor
G. Carrillo
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April
13, 2018
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Chief
Executive Officer
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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 Tuesday, June 5, 2018
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 2018 Annual Meeting (the “Annual Meeting”) of the Company’s
stockholders to be held at the Westin Dallas Park Central, 12720 Merit Drive, Dallas, Texas 75251 on Tuesday, June 5, 2018, 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 19, 2018 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, 2018, and filing the Notice
with the SEC, on or about April 13, 2018. 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, 2017 filed with the SEC on March 12, 2018.
At
the Annual Meeting, the stockholders will be asked to:
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1.
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Elect four directors of the Company as Class I directors
to serve for a term of three years;
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2.
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Ratify the appointment of Malone Bailey, LLP, as the
Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018; and
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Conduct such other business as may properly come before
the Annual Meeting and any adjournment(s) thereof.
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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:
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(i)
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FOR
the election as directors of the nominees
of the Board named below;
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(ii)
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FOR
the proposal to ratify the appointment of
Malone Bailey, LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31,
2018; and
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(iii)
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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.
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The
Company is unaware of any additional matters not set forth in the Notice that will be presented for consideration at the Annual
Meeting.
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, 2018 (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 57,870,000 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 I 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 Malone Bailey, LLP as the Company’s independent registered public accounting firm
for the fiscal year ending December 31, 2018 (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:
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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 4, 2018. 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.
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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 4, 2018. 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.
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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.
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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/
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 are issuable upon the
exercise of outstanding options and warrants through June 9, 2018. 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 57,870,000 shares of Common Stock outstanding on the Record Date.
The
address of John M. Brown, Dustin L. Guinn, Victor G. Carrillo, Michael B. Croswell, Paul Oroian, Forrest A. Garb, William H. Avery,
Martin M. van Brauman, Justin W. Furnace, Gene Scammahorn, Dr. Lee Russell and Kent Siegel is 12655 North Central Expressway,
Suite 1000, Dallas, TX 75243. The address of Dr. Yehezkel “Charlie” Druckman is 9 Halamish Street, Caesarea Industrial
Park, 3088900 Israel.
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Name of Beneficial Owner
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Amount and
Nature of
Beneficial
Ownership
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Percent of Class
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John M. Brown
(1)
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1,115,000
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(4)
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1.9
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Dustin L. Guinn
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335,000
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(5)
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Victor G. Carrillo
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557,193
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(6)
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Michael B. Croswell Jr.
(1)(2)
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414,500
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(7)
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Forrest A. Garb
(1)
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299,147
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(8)
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William H. Avery
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677,500
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(9)
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1.2
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Paul Oroian
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316,160
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(10)
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Dr. Yehezkel “Charlie” Druckman
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285,000
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(11)
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Justin W. Furnace
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240,000
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(12)
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Gene Scammahorn
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241,432
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(13)
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Kent Siegel
(1)
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276,000
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(14)
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Martin M. van Brauman
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432,521
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(15)
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Dr. Lee Russell
(3)
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295,000
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(16)
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Group Total*
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5,484,453
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9.5
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*
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Based on estimated 57,870,000 outstanding shares at
Record Date
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**
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If the percentage ownership is not shown above, it is less than 1%
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(1)
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Nominee for Class I Director.
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(2)
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Mr. Croswell was appointed to the Board on May 1, 2017.
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(3)
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Dr. Lee R. Russell was appointed to the Board on May
1, 2017.
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(4)
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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.
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(5)
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Comprised of (a) 235,000 shares of Common Stock owned
by Mr. Guinn and (b) 100,000 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.
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Comprised of (a) 251,500 shares of Common Stock owned
by Mr. Carrillo and (b) 305,693 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.
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Comprised of (a) 57,000 shares of Common Stock owned
by Mr. Croswell and (b) 357,500 shares of Common Stock issuable upon exercise of stock options awarded under the Plans, which
are currently exercisable.
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(8)
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Comprised of (a) 3,147 shares of Common Stock owned
by Mr. Garb and (b) 296,000 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.
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(9)
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Comprised of (a) 350,000 shares of Common Stock owned
by Mr. Avery and (b) 327,500 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.
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(10)
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Comprised of (a) 15,160 shares of Common Stock owned
by Mr. Oroian and (b) 301,000 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.
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(11)
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Comprised of (a) 25,000 shares of Common Stock owned
by Dr. Druckman and (b) 260,000 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.
Note: On April 9, 2018, memorial services
were held in Jerusalem, Israel for Dr. Yehezkel “Charlie” Druckman.
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(12)
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Comprised of (a) 5,000 shares of Common Stock owned
by Mr. Furnace and (b) 235,000 shares of Common Stock issuable upon exercise of options awarded to Mr. Furnace under the Plans
which are currently exercisable or that become exercisable within 60 days following the Record Date.
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(13)
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Comprised of (a) 1,432 shares of Common Stock owned
by Mr. Scammahorn and (b) 240,000 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.
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(14)
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Comprised of (a) 5,000 shares of Common Stock owned
by Mr. Siegel and (b) 271,000 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.
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(15)
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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.
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(16)
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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.
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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 18 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”) was spud on June 5, 2017. The MJ #1 well was drilled to a total depth (“TD”)
of 5,060 meters (approximately 16,600 feet). Zion also obtained several wireline log suites and the well has been cased and cemented
in preparation for upcoming testing operations. However, as of the date of this Proxy Statement, the Company is not able to confirm
whether the MJ #1 well will be commercially productive and will not be able to do so until after testing and fully evaluating
the well.
As
of December 31, 2017, we became an “accelerated filer reporting company” for purposes of the SEC’s executive compensation
and other disclosure rules. The executive compensation disclosures that follow are compliant with the SEC’s executive compensation
disclosure rules for accelerated filer reporting companies.
Our
current “Named Executive Officers” are:
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John M. Brown — Executive Board Chairman (EC);
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Dustin L. Guinn — Executive Vice Chairman, President/Chief
Operating Officer (President/COO);
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Victor G. Carrillo — Chief Executive Officer (CEO);
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Michael B. Croswell Jr. — Chief Financial Officer
(CFO).
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This
section describes the principles, policies, and practices that formed the foundation of our compensation program in fiscal year
2017 and explains how they applied to our Named Executive Officers for fiscal year 2017, 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:
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Attract and retain highly qualified talent.
We
need to attract, motivate, and retain management talent of high quality in a competitive market.
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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.
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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.
|
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 at this time, the most relevant comparison
metric is market capitalization (“market cap”), and we have identified 15 companies in the oil and gas exploration
and production field that have a market cap of between $43 and $1,120 million to compare to Zion.
Market
capitalization is used as the most relevant comparison metric, since Zion is currently a development stage company with neither
production nor revenue and has 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”) were 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 constituents for 2018 are 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
|
|
|
8.
|
Gastar
Exploration, Inc.
|
|
|
12.
|
Northern
Oil and Gas, Inc.
|
|
|
13.
|
PetroQuest
Energy, Inc.
|
|
|
14.
|
Prime
Energy Corporation
|
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 and going forward.
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 going forward. The four key officer positions are the Executive Chairman,
Chief Executive Officer, President and Chief Operating Officer and the Chief Financial Officer.
Total
compensation for executives generally consists of the following five categories: (1) Cash salaries; (2) Cash bonuses; (3) Stock
awards; (4) Stock options; and (5) Other. With respect to a three-year performance and pay rankings for Zion and the peer companies,
Zion would be 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 are much greater than Zion’s
pay package over each year.
Table
1: Total Annual CEO Compensation Averages
|
|
|
Over 3-Years
|
|
|
Over 2-Years
|
|
|
Over 1-Year
|
|
|
Company
|
|
Total Pay
|
|
|
Total Pay
|
|
|
Total Pay
|
|
|
Zion Oil & Gas, Inc.
|
|
|
463,850
|
|
|
|
438,775
|
|
|
|
447,902
|
|
|
Approach Resources, Inc.
|
|
|
2,459,205
|
|
|
|
2,125,720
|
|
|
|
1,592,494
|
|
|
Bill Barrett Corp.
|
|
|
3,922,009
|
|
|
|
9,996,796
|
|
|
|
3,776,409
|
|
|
Cobalt International Energy, Inc.
|
|
|
8,714,357
|
|
|
|
7,478,275
|
|
|
|
5,730,745
|
|
|
Comstock Resources, Inc.
|
|
|
3,331,990
|
|
|
|
3,030,147
|
|
|
|
2,811,595
|
|
|
Contango Oil & Gas Company
|
|
|
1,934,487
|
|
|
|
2,363,084
|
|
|
|
3,011,817
|
|
|
Evolution Petroleum Corporation
|
|
|
1,073,829
|
|
|
|
1,176,243
|
|
|
|
1,069,597
|
|
|
EXCO Resources, Inc.
|
|
|
3,269,234
|
|
|
|
3,421,654
|
|
|
|
4,327,631
|
|
|
Gastar Exploration, Inc.
|
|
|
2,187,764
|
|
|
|
2,008,931
|
|
|
|
1,853,101
|
|
|
Jones Energy, Inc.
|
|
|
3,086,990
|
|
|
|
2,898,052
|
|
|
|
2,519,997
|
|
|
Legacy Reserves LP
|
|
|
3,122,766
|
|
|
|
3,134,882
|
|
|
|
4,184,220
|
|
|
Lilis Energy, Inc.
|
|
|
2,010,737
|
|
|
|
2,881,528
|
|
|
|
3,717,734
|
|
|
Northern Oil and Gas, Inc.
|
|
|
5,471,532
|
|
|
|
6,251,266
|
|
|
|
3,830,669
|
|
|
PetroQuest Energy, Inc.
|
|
|
1,465,181
|
|
|
|
1,163,945
|
|
|
|
1,471,081
|
|
|
PrimeEnergy Corporation
|
|
|
1,399,676
|
|
|
|
578,334
|
|
|
|
581,493
|
|
|
VAALCO Energy, Inc.
|
|
|
1,503,170
|
|
|
|
1,380,681
|
|
|
|
1,353,941
|
|
The
Peer Group is 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.
Table
2: Total NEO Compensation to Market Cap
|
Company
|
|
Total NEO
Compensation
|
|
|
Market Cap
(millions)
|
|
|
Percentage
|
|
|
Zion Oil & Gas, Inc.
|
|
|
1,912,077
|
|
|
|
122
|
|
|
|
1.56
|
|
|
Approach Resources, Inc.
|
|
|
4,454,251
|
|
|
|
223
|
|
|
|
1.99
|
|
|
Bill Barrett Corp.
|
|
|
9,407,763
|
|
|
|
303
|
|
|
|
3.10
|
|
|
Cobalt International Energy, Inc.
|
|
|
5,010,000
|
|
|
|
101
|
|
|
|
4.96
|
|
|
Comstock Resources, Inc.
|
|
|
6,898,139
|
|
|
|
108
|
|
|
|
6.38
|
|
|
Contango Oil & Gas Company
|
|
|
8,873,707
|
|
|
|
147
|
|
|
|
6.03
|
|
|
Evolution Petroleum Corporation
|
|
|
1,805,429
|
|
|
|
252
|
|
|
|
0.72
|
|
|
EXCO Resources, Inc.
|
|
|
30,198,572
|
|
|
|
83
|
|
|
|
36.38
|
|
|
Gastar Exploration, Inc.
|
|
|
4,049,843
|
|
|
|
140
|
|
|
|
2.89
|
|
|
Jones Energy, Inc.
|
|
|
5,156,985
|
|
|
|
129
|
|
|
|
3.99
|
|
|
Legacy Reserves LP
|
|
|
3,263,250
|
|
|
|
121
|
|
|
|
2.69
|
|
|
Lilis Energy, Inc.
|
|
|
9,120,657
|
|
|
|
226
|
|
|
|
4.03
|
|
|
Northern Oil and Gas, Inc.
|
|
|
9,099,680
|
|
|
|
98
|
|
|
|
9.28
|
|
|
PetroQuest Energy, Inc
|
|
|
3,271,500
|
|
|
|
47
|
|
|
|
6.96
|
|
|
PrimeEnergy Corporation
|
|
|
1,141,796
|
|
|
|
104
|
|
|
|
1.09
|
|
|
VAALCO Energy, Inc.
|
|
|
2,861,950
|
|
|
|
52
|
|
|
|
5.50
|
|
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
On
our filer status determination date of December 31, 2017, Zion had an aggregate market value held by its non-affiliates of
$75 million or more as of June 30, 2017 and entered into an accelerated filer status for the annual report that was filed for
2017 on March 12, 2018 and now is required to provide pay ratio disclosure for the first full fiscal year after January 1,
2017 in the 2019 proxy statement. Nevertheless, Zion has elected to voluntarily disclose our CEO to median employee pay ratio
in this proxy statement.
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 2017 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 20 of this Proxy Statement. Pay elements that were included in the annual total
compensation for each employee are: (1) salary received in 2017; (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 as of December 31, 2017. We determined the compensation of our median employee by: (1) calculating
the annual total compensation described above for each of our employees; (2) ranking the annual total compensation of all employees
inclusive of the CEO from lowest to highest (a list of 37 employees and consultants), and (3) chose the employee ranked 19
th
as the “Median Employee”.
Zion’s
CEO, Mr. Carrillo, had 2017 annual total compensation of $448,902, consisting of salary, bonuses, option awards and all other
compensation, as reflected in the Executive Compensation table included in this Proxy Statement. Our median employee’s annual
total compensation for 2017 was $139,000. We estimate that Mr. Carrillo’s annual total compensation was approximately 3.2
times that of our median employee in 2017.
Our
Compensation Program Decisions
Zion’s
executive compensation programs are designed to:
|
|
●
|
attract
and retain highly qualified, talented and experienced management
|
|
|
●
|
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
2017 and in the future, the Compensation Committee believes it is appropriate to place a heavier emphasis on long-term equity
incentives on 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.
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.
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.
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 7,
2018 that the Compensation Discussion and Analysis be included in this proxy statement.
|
|
The
Compensation Committee
|
|
|
|
|
|
Forrest
Garb (Chair)
|
|
|
Kent
Siegel
|
|
|
Justin
Furnace
|
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,
Executive Chairman
|
|
2015
2016
2017
|
|
273,000
249,000
249,000
|
|
30,000
65,000
30,000
|
|
20,529
161,817
239,750
|
|
95,158
99,067
113,669
|
|
418,687
574,884
632,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victor G. Carrillo,
Chief Executive Officer
|
|
2015
2016
2017
|
|
250,000
250,000
250,000
|
|
50,000
|
|
123,325
149,569
137,000
|
|
75,975
55,374
61,542
|
|
449,300
504,943
448,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dustin L. Guinn
Executive Vice Chairman
President/COO
|
|
2016
2017
|
|
125,000
250,000
|
*
|
|
|
176,946
171,500
|
|
22,478
44,147
|
|
324,424
465,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael B. Croswell Jr.
Chief Financial Officer
|
|
2016
2017
|
|
56,250
150,000
|
*
|
1,026
|
|
154,062
178,200
|
|
25,530
36,549
|
|
236,869
364,749
|
|
*
|
Note:
Mssrs. Guinn and Croswell were appointed to their respective positions in 2016 and, therefore, the 2016 compensation represents
the applicable portion for 2016.
|
|
(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, 2017. To see the value actually received by the Named Executive
Officers in fiscal 2017, see the “Option Exercises and Stock Vested” in fiscal 2017 Table below.
|
|
(2)
|
For 2017, 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 2017 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)
|
|
|
Israel
Related
Social
Benefits
(4)
|
|
|
Total
|
|
|
John M. Brown
|
|
|
41,981
|
|
|
|
18,767
|
|
|
|
52,920
|
|
|
|
—
|
|
|
|
113,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victor G. Carrillo
|
|
|
1,747
|
|
|
|
11,923
|
|
|
|
47,873
|
|
|
|
—
|
|
|
|
61,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dustin L. Guinn
|
|
|
2,574
|
|
|
|
9,240
|
|
|
|
32,333
|
|
|
|
—
|
|
|
|
44,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mike Croswell
|
|
|
2,679
|
|
|
|
2,654
|
|
|
|
31,216
|
|
|
|
—
|
|
|
|
36,549
|
|
|
(1)
|
Represents for Mr. Brown: office allowance ($24,000),
payment of unused vacation expenses ($13,327), and cell phone expenses ($4,654); Represents for Mr. Carrillo: cell phone expenses
($1,747); Represents for Mr. Guinn: cell phone expense ($2,574); Represents for Mr. Croswell: cell phone expenses ($1,760) and
professional dues ($919).
|
|
(2)
|
Represents for Mr. Brown: leased automobile cost, insurance
and maintenance ($18,767); Represents for Mr. Carrillo: leased automobile cost, insurance and maintenance ($11,923); Represents
for Mr. Guinn: leased automobile cost and maintenance ($9,240); Represents for Mr. Croswell: insurance and maintenance ($2,654).
|
|
(3)
|
Represents for Messrs. Brown, Carrillo, Guinn, and Croswell:
direct cash payments to providers of health, dental, life, vision, and disability insurance.
|
|
(4)
|
These are comprised of contributions by the Company
to savings, severance, pension, disability and insurance plans generally provided in Israel, including education funds and managerial
insurance funds.
|
Grant
of Plan Based Awards in 2017
The
table below sets forth information regarding grants of plan-based awards made to our Named Executive Officers during 2017.
|
Name
|
|
Approval
Date
(1)
|
|
Grant
Date
(1)
|
|
Option
Awards:
Number of
Securities
Underlying
Options (#)
|
|
|
Exercise
or
Base Price of
Option
Awards
($/Share)
|
|
Grant
Date
Fair Value of
Option
Awards ($)
|
|
John
M. Brown
|
|
01/01/2017
01/01/2017
|
|
01/02/2017
01/02/2017
|
|
25,000
150,000
|
(2)
(3)
|
|
$
$
|
0.01
0.01
|
|
$
$
|
34,250
205,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victor
G. Carrillo
|
|
01/02/2017
|
|
01/02/2017
|
|
100,000
|
(3)
|
|
$
|
0.01
|
|
$
|
137,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dustin
Guinn
|
|
01/02/2017
01/05/2017
|
|
01/02/2017
01/05/2017
|
|
100,000
25,000
|
(3)
(4)
|
|
$
$
|
0.01
0.01
|
|
$
$
|
137,000
34,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Croswell
|
|
01/02/2017
01/02/2017
|
|
01/05/2017
01/05/2017
|
|
120,000
10,000
|
(3)
(4)
|
|
$
$
|
0.01
0.01
|
|
$
$
|
164,400
13,800
|
|
(1)
|
All grants were approved by the Compensation Committee.
|
|
(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 1, 2027.
|
|
(3)
|
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, 2027.
|
|
(4)
|
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, 2027.
|
Outstanding
Equity Awards at Fiscal Year End –December 2017
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, 2017.
|
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
|
|
|
|
25,000
|
|
|
|
|
|
$
|
1.38
|
|
1/1/2025
|
|
|
|
25,000
|
|
|
|
|
|
$
|
0.01
|
|
1/1/2026
|
|
|
|
75,000
|
|
|
|
|
|
$
|
0.01
|
|
6/5/2026
|
|
|
|
25,000
|
|
|
|
|
|
$
|
0.01
|
|
1/1/2027
|
|
|
|
150,000
|
|
|
|
|
|
$
|
0.01
|
|
1/2/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victor
G. Carrillo
|
|
200,000
|
|
|
|
|
|
$
|
2.61
|
|
12/4/2021
|
|
|
|
50,000
|
|
|
|
|
|
$
|
1.70
|
|
12/20/2022
|
|
|
|
20,693
|
|
|
|
|
|
$
|
1.67
|
|
10/1/2024
|
|
|
|
10,000
|
|
|
|
|
|
$
|
1.38
|
|
1/2/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dustin
Guinn
|
|
25,000
|
|
|
|
|
|
$
|
2.03
|
|
5/1/2021
|
|
|
|
50,000
|
|
|
|
|
|
$
|
1.55
|
|
6/05/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Croswell
|
|
40,000
|
|
|
|
|
|
$
|
2.61
|
|
12/4/2021
|
|
|
|
30,000
|
|
|
|
|
|
$
|
1.70
|
|
12/20/2022
|
|
|
|
1,693
|
|
|
|
|
|
$
|
1.67
|
|
10/1/2024
|
|
|
|
48,307
|
|
|
|
|
|
$
|
1.38
|
|
1/2/2025
|
|
|
|
85,000
|
|
|
|
|
|
$
|
0.01
|
|
6/5/2026
|
|
|
|
120,000
|
|
|
|
|
|
$
|
0.01
|
|
1/2/2027
|
|
|
|
10,000
|
|
|
|
|
|
$
|
0.01
|
|
1/5/2027
|
Option
Exercises and Stock Vested in Fiscal 2017
The
following table provides information about options exercised by the Named Executive Officers during the fiscal year ended December
31, 2017:
|
|
|
Option Awards
|
|
|
Name
|
|
Number of
Shares
Acquired on
Exercise (#)
|
|
|
Value
Realized on
Exercise
(1)
($)
|
|
|
John M. Brown
(2)
|
|
|
50,000
|
|
|
|
65,000
|
|
|
Victor G. Carrillo
(3)
|
|
|
150,000
|
|
|
|
199,500
|
|
|
Dustin L. Guinn
(4)
|
|
|
235,000
|
|
|
|
310,200
|
|
|
Michael Croswell
(5)
|
|
|
15,000
|
|
|
|
17,550
|
|
|
(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.
|
|
(2)
|
Mr. Brown exercised 50,000 penny options on January
11, 2017.
|
|
(3)
|
Mr. Carrillo exercised 150,000 penny options on January
12, 2017.
|
|
(4)
|
Mr. Guinn exercised 235,000 penny options on January
17, 2017.
|
|
(5)
|
Mr. Croswell exercised 15,000 penny options on April
18, 2017.
|
Employment
Agreements
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.
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 Employment 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 Employment Agreement provides for customary
protections of the Company’s confidential information and intellectual property.
Victor
G. Carrillo.
Mr. Carrillo was appointed a director in September 2010, Executive Vice President in January 2011 and President
and Chief Operating Officer in October 2011. Effective June 15, 2015, Mr. Carrillo was appointed as the Chief Executive Officer
and effective June 16, 2015 the Company and Mr. Carrillo entered into a new employment agreement for an initial term until December
31, 2016 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. Carrillo continues to be paid an annual salary of $250,000, subject to annual review and adjustments.
Under
the agreement, Mr. Carrillo was granted a one-time fully vested option to purchase up to 50,000 shares of common stock of the
Company at a per share exercise price of $0.01 and a signing bonus of $50,000. 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, 2016 and
continuing on the 5
th
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. Carrillo 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.
Dustin
L. Guinn.
Mr. Guinn was appointed a director on May 1, 2015 and is currently serving as the Executive Vice Chairman since
July 1, 2016 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 is 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 5
th
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. 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 5
th
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.
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, 2017.
|
Name
|
|
Salary
Continuation
(1)
|
|
|
Bonus
|
|
|
Accrued
Vacation
Pay
|
|
|
Total Value
|
|
|
John M. Brown
|
|
|
249,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
249,000
|
|
|
Victor G. Carrillo
|
|
|
250,000
|
|
|
|
—
|
|
|
|
16,346
|
|
|
|
266,346
|
|
|
Dustin L. Guinn
|
|
|
250,000
|
|
|
|
—
|
|
|
|
7,690
|
|
|
|
257,690
|
|
|
Michael B. Croswell
|
|
|
150,000
|
|
|
|
—
|
|
|
|
13,749
|
|
|
|
163,749
|
|
|
(1)
|
Represents
for Messrs. Brown, Carrillo, Guinn, and Croswell: 12 months of 2017 base salary.
|
DIRECTOR
COMPENSATION
Our
non-employee director compensation program in 2017 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 2017 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, 2017.
|
Name
|
|
Fees Earned
or Paid in
Cash
|
|
|
Stock
Awards
|
|
|
Option
Awards
(1)
|
|
|
All Other
Compensation
|
|
|
Total
|
|
|
Forrest A. Garb
|
|
|
33,000
|
|
|
|
|
|
|
|
29,427
|
(2)
|
|
|
5,665
|
(13)
|
|
|
68,092
|
|
|
Paul Oroian
|
|
|
42,000
|
|
|
|
|
|
|
|
29,427
|
(2)
|
|
|
6,412
|
(5)
|
|
|
77,839
|
|
|
William H. Avery
|
|
|
18,000
|
|
|
|
|
|
|
|
136,091
|
(3)
|
|
|
169,596
|
(6)
|
|
|
323,687
|
|
|
Dr. Yehezkel Druckman
|
|
|
30,000
|
|
|
|
|
|
|
|
29,427
|
(2)
|
|
|
70,764
|
(7)
|
|
|
130,191
|
|
|
Dr. Lee Russell
|
|
|
12,000
|
|
|
|
|
|
|
|
141,427
|
(2)
|
|
|
100,211
|
(7)
|
|
|
253,638
|
|
|
Justin Furnace
|
|
|
39,000
|
|
|
|
|
|
|
|
29,427
|
(2)
|
|
|
4,265
|
(8)
|
|
|
72,693
|
|
|
Gene Scammahorn
|
|
|
30,000
|
|
|
|
|
|
|
|
29,427
|
(2)
|
|
|
4,138
|
(9)
|
|
|
63,566
|
|
|
Kent S. Siegel
|
|
|
30,000
|
|
|
|
|
|
|
|
29,427
|
(2)
|
|
|
5,338
|
(10)
|
|
|
64,765
|
|
|
Ralph F. DeVore
(4)
|
|
|
18,000
|
|
|
|
|
|
|
|
29,427
|
(2)
|
|
|
5,000
|
(11)
|
|
|
52,427
|
|
|
Martin M. van Brauman
|
|
|
18,000
|
|
|
|
|
|
|
|
163,309
|
(3)
|
|
|
210,066
|
(12)
|
|
|
391,375
|
|
|
(1)
|
In accordance with SEC rules, the amounts in this column
reflect the fair value on the grant date of option awards granted during the indicated year, 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 actually received or 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 Zion that reflects the fair value of the stock options on the
grant date and therefore does not affect our cash balances. 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 the
Company’s financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2017.
|
|
(2)
|
The details relating to these grants are as follows:
On June 7, 2017, we granted to each non-employee director options to purchase 50,000 of our Common Stock under our 2011 Non-Employee
Directors Stock Option Plan at a per share exercise price of $1.75. The options were fully vested on the date of grant and expire
on June 7, 2023.
|
|
(3)
|
Mr. Avery was granted 100,000 options under the 2011
Equity Incentive Plan to purchase 100,000 shares of our Common Stock at a per share exercise price of $0.01, which options were
vested upon issuance and continue to be exercisable through January 2, 2027. Mr. Van Brauman was granted 120,000 options under
the 2011 Equity Incentive Plan to purchase 120,000 shares of our Common Stock at a per share exercise price of $0.01, which options
were vested upon issuance and continue to be exercisable through January 2, 2027.
|
|
(4)
|
Mr. DeVore resigned from the Board on January 15, 2018.
|
|
(5)
|
Annual meeting expense ($6,412).
|
|
(6)
|
Annual meeting expense ($5,000); legal fees as general
counsel ($162,000); insurance-medical ($2,596).
|
|
(7)
|
Consulting fees for Dr. Druckman ($70,764) and for Dr.
Russell ($96,000). Annual meeting expense for Dr. Russell ($4,211).
|
|
(8)
|
Annual meeting expense ($4,265).
|
|
(9)
|
Annual meeting expense ($4,138).
|
|
(10)
|
Annual meeting expense ($5,338).
|
|
(11)
|
Annual meeting expense ($5,000).
|
|
(12)
|
Annual meeting expense ($5,778); legal fees for SEC/NASDAQ
filings, tax, corporate governance documents/procedures, etc. ($162,000); fees for secretary/treasurer ($36,000); insurance-medical
($5,409), professional dues ($880).
|
|
(13)
|
Annual meeting expense ($5,665).
|
INFORMATION
RELATING TO AN EXECUTIVE OFFICER WHO IS NOT A DIRECTOR NOMINEE
All
executive officers of the Company are members of the Board of Directors.
Employment
Agreements
We
have entered into employment agreements with Messrs. Brown, Carrillo, Guinn, and Croswell. See “Executive Compensation —
Employment Agreements” for additional information.
Policy
for Approval of Related Party Transactions
Our
Audit Committee Charter provides that our Audit Committee shall review for potential conflict of interest situations on an ongoing
basis and shall approve all “related party transactions” required to be disclosed under SEC regulations or otherwise
subject to approval by an independent body of our Board under the requirements of the NASDAQ. Except as set forth above, we do
not have a written approval policy for transactions between the Company and our executive officers and directors, but these transactions
are subject to the limitations on conflicts of interest and related-party transactions found in our Code of Business Conduct and
Ethics (the “Code”). Under the Code, executive officers and directors endeavor to avoid any actual, potential or apparent
conflict of interest between their personal and professional relationships. Any proposed related transactions, however, may be
approved in accordance with both applicable law and applicable NASDAQ rules.
EQUITY
COMPENSATION PLAN INFORMATION
The
following table sets forth certain information with respect to securities authorized for issuance under equity compensation plans
as of December 31, 2017.
|
Plan Category
|
|
Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights(a)
|
|
|
Weighted-
average exercise
price of
outstanding
options,
warrants and
rights(b)
|
|
|
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))(c)
|
|
|
Equity compensation plans approved by
security holders:
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
4,339,443
|
|
|
$
|
1.37
|
|
|
|
2,016,750
|
|
|
Equity compensation plans not approved by security holders:
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
TOTAL
|
|
|
4,339,443
|
|
|
$
|
1.37
|
|
|
|
2,016,750
|
|
Long-Term
Incentive Plan
At
our 2002 Annual Meeting of Stockholders, the stockholders approved the establishment of a long-term key employee and consultant
incentive plan, which may be structured as an employees’ royalty pool, to be funded by the equivalent of a 1.5% overriding
royalty interest. The Company may, but has not yet, established a long-term management incentive plan for key employees and consultants
whereby a 1.5% overriding royalty or equivalent interest in the all current and future oil and gas exploration and development
rights would be assigned to key employees and consultants. As this plan has not been established as of December 31, 2017, the
Company did not have any outstanding obligation in respect of the plan.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires officers and directors of
the Company and persons who beneficially own more than 10% of the Common Stock outstanding to file initial statements of beneficial
ownership of Common Stock (Form 3) and statements of changes in beneficial ownership of Common Stock (Forms 4 or 5) with the SEC.
Officers, directors and such greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of
all such forms they file.
Based
upon a review of the filings furnished to the Company pursuant to Rule 16a-3(e) promulgated under the Exchange Act and on representations
from its executive officers and directors and persons who beneficially own more than 10% of the Common Stock, all filing requirements
of Section 16 (a) of the Exchange Act, were complied with in a timely manner during the fiscal year ended December 31, 2017.
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
Our
Board currently consists of 12 directors. Our Amended and Restated Certificate of Incorporation classifies the Board into three
classes, each having a staggered term expiring at successive annual meetings. Four Class I directors are to be elected at the
Annual Meeting to serve a three-year term expiring at the 2021 Annual Meeting of Stockholder (and until their successors shall
be elected and shall qualify). The term of our Class II directors, Justin W. Furnace, Martin M. van Brauman, Dustin L. Guinn,
Gene Scammahorn and Dr. Lee Russell, shall expire at the 2019 Annual Meeting of Stockholders. The term of our Class III directors,
Victor Carrillo, Paul Oroian, and William Avery, shall expire at the 2020 Annual Meeting of Stockholders.
The
Board has nominated the persons named in the table below for election as Class I directors. All such persons are presently directors
of the Company, and each has consented to being named as a nominee for election as a Class I director and has agreed to serve
if elected. Unless otherwise specified in the accompanying proxy, the shares voted pursuant to it will be voted for the persons
named below as nominees for election as Class I directors. If, for any reason, at the time of the election, any of the nominees
should be unable or unwilling to accept election, such proxy will be voted for the election, in such nominee’s place, of
a substitute nominee recommended by the Board to the extent that such substitute nominee exists. However, the Board has no reason
to believe that any nominee will be unable or unwilling to serve as a director.
The
four nominees receiving the highest number of affirmative votes of shares present or represented by proxy and entitled to vote
for them shall be elected as directors.
|
Name
of Nominee
|
|
Principal
Occupation
|
|
Age
|
|
Year
Became a Director
|
|
John
M. Brown
|
|
Executive
Chairman
|
|
78
|
|
2000
|
|
Forrest
Garb
|
|
Director
|
|
88
|
|
2005
|
|
Kent
Siegel
|
|
Director
|
|
62
|
|
2012
|
|
Michael
B. Croswell, Jr.
|
|
CFO/Director
|
|
47
|
|
2017
|
The
following describes at least the last five years of business experience of the directors standing for re-election. The descriptions
include any other directorships at public companies held during the past five years by these directors. No family relationship
exists between any director and executive officer of the Company.
John
M. Brown
, age 78, is the founder of Zion Oil & Gas and has been a director and Chairman of the Board of Directors of Zion
since its organization in April 2000. Mr. Brown was appointed Executive Chairman in January 2010. Mr. Brown was also appointed
as Interim Chief Executive Officer on October 18, 2012 and on January 1, 2014, Mr. Brown was appointed as the Chief Executive
Officer and to continue as the Executive Chairman. Previously, he served as our Chief Executive Officer from April 2000 to September
2004 and as President from April 2000 to October 2001. Mr. Brown has extensive management, marketing and sales experience, having
held senior management positions in two Fortune 100 companies - GTE Valeron, a subsidiary of GTE Corporation and a manufacturer
of cutting tools, where he was employed from 1966-86 and served as the corporate director of purchasing, and Magnetek, Inc., a
manufacturer of digital power supplies, systems and controls, where he was corporate director of procurement during 1988-89. Mr.
Brown was a director and principal stockholder in M&B Concrete Construction, Inc. from 1996 to 2003 and is an officer and
director of M&B Holding Inc. (a Nevada corporation) based in Dallas, Texas, the sole shareholder of M&B General Contracting
Inc. (a Delaware corporation). These companies primarily provide cement walls and floors for industrial buildings, office buildings
and home developers. Prior to founding the Company, Mr. Brown had been actively pursuing a license for oil and gas exploration
in Israel for many years. His efforts led to our obtaining, in May 2000, the Ma’anit License, the precursor to the Joseph
License. Mr. Brown holds a BBA degree from Fullerton College. Mr. Brown’s senior management experience in two Fortune 500
companies as well as his extensive experience in the oil and gas sector in the State of Israel provide with him with the insight
and vision needed to serve as CEO and chairman of our Board of Directors.
Forrest
A. Garb
, age 88, was appointed a director in November 2005 and serves as Chairman of the Compensation Committee. Mr.
Garb is a petroleum engineer who has provided independent consulting services for more than 45 years. His consulting
career began with H.J. Gruy and Associates, Inc. and its successors, where he served as a vice president for four years,
executive vice-president for ten years, and president for fifteen years, until leaving in 1986, following Gruy’s merger
into a public company. In his capacity as president, Mr. Garb contracted, performed and supervised over 12,500 projects
ranging from simple evaluations to sophisticated reservoir simulations. In 1988, Mr. Garb founded Forrest A. Garb &
Associates, Inc., a privately-owned petroleum consulting firm, where he served as chairman and chief executive officer until
his retirement in 2003 and sale of his interests in the company to its key employees. Prior to entering into consulting, Mr.
Garb was educated in petroleum engineering at Texas A&M University (BSc and Professional MSc) and received his early
training at Socony Mobil Oil Company in Kansas, Texas, Louisiana and Venezuela. Mr. Garb is a member of the Society of
Petroleum Engineers and is a past President of the Society of Petroleum Evaluation Engineers. He is a member of the
Association of Computing Machinery, the American Arbitration Association, the Petroleum Engineers Club of Dallas, the Dallas
Geological Society, and is a member of the American Association of Petroleum Geologists. He is a charter member of The
American Institute of Minerals Appraisers. He is a registered professional engineer in the state of Texas. Mr. Garb’s
petroleum engineering background and vast experience in the petroleum industry spanning over 45 years provide our Board with
a valuable resource in assessing oil and gas prospects.
Kent
S. Siegel,
age 62
,
was appointed a director in December 2012 and assumed his office as of January 1, 2013. Mr. Siegel
previously served as a director on the Company’s Board from November 2003 through March 31, 2011 and as the Company’s
Chief Financial Officer from July 9, 2010 through March 31, 2011, the date of his resignation. Mr. Siegel has served as president
and chief operating officer of Kent S. Siegel, P.C. since 1984. Kent S. Siegel, P.C. is a firm of certified public accountants
and attorneys at law based in West Bloomfield, Michigan, at which Mr. Siegel practices as a tax and bankruptcy attorney and CPA.
Mr. Siegel holds a Bachelor of Business Administration from Michigan State University School of Business, a Juris Doctorate from
Wayne State University School of Law and a Bachelor of Science in Electrical Engineering from Lawrence Technological University
School of Engineering. Mr. Siegel’s extensive experience as a certified public accountant and in tax law provides our Board
with a critical accounting and tax law perspective. Mr. Siegel is a valuable member of the Audit Committee of our Board and serves
on the Compensation Committee.
Michael
B. Croswell Jr.
, age 47, CPA, was appointed to the Board on May 1, 2017 and has been serving as Corporate Controller for the
Company since April 2011. In February 2013, Michael was promoted to Vice President of Administration and in August 2016, Mr. Croswell
was promoted to Chief Financial Officer. Mr. Croswell is a corporate accounting and management professional with a diverse range
of industry experience. Mr. Croswell is a Certified Public Accountant since 1997 and earned his Bachelor of Business Administration
degree in accounting from Stephen F. Austin State University in 1994 and earned a Master of Business Administration degree from
the University of Dallas in 2013.
There
are no family relationships between any of the above directors.
Information
Relating to Continuing Directors who are not Standing for Re-election this Year
Dustin
L. Guinn
, age 41, is currently serving as the Executive Vice Chairman since July 1, 2016 and the President and Chief Operating
Officer since September 13, 2016. He was appointed a director on May 1, 2015. Dustin Guinn served as Chief Executive Officer of
Viking Services, in which he had acted in this capacity from June of 2011 through September 30, 2015. Mr. Guinn’s primary
responsibilities included operational and strategic management focusing on the growth, deployment and profitability of assets
in Turkey, Northern Iraq, Hungary, Bulgaria, Serbia, Romania and other strategic countries within the Middle East, North Africa,
as well as Central and Eastern Europe. Mr. Guinn has extensive experience in transactional mergers and acquisitions involving
both entity and asset purchases as well as the integration of those acquisitions and was intimately involved in the growth of
Viking, in terms of financial, operational, structural, and reporting and management growth since its inception in 2008. Prior
to assuming the responsibilities of CEO in 2011 Mr. Guinn served as President of Viking International and Viking Geophysical in
which he leveraged his financial background and experience to focus on the continued development of operational efficiencies,
reporting implementation, profitable asset deployment and accountability focusing on return on investment metrics. Mr. Guinn was
integral in the procurement and negotiation of many of Viking’s key long-term, ongoing service contracts and MSA’s
that Viking currently enjoys. Mr. Guinn has also served in a number of capacities within Viking such as CFO, Treasury Manager
and Financial Analyst, which have allowed for the opportunity to have a balanced and well-rounded understanding of the business.
Mr. Guinn graduated, with honors, from New Mexico State University with a Bachelor of Business Administration degree in Finance,
during which time he competed in both track and field and football (Three Year Starter at Tight End) and earned a Master’s
Degree in Business Administration from West Texas A&M.
Victor
G. Carrillo
, age 53, was appointed Chief Executive Officer on June 15, 2015. He served as President and Chief Operating Officer
from October 2011 until June 15, 2015. He served as Executive Vice President from January 2011 until June 15, 2015. He has been
a director since September 2010. From January 2011 through May 2016, Mr. Carrillo served on the Board of Directors of Magnum-Hunter
Resources, a publicly traded oil and gas company exploring in the United States and Canada. Since October 2016, he has been serving
on the Board of Directors of Energy Hunter Resources, a private oil & gas company exploring in Texas. Mr. Carrillo also serves
on the Advisory Board of the Maguire Energy Institute at Southern Methodist University and on the Board of Directors of the Texas-Israel
Chamber of Commerce. Mr. Carrillo is a petroleum geologist and geophysicist, attorney, former Abilene City Councilman, former
Taylor County Judge, and for eight years served as statewide-elected commissioner of the Railroad Commission of Texas (the state’s
regulatory authority over oil and gas drilling). He has over 25 years of professional experience, much of it in the oil and gas
industry, specifically in exploration and production. He holds a Juris Doctorate degree from the University of Houston Law Center,
a Master of Science degree in geology from Baylor University, and a Bachelor of Science degree in geology from Hardin-Simmons
University. Mr. Carrillo also received an honorary doctorate degree from Hardin-Simmons University in May 2006.
Paul
Oroian
, age 65, was appointed a director in November 2003. He has served as president and managing partner of Oroian, Guest
and Little, P.C., a certified public accounting and consulting firm based in San Antonio, Texas, since its founding in 1983. From
1980-1983, Mr. Oroian was a tax senior in the San Antonio offices of Arthur Young and Company. Mr. Oroian holds a Bachelor of
Science degree in Business Administration from Bryant College. He has served as a board member of Technology Oversight Committee
and the IRS Regional Liaison Committee of the Texas Society of Certified Public Accountants and was vice president and a director
of the San Antonio CPA Society between 1992 and 1998. Mr. Oroian’s extensive experience as a certified public accountant
was instrumental in his appointment to the Audit Committee of our Board and provides our Board with a critical accounting perspective.
Mr. Oroian also serves as the Board’s Lead Independent Director.
Dr.
Yehezkel “Charlie” Druckman
, age 79, was appointed a director in November 2005. Dr. Druckman was Petroleum Commissioner
for the State of Israel from 1995 until his retirement in 2004, where he supervised the licensing of petroleum rights both onshore
and offshore Israel. These efforts led to the discovery of 1.5 trillion cubic feet of gas in the Israeli offshore Mari B and other
smaller fields during 1999-2000. Since 1965, he has been a member of the professional staff of the Geological Survey of Israel,
where he headed the Mapping, Stratigraphy and Oil Division during 1982-1985 and 1991-1994. He was also affiliated with Louisiana
State University at Baton Rouge as Research Associate in Geology during 1978-1980 and 1989-1990. He was awarded in 1974 the Israel
Geological Society’s Perez Grader award. He is an active member of the American Association of Petroleum Geologists and
the Geological Society of Israel (where he served as president in 1982 and for a number of years on the Society’s editorial
board). He also served as member of the Israeli National Petroleum Commission and Board of Directors of Oil Exploration (Investments)
Ltd., an Israeli government company. Dr. Druckman graduated from the Hebrew University in Jerusalem where he was awarded BSc,
MSc and PhD degrees in geology. Dr. Druckman’s academic credentials as a geologist, his experience as the Petroleum Commissioner
for the State of Israel for nearly a decade and his vast knowledge and expertise in the geological mapping of the State of Israel
for petroleum exploration purposes provide us with a critical resource in our ongoing oil and gas exploration efforts in Israel
as well as a liaison to the Israeli regulatory authorities with whom we are in ongoing contact with respect to the maintenance
of our license and other oil and gas exploration rights.
Note: On April 9, 2018, memorial services were held in Jerusalem,
Israel for Dr. Yehezkhel “Charlie” Druckman.
William
H. Avery,
age 70, was appointed to the Board as a non-employee director, effective September 1, 2013. From 2001 to 2003, Mr.
Avery worked on a broad variety of administrative, financial and legal matters for the Company. He served as Vice President of
Finance and Treasurer commencing 2003 until 2007. He worked full time as Executive Vice President and Treasurer and as a director
commencing in 2007 with responsibility for administration, finance and legal until 2010. From December 2012 to current, he has
been retained as General Counsel on a part time basis under an independent consulting contract. Mr. Avery has a BBA in Finance
and Economics from Southern Methodist University and a Juris Doctorate from Duke University.
Justin
W. Furnace
, age 40, was appointed a director in April 2012. Mr. Furnace is the Director of External Affairs for Hilcorp
Energy Company in Houston, Texas. Previously, from May of 2010 to September 2012, he was the President of the Texas
Independent Producers & Royalty Owners Association (TIPRO), a trade association representing the interests of more than
2,300 independent oil and natural gas producers and royalty owners throughout Texas. As TIPRO President, Mr. Furnace was
responsible for overseeing the association’s governmental affairs in Texas and Washington D.C. and representing the
interests of the association membership before various regulatory bodies, among other things. Prior to that, from June 2007
to May 2010, Mr. Furnace served as chief of staff and legal counsel to then Chairman Victor Carrillo of the Texas Railroad
Commission. He was the Chairman’s top policy advisor, in charge of evaluating, assessing and implementing all legal,
technical and legislative strategies. Prior to his tenure at the Railroad Commission, from September 2004 to December 2006,
he practiced law at the Beaumont office of Mehaffy Webber as an associate in the firm’s business and litigation
departments. While at the firm, he focused on both transactions and litigation relating to oil and gas, real estate and
corporate matters. A graduate of Hardin-Simmons University in 2001, Mr. Furnace currently serves on its Board of Development.
He later received his Doctor of Jurisprudence degree from Texas Tech University School of Law in 2004. Mr. Furnace’s
background in commercial oil and gas law and his regulatory experience make him a valuable objective resource for our company
on these matters.
Gene
Scammahorn,
age
71,
was appointed a director in October 2012. Until recently, Mr. Scammahorn was an Internal Audit
Director at Xerox Business Services, LLC, a position that he held since 2001. In this position, he was primarily responsible for
consulting and advising operating management in preparations for over 100 external SSAE (formerly SAS 70) audits of domestic and
global business process outsourcing contracts. Mr. Scammahorn has over 30 years of business experience, including two “Big
Four” public accounting firms, major oil and gas companies and banking and consulting. He has participated in audit committee
presentations and meetings for major clients, the Federal Reserve Bank of Dallas and Xerox Business Services, LLC. He received
a BS in Accounting in 1973 from the University of Tulsa and is a Certified Public Accountant and a Certified Financial Planner.
Mr. Scammahorn’s extensive experience as a certified public accountant was instrumental in his appointment to the Audit
Committee of our Board and provides our Board with a critical accounting perspective.
Martin
M. van Brauman
, age 70, was appointed to the Board effective April 1, 2014 and since January 1, 2012 has been the Corporate
Secretary and Treasurer and since June 1, 2013 has been a Senior Vice President. From July 1, 2007 to January 31, 2009, he served
as the Chief Financial Officer, Corporate Secretary, Senior Vice President and Board director. Between February 1, 2009 and July
1, 2009, he served as the Chief Legal Officer. He is Board Certified in Tax Law by the Texas Board of Legal Specialization and
has been in private legal practice in Dallas specializing in international and corporate tax and business corporate law. Previously,
he spent 12 years as a Senior Attorney (International Specialist and Petroleum Industry Specialist) with the Office of Chief Counsel,
IRS, followed by three years as a tax consultant with Deloitte & Touche and Grant Thornton. He has published on subjects related
to taxation of international oil and gas ventures. Mr. van Brauman holds a B.E. degree from Vanderbilt University, a Doctor of
Jurisprudence degree from St. Mary’s University and an M.B.A. (Beta Gamma Sigma) and LL.M. (Tax Law) from Southern Methodist
University. He has been an Adjunct Professor at Southern Methodist University, School of Law, L.L.M. Tax Program and at the University
of Texas at Dallas, Masters of Accounting Program. He is on the Advisory Board of the Jewish and Israel Studies Program, University
of North Texas. He is a Capitol Club member of the American Israel Public Affairs Committee (“AIPAC”).
Dr.
Lee R. Russell
, age 69, was appointed to the Board on May 1, 2017 and has been an independent Geoscience Consultant with the
Company since August of 2012. He has over 41 years of industry experience in research and exploration positions with Shell Oil
Co., Arco, and Sun Oil, as well as in his own exploration pursuits and consultancy. Projects have ranged from domestic exploration
in the Gulf of Mexico, Rocky Mountains, and Alaska, to international projects in East and West Africa, North Sea, Norway, Onshore
China, New Zealand, Papua New Guinea, and Newfoundland. He is a published author of many scientific articles and served as a Panel
Chair and Co-Author of a National Research Council study on “Solid Earth Sciences and Society.” He received his BA
in Geology from Ohio Wesleyan University in 1970, and MSc and PhD degrees in Geology and Geophysics from Texas Tech University
in 1972 and 1977. He is a member of the American Association of Petroleum Geologists, serving two terms as Associate Editor, and
is a Fellow of the Geological Society of America.
There
are no family relationships between any of the above directors.
ADDITIONAL
INFORMATION CONCERNING THE BOARD OF DIRECTORS
CORPORATE
GOVERNANCE POLICIES
The
Company’s business is managed under the direction of the Board. In connection with its oversight of the Company’s
operations and governance, the Board has adopted, among other things, the following:
|
|
●
|
Corporate
Governance Guidelines to implement certain policies regarding the governance of the Company;
|
|
|
●
|
a
Code of Business Conduct and Ethics to provide guidance to directors, officers and employees with regard to certain ethical and
compliance issues;
|
|
|
●
|
Charters
of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee of the Board;
|
|
|
●
|
an
Insider Trading Policy to facilitate compliance with insider trading regulations;
|
|
|
●
|
an
Audit Committee Whistleblower and Complaint Policy and Procedures (i) to allow directors, officers and employees to make confidential
anonymous submissions regarding concerns with respect to accounting or auditing matters and (ii) which provides for the receipt
of complaints regarding accounting, internal controls or auditing; and
|
|
|
●
|
a
Stockholder and Interested Parties Communications Policy pursuant to which holders of our securities and other interested parties
can communicate with the Board, Board Committees and/or individual directors.
|
Each
of these documents can be viewed on the Company’s website at
www.zionoil.com/investor-center/corporate-governance
.
The Company’s website and the information contained on or connected to its website are not incorporated by reference herein
and its web address is included as an inactive textual reference only. Copies of the foregoing documents and disclosures are available
without charge to any person who requests them. Requests should be directed to Zion Oil & Gas, Inc., Attn: Corporate Secretary,
12655 North Central Expressway, Suite 1000, Dallas, Texas 75243.
BOARD
MEETINGS
During
the fiscal year ended December 31, 2017, the Board held four board meetings and acted by unanimous written consent on 15 occasions.
Each of the directors attended 100% of the aggregate number of meetings of the Board and of any committees of the Board on which
they served.
The
Board does not have a formal policy with respect to Board members’ attendance at annual stockholder meetings, although it
encourages directors to attend and participate at all such meetings. All of the directors serving at the time of the 2017 annual
meeting attended the Company’s 2017 annual meeting held in Caesarea, Israel on June 7, 2017.
CODE
OF ETHICS
We
have adopted a Code of Business Conduct and Ethics that applies to our directors, officers and all employees. The code has been
posted on our web site at
www.zionoil.com/investor-center/corporate-governance
, and may also be obtained free of
charge by writing to Ethics Code, c/o Zion Oil & Gas, Inc., 12655 North Central Expressway, Suite 1000, Dallas, Texas 75243.
We intend to satisfy the disclosure requirement under Item 10 of Form 8-K regarding an amendment to, or waiver from, a provision
of our Code of Business Conduct and Ethics by posting such information on our website, at the address and location specified above.
BOARD
LEADERSHIP STRUCTURE
The
role of Executive Chairman is held by Mr. Brown, of Executive Vice Chairman is held by Mr. Guinn and of the CEO by Mr.
Carrillo. Mr. Guinn also holds the position of President and Chief Operating Officer. The Board believes that this management
structure provides the optimal leadership situation for the Company during this period to ensure that key business issues and
interests of the Company’s stakeholders (stockholders, employees, communities and prospective investors) are
communicated to the Board. In addition, Mr. Brown’s experience as founder and continuing Chairman of the Company since
its inception and qualifications, enable him to fulfill the responsibilities of both roles and effectively lead Zion with a
unified vision.
The
Board believes that other elements of the Company’s corporate structure ensure that independent directors can perform their
role as independent fiduciaries in the Board’s oversight of management and our business and minimize any potential conflict
that may result. In this regard, it shall be noted that Mr. Oroian serves as Lead Independent Director. Our Corporate Governance
Guidelines provide that our independent directors will meet in executive session at least annually, and more frequently as needed
at the call of one or more independent directors. These executive sessions are presided over by the Lead Independent Director
or, if the Lead Independent Director is not in attendance, by another person chosen by the independent directors.
LEAD
INDEPENDENT DIRECTOR
The
Lead Independent Director serves a valuable role in leading the Board and creating an atmosphere, in which the Board can enhance
the Company’s success. The Lead Independent Director’s significant responsibilities are to:
|
|
●
|
act
as a liaison between the independent directors and the Chairman and management, including with regard to the interest of the independent
directors in having particular issues or topics addressed in a Board meeting:
|
|
|
●
|
set
the agendas for, call for, and preside over the executive sessions of the independent directors, which typically is conducted
at the annual Board meeting, but can be conducted at any Board meeting as needed by the Lead Independent Director;
|
|
|
●
|
brief
the Chairman, CEO and management, as needed, on the issues discussed in the executive sessions;
|
|
|
●
|
collaborate
with the Chairman and CEO on the agendas for the meetings of the Board (including schedule and materials);
|
|
|
●
|
have
the ability to call Special meetings of the Board and determine the agenda for such Special Board meeting;
|
|
|
●
|
coordinate
the retention of consultants and advisors who report directly to the Board on Board matters (as opposed to committee consultants
and advisors);
|
|
|
●
|
facilitate
and assist the Nominating & Corporate Governance Committee with Board, committee and director evaluations;
|
|
|
●
|
assist
the Chairman, CEO and Chair of the Compensation Committee with succession planning, as necessary;
|
|
|
●
|
foster
a respectful atmosphere, in which directors feel comfortable asking questions, providing insight and engaging in dialogue;
|
|
|
●
|
frequently
meet with management to preview significant matters expected to be presented to the Board; and
|
|
|
●
|
as
needed or requested by the Board, perform other corporate governance duties.
|
DIRECTOR
INDEPENDENCE
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. Of the 13 members of our Board of Directors until the recent
death a number of days ago of Dr. Druckman, seven (Messrs. Furnace, Garb, Oroian, Siegel, Russell, Druckman and Scammahorn) met
the criteria of independence set by the NASDAQ Global Market for membership on the board of a NASDAQ listed company (“NASDAQ
independence criteria”). Each of these seven directors had certified their belief that they met such independence standards.
Also, all of the members of the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee
are independent under applicable SEC and NASDAQ rules and regulations.
NASDAQ
independence criteria provide, among other requirements, that an independent director: (i) cannot be and, over the past three
years, cannot have been an officer or employee of the Company and cannot be an immediate family member of such person; (ii) cannot
receive or, over the past three years, have an immediate family member who receives or received from the Company more than $120,000
in any consecutive twelve month period for services other than as one of the Company’s directors (or, with respect to an
immediate family member, as a Company employee); (iii) cannot be affiliated, or be an immediate family member of a person affiliated
with, any organization to which the Company made, or from which the Company received payments (other than those arising solely
from investments in the Company’s securities or payments under non-discretionary charitable contribution matching programs)
that exceed five percent of the organization’s consolidated gross revenues for that year, or $200,000, whichever is more,
in any of the most recent three fiscal years.
SEC
independence criteria, which govern members of and candidates for service on the Audit Committee, provide that an “independent”
director cannot be one of the Company’s officers or be in a position, directly or indirectly, to control the Company’s
management or policies (other than in his position as a director). Neither can he or she be, or be affiliated with, a paid consultant
or provider of services to the Company.
BOARD
COMMITTEES
The
Company’s Board has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee,
with each comprised of independent directors. Each committee operates under a charter that has been approved by our Board. All
of the charters are publicly available on our website at
www.zionoil.com/investor-center/corporate-governance
. Copies
of our committee charters are available, without charge, upon request in writing to Investor Relations Department
.
Audit
Committee
The
Company’s Audit Committee is currently comprised of Messrs. Oroian, Siegel and Scammahorn. Mr. Oroian was elected to serve
as Chairman. All members of the Audit Committee are financial experts possessing accounting and audit skills, since all members
are licensed CPAs. Mr. Scammahorn recently retired as an Internal Audit Director at Xerox Business Services, LLC. Mr. Oroian is
president and managing partner of Oroian, Guest and Little, P.C., a certified public accounting and consulting firm. Mr. Siegel
is the president and chief operating officer of Kent S. Siegel, P.C., a certified public accounting firm and is also a tax lawyer.
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
Board has determined that each member of the Audit Committee is an “independent director” 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. In addition, the Board has determined that Mr. Oroian qualifies 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
experience and understanding with respect to certain accounting and auditing matters. The designation does not impose on Mr. Oroian
any duties, obligations or liability that is greater than is generally imposed on him as a member of the Audit Committee and Board,
and his designation as an Audit Committee financial expert pursuant to this SEC requirement does not affect the duties, obligations
or liability of any other member of the Audit Committee or Board.
During
the fiscal year ended December 31, 2017, the Audit Committee met five times.
Compensation
Committee
The
current members of our Compensation Committee are Messrs. Furnace, Garb and Siegel. Mr. Garb was elected to serve as
Chairman effective October 1, 2017 with Mr. Furnace and Mr. Siegel remaining on the Committee. All three current members of
the Compensation Committee satisfy the SEC independence criteria and the NASDAQ 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:
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determining
compensation for the Company’s executive officers;
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assisting
in developing and reviewing the annual performance goals and objectives of our executive officers;
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assessing
the adequacy and competitiveness of our executive compensation program;
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administering
our incentive compensation program and other equity-based compensation plans;
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reviewing
and recommending compensation for our non-employee directors; and
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reviewing
and evaluating the adequacy of the Compensation Committee charter on an annual basis.
|
During
the fiscal year ended December 31, 2017, the Compensation Committee met once and acted by unanimous consent on ten occasions.
Our
executive officers receive a compensation package consisting of base salary, long-term equity awards, and participation in benefit
plans generally available to all of our employees including life, health, disability and dental insurance. We have chosen these
elements of compensation to create a flexible package that reflects the long-term nature of our business. We also enter into employment
agreements with our executive officers that provide for certain severance benefits upon termination of employment following a
Company change of control.
In
setting executive officer compensation levels, the Compensation Committee, which is comprised entirely of independent directors,
is guided by the following considerations:
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recommendations
from the CEO and Chairman of the Board based on individual executive performance and appropriate benchmark data;
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ensuring
compensation levels reflect the Company’s past performance and expectations of future performance;
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●
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ensuring
compensation levels are competitive with compensation generally being paid to executives we seek to recruit to ensure our ability
to attract and retain experienced and well-qualified executives; and
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ensuring
a portion of executive officer compensation is paid in the form of equity-based incentives to closely link stockholder and executive
interests.
|
The
Compensation Committee periodically engages a consulting company to obtain market data and information on compensation trends
regarding executive and director compensation.
Nominating
and Corporate Governance Committee
The
current members of our Nominating and Corporate Governance Committee are Messrs. Oroian, Furnace and Scammahorn. Mr. Furnace was
elected to serve as Chairman. 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.
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
.
During
the fiscal year ended December 31, 2017, the Nominating and Corporate Governance Committee met once and acted by unanimous consent
on three occasions.
While
the Nominating and Corporate Governance Committee does not have a formal policy with respect to diversity, the Committee
considers diversity as part of its overall assessment of the Board’s functioning and needs. The Board of Directors
believes that it is essential that Board members represent diverse business backgrounds and experience and include
individuals with a background in related fields and industries. In considering candidates for the Board, the Nominating and
Corporate Governance Committee considers the entirety of each candidate’s credentials in the context of these standards
and the expertise needed by the Company. We believe that the backgrounds and qualifications of our directors, considered as a
group, should and do provide a composite mix of experience, knowledge and abilities that will allow the Board to fulfill its
responsibilities with respect to the Company’s functioning and needs.
The
Nominating and Corporate Governance Committee will consider qualified director candidates recommended by stockholders in compliance
with its formally adopted director nominee policy and subject to applicable inquiries. Proposals for consideration by the Nominating
and Corporate Governance Committee of director nominees may be made by submitting the names and supporting information to: Justin
Furnace, Chairman, Nominating and Corporate Governance Committee, Zion Oil & Gas, Inc., 12655 North Central Expressway, Suite
1000, Dallas, Texas 75243. A stockholder nomination must contain the following information about the nominee:
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Business
and residence addresses;
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Principal
occupation or employment;
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The
number of shares of the Company’s Common Stock and other Company securities held by the nominee;
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A
resume of his or her business and educational background;
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The
information that would be required under SEC rules in a proxy statement soliciting proxies for the election of such nominee as
a director; and
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A
signed consent of the nominee to serve as a director, if nominated and elected.
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The
nomination should also contain the following information concerning the nominating stockholder:
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The
number of shares of the Company’s Common Stock and other securities held by the nominating stockholder.
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The
nature of the holdings – whether directly or beneficially (if beneficially, details of the legal holder and the nature of
the beneficial interest should be provided); and
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Whether
the nominating stockholder has any agreement or understanding of any type (written or oral) with any other stockholder, person,
or entity concerning the voting of Company shares and, if so, the identity and address of the other parties to the agreement or
understanding, the stockholdings of each of the other parties, and the nature of the agreement or understanding.
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STOCKHOLDER
AND INTERESTED PARTIES COMMUNICATIONS POLICY
In
recognition of the importance of providing all interested parties, including shareholders, with the ability to communicate with
members of the Board, including non-management directors, the Board has adopted a Stockholder and Interested Parties Communications
Policy, a copy of which is available on our website at
www.zionoil.com/investor-center/corporate-governance
. Stockholders
may communicate with the Board by sending written communications to the Board of Directors, care of Mr. Paul Oroian, Lead
Independent Director, to:
Mr.
Oroian, Lead Independent Director
Zion Oil & Gas, Inc.
12655 North Central Expressway, Suite 1000
Dallas, Texas 75243
All
such letters must follow the directions set out in the Stockholder and Interested Parties Communications Policy. Communications
should not exceed 1,000 words in length and should indicate (i) the type and amount of Company securities held by the person submitting
the communication, if any, and/or the nature of the person’s interest in the Company, (ii) any personal interest the person
has in the subject matter of the communication and (iii) the person’s mailing address, email address and telephone number.
Unless the communication relates to an improper topic (e.g., it contains offensive content or advocates that we engage in
illegal activities) or it fails to satisfy the procedural requirements of the policy, we will deliver it to the person(s) to whom
it is addressed.
The
Nominating and Corporate Governance Committee may revise these procedures at any time. Until other procedures are developed and
posted on our website, all communications to the Board should be mailed with the information in accordance with the procedures
described in the communications policy.
Board’s
Role in Risk Oversight
Management
is responsible for the day-to-day management of risks the Company faces, while the Board of Directors, as a whole and through
its committees, has the ultimate responsibility for the oversight of risk management. Senior officers attend meetings of the Board,
provide presentations on operations including significant risks, and are available to address any questions or concerns raised
by the Board. Additionally, our three Board committees assist the Board in fulfilling its oversight responsibilities in certain
areas of risk. Pursuant to its charter, the Audit Committee coordinates the Boards’ oversight of the Company’s internal
control over financial reporting, disclosure controls and procedures and code of conduct. Management regularly reports to the
Audit Committee on these areas. The Compensation Committee assists the Board in fulfilling its oversight responsibilities with
respect to the management of risks arising from our compensation policies and programs. The Nominating and Corporate Governance
Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with
Board organization, membership and structure, succession planning for our directors and corporate governance. When any committees
receives a report related to material risk oversight, the Chairman of the relevant committee reports on the discussion to the
full Board.
In
addition to receiving reports from Board committees regarding the risks considered in their respective areas, at least once a
year, the Board will specifically review our long-term strategic plans and the principal issues and risks we may face, as well
as the processes through which we manage risk. This ensures our Board has a broad view of our strategy and overall risk management
process and enables the full Board to coordinate risk oversight, especially with respect to risk interrelationships. We believe
our Executive Chairman’s role enhances the Board’s administration of its risk oversight function because, through
his role as Chairman, he is able to provide the Board with valuable insight into our risk profile and the options to mitigate
and address our risk based upon his experiences with the management of our business.
REPORT
OF THE AUDIT COMMITTEE
The
Company’s management has the primary responsibility for the financial statements and the reporting process, including the
Company’s system of internal controls and disclosure controls and procedures. An independent registered public accounting
firm has been engaged to audit the Company’s financial statements and express an opinion on the financial statements based
on the audit. The Audit Committee oversees (i) the Company’s accounting and financial reporting processes and (ii) the audits
of the financial statements of the Company on behalf of the Board.
The
Audit Committee has met and held discussions with management and Malone Bailey LLP, the Company’s independent registered
public accounting firm. Management represented to the Audit Committee that the Company’s financial statements for the year
ended December 31, 2017 were prepared in accordance with generally accepted accounting principles. The Audit Committee discussed
the financial statements with both management and the independent auditors. The Audit Committee also discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA,
Professional Standards
,
Vol. 1, AU section 380).
The
Audit Committee discussed with the independent auditors the overall scope and plans for the audit. We met with the independent
auditors, with and without management, to discuss the results of their examination, the evaluation of the Company’s internal
controls, and the overall quality of the Company’s financial reporting.
The
Audit Committee discussed with the independent auditors the auditor’s independence from the Company and management, including
the independent auditors written disclosures required by PCAOB Rule 3526 (File No. PCAOB-2008-03) (Independence Discussions with
Audit Committees).
Based
on the foregoing, the Audit Committee has recommended to the Board of Directors, and the Board approved, that the audited financial
statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, for filing with
the SEC.
This
report is submitted by the Chairman of the Audit Committee.
AUDIT
COMMITTEE
Paul Oroian
Kent Siegel
Gene Scammahorn
March 1, 2018
The
information contained in this report shall not be deemed to be “soliciting material” or to be “filed”
with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates it by reference in such filing.
BOARD
RECOMMENDATIONS
PROPOSAL
NO. 1
BOARD
RECOMMENDATION
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO ELECT THE FOUR CLASS I DIRECTORS THAT HAVE BEEN NOMINATED
TO THE BOARD OF DIRECTORS.
PROPOSAL
NO. 2
RATIFICATION
OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
MaloneBailey,
LLP (“MaloneBailey”), an independent registered public accounting firm, was the auditor for the year ended December
31, 2017 and has been selected as the independent auditor for the year ending December 31, 2018. Although stockholder ratification
is not required for the appointment of MaloneBailey, since the Audit Committee has the responsibility for appointing the Company’s
independent auditors, the appointment is being submitted for ratification with a view toward soliciting the stockholders’
opinions, which the Audit Committee will take into consideration in the future.
It
is expected that a representative of MaloneBailey will be available to respond to appropriate questions from stockholders present
at the annual meeting.
Principal
Accountant Fees and Services
The
following table sets forth the fees for services provided by Malone Bailey and KPMG Somekh Chaikin (“SC”) relating
to the fiscal years ended December 31, 2017 and December 31, 2016.
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Fiscal Year 2017
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Fiscal Year 2016
|
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SC
|
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Malone
Bailey
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SC
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Malone
Bailey
|
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Audit Fees
(1)
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$
|
39,000
|
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|
$
|
68,000
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|
$
|
39,000
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|
$
|
57,000
|
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|
Audit-Related Fees
(2)
|
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—
|
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|
$
|
12,748
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$
|
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4,550
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Tax Fees
(3)
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|
$
|
7,500
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|
—
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|
$
|
8,800
|
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|
—
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|
Other Fees
(4)
|
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—
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53,760
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—
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—
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Total
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$
|
46,500
|
|
|
$
|
134,508
|
|
|
$
|
47,800
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|
$
|
61,550
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(1)
|
Audit
Fees consist of fees for professional services rendered for the audit of our financial statements included in the Annual Report
on Form 10-K, internal controls over financial reporting and the review of the interim financial statements included in the Quarterly
Reports on Form 10-Q, and for the services that are normally provided in connection with regulatory filings or engagements.
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(2)
|
Audit-Related
Fees consist of assurance and/or related services that were reasonably related to the performance of the audit or review of the
Company’s financial statements.
|
|
(3)
|
Tax
Fees consist of services that were related to the filing of tax returns for our Israeli branch (figures presented exclude VAT
tax).
|
|
(4)
|
SOX
fees.
|
Policy
on Pre-Approval of Services
Our
Audit Committee considers and pre-approves any audit and non-audit engagement or relationship between the Company and any independent
accountant. The Audit Committee has delegated to the Chairman of the Audit Committee the authority to pre-approve all audit or
non-audit services to be provided by an independent accountant if presented to the full Audit Committee at its next meeting. In
accordance with these procedures, the engagement of MaloneBailey to conduct the audit of our 2017 financial statements was pre-approved
by the Chairman of our Audit Committee and approved by the Audit Committee.
BOARD
RECOMMENDATION
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF MALONEBAILEY, LLP AS THE COMPANY’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018. PROXIES RECEIVED IN RESPONSE TO THIS
SOLICITATION WILL BE VOTED FOR THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM UNLESS OTHERWISE SPECIFIED
IN THE PROXY.
OTHER
MATTERS
At
the Annual Meeting, management does not intend to present any matters other than matters referred to herein, and as of this date
management does not know of any such matter that will be presented for a vote at said Meeting.
STOCKHOLDER
PROPOSALS
Under
the rules of the SEC, stockholder proposals intended to be presented at the Company’s 2019 Annual Meeting of Stockholders
in accordance with Rule 14a-8 promulgated under the Exchange Act must be made in accordance with the bylaws of the Company and
received by the Company, at its principal executive offices, to be eligible for inclusion in the Company’s proxy statement
for that meeting, no later than December 31, 2018. The proposal must otherwise comply with all requirements of the SEC for stockholder
proposals. Appropriate stockholder proposals submitted outside of Rule 14a-8 must be pursuant to our bylaws and policies. The
Board will review any stockholder proposals that are filed as required and will determine whether such proposals meet applicable
criteria for inclusion in its 2019 proxy statement.
SOLICITATION
OF PROXIES
The
Company will pay the cost for the solicitation of proxies. Solicitation of proxies may be made in person or by mail, telephone,
or telecopy by directors, officers, and employees of the Company. The Company may also engage the services of others to solicit
proxies in person or by telephone or telecopy. In addition, the Company may also request banking institutions, brokerage firms,
custodians, nominees, and fiduciaries to forward solicitation material to the beneficial owners of Common Stock held of record
by such persons, and the Company will reimburse such persons for the costs related to such services.
It
is important that your shares be represented at the Annual Meeting. If you are unable to be present in person, you may vote by
telephone or via the Internet. If you have received a paper copy of the proxy card by mail you may also sign, date and return
the proxy card promptly in the enclosed postage-prepaid envelope.
“HOUSEHOLDING”
OF PROXY MATERIALS
The
SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements
and related notices with respect to two or more stockholders sharing the same address by delivering a single proxy statement or
notice addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially
provides extra convenience for stockholders and cost savings for companies. The Company and some brokers household proxy materials,
delivering a single proxy statement or notice to multiple stockholders sharing an address unless contrary instructions have been
received from one or more of the affected stockholders. Once you have received notice from your broker or us that they or we will
be householding materials to your address, householding will continue until you are notified otherwise or until you instruct us
to the contrary. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy
statement and related notices, or if you are receiving multiple copies of the proxy statement and related notices and wish to
receive only one, please notify your broker if your shares are held in a brokerage account or us if you hold registered shares.
You may notify us by sending a written request to Investor Relations, Zion Oil & Gas, Inc., 12655 North Central Expressway,
Suite 1000, Dallas, Texas 75243 or by calling us at (214) 221-4610.
The
Company undertakes to deliver promptly, upon written or oral request, a separate copy of the Annual Report on Form 10-K for the
year ended December 31, 2017, the Proxy Statement and the Notice of Annual Meeting of Stockholders and related notices to a stockholder
at a shared address to which a single copy of such documents was delivered. Stockholders may make such request in writing, directed
to Investor Relations, Zion Oil & Gas, Inc., 12655 North Central Expressway, Suite 1000, Dallas, Texas 75243 or by calling
us at (214) 221-4610.
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By
Order of the Board of Directors
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/s/
VICTOR G. CARRILLO
|
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Victor
G. Carrillo
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Chief
Executive Officer
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April
13, 2018
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