SETTLEMENT AGREEMENT
EXHIBIT
10.7
SETTLEMENT
AGREEMENT made as of the
6th day of January 2009 (the
"Effective Date"), by and between Zion Oil & Gas,
Inc., a Delaware
corporation with its principal executive offices at 0000 Xxxxxx Xx., Xxxxx 000,
Xxxxxx, Xxxxx 00000 and the offices of its registered Israeli branch at 00
Xxxxxxx Xx., Xxxxx Xxxxxxxxxx Xxxx, Xxxxxxxx 00000 (the "Company") and
Xxxxxx
Xxxxxxxxx residing 00
Xxxxxx Xxxxxx, Xxx Xxxx, 00000, Xxxxxx ("PM").
WITNESSETH
WHEREAS, until December 31,
2008, PM held with the Company the position of Executive Vice President under a
certain personal employment agreement between the Company and PM, dated as of
June 1, 2007 (hereinafter, the "Employment Agreement");
WHEREAS, the term of
employment under the Employment Agreement expired on the close of business on
December 31, 2008;
WHEREAS, commencing January 1,
2004 and continuing through May 31, 2007, PM's services were retained by the
Company under a certain retention agreement dated as of February 29, 2004 (the
“Retention Agreement”);
WHEREAS, along with other
officers of the Company, PM agreed to defer part of the salary payments due to
him under the Employment Agreement and, prior to the effectiveness of the
Employment Agreement, part of the periodic payments due to him under the
Retention Agreement, which agreement to defer terminated on July 1, 2008;
and
WHEREAS, the Company and PM
desire to address the payment to PM of the unpaid deferred amounts, as well as
other related matters, all on the terms and conditions set forth
herein.
NOW, THEREFORE, in
consideration of the terms and conditions hereafter set forth the adequacy and
sufficiency of which are hereby acknowledged, the parties agree hereafter as
follows:
1. Financial
Terms.
(i) Amount Owed. By their
signature below, each of the Company and PM agree that the sum total of the
deferred salary payments under the Employment Agreement and the amount deferred
under the Retention Agreement that is owed to PM as of the Effective Date is
$283,385 (such sum total
of deferred amounts under Employment Agreement and the Retention Agreement
hereinafter referred to collectively as the “Deferred Amount”).
(ii)
Scheduled Payment of
the Deferred Amount. Subject to the terms and conditions set forth herein
and in consideration of the releases contained herein, the Company hereby agrees
to pay to PM as follows:
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(a)
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Within
three (3) business days following the execution and delivery by PM of this
Agreement but in any event no later than January 9, 2009, the Company
shall remit to PM, on account of the Deferred Amount and against a
properly authorized VAT invoice to be issued within 5 business days
of receipt of payment, the sum of $43,385, plus value added tax
(“VAT”) required under Israeli law (currently 15.5%), for a total payment
of $50,110;
and
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(b)
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Commencing
on February 5, 2009, and thereafter on the 5th day
of each succeeding calendar month until the balance of the Deferred Amount
(such balance being $240,000 immediately following the payment specified
in Section 1(ii)(a) above) is paid out, the Company shall remit to PM on
account of the Deferred Amount and against a properly authorized VAT
invoice to be issued within 5 business days of receipt of payment (each
monthly payment being referred to as the “Monthly Amount”) $10,000, plus VAT for
a total monthly payment of $11,550.
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All
payments above shall be made in New Israeli Shekels at the US Dollar
representative rate quoted by the Bank of Israel on the trading day immediately
preceding payment. In the event that the day of payment of the amounts above is
a bank holiday in Israel, then payment shall be due on the next succeeding
business day.
(iii) Indemnification by
PM. PM agrees to hold harmless and indemnify the Company, its
affiliates, their respective past, present and future officers, directors,
shareholders, employees, agents, attorneys, successors and assigns for the
reasonable costs of defense and any and all losses, claims, damages, liabilities
or expenses, including, without limitation, reasonable attorneys' fees,
judgments, fines, excise taxes or penalties, amounts paid in settlement and
other expenses incurred in connection with any proceeding by the Israeli tax
authorities, the value added authorities or any other regulatory agency in
respect of amounts paid to PM under Section 1(ii) above. PM expressly agrees
that any amounts that may be due and payable to the Company under this provision
shall be offset against payments payable to PM under Section 1(ii) of this
Agreement.
(iv)
Increase in Scheduled
Monthly Amount. The parties acknowledge that the basis for the
determination of the Monthly Amount in Section 1(ii)(b) above is the current
maximum monthly draw by Company officers of salaries due to them, with the
balance of such salaries being deferred. Consistent with Company policy, the
maximum amount of their respective salaries that officers have drawn per month
(in each case the “Officer’s Monthly Draw”) does not exceed
$10,000.
Accordingly,
the parties agree that until such time as the Deferred Amount shall have been
paid in full and while this agreement continues in effect, to the extent that
the Officer’s Monthly Draw of any Company officer shall exceed $12,500, then,
commencing with the Monthly Amount due in the next succeeding calendar month and
continuing until the Deferred Amount shall have paid in full, PM’s Monthly
Amount shall be increased by an amount equal to the Monthly Draw above $12,500
(plus VAT thereon); provided,
that, if at any such time a Company’s Officer’s Monthly Draw shall
thereafter be decreased to $12,500 or lower, commencing on the scheduled payment
date in the next succeeding calendar month, PM’s Monthly Amount shall be reduced
to $10,000 (plus VAT).
By way of
illustration and not limitation, in the event that a Company Officer’s Monthly
Draw shall during January 2009 be increased to $14,000, then,
commencing with the Monthly Amount due in February 2009, the Monthly Amount
payable to PM shall be adjusted to $11,500 (plus VAT). If subsequently such
Officer’s draw shall be reduced to $12,500, then, commencing with the Monthly
Amount due on the next succeeding month, PM's Monthly Amount shall be adjusted
to $10,000 (plus VAT). In each case, these amounts will be paid until the
balance of the unpaid Deferred Amount shall have been paid in full.
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A
statement as to whether or not any Officer’s Monthly Draw exceeds $12,500 shall
be included in the Quarterly Certificate to be provided pursuant to Section 1(v)
below. If any Officer's Monthly Draw exceeds $12,500, the amount of that
Officer's draw and the date on which that draw commenced shall be set forth in
the Quarterly Certificate.
(v)
Pre-Payment of
Deferred Amount. As of the Effective Date, the parties agree
that the aggregate amount due to Company officers, as a class (except for PM),
in respect of deferred salaries is equal to $1,344,935 and said
amount is hereinafter referred to, on a collective basis, as the “Officers’
Deferred Amount”). It is the parties intention that at all times after the
Effective Date, the remaining unpaid balance of the Deferred Amount owing to PM
at any time under Section 1 (ii) (b) above shall not be, on a pro-rata percentage basis, more than
the unpaid balance owed to the officers of the Company (other than PM), as a
class, in respect of the Officers' Deferred Amount. The Company will track all
payments made to such Company officers in respect of Officers’ Deferred Amount
to confirm compliance with this provision. To the extent that any payment (a
“Deferred Payment Amount”) shall be made in respect of the Officers’
Deferred Amount, above the amount provided for under this Section 1(v), then the
Company shall remit, within 5 business days’ of such payment, to PM a sum (plus
VAT thereon) in an amount (such amount being the “Shortfall Payment”) necessary
to ensure that the remaining unpaid balance of the Deferred Amount owed to PM
following the payment of any Deferred Payment Amount shall not be, on a pro-rata percentage basis,
more than the remaining unpaid balance of the Officers' Deferred Amount.
Shortfall Payments shall be made on more than one occasion if and when
appropriate.
By way of
illustration and not limitation, if on or after such time as the Company shall
have made payments to PM in respect of the Deferred Amount in accordance with
the terms of this Agreement such that the total unpaid balance of the Deferred
Amount owed to PM shall have been reduced by 50% (i.e., the Company shall have
made payments in the total amount of $120,000), then assuming that the Company
shall have not made any payments in respect of the Officers’ Deferred Amounts,
if the Company elects to make payments in respect of Officers’ Deferred Amount
in excess of $672,468, it shall make a Shortfall Payment to PM as provided for
hereunder
Following
the payment of the Shortfall Payment, the Monthly Amount due shall continue to
be paid each month as provided under Section 1(ii)(b) until the payment in full
of the Deferred Amount.
In
order to ensure compliance with this provision, the Company shall provide to PM,
on a quarterly basis beginning with the quarter ended March 31, 2009 and
thereafter with respect to each succeeding quarter until the Deferred Amount
shall have been paid in full, a written sworn statement (the "Quarterly
Certificate") signed by the Company's Chief Executive Officer and by the
Company’s authorized representative in Israel (to the extent that such
authorized representative is not also the Chief Executive Officer), to be
furnished within 10 business days following such quarter end, setting forth the
following:
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(i)
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Deferred
Payment Amounts, if any, made in respect of the Officers' Deferred Amount
during the preceding quarter, the date on which any such
payment was made, the Company officer to whom or for whose account any
payment was made; and
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(ii)
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a
statement as to whether or not any Officer’s Monthly Draw exceeds $12,500
and, if so, the name of the officer, the date on which the increase in
such officer’s monthly draw commenced and the current monthly
draw of the officer at the end of the
quarter.
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PM shall
bear the full cost of the preparation and delivery of the sworn Quarterly
Certificate, which the parties agree shall be $100 per certificate. The parties
agree that such cost shall be offset against the next succeeding Monthly Amount
payable under Section 1(ii)(b). To avoid any confusion,
the parties hereby agree that the conversion by a Company Officer of that
Officer's Deferred Amount into equity or equity linked securities of the Company
shall not be deemed to trigger the provisions of this Section 1(v); provided,
however, that in the event that the entire unpaid balance of the Officers'
Deferred Amount is paid in full prior to the payment in full of PM's Deferred
Amount, whether such payment be by way of equity conversion or cash payment, any
remaining Deferred Amount due PM shall become due and payable within 5 business
days following the date on which the Officers Deferred Amount is paid in
full.
(vi)
Acceleration of the
Deferred Amount. In the event that the Company fails to pay a required
Monthly Amount by the 10th
business day of the next succeeding calendar month, then, the remaining unpaid
balance of the Deferred Amount shall be due and payable if the Company fails to
pay said delinquent Monthly Amount by the expiration of 5 business days after
receipt by the Company of written notice from PM demanding payment. The right of
PM to accelerate the payment of the Deferred Amount shall expire upon the
remittance by the Company of the late payment by the date provided above. Late
payments shall bear interest at the rate of Bank Hapoalim Prime + 2% per
annum.
(vii)
Bituach Menahalim and
Keren Hishtalmut. Upon execution and delivery by PM of this Agreement,
the Company shall take all reasonable steps to assist with the release and
transfer to PM or redemption of all amounts accumulated in PM's current Bituach
Menahalim and Keren Histalmut policies, in accordance with such policies terms
and conditions and applicable law. Such assistance shall include the provision
by the Company to PM of an appropriate executed Form (Tofes) 161.
By his
signature below and in consideration of the performance of the Company's
undertakings under this Agreement, PM agrees as follows:
(1) THAT,
SUBJECT TO THE COMPANY'S MAKING THE REQUIRED PAYMENTS INTO THE POLICIES IN
CONNECTION WITH PM'S DECEMBER SALARY, THE TRANSFER TO HIM OF SUCH POLICIES IS
BEING MADE IN FULL SATISFACTION OF ALL CLAIMS BY PM AGAINST THE COMPANY FOR
SEVERANCE PAY AND ANY SIMILAR PAYMENTS THAT MAY BE DUE PM UNDER THE EMPLOYMENT
AGREEMENT OR APPLICABLE LAW, AND PM HEREBY WAIVES ANY RIGHTS HE MAY HAVE UNDER
APPLICABLE LAW OR THE EMPLOYMENT AGREEMENT TO ANY ADDITIONAL AMOUNTS THAT THE
COMPANY MAY BE REQUIRED TO PAY FOR SEVERANCE OR SIMILAR
PAYMENTS UNDER ISRAELI LAW OR FURTHER PAYMENTS INTO SUCH POLICIES, AND FURTHER
AGREES THAT HE SHALL HAVE NO RIGHT OR REMEDY AGAINST THE COMPANY FOR ANY SUCH
PAYMENTS OR SHORTFALL;
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(2) TO
INDEMNIFY AND HOLD HARMLESS THE COMPANY, ITS AFFILIATES, THEIR RESPECTIVE PAST,
PRESENT AND FUTURE OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS,
ATTORNEYS, SUCCESSORS AND ASSIGNS, AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES,
LIABILITIES OR EXPENSES THAT MAY BE INCURRED BY SUCH PERSONS WITH RESPECT TO
SEVERANCE PAY ACCRUED UNDER SUCH POLICIES; and
(3) THAT
THIS AGREEMENT WILL BE DEEMED AS A FINAL SETTLEMENT AND ADMISSION PURSUANT TO
CLAUSE 29 OF THE SEVERANCE PAY LAW, 1963. IN CONNECTION WITH THE
ABOVE WAIVER, PM FURTHER REPRESENTS THAT HE IS AN ATTORNEY AND HAS CONSULTED
WITH AN ATTORNEY EXPERIENCED IN LABOR LAW MATTERS IN ISRAEL AND UNDERSTANDS THE
CONSEQUENCES OF THIS WAIVER.
(viii)
Disbursements.
The Company shall pay PM disbursements for the month of December 2008 and
unbilled disbursements for previous periods within 5 business days of the
receipt of PM's disbursements statement together with supporting documentation
in accordance with standard practice.
All
taxes, withholdings and deductions payable or due in respect of PM's receipt of
the Deferred Amount, or any component thereof, if any, will be borne by PM.
On the execution
of this Agreement, PM shall provide to the Company a copy of a
current confirmation from the Israel Income Tax authorities setting forth PM's
applicable withholding rate and the Company shall act accordingly. Upon
expiration of PM's current confirmation, PM shall provide the Company with a
copy of a replacement confirmation.
2. Return of Company
Property. On or before January 12, 2009, PM shall return to Company all
Company property then in his possession, provided that with respect to a Company
desk top computer in PM's possession, PM shall purchase it from the Company for
1,000 NIS which amount shall be set off against the monies due PM
pursuant to Section 1(viii) above. The Company shall have an opportunity to make
a back-up or copy of the database PM's personal laptop as well as the desktop,
except for PM's files of a personal nature. Under all circumstances, by his
signature below, PM represents that he has destroyed all Company files or other
database on the desktop or PM’s laptop that contain (in whole or in part) any
Company information or material. The Company property includes the items listed
on Schedule I attached
hereto.
3. Continuing Obligations of
PM. Notwithstanding anything else contained herein, PM hereby
acknowledges and agrees that the provisions of Article 7 and Article 8 of the
Employment Agreement shall continue in full force and effect after the Effective
Date of this Agreement, in accordance with their terms and for the duration
specified therein. Nothing contained in this Agreement shall be construed or
interpreted as a waiver by the Company or any of its affiliates of any right or
remedy available under Article 7 and/or 8 of the Employment Agreement in the
event of a breach occurring after the Effective Date of this
Agreement.
4. Undertakings.
4.1
PM acknowledges that it is the Company's position that,
through December 31, 2008, PM is an "affiliate" and represents and warrants that
as to any sales of his shares in the Company through March 31, 2009 he will
comply with all the requirements of Rule 144 ("Rule 144") promulgated under the
Securities Act of 1933, as amended.
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4.2 The
Company represents and warrants that at all times through March 31, 2009, it
shall comply with all requirements of Rule 144 necessary to enable PM to sell
shares of the Company under Rule 144. To the extent reasonably required by PM's
broker, the Company shall confirm in writing the Company's compliance with the
said Rule 144 requirements within 3 business days of receipt of the broker's
request.
4.3.
(a) Upon the provision of appropriate Rule 144 documentation,
the Company shall no later than one business day following the Effective Date,
deliver to PM and the to Company's transfer agent an opinion of its counsel in
such form as shall be acceptable to the Company's transfer agent and PM's broker
and addressed to the Company's transfer agent, for purposes of facilitating open
market sales by PM (including members of his household) under Rule 144 for the
period through March 31, 2009.
(b) Upon
PM’s compliance with the provisions of Rule 144 and upon PM’s or PM's broker's
written request to the Company, the Company shall cause its counsel to issue to
him and to the Company's transfer agent on (or after) April 1, 2009, a legal
opinion in form acceptable to the Company's transfer agent for purposes of
releasing for open market sales all shares held by PM (including members of his
household and the Xxxxxx Xxxxxxxxx Irrevocable Trust) including shares which
might have been sold under Rule 144 commencing on April 1, 2009.
(c) If
additional opinions and confirmations of Company counsel and of the Company
(including any Company officer) are necessary from time to time or at any time
by the Company's transfer agent or PM's broker (including responses to inquiries
by or on behalf of PM's broker in connection with its Rule 144 due diligence) in
order to accomplish the purposes above stated, the Company shall deliver such
opinions and confirmations within two (2) business days of receipt of request
therefor.
5. Releases.
5.1 In
consideration of the promises, covenants and releases contained herein, the
adequacy of which is hereby acknowledged, PM (individually and in any
representative capacity and on behalf of each of his respective agents,
attorneys, heirs, successors, executors, personal representatives and assigns)
does hereby absolutely and unconditionally waive, release and forever discharge
the Company, its affiliates and subsidiaries, their respective past, present and
future officers, directors, shareholders, employees, agents, attorneys,
successors and assigns (hereinafter, the "Company Released Parties"), from any
and all claims, demands, obligations, liabilities, rights, causes of action and
damages, whether liquidated or unliquidated, absolute or contingent, known or
unknown, from the beginning of time to the Effective Date of this Agreement,
including, without limitation, those that may arise under the Employment
Agreement or the Retention Agreement or that may arise under any body of labor
or contract law, including any claims under Israeli labor laws and regulations,
or any claim for wrongful termination, or claims with respect to any other
payment required under Israeli law or otherwise. Notwithstanding the
foregoing and any other provision to the contrary, (i) the rights and
obligations set forth in this Agreement shall remain in full force and effect;
(ii) no release hereunder shall be construed to release any of PM's rights under
this Agreement or under any officer and director liability insurance coverage or
any errors and omissions coverage; and (iii) no release hereunder shall waive
any indemnification rights previously granted to PM.
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5.2 In
consideration of the promises, covenants and releases contained herein, the
adequacy of which is hereby acknowledged, the Company (on its behalf and on
behalf of its affiliates and subsidiaries and each of their respective, past,
present and future officers, directors, employees, attorneys, agents,
successors, executors, and assigns) does hereby absolutely and unconditionally
waive, release and forever discharge PM (and his agents, attorneys, heirs,
successors, executors, personal representatives and assigns), from any claims,
demands, obligations, liabilities, rights, causes of action and damages whether
liquidated or unliquidated, absolute or contingent, known or unknown, from the
beginning of time to the Effective Date; provided,
that, this release shall not apply to any derivative claim or suit
brought or maintained by a shareholder of the Company who is not an officer or
director of the Company and who does not bring or maintain the claim or action
with the solicitation of such officer or director. Additionally, the foregoing
release shall not be construed as a waiver of future claims by the Company
arising from PM's conduct after the Effective Date of this Agreement with
respect to PM's continuing obligations to the Company under the Employment
Agreement and any undertakings of PM pursuant to this Agreement.
6. Non-Disparagement. PM
(on behalf of his heirs and personal representatives), agrees not to make
disparaging remarks concerning the Company or its businesses or any of their
respective employees, consultants, stockholders, directors, affiliates,
subsidiaries or representatives. The Company agrees not to make disparaging
remarks concerning PM. Nothing herein shall be interpreted as affecting either
of the parties' obligations to comply with the specific terms of any valid and
effective subpoena, oral questions, interrogatories, requests for information,
civil investigative demand or order issued by a court of competent jurisdiction
or by a governmental body.
7. Reliance. The parties
acknowledge and agree that in the execution of this Agreement, neither has
relied upon any representation by any party or attorney, except as expressly
stated or referred to herein.
8. Headings. Section and
subsection headings are not to be considered part of this Agreement and are
included solely for convenience and are not intended to be full or accurate
descriptions of the content thereof.
9. Successors and
Assigns. Except as otherwise provided in this Agreement, all the terms
and provisions of this Agreement shall bind, and shall inure to the benefit of,
the parties hereto and their respective heirs, personal representatives,
successors and assigns.
10. Non-Assignment. By
his signature below, PM represents and warrants that he has not assigned or
otherwise conveyed to any third party any claim against the Company. By its
signature below, the Company represents and warrants that it has not assigned or
otherwise conveyed to any third party any claim against PM.
11. Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
12. Entire Agreement.
This Agreement constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof and supersedes any prior or contemporaneous
understanding or agreement or letters, written or verbal, among the parties with
respect to the subject matter hereof other than as expressly referenced herein.
No supplement, modification or waiver or termination of this Agreement or any
provision hereof shall be binding unless executed in writing by the parties to
be bound thereby.
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13. Representation. Each
of PM and the Company acknowledges that they have had the opportunity to consult
with legal counsel respecting this Agreement. Each person executing this
Agreement on behalf of a corporation hereby represents and warrants that he has
been authorized to do so by all necessary corporate action.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of
the parties has set forth its/his signature as of the date first written
above.
ZION OIL
& GAS, INC.
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By:
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/s/ Xxxxxxx Xxxxxxx |
/s/
Xxxxxx Xxxxxxxxx
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XXXXXX
XXXXXXXXX
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Title:
Chief Executive Officer
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Name:
Xxxxxxx Xxxxxxx
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SCHEDULE
I
COMPANY PROPERTY TO BE RETURNED TO
ZION OIL & GAS, INC.
PM shall
return to the Company the following items currently in his possession in
accordance with the provisions of section 2 of the Agreement to which this
Schedule I is attached:
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1.
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Desktop
computer (at PM's home) – to be purchased by PM as provided in section 2
of the Agreement
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2.
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Original
of Xxxxx Xxxxxxx'x blessing (and another piece of paper with Xxxxx
Xxxxxxx'x handwriting penned at the meeting during which the Rabbi gave
his blessing)
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3.
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Xxxx
Xxxxx' Vision Book – 21 copies
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4.
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Reprints
of the July 5, 2004 Oil & Gas Journal article – 2
packets
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5.
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Reprints
of the February 18, 2002 Oil & Gas Journal article – 1
packet
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6.
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5
blue Zion baseball caps
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7.
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9
white Zion baseball caps
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8.
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1
blue Zion windbreaker
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9.
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1
Zion fleece jacket
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10.
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2
annotated maps of the 12 tribes – mounted on Styrofoam backing (used in
the 2005 dedication ceremony)
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11.
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2
annotated geological maps – mounted on Styrofoam backing (used in the 2005
dedication ceremony)
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12.
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Zion
CDs distributed at the 2005 well
dedication
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13.
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files
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