Development and Manufacturing Agreement
Exhibit
4.16
|
1.
|
PARTIES
TO THE AGREEMENT
|
|
SulphCo, Inc. (“SulphCo”)
|
Märkisches
Werk GmbH (“MWH”)
|
|
|
0000 X. Xxx Xxxxxxx Xxxx N.
|
Xxxx
Xxxxx 21
|
|
|
Suite 190
|
D-58543
Halver
|
|
|
Xxxxxxx, XX 00000
|
Xxxxxxx
|
|
|
XXX
|
|
2.
|
PRIMARY
FIELDS OF BUSINESS
|
SulphCo
is
engaged in the business of commercializing its patented and proprietary
SonocrackingTM
process.
The SonocrackingTM process
is designed to use high power ultrasound to modify the composition and structure
of crude oil derived from any source (e.g.,normal crude oil production, tar
sands, shale, etc.) and/or crude oil fractions (e.g., diesel, kerosene, etc.),
including, without limitation, the upgrading of crude oil and fractions thereof
by lowering the density, lowering the viscosity and reducing the
sulfur-containing, nitrogen-containing, acid-containing and other undesirable
components of crude oil and its fractions. Among the benefits of this upgrading
of crude oil is the transformation of sour heavy crude oils into sweeter,
lighter crudes, producing more gallons of usable oil per barrel. For purposes
of
this Agreement, SulphCo’s“Primary
Field of Business” shall include (i) the foregoing applications, together with
any future benefits yet to be discovered that may be derived through the
application of the SonocrackingTM process
to crude oil, its components, fractions, or refined products, as well as (ii)
the general application of ultrasound to crude oil, its components, fractions,
or refined products.
MWH
is a
developer and manufacturer of components and systems used in diverse industries
for demanding applications.
|
3.
|
OBJECTIVES
|
SulphCo
seeks to
secure a reliable, high-quality, high-value development partner and supplier
for
its SonocrackingTM
probe
assembly and reactor (“Equipment”).
The
supplier should be able to offer manufacturing and development assistance
throughout the trial and commercial phases of SulphCo’s
business expansion. Supplier must also be capable of rapidly ramping-up
manufacturing in order to meet expected accelerating demand for its Equipment.
SulphCo
intends
to use MWH
as a
development partner and supplier for said Equipment.
MWH
seeks to
secure an additional long-term customer for the sale of highly-complex
manufactured systems. MWH
also
seeks to further diversify its business by participating in new growth
industries. MWH
intends
to provide SulphCo
with
development assistance and supply of Equipment.
Page
1 of
8
|
4.
|
GENERAL
RESPONSIBILITIES OF MWH
|
During
the term of this Agreement, MWH
will
provide SulphCo
with
development assistance (engineering and development personnel) to improve the
Equipment
according
to development goals and targets to be established from time to time by
SulphCo.
In
addition, MWH
will
manufacture and deliver Equipment
in the
quantity and by the reasonable delivery dates that SulphCo
specifies in purchase orders and according to manufacturing specifications
and
technical drawings provided or referenced by SulphCo
in its
purchase orders.
SulphCo
shall
specify quality control standards for the Equipment
and the
tests that MWH
is to
perform on each unit of Equipment
manufactured for SulphCo
prior
to
each delivery in order to ensure uniform Equipment
quality
and function. Once a reliable series of quality control tests are developed
and
specified in writing by SulphCo,
MWH
shall
integrate these tests into its Equipment
manufacturing process and the costs associated with the tests shall be
incorporated into the Equipment
price.
SulphCo shall have no obligation to purchase any Equipment
that
fails to meet the quality standards that it sets for the Equipment.
|
5.
|
GENERAL
RESPONSIBILITIES OF SULPHCO
|
SulphCo
will
provide MWH
with
orders for the Equipment
but
is in
no way obligated to order any fixed quantity over any fixed period of time.
SulphCo
will
provide MWH
with the
manufacturing specifications and technical drawings necessary for MWH
to
produce the Equipment,
including, without limitation, all necessary technical and shop drawings,
manufacturing materials and tolerance requirements, quality control requirements
and functional requirements. SulphCo
agrees
to consider all MWH
suggestions for Equipment
improvements and shall make commercially reasonable efforts to improve the
Equipment.
|
6.
|
DEMAND
SHARE AND EXCLUSIVITY
|
Subject
to the other provisions hereof, MWH
will
sell Equipment
exclusively to SulphCo,
and
will not sell, vend, exchange, barter, give, or transfer such Equipment
to any
other party without express written permission of SulphCo.
SulphCo
will not
prevent MWH
from
developing, manufacturing or selling ultrasound technology to third parties
engaged in business that is outside of SulphCo’s
Primary Field of Business.
SulphCo
will
purchase a minimum of 60% of its annual Equipment
requirements from MWH.
SulphCo
may
purchase a lesser percentage of its annual Equipment
requirements from MWH
under
the following circumstances:
(a)
if
SulphCo
is able
to purchase Equipment
from
another source with comparable quality and identical design at price that is
at
least 25% less than the price that MWH
charges
SulphCo
for the
comparable product. In such circumstances SulphCo
will
provide MWH
in
writing with the opportunity to meet the price quoted to SulphCo
by the
other source. In the event that MWH
will not
meet the other source’s price, SulphCo
shall be
free to purchase Equipment
from the
other source, and shall be under no obligation to purchase Equipment
from
MWH;
Page
2 of
8
(b)
if
MWH
fails to
manufacture the Equipment
with a
level of quality consistent with SulphCo’s
manufacturing or quality control specifications, and another supplier
demonstrates that it is able to meet SulphCo’s
manufacturing or quality control specifications;
(c)
if
MWH
is not
able to consistently deliver the Equipment
in a
reasonable timeframe required by SulphCo
and
another supplier is able to do so.
|
7.
|
FORECAST
DEMAND FULFILLMENT
|
SulphCo
will, to
the extent possible, provide MWH
with
forecasts for its Equipment
demand.
MWH
will
operate with a maximum 16-week lead time for new orders. If SulphCo
so
requests, MWH
will
build and maintain a three-month stock of Equipment
at one
of its warehouses in the USA. In such a case, SulphCo
shall
compensate MWH
for any
such stock that it is unable to sell as a result of Equipment
design
changes, design innovations, or other Equipment
changes
required by SulphCo.
MWH
shall be
responsible for, and SulphCo
shall
not compensate MWH
for, any
stocked Equipment
that
fails to meet SulphCo’s
manufacturing or quality control specifications.
|
8.
|
EQUITY
PAYMENT FOR SERVICES
|
In
consideration for the development services that MWH
has
provided under earlier agreements and will continue to provide under this
Agreement,
SulphCo
shall
issue to MWH
an
option to purchase 50,000 shares of its common stock, par value $0.001 per
share
(the “Option”),
as
payment for services under this Agreement immediately upon receiving the
approval of the American Stock Exchange of the Additional Listing Application.
The Option
shall
have an exercise price determined by the average of the high and low prices
of
SulphCo
common
stock on the date hereof (the “Grant
Date”).
The
Option
shall
vest as follows: one-half of the Option
(option
to purchase 25,000 shares of SulphCo
common
stock) shall vest six (6) months after the Grant
Date
and the
remaining half of the Option
shall
vest one (1) year after the Grant
Date.
In
addition to the foregoing, in the event that, within one (1) year of the date
hereof, the Equipment
demonstrates that, when operated in accordance with SulphCo’s
specifications and directions in the field and under actual operating
conditions, it will consistently produce sulphur reductions greater than 25%
on
Arab Light and Khafji crude oils (or similar oils as determined by SulphCo),
SulphCo
shall
issue to MWH
an
additional 50,000 shares of its common stock (the “Additional
Shares”),
subject to receiving approval by the American Stock Exchange of the Additional
Listing Application for the Additional
Shares.
The
Board of Directors of SulphCo
(but not
any director who is an employee, officer, or member of the board of directors
of
MWH)
shall
make the determination of award of the Additional
Shares
for
meeting the sulphur reduction criteria.
MWH
may
exercise the vested portion of the Option
in whole
or in part until the termination dates set forth below. In the event that
MWH
wishes
to exercise the Option,
it
shall send to SulphCo
a
written notice (the date of each such notice being herein referred to as a
“Notice
Date”)
setting forth its irrevocable election to that effect, which notice also
specifies a date not earlier than three (3) business days from the Notice
Date
for the
closing of such option exercise.
Page
3 of
8
In
the
event of any change in SulphCo
common
stock by reason of a stock dividend, split-up, merger, recapitalization,
combination, exchange of shares or similar transaction, the type and number
of
shares of common stock underlying the Option
or
issuable upon the grant of the Additional
Shares
shall be
adjusted appropriately, so that MWH
shall
receive upon exercise of the Option
or
issuance of the Additional
Shares,
the
number and class of shares that MWH
would
have received if the Option
or
Additional
Shares
had been
exercised or granted immediately prior to such event.
The
right
to exercise the Option
shall
terminate on third anniversary of the Grant
Date.
|
9.
|
PIGGYBACK
REGISTRATION RIGHTS
|
SulphCo
shall
include the shares of common stock underlying the Option
in a
registration statement to the extent permissible by the rights of holders of
demand registration rights or any underwriter.
|
10.
|
TERM
|
This
Agreement
shall
become effective upon signing, and shall continue in effect thereafter for
a
period of five years, unless earlier terminated as provided herein. After the
initial five year term, this Agreement
will
automatically renew on an annual basis unless terminated in writing by either
party with six months notice.
|
11.
|
TERMINATION
|
SulphCo
may
terminate this Agreement
with
notice at any time if (i) MWH
is
unable, for any reason, to deliver Equipment
to
SulphCo
under
reasonable terms of this Agreement;
(ii)
MWH
violates
any SulphCo
intellectual property rights. In such cases MWH
will be
given written notice and the chance to correct such violations within 90 days
before termination.
Either
party may terminate this Agreement
immediately with written notice if (i) the other party breaches any material
term or condition of this Agreement
and
fails
to cure the breach within 30 days of receiving notice from the other party;
or
(ii) if such other party becomes insolvent or if the normal conduct of business
shall become substantially impaired by such party's credit problems and is
unable to correct such insolvency within 90 days.
On
termination of this Agreement
for any
reason, MWH
will
cease all Equipment
manufacture and will provide SulphCo
with a
complete report of all Equipment
manufactured, in transit or stored. MWH
must
also immediately, at SulphCo’s
option, erase, destroy or return to SulphCo
all
Equipment
supporting documentation and all Confidential Information in its possession.
SulphCo
must
compensate MWH
for all
Equipment
in its
manufacturing pipeline.
Page
4 of
8
|
12.
|
AUDITS
|
All
records of MWH
relating
to the manufacture and sale of Equipment
under
this Agreement
are
subject to periodic quality assurance and record keeping audits by SulphCo
or its
designated representatives. MWH
will
permit inspection of its records by SulphCo
and its
designated representatives upon reasonable notice.
|
13.
|
RIGHTS
TO FUTURE TECHNOLOGY AND INTELLECTUAL
PROPERTY
|
During
the course of this Agreement
all new
technology and intellectual property, including improvements to any existing
technology and intellectual property, that are directly related to the design,
development, and manufacture of ultrasonic Equipment
for
SulphCo
by
MWH
within
SulphCo’s
Primary Field of Business will belong to SulphCo.
Accordingly, MWH
agrees
to grant and does hereby grant to SulphCo
the full
and entire right, title, and interest in such new technology and intellectual
property, and MWH
agrees
to inform SulphCo
within a
reasonable period of time of the discovery or development of such new technology
and intellectual property and to reasonably cooperate with SulphCo
in the
review and execution of any documents required for securing patent rights to
such new technology and intellectual property and for securing SulphCo’s
ownership thereof. SulphCo
will
automatically grant MWH
a
cost-free, worldwide, non-exclusive, non-expiring license to use any such new
technology in applications outside of SulphCo’s
Primary Field of Business, provided that MWH
shall
take reasonable steps to be agreed upon by the parties to protect SulphCo's
intellectual property in the course of such use, and provided that such license
shall not restrict SulphCo’s
ability
to make, use, or sell any such new technology in any application within or
without SulphCo’s
Primary
Field of Business.
|
14.
|
WARRANTIES
AND REPRESENTATIONS.
|
MWH
represents, warrants and covenants to SulphCo
that all
Equipment
supplied
to SulphCo
by
MWH
will i)
conform to all applicable Equipment
specifications provided by SulphCo,
and ii)
be manufactured and packaged in a good and workmanlike manner and will be
labeled and shipped in accordance with any instructions given by SulphCo.
|
15.
|
INDEMNITY
|
SulphCo
shall
defend and indemnify MWH,
its
affiliates, distributors, agents, employees and assigns from and against any
and
all claims, damages, suits, losses and expenses (including without limitation
reasonable attorneys' fees and costs) which may be made against or incurred
by
MWH,
its
affiliates, distributors, agents, employees and assigns which directly or
indirectly are caused by, arise from, are incident to or connected with
SulphCo’s
Equipment
design,
possession, function, or use.
|
16.
|
INSURANCE
|
SulphCo
shall
obtain and maintain adequate commercial product liability insurance naming
MWH
as an
additional insured. Said insurance will be maintained during the term of this
Agreement
with a
reputable, financially sound insurance carrier.
Page
5 of
8
|
17.
|
INFORMATION
SHARING AND NONDISCLOSURE
|
(a)
SulphCo
will
provide confidential information to MWH
in order
to enable MWH
to
submit proposals and manufacture products for SulphCo
(“SulphCo Confidential
Information”).
MWH
shall
consider all information that SulphCo
provides
as confidential and shall protect it using the same methods as it uses to
protect its own confidential information.
(b)
SulphCo Confidential
Information
is any
information relating specifically to SulphCo’s
business, including, but not limited to, computer programs, computer files,
documents, manuals, drawings, specifications, production schedules, test data,
maintenance procedures/processes, general knowledge of business plans and/or
activities, trade secrets, business methods, processes, devices, or any other
information used by SulphCo
that may
give SulphCo
an
opportunity to obtain an advantage over competitors who do not know or use
such
information, disclosed by SulphCo
to
MWH
either
directly or indirectly, orally, electronically, or in writing.
(c)
MWH
agrees
to use SulphCo Confidential
Information
only for
the purpose intended as set forth herein, and not to disclose SulphCo Confidential
Information
to any
third party without SulphCo’s
prior
written consent.
(d)
MWH
agrees
to restrict access to SulphCo Confidential
Information
only to
employees of MWH
whose
access is necessary to carry out the purpose of this Agreement
after
such employees have been informed of the terms of this Agreement.
(e)
The
restrictions on disclosure and use of SulphCo Confidential
Information
set
forth above shall not apply to information which MWH
can
prove was already in MWH’s
possession at the time of first receipt from SulphCo
or was
or becomes part of the public domain without breach of this Agreement
by
MWH.
(f)
SulphCo
agrees
to allow MWH
to share
the SulphCo
Confidential Information
with its
material sub-suppliers as necessary in order to carry out the purposes of this
Agreement
provided
that reasonable care is used to prevent the misuse or wider disclosure of said
Confidential Information.
(g)
On
occasion, MWH
may
provide information to SulphCo
that is
considered proprietary. Said MWH
confidential information shall be handled by SulphCo
and be
governed by the same rules as laid out in Paragraphs 16a-h hereof. SulphCo
agrees
that such information is the property of MWH
and
SulphCo
further
agrees not to duplicate or disseminate such information to third parties without
written consent of MWH,
unless
such information is in the public domain or obtained by SulphCo
independently from third parties.
(h)
This
confidentiality provision shall survive any termination or expiration of this
Agreement
by
5
years.
Page
6 of
8
|
18.
|
MISCELLANEOUS
|
|
(a)
|
This
Agreement,
and any interest herein, may not be assigned by MWH
without prior written approval of SulphCo.
|
|
(b)
|
This
Agreement
shall be construed in accordance with the substantive laws of the State of
Texas, without regard to conflict of law principles. Each of the
parties
hereto irrevocably consent to the exclusive personal and subject
matter jurisdiction of United States District Court for the Southern
District of Texas, Houston Division, and the Texas state courts
located in Xxxxxx County, Texas, U.S.A. regarding the enforcement or
interpretation of this Agreement
and matters or disputes relating to the matters covered by this
Agreement.
|
|
(c)
|
Notices
and other correspondence related to this Agreement
should be directed to the parties as
follows:
|
To
SulphCo:
SulphCo,
Inc.
0000
X.
Xxx Xxxxxxx Xxxx X.
Xxxxxxx,
XX 00000, XXX
Fax
Number: (000)
000-0000
Email
Address:
xxxxxxx@xxxxxxx.xxx
Attention:
Xxxxxxx
X. Xxxxxx or current CFO
To
MWH:
Märkisches
Werk GmbH
Xxxx
Xxxxx 00
X-00000
Xxxxxx, Xxxxxxx
Fax
Number:
x00
(0000) 000-0000
Email
Address:
x.xxxxxxxx@xxx.xx
Attention:
Xx
Xxxxxxxx or current Geschäftsführer
|
(d)
|
This
Agreement
constitutes
the entire Agreement
between the parties pertaining to the subject matter hereof and supersedes
all prior Agreements,
understandings, negotiations, and discussions, whether oral or written,
of
the parties with regard thereto. The invalidity, in whole or in part,
of
any provision hereof shall not affect the validity of the remainder
of
such provision. No claim or right arising out of a breach of this
Agreement
can be discharged in whole or in part by a waiver or renunciation
of the
claim or right unless the waiver or renunciation is supported by
consideration and is in writing signed by the aggrieved party. The
failure
of either party to enforce within a reasonable period of time any
of the
provisions hereof shall not be construed to be a waiver of such provision
or of the right of such party thereafter to enforce each and every
such
provision.
|
|
(e)
|
This
Agreement
may not be changed or modified except in writing signed by both
parties.
|
Page
7 of
8
|
(f)
|
Neither party
shall use the other party’s name
in publicity, advertising, or similar activity without the other
party’s
prior written consent.
|
|
(g)
|
All
purchase orders issued by SulphCo
to
MWH
for Equipment
during the term of this Agreement
are subject to the provisions of this Agreement
as
though fully set forth in such purchase order. Each such purchase
order
shall be subject to the terms and conditions set out therein. In
the event
that the provisions of this Agreement
conflict with any such purchase order, the provisions of this Agreement
shall govern. No other terms and conditions, including, but not limited
to, SulphCo’s
standard printed terms and conditions, on MWH’s
order acknowledgment or otherwise, shall have any application to
this
Agreement,
any purchase order, or any transactions occurring pursuant
thereto.
|
|
(h)
|
SulphCo
must pay MWH
for all orders by wire transfer using net 30 day terms upon shipment
of
product.
|
|
19.
|
AUTHORIZING
SIGNATURES
|
|
/s/
Xxxxx X. Xxxx
|
June
27, 2008
|
|
|
Xx.
Xxxxx X. Xxxx
|
Date
|
|
|
CEO,
SulphCo, Inc.
|
|
June
27, 2008
|
||
|
Date
|
||
|
Geschäftsführer,
MWH
|
Page
8 of
8
