STOCK OPTION AGREEMENT
Exhibit 99.3
This STOCK OPTION AGREEMENT (the “Agreement”) is made and entered into as of October 3, 2008
by and between the parties listed on Schedule A hereto as Optionees (“Optionees”), and Xxxxxx
Xxxxxxxxx and Xxxxx Xxxxxxxxx (“Stockholders”) of Sulphco, Inc., a Nevada corporation (the
“Company”).
BACKGROUND
A. The Optionees and Stockholder have entered into that certain Stock Purchase Agreement dated
October 3, 2008 (“SPA”), pursuant to which Optionees are purchasing from Stockholders up to
5,025,000 shares of restricted Common Stock of the Company.
B. Stockholders are the beneficial owners (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) of at least the amount of shares of
outstanding common stock of the Company (“Shares” or “Securities”) necessary to fulfill
Stockholders’ obligations hereunder.
C. Capitalized terms not otherwise defined herein shall have the meaning attributed to them in
the SPA.
NOW, THEREFORE, in consideration of the execution and delivery by Optionees of the
Assignment and the mutual covenants, conditions and agreements herein contained, and intending to
be legally bound, the parties hereto hereby agree as follows:
1. Option.
(a) Subject to the terms and conditions set forth in this Agreement, effective immediately,
the Stockholders hereby grant to Optionees an option (the “Option”) to purchase up to 5,025,000
Shares (“Option Shares”) from the Stockholders (for each Optionee up to the Proportionate Amount
set forth on Schedule A hereof), at a per share purchase price equal to Two Dollars ($2.00) per
share (the “Purchase Price”).
(b) Simultaneously with the execution of this Option Agreement, Stockholders will deliver the
Option Shares into escrow with Grushko & Xxxxxxx, P.C., as escrow agent (“Escrow Agent”), pursuant
to the form of escrow agreement attached hereto as Exhibit A. If at any time after the date of
execution of this Agreement and during the term hereof, Stockholders receive any further shares of
stock due to a stock split, or otherwise, with regard to the Option Shares, they shall immediately
deliver those shares into escrow with the Escrow Agent.
(c) The Option may be exercised by an Optionee as to its proportionate amount of the first
2,512,500 of the Option Shares in whole or in part commencing on the Initial Closing Date and
continuing through the one year anniversary of the Initial Closing Date. The Option may be
exercised by an Optionee as to its proportionate amount of the second 2, 512,500 of the Option
Shares in whole or in part commencing on the Second Closing Date and continuing
through the one year anniversary of the Second Closing Date (the “Termination Date”). There may be
up to five exercises of the Option by each Optionee. At the time of each partial exercise the
Stockholders shall make a notation in their books and records as to the remaining portion of the
Option subject to exercise.
(d) This Option may be exercised by each Optionee only up to the same number of shares as are
purchased by such Optionee under the SPA.
(e) In the event that an Optionee wishes to exercise the Option, it shall send to the
Stockholders and Escrow Agent 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 five (5) business days nor later than thirty (30) business days
from the Notice Date for the closing of such purchase (an “Option Closing Date”). The place of any
Option Closing shall be at the offices of Grushko & Xxxxxxx, P.C. at 000 Xxxxx Xxxxxx, Xxxxx 0000,
Xxx Xxxx, XX 00000, and the time of the Option Closing shall be 10:00 a.m. (New York Time) on the
Option Closing Date.
(f) At the Option Closing, an Optionee shall pay to the Stockholders by delivery to Escrow
Agent in immediately available funds by wire transfer to the bank account designated in writing in
the Escrow Agreement an amount equal to the Purchase Price. The terms of the Escrow Agreement
shall govern mechanics for release of stock and funds and related matters.
(g) At the Option Closing, upon delivery of immediately available funds as provided above, the
Escrow Agent shall deliver: (i) to the Optionee a certificate or certificates representing the
Option Shares to be purchased at such Option Closing (or, a certificate endorsed in blank) and
registered on the books and records of the Company in Optionee’s name, which Securities shall be
free and clear of all liens, claims, charges and encumbrances of any kind whatsoever, and (ii) to
Stockholders, the Purchase Price.
(h) In the event of any change in the Common Stock by reason of a stock dividend, split-up,
merger, recapitalization, combination, exchange of shares or similar transaction, the type and
number of Option Shares subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, so that Optionee shall receive upon exercise of the Option the number and class of
shares or other securities or property together with any additional shares delivered to the Escrow
Agent pursuant to Section 1(b) above that Optionee would have received if the Option had been
exercised immediately prior to such event or the record date therefor, as applicable.
2. Termination. The right to exercise this Option shall terminate on the Termination
Date. Notwithstanding the foregoing, if the Option cannot be exercised by reason of any applicable
judgment, decree, order, law or regulation, the Option shall remain exercisable and shall not
terminate until thirty (30) business day after such impediment shall have been removed.
Notwithstanding the termination of the Option or this Agreement, Optionees shall be entitled to
purchase the Securities if it has exercised the Option in accordance with the terms hereof prior to
such termination and such termination shall not affect any rights hereunder which by their terms do
not terminate or expire prior to or as of such termination.
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3. Representations and Warranties of the Stockholders. The Stockholders hereby
represent and warrant to Optionees as follows:
(a) Due Authorization; Enforceability. The Stockholders have full power and authority
to execute and deliver this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly authorized by all
necessary action on the part of the Stockholders, and no other proceedings on the part of the
Stockholders are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and delivered by the
Stockholders and constitutes a valid and binding agreement of the Stockholders, enforceable against
such Stockholders in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors’ rights and to general principles of equity.
(b) Ownership of Securities; Voting Rights. The Stockholders have sole voting power
with respect to the Option Shares. The Option Shares are not subject to any voting trust agreement
or other contract, agreement, arrangement, commitment or understanding to which the Stockholders
are a party restricting or otherwise relating to the voting, dividend rights or disposition of the
Option Shares.
(c) No Encumbrances. Upon the exercise of the Option and the delivery to an Optionee
by Stockholders of a certificate or certificates, or other similar document, evidencing the Option
Shares, Optionee will receive good, valid and marketable title to the Shares, free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on Optionees’ voting rights, charges and other encumbrances of any nature whatsoever
(except any security interest created by Optionees).
(d) No Conflicts. No authorization, consent or approval of any court or any public
body or authority is necessary for the consummation by the Stockholders of the transactions
contemplated by this Agreement. The execution, delivery and performance of this Agreement by the
Stockholders will not constitute a breach, violation or default (or any event which, with notice or
lapse of time or both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or acceleration under,
or result in the creation of any lien or encumbrance upon any of the properties or assets of such
Stockholders under, any note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument to which such Stockholders are a party or by which his or her properties or
assets are bound, other than breaches, violations, defaults, terminations, accelerations or
creation of liens and encumbrances which, in the aggregate, would not materially impair the ability
of such Stockholders to perform his or her obligations hereunder.
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(e) Brokers. No broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or commission in connection with the transactions contemplated hereby based
upon arrangements made by or on behalf of the Stockholders.
(f) Legal Representation. Stockholders were provided with the opportunity to present
this Agreement and related documentation to an attorney for review and have determined upon their
own free will to not avail themselves of such right. They understand that the transaction
contemplated by this Assignment is a sophisticated business and financial transaction, and they
have the acumen and experience to review this Assignment and related documentation and to enter
into the transactions set forth in the Assignment without the aid of counsel. They acknowledge
that they have not relied upon the advice, judgment or counsel of attorneys for the Optionees and
they waive any claims they may have against them arising out of this transaction
4. Representations and Warranties of Optionees. Each Optionee represents warrants as
follows:
(a) Compliance with the Securities Act of 1933. The Optionee understands and agrees
that the Option Shares have not been registered under the Securities Act of 1933 (“1933 Act”) or
any applicable state securities laws, by reason of their issuance in a transaction that does not
require registration under the 1933 Act (based in part on the accuracy of the representations and
warranties of Optionee contained herein), and that Option Shares must be held indefinitely unless a
subsequent disposition is registered under the 1933 Act or any applicable state securities laws or
is exempt from such registration.
(b) Status of Optionee. The Optionee is, and will be at the time of the exercise of
the Option, an “accredited investor”, as such term is defined in Regulation D promulgated by the
Commission under the 1933 Act, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of United States publicly-owned
companies in private placements in the past and, with its representatives, has such knowledge and
experience in financial, tax and other business matters as to enable the Optionee to utilize the
information made available by the Company to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed purchase, which represents a speculative
investment. The Optionee has the authority and is duly and legally qualified to purchase and own
the Option Shares. The Optionee is able to bear the risk of such investment for an indefinite
period and to afford a complete loss thereof. The information set forth on the signature page
hereto regarding the Optionee is accurate.
(c) Restricted Securities. Optionee will not sell, offer to sell, assign, pledge,
hypothecate or otherwise transfer any of the Option Shares unless pursuant to an effective
registration statement under the 1933 Act, or unless an exemption from registration is available.
(d) Upon exercise of the Option in whole or in part, the Option Shares issued shall bear the
following or similar legend:
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“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO SULPHCO, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.”
5. Stockholders Covenants. The Stockholders hereby covenant and agree as follows:
(a) The Stockholders hereby agree, while this Agreement is in effect, and except as
contemplated hereby, not to sell, transfer, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with respect to the sale,
transfer, pledge, encumbrance, assignment or other disposition of (all of the foregoing, “Sell,”
“Sold” or “Sale,” as the case may be), any of the Option Shares.
(b) The Stockholders agree not to engage in any action or omit to take any action which would
have the effect of preventing or disabling Stockholders from delivering the Option Shares to
Optionees or otherwise performing its obligations under this Agreement.
(c) The Stockholders are responsible for making any filings required to be made by him with
all regulatory bodies arising from the transactions contemplated hereby.
6. Miscellaneous.
(a) Fees and Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by the party incurring such
expenses, except for the Legal Fees set forth in the SPA.
(b) Amendment. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties.
(c) Choice of Law and Venue; Jury Trial Waiver. This Assignment shall be governed by,
and construed in accordance with, the internal laws of the State of New York, without regard to
principles of conflicts of law. STOCKHOLDERS AND OPTIONEESWAIVE ANY RIGHT TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS ASSIGNMENT OR ANY TRANSACTION
CONTEMPLATED HEREIN, INCLUDING CLAIMS BASED ON CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER COMMON
LAW OR STATUTORY BASES. Each party hereby submits to the exclusive jurisdiction of the state and
federal courts located in the County of New York, State of New York.
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(d) Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier
service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile,
addressed as set forth below or to such other address as such party shall have specified most
recently by written notice. Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or number designated
below (if delivered on a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other than on a business
day during normal business hours where such notice is to be received) or (b) on the second business
day following the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to Stockholders:
|
Xxxxxx Xxxxxxxxx | |
0000 Xxxxx Xxxx Xxx | ||
Xxxx, XX 00000 | ||
Fax: (000) 000-0000 |
Notice to either Xxxxxx Xxxxxxxxx or Xxxxx Xxxxxxxxx shall be deemed notice to both of Xxxxxx
Xxxxxxxxx and Xxxxx Xxxxxxxxx.
If to Optionees :
|
To the one or more addresses and telecopier numbers indicated on Schedule A hereto | |
With a copy to:
|
Grushko & Xxxxxxx, P.C. | |
000 Xxxxx Xxxxxx, Xxxxx 0000 | ||
Xxx Xxxx, Xxx Xxxx 00000 | ||
Fax: (000) 000-0000 |
(e) Assignment; Binding Effect; No Third Party Beneficiaries. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written consent of the other
parties. Any purported assignment without the consent required pursuant to the preceding sentence
shall be null and void. Subject to the second preceding sentence, this Agreement (including,
without limitation, the obligations of the Stockholders under Section 1 and Section 2 hereof) shall
be binding upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this Agreement to the contrary,
nothing in this Agreement, expressed or implied, is intended to confer on any person other than the
parties hereto or their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement. Notwithstanding the foregoing, any Optionee may
assign this agreement to one or more of its affiliates.
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(f) Severability. In the event that any provision of this Agreement, or the
application thereof, becomes or is declared by a court of competent jurisdiction to be illegal,
void or unenforceable, the remainder of this Agreement will continue in full force and effect and
the application of such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision that will achieve,
to the extent possible, the economic, business and other purposes of such void or unenforceable
provision.
(g) Counterparts/Execution. This Agreement may be executed in any number of
counterparts and by different signatories hereto on separate counterparts, each of which, when so
executed, shall be deemed an original, but all such counterparts shall constitute but one and the
same instrument. This Agreement may be executed by facsimile transmission and delivered by
facsimile transmission.
(h) Further Assurances. Each party hereto shall perform such further acts and
execute such further documents as may reasonably be required to carry out the provisions of this
Agreement.
(i) Blocker. An Optionee shall not be entitled to purchase any shares of Common Stock
pursuant to this Agreement if the sum of (i) the number of shares of Common Stock beneficially
owned by the Optionee and its Affiliates on the Closing Date, and (ii) the number of shares of
Common Stock purchasable on the Closing Date, would result in beneficial ownership by the Optionee
and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on
the Closing Date. For the purposes of the provision to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Each Optionee, for itself only,
shall have the authority and obligation to determine whether the restriction contained in this
Section 4(c) will limit any purchases hereunder and to the extent that the Optionee determines that
the limitation contained in this Section applies, the determination of the amount of shares of
Common Stock purchasable by such Optionee hereunder shall be the responsibility and obligation of
the such Optionee. Each Optionee for itself only, may increase the permitted beneficial ownership
amount up to 9.99% upon and effective after 61 days prior written notice to Gunnerman. The
Optionee may allocate which of the equity of the Company deemed beneficially owned by the Optionee
shall be included in the 4.99% amount described above and which shall be allocated to the excess
above 4.99%.
[Balance of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of October 3, 2008.
STOCKHOLDERS
XXXXXX XXXXXXXXX
|
XXXXX XXXXXXXXX | |||
“Stockholder”
|
“Stockholder” | |||
/s/ Xxxxxx Xxxxxxxxx
|
/s/ Xxxxx Xxxxxxxxx
|
Optionees
Iroquois
Master Fund, Ltd. |
Iroquois Capital Opportunity Fund, LP | |||
/s/
Xxxxxx Xxxxxxxxx |
/s/ Xxxx Xxxxx |
|||
Its: Authorized
Representative |
Its: Authorized
Representative
|
|||
Xxxx
Xxxxx
|
Xxxxx International, LP. | |||
/s/ Xxxx Xxxxx |
/s/ Xxxxxx Xxxxx |
|||
Its:
|
Its: Authorized Representative | |||
Xxxxxx
Xxxx |
Xxxxx Xxxx Irrevocable Trust | |||
/s/
Xxxxxx Xxxx |
/s/ Xxxxxx Xxxx |
|||
Its:
|
Its: Trustee | |||
Xxxx
Xxxxxx Foundation Trust
|
Xxxxx Xxxx Trust | |||
/s/
Xxxxxx Xxxx |
/s/ Xxxxxx Xxxx |
|||
Its: Trustee
|
Its: Trustee | |||
Xxxxxxx
X. Xxxx Custodian for Xxxxxxxx Xxxx |
Xxxxxxx X. Xxxx Custodian for Xxxxx Xxxx | |||
/s/
Xxxxxx Xxxx |
/s/ Xxxxxx Xxxx |
|||
Its: Custodian
|
Its: Custodian | |||
Xxxxxxx
X. Xxxx Custodian for Xxxxxxx Xxxx |
Xxxxxx Xxxxxxxxx | |||
/s/
Xxxxxx Xxxx |
/s/ Xxxxxx Xxxxxxxxx |
|||
Its: Custodian
|
||||
Xxxxxxx
Xxxxxxxxx |
American Capital Management LLC | |||
/s/
Xxxxxxx Xxxxxxxxx |
/s/ Xxxxxxx Xxxxxxxxx |
|||
Its: Custodian
|
Its: Authorized Representative | |||
Xxxxxx,
Ltd |
Ralkmaker Associates, Inc | |||
/s/
Xxxxx Xxxxx |
/s/ Xxxxxxxx Xxxxxx |
|||
Its: Authorized
Representative
|
Its: Authorized Representative | |||
Xxx
Xxxxxxx |
Xxxxxx Xxxxxxx | |||
/s/
Xxx Xxxxxxx |
/s/ Xxxxxx Xxxxxxx |
|||
Its:
|
Its: | |||
Empire
Group, Ltd |
Xxxxxxx Xxxxxxx | |||
/s/
Xxxxxx Xxxxx |
/s/ Xxxxxxx Xxxxxxx |
|||
Its: Authorized
Representative
|
Its: |
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SCHEDULE A TO STOCK OPTION AGREEMENT
Optionee | Shares | |||
Iroquois Master Fund Ltd. 000 Xxxxxxxxx Xxx., 00xx Xxxxx, Xxx Xxxx XX 00000 (000) 000-0000 Attn: Xxxxxx Xxxxxxxxx |
900,000 | |||
Iroquois Capital Opportunity Fund LP 000 Xxxxxxxxx Xxx., 00xx Xxxxx, Xxx Xxxx XX 00000 (000) 000-0000 Attn: Xxxxxx Xxxxxxxxx |
900,000 | |||
Xxxx Xxxxx 000 Xxxxxxxxx Xxx., 00xx Xxxxx, Xxx Xxxx XX 00000 (000) 000-0000 |
700,000 | |||
Xxxxx International LP 00 Xxxx Xxxxxxx XXX, Xxxxx 000 Xxxxxx Xxxxxx XX, 00000 (000) 000-0000 Attn: Xxx Xxxxxxx |
1,000,000 | |||
Xxxxxx Xxxx 000 Xxxxxxxxx Xxx., 00xx Xxxxx, Xxx Xxxx XX 00000 (000) 000-0000 Attn: Xxxxxxx Xxxx |
25,000 | |||
Xxxxx Xxxx Irrevocable Trust 000 Xxxxxxxxx Xxx., 00xx Xxxxx, Xxx Xxxx XX 00000 (000) 000-0000 Attn: Xxxxxxx Xxxx |
100,000 | |||
Xxxx Xxxxxx Foundation Trust 000 Xxxxxxxxx Xxx., 00xx Xxxxx, Xxx Xxxx XX 00000 (000) 000-0000 Attn: Xxxxxxx Xxxx |
40,000 | |||
Xxxxx Xxxx Trust 000 Xxxxxxxxx Xxx., 00xx Xxxxx, Xxx Xxxx XX 00000 (000) 000-0000 Attn: Xxxxxxx Xxxx |
50,000 | |||
Xxxxxxx X. Xxxx Custodian for Xxxxxxxx Xxxx 000 Xxxxxxxxx Xxx., 00xx Xxxxx, Xxx Xxxx XX 00000 (000) 000-0000 Attn: Xxxxxxx Xxxx |
20,000 | |||
Xxxxxxx X. Xxxx Custodian for Xxxxx Xxxx 000 Xxxxxxxxx Xxx., 00xx Xxxxx, Xxx Xxxx XX 00000 (000) 000-0000 Attn: Xxxxxxx Xxxx |
20,000 |
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Optionee | Shares | |||
Xxxxxxx X. Xxxx Custodian for Xxxxxxx Xxxx 000 Xxxxxxxxx Xxx., 00xx Xxxxx, Xxx Xxxx XX 00000 (000) 000-0000 Attn: Xxxxxxx Xxxx |
20,000 | |||
Xxxxxx Xxxxxxxxx 000 Xxxxxxxxx Xxx., 00xx Xxxxx, Xxx Xxxx XX 00000 (000) 000-0000 |
200,000 | |||
Xxxxxx Xxxxxxxxx 000 Xxxxxxxxx Xxx., 00xx Xxxxx, Xxx Xxxx XX 00000 (000) 000-0000 |
50,000 | |||
American Capital Management LLC 000 Xxxxxxxxx Xxx., 00xx Xxxxx, Xxx Xxxx XX 00000 (000) 000-0000 Attn: Xxxxxx Xxxxxxxxx |
200,000 | |||
Xxxxxx Ltd. 000, Xxxxxxxxxxxxxxxxxxxx Xxxxxx, Xxxxxxxxxxx, 0000 Attn: Xxxxx Xxxxx |
200,000 | |||
Rainmaker Associates Inc. 00 X 00xx Xx. Xxxxx 000 Xxx Xxxx, XX 00000 (000) 000-0000 Attn: Xxxxxxxx Xxxxxx |
100,000 | |||
Xxx Xxxxxxx 00-00 Xxxxxxxxxx Xxx Xxxxxxxxx XX, 00000 (201) 000- 0000 |
000,000 | |||
Xxxxxx Xxxxxxx 00-00 Xxxxxxxxxx Xxx Xxxxxxxxx XX, 00000 (201) 000- 0000 |
000,000 | |||
Empire Group, Ltd. c/o Primeway SA 0 xxx xx Xxxxx 0000 Xxxxxx Xxxxxxxxxxx 011 41 22 307 37 24 Attention Xxxxxx Xxxxx |
100,000 | |||
Xxxxxxx Xxxxxxxx 00 Xxxxxx Xxxx Xx Xxxxx Xxxx Xxxxxx, XX0 0XX 011 44207 483 4138 |
200,000 | |||
Total |
5,025,000 |
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