Exhibit 10.2
 

EMPLOYMENT AGREEMENT

 
This EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of May 17, 2007,
by and between SulphCo, Inc., a Nevada corporation (along with its successors
and assigns, the “Company”), and Stanley W. Farmer (“Executive”).
 
WHEREAS, the Company desires to employ Executive, and Executive desires to be
employed by the Company, on the terms and conditions hereinafter set forth.
 
NOW, THEREFORE, in consideration of the mutual promises contained herein and
other good and valuable consideration, the Company and Executive agree as
follows:
 
1.     Employment.
 
(a) Term. Subject to the terms hereof, Executive’s employment hereunder shall
commence as of June 11, 2007 (the “Effective Date”) and continue until the first
anniversary of the Effective Date, with automatic one (1) year extensions
thereafter, unless otherwise terminated by Executive or by the Company pursuant
to Section 3 of the Agreement (such period, the “Employment Period”).
 
(b) Position, Place of Performance and Duties. Executive will serve as the
Company’s Vice President and Chief Financial Officer, and Executive shall report
directly to the Company’s Chief Executive Officer (“CEO”), the Company’s Board
of Directors (the “Board”) and any committees thereof. Executive will have the
responsibilities, duties and authority commensurate with the position of Vice
President and Chief Financial Officer, and Executive will perform such other
services of an executive nature as may be prescribed from time to time by the
CEO and the Board. Executive will generally perform his services hereunder at
the Company’s offices in Houston, TX, or such other place as may be agreed to by
Executive and the Board. During the Employment Period, the Company shall pay for
all reasonable travel expenses associated with Executive’s commute between Texas
and Nevada for the purpose of performing services hereunder. During the
Employment Period, Executive will be available to travel for business at such
times and to such places as may be reasonably necessary in connection with the
performance of his duties hereunder, including, but not limited to, anywhere in
the United States, the Middle East and Europe. Executive shall devote his full
business time and efforts to the performance of his duties hereunder. For the
duration of the Employment Period, Executive agrees not to actively engage in
any other employment, occupation or consulting activity for any direct or
indirect remuneration without the prior written approval of the Board, which
approval will not be unreasonably withheld; provided, however, that Executive
may, without the approval of the Board, serve in any capacity with any civic,
educational or charitable organization, subject to Executive’s obligations under
this Agreement and any agreement contemplated under Section 5 of this Agreement.
 
2.     Compensation.
 
(a) Base Salary. During the Employment Period, the Company will pay Executive a
base salary at the annual rate of $250,000, which amount will be reviewed
annually and subject to adjustment at the good faith discretion of the Board (or
the Compensation Committee of the Board (the “Compensation Committee”)),
including without limitation, discretionary cost of living adjustments (as
adjusted from time to time, the “Base Salary”). The Base Salary will be payable
in substantially equal installments in accordance with the Company’s payroll
practices as in effect from time to time.
 
 
 

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(b) Annual Bonus. During the Employment Period, based on Executive’s performance
relative to targets set by the Board and/or the Compensation Committee in its
sole discretion, and subject to the overall performance of the Company,
Executive will be eligible to receive annual bonuses, with a target bonus of up
to 50% of Base Salary, in accordance with the terms and conditions established
by the Board and/or the Compensation Committee from time to time.
 
(c) Equity Compensation. On the Effective Date, Executive will be granted a
stock option to purchase one hundred fifty thousand (150,000) shares of the
Company's common stock at an exercise price equal to the fair market value of
the Company’s common stock on the date of grant (the “Option”). The Option will
vest over a three-year period, with 1/3 of the shares subject to the Option
vesting on each of the first three anniversaries following the date of grant.
The Option will be subject to the terms, definitions and provisions of the
SulphCo, Inc. 2006 Stock Option Plan, and the accompanying stock option
agreement under which it is granted. In addition, Executive may further be
entitled to annual option grants as part of the annual review process at the
discretion of the Board and the Compensation Committee.
 
(d) Vacation. During the Employment Period, Executive will be entitled to (i)
five weeks paid vacation in each calendar year (to be taken at such times and in
such number of days as Executive and the Company shall mutually agree), (ii)
paid sick days as needed due to illness or other incapacity, and (iii) paid
Company holidays, all in accordance with the Company’s policies for its senior
executives as in effect from time to time. Any accrued unused vacation may be
carried over from one year to the following year, provided that no more than
five weeks vacation may be carried over at any time.
 
(e) Benefits. During the Employment Period, Executive (and his eligible
dependents) will be entitled to participate in the same manner as the Company’s
other senior executives in any employee benefit plans which the Company provides
or may establish for the benefit of its senior executives generally; provided
that the Company reserves the right to cancel or change any of its employee
benefit plans and programs at any time.
 
(f) Reimbursement of Expenses. During the Employment Period, the Company will
reimburse Executive for all out-of-pocket business expenses that are incurred by
him in furtherance of the Company’s business in accordance with the Company’s
policies with respect thereto as in effect from time to time. Without limiting
the generality of the foregoing, the Company shall pay or reimburse Executive
for charges relating to the use of his cellular phone and reasonable business
travel expenses.
 
(g) Signing Bonus. Within ten (10) days following the Effective Date, the
Company shall pay to Executive a one-time signing bonus of $75,000.
 
(h) Incentive Compensation. During the Employment Period, Executive will be
entitled to participate in the same manner as the Company’s other senior
executives in any executive incentive compensation plans which the Company
provides or may establish for the benefit of its senior executives generally;
provided that the Company reserves the right to cancel or change any of such
plans and programs at any time.
 
 
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3.     Termination. Executive’s employment hereunder will terminate upon the
first to occur of the following:
 
(a) Executive’s death;
 
(b) by the Company in the event of Executive’s Disability (as defined below);
 
(c) by the Company for Cause (as defined below);
 
(d) by the Company without Cause; or
 
(e) by Executive, with or without Good Reason (as defined below).
 
For purposes of this Agreement, the following terms shall have the following
meanings:
 
“Cause” means: (i) Executive’s conviction of, or plea of nolo contendere to, a
felony, or a crime involving dishonesty, disloyalty or moral turpitude; (ii)
Executive’s willful disloyalty or deliberate dishonesty; (iii) the commission by
Executive of an act of fraud or embezzlement against the Company; (iv)
Executive’s failure to use his good faith efforts to perform in all material
respects such duties as are contemplated by this Agreement, or to follow any
lawful direction of the CEO, the Board or any committee thereof; (v) Executive’s
gross negligence in the performance of his duties hereunder; or (vi) a material
breach by Executive of any provision of this Agreement or of any Company policy,
which breach is not cured within thirty (30) days after delivery to Executive by
the Company of written notice of such breach, provided that, if such breach is
not capable of being cured within such 30-day period, Executive will have a
reasonable additional period to cure such breach. No act or omission on
Executive’s part will be considered “willful” unless done, or admitted to be
done, by Executive in bad faith or without his reasonable belief that such act
or omission was in the best interests of the Company. Any determination of
“Cause” shall be made in good faith by a majority vote of the Board.
 
“Disability” means Executive’s mental, physical or other disability, the
condition of which renders him incapable of performing his obligations under
this Agreement for a period of 90 consecutive days or an aggregate of 120 days
(whether or not consecutive) in any 12-month period. Any determination of
“Disability” shall be made in good faith by a majority vote of the Board.
 
“Good Reason” means, without Executive’s consent: (i) a failure by the Company
to comply with any material provision of this Agreement which is not cured
within thirty (30) days after Executive has given written notice of such
noncompliance to the Company, provided that, if such failure is not capable of
being cured within such 30-day period, the Company will have a reasonable
additional period to cure such failure; (ii) a material adverse change by the
Company in Executive’s responsibilities, duties or authority as the Vice
President and Chief Financial Officer of the Company, which causes Executive’s
position with the Company to have less responsibility or authority than
Executive’s position immediately prior to such change, provided that any such
change is not in connection with the termination of Executive’s employment with
the Company; or (iii) at Executive’s election, a Change in Control of the
Company if, following such Change in Control, Executive is no longer the Vice
President and Chief Financial Officer of the Company (or the surviving or
successor company, as applicable), provided that Executive’s election under this
subsection (iii) may only be exercised within the thirty (30) day period
following the first six (6) month anniversary following the Change in Control.
 
 
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“Change in Control” means: (i) the acquisition by any person, entity or
affiliated group becoming the beneficial owner of more than 50% of the
outstanding equity securities of the Company or otherwise becoming entitled to
vote more than 50% of the voting power of the Company; (ii) a consolidation or
merger (in one transaction or a series of related transactions) of the Company
pursuant to which the holders of the Company’s equity securities immediately
prior to such transaction or series of related transactions would not be the
holders immediately after such transaction or series of related transactions of
at least 50% of the voting power of the entity surviving such transaction or
series of related transactions; or (iii) the sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company. In all respects, the definition
of “Change in Control” shall be interpreted to comply with Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), and any successor
statute, regulation and guidance thereto.
 
4.     Termination Procedures; Effect of Termination.
 
(a) Notice of Termination. Any termination of Executive’s employment by the
Company or Executive (other than termination on account of Executive’s death)
shall be communicated by written notice (a “Notice of Termination”) to the other
party hereto in accordance with Section 7(a) below, which notice shall indicate
the specific termination provision in Section 3 of this Agreement relied upon
and, if the termination is by the Company for Cause or by Executive for Good
Reason, the specific reasons therefor.
 
(b) Date of Termination. As used herein, “Date of Termination” shall mean: (i)
if Executive’s employment is terminated as a result of Executive’s death, the
date of Executive’s death; (ii) if Executive’s employment is terminated by
reason of Executive’s Disability, on the date Notice of Termination is given or
such later date specified in the Notice of Termination as the effective date of
termination; (iii) if Executive’s employment is terminated by the Company for
Cause, on the date Notice of Termination is given or such later date specified
in the Notice of Termination as the effective date of termination; (iv) if
Executive’s employment is terminated by the Company without Cause, such date
which is specified in the Notice of Termination as the effective date of
termination; and (v) if Executive’s employment is terminated by Executive, with
or without Good Reason, such date which is specified in the Notice of
Termination as the effective date of termination, which date shall be at least
thirty (30) days following the date the Notice of Termination is given.
 
(c) Compensation Upon Termination.
 
(i) At any time that Executive’s employment is terminated, the Company will pay
the Accrued Obligations (as defined below) to Executive (or to his estate or
legal representative, if applicable) on or promptly following the Date of
Termination. For purposes of this Agreement, “Accrued Obligations” means (A) the
portion of Executive’s Base Salary as has accrued up through the Date of
Termination which the Executive has not yet been paid, (B) an amount equal to
any unpaid bonus which has already been earned and awarded by the Board and/or
the Compensation Committee through the Date of Termination, (C) an amount equal
to the value of Executive’s accrued unused vacation days, and (D) the amount of
expenses incurred by Executive on behalf of the Company prior to the Date of
Termination and not yet reimbursed as of such date.
 
 
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(ii) In addition to the Accrued Obligations, if Executive’s employment is
terminated by the Company without Cause or by Executive for Good Reason (and
other than due to Executive’s death or Disability), then in exchange for
Executive’s execution and delivery to the Company of a full general release
(which Executive does not later revoke in accordance with its terms), in a form
acceptable to the Company, releasing all claims, known or unknown, that
Executive may have against the Company, and any subsidiary or related entity,
their officers, directors, employees and agents, the Company will (A) within
thirty (30) days following the Date of Termination, pay to Executive (or his
estate or legal representative if applicable) a lump-sum severance payment equal
to one year of his then current Base Salary, and (B) upon proper election of
continuation coverage under Title X of the Consolidated Budget Reconciliation
Act of 1985, as amended (“COBRA”) under the Company’s group health plans,
continue to pay the group medical and dental COBRA premiums for Executive and
Executive’s eligible dependents until the earlier of (x) the date Executive
first becomes eligible for coverage under a subsequent employer’s applicable
group health plan(s), (y) the date such coverage terminates under applicable
law, or (z) twelve (12) months after the Date of Termination.
 
Notwithstanding any other provision with respect to the timing of payments under
this Section 4(c), if, at the time of Executive’s termination, Executive is
deemed to be a “specified employee”  (within the meaning of Code Section 409A,
and any successor statute, regulation and guidance thereto) of the Company, then
only to the extent necessary to comply with the requirements of Code Section
409A, any payments to which Executive may become entitled under Section 4(c)
which are subject to Code Section 409A (and not otherwise exempt from its
application) will be withheld until the first business day of the seventh month
following the Date of Termination, at which time the Executive shall be paid an
aggregate amount of any withheld payments otherwise due under Section 4(c), as
applicable.
 
(d) Other Provisions. The effect of termination on any stock options or
restricted stock granted or issued to Executive shall be governed by the terms
and provisions of any applicable option agreement, restricted stock agreement
and/or equity incentive plan. The amount of any benefit due to Executive after
the date of such termination pursuant to this Agreement will not be reduced or
offset by any payment or benefit that Executive may receive from any other
source.
 
5.     Restrictive Covenants. On the Effective Date, Executive will enter into a
confidentiality, non-competition, non-solicitation, assignment of inventions and
non-disparagement agreement, substantially similar to the Company’s standard
form of agreement used for its senior executives, and the non-competition and
non-solicitation covenants shall last for two years following the Date of
Termination.
 
6.     Indemnification. The Company shall, to the fullest extent permitted by
law and by its Articles of Incorporation and Bylaws, indemnify Executive and
hold him harmless for any acts or decisions made by him in good faith while
performing his duties to the Company, and the Company shall at all times during
Executive’s employment with the Company, maintain directors’ and officers’
liability insurance, at and upon commercially reasonable terms and limits.
 
 
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7.     General.
 
(a) Notices. All notices, requests, consents and other communications hereunder
will be in writing, will be addressed to the receiving party’s address set forth
below or to such other address as a party may designate by notice hereunder, and
will be either (i) delivered by hand, (ii) sent by overnight courier, or
(iii) sent by registered or certified mail, return receipt requested, postage
prepaid. All notices, requests, consents and other communications hereunder will
be deemed to have been given either (A) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(B) if sent by overnight courier, on the next business day following the day
such notice is delivered to the courier service, or (C) if sent by registered or
certified mail, on the third business day following the day such mailing is
made. All notices, requests, consents and other communications hereunder will be
sent as follows:
 

If to the Company:
SulphCo, Inc.

850 Spice Islands Drive
Sparks, Nevada 89431
Attention: Chief Executive Officer
 

If to Executive:
Stanley W. Farmer

13418 North Bend Landing
Cypress, Texas 77429
 
(b) Entire Agreement. This Agreement (together with any other agreements
referenced herein) embodies the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior oral or written agreements and understandings relating to the subject
matter hereof. No statement, representation, warranty, covenant or agreement of
any kind not expressly set forth in this Agreement will affect, or be used to
interpret, change or restrict, the express terms and provisions of this
Agreement.
 
(c) Modifications and Amendments. The terms and provisions of this Agreement may
be modified or amended only by written agreement executed by the parties hereto.
The Company and Executive agree that they will negotiate in good faith and
jointly execute an amendment to modify this Agreement to the extent necessary to
comply with the requirements of Code Section 409A, or any successor statute,
regulation and guidance thereto, provided, however, no such amendment will
increase the financial obligations of the Company to Executive.
 
 
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(d) Waivers and Consents. The terms and provisions of this Agreement may be
waived, or consent for the departure therefrom granted, only by written document
executed by the party entitled to the benefits of such terms or provisions. No
such waiver or consent will be deemed to be or will constitute a waiver or
consent with respect to any other terms or provisions of this Agreement, whether
or not similar Each such waiver or consent will be effective only in the
specific instance and for the purpose for which it was given, and will not
constitute a continuing waiver or consent.
 
(e) Successors and Assigns; Third Party Beneficiaries. All statements,
representations, warranties, covenants and agreements in this Agreement will be
binding on the parties hereto and will inure to the benefit of the respective
successors, heirs, executors and permitted assigns of each party hereto. Any
such successor of the Company will be deemed substituted for the Company under
the terms of this Agreement for all purposes. For this purpose, “successor”
means any person, firm, corporation or other business entity which at any time,
whether by purchase, merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company. Executive may not
assign any of Executive’s rights to compensation or other benefits under this
Agreement, except by will or the laws of descent and distribution. Any other
attempted assignment, transfer, conveyance or other disposition of Executive’s
right to compensation or other benefits will be null and void. Nothing in this
Agreement will be construed to create any rights or obligations except among the
parties hereto, and (except for Executive’s estate or other legal
representative) no person or entity will be regarded as a third-party
beneficiary of this Agreement.
 
(f) Governing Law. This Agreement and the rights and obligations of the parties
hereunder will be construed in accordance with and governed by the law of the
State of Texas, without giving effect to the conflict of law principles thereof.
 
(g) Jurisdiction, Venue. Any legal action or proceeding with respect to this
Agreement will be brought in the Federal or state courts of Harris County, Texas
with competent subject matter jurisdiction. By execution and delivery of this
Agreement, each of the parties hereto accepts for itself and in respect of its
property, generally and unconditionally, the exclusive jurisdiction of the
aforesaid courts
 
(h) Severability. The parties intend this Agreement to be enforced as written.
However, if any court of competent jurisdiction determines any provision, or any
portion thereof, of this Agreement to be unenforceable or invalid, then such
provision shall be deemed limited to the extent that such court deems it valid
or enforceable and the remaining provisions of this Agreement shall nevertheless
remain in full force and effect.
 
(i) Headings and Captions. The headings and captions of the various subdivisions
of this Agreement are for convenience of reference only and will in no way
modify or affect the meaning or construction of any of the terms or provisions
hereof.
 
 
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(j) No Waiver of Rights, Powers and Remedies. No failure or delay by a party
hereto in exercising any right, power or remedy under this Agreement, and no
course of dealing between the parties hereto, will operate as a waiver of any
such right, power or remedy of the party No single or partial exercise of any
right, power or remedy under this Agreement by a party hereto, nor any
abandonment or discontinuance of steps to enforce any such right, power or
remedy, will preclude such party from any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. The election of any
remedy by a party hereto will not constitute a waiver of the right of such party
to pursue other available remedies. No notice to or demand on a party not
expressly required under this Agreement will entitle the party receiving such
notice or demand to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the party giving such
notice or demand to any other or further action in any circumstances without
such notice or demand.
 
(k) Expenses. Each party shall bear its own fees and expenses incurred in
connection with the preparation, negotiation, execution and delivery of this
Agreement. The prevailing party in any legal proceeding to enforce this
Agreement shall be entitled to legal fees and costs reasonably incurred. 
 
(l) Deductions and Withdrawals. The Company will deduct from each payment to be
made to Executive under this Agreement such amounts, if any, required to be
deducted or withheld under applicable law or under any Company-sponsored
employee benefit plan in which Executive participates.
 
(m) Tax Consequences. Executive hereby acknowledges and agrees that the Company
makes no representations or warranties regarding the tax treatment or tax
consequences of any compensation, benefits or other payments under the
Agreement, including, without limitation, by operation of Code Section 409A, or
any successor statute, regulation and guidance thereto.
 
(n) Counterparts. This Agreement may be executed in two or more counterparts,
and by different parties hereto on separate counterparts, each of which will be
deemed an original, but all of which together will constitute one and the same
instrument. This Agreement may be delivered by facsimile, and facsimile
signatures shall be treated as original signatures for all applicable purposes.
 
(o) Opportunity to Review. Executive hereby acknowledges that Executive has had
adequate opportunity to review these terms and conditions and to reflect upon
and consider the terms and conditions of this Agreement, and that Executive has
had the opportunity to consult with counsel of Executive’s own choosing
regarding such terms.  Executive further acknowledges that Executive fully
understands the terms of this Agreement and has voluntarily executed this
Agreement.
 
[Remainder of page left intentionally blank. Signature page(s) to follow.]
 
 
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IN WITNESS WHEREOF, the undersigned have executed and delivered this Agreement
as of the date and year first above written.
 
 
SULPHCO, INC.

By:__________________________

Name:________________________

Title:_________________________

EXECUTIVE
 

_____________________________
Stanley W. Farmer  
 

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