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Exhibit 10.3

MEMBERSHIP INTEREST PURCHASE AGREEMENT

by and among

SNRG CORPORATION,

As Purchaser

W. W. SCOTT, JR.

and

JOHN W. JOHNSON,

As Sellers

Dated as of August 17, 2005

 

 

 

 

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MEMBERSHIP INTEREST PURCHASE AGREEMENT

Membership Interest Purchase Agreement (this “Agreement”), dated as of August
17, 2005, by and among SNRG Corporation, formerly known as Texen Oil & Gas,
Inc., a Nevada corporation (the “Purchaser”), Woodrow W. Scott, Jr., an
individual (“Scott”), and John W. Johnson, an individual (“Johnson”, and
together with Scott, the “Sellers”).

RECITALS

WHEREAS, in October, 2001, Port Assets, LLC., a limited liability company formed
and existing under the laws of the State of Texas (the “Company”), acquired the
Plant pursuant to a Bankruptcy Trustee’s Bill of Sale; and

WHEREAS, the Board of Directors of the Purchaser has approved and authorized the
acquisition of the Company, upon the terms and subject to the conditions set
forth in this Agreement, and the execution, delivery, and performance of this
Agreement and the transaction contemplated hereby; and

WHEREAS, each of the Sellers has the capacity to execute and deliver this
Agreement and to perform the transactions contemplated hereby; and

WHEREAS, the Purchaser and the Sellers desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated hereby.

NOW, THEREFORE, in consideration of the foregoing, and of the representations,
warranties, covenants and agreements contained herein, the parties hereto hereby
agree as follows:

ARTICLE I

 

Definitions

1.1          Definitions. In addition to terms defined elsewhere in this
Agreement, the following terms when used in this Agreement shall have the
meanings indicated below:

“Affiliate” of a Person shall mean a Person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with such Person.

“Agreement” shall have the meaning set forth in the preamble hereto.

“Applicable Law” shall mean, with respect to any Person, any international,
national, regional, state or local treaty, statute, law, ordinance, rule,
administrative action, regulation, order, writ, injunction, judgment, decree or
other requirement of any Governmental Authority

 

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and any requirements imposed by common law or case law, applicable to such
Person or any of its properties, assets, officers, directors, employees,
consultants or agents (in connection with their activities on behalf of such
Person or any of its Affiliates). Applicable Law includes, without limitation,
Environmental and Safety Requirements, and state and local zoning and building
laws.

“Business Day” shall mean any day on which banks are not required or authorized
by Applicable Law or executive order to close in the State of Texas.

“Closing” shall have the meaning set forth in Section 7.1.

“Closing Date” shall have the meaning set forth in Section 7.1.

“Company” shall have the meaning set forth in the preamble hereto.

“Encumbrance” shall mean any claim, lien, charge, security interest, pledge,
mortgage, or any other restriction or encumbrance of any kind or nature.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.

“GAAP” shall mean United States generally accepted accounting principles, as in
effect from time to time.

“Governmental Authority” shall mean any domestic, international, national,
territorial, regional, state or local governmental authority, quasi-governmental
authority, instrumentality, court, commission, arbitrator or arbitration panel,
or tribunal or any regulatory, administrative or other agency, or any political
or other subdivision, department or branch of any of the foregoing.

“Gross Revenue” shall be determined in accordance with GAAP, consistently
applied; provided that Gross Revenue shall include, but not be limited to, all
Tipping Fees paid with respect to materials or waste delivered to the Plant and
all revenues generated from any materials or waste processed by the Plant,
including revenues generated by the sale of products derived from such materials
or waste.

“Knowledge” or “knowledge” shall mean, with respect to any Person, the actual
knowledge of such Person.

“Litigation” shall have the meaning set forth in Section 4.7.

“Material Adverse Change” shall mean any material adverse change in the
financial condition, assets, liabilities, properties, or business of the
Purchaser or the Company, as the case may be.

“Material Adverse Effect” shall mean any event or condition of any character
which has had or could reasonably be expected to have a material adverse effect
on the condition, assets, liabilities, properties, business, or prospects of the
Purchaser, or the Company, as the case may be.

 

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“Person,” whether or not capitalized, shall mean any natural person,
corporation, unincorporated organization, partnership, limited liability
company, association, joint stock company, joint venture, trust or Governmental
Authority, or any agency or political subdivision of any Governmental Authority
or any other entity.

“Plant” shall mean the gasification facility located on Farm Road 3057 in Bay
City, Texas, formerly known as the Molten Metal Technologies Bay City plant.

“Purchaser” shall have the meaning set forth in the preamble hereto.

“SEC” shall mean the Securities and Exchange Commission of the United States.

“Securities Act” shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.

“Tipping Fees” shall mean fees paid to or received by the Company with regard to
materials delivered to the Plant for processing.

1.2          Interpretation. For purposes of this Agreement, (i) the words
“include,” “includes” and “including” shall be deemed to be followed by the
words “without limitation”, (ii) the words “herein”, “hereof”, “hereby”,
“hereto” and “hereunder” refer to this Agreement as a whole, including the
Exhibits and Schedules, (iii) the use of any gender shall be construed to
include all other genders, unless the context clearly indicates that less than
all the genders is intended, (iv) word describing the singular number shall
include the plural, and vice versa, (v) all references to a Person are also to
its permitted successors and assigns, and (vi) the words “shall” and “will” mean
the listed duties are mandatory. References herein to Articles, Sections,
Exhibits and Schedules mean the Articles and Sections of, and the Exhibits and
Schedules attached to, this Agreement.

ARTICLE II

 

Purchase of Securities; Consideration

2.1          Purchase of Securities. Subject to the terms and conditions set
forth herein, the Sellers shall sell to the Purchaser, and the Purchaser shall
purchase from the Sellers, all of the Sellers’ right, title, and interest in and
to the membership interests of the Company (the “Membership Interests”)
indicated next to such Seller’s name on Schedule 2.1 hereto, which shall
collectively constitute one hundred percent (100%) of the issued and outstanding
membership interests of the Company. At the Closing, each Seller shall deliver
to the Purchaser all of the Membership Interests indicated next to such Seller’s
name on Schedule 2.1 hereto, together with membership interest powers duly
executed by such Seller in blank and sufficient to convey to Purchaser good and
marketable title to the Membership Interests free and clear of any and all
Encumbrances of any nature whatsoever and together with all accrued benefits and
rights attaching thereto.

2.2          Consideration. The purchase price for the Membership Interests (the
“Purchase Price”) shall be paid by the Purchaser to the Sellers as follows:

 

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(a)          $3,000,000, of which $150,000 has previously been paid to the
Sellers by the Purchaser, and $2,850,000 of which shall be payable at the
Closing in cash by wire transfer of immediately available funds to an account or
accounts specified by the Sellers;

(b)          All Royalty Payments (as defined below) which become payable in
accordance with Section 2.3; and

(c)          Warrants to purchase up to 3,000,000 shares of common stock, par
value $0.00001 per share of the Purchaser (the “Purchaser Common Stock”), having
substantially the same terms as set forth on Schedule 2.2 hereto.

2.3          Royalty Payments. Commencing on August 15, 2007, the Purchaser
shall pay the Sellers royalty payments equal to three percent (3%) of all Gross
Revenue earned by the Company, or its successor, from the first Ninety Thousand
(90,000) metric tons of material or waste processed by the Plant in any calendar
year thereafter; provided, however, that in the 2007 calendar year, the
Purchaser shall pay the Sellers royalty payments equal to three percent (3%) of
all Gross Revenue from the first Ninety Thousand (90,000) metric tons of
material or waste processed by the Plant on and after August 15, 2007 thru
December 31, 2007 (the “Royalty Payments”). Royalty Payments earned during any
calendar quarter shall be paid to the Sellers no later than the forty-fifth
(45th) calendar day after the end of such calendar quarter and shall be
accompanied by a certificate, substantially in the form attached hereto as
Schedule 2.3, completed and signed by an officer of the Company and the
Purchaser.

2.4          Buyout of Royalty Payments. At any time prior to August 15, 2007,
the Purchaser may terminate the Royalty Payments (the “Buy-Out Right”) by paying
to the Sellers an amount (the “Buy-Out Payment”) equal to the greater of (i)
$3,000,000 and (ii) eight (8) times the Annualized Royalty Payments (as defined
below) which would have been paid to the Sellers if Royalty Payments had been
calculated and paid prior to August 15, 2007. “Annualized Royalty Payments”
shall mean the average of the Royalty Payments which would have been paid to the
Sellers in the two calendar quarters immediately prior to the calendar quarter
in which the Buy-Out Notice is delivered to the Sellers multiplied by four (4).
The Buy-Out Payment shall be paid in cash by wire transfer of immediately
available funds to an account or accounts specified by the Sellers. The
Purchaser may exercise the Buy-Out Right by delivering to the Sellers written
notice of its intent to exercise the Buy-Out Right (the “Buy-Out Notice”), which
notice shall set forth a calculation of Annualized Royalty Payments which would
have been paid, including sufficient facts and financial results to permit the
Sellers to confirm the calculation of the Annualized Royalty Payments. The
exercise of the Buy-Out Right shall be effective as of the first day of the
calendar quarter in which such Buy-Out Notice is delivered to the Sellers and
shall be paid on the thirtieth (30) day following receipt of the Buy-Out Notice
by the Sellers. For the avoidance of doubt, the Buy-Out Payment shall not be
reduced by the amount of any Royalty Payments, if any, paid to the Sellers prior
to delivery of the Buy-Out Notice to the Sellers.

 

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ARTICLE III

 

Representations and Warranties of the Purchaser

In order to induce the Sellers to enter into this Agreement and to consummate
the transactions contemplated hereby, the Purchaser hereby represents and
warrants to the Sellers as follows:

3.1          Existence; Good Standing; Corporate Authority. The Purchaser is a
corporation duly organized, validly existing and in good standing under the
Applicable Laws of the State of Nevada.

3.2          Authorization, Power, and Enforceability. The execution, delivery,
and performance of this Agreement and issuance of the Warrants by the Purchaser
and the consummation by the Purchaser of the transactions contemplated hereby
have been duly authorized by all requisite corporate action on the part of the
Purchaser. The Purchaser has the requisite corporate power and authority to
execute and deliver this Agreement and the Warrant, as applicable, and to
consummate the transactions contemplated hereby and thereby. This Agreement and
the Warrants, as applicable, have been duly executed and delivered by the
Purchaser and constitute the legal, valid, and binding obligations of the
Purchaser, enforceable in accordance with their respective terms, except to the
extent that their enforcement is limited by bankruptcy, insolvency,
reorganization, or other similar laws, now or hereafter in effect, relating to
creditors’ rights generally and by general principles of equity.

3.3          No Violation or Conflict; Consents. The execution, delivery, and
performance by the Purchaser of this Agreement and the Warrant, as applicable,
will not (a) violate, conflict with or result in a breach of the Certificate of
Incorporation or Bylaws of the Purchaser; (b) with or without the passage of
time or the giving of notice, result in the breach of, or constitute a default,
cause the acceleration of performance or require any consent under, or result in
the creation of any lien, charge, or other Encumbrance upon any property or
assets of the Purchaser pursuant to any agreement or instrument to which the
Purchaser is a party or by which the Purchaser is a party or by which the
Purchaser or its properties may be bound or affected; (c) violate or conflict
with any Applicable Law or regulation, or any writ, order, or decree of any
court or other Governmental Authority, except for any such violations which
would not have a Material Adverse Effect; or (d) require any consent, approval
or authorization of, or filing or registration with, any Governmental Authority
in connection with, or prior to, the execution, delivery, or performance of this
Agreement, the Warrants, and the consummation of the transactions contemplated
hereby.

ARTICLE IV

 

Representations and Warranties of the Sellers

In order to induce the Purchaser to enter into this Agreement and to consummate
the transactions contemplated hereby, the Sellers hereby represent and warrant
to the Purchaser as follows:

 

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4.1          Existence; Good Standing; Corporate Authority. The Company is a
limited liability company duly formed, validly existing and in good standing
under the Applicable Laws of its jurisdiction of formation. The Company is not
qualified to do business as a foreign corporation under the laws of any other
state of the United States. The Company has all requisite power and authority to
own or lease its properties, except where the failure to have such power and
authority would not have a Material Adverse Effect. The Sellers have heretofore
delivered to the Purchaser a true, correct, and complete copy of the Company’s
Certificate of Formation and any other governing documents between the Company
and its managers or members.

4.2          Authorization, Power, and Enforceability. Each of the Sellers has
the capacity to execute, deliver, and perform this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of the Sellers and constitutes the legal, valid, and binding
obligations of each of the Sellers, enforceable in accordance with its terms,
except to the extent that its enforcement is limited by bankruptcy, insolvency,
reorganization, or other similar laws, now or hereafter in effect, relating to
creditors’ rights generally and by general principles of equity.

4.3          No Violation or Conflict; Consents. The execution, delivery, and
performance by each of the Sellers of this Agreement will not (a) with or
without the passage of time or the giving of notice, result in the breach of, or
constitute a default, cause the acceleration of performance or require any
consent under, or result in the creation of any lien, charge, or other
Encumbrance upon any property or assets of the Company pursuant to any agreement
or instrument to which the Company is a party or by which the Company or either
of the Sellers is a party or by which the Company, the Sellers, or their
respective properties may be bound or affected; (b) violate or conflict with any
Applicable Law or regulation, or any writ, order, or decree of any court or
other Governmental Authority, except for any such violations which would not
have a Material Adverse Effect; or (c) require any consent, approval or
authorization of, or filing or registration with, any Governmental Authority in
connection with, or prior to, the execution, delivery, or performance of this
Agreement and the consummation of the transactions contemplated hereby.

4.4          Title to Membership Interests. Each Seller is the record and sole
beneficial owner of the Membership Interests set forth opposite his name on
Schedule 2.1 hereto, and such Membership Interests are owned free and clear of
any Encumbrances. At Closing, the Sellers will transfer and convey, and the
Purchaser will acquire, good and marketable title to the Membership Interests,
free and clear of all Encumbrances, other than Encumbrances placed thereon by
Persons claiming by, through, or under the Purchaser. The Membership Interests
set forth on Schedule 2.1 hereto constitute all of the outstanding membership
interests of the Company. There are no outstanding (a) securities or instruments
convertible into or exercisable for any membership interests of the Company or
(b) options, warrants, subscriptions, or other rights to acquire membership
interests of the Company.

4.5          Conduct of Business. Since the date of its formation, the Company
has not conducted any operating business other than ownership of the Plant and
the liquidation of some materials located in or around the Plant at the time it
was acquired by the Company, and since the date the Company acquired the Plant,
the Plant has not conducted any operations. Since the date of its formation, the
Company has not sold any products or services.

 

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4.6

Subsidiaries. The Company has no subsidiaries.

4.7          Litigation. There are no actions, suits, proceedings, inquiries,
arbitrations, or investigations (“Litigation”) against or affecting the Company,
at law or in equity.

4.8          No Undisclosed Liabilities. The Company does not have any
liabilities or obligations of any nature, contingent or otherwise, other than
any (i) liabilities or obligations arising out of the Net Profits Agreements,
(ii) Financial Advisor’s fees described in Section 4.15 below, (iii) accrued and
unpaid property taxes which are not currently due and payable, and (iv)
liabilities and obligations incurred in the ordinary course of business,
consistent with past practice, since June 1, 2005.

4.9          Taxes. The Company has timely filed all tax returns required to be
filed by the Company, and all such tax returns are true, complete, and correct.
The Company has paid all taxes required to be paid pursuant to such tax returns
or Applicable Law. Neither of the Sellers has filed any income tax returns with
regard to the Membership Interests that are inconsistent in any material respect
with the income tax returns filed by the Company.

4.10       Employees. The Company has not had and does not have any employees.
The Company has not maintained and does not maintain any employee benefit plans.

4.11       Contracts. Except for (i) the Environmental Indemnity, dated October
18, 2001, between Celanese, Ltd. and Port Assets, LLC (the “Environmental
Indemnity”) and (ii) the Consulting and Compensation Agreement between the
Company and Don Brady, the Compensation and Termination Agreement among the
Company, Scott, Twist, Inc., and Duratherm Inc., and that certain agreement
between the Company and Billy Powell with respect to proceeds received by the
Sellers upon sale of the Company (the “Net Profits Agreements”, and together
with the Environmental Indemnity, the “Contracts”), the Company is not party to
or bound by any contracts, agreements, or understandings, true, complete, and
correct executed copies of which have been delivered to the Purchaser. The
Environmental Indemnity is in full force and effect and is the legal, valid, and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except to the extent that its enforcement is limited by
bankruptcy, insolvency, reorganization, or other similar laws, now or hereafter
in effect, relating to creditors’ rights generally and by general principles of
equity. The Company is not in breach of or default under the Contracts, nor, to
the knowledge of the Company or the Sellers, is any other party to the Contracts
in breach thereof or default thereunder. The Company has not received written
notice terminating, or threatening to terminate, the Contracts.

4.12       Title To and Condition of Property. Except for the real property on
which the Plant is located (the “Real Property”), the Company does not own or
lease any real property. The Company has good and marketable fee simple title to
the Real Property, free and clear of all Encumbrances. There are no outstanding
options or rights to purchase the Real Property or any portion thereof. There
are no pending or threatened eminent domain proceedings with respect to any
portion of the Real Property. There is no injunction, decree, order or judgment
outstanding, nor any action, claim, suit, arbitration or other proceeding,
pending or threatened, relating to the ownership, occupancy or operation of the
Real Property by any Person. Except for de minimis items, the Company owns the
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Property free and clear of all Encumbrances. The Sellers make no representations
or warranties with respect to the condition of the Plant and the real property
on which it is located.

4.13       Intellectual Property. Except for intellectual property acquired by
the Company in connection with the acquisition of the Plant pursuant to a
Bankruptcy Trustee’s Bill of Sale, the Company owns no patents, trademarks,
services marks, trade names, logos, internet domain names, copyrights,
confidential technology, or trade secrets, or any applications for any of the
foregoing.

4.14       No Restrictions on Business Activities. There is no agreement
(non-compete or otherwise), judgment, injunction, order or decree to which the
Company is a party or is otherwise binding on the Company, the Plant, or the
Real Property that has had or could reasonably be expected to have a Material
Adverse Effect on the Company, the Plant, or the Real Property.

4.15       Brokers. The Company has previously disclosed to the Purchaser that
the Company employed and will compensate a financial adviser in connection with
the transactions contemplated hereby (the “Financial Advisor”). Except as set
forth in the preceding sentence, the Company has not employed any other
financial advisor, broker, or finder and has not and will not incur any other
broker’s, finder’s, investment banking, or similar fees, commissions, or
expenses in connection with the transactions contemplated by this Agreement.

4.16       Non-public Information. The Sellers understand and agree that the
Purchaser is a public-reporting company and its securities are publicly-held and
that Sellers may be required to timely file reports under Section 13 or Section
16 of the Exchange Act and may be subject to other obligations and restrictions
under the federal securities laws with respect to any securities of the
Purchaser that they currently own or acquire in the future. The Sellers
understand and agree that information related to this Agreement and the
transactions contemplated hereby may constitute material non-public information
regarding the Purchaser and that the Sellers must hold such information in
strict confidence, except to the extent such disclosure is required by
Applicable Law, and may not use such information or trade securities of the
Purchaser while the Sellers have possession of such material non-public
information unless and until such information has been fully disseminated to the
public by the Purchaser in accordance with Applicable Law.

4.17       Disclosure. To the knowledge and belief of the Sellers, no
representation or warranty of the Sellers herein contains any untrue statement
of a material fact or omits to state a material fact necessary to make
statements contained herein, in light of the circumstances in which they were
made, not misleading. To the knowledge and belief of the Sellers, there is no
fact that has not been disclosed to the Purchaser that could have a Material
Adverse Effect on the Company.

4.18       Warranties. The transactions contemplated by this Agreement are not
fraudulent to any creditor or security interest holder of the Company. The
Company is not and will not become subject to warranty or service obligations.

 

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ARTICLE V

 

Indemnification

5.1          Survival of the Representations and Warranties. The representations
and warranties of the Purchaser and the Sellers set forth in this Agreement
shall survive the Closing Date for a period of one (1) year after the Closing
Date.

 

5.2

Indemnification.

(a)          By Sellers. Each Seller agrees to indemnify and hold harmless the
Purchaser and its officers, directors, employees, security holders, advisors,
and agents (collectively, the “Purchaser Indemnified Parties”) from, against,
and in respect of (i) the full amount of any and all liabilities, damages,
deficiencies, fines, assessments, losses, taxes, penalties, interest, costs, and
expenses, including reasonable attorneys’ fees, (“Damages”) arising from any
breach or violation of any of the representations, warranties, covenants, or
agreements of the Sellers set forth in this Agreement or any act or omission by
the Company or the Sellers prior to the Closing Date, (ii) any amounts or
Damages paid by the Company pursuant to the Net Profits Agreements or in
connection with the termination thereof, (iii) any broker’s, finder’s,
investment banking, or similar fees, commissions, or expenses paid by the
Purchaser or the Company to the Financial Advisor, and (iv) any and all actions,
suits, proceedings, demands, assessments, judgments, costs, and expenses
incidental to any of the foregoing.

(b)          By the Purchaser. The Purchaser agrees to indemnify and hold
harmless the Sellers and their advisors and agents (collectively, the “Seller
Indemnified Parties”) from, against, and in respect of (i) the full amount of
any and all Damages arising from any breach or violation of any of the
representations, warranties, covenants, or agreements of the Sellers set forth
in this Agreement and (ii) any and all actions, suits, proceedings, demands,
assessments, judgments, costs, and expenses incidental to any of the foregoing.

 

(c)

Limitations on Indemnification.

(i)           No indemnification payment shall be made to the Purchaser
Indemnified Parties until the amounts which the Purchaser Indemnified Parties
would otherwise be entitled to receive as indemnification under this Agreement
aggregate at least $5,000, at which time the Purchaser Indemnified Parties shall
be indemnified dollar for dollar to the extent such liability exceeds $5,000.
The indemnification provided for in Sections 5.2(a)(ii) and 5.2(a)(iii) hereof
shall not be subject to the limitations set forth in this Section 5.3(c)(i) and
shall be indemnified to the Purchaser Indemnified Parties dollar for dollar to
the extent any liability with respect to such matters exists. No indemnification
payment shall be made to the Seller Indemnified Parties until the amounts which
the Seller Indemnified Parties would otherwise be entitled to receive as
indemnification under this Agreement aggregate at least $5,000, at which time
the Seller Indemnified Parties shall be indemnified dollar for dollar to the
extent such liability exceeds $5,000.

(ii)         The maximum aggregate liability of the Sellers for any claim
arising from or relating to this Agreement or the transactions contemplated
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pursuant to Section 5.2(a), as a breach of contract, tort, violation of a
statute, by a third party, or otherwise, regardless of the theory or basis of
such claim, shall not exceed $3,000,000 plus the amount of any Royalty Payments
paid to the Sellers pursuant to Section 2.3 hereof; provided, however the
limitation set forth in this sentence shall not apply to any indemnification
provided for in Sections 5.2(a)(ii) and 5.2(a)(iii) hereof. The maximum
aggregate liability of the Purchaser for any claim arising from or relating to
this Agreement or the transactions contemplated hereby, whether asserted
pursuant to Section 5.2(b), as a breach of contract, tort, violation of a
statute, by a third party, or otherwise, regardless of the theory or basis of
such claim, shall not exceed $1,000,000.

(iii)        The amount for which any Indemnified Party shall be indemnified
hereunder shall be reduced by an amount equal to any insurance proceeds received
by the Indemnified Party with respect to the claim for which the Indemnified
Party is seeking to be indemnified less the amount of any insurance premiums
paid by such Indemnified Party with respect to such insurance.

 

(d)

Indemnification Procedure.

(i)           Any party to this Agreement seeking indemnification under this
Section 5.2 (an "Indemnified Party") shall give each party from whom
indemnification is being sought (an "Indemnifying Party") written notice (the
“Indemnification Notice”) of any matter which such Indemnified Party has
determined has given or could give rise to a right of indemnification under this
Agreement as soon as practicable after the Indemnified Party becomes aware of
any fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 5.2.

(ii)          With respect to Damages arising from claims of any third party for
which indemnification is provided in this Section 5.2 ("Third Party Claims"),
the Indemnified Party seeking such indemnification shall give the Indemnifying
Party from which such indemnification is sought a written Indemnification Notice
with respect to such Third Party Claim as soon as practicable and in any event
within ten (10) days after the receipt by the Indemnified Party of such
Indemnification Notice; provided, however, that the failure to provide, or the
failure to timely provide, an Indemnification Notice shall not shall not be
deemed to have waived any of the rights of the Indemnified Party for
indemnification pursuant to this Section 5.2, except to the extent the rights of
the Indemnifying Party are materially prejudiced. The Indemnifying Party shall
be entitled to assume and control the defense of such Third Party Claim at its
expense and through counsel of its choice if it gives notice of its intention to
do so to the Indemnified Party within thirty (30) days after the receipt of an
Indemnification Notice from the Indemnified Party; provided, however, that if
there exists a conflict of interest that would make it inappropriate for the
same counsel to represent both the Indemnified Party and the Indemnifying Party,
then the Indemnified Party shall be entitled to retain its own counsel and the
Indemnifying Party shall pay the reasonable fees and expenses of such counsel,
provided further however that the Indemnifying Party shall not be obligated to
pay the reasonable fees and expenses of more than one separate counsel for all
Indemnified Parties, taken together (except to the extent that local counsel are
necessary or advisable for the conduct of such action or proceeding, in which
case the Indemnifying Party shall also pay the reasonable fees and expenses of
any such local counsel). If the Indemnifying Party shall not timely assume and
conduct the defense of any

 

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Third Party Claim or Litigation resulting there from, the Indemnified Party may
defend against such claim or Litigation in such manner as it may deem
appropriate and may settle such claim or Litigation on such terms as it may deem
appropriate; provided, however, that in settling any action in respect of which
indemnification is payable under this article, it shall act in a commercially
reasonable manner. In the event the Indemnifying Party exercises the right to
undertake any such defense against any such Third Party Claim as provided above,
the Indemnified Party shall cooperate with the Indemnifying Party in such
defense and make available to the Indemnifying Party, all witnesses, pertinent
records, materials and information in the Indemnified Party's possession or
under the Indemnified Party's control relating thereto as is reasonably
requested by the Indemnifying Party. Similarly, in the event the Indemnified
Party is, directly or indirectly, conducting the defense against any such Third
Party Claim, the Indemnifying Party shall cooperate with the Indemnified Party
in such defense and make available to the Indemnified Party, all such witnesses,
records, materials and information in the Indemnifying Party's possession or
under the Indemnifying Party's control relating thereto as is reasonably
requested by the Indemnified Party. The Indemnifying Party shall not, without
the written consent of the Indemnified Party, (i) settle or compromise any Third
Party Claim or consent to the entry of any judgment which does not include an
unconditional written release by the claimant or plaintiff of the Indemnified
Party from all liability in respect of such Third Party Claim, (ii) settle or
compromise any Third Party Claim if the settlement imposes equitable remedies or
material obligations on the Indemnified Party or (iii) settle or compromise any
Third Party Claim in a manner that is adverse to the business or reputation of
the Indemnified Party, other than any settlement or compromise that results
solely in financial obligations for which such Indemnified Party will be
indemnified hereunder.

(iii)        With regard to any Damages for which indemnification is payable
hereunder, such indemnification shall be paid by the Indemnifying Party upon
earliest to occur of (i) in the case of the entry of a judgment against the
Indemnified Party and the expiration of any applicable appeal period, five (5)
Business Days prior to the date that the judgment creditor has the right to
execute such judgment, (ii) in the case of the entry of an unappealable judgment
or final appellate decision against the Indemnified Party, within fifteen (15)
Business Days after the entry of such Judgment, (iii) upon settlement of the
claim by the Indemnifying Party and the Indemnified Party.

ARTICLE VI

 

Additional Agreements

6.1          Warrants and Security Interest. The parties agree to use their best
efforts to negotiate the definitive terms of the Warrants, which terms shall be
substantially similar to the terms set forth on Schedule 2.2 hereto, and to
execute and deliver the Warrants no later than one-hundred eighty (180) calendar
days after the Closing Date (the “Warrant Deadline Date”). The Purchaser
understands and agrees that if the Warrants are not executed and delivered to
the Sellers or their designees prior to the Warrant Deadline Date, the Buy-Out
Right shall immediately and irrevocably terminate, without any further action
required by the Purchaser or the Sellers, and the Purchaser shall pay the
Sellers one hundred percent (100%) of the Royalty Payments required pursuant to
Section 2.3.

 

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6.2

Sale of the Company or the Plant.

(a)          The Purchaser agrees that it shall not sell, assign, transfer, or
otherwise convey to any Person the Company or the Plant, unless such Person
agrees in writing to assume the obligation to pay the Royalty Payments on terms
substantially similar to those set forth in Section 2.3 above. If,
notwithstanding the foregoing, the Company or the Plant, or any proceeds of or
interests therein, is sold, assigned, transferred, or otherwise conveyed to any
Person, and such Person does not assume in writing the obligation to pay the
Royalty Payments, the Buy-Out Right set forth in Section 2.3 above shall be
deemed to have been automatically exercised by the Purchaser, without any
further action being required by the Purchaser or the Sellers, effective as of
the first day of the calendar quarter in which such sale, assignment, transfer,
or other conveyance is consummated and without regard to whether such sale,
assignment, transfer, or other conveyance occurs prior to the second anniversary
of the Closing Date, and the Buy-Out Payment shall become immediately due and
payable in its entirety by the Purchaser.

(b)          Notwithstanding anything to the contrary in Section 6.2(a) above,
the Sellers acknowledge and agree that nothing in this Agreement shall prohibit
the Purchaser from pledging, mortgaging, hypothecating, or otherwise granting a
security interest in the Company or the membership interests thereof and that
nothing in this Agreement shall prohibit the Company from pledging, mortgaging,
hypothecating, or otherwise granting a security interest in the Plant or any of
its other assets in order to obtain financing necessary to consummate the
transactions contemplated hereby or to pay any portion of the Purchase Price,
the Royalty Payments, or the Buy-Out Payment. The Sellers further acknowledge
and agree that any such secured party shall have the right to foreclose on any
such security interest granted to it or otherwise enforce its rights as a
creditor of the Purchaser, thereby acquiring ownership of the Company, the
Plant, or any other assets of the Company (a “Port Assets Foreclosure”) and
shall have the right to sell the Company, the Plant, or any other assets of the
Company to any third party.

(c)          Upon the occurrence of a Port Assets Foreclosure, the Purchaser’s
obligation to pay the Royalty Payments, shall be as follows:

(i)           If (x) any officer, director, or employee of the Purchaser, the
Company, or their Affiliates, or any relative of such officer, director, or
employee, receives any compensation or other financial benefit as a result of or
in connection with such Port Assets Foreclosure or (y) after the date of such
Port Assets Foreclosure, any officer, director, or employee of the Purchaser,
the Company, or their Affiliates, or any relative of such officer, director, or
employee, continues to be employed by the Purchaser, the Company, or their
Affiliates, then the Purchaser’s obligation to pay the Royalty Payments shall
continue as provided in Section 2.3 hereof, notwithstanding the fact that the
Purchaser’s ownership of the Company has diminished or ceased and
notwithstanding the fact that the Company no longer owns the Plant.

(ii)         In any circumstance other than those described in clauses (x) and
(y) of Section 6.2(c) above, the Purchaser’s obligation to pay the Royalty
Payments shall cease following such Port Assets Foreclosure.

 

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6.3          Termination of the Net Profits Agreements. The Sellers agree to use
their best efforts to cause each of the Net Profits Agreements to be terminated
no later than sixtieth (60th) day after the Closing Date. The Purchaser and the
Company agree that they shall not (i) have any discussions or negotiations with
any party to the Net Profits Agreements, other than the Sellers, regarding the
termination of the Net Profits Agreements and (ii) shall not enter into any
agreement to cease, suspend, terminate, or otherwise affect the Net Profits
Agreements, without the prior written consent of the Sellers, which consent
shall not be unreasonably withheld. The Sellers acknowledge and agree that any
payments or liabilities arising from the Net Profits Agreements or in connection
with the termination thereof shall be paid in their entirety by the Sellers and
shall be subject to the indemnification provisions of Section 5.2(a)(ii) hereof.

6.4          Payment to the Financial Advisor. The Sellers acknowledge and agree
that any broker’s, finder’s, investment banking, or similar fees, commissions,
or expenses owed to the Financial Advisor as a result of the consummation of the
transactions contemplated hereby shall be paid in their entirety by the Sellers
and shall be subject to the indemnification provisions of Section
5.2(a)(iii).ARTICLE VII

ARTICLE VII

 

Closing; Deliveries

7.1          Closing; Effective Date. Subject to the terms and conditions set
forth herein, the closing of the transactions contemplated by this Agreement
(the “Closing”) shall take place at the offices of Gardere Wynne Sewell LLP in
Houston, Texas on August 16, 2005, or on such other date and at such other place
as may be agreed to by the parties (the “Closing Date”). Al proceedings to be
taken and all documents to be executed at the Closing shall be deemed to have
been taken, delivered and executed simultaneously, and no proceeding shall be
deemed to have been taken nor documents deemed executed or delivered until all
have been taken, delivered, and executed.

7.2          Deliveries by the Sellers and the Company. At Closing, the Sellers
and the Company, as appropriate, shall deliver the following documents to the
Purchaser:

(a)          all of the outstanding Membership Interests of the Company (which
Membership Interests are uncertificated); and the written resignations of each
of the managers of the Company, effective upon Closing;

 

(b)

the books and records of the Company; and

(c)          a certificate issued by the Secretary of State of the State of
Texas, as to the good standing of the Company and payment of franchise taxes and
certifying the Company’s Certificate of Formation.

7.3          Deliveries by the Purchaser. At Closing, the Purchaser shall
deliver the following documents and funds to the Sellers.

(a)          a wire transfer of funds to Sellers, pro rata, in the aggregate
amount of $2,850,000;

 

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(b)          a certificate, dated the Closing Date, of the secretary of the
Purchaser, setting forth the authorizing resolutions adopted by the Purchaser’s
Board of Directors approving the terms and conditions of this Agreement and the
documents and transactions contemplated hereby and thereby; and

(c)          a certificate issued by the Secretary of State of the State of
Nevada, as to the good standing of the Purchaser and payment of franchise taxes.

ARTICLE VIII

 

General Provisions

8.1          Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date of receipt and shall be delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), sent
by overnight courier or sent by facsimile with confirmation of receipt, to the
applicable party at the following addresses or facsimile numbers (or at such
other address or telecopy number for a party as shall be specified by like
notice):

If to the Purchaser:

SNRG Corporation

14300 N. Northsight Blvd.

Suite 227

Scottsdale, AZ 85260

Attn: President

Facsimile: 480-991-2203

If to the Sellers:

W. W. Scott, Jr.

_______________________

_______________________

_______________________

Facsimile: _______________

John W. Johnson

_______________________

_______________________

_______________________

Facsimile: _______________

or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed. Any party to this Agreement
may notify any other party of any changes to the address or any of the other
details specified in this paragraph; provided that such notification shall only
be effective on the date specified in such notice or five business days after
the notice is given, whichever is later. Rejection or other refusal to accept or
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changed address of which no notice was given shall be deemed to be receipt of
the notice as of the date of such rejection, refusal or inability to deliver.

8.2          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 each of the other parties
hereto. Notwithstanding the foregoing, (a) the Purchaser may assign its rights,
interests, or obligations hereunder, other than the obligation to issue the
Warrants having substantially the terms set forth on Schedule 2.2 hereto and the
obligation to issue shares of Purchaser’s Common Stock upon exercise thereof, to
any Affiliate of the Purchaser; provided, that the Purchaser executes and
delivers to the Sellers a guaranty of payment and performance of all the
Purchaser’s obligations hereunder, which guaranty shall be in a form and
substance reasonably acceptable to the Sellers and (b) the Sellers may form a
limited liability company or other legal entity owned by the Sellers for the
purpose of receiving Royalty Payments and holding the Warrants. Subject to the
preceding, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective heirs, successors, executors,
administrators 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, and their respective heirs,
successors, executors, administrators and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.

8.3          Entire Agreement. This Agreement contain every obligation and
understanding between the parties relating to the subject matter hereof and
merges all prior discussions, negotiations, agreements, understandings,
representations, and warranties among the parties, including that certain
letter, dated June 2, 2005, from the Purchaser to the Sellers, as amended, and
none of the parties shall be bound by any discussions, negotiations, agreements,
understandings, representations, and warranties other than as expressly provided
herein.

8.4          Governing Law. This agreement has been entered into and shall be
construed and enforced in accordance with the laws of the State of Texas,
without reference to the choice of laws principles thereof.

8.5          Arbitration. Any controversy, claim or dispute arising out of or
relating to this Agreement, shall be settled solely and exclusively by one
arbitrator in a binding arbitration in Houston, Texas conducted in accordance
with the rules and procedures of the American Arbitration Association (“AAA”),
as in effect from time to time; provided, that (i) the arbitrator shall be
chosen by AAA; and (b) each party to the arbitration will pay its pro rata share
of the expenses and fees of the arbitrator, together with other expenses of the
arbitration incurred or approved by the arbitrator. Each party shall bear its
own attorneys fees and expenses. The parties agree to abide by all written
decisions and awards rendered in such proceedings. Such decisions and awards
rendered in writing and signed by the arbitrator shall be final and conclusive.
All such controversies, claims or disputes shall be settled in this manner in
lieu of any action at law or equity; provided however, that nothing in this
subsection shall be construed as precluding the bringing an action for
injunctive relief or other equitable relief. The arbitrator shall not have the
right to award punitive damages or speculative damages to either party and shall
not have the power to amend this Agreement or the Warrants. The arbitrator shall
be required to follow Applicable Law. If for any reason this arbitration clause
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Purchaser and each of the Sellers agrees to submit to the jurisdiction and venue
as set forth in Section 8.6 below.

8.6          Jurisdiction and Venue. This Agreement shall be subject to the
jurisdiction of the federal and Texas state courts located in Harris County,
Texas. The parties to this Agreement agree that any breach of any term or
condition of this Agreement shall be deemed to be a breach occurring in the
State of Texas by virtue of a failure to perform an act required to be performed
in the State of Texas and irrevocably and expressly agree to submit to the
jurisdiction of the federal and states courts located in Harris County, Texas
for the purpose of resolving any disputes among the parties relating to this
Agreement or the transactions contemplated hereby. By the execution and delivery
of this Agreement, the parties hereto irrevocably waive, to the fullest extent
permitted by law, any objection which they may now or hereafter have to the
laying of venue or the jurisdiction of any suit, action or proceeding arising
out of or relating to this Agreement, or any judgment entered by any court in
respect hereof brought in federal and state courts located in Harris County,
Texas, and further irrevocably waive any claim that any suit, action or
proceeding brought in the federal and state courts located in Harris County,
Texas has been brought in an inconvenient forum. Each party hereto agrees that
service of process may be made by personal service of a copy of the summons and
complaint or other legal process in any such suit, action, or proceeding, or by
registered or certified mail (postage prepaid) to the proper address for notice
set forth herein or by any other method of service provided for under the
Applicable Laws then in effect in the State of Texas.

8.7          Fee and Expenses. Each party hereto agrees to pay, without right of
reimbursement from the other party, the costs incurred by it incident to the
performance of its obligations under this Agreement and the consummation of the
transaction contemplated hereby, including, without limitation, costs incident
to the preparation of this Agreement, and the fees and disbursements of counsel,
accountants, and consultants employed by such party in connection herewith.

8.8          Conveyance Taxes. The Sellers shall cooperate in the preparation,
execution and filing of all returns, questionnaires, applications or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees and any similar Taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time.

8.9          Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever. The table of contents contained in this
Agreement is for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

8.10       Waivers. Except as otherwise provided herein, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. Any term, covenant or condition of
this Agreement may be waived at any time by the party which is entitled to the
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waiving such term or condition. The waiver by any party hereto of a breach of
any provision hereunder shall not operate or be construed as a waiver of any
prior or subsequent breach of the same or any other provision hereunder.

8.11       Severability. Any term or provision of this Agreement that is
declared invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable, the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby are consummated as originally contemplated to the greatest extent
possible.

8.12       Participation of the Parties. The parties hereto acknowledge that
this Agreement and all matters contemplated herein, have been negotiated among
all parties hereto and their respective legal counsel and that all such parties
have participated in the drafting and preparation of this Agreement from the
commencement of negotiations at all times through the execution hereof.

8.13       Publicity. Nothing contained herein shall prevent any party hereto,
or its affiliates and subsidiaries, from making any public announcement or
filing required by federal or state securities laws or stock exchange rules.
Subject to the foregoing, no public announcement or other publicity concerning
this Agreement or the transactions contemplated hereby shall be made without
prior written notice to each other party hereto as to the form, content, timing,
and manner of distribution.

8.14       Execution. This Agreement may be executed by facsimile signatures by
any party and such signature shall be deemed binding for all purposes hereof,
without delivery of an original signature being thereafter required.

8.15       Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which, when so executed and delivered, shall be
an original. All such counterparts shall together constitute one and the same
instrument.

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IN WITNESS WHEREOF, the parties have each executed and delivered this Agreement
as of the day and year first written above.

SNRG CORPORATION

 

By:

/s/ D. Elroy Fimrite

 

 

Name:

D. Elroy Fimrite

 

Title:

President

 

/s/ W.W. Scott, Jr.

W. W. Scott, Jr.

/s/ John W. Johnson

John W. Johnson

By: W. W. Scott, Jr., as attorney-in-fact pursuant to a Special Durable Power of
Attorney, dated August 10, 2005

 

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SCHEDULE 2.1

Outstanding Membership Interests of the Company

 

W. W. Scott, Jr.:

Fifty percent (50%) of the issued and outstanding membership interests of the
Company

John W. Johnson:

Fifty percent (50%) of the issued and outstanding membership interests of the
Company

 

 

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SCHEDULE 2.2

The Warrants to be issued to the Sellers pursuant to Section 2.2(c) of the
Agreement shall contain substantially the following terms:

 

Number of shares to be issued upon exercise

3,000,000 shares of Purchaser Common Stock

Exercise Period

Any time after the Closing Date and prior to the fifth (5th) anniversary of the
date of the issuance of the Warrants.

Exercise Price

$0.50 per share

Anti-Dilution Protection

The number of shares issuable under the warrant will be subject to anti-dilution
protection.

Registration Rights

 

•     Piggy-Back Registration

Piggy-back registration rights with respect to offerings registered by the
Purchaser, subject to the right of the Purchaser and its underwriters, in view
of market conditions, to reduce the number of shares proposed to be registered;
provided, that such reduction shall be on a basis similar to reductions imposed
on other shareholders who are exercising piggy-back registration rights.

•     Expenses

The registration expenses (exclusive of underwriting discounts and commissions)
of all registrations will be borne by the Purchaser.

 

 

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SCHEDULE 2.3

 

FORM OF CERTIFICATE TO ACCOMPANY ROYALTY PAYMENTS

ROYALTY CERTIFICATE

Dated: __________ ___, 20___

Fiscal Quarter ended:

__________ ___, 20___

Amount of materials or waste processed by the Plant (in metric tons) during such
fiscal quarter: __________________

Gross Revenue earned by the Company, or its successor, in such fiscal quarter:
$__________________

Royalty Rate:

3%

Royalty Payments due to Sellers with respect to such fiscal quarter:
$__________________

YTD amount of materials or waste processed by the Plant (in metric tons):

__________________

Capitalized terms used, but not defined, herein shall have the respective
meanings ascribed to them in the Membership Interest Purchase Agreement, dated
August 16, 2005, by and among SNRG Corporation, W. W. Scott, Jr., and John W.
Johnson. The information contained in this Certificate may constitute material
non-public information and is subject to the non-disclosure and non-use
provisions in Section 4.16 of said agreement.

 

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A check in the amount of the Royalty Payments specified above is attached
hereto. Such check shall be payable to the order of the Sellers or such other
Person as the Sellers may specify from time to time.

I certify that I am an officer of either the Company or the Purchaser and that
the information contained in this Royalty Certificate is complete and accurate
in all respects.

SIGNED:

 

SNRG Corporation

By:       ________________________

Name: __________________

Title:   _________________

 

Port Assets, LLC

By:       ________________________

Name: __________________

Title:   _________________

 

 

 

 

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