AMENDED AND RESTATED LOAN AGREEMENT

This Amended and Restated Loan Agreement (the “Agreement”) is executed with
effect from June 30, 2010 by and among HEMIWEDGE INDUSTRIES, INC. (formerly
called SHUMATE INDUSTRIES, INC.), a Delaware corporation (“Industries”),
HEMIWEDGE VALVE CORPORATION, a Texas corporation (“Hemiwedge”) (Industries and
Hemiwedge being hereinafter sometimes collectively called the (“Borrowers”) and
EADS INVESTMENTS I, LLC, a Texas limited liability company (“EADS”), and D.
BRADLEY McWILLIAMS, an individual residing in Texas (“McWilliams”) (EADS and
McWILLIAMS herein collectively called the “Lenders”).

RECITALS:

 
A.
On September 30, 2008, the Borrowers and Shumate Machine Works, Inc. (“Machine
Works”), as borrowers (the Borrowers and Machine Works, collectively the
“Original Borrowers”), Matthew C. Flemming (“Flemming”), Russell T. Clark
(“Clark”) and Larry Shumate (“Shumate”) as guarantors (Flemming, Clark and
Shumate being herein collectively called the “Original Guarantors”), and
Stillwater National Bank and Trust Company (the “Bank”) entered into a Loan and
Consolidation Agreement (“Prior Loan Agreement”), whereunder the Bank extended
and consolidated certain loans and other financial accommodations to the
Original Borrowers and the Original Guarantors guarantee all indebtedness and
obligations of the Original Borrowers under such Prior Loan Agreement (“Prior
Indebtedness”).

 
B.
In connection with the Prior Loan Agreement, the Original Borrowers also
executed an Amended and Restated Promissory Note (Term Note) (“Prior Note”), an
Amended and Restated Security Agreement (“Prior Security Agreement”) and certain
other loan documents in favor of the Bank. (The Prior Loan Agreement, Prior
Note, Prior Security Agreement and other prior loan documents being herein
collectively called (the “Prior Loan Documents”.)

 
C.
Effective as of October 1, 2008, Machine Works, with the consent of the Bank,
sold all of its business and assets to a third party.

 
D.
On February 11, 2009, with consent of the Bank, Industries changed its name from
Shumate Industries, Inc. to Hemiwedge Industries, Inc.

 
E.
Pursuant to the provisions of an Assignment of Note, Loan Documents and Security
Interests, executed with effect on the same date as this Agreement (“Assignment
Agreement”), the Lenders purchased from the Bank all outstanding indebtedness
and obligations of the Borrowers and Original Guarantors under the Prior Loan
Documents (including the Prior Indebtedness).

 
F.
Pursuant to the terms of the Assignment Agreement, the Bank released the
Borrowers and Original Guarantors from all obligations and indebtedness to the
Bank under the Prior Loan Documents.

 
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G.
Prior to the date of this Loan Agreement, the Lenders have also released the
Original Guarantors from their obligations under the Prior Loan Documents.

 
H.
As a condition of (i) the purchase by the Lenders of the Prior Indebtedness and
all obligations of Borrowers to the Bank under the Prior Loan Documents and (ii)
the agreement by the Lenders to extend and renew the Prior Indebtedness and
obligations of the Borrowers under the Prior Loan Documents and (iii) the
Lender’s forbearance from accelerating the loans and Prior Indebtedness under
the Prior Loan Documents, the Borrowers have agreed to enter into this Agreement
and certain other loan documents and security agreements with the Lenders.

Now, therefore, in consideration of the premises, the credit given and
forbearance extended to the Borrowers hereunder and the mutual covenants
continued herein, the Parties hereto agree as follows:

Section 1.              Definitions.

1.1           Defined Terms.  The defined terms set forth in the opening
paragraph and recitals to this Agreement have the meanings set forth
therein.  Capitalized terms used but not defined herein have the meanings set
forth in the Security Agreement (defined herein).  In addition, for the purposes
of this Agreement, the following capitalized words and phrases shall have the
meanings set forth below.

            “Affiliate” shall mean, with respect to any specified Person, any
other Person that directly or indirectly, through one or more intermediaries,
controls the specified Person or is controlled by or is under common control
with the specified Person.  For purposes of this definition, “control” means the
direct or indirect ownership of more than fifty percent (50%) of the outstanding
capital stock or other equity interests having ordinary voting power.

“A/R Facility’” shall mean a credit facility established for the factoring
and/or sale of certain accounts receivable of any Borrower arising from the sale
of Inventory or the provision of services for hire in the ordinary course of
business by such Borrower.

“Asset Disposition” shall mean the sale, lease, assignment or other transfer for
value (each a “Disposition”) by any Borrower to any Person of any asset or right
of such Borrower (including, the loss, destruction or damage of any thereof or
any actual or threatened condemnation, confiscation, requisition, seizure or
taking thereof).
 
“Bankruptcy Code” shall mean the United States Bankruptcy Code, as now existing
or hereafter amended.
 
“Bridge Notes”  shall mean those convertible promissory notes issued by
Industries to each of (i) Whitebox Shumate Ltd, on July 10, 2007 in the
principal amount of $2,000,000; (ii) Mitchell Lukin on July 23, 2007 in the
principal amount of $50,000 and (iii) Ironman Energy Capital L.P. on November 1,
2007 in the principal amount of $1,000,000.

 
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“Business Day” shall mean any day other than a Saturday, Sunday or a legal
holiday on which banks are authorized or required to be closed for the conduct
of commercial banking business in Houston, Texas.
 
“Capital Lease” shall mean, as to any Person, a lease of any interest in any
kind of property or asset, whether real, personal or mixed, or tangible or
intangible, by such Person, as lessee, that is, or should, in accordance with
GAAP, be recorded as a “capital lease” on the financial statements of such
Person prepared in accordance with GAAP.
 
“Capital Securities” shall mean, with respect to any Person, all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person’s capital, whether now outstanding or
issued or acquired after the date hereof, including common shares, preferred
shares, membership interests in a limited liability company, limited or general
partnership interests in a partnership or any other equivalent of such ownership
interest.
 
“Capitalized Lease Obligations” shall mean, as to any Person, all rental
obligations of such Person, as lessee under a Capital Lease which are or will be
required to be capitalized on the books of such Person.
 
“Closing Date” shall have the meaning set forth in Section 5.1
 
“Collateral” shall have the meaning set forth in the Security Agreement.
 
 “Contingent Liability” and “Contingent Liabilities” shall mean, respectively,
each obligation and liability of any Borrower and all such obligations and
liabilities of the Borrower incurred pursuant to any agreement, undertaking or
arrangement by which such Borrower:  (a) guarantees, endorses or otherwise
becomes or is contingently liable upon (by direct or indirect agreement,
contingent or otherwise, to provide funds for payment, to supply funds to, or
otherwise to invest in, a debtor, or otherwise to assure a creditor against
loss) the indebtedness, dividend, obligation or other liability of any other
Person in any manner (other than by endorsement of instruments in the course of
collection), including any indebtedness, dividend or other obligation which may
be issued or incurred at some future time; (b) guarantees the payment of
dividends or other distributions upon the shares or ownership interest of any
other Person; (c) undertakes or agrees (whether contingently or otherwise):  (i)
to purchase, repurchase, or otherwise acquire any indebtedness, obligation or
liability of any other Person or any property or assets constituting security
therefor, (ii) to advance or provide funds for the payment or discharge of any
indebtedness, obligation or liability of any other Person (whether in the form
of loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, working capital or other financial
condition of any other Person, or (iii) to make payment to any other Person
other than for value received; (d) agrees to lease property or to purchase
securities, property or services from such other Person with the purpose or
intent of assuring the owner of such indebtedness or obligation of the ability
of such other Person to make payment of the indebtedness or obligation; (e) to
induce the issuance of, or in connection with the issuance of, any letter of
credit for the benefit of such other Person; or (f) undertakes or agrees
otherwise to assure a creditor against loss.  The amount of any Contingent
Liability shall (subject to any limitation set forth herein) be deemed to be the
outstanding principal amount (or maximum permitted principal amount, if larger)
of the indebtedness, obligation or other liability guaranteed or supported
thereby.

 
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“Debt” shall mean, as to any Person, without duplication, (a) all indebtedness
of such Person; (b) all borrowed money of such Person (including principal,
interest, fees and charges), whether or not evidenced by bonds, debentures,
notes or similar instruments; (c) all obligations to pay the deferred purchase
price of property or services; (d) all obligations, contingent or otherwise,
with respect to the maximum face amount of all letters of credit (whether or not
drawn), bankers’ acceptances and similar obligations issued for the account of
such Person, and all unpaid drawings in respect of such letters of credit,
bankers’ acceptances and similar obligations; (e) all indebtedness secured by
any Lien (other than Permitted Liens) on any property owned by such Person,
whether or not such indebtedness has been assumed by such Person (provided,
however, if such Person has not assumed or otherwise become liable in respect of
such indebtedness, such indebtedness shall be deemed to be in an amount equal to
the fair market value of the property subject to such Lien at the time of
determination); (f) the aggregate amount of all Capitalized Lease Obligations of
such Person; (g) all Contingent Liabilities of such Person, whether or not
reflected on its balance sheet; (h) all hedging obligations of such Person; (i)
all Debt of any partnership of which such Person is a general partner; and (j)
all monetary obligations of such Person under (i) a so-called synthetic,
off-balance sheet or tax retention lease, or (ii) an agreement for the use or
possession of property creating obligations that do not appear on the balance
sheet of such Person but which, upon the insolvency or bankruptcy of such
Person, would be characterized as the indebtedness of such Person (without
regard to accounting treatment).  Notwithstanding the foregoing, Debt shall not
include trade payables and accrued expenses incurred by such Person in
accordance with customary practices and in the ordinary course of business of
such Person.
 
“Default Rate” shall mean the maximum interest rate permitted by applicable law
payable in cash only.
 
“Disposition” shall have the meaning set forth in the definition of Asset
Disposition above.
 
 “Environmental Laws” shall mean all present or future federal, state or local
laws, statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative or judicial orders, consent agreements,
directed duties, requests, licenses, authorizations and permits of, and
agreements with, any Governmental Authority, in each case relating to any matter
arising out of or relating to public health and safety, or pollution or
protection of the environment or workplace, including any of the foregoing
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, discharge, emission, release,
threatened release, control or cleanup of any Hazardous Substance.
 
“Equity Securities” shall mean common and/or preferred stock or some other
equity securities of Industries, including equity securities which are directly
or indirectly convertible or exchangeable for equity securities of Industries.

 
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“Event of Default” shall mean any of the events or conditions which are set
forth in Section 8.1 hereof.
 
“Excluded Taxes” shall mean, with respect to the Lenders or any other recipient
of any payment to be made by or on account of any obligation of the Borrowers
hereunder, (a) taxes imposed on or measured by its overall net income (however
denominated), and franchise taxes imposed on it (in lieu of net income taxes),
by the jurisdiction (or any political subdivision thereof) under the laws of
which such recipient is organized or in which it is doing business or in which
its principal office is located or, in the case of the Lenders, in which its or
his principal applicable lending office is located, and (b) any branch profits
taxes imposed by the United States or any similar tax imposed by any other
jurisdiction in which any Borrower is located.
 
“GAAP” shall mean generally accepted accounting principles in effect in the
United States of America consistently applied with prior periods.
 
 “Governmental Authority” shall mean the government of the United States of
America or any other nation, or of any political subdivision thereof, whether
state or local, and any agency, authority, instrumentality, regulatory body,
court, central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
 
 “Hazardous Substances” shall mean (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, dielectric fluid containing levels of
polychlorinated biphenyls, radon gas and mold; (b) any chemicals, materials,
pollutant or substances defined as or included in the definition of “hazardous
substances”, “hazardous waste”, “hazardous materials”, “extremely hazardous
substances”, “restricted hazardous waste”, “toxic substances”, “toxic
pollutants”, “contaminants”, “pollutants” or words of similar import, under any
applicable Environmental Law; and (c) any other chemical, material or substance,
the exposure to, or release of which is prohibited, limited or regulated by any
Governmental Authority or for which any duty or standard of care is imposed
pursuant to, any Environmental Law.
 
 “Indemnified Party” shall mean the Lenders and any Affiliate of the Lenders,
and each of their respective officers, directors, owners, employees, attorneys
and agents, and all of such parties and entities.
 
“Indemnified Taxes” shall mean Taxes other than Excluded Taxes.
 
“Interest Common Stock” shall mean the number of common shares of
Industries  issued to the Lenders by Industries on any Interest Due Date
pursuant to the provisions of Section 3.3(a) hereof.
 
“Interest Due Date” shall mean September 30, 2010, December 31, 2010, March 31,
2011, and on the Maturity Date, whenever same occurs.
 
“Interest Rate” shall have the meaning set forth in Section 3.1.

 
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“Interest Period” shall mean (i) with respect to the period commencing on the
date of this Agreement, the number of days elapsed from such date until
September 30, 2010, (ii) with respect to the period ending on each Interest Due
Date thereafter, the number of days elapsed from the immediately preceding
Interest Due Date until the immediately following Interest Due Date, and (iii)
with respect to the period ending on the Maturity Date, the number of days
elapsed from the immediately preceding Interest Due Date to the Maturity Date or
the date on which all interest due on such  Maturity Date is actually paid.
 
“Investment” shall mean, with respect to any Person, any investment in another
Person, whether by acquisition of any debt or equity security, by making any
loan or advance, by becoming obligated with respect to a Contingent Liability in
respect of obligations of such other Person (other than travel and similar
advances to employees in the ordinary course of business).
 
 “Liabilities” shall mean at all times all liabilities of any Borrower that
would be shown as such on a balance sheet of the Borrower prepared in accordance
with GAAP.
 
“Lien” shall mean, with respect to any Person, any interest granted by such
Person in any real or personal property, asset or other right owned or being
purchased or acquired by such Person (including an interest in respect of a
Capital Lease) which secures payment or performance of any obligation and shall
include any mortgage, lien, encumbrance, title retention lien, charge or other
security interest of any kind, whether arising by contract, as a matter of law,
by judicial process or otherwise.
 
“Loan” shall have the meaning set forth in Section 2.1 hereof.
 
“Loan Account” shall have the meaning set forth in Section 2.2 hereof.
 
“Loan Documents” shall mean each the Note and each of the other agreements,
documents, instruments and certificates set forth in Section 5.1 hereof, and any
and all such other instruments, documents, certificates and agreements from time
to time executed and delivered by any Borrower for the benefit of the Lenders or
either of them pursuant to any of the foregoing, and all amendments,
restatements, supplements and other modifications thereto.
 
“Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the assets, business, properties, prospects, condition
(financial or otherwise) or results of operations of any Borrower, taken as a
whole; (b) a material impairment of the ability of any Borrower, taken as a
whole, to perform any of their respective obligations under the Related
Documents; (c) a material adverse change on any substantial portion of the
Collateral; (d) a material adverse effect on the perfection or priority of any
Lien granted to the Lenders under the Loan Documents or the rights or remedies
of the Lenders under the Loan Documents, taken as a whole; or (e) a material
adverse effect on the legality, validity, binding effect or enforceability
against any Borrower of any of the Related Documents to which they are parties,
except to the extent, with respect to the preceding clauses (a)-(e), such
material change or material adverse effect was caused by any Lenders or any of
its or his Affiliates.
 
“Maturity Date” shall mean June 30, 2011 or such earlier date as the Note and
the Loan and all Obligations shall become due and payable in full under the
provisions of the Note and this Agreement, whether upon acceleration, default,
termination or otherwise.

 
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“Net Cash Proceeds” shall mean, the aggregate cash proceeds (including cash
proceeds received pursuant to policies of insurance or by way of deferred
payment of principal pursuant to a note, installment receivable or otherwise,
but only as and when received) received by any Borrower pursuant to an Asset
Disposition net of (i) the direct costs relating to such sale, lease,
assignment, transfer or other disposition (including sales commissions and
legal, accounting and investment banking fees), (ii) taxes paid or reasonably
estimated by such Borrower to be payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), and (iii) amounts required to be applied to the repayment of any
Debt secured by a Lien on the asset subject to such Asset Disposition.
 
“Note” shall mean the Amended and Restated Promissory Note, of even date
herewith, duly executed by the Borrowers and payable to the order of the
Lenders, together with any and all renewal, extension, modification or
replacement promissory notes executed by the Borrowers and delivered to the
Lenders and given in substitution therefor.
 
“Obligations” shall mean the Loan, all interest accrued thereon and all sums of
money owed to or expenses incurred by the Lenders hereunder or under any other
Loan Document.
 
“Obligor” shall mean the Borrowers and each of them and such term may be used
interchangeably with Borrower or Borrowers in this Agreement.
 
“Permitted Equity Offering” shall mean an arms length bona fide third party sale
by Industries of up to Five Million Dollars ($5,000,000) worth of its Equity
Securities provided that such sale is made for cash received by Industries (or
conversion of Debt as permitted by Section 7.6) at the time of closing of such
sale.
 
“Permitted Liens” shall mean (a) Liens for Taxes, assessments or other
governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith by appropriate proceedings and, in each
case, for which any Borrower maintains adequate reserves in accordance with GAAP
and in respect of which no Lien has been filed; (b) easements, rights of way,
restrictions, minor defects or irregularities in title and other similar Liens
not interfering in any material respect with the ordinary conduct of the
business of the Borrower;  (c) Liens granted to the Lenders under the Related
Documents; (d) Liens granted under any A/R Facility on the accounts covered by
such A/R Facility (e) Liens permitted under the Security Agreement; (f) Liens
granted to the Second Lien Holders under the Second Lien Documents; (g) Liens
approved by the Lenders in writing, at their sole discretion; and (h) Liens
securing Debt permitted by Section 7.2(e) incurred to finance the acquisition of
fixed or capital assets, provided that (1) such Liens shall be created
substantially simultaneously with the acquisition of such assets, (2) such Liens
do not at any time encumber any assets other than the assets financed by such
Debt, (3) such Liens do not and are not modified to secure other Debt and the
amount of Debt secured thereby is not increased and (4) the principal amount of
Debt secured by any such Lien shall at no time exceed the original purchase
price of such fixed or capital assets.
 
“Person” shall mean any natural person, partnership, limited liability company,
corporation, trust, joint venture, joint stock company, association,
unincorporated organization, government or agency or political subdivision
thereof, or other entity, whether acting in an individual, fiduciary or other
capacity.

 
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“Related Documents” shall mean collectively, the Loan Documents, and any other
agreements entered into by the Borrowers with respect to any of the Loan
Documents.
 
“Second Lien Documents” shall mean the promissory notes and amendments to
promissory notes and UCC financing statements issued to the Second Lien Holders.
 
“Second Lien Holders” shall mean, collectively, the following secured creditors
of Industries:  Joel Oppenheimer, Claud J. Jacobs Residuary Trust, Monster
Bridge Ventures LLC, George Gilman, SC Hydraulics, Inc., Garuda, U.S., Inc.,
Equity Trust Company D.B.A. Sterling Trust, Custodian FBO: Richard Kraniak,
Francis Jungers, Kenton Chickering, Karl Geoca, Thomas A. Newton, Jr., Eads
Investments I, LLC., and Brad McWilliams.
 
“Security Agreement” shall have the meaning set forth in Section 5.1 hereof.
 
“Securities Act” shall mean the Securities Act of 1933, as amended.
 
“Securities” shall mean, collectively, the Note, the Warrant, the Interest
Common Stock and the Warrant Shares.
 
“Securities Laws” shall mean all applicable United States federal and state
securities laws and regulations thereunder applicable to the registration,
mortgaging, hypothecating, pledging or selling or offering to mortgage,
hypothecate, pledge or sell securities in the United States and any relevant
state, including (i) the Securities Act of 1933, the Securities Exchange Act of
1934 and the Sarbanes-Oxley Act of 2002, (ii) the rules and regulations of the
National Quotation Bureau, the OTC Bulletin Board, the Financial Regulatory
Authority, the Securities and Exchange Commission and any other regulatory
authority having authority with respect to the trading of over the counter
stocks, (iii) all relevant state’s Blue Sky laws, and (iv) all other applicable
securities laws.
 
“Subsidiary” and “Subsidiaries” shall mean, respectively, with respect to any
Person, each and all such corporations, partnerships, limited partnerships,
limited liability companies, limited liability partnerships, joint ventures or
other entities of which or in which such Person owns, directly or indirectly,
such number of outstanding Capital Securities as have more than fifty percent
(50.00%) of the ordinary voting power for the election of directors or other
managers of such corporation, partnership, limited liability company or other
entity.  Unless the context otherwise requires, each reference to Subsidiaries
herein shall be a reference to Subsidiaries of any Borrower.
 
“Stock Pledge” shall have the meaning set forth in Section 5.1(d) hereof.
 
“Taxes” shall mean any and all present and future stamp and documentary taxes or
other taxes, duties, levies, imposts, deductions, assessments, charges or
withholdings, and any and all liabilities (including interest and penalties and
other additions to taxes) with respect to the foregoing.

 
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“UCC” shall mean the Uniform Commercial Code in effect in the State of Texas
from time to time.
 
“Unmatured Event of Default” shall mean any event which, with the giving of
notice, the passage of time or both, would constitute an Event of Default.
 
“Voidable Transfer” shall have the meaning set forth in Section 9.14 hereof.
 
“Warrant” shall have the meaning set forth in Section 5.1(f) hereof.
 
“Warrant Shares” shall have the meaning set forth in Section 5.1(f) hereof.
 
Section 1.2            Accounting Terms.  Any accounting terms used in this
Agreement which are not specifically defined herein shall have the meanings
customarily given them in accordance with GAAP.  Calculations and determinations
of financial and accounting terms used and not otherwise specifically defined
hereunder and the preparation of financial statements to be furnished to the
Lenders pursuant hereto shall be made and prepared, both as to classification of
items and as to amount, in accordance with GAAP as used in the preparation of
the financial statements of the Borrower on the date of this Agreement.
 
Section 1.3             Other Interpretive Provisions.
 
(a)           The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.  Whenever the context so
requires, the neuter gender includes the masculine and feminine, the single
number includes the plural, and vice versa, and in particular the word
“Borrower” shall be so construed.
 
(b)           Section and Schedule references are to this Agreement unless
otherwise specified.  The words “hereof”, “herein” and “hereunder” and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
 
(c)           The term “including” is not limiting, and means “including,
without limitation”.
 
(d)           The term “day” means a calendar day commencing on 12:00 a.m. and
ending at 12:00 a.m. on the immediately following calendar day.
 
(e)           Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement and the other Loan Documents) and other
contractual instruments shall be deemed to include all subsequent amendments,
restatements, supplements and other modifications thereto, but only to the
extent such amendments, restatements, supplements and other modifications are
not prohibited by the terms of any Loan Document, and (ii) references to any
statute or regulation shall be construed as including all statutory and
regulatory provisions amending, replacing, supplementing or interpreting such
statute or regulation.
 
(f)            To the extent any of the provisions of the other Loan Documents
are inconsistent with the terms of this Agreement; the provisions of this
Agreement shall govern.

 
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Section 2.              Loan.
 
2.1           Outstanding Debt.  The Borrowers are jointly and severally liable,
and jointly and severally agree to pay, to the Lenders, in an equal share to
each Lender (on a 50/50 basis), the amount of [SEVEN HUNDRED AND SIX THOUSAND
ONE HUNDRED TWENTY-FIVE DOLLARS ($706,125)] and all other Obligations under the
Note and Related Loan Documents (the “Loan”).
 
2.2           Loan Account.  The Lenders shall maintain a loan account (the
“Loan Account”) on their books in which shall be recorded (i) all payments made
by Borrowers on the Loan and (ii) all other appropriate debits and credits as
provided in this Agreement, including, without limitation, all interest, charges
and expenses.  All amounts recorded in the Loan Account shall be, absent
manifest error, prima facie evidence of (i) the principal amount of the Loan
remaining due hereunder, (ii) any accrued and unpaid interest owing on the Loan,
and (iii) all amounts repaid on the Loan; provided, however, the failure to
maintain any such Loan Account or to record any such amount or any error in
recording such amounts shall not limit or otherwise affect the obligations of
the Borrowers under this Agreement to repay the principal amount of the Loan,
together with all interest accruing thereon.
 
2.3           Note.  The Loan shall be evidenced by the Note.
 
Section 3.              Interest Rate and Expenses.
 
3.1           Interest Rates.  Except as otherwise provided in Section 3.2, the
Loan shall accrue interest during each Interest Period at a rate per annum equal
to ten percent (10%) (“Interest Rate”).  After the occurrence and during the
continuation of an Event of Default, interest on the outstanding principal
balance of the Loan shall accrue interest at the Default Rate.  Except as
otherwise set forth herein, all interest at the Interest Rate shall be
calculated on a per diem basis based on a year consisting of 360 days and shall
be paid for the actual number of days elapsed during each Interest Period.
 
3.2           Payment of Interest.  Accrued and unpaid interest at the Interest
Rate shall be due and payable for the applicable Interest Period on each
Interest Due Date as follows:
 
(a)           In cash, or;
 
(b)           At Industries’ option, Industries may by notice in writing to the
Lenders, elect to pay all interest due by the Borrowers by issuing authorized
but unissued common shares of Industries to the Lenders in the amount set forth
in Section 3.3.
 
(c)           All accrued but unpaid interest due under this Agreement and the
Note shall be paid in full on the Maturity Date.
 
3.3           Computation and Issuance of Common Shares.
 
(a)           In the event Industries elects to issue Interest Common Stock to
the Lenders on any Interest Due Date, the amount of Interest Common Stock to be
issued on such date shall be determined on a per diem basis where the interest
due by the Borrowers on the Loan per day during any Interest Period will be
deemed to equal a total of 5,000 common shares (or 2,500 common shares per
Lender) of Industries (par value of $0.001 per share) and the number of shares
to be issued to the Lenders on any Interest Due Date shall be determined by
multiplying 5,000 by the number of days elapsed in the applicable Interest
Period.

 
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(b)           Interest Common Stock shall be issued and delivered by Industries
pursuant to agreed procedures determined by the Board of Directors of Industries
in compliance with its incorporation documents, Delaware law and all relevant
federal and local Securities Laws.
 
(c)           All Interest Common Stock to be issued on any Interest Due Date
shall be issued and delivered by Industries to the Lenders in equal shares (on a
50/50 basis) no later than five (5) Business days after such Interest Due Date,
with the result that each Lender shall have issued and delivered to it or him,
as applicable, a certificate representing Common Shares of Industries equal to
50% of the Interest Common Stock issued by Industries to Lenders on such
Interest Payment Date.
 
(d)           All Interest Common Stock issued to the Lenders shall be (i)
deemed fully paid and non-assessable and be entitled to rights and privileges of
other common stockholders of Industries and (ii) in full payment and
satisfaction of all interest due by the Borrowers on the applicable Interest Due
Date.
 
(e)           The certificates for all Interest Common Stock issued to each
Lender shall bear the legend set forth in Section 7A.3 hereof.
 
3.4           Costs, Fees and Expenses.  The Borrowers shall pay or reimburse
the Lenders (up to $34,000) for all reasonable costs, fees and expenses incurred
by the Lenders, or for which the Lenders become obligated, in connection with,
any and all stamp and other taxes payable in connection with this Agreement or
the other Loan Documents, UCC search fees, filing fees and other costs and
expenses (including reasonable attorneys fees) in connection with the execution
and delivery of this Agreement and the other Loan Documents.  That portion of
the Obligations consisting of costs, expenses or advances to be reimbursed by
the Borrower to the Lenders pursuant to this Agreement or the other Loan
Documents which are not paid on or prior to the date hereof shall be payable by
the Borrower to the Lenders within five (5) Business Days of notice thereof or
at the Lenders’ option, on notice to the Borrowers, be rolled into and added to
the principal amount of the Loan and Note.  In addition, if at any time or times
hereafter the Lenders: (a) employ counsel for advice or other representation (i)
to represent the Lenders in any litigation, contest, dispute, suit or proceeding
or to commence, defend, or intervene or to take any other action in or with
respect to any litigation, contest, dispute, suit, or proceeding (whether
instituted by the Lenders, the Borrower, or any other Person) in any way or
respect relating to this Agreement, the other Loan Documents or the Borrower’s
business or affairs, or (ii) to enforce any rights of the Lenders against the
Borrower or any other Person that may be obligated to the Lenders by virtue of
this Agreement or the other Loan Documents; (b) takes any action to protect,
collect, sell, liquidate, or otherwise dispose of any of the Collateral; and/or
(c) attempts to or enforces any of the Lenders’ rights or remedies under this
Agreement or the other Loan Documents, the costs and expenses incurred by the
Lenders in any manner or way with respect to the foregoing, shall be part of the
Obligations, payable by the Borrower to the Lenders on demand.

 
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Section 4.              Payments.
 
4.1           Principal Payments.  Unless sooner paid in full, the outstanding
principal balance of the Loan shall be paid in full on the Maturity
Date.  Principal amounts repaid on the Loan may not be borrowed again.
 
4.2           Mandatory Prepayment.  The Borrowers shall make a prepayment of
the outstanding principal amount of the Loan concurrently with the receipt by
the Borrowers of any Net Cash Proceeds from any Asset Disposition in an amount
equal to 100% of such Net Cash Proceeds.
 
4.3           Optional Prepayments.  The Borrowers may voluntarily prepay
amounts due on the Note, in whole or in part, at any time on or after the date
hereof.
 
4.4           Due Date Extensions.  If any payment to be made by the Borrowers
hereunder shall become due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of time of
the applicable Interest Period or Maturity Date shall be included in computing
any interest in respect of such payment; provided, however, that if the effect
of any extension would be to carry the payment over to the next calendar month,
such payment shall be due and made on the preceding Business Day of the month in
which such payment is due and any such reduction of time in the applicable
Interest Period shall be included in computing interest due on such date of
payment.
 
4.5           Collection of Funds.  All payments made by the Borrowers hereunder
or under any of the Loan Documents shall be made without setoff, counterclaim,
or other defense and shall be applied first to the payment of accrued interest,
next to the payment of all other fees, charges or costs owed to Lenders under
the Agreement and then to the payment of outstanding principal owed on the Loan.
 
4.6           Taxes.
 
(a)           Any and all payments by or on account of any obligation of the
Borrowers hereunder or under any other Loan Document shall be made free and
clear of and without reduction or withholding for any Taxes.  If, however,
applicable law requires the Borrowers or the Lenders to withhold or deduct any
Tax, such Tax shall be withheld or deducted in accordance with such laws as
determined by the Borrowers or the Lenders, as the case may be.  If the
Borrowers or the Lenders shall be required by any applicable laws to withhold or
deduct any Taxes from any payment, then (i) the Borrowers or the Lenders, as
required by such laws, shall withhold or make such deductions, (ii) the
Borrowers or the Lenders, to the extent required by such laws, shall timely pay
the full amount so withheld or deducted by it to the relevant Governmental
Authority in accordance with such laws, and (iii) to the extent that the
withholding or deduction is made on account of Indemnified Taxes, the sum
payable by the Borrowers shall be increased as necessary so that after any
required withholding or the making of all required deductions (including
deductions applicable to additional sums payable under this Section 4.6) the
Lenders receive an amount equal to the sum it would have received had no such
withholding or deduction been made.

 
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(b)           Without limiting the provisions of subsection (a) above, the
Borrowers shall, and do hereby jointly and severally, indemnify and hold
harmless the Lenders, and shall make payment in respect thereof within ten (10)
days after demand therefor, for the full amount of any Indemnified Taxes
(including Indemnified Taxes imposed or asserted on or attributable to amounts
payable under this Section) withheld or deducted by the Borrowers or the Lenders
or paid by the Lenders, and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such Indemnified Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority.
 
Section 5.              Conditions of Borrowing.
 
The obligation of the Lenders to disburse any portion of the Loan is subject to
the following conditions precedent:
 
5.1           Initial Closing Conditions.  The Lenders shall have received all
of the following, each duly executed and dated the Closing Date (or such earlier
date as shall be satisfactory to the Lenders), in form and substance
satisfactory to the Lenders (and the date on which all such conditions precedent
have been satisfied or waived in writing by the Lenders is called the “Closing
Date”):
 
(a)           Loan Agreement.  Two copies of this Agreement duly executed by the
Borrowers.
 
(b)           Note.  The Note evidencing the Loan in form and substance
satisfactory to the Lenders, duly executed by the Borrowers.
 
(c)           Security Agreement.  An Amended and Restated Security Agreement
dated as of the date of this Agreement, executed by the Borrowers, in the form
prepared by and acceptable to the Lenders (the “Security Agreement”).
 
(d)           Stock Pledge.  A pledge of all of the issued and outstanding
shares of Hemiwedge executed by Industries in favor of Lenders, in form and
substance satisfactory to Lenders (“Stock Pledge”)
 
(e)           Assignment Agreement.  The execution and delivery to the Lenders
by the Bank of the Assignment Agreement in form and substance satisfactory to
the Lenders and delivery to the Lenders of all Prior Loan Documents in a manner
acceptable to the Lenders.
 
(f)           Stock Warrants.  The issuance and delivery to Lenders of a Stock
Warrant or Warrants (“Warrant”) for 2,875,000 shares of common stock of
Industries (par value of $0.001 each) exercisable within sixty (60) months after
the Closing Date for a purchase price of $0.10 per share (“Warrant Shares”);
provided that the amount of Warrant Shares shall be reduced to 575,000 Shares of
Common Stock at a purchase price of $0.10 per share if, within forty-five (45)
days of the effective date of this Agreement, either (i) Lenders sell all (but
not less than all) of their interest in the Loan and Note to a third party for
the full outstanding balance of the Loan, plus all interest and costs owed
thereon (including attorney’s fees of Lenders) or (ii) the Loan and all
Obligations are paid in full plus all interest and costs (without duplication)
owed thereon (including attorney fees of Lenders) all in the form and substance
satisfactory to the Lenders.

 
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(g)           Search Results; Lien Terminations.  Copies of UCC search reports
dated such a date as is reasonably acceptable to the Lenders, listing all
effective financing statements which name the Borrowers, as debtor, together
with copies of such financing statements.
 
(h)           UCC #3 Assignments.  Delivery to the Lenders of all necessary UCC
#3 Assignments of Financing Statements duly executed by the Bank in favor of the
Lenders with respect to all liens and security interests granted by the
Borrowers to the Bank pursuant to the Prior Security Agreement and Prior Loan
Documents, all in form and substance satisfactory to the Lenders.
 
(i)            Organizational and Authorization Documents.  Copies of (i) the
Certificate of Incorporation and Bylaws and Certificate of Organization or
Incorporation of each of Industries and Hemiwedge as applicable; (ii)
resolutions of the Board of Directors of each of Industries and Hemiwedge, as
applicable, approving and authorizing such Person’s execution, delivery and
performance of the Loan Documents and Related Documents to which it is party and
the transactions contemplated thereby, and, with respect to Industries, the
issuance of the Interest Common Shares; and (iii) signature and incumbency
certificates of the officers of each of Industries and Hemiwedge, as applicable,
executing any of the Related Documents.
 
(j)            Good Standing Certificates.  Copies of good standing certificates
in the state of incorporation and formation of Industries and Hemiwedge, as
applicable.
 
(k)           Additional Documents.  Such other certificates, financial
statements, schedules, resolutions, opinions of counsel, notes and other
documents which are provided for hereunder or which the Lenders shall reasonably
require.
 
5.2           Further Conditions.  The obligation of the Lenders to close and
continue the Loan is subject to the following additional conditions precedent
that:
 
(a)           Event of Default.  No Event of Default, or Unmatured Event of
Default, shall have occurred and be continuing or would result therefrom.
 
(b)           Representations and Warranties.  The representations or warranties
of the Borrowers contained in this Agreement or in any Related Document shall be
true and correct in all respects on the Closing Date and shall remain true and
correct thereafter (except to the extent stated to relate to a specific earlier
date, in which case such representations and warranties shall be true and
correct as of such earlier date); provided, however, that such representations
and warranties shall be deemed to be true and correct unless the failure or
failures of all such representations and warranties to be true and correct would
reasonably be expected, in the aggregate, to have a Material Adverse Effect.
 
(c)           Material Adverse Effect.  There has been no development or event,
which has had or could reasonably be expected to have a Material Adverse Effect.

 
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Each payment of interest in cash or issuance of Interest Common Shares on any
Interest Due Date shall constitute a representation and warranty by each
Borrower that the conditions contained in this Section 5.2 have been satisfied.
 
Section 6.              Representations and Waranties.
 
To induce the Lenders to purchase the Prior Indebtedness and extend and continue
the Loan, the Borrowers each make the following representations and warranties
to the Lenders, each of which shall survive the execution and delivery of this
Agreement:
 
6.1           Organization and Name.
 
(a)           Industries is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware, with all requisite power and
authority to carry on and conduct its business as presently conducted and to
enter into and perform its obligations under this Agreement and the Related
Documents.
 
(b)           Hemiwedge is a corporation duly organized, existing and in good
standing under the laws of the State of Texas, with all requisite power and
authority to carry on and conduct its business as presently conducted and to
enter into and perform its obligations under this Agreement and the Related
Documents.
 
(c)           The exact legal name of each Borrower is as set forth in the first
paragraph of this Agreement.
 
6.2           Authorization.  All necessary and appropriate action by each board
of directors of the Borrowers has been taken (a) on the part of each Borrower to
authorize the execution and delivery by each of the Borrowers of this Agreement
and the Related Documents and (b) on the part of Industries, to issue and
deliver the Interest Common Shares.
 
6.3           Validity and Binding Nature.  This Agreement has been duly
executed and delivered by each Borrower and is the legal, valid and binding
obligation of each such Borrower, enforceable against each Borrower in
accordance with its terms, subject to bankruptcy, insolvency and similar laws
affecting the enforceability of creditors’ rights generally and to general
principles of equity.
 
6.4           Consent; Absence of Breach.  The execution, delivery and
performance by each Borrower of this Agreement and the Related Documents as
applicable, does not and will not (i) require any consent, approval,
authorization, or filings with, notice to or other act by or in respect of, any
Governmental Authority or any other Person (other than any consent or approval
which has been obtained and is in full force and effect); (ii) conflict with (A)
any provision of law or any applicable regulation, order, writ, injunction or
decree of any court or Governmental Authority, or (B) any other loan or credit
agreement entered into and currently in force by either Borrower, or (C) any
material agreement, indenture, instrument or other document, or any judgment,
order or decree, which is binding upon any Borrower or any of its properties or
assets; or (iii) require, or result in, the creation or imposition of any Lien
on any asset of the Borrowers, other than Liens in favor of the Lenders.

 
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6.5           Adverse Circumstances.  No condition, circumstance, event,
agreement, document, instrument, restriction, litigation or proceeding (or
threatened litigation or proceeding or basis therefor) exists which can
reasonably be expected to (i) have a Material Adverse Effect, or (ii) constitute
an Event of Default or an Unmatured Event of Default.
 
6.6           Financial Statements.  All financial statements with respect to
each Borrower that have been submitted to the Lenders have been prepared on a
basis, except as otherwise noted therein, consistent with the previous fiscal
year and present fairly the financial condition of each Borrower and the results
of the operations for each such as of such date and for the periods indicated,
all in accordance with GAAP.  Since the date of the most recent financial
statement, there has been no change in the financial condition or in the assets
or liabilities of either Borrower having a Material Adverse Effect on such
Borrower.
 
6.7           Litigation and Contingent Liabilities.  Except as set forth in
Schedule 6.7, there is no litigation, arbitration proceeding, demand, charge,
claim, petition or governmental investigation or proceeding pending, or, to
Borrowers’ knowledge, threatened, against any Borrower, which, if adversely
determined, which might reasonably be expected to have a Material Adverse
Effect.  Other than any liability incident to such litigation or proceedings,
neither Borrower has any material guarantee obligations, contingent liabilities,
liabilities for taxes, or any long-term leases or unusual forward or long-term
commitments, including any interest rate or foreign currency swap or exchange
transaction or other obligation in respect of derivatives, that are not
fully-reflected or fully reserved for in the most recent audited financial
statements delivered to the Lenders.
 
6.8           Current Borrowers Indebtedness.  Schedule 6.8  sets forth a true
and correct listing of all current indebtedness of the Borrowers as of the date
of this Agreement (including all trade payables in excess of $50,000).
 
6.9           Environmental Laws and Hazardous Substances.  No Obligor has
generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Substances in any manner which at any time violates
any Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder, except as would not reasonably be expected to result
in a Material Adverse Effect.  No Obligor has any material liability, contingent
or otherwise, in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Substances or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Material, except as would not reasonably be expected to result in a Material
Adverse Effect.  There has been no investigation, proceeding, complaint, order,
directive, claim, citation or notice by any Governmental Authority or any other
Person, nor is any pending or, to the best of any Obligor’s knowledge,
threatened against such Obligor, and the Borrowers shall immediately notify the
Lenders upon becoming aware of any such investigation, proceeding, complaint,
order, directive, claim, citation or notice, with respect to any non-compliance
with, or violation of, the requirements of any Environmental Law by any Borrower
or the release, spill or discharge, threatened or actual, of any Hazardous
Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Material or any
other environmental, health or safety matter, which affects any Borrower or any
of its businesses, operations or assets or any properties.

 
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6.10         Taxes.  Except as set forth on Schedule 6.10, the Borrowers have
each timely filed all tax returns and reports required by law to have been filed
by them and have paid all Taxes due and payable with respect to such returns,
except (i) any such Taxes which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books, are insured against or bonded over to
the satisfaction of the Lenders and the contesting of such payment does not
create a Lien on the Collateral or (ii) to the extent that the failure to do so
(individually or collectively) could not reasonably be expected to result in a
Material Adverse Effect.
 
6.11         Governmental Regulation.  No Obligor is subject to regulation under
any federal or state statute or regulation limiting its ability to incur
indebtedness for borrowed money.
 
6.12         [Intentionally Deleted]
 
6.13         Compliance with Securities Laws/Common Interest Stock.  With
respect to Industries, as of the effective date of this Agreement:
 
(a)               The total number of authorized shares of its common stock is
Fifty Million ($50,000,000) shares with a par value of $0.001 each;

 
(b)               There is only one class of common stock;

 
(c)               The total number of its issued and outstanding shares of
common stock is 27,911,088;

 
(d)               The total number of its authorized but unissued shares of
common stock is 22,088,912;

 
(e)               The total number of its shares of common stock held in
treasury is zero (0);

 
(f)                The total number  of its authorized shares of preferred stock
is Ten Million (10,000,000) shares with a par value of $0.001 each, of which no
(0) shares are issued and outstanding;

 
(g)               The total amount of outstanding common stock warrants issued
by Industries as of the date of this Agreement (excluding any Warrants to be
issued to the Lenders under this Agreement) is 10,383,579.

 
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(h)               The Board of Directors of Industries has (i) determined that
it is in the best interests of Industries and its shareholders to grant the
company’s officers the option of issuing unissued common stock  or selling
treasury stock, as the case may be , and delivering the Interest Common Stock to
the Lenders in lieu of paying interest in cash on any Interest Due Date, and
(ii) passed all necessary directors’ resolutions to authorize (x) either the
issuance of  authorized but unissued shares of common stock or (y) the
reissuance of common stock treasury shares, at the option and discretion of the
officers of the company, to the Lenders on any Interest Due Date; and

 
(i)                Industries is in compliance with all Delaware corporate laws
and all Securities Laws with respect to the issuance/sale and delivery of
Interest Common Stock to the Lenders in lieu of the payment of interest at the
discretion of its officers and the offer, sale and issuance of the Securities
are and will be exempt from the registration requirements of Securities Act,
provided that, in making these representations and warranties, Industries is
relying in part on the accuracy of representations and warranties of the Lenders
contained in Section 7A hereof.

 
6.14         No Usury.  The transaction evidenced by this Agreement and the Loan
Documents does not violate any usury law or other law relating to the payment of
interest on loans.
 
6.15         Full Disclosure.  Neither this Agreement, the other Loan Documents,
nor any statement or documents referred to herein or delivered to the Lenders by
any of the Borrowers, or any other Person on their behalf contains any untrue
statement or omits to state a material fact necessary to make the statements
herein or therein not misleading.
 
6.16         Ownership of Collateral.
 
(a)           Borrowers have good and marketable title to all of the Collateral;
and
 
(b)           Except as set forth in Schedule II to the Security Agreement, with
respect to Intellectual Property licensed to other Persons, Hemiwedge, pursuant
to the provisions of the Security Agreement, is pledging and granting to the
Lenders a security interest in all of the Patents and Intellectual Property that
it owns or in which it has a license.
 
6.17         Priority.  When the financing statements delivered pursuant to the
Security Agreement are filed in the proper offices where each of the Borrowers
are incorporated, the Lenders will have a valid and perfected first security
interest in the Collateral described in the Security Agreement, subject to no
prior security interest, assignment, lien or encumbrance except interests, if
any, specifically approved by the Lenders in writing.
 
6.18         Permits.  The Borrowers each have, or will each obtain, all
governmental and private permits, certificates, consents and franchises which
are material to the business, property, assets, operations or condition,
financial or otherwise, of the Borrowers to carry on their businesses as now
being conducted.  All such governmental and private permits, certificates,
consents and franchises are, or will be, valid and subsisting, and there is no
existing violation thereof.

 
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6.19         ERISA.  Each qualified retirement plan of each of the Borrowers
presently conforms and is administered in a manner consistent with the Employee
Retirement Income Security Act of 1974.
 
6.20         Survival of Representations.  All representations and warranties
made by each of the Borrowers herein will survive the Closing Date, and any
investigation at any time made by or on behalf of the Lenders will not diminish
the Lenders’ rights to rely thereon.  All statements contained in any
certificate or other instrument delivered by or on behalf of the Borrowers under
or pursuant to this Agreement or in connection with the transactions
contemplated hereby will constitute representations and warranties made by
Borrowers hereunder.
 
Section 7.              Covenants.
 
7.1           Compliance Certificate; Notices.  The Borrowers shall furnish, or
cause to be furnished, to the Lenders:
 
(a)           Place of Business; Collateral Locations.  At least 30 days’ prior
to any change in the principal place of business or books and records of any
Borrower or any change in location of Collateral provide written notice to the
Lenders of such change.
 
(b)           Notice of Proceedings.  Promptly upon becoming aware, shall give
written notice to the Lenders of any litigation, arbitration or governmental
investigation or proceeding not previously disclosed or the Borrowers to the
Lenders which has been instituted or, to the knowledge of the Borrowers, is
threatened against either of them or to which any of their respective properties
is subject which might reasonably be expected to have a Material Adverse Effect.
 
(c)           Notice of Event of Default or Material Adverse
Effect.  Immediately after the commencement thereof, give notice to the Lenders
in writing of the occurrence of any Event of Default or any Unmatured Event of
Default, or the occurrence of any condition or event which could reasonably be
expected to have a Material Adverse Effect.
 
7.2           Debt.  The Borrowers shall not, without prior written consent of
the Lenders, either directly or indirectly, create, assume, incur or have
outstanding any Debt (including purchase money indebtedness), or become liable,
whether as endorser, guarantor, surety or otherwise, for any Debt or obligation
of any other Person, except:
 
(a)           the Obligations under this Agreement and the other Related
Documents;
 
(b)           obligations of the Borrowers for Taxes, assessments, municipal or
other governmental charges;
 
(c)           Debt owed to the Second Lien Holders as of the date of this
Agreement and Debt pursuant to the Bridge Notes, all of which Debt is listed in
Schedule 6.8 hereto; provided, that, (i) such Debt is junior to the Obligations
and (ii) no principal payments may be made on such Debt by either Borrower
during the term of the Loan without the Lenders prior written consent, and
provided further that no such principal payments may be made out of the proceeds
of (x) any Debt permitted to be incurred pursuant to the provisions of Section
7.2(e) hereof or (y) any Permitted Equity Offering for working capital purposes
of Hemiwedge; and

 
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(d)           Debt incurred from third party lenders for working capital
purposes of Hemiwedge not to exceed a total of Fifty Thousand Dollars ($50,000)
during the term of the Loan, which Debt may not be secured by a Lien on any of
the Collateral.
 
(e)           Debt (including Capitalized Lease Obligations) incurred solely to
finance the acquisition of fixed or capital assets in an aggregate principal
amount not to exceed, as to the Borrowers, taken together, Fifty Thousand
Dollars ($50,000) at any time outstanding.
 
7.3           Encumbrances.  The Borrowers shall not, either directly or
indirectly, create, assume, incur or suffer or permit to exist any Lien (except
for Permitted Liens) or charge of any kind or character upon any asset of the
Borrowers, whether owned at the date hereof or hereafter acquired, except for
Permitted Liens.
 
7.4           Investments.  The Borrowers shall not, either directly or
indirectly, make or have outstanding any Investment, except (i) bank deposits in
the ordinary course of business and (ii) Industries’ equity investment in
Hemiwedge existing as of the date of this Agreement, but no more.
 
7.5           Transfer; Sales.  The Borrowers shall not, whether in one
transaction or a series of related transactions, (a) purchase or otherwise
acquire all or substantially all of the assets or any Capital Securities of any
class of, or any partnership or joint venture interest in, any other Person, or
(b) except (i) as otherwise permitted under this Loan Agreement or (ii) for worn
out or damaged machinery and equipment, provided that same is replaced with
equivalent or better machinery or equipment, as appropriate, sell, transfer,
convey or lease all or any part of its assets, including the Collateral except
the sale by Hemiwedge of Inventory in the ordinary course of business.
 
7.6           Distributions.  Except as set forth below or as permitted by this
Agreement or as contemplated by any Related Documents, without the Lenders prior
written consent, the Borrowers shall not, (a) make any distribution or dividend,
whether in cash or otherwise, to any person provided, however, that the
Borrowers may pay dividends to its shareholders in the form of capital stock (in
an amount not to exceed $500,000 worth per annum) or up to a maximum amount of
Fifty Thousand Dollars ($50,000) in cash during the term of the Loan out of
available cash derived from operations of Hemiwedge (other than cash generated
by any Permitted Equity Offering or new Debt permitted by Section 7.2(d) hereof,
(b) purchase or redeem any of its equity interests or any warrants, options or
other rights in respect thereof, except pursuant to an “employee benefit plan”
as defined under the Securities Act of 1933, as amended, (c) pay any management
fees or similar fees to any of its Affiliates, (d) pay or prepay interest on,
principal of, premium, if any, redemption, conversion, exchange, purchase,
retirement, defeasance, sinking fund or any other payment in respect of any Debt
(other than the Loan) except as for (i) conversion of any Debt into equity
pursuant to the Permitted Equity Offering and (ii) otherwise permitted by
Section 7.2(c) hereof, or (e) set aside funds for any of the
foregoing.  Notwithstanding the foregoing, nothing in this Section shall prevent
the payment by Borrowers of amounts owed to (1) Soderberg Research and
Development, Inc. under that certain Asset Purchase Agreement dated as of
December 2, 2005 and (2) Tejas Research & Engineering, L.P. under that certain
Intellectual Property Agreement dated as of October 14, 2008.

 
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7.7           Transactions with Affiliates.  Without Lenders’ consent (not to be
unreasonably withheld, conditioned or delayed), the Borrowers shall not,
directly or indirectly, enter into or permit to exist any transaction with any
of its Affiliates or with any director, officer or employee of the Borrower
other than as set forth in this Agreement or any of the other Related Documents.
 
7.8           Business Activities and Organizational Documents.  The Borrowers
shall not (a) engage in any line of business other than the businesses engaged
in on the date hereof and businesses reasonably related thereto or (b) permit
its charter, bylaws or other organizational documents to be amended or modified
in any way except with respect to changes required by any investor injecting
equity funds in Hemiwedge or Industries pursuant to any Permitted Equity
Offering.
 
7.9           Place of Business; Collateral Locations and Change of Legal
Status.  Without first giving at least 30 days’ prior written notice to the
Lenders and taking all action required by the Lenders for the purpose of
perfecting or protecting the security interests under the Loan Documents, none
of the Borrowers shall (a) change its principal place of business, the location
of its books and records or location of Collateral or (b) change its name, its
organizational identification number, its type of organization, its jurisdiction
of organization or other legal structure.
 
7.10         Inconsistent Agreements.  The Borrowers shall not enter into any
agreement containing any provision which would (a) be violated or breached by
any borrowing by the Borrowers hereunder or by the performance by the Borrowers
of any of their Obligations hereunder or under any other Loan Document, or (b)
prohibit the Borrowers from granting to the Lenders a Lien on any of its assets.
 
7.11         Taxes.  All Taxes which hereafter become due and assessments,
governmental charges and levies which are hereafter imposed on Borrowers on
their respective assets, income, and profits will be paid prior to the date on
which penalties attach thereto; provided that Borrowers will not be required to
pay any such charge which is being contested in good faith by proper proceedings
as to which adequate reserves have been established.
 
7.12         Qualification; Licenses.  Each of the Borrowers will take such
actions or cause such actions to be taken as might be required to maintain each
of the Borrowers’ corporate existence and all governmental and private permits,
licenses and authorities of Borrowers necessary or desirable to the continuation
of their businesses and will comply with all statues an regulations of
Governmental Authorities.
 
7.13         Additional Documents.  At any time and from time to time, upon
written request of Lenders, each of the Borrowers agrees to furnish any
additional information and to execute any and all additional documents, not
inconsistent with the provisions of this Agreement, which may be required by the
Lenders in connection with or pursuant to any provision set forth in this
Agreement or the Related Documents;

 
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7.14         Books and Records.  Each of the Borrowers will keep and maintain
accurate books and records in accordance with GAAP.
 
7.15         Insurance.  Each of the Borrowers will maintain property,
liability, workers compensation and other forms of insurance in amounts
reasonably designated at any time or from time to time by the Lender.
 
7.16         Registration Rights.
 
(a)           Piggyback Registration.  If at any time or from time to time
Industries shall propose to file on its behalf or on behalf of any of its
security holders a registration statement (other than with respect to a merger,
combination, employee stock benefit plan or dividend reinvestment plan or any
successor forms thereto) under the Securities Act on any form for the general
registration of securities with respect to the class of securities represented
by the Securities, Industries shall in each case:
 
(i)           promptly give written notice to each Lender at least thirty (30)
days before the anticipated filing date, indicating the proposed offering price
and describing the plan of distribution;
 
(ii)          include in such registration (and any related qualification under
blue sky or other state securities laws or other compliance) and, at the request
of any Lender, in any underwriting involved therein, all the Securities
specified by any Lender in a written request delivered to Industries within
twenty (20) days after receipt of such written notice from Industries; and
 
(iii)         if such offering is proposed to be underwritten, use its best
efforts to cause the managing underwriter(s) of such proposed underwritten
offering to permit the Securities to be included in the registration statement
for such offering on the same terms and conditions as any similar securities of
Industries included therein.
 
(b)           Notwithstanding the provisions of Section 7.16(a) above, if either
(A) the registration limitations imposed by the Securities and Exchange
Commission pursuant to Rule 415 of the Securities Act require a reduction of the
amount of securities included on any registration statement filed by Industries
or (B) the lead managing underwriter selected by Industries for an underwritten
offering for which piggyback rights are requested by the Lenders pursuant to
Section 7.16(a) determines that marketing or other factors require a limitation
on the number of shares of Industries’ common stock to be offered and sold in
such offering, then the Lenders agree that their shares of Interest Common Stock
and Warrant Shares being included in the offering (the “Lender Registrable
Securities”), shall be first either (i) reduced as necessary to meet the
required limitation or (ii) if such limitation requires a greater reduction than
would permit any of such Lender’s Registrable Securities to be included in such
offering, excluded from any such registration statement to be filed by
Industries, it being understood and agreed that all or part of the Lender
Registrable Securities, as necessary, shall be removed from such registration
statement prior to any securities from any other investor contained on the
subject registration statement.

 
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(c)           Each Lender who elects to exercise its rights under Section
7.16(a) agrees to furnish to Industries a completed questionnaire in the form
attached to this Agreement as Schedule 7.16(b) (a “Selling Shareholder
Questionnaire”) not less than two days prior to proposed filing date of a
registration statement by Industries.
 
Section 7A.           Representations, Warranties and Covenants of the Lender.
 
7A.1        Representations and Warranties of the Lender.  Each Lender
represents and warrants to the Borrowers that:
 
(a)           it is an “accredited investor” within the meaning of Rule 501 of
Regulation D under the Securities Act, as presently in effect;
 
(b)           the Securities being purchased by it are being acquired for its
own account for the purpose of investment and not with a view to, or for resale
in connection with, any distribution thereof within the meaning of the
Securities Act; and
 
(c)           it understands that (i) the Securities have not been registered
under the Securities Act by reason of their issuance in a transaction exempt
from the registration requirements of the Securities Act pursuant to Section
4(2) thereof or Rule 505 or 506 or Section 3(a)(9) promulgated under the
Securities Act, (ii) it understands that the Securities are being offered in
transactions not involving any public offering within the meaning of the
Securities Act (ii) if in the future either Lender decides to offer, resell,
pledge or otherwise transfer any of the Securities, such Securities may be
offered, resold, pledged or otherwise transfer any of the Securities, such
Securities may be offered, resold, pledged or otherwise transferred only (A) to,
Industries, as issuer (B) to a person whom the seller reasonably believes is a
qualified institutional buyer in a transaction meeting the requirements of Rule
144A under the Securities Act, (C) pursuant to an exemption from registration
under the Securities Act provided by Rule 144 thereunder (if available), (D) to
an accredited investor in a transaction exempt from the registration
requirements of the Securities Act or (E) pursuant to an effective registration
statement under the Securities Act, in each of cases (A) through (E) in
accordance with any applicable Securities Laws of the states and other
jurisdictions of the United States, and that (iii) such seller will, and each
subsequent holder is required to, notify any subsequent purchaser of the
Securities from it of the resale restrictions referred to in (ii) above (iv) the
Securities will bear the legend to such effect set forth in Section 7A.3 hereof.
 
7A.2        Restricted Securities.  Subject to the provisions of Section 7A.1,
the Lender agrees not to make any disposition of all or any portion of the
Securities unless and until such securities are registered under the Securities
Act and under any other applicable securities laws or such sale or transfer is
exempt from such registration.
 
7A.3        Legend.  Each Lender acknowledges that the certificates evidencing
the Securities will bear the legend set forth below:

 
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THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, OR ANY APPLICABLE STATE
SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(“Securities Act”)  OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.
 
The legend set forth above shall be removed by Borrowers from any certificate
evidencing Securities, and the Borrowers shall issue a certificate without such
legend to the holder thereof, upon delivery to the Borrowers of an opinion by
counsel (which may be counsel for the Borrower) that a registration statement
under the Securities Act is at that time in effect with respect to the legended
security or that such security can be freely transferred without such a
registration statement being in effect and that such transfer will not
jeopardize the exemption or exemptions from registration pursuant to which the
Borrower issued the Securities; provided, however, that no opinion shall be
required for dispositions pursuant to Rule 144 under the Securities Act or in
any transfer in compliance with applicable securities laws where transferee
shall receive securities bearing the legend above.
 
7A.4       Cancellation of Guaranties.  Lenders represent and warrant that prior
to execution of this Agreement, they have executed the necessary documentation
to release the Original Guarantors from their obligations under the Prior Loan
Documents and further covenant and agree that such Guarantors will have no
obligations under this Agreement and the Related Loan Documents.
 
7A.5       Subordination to A/R Facility.  Lenders covenant and agree that with
respect to any Liens created under the A/R Facility to subordinate solely with
respect to the receivables under such A/R Facility their right to repayment of
the Obligations out of any Proceeds received by Borrowers of any such A/R
Facility for which Lenders agree that the lender under such A/R Facility shall
have a first priority security interest in, and only in, such receivables.
 
7A.6       Lenders Reaffirmation.     Each Lender reaffirms its representations,
warranties and covenants in Sections 7A.1 to 7A.3 concurrently with the issuance
of Interest Common Shares on any Interest Due Date.
 
Section 8.              Events of Default and Their Effect.
 
8.1           Events of Default.  The Borrowers shall be in default under this
Agreement, the Note and all other Loan Documents upon the occurrence of any of
the following events (each an “Event of Default”):
 
(a)           Nonpayment of Obligations.  Any interest or other amount due and
owing on the Note or any of the Obligations, whether by its terms or as
otherwise provided herein, is not paid when due and such failure shall continue
for five (5) Business Days.

 
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(b)           Misrepresentation.  Any warranty, representation, certificate or
statement of any Borrower in this Agreement, the other Loan Documents or any
other agreement with the Lenders shall be incorrect in any material respect when
made.
 
(c)           Nonperformance.  Any failure to perform or default in the
performance of any covenant, condition or agreement contained in this Agreement
or in the other Loan Documents (other than an Event of Default described in
Section 8.1(a)) which remains uncorrected for more than thirty (30) days after
receipt of written notice from the Lenders of such failure to perform or
default.
 
(d)           Bankruptcy, Insolvency, etc.  Any Borrower declares insolvency, or
admits in writing its inability or refusal to pay debts as they become due; or
any Borrower applies for, consents to, or acquiesces in the appointment of a
trustee, receiver or other custodian for such Borrower or any property thereof,
or makes a general assignment for the benefit of creditors; or, in the absence
of such application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for any Borrower or for a substantial part of the
property of any thereof; or any bankruptcy, reorganization, debt arrangement, or
other case or proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is commenced in respect of any Borrower
by such Borrower or any other Person; or any Borrower takes any action to
authorize, or in furtherance of, any of the foregoing.
 
(e)           Material Adverse Effect/Cross Default Provisions.  Any Material
Adverse Effect shall occur or any Borrower shall be in default of any other
promissory note or Debt obligation (other than the Bridge Notes or other
obligations listed in any Schedule to this Agreement as in default on the date
hereof), whether for borrowed money or otherwise, and same remains unpaid for
five (5) days after demand for payment thereof has been made.
 
(f)           Judgments.  The entry of any final judgment, decree, levy,
attachment, garnishment or other process, or the filing of any Lien against any
Borrower which is not fully covered by insurance and which could reasonably be
expected to result in a Material Adverse Effect.
 
(g)           Governmental Proceeding.  Any action or other proceeding (judicial
or administrative) commenced against any Borrower or its operations by a
Governmental Authority which, if adversely determined would have a Material
Adverse Effect.
 
8.2           Effects of Events of Default/Maturity.  Upon the occurrence and
during the continuation of an Event of Default, the Lenders shall have all
rights, powers and remedies set forth in the Loan Documents and the other
Related Documents relating to any of the Obligations or any security therefor,
as a secured party under the UCC or as otherwise provided at law or in
equity.  Without limiting the generality of the foregoing, without any notice or
written demand from Lenders, the Loan shall be immediately due and payable and
the Lenders may exercise their rights under the Security Agreement and other
Related Documents.  The Borrowers hereby waive any and all presentment, demand,
notice of dishonor, protest, and all other notices and demands in connection
with the enforcement of the Lenders’ rights under the Loan Documents and the
other Related Documents.  No delay or failure to take action by Lenders upon the
occurrence of any Event of Default shall constitute a waiver by Lenders of any
of their rights or remedies under this Agreement, nor shall such delay or
failure of or actual waiver given by Lenders on any one or more occasions be
deemed to be a waiver of Lenders’ rights with respect to any future Events of
Default hereunder, provided that no such waiver shall constitute a waiver if any
future Event of Default which may occur.

 
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8.3           Waiver of Event of Default.  The Lenders may, by an instrument in
writing signed by the Lenders, waive any Event of Default that has occurred and
any of the consequences of such Event of Default; and in such event, Borrowers
will be restored to their respective former positions,  rights and Indebtedness
under this Agreement and the Related Documents.  Any Event of Default so waived
will, for all purposes of this Agreement, be deemed to have been cured and not
to be continuing, provided that no such waiver shall constitute a waiver of any
future Event of Default unless Lenders otherwise specifically agree in writing.
 
Section 9.               Miscellaneous.
 
9.1           Notices.         All notices, requests, demands and other
communications provided for hereunder shall be in writing and addressed to the
Parties as follows:
 
If to the Borrowers:
Hemiwedge Industries, Inc.

 
1011 Beach Airport Road

 
Conroe, Texas 77301

 
Fax:  936.539.2990

 
 
and

 
 
Hemiwedge Valve Corporation

 
1011 Beach Airport Road

 
Conroe, Texas 77301

 
Fax:  936.539.2990

 
 
With a copy to:

 
 
Indeglia & Carney, P.C.

 
1900 Main Street, Suite 300

 
Irvine, CA 92614

 
Attention: Marc A. Indeglia, Esq.

 
Fax:  949.861.3324

 
If to the Lenders:
To the addresses listed underneath each such Lenders name on the signature pages
hereof.

or at such other address as any Party may designate to the other Parties by
written notice.  All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; when
received, if deposited in the mail postage prepaid; when transmission is
verified, if sent by fax; and on the next Business Day, if timely delivered (as
shown on a delivery receipt) to an air courier guaranteeing overnight delivery.

 
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9.2           ENTIRE AGREEMENT.  THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN
DOCUMENTS SETS OUT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES, AND, SUPERSEDES ALL NEGOTIATIONS, REPRESENTATIONS, WARRANTIES,
COMMITMENTS, TERM SHEETS, DISCUSSIONS, NEGOTIATIONS, OFFERS OR CONTRACTS (OF ANY
KIND OR NATURE, WHETHER ORAL OR WRITTEN) PRIOR TO OR CONTEMPORANEOUS WITH THE
EXECUTION HEREOF WITH RESPECT TO ANY MATTER, DIRECTLY OR INDIRECTLY RELATED TO
THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.  NO PROMISES, EITHER
EXPRESSED OR IMPLIED, EXIST BETWEEN THE BORROWER AND THE LENDERS, UNLESS
CONTAINED HEREIN OR THEREIN.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE
THE RESULT OF NEGOTIATIONS AMONG THE LENDERS AND THE BORROWERS AND HAVE BEEN
REVIEWED (OR HAVE HAD THE OPPORTUNITY TO BE REVIEWED) BY COUNSEL TO ALL SUCH
PARTIES, AND ARE THE PRODUCTS OF ALL PARTIES.  ACCORDINGLY, THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS SHALL NOT BE CONSTRUED MORE STRICTLY AGAINST THE
LENDERS MERELY BECAUSE OF THE LENDERS’S INVOLVEMENT IN THEIR PREPARATION.
 
9.3           Amendments; Waivers.  No delay on the part of the Lenders in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise by the Lenders of any right, power or
remedy preclude other or further exercise thereof, or the exercise of any other
right, power or remedy.  No amendment, modification or waiver of, or consent
with respect to, any provision of this Agreement or the other Loan Documents
shall in any event be effective unless the same shall be in writing and
acknowledged by the Lenders, and then any such amendment, modification, waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
 
9.4           Governing Law.  This Agreement and the other Loan Documents (i)
shall be delivered and accepted in and shall be deemed to be contracts made
under and governed by the internal laws of the State of Texas applicable to
contracts made and to be performed entirely within such State, without regard to
conflict of laws principles, and (ii) shall be governed, construed and
interpreted in accordance with the internal laws of the state of Texas.

 
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9.5           FORUM SELECTION AND CONSENT TO JURISDICTION.  ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS
OF THE STATE OF TEXAS AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF TEXAS.  THE LENDERS AND THE BORROWERS HEREBY EXPRESSLY AND
IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND
OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE.  THE LENDERS AND THE
BORROWERS FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF
TEXAS.  THE LENDERS AND THE BORROWERS EACH HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
 
9.6           WAIVER OF JURY TRIAL.  THE LENDERS AND THE BORROWERS, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL
BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT, ANY OF THE OTHER OBLIGATIONS, THE
COLLATERAL, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR
ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE
FOREGOING, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE LENDERS
AND THE BORROWERS ARE ADVERSE PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.  THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE LENDERS GRANTING ANY FINANCIAL ACCOMMODATION TO
THE BORROWERS.
 
9.7           Assignability.  The Lenders may assign the Lenders’ rights in this
Agreement, the other Loan Documents, the Obligations, or any part thereof or
transfer the Lenders’ rights in any or all of the Collateral without the
Borrowers’ prior written consent (which may not be unreasonably withheld,
conditioned or delayed).  The Borrowers may not sell or assign this Agreement,
or any other agreement with the Lenders or any portion thereof, either
voluntarily or by operation of law, without the prior written consent of the
Lenders.  This Agreement shall be binding upon the Lenders and the Borrowers and
their respective legal representatives and successors.  All references herein to
the Borrowers shall be deemed to include any successors, whether immediate or
remote.
 
9.8           Confirmations.  The Borrowers and the Lenders agree from time to
time, upon written request received by it from the other, to confirm to the
other in writing the aggregate unpaid principal amount of the Loan then
outstanding.
 
9.9           Enforceability.  Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by,
unenforceable or invalid under any jurisdiction, such provision shall as to such
jurisdiction, be severable and be ineffective to the extent of such prohibition
or invalidity, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.

 
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9.10         Survival of Borrowers Representations.  All covenants, agreements,
representations and warranties made by the Borrowers herein shall,
notwithstanding any investigation by the Lenders, be deemed material and relied
upon by the Lenders and shall survive the making and execution of this Agreement
and the Loan Documents and the issuance of any Note, and shall be deemed to be
continuing representations and warranties until such time as the Borrowers have
fulfilled all of their Obligations to the Lenders, and the Lenders have been
indefeasibly paid in full in cash.  The Lenders, in extending financial
accommodations to the Borrower, are expressly acting and relying on the
aforesaid representations and warranties.
 
9.11         Time of Essence.  Time is of the essence in making payments of all
amounts due the Lenders under this Agreement and in the performance and
observance by the Borrowers of each covenant, agreement, provision and term of
this Agreement.
 
9.12         Counterparts; Facsimile Signatures.  This Agreement may be executed
in any number of counterparts and by the different parties hereto on separate
counterparts and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same
Agreement.  Receipt of an executed signature page to this Agreement by facsimile
or other electronic transmission shall constitute effective delivery
thereof.  Electronic records of executed Loan Documents maintained by the
Lenders shall deemed to be originals thereof.
 
9.13         Indemnification.  The Borrowers jointly and severally agree to
defend (with counsel satisfactory to the Lenders), protect, indemnify, exonerate
and hold harmless each Indemnified Party from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and distributions of any kind or nature (including the
disbursements and the reasonable fees of counsel for each Indemnified Party
thereto, which shall also include, without limitation, reasonable attorneys’
fees and time charges of attorneys who may be employees of any Indemnified
Party), which may be imposed on, incurred by, or asserted against, any
Indemnified Party (whether direct, indirect or consequential and whether based
on any federal, state or local laws or regulations, including securities laws,
Environmental Laws, commercial laws and regulations, under common law or in
equity, or based on contract or otherwise) in any manner relating to or arising
out of this Agreement or any of the Loan Documents, or any act, event or
transaction related or attendant thereto, the preparation, execution and
delivery of this Agreement and the Loan Documents, including the making or
issuance and management of the Loan, the use or intended use of the proceeds of
the Loan, the enforcement of the Lenders’ rights and remedies under this
Agreement, the Loan Documents, any Note, any other instruments and documents
delivered hereunder, or under any other agreement between the Borrowers and the
Lenders; provided, however, that the Borrowers shall not have any obligations
hereunder to any Indemnified Party with respect to matters determined by a court
of competent jurisdiction by final and nonappealable judgment to have been
caused by or resulting from the willful misconduct or gross negligence of such
Indemnified Party.  To the extent that the undertaking to indemnify set forth in
the preceding sentence may be unenforceable because it violates any law or
public policy, the Borrowers shall satisfy such undertaking to the maximum
extent permitted by applicable law.  Any liability, obligation, loss, damage,
penalty, cost or expense covered by this indemnity shall be paid to each
Indemnified Party on demand, and failing prompt payment, together with interest
thereon at the Default Rate from the date incurred by each Indemnified Party
until paid by the Borrowers, shall be added to the Obligations of the Borrowers
and be secured by the Collateral.  The provisions of this Section shall survive
the satisfaction and payment of the other Obligations and the termination of
this Agreement.

 
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9.14         Revival and Reinstatement of Obligations.  If the payment of the
Obligations by any Obligor or the transfer to the Lenders of any property should
for any reason subsequently be declared to be void or voidable under any state
or federal law relating to creditors’ rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, or other
voidable or recoverable payments of money or transfers of property
(collectively, a “Voidable Transfer”), and if the Lenders is required to repay
or restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Lenders is required or elects to repay
or restore, and as to all reasonable costs, expenses, and attorney’s fees of the
Lenders, the Obligations shall automatically be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.
 
9.15         Joint and Several Obligations.  All Obligations of Borrowers under
this Agreement and may be collected by Lenders from any are or both of them, the
Note or any other Loan Document are joint and several Obligations of Borrowers
to Lenders.
 
9.16         Termination.  After all Obligations have been paid and satisfied in
full, this Agreement shall terminate and the Lenders shall take all action
reasonably requested by Borrowers to release Lenders’ security interest in the
Collateral.
 
9.17         Amendment and Restatement.  This Agreement amends, extends, renews,
continues, and restates (but does not release, or extinguish and is not in
novation of) the Prior Indebtedness, the Prior Loan Documents and all documents
executed by Borrowers in connection with the Prior Loan Agreement, with the
intention and agreement that all indebtedness, obligations, liens and security
interests relate back and continue to run, without lapse, from the effective
date of the Prior Loan Agreement and the date of attachment and perfection of
the Collateral of Borrowers under the Prior Security Agreement.
 
[Remainder of the page is intentionally blank; signature page on next page]

 
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IN WITNESS WHEREOF, the Borrowers and the Lenders have executed this Term Loan
Agreement as of the date first above written.
 
BORROWERS:
HEMIWEDGE INDUSTRIES, INC. , a Delaware
limited liability company
       
By:
   
Name:
Matthew C. Flemming
 
Title:
CFO and Secretary
       
HEMIWEDGE VALVE CORPORATION,  a
Texas corporation
       
By:
   
Name:
Matthew C. Flemming
 
Title:
CFO and Secretary
     
LENDERS:
EADS INVESTMENT I, LLC., a
  
Texas limited liability company
       
By:
   
Name:
Rodney Eads
 
Title:
Member
 
Address:
18305 Kitzman Road
   
Cypress, Texas 77429
  
  
    
D. BRADLEY McWILLIAMS, an individual residing in Texas
       
Address:
710 North Post Oak Road
   
Suite 400
   
Houston, Texas 77024
     

 
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DISCLOSURE SCHEDULE
 
This Disclosure Schedule has been prepared in connection with the Amended and
Restated Loan Agreement dated as of June 30, 2010 (the “Agreement”) by and among
Shumate Industries, Inc., a Delaware corporation (the “Industries”), Hemiwedge
Valve Corporation, a Texas corporation (“Hemiwedge”) (each a “Borrower” and,
collectively, the “Borrowers”), and EADS Investments I, LLC, a Texas limited
liability company (”EADS”) and D. Bradley McWilliams (“McWilliams”)
(collectively, the  “Lenders”).  Capitalized terms not otherwise defined in this
Disclosure Schedule shall have the same meaning as in the Agreement.
 
The disclosure of any matter in this Disclosure Schedule should not be construed
as indicating that such matter is necessarily required to be disclosed in order
for any representation or warranty in the Agreement to be true and correct in
all material respects.  Any description of any document included in this
Disclosure Schedule is qualified in all respects by reference to such document.

 
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COGAN & PARTNERS
DRAFT 05.19.10
 
SCHEDULE 6.5

ADVERSE CIRCUMSTANCES

Bridge Notes

Industries is currently in default under those convertible promissory notes
issued by Industries to each of (i) Whitebox Shumate Ltd, on July 10, 2007 in
the principal amount of $2,000,000; (ii) Mitchell Lukin on July 23, 2007 in the
principal amount of $50,000 and (iii) Ironman Energy Capital L.P. on November 1,
2007 in the principal amount of $1,000,000.
Other Notes

On March 12, 2009, Industries issued a promissory note to Western Valve in the
aggregate principal amount of $50,000.  The maturity date on the note was August
30, 2009.  Industries did not make payment on the maturity date and as such the
note is currently in default.  To date, Western Valve has not made a demand for
payment.

On October 30, 2009, Industries issued a promissory note to Shumate Energy
Technologies, Inc. in the aggregate principal amount of $52,831.  The maturity
date of this note is October 15, 2010.  Per the terms of the note, Industries
was to begin making monthly payments in January 2010, although the amount
required.  Industries has not made any payments under the note to date and as
such is in technical default.  Noteholder has not made any request for payment
to date.

Lease

Hemiwedge is in default under Lease as further described under Schedule 6.7.

 
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SCHEDULE 6.7

List of Litigation or Adverse Claims:

LITIGATION
 
Sunbelt

On June 23, 2008, Industries received notice from Sunbelt Machine Works
Corporation of its intention to seek arbitration in Houston, Harris County Texas
relating to the $150,000 termination payment due under (and in connection with
the termination of) that certain Stock Purchase Agreement dated August 17, 2007.
Industries failed to make the first 3 installment payments of $37,500 to Sunbelt
on each of October 25, 2007, February 20, 2008, and June 20, 2008, as required
under the Stock Purchase Agreement. Sunbelt had threatened litigation regarding
this matter in April 2008, and we were unable to come to terms on a settlement.
Sunbelt is seeking an award of $150,000 and reasonable attorney’s fees, expenses
and costs incurred to enforce their contractual rights. Industries has recorded
$178,995 in accrued expenses in our financial statements to reflect this
contingency.

On July 14, 2008, Industries entered into a letter agreement with Sunbelt
pursuant to which Sunbelt agreed to withdraw the notice of arbitration until
November 1, 2008, in exchange for an immediate payment of $1,000 and installment
payments of $500 on the 1st and 15th of each month until November 1, 2008. On
October 8, 2008, Industries entered into a letter agreement with Sunbelt under
which Hemiwedge agreed to pay Sunbelt $75,000 in full satisfaction of this
matter; provided, however, that payment must be received by Sunbelt within 90
days of the date of the letter for such settlement to be effective. Due to cash
constraints, Industries was unable to make the payment within the required 90
days. As of the date hereof, Sunbelt has not informed us of any indication to
reinstitute arbitration proceedings.

Lease

On April 27, 2009, Trader Properties LLC (“Landlord”) provided Hemiwedge with a
notice of default under that certain Lease Agreement relating to the premises at
1011 Beach Airport Road, Conroe, Texas between Hemiwedge and Landlord (the
“Lease”).  On May 12, 2009, Landlord notified Stillwater of Hemiwedge’s default
under said Lease.  At the time of such May 12, 2009 letter, the amount owed to
Landlord was $65,100.  As of the date of the Agreement, Hemiwedge owed Landlord
$24,500 in unpaid rent.
 
 
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SCHEDULE 6.8

Debt

See Attached.

 
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SCHEDULE 6.10

TAXES

Federal
             
Form 941 Tax Due, 2nd Quarter 2009
  $ 42,824 *          
Form 941 Tax Due, 4th Quarter 2009
  $ 20,025 *          
State
                 
Texas Unemployment Tax, 1st Quarter 2010
  $ 13,500 *          
Personal Property tax for inventory
  $ 34,000 *

*These amounts do not include any penalty or interest that may be assessed by
the taxing authority.  The amount of the personal property tax due is
approximated.

 
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SCHEDULE 7.16 (b)

Hemiwedge Industries, Inc.
 
Selling Securityholder Notice and Questionnaire
 
The undersigned beneficial owner of common stock (the “Registrable Securities”)
of Hemiwedge Industries, Inc.., a Delaware corporation (the “Company”),
understands that the Company has filed or intends to file with the Securities
and Exchange Commission (the “Commission”) a registration statement (the
“Registration Statement”) for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the “Securities Act”), of the Registrable
Securities.
 
Certain legal consequences arise from being named as a selling securityholder in
the Registration Statement and the related prospectus.  Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Registration Statement and the related
prospectus.
 
NOTICE
 
The undersigned beneficial owner (the “Selling Securityholder”) of Registrable
Securities hereby elects to include the Registrable Securities owned by it in
the Registration Statement.

 
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The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
 
QUESTIONNAIRE
 
 
1.
Name.

 
 
(a)
Full Legal Name of Selling Securityholder

 
 
 

 
 
(b)
Full Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities are held:

 
 
 

 
 
(c)
Full Legal Name of Natural Control Person (which means a natural person who
directly or indirectly alone or with others has power to vote or dispose of the
securities covered by the questionnaire):

 
 
 

 
 
2.  Address for Notices to Selling Securityholder:

 

     

Telephone:
 
Fax:
 
Contact Person:
 

 
3.  Broker-Dealer Status:
 
 
(a)
Are you a broker-dealer?

 
Yes   ¨                      No   ¨
 
 
(b)
If “yes” to Section 3(a), did you receive your Registrable Securities as
compensation for investment banking services to the Company.

 
Yes   ¨                      No   ¨
 
Note:
If no, the Commission’s staff has indicated that you should be identified as an
underwriter in the Registration Statement.

 
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(c)
Are you an affiliate of a broker-dealer?

 
Yes   ¨                      No   ¨
 
 
(d)
If you are an affiliate of a broker-dealer, do you certify that you bought the
Registrable Securities in the ordinary course of business, and at the time of
the purchase of the Registrable Securities to be resold, you had no agreements
or understandings, directly or indirectly, with any person to distribute the
Registrable Securities?

 
Yes   ¨                      No   ¨
 
Note:
If no, the Commission’s staff has indicated that you should be identified as an
underwriter in the Registration Statement.

 
4.  Beneficial Ownership of Other Securities of the Company Owned by the Selling
Securityholder.
 
Except as set forth below in this Item 4, the undersigned is not the beneficial
or registered owner of any securities of the Company other than the securities
issuable pursuant to the Subscription Agreement.
 
 
(a)
Type and Amount of other securities beneficially owned by the Selling
Securityholder:

 

 
 
 

5.  Relationships with the Company:
 
Except as set forth below, neither the undersigned nor any of its affiliates,
officers, directors or principal equity holders (owners of 5% of more of the
equity securities of the undersigned) has held any position or office or has had
any other material relationship with the Company (or its predecessors or
affiliates) during the past three years.
 
State any exceptions here:
 

 
 
 

The undersigned agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein that may occur subsequent to the date
hereof at any time while the Registration Statement remains effective.
 
By signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 5 and the inclusion of such
information in the Registration Statement and the related prospectus and any
amendments or supplements thereto.  The undersigned understands that such
information will be relied upon by the Company in connection with the
preparation or amendment of the Registration Statement and the related
prospectus.

 
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IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.
 
Dated:
   
Beneficial Owner:
                    
By:
              
Name:
            
Title:
  

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

Attn:

 
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