Execution Version

 
TRANSFER AGREEMENT
 
BY AND AMONG
 
SHUMATE INDUSTRIES, INC.,
 
HEMIWEDGE VALVE CORPORATION
 
AND
 
TEJAS RESEARCH & ENGINEERING, L.P.
 

 
October 14, 2008
 

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TABLE OF CONTENTS
 

   
Page
     
ARTICLE I
THE TRANSACTIONS
1
1.1
Assignment and License of the Intellectual Property
1
1.2
Issuance of Warrants
1
1.3
No Assumption of Liabilities
1
     
ARTICLE II
THE PURCHASE PRICE
2
2.1
Purchase Price
2
     
ARTICLE III
CLOSING
2
3.1
Closing
2
3.2
Deliveries and Actions by the Sellers
2
3.3
Deliveries and Actions by Tejas
3
     
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
4
4.1
Representations and Warranties of the Sellers
4
4.2
Representations and Warranties of Tejas
7
     
ARTICLE V
COVENANTS
9
5.1
Reasonable Commercial Efforts
9
5.2
Confidentiality
10
5.3
Engineering Support
11
5.4
Subsequent Financing
11
5.5
Transfer Taxes
12
     
ARTICLE VI
MISCELLANEOUS
12
6.1
Nature and Survival of Representations
12
6.2
Notices
12
6.3
Successors and Assigns
13
6.4
Governing Law
13
6.5
Venue; Service of Process
13
6.6
Headings
13
6.7
Counterparts and Facsimile Signatures
13
6.8
Further Assurances
14
6.9
Amendment and Waiver
14
6.10
Entire Agreement
14
6.11
Severability
14
6.12
Expenses
14
6.13
Construction
15
6.14
Definitions
15

 
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SCHEDULES:
 
Schedule 4.1(c)
Third Party and Governmental Consents (Sellers)
Schedule 4.1(f)
Assets; Encumbrances to be Released at Closing
Schedule 4.1(h)
Subsequent Events
Schedule 4.1(j)
Capitalization
Schedule 4.1(k)
Brokers’ Fees

 
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TRANSFER AGREEMENT
 
THIS TRANSFER AGREEMENT (this “Agreement”) is entered into this 15th day of
October, 2008, by and among Shumate Industries, Inc., a Delaware corporation
(“Shumate”), Hemiwedge Valve Corporation, a Texas corporation and wholly owned
subsidiary of Shumate (“Hemiwedge” and, together with Shumate, the “Sellers”),
and Tejas Research & Engineering, L.P., a Texas limited partnership (“Tejas”).
 
WHEREAS, the Sellers, directly or indirectly, have designed and developed valve
products in the energy field services (the “Hemiwedge Valve Technology”);
 
WHEREAS, the Sellers desire to transfer to Tejas, and Tejas desires to acquire
from the Sellers, certain of the Sellers’ assets related to the Hemiwedge Valve
Technology, on the terms and conditions set forth in this Agreement;
 
WHEREAS, Shumate desires to sell to Tejas, and Tejas desires to purchase from
Shumate, certain common stock purchase warrants of Shumate; and
 
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
intending to be legally bound hereby, the parties hereto agree as follows:
 
ARTICLE I
THE TRANSACTIONS
 
1.1
Assignment and License of the Intellectual Property. On the Closing Date (as
hereinafter defined), Hemiwedge and Tejas shall enter into that certain
Intellectual Property Agreement dated as of the date hereof (the “Intellectual
Property Agreement”) providing for the assignment of certain intellectual
property and related assets (the “Purchased Assets”) and the license of certain
intellectual property (the “Licensed Assets” and together with the Purchased
Assets, the “Assets”).

 
1.2
Issuance of Warrants. On the Closing Date:

 

 
(a)
Shumate shall deliver (i) to Tejas its Common Stock Purchase Warrants dated as
of the date hereof (“Warrants”) to acquire 2,443,269 shares of Shumate’s common
stock, par value $.001 per share (“Common Stock”), and (ii) upon the transfer by
Tejas to Intervale Capital, LLC, a Delaware limited liability company (“ICLLC”),
of the Warrants, to ICLLC Warrants to acquire such number of shares of Common
Stock transferred by Tejas to ICLLC;

 

 
(b)
Shumate and Tejas shall enter into that certain Registration Rights Agreement
dated as of the date hereof (the “Registration Rights Agreement”) providing for
the registration of the Common Stock that may be acquired upon exercise of the
Warrants.

 
1.3
No Assumption of Liabilities. Tejas shall not assume or be responsible for any
claims against or commitments, contracts, agreements, obligations or other
liabilities of the Sellers, whether known or unknown, asserted or unasserted,
accrued or unaccrued, absolute or contingent, liquidated or unliquidated, due or
to become due, and whether contractual, statutory, or otherwise, and the Sellers
will at all times indemnify and hold Tejas harmless from and against any claim
therefor or liability arising therefrom.

 

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ARTICLE II
THE PURCHASE PRICE
 
2.1
Purchase Price. The aggregate purchase price to be paid by Tejas to the Sellers
in consideration of the sale, assignment and transfer of the Assets, the sale of
the Warrants and the consummation of the other transactions contemplated herein
shall be Three Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00)
(the “Purchase Price”).

 
ARTICLE III
CLOSING
 
3.1
Closing. The closing of the transactions contemplated by this Agreement (the
“Closing”) shall take place contemporaneously with the execution of this
Agreement (the “Closing Date”) at the offices of Tejas’s counsel in Houston,
Texas or at such other place as may be agreed by the parties. For convenience,
the parties agree that the Closing may take place by the exchange of electronic
signatures to the documents to be executed and delivered at the Closing (the
“Closing Documents”) and delivery of the Purchase Price by wire transfer of
immediately available funds, followed by the mailing of executed originals of
the Closing Documents, without the need for a face to face meeting.

 
3.2
Deliveries and Actions by the Sellers. At the Closing, the Sellers shall
deliver, or cause to be delivered, to Tejas:

 

 
(a)
the Assets, free and clear of all Encumbrances, other than the Permitted
Encumbrances (as defined in the Intellectual Property Agreement);

 

 
(b)
one or more bills of sale, assignments or other conveyances, in form and
substance reasonably satisfactory to Tejas (collectively, the “Assignments”),
duly executed by the applicable Seller;

 

 
(c)
the Intellectual Property Agreement, duly executed by Hemiwedge;

 

 
(d)
the (i) Warrants issued to Tejas to acquire 2,443,269 shares of Common Stock and
(ii) upon the transfer by Tejas to ICLLC of such Warrants, Warrants issued to
ICLLC to acquire such number of shares of Common Stock transferred by Tejas to
ICLLC, in each case, duly executed by Shumate;

 

 
(e)
the Registration Rights Agreement, duly executed by Shumate;

 

 
(f)
copies of all consents and approvals required in connection with (i) the
execution, delivery and performance of this Agreement and (ii) the sale or
license of the Assets, including those consents listed on Schedule 4.1(c), in
form and substance reasonably satisfactory to Tejas;

 
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(g)
evidence, in form and substance reasonably satisfactory to Tejas, of the release
of all Encumbrances on the Assets, including those listed on Schedule 4.1(f)(i);

 

 
(h)
a secretary’s certificate or certificates from each of the Sellers, which
certifies as true, accurate, and complete, as of the Closing Date: (i) a copy of
the resolutions of the board of directors of such Seller, authorizing the
execution, delivery, and performance by such Seller of this Agreement and the
ancillary agreements described therein, and the consummation by such Seller of
the transactions contemplated hereby and thereby; (ii) with respect to
Hemiwedge, a copy of the resolutions of the shareholders of Hemiwedge, approving
the consummation by Hemiwedge of the transactions contemplated in this Agreement
and the ancillary agreements described herein; (iii) the incumbency of the
officer or officers of such Seller authorized to execute this Agreement and any
ancillary agreements on behalf of such Seller; and (iv) the charter and bylaws,
or comparable organizational documents, of such Seller;

 

 
(i)
a certificate issued by the Secretary of State of the state of each Sellers’
jurisdiction of incorporation evidencing the existence and good standing of such
Seller, as of a recent date;

 

 
(j)
an originally executed copy of the written opinions of Indeglia & Carney and
Burleson Cooke L.L.P., counsel for the Sellers, as to such matters concerning
the Sellers and the Closing Documents as Tejas may reasonably request, dated as
of the Closing, addressed to Tejas, and otherwise in form and substance
reasonably satisfactory to Tejas; and

 

 
(k)
such other documents and instruments as Tejas may reasonably request and which
are deemed by Tejas to be reasonably necessary or advisable to effect the
transactions contemplated herein and by the ancillary agreements.

 
3.3
Deliveries and Actions by Tejas. At the Closing, Tejas shall deliver, or cause
to be delivered, to the Sellers:

 

 
(a)
the Purchase Price;

 

 
(b)
the Intellectual Property Agreement, duly executed by Tejas;

 

 
(c)
the Registration Rights Agreement, duly executed by Tejas; and

 

 
(d)
such other documents and instruments as the Sellers may reasonably request and
which are deemed by the Sellers to be reasonably necessary or advisable to
effect the transactions contemplated herein and by the ancillary agreements.

 
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
 
4.1
Representations and Warranties of the Sellers. The Sellers represent and warrant
to Tejas, as of the date hereof, as follows:

 

 
(a)
Organization of the Seller. The Sellers are duly organized, validly existing and
in good standing under the laws of their respective jurisdiction of
incorporation and are duly qualified to do business and are in good standing in
each jurisdiction in which the nature of the business being conducted requires
such Seller to be so qualified.

 

 
(b)
Authorization. The Sellers have the necessary power and authority to enter into
and deliver this Agreement and to perform their respective obligations
hereunder. The execution and delivery of this Agreement by the Sellers and the
performance by the Sellers of their respective obligations hereunder have been
duly authorized by all necessary corporate action. This Agreement and all
agreements contemplated to be delivered hereunder have been executed and
delivered by each Seller party thereto and constitute the legal, valid and
binding obligations of the Sellers enforceable against each of them in
accordance with their terms, subject, however, to limitations with respect to
enforcement imposed by law in connection with bankruptcy, insolvency and other
laws affecting creditors’ rights generally.

 

 
(c)
Noncontravention. Neither the execution and the delivery of this Agreement by
the Sellers, nor the consummation by the Sellers of the transactions
contemplated hereby will (with or without the giving of notices or the passage
of time) (i) violate any applicable Law or other restriction of any Governmental
Authority to which any Seller, the Hemiwedge Technology or the Assets are
subject or any provision of the Sellers’ respective charter or bylaws (or other
organizational documents) or (ii) except as set forth in Schedule 4.1(c),
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which the Sellers are a party or by which the
Sellers are bound or to which any of the Assets is subject which (in the case of
clause (ii) only) could adversely affect the consummation of the transactions
contemplated hereby or the value of the Assets or result in the imposition of
any Encumbrance upon any of the Assets. Except as set forth in Schedule 4.1(c),
the Sellers do not need to give any notice to, make any filing with or obtain
any authorization, consent or approval of, any Governmental Authority or other
third party in order for the parties to consummate the transactions contemplated
by this Agreement.

 

 
(d)
Securities and Exchange Commission Filings. The information filed with the U.S.
Securities and Exchange Commission (the “SEC”) by or on behalf of Shumate (the
“SEC Filings”) complies as to form in all material respects with the
requirements of the Securities Act of 1933, as amended (the “Securities Act”),
and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as
applicable. No facts have come to the attention of the Sellers that have caused
any of the Sellers to believe that any such information contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.

 
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(e)
Financial Statements. Except as may have been corrected or supplemented in a
subsequent SEC Filing, the financial statements of Shumate included in the SEC
Filings (the “Financial Statements”) comply in all material respects with
applicable accounting requirements and the rules and regulations of the SEC with
respect thereto as in effect at the time of filing. Except as may have been
corrected or supplemented in a subsequent SEC Filing, the Financial Statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved,
except as may be otherwise specified in such Financial Statements or the notes
thereto, or, in the case of unaudited financial statements, as permitted by
Regulation S-X promulgated under the Securities Act and the Exchange Act, and
fairly present in all material respects the financial position of Shumate and
its consolidated subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, year-end audit adjustments and the lack of
footnotes.

 

 
(f)
Assets. Except as set forth on Schedule 4.1(f), the Sellers are the sole and
exclusive owner of, and have good and marketable title to, each of the Assets,
free and clear of all Encumbrances except for the Encumbrances, if any, listed
on Schedule 4.1(f) and which will be removed at or prior to the Closing, and are
exclusively entitled to possess and dispose of same. At Closing, the Sellers
will transfer to Tejas sole and exclusive, and good and marketable, title to all
of the Assets, free and clear of any and all Encumbrances. There are no
outstanding agreements or options to sell which grant to any Person other than
Tejas the right to purchase or otherwise acquire any of the Assets. 

 

 
(g)
Intellectual Property. Neither Shumate nor any of its Affiliates have any right,
title or interest in or to the Hemiwedge Intellectual Property, or the
Technology and Deliverables (as such terms are defined in the Intellectual
Property Agreement) associated therewith.

 

 
(h)
Subsequent Events. Except as set forth on Schedule 4.1(h), since June 30, 2008,
there has not been any change that constitutes, and no event or events have
occurred which have resulted in or constitute, or would reasonably be expected
to result in or constitute, a material adverse effect on the Hemiwedge Valve
Technology or the Assets. Without limiting the foregoing, since that date, none
of the following has occurred:

 

 
(i)
the Sellers have not sold, leased, transferred or assigned any of the Assets;

 

 
(ii)
no Encumbrance has been imposed upon any of the Assets; and

 
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(iii)
the Sellers have not committed to do any of the foregoing.

 

 
(i)
Legal Proceedings. There is no complaint or petition in which relief is sought
involving, affecting, or relating to the ownership, operation or use of the
Assets or that would prevent, delay or make illegal the transactions
contemplated by this Agreement, and there is no litigation, action, suit,
proceeding or investigation by any Governmental Authority pending or threatened
against (orally or in writing), involving, affecting or relating to the Sellers,
the Assets, the Hemiwedge Valve Technology or the transactions contemplated by
this Agreement.

 

 
(j)
Capitalization; Reservation of Common Stock. The authorized common stock of
Shumate consists of 50,000,000 shares of Common Stock, of which, as of the date
hereof, (i) 22,013,879 shares of Common Stock are issued and outstanding and
(ii) 2,443,269 shares of Common Stock have been reserved and are available
solely for issuance and delivery to Tejas and/or its designated nominee, as
applicable, upon the exercise of the Warrants. Except as set forth in Schedule
4.1(j), there are no rights or obligations which are convertible into,
exchangeable for, or exercisable to acquire any Common Stock. 

 

 
(k)
Brokers’ Fees. Except as set forth in Schedule 4.1(k), the Sellers have not
incurred any obligation or liability, contingent or otherwise, for brokers’ or
finders’ fees in respect of the matters provided for in this Agreement for which
Tejas could become liable.

 

 
(l)
Asset Assignment and License Process. The Sellers have been engaged in ongoing
discussions with various prospective financiers, corporate and strategic
partners, purchasers, and licensors with respect to the Assets, pursuant to
which the Sellers have sought to achieve the highest value and best price for
the sale, assignment and/or license of the Assets. The Assets were marketed for
approximately six months. The offer made by Tejas represented the highest value
and best price for the Assets. The negotiation of the assignment and license of
the Assets to Tejas was conducted in good faith and on an arms’ length basis.

 

 
(m)
Accuracy of Information Furnished. No representation, warranty, statement or
information contained in this Agreement (including the various Schedules
attached hereto) or any agreement executed in connection herewith or in any
certificate delivered pursuant hereto or thereto or made or furnished to Tejas
or their respective representatives by or on behalf of the Sellers, contains or
shall contain any untrue statement of a material fact or omits or shall omit any
material fact necessary to make the information contained therein not
misleading. The Sellers have provided Tejas with true, accurate and complete
copies of all documents listed or described in the various Schedules attached
hereto.

 
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4.2
Representations and Warranties of Tejas. Tejas hereby represents and warrants to
the Sellers, as of the date hereof, as follows:

 

 
(a)
Organization of Tejas. Tejas is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and is duly
qualified to do business and is in good standing in each jurisdiction in which
the nature of its business being conducted requires it to be so qualified.

 

 
(b)
Authorization. Tejas has the necessary power and authority to enter into and
deliver this Agreement and to perform its obligations hereunder. The execution
and delivery of this Agreement by Tejas and the performance by Tejas of its
obligations hereunder have been duly authorized by all necessary action. This
Agreement and all agreements contemplated to be delivered hereunder constitute
the legal, valid and binding obligations of Tejas enforceable against it in
accordance with their terms, subject, however, to limitations with respect to
enforcement imposed by law in connection with bankruptcy, insolvency and other
laws affecting creditors’ rights generally.

 

 
(c)
Noncontravention. Neither the execution and the delivery of this Agreement by
Tejas, nor the consummation by Tejas of the transactions contemplated hereby
will (with or without the giving of notices or the passage of time) (i) violate
any applicable Law or other restriction of any Governmental Authority to which
Tejas is subject or any provision of its charter or bylaws (or other
organizational documents) or (ii)  conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other arrangement
to which Tejas is a party or by which Tejas is bound. Tejas does not need to
give any notice to, make any filing with or obtain any authorization, consent or
approval of, any Governmental Authority or other third party in order for the
parties to consummate the transactions contemplated by this Agreement.

 

 
(d)
Brokers’ Fees. Tejas has not incurred any obligation or liability, contingent or
otherwise, for brokers’ or finders’ fees in respect of the matters provided for
in this Agreement for which the Sellers could become liable.

 

 
(e)
Information on Shumate. Tejas has received and had the opportunity to review all
documents and any other information requested from Shumate, has been given full
and complete access to information regarding Shumate, and has utilized such
access to Tejas’s satisfaction for the purpose of obtaining such information
regarding Shumate as Tejas has reasonably requested; and, particularly, Tejas
has been given reasonable opportunity to ask questions of, and receive answers
from, representatives of Shumate concerning the terms and conditions of the
offering of the Warrants and to obtain any additional information, to the extent
reasonably available.

 

 
(f)
Information on Tejas. Tejas is an “accredited investor”, as such term is defined
in Regulation D promulgated by the Commission under the Securities Act, is
experienced in investments and business matters, has made investments of a
speculative nature and, with its representatives, has such knowledge and
experience in financial, tax and other business matters as to enable Tejas to
utilize the information made available by Shumate to evaluate the merits and
risks of and to make an informed investment decision with respect to the
proposed purchase. Tejas has the authority and is duly and legally qualified to
purchase and own the Securities. Tejas is able to bear the risk of such
investment for an indefinite period and to afford a complete loss thereof.

 
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(g)
Investment Intent. On the Closing Date, Tejas will purchase the Warrants as
principal for its own account for investment only and not with a view toward, or
for resale in connection with, the public sale or any distribution thereof,
other than, as soon as practicable following Tejas’s receipt of the Warrants, to
transfer the Warrants to Intervale Capital, LLC, a Delaware limited liability
company.

 

 
(h)
Compliance with Securities Act. Tejas understands and agrees that neither the
Warrants nor the shares of Common Stock issuable upon exercise thereof (the
“Warrant Shares”) have been registered under the Securities Act or any
applicable state securities laws, by reason of their issuance in a transaction
that does not require registration under the Securities Act (based in part on
the accuracy of the representations and warranties of Tejas contained herein),
and that the Warrants and the Warrant Shares must be held indefinitely unless a
subsequent disposition is registered under the Securities Act or any applicable
state securities laws or is exempt from such registration.

 

 
(i)
Warrant Legend. The Warrants shall bear the following legend:

 
“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, TRANSFERRED, HYPOTHECATED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO SHUMATE INDUSTRIES, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED. A COPY OF THE WARRANT IS AVAILABLE AT THE OFFICES
OF THE COMPANY.”
 

 
(j)
Warrant Shares Legend. The Warrant Shares shall bear the following legend:

 
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER OR EXEMPTION FROM SUCH ACT AND ALL
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO SHUMATE INDUSTRIES, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.”
 
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(k)
Communication of Offer. The offer to sell the Warrants was directly communicated
to Tejas by Shumate. At no time was Tejas presented with or solicited by any
leaflet, newspaper or magazine article, radio or television advertisement, or
any other form of general advertising or solicited or invited to attend a
promotional meeting otherwise than in connection and concurrently with such
communicated offer.

 

 
(l)
Restricted Securities. Tejas understands that the Securities have not been
registered under the Securities Act and Tejas will not sell, offer to sell,
assign, pledge, hypothecate or otherwise transfer any of the Warrants unless
pursuant to an effective registration statement under the Securities Act.
Notwithstanding anything to the contrary contained in this Agreement, Tejas may
transfer (without restriction and without the need for an opinion of counsel)
the Securities to its Affiliates (as defined below) provided that each such
Affiliate is an “accredited investor” under Regulation D and such Affiliate
agrees to be bound by the terms and conditions of this Agreement.

 

 
(m)
No Governmental Review. Tejas understands that no United States federal or state
agency or any other governmental or state agency has passed on or made
recommendations or endorsement of the Securities or the suitability of the
investment in the Warrants nor have such authorities passed upon or endorsed the
merits of the offering of the Warrants.

 
ARTICLE V
COVENANTS
 
5.1
Reasonable Commercial Efforts. Each party will use its reasonable commercial
efforts to take all actions and to do all things necessary, proper or advisable
to consummate, make effective and comply with all of the terms of this Agreement
and the transactions contemplated hereby (including satisfaction, but not
waiver, of the closing deliveries required by ARTICLE III).

 
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5.2
Confidentiality. 

 

 
(a)
Each party acknowledges that in performing this Agreement, the party may be
provided with and have access to the other party’s confidential information,
including, without limitation, technical information (such as software,
algorithms, technology, and trade secrets relating to the Assets), processes,
product plans and sales information, that the party treats as proprietary,
confidential or of substantial value and which value would be impaired if
improperly used or disclosed to third parties (“Confidential Information”). The
parties acknowledge that Confidential Information may include any of the
foregoing which has been provided to the other party prior to the Closing Date.
However, “Confidential Information” shall not include information that (i) is or
becomes available to the public through no wrongful act of the receiving party,
(ii) was in the possession of the receiving party prior to the time it was
disclosed hereunder, (iii) is independently made available as a matter of right
to the receiving party by a third party, or (iv) is independently developed for
the receiving party.

 

 
(b)
For a period of five (5) years from the Closing Date, each party shall maintain
the other party’s Confidential Information in confidence and not disclose the
other party’s Confidential Information to any Person other than to its officers,
fiduciaries, employees, agents or consultants who have a business need to know
such Confidential Information, who have been informed of the confidential nature
of such Confidential Information and who are, either by nature of their
positions or duties or pursuant to written agreement, subject to substantially
equivalent restrictions with respect to the use and disclosure of the
Confidential Information as are set forth in this Agreement.

 

 
(c)
The obligation of each party to maintain the other party’s Confidential
Information in confidence shall not apply to any Confidential Information (i)
that becomes publicly available (other than by reason of a disclosure by a party
in violation of this Agreement), (ii) the disclosure of which has been consented
to by the other party in writing, or (iii) the disclosure of which is required
by a court of competent jurisdiction or other Governmental Authority or
otherwise as required by applicable Law or regulation of a national securities
exchange on which the securities of such party may then be listed.

 

 
(d)
Before any party discloses any of the other party’s Confidential Information
pursuant to Section 5.2(c)(iii), such party shall as soon as practicable, and in
any event prior to making any such disclosure, notify the other party of the
specific Confidential Information proposed to be disclosed and of the court
order, subpoena, interrogatories, government order or other reason that requires
disclosure of the Confidential Information so that the other party may seek a
protective order or other remedy to protect the confidentiality of the
Confidential Information or waive compliance with the applicable provisions of
this ARTICLE V. Such party shall also consult with the other party on the
advisability of taking steps to eliminate or narrow the requirement to disclose
the Confidential Information and shall otherwise cooperate with the efforts of
the other party to obtain a protective order or other remedy to protect the
Confidential Information. If a protective order or other remedy cannot be
obtained, such party may disclose only that Confidential Information that its
counsel advises in writing (which writing shall also be addressed and delivered
to the other party) is legally required to be disclosed.

 
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(e)
Each party shall promptly inform the other party if it becomes aware of any
reason, whether under applicable law, policy or otherwise, that it will, or
might become compelled to, use the other party’s Confidential Information other
than as contemplated by Section 5.2(b) or disclose Confidential Information in
violation of the confidentiality restrictions in this ARTICLE V.

 
5.3
Engineering Support. 

 

 
(a)
At the reasonable request of Tejas, the Sellers shall provide engineering
support, including the use of the Sellers’ design engineers, application
engineers and technical specialists (collectively, the “Engineering Support”),
to Tejas as follows:

 

 
(i)
From time to time after the date hereof, the Sellers shall provide up to 500
hours of Engineering Support to Tejas, at no charge to Tejas.

 

 
(ii)
From time to time after the number of hours of Engineering Support set forth in
clause (i) above have been provided by the Sellers, the Sellers shall continue
to provide up to 1,000 hours of Engineering Support to Tejas, at an agreed
charge of (x) $100 per hour for Engineering Support provided by design engineers
and application engineers and (y) the lesser of $100 per hour and the then
current market rate per hour for Engineering Support provided by technical
specialists.

 

 
(iii)
From time to time after the aggregate number of hours of Engineering Support set
forth in clauses (i) and (ii) above has been provided by the Sellers, the
Sellers shall continue to provide Engineering Support to Tejas on a reasonable
basis on commercial terms and at market rates for comparable services.

 

 
(b)
All payments to be made pursuant to this Section 5.3 hereunder by Tejas shall be
due and payable thirty (30) days after receipt by Tejas of an invoice
identifying such amounts owed.

 
5.4
Subsequent Financing. The Sellers hereby agree that, in the event that during
the period commencing on the date hereof and ending on October 14, 2011, any
Seller or any of its respective affiliates shall desire to raise capital through
the issuance of debt or equity securities, or enter into any other arrangement
having the practical effect of the foregoing (any such transaction, a
“Subsequent Financing”), ICLLC shall be given not less than fifteen (15)
business days prior written notice of any proposed Subsequent Financing. ICLLC
or its affiliates who exercise their rights pursuant to this Section 5.4 shall
have the right during the fifteen (15) business days following receipt of the
notice to provide, arrange, place, underwrite and/or otherwise participate in
such Subsequent Financing in accordance with the terms and conditions set forth
in the notice of Subsequent Financing. In the event such terms and conditions
are modified in a manner that is more advantageous to an investor during the
notice period, ICLLC shall be given prompt notice of such modification and shall
have the right during the seven (7) business days following the notice of
modification to exercise such right. The Sellers acknowledge that ICLLC and its
affiliates reserve the right not to participate in any Subsequent Financing and
that the foregoing is not a commitment by ICLLC or its affiliates to participate
in any Subsequent Financing; such a commitment would arise only under a separate
written agreement acceptable to the Sellers and ICLLC and/or its affiliates, as
applicable.

 
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5.5
Transfer Taxes. The Sellers shall bear and pay any and all applicable sales and
use Taxes and similar transfer Taxes payable in connection with the sale,
assignment, transfer or license of the Assets. The Sellers, at their own
expense, shall file all necessary Tax Returns and other documentation with
respect to such Taxes, if required by applicable law.

 
ARTICLE VI
MISCELLANEOUS
 
6.1
Nature and Survival of Representations. The representations and warranties of
Tejas and the Sellers contained in this Agreement shall survive the Closing
indefinitely.

 
6.2
Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery or facsimile, addressed as set forth below or to
such other address as such party shall have specified most recently by written
notice. Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be: (i) if to Shumate to: Shumate Industries, Inc., 1011
Beach Airport Road, Conroe, Texas 77301, Attn: President, CEO, telecopier
number: (936) 539-2990, (ii) if to Hemiwedge to: c/o Shumate Industries, Inc.,
1011 Beach Airport Road, Conroe, Texas 77301, Attn: President, CEO, telecopier
number: (936) 539-2990, and in the case of clause (i) and (ii) above, with a
copy by telecopier only to: Indeglia & Carney, telecopier number: (949)
851-5940, Attn: Marc A. Indeglia, and (iii) if to Tejas to: Tejas Research &
Engineering, L.P., 9185 Six Pines Drive, The Woodlands, Texas 77380, Attn:
Thomas Hill, telecopier number: (403) 466-8063, with an additional copy by
telecopier only to: (x) Intervale Capital, LLC, telecopier number: (713)
961-0361, Attn: Curtis W. Huff and (y) Fulbright & Jaworski, L.L.P., telecopier
number: (713) 651-5246, Attn: Gene G. Lewis. Tejas and the Sellers agree to
promptly advise the other parties hereto of any change of address from that so
set forth.

 
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6.3
Successors and Assigns. This Agreement, and all rights and powers granted
hereby, will bind and inure to the benefit of the parties hereto and their
respective successors and assigns, but neither this Agreement nor any of the
rights, interests, or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties hereto.
Except as set forth in the next preceding sentence, this Agreement is not
intended to confer upon any other Person except the parties hereto any rights or
remedies hereunder. The parties hereto hereby agree that ICLLC shall be a third
party beneficiary to this Agreement and shall have the right to enforce Sections
1.2(a)(ii), 3.2(a)(ii) and 5.4. Notwithstanding the forgoing, Tejas shall have
an absolute right to assign its rights in whole or in part (a) under this
Agreement at any time prior to Closing to any of its Affiliates without the
Sellers’ prior written approval and (b) under Section 5.3 at any time to any
assignee or sublicensee of the Hemiwedge Valve Technology so long as such
assignment does not materially increase the obligations of the Sellers to
provide Engineering Support pursuant to Section 5.3(a)(i) or 5.3(a)(ii).

 
6.4
Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Texas (without giving effect to conflict of laws
principles thereof).

 
6.5
Venue; Service of Process. With respect to any suit, action or proceeding
(“Proceeding”) arising out of or relating to this Agreement each of the parties
hereto hereby irrevocably (i) submits to the exclusive jurisdiction of the
United States District Court for the Southern District of Texas and waives any
objection to venue being laid therein whether based on the grounds of forum non
conveniens or otherwise and hereby agrees not to commence any such Proceeding
other than before the United States District Court for the Southern District of
Texas; provided, however, that a party may commence any Proceeding in a court
other than the United States District Court for the Southern District of Texas
solely for the purpose of enforcing an order or judgment issued by the United
States District Court for the Southern District of Texas and (ii) consents to
service of process in any Proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, or by recognized international
express carrier or delivery service, to the Company or Holders at their
respective addresses referred to in Section 6.2 hereof; provided, however, that
nothing herein shall affect the right of any party hereto to serve process in
any other manner permitted by law.

 
6.6
Headings. The headings preceding the text of the sections and subsections hereof
are inserted solely for convenience of reference and shall not constitute a part
of this Agreement, nor shall they affect its meaning, construction, or effect.

 
6.7
Counterparts and Facsimile Signatures. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

 
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6.8
Further Assurances. The parties hereby agree to perform, execute or deliver, or
cause to be performed, executed or delivered, such further acts, assurances and
instruments as either party may reasonably require to complete or perfect the
conveyance and transfer to Tejas of all of the Sellers’ right, title and
interest in and to the Assets free and clear of any and all Encumbrances
consistent with this Agreement, and to do any and all such further acts and
things as may be reasonably necessary to effect completely the intent of this
Agreement.

 
6.9
Amendment and Waiver. The parties may by mutual written agreement amend this
Agreement in any respect; and any party, as to such party, may (a) extend the
time for the performance of any of the obligations of any other party; (b) waive
any inaccuracies in representations by any other party; (c) waive compliance by
any other party with any of the agreements contained herein and performance of
any obligations by such other party; and (d) waive the fulfillment of any
condition that is precedent to the performance by such party of any of its
obligations under this Agreement. To be effective, any such amendment or waiver
must be in writing and be signed by the party against whom enforcement of the
same is sought.

 
6.10
Entire Agreement. This Agreement and the Schedules hereto, each of which is
hereby incorporated herein, and the other documents executed and delivered
pursuant hereto and contemporaneously herewith, set forth all of the
representations, warranties, promises, covenants, agreements, conditions, and
undertakings between the parties hereto with respect to the subject matter
hereof, and supersede all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written.

 
6.11
Severability. If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

 
6.12
Expenses. Except as otherwise expressly agreed herein, Tejas, on the one hand,
and the Sellers, on the other hand, will bear their own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.

 
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6.13
Construction. Whenever the context requires, the gender of all words used in
this Agreement includes the masculine, feminine and neuter. Terms defined in the
singular have the corresponding meanings in the plural, and vice versa. All
references to Articles and Sections refer to articles and sections of this
Agreement, all references to Annexes refer to annexes to this Agreement and all
references to Schedules refer to Schedules to this Agreement, which Exhibits and
Schedules are attached hereto and made a part hereof for all purposes. A “party”
means any of Tejas and the Sellers, and the “parties” means all of them. The
word “includes” or “including” means “including, but not limited to.” The word
“or” will have the inclusive meaning represented by the phrase “and/or.” The
words “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this
Agreement shall refer to this Agreement as a whole and not any particular
section or article in which such words appear. “Shall” and “will” have equal
force and effect. Any reference to a statute, regulation or law shall include
any amendment thereof or any successor thereto and any rules and regulations
promulgated thereunder. Currency amounts referenced herein, unless otherwise
specified, are in United States Dollars. Whenever this Agreement refers to a
number of days, such number shall refer to calendar days unless business days
are specified.

 
6.14
Definitions. The following definitions shall be applicable to the terms set
forth herein:

 

 
(a)
“Affiliate” shall mean, as applied to any Person, any other Person that directly
or indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, that Person.

 

 
(b)
“Governmental Authority” shall mean any federal, state, municipal, national or
other government, governmental department, commission, board, bureau, court,
agency or instrumentality or political subdivision thereof or any entity or
officer exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to any government or any court, in
each case whether associated with a state of the United States, the United
States, or a foreign entity or government.

 

 
(c)
“Law” shall mean all constitutions, treaties, statutes, laws, ordinances,
regulations, rules or Orders associated with any Governmental Authority;

 

 
(d)
“Order” shall mean any order, writ, rule, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority; and

 

 
(e)
“Person” shall include an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or any federal, state, county or
municipal governmental or quasi-governmental agency, department, commission,
board, bureau, instrumentality or similar entity, foreign or domestic, having
jurisdiction over any Seller or Tejas.

 
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
 
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
 
 

  SHUMATE INDUSTRIES, INC., for itself and as sole shareholder of Hemiwedge
Valve Corporation               By:     Name: Matthew C. Flemming   Title: Chief
Financial Officer

 
 

  HEMIWEDGE VALVE CORPORATION               By:     Name: Matthew C. Flemming  
Title: Chief Financial Officer

 
 

  TEJAS RESEARCH & ENGINEERING, L.P.               By:     Name: Thomas Hill  
Title: Chief Executive Officer

 
SIGNATURE PAGE TO TRANSFER AGREEMENT

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