Document:

ASSET
      PURCHASE AGREEMENT

     

    THIS
      ASSET PURCHASE AGREEMENT (“Agreement”), dated as of August 29, 2008, is by and
      among American International Industries, Inc., a -----------------Nevada
      corporation (the “Purchaser”),
      Shumate Machine Works, Inc., a Texas corporation (the “Company”),
      and
      Shumate Industries, Inc., a Delaware corporation and the sole shareholder of
      the
      Company (the “Parent”).

     

    RECITALS

     

    A. The
      Parent owns all of the issued and outstanding shares of capital stock of the
      Company.

     

    B. The
      parties hereto wish to provide for the terms and conditions upon which the
      Purchaser will acquire substantially all of the assets and assume specified
      liabilities of the Company.

     

    C. The
      parties hereto wish to make certain representations, warranties, covenants
      and
      agreements in connection with the purchase of assets and assumption of
      liabilities and also to prescribe various conditions to such
      transaction.

     

    AGREEMENT

     

    Accordingly,
      and in consideration of the representations, warranties, covenants, agreements
      and conditions herein contained, the parties hereto agree as
      follows:

     

    ARTICLE
      1

     

    PURCHASE
      AND SALE OF ASSETS

     

    1.1 Assets
      to be Purchased.
      Upon
      satisfaction of all conditions to the obligations of the parties contained
      herein (other than such conditions as shall have been waived in accordance
      with
      the terms hereof), the Company shall sell, transfer, convey, assign and deliver
      to the Purchaser, and the Purchaser shall purchase from the Company, at the
      Closing (as hereinafter defined), all of the Company’s right, title and interest
      in and to the assets, properties, goodwill and rights of the Company, as a
      going
      concern, of every nature, kind and description, tangible and intangible,
      wherever located and whether or not carried or reflected on the books and
      records of the Company (hereinafter sometimes collectively called the
“Assets”),
      including without limitation: (i) the assets referred to in the form of
      Bill of Sale listed on Exhibit 1.1(a) hereto; and (ii) the assets
      reflected on the Latest Balance Sheet (as hereinafter defined), with only such
      dispositions of such assets reflected on the Latest Balance Sheet as shall
      have occurred
      in the ordinary course of the Company’s business between the date thereof and
      the Closing and which are permitted by the terms hereof, and excluding only
      (x) the minute books, corporate seal and stock records of the Company and
      (y) the assets specifically described on Exhibit 1.1(b) hereto.
      All
      machinery, equipment, vehicles and other personal property, including without
      limitation inventories, accounts and notes receivable, trade notes, trade
      accounts, shall be conveyed free and clear of any mortgage, pledge, lien or
      security interest of any kind or nature (whether or not of record) except for
      the Permitted Liens.

     

    
      
         

      

      
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    1.2 Assumptions
      of Certain Liabilities.
      Upon
      satisfaction of all conditions to the obligations of the parties contained
      herein (other than such conditions as shall have been waived in accordance
      with
      the terms hereof), the Purchaser, pursuant to a Liabilities Undertaking in
      the
      form of Exhibit 1.2(a) hereto (“Liabilities
      Undertaking”),
      shall
      assume those certain liabilities and obligations of the Company listed on
      Exhibit A to Exhibit 1.2(a) hereto (the “Assumed
      Liabilities”).
      The
      Purchaser is not assuming, and will not be obligated or liable for, any
      liability of the Company not listed on Exhibit A to Exhibit 1.2(a).

     

    1.3 Purchase
      Price.
      The
      Purchaser shall pay for the Company’s Assets the following consideration (the
“Purchase
      Price”):

     

    (a) Five
      Million Dollars ($5,000,000); and

     

    (b) Assumption
      by the Purchaser of the Assumed Liabilities.

     

    As
      set
      forth in further detail in Sections 6.3 and 6.11, payment of the Purchase and
      Closing are subject to (i) simultaneous closing of the new Five Million Dollar
      ($5,000,000) term note and One Million Dollar ($1,000,000) revolving facility
      at
      terms acceptable to the Purchaser with Stillwater National Bank and Trust
      Company and (ii) the revised appraisal of the fair market value in place of
      the
      property and equipment and the intangible assets of the Company attached hereto
      as Schedule 6.11 being valued at least $5,000,000.

     

    1.4 Payment
      of Purchase Price.

     

    The
      Purchase Price shall be payable by the Purchaser as follows:

     

    (a) The
      Purchaser shall pay Five Million Dollars ($5,000,000), by either (i) federal
      wire transfer on the date of Closing in accordance with such instructions as
      the
      Company may provide to the Purchaser at least 72 hours prior to the Closing
      or (ii) assumption of those certain term notes of the Parent and Company with
      Stillwater National Bank and Trust Company set forth on Schedule 1.4(a) (the
      “Assumed
      Stillwater Notes”)
      or
      (iii) a combination of (i) and (ii) totaling $5,000,000.

     

    (b) The
      Purchaser shall execute the Liability Undertaking and deliver it to the Company
      at the Closing.

     

    1.5 Purchase
      Price Adjustment.
      The
      determination of the Company’s Negative Working Capital (as defined below) on
      the date of Closing, and the Shares (as defined below) due Purchaser, if any,
      shall be accomplished at and after the Closing in the following
      manner:

     

    (a) As
      of or
      prior to the Closing, the Purchaser and the Company shall use their best
      commercially reasonable efforts to mutually agree upon and prepare a balance
      sheet as of the Closing Date (as hereinafter defined) in accordance with GAAP,
      including a calculation of the Negative Working Capital as of the Closing Date
      (the “Closing
      Balance Sheet”).

     

    
      
         

      

      
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    (b) For
      purposes of this Agreement, “Negative Working Capital” means the amount by
      which, if any, Assumed Liabilities exceeds the sum of accounts receivable,
      inventory, cash and pre-paid assets of the Company on the Adjusted Closing
      Balance Sheet (as defined below). Upon final determination of the Adjusted
      Closing Balance Sheet and Negative Working Capital as set forth in subsections
      (c) and (d) below, Parent agrees to issue Purchaser shares of Parent’s common
      stock, par value $0.001 per share (the “Common
      Stock”)
      having
      an aggregate market value equal to the Negative Working Capital not to exceed
      $700,000 (the “Shares”),
      such
      number of shares to be determined by dividing the Negative Working Capital
      (not
      to exceed $700,000) by the closing price of the Common Stock on the Over the
      Counter Bulletin Board on the Closing Date (“Closing
      Price”).
      Parent and Purchaser hereby agree that the Closing Price shall not exceed
      $0.40.

     

    (c) The
      Parent and the Company shall promptly prepare the post Closing Balance Sheet
      within forty-five (45) days of the date of Closing and shall deliver copies
      thereof to the Purchaser (the “Adjusted
      Closing Balance Sheet”).
      The
      Parent and Company shall prepare a computation of the Negative Working Capital
      based on the Adjusted Closing Balance Sheet and shall submit such computation
      to
      Purchaser in writing at the same time that copies of the Adjusted Closing
      Balance Sheet are delivered.

     

    (d) The
      Purchaser shall have thirty (30) days after receipt of the Adjusted Closing
      Balance Sheet and the Negative Working Capital of the Company (the “Review
      Period”)
      to
      review and verify the Adjusted Closing Balance Sheet and the Negative Working
      Capital of the Company. If no party objects in writing to the Adjusted Closing
      Balance Sheet and the Negative Working Capital of the Company within the Review
      Period, then the Adjusted Closing Balance Sheet and the Negative Working Capital
      of the Company shall be final and binding on all parties, and the Shares shall
      be payable in accordance with subsection (b). If any party does so object
      within the Review Period then the parties shall meet as soon as practicable
      to
      attempt to resolve any such objection. If the parties agree in writing on a
      final Adjusted Closing Balance Sheet and the Negative Working Capital of the
      Company within ten (10) days after the expiration of the Review Period, then
      the
      provisions of subsection (b) shall apply. If the parties cannot agree upon
      a
      final Adjusted Closing Balance Sheet and the Negative Working of the Company
      within ten (10) days after the Review Period, then the provisions of
      Section 10.12 shall become applicable.

     

    (e) The
      Purchase Price will be allocated among the Assets in the manner required by
      Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”)
      as
      shall be mutually agreed by the Purchaser and the Company. The Company and
      the
      Purchaser will file all Tax Returns (as defined herein) and tax reports
      (including IRS Form 8594) in accordance with and based upon such allocation
      and
      will take no position in any Tax Return, tax proceeding or tax audit which
      is
      inconsistent with such allocation.

     

    1.6 Closing.
      Unless
      this Agreement shall have been terminated and the transactions contemplated
      herein shall have been abandoned pursuant to Article 7 hereof, a closing
      (the “Closing”)
      will
occur
      within 48 hours of satisfaction or waiver of all closing conditions set forth
      in
      Articles 6 and 7, or such later date or time as the parties hereto may agree
      in
      writing (the
      “Closing
      Date”),
      provided, however, that in no event shall the Closing occur later than the
      “Termination
      Date”
which
      shall be the October 1, 2008, unless the parties hereto shall agree in writing
      to extend the date of such Closing. The Closing shall be held at the offices
      of
      the Purchaser at 601 Cien Street, Suite 235, Kemah, Texas 7765, or such other
      place as the parties may agree, at 10:00 a.m., local time or such other
      time as the parties may agree, at which time and place the documents and
      instruments necessary or appropriate to effect the transactions contemplated
      herein will be exchanged by the parties.

     

    
      
         

      

      
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    ARTICLE
      2

     

    REPRESENTATIONS
      AND WARRANTIES OF COMPANY

     

    The
      Company hereby represents and warrants to the Purchaser as of the date hereof
      as
      follows:

     

    2.1 Corporate
      Organization.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the state of Texas, has full corporate power and authority
      to
      carry on its business as it is now being conducted and to own, lease and operate
      its properties and assets, is duly qualified or licensed to do business as
      a
      foreign corporation in good standing in every other jurisdiction
      in which the character or location of the properties and assets owned, leased
      or
      operated by it or the conduct of its business requires such qualification or
      licensing, except in such jurisdictions in which the failure to be so qualified
      or licensed and in good standing would not, individually or in the aggregate,
      have a Material Adverse Effect (as hereinafter defined) on the Company.

     

    2.2 Capitalization.
      The
      authorized capital stock of the Company is set forth in Section 2.2 of the
      disclosure schedule delivered by the Company (the “Disclosure
      Schedule”).
      The
      number of shares of capital stock of the Company outstanding is set forth in
      Section 2.2 of the Disclosure Schedule. All issued and outstanding shares of
      capital stock of the Company are duly authorized, validly issued, fully paid,
      nonassessable and are without, and were not issued in violation of, preemptive
      rights. Except as set forth in Section 2.2 of the Disclosure Schedule:
      (i) there are no shares of capital stock or other equity securities of the
      Company outstanding or any securities convertible into or exchangeable for
      such
      shares, securities or rights; (ii) there are no outstanding options,
      warrants, conversion privileges or other rights to purchase or acquire any
      capital stock or other equity securities of the Company or any securities
      convertible into or exchangeable for such shares, securities or rights; and
      (iii) there are no contracts, commitments, understandings, arrangements or
      restrictions by which the Company is bound to issue or acquire any additional
      shares of its capital stock or other equity securities or any options, warrants,
      conversion privileges or other rights to purchase or acquire any capital stock
      or other equity securities of the Company or any securities convertible into
      or
      exchangeable for such shares, securities or rights.

     

    2.3 Authorization.
      The
      Company has full corporate power and authority to enter into this Agreement
      and
      the Company Delivered Documents (as hereinafter defined) and to carry out the
      transactions contemplated herein and therein. The Board of Directors of the
      Company has taken all action required by law, its articles of incorporation
      and
      bylaws and otherwise to authorize the execution, delivery and performance of
      this Agreement and the consummation of the transactions contemplated herein.
      This Agreement has been duly and validly executed and delivered by the Company
      and no other
      corporate action is necessary.
      This
      Agreement is the valid and binding legal obligation of the Company enforceable
      against the Company in accordance with its terms.

     

    
      
         

      

      
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    2.4 Non-Contravention.
      Except
      as set forth in Section 2.4 of the Disclosure Schedule, neither the execution,
      delivery and performance of this Agreement nor the consummation of the
      transactions contemplated herein will to the Company’s knowledge:
      (i) violate or be in conflict with any provision of the articles of
      incorporation or bylaws of the Company; or (ii) except for such violations,
      conflicts, defaults, accelerations, terminations, cancellations, impositions
      of
      fees or penalties, mortgages, pledges, liens, security interests, encumbrances,
      restrictions, changes or other events which could not reasonably be expected
      to,
      individually or in the aggregate, have a Material Adverse Effect, (A) be in
      conflict with, or constitute a default, however defined (or an event which,
      with
      the giving of due notice or lapse of time, or both, would constitute such a
      default), under, or cause or permit the acceleration of the maturity of, or
      give
      rise to any right of termination, cancellation, imposition of fees or penalties
      under, any debt, note, bond, lease, mortgage, indenture, license, obligation,
      contract, commitment, franchise, permit, instrument or other agreement or
      obligation to which the Company (unless with respect to which defaults or other
      rights, requisite waivers or consents shall have been obtained at or prior
      to
      the Closing) or (B) result in the creation or imposition of any mortgage,
      pledge, lien, security interest, encumbrance, restriction, adverse claim or
      charge of any kind, upon any property or assets of the Company or under any
      debt, obligation, contract, agreement or commitment to which the Company is
      a
      party or by which the Company or any of its assets or properties is or may
      be
      bound; or (iii) violate any applicable statute, treaty, law, judgment,
      writ, injunction, decision, decree, order, regulation, ordinance or other
      similar authoritative matters (sometimes hereinafter separately referred to
      as a
“Law”
and
      sometimes collectively as “Laws”)
      of any
      applicable foreign, federal, state or local governmental or quasi-governmental,
      administrative, regulatory or judicial court, department, commission, agency,
      board, bureau, instrumentality or other authority (hereinafter sometimes
      separately referred to as an “Authority”
and
      sometimes collectively as “Authorities”).

     

    2.5 Consents
      and Approvals.
      Except
      as set forth in Section 2.5 of the Disclosure Schedule, with respect to the
      Company, no consent, approval, order or authorization of or from, or
      registration, notification, declaration or filing with (hereinafter sometimes
      separately referred to as a “Consent”
and
      sometimes collectively as “Consents”)
      any individual
      or entity, including without limitation any Authority, is required in connection
      with the execution, delivery or performance of this Agreement by the Company
      or
      the consummation by the Company of the transactions contemplated herein, except
      where the failure to obtain such Consent would not prevent or delay consummation
      of the transactions contemplated herein, or otherwise prevent or delay the
      Company from performing its obligations under this Agreement, and would not
      have
      a Material Adverse Effect.

     

    2.6 Financial
      Statements.
      The
      balance sheets of the Company as of December 31, 2007 (the “December
      2007 Balance Sheet”),
      and
      related statements of operations are set forth in Section 2.6 of the Disclosure
      Schedule. The balance sheet of the Company as of June 30, 2008 is referred
      to
      herein as the “Latest
      Balance Sheet”
and
      is
      also set forth in Section 2.6 of the Disclosure Schedule. Except as disclosed
      in
      Section 2.6 of the Disclosure Schedule, the aforesaid financial statements
      have
      been prepared from, and are consistent with, the books and records of the
      Company.

     

    
      
         

      

      
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    2.7 Absence
      of Certain Changes.
      Except
      as set forth in Section 2.7 of the Disclosure Schedule, except for the
      negotiation and execution of this Agreement, since the date of the Latest
      Balance Sheet, the Company has owned and operated its assets, properties and
      businesses in the ordinary course of business and consistent with past practice;
      without limiting the generality of the foregoing, the Company has not, subject
      to the aforesaid exceptions:

     

    (a) suffered
      any adverse change in its condition (financial or otherwise), working capital,
      assets, properties, liabilities, obligations, reserves, businesses, prospects,
      goodwill or going concern value or experienced any event or failed to take
      any
      action which reasonably could be expected to result in such an adverse
      change;

     

    (b) suffered
      any loss, damage, destruction or other casualty (whether or not covered by
      insurance) or suffered any loss of officers, employees, dealers, distributors,
      independent contractors, customers, or suppliers or other favorable business
      relationships;

     

    (c) declared,
      set aside, made or paid any dividend or other distribution in respect of its
      capital stock; or purchased or redeemed any shares of its capital
      stock;

     

    (d) issued
      or
      sold any shares of its capital stock, or any options, warrants, conversion,
      exchange or other rights to purchase or acquire any such shares or any
      securities convertible into or exchangeable for such shares;

     

    (e) incurred
      any indebtedness for borrowed money;

     

    (f) mortgaged,
      pledged, or subjected to any lien, lease, security interest or other charge
      or
      encumbrance any of its properties or assets, tangible or intangible, except
      for
      Permitted Liens;

     

    (g) acquired
      or disposed of any assets or properties, except in the ordinary course of
      business;

     

    (h) forgiven
      or canceled any debts or claims, or waived any rights;

     

    (i) granted
      to any officer or salaried employee or any other employee any increase in
      compensation in any form or paid any severance or termination pay;

     

    (j) entered
      into any commitment for capital expenditures for additions to plant, property
      or
      equipment; or

     

    (k) agreed,
      whether in writing or otherwise, to take any action described in this
      subsection.

     

    
      
         

      

      
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    2.8 Real
      Properties.
      The
      Company does not own any real properties. Section
      2.8 of the Disclosure Schedule lists all real properties leased by the Company.
      Section 2.8 of the Disclosure Schedule includes a brief description of the
      operating facilities located thereon, the annual rent payable thereon, the
      length of the term, any option to renew with respect thereto and the notice
      and
      other provisions with respect to termination of rights to the use thereof.
      Except
      as
      set forth in Section 2.8 of the Disclosure Schedule, such leasehold interests
      are valid and in full force and effect and enforceable in accordance with their
      terms and there does not exist any violation, breach or default thereof or
      thereunder. 

     

    2.9 Machinery,
      Equipment, Vehicles and Personal Property.
      Section
      2.9 of the Disclosure Schedule lists all material machinery, equipment and
      vehicles owned or leased by the Company, other than those items set forth on
      Exhibit 1.1(b). Except as set forth in Section 2.9 of the Disclosure Schedule,
      the Company has good and merchantable right, title and interest in and to all
      its machinery, equipment, vehicles and other personal property reflected in
      the
      Latest Balance Sheet and purchased or otherwise acquired since the date of
      the
      Latest Balance Sheet (except for such items sold in the ordinary course of
      business since the date of the Latest Balance Sheet). Except as set forth
      in Section
      2.9 of the Disclosure Schedule, none of such machinery, equipment, vehicles
      or
      other personal property owned by the Company is subject to any mortgage, pledge,
      lien or security interest of any kind or nature (whether or not of record)
      except Permitted Liens. Except as set forth in Section 2.9 of the Disclosure
      Schedule, all of the machinery, equipment, vehicles or other personal property
      owned by the Company is in good repair and good operating condition, ordinary
      wear and tear excepted, and is free from latent and patent
      defects..

     

    2.10 Inventories.
      Section
      2.10 of the Disclosure Schedule lists all inventory of the Company as of July
      31, 2008, excluding the inventory included within the Excluded Assets. Except
      as
      set forth in Section 2.10 of the Disclosure Schedule, all inventory of the
      Company, whether reflected in the Latest Balance Sheet or otherwise (but
      excluding the inventory included within the Excluded Assets), consists of a
      quality and quantity usable and salable in the ordinary course of business,
      and
      the present quantities of all inventory of the Company are reasonable in the
      present circumstances of the businesses as currently conducted or as proposed
      to
      be conducted; provided, however, that the foregoing does not take into account
      any plans of the Purchaser for conduct of the business after the Closing
      Date.

     

    2.11 Receivables
      and Payables.

     

    (a) Section
      2.11 of the Disclosure Schedule lists all accounts receivable, notes receivable,
      trade notes and trade accounts (collectively, “Accounts
      Receivable”)
      of the
      Company as of July 31, 2008, including their aging. Except as set forth in
      Section 2.11 of the Disclosure Schedule, (A) the Company has good right,
      title and interest in and to all its Accounts Receivable, including those
      reflected in the Latest Balance Sheet and those acquired and generated since
      the
      date of the Latest Balance Sheet (except for those paid since the date of the
      Latest Balance Sheet); (B) none of such Accounts Receivable is subject to
      any mortgage, pledge, lien or security interest of any kind or nature (whether
      or not of record) except Permitted Liens; (C) except to the extent of
      applicable reserves shown in the Latest Balance Sheet, to the knowledge of
      the
      Company, all of the Accounts Receivable owing to the Company constitute valid
      and enforceable claims arising from bona fide transactions in the ordinary
      course of business, and there are no claims, refusals to pay or other rights
      of
      set-off against any thereof; (D) no account or note debtor is delinquent in
      payment by more than ninety days; (E) the aging schedule of the Accounts
      Receivable of the Company set forth in the Disclosure Schedule is complete
      and
      accurate in all material respects; and (F) to the knowledge of the Company,
      there is no reason why any Accounts Receivable will not be collected in
      accordance with its terms, other than for such accounts and notes which are
      not
      in excess of the reserves established therefor and reflected in the Latest
      Balance Sheet.

     

    
      
         

      

      
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    (b) Section
      2.11(b) of the Disclosure Schedule lists all accounts payable of the Company.
      All accounts payable and notes payable by the Company arose in bona fide
      transactions in the ordinary course of business and except as set forth on
      Section 2.11 of the Disclosure Schedule no such account payable or note payable
      is delinquent by more than ninety days in its payment.

     

    2.12 Litigation.
      Except
      as set forth in Section 2.12 of the Disclosure Schedule, to the knowledge of
      the
      Company, there is no legal, administrative, arbitration, or other proceeding,
      suit, claim or action of any nature or investigation, review or audit of any
      kind (including without limitation a proceeding, suit, claim or action, or
      an
      investigation, review or audit by any Authority, involving any environmental
      Law
      or matter), judgment, decree, decision, injunction, writ or order pending,
      noticed, scheduled or threatened or contemplated by or against or involving
      the
      Company, its assets, properties or businesses or its directors, officers, agents
      or employees (but only in their capacity as such), whether at law or in equity,
      before or by any person or entity or Authority, or which questions or challenges
      the validity of this Agreement or any action taken or to be taken by the parties
      hereto pursuant to this Agreement or in connection with the transactions
      contemplated herein.

     

    2.13 Insurance.
      Section
      2.13 of the Disclosure Schedule contains an accurate and complete list of all
      policies of fire and other casualty, general liability, theft, life, workers’
compensation, health, directors and officers, business interruption and other
      forms of insurance owned or held by the Company, specifying the insurer, the
      policy number, the term of the coverage and, in the case of any “claims made”
coverage, the same information as to predecessor policies for the previous
      three
      years. All present policies are in full force and effect and all premiums with
      respect thereto have been paid. The Company has not been denied any form of
      insurance and no policy of insurance has been revoked or rescinded during the
      past five years, except as described in Section 2.13 of the Disclosure
      Schedule.

     

    2.14 Benefit
      Plans.
      

     

    (a) Section
      2.14 of the Disclosure sets
      forth a true and complete list of each Employee Plan (as hereinafter defined)
      and Benefit Arrangement (as hereinafter defined).

     

    (b) The
      Company has performed in all material respects all obligations required to
      be
      performed by it under each Employee Plan that is intended to qualify under
      Sections 401(a), 401(k) or 401(m) of the Code, and each such Employee Plan
      and
      Benefit Arrangement has been established and maintained in all material respect
      in accordance with its terms and in compliance with all applicable laws,
      statutes, orders, rules and regulations, including but not limited to ERISA
      or
      the Code.

     

    
      
         

      

      
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    (c) Except
      as
      set forth on Section 2.14 of the Disclosure Schedule, the execution of this
      Agreement and the consummation of the transactions contemplated herein will
      not
      (either alone or upon the occurrence of any additional or subsequent events)
      constitute an event under any Employee Plan or Benefit Arrangement that will
      or
      could reasonably be expected to result in any payment, acceleration, forgiveness
      of indebtedness, vesting, distribution, increase in benefits or obligation
      to
      fund benefits that will result in any liability of Purchaser.

     

    2.15 Contracts
      and Commitments; No Default.

     

    (a) Except
      as
      set forth in Section 2.15 of the Disclosure Schedule, the Company:

     

    (i) has
      no
      written contract, commitment, agreement or arrangement with any person or,
      to
      the Company’s knowledge, any oral contract, commitment, agreement or arrangement
      which (1) requires payments individually in excess of $10,000 annually or
      in excess of $50,000 over its term (including without limitation periods covered
      by any option to extend or renew by either party) and (2) is not terminable
      on thirty (30) days’ or less notice without cost or other
      Liability;

     

    (ii) does
      not
      pay any person or entity cash remuneration at the annual rate (including without
      limitation guaranteed bonuses) of more than $50,000 for employment or consulting
      services rendered;

     

    (iii) is
      not
      restricted by agreement from carrying on its businesses or any part thereof
      anywhere in the world or from competing in any line of business with any person
      or entity;

     

    (iv) is
      not
      subject to any obligation or requirement to provide funds to or make any
      investment (in the form of a loan, capital contribution or otherwise) in any
      person or entity;

     

    (v) is
      not
      party to any agreement, contract, commitment or loan to which any of its
      directors, officers or shareholders or any “affiliate” or “associate” (as
      defined in Rule 405 as promulgated under the Securities Act of 1933) (or
      former affiliate or associate) thereof is a party;

     

    (vi) is
      not
      party to any purchase or sale contract or agreement that calls for aggregate
      purchases or sales in excess over the course of such contract or agreement
      of
      $25,000 or which continues for a period of more than twelve months (including
      without limitation periods covered by any option to renew or extend by either
      party) which is not terminable on sixty (60) days’ or less notice without cost
      or other Liability at or any time after the Closing;

     

    (vii) is
      not
      subject to any contract, commitment, agreement or arrangement with any
“disqualified individual” (as defined in Section 280G(c) of the Code) which
      contains any severance or termination pay liabilities which would result in
      a
      disallowance of the deduction for any “excess parachute payment” (as defined in
      Section 280G(b)(1) of the Code) under Section 280G of the Code;
      and

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (viii) has
      no
      distributorship, dealer, manufacturer’s representative, franchise or similar
      sales contract relating to the payment of a commission.

     

    Each
      contract, agreement, instrument, license, commitment, loan, restriction and
      other arrangement set forth on Section 2.15 of the Disclosure Schedule shall
      be
      referred to as a “Material
      Contract”
and
      shall be collectively referred to as the “Material
      Contracts.”

     

    (b) To
      the
      knowledge of the Company, true and complete copies (or summaries, in the case
      of
      oral items) of all Material Contracts have been made available to the Purchaser
      for review. Except as set forth in Section 2.15 of the Disclosure Schedule
      to
      the knowledge of the Company, all Material Contracts are valid and enforceable
      by and against the Company in accordance with their respective terms; the
      Company is not in material breach, violation or default, however defined, in
      the
      performance of any of its obligations thereunder, and, to the knowledge of
      the
      Company, no facts and circumstances exist which, whether with the giving of
      due
      notice, lapse of time, or both, would constitute such a material breach,
      violation or default thereunder or thereof; and, to the Company’s knowledge, no
      other parties thereto are in a breach, violation or default, however defined,
      thereunder or thereof, and no facts or circumstances exist which, whether with
      the giving of due notice, lapse of time, or both, would constitute such a
      breach, violation or default thereunder or thereof.

     

    2.16 Orders,
      Commitments and Returns.
      Except
      as set forth in Section 2.16 of the Disclosure Schedule, to the knowledge of
      the
      Company, all accepted and unfulfilled orders for the sale of products and the
      performance of services entered into by the Company and all outstanding
      contracts or commitments for the purchase of supplies, materials and services
      were made in bona fide transactions in the ordinary course of business. Except
      as set forth in Section 2.16 of the Disclosure Schedule, to the knowledge of
      the
      Company, there are no claims against the Company to return products by reason
      of
      alleged over-shipments, defective products or otherwise, or of products in
      the
      hands of customers, retailers or distributors under an understanding that such
      products would be returnable.

     

    2.17 Labor
      Matters.
      Except
      as set forth in Section 2.17 of the Disclosure Schedule to the knowledge of
      the
      Company: (i) the Company is and has been in material compliance with all
      applicable Laws respecting employment and employment practices, terms and
      conditions of employment and wages and hours, including without limitation
      any
      such Laws respecting employment discrimination and occupational safety and
      health requirements, and has not and is not engaged in any unfair labor
      practice; (ii) to the knowledge of the Company, there is no unfair labor
      practice complaint against the Company pending or
      threatened before the National Labor Relations Board or any other comparable
      Authority; (iii) there is no labor strike, dispute, slowdown or stoppage
      actually pending or, to the Company’s knowledge, threatened against or directly
      affecting the Company; (iv) to the knowledge of the Company, no labor
      representation question exists respecting the employees of the Company and
      there
      is not pending or threatened any activity intended or likely to result in a
      labor representation vote respecting the employees of the Company; (v) no
      grievance or any arbitration proceeding arising out of or under collective
      bargaining agreements is pending and no claims therefor exist or, to the
      Company’s knowledge, have been threatened; (vi) no collective bargaining
      agreement is binding and in force against the Company or currently being
      negotiated by the Company; (vii) to the knowledge of the Company, the
      Company has not experienced any significant work stoppage or other significant
      labor difficulty; (viii) the Company is not delinquent in payments to any
      persons for any wages, salaries, commissions, bonuses or other direct
      or
      indirect compensation for any services performed by them or amounts required
      to
      be reimbursed to such persons, including without limitation any amounts due
      under any Employee Plan and Benefit Arrangement; (ix) except as upon
      termination of the employment of any person, neither the Purchaser nor any
      subsidiary of the Purchaser will, by reason of anything done by the Company
      or
      the Parent at or prior to or as of the date of Closing, be liable to any of
      such
      persons for so-called “severance pay” or any other payments; and (x) to the
      knowledge of the Company, within the twelve month period prior to the date
      hereof there has not been any expression of intention to the Company by any
      officer or key employee identified in Section 2.17 of the Disclosure Schedule
      to
      terminate such employment.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    2.18 Dealers
      and Suppliers.
      Except
      as set forth in Section 2.18 of the Disclosure Schedule, there has not been
      in
      the twelve month period prior to the date hereof any adverse change in the
      business relationship of the Company with any dealer or supplier to the Company
      which is reasonably likely to have a Material Adverse Effect.

     

    2.19 Permits
      and Other Operating Rights.
      Except
      as set forth in Section 2.19 of the Disclosure Schedule, the Company does not
      require the Consent of any Authority to permit it to operate in the manner
      in
      which it presently is being operated, and possesses all permits and other
      authorizations from all Authorities presently required necessary to permit
      it to
      operate it businesses in the manner in which they presently are
      conducted.

     

    2.20 Compliance
      with Law.
      Except
      as set forth in Section 2.20 of the Disclosure Schedule, and without limiting
      the scope of any other representations or warranties contained in this
      Agreement, but without intending to duplicate the scope of such other
      representations and warranties to the knowledge of the Company, the assets,
      properties, businesses and operations of the Company are and have been in
      material compliance with all Laws applicable to the ownership and conduct of
      their assets, properties, businesses and operations.
      To the
      knowledge of the Company, there are no outstanding and unsatisfied deficiency
      reports, plans of correction, notices of noncompliance or work orders relating
      to any Authorities arising as a result of any such failure to be in material
      compliance, and no such discussions with any Authorities arising as a result
      of
      any such failure to be in material compliance are scheduled or
      pending.

     

    2.21 Assets
      of Business.
      The
      Assets constitute substantially all of the assets held for use or used primarily
      in connection with its businesses, except for the Excluded Assets, and, except
      for the Excluded Assets, are adequate to carry on such businesses as presently
      conducted by the Company.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    2.22 Brokers.
      Except
      as set forth in Section 2.22 of the Disclosure Schedule, neither the Company
      nor
      any of its directors, officers or employees has employed any broker, finder,
      or
      financial advisor or incurred any liability for any brokerage fee or commission,
      finder’s fee or financial advisory fee, in connection with the transactions
      contemplated hereby, nor is there any basis known to the Company for any such
      fee or commission to be claimed by any person or entity.
      Notwithstanding the above, any finder’s fee or commission, if owed, will be paid
      solely by the Purchaser.

     

    2.23 Customers.
      Except
      as set forth in Section 2.23 of the Disclosure Schedule, in the 12-month period
      prior to the date hereof, with respect to any customer of the Company
      representing more than $250,000 of sales in such 12-month period, there has
      been
      neither any significant dispute nor to the knowledge of the Company any set
      of
      circumstances which is reasonably anticipated to have a material adverse effect
      on the relationship between the Company and such customer.

     

    2.24
      Taxes
      and Tax Returns.
      Except
      as set forth on Section 2.24 of the Disclosure Schedule, Parent has duly filed,
      on behalf of the Company, with the appropriate governmental agencies all federal
      tax returns and reports, all state and local tax returns and reports with
      respect to income, payroll, sales and franchise taxes and all other tax returns
      and reports, the filing of which is necessary for the conduct of its business.
      All such tax returns properly reflect the taxes of the Company for the periods
      covered. All federal, state, and local taxes, assessments, interest, penalties,
      deficiencies, fees, or other governmental charges or impositions called for
      by
      such tax returns, or claimed to be due by any taxing authority, have been
      properly accrued or paid and all deposits required by law to be made with
      respect to employee's withholding taxes have been made. There are no material
      unresolved questions or claims concerning the Company’s tax liability. Parent,
      on behalf of the Company, has not received any notice of audit, deficiency,
      or
      assessment or proposed deficiency or assessment by the Internal Revenue Service
      or any other taxing authority, nor has Parent, on behalf of the Company, waived
      any statute of limitations with respect to taxes or agreed to any extensions
      of
      time with respect to a tax assessment of deficiency.

     

    ARTICLE
      3

     

    REPRESENTATIONS
      AND WARRANTIES OF PARENT

     

    Parent
      represents and warrants to the Purchaser as of the date hereof as
      follows:

     

    3.1. Corporate
      Organization.
      Parent
      is a corporation duly organized, validly existing and in good standing under
      the
      laws of the State of Delaware. Purchaser is qualified to do business and is
      in
      good standing as a foreign corporation in each jurisdiction where the nature
      of
      the activities conducted by it or the character of the property owned, leased
      or
      operated by it make such qualification necessary or appropriate, except for
      those jurisdictions where the failure to be so qualified has not and could
      not
      reasonably be expected to have a Material Adverse Effect on the ability of
      the
      Parent, to fulfill its obligations under this Agreement. 

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    3.2. Authorization.
      Parent
      has full corporate power and authority to enter into this Agreement and to
      carry
      out the transactions contemplated herein and therein. The Boards of Directors
      of
      the Parent have taken all action required by law, its articles of incorporation
      and bylaws or otherwise (including without limitation, procuring approval by
      the
      Parent’s stockholders) to authorize the execution, delivery and performance of
      this Agreement and the consummation of the transactions contemplated herein
      and
      no other corporate action is required. This Agreement is the valid and binding
      legal obligation of Parent enforceable against it in accordance with its
      terms.

     

    3.3 Issuance
      of Shares.
      The
      Shares to be issued to Purchaser hereunder have been duly authorized and, when
      issued in accordance with the terms of this Agreement, will be validly issued,
      fully paid and non-assessable. 

     

    ARTICLE
      4

     

    REPRESENTATIONS
      AND WARRANTIES OF PURCHASER

     

    Purchaser
      represents and warrants to the Company and the Parent as of the date hereof
      as
      follows:

     

    4.1. Corporate
      Organization.
      Purchaser is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Nevada. Purchaser is qualified to do business
      and
      is in good standing as a foreign corporation in each jurisdiction where the
      nature of the activities conducted by it or the character of the property owned,
      leased or operated by it make such qualification necessary or appropriate,
      except for those jurisdictions where the failure to be so qualified has not
      and
      could not reasonably be expected to have a Material Adverse Effect on the
      ability of the Purchaser, to fulfill its obligations under this Agreement.
      

     

    4.2. Authorization.
      Purchaser has full corporate power and authority to enter into this Agreement
      and the Purchaser Delivered Documents and to carry out the transactions
      contemplated herein and therein. The Boards of Directors Purchaser have taken
      all action required by law, their respective articles of incorporation and
      bylaws or otherwise to authorize the execution, delivery and performance of
      this
      Agreement and the consummation of the transactions contemplated herein and
      no
      action of the stockholders or the Purchaser is required. This Agreement is
      the
      valid and binding legal obligation of Purchaser enforceable against it in
      accordance with its terms.

     

    4.3. Non-Contravention.
      Neither
      the execution, delivery and performance of this Agreement nor the consummation
      of the transactions contemplated herein will: (i) violate any provision of
      the articles of incorporation or bylaws of the Purchaser; or (ii) except
      for such violations, conflicts, defaults, accelerations, terminations,
      cancellations, impositions of fees or penalties, mortgages, pledges, liens,
      security interests, encumbrances, restrictions and charges which would not,
      individually or in the aggregate, have a Material Adverse Effect on Purchaser,
      (A) violate, be in conflict with, or constitute a default, however defined
      (or an event which, with the giving of due notice or lapse of time, or both,
      would constitute such a default), under, or cause or permit the acceleration
      of
      the maturity of, or give rise to, any right of termination, cancellation,
      imposition of fees or penalties under, any debt, note, bond, lease, mortgage,
      indenture, license, obligation, contract, commitment, franchise, permit,
      instrument or other agreement or obligation to which Purchaser is a party or
      by
      which they or any of its properties or assets is or may be bound (unless with
      respect to which defaults or other rights, requisite waivers or consents will
      have been obtained at
      or prior
      to the Closing) or (B) result in the creation or imposition of any
      mortgage, pledge, lien, security interest, encumbrance, restriction, adverse
      claim or charge of any kind, upon any property or assets of Purchaser under
      any
      debt, obligation, contract, agreement or commitment to which Purchaser is a
      party or by which Purchaser or any of their assets or properties is or may
      be
      bound; or (iii) violate any Law.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    4.4. Consents
      and Approvals.
      No
      Consent is required by any person or entity, including without limitation any
      Authority, in connection with the execution, delivery and performance by
      Purchaser of this Agreement, or the consummation of the transactions
      contemplated herein, other than any Consent which, if not made or obtained,
      will
      not, individually or in the aggregate, have a Material Adverse Effect on the
      business of Purchaser.

     

    4.5. Brokers.
      Neither
      Purchaser nor any of its directors, officers or key employees have employed
      any
      broker, finder or financial advisor, or incurred any liability for any brokerage
      fee or commission, finder’s fee or financial advisory fee, in connection with
      the transactions contemplated hereby, nor is there any basis known to Purchaser
      for any such fee or commission to be claimed by any person or
      entity.
      Notwithstanding the above, any finder’s fee or commission, if owed, will be paid
      solely by the Purchaser.

     

    4.6. Legal
      Proceedings.
      There
      are no actions, suits or proceedings instituted, pending or to the knowledge
      of
      the Purchaser, threatened against Purchaser, or against any of its affiliates
      or
      against any property, asset, interest or right of any of them, either
      individually or in the aggregate, that would prevent or delay consummation
      of
      the transactions contemplated by this Agreement or otherwise prevent Purchaser
      from performing their respective obligations under this Agreement. Neither
      Purchaser is not subject to any judgment, order, writ, injunction or decree
      that
      would prevent or delay consummation of the transactions contemplated by this
      Agreement or otherwise prevent Purchaser from performing its obligations under
      this Agreement.

     

    4.7 Securities
      Laws.
      Purchaser
      acknowledges that:

     

    
      	 	
              (i)

            	
              the
                Shares to be issued pursuant to this
                Agreement have not been registered or qualified under federal or
                state
                securities laws;

            

    

     

    
      	 	
              (ii)

            	
              Purchaser
                is purchasing such Shares solely for its own account and not with
                a view
                to, or for sale in connection with, any resale or distribution in
                violation of federal or state securities
                laws;

            

    

     

    
      	 	
              (iii)

            	
              Purchaser
                understands that such Shares are characterized as "restricted securities"
                under the federal securities laws, is familiar with the resale limitations
                imposed thereby (including the provisions of Rule 144 under the Securities
                Act and the requirements thereof) and agrees and understands that
                no
                transfer of such shares may be made without registration thereof
                under the
                Securities Act, or pursuant to an exemption thereunder;
                and

            

    

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    
      	 	
              (iv)

            	
              The
                Shares, when issued, will bear the following
                legend:

            

    

     

    THE
      SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THE
      SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED
      FOR VALUE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION THEREOF UNDER THE
      SECURITIES ACT OF 1933 AND/OR THE SECURITIES ACT OF ANY STATE HAVING
      JURISDICTION OR AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION THAT SUCH
      REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR ACTS.

     

    ARTICLE
      5

     

    COVENANTS

     

    5.1 Conduct
      of the Company Business.
      The
      Company shall maintain its assets and properties and carry on its businesses
      and
      operations only in ordinary course in substantially the same manner as planned
      and previously operated; and the Company shall use its reasonable efforts to
      preserve intact its business organizations, existing business relationships
      (including without limitation its relationships with officers, employees,
      dealers, distributors, independent contractors, customers and suppliers), good
      will and going concern value.

     

    5.2 Full
      Access to the Purchaser.
      The
      Company shall afford to the Purchaser and its directors, officers, employees,
      counsel, accountants, investment advisors and other authorized representatives
      and agents full and complete access to the facilities, properties, books and
      records of the Company in order that the Purchaser may have full opportunity
      to
      make such investigations
      as it shall desire to make of the affairs of the Company, provided
      that
      any such
      investigation shall be conducted in such a manner as not to interfere
      unreasonably with business operations, and provided
      further that
      neither
      the Purchaser nor any of its directors, officers, employees, counsel,
      accountants, investment advisors or other authorized representatives or agents
      shall have access to the facilities, properties, employees, customers or
      suppliers except upon the written consent of Larry Shumate, President of the
      Company, or Matthew Flemming, Secretary of the Company, which consent shall
      not
      be unreasonably withheld and, in any event, either or both of Larry Shumate
      and
      Matthew Flemming shall have the right to be present. In addition, the Company
      shall furnish such additional financial and operating data and other information
      as the Purchaser shall, from time to time, reasonably request, including without
      limitation access to the working papers of its independent certified public
      accountants.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    5.3 Confidentiality.
      Each of
      the parties hereto agrees that it will not use, or permit the use of, any of
      the
      information relating to any other party hereto furnished to it in connection
      with the transactions contemplated herein (“Information”)
      in a
      manner or for a purpose detrimental to such other party or otherwise than in
      connection with the transaction, and that they will not disclose, divulge,
      provide or make accessible, or permit the Disclosure of (collectively,
“Disclose”
or
      “Disclosure”
as
      the
      case may be), any of the Information to any person or entity, other than their
      responsible directors, officers, employees, investment advisors, accountants,
      counsel and other authorized representatives and agents, except as may be
      required by judicial or administrative process or, in the opinion of such
      party’s regular counsel, by other requirements of Law; provided,
      however,
      that
      prior to any Disclosure of any Information permitted hereunder, the disclosing
      party shall first obtain the recipients’ undertaking to comply with the
      provisions of this subsection with respect to such information. The term
“Information”
as
      used
      herein shall not include any information relating to a party which the party
      disclosing such information can show: (i) to have been in its possession
      prior to its receipt from another party hereto; (ii) to be now or to later
      become generally available to the public through no fault of the disclosing
      party; (iii) to have been available to the public at the time of its
      receipt by the disclosing party; (iv) to have been received separately by
      the disclosing party in an unrestricted manner from a person entitled to
      disclose such information; or (v) to have been developed independently by
      the disclosing party without regard to any information received in connection
      with this transaction.
      Each party hereto also agrees to promptly return to the party from whom
      originally received all original and duplicate copies of written materials
      containing Information should the transactions contemplated herein not occur.
      A
      party hereto shall be deemed to have satisfied its obligations to hold the
      Information confidential if it exercises the same care as it takes with respect
      to its own similar information.

     

    5.4 Filings;
      Consents; Removal of Objections.
      Subject
      to the terms and conditions herein provided, the parties hereto shall use their
      best efforts to take or cause to be taken all actions and do or cause to be
      done
      all things necessary, proper or advisable under applicable Laws to consummate
      and make effective, as soon as reasonably practicable, the transactions
      contemplated hereby, including without limitation obtaining all Consents of
      any
      person or entity, whether private or governmental, required in connection with
      the consummation of the transactions contemplated herein. In furtherance, and
      not in limitation of the foregoing, it is the intent of the parties to
      consummate the transactions contemplated herein at the earliest practicable
      time
      in accordance with the applicable provisions governing the time within which
      such transactions shall be completed, and they respectively agree to exert
      their
      best efforts to that end, including without limitation: (i) if applicable,
      the filing with the Federal Trade Commission (“FTC”)
      and
      the Antitrust Division of the Department of Justice (the “Antitrust
      Division”)
      all
      requisite documents and notifications in connection with the transactions
      contemplated hereby pursuant to the HSR Act as soon as practicable
      following the date hereof, and to respond as promptly as practicable to all
      inquiries from the FTC or the Antitrust Division in connection therewith;
      (ii) the removal or satisfaction, if possible, of any objections to the
      validity or legality of the transactions contemplated herein; and (iii) the
      satisfaction of the conditions to consummation of the transactions contemplated
      hereby.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    5.5 Further
      Assurances; Cooperation; Notification.

     

    (a) Each
      party hereto will, before, at and after the Closing, execute and deliver such
      instruments and take such other actions as the other party or parties, as the
      case may be, may reasonably require in order to carry out the express intent
      of
      this Agreement. Without limiting the generality of the foregoing, at any time
      after the Closing, at the request of the Purchaser and without further
      consideration, the Company will execute and deliver such instruments of sale,
      transfer, conveyance, assignment and confirmation and take such action as the
      Purchaser may reasonably deem necessary or desirable in order to more
      effectively transfer, convey and assign to the Purchaser, and to confirm the
      Purchaser’s title to, all of the Assets, to put the Purchaser in actual
      possession and operating control thereof and to assist the Purchaser in
      exercising all rights with respect thereto.

     

    (b) At
      all
      times from the date hereof until the Closing, each party shall promptly notify
      the other in writing of the occurrence of any event which it reasonably believes
      will or may result in a failure by such party to satisfy the conditions
      specified in Article 6 and Article 7 hereof.

     

    (c) After
      the
      Closing, the Purchaser shall assist and cooperate reasonably with the Company
      and the Parent in connection with the winding up of the business and affairs
      of
      the Company arising as a result of the Closing.

     

    5.6 Supplements
      to Disclosure Schedule.
      Prior
      to the Closing, the Company and the Parent will supplement or amend the
      Disclosure Schedule with respect to any event or development which, if existing
      or occurring at or prior to the date of this Agreement, would have been required
      to be set forth or described in the Disclosure Schedule or which is necessary
      to
      correct any information in the Disclosure Schedule or in any representation
      and
      warranty of the Company or the Parent which has been rendered inaccurate by
      reason of such event or development. For purposes of determining the accuracy
      as
      of the date hereof of the representations and warranties of the Company and
      the
      Parent contained in Articles 2 and 3 hereof in order to determine the
      fulfillment of the conditions set forth in Section 6.1, the Disclosure
      Schedule shall be deemed to exclude any information contained in any supplement
      or amendment hereto delivered after the delivery of the Disclosure
      Schedule.

     

    5.7 Public
      Announcements.
      None of
      the parties hereto shall make any public announcement with respect to the
      transactions contemplated herein without the prior written consent of the other
      parties, which consent shall not be unreasonably withheld or delayed;
provided,
      however,
      that
      any of the parties hereto may at any time make any announcements
      which are deemed by its counsel to be required by applicable Law so long as
      the
      party so required to make an announcement promptly upon learning of such
      requirement notifies the other parties of such requirement and discusses with
      the other parties in good faith the exact proposed wording of any such
      announcement.
      As of
      the date of this Agreement, the Purchaser is not aware of any facts giving
      rise
      to a current duty to publicly disclose information pertaining to the negotiation
      or execution of this Agreement.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    5.8 Transactional
      Tax Undertakings; Cooperation on Tax Matters.

     

    (a) Tax
      Filings.
      The
      parties hereto shall cooperate to make any necessary filings with state and
      local taxing authorities and to furnish any required supplemental information
      to
      any state and local tax liabilities resulting from the consummation of the
      transactions contemplated herein.

     

    (b) Cooperation
      on Tax Matters.
      Purchaser, the Company and the Parent shall cooperate fully, as and to the
      extent reasonably requested by the other party, in connection with the filing
      of
      Tax Returns and any audit, litigation or other proceeding with respect to taxes.
      Such cooperation shall include the retention and (upon the other party’s
      request) the provision of records and information which are reasonably relevant
      to any such Tax Returns audit, litigation or other proceeding and making
      employees available on a mutually convenient basis to provide additional
      information and explanation on any material provided hereunder.

     

    5.9 Employee
      Benefits.
      After
      the date of Closing, the Purchaser shall offer to substantially all employees
      employed by the Company immediately prior to the date of Closing with respect
      to
      the businesses relating to the Company’s Assets (except for Larry C. Shumate,
      whose employment arrangement is set forth in Section 6.10 (the
“Company
      Employees”))
      the
      opportunity to maintain such employee’s current employment; provided, that the
      Purchaser may terminate the employment of any employees who accept such offer
      at
      any time after such date of Closing. During the first six (6) months after
      the
      date of Closing, the compensation and benefits provided by the Purchaser shall
      be reasonably comparable on an overall basis (including without limitation
      all
      compensation and benefits accrued by such employees as of the date of Closing
      under all Employee Plan and Benefit Arrangements irrespective of whether such
      accrued benefits are actually received by such employees) to those provided
      to
      such employees prior to the date of Closing with credit given for the length
      of
      actual service with the Company prior to the date of Closing.

     

    5.10 Bulk
      Sales Law Compliance.
      The
      Purchaser hereby waives compliance by the parties with the provisions of any
      applicable bulk sales laws to the transactions contemplated by this Agreement.
      

     

    5.11 Prorations
      and Adjustments.
      Notwithstanding anything herein to the contrary, and subject to the provisions
      of Section 5.11 hereof, all real estate taxes and personal property taxes
      associated with the Assets, as well as all costs and expenses for electricity,
      natural gas, telephone and other telecommunications, water and other utilities
      used by the Company in connection with the operation of the business, as well
      as
      all payroll costs, shall be prorated and adjusted between the Purchaser and
      the
      Company as of the Closing Date such that the Company shall pay and be
      responsible for all items accruing prior to the Closing Date and the Purchaser
      shall pay and be responsible for all items accruing on and after the Closing
      Date, regardless of whether such items are paid in advance or in
      arrears. 

     

    5.12 Retention
      of and Access to Records. After
      the
      Closing Date, Purchaser shall retain for a period of seven (7) years those
      records of the Company delivered to Purchaser. Purchaser shall also provide
      the
      Company and Parent and their representatives reasonably access thereto, during
      normal business hours and on at least two days’ prior written
      notice.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    ARTICLE
      6

     

    CONDITIONS
      TO OBLIGATIONS OF PURCHASER

     

    Notwithstanding
      any other provision of this Agreement to the contrary, the obligation of the
      Purchaser to effect the transactions contemplated herein shall be subject to
      the
      satisfaction at or prior to the Closing of each of the following
      conditions:

     

    6.1 Representations
      and Warranties True.
      The
      representations and warranties of the Company and the Parent contained in this
      Agreement, shall be true, complete and accurate in all material respects as
      of
      the date when made and at and as of the
      Closing as though such representations and warranties were made at and as of
      such time, except for changes specifically permitted or contemplated by this
      Agreement, and except insofar as the representations and warranties relate
      expressly and solely to a particular date or period, in which case they shall
      be
      true and correct at the Closing with respect to such date or period;
provided
      that
      a breach
      of any representation or warranty shall not constitute a failure of the
      condition contained in this Section 6.1 if such breach, either alone, or in
      conjunction with all other breaches, has not had, or will not have, a Material
      Adverse Effect.

     

    6.2 Performance.
      The
      Company and the Parent shall have performed and complied in all material
      respects with all agreements, covenants, obligations and conditions required
      by
      this Agreement to be performed or complied with by the Company and the Parent
      on
      or prior to the Closing.

     

    6.3 Financing.
      On or
      prior to Closing, Purchaser shall have received from Stillwater National Bank
      and Trust Company (i) adequate financing to perform all of its obligations
      under
      this Agreement and the transactions contemplated hereby and thereby, including,
      without limitation, the payment of the Purchase Price; (ii) a new term note,
      amending and restating the Assumed Stillwater Notes, in an amount equal to
      $5,000,000 and (iii) a revolving credit facility in an amount equal to
      $1,000,000.

     

    6.4 Consents The
      Purchaser shall have received consents to assume leases for any equipment
      subject to a lease identified on Section 2.9 of the Disclosure Schedule,
      including, without, limitation, the consent from Vencore Solutions
      LLC.

     

    6.5 Required
      Approvals and Consents.

     

    (a) All
      action required by law and otherwise to be taken by the Board of Directors
      of
      the Company and the Parent to authorize the execution, delivery and performance
      of this Agreement and the consummation of the transactions contemplated hereby
      shall have been duly and validly taken.

     

    (b) All
      Consents of or from all Authorities required hereunder to consummate the
      transactions contemplated herein, and all Consents of from all persons and
      entities other than Authorities that are identified in the Disclosure Schedule
      shall have been delivered, made or obtained, and the Purchaser shall have
      received copies thereof.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    6.6 Adverse
      Changes.
      No
      change, circumstance or event which constitutes or has resulted in, or that
      is
      reasonably likely to result in, a Material Adverse Effect relative
      to
      the
      Company since the date of the Latest Balance Sheet.

     

    6.7 No
      Proceeding or Litigation.
      No
      suit, action, investigation, inquiry or other proceeding by any Authority or
      other person or entity shall have been instituted or threatened which questions
      the validity or legality of the transactions contemplated hereby or which,
      if
      successfully asserted, would individually or in the aggregate, otherwise have
      a
      Material Adverse Effect on the business,
      financial condition, prospects, or operations of the Company.

     

    6.8 Legislation.
      No Law
      shall have been enacted which prohibits, restricts or materially delays the
      consummation of the transactions contemplated hereby or any of the conditions
      to
      the consummation of such transaction.

     

    6.9 Certificates.
      Purchaser shall have received such certificates of the Company’s officers and
      the Parent, in a form and substance reasonably satisfactory to the Purchaser,
      dated the
      date
      of Closing, to evidence compliance with the conditions set forth in Sections
      6.1
      and 6.2.

     

    6.10 Employment
      Agreements.
      On or
      before the date of Closing, Larry C. Shumate shall have executed and delivered
      to the Purchaser the employment agreement substantially in the form and
      substance set forth in Exhibit 6.10 hereto (the “Employment
      Agreement”).

     

    6.11 Appraisal. On
      or
      before the Closing, Purchaser shall have received an (i) appraisal of the fair
      market value in place of the current property and equipment of the Company
      and
      (ii) a schedule of the intangible assets of the Company attached hereto as
      Schedule 6.11 and the combination of (i) and (ii) shall equal or exceed
      $5,000,000 in the aggregate.

     

    6.12 Documentation
      for Conveyance of the Company’s Assets.
      The
      Purchaser shall have received, in a form and substance reasonably satisfactory
      to the Purchaser, dated the date of Closing, all of the Bills of Sale, deeds,
      assignments and other conveyance and transfer documentation listed on Exhibit
      5.11.

     

    ARTICLE
      7

     

    CONDITIONS
      TO COMPANY’S OBLIGATIONS

     

    Notwithstanding
      anything in this Agreement to the contrary, the obligation of the Company and
      the Parent to effect the transactions contemplated herein shall be subject
      to
      the satisfaction at or prior to the Closing of each of the following
      conditions:

     

    7.1 Representations
      and Warranties True.
      The
      representations and warranties of the Purchaser contained in this Agreement
      shall be in all material respects true, complete and accurate as of the date
      when made and at and as of the Closing, as though such representations and
      warranties were made at and as of such time, except for changes permitted or
      contemplated in this Agreement, and except insofar as the representations and
      warranties relate expressly and solely to a particular date or period, in which
      case they shall be true and correct in all material respects at the Closing
      with
      respect to such date or period.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    7.2 Performance.
      The
      Purchaser shall have performed and complied in all material respects with all
      agreements, covenants, obligations and conditions required by this Agreement
      to
      be performed or complied with by the Purchaser at or prior to the
      Closing.

     

    7.3 Corporate
      Approvals.
      All
      Consents listed on Section 2.5 of the Disclosure Schedule shall have been
      delivered, made or obtained. All action required to be taken by Purchaser to
      authorize the execution, delivery and performance of this Agreement by the
      Purchaser and the consummation of the transactions contemplated hereby shall
      have been duly and validly taken.

     

    7.4 No
      Proceeding or Litigation.
      No
      suit, action, investigation, inquiry or other proceeding by any Authority or
      other person or entity shall have been instituted or threatened which questions
      the validity or legality of the transactions contemplated hereby.

     

    7.5 Certificates.
      The
      Purchaser shall have furnished the Company and the Parent with such certificates
      of Purchaser’s officers, in a form and substance reasonably acceptable to the
      Company and the Parent, dated the date of Closing, to evidence compliance with
      the conditions set forth in Sections 7.1 and 7.2.

     

    7.6 Payment
      of Consideration.
      The
      Company shall have received (a) satisfactory evidence that the wire
      transfer required by Section 1.4(a) and/or assumption of the Assumed Stillwater
      Notes has been completed, and (b) the executed Liabilities Undertaking
      required by Section 1.4(b).

     

    7.7 Releases.
      The
      Company and Parent shall have received releases, in form reasonably satisfactory
      to the Company, Parent and their counsel, from (i) Stillwater National Bank
      and
      Trust Company, including without limitation UCC-3 termination statements,
      regarding any of the Assumed Stillwater Notes actually assumed by Purchaser;
      (ii) P&S Properties LLC with respect to the Improved Property Commercial
      Lease for the premises located at 12060 FM 3083, Conroe, Texas being assigned
      to
      Purchaser; (jjj) Hitachi Capital American Corp. relating to that certain Master
      Motor Vehicle Security Agreement being assumed by Purchaser; and (iv) with
      respect to that certain Sunfiirm Model CST 42160, either Vencore Solutions
      LLC
      under that certain Master Lease 8801 or Champion Machine under invoice No.
      0907-2641 .

     

    7.8 Employment
      Agreements.
      On or
      before the date of Closing, the Purchaser shall have executed and delivered,
      or
      caused to have been executed and delivered, to Larry C. Shumate his Employment
      Agreement.

     

    7.9 Execution
      and Delivery of Certain Agreements.
      The
      Company and the Parent shall have received satisfactory evidence that the
      agreements identified in Exhibit 7.9 hereto have been executed and
      delivered by the parties thereto.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    ARTICLE
      8

     

    TERMINATION
      AND ABANDONMENT

     

    8.1 Methods
      of Termination.
      This
      Agreement may be terminated and the transactions contemplated herein may be
      abandoned at any time notwithstanding approval thereof by the shareholders
      of
      the Company, but not later than the Closing:

     

    (a) By
      mutual
      written consent of the Purchaser and the Company; or

     

    (b) By
      Purchaser on or after the Termination Date or such later date as may be
      established pursuant to Article 1 hereof, if any of the conditions provided
      for in Article 6 of this Agreement shall not have been satisfied or waived
      in writing by Purchaser prior to such date; or

     

    (c) By
      the
      Company on or after the Termination Date or such later date as may be
      established pursuant to Article 1 hereof, if any of the conditions provided
      for in Article 7 of this Agreement shall not have been satisfied or waived
      in writing by the Company prior to such date; or

     

    (d) By
      any
      party if the Closing shall not have occurred on or before October 1,
      2008.

     

    8.2 Procedure
      Upon Termination.
      In the
      event of termination and abandonment pursuant to Section 8.1, written
      notice thereof shall forthwith be given to the other party or parties, and
      the
      provisions of this Agreement shall terminate, and the transactions contemplated
      herein shall be abandoned, without further action by any party hereto. If this
      Agreement is terminated as provided herein: (a) each party will, upon
      request, redeliver all documents, work papers and other material of any other
      party (and all copies thereof) relating to the transactions contemplated herein,
      whether so obtained before or after the execution hereof, to the party
      furnishing the
      same;
      (b) the confidentiality obligations of Section 5.3 shall continue to
      be applicable; and (c) except as provided in this subsection, no party
      shall have any liability for a breach of any representation, warranty,
      agreement, covenant or other provision of this Agreement, unless such breach
      was
      due to a willful or bad faith action or omission of such party or any
      representative, agent, employee or independent contractor thereof.

     

    ARTICLE
      9

     

    SURVIVAL
      AND INDEMNIFICATION

     

    9.1 Survival.
      The
      representations, warranties and covenants of each of the parties hereto shall
      survive the Closing for a period to one (1) year.

     

    9.2 Indemnification
      by Purchaser.
      Purchaser agrees to indemnify the Company and the Parent from and against any
      and all loss, liability, claim or damage (“Losses”)
      suffered or incurred by it by reason of (a) any untrue representation of,
      or breach of warranty by Purchaser in any part of this Agreement, provided,
      however, that no claim for indemnity may be made pursuant to this subsection
      after the first anniversary of the date of Closing; (b) any Assumed Liabilities;
      and (c) any nonfulfillment of any covenant, agreement or undertaking of
      Purchaser in any part of this Agreement which by its terms is to remain in
      effect after the Closing and has not been specifically waived in writing at
      the
      Closing by the party or parties hereof entitled to the benefits
      thereof.
      The
      Purchaser shall reimburse the Company and the Parent for any and all fees,
      costs
      and expenses of any kind arising out of or relating to enforcement of the
      indemnification rights pursuant to this Section 9.2 (including, without
      limitation, any and all Legal Expenses) and, for purposes hereof, such fees,
      costs and expenses shall be deemed to be Losses.

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    9.3 Indemnification
      by the Company and the Parent .
      The
      Company and Parent, jointly and severally, agree to indemnify the Purchaser
      from
      and against any and all Losses suffered or incurred by it by reason of (a)
      any
      materially untrue representation of, or material breach of warranty by the
      Company or any Parent in this Agreement, provided,
      however,
      that no
      claim for indemnity may be made pursuant to this subsection after the first
      anniversary of the date of Closing and (b) any nonfulfillment of any covenant,
      agreement or undertaking of the Company or Parent in this Agreement which by
      its
      terms is to remain in effect after the Closing and has not been specifically
      waived in writing at the Closing by the party or parties hereto entitled to
      the
      benefits thereof, which nonfullfillment cause a Material Adverse Effect .
      Notwithstanding anything to the contrary in this subsection, no claim may be
      made under this subsection if it (or the principal facts with respect to it)
      were known or reasonably should have been known and the claim could have been
      asserted at a time when it would have resulted in a required adjustment which
      would be reflected in the Closing Balance Sheet or the Adjusted Closing Balance
      Sheet.
      The
      Company and the Parent, jointly and severally, shall reimburse the Purchaser
      for
      any and all fees, costs and expenses of any kind arising out of or relating
      to
      enforcement of the indemnification rights pursuant to this Section 9.3
      (including, without limitation, any and all Legal Expenses) and, for purposes
      hereof, such fees, costs and expenses shall be deemed to be Losses.

     

    9.4 Claims
      for Indemnification.
      Whenever any claim shall arise for indemnification hereunder, the party seeking
      indemnification (the “Indemnified
      Party”)
      shall
      promptly notify the party from whom indemnification is sought (the “Indemnifying
      Party”)
      of the
      claim and, when known, the facts constituting the basis for such claim. In
      the
      case of any such claim for indemnification hereunder resulting from or in
      connection with any claim or legal proceedings of a third party, the notice
      to
      the Indemnifying Party shall specify, if known, the amount or an estimate of
      the
      amount of the liability arising therefrom. The Indemnified Party shall not
      settle or compromise any claim by a third party for which it is entitled to
      indemnification hereunder without the prior written consent of the Indemnifying
      Party, which shall not be unreasonably withheld. If the Indemnifying Party
      is of
      the opinion that the Indemnified Party is not entitled to indemnification,
      or is
      not entitled to indemnification in the amount claimed in such notice, it shall
      deliver, within twenty (20) days after the receipt of such notice, a written
      objection to such claim and written specifications in reasonable detail of
      the
      aspects or details objected to, and the grounds for such objection. If the
      Indemnifying Party shall file timely written notice of objection to any claim
      for indemnification, the validity and amount of such claim shall be determined
      by arbitration pursuant to Section 10.12 hereof. 

     

    9.5 Certain
      Limitations.
      Notwithstanding anything to the contrary in this Agreement, the aggregate amount
      of damages recoverable pursuant to the provisions of this Article 9 by the
      Purchaser shall be limited to $5,000,000 (the “Indemnification
      Cap”).

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    9.6 Tax
      and Insurance.
      All
      indemnification or reimbursement payments required pursuant to this Agreement
      shall be made net of all tax and insurance benefits actually received by the
      Indemnified Party. In the event that any claim for indemnification asserted
      hereunder is, or may be, the subject of any insurance coverage or other right
      to
      indemnification or contribution from any third person, the Indemnified
      Party(ies) expressly agree that he (they) shall promptly notify the applicable
      insurance carrier of any such claim or loss and tender defense thereof to such
      carrier, and shall also promptly notify any potential third party indemnitor
      or
      contributor which may be liable for any portion of such losses or claims. The
      Indemnified Party(ies) agree to pursue, at the cost and expense of the
      Indemnified Party, such claims diligently and to reasonably cooperate, at the
      cost and expense of the Indemnified Party, with each applicable insurance
      carrier and third party indemnitor or contributor.

     

    9.7 Undertakings.
      Prior
      to the assertion of any claims for indemnification under this Agreement, the
      Indemnified Party shall utilize all reasonable efforts, consistent with normal
      practices and policies and good commercial practice, to mitigate any losses
      or
      damages subject to indemnification hereunder.

     

    9.8 Remedies.
      Except
      for fraudulent tort causes of action and except as otherwise specifically
      provided in this Agreement, the sole and exclusive remedy of the Purchaser
      under
      this Agreement shall be restricted to the indemnification rights set forth
      in
      this Article 9.

     

    ARTICLE
      10

     

    MISCELLANEOUS
      PROVISIONS

     

    10.1 Expenses.
      Each of
      the parties hereto shall bear its own costs, fees and expenses in connection
      with the negotiation, preparation, execution, delivery and performance of this
      Agreement and the consummation of the transactions contemplated hereby,
      including without limitation fees, commissions and expenses payable to brokers,
      finders, investment bankers, consultants, exchange or transfer agents,
      attorneys, accountants and other professionals, whether or not the transactions
      contemplated herein is consummated;

     

    10.2 Amendment
      and Modification.
      Subject
      to applicable Law, this Agreement may be amended or modified by the parties
      hereto at any time prior to the Closing with respect to any of the terms
      contained herein; provided, however, that all such amendments and modifications
      must be in writing duly executed by all of the parties hereto.

     

    10.3 Waiver
      of Compliance; Consents.
      Any
      failure of a party to comply with any obligation, covenant, agreement or
      condition herein may be expressly waived in writing by the party entitled hereby
      to such compliance, but such waiver or failure to insist upon strict
      compliance with such obligation, covenant, agreement or condition shall not
      operate as a waiver of, or estoppel with respect to, any subsequent or other
      failure. No single or partial exercise of a right or remedy shall preclude
      any
      other or further exercise thereof or of any other right or remedy hereunder.
      Whenever this Agreement requires or permits the consent by or on behalf of
      a
      party, such consent shall be given in writing in the same manner as for waivers
      of compliance.

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    10.4 No
      Third Party Beneficiaries.
      Nothing
      in this Agreement shall entitle any person or entity (other than a party hereto
      and his, her or its respective successors and assigns permitted hereby) to
      any
      claim, cause of action, remedy or right of any kind.

     

    10.5 Notices.
      All
      notices, requests, demands and other communications required or permitted
      hereunder shall be made in writing and shall be deemed to have been duly given
      and effective:

     

    (a) on
      the
      date of delivery, if delivered personally; 

     

    (b) on
      the
      earlier of the fourth (4th) day after mailing or the date of the return receipt
      acknowledgment, if mailed, postage prepaid, by certified or registered mail,
      return receipt requested;

     

    (c) on
      the
      first business day after having been transmitted to a third party providing
      delivery services in the ordinary course of business which guarantees delivery
      on the next business day after such transmittal (e.g.,
      via
      Federal Express); or

     

    (d) on
      the
      date of transmission, if sent by facsimile, telecopy, telegraph, telex, e-mail
      or other similar telegraphic or electronic communications equipment,
provided
      that
      such
      transmission is confirmed by prompt mailing (postage prepaid, by certified
      or
      registered mail, return receipt requested) or by guaranteed overnight
      delivery:

     

    If
      to the
      Company or the Parent:

    

      
        	 	
                To:

              	
                Shumate
                  Industries, Inc.

              
	 	 	
                12060
                  FM 3083

              
	 	 	
                Conroe,
                  TX 77301

              
	 	 	
                Attn:
                  President

              
	 	 	
                Fax:
                  (936) 539-9396

              
	 	 	 
	 	
                With
                  a copy to:

              	
                Indeglia
                  & Carney

              
	 	 	
                1900
                  Main Street, Suite 125

              
	 	 	
                Irvine,
                  CA 92614

              
	 	 	
                Fax:
                  (949) 851-5940

              
	 	 	 

      

       

    

    or
      to
      such other person or address as the Company or the Parent shall furnish to
      the
      other parties hereto in writing in accordance with this subsection.

     

    If
      to the
      Purchaser:

    

      
        	 	
                To:

              	
                American
                  International Industries

              
	 	 	
                601
                  Cien Street, Suite 235

              
	 	 	
                Kemah,
                  TX 77565

              
	 	 	
                Attn:
                  Daniel Dror, Chief Executive Officer

              
	 	 	
                Fax:
                  (281) 334-9508

              
	 	 	 
	 	
                With
                  a copy to:

              	
                Park
                  Avenue Group, Inc.

              
	 	 	
                90
                  John Street

              
	 	 	
                Suite
                  626

              
	 	 	
                New
                  York NY 10038

              
	 	 	
                Attn:
                  Rich Rubin

              
	 	 	
                Fax:
                  (646) 202-9681

              

      

       

    

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

     

    or
      to
      such other person or address as the Purchaser shall furnish to the other parties
      hereto in writing in accordance with this subsection.

     

    10.6 Assignment.
      This
      Agreement and all of the provisions hereof shall be binding upon and inure
      to
      the benefit of the parties hereto and their respective successors and permitted
      assigns, but neither this Agreement nor any of the rights, interests or
      obligations hereunder shall be assigned (whether voluntarily, involuntarily,
      by
      operation of law or otherwise) by any of the parties hereto without the prior
      written consent of the other parties, provided
      that
      the
      Company may assign this Agreement, and any of its rights and/or obligations
      arising hereunder, in whole or in part, and from time to time, in connection
      with any dissolution and/or winding up of its business and affairs after the
      Closing and provided further,
      that
      Purchaser may assign its rights and delegate any of its obligations under this
      Agreement to any Subsidiary of Purchaser; provided that no such assignment
      shall
      relieve Purchaser or delegation shall relieve Purchaser from any of its
      obligations hereunder.

     

    10.7 Governing
      Law.
      This
      Agreement and the legal relations among the parties hereto shall be governed
      by
      and construed in accordance with the internal substantive laws of the State
      of
      Texas (without regard to the laws of conflict that might otherwise apply) as
      to
      all matters, including without limitation matters of validity, construction,
      effect, performance and remedies.

     

    10.8 Counterparts.
      This
      Agreement may be executed simultaneously in one or more counterparts, each
      of
      which shall be deemed an original, but all of which together shall constitute
      one and the same instrument.

     

    10.9 Headings.
      The
      table of contents and the headings of the sections and subsections of this
      Agreement are inserted for convenience only and shall not constitute a part
      hereof.

     

    10.10 Entire
      Agreement.
      This
      Agreement, the Disclosure Schedule and the exhibits and other writings expressly
      set forth or incorporated in this Agreement or in the Disclosure Schedule are
      part of this Agreement, and together they embody the entire agreement and
      understanding of the parties hereto in respect of the transactions contemplated
      by this Agreement and together they are referred to as “this Agreement” or the
“Agreement.” There
      are
      no restrictions, promises, warranties, agreements, covenants or undertakings,
      other than those expressly set forth or referred to in this Agreement. Without
      limiting the generality of the foregoing, this Agreement supersedes all prior
      agreements and understandings between the parties with respect to the
      transaction or transactions contemplated by this Agreement. Provisions of this
      Agreement shall be interpreted to be valid and enforceable under applicable
      Law
      to the extent that such interpretation does not materially alter this Agreement;
      provided,
      however,
      that if
      any such provision shall become invalid or unenforceable under applicable Law
      such provision shall be stricken to the extent necessary and the remainder
      of
      such provisions and the remainder of this Agreement shall continue in full
      force
      and effect.

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    10.11 Injunctive
      Relief.
      It is
      expressly agreed among the parties hereto that monetary damages would be
      inadequate to compensate a party hereto for any breach by any other party of
      its
      covenants and agreements in Section 4.3 hereof. Accordingly, the parties agree
      and acknowledge that any such violation or threatened violation will cause
      irreparable injury to the other and that, in addition to any other remedies
      which may be available, such party shall be entitled to injunctive relief
      against the threatened breach of Section 4.3 hereof or the continuation of
      any
      such breach without the necessity or proving actual damages and may seek to
      specifically enforce the terms thereof.

     

    10.12 Arbitration.
      With
      the sole exception of the injunctive relief contemplated by Section 10.11,
      any controversy or claim arising out of or relating to this Agreement, including
      any exhibits thereto or the making, performance or interpretation thereof,
      including without limitation alleged fraudulent inducement thereof, shall be
      settled finally, completely and conclusively by binding arbitration in Houston,
      Harris County, Texas by a panel of three arbitrators in accordance with the
      Commercial Arbitration Rules of the American Arbitration Association.
In
      the
      arbitration proceeding, the Parent shall select one arbitrator, the Purchaser
      shall select one arbitrator and the two arbitrators so selected shall select
      a
      third arbitrator. Should one party fail to select an arbitrator within ten
      (10)
      business days after notice of the appointed of an arbitrator by the other party
      or should the two arbitrators selected by the Parent and the Purchaser fail
      to
      select an arbitrator within ten (10) business days after the date of the
      appointment of the last of such two arbitrators, any person sitting as a Judge
      of the United States District Court of the Southern District of Texas, Houston
      Division, upon application of the Parent or the Purchaser, shall appoint an
      arbitrator to fill such space with the same force and effect as though such
      arbitrator had been appointed in accordance with the immediately preceding
      sentence of this Section 10.12. Arbitration shall be initiated by written demand
      by the party seeking arbitration. This agreement to arbitrate shall be
      specifically enforceable only in the District Court of Harris County, Texas.
      A
      decision of the arbitrator shall be final, conclusive, and binding on all
      parties, and judgment may be entered thereon in the District Court of Harris
      County, Texas, to enforce such decision and the benefits thereof. 

     

    10.13 Certain
      Definitions.
      For
      purposes of this Agreement, 

     

    “Benefit
      Arrangement”
means
      an employment, severance or similar contract, arrangement or policy and each
      plan or arrangement providing for severance pay, life insurance or health care
      coverage (including any self-insured arrangements), flexible spending accounts
      or cafeteria benefit programs under Code Section 125, workers' compensation,
      disability benefits, dependent care benefits, supplemental unemployment
      benefits, vacation benefits, pension or retirement benefits or providing for
      deferred compensation, profit-sharing, cash or stock bonuses, stock options,
      stock appreciation rights, stock purchase or other forms of incentive
      compensation or post-retirement life insurance, health care or disability
      coverage that (i) is not an Employee Plan, (ii) is maintained or contributed
      to
      by the Company or any of their ERISA Affiliates and (iii) covers any
      Employee.

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    “Closing
      Balance Sheet”
shall
      mean the balance sheet of the Company as of the Closing Date prepared in
      accordance with GAAP on a basis consistent with the Latest Balance
      Sheet.

     

    
      	 	
              “Company
                Delivered Documents”
                shall mean all of the agreements, certificates, instruments and other
                documents to be delivered by the Company or the Parent pursuant to
                or in
                connection with this Agreement.

            

    

     

    “Employee
      Plan”
means
      each "employee benefit plan," as such term is defined in Section 3(3) of ERISA,
      that (i) is subject to any provision of ERISA; (ii) is maintained or contributed
      to by Purchaser or any of its ERISA Affiliates with respect to the employees
      of
      the Company; and (iii) covers any employee of the Company.

     

    “Knowledge”
      “to
      the
      knowledge”,
      “known”
or
      “awareness”
and
      words of similar import shall mean the actual knowledge of a person and, when
      used with respect to the Company, shall mean the actual knowledge of Larry
      Shumate.

     

    
      	 	
              “Legal
                Expenses”
                of a person shall mean any and all fees, costs and expenses of any
                kind
                reasonably incurred by such person and its counsel in investigating,
                preparing for, defending against or providing evidence, producing
                documents or taking other action with respect to, any threatened
                or
                asserted claim.

            

    

     

    “Material
      Adverse Effect”
shall
      mean an event, change or occurrence which has a material negative impact on
      the
      condition (financial or otherwise), businesses, results of operations or
      prospects of the Company or the Purchaser, as the case may be (and going concern
      value, in the case of the Company), or the ability of the Company, or the
      Purchaser as the case may be, to consummate the transactions contemplated
      hereby, other than any such event, change or occurrence resulting or arising
      from general economic conditions.

     

    “Permitted
      Liens”
shall
      mean: (i) liens securing specified liabilities or obligations shown on the
      Latest Balance Sheet with respect to which no breach, violation or default
      exists; (ii) mechanics’, carriers’, workers’ and other similar liens
      arising in the ordinary course of business; (iii) minor imperfections of
      title which do not impair the existing use of the Assets; and (iv) liens
      for current taxes not yet due and payable or being contested in good faith
      by
      appropriate proceedings.

     

    ”Person”
means
      an individual, partnership, corporation, business trust, limited liability
      company, limited liability partnership, joint stock company, trust,
      unincorporated association, joint venture or other entity or governmental
      body.

     

    “Purchaser
      Delivered Documents”
shall
      mean all of the agreements, certificates, instruments and other documents to
      be
      delivered by the Purchaser pursuant to or in connection with this
      Agreement.

     

    “Subsidiary”
shall
      mean, with respect to any Person (the “Owner”),
      any
      corporation or other Person of which securities or other interests having the
      power to elect a majority of that corporation’s or other Person’s board of
      directors or similar governing body, or otherwise having the power to direct
      the
      business and policies of that corporation or other Person (other than securities
      or other interests having such power only upon the happening of a contingency
      that has not occurred), are held by the Owner or one or more of its
      Subsidiaries. 

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
      executed as of the day and year first above written.

     

    “PURCHASER”

    

    AMERICAN
      INTERNATIONAL INDUSTRIES, INC.

    

    By:___________________________

    Name:

    Title:

    

    “COMPANY”

    

    SHUMATE
      MACHINE WORKS, INC.

    

    By:___________________________

    Name:

    Title:

    

    “PARENT”

    

    SHUMATE
      INDUSTRIES, INC.

    

    By:___________________________

    Name:

    Title:

     

    
      
         

      

      
        29Unassociated Document

    EXHIBIT
      4.1

    

    [FACE
      OF
      CERTIFICATE - SMG INDIUM RESOURCES LTD.]

    

    UNITS
      

    

    ITD.U
      

     

    SEE
      REVERSE FOR CERTAIN DEFINITIONS 

    

    CUSIP
      78454K 201

    

    

    SMG
      INDIUM RESOURCES LTD.

    

    UNITS
      CONSISTING OF ONE SHARE OF COMMON STOCK AND ONE WARRANT EACH TO PURCHASE ONE
      SHARE OF COMMON STOCK

    

    This
      Certifies that 

    

     

    is
      the
      owner of

    

    Units.

    

    Each
      Unit
      (“Unit”) consists of one (1) share of common stock, par value $.001 per share
      (“Common Stock”), of SMG INDIUM RESOURCES LTD., a Delaware corporation (the
“Company”), and one warrant (the “Warrant”). Each Warrant entitles the holder to
      purchase one (1) share of Common Stock for $6.00 per share (subject to
      adjustment). Each Warrant will become exercisable on [ ], 2008 [THE DATE OF
      THE
      FINAL PROSPECTUS RELATING TO THE COMPANY’S INITIAL PUBLIC OFFERING], and will
      expire unless exercised before 5:00 p.m., New York City Time, on [----], 2011
      [THREE YEARS FROM THE DATE OF THE FINAL PROSPECTUS RELATING THE COMPANY’S
      INITIAL PUBLIC OFFERING]. 

    

    The
      Common Stock and Warrant comprising the Units represented by this certificate,
      unless the Underwriters inform the Company of an earlier date, are not
      separately transferable prior to [ ], 2008 [NINETY DAYS FROM THE DATE OF THE
      FINAL PROSPECTUS RELATING THE COMPANY’S INITIAL PUBLIC OFFERING], provided,
      however, in no event will the Common Stock and Warrants begin to trade
      separately until the business day following the earlier to occur of the
      expiration of the underwriters’ over-allotment or its exercise in
      full.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
The
      terms
      of the Warrants are governed by a Warrant Agreement, dated as of [ ], 2008,
      between the Company and Continental Stock Transfer & Trust Company, as
      Warrant Agent, and are subject to the terms and provisions contained therein,
      all of which terms and provisions the holder of this certificate consents to
      by
      acceptance hereof. Copies of the Warrant Agreement are on file at the office
      of
      the Warrant Agent at 17
      Battery Place, New York, New York 10004,
      and are
      available to any Warrant holder on written request and without cost.

    

    This
      certificate is not valid unless countersigned by the Transfer Agent and
      Registrar of the Company.

     

    Witness
      the facsimile seal of the Company and the facsimile signature of its duly
      authorized officers. 

    

    [SMG
      INDIUM RESOURCES LTD.]

    

    

    COUNTERSIGNED
      AND REGISTERED: 

    CONTINENTAL
      STOCK TRANSFER & TRUST COMPANY 

    TRANSFER
      AGENT AND REGISTRAR 

    BY:
      

    AUTHORIZED
      OFFICER 

    

    

    By
      

    

    

    (SIGNATURE)

    CHIEF
      EXECUTIVE OFFICER 

    

    

    (SEAL)

    

    (SIGNATURE)

    SECRETARY
      

    

    

    

    

    [REVERSE
      OF CERTIFICATE]

    

    SMG
      INDIUM RESOURCES LTD.

    

    The
      Company will furnish without charge to each stockholder who so requests, a
      statement of the powers, designations, preferences and relative, participating,
      optional or other special rights of each class of stock or series thereof of
      the
      Company and the qualifications, limitations, or restrictions of such preferences
      and/or rights. This certificate and the units represented hereby are issued
      and
      shall be held subject to the terms and conditions applicable to the securities
      underlying and comprising the units, including, as applicable, the Certificate
      of Incorporation and all amendments thereto, the Warrant Agreement and
      resolutions of the Board of Directors providing for the issue of Securities
      (copies of which may be obtained from the secretary of the corporation), to
      all
      of which the holder of this certificate by acceptance hereof
      assets.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    The
      following abbreviations, when used in the inscription on the face of this
      certificate, shall be construed as though they were written out in full
      according to applicable laws or regulations:

     

    TEN
      COM -
      as tenants in common  

    TEN
      ENT -
      as tenants by the entireties  

    JT
      TEN -
      as joint tenants with right of survivorship and not as tenants in
      common

    

    UNIF
      GIFT
      MIN ACT- ______________Custodian________________

    (Cust)
        
 (Minor)

    under
      Uniform Gifts to Minors Act ________________________ 

                                                                                    
      (State)
      

    

    Additional
      abbreviations may also be used though not in the above list.

     

    For
      value
      received ___________________________ , hereby sell(s), assign(s) and transfer(s)
      unto

     

    PLEASE
      INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE 

    ___________________________________________________________________________________________________________________

    (PLEASE
      PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

    ___________________________________________________________________________________________________________________

    ___________________________________________________________________________________________________________________
Units
      represented by the within Certificate, and do hereby irrevocably constitute
      and
      appoint

    ___________________________________________________________________________________________________________________

    Attorney
      to transfer the said Units on the books of the within named Company with full
      power of substitution in the premises.

     

    Dated:
      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Notice: The
      signature to this assignment must correspond with the name as written upon
      the
      face of the certificate in every particular, without alteration or enlargement
      or any change whatever.

     

    Signature(s)
      Guaranteed: 

    

    By
      ___________________

    THE
      SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
      STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
      IN
      AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE
      17Ad-15).

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