Document:

SECURED
      CONVERTIBLE PROMISSORY NOTE

    

    U.S.
      $2,500,000.00

    

    FOR
      VALUE
      RECEIVED, Shumate Industries, Inc. (formerly Excalibur Industries, Inc.), a
      Delaware corporation (the “Maker”),
      hereby promises to pay to the order of Stillwater National Bank & Trust
      Company, a national banking association, or its successors and assigns (the
      “Payee”),
      at
      its address at 1500 South Utica Avenue, Tulsa, Oklahoma 74104, or to such other
      address as Payee shall provide in writing to the Maker for such purpose, a
      principal sum of Two Million Five Hundred Thousand Dollars (U.S. $2,500,000.00).
      The aggregate principal amount outstanding under this Note will be conclusively
      evidenced by the schedule annexed as Exhibit B hereto (the “Loan
      Schedule”).
      The
      entire principal amount hereunder shall be due and payable in full on October
      19, 2010 (the “Maturity
      Date”),
      or on
      such earlier date as such principal amount may earlier become due and payable
      pursuant to the terms hereof.

    

    1. Interest
      Rate.
      Interest shall accrue on the unpaid principal amount of this Secured Convertible
      Promissory Note (this “Note”)
      at the
      rate of Wall Street Journal Prime Rate (WSJPR) plus two percent (2%) per annum,
      adjusted to date of change from the date of the first making of the loan for
      such principal amount until such unpaid principal amount is paid in full or
      earlier converted into shares (the “Shares”)
      of the
      Maker’s common stock, $0.001 par value (the “Common
      Stock”),
      in
      accordance with the terms hereof. Interest hereunder shall accrue until the
      earlier of (a) October 19, 2007, or (b) the entire principal amount under this
      Note and all accrued and unpaid interest thereon is converted in accordance
      with
      the terms hereof, at which time the accrued interest will be capitalized into
      principal. Beginning on January 19, 2008, interest hereunder shall be paid
      quarterly or on such earlier date as the principal amount under this Note
      becomes due and payable or is converted in accordance with the terms hereof.
      Interest shall be computed on the basis of a 360-day year for the actual number
      of days elapsed.

    

    2. Conversion
      of Principal and Interest.
      Subject
      to the terms and conditions hereof, the Payee, at its sole option, may deliver
      to the Maker a notice in the form attached hereto as Exhibit A (a “Conversion
      Notice”)
      and an
      updated Loan Schedule, at any time and from time to time after the date hereof
      and prior to the payment of the principal amount and all accrued interest
      thereon (the date of the delivery of a Conversion Notice shall be referred
      to
      herein as a “Conversion
      Date”),
      to
      convert all or any portion of the outstanding principal amount of this Note
      plus
      accrued and unpaid interest thereon, for a number of Shares equal to the
      quotient obtained by dividing the dollar amount of such outstanding principal
      amount of this Note plus the accrued and unpaid interest thereon being converted
      by the Conversion Price (as defined in Section 17). Conversions hereunder shall
      have the effect of lowering the outstanding principal amount of this Note plus
      all accrued and unpaid interest thereunder in an amount equal to the applicable
      conversion, which shall be evidenced by entries set forth in the Conversion
      Notice and the Loan Schedule.

    

    3. [Intentionally
      Omitted.]

    

    
      
        
        

      

      
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    4. Deliveries.
      

    

    (a) Not
      later
      than five (5) Trading Days (as defined in Section 17) after any Conversion
      Date,
      the Maker will deliver to the Payee (i) a certificate or certificates
      representing the number of Shares being acquired upon the conversion of the
      principal amount of this Note and any interest accrued thereunder being
      converted pursuant to the Conversion Notice, and (ii) an endorsement by the
      Maker of the Loan Schedule acknowledging the remaining outstanding principal
      amount of this Note plus all accrued and unpaid interest thereon not converted
      (an “Endorsement”).
      The
      Maker’s delivery to the Payee of stock certificates in accordance clause (i)
      above shall be Maker’s conclusive endorsement of the remaining outstanding
      principal amount of this Note plus all accrued and unpaid interest thereon
      not
      converted as set forth in the Loan Schedule. 

    

    5. Certain
      Adjustments.

    

    (a) If
      the
      Maker, at any time while any portion of the principal amount due under this
      Note
      is outstanding, (a) shall pay a stock dividend or otherwise make a distribution
      or distributions on shares of its Common Stock or any other equity or equity
      equivalent securities payable in shares of Common Stock, (b) subdivide
      outstanding shares of Common Stock into a larger number of shares, (c) combine
      (including by way of reverse stock split) outstanding shares of Common Stock
      into a smaller number of shares, or (d) issue by reclassification of shares
      of
      the Common Stock any shares of capital stock of the Maker, then the Conversion
      Price (as defined in Section 17) shall be multiplied by a fraction of which
      the
      numerator shall be the number of shares of Common Stock (excluding treasury
      shares, if any) outstanding before such event and of which the denominator
      shall
      be the number of shares of Common Stock outstanding after such event. Any
      adjustment made pursuant to this Section shall become effective immediately
      after the record date for the determination of stockholders entitled to receive
      such dividend or distribution and shall become effective immediately after
      the
      effective date in the case of a subdivision, combination or
      re-classification.

    

    (b) In
      case
      of any reclassification of the Common Stock or any compulsory share exchange
      pursuant to which the Common Stock is converted into other securities, cash
      or
      property, the Payee shall have the right thereafter to convert the then
      outstanding principal amount, together with all accrued but unpaid interest
      and
      any other amounts then owing under this Note only into the shares of stock
      and
      other securities, cash and property receivable upon or deemed to be held by
      holders of the Common Stock following such reclassification or share exchange,
      and the Payee shall be entitled upon such event to receive such amount of
      securities, cash or property as the shares of the Common Stock of the Maker
      into
      which the then outstanding principal amount, together with all accrued but
      unpaid interest and any other amounts then owing hereunder in respect of this
      Note could have been converted immediately prior to such reclassification or
      share exchange would have been entitled. This provision shall similarly apply
      to
      successive reclassifications or share exchanges.

    

    (c) No
      adjustments in the Conversion Price shall be required if such adjustment is
      less
      than $0.01, provided that any adjustments which by reason of this Section are
      not required to be made shall be carried forward and taken into account in
      any
      subsequent adjustment. All calculations under this Section 5 shall be made
      to
      the nearest cent or to the nearest 1/100th
      of a
      share, as the case may be.

    

    
      
        
        

      

      
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    (d) Whenever
      the Conversion Price is adjusted pursuant to Section 5(b), the Maker shall
      promptly mail to the Payee a notice setting forth the Conversion Price after
      such adjustment and setting forth a brief statement of the facts requiting
      such
      adjustment.

    

    (e) If
      (A)
      the Maker shall declare a dividend (or any other distribution) on the Common
      Stock; (B) the Maker shall declare a special nonrecurring cash dividend on
      or a
      redemption of the Common Stock; (C) the Maker shall authorize the granting
      to
      all holders of the Common Stock rights or warrants to subscribe for or purchase
      any shares of capital stock of any class or of any rights; (D) the approval
      of
      any stockholders of the Maker shall be required in connection with any
      reclassification of the Common Stock, any consolidation or merger to which
      the
      Maker is a party, any sale or transfer of all or substantially all of the assets
      of the Maker, of any compulsory share exchange whereby the Common Stock is
      convened into other securities, cash or property; (E) the Maker shall authorize
      the voluntary or involuntary dissolution, liquidation or winding up of the
      affairs of the Maker; then, in each case, the Maker shall cause to be filed
      at
      each office or agency maintained for the purpose of conversion of the any
      portion of the principal amount and interest outstanding under this Note, and
      shall cause to be mailed to the Payee at its last address as it shall appear
      upon the stock books of the Maker, at least 5 calendar days prior to the
      applicable record or effective date hereinafter specified, a notice stating
      (x)
      the date on which a record is to be taken for the purpose of such dividend,
      distribution, redemption, rights or warrants, or if a record is not to be taken,
      the date as of which the holders of the Common Stock of record to be entitled
      to
      such dividend, distributions, redemption, rights or warrants are to be
      determined or (y) the date on which such reclassification, consolidation,
      merger, sale, transfer or share exchange is expected to become effective or
      close, and the date as of which it is expected that holders of the Common Stock
      of record shall be entitled to exchange their shares of the Common Stock for
      securities, cash or other property deliverable upon such reclassification,
      consolidation, merger, sale, transfer or share exchange; provided, however,
      that
      the failure to mail such notice or any defect therein or in the mailing thereof
      shall not affect the validity of the corporate action required to be specified
      in such notice.

    

    (f) In
      case
      of any (1) merger or consolidation of the Maker with or into another Person
      that
      would constitute a Change of Control Transaction (as defined in Section 17),
      or
      (2) sale, directly or indirectly, by the Maker of more than one-half of the
      assets of the Maker (on an as valued basis) in one or a series of related
      transactions, or (3) tender or other offer or exchange (whether by the Maker
      or
      another Person) pursuant to which holders of Common Stock are permitted to
      tender or exchange their shares for other securities, stock, cash or property
      of
      the Maker or another Person, then the Payee shall have the right to (A) convert
      the then aggregate amount of principal and interest outstanding under this
      Note
      into the shares of stock and other securities, cash, and property receivable
      upon or deemed to be held by holders of Common Stock following such merger,
      consolidation or sale, and the Payee shall be entitled upon such event or series
      of related events to receive such amount of securities, cash and property as
      the
      shares of Common Stock into which such aggregate amount of principal and
      interest outstanding under this Note could have been convened immediately prior
      to such merger, consolidation or sale would have been entitled, (B) in the
      case
      of a merger or consolidation, (x) require the surviving entity to issue shares
      of convertible debt with aggregate principal amount equal to the then aggregate
      amount of principal outstanding under this Note, plus all accrued and unpaid
      interest and other amounts owing thereon, which convertible debt shall have
      terms identical (including with respect to conversion) to the terms of this
      Note
      and shall be entitled to all of the rights and privileges of the Payee as set
      forth herein and the agreements pursuant to which this Note was issued
      (including, without limitation, as such rights relate to the acquisition,
      transferability, registration and listing of such shares of stock other
      securities issuable upon conversion thereof), and (y) simultaneously with the
      issuance of such convertible debt, shall have the right to convert such debt
      only into shares of stock and other securities, cash and property receivable
      upon or deemed to be held by holders of Common Stock following such merger
      or
      consolidation, or (C) in the event of an exchange or tender offer or other
      transaction contemplated by clause (3) of this Section, tender or exchange
      the
      then outstanding aggregate amount of principal and interest under this Note
      for
      such securities, stock, cash and other property receivable upon or deemed to
      be
      held by holders of Common Stock that have tendered or exchanged their shares
      of
      Common Stock following such tender or exchange, and the Payee shall be entitled
      upon such exchange or tender to receive such amount of securities, cash and
      property as the shares of Common Stock into which the then outstanding aggregate
      amount of principal and interest under this Note could have been converted
      (taking into account all then accrued and unpaid dividends) immediately prior
      to
      such tender or exchange would have been entitled as would have been issued.
      In
      the case of clause (C), the conversion price applicable for the newly issued
      shares of convertible preferred stock or convertible debentures shall be based
      upon the amount of securities, cash and property that each share of Common
      Stock
      would receive in such transaction and the Conversion Price in effect immediately
      prior to the effectiveness or closing date for such transaction. The terms
      of
      any such merger, sale, consolidation, tender or exchange shall include such
      terms so as to continue to give the Payee the right to receive the securities,
      cash and property set forth in this Section upon any conversion or redemption
      following such event. This provision shall similarly apply to successive such
      events.

    

    
      
        
        

      

      
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    (g) The
      Maker
      covenants that it will at all times reserve and keep available out of its
      authorized and unissued shares of Common Stock solely for the purpose of
      issuance upon conversion of the outstanding aggregate amount of principal and
      interest under this Note as herein provided, free from preemptive rights or
      any
      other actual or contingent purchase rights of persons other than the Payee,
      not
      less than such number of shares of the Common Stock as shall be issuable (taking
      into account the adjustments and restrictions of Section 5) upon the conversion
      of the outstanding amount of principal and interest under this Note. The Maker
      covenants that all shares of Common Stock that shall be so issuable shall,
      upon
      issuance, be duly authorized, validly issued and fully paid, nonassessable
      and,
      if a Registration Statement (as defined in Section 8) has been declared
      effective under the Securities Act, registered for public sale in accordance
      with such Registration Statement.

    

    (h) Upon
      a
      conversion hereunder, the Maker shall not be required to issue stock
      certificates representing fractions of shares of the Common Stock, but may,
      if
      otherwise permitted, make a cash payment in respect of any final fraction of
      a
      share based on the Per Share Market Value at such time. If the Maker elects
      not,
      or is unable, to make such a cash payment, the Payee shall be entitled to
      receive, in lieu of the final fraction of a share, one whole share of Common
      Stock.

    

    (i) The
      issuance of certificates for shares of the Common Stock on conversion of the
      principal amount and interest outstanding under this Note shall be made without
      charge to the Payee for any documentary stamp or similar taxes that may be
      payable in respect of the issue or delivery of such certificate.

     

    
      
        
        

      

      
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    6. Mandatory
      Prepayment Upon Triggering Events.
      Upon
      the occurrence of a Triggering Event (as defined below), the Payee shall have
      the right (in addition to all other rights it may have hereunder or under
      applicable law), exercisable at the sole option of the Payee, to require the
      Maker to prepay all or a portion of the outstanding principal amount of this
      Note plus all accrued and unpaid interest thereon. Such prepayment shall be
      due
      and payable within thirty (30) Trading Days of the date on which the notice
      for
      the payment therefor is provided by the Payee. 

    

    A
      “Triggering Event” means any one or more of the following events (whatever the
      reason and whether it shall be voluntary or involuntary, or effected by
      operation of law or pursuant to any judgment, decree or order of any court.
      or
      any order, rule or regulation of any administrative or governmental
      body):

    

    (i) any
      default in the payment of the principal of interest on or other payments owing
      in respect of this Note, free of any claim of subordination, as and when the
      same shall become due and payable (whether on a Conversion Date, the Maturity
      Date, by acceleration or otherwise);

    

    (ii) the
      Maker
      shall fail for any reason to deliver certificates or an Endorsement to the
      Payee
      prior to the sixtieth (60th)
      day
      after a Conversion Date pursuant to and in accordance with Section
      4(a);

    

    (iii) the
      Maker
      shall be a party to any Change of Control Transaction or shall agree to sell
      or
      dispose of all or in excess of 33% of its assets in one or more transactions
      (whether or not such sale would constitute a Change of Control Transaction),
      or
      shall redeem or repurchase more than a de minimis number of shares of Common
      Stock or other equity securities of the Maker (other than redemptions of
      Shares); or

    

    (iv) the
      Maker
      or Shumate Machine Works, Inc., a Texas corporation (“Machine”)
      shall
      commence or there shall be commenced against the Maker or Machine a case under
      any applicable bankruptcy or insolvency laws as now or hereafter in effect
      or
      any successor thereto, or the Maker commences any other proceeding under any
      reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
      insolvency or liquidation or similar law of any jurisdiction whether now or
      hereafter in effect relating to the Maker or Machine or there is commenced
      against the Maker or Machine any such bankruptcy, insolvency or other proceeding
      which remains undismissed for a period of 60 days; or the Maker or Machine
      is
      adjudicated insolvent or bankrupt; or any order of relief or other order
      approving any such case or proceeding is entered; or the Maker or Machine
      suffers any appointment of any custodian or the like for it or any substantial
      part of its property which continues undischarged or unstayed for a period
      of 60
      days; or the Maker or Machine shall by any act or failure to act indicate its
      consent to, approval of or acquiescence in any of the foregoing; or any
      corporate or other action is taken by the Maker or Machine for the purpose
      of
      effecting any of the foregoing.

    

    7. Secured
      Obligation.
      The
      obligations under this Note are secured pursuant to the Security Agreement
      (as
      defined in Section 17).

     

    
      
        
        

      

      
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    8. Registration.

     

    (a) Definitions.
      As used
      in this Section 8, the following terms shall have the following
      meanings:

     

    (i) Exchange
      Act:
      The
      Securities Exchange Act of 1934, as amended, and the rules and regulations
      of
      the SEC promulgated thereunder.

    

    (ii) Losses:
      See
      Section 8(f) hereof.

    

    (iii) Prospectus:
      The
      prospectus included in any Registration Statement (including, without
      limitation, a prospectus that discloses information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Securities Act Rule 430A), as amended or supplemented by any prospectus
      supplement, with respect to the terms of the offering of any portion of the
      Registrable Securities covered by such Registration Statement and all other
      amendments and supplements to the prospectus, including post-effective
      amendments, and all material incorporated by reference or deemed to be
      incorporated by reference in such prospectus.

    

    (iv) Registration
      Expenses:
      All
      reasonable expenses incurred by the Maker in complying with Sections 8(c) and
      8(d) hereof, including, without limitation, all registration and filing fees,
      printing expenses, fees and disbursements of counsel for the Maker, accountants’
expenses (including, without limitation, any special audits or “comfort” letters
      incidental to or required by any such registration), any fees or disbursements
      of underwriters customarily paid by issuers or sellers of securities (but
      excluding underwriting discounts and commissions) and blue sky fees and expenses
      in all states reasonably designated by the holders of Registrable
      Securities.

    

    (v) Registrable
      Securities:
      The
      Shares and any Common Stock issued or issuable in respect of the Shares pursuant
      to any stock split, stock dividend, recapitalization, or similar
      event.

    

    (vi) Registration
      Statement:
      Any
      registration statement of the Maker which covers any of the Registrable
      Securities pursuant to the provisions of this Agreement, including the
      Prospectus, amendments and supplements to such registration statement, including
      post-effective amendments, all exhibits and all material incorporated by
      reference or deemed to be incorporated by reference in such registration
      statement.

    

    (vii) Rule
      144:
      Rule 144
      under the Securities Act, as such Rule may be amended from time to time, or
      any
      similar rule or regulation hereafter adopted by the SEC (excluding Rule
      144A).

    

    (viii) SEC:
      The
      Securities and Exchange Commission.

    

    (ix) Securities
      Act:
      The
      Securities Act of 1933, as amended, and the rules and regulations promulgated
      by
      the SEC thereunder.

     

    
      
        
        

      

      
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    (x) Underwritten
      registration or underwritten offering:
      A
      registration in which securities of the Maker are sold to an underwriter for
      reoffering to the public.

     

    (b) Securities
      Subject to the Registration Rights.
      The
      securities entitled to the benefits of the Registration Rights set forth in
      this
      Section 8 are the Registrable Securities.

    (c) Registration
      Rights.
      If, at
      any time after October 19, 2005 and expiring October 19, 2010, the Maker
      proposes to register any of its securities under the Securities Act (except
      for
      registrations on Forms S-8 or S-4 or their equivalent), it will give written
      notice by registered mail, at least thirty (30) days prior to the filing of
      each
      such Registration Statement, to the Holder of its intention to do so. If Holder
      notifies the Maker within twenty (20) days after receipt of any such notice
      of
      its desire to include any Registrable Securities in such proposed Registration
      Statement, the Maker shall afford Holder the opportunity to have any such
      Registrable Securities registered under such Registration Statement. These
      rights may be exercised at any time on an unlimited number of occasions prior
      to
      October 19, 2007, subject to the terms and conditions set forth in this Section
      8.

     

    (d) Holdback
      and Lock-Up Agreements.

    

    (i) Restrictions
      on Public Sale by Holders of Registrable Securities.
      Each
      holder of Registrable Securities whose Registrable Securities are covered by
      a
      Registration Statement filed pursuant to Section 8(c) hereof agrees, if
      requested by the managing underwriters in an underwritten offering (to the
      extent timely notified in writing by the Maker or the managing underwriters),
      not to effect any public sale or distribution of securities of the Maker of
      any
      class included in such Registration Statement, including a sale pursuant to
      Rule 144 (except as part of such underwritten offering), during the 10-day
      period prior to, and the 180-day period beginning on, the effective date of
      any
      underwritten offering made pursuant to such Registration Statement.

    

    (ii) The
      foregoing provisions shall not apply to any holder of Registrable Securities
      if
      such holder is prevented by applicable statute or regulation from entering
      into
      any such agreement; provided, however, that any such holder shall undertake
      in
      its request to participate in any such underwritten offering not to effect
      any
      public sale or distribution of the class of Registrable Securities covered
      by
      such Registration Statement (except as part of such underwritten offering)
      during such period unless it has provided five (5) business days prior written
      notice of such sale or distribution to the managing underwriters.

     

    (e) Expenses
      and Procedures.

    

    (i) Expenses
      of Registration.
      All
      Registration Expenses (exclusive of underwriting discounts and commissions)
      shall be borne by the Maker. Each holder of Registrable Securities shall bear
      all underwriting discounts, selling commissions, sales concessions and similar
      expenses applicable to the sale of the Registrable Securities sold by such
      holder.

    

    (ii) Registration
      Procedures.
      The
      Maker will keep the holders of Registrable Securities advised as to the
      initiation of registration, qualification and compliance and as to the
      completion thereof. At its expense, the Maker will furnish such number of
      Prospectuses and other documents incident thereto as the holders or underwriters
      from time to time may reasonably request.

     

    
      
        
        

      

      
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    (iii) Information.
      The
      Maker may require each seller of Registrable Securities as to which any
      registration is being effected to furnish such information regarding the
      distribution of such Registrable Securities as the Maker may from time to time
      reasonably request and the Maker may exclude from such registration the
      Registrable Securities of any seller who unreasonably fails to furnish such
      information after receiving such request.

    

    (iv) Delay
      or Suspension.
      Notwithstanding anything herein to the contrary, the Maker may, at any time,
      suspend the effectiveness of any Registration Statement for a period of up
      to 60
      consecutive days or 90 days in the aggregate in any calendar year, as
      appropriate (a “Suspension
      Period”),
      by
      giving notice to each holder of Registrable Securities to be included in the
      Registration Statement, if the Maker shall have determined, after consultation
      with its counsel, that the Maker is required to disclose any material corporate
      development which the Maker determines could reasonably be expected to have
      a
      material effect on the Maker. Each holder of Registrable Securities agrees
      by
      acquisition of such Registrable Securities that, upon receipt of any notice
      from
      the Maker of a Suspension Period, such holder shall forthwith discontinue
      disposition of such Registrable Securities covered by such Registration
      Statement or Prospectus until such holder (i) is advised in writing by the
      Maker that the use of the applicable Prospectus may be resumed, (ii) has
      received copies of a supplemental or amended prospectus, if applicable, and
      (iii) has received copies of any additional or supplemental filings which
      are incorporated or deemed to be incorporated by reference in such Prospectus.
      The Maker shall prepare, file and furnish to each holder of Registrable
      Securities immediately upon the expiration of any Suspension Period, appropriate
      supplements or amendments, if applicable, to the Prospectus and appropriate
      documents, if applicable, incorporated by reference in the Registration
      Statement. The Maker agrees to use its best efforts to cause any Suspension
      Period to be terminated as promptly as possible.

    

    (v) Blue
      Sky.
      The
      Maker will, as expeditiously as possible, use its best efforts to register
      or
      qualify the Registrable Securities covered by a Registration Statement under
      the
      securities or blue sky laws of such jurisdictions as the Maker deems appropriate
      or, in the case of an underwritten public offering, the managing underwriter
      shall reasonably request, provided that the Maker shall not be required in
      connection therewith or as a condition thereto to qualify to do business in
      any
      jurisdiction where it is not so qualified or to take any action which would
      subject it to taxation or service of process in any jurisdiction where it is
      not
      otherwise subject to such taxation or service of process.

    

    (vi) Notification
      of Material Events.
      The
      Maker will, as expeditiously as possible, immediately notify each holder of
      Registrable Securities under a Registration Statement, at any time when a
      prospectus relating thereto is required to be delivered under the Securities
      Act, of the happening of any event as a result of which the Prospectus contained
      in such Registration Statement, as then in effect, includes an untrue statement
      of a material fact or omits to state any material fact required to be stated
      therein or necessary to make the statements therein not misleading in the light
      of the circumstances then existing and, as expeditiously as possible, amend
      or
      supplement such Prospectus to eliminate the untrue statement or the
      omission.

     

    
      
        
        

      

      
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    (f) Indemnification.

    

    (i) Indemnification
      by Maker.
      The
      Maker shall, without limitation as to time, indemnify and hold harmless, to
      the
      full extent permitted by law, each holder of Registrable Securities, its
      officers, directors, agents and employees, each person who controls such holder
      (within the meaning of Section 15 of the Securities Act or Section 20 of the
      Exchange Act), and the officers, directors, agents or employees of any such
      controlling person, from and against all losses, claims, damages, liabilities,
      costs (including, without limitation, all reasonable attorneys’ fees) and
      expenses (collectively “Losses”),
      as
      incurred, arising out of or based upon any untrue statement or alleged untrue
      statement of a material fact contained in any Registration Statement, Prospectus
      or preliminary prospectus or any amendment or supplement thereto, or arising
      out
      of or based upon any omission or alleged omission of a material fact required
      to
      be stated therein or necessary to make the statements therein in light of the
      circumstances under which they were made (in the case of any Prospectus) not
      misleading, except insofar as the same are based solely upon information
      furnished to the Maker by such holder for use therein; provided, however, that
      the Maker shall not be liable in any such case to the extent that any such
      Loss
      arises out of or is based upon an untrue statement or alleged untrue statement
      or omission made in any preliminary prospectus or Prospectus if (i) such holder
      failed to send or deliver a copy of the Prospectus or Prospectus supplement
      with
      or prior to the delivery of written confirmation of the sale of Registrable
      Securities and (ii) the Prospectus or Prospectus supplement would have corrected
      such untrue statement or omission. If requested, the Maker shall also indemnify
      underwriters, selling brokers, dealer managers and similar securities industry
      professionals participating in the distribution, their officers, directors,
      agents and employees and each person who controls such persons (within the
      meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
      to the same extent as provided above with respect to the indemnification of
      the
      holders of Registrable Securities.

    

    (ii) Indemnification
      by Holder of Registrable Securities.
      In
      connection with any Registration Statement in which a holder of Registrable
      Securities is participating, such holder of Registrable Securities shall furnish
      to the Maker in writing such information as the Maker may reasonably request
      for
      use in connection with any Registration Statement or Prospectus. Such holder
      hereby agrees to indemnify and hold harmless, to the full extent permitted
      by
      law, the Maker, and its officers, directors, agents and employees, each person
      who controls the Maker (within the meaning of Section 15 of the Securities
      Act
      or Section 20 of the Exchange Act), and the officers, directors, agents or
      employees of any such controlling person, from and against all losses, as
      incurred, arising out of or based upon any untrue statements or alleged untrue
      statement of material fact contained in any Registration Statement, Prospectus
      or preliminary prospectus, or arising out of or based upon any omission of
      a
      material fact required to be stated therein or necessary to make the statements
      therein in light of the circumstances under which they were made (in the case
      of
      any Prospectus) not misleading, to the extent, but only to the extent, that
      such
      untrue statement or omission is contained in any information so furnished in
      writing by such holder to the Maker for use in such Registration Statement,
      Prospectus or preliminary prospectus. The Maker shall be entitled to receive
      indemnities from accountants, underwriters, selling brokers, dealer managers
      and
      similar securities industry professionals participating in the distribution
      to
      the same extent as provided above with respect to information so furnished
      by
      such persons specifically for inclusion in any Registration Statement,
      Prospectus or preliminary prospectus, provided, that the failure of the Maker
      to
      obtain any such indemnity shall not relieve the Maker of any of its obligations
      hereunder. Notwithstanding any provision of this Section 8(f) to the
      contrary, the liability of a holder of Registrable Securities under this
      Section 8(f) shall not exceed the purchase price received by such holder
      for the Registrable Securities sold pursuant to a Registration Statement or
      Prospectus.

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    (iii) Conduct
      of Indemnification Proceedings.
      If any
      action or proceeding (including any governmental investigation or inquiry)
      shall
      be brought or any claim shall be asserted against any person entitled to
      indemnity hereunder (an “indemnified
      party”),
      such
      indemnified party shall promptly notify the party from which such indemnity
      is
      sought (the “indemnifying
      party”)
      in
      writing, and the indemnifying party shall assume the defense thereof, including
      the employment of counsel reasonably satisfactory to the indemnified party
      and
      the payment of all fees and expenses incurred in connection with the defense
      thereof. All such fees and expenses (including any fees and expenses incurred
      in
      connection with investigation or preparing to defend such action or proceeding)
      shall be paid to the indemnified party, as incurred, within 20 days of written
      notice thereof to the indemnifying party; provided, however, that if, in
      accordance with this Section 8(f), the indemnifying party is not liable to
      the
      indemnified party, such fees and expenses shall be returned promptly to the
      indemnifying party. Any such indemnified party shall have the right to employ
      separate counsel in any such action, claim or proceeding and to participate
      in
      the defense thereof, but the fees and expenses of such counsel shall be the
      expense of such indemnified party unless (a) the indemnifying party has
      agreed to pay such fees and expenses, (b) the indemnifying party shall have
      failed promptly to assume the defense of such action, claim or proceeding and
      to
      employ counsel reasonably satisfactory to the indemnified party in any such
      action, claim or proceeding, or (c) the named parties to any such action,
      claim or proceeding (including any impleaded parties) include both such
      indemnified party and the indemnifying party, and such indemnified party shall
      have been advised by counsel that there may be one or more legal defenses
      available to it which are different from or additional to those available to
      the
      indemnifying party (in which case, if such indemnified party notifies the
      indemnifying party in writing that it elects to employ separate counsel at
      the
      expense of the indemnifying party, the indemnifying party shall not have the
      right to assume the defense of such action, claim or proceeding on behalf of
      such indemnified party, it being understood, however, that the indemnifying
      party shall not, in connection with any one such action, claim or proceeding
      or
      separate but substantially similar or related actions, claims or proceedings
      in
      the same jurisdiction arising out of the same general allegations or
      circumstances, be liable for the reasonable fees and expenses of more than
      one
      separate firm of attorneys (together with appropriate local counsel) at any
      time
      for all such indemnified parties, unless in the opinion of counsel for such
      indemnified party a conflict of interest may exist between such indemnified
      party and any other of such indemnified parties with respect to such action,
      claim or proceeding, in which event the indemnifying party shall be obligated
      to
      pay the fees and expenses of such additional counsel or counsels). No
      indemnifying party will consent to entry of any judgment or enter into any
      settlement which does not include as an unconditional term thereof the release
      of such indemnified party from all liability in respect to such claim or
      litigation without the written consent (which consent will not be unreasonably
      withheld) of the indemnified party. No indemnified party shall consent to entry
      of any judgment or enter into any settlement without the written consent (which
      consent will not be unreasonably withheld) of the indemnifying party from which
      indemnify or contribution is sought.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

    (iv) Contribution.
      If the
      indemnification provided for in this Section 8(f) is unavailable to an
      indemnified party under Section 8(f)(i) or 8(f)(ii) hereof (other than by reason
      of exceptions provided in those Sections) in respect of any Losses, then each
      applicable indemnifying party in lieu of indemnifying such indemnified party
      shall contribute to the amount paid or payable by such indemnified party as
      a
      result of such Losses, in such proportion as is appropriate to reflect the
      relative fault of the indemnifying party and indemnified party in connection
      with the actions, statements or omissions which resulted in such Losses as
      well
      as any other relevant equitable considerations. The relative fault of such
      indemnifying party and the indemnified party shall be determined by reference
      to, among other things, whether any action in question, including any untrue
      statement or alleged untrue statement of a material fact or omission or alleged
      omission of a material fact, has been taken or made by, or relates to
      information supplied by, such indemnifying party or indemnified party, and
      the
      parties’ relative intent, knowledge, access to information and opportunity to
      correct or prevent such action, statement or omission. The amount paid or
      payable by a party as a result of any Losses shall be deemed to include, subject
      to the limitations set forth in Section 8(f)(iii), any legal or other fees
      or
      expenses reasonably incurred by such party in connection with any action, suit,
      claim, investigation or proceeding.

    

    The
      parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section 8(f)(iv) were determined by pro rata allocation or
      by
      any other method of allocation that does not take into account the equitable
      considerations referred to in the immediately preceding paragraph. No person
      guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
      of
      the Securities Act) shall be entitled to contribution from any person who was
      not guilty of such fraudulent misrepresentation.

    

    (g) Rule
      144.
      The
      Maker shall file the reports required to be filed by it under the Securities
      Act
      and the Exchange Act and the rules and regulations adopted by the SEC
      thereunder, and will take such further action as any holder of Registrable
      Securities may reasonably request, all to the extent required from time to
      time
      to enable such holder to sell Registrable Securities without registration under
      the Securities Act within the limitation of the exemption provided by Rule
      144
      or Rule 144A. Upon the request of any holder of Registrable Securities, the
      Maker shall deliver to such holder a written statement as to whether the Maker
      has complied with such requirements. Notwithstanding the foregoing, nothing
      in
      this Section 8(g) shall be deemed to require the Maker to register any of its
      securities under any section of the Exchange Act. 

    

    (h) Underwritten
      Registrations.
      No
      holder of Registrable Securities may participate in any underwritten
      registration hereunder unless such person (i) agrees to sell such holder’s
      Registrable Securities on the basis provided in any underwriting arrangements
      approved by the persons entitled hereunder to approve such arrangements, and
      (ii) completes and executes all
      questionnaires, powers of attorney, indemnities, underwriting agreements and
      other documents required under the terms of such underwriting
      arrangements.

    

    9. No
      Waiver of Payee’s Rights, etc.
      All
      payments of principal and interest shall be made without setoff, deduction
      or
      counterclaim. No delay or failure on the part of the Payee in exercising any
      of
      its options, powers or rights, nor any partial or single exercise of its
      options, powers or rights shall constitute a waiver thereof or of any other
      option, power or right, and no waiver on the part of the Payee of any of its
      options, powers or rights shall constitute a waiver of any other option, power
      or right. The Maker hereby waives presentment of payment, protest, and notices
      or demands in connection with the delivery, acceptance, performance, default
      or
      endorsement of this Note. Acceptance by the Payee of less than the full amount
      due and payable hereunder shall in no way limit the right of the Payee to
      require full payment of all sums due and payable hereunder in accordance with
      the terms hereof.

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    10. Modifications.
      No term
      or provision contained herein may be modified, amended or waived except by
      written agreement or consent signed by the party to be bound
      thereby.

    

    11. Cumulative
      Rights and Remedies; Usury.
      The
      rights and remedies of the Payee expressed herein are cumulative and not
      exclusive of any rights and remedies otherwise available. If it shall be found
      that any interest outstanding hereunder shall violate applicable laws governing
      usury, the applicable rate of interest outstanding hereunder shall be reduced
      to
      the maximum permitted rate of interest under such law.

    

    12. Collection
      Expenses.
      If this
      obligation is placed in the hands of an attorney for collection after default,
      and provided the Payee prevails on the merits in respect to its claim of
      default, the Maker shall pay (and shall indemnify and hold harmless the Payee
      from and against), all reasonable attorneys’ fees and expenses incurred by the
      Payee in pursuing collection of this Note.

    

    13. Successors
      and Assigns.
      This
      Note shall be binding upon the Maker and its successors and shall inure to
      the
      benefit of the Payee and its successors and assigns. The term “Payee” as used
      herein, shall also include any endorsee, assignee or other holder of this
      Note.

    

    14. Lost
      or Stolen Promissory Note.
      If this
      Note is lost, stolen, mutilated or otherwise destroyed, the Maker shall execute
      and deliver to the Payee a new promissory note containing the same terms, and
      in
      the same form, as this Note. In such event, the Maker may require the Payee
      to
      deliver to the Maker an affidavit of lost instrument and customary indemnity
      in
      respect thereof as a condition to the delivery of any such new promissory
      note.

    

    15. Shumate
      Machine Works Dividend Obligation.
      After
      October 19, 2007, Machine shall be obligated, to the extent net income is
      available in a given quarter, to declare a dividend sufficient to enable the
      Maker to meet the current obligations under this Note. This obligation of
      Machine is cumulative and Machine shall be a party to this Note for the sole
      purpose of binding itself to these covenants but shall not otherwise be an
      obligor under this Note.

    

    16. Governing
      Law.
      This
      Note shall be governed by and construed and enforced in accordance with the
      internal laws of the State of Oklahoma without regard to the principles of
      conflicts of law thereof. 

    

    17. Definitions.
      For the
      purposes hereof, the following terms shall have the following meanings:

    

    “Business
      Day”
means
      any day except Saturday, Sunday and any day which shall be a legal holiday
      or a
      day on which banking institutions in the State of Delaware are authorized or
      required by law or other government action to close.

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

    

    “Change
      of Control Transaction”
means
      the occurrence of any of (i) an acquisition after the date hereof by an
      individual or legal entity or “group” (as described in Rule 13d-5(b)(1)
      promulgated under the Exchange Act) of in excess of 33% of the voting securities
      of the Maker, (ii) a replacement of more than one-half of the members of the
      Maker’s board of directors which is not approved by those individuals who are
      members of the board of directors on the date hereof in one or a series of
      related transactions, (iii) the merger of the Maker with or into another entity,
      the direct or indirect consolidation or sale of all or substantially all of
      the
      assets of the Maker in one or a series of related transactions, unless following
      such transaction, the holders of the Maker’s securities continue to hold at
      least 66% of such securities following such transaction or (iv) the execution
      by
      the Maker of an agreement to which the Maker is a party or by which it is bound,
      providing for any of the events set forth above in (i), (ii) or
      (iii).

    

    “Conversion
      Price”
shall
      be $1.00 per Share (subject to adjustment pursuant to Section 5
      hereof).

    

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

    

    “Per
      Share Market Value”
means
      on any particular date (a) the closing bid price per share of Common Stock
      on
      such date on the OTC Bulletin Board or on such Subsequent Market on which the
      shares of Common Stock are then listed or quoted, or if there is no such price
      on such date, then the closing bid price on the OTC Bulletin Board or on such
      Subsequent Market on the date nearest preceding such date, or (b) if the shares
      of Common Stock are not then listed or quoted on the OTC Bulletin Board or
      a
      Subsequent Market, the closing bid price for a share of Common Stock in the
      over-the-counter market, as reported by the National Quotation Bureau
      Incorporated or similar organization or agency succeeding to its functions
      of
      reporting prices) at the close of business on such date, or (c) if the shares
      of
      Common Stock are not then reported by the National Quotation Bureau Incorporated
      (or similar organization or agency succeeding to its functions of reporting
      prices), then the average of the “Pink Sheet” quotes for the relevant conversion
      period, as determined in good faith by the Payee.

    

    “Person”
means
      a
      corporation, an association, a partnership, limited liability company an
      organization, a business, an individual, a government or political subdivision
      thereof or a governmental agency.

    

    “Qualified
      Public Offering”
means
      a
      registered public offering of the Maker’s Common Stock pursuant to a
      Registration Statement under the Securities Act, but only if the price per
      share
      of the Common Stock so offered is at least $2.00 (subject to recapitalization
      and reorganization adjustments) and the gross proceeds of the offering to the
      Maker equal or exceed $5,000,000.00.

    

    “Securities
      Act”
means
      the Securities Act of 1933, as amended.

    

    “Security
      Agreement”
means
      the Security Agreement, dated as of the date hereof, between the Maker and
      the
      Payee, as amended modified or supplemented from time to time in accordance
      with
      its terms.

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

    

    “Senior
      Indebtedness”
means,
      with respect to the Maker, the principal of, premium, if any, and interest
      on
      any indebtedness of the Maker, whether outstanding on the date hereof or
      thereafter created, incurred or assumed, unless, in the case of any particular
      indebtedness, the instrument creating or evidencing the same or pursuant to
      which the same is outstanding expressly provides that such indebtedness shall
      not be senior in right of payment to any indebtedness of the Maker. Without
      limiting the generality of the foregoing, “Senior Indebtedness” will include the
      principal of, premium, if any, and interest (including interest that would
      accrue but for the filing of a petition initiating any proceeding under any
      state or federal bankruptcy laws, whether or not such claim is allowable in
      such
      proceeding) on all obligations of every nature of the Maker from time to time
      owed to any bank, savings and loan, SBIC, investment fund or any other
      institutional lender. Notwithstanding the foregoing, “Senior Indebtedness” shall
      not include, to the extent constituting indebtedness, (i) indebtedness that
      is subordinate or junior in right of payment to any other indebtedness of the
      Maker, (ii) indebtedness which, when incurred and without respect to any
      election under Section 1111(b) of Title 11, United States Code, is
      without recourse to the Maker, (iii) indebtedness for goods, materials or
      services purchased in the ordinary course of business or indebtedness consisting
      of trade payables or other current liabilities (other than any current
      liabilities owing under the current portion of any long-term indebtedness which
      would constitute Senior Indebtedness but for the operation of this clause
      (iii)), (iv) indebtedness of or amounts owed by the Maker for compensation
      to employees or for services rendered to the Maker, (v) any liability for
      federal, state, local or other taxes owed or owing by the Maker, and
      (vi) indebtedness of the Maker to a subsidiary of the Maker.

    

    “Subsequent
      Market”
means
      the New York Stock Exchange, American Stock Exchange, Nasdaq SmallCap Market
      or
      Nasdaq National Market.

    

    “Trading
      Day”
means
      (a) a day on which the shares of Common Stock are traded on such Subsequent
      Market on which the shares of Common Stock are then listed or quoted, or (b)
      if
      the shares of Common Stock are not listed on a Subsequent Market, a day on
      which
      the shares of Common Stock are traded in the over-the-counter market, as
      reported by the OTC Bulletin Board, or (c) if the shares of Common Stock are
      not
      quoted on the OTC Bulletin Board, a day on which the shares of Common Stock
      are
      quoted in the over-the-counter market as reported by the National Quotation
      Bureau Incorporated (or any similar organization or agency succeeding its
      functions of reporting prices); provided, however, that in the event that the
      shares of Common Stock are not listed or quoted as set forth in (a), (b) and
      (c)
      hereof, then Trading Day shall mean any day except Saturday, Sunday and any
      day
      which shall be a legal holiday or a day on which banking institutions in the
      State of Delaware are authorized or required by law or other government action
      to close.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

    

    IN
      WITNESS WHEREOF, the Maker has caused this Secured Convertible Promissory.
      Note
      to be duly executed and delivered as of the date first set forth
      above.

     

     

    
      
        	 	 	 
	 	SHUMATE
                INDUSTRIES, INC. (formerly EXCALIBUR INDUSTRIES, INC.) 
	 
 	 
 	 
 
	 	By:  	/s/ Matthew
                C. Flemming
	 	
                
                  Name:
                    Matthew C. Flemming

                

              
	 	Title:
                Chief Financial Officer

      

    
      
        	 	 	 
	 	SHUMATE
                MACHINE
                WORKS, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Matthew
                C. Flemming
	 	Name: Matthew C. Flemming
	 	Title:
                Chief Financial Officer

      

    

    
 

    

    [Signature
      Page to Convertible Promissory Note]

    

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

    

    NOTICE
      OF CONVERSION

    

    Dated:

    

    The
      undersigned hereby elects to convert the principal amount and interest indicated
      below of the attached Secured Convertible Promissory Note into shares of common
      stock, $0.001 par value (the “Common
      Stock”),
      of
      Excalibur Industries, Inc., according to the conditions hereof, as of the date
      written below. No fee will be charged to the holder for any
      conversion.

    

    Exchange
      calculations: ______________________________________________

    

    Date
      to
      Effect Conversion: ___________________________________________

    

    Principal
      Amount and Interest of 

    Secured
      Convertible Note to be Converted: ______________________________

    

    Number
      of
      shares of Common Stock to be Issued: ________________________

    

    

    Applicable
      Conversion Price:

    

    Signature:
      __________________________________________

    

    Name:_____________________________________________

    

    Address:
      ___________________________________________

    

    

    
      
        
          Exhibit
            A

        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

    

    LOAN
      SCHEDULE

    

    Secured
      Convertible Promissory Note Issued by Excalibur Industries, Inc.

    

    Dated:
      October 19, 2005

    

    SCHEDULE

    OF

    CONVERSIONS
      AND PAYMENTS OF PRINCIPAL

    
      	
               

              Date
                of Conversion

            	
              Amount
                of Conversion

            	
              Total
                Amount Due Subsequent

              To
                Conversion

            
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

    

    

     

     

     

     

    
 

         

    Exhibit
      BSHUMATE
      INDUSTRIES, INC.

    

    STOCK
      PURCHASE AGREEMENT

    

    This
      Stock Purchase Agreement (“Agreement”)
      is
      made as of December 2, 2005, but is only effective as of the date of acceptance
      of the “Purchaser
      Signature Page”
by
      and
      between Shumate Industries, Inc., a Delaware corporation (the “Company”),
      and
      the purchaser who executes the Purchaser Signature Page hereto (the
“Purchaser”).

     

    RECITALS

    

    A. The
      Company desires to obtain funds from each Purchaser in order to provide working
      capital to and further the operations of the Company.

    

    B. In
      order
      to obtain such funds, the Company is offering up to 416,667 shares (the
“Shares”)
      of
      common stock, $.001 par value per share (the “Common
      Stock”)
      and
      the right to purchase
      up to $50,000 worth of additional securities in the Financing on the same terms
      and conditions set forth in the Financing (as defined below) in such Purchaser’s
      discretion,
      on the
      terms and subject to the conditions set forth herein.

    

    AGREEMENT

    

    It
      is
      agreed as follows:

    

    1. PURCHASE
      AND SALE OF SHARES. In
      reliance upon the representations and warranties of the Company and each
      Purchaser contained herein and subject to the terms and conditions set forth
      herein, at Closing, each Purchaser shall purchase, and the Company shall sell
      and issue to each Purchaser, the number of Shares set forth on the Purchaser
      Signature Page bearing such Purchaser’s name at a purchase price of $0.60 per
      share (the “Purchase Price”).
      The
      Purchasers shall purchase at least 416,667 Shares at the initial closing and
      shall have the exclusive right, but not the obligation, to purchase up to
      $50,000 worth of additional securities in the Financing on the same terms and
      conditions set forth in the Financing in such Purchaser’s discretion.
“Financing”
means
      the sale of the Company’s capital stock or other securities in a private
      placement which is exempt from registration under the Securities Act with gross
      proceeds to the Company of up to one million five hundred thousand dollars
      ($1,500,000).

     

    2. CLOSING(S).

     

    2.1 Date
      and Time.
      The
      closing of the sale of Shares contemplated by this Agreement (each a
“Closing”)
      shall
      take place at the offices of the Company or at such other place as the Company
      and such Purchaser shall agree in writing, on or before December 15, 2005,
      unless otherwise extended by the Company (the “Final
      Closing Date”).

     

    2.2 Deliveries
      by Purchaser.
      Each
      Purchaser shall deliver the following at such Purchaser’s Closing:

    

    2.2.1 a
      completed and executed Purchaser Signature Page.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    2.2.2 a
      check
      or wire transfer to the general account of the Company in the amount of the
      Purchase Price for each Share purchased.

    

    2.3 Deliveries
      by Company.
      At each
      Closing, or as soon thereafter as practicable, the Company will deliver to
      each
      Purchaser the certificates representing the Shares purchased by such Purchaser
      against payment of the Purchase Price. Each such Share shall be in definitive
      form and registered in the name of the Purchaser, as set forth on the Purchaser
      Signature Page, against delivery to the Company by the Purchaser of the items
      set forth in paragraph 2.2 above.

     

    2.4 Each
      Closing Identical.
      Each
      Closing shall be upon substantially identical terms and conditions to those
      contained herein. Each Closing may be effected at the Company’s sole election
      until all of the Shares have been sold, provided that all of such Closings
      are
      held on or prior to the Final Closing Date.

     

    3. REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.

    

    As
      a
      material inducement to each Purchaser to enter into this Agreement and to
      purchase the Shares, the Company represents and warrants that the following
      statements are true and correct in all material respects as of the date hereof
      and will be true and correct in all material respects at Closing, except as
      expressly qualified or modified herein.

    

    3.1 Organization
      and Good Standing.
      The
      Company is a corporation duly organized, validly existing, and in good standing
      under the laws of the State of Delaware and has full corporate power and
      authority to enter into and perform its obligations under this Agreement, and
      to
      own its properties and to carry on its business as presently conducted and
      as proposed
      to be conducted. 

     

    3.2 Capitalization.
      The
      Company is authorized to issue 50,000,000 shares of Common Stock of which,
      as of
      November 1, 2005, 11,028,295 shares were issued and outstanding, and 10,000,000
      shares of undesignated preferred stock, $0.001 par value, of which none are
      issued and outstanding. All outstanding shares of Common Stock have been duly
      authorized and validly issued, and are fully paid, nonassessable, and free
      of
      any preemptive rights.

     

    3.3 Validity
      of Transactions.
      This
      Agreement, and each document executed and delivered by the Company in connection
      with the transactions contemplated by this Agreement, including this Agreement,
      have been duly authorized, executed and delivered by the Company and is each
      the
      valid and legally binding obligation of the Company, enforceable in accordance
      with its terms, except as limited by applicable bankruptcy, insolvency
      reorganization and moratorium laws and other laws affecting enforcement of
      creditor’s rights generally and by general principles of equity.

     

    3.4 Valid
      Issuance of Shares.
      The
      Shares that are being issued to each Purchaser hereunder, when issued, sold
      and
      delivered in accordance with the terms hereof for the consideration expressed
      herein, will be duly and validly issued, fully paid and nonassessable and free
      of restrictions on transfer, other than restrictions on transfer under this
      Agreement and under applicable federal and state securities laws, will be free
      of all other liens and adverse claims.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    3.5 No
      Violation.
      The
      execution, delivery and performance of this Agreement has been duly authorized
      by the Company’s Board of Directors and will not violate any law or any order of
      any court or government agency applicable to the Company, as the case may be,
      or
      the Articles of Incorporation or Bylaws of the Company, and will not result
      in
      any breach of or default under, or, except as expressly provided herein, result
      in the creation of any encumbrance upon any of the assets of the Company
      pursuant to the terms of any agreement or instrument by which the Company or
      any
      of its assets may be bound. No approval of or filing with any governmental
      authority is required for the Company to enter into, execute or perform this
      Agreement.

    

    3.6 SEC
      Reports and Financial Statements.
      

    

    3.6.1 The
      Company has delivered or made available to each Purchaser accurate and complete
      copies (excluding copies of exhibits) of each report, registration statement,
      and definitive proxy statement filed by the Company with the United States
      Securities and Exchange Commission (“SEC”)
      since
      January 1, 2004 (collectively, with all information incorporated by reference
      therein or deemed to be incorporated by reference therein, the “SEC
      Reports”). All
      statements, reports, schedules, forms and other documents required to have
      been
      filed by the Company with the SEC have been so filed on a timely basis, except
      as indicated in such SEC Reports. As of the time it was filed with the SEC
      (or,
      if amended or superseded by a filing prior to the date of this Agreement, then
      on the date of such filing): (i) each of the SEC Reports complied in all
      material respects with the applicable requirements of the Securities Act of
      1933, as amended, or the Securities Exchange Act of 1934, as amended; and (ii)
      none of the SEC Reports contained any untrue statement of a material fact or
      omitted to state a material fact required to be stated therein or necessary
      in
      order to make the statements therein, in the light of the circumstances under
      which they were made, not misleading.

    

    3.6.2 Except
      for the pro forma financial statements, the consolidated financial statements
      contained in the SEC Reports: (i) complied as to form in all material respects
      with the published rules and regulations of the SEC applicable thereto; (ii)
      were prepared in accordance with GAAP applied on a consistent basis throughout
      the periods covered (except as may be indicated in the notes to such financial
      statements and, in the case of unaudited statements, as permitted by Form 10-QSB
      of the SEC, and except that unaudited financial statements may not contain
      footnotes and are subject to normal and recurring year-end audit adjustments
      which will not, individually or in the aggregate, be material in amount); and
      (iii) fairly present, in all material respects, the consolidated financial
      position of the Company and its consolidated subsidiaries as of the respective
      dates thereof and the consolidated results of operations of the Company and
      its
      consolidated subsidiaries for the periods covered thereby. All adjustments
      considered necessary for a fair presentation of the financial statements have
      been included.

     

    3.7 Securities
      Law Compliance.
      Assuming the accuracy of the representations and warranties of each Purchaser
      set forth in Section 4 of this Agreement, the offer, issue, sale and delivery
      of
      the Shares will constitute an exempted transaction under the Securities Act
      of
      1933, as amended and now in effect (the “Securities
      Act”),
      and
      registration of the Shares under the Securities Act is not required. The Company
      shall make such filings as may be necessary to comply with the Federal
      securities laws and the “blue sky” laws of any state, which filings will be made
      in a timely manner.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    4. REPRESENTATIONS
      AND WARRANTIES OF EACH PURCHASER.

    

    Each
      Purchaser hereby represents, warrants and covenants with the Company as
      follows:

    

    4.1 Legal
      Power.
      Each
      Purchaser has the requisite individual, corporate, partnership, limited
      liability company, trust, or fiduciary power, as appropriate, and is authorized,
      if such Purchaser is a corporation, partnership, limited liability company,
      or
      trust, to enter into this Agreement, to purchase the Shares hereunder, and
      to
      carry out and perform its obligations under the terms of this
      Agreement.

     

    4.2 Due
      Execution.
      This
      Agreement has been duly authorized, if such Purchaser is a corporation,
      partnership, limited liability company, trust or fiduciary, executed and
      delivered by such Purchaser, and, upon due execution and delivery by the
      Company, this Agreement will be a valid and binding agreement of such
      Purchaser.

     

    4.3 Access
      to Information.
      Each
      Purchaser represents that such Purchaser has been given full and complete access
      to the Company for the purpose of obtaining such information as such Purchaser
      or its qualified representative has reasonably requested in connection with
      the
      decision to purchase the Shares. Each Purchaser represents that such Purchaser
      has received and reviewed copies of the SEC Reports. Each Purchaser represents
      that such Purchaser has been afforded the opportunity to ask questions of the
      officers of the Company regarding its business prospects and the Shares, all
      as
      such Purchaser or such Purchaser’s qualified representative have found necessary
      to make an informed investment decision to purchase the Shares.

    4.4 Restricted
      Securities.

    

    4.4.1 Each
      Purchaser has been advised that the Shares have not been registered under the
      Securities Act or any other applicable
      securities laws and that Shares
      are being offered and sold pursuant to Section 4(2) of the Securities Act and/or
      Rule
      506
      of Regulation D thereunder, and that the Company’s reliance upon Section
      4(2) and/or Rule 506 of Regulation D is predicated in part on such
      Purchaser representations as contained herein.
      Each
      Purchaser acknowledges that the Shares will be issued as “restricted securities”
as defined by Rule 144 promulgated pursuant to the Securities Act. The Shares
      may not be resold in the absence of an effective registration thereof under
      the
      Securities Act and applicable state securities laws unless, in the opinion
      of
      the Company’s counsel, an applicable exemption from registration is
      available.

    

    4.4.2 Each
      Purchaser represents that such Purchaser is acquiring the Shares for such
      Purchaser’s own account, and not as nominee or agent, for investment purposes
      only and not with a view to, or for sale in connection with, a distribution,
      as
      that term is used in Section 2(11) of the Securities Act, in a manner which
      would require registration under the Securities Act or any state securities
      laws.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    4.4.3 Each
      Purchaser understands and acknowledges that the Securities, 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.

     

    4.4.4 Each
      Purchaser acknowledges that an investment in the Securities is not liquid and
      is
      transferable only under limited conditions. Each Purchaser acknowledges that
      such securities must be held indefinitely unless they are subsequently
      registered under the Securities Act or an exemption from such registration
      is
      available. Each Purchaser is aware of the provisions of Rule 144
      promulgated under the Securities Act, which permits limited resale of restricted
      securities subject to the satisfaction of certain conditions and that such
      Rule
      is not now available and, in the future, may not become available for resale
      of
      any of the Shares.

    

    4.4.5 Each
      Purchaser is an “accredited investor” as defined under Rule 501 under the
      Securities Act. The representations made by each Purchaser on the Purchaser
      Signature Page are true and correct.

     

    4.5 Purchaser
      Sophistication and Ability to Bear Risk of Loss.
      Each
      Purchaser acknowledges that it is able to protect its interests in connection
      with the acquisition of the Shares
      and can bear the economic risk of investment in such securities without
      producing a material adverse change in such Purchaser’s financial condition.
      Each Purchaser, either alone or with such Purchaser’s representative(s),
      otherwise has such knowledge and experience in financial or business matters
      that such Purchaser is capable of evaluating the merits and risks of the
      investment in the Shares.

     

    4.6 Preexisting
      Relationship.
      Each
Purchaser
      has a preexisting personal or business relationship with the Company, one or
      more of its officers, directors, or controlling persons, or in the event that
      such Purchaser is introduced to the Company by a finder or broker-dealer, such
      finder or broker-dealer.

    

    4.7 Purchases
      by Groups.
      Each
      Purchaser represents, warrants and covenants that it is not acquiring the Shares
      as part of a group within the meaning of Section 13(d)(3) of the Securities
      Exchange Act of 1934, as amended.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    5. REGISTRATION.

     

    5.1 Definitions.
      As used
      in this Section 5, the following terms shall have the following
      meanings:

     

    5.1.1 Exchange
      Act:
      The
      Securities Exchange Act of 1934, as amended, and the rules and regulations
      of
      the SEC promulgated thereunder.

    

    5.1.2 Losses:
      See
      Section 5.6 hereof.

    

    5.1.3 Prospectus:
      The
      prospectus included in any Registration Statement (including, without
      limitation, a prospectus that discloses information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Securities Act Rule 430A), as amended or supplemented by any prospectus
      supplement, with respect to the terms of the offering of any portion of the
      Registrable Securities covered by such Registration Statement and all other
      amendments and supplements to the prospectus, including post-effective
      amendments, and all material incorporated by reference or deemed to be
      incorporated by reference in such prospectus.

    

    5.1.4 Registration
      Expenses:
      All
      reasonable expenses incurred by the Company in complying with Sections 5.3
      and
      5.4 hereof, including, without limitation, all registration and filing fees,
      printing expenses, fees and disbursements of counsel for the Company,
      accountants’ expenses (including, without limitation, any special audits or
“comfort” letters incidental to or required by any such registration), any fees
      or disbursements of underwriters customarily paid by issuers or sellers of
      securities (but excluding underwriting discounts and commissions) and blue
      sky
      fees and expenses in all states reasonably designated by the holders of
      Registrable Securities.

    

    5.1.5 Registrable
      Securities:
      The
      Shares and any Common Stock issued or issuable in respect of the Shares pursuant
      to any stock split, stock dividend, recapitalization, or similar
      event.

    

    5.1.6 Registration
      Statement:
      Any
      registration statement of the Company which covers any of the Registrable
      Securities pursuant to the provisions of this Agreement, including the
      Prospectus, amendments and supplements to such registration statement, including
      post-effective amendments, all exhibits and all material incorporated by
      reference or deemed to be incorporated by reference in such registration
      statement.

    

    5.1.7 Rule
      144:
      Rule 144
      under the Securities Act, as such Rule may be amended from time to time, or
      any
      similar rule or regulation hereafter adopted by the SEC (excluding Rule
      144A).

    

    5.1.8 SEC:
      The
      Securities and Exchange Commission.

    

    5.1.9 Securities
      Act:
      The
      Securities Act of 1933, as amended, and the rules and regulations promulgated
      by
      the SEC thereunder.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5.1.10 Underwritten
      registration or underwritten offering:
      A
      registration in which securities of the Company are sold to an underwriter
      for
      reoffering to the public.

     

    5.2 Securities
      Subject to the Registration Rights.
      The
      securities entitled to the benefits of the Registration Rights set forth in
      this
      Section 5 are the Registrable Securities.

     

    5.3 Registration
      Rights.
      If, at
      any time after the Final Closing Date and expiring on the fifth (5th)
      anniversary of the Final Closing Date, the Company proposes to register any
      of
      its securities under the Securities Act (except for registrations on Forms
      S-8
      or S-4 or their equivalent), it will give written notice by registered mail,
      at
      least thirty (30) days prior to the filing of each such Registration Statement,
      to the holders of Registrable Securities of its intention to do so. If any
      holders of Registrable Securities notify the Company within twenty (20) days
      after receipt of any such notice of its desire to include any Registrable
      Securities in such proposed Registration Statement, the Company shall afford
      such holders of Registrable Securities the opportunity to have any such
      Registrable Securities registered under such Registration Statement. These
      rights may be exercised at any time on an unlimited number of occasions prior
      to
      the fifth (5th)
      anniversary of the Final Closing Date, subject to the terms and conditions
      set
      forth in this Section 5.

     

    5.4 Holdback
      and Lock-Up Agreements.

    

    5.4.1 Restrictions
      on Public Sale by Holders of Registrable Securities.
      Each
      holder of Registrable Securities whose Registrable Securities are covered by
      a
      Registration Statement filed pursuant to Section 5.3 hereof agrees, if
      requested by the managing underwriters in an underwritten offering (to the
      extent timely notified in writing by the Company or the managing underwriters),
      not to effect any public sale or distribution of securities of the Company
      of
      any class included in such Registration Statement, including a sale pursuant
      to
      Rule 144 (except as part of such underwritten offering), during the 10-day
      period prior to, and the 180-day period beginning on, the effective date of
      any
      underwritten offering made pursuant to such Registration Statement; provided,
      however, the foregoing prohibition shall only apply if all Registrable
      Securities requested by such holder to be covered by such Registration Statement
      are included in such Registration Statement.

    

    5.4.2 The
      foregoing provisions shall not apply to any holder of Registrable Securities
      if
      such holder is prevented by applicable statute or regulation from entering
      into
      any such agreement; provided, however, that any such holder shall undertake
      in
      its request to participate in any such underwritten offering not to effect
      any
      public sale or distribution of the class of Registrable Securities covered
      by
      such Registration Statement (except as part of such underwritten offering)
      during such period unless it has provided five (5) business days prior written
      notice of such sale or distribution to the managing underwriters.

     

    5.5 Expenses
      and Procedures.

    

    5.5.1 Expenses
      of Registration.
      All
      Registration Expenses (exclusive of underwriting discounts and commissions)
      shall be borne by the Company. Each holder of Registrable Securities shall
      bear
      all underwriting discounts, selling commissions, sales concessions and similar
      expenses applicable to the sale of the Registrable Securities sold by such
      holder.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    5.5.2 Registration
      Procedures.
      The
      Company will keep the holders of Registrable Securities advised as to the
      initiation of registration, qualification and compliance and as to the
      completion thereof. At its expense, the Company will furnish such number of
      Prospectuses and other documents incident thereto as the holders or underwriters
      from time to time may reasonably request.

    

    5.5.3 Information.
      The
      Company may require each seller of Registrable Securities as to which any
      registration is being effected to furnish such information regarding the
      distribution of such Registrable Securities as the Company may from time to
      time
      reasonably request and the Company may exclude from such registration the
      Registrable Securities of any seller who unreasonably fails to furnish such
      information after receiving such request.

    

    5.5.4 Delay
      or Suspension.
      Notwithstanding anything herein to the contrary, the Company may, at any time,
      suspend the effectiveness of any Registration Statement for a period of up
      to 60
      consecutive days or 90 days in the aggregate in any calendar year, as
      appropriate (a “Suspension
      Period”),
      by
      giving notice to each holder of Registrable Securities to be included in the
      Registration Statement, if the Company shall have determined, after consultation
      with its counsel, that the Company is required to disclose any material
      corporate development which the Company determines could reasonably be expected
      to have a material effect on the Company. Each holder of Registrable Securities
      agrees by acquisition of such Registrable Securities that, upon receipt of
      any
      notice from the Company of a Suspension Period, such holder shall forthwith
      discontinue disposition of such Registrable Securities covered by such
      Registration Statement or Prospectus until such holder (i) is advised in
      writing by the Company that the use of the applicable Prospectus may be resumed,
      (ii) has received copies of a supplemental or amended prospectus, if
      applicable, and (iii) has received copies of any additional or supplemental
      filings which are incorporated or deemed to be incorporated by reference in
      such
      Prospectus. The Company shall prepare, file and furnish to each holder of
      Registrable Securities immediately upon the expiration of any Suspension Period,
      appropriate supplements or amendments, if applicable, to the Prospectus and
      appropriate documents, if applicable, incorporated by reference in the
      Registration Statement. The Company agrees to use its best efforts to cause
      any
      Suspension Period to be terminated as promptly as possible.

    

    5.5.5 Blue
      Sky.
      The
      Company will, as expeditiously as possible, use its best efforts to register
      or
      qualify the Registrable Securities covered by a Registration Statement under
      the
      securities or blue sky laws of such jurisdictions as the Company deems
      appropriate or, in the case of an underwritten public offering, the managing
      underwriter shall reasonably request, provided that the Company shall not be
      required in connection therewith or as a condition thereto to qualify to do
      business in any jurisdiction where it is not so qualified or to take any action
      which would subject it to taxation or service of process in any jurisdiction
      where it is not otherwise subject to such taxation or service of
      process.

    

    5.5.6 Notification
      of Material Events.
      The
      Company will, as expeditiously as possible, immediately notify each holder
      of
      Registrable Securities under a Registration Statement, at any time when a
      prospectus relating thereto is required to be delivered under the Securities
      Act, of the happening of any event as a result of which the Prospectus contained
      in such Registration Statement, as then in effect, includes an untrue statement
      of a material fact or omits to state any material fact required to be stated
      therein or necessary to make the statements therein not misleading in the light
      of the circumstances then existing and, as expeditiously as possible, amend
      or
      supplement such Prospectus to eliminate the untrue statement or the
      omission.

     

    5.6 Indemnification.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    5.6.1 Indemnification
      by Company.
      The
      Company shall, without limitation as to time, indemnify and hold harmless,
      to
      the full extent permitted by law, each holder of Registrable Securities, its
      officers, directors, agents and employees, each person who controls such holder
      (within the meaning of Section 15 of the Securities Act or Section 20 of the
      Exchange Act), and the officers, directors, agents or employees of any such
      controlling person, from and against all losses, claims, damages, liabilities,
      costs (including, without limitation, all reasonable attorneys’ fees) and
      expenses (collectively “Losses”),
      as
      incurred, arising out of or based upon any untrue statement or alleged untrue
      statement of a material fact contained in any Registration Statement, Prospectus
      or preliminary prospectus or any amendment or supplement thereto, or arising
      out
      of or based upon any omission or alleged omission of a material fact required
      to
      be stated therein or necessary to make the statements therein in light of the
      circumstances under which they were made (in the case of any Prospectus) not
      misleading, except insofar as the same are based solely upon information
      furnished to the Company by such holder for use therein; provided, however,
      that
      the Company shall not be liable in any such case to the extent that any such
      Loss arises out of or is based upon an untrue statement or alleged untrue
      statement or omission made in any preliminary prospectus or Prospectus if (i)
      such holder failed to send or deliver a copy of the Prospectus or Prospectus
      supplement with or prior to the delivery of written confirmation of the sale
      of
      Registrable Securities and (ii) the Prospectus or Prospectus supplement would
      have corrected such untrue statement or omission. If requested, the Company
      shall also indemnify underwriters, selling brokers, dealer managers and similar
      securities industry professionals participating in the distribution, their
      officers, directors, agents and employees and each person who controls such
      persons (within the meaning of Section 15 of the Securities Act or Section
      20 of
      the Exchange Act) to the same extent as provided above with respect to the
      indemnification of the holders of Registrable Securities.

    

    5.6.2 Indemnification
      by Holder of Registrable Securities.
      In
      connection with any Registration Statement in which a holder of Registrable
      Securities is participating, such holder of Registrable Securities shall furnish
      to the Company in writing such information as the Company may reasonably request
      for use in connection with any Registration Statement or Prospectus. Such holder
      hereby agrees to indemnify and hold harmless, to the full extent permitted
      by
      law, the Company, and its officers, directors, agents and employees, each person
      who controls the Company (within the meaning of Section 15 of the Securities
      Act
      or Section 20 of the Exchange Act), and the officers, directors, agents or
      employees of any such controlling person, from and against all losses, as
      incurred, arising out of or based upon any untrue statements or alleged untrue
      statement of material fact contained in any Registration Statement, Prospectus
      or preliminary prospectus, or arising out of or based upon any omission of
      a
      material fact required to be stated therein or necessary to make the statements
      therein in light of the circumstances under which they were made (in the case
      of
      any Prospectus) not misleading, to the extent, but only to the extent, that
      such
      untrue statement or omission is contained in any information so furnished in
      writing by such holder to the Company for use in such Registration Statement,
      Prospectus or preliminary prospectus. The Company shall be entitled to receive
      indemnities from accountants, underwriters, selling brokers, dealer managers
      and
      similar securities industry professionals participating in the distribution
      to
      the same extent as provided above with respect to information so furnished
      by
      such persons specifically for inclusion in any Registration Statement,
      Prospectus or preliminary prospectus, provided, that the failure of the Company
      to obtain any such indemnity shall not relieve the Company of any of its
      obligations hereunder. Notwithstanding any provision of this Section 5.6 to
      the contrary, the liability of a holder of Registrable Securities under this
      Section 5.6 shall not exceed the purchase price received by such holder for
      the Registrable Securities sold pursuant to a Registration Statement or
      Prospectus.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    5.6.3 Conduct
      of Indemnification Proceedings.
      If any
      action or proceeding (including any governmental investigation or inquiry)
      shall
      be brought or any claim shall be asserted against any person entitled to
      indemnity hereunder (an “indemnified
      party”),
      such
      indemnified party shall promptly notify the party from which such indemnity
      is
      sought (the “indemnifying
      party”)
      in
      writing, and the indemnifying party shall assume the defense thereof, including
      the employment of counsel reasonably satisfactory to the indemnified party
      and
      the payment of all fees and expenses incurred in connection with the defense
      thereof. All such fees and expenses (including any fees and expenses incurred
      in
      connection with investigation or preparing to defend such action or proceeding)
      shall be paid to the indemnified party, as incurred, within 20 days of written
      notice thereof to the indemnifying party; provided, however, that if, in
      accordance with this Section 5.6, the indemnifying party is not liable to the
      indemnified party, such fees and expenses shall be returned promptly to the
      indemnifying party. Any such indemnified party shall have the right to employ
      separate counsel in any such action, claim or proceeding and to participate
      in
      the defense thereof, but the fees and expenses of such counsel shall be the
      expense of such indemnified party unless (a) the indemnifying party has
      agreed to pay such fees and expenses, (b) the indemnifying party shall have
      failed promptly to assume the defense of such action, claim or proceeding and
      to
      employ counsel reasonably satisfactory to the indemnified party in any such
      action, claim or proceeding, or (c) the named parties to any such action,
      claim or proceeding (including any impleaded parties) include both such
      indemnified party and the indemnifying party, and such indemnified party shall
      have been advised by counsel that there may be one or more legal defenses
      available to it which are different from or additional to those available to
      the
      indemnifying party (in which case, if such indemnified party notifies the
      indemnifying party in writing that it elects to employ separate counsel at
      the
      expense of the indemnifying party, the indemnifying party shall not have the
      right to assume the defense of such action, claim or proceeding on behalf of
      such indemnified party, it being understood, however, that the indemnifying
      party shall not, in connection with any one such action, claim or proceeding
      or
      separate but substantially similar or related actions, claims or proceedings
      in
      the same jurisdiction arising out of the same general allegations or
      circumstances, be liable for the reasonable fees and expenses of more than
      one
      separate firm of attorneys (together with appropriate local counsel) at any
      time
      for all such indemnified parties, unless in the opinion of counsel for such
      indemnified party a conflict of interest may exist between such indemnified
      party and any other of such indemnified parties with respect to such action,
      claim or proceeding, in which event the indemnifying party shall be obligated
      to
      pay the fees and expenses of such additional counsel or counsels). No
      indemnifying party will consent to entry of any judgment or enter into any
      settlement which does not include as an unconditional term thereof the release
      of such indemnified party from all liability in respect to such claim or
      litigation without the written consent (which consent will not be unreasonably
      withheld) of the indemnified party. No indemnified party shall consent to entry
      of any judgment or enter into any settlement without the written consent (which
      consent will not be unreasonably withheld) of the indemnifying party from which
      indemnify or contribution is sought.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    5.6.4 Contribution.
      If the
      indemnification provided for in this Section 5.6 is unavailable to an
      indemnified party under Section 5.6.1 or 5.6.2 hereof (other than by reason
      of
      exceptions provided in those Sections) in respect of any Losses, then each
      applicable indemnifying party in lieu of indemnifying such indemnified party
      shall contribute to the amount paid or payable by such indemnified party as
      a
      result of such Losses, in such proportion as is appropriate to reflect the
      relative fault of the indemnifying party and indemnified party in connection
      with the actions, statements or omissions which resulted in such Losses as
      well
      as any other relevant equitable considerations. The relative fault of such
      indemnifying party and the indemnified party shall be determined by reference
      to, among other things, whether any action in question, including any untrue
      statement or alleged untrue statement of a material fact or omission or alleged
      omission of a material fact, has been taken or made by, or relates to
      information supplied by, such indemnifying party or indemnified party, and
      the
      parties’ relative intent, knowledge, access to information and opportunity to
      correct or prevent such action, statement or omission. The amount paid or
      payable by a party as a result of any Losses shall be deemed to include, subject
      to the limitations set forth in Section 5.6.3, any legal or other fees or
      expenses reasonably incurred by such party in connection with any action, suit,
      claim, investigation or proceeding.

    

    The
      parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section 5.6.4 were determined by pro rata allocation or by
      any
      other method of allocation which does not take into account the equitable
      considerations referred to in the immediately preceding paragraph. No person
      guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
      of
      the Securities Act) shall be entitled to contribution from any person who was
      not guilty of such fraudulent misrepresentation.

    

    5.7 Rule
      144.
      The
      Company shall file the reports required to be filed by it under the Securities
      Act and the Exchange Act and the rules and regulations adopted by the SEC
      thereunder, and will take such further action as any holder of Registrable
      Securities may reasonably request, all to the extent required from time to
      time
      to enable such holder to sell Registrable Securities without registration under
      the Securities Act within the limitation of the exemption provided by Rule
      144
      or Rule 144A. Upon the request of any holder of Registrable Securities, the
      Company shall deliver to such holder a written statement as to whether the
      Company has complied with such requirements. Notwithstanding the foregoing,
      nothing in this Section 5.7 shall be deemed to require the Company to register
      any of its securities under any section of the Exchange Act.

     

    5.8 Underwritten
      Registrations.
      No
      holder of Registrable Securities may participate in any underwritten
      registration hereunder unless such person (i) agrees to sell such holder’s
      Registrable Securities on the basis provided in any underwriting arrangements
      approved by the persons entitled hereunder to approve such arrangements, and
      (ii) completes and executes all
      questionnaires, powers of attorney, indemnities, underwriting agreements and
      other documents required under the terms of such underwriting
      arrangements. 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    6. COVENANTS
      OF THE COMPANY.

    

    6.1 Use
      of
      Proceeds.
      The
      Company intends to employ the proceeds from the purchase and sale of the Shares
      for the purposes set forth on Schedule
      6.1
      hereto.
      Except as set forth on Schedule
      6.1,
      the
      proceeds from the purchase and sale of the Shares may not and will not be used
      for accrued and unpaid officer and director salaries, payment of financing
      related debt, redemption of outstanding notes or equity instruments of the
      Company, litigation related expenses or settlements, brokerage fees, nor
      non-trade obligations outstanding on a Closing Date. Pending the Company’s use
      of the proceeds from the purchase and sale of the Shares, the Company intends
      to
      invest the funds in government securities and insured, short-term,
      interest-bearing investments of varying maturities. Schedule
      6.1 represents
      the Company’s best estimate of the allocation of the proceeds from the purchase
      and sale of the Shares. Future events, including the problems, delays, expenses,
      and complications frequently encountered by development stage companies such
      as
      the Company, as well as changes in economic, regulatory, or competitive
      conditions, changes in the Company’s planned business (and its success or
      failure), and changes in the Company’s product development activities, may
      require that it reallocate funds. It is possible that that the estimates in
      Schedule
      6.1 will
      prove inaccurate, that the Company’s efforts to introduce its products and
      services will require considerable additional expenditures, or that unforeseen
      events will cause the Company to expend more funds than it currently
      expects.

    

    6.2 Board
      Representation.
      The
      Company shall increase the number of its authorized directors to seven (7).
      The
      Purchaser is entitled to nominate one (1) person to fill one of the vacancies
      created by the increase in the number of directors, and the Company shall
      appoint such nominee as a director of the Company to fill the vacancy on the
      board of directors, his or her term of office to commence immediately upon
      such
      appointment, and to continue until his successor is duly elected and
      qualified.

    

    6.3 Legal
      Fees.
      After
      the Final Closing Date, the Company will promptly reimburse the Purchasers
      for
      reasonable legal expenses incurred by the firm of _______________ not to exceed
      $5,000, incurred in connection with the transactions contemplated by this
      Agreement, plus out-of-pocket expenses incurred, provided that the firm of
      _________________ delivers the invoices containing a detailed statement of
      services to the Company at the address provided in Section 7.7 of this
      Agreement. The Company will pay such invoices within ten (10) business days
      after submission of such invoices. The Company will be solely responsible for
      its own legal costs incurred in performing its obligations in this
      transaction.

    

    7. MISCELLANEOUS.

     

    7.1 Indemnification.
      Each
      Purchaser agrees to defend, indemnify and hold the Company harmless against
      any
      liability, costs or expenses arising as a result of any dissemination of any
      of
      the Shares by such Purchaser in violation of the Securities Act or applicable
      state securities law.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    7.2 Governing
      Law.
      This
      Agreement shall be governed by and construed under the laws of the State of
      Delaware.

     

    7.3 Successors
      and Assigns.
      Except
      as otherwise expressly provided herein, the provisions hereof shall inure to
      the
      benefit of, and be binding upon, the successors, assigns, heirs, executors,
      and
      administrators of the parties hereto.

     

    7.4 Entire
      Agreement.
      This
      Agreement and the Exhibits hereto and thereto, and the other documents delivered
      pursuant hereto and thereto, constitute the full and entire understanding and
      agreement among the parties with regard to the subjects hereof and no
      party shall
      be
      liable or bound to any other party in any manner by any representations,
      warranties, covenants, or agreements except as specifically set forth herein
      or
      therein. Nothing in this Agreement, express or implied, is intended to confer
      upon any party, other than the parties hereto and their respective successors
      and assigns, any rights, remedies, obligations, or liabilities under or by
      reason of this Agreement, except as expressly provided herein.

     

    7.5 Severability.
      In case
      any provision of this Agreement shall be invalid, illegal, or unenforceable,
      it
      shall to the extent practicable, be modified so as to make it valid, legal
      and
      enforceable and to retain as nearly as practicable the intent of the parties,
      and the validity, legality, and enforceability of the remaining provisions
      shall
      not in any way be affected or impaired thereby.

     

    7.6 Amendment
      and Waiver.
      Except
      as otherwise provided herein, any term of this Agreement may be amended, and
      the
      observance of any term of this Agreement may be waived (either generally or
      in a
      particular instance, either retroactively or prospectively, and either for
      a
      specified period of time or indefinitely), with the written consent of the
      Company and the Purchasers, or, to the extent such amendment affects only one
      Purchaser, by the Company and such Purchaser. Any amendment or waiver effected
      in accordance with this Section shall be binding upon each future holder of
      any
      security purchased under this Agreement (including securities into which such
      securities have been converted) and the Company.

     

    7.7 Notices.
      All
      notices and other communications required or permitted hereunder shall be in
      writing and shall be effective when delivered personally, or sent by telex
      or
      telecopier (with receipt confirmed), provided that a copy is mailed by
      registered mail, return receipt requested, or when received by the addressee,
      if
      sent by Express Mail, Federal Express or other express delivery service (receipt
      requested) in each case to the appropriate address set forth below:

     

    
      	 If to the Company:	Shumate Industries, Inc.
	 	
              12060
                FM 3083

            
	 	Conroe, Texas 77301
	 	 
	 If to the Purchaser:	At the address set forth on the Purchaser’s
              Signature Page

    

     

    7.8 Faxes
      and Counterparts.
      This
      Agreement may be executed in one or more counterparts. Delivery of an executed
      counterpart of the Agreement or any exhibit attached hereto by facsimile
      transmission shall be equally as effective as delivery of an executed hard
      copy
      of the same. Any party delivering an executed counterpart of this Agreement
      or
      any exhibit attached hereto by facsimile transmission shall also deliver an
      executed hard copy of the same, but the failure by such party to deliver such
      executed hard copy shall not affect the validity, enforceability or binding
      nature effect of this Agreement or such exhibit.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    7.9 Titles
      and Subtitles.
      The
      titles of the paragraphs and subparagraphs of this Agreement are for convenience
      of reference only and are not to be considered in construing this
      Agreement.

    

    IN
      WITNESS WHEREOF, the parties have executed this Agreement as of the date set
      forth on the Purchase Signature Page hereto. 

     

    
      	 	 PURCHASER
	 	 	 
	 	 (By Counterpart Form - SP
              Pages)
	 	 	 
	 	 	 
	 	 	 
	 	
              COMPANY

            
	 	 	 
	 	SHUMATE
              INDUSTRIES, INC.
	 
 	 
 	 
 
	 	By:  	/s/
              Matthew C.
              Flemming 
	 	Matthew C. Flemming 
	 	Chief
              Financial Officer

    

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    PURCHASER
      SIGNATURE PAGE

    

    The
      undersigned Purchaser has read the Stock Purchase Agreement dated as of December
      2, 2005 and acknowledges that execution of this Purchaser Signature Page shall
      constitute the undersigned’s execution of such agreement.

    

    I
      hereby
      subscribe for an aggregate of 416,667 Shares at $0.60 per Share and hereby
      deliver good funds with respect to this subscription for the
      Shares.

    

    

    I
      am a
      resident of the State of Texas. 

    A.
      Earl
      Swift 

    
      
        

      
Please
      print above the exact name(s) in which the Shares are to be
      held

    

    

               

    

    
      	My
              address is:	 [REDACTED]
	 	 
	 	 

    

    
 

    
      
        SP-1

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    I
      acknowledge that the offering of the Shares is subject to the Federal securities
      laws of the United States and state securities laws of those states in which
      the
      Shares are offered, and that, pursuant to the U.S. Federal securities laws
      and
      state securities laws, the Shares may be purchased by persons who come within
      the definition of an “Accredited
      Investor”
as
      that
      term is defined in Rule 501(a) of Regulation D promulgated under the Securities
      Act (“Regulation
      D”).

     

    By
      initialing one of the categories below, I represent and warrant that I come
      within the category so initialed and have truthfully set forth the factual
      basis
      or reason I come within that category. All information in response to this
      paragraph will be kept strictly confidential. I agree to furnish any additional
      information that the Company deems necessary in order to verify the answers
      set
      forth below.

    

    NOTE:
      You must either initial that at least ONE
      category.

    

    Individual
      Purchaser: 

    (A
      Subscriber who is an individual may initial either Category I, II, or
      III)

     

    
      	
              Category
                I

            	           
              	 	
              I
                am a director or executive officer of the Company.

            
	 	 	 	 
	
              Category II

            	
                 
 
X  
                    

            	 	I
              am an
              individual (not a partnership, corporation, etc.) whose individual
              net
              worth, or joint net worth with my spouse, presently exceeds
              $1,000,000.
	 	 	 	 
	 	 	 	
              Explanation.
                In
                calculation of net worth, you may include equity in personal property
                and
                real estate, including your principal residence, cash, short term
                investments, stocks and securities. Equity in personal property and
                real
                estate should be based on the fair market value of such property
                less debt
                secured by such property.

            
	 	 	 	 
	Category
              III	           
              	 	
              I
                am an individual (not a partnership, corporation, etc.) who had an
                individual income in excess of $200,000 in 2003 and 2004, or joint
                income
                with my spouse in excess of $300,000 in 2003 and 2004, and I have
                a
                reasonable expectation of reaching the same income level in
                2005.

            
	 	 	 	 
	 	 	 	 

    

     

    
      
        SP-2

      

      
        
        

        
          

        

      

      
        
        

      

    

    Entity
      Purchasers: 

    

    (A
      Purchaser which is a corporation, limited liability company, partnership, trust,
      or other entity may initial
      either Category IV, V, VI, VII or VIII)

     

    
      	
              Category
                IV

            	           
              	 	The Purchaser is an entity in which
              all of
              the equity owners are “Accredited
              Investors”
              as defined in Rule 501(a) of Regulation D. If
              relying upon this category alone, each equity owner must complete a
              separate copy of this Agreement.
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	
               (describe
                entity)

            
	 	 	 	 
	
              Category
                V

            	           
              	 	The Purchaser is a trust, with total
              assets
              in excess of $5,000,000, not formed for the specific purpose of acquiring
              the Shares offered, whose purchase is directed by a “Sophisticated
              Person”
              as described in Rule 506(b)(2)(ii) of Regulation D.
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	
               (describe
                entity)

            
	 	 	 	 
	Category VI	           
              	 	
              The
                Purchaser is an organization described in Section 501(c)(3) of the
                Internal Revenue Code, corporation, Massachusetts or similar business
                trust, or partnership, not formed for the specific purpose of acquiring
                the Shares, with total assets in excess of $5,000,000. 

            
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	
               (describe
                entity)

            
	 	 	 	 
	Category VII	           
              	 	
              The
                Purchaser is a private business development company as defined
                in Section 202(a)(22) of the Investment Advisers Act of 1940.
                

            
	 	 	 	
            
	 	 	 	 
	 	 	 	 
	 	 	 	
               (describe
                entity)

            
	 	 	 	 

    

     

    
      
        SP-3

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Executed
      this 2nd
      day of
      December, 2005 at Houston, Texas.

    

    SIGNATURES

    

    INDIVIDUAL

    

    

    
      	 	 	
              A.
                Earl Swift

            
	 	 	Name
	 	 	 
	
              /s/
                A. Earl Swift

            	 	
              [REDACTED]

            
	
              Signature
                (Individual)

            	 	Street
              address
	 	 	 
	 	 	
              Address
                to Which Correspondence Should be Directed

            
	 	 	 
	 	 	
              [REDACTED]

            
	Signature
              (All record holders should sign)	 	
              City,
                State and Zip Code

            
	 	 	 
	 	 	
               [REDACTED]

            
	Name(s)
              Typed or Printed	 	Tax Identification
              or
              Social Security Number
	 	 	 
	 	 	 (    
) [REDACTED]
	 	 	
              Telephone
                Number

            
	 	 	 
	Name(s)
              Typed or Printed (All recorded holders should sign)	 	 

    

     

    
      
        SP-4

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    CORPORATION,
      PARTNERSHIP, TRUST ENTITY OR OTHER

    

    

    
      	 	 	
              Address
                to Which Correspondence Should be Directed:

            
	 	 	 
	 	 	 
	Type
              of Entity (i.e., corporation, partnership, etc.)	 	Street
              Address
	 	 	 
	By:
	 	 
	*Signature	 	Tax
              Identification or Social Security Number
	 	 	 
	 	 	 
	State
              of Formation of Entity	 	City,
              State and Zip Code
	 	 	 
	 	 	 
	Name
              Typed or Printed	 	 
	 	 	 
	 Its:
	 	 (
              )
	Title	 	Telephone
              Number

    

     

    *If
      Shares are being subscribed for by an entity, the Certificate of Signatory
      must
      also be completed.

     

    
      
        SP-5

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    CERTIFICATE
      OF SIGNATORY

    

    To
      be
      completed if Shares of Common Stock are being subscribed for by an
      entity.

    

    

    I,__________________________________,
      am the ___________________________ of ___________________________
      (the “Entity”).

    

    I
      certify
      that I am empowered and duly authorized by the Entity to execute and carry
      out
      the terms of the Stock Purchase Agreement and to purchase and hold the shares
      of
      Common Stock. The Stock Purchase Agreement has been duly and validly executed
      on
      behalf of the Entity and constitutes a legal and binding obligation of the
      Entity.

    

    IN
      WITNESS WHEREOF, I have hereto set my hand this ______ day of December,
      2005.

    

    

    
      	 	 
	 	
              Signature

            

    

    

    

    
      
        SP-6

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    ACCEPTANCE

    
 

    AGREED
      AND ACCEPTED:

    

    SHUMATE
      INDUSTRIES, INC.

     

    
      	 
	By: /s/
              Matthew C. Flemming 
	
              Matthew
                C. Flemming

            
	
              Chief
                Financial Officer

            
	 
	Date: December 2,
              2005

    

     

     

    
      
        
          SP-7

        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE
      6.1

    

    USE
      OF PROCEEDS

    

    
      
        
          	$200,000	 	
                   Loan
                    to HemiWedge Valve Corporation, a wholly-owned subsidiary of
                    the Company,
                    (“HemiWedge”)
                    to acquire intellectual property assets pursuant to an asset
                    purchase
                    agreement by and among HemiWedge and certain sellers dated on
                    or about
                    December 2, 2005

                

        

        
          	 	 	 

        

        
          	$50,000	 	Working
                  Capital

        

        
          	 	 	 

        

      

    

    

     

     

     

     

     

     

    Schedule
      6.1

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