Document:

Exhibit 10.1

                                    AGREEMENT

       THIS AGREEMENT is executed effective the 19th day of October, 2005,
between SHUMATE INDUSTRIES INC. (formerly EXCALIBUR INDUSTRIES, INC.), a
Delaware corporation ("Industries"), SHUMATE MACHINE WORKS, INC., a Texas
corporation ("Machine"), MATTHEW FLEMMING, an individual ("Flemming"), LARRY
SHUMATE, an individual ("Shumate"), RUSS CLARK, an individual ("Clark"), and
STILLWATER NATIONAL BANK AND TRUST COMPANY, a national banking association (the
"Lender"). Flemming, Shumate and Clark are sometimes referred to herein as
"Gurantor" or "Guarantors."

                                R E C I T A L S:

       WHEREAS Industries, Machine and/or Flemming are currently obligated to
the Bank the following principal amounts totaling approximately $13,808,398, as
follows:

      SNB Note #5195802                          1,100,000
      SNB Note #5198301                          3,500,000
      SNB Note #5423900                            212,811
      SNB Note #5550600                            550,000
      SNB Note #5528400                            500,000
      SNB Note #5732800                          2,450,000
      SNB Note #5732700 (LOC)                      791,861
      SNB Note #5831900                          1,100,000
      Overdraft of DDA #6175206                  1,574,356
      TW Consulting Notes                        2,710,183
      TW Accrued Interest (est.)                 1,000,000
                                              ------------
                                                15,489,211

The above described principal indebtedness, together with all interest,
penalties and fees incurred in connection therewith, is referred to hereafter as
the "Prior Debt" and all loan agreements, notes, security agreements,
guaranties, mortgages and other documents executed in connection with the Prior
Debt are hereafter referred to as the "Prior Loan Documents."

       WHEREAS Industries and Machine are indebted to the United States ex rel
Internal Revenue Service in an amount not exceeding $237,546.56 as of October
19, 2005, which debt is secured by a lien covering certain assets of Industries
and Machine (the "IRS Lien"); and

       WHEREAS there presently exist certain defaults under the terms of the
Prior Loan Documents;

       NOW, THEREFORE, in consideration of the mutual agreements between the
parties, it is agreed as follows:

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1. RESTRUCTURE AND NEW LENDING. Pursuant to this Agreement, the parties agree to
a complete restructuring of the Prior Debt, together with additional lending
from the Lender, all to be effectuated through the issuance of amended and
restated instruments, new instruments and common stock. This Agreement together
with all notes, security agreements, mortgages, guaranties, securites and other
documents and instruments executed to effectuate this Agreement shall be
referred to hereafter as the "Restructure Documents."

2. CLOSING. Subject to all of the terms and conditions set forth in this
Agreement being satisfied, the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Lender's
counsel on such date, at such place and at such time (the "Closing Date") within
two (2) business days after the satisfaction or waiver of the last of the
conditions set forth in Sections 10 and 11 and hereof as shall be determined by
the mutual consent of the parties hereto.

3. ACQUISITION OF LEASES. [Deleted.]

4. CREDIT FACILITIES. In accordance with this Agreement, the Lender shall make
available to Industries, Machine, and Flemming certain credit facilities upon
the following terms:

       4.1.   Evidence of Indebtedness. The indebtedness under the credit
              facilities will be evidenced as follows:

              4.1.1. Amended & Restated Note. At Closing, Industries and Machine
                     will sign an amended and restated note in form and
                     substance and payable on the terms approved by Lender (the
                     "Amended and Restated Note") in the amount of $2,500,000,
                     plus any excess on the existing line of credit, including
                     deposit account overdrafts, if any. The amended and
                     restated note shall amend and restated SNB Note Nos.
                     5195802, 5198301, 5423900, 5550600, 5528400, 5732800 and
                     5831900 and shall be countersigned by the Lender to
                     evidence that the notes are being amended, restated, and
                     superseded by the Amended and Restated note. Interest only
                     will be paid monthly for three months following Closing.
                     Thereafter, Industries and Machine will make 27 equal
                     monthly payments in an amount sufficient to fully amortize
                     principal and interest on the Amended and Restated Note
                     over 120 months. The Amended and Restated Note shall mature
                     and become due 30 months after closing, at which time,
                     Industries and Machine will make a balloon payment of the
                     entire outstanding principal balance together with all
                     accrued interest and other charges, if any. The following
                     terms will also apply:

                     a)     Use of Proceeds. Proceeds of the Amended and
                            Restated Note will be applied as follows: $303,000
                            will be advanced to the sellers of certain machines
                            ($83,000.00 will be paid to Shumate for the purchase
                            of that certain Daewoo Puma 300LC, Serial # P25L0324
                            and $220,000.00 will be paid to Swift for the
                            purchase of that certain Mitsubishi 800 M-80C,
                            Serial # CH4091); $100,000 will be available to use
                            for Industries' purchase of the stock of Machine;
                            $2,962,000.00 will be deemed to be applied to the
                            Prior Debt.

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                     b)     Collateral. The Amended and Restated Note will be
                            secured by a first priority security interest
                            covering all existing and future assets of
                            Industries and Machine, including but not limited
                            to, accounts receivable, inventory, equipment, and
                            intangibles.

                     c)     Additional Terms. The Amended and Restated Note will
                            be cross collateralized and cross defaulted with the
                            Revolving Note (as defined below) and the IRS Note
                            (as defined below).

              4.1.2. IRS Note. As soon as reasonably possible after Closing,
                     Industries and Machine will sign a term note in an amount
                     equal to the settlement of the existing IRS lien not to
                     exceed $237,546.56 ("IRS Note"). Commencing 30 days after
                     execution of the IRS Note, Industries and Machine will make
                     48 equal monthly payments in an amount sufficient to fully
                     amortize principal and interest on the IRS Note over 48
                     months. The IRS Note shall mature and become due 48 months
                     after closing, at which time, Industries and Machine will
                     pay the entire outstanding principal balance together with
                     all accrued interest and other charges, if any. The
                     following terms shall also apply:

                     a)     Use of Proceeds. The proceeds of the IRS Note shall
                            be disbursed to the IRS to pay the debt secured by
                            the IRS tax lien.

                     b)     Collateral. The IRS Note will be secured by a first
                            priority security interest in all existing and
                            future assets of Industries and Machine, including
                            but not limited to, accounts receivable, inventory,
                            equipment and intangibles.

                     c)     Additional Terms. The IRS Note will be cross
                            collateralized and cross defaulted with Revolving
                            Note and the Amended and Restated Note.

                     d)     Guarantors. Flemming will guarantee 50% of the loan
                            amount under the IRS Note, Shumate shall guarantee
                            50% of the loan amount under the IRS Note, and Clark
                            shall guarantee 25% of the loan amount under the IRS
                            Note. As the principal is reduced, the amount of the
                            guaranties will not decline.

                     e)     Flemming, Shumate, and Clark shall each be referred
                            to as a "Guarantor" and collectively as the
                            "Guarantors."

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              4.1.3. Revolving Line of Credit. At Closing, the Lender will
                     provide Industries and Machine a revolving line of credit
                     as follows:

                     a)     Note. Industries and Machine will execute and
                            deliver to the Lender a promissory note of even date
                            herewith in the principal face amount of
                            $1,000,000.00 (the "Revolving Note"), which will be
                            in form and substance and payable on the terms
                            approved by the Lender. It is specifically agreed
                            that the aggregate of advances made during the term
                            of the Revolving Note may exceed the face amount
                            thereof, but the unpaid principal balance due on the
                            Revolving Note will not exceed the lesser of (i) the
                            Borrowing Base (as defined below), or (ii) the face
                            amount of the Revolving Note.

                     b)     Initial Balance. The initial balance of the
                            Revolving Note will be the balance of the existing
                            line of credit less the excess transferred to the
                            Amended and Restated Note.

                     c)     Advances. Advances under the Revolving Note will be
                            limited to the Borrowing Base. The Borrowing Base
                            shall be determined on a monthly basis upon the
                            submission to the Lender of a signed monthly
                            borrowing base certificate" in form acceptable to
                            the Lender. Each monthly borrowing base certificate
                            will be supported by a current accounts receivable
                            aging, and such other documentation that may
                            reasonably be required by the Lender to determine
                            the Borrowing Base. After determination of the
                            Borrowing Base for any given month, Industries and
                            Machine may obtain advances by submitting an advance
                            request in form acceptable to the Lender.

                     d)     Maturity. Notwithstanding anything herein to the
                            contrary, the Revolving Note will mature and become
                            fully due and payable 12 months from the Closing
                            Date.

                     e)     Collateral. The Revolving Note will be secured by a
                            first priority security interest in all existing and
                            future assets of Industries and Machine, including,
                            but not limited to, accounts receivable, inventory,
                            equipment, and intangibles.

                     f)     Other Terms. The Revolving Note will be cross
                            collateralized and cross defaulted with the Amended
                            and Restated Note and the IRS Note.

                     g)     Repayment. The Revolving Note will be payable in
                            monthly installments of interest only, with
                            outstanding principal and interest due upon
                            maturity.

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              4.1.4. Convertible Note. At the Closing, Industries and Machine
                     will sign a convertible note in the amount of $2,500,000
                     (the "Convertible Note"). Interest shall accrue from the
                     Closing Date until the earlier of (i) conversion or (ii) 24
                     months, at which time the accrued interest will be
                     capitalized into principal. Beginning at the end of the
                     ninth quarter, Industries and Holdings will make quarterly
                     interest payments. The Convertible Note will mature on the
                     earlier of sixty months from the date of issuance of the
                     Convertible Note or the date on which the Convertible Note
                     is fully converted into Common Stock (as defined below).
                     All outstanding principal and interest will be due at
                     maturity.

                     a)     Conversion. The principal and accrued interest on
                            the Convertible Note will be convertible into shares
                            ("Conversion Shares") of common stock of Industries
                            ("Common Stock") at a conversion rate of $1.00 per
                            share (on a post-reverse split basis). The
                            conversion price of the Convertible Note will be
                            subject to proportional adjustment for stock splits,
                            stock dividends, recapitalizations, and the like.
                            The Convertible Note shall be convertible at the
                            option of the Lender into Conversion Shares at the
                            then applicable conversion price.

                     b)     Collateral. The Convertible Note will be
                            collateralized by all business assets of Industries,
                            including 100% of the issued and outstanding capital
                            stock of Machine.

                     c)     Additional Terms. After twenty-four months, Machine
                            shall be obligated, to the extent net income is
                            available in a given quarter, to declare a dividend
                            sufficient to enable its shareholder to meet the
                            current obligations under the Convertible Note. This
                            obligation of Machine is cumulative and Machine
                            shall be a party to the Convertible Note for the
                            sole purpose of binding itself to these covenants
                            but shall not otherwise be an obligor under the
                            Convertible Note.

                     d)     Registration Rights.

                            1)     Company Registration: The Lender shall be
                                   entitled to "piggy-back" registration rights
                                   on all registrations of any other equity
                                   securities of Industries, subject to the
                                   right, however, of Industries and its
                                   underwriters to reduce the number of shares
                                   proposed to be registered pro rata in view of
                                   market conditions.

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                            2)     Expenses: Industries shall bear registration
                                   expenses (exclusive of underwriting discounts
                                   and commissions) of all such piggy-back
                                   registrations.

                            3)     Term of Rights: The lesser of five (5) years
                                   after the date of this Agreement or date
                                   after which a Lender may dispose of all of
                                   its shares under Rule 144 within a ninety
                                   (90) day period.

                            4)     Other Provisions: Other provisions shall be
                                   contained in a Registration Rights Agreement
                                   as are reasonable, including cross
                                   indemnification, the period of time in which
                                   the Registration Statement will be kept
                                   effective, underwriting arrangements,
                                   transfer rights and lock-up provisions.

              4.1.5. Flemming Note. At Closing, Flemming will execute and
                     deliver to the Lender a promissory note in the amount of
                     $350,000 (the "Flemming Note"), which shall mature 30
                     months after the Closing Date. All principal and interest
                     on the Flemming Note will be due at maturity. The following
                     terms shall also apply:

                     a)     Use of Proceeds. The proceeds of the Flemming Note
                            will be used to fund Flemming's $250,000 capital
                            contribution to Industries with the remainder
                            applied to the existing personal indebtedness of
                            Flemming to the Lender.

                     b)     Collateral. The Flemming Note will be secured by all
                            of Flemming's existing and future equity and other
                            interests in or right to payment or property from
                            Industries or Machine, excluding Flemming's ordinary
                            compensation earned from Machine.

                     c)     Other Terms. The Lender will release Flemming from
                            the balance of his obligations under the Prior Debt.
                            As a part of such release, the Lender will dismiss
                            all litigation, and release all judgments, if any,
                            against Flemming arising from his guaranty of the
                            Prior Debt.

       4.2.   Interest. Interest on each of the credit facilities will be paid
              at the interest rate equal to the Prime Rate plus two percent (2
              %) per annum, adjusted on each day on which a change in the Prime
              Rate occurs (the "Interest Rate"). "Prime Rate" means the prime
              rate as published in the "Money Rates Section" of the Wall Street
              Journal, which rate is not necessarily the lowest rate of interest
              charged by the Lender. All interest on the Amended and Restated
              Note will be calculated for the actual number of days elapsed at a
              per diem charge based on a year consisting of 360 days.

       4.3.   Notation of Advances. The Lender shall have the right (acting at
              its sole discretion with or without the consent of Industries and
              Machine) from time make notations of advances by it to Industries
              and Machine and payments to it by Industries and Machine on any
              liability ledger records maintained by or for the Lender as to
              indebtedness of Industries and Machine, and such ledger shall be
              presumed correct until the contrary is established by Industries
              or Machine. Upon demand by the Lender at any time or from time to
              time, Industries or Machine will confirm and admit by signed
              writing the exact amount of indebtedness for principal and
              interest then outstanding under this Agreement. Any billing
              statement or accounting rendered by or for the Lender shall be
              conclusive and fully binding on Industries and Machine unless
              specific written notice of exception is given to the Lender by
              Industries and Machine within thirty (30) days thereafter.

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<PAGE>

       4.4.   Authority to Request Advances. The Lender may make loans in any
              amount and in any manner requested orally or in writing by any
              officer or agent of Industries and Machine or by any person
              reasonably believed by the Lender to be an officer or agent of
              Industries and Machine. Loan proceeds may be disbursed by deposit
              in any deposit account of Industries or Machine, by an instrument
              payable to Industries or Machine.

       4.5.   Prepayment. Industries and Machine may prepay the credit
              facilities at any time, without premium or penalty. Each
              prepayment will be applied by the Lender first to the payment of
              unpaid fees and expenses, then to accrued interest on the
              Revolving Note and then to the payment of principal. If at any
              time the aggregate outstanding principal balance of the debt under
              the Revolving Note exceeds the amount then permitted under the
              Borrowing Base, Industries and Machine shall immediately, without
              notice or demand, make payment upon the Revolving Note in an
              amount equal to the excess.

       4.6.   Lending Restrictions. Notwithstanding any other provision of this
              Agreement or the other Restructure Documents, any advance herein
              provided for will not be required to be made by the Lender: (a) if
              after making such advance, the Lender would, as determined in the
              sole discretion of the Lender, exercised in good faith, be in
              violation of any regulatory requirements imposed by any branch of
              government of the United States of America or any state thereof;
              (b) if any event of Default (as defined in Section 12 below) has
              occurred and has not been cured by Industries and Machine or
              waived by the Lender; (c) if, since the Closing Date and up to the
              date of the advance request, any litigation or governmental
              proceeding has been instituted against Industries, Machine, any
              Guarantor or any of the Collateral (defined below), which, if
              decided adversely, will, in the reasonable opinion of the Lender,
              adversely affect to a material extent, the financial condition or
              continued operation of Industries or Machine; or (d) if, since the
              Closing Date and up to the date of the advance request, any loss,
              destruction, liens, claims, or encumbrances against any of the
              Collateral (other than those in favor of the Lender) have
              occurred, been made or filed and have not been removed or settled
              to the satisfaction of the Lender.

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5. BORROWING BASE. "Borrowing Base" means, as of any given date, the sum of the
following: (1) eighty percent (80%), or at the Lender's sole discretion any
lesser percentage designated upon sixty (60) days notice, of Eligible Trade
Accounts Receivable, plus (2) fifty percent (50%) of the value of the inventory
with such inventory availability being limited to 50% of the borrowing base and
capped at $100,000, up to a maximum of One Million and No/100 Dollars
($1,000,000.00) and subject to the following:

       5.1.   "Trade Accounts Receivable" means, as of any given date, all
              accounts receivable of Industries or Machine for goods sold and
              delivered and services rendered by Industries or Machine in the
              ordinary course of the business presently conducted by each of
              them and representing amounts then invoiced and due and owing. A
              Trade Account Receivable shall be an "Eligible Trade Account
              Receivable," and shall be included in the Borrowing Base, only if
              and so long as it meets each and all of the following
              requirements:

              5.1.1. It is a valid, genuine and legally enforceable obligation,
                     subject to no defense, set off or counter-claim, of the
                     account debtor or other obligor named herein or in the
                     records of Industries or Machine pertaining thereto, and
                     that neither Industries nor Machine has received from the
                     account debtor or other obligor any notification
                     repudiating such obligation or asserting that such
                     obligation is subject to any defense, set off or
                     counterclaim; and

              5.1.2. It is owned by Industries or Machine free and clear of all
                     interests, liens, attachments, encumbrances, and security
                     interests except the security interest granted to the
                     Lender pursuant to this Agreement; and

              5.1.3. The account debtor or other obligor is located in the
                     United States; and

              5.1.4. Not more than ninety (90) days have expired since the date
                     of invoice; or, if the Lender in its sole discretion
                     accepts as eligible a Trade Account Receivable which is due
                     on a date stated in the invoice, not more than thirty (30)
                     days have expired since the date stated; and

              5.1.5. Neither Industries nor Machine has received notice from the
                     Lender that the credit of the account debtor is not
                     satisfactory to the Lender for any reason; and

              5.1.6. The account debtor is not an entity in which Industries or
                     Machine or any Guarantor has a controlling interest; and

              5.1.7. Eligible Trade Accounts Receivable shall not include any
                     account receivable of the same account debtor to
                     Industries, Machine, or any or the Guarantors in excess of
                     fifteen percent (15%) of the then Eligible Trade Accounts
                     Receivable calculated after ineligible accounts; and

              5.1.8. The entire receivable of one account debtor becomes
                     ineligible if more than ten percent (10%) of the total due
                     is over ninety (90) days past due, unless the ten percent
                     (10%) over ninety (90) days is attributable to an isolated
                     dispute over a specific invoice.

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<PAGE>

       5.2.   The value of Inventory used in determining the Borrowing Base
              shall equal the value of raw material plus the value of finished
              product and shall not include the value of any work in progress.

6. COLLATERAL SECURITY. The performance of all covenants and agreements
contained in this Agreement and in the other documents executed or delivered as
a part of this transaction and the payment of the notes and all renewals,
amendments and modifications thereof shall be secured by the following, which
shall be delivered at the Closing:

       6.1.   Security Agreement. Industries and Machine will grant to the
              Lender a security interest covering the following:

              6.1.1. Accounts. All of Industries and Machine's accounts and
                     contracts receivable of any kind whether now existing or
                     hereafter arising (herein called the "Accounts"); all
                     chattel papers, documents and instruments relating to the
                     Accounts; and all rights now or hereafter existing in and
                     to all security agreements, leases, and other contracts
                     securing or otherwise relating to any Accounts or any such
                     chattel papers, documents and instruments;

              6.1.2. Furniture, Fixtures, and Equipment. All of Industries and
                     Machine's furniture, fixtures and equipment in all of its
                     forms whether now owned or hereafter acquired and wherever
                     located (herein called the "Equipment"); all parts thereof
                     and all accessions or additions thereto, whether now owned
                     or hereafter acquired;

              6.1.3. General Intangibles. All of Industries and Machine's
                     general intangibles of any kind whether now existing or
                     hereafter arising (herein called the "General
                     Intangibles"); all chattel papers, documents and
                     instruments relating to the General Intangibles; and all
                     rights now or hereafter existing in and to all security
                     agreements, leases, licenses, permits, patents,
                     distribution agreements and contracts securing or otherwise
                     relating to any General Intangibles or any such chattel
                     papers, documents and instruments and all of Industries and
                     Machine's lien rights against other persons whether
                     statutory, contractual, or by common law with respect to
                     the leases, Inventory or other collateral described in this
                     Agreement;

              6.1.4. Inventory. All of Industries and Machine's inventory in all
                     of its forms whether now owned or hereafter acquired and
                     wherever located (herein called the "Inventory"), and all
                     accessions or additions thereto and products thereof,
                     whether now owned or hereafter acquired;

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              6.1.5. Other. Without in any way limiting or modifying the
                     foregoing in any respect, all of Industries and Machine's
                     goods, chattels, business records, contracts, contract
                     rights, advertising agreements, tax refunds, documents of
                     title, fixtures, insurance policies and proceeds, patents,
                     trademarks, service marks, logos, trade names, copyrights
                     and applications therefor, licenses, licensing fees,
                     permits, approvals, consents, certificates, stock, surveys,
                     engineering reports, tools, landscaping, machinery,
                     furniture, furnishing, business machines, appliances,
                     vehicles, trailers, rolling stock, deposits, security
                     deposits, money, securities, claims, demands, causes of
                     action, refunds, rebates, income and all other tangible and
                     intangible real, personal or mixed property whether now
                     owned or hereafter acquired;

              6.1.6. Additional Property. Any additional Property from time to
                     time delivered to or deposited with the Lender as security
                     pursuant to the terms of this Agreement; and

              6.1.7. Proceeds. All proceeds, products, additions to,
                     replacements of, substitutions for, and accessions of any
                     and all Property described above.

              The property described in this section shall be referred to
              hereafter as the "Collateral."

       6.2.   Flemming Security Agreement. Flemming will execute and deliver to
              the Lender a security agreement covering all of Flemming's
              existing and future equity and other interests in or right to
              payment or property from Industries or Machine, excluding
              Flemming's ordinary compensation earned from Machine.

       6.3.   Lockbox Agreement. The Lender and Industries and Machine agree
              that (i) Lender will establish a lockbox account (the "Lockbox")
              for the receipt of payments on account and accounts receivable of
              Industries and Machine; (ii) Industries and Machine will cooperate
              with Lender to assure that all account debtors of Industries and
              Machine are notified to make payments on account to the Lockbox;
              and (iii) without limiting the requirement that all account
              debtors make payment only to the Lockbox, any payments received
              directly by Industries or Machine will be deposited before 11:00
              a.m. the following business day into the Lockbox. The Lockbox will
              be swept by the Lender on a daily basis and the funds therein will
              be applied to the principal balance on the Revolving Note,
              provided however, that, on or about the 15th day of each month,
              the funds swept from the lockbox will be applied first to pay the
              outstanding interest on the Revolving Note and then to principal
              balance.

7. GUARANTIES. Flemming and Shumate will each provide a limited guaranty equal
to 50% of the dollar amount of the IRS Note. Clark will provide a limited
guaranty equal to 25% of the IRS Note. These guaranties are cumulative in favor
of the Lender. As the principal is reduced, the amount of the guaranties will
not decline.

8. CONVERSION OF PORTION OF PRIOR DEBT. At the Closing, $2,368,000 of the Prior
Debt (the "Conversion Amount") will be converted into a number of shares (the
"Shares") of Common Stock equal to the quotient obtained by dividing the
Conversion Amount by $1.00 per share (the "Conversion Price").

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       8.1.   Number of Shares. Industries and Machine represent and warrant
              that, as of Closing, the Shares will constitute not less than
              twenty percent (20%) of the issued and outstanding common stock of
              Industries.

       8.2.   No Adjustments. It is anticipated that Industries may combine, by
              way of reverse stock split, the outstanding shares of Common Stock
              into a smaller number of shares. It is hereby understood that the
              Conversion Price set forth in Section 8 shall not be adjusted if
              Industries, at any time while this Agreement is in effect, (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 Industries.

       8.3.   Taxes. The issuance of certificates for the Shares on conversion
              of the Conversion Amount shall be made without charge to the
              Lender for any documentary stamp or similar taxes that may be
              payable in respect of the issue or delivery of such certificate.

       8.4.   Registration Rights.

              8.4.1. Definitions. As used in this Section 8.4, the following
                     terms shall have the following meanings:

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

                     b)     Losses: See Section 8.4.6 hereof.

                     c)     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.

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                     d)     Registration Expenses: All reasonable expenses
                            incurred by Industries in complying with Sections
                            8.4.3 and 8.4.4 hereof, including, without
                            limitation, all registration and filing fees,
                            printing expenses, fees and disbursements of counsel
                            for Industries, 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.

                     e)     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.

                     f)     Registration Statement: Any registration statement
                            of Industries 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.

                     g)     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).

                     h)     SEC: The Securities and Exchange Commission.

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

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

              8.4.2. Securities Subject to the Registration Rights. The
                     securities entitled to the benefits of the Registration
                     Rights set forth in this Section 8.4 are the Registrable
                     Securities.

              8.4.3. Registration Rights. If, at any time after the Closing and
                     expiring on the fifth anniversary of the Closing,
                     Industries 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 Lender
                     of its intention to do so. If the Lender notifies
                     Industries within twenty (20) days after receipt of any
                     such notice of its desire to include any Registrable
                     Securities in such proposed Registration Statement,
                     Industries shall afford the Lender 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
                     fifty anniversary of the Closing Date, subject to the terms
                     and conditions set forth in this Section 8.4.

                                       12
<PAGE>

              8.4.4. Holdback and Lock-Up Agreements.

                     a)     Restrictions on Public Sale by the Lenders of
                            Registrable Securities. Each holder of Registrable
                            Securities whose Registrable Securities are covered
                            by a Registration Statement filed pursuant to
                            Section 8.4.3 hereof agrees, if requested by the
                            managing underwriters in an underwritten offering
                            (to the extent timely notified in writing by
                            Industries or the managing underwriters), not to
                            effect any public sale or distribution of securities
                            of Industries 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.

                     b)     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.

              8.4.5. Expenses and Procedures.

                     a)     Expenses of Registration. All Registration Expenses
                            (exclusive of underwriting discounts and
                            commissions) shall be borne by Industries. 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.

                     b)     Registration Procedures. Industries 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, Industries will furnish such number of
                            Prospectuses and other documents incident thereto as
                            the holders or underwriters from time to time may
                            reasonably request.

                                       13
<PAGE>

                     c)     Information. Industries 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 Industries may from time to time
                            reasonably request and Industries may exclude from
                            such registration the Registrable Securities of any
                            seller who unreasonably fails to furnish such
                            information after receiving such request.

                     d)     Delay or Suspension. Notwithstanding anything herein
                            to the contrary, Industries 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
                            Industries shall have determined, after consultation
                            with its counsel, that Industries is required to
                            disclose any material corporate development which
                            Industries determines could reasonably be expected
                            to have a material effect on Industries. Each holder
                            of Registrable Securities agrees by acquisition of
                            such Registrable Securities that, upon receipt of
                            any notice from Industries 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 Industries 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.
                            Industries 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. Industries agrees to use its best efforts
                            to cause any Suspension Period to be terminated as
                            promptly as possible.

                     e)     Blue Sky. Industries 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 Industries deems
                            appropriate or, in the case of an underwritten
                            public offering, the managing underwriter shall
                            reasonably request, provided that Industries 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.

                                       14
<PAGE>

                     f)     Notification of Material Events. Industries 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.

              8.4.6. Indemnification.

                     a)     Indemnification by Maker. Industries 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 Industries by such holder
                            for use therein; provided, however, that Industries
                            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, Industries 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.

                                       15
<PAGE>

                     b)     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 Industries in writing such
                            information as Industries 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, Industries, and its officers, directors, agents
                            and employees, each person who controls Industries
                            (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 Industries
                            for use in such Registration Statement, Prospectus
                            or preliminary prospectus. Industries 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 Industries to obtain any such indemnity shall not
                            relieve Industries of any of its obligations
                            hereunder. Notwithstanding any provision of this
                            Section 8.4.6 to the contrary, the liability of a
                            holder of Registrable Securities under this Section
                            8.4.6 shall not exceed the purchase price received
                            by such holder for the Registrable Securities sold
                            pursuant to a Registration Statement or Prospectus.

                                       16
<PAGE>

                     c)     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 8.4.6, 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.

                                       17
<PAGE>

                     d)     Contribution. If the indemnification provided for in
                            this Section 8.4.6 is unavailable to an indemnified
                            party under Section 8.4.6(a) or 8.4.6(b) 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 8.4.6(c), any legal
                            or other fees or expenses reasonably incurred by
                            such party in connection with any action, suit,
                            claim, investigation or proceeding.

                     e)     The parties hereto agree that it would not be just
                            and equitable if contribution pursuant to this
                            Section 8.4.6 (d) 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.

                                       18
<PAGE>

              8.4.7. Rule 144. Industries 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, Industries shall deliver
                     to such holder a written statement as to whether Industries
                     has complied with such requirements. Notwithstanding the
                     foregoing, nothing in this Section 8.4.7 shall be deemed to
                     require Industries to register any of its securities under
                     any section of the Exchange Act.

              8.4.8. 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.

9. RELEASES. The parties agree that the following releases will be delivered at
the Closing of the transactions contemplated herein:

       9.1.   Companies. At the Closing, the Lender shall release Industries,
              Holding, and Machine from their obligations for payment of the
              Prior Debt except to the extent that the Prior Debt is amended and
              restated and provision for payment is made herein, in the Amended
              and Restated Note, the IRS Note, the Revolving Note, or in the
              Convertible Note. As a part of such release, the Lender will
              dismiss all litigation, and release all judgments, if any, against
              Industries, Holding, and Machine arising out of or relating to the
              Prior Debt. Unless otherwise expressly amended pursuant to the
              Restructure Documents, all other terms of the Prior Loan Documents
              shall remain in effect.

       9.2.   Flemming. At Closing, the Lender shall release Flemming from his
              obligation for payment of the Prior Debt except to the extent that
              the Prior Debt is amended and restated and provision for payment
              is made herein, in the Flemming Note or in Flemming's guaranty. As
              a part of such release, the Lender will dismiss all litigation,
              and release all judgments, if any, against Flemming arising from
              his guaranty of the Prior Debt. Unless otherwise expressly amended
              pursuant to the Restructure Documents, all other terms of the
              Prior Loan Documents shall remain in effect.

       9.3.   Lender. At Closing, Industries, Machine, and Flemming shall
              jointly and severally release the Lender from any and all claims
              arising in connection with or relating to the Prior Debt.

                                       19
<PAGE>

10. CONDITIONS OF LENDING. The obligation of the Lender to perform this
Agreement and to make the initial or any future advances under any of the notes
executed pursuant to the Agreement is subject to the continued performance by
Industries, Machine, Flemming, Shumate, and Clark of the following conditions
precedent:

       10.1.  Flemming Capital Contribution. At Closing, Flemming will make a
              capital contribution to Industries in the amount of $250,000. Such
              capital contribution will be in the form of a cash payment to the
              Lender, which shall be applied to the Prior Debt.

       10.2.  Stockholder Approval. The existing stockholders of Industries
              shall approve the terms of the recapitalization as provided herein
              and the accompanying dilutions of existing outstanding common
              stock.

       10.3.  Restructure Documents; Collateral. The Restructure Documents and
              all other instruments and documents incidental to the transactions
              contemplated hereby shall have been duly executed, acknowledged
              (where appropriate), and delivered to the Lender by Industries and
              Machine, all in form and substance satisfactory to the Lender.

       10.4.  Settlement with IRS. [Intentionally omitted.]

       10.5.  Prohibitive Orders. No order, writ or injunction of any court or
              administrative agency is in effect or is being sought prohibiting
              the transactions contemplated by this Agreement or the other
              Restructure Documents.

       10.6.  Authority. The Lender shall have received a certificate of
              incorporation, certificate of good standing, a certified copy of
              the bylaws and certified copies of corporate resolutions and other
              documents reasonably required to authorize the execution, delivery
              and performance of the Restructure Documents by Industries and
              Machine, all in form and substance satisfactory to the Lender.

       10.7.  Representations and Warranties . The representations and
              warranties set forth in this Agreement shall be true and correct
              on and as of Closing, the initial advance, and each additional
              advance with the same effect as if such representations and
              warranties had been made on and as of such date and there shall
              have occurred.

       10.8.  Opinion of Counsel. The Lender shall have received an opinion of
              counsel for Industries and Machine stating that, subject to
              standard assumptions, qualifications, exceptions, and
              limitations):

              10.8.1. Organization and Existence. Industries and Machine are
                      corporations duly incorporated and validly existing under
                      the laws of their respective states of incorporation.
                      Industries and Machine have the corporate power to
                      execute, deliver and perform their respective obligations
                      under the Restructure Documents and to own their
                      respective properties and to conduct their respective
                      businesses in the manner presently conducted, except where
                      the failure to so qualify would not have a material
                      adverse effect on Industries and Machine.

                                       20
<PAGE>

              10.8.2. Power and Authority; Validity. Each of the Restructure
                      Documents has been duly authorized, executed and delivered
                      by Industries and Machine, and if an action or proceeding
                      was brought in a California court to enforce any
                      Transaction Document and the court was to apply the laws
                      of the State of California to govern and interpret such
                      Transaction Document, the Transaction Document would
                      constitute the valid and binding obligation of Industries
                      and Machine, enforceable against it in accordance with its
                      terms;

              10.8.3. No Violations. The execution and delivery by Industries
                      and Machine of the Restructure Documents and the
                      consummation by Industries and Machine of the transactions
                      contemplated thereby will not contravene, breach or result
                      in any default under the certificate of incorporation or
                      bylaws of Industries and Machine or, to counsel's
                      knowledge, under any agreement or other legally binding
                      instrument to which Industries or Machine is a party, and,
                      to counsel's knowledge, will not result in the violation
                      by Industries and Machine of any statute, regulation or
                      law to which Industries and Machine are subject, except in
                      each case, for conflicts, breaches or defaults which in
                      the aggregate would not materially hinder or impair the
                      consummation of the transactions contemplated by the
                      Restructure Documents or have a material adverse effect on
                      the Lender.

              10.8.4. Collateral. If an action or proceeding was brought to
                      enforce any security interest under the Restructure
                      Documents and the court was to apply the Model Uniform
                      Commercial Code to govern and interpret the Restructure
                      Documents, the Restructure Documents are sufficient to
                      create in favor of the Lender an enforceable security
                      interest in those items and types of collateral described
                      in the Restructure Documents to the extent provided by the
                      Model Uniform Commercial Code.

       10.9.  No Default. There shall not exist any Event of Default under this
              Agreement or any event which, with the giving of notice or the
              lapse of time (or both) would become an Event of Default
              thereunder; and

       10.10. Deliveries. Industries and Machine shall have delivered the
              following to the Lender:

              10.10.1.  Notes. The Amended and Restated Note, the Revolving
                        Note, and the Convertible Note;

              10.10.2. Security Agreement. A security agreement duly executed
                        by Industries and Machine, in form and substance
                        satisfactory to the Lender, granting the Lender a
                        security interest in the Collateral;

                                       21
<PAGE>

              10.10.3.  Resolutions. Copies of resolutions of the board of
                        directors of Industries and Machine authorizing the
                        execution, delivery and performance of the Restructure
                        Documents by Industries and Machine;

              10.10.4.  Articles and Certificate. A copy of the articles of
                        incorporation of Industries and Machine and a
                        certificate of good standing as to Industries and
                        Machine issued by the secretary of state of the
                        appropriate state;

              10.10.5.  Schedules. All collateral schedules, financing
                        statements, security interest, subordination agreements,
                        releases and termination statements which the Lender may
                        request to assure the creation, perfection and priority
                        of the security interests created by the security
                        agreement;

              10.10.6.  Lock Box Agreement. Lock box agreement duly executed by
                        Industries and Machine in form and substance
                        satisfactory to the Lender, defining how payments of
                        accounts receivable are to be paid and accounted for;

              10.10.7.  Guaranties. Guaranty Agreements in form and substance
                        satisfactory to the Lender executed by each of the
                        Guarantors;

              10.10.8.  UCC Financing Statements. UCC financing statements
                        describing the collateral securing the repayment of the
                        indebtedness and UCC financing statements for Industries
                        and Machine;

              10.10.9.  Subscription Agreement. A subscription agreement for the
                        Flemming capital contribution referred to in Section
                        10.1;

              10.10.10. Bills of Sale. Bills of sale reflecting evidence that
                        Machine has acquired the equipment referred to in
                        Section 4.1.1.a;

              10.10.11. Common Stock. The certificates representing the Shares
                        in definitive form and registered in the name of the
                        Lender.

              10.10.12. Settlement and Release Agreements; Dismissals. One or
                        more settlement and release agreements, in form and
                        substance satisfactory to the Lender, releasing such
                        persons from any and all claims arising out of or
                        relating to the Prior Debt except as set forth Article
                        9.

11. CONDITIONS OF CLOSING BY INDUSTRIES, MACHINE, FLEMMING, SHUMATE, AND CLARK.
The obligations of Industries, Machine, Flemming, Shumate, and Clark to perform
this Agreement and consummate the transactions contemplated hereby, is subject
to the performance by Lender of each of the following conditions precedent:

       11.1.  Stockholder Approval. The existing stockholders of Industries
              shall approve the terms of the recapitalization as provided herein
              and the accompanying dilutions of existing outstanding common
              stock.

                                       22
<PAGE>

       11.2.  Restructure Documents. The Restructure Documents and all other
              instruments and documents incidental to the transactions
              contemplated hereby shall have been duly executed, acknowledged
              (where appropriate), and delivered to by the Lender, all in form
              and substance satisfactory to Industries.

       11.3.  Prohibitive Orders. No order, writ or injunction of any court or
              administrative agency is in effect or is being sought prohibiting
              the transactions contemplated by this Agreement or the other
              Restructure Documents.

       11.4.  Deliveries. Industries and Machine shall have delivered the
              following to the Lender:

              11.4.1.   Subscription Agreement. A subscription agreement for the
                        Flemming capital contribution referred to in Section
                        10.1;

              11.4.2.   Bills of Sale. Bills of sale reflecting evidence that
                        Machine has acquired the equipment referred to in
                        Section 4.1.1.a;

              11.4.3.   Settlement and Release Agreements; Dismissals. One or
                        more settlement and release agreements and dismissals,
                        in form and substance satisfactory to Industries,
                        Machine and Flemming releasing such persons from any and
                        all claims arising out of or relating to the Prior Debt
                        except as set forth herein, as set forth in Article 9.

12. REPRESENTATIONS AND WARRANTIES. To induce the Lender to enter into this
Agreement and to make advances to Industries and Machine pursuant hereto,
Industries, Machine jointly and severally represent and warrant to the Lender
that:

       12.1.  Existence and Power. Industries and Machine are and will continue
              to be corporations duly formed and validly existing in good
              standing under the laws of their respective states of organization
              and are authorized and qualified to do business in each state
              where, because of the nature of the activities or assets, such
              qualification is required, except those states where failure to so
              qualify will not have a material adverse effect; Industries and
              Machine have adequate power, authority, and legal right to own,
              operate and hold the Collateral; Industries and Machine are or
              will be at the time of acquisition, duly authorized, qualified and
              licensed under all applicable laws, regulations, ordinances or
              orders of public authorities to carry on their business in the
              operation and ownership of the Collateral; Industries and Machine
              have adequate authority, power and legal right to enter into,
              execute, deliver and perform the terms of the Restructure
              Documents, to borrow money and to give security for borrowings as
              contemplated by the Restructure Documents and to consummate the
              transactions contemplated thereby, and in doing so, neither
              Industries nor Machine will violate any law or the provisions of
              any articles, charter or bylaws or any other agreement or
              instrument binding upon Industries, Machine or the Collateral. The
              Restructure Documents, upon their execution and delivery, will
              constitute valid, legal and binding Indebtedness of Industries and
              Machine, enforceable in accordance with their terms, subject only
              to applicable bankruptcy, insolvency or similar laws generally
              affecting the enforcement of creditor's rights.

                                       23
<PAGE>

       12.2.  No Usury. The transaction evidenced by this Agreement does not
              violate any usury law or other law relating to the payment of
              interest on loans.

       12.3.  Regulatory Compliance. The authorization, execution, delivery, and
              performance of this Agreement and each and every Restructure
              Document are not and will not be subject to the jurisdiction,
              approval or consent of, or to any requirement of registration with
              or notification to, any federal, state or local regulatory body or
              administrative agency, other than the filing of a preliminary and
              a definitive information statement under Section 14 of the
              Securities Exchange Act of 1934, as amended, and any notice
              filings under federal and state securities laws;

       12.4.  Financial Statements. Financial statements furnished to the Lender
              by Industries and Machine were prepared in accordance with
              generally accepted accounting principles consistently applied,
              except as expressly therein set forth. They present fairly the
              financial condition of Industries and Machine as of the dates
              thereof. The annual reports disclose fully all liabilities of
              Industries and Machine whether or not contingent, with respect to
              any pension plan. Since the date of the most recent financial
              statement, there has been no material adverse change in the
              financial condition of Industries or Machine other than as
              disclosed to the Lender;

       12.5.  Liabilities. Neither Industries nor Machine has any material
              liabilities, direct or contingent, except those to Lender and
              those disclosed to the Lender;

       12.6.  Full Disclosure. Neither this Agreement, the other Restructure
              Documents nor any statement or documents referred to herein or
              delivered to the Lender by Industries and Machine, or any other
              party on their behalf contains any untrue statement or omits to
              state a material fact necessary to make the statements herein or
              therein not misleading;

       12.7.  Litigation. Except as disclosed in writing to the Lender, to the
              knowledge of Industries and/or Machine, there is no action, suit
              proceeding or investigation pending, or threatened against
              Industries or Machine which, if adversely determined, would
              adversely affect Industries or Machine or impair the ability of
              Industries or Machine to carry on their businesses substantially
              as now conducted or contemplated or result in any substantial
              liability not adequately covered by insurance;

       12.8.  No Default. The making and performance by Industries and Machine
              of this Agreement will not violate any provision or constitute a
              default under any indenture, agreement, or instrument to which
              Industries or Machine may be a party or by which Industries,
              Machine or any of the Collateral is bound or affected;

                                       24
<PAGE>

       12.9.  Ownership of Collateral. Industries and Machine have or will
              acquire good and marketable title to the Collateral;

       12.10. No Encumbrances. All assets of Industries and Machine are free and
              clear of all liens, security interests, and encumbrances, except
              those specifically permitted by Lender;

       12.11. Priority. When the financing statements delivered pursuant to this
              Agreement are filed in the proper offices where Industries and
              Machines are incorporated, the Lender will have a valid and
              perfected first security interest in the Collateral described in
              the Security Agreement, subject to no prior security interest,
              assignment, lien or encumbrance except interests, if any,
              specifically approved by the Lender in writing;

       12.12. Permits. Industries and Machine have, or will obtain, all
              governmental and private permits, certificates, consents and
              franchises which are material to the business, property, assets,
              operations or condition, financial or otherwise, of Industries and
              Machine to carry on their businesses as now being conducted. All
              such governmental and private permits, certificates, consents and
              franchises are, or will be, valid and subsisting, and there is no
              existing violation thereof;

       12.13. Taxes. Except as disclosed to the Lender, Industries and Machine
              and the Guarantor have filed all foreign, federal, state and local
              tax returns which are required to be filed and have paid or made
              provisions for payment of all taxes which have or may become due
              pursuant to said returns or pursuant to any assessment. Neither
              Industries and Machine nor the Guarantors know of any basis for
              the assessment of any deficiency taxes;

       12.14. Location of Business Records. Industries and Machine will give the
              Lender written notice of each location of Industries or Machine at
              which inventory and records of Industries or Machine pertaining to
              Collateral are kept. Except as such notice is given, all records
              of Industries and Machine pertaining to the Collateral are and
              will continue to be kept at Industries and Machine's addresses as
              they appear in this Agreement, or at such other address as
              Industries and Machine designate for such purpose in a written
              notice to the Lender.

       12.15. ERISA. Each qualified retirement plan of Industries or Machine
              presently conforms and is administered in a manner consistent with
              the Employee Retirement Income Security Act of 1974.

       12.16. Survival of Representations. All representations and warranties
              made by Industries, Machine, or the Guarantors herein will survive
              the Closing, and any investigation at any time made by or on
              behalf of the Lender will not diminish the Lender's right to rely
              thereon. All statements contained in any certificate or other
              instrument delivered by or on behalf of Industries, Machine or the
              Guarantors under or pursuant to this Agreement or in connection
              with the transactions contemplated hereby will constitute
              representations and warranties made by Industries or Machine
              hereunder.

                                       25
<PAGE>

13. AFFIRMATIVE COVENANTS. Until payment in full of the Indebtedness, Industries
and , Machine jointly and severally agree that, unless the Lender otherwise
consents in writing, Industries and Machine will perform or cause to be
performed the following agreements:

       13.1.  Performance of Obligations. Industries and Machine will promptly
              and punctually perform all of the obligations hereunder and under
              the Restructure Documents, and under all other instruments
              executed or delivered pursuant thereto;

       13.2.  Maintenance of Collateral. Maintain their properly in good working
              order and condition; make all needful and proper repairs,
              replacements, additions and improvements thereto.

       13.3.  Equipment Appraisal Updates. Equipment appraisal update
              inspections will be performed every six months.

       13.4.  Financial Reports and Condition. Industries and Machine will
              furnish or cause to be furnished to the Lender, prepared in
              accordance with generally accepted accounting principles, and
              certified as to truth and accuracy by either the chief executive
              officer or chief financial officer of Industries and Machine, the
              following:

              13.4.1.   Weekly Borrowing Base Certificate. On a weekly basis,
                        Industries and Machine will provide a Weekly Borrowing
                        Base Certificate in a form acceptable to the Lender for
                        reporting purposes only. For the purposes of determining
                        credit availability, the Borrowing Base is determined on
                        a monthly basis as provided above.

              13.4.2.   Projections. Industries and Machine will provide
                        detailed 2006 financial statement projections by January
                        31, 2006, and for each year thereafter by January 31st
                        of the subject year.

              13.4.3.   Quarterly Financial Statements. Industries and Machine
                        will deliver quarterly financial statements of at least
                        compiled quality by the 45th day following the end of
                        each quarter. 13.4.4. Annual Financial Statements.
                        Industries and Machine will furnish to the Lender their
                        audited annual financial statement on or before April
                        15th of each year.

              13.4.5.   Income Tax Returns. Industries and Machine will furnish
                        to the Lender copies of their respective federal income
                        tax returns and requests for an extension of time in
                        which to file within fifteen (15) days after filing of
                        same.

                                       26
<PAGE>

              13.4.6.   Monthly Financial Reports. Within fifteen (15) days
                        after the close of each month commencing with the month
                        ending October 31, 2005, Industries and Machine and
                        Guarantors will furnish to the Lender the following
                        Monthly internally prepared consolidating financial
                        statements of Industries and Machine including the
                        following:

                        a)      Accounts Receivable Aging/Listings. A current
                                aging of accounts receivable of Industries and
                                Machine;

                        b)      Inventory. A current listing of the inventory of
                                Industries and Machine;

                        c)      Balance Sheet. A balance sheet which
                                demonstrates a "Liquidity Ratio" of 1.10 to 1.0.
                                Industries and Machine will provide the Lender
                                with within forty-five (45) days after the close
                                of each of its fiscal year's quarter information
                                reasonably needed by the Lender to determine the
                                Liquidity Ratio. As used herein, Liquidity Ratio
                                shall be defined as the ratio of Industries and
                                Machine's current assets to Industries and
                                Machine's current liabilities. Notwithstanding
                                anything herein to the contrary, failure to
                                obtain the stated Liquidity Ratio shall not be
                                an event of default until March 31, 2006, and
                                tested quarterly thereafter.

                        d)      Income Statement. Beginning March 31, 2006, an
                                income statement which demonstrates a minimum
                                debt coverage ratio of 1.00:1, increasing by 5
                                basis points each quarter to 1.20 at March 31,
                                2007. Industries shall thereafter maintain a
                                debt coverage ratio of 1.20, tested quarterly.

                        e)      Cash Flow Statements. A statement of changes in
                                cash and a cash flow statement of Industries and
                                Machine in form satisfactory to the Lender.

       13.5.  Quarterly Field Audits. Industries and Machine will provide
              quarterly field audits on or before the 15th day following the end
              of the subject quarter with the next field audit to be completed
              by January 15, 2006.

       13.6.  Other Information. At the Lender's request from time to time,
              Industries and/or Machine will provide the Lender with such other
              information as the Lender may reasonably request regarding the
              business affairs or financial condition of Industries and Machine,
              and Industries and Machine will provide access to the Lender at
              all reasonable times to all agreements, purchase and sale
              contracts, maintenance agreements, and all other documents and
              information relating to the Collateral.

       13.7.  Taxes. All taxes which hereafter become due and assessments,
              governmental charges and levies which are hereafter imposed on
              Industries and Machine or their respective assets, income and
              profits will be paid prior to the date on which penalties attach
              thereto; provided that Industries and Machine will not be required
              to pay any such charge which is being contested in good faith by
              proper proceedings as to which adequate reserves have been
              established.

                                       27
<PAGE>

       13.8.  Tax on Indebtedness. Industries and Machine hereby agree to pay
              any and all taxes which may be levied or assessed directly or
              indirectly on the notes or any of the Restructure Documents, or
              the debt secured thereby, without regard to any law which may be
              hereafter enacted imposing payment of the whole or any part
              thereof upon the Lender, its successors or assigns; and, upon
              violation of this Agreement, or upon the rendering by any court of
              competent jurisdiction of a decision that such an agreement by
              Industries or Machine is legally inoperative, or if the rate of
              said tax, when added to the rate of interest provided for in the
              Note, shall exceed the then legal rate of interest, then, and in
              any such event, the debt hereby secured, without deduction, shall,
              at the option of the Lender, become immediately due and payable,
              anything contained in the Restructure Documents notwithstanding;
              provided that Industries and Machine's obligation to pay such
              taxes shall exclude United States franchise taxes and United
              States taxes imposed on or measured by Lender's net income or net
              receipts;

       13.9.  Access. Industries and Machine shall permit any officer, employee,
              attorney, or accountant for the Lender or for any participant
              designated by the Lender, to inspect the Collateral or to review,
              make extracts from, or copy any and all of its corporate and
              financial books, records and properties of Industries and Machine
              at all times during ordinary business hours.

       13.10. Title; Pledge. Industries and Machine agree to grant to the Lender
              first perfected security interests covering all or any part of the
              Collateral. Industries and Machine will maintain and defend good
              and marketable title to the Collateral free and clear of all
              claims, liens or encumbrances except those in favor of the Lender.

       13.11. Qualification; Licenses. Industries and Machine will take such
              actions or cause such actions to be taken as might be required to
              maintain Industries and Machine's corporate existence and all
              governmental and private permits, licenses and authorities of
              Industries and Machine necessary or desirable to the continuation
              of their businesses and will comply with all statutes and
              governmental regulations.

       13.12. Notices. Industries and Machine will promptly give written notice
              to the Lender of: (a) any litigation commenced against or
              affecting Industries or Machine, or the Collateral; (b) any
              dispute which exists between Industries or Machine and any
              governmental regulatory body or law enforcement authority relating
              to any federal or state laws that could reasonably be expected to
              have a material adverse effect on (i) the financial condition or
              results of operations of Industries or Machine, or (ii) the
              ability of Industries or Machine to perform their obligations
              hereunder or under any other Restructure Documents; (c) any event
              of Default; (d) any change in the senior management of Industries
              or Machine regardless of the reason for such change (i.e. action
              by stockholders, board of directors, death or retirement); and (e)
              any other matter which has resulted or could be expected to result
              in a material adverse change in (i) the financial condition or
              results of operations of Industries or Machine or (ii) the ability
              of Industries or Machine to perform under this Agreement or any of
              the Restructure Documents.

                                       28
<PAGE>

       13.13. Additional Documents. At any time and from time to time, upon
              written request of the Lender, Industries or Machine agree to
              furnish any additional information and to execute any and all
              additional documents, not inconsistent with the provisions of this
              Agreement, which may be required by the Lender in connection with
              or pursuant to any provision set forth in this Agreement or the
              Restructure Documents;

       13.14. Compliance with Applicable Law. Industries and Machine will
              continuously comply with all applicable regulations, rules,
              ordinances or orders of the United States of America, any state,
              or any other jurisdiction, or of any agency of federal state and
              local taxing authority or other agency which might materially and
              adversely affect the business, operations or financial condition
              of Industries or Machine;

       13.15. Books and Records. Industries and Machine will keep and maintain
              accurate books and records in accordance with sound accounting
              practices consistently applied;

       13.16. Insurance. Industries and Machine will maintain property,
              liability, workman's compensation and other forms of insurance in
              amounts reasonably designated at any time or from time to time by
              the Lender;

       13.17. Notice to Existing Account Debtors. Industries and Machine shall
              provide notice in accordance with the Lockbox Agreement to all
              existing account debtors;

       13.18. Notice to New Account Debtors. Industries and Machine shall insert
              language into all new contracts notifying the contract party that
              Industries or Machine's right to payment under the contract is
              pledged to the Lender and shall instruct the account debtor to
              make such payments to the Lockbox; and

       13.19. Operating Accounts. Industries and Machine will conduct their
              banking business through accounts established or to be established
              with the Lender for all accounts, cash and cash equivalents.

14. NEGATIVE COVENANTS. Until payment in full of the Indebtedness, Industries
and Machine jointly and severally agree that unless the Lender otherwise
consents in writing, which consent shall not be unreasonably withheld, neither
Industries and Machine nor the Guarantors will perform or permit to be performed
any of the following acts:

       14.1.  Control. There shall be no change in the executive management of
              Industries or Machine without the Bank's prior written consent.

                                       29
<PAGE>

       14.2.  Use of Loan Proceeds. Neither Industries nor Machine shall permit
              any funds advanced to Industries or Machine under this Loan
              Agreement to be used for any purposes other than financing the
              businesses of Industries and Machine;

       14.3.  Other Debt. Industries and Machine shall incur no additional debt
              in excess of $50,000 without prior approval from the Lender.

       14.4.  Insider Debt. Permit funds to be owing to Industries and Machine
              by the directors or stockholders of Industries or Machine, or
              members of their families, on account of any loan, credit sale or
              other transaction or event;

       14.5.  Contingent Liabilities. Neither Industries nor Machine will
              assume, guarantee, endorse or otherwise become contingently liable
              for the indebtedness of any other person, firm or corporation,
              except by the endorsement of negotiable instruments for deposit or
              collection or other similar transactions in the ordinary course of
              their business;

       14.6.  Senior Debt. Neither Industries nor Machine will take or permit to
              be taken any action which would or might impair the senior
              position of the Lender under the Restructure Documents;

       14.7.  Creation of Liens. Neither Industries nor Machine shall create,
              assume or suffer to exist any mortgage, pledge, lien, charge or
              encumbrance on any of the Collateral excluding only encumbrances
              to the Lender contemplated by this Agreement, except the security
              interests created by the Security Agreement, liens for taxes or
              assessments not yet due or contested in good faith by appropriate
              proceedings, security interests approved by the Lender in writing,
              at its sole discretion, and other liens, charges and encumbrances
              incidental to the conduct of their business or the ownership of
              their property which were not incurred in connection with the
              borrowing of money or the purchase of property on credit and which
              do not in the aggregate materially detract from the value of their
              property or materially impair the use thereof in their business;

       14.8.  Disposition of Collateral. Neither Industries nor Machine shall
              sell, convey, assign, transfer or otherwise dispose of any of the
              Collateral or any other assets of Industries or Machine except for
              the use of inventory in the ordinary course of business;

       14.9.  Liquidation or Merger. Neither Industries nor Machine shall
              liquidate, dissolve, or enter into any consolidation, merger, sale
              of substantially all of its assets, or other business combination,
              and neither Industries nor Machine shall discontinue or
              substantially alter the normal operation of their respective
              businesses.

       14.10. Distribution. Except as set forth in the Convertible Note, neither
              Industries nor Machine shall: (a) declare or pay any dividends,
              stock bonuses or any other distributions to any stockholder or any
              other person; or (b) authorize or make any other distribution to
              any stockholder, subsidiary, affiliate or person of any of the
              assets or business of Industries or Machine;

                                       30
<PAGE>

       14.11. Stock Redemption. Neither Industries nor Machine shall purchase,
              acquire, redeem, retire or call or make any commitment to
              purchase, acquire, redeem, retire or call any of the capital stock
              or other equity instruments of Industries, except pursuant to an
              "employee benefit plan" as defined in the Securities Act of 1933,
              as amended;

       14.12. Excessive Compensation. Neither Industries nor Machine shall pay
              excessive or unreasonable salaries, bonuses, fees, commissions or
              other compensation;

       14.13. Investments. Neither Industries nor Machine shall purchase stock
              or securities of, extend credit to or make investments in, become
              liable as surety for, or guarantee or endorse any obligation of,
              any person, firm or corporation, except direct obligations of the
              United States and commercial lender deposits;

       14.14. Margin Stock. Neither Industries nor Machine shall use any of the
              proceeds received from the Lender for the purpose of purchasing or
              carrying margin stock within the meaning of Regulation U of the
              Board of Governors of the Federal Reserve System;

       14.15. Purchase of Property. Neither Industries nor Machine shall acquire
              equipment valued in excess of $50,000 without prior Lender
              approval. Acquisition includes every means of acquiring new
              equipment including capital leases, true leases or any other
              arrangement by which Industries and Machines undertake to pay
              monthly obligations in excess of $1,500 related to such equipment.

       14.16. Default. Neither Industries nor Machine shall permit any default
              or event of default to occur under any note, loan agreement,
              lease, mortgage, contract for deed, security agreement or other
              contractual obligation binding upon Industries or Machine;

       14.17. Other Agreements. Neither Industries nor Machine shall enter into
              any agreement that limits or restricts the ability of Industries
              or Machine to comply with the terms of the Restructure Documents.

15. EVENTS OF DEFAULT. Unless consented to by the Lender, the occurrence of any
of the following events will constitute a "Default" under the Restructure
Documents:

       15.1.  Nonpayment of Note. Default in payment when due of any interest or
              principal of any of the notes when and such failure shall continue
              for five (5) calendar days.

       15.2.  Other Nonpayment. Default in payment when due of any other
              indebtedness payable to the Lender under the terms of the
              Restructure Documents and such failure shall continue for five (5)
              calendar days;

       15.3.  Breach of Agreement. Default by Industries or Machine in the
              performance or observance of any covenant contained in the
              Restructure Documents or under the terms of any other instrument
              delivered to the Lender in connection with any of the Restructure
              Documents when such failure continues for a period of ten (10)
              calendar days;

                                       31
<PAGE>

       15.4.  Representations and Warranties. Any representation, statement,
              certificate, schedule or report made or furnished to the Lender on
              behalf of Industries or Machine proves to be false or erroneous in
              any material respect at the time of the making thereof or any
              warranty ceases to be complied with in any material respect;

       15.5.  Default on Substantial Obligations. Industries and Machine shall
              fail to pay when due any substantial liability or liabilities owed
              to persons other than the Lender; or the maturity of any such
              liability or liabilities shall be accelerated; or any breach,
              default or event of default shall occur under any indenture, loan
              agreement, note or agreement pertaining to any such liability,
              entitling a creditor or representative of creditors of Industries
              or Machine, acting with or without the consent or concurrence of
              other creditors and with or without notice or a period of grace,
              to accelerate the maturity of or demand payment of any such
              liability, whether such breach, default or event of default is
              waived by the creditor so entitled. "Substantial" for these
              purposes, means in excess of Twenty-Five Thousand and No/100
              Dollars ($25,000);

       15.6.  Insolvency. The making of an assignment for the benefit of the
              creditors of Industries or Machine;

       15.7.  Bankruptcy. The institution of bankruptcy, reorganization,
              liquidation or receivership proceedings by or against Industries
              or Machine under the Bankruptcy Code, as amended, or under any
              other laws, whether state or federal, for the relief of Industries
              or Machine, now or hereafter existing;

       15.8.  Receivership. The appointment of a receiver or trustee for
              Industries and Machine, the Guarantors or for any substantial part
              of the Collateral, or the discontinuance of business or a material
              adverse change in the nature of the business of Industries or
              Machine or in the financial condition of Industries or Machine;

       15.9.  Benefit Plan Insecurity. Any event or reportable event which the
              Lender in good faith determines to constitute potential grounds
              for the termination of any employee benefit plan or other plan
              maintained for employees of Industries or Machine, or for the
              appointment of a trustee to administer any such plan, shall have
              occurred and be continuing thirty (30) calendar days after written
              notice to such effect shall have been given by the Lender to
              Industries or Machine; or any such plan shall be terminated, or a
              trustee shall be appointed to administer any such plan; or the
              Pension Benefit Guaranty Corporation shall institute proceedings
              to terminate any such plan or to appoint a trustee to administer
              any such plan;

       15.10. Judgment. Entry by any court of a final judgment against
              Industries or Machine or an attachment of any portion of the
              Collateral;

                                       32
<PAGE>

       15.11. Termination of Corporate Existence. The cessation by Industries or
              Machine to be a validly existing corporation under the laws of
              their respective states of organization; or

       15.12. Failure of Liens. Failure of the Lender's security interests
              covering the Collateral to constitute first and prior liens on any
              of the Collateral.

16. REMEDIES. On the occurrence of an event of Default which has not been timely
cured, the Lender may terminate all Indebtedness of the Lender under the
Restructure Documents, including, without limitation, any obligation to make
advances under the Revolving Note, and may exercise any one or more of the
following options:

       16.1.  Termination of Lender Obligations. The Lender may terminate the
              obligations of the Lender under this Agreement.

       16.2.  Acceleration. The Lender may declare the Indebtedness evidenced to
              be immediately due and payable, and the same shall thereupon be
              immediately due and payable, without notice or presentment or
              other demand, and the Lender thereupon may exercise and enforce
              all rights and remedies available to it to collect the
              Indebtedness;

       16.3.  Selective Enforcement. In the event the Lender elects to
              selectively and successively enforce the Lender's rights under any
              one or more of the instruments securing payment of the
              Indebtedness, such action will not be deemed a waiver or discharge
              of any other lien or encumbrance securing payment of the
              Indebtedness until such time as the Lender has been paid in full
              all sums advanced by the Lender;

       16.4.  Waiver of Event of Default. The Lender may, by an instrument in
              writing signed by the Lender, waive any event of Default that has
              occurred and any of the consequences of such event of Default; and
              in such event, the Lender, Industries and Machine will be restored
              to their respective former positions, rights and Indebtedness
              under the Restructure Documents. Any event of Default so waived
              will, for all purposes of this Agreement, be deemed to have been
              cured and not to be continuing, but no such waiver will extend to
              any subsequent or other event of Default or impair any consequence
              of such subsequent or other event of Default. The rights and
              remedies of the Lender shall be cumulative and the exercise or
              enforcement of any one right or remedy shall neither be a
              condition to nor bar the exercise and enforcement of any other;

       16.5.  Performance by Lender. In the event Industries or Machine fail to
              cure any Default in the time provided by the Lender, the Lender
              will at any time thereafter have the right (but not the
              obligation) to pay any claim or lien (whether prior or subordinate
              to liens held by the Lender) affecting the Collateral and to take
              possession of the Collateral in such manner as the Lender
              determines. Industries and Machine hereby authorize the Lender to
              increase the indebtedness owing by Industries and Machine to the
              Lender by the cost of satisfying claims against the Collateral and
              the cost of repossession of the Collateral and agree that the
              Restructure Documents will evidence and secure payment of such
              costs whether or not the total funds advanced exceed the face
              amount of the Restructure Documents;

                                       33
<PAGE>

       16.6.  Cumulative Remedies. No failure on the part of the Lender to
              exercise and no delay in exercising any right hereunder will
              operate as a waiver thereof, nor will any single or partial
              exercise by the Lender of any right hereunder preclude any other
              or further right of exercise thereof or the exercise of any other
              right. The remedies herein provided are cumulative and not
              alternative; and

       16.7.  Setoff. Regardless of the adequacy of any other Collateral held by
              the Lender, any deposits or other sums credited by or due from the
              Lender to Industries or Machine will at all times constitute
              collateral security for all of the Indebtedness of Industries and
              Machine and may be set off against any and all liabilities, direct
              or indirect, absolute or contingent, due or to become due, now
              existing or hereafter arising, of Industries or Machine to the
              Lender. The rights granted by this paragraph will be in addition
              to the rights of the Lender under any statutory lien.

17. MISCELLANEOUS. It is further agreed as follows:

       17.1.  Recitals. The recitals are hereby acknowledged by the parties to
              be true and correct and are adopted and incorporated herein as
              material terms of this Agreement.

       17.2.  Fees. In partial consideration of the extension of credit
              contemplated under this Agreement, Industries and Machine shall
              pay to the Lender origination fees in the amount of 0.5% of the
              original principal balances of the Amended and Restated Note, the
              IRS Note, the Revolving Note, and the Convertible Note.

       17.3.  Hold Harmless. Each party hereby agrees to indemnify and hold any
              other party to this Agreement harmless from all liability, loss,
              damage or expense, including reasonable attorney's fees, whether
              incurred under retainer, salary or otherwise, that such party may
              incur in good faith in compliance with or the enforcement of the
              terms of this Agreement or any of the Restructure Documents.

       17.4.  Supersession. It is agreed and understood between Industries,
              Machine, the Guarantors and the Lender that: (a) except to the
              extent the Prior Loan Documents are amended hereby, at and after
              the Closing, the Prior Loans will remain in full force and effect;
              and (b) the execution of this Agreement will not discharge,
              interrupt, impair, abate or otherwise modify the priority or the
              validity of any lien or security interest securing payment of the
              indebtedness evidenced by the Prior Loan Documents.

       17.5.  Notices. All notices, requests and demands will be served by first
              class or express mail, postage prepaid, or sent by telex,
              telegram, telecopy or other similar form of rapid transmission
              confirmed by mailing written confirmation at substantially the
              same time as such rapid transmission, as follows:

                                       34
<PAGE>

              Industries,
              Machine and
              the Guarantors-   12060 FM 3083
                                Conroe, TX  77301
                                Attn: Matthew C. Flemming, CFO
                                Fax: (936) 539-9396

              With a copy to-   Marc A. Indeglia
                                Spectrum Law Group, LLP
                                1900 Main Street, Suite 125
                                Irvine, CA 92614
                                Fax: (949) 851-5940

              The Lender -      Stillwater National Bank and Trust Company
                                1500 S. Utica
                                Tulsa, Oklahoma 74104
                                Attn:  Jerry L. Lanier, Executive Vice President
                                Fax: (918) 523-3892

              With a copy to -  Bryan J. Wells
                                Conner & Winters, P.C.
                                211 N. Robinson
                                1700 One Leadership Square
                                Oklahoma City, Oklahoma 73102
                                Fax: (405) 232-2695

              or at such other address as any party designates for such purpose
              in a written notice to the other parties. Notices will be deemed
              to have been given on the date notice is sent by rapid
              transmission or three business days after notice is placed in the
              mail, properly addressed, postage prepaid.

       17.6.  Construction. Nothing contained in this Agreement will be
              construed to constitute the Lender as a joint venturer with
              Industries or Machine or to constitute a partnership. The
              descriptive headings of the paragraphs of this Agreement are for
              convenience only and are not to be used in the construction of the
              content of this Agreement. This Agreement may be executed in
              multiple counterparts, each of which will be an original
              instrument, but all of which will constitute one agreement.

       17.7.  Venue. This Agreement and the documents issued hereunder are
              executed and delivered as an incident to a lending transaction
              negotiated and to be performed in Oklahoma City, Oklahoma County,
              Oklahoma. The Restructure Documents are intended to constitute a
              contract made under the laws of the State of Oklahoma and to be
              construed in accordance with the internal laws of said state.
              Industries, Machine, the Guarantors and the Lender hereby waive
              all objections and consent to the jurisdiction and venue of any
              state or federal court sitting in Oklahoma County, Oklahoma.

                                       35
<PAGE>

       17.8.  Severability. In case any one or more of the provisions contained
              in the Restructure Documents should be invalid, illegal or
              unenforceable in any respect in any jurisdiction, the validity,
              legality and enforceability of such provision or provisions will
              not in any way be affected or impaired thereby in any other
              jurisdiction; and the validity, legality and enforceability of the
              remaining provisions contained herein and therein will not in any
              way be affected or impaired thereby.

       17.9.  No Oral Modification. This Agreement may not be amended, altered,
              modified or changed verbally, but only by an agreement in writing
              signed by the party against whom enforcement of any amendment,
              waiver, change, modification or discharge is sought.

       17.10. Extension of Loan Term. It is understood that the Lender is under
              no obligation to extend the term of this Agreement beyond the
              maturity of any of the notes and that any such extension will be
              made at the Lender's sole discretion. Any such extension will be
              evidenced by the acceptance by the Lender of a promissory note
              renewing and extending the time of payment of any of the notes on
              terms acceptable to the Lender.

       17.11. No Waiver. No advance of loan proceeds under any of the
              Restructure Documents will constitute a waiver of any of the
              representations, warranties, conditions or covenants of Industries
              or Machine under the Restructure Documents. In the event
              Industries or Machine are unable to satisfy any warranty,
              condition or covenant contained in the Restructure Documents, no
              advance of loan proceeds will preclude the Lender from thereafter
              declaring such inability to be an event of Default.

       17.12. Exclusive Benefit. All provisions of the Restructure Documents are
              for the sole and exclusive benefit of the Lender, Industries,
              Machine, Flemming, Shumate, Clark, and Stuart, and no other person
              will have standing to require satisfaction of the provisions
              thereof or be entitled to assume that advances thereunder will not
              be made by the Lender in the absence of strict compliance with the
              provisions of the Restructure Documents. Any and all provisions of
              the Restructure Documents may be waived by the Lender in whole or
              in part at any time if, in the sole discretion of the Lender, it
              is advisable to do so.

       17.13. Application of Loan Proceeds. The Lender may apply the loan
              proceeds under the notes to the satisfaction of any condition,
              warranty or covenant of Industries and Machine under any of the
              Restructure Documents, and any proceeds so applied will be
              considered as a part of the loan proceeds advanced and will be
              secured by the Restructure Documents.

                                       36
<PAGE>

       17.14. Binding Effect. This Agreement will be binding on Industries,
              Machine, the Guarantors and their successors and permitted assigns
              and will inure to the benefit of the Lender and the Lender's
              successors and assigns.

       17.15. Counterparts. This Agreement may be executed in multiple
              counterparts, each of which will be an original instrument, but
              all of which will constitute one agreement. The parties to this
              Agreement may rely upon original, fax, digital or scanned
              signatures in the execution of this Agreement.

       IN WITNESS WHEREOF, Industries, Machine, the Guarantors and the Lender
have duly executed this Agreement effective the date first above written.

                                    SHUMATE  INDUSTRIES,  INC.,
                                    (formerly EXCALIBUR INDUSTRIES, INC.),
                                    a Delaware corporation

                                    By: /s/ Matthew C. Flemming
                                       -----------------------------------------
                                       Name: Matthew C. Flemming
                                       Title: Chief Financial Officer

                                    SHUMATE MACHINE WORKS, INC.
                                    a Texas corporation

                                    By: /s/ Matthew C. Flemming
                                       -----------------------------------------
                                       Name: Matthew C. Flemming
                                       Title: Chief Financial Officer

                                    /s/ Matthew C. Flemming
                                    --------------------------------------------
                                    MATTHEW FLEMMING, individually

                                    /s/ Larry Shumate
                                    --------------------------------------------
                                    LARRY SHUMATE, individually

                                    /s/ Russ Clark
                                    --------------------------------------------
                                    RUSS CLARK, individually

                                    STILLWATER NATIONAL BANK AND TRUST COMPANY,
                                    a national banking association

                                    By: /s/ Michael Mattson
                                       -----------------------------------------
                                    Name: Michael Mattson
                                         ---------------------------------------
                                    Title: Vice President
                                          --------------------------------------
                                          (the "Lender")

                                       38MUTUAL RELEASE
                                 --------------

         THIS AGREEMENT is executed effective the 19th day of October, 2005,
between SHUMATE INDUSTRIES, INC. (formerly EXCALIBUR INDUSTRIES, INC.), a
Delaware corporation ("Industries"), SHUMATE MACHINE WORKS, INC., a Texas
corporation ("Machine"), MATTHEW FLEMMING, an individual ("Flemming"), and
STILLWATER NATIONAL BANK AND TRUST COMPANY, a national banking association
("Stillwater").

                                R E C I T A L S:

         WHEREAS Industries, Machine and/or Flemming were obligated to the Bank
the following principal amounts totaling approximately $13,808,398, as follows:

                                                   As of
                                                  10/19/05
                                               ---------------
   SNB Note #5195802                                1,100,000
   SNB Note #5198301                                3,500,000
   SNB Note #5423900                                  212,811
   SNB Note #5550600                                  550,000
   SNB Note #5528400                                  500,000
   SNB Note #5732800                                2,450,000
   SNB Note #5732700 (LOC)                            791,861
   SNB Note #5831900                                1,100,000
   Overdraft of DDA #6175206                        1,574,356
   TW Consulting Notes                              2,710,183
   TW Accrued Interest (est.)                       1,000,000
                                               ---------------
                                                   15,489,211

         The above described principal indebtedness, together with all interest,
penalties and fees incurred in connection therewith, is referred to hereafter as
the "Prior Debt" and all loan agreements, notes, security agreements,
guaranties, mortgages and other documents executed in connection with the Prior
Debt are hereafter referred to as the "Prior Loan Documents."

         WHEREAS Industries, Machine, Flemming and Stillwater have entered into
an Agreement of even date herewith (the "Restructure Agreement") by which the
Prior Debt was restructured, among other things.

         NOW, THEREFORE, THIS AGREEMENT, WITNESSE'TH, that for valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree that, except for those obligations created in the
Restructure Agreement and the documents, instruments, agreements or other papers
issued, executed or delivered

<PAGE>

pursuant thereto, the parties hereby jointly and severally release, acquit and
forever discharge one another and their subsidiaries, affiliates, officers,
directors, shareholders, agents, employees, servants, attorneys and
representatives, as well as the respective heirs, personal representatives,
successors and assigns of any and all of them (hereafter collectively called the
"Released Parties") from any and all claims, demands, debts, actions, causes of
action, suits, contracts, agreements, obligations, accounts, defenses, offsets
against indebtedness and liabilities of any kind or character whatsoever, known
or unknown, suspected or unsuspected, in contract or in tort, at law or in
equity, including without implied limitation, such claims and defenses as fraud,
mistake, duress and usury, which the parties ever had, now have, or might
hereafter have against the Released Parties, jointly or severally, for or by
reason of any matter, cause or thing whatsoever occurring prior to the date of
the Restructure Agreement, whether or not related in whole or in part, directly
or indirectly to the Prior Debt. In addition, the parties agree not to commence,
join in, prosecute or participate in any suit or other proceeding in a position
which is adverse to any of the Released Parties arising directly or indirectly
from any of the foregoing matters. This release shall not have no effect on the
liability of William Stuart to Stillwater in connection with the Prior Debt or
any other indebtedness of William Stuart to Stillwater.

         THIS AGREEMENT is entered into effective the date first written above.

                                   SHUMATE INDUSTRIES, INC., (formerly EXCALIBUR
                                   INDUSTRIES, INC.), a Delaware corporation

                                   By:    /s/ Matthew C. Flemming
                                       -----------------------------------------
                                   Name:  Matthew C. Flemming
                                         ---------------------------------------
                                   Title: Chief Financial Officer
                                          --------------------------------------

                                   SHUMATE MACHINE WORKS, INC.
                                   a Texas corporation

                                   By:    /s/ Matthew C. Flemming
                                       -----------------------------------------
                                   Name:  Matthew C. Flemming
                                         ---------------------------------------
                                   Title: Chief Financial Officer
                                          --------------------------------------

                                   /s/ Matthew C. Flemming
                                   ---------------------------------------------
                                   MATTHEW FLEMMING, individually

                                   STILLWATER NATIONAL BANK AND TRUST COMPANY,
                                   a national banking association

                                   By:    /s/ Michael Mattson
                                       -----------------------------------------
                                   Name:  Michael Mattson
                                         ---------------------------------------
                                   Title: Vice President
                                          --------------------------------------

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