Document:

AMENDED AND RESTATED LOAN
AGREEMENT

    

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

    

    RECITALS:

    

    
      	
               
      

            	
              A.

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

            

    

    

    
      	
               
      

            	
              B.

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

            

    

    

    
      	
               
      

            	
              C.

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

            

    

    

    
      	
               
      

            	
              D.

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

            

    

    

    
      	
               
      

            	
              E.

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

            

    

    

    
      	
               
      

            	
              F.

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

            

    

    
      
         

      

      
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              G.

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

            

    

    

    
      	
               
      

            	
              H.

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

            

    

    

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

    

    Section
1.              Definitions.

    

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

    

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

    

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

    

    “Asset
Disposition” shall mean the sale, lease, assignment or other transfer for
value (each a “Disposition”)
by any Borrower to any Person of any asset or right of such Borrower (including,
the loss, destruction or damage of any thereof or any actual or threatened
condemnation, confiscation, requisition, seizure or taking
thereof).

     

    “Bankruptcy
Code” shall mean the United States Bankruptcy Code, as now existing or
hereafter amended.

     

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

    
      
         

      

      
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    “Business
Day” shall mean any day other than a Saturday, Sunday or a legal holiday
on which banks are authorized or required to be closed for the conduct of
commercial banking business in Houston, Texas.

     

    “Capital
Lease” shall mean, as to any Person, a lease of any interest in any
kind of property or asset, whether real, personal or mixed, or tangible or
intangible, by such Person, as lessee, that is, or should, in accordance with
GAAP, be recorded as a “capital lease” on the financial statements of such
Person prepared in accordance with GAAP.

     

    “Capital
Securities” shall mean, with respect to any Person, all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person’s capital, whether now outstanding or
issued or acquired after the date hereof, including common shares, preferred
shares, membership interests in a limited liability company, limited or general
partnership interests in a partnership or any other equivalent of such ownership
interest.

     

    “Capitalized
Lease Obligations” shall mean, as to any Person, all rental obligations
of such Person, as lessee under a Capital Lease which are or will be required to
be capitalized on the books of such Person.

     

    “Closing
Date” shall have the meaning set forth in Section 5.1

     

    “Collateral”
shall have the meaning set forth in the Security Agreement.

     

     “Contingent
Liability” and “Contingent
Liabilities” shall mean, respectively, each obligation and liability of
any Borrower and all such obligations and liabilities of the Borrower incurred
pursuant to any agreement, undertaking or arrangement by which such
Borrower:  (a) guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
indebtedness, dividend, obligation or other liability of any other Person in any
manner (other than by endorsement of instruments in the course of collection),
including any indebtedness, dividend or other obligation which may be issued or
incurred at some future time; (b) guarantees the payment of dividends or other
distributions upon the shares or ownership interest of any other Person; (c)
undertakes or agrees (whether contingently or otherwise):  (i) to
purchase, repurchase, or otherwise acquire any indebtedness, obligation or
liability of any other Person or any property or assets constituting security
therefor, (ii) to advance or provide funds for the payment or discharge of any
indebtedness, obligation or liability of any other Person (whether in the form
of loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, working capital or other financial
condition of any other Person, or (iii) to make payment to any other Person
other than for value received; (d) agrees to lease property or to purchase
securities, property or services from such other Person with the purpose or
intent of assuring the owner of such indebtedness or obligation of the ability
of such other Person to make payment of the indebtedness or obligation; (e) to
induce the issuance of, or in connection with the issuance of, any letter of
credit for the benefit of such other Person; or (f) undertakes or agrees
otherwise to assure a creditor against loss.  The amount of any
Contingent Liability shall (subject to any limitation set forth herein) be
deemed to be the outstanding principal amount (or maximum permitted principal
amount, if larger) of the indebtedness, obligation or other liability guaranteed
or supported thereby.

    
      
         

      

      
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    “Debt”
shall mean, as to any Person, without duplication, (a) all indebtedness of such
Person; (b) all borrowed money of such Person (including principal, interest,
fees and charges), whether or not evidenced by bonds, debentures, notes or
similar instruments; (c) all obligations to pay the deferred purchase price of
property or services; (d) all obligations, contingent or otherwise, with respect
to the maximum face amount of all letters of credit (whether or not drawn),
bankers’ acceptances and similar obligations issued for the account of such
Person, and all unpaid drawings in respect of such letters of credit, bankers’
acceptances and similar obligations; (e) all indebtedness secured by any Lien
(other than Permitted Liens) on any property owned by such Person, whether or
not such indebtedness has been assumed by such Person (provided, however, if such
Person has not assumed or otherwise become liable in respect of such
indebtedness, such indebtedness shall be deemed to be in an amount equal to the
fair market value of the property subject to such Lien at the time of
determination); (f) the aggregate amount of all Capitalized Lease Obligations of
such Person; (g) all Contingent Liabilities of such Person, whether or not
reflected on its balance sheet; (h) all hedging obligations of such Person; (i)
all Debt of any partnership of which such Person is a general partner; and (j)
all monetary obligations of such Person under (i) a so-called synthetic,
off-balance sheet or tax retention lease, or (ii) an agreement for the use or
possession of property creating obligations that do not appear on the balance
sheet of such Person but which, upon the insolvency or bankruptcy of such
Person, would be characterized as the indebtedness of such Person (without
regard to accounting treatment).  Notwithstanding the foregoing, Debt
shall not include trade payables and accrued expenses incurred by such Person in
accordance with customary practices and in the ordinary course of business of
such Person.

     

    “Default
Rate” shall mean the maximum interest rate permitted by applicable law
payable in cash only.

     

    “Disposition”
shall have the meaning set forth in the definition of Asset Disposition
above.

     

     “Environmental
Laws” shall mean all present or future federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative or judicial orders, consent agreements, directed duties,
requests, licenses, authorizations and permits of, and agreements with, any
Governmental Authority, in each case relating to any matter arising out of or
relating to public health and safety, or pollution or protection of the
environment or workplace, including any of the foregoing relating to the
presence, use, production, generation, handling, transport, treatment, storage,
disposal, distribution, discharge, emission, release, threatened release,
control or cleanup of any Hazardous Substance.

     

    “Equity
Securities” shall mean common and/or preferred stock or some other equity
securities of Industries, including equity securities which are directly or
indirectly convertible or exchangeable for equity securities of
Industries.

    
      
         

      

      
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    “Event
of Default” shall mean any of the events or conditions which are set
forth in Section
8.1 hereof.

     

    “Excluded
Taxes” shall mean, with respect to the Lenders or any other recipient of
any payment to be made by or on account of any obligation of the Borrowers
hereunder, (a) taxes imposed on or measured by its overall net income (however
denominated), and franchise taxes imposed on it (in lieu of net income taxes),
by the jurisdiction (or any political subdivision thereof) under the laws of
which such recipient is organized or in which it is doing business or in which
its principal office is located or, in the case of the Lenders, in which its or
his principal applicable lending office is located, and (b) any branch profits
taxes imposed by the United States or any similar tax imposed by any other
jurisdiction in which any Borrower is located.

     

    “GAAP”
shall mean generally accepted accounting principles in effect in the United
States of America consistently applied with prior periods.

     

     “Governmental
Authority” shall mean the government of the United States of America or
any other nation, or of any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.

     

     “Hazardous
Substances” shall mean (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, dielectric fluid containing levels of
polychlorinated biphenyls, radon gas and mold; (b) any chemicals,
materials, pollutant or substances defined as or included in the definition of
“hazardous substances”, “hazardous waste”, “hazardous materials”, “extremely
hazardous substances”, “restricted hazardous waste”, “toxic substances”, “toxic
pollutants”, “contaminants”, “pollutants” or words of similar import, under any
applicable Environmental Law; and (c) any other chemical, material or
substance, the exposure to, or release of which is prohibited, limited or
regulated by any Governmental Authority or for which any duty or standard of
care is imposed pursuant to, any Environmental Law.

     

     “Indemnified
Party” shall mean the Lenders and any Affiliate of the Lenders, and each
of their respective officers, directors, owners, employees, attorneys and
agents, and all of such parties and entities.

     

    “Indemnified
Taxes” shall mean Taxes other than Excluded Taxes.

     

    “Interest
Common Stock” shall mean the number of common shares of
Industries  issued to the Lenders by Industries on any Interest Due
Date pursuant to the provisions of Section 3.3(a)
hereof.

     

    “Interest
Due Date” shall mean September 30, 2010, December 31, 2010, March 31,
2011, and on the Maturity Date, whenever same occurs.

     

    “Interest
Rate” shall have the meaning set forth in Section
3.1.

    
      
         

      

      
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    “Interest
Period” shall mean (i) with respect to the period commencing on the date
of this Agreement, the number of days elapsed from such date until September 30,
2010, (ii) with respect to the period ending on each Interest Due Date
thereafter, the number of days elapsed from the immediately preceding Interest
Due Date until the immediately following Interest Due Date, and (iii) with
respect to the period ending on the Maturity Date, the number of days elapsed
from the immediately preceding Interest Due Date to the Maturity Date or the
date on which all interest due on such  Maturity Date is actually
paid.

     

    “Investment”
shall mean, with respect to any Person, any investment in another Person,
whether by acquisition of any debt or equity security, by making any loan or
advance, by becoming obligated with respect to a Contingent Liability in respect
of obligations of such other Person (other than travel and similar advances to
employees in the ordinary course of business).

     

     “Liabilities”
shall mean at all times all liabilities of any Borrower that would be shown as
such on a balance sheet of the Borrower prepared in accordance with
GAAP.

     

    “Lien”
shall mean, with respect to any Person, any interest granted by such Person in
any real or personal property, asset or other right owned or being purchased or
acquired by such Person (including an interest in respect of a Capital Lease)
which secures payment or performance of any obligation and shall include any
mortgage, lien, encumbrance, title retention lien, charge or other security
interest of any kind, whether arising by contract, as a matter of law, by
judicial process or otherwise.

     

    “Loan”
shall have the meaning set forth in Section 2.1
hereof.

     

    “Loan
Account” shall have the meaning set forth in Section 2.2
hereof.

     

    “Loan
Documents” shall mean each the Note and each of the other agreements,
documents, instruments and certificates set forth in Section 5.1 hereof,
and any and all such other instruments, documents, certificates and agreements
from time to time executed and delivered by any Borrower for the benefit of the
Lenders or either of them pursuant to any of the foregoing, and all amendments,
restatements, supplements and other modifications thereto.

     

    “Material
Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the assets, business, properties, prospects, condition
(financial or otherwise) or results of operations of any Borrower, taken as a
whole; (b) a material impairment of the ability of any Borrower, taken as a
whole, to perform any of their respective obligations under the Related
Documents; (c) a material adverse change on any substantial portion of the
Collateral; (d) a material adverse effect on the perfection or priority of any
Lien granted to the Lenders under the Loan Documents or the rights or remedies
of the Lenders under the Loan Documents, taken as a whole; or (e) a material
adverse effect on the legality, validity, binding effect or enforceability
against any Borrower of any of the Related Documents to which they are parties,
except to the extent, with respect to the preceding clauses (a)-(e), such
material change or material adverse effect was caused by any Lenders or any of
its or his Affiliates.

     

    “Maturity
Date” shall mean June 30, 2011 or such earlier date as the Note and the
Loan and all Obligations shall become due and payable in full under the
provisions of the Note and this Agreement, whether upon acceleration, default,
termination or otherwise.

    
      
         

      

      
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    “Net
Cash Proceeds” shall mean, the aggregate cash proceeds (including cash
proceeds received pursuant to policies of insurance or by way of deferred
payment of principal pursuant to a note, installment receivable or otherwise,
but only as and when received) received by any Borrower pursuant to an Asset
Disposition net of (i) the direct costs relating to such sale, lease,
assignment, transfer or other disposition (including sales commissions and
legal, accounting and investment banking fees), (ii) taxes paid or reasonably
estimated by such Borrower to be payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), and (iii) amounts required to be applied to the repayment of any
Debt secured by a Lien on the asset subject to such Asset
Disposition.

     

    “Note”
shall mean the Amended and Restated Promissory Note, of even date herewith, duly
executed by the Borrowers and payable to the order of the Lenders, together with
any and all renewal, extension, modification or replacement promissory notes
executed by the Borrowers and delivered to the Lenders and given in substitution
therefor.

     

    “Obligations”
shall mean the Loan, all interest accrued thereon and all sums of money owed to
or expenses incurred by the Lenders hereunder or under any other Loan
Document.

     

    “Obligor”
shall mean the Borrowers and each of them and such term may be used
interchangeably with Borrower or Borrowers in this Agreement.

     

    “Permitted
Equity Offering” shall mean an arms length bona fide third party sale
by Industries of up to Five Million Dollars ($5,000,000) worth of its Equity
Securities provided that such sale is made for cash received by Industries (or
conversion of Debt as permitted by Section 7.6) at the
time of closing of such sale.

     

    “Permitted
Liens” shall mean (a) Liens for Taxes, assessments or other governmental
charges not at the time delinquent or thereafter payable without penalty or
being contested in good faith by appropriate proceedings and, in each case, for
which any Borrower maintains adequate reserves in accordance with GAAP and in
respect of which no Lien has been filed; (b) easements, rights of way,
restrictions, minor defects or irregularities in title and other similar Liens
not interfering in any material respect with the ordinary conduct of the
business of the Borrower;  (c) Liens granted to the Lenders under the
Related Documents; (d) Liens granted under any A/R Facility on the accounts
covered by such A/R Facility (e) Liens permitted under the Security Agreement;
(f) Liens granted to the Second Lien Holders under the Second Lien Documents;
(g) Liens approved by the Lenders in writing, at their sole discretion; and (h)
Liens securing Debt permitted by Section 7.2(e) incurred to finance the
acquisition of fixed or capital assets, provided that (1) such Liens shall be
created substantially simultaneously with the acquisition of such assets, (2)
such Liens do not at any time encumber any assets other than the assets financed
by such Debt, (3) such Liens do not and are not modified to secure other Debt
and the amount of Debt secured thereby is not increased and (4) the principal
amount of Debt secured by any such Lien shall at no time exceed the original
purchase price of such fixed or capital assets.

     

    “Person”
shall mean any natural person, partnership, limited liability company,
corporation, trust, joint venture, joint stock company, association,
unincorporated organization, government or agency or political subdivision
thereof, or other entity, whether acting in an individual, fiduciary or other
capacity.

    
      
         

      

      
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    “Related
Documents” shall mean collectively, the Loan Documents, and any other
agreements entered into by the Borrowers with respect to any of the Loan
Documents.

     

    “Second
Lien Documents” shall mean the promissory notes and amendments to
promissory notes and UCC financing statements issued to the Second Lien
Holders.

     

    “Second
Lien Holders” shall mean, collectively, the following secured creditors
of Industries:  Joel Oppenheimer, Claud J. Jacobs Residuary Trust,
Monster Bridge Ventures LLC, George Gilman, SC Hydraulics, Inc., Garuda, U.S.,
Inc., Equity Trust Company D.B.A. Sterling Trust, Custodian FBO: Richard
Kraniak, Francis Jungers, Kenton Chickering, Karl Geoca, Thomas A. Newton, Jr.,
Eads Investments I, LLC., and Brad McWilliams.

     

    “Security
Agreement” shall have the meaning set forth in Section 5.1
hereof.

     

    “Securities
Act” shall mean the Securities Act of 1933, as amended.

     

    “Securities”
shall mean, collectively, the Note, the Warrant, the Interest Common Stock and
the Warrant Shares.

     

    “Securities
Laws” shall mean all applicable United States federal and state
securities laws and regulations thereunder applicable to the registration,
mortgaging, hypothecating, pledging or selling or offering to mortgage,
hypothecate, pledge or sell securities in the United States and any relevant
state, including (i) the Securities Act of 1933, the Securities Exchange Act of
1934 and the Sarbanes-Oxley Act of 2002, (ii) the rules and regulations of the
National Quotation Bureau, the OTC Bulletin Board, the Financial Regulatory
Authority, the Securities and Exchange Commission and any other regulatory
authority having authority with respect to the trading of over the counter
stocks, (iii) all relevant state’s Blue Sky laws, and (iv) all other applicable
securities laws.

     

    “Subsidiary”
and “Subsidiaries”
shall mean, respectively, with respect to any Person, each and all such
corporations, partnerships, limited partnerships, limited liability companies,
limited liability partnerships, joint ventures or other entities of which or in
which such Person owns, directly or indirectly, such number of outstanding
Capital Securities as have more than fifty percent (50.00%) of the ordinary
voting power for the election of directors or other managers of such
corporation, partnership, limited liability company or other
entity.  Unless the context otherwise requires, each reference to
Subsidiaries herein shall be a reference to Subsidiaries of any
Borrower.

     

    “Stock
Pledge” shall have the meaning set forth in Section 5.1(d)
hereof.

     

    “Taxes”
shall mean any and all present and future stamp and documentary taxes or other
taxes, duties, levies, imposts, deductions, assessments, charges or
withholdings, and any and all liabilities (including interest and penalties and
other additions to taxes) with respect to the foregoing.

    
      
         

      

      
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    “UCC”
shall mean the Uniform Commercial Code in effect in the State of Texas from time
to time.

     

    “Unmatured
Event of Default” shall mean any event which, with the giving of notice,
the passage of time or both, would constitute an Event of Default.

     

    “Voidable
Transfer” shall have the meaning set forth in Section 9.14
hereof.

     

    “Warrant”
shall have the meaning set forth in Section 5.1(f)
hereof.

     

    “Warrant
Shares” shall
have the meaning set forth in Section 5.1(f)
hereof.

     

    Section
1.2            Accounting
Terms.  Any accounting terms used in this Agreement which are
not specifically defined herein shall have the meanings customarily given them
in accordance with GAAP.  Calculations and determinations of financial
and accounting terms used and not otherwise specifically defined hereunder and
the preparation of financial statements to be furnished to the Lenders pursuant
hereto shall be made and prepared, both as to classification of items and as to
amount, in accordance with GAAP as used in the preparation of the financial
statements of the Borrower on the date of this Agreement.

     

    Section
1.3             Other Interpretive
Provisions.

     

    (a)           The
meanings of defined terms are equally applicable to the singular and plural
forms of the defined terms.  Whenever the context so requires, the
neuter gender includes the masculine and feminine, the single number includes
the plural, and vice versa, and in particular the word “Borrower” shall be so
construed.

     

    (b)           Section
and Schedule references are to this Agreement unless otherwise
specified.  The words “hereof”, “herein” and “hereunder” and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.

     

    (c)           The
term “including” is not limiting, and means “including, without
limitation”.

     

    (d)           The
term “day” means a calendar day commencing on 12:00 a.m. and ending at 12:00
a.m. on the immediately following calendar day.

     

    (e)           Unless
otherwise expressly provided herein, (i) references to agreements
(including this Agreement and the other Loan Documents) and other contractual
instruments shall be deemed to include all subsequent amendments, restatements,
supplements and other modifications thereto, but only to the extent such
amendments, restatements, supplements and other modifications are not prohibited
by the terms of any Loan Document, and (ii) references to any statute or
regulation shall be construed as including all statutory and regulatory
provisions amending, replacing, supplementing or interpreting such statute or
regulation.

     

    (f)           
To the extent any of the provisions of the other Loan Documents are inconsistent
with the terms of this Agreement; the provisions of this Agreement shall
govern.

    
      
         

      

      
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    Section
2.              Loan.

     

    2.1           Outstanding
Debt.  The Borrowers are jointly and severally liable, and
jointly and severally agree to pay, to the Lenders, in an equal share to each
Lender (on a 50/50 basis), the amount of [SEVEN HUNDRED AND SIX THOUSAND ONE
HUNDRED TWENTY-FIVE DOLLARS ($706,125)] and all other Obligations under
the Note and Related Loan Documents (the “Loan”).

     

    2.2           Loan
Account.  The Lenders shall maintain a loan account (the “Loan
Account”) on their books in which shall be recorded (i) all payments made
by Borrowers on the Loan and (ii) all other appropriate debits and credits as
provided in this Agreement, including, without limitation, all interest, charges
and expenses.  All amounts recorded in the Loan Account shall be,
absent manifest error, prima
facie evidence of (i) the principal amount of the Loan remaining due
hereunder, (ii) any accrued and unpaid interest owing on the Loan, and (iii) all
amounts repaid on the Loan; provided, however, the failure
to maintain any such Loan Account or to record any such amount or any error in
recording such amounts shall not limit or otherwise affect the obligations of
the Borrowers under this Agreement to repay the principal amount of the Loan,
together with all interest accruing thereon.

     

    2.3           Note.  The
Loan shall be evidenced by the Note.

     

    Section
3.              Interest Rate and
Expenses.

     

    3.1           Interest
Rates.  Except as otherwise provided in Section 3.2, the Loan
shall accrue interest during each Interest Period at a rate per annum equal to ten
percent (10%) (“Interest
Rate”).  After the occurrence and during the continuation of an
Event of Default, interest on the outstanding principal balance of the Loan
shall accrue interest at the Default Rate.  Except as otherwise set
forth herein, all interest at the Interest Rate shall be calculated on a per diem basis based on a
year consisting of 360 days and shall be paid for the actual number of days
elapsed during each Interest Period.

     

    3.2           Payment of
Interest.  Accrued and unpaid interest at the Interest Rate
shall be due and payable for the applicable Interest Period on each Interest Due
Date as follows:

     

    (a)           In
cash, or;

     

    (b)           At
Industries’ option, Industries may by notice in writing to the Lenders, elect to
pay all interest due by the Borrowers by issuing authorized but unissued common
shares of Industries to the Lenders in the amount set forth in Section
3.3.

     

    (c)           All
accrued but unpaid interest due under this Agreement and the Note shall be paid
in full on the Maturity Date.

     

    
      3.3          
Computation and Issuance of
Common Shares.

    

     

    (a)           In
the event Industries elects to issue Interest Common Stock to the Lenders on any
Interest Due Date, the amount of Interest Common Stock to be issued on such date
shall be determined on a per diem basis where the
interest due by the Borrowers on the Loan per day during any Interest Period
will be deemed to equal a total of 5,000 common shares (or 2,500 common shares
per Lender) of Industries (par value of $0.001 per share) and the number of
shares to be issued to the Lenders on any Interest Due Date shall be determined
by multiplying 5,000 by the number of days elapsed in the applicable Interest
Period.

    
      
         

      

      
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    (b)           Interest
Common Stock shall be issued and delivered by Industries pursuant to agreed
procedures determined by the Board of Directors of Industries in compliance with
its incorporation documents, Delaware law and all relevant federal and local
Securities Laws.

     

    (c)           All
Interest Common Stock to be issued on any Interest Due Date shall be issued and
delivered by Industries to the Lenders in equal shares (on a 50/50 basis) no
later than five (5) Business days after such Interest Due Date, with the result
that each Lender shall have issued and delivered to it or him, as applicable, a
certificate representing Common Shares of Industries equal to 50% of the
Interest Common Stock issued by Industries to Lenders on such Interest Payment
Date.

     

    (d)           All
Interest Common Stock issued to the Lenders shall be (i) deemed fully paid and
non-assessable and be entitled to rights and privileges of other common
stockholders of Industries and (ii) in full payment and satisfaction of all
interest due by the Borrowers on the applicable Interest Due Date.

     

    (e)           The
certificates for all Interest Common Stock issued to each Lender shall bear the
legend set forth in Section 7A.3
hereof.

     

    3.4           Costs, Fees and
Expenses.  The Borrowers shall pay or reimburse the Lenders (up
to $34,000) for all reasonable costs, fees and expenses incurred by the Lenders,
or for which the Lenders become obligated, in connection with, any and all stamp
and other taxes payable in connection with this Agreement or the other Loan
Documents, UCC search fees, filing fees and other costs and expenses (including
reasonable attorneys fees) in connection with the execution and delivery of this
Agreement and the other Loan Documents.  That portion of the
Obligations consisting of costs, expenses or advances to be reimbursed by the
Borrower to the Lenders pursuant to this Agreement or the other Loan Documents
which are not paid on or prior to the date hereof shall be payable by the
Borrower to the Lenders within five (5) Business Days of notice thereof or at
the Lenders’ option, on notice to the Borrowers, be rolled into and added to the
principal amount of the Loan and Note.  In addition, if at any time or
times hereafter the Lenders: (a) employ counsel for advice or other
representation (i) to represent the Lenders in any litigation, contest, dispute,
suit or proceeding or to commence, defend, or intervene or to take any other
action in or with respect to any litigation, contest, dispute, suit, or
proceeding (whether instituted by the Lenders, the Borrower, or any other
Person) in any way or respect relating to this Agreement, the other Loan
Documents or the Borrower’s business or affairs, or (ii) to enforce any
rights of the Lenders against the Borrower or any other Person that may be
obligated to the Lenders by virtue of this Agreement or the other Loan
Documents; (b) takes any action to protect, collect, sell, liquidate, or
otherwise dispose of any of the Collateral; and/or (c) attempts to or
enforces any of the Lenders’ rights or remedies under this Agreement or the
other Loan Documents, the costs and expenses incurred by the Lenders in any
manner or way with respect to the foregoing, shall be part of the Obligations,
payable by the Borrower to the Lenders on demand.

    
      
         

      

      
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    Section
4.              Payments.

     

    4.1           Principal
Payments.  Unless sooner paid in full, the outstanding
principal balance of the Loan shall be paid in full on the Maturity
Date.  Principal amounts repaid on the Loan may not be borrowed
again.

     

    4.2           Mandatory
Prepayment.  The Borrowers shall make a prepayment of the
outstanding principal amount of the Loan concurrently with the receipt by the
Borrowers of any Net Cash Proceeds from any Asset Disposition in an amount equal
to 100% of such Net Cash Proceeds.

     

    4.3           Optional
Prepayments.  The Borrowers may voluntarily prepay amounts due
on the Note, in whole or in part, at any time on or after the date
hereof.

     

    4.4           Due Date
Extensions.  If any payment to be made by the Borrowers
hereunder shall become due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of time of
the applicable Interest Period or Maturity Date shall be included in computing
any interest in respect of such payment; provided, however, that if the effect
of any extension would be to carry the payment over to the next calendar month,
such payment shall be due and made on the preceding Business Day of the month in
which such payment is due and any such reduction of time in the applicable
Interest Period shall be included in computing interest due on such date of
payment.

     

    4.5           Collection of
Funds.  All payments made by the Borrowers hereunder or under
any of the Loan Documents shall be made without setoff, counterclaim, or other
defense and shall be applied first to the payment of accrued interest, next to
the payment of all other fees, charges or costs owed to Lenders under the
Agreement and then to the payment of outstanding principal owed on the
Loan.

     

    4.6           Taxes.

     

    (a)           Any
and all payments by or on account of any obligation of the Borrowers hereunder
or under any other Loan Document shall be made free and clear of and without
reduction or withholding for any Taxes.  If, however, applicable law
requires the Borrowers or the Lenders to withhold or deduct any Tax, such Tax
shall be withheld or deducted in accordance with such laws as determined by the
Borrowers or the Lenders, as the case may be.  If the Borrowers or the
Lenders shall be required by any applicable laws to withhold or deduct any Taxes
from any payment, then (i) the Borrowers or the Lenders, as required by such
laws, shall withhold or make such deductions, (ii) the Borrowers or the Lenders,
to the extent required by such laws, shall timely pay the full amount so
withheld or deducted by it to the relevant Governmental Authority in accordance
with such laws, and (iii) to the extent that the withholding or deduction is
made on account of Indemnified Taxes, the sum payable by the Borrowers shall be
increased as necessary so that after any required withholding or the making of
all required deductions (including deductions applicable to additional sums
payable under this Section 4.6) the
Lenders receive an amount equal to the sum it would have received had no such
withholding or deduction been made.

    
      
         

      

      
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    (b)           Without
limiting the provisions of subsection (a) above, the Borrowers shall, and do
hereby jointly and severally, indemnify and hold harmless the Lenders, and shall
make payment in respect thereof within ten (10) days after demand therefor, for
the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or
asserted on or attributable to amounts payable under this Section) withheld or
deducted by the Borrowers or the Lenders or paid by the Lenders, and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes were correctly or legally imposed
or asserted by the relevant Governmental Authority.

     

    Section
5.              Conditions of
Borrowing.

     

    The
obligation of the Lenders to disburse any portion of the Loan is subject to the
following conditions precedent:

     

    5.1           Initial Closing
Conditions.  The Lenders shall have received all of the
following, each duly executed and dated the Closing Date (or such earlier date
as shall be satisfactory to the Lenders), in form and substance satisfactory to
the Lenders (and the date on which all such conditions precedent have been
satisfied or waived in writing by the Lenders is called the “Closing
Date”):

     

    (a)           Loan
Agreement.  Two copies of this Agreement duly executed by the
Borrowers.

     

    (b)           Note.  The
Note evidencing the Loan in form and substance satisfactory to the Lenders, duly
executed by the Borrowers.

     

    (c)           Security
Agreement.  An Amended and Restated Security Agreement dated as
of the date of this Agreement, executed by the Borrowers, in the form prepared
by and acceptable to the Lenders (the “Security
Agreement”).

     

    (d)           Stock
Pledge.  A pledge of all of the issued and outstanding shares
of Hemiwedge executed by Industries in favor of Lenders, in form and substance
satisfactory to Lenders (“Stock
Pledge”)

     

    (e)           Assignment
Agreement.  The execution and delivery to the Lenders by the
Bank of the Assignment Agreement in form and substance satisfactory to the
Lenders and delivery to the Lenders of all Prior Loan Documents in a manner
acceptable to the Lenders.

     

    (f)           Stock
Warrants.  The issuance and delivery to Lenders of a Stock
Warrant or Warrants (“Warrant”)
for 2,875,000 shares of common stock of Industries (par value of $0.001 each)
exercisable within sixty (60) months after the Closing Date for a purchase price
of $0.10 per share (“Warrant
Shares”); provided that
the amount of Warrant Shares shall be reduced to 575,000 Shares of Common
Stock at a purchase price of $0.10 per share if, within forty-five (45) days of
the effective date of this Agreement, either (i) Lenders sell all (but not less
than all) of their interest in the Loan and Note to a third party for the full
outstanding balance of the Loan, plus all interest and costs owed thereon
(including attorney’s fees of Lenders) or (ii) the Loan and all Obligations are
paid in full plus all interest and costs (without duplication) owed thereon
(including attorney fees of Lenders) all in the form and substance satisfactory
to the Lenders.

    
      
         

      

      
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    (g)           Search Results; Lien
Terminations.  Copies of UCC search reports dated such a date
as is reasonably acceptable to the Lenders, listing all effective financing
statements which name the Borrowers, as debtor, together with copies of such
financing statements.

     

    (h)           UCC #3
Assignments.  Delivery to the Lenders of all necessary UCC #3
Assignments of Financing Statements duly executed by the Bank in favor of the
Lenders with respect to all liens and security interests granted by the
Borrowers to the Bank pursuant to the Prior Security Agreement and Prior Loan
Documents, all in form and substance satisfactory to the Lenders.

     

    (i)           
Organizational and
Authorization Documents.  Copies of (i) the Certificate of
Incorporation and Bylaws and Certificate of Organization or Incorporation of
each of Industries and Hemiwedge as applicable; (ii) resolutions of the Board of
Directors of each of Industries and Hemiwedge, as applicable, approving and
authorizing such Person’s execution, delivery and performance of the Loan
Documents and Related Documents to which it is party and the transactions
contemplated thereby, and, with respect to Industries, the issuance of the
Interest Common Shares; and (iii) signature and incumbency certificates of the
officers of each of Industries and Hemiwedge, as applicable, executing any of
the Related Documents.

     

    (j)           
Good Standing
Certificates.  Copies of good standing certificates in the
state of incorporation and formation of Industries and Hemiwedge, as
applicable.

     

    (k)           Additional
Documents.  Such other certificates, financial statements,
schedules, resolutions, opinions of counsel, notes and other documents which are
provided for hereunder or which the Lenders shall reasonably
require.

     

    5.2           Further
Conditions.  The obligation of the Lenders to close and
continue the Loan is subject to the following additional conditions precedent
that:

     

    (a)           Event of
Default.  No Event of Default, or Unmatured Event of Default,
shall have occurred and be continuing or would result therefrom.

     

    (b)           Representations and
Warranties.  The representations or warranties of the Borrowers
contained in this Agreement or in any Related Document shall be true and correct
in all respects on the Closing Date and shall remain true and correct thereafter
(except to the extent stated to relate to a specific earlier date, in which case
such representations and warranties shall be true and correct as of such earlier
date); provided, however, that such representations and warranties shall be
deemed to be true and correct unless the failure or failures of all such
representations and warranties to be true and correct would reasonably be
expected, in the aggregate, to have a Material Adverse Effect.

     

    (c)           Material Adverse
Effect.  There has been no development or event, which has had
or could reasonably be expected to have a Material Adverse
Effect.

    
      
         

      

      
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    Each
payment of interest in cash or issuance of Interest Common Shares on any
Interest Due Date shall constitute a representation and warranty by each
Borrower that the conditions contained in this Section 5.2 have been
satisfied.

     

    Section
6.              Representations and
Waranties.

     

    To induce
the Lenders to purchase the Prior Indebtedness and extend and continue the Loan,
the Borrowers each make the following representations and warranties to the
Lenders, each of which shall survive the execution and delivery of this
Agreement:

     

    6.1           Organization and
Name.

     

    (a)           Industries
is a corporation duly organized, existing and in good standing under the laws of
the State of Delaware, with all requisite power and authority to carry on and
conduct its business as presently conducted and to enter into and perform its
obligations under this Agreement and the Related Documents.

     

    (b)           Hemiwedge
is a corporation duly organized, existing and in good standing under the laws of
the State of Texas, with all requisite power and authority to carry on and
conduct its business as presently conducted and to enter into and perform its
obligations under this Agreement and the Related Documents.

     

    (c)           The
exact legal name of each Borrower is as set forth in the first paragraph of this
Agreement.

     

    6.2           Authorization.  All
necessary and appropriate action by each board of directors of the Borrowers has
been taken (a) on the part of each Borrower to authorize the execution and
delivery by each of the Borrowers of this Agreement and the Related Documents
and (b) on the part of Industries, to issue and deliver the Interest Common
Shares.

     

    6.3           Validity and Binding
Nature.  This Agreement has been duly executed and delivered by
each Borrower and is the legal, valid and binding obligation of each such
Borrower, enforceable against each Borrower in accordance with its terms,
subject to bankruptcy, insolvency and similar laws affecting the enforceability
of creditors’ rights generally and to general principles of equity.

     

    6.4           Consent; Absence of
Breach.  The execution, delivery and performance by each
Borrower of this Agreement and the Related Documents as applicable, does not and
will not (i) require any consent, approval, authorization, or filings with,
notice to or other act by or in respect of, any Governmental Authority or any
other Person (other than any consent or approval which has been obtained and is
in full force and effect); (ii) conflict with (A) any provision of law or any
applicable regulation, order, writ, injunction or decree of any court or
Governmental Authority, or (B) any other loan or credit agreement entered into
and currently in force by either Borrower, or (C) any material agreement,
indenture, instrument or other document, or any judgment, order or decree, which
is binding upon any Borrower or any of its properties or assets; or (iii)
require, or result in, the creation or imposition of any Lien on any asset of
the Borrowers, other than Liens in favor of the Lenders.

    
      
         

      

      
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    6.5           Adverse
Circumstances.  No condition, circumstance, event, agreement,
document, instrument, restriction, litigation or proceeding (or threatened
litigation or proceeding or basis therefor) exists which can reasonably be
expected to (i) have a Material Adverse Effect, or (ii) constitute an Event of
Default or an Unmatured Event of Default.

     

    6.6           Financial
Statements.  All financial statements with respect to each
Borrower that have been submitted to the Lenders have been prepared on a basis,
except as otherwise noted therein, consistent with the previous fiscal year and
present fairly the financial condition of each Borrower and the results of the
operations for each such as of such date and for the periods indicated, all in
accordance with GAAP.  Since the date of the most recent financial
statement, there has been no change in the financial condition or in the assets
or liabilities of either Borrower having a Material Adverse Effect on such
Borrower.

     

    6.7           Litigation and Contingent
Liabilities.  Except as set forth in Schedule 6.7, there
is no litigation, arbitration proceeding, demand, charge, claim, petition or
governmental investigation or proceeding pending, or, to Borrowers’ knowledge,
threatened, against any Borrower, which, if adversely determined, which might
reasonably be expected to have a Material Adverse Effect.  Other than
any liability incident to such litigation or proceedings, neither Borrower has
any material guarantee obligations, contingent liabilities, liabilities for
taxes, or any long-term leases or unusual forward or long-term commitments,
including any interest rate or foreign currency swap or exchange transaction or
other obligation in respect of derivatives, that are not fully-reflected or
fully reserved for in the most recent audited financial statements delivered to
the Lenders.

     

    6.8           Current Borrowers
Indebtedness.  Schedule
6.8  sets forth a true and correct listing of all current
indebtedness of the Borrowers as of the date of this Agreement (including all
trade payables in excess of $50,000).

     

    6.9           Environmental Laws and
Hazardous Substances.  No Obligor has generated, used, stored,
treated, transported, manufactured, handled, produced or disposed of any
Hazardous Substances in any manner which at any time violates any Environmental
Law or any license, permit, certificate, approval or similar authorization
thereunder, except as would not reasonably be expected to result in a Material
Adverse Effect.  No Obligor has any material liability, contingent or
otherwise, in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Substances or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Material, except as would not reasonably be expected to result in a Material
Adverse Effect.  There has been no investigation, proceeding,
complaint, order, directive, claim, citation or notice by any Governmental
Authority or any other Person, nor is any pending or, to the best of any
Obligor’s knowledge, threatened against such Obligor, and the Borrowers shall
immediately notify the Lenders upon becoming aware of any such investigation,
proceeding, complaint, order, directive, claim, citation or notice, with respect
to any non-compliance with, or violation of, the requirements of any
Environmental Law by any Borrower or the release, spill or discharge, threatened
or actual, of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Material or any other environmental, health or safety matter, which affects any
Borrower or any of its businesses, operations or assets or any
properties.

    
      
         

      

      
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    6.10         Taxes.  Except
as set forth on Schedule 6.10, the
Borrowers have each timely filed all tax returns and reports required by law to
have been filed by them and have paid all Taxes due and payable with respect to
such returns, except (i) any such Taxes which are being diligently contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books, are insured against
or bonded over to the satisfaction of the Lenders and the contesting of such
payment does not create a Lien on the Collateral or (ii) to the extent that the
failure to do so (individually or collectively) could not reasonably be expected
to result in a Material Adverse Effect.

     

    6.11         Governmental
Regulation.  No Obligor is subject to regulation under any
federal or state statute or regulation limiting its ability to incur
indebtedness for borrowed money.

     

    6.12         [Intentionally
Deleted]

     

    6.13         Compliance with Securities
Laws/Common Interest Stock.  With respect to Industries, as of
the effective date of this Agreement:

     

    (a)              
The total number of authorized shares of its common stock is Fifty Million
($50,000,000) shares with a par value of $0.001 each;

     

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

     

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

     

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

     

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

     

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

     

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

    
      
         

      

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

     

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

     

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

     

    6.15         Full
Disclosure.  Neither this Agreement, the other Loan Documents,
nor any statement or documents referred to herein or delivered to the Lenders by
any of the Borrowers, or any other Person on their behalf contains any untrue
statement or omits to state a material fact necessary to make the statements
herein or therein not misleading.

     

    6.16         Ownership of
Collateral.

     

    (a)           Borrowers
have good and marketable title to all of the Collateral; and

     

    (b)           Except
as set forth in Schedule II to the
Security Agreement, with respect to Intellectual Property licensed to other
Persons, Hemiwedge, pursuant to the provisions of the Security Agreement, is
pledging and granting to the Lenders a security interest in all of the Patents
and Intellectual Property that it owns or in which it has a
license.

     

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

     

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

    
      
         

      

      
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    6.19         ERISA.  Each
qualified retirement plan of each of the Borrowers presently conforms and is
administered in a manner consistent with the Employee Retirement Income Security
Act of 1974.

     

    6.20         Survival of
Representations.  All representations and warranties made by
each of the Borrowers herein will survive the Closing Date, and any
investigation at any time made by or on behalf of the Lenders will not diminish
the Lenders’ rights to rely thereon.  All statements contained in any
certificate or other instrument delivered by or on behalf of the Borrowers under
or pursuant to this Agreement or in connection with the transactions
contemplated hereby will constitute representations and warranties made by
Borrowers hereunder.

     

    Section
7.              Covenants.

     

    7.1           Compliance Certificate;
Notices.  The Borrowers shall furnish, or cause to be
furnished, to the Lenders:

     

    (a)           Place of Business;
Collateral Locations.  At least 30 days’ prior to any change in
the principal place of business or books and records of any Borrower or any
change in location of Collateral provide written notice to the Lenders of such
change.

     

    (b)           Notice of
Proceedings.  Promptly upon becoming aware, shall give written
notice to the Lenders of any litigation, arbitration or governmental
investigation or proceeding not previously disclosed or the Borrowers to the
Lenders which has been instituted or, to the knowledge of the Borrowers, is
threatened against either of them or to which any of their respective properties
is subject which might reasonably be expected to have a Material Adverse
Effect.

     

    (c)           Notice of Event of Default
or Material Adverse Effect.  Immediately after the commencement
thereof, give notice to the Lenders in writing of the occurrence of any Event of
Default or any Unmatured Event of Default, or the occurrence of any condition or
event which could reasonably be expected to have a Material Adverse
Effect.

     

    7.2           Debt.  The
Borrowers shall not, without prior written consent of the Lenders, either
directly or indirectly, create, assume, incur or have outstanding any Debt
(including purchase money indebtedness), or become liable, whether as endorser,
guarantor, surety or otherwise, for any Debt or obligation of any other Person,
except:

     

    (a)           the
Obligations under this Agreement and the other Related Documents;

     

    (b)           obligations
of the Borrowers for Taxes, assessments, municipal or other governmental
charges;

     

    (c)           Debt
owed to the Second Lien Holders as of the date of this Agreement and Debt
pursuant to the Bridge Notes, all of which Debt is listed in Schedule 6.8 hereto;
provided, that,
(i) such Debt is junior to the Obligations and (ii) no principal payments may be
made on such Debt by either Borrower during the term of the Loan without the
Lenders prior written consent, and provided further that no such
principal payments may be made out of the proceeds of (x) any Debt permitted to
be incurred pursuant to the provisions of Section 7.2(e) hereof or (y) any
Permitted Equity Offering for working capital purposes of Hemiwedge;
and

    
      
         

      

      
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    (d)           Debt
incurred from third party lenders for working capital purposes of Hemiwedge not
to exceed a total of Fifty Thousand Dollars ($50,000) during the term of the
Loan, which Debt may not be secured by a Lien on any of the
Collateral.

     

    (e)           Debt
(including Capitalized Lease Obligations) incurred solely to finance the
acquisition of fixed or capital assets in an aggregate principal amount not to
exceed, as to the Borrowers, taken together, Fifty Thousand Dollars ($50,000) at
any time outstanding.

     

    7.3           Encumbrances.  The
Borrowers shall not, either directly or indirectly, create, assume, incur or
suffer or permit to exist any Lien (except for Permitted Liens) or charge of any
kind or character upon any asset of the Borrowers, whether owned at the date
hereof or hereafter acquired, except for Permitted Liens.

     

    7.4           Investments.  The
Borrowers shall not, either directly or indirectly, make or have outstanding any
Investment, except (i) bank deposits in the ordinary course of business and (ii)
Industries’ equity investment in Hemiwedge existing as of the date of this
Agreement, but no more.

     

    7.5           Transfer;
Sales.  The Borrowers shall not, whether in one transaction or
a series of related transactions, (a) purchase or otherwise acquire all or
substantially all of the assets or any Capital Securities of any class of, or
any partnership or joint venture interest in, any other Person, or (b) except
(i) as otherwise permitted under this Loan Agreement or (ii) for worn out or
damaged machinery and equipment, provided that same is replaced with equivalent
or better machinery or equipment, as appropriate, sell, transfer, convey or
lease all or any part of its assets, including the Collateral except the sale by
Hemiwedge of Inventory in the ordinary course of business.

     

    7.6           Distributions.  Except
as set forth below or as permitted by this Agreement or as contemplated by any
Related Documents, without the Lenders prior written consent, the Borrowers
shall not, (a) make any distribution or dividend, whether in cash or otherwise,
to any person provided, however, that the
Borrowers may pay dividends to its shareholders in the form of capital stock (in
an amount not to exceed $500,000 worth per annum) or up to a maximum amount of
Fifty Thousand Dollars ($50,000) in cash during the term of the Loan out of
available cash derived from operations of Hemiwedge (other than cash generated
by any Permitted Equity Offering or new Debt permitted by Section 7.2(d) hereof,
(b) purchase or redeem any of its equity interests or any warrants, options or
other rights in respect thereof, except pursuant to an “employee benefit
plan” as defined under the Securities Act of 1933, as amended, (c) pay
any management fees or similar fees to any of its Affiliates, (d) pay or prepay
interest on, principal of, premium, if any, redemption, conversion, exchange,
purchase, retirement, defeasance, sinking fund or any other payment in respect
of any Debt (other than the Loan) except as for (i) conversion of any Debt into
equity pursuant to the Permitted Equity Offering and (ii) otherwise permitted by
Section 7.2(c) hereof, or (e) set aside funds for any of the
foregoing.  Notwithstanding the foregoing, nothing in this Section
shall prevent the payment by Borrowers of amounts owed to (1) Soderberg Research
and Development, Inc. under that certain Asset Purchase Agreement dated as of
December 2, 2005 and (2) Tejas Research & Engineering, L.P. under that
certain Intellectual Property Agreement dated as of October 14,
2008.

    
      
         

      

      
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    7.7           Transactions with
Affiliates.  Without Lenders’ consent (not to be unreasonably
withheld, conditioned or delayed), the Borrowers shall not, directly or
indirectly, enter into or permit to exist any transaction with any of its
Affiliates or with any director, officer or employee of the Borrower other than
as set forth in this Agreement or any of the other Related
Documents.

     

    7.8           Business Activities and
Organizational Documents.  The Borrowers shall not (a) engage
in any line of business other than the businesses engaged in on the date hereof
and businesses reasonably related thereto or (b) permit its charter, bylaws or
other organizational documents to be amended or modified in any way except with
respect to changes required by any investor injecting equity funds in Hemiwedge
or Industries pursuant to any Permitted Equity Offering.

     

    7.9           Place of Business;
Collateral Locations and Change of Legal Status.  Without first
giving at least 30 days’ prior written notice to the Lenders and taking all
action required by the Lenders for the purpose of perfecting or protecting the
security interests under the Loan Documents, none of the Borrowers shall (a)
change its principal place of business, the location of its books and records or
location of Collateral or (b) change its name, its organizational identification
number, its type of organization, its jurisdiction of organization or other
legal structure.

     

    7.10         Inconsistent
Agreements.  The Borrowers shall not enter into any agreement
containing any provision which would (a) be violated or breached by any
borrowing by the Borrowers hereunder or by the performance by the Borrowers of
any of their Obligations hereunder or under any other Loan Document, or (b)
prohibit the Borrowers from granting to the Lenders a Lien on any of its
assets.

     

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

     

    7.12         Qualification;
Licenses.  Each of the Borrowers will take such actions or
cause such actions to be taken as might be required to maintain each of the
Borrowers’ corporate existence and all governmental and private permits,
licenses and authorities of Borrowers necessary or desirable to the continuation
of their businesses and will comply with all statues an regulations of
Governmental Authorities.

     

    7.13         Additional
Documents.  At any time and from time to time, upon written
request of Lenders, each of the Borrowers agrees to furnish any additional
information and to execute any and all additional documents, not inconsistent
with the provisions of this Agreement, which may be required by the Lenders in
connection with or pursuant to any provision set forth in this Agreement or the
Related Documents;

    
      
         

      

      
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    7.14         Books and
Records.  Each of the Borrowers will keep and maintain accurate
books and records in accordance with GAAP.

     

    7.15         Insurance.  Each
of the Borrowers will maintain property, liability, workers compensation and
other forms of insurance in amounts reasonably designated at any time or from
time to time by the Lender.

     

    7.16         Registration
Rights.

     

    (a)           Piggyback
Registration.  If at any time or from time to time Industries
shall propose to file on its behalf or on behalf of any of its security holders
a registration statement (other than with respect to a merger, combination,
employee stock benefit plan or dividend reinvestment plan or any successor forms
thereto) under the Securities Act on any form for the general registration of
securities with respect to the class of securities represented by the
Securities, Industries shall in each case:

     

    (i)           promptly
give written notice to each Lender at least thirty (30) days before the
anticipated filing date, indicating the proposed offering price and describing
the plan of distribution;

     

    (ii)          include
in such registration (and any related qualification under blue sky or other
state securities laws or other compliance) and, at the request of any Lender, in
any underwriting involved therein, all the Securities specified by any Lender in
a written request delivered to Industries within twenty (20) days after receipt
of such written notice from Industries; and

     

    (iii)         if
such offering is proposed to be underwritten, use its best efforts to cause the
managing underwriter(s) of such proposed underwritten offering to permit the
Securities to be included in the registration statement for such offering on the
same terms and conditions as any similar securities of Industries included
therein.

     

    (b)           Notwithstanding
the provisions of Section 7.16(a) above, if either (A) the registration
limitations imposed by the Securities and Exchange Commission pursuant to
Rule 415 of the Securities Act require a reduction of the amount of securities
included on any registration statement filed by Industries or (B) the lead
managing underwriter selected by Industries for an underwritten offering for
which piggyback rights are requested by the Lenders pursuant to Section 7.16(a)
determines that marketing or other factors require a limitation on the number of
shares of Industries’ common stock to be offered and sold in such offering, then
the Lenders agree that their shares of Interest Common Stock and Warrant Shares
being included in the offering (the “Lender
Registrable Securities”), shall be first either (i) reduced as necessary
to meet the required limitation or (ii) if such limitation requires a greater
reduction than would permit any of such Lender’s Registrable Securities to be
included in such offering, excluded from any such registration statement to be
filed by Industries, it being understood and agreed that all or part of the
Lender Registrable Securities, as necessary, shall be removed from such
registration statement prior to any securities from any other investor contained
on the subject registration statement.

    
      
         

      

      
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    (c)           Each
Lender who elects to exercise its rights under Section 7.16(a) agrees to furnish
to Industries a completed questionnaire in the form attached to this Agreement
as Schedule
7.16(b) (a “Selling Shareholder
Questionnaire”) not less than two days prior to proposed filing date of a
registration statement by Industries.

     

    Section
7A.           Representations,
Warranties and Covenants of the Lender.

     

    7A.1        Representations
and Warranties of the Lender.  Each Lender represents and warrants to
the Borrowers that:

     

    (a)           it
is an “accredited investor” within the meaning of Rule 501 of Regulation D under
the Securities Act, as presently in effect;

     

    (b)           the
Securities being purchased by it are being acquired for its own account for the
purpose of investment and not with a view to, or for resale in connection with,
any distribution thereof within the meaning of the Securities Act;
and

     

    (c)           it
understands that (i) the Securities have not been registered under the
Securities Act by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) thereof
or Rule 505 or 506 or Section 3(a)(9) promulgated under the Securities Act, (ii)
it understands that the Securities are being offered in transactions not
involving any public offering within the meaning of the Securities Act (ii) if
in the future either Lender decides to offer, resell, pledge or otherwise
transfer any of the Securities, such Securities may be offered, resold, pledged
or otherwise transfer any of the Securities, such Securities may be offered,
resold, pledged or otherwise transferred only (A) to, Industries, as issuer (B)
to a person whom the seller reasonably believes is a qualified institutional
buyer in a transaction meeting the requirements of Rule 144A under the
Securities Act, (C) pursuant to an exemption from registration under the
Securities Act provided by Rule 144 thereunder (if available), (D) to an
accredited investor in a transaction exempt from the registration requirements
of the Securities Act or (E) pursuant to an effective registration statement
under the Securities Act, in each of cases (A) through (E) in accordance with
any applicable Securities Laws of the states and other jurisdictions of the
United States, and that (iii) such seller will, and each subsequent holder is
required to, notify any subsequent purchaser of the Securities from it of the
resale restrictions referred to in (ii) above (iv) the Securities will bear the
legend to such effect set forth in Section 7A.3
hereof.

     

    7A.2        Restricted
Securities.  Subject to the provisions of Section 7A.1, the
Lender agrees not to make any disposition of all or any portion of the
Securities unless and until such securities are registered under the Securities
Act and under any other applicable securities laws or such sale or transfer is
exempt from such registration.

     

    7A.3       
Legend.  Each
Lender acknowledges that the certificates evidencing the Securities will bear
the legend set forth below:

    
      
         

      

      
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    THESE SECURITIES HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT, OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 (“Securities
Act”)  OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY
LAWS.

     

    The
legend set forth above shall be removed by Borrowers from any certificate
evidencing Securities, and the Borrowers shall issue a certificate without such
legend to the holder thereof, upon delivery to the Borrowers of an opinion by
counsel (which may be counsel for the Borrower) that a registration statement
under the Securities Act is at that time in effect with respect to the legended
security or that such security can be freely transferred without such a
registration statement being in effect and that such transfer will not
jeopardize the exemption or exemptions from registration pursuant to which the
Borrower issued the Securities; provided, however, that no opinion shall be
required for dispositions pursuant to Rule 144 under the Securities Act or in
any transfer in compliance with applicable securities laws where transferee
shall receive securities bearing the legend above.

     

    7A.4       Cancellation of
Guaranties.  Lenders represent and warrant that prior to
execution of this Agreement, they have executed the necessary documentation to
release the Original Guarantors from their obligations under the Prior Loan
Documents and further covenant and agree that such Guarantors will have no
obligations under this Agreement and the Related Loan Documents.

     

    7A.5       Subordination to A/R
Facility.  Lenders covenant and agree that with respect to any
Liens created under the A/R Facility to subordinate solely with respect to the
receivables under such A/R Facility their right to repayment of the Obligations
out of any Proceeds received by Borrowers of any such A/R Facility for which
Lenders agree that the lender under such A/R Facility shall have a first
priority security interest in, and only in, such receivables.

     

    7A.6       Lenders
Reaffirmation.     Each Lender reaffirms its
representations, warranties and covenants in Sections 7A.1 to 7A.3 concurrently
with the issuance of Interest Common Shares on any Interest Due
Date.

     

    Section
8.              Events of Default and Their
Effect.

     

    8.1           Events of
Default.  The Borrowers shall be in default under this
Agreement, the Note and all other Loan Documents upon the occurrence of any of
the following events (each an “Event
of Default”):

     

    (a)           Nonpayment of
Obligations.  Any interest or other amount due and owing on the
Note or any of the Obligations, whether by its terms or as otherwise provided
herein, is not paid when due and such failure shall continue for five (5)
Business Days.

    
      
         

      

      
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    (b)           Misrepresentation.  Any
warranty, representation, certificate or statement of any Borrower in this
Agreement, the other Loan Documents or any other agreement with the Lenders
shall be incorrect in any material respect when made.

     

    (c)           Nonperformance.  Any
failure to perform or default in the performance of any covenant, condition or
agreement contained in this Agreement or in the other Loan Documents (other than
an Event of Default described in Section 8.1(a)) which remains uncorrected for
more than thirty (30) days after receipt of written notice from the Lenders of
such failure to perform or default.

     

    (d)           Bankruptcy, Insolvency,
etc.  Any Borrower declares insolvency, or admits in writing
its inability or refusal to pay debts as they become due; or any Borrower
applies for, consents to, or acquiesces in the appointment of a trustee,
receiver or other custodian for such Borrower or any property thereof, or makes
a general assignment for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver or other custodian is
appointed for any Borrower or for a substantial part of the property of any
thereof; or any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is commenced in respect of any Borrower by such Borrower
or any other Person; or any Borrower takes any action to authorize, or in
furtherance of, any of the foregoing.

     

    (e)           Material Adverse
Effect/Cross Default Provisions.  Any Material Adverse Effect
shall occur or any Borrower shall be in default of any other promissory note or
Debt obligation (other than the Bridge Notes or other obligations listed in any
Schedule to
this Agreement as in default on the date hereof), whether for borrowed money or
otherwise, and same remains unpaid for five (5) days after demand for payment
thereof has been made.

     

    (f)           Judgments.  The
entry of any final judgment, decree, levy, attachment, garnishment or other
process, or the filing of any Lien against any Borrower which is not fully
covered by insurance and which could reasonably be expected to result in a
Material Adverse Effect.

     

    (g)           Governmental
Proceeding.  Any action or other proceeding (judicial or
administrative) commenced against any Borrower or its operations by a
Governmental Authority which, if adversely determined would have a Material
Adverse Effect.

     

    8.2           Effects of Events of
Default/Maturity.  Upon the occurrence and during the
continuation of an Event of Default, the Lenders shall have all rights, powers
and remedies set forth in the Loan Documents and the other Related Documents
relating to any of the Obligations or any security therefor, as a secured party
under the UCC or as otherwise provided at law or in equity.  Without
limiting the generality of the foregoing, without any notice or written demand
from Lenders, the Loan shall be immediately due and payable and the Lenders may
exercise their rights under the Security Agreement and other Related
Documents.  The Borrowers hereby waive any and all presentment,
demand, notice of dishonor, protest, and all other notices and demands in
connection with the enforcement of the Lenders’ rights under the Loan Documents
and the other Related Documents.  No delay or failure to take action
by Lenders upon the occurrence of any Event of Default shall constitute a waiver
by Lenders of any of their rights or remedies under this Agreement, nor shall
such delay or failure of or actual waiver given by Lenders on any one or more
occasions be deemed to be a waiver of Lenders’ rights with respect to any future
Events of Default hereunder, provided that no such waiver shall constitute a
waiver if any future Event of Default which may occur.

    
      
         

      

      
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    8.3           Waiver of Event of
Default.  The Lenders may, by an instrument in writing signed
by the Lenders, waive any Event of Default that has occurred and any of the
consequences of such Event of Default; and in such event, Borrowers will be
restored to their respective former positions,  rights and
Indebtedness under this Agreement and the Related Documents.  Any
Event of Default so waived will, for all purposes of this Agreement, be deemed
to have been cured and not to be continuing, provided that no such waiver shall
constitute a waiver of any future Event of Default unless Lenders otherwise
specifically agree in writing.

     

    Section
9.               Miscellaneous.

     

    9.1           Notices.        
All notices, requests, demands and other communications provided for hereunder
shall be in writing and addressed to the Parties as follows:

     

    
      	
              If
      to the Borrowers:

            	
              Hemiwedge
      Industries, Inc.

            

    

    
      	
               
      

            	
              1011
      Beach Airport Road

            

    

    
      	
               
      

            	
              Conroe,
      Texas 77301

            

    

    
      	
               
      

            	
              Fax:  936.539.2990

            

    

     

    
      	
               
      

            	
              and

            

    

     

    
      	
               
      

            	
              Hemiwedge
      Valve Corporation

            

    

    
      	
               
      

            	
              1011
      Beach Airport Road

            

    

    
      	
               
      

            	
              Conroe,
      Texas 77301

            

    

    
      	
               
      

            	
              Fax:  936.539.2990

            

    

     

    
      	
               
      

            	
              With
      a copy to:

            

    

     

    
      	
               
      

            	
              Indeglia
      & Carney, P.C.

            

    

    
      	
               
      

            	
              1900
      Main Street, Suite 300

            

    

    
      	
               
      

            	
              Irvine,
      CA 92614

            

    

    
      	
               
      

            	
              Attention:
      Marc A. Indeglia, Esq.

            

    

    
      	
               
      

            	
              Fax:  949.861.3324

            

    

     

    
      	
              If
      to the Lenders:

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

            

    

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

    
      
         

      

      
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    9.2           ENTIRE
AGREEMENT.  THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN
DOCUMENTS SETS OUT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES, AND, SUPERSEDES ALL NEGOTIATIONS, REPRESENTATIONS, WARRANTIES,
COMMITMENTS, TERM SHEETS, DISCUSSIONS, NEGOTIATIONS, OFFERS OR CONTRACTS (OF ANY
KIND OR NATURE, WHETHER ORAL OR WRITTEN) PRIOR TO OR CONTEMPORANEOUS WITH THE
EXECUTION HEREOF WITH RESPECT TO ANY MATTER, DIRECTLY OR INDIRECTLY RELATED TO
THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.  NO
PROMISES, EITHER EXPRESSED OR IMPLIED, EXIST BETWEEN THE BORROWER AND THE
LENDERS, UNLESS CONTAINED HEREIN OR THEREIN.  THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS ARE THE RESULT OF NEGOTIATIONS AMONG THE LENDERS AND THE
BORROWERS AND HAVE BEEN REVIEWED (OR HAVE HAD THE OPPORTUNITY TO BE REVIEWED) BY
COUNSEL TO ALL SUCH PARTIES, AND ARE THE PRODUCTS OF ALL
PARTIES.  ACCORDINGLY, THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL NOT BE CONSTRUED MORE STRICTLY AGAINST THE LENDERS MERELY BECAUSE OF THE
LENDERS’S INVOLVEMENT IN THEIR PREPARATION.

     

    9.3           Amendments;
Waivers.  No delay on the part of the Lenders in the exercise
of any right, power or remedy shall operate as a waiver thereof, nor shall any
single or partial exercise by the Lenders of any right, power or remedy preclude
other or further exercise thereof, or the exercise of any other right, power or
remedy.  No amendment, modification or waiver of, or consent with
respect to, any provision of this Agreement or the other Loan Documents shall in
any event be effective unless the same shall be in writing and acknowledged by
the Lenders, and then any such amendment, modification, waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.

     

    9.4           Governing
Law.  This Agreement and the other Loan Documents (i) shall be
delivered and accepted in and shall be deemed to be contracts made under and
governed by the internal laws of the State of Texas applicable to contracts made
and to be performed entirely within such State, without regard to conflict of
laws principles, and (ii) shall be governed, construed and interpreted in
accordance with the internal laws of the state of Texas.

    
      
         

      

      
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    9.5           FORUM SELECTION AND CONSENT
TO JURISDICTION.  ANY LITIGATION BASED HEREON, OR ARISING OUT
OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF TEXAS
AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
TEXAS.  THE LENDERS AND THE BORROWERS HEREBY EXPRESSLY AND IRREVOCABLY
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS FOR THE PURPOSE OF ANY
SUCH LITIGATION AS SET FORTH ABOVE.  THE LENDERS AND THE BORROWERS
FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF
TEXAS.  THE LENDERS AND THE BORROWERS EACH HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

     

    9.6           WAIVER OF JURY
TRIAL.  THE LENDERS AND THE BORROWERS, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE,
ANY OTHER LOAN DOCUMENT, ANY OF THE OTHER OBLIGATIONS, THE COLLATERAL, OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, OR ANY
COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE LENDERS AND THE BORROWERS
ARE ADVERSE PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.  THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE LENDERS GRANTING ANY FINANCIAL ACCOMMODATION TO THE
BORROWERS.

     

    9.7           Assignability.  The
Lenders may assign the Lenders’ rights in this Agreement, the other Loan
Documents, the Obligations, or any part thereof or transfer the Lenders’ rights
in any or all of the Collateral without the Borrowers’ prior written consent
(which may not be unreasonably withheld, conditioned or delayed).  The
Borrowers may not sell or assign this Agreement, or any other agreement with the
Lenders or any portion thereof, either voluntarily or by operation of law,
without the prior written consent of the Lenders.  This Agreement
shall be binding upon the Lenders and the Borrowers and their respective legal
representatives and successors.  All references herein to the
Borrowers shall be deemed to include any successors, whether immediate or
remote.

     

    9.8           Confirmations.  The
Borrowers and the Lenders agree from time to time, upon written request received
by it from the other, to confirm to the other in writing the aggregate unpaid
principal amount of the Loan then outstanding.

     

    9.9           Enforceability.  Wherever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by, unenforceable or invalid under any
jurisdiction, such provision shall as to such jurisdiction, be severable and be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other
jurisdiction.

    
      
         

      

      
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    9.10         Survival of Borrowers
Representations.  All covenants, agreements, representations
and warranties made by the Borrowers herein shall, notwithstanding any
investigation by the Lenders, be deemed material and relied upon by the Lenders
and shall survive the making and execution of this Agreement and the Loan
Documents and the issuance of any Note, and shall be deemed to be continuing
representations and warranties until such time as the Borrowers have fulfilled
all of their Obligations to the Lenders, and the Lenders have been indefeasibly
paid in full in cash.  The Lenders, in extending financial
accommodations to the Borrower, are expressly acting and relying on the
aforesaid representations and warranties.

     

    9.11         Time of
Essence.  Time is of the essence in making payments of all
amounts due the Lenders under this Agreement and in the performance and
observance by the Borrowers of each covenant, agreement, provision and term of
this Agreement.

     

    9.12         Counterparts; Facsimile
Signatures.  This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same
Agreement.  Receipt of an executed signature page to this Agreement by
facsimile or other electronic transmission shall constitute effective delivery
thereof.  Electronic records of executed Loan Documents maintained by
the Lenders shall deemed to be originals thereof.

     

    9.13         Indemnification.  The
Borrowers jointly and severally agree to defend (with counsel satisfactory to
the Lenders), protect, indemnify, exonerate and hold harmless each Indemnified
Party from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and distributions
of any kind or nature (including the disbursements and the reasonable fees of
counsel for each Indemnified Party thereto, which shall also include, without
limitation, reasonable attorneys’ fees and time charges of attorneys who may be
employees of any Indemnified Party), which may be imposed on, incurred by, or
asserted against, any Indemnified Party (whether direct, indirect or
consequential and whether based on any federal, state or local laws or
regulations, including securities laws, Environmental Laws, commercial laws and
regulations, under common law or in equity, or based on contract or otherwise)
in any manner relating to or arising out of this Agreement or any of the Loan
Documents, or any act, event or transaction related or attendant thereto, the
preparation, execution and delivery of this Agreement and the Loan Documents,
including the making or issuance and management of the Loan, the use or intended
use of the proceeds of the Loan, the enforcement of the Lenders’ rights and
remedies under this Agreement, the Loan Documents, any Note, any other
instruments and documents delivered hereunder, or under any other agreement
between the Borrowers and the Lenders; provided, however, that the
Borrowers shall not have any obligations hereunder to any Indemnified Party with
respect to matters determined by a court of competent jurisdiction by final and
nonappealable judgment to have been caused by or resulting from the willful
misconduct or gross negligence of such Indemnified Party.  To the
extent that the undertaking to indemnify set forth in the preceding sentence may
be unenforceable because it violates any law or public policy, the Borrowers
shall satisfy such undertaking to the maximum extent permitted by applicable
law.  Any liability, obligation, loss, damage, penalty, cost or
expense covered by this indemnity shall be paid to each Indemnified Party on
demand, and failing prompt payment, together with interest thereon at the
Default Rate from the date incurred by each Indemnified Party until paid by the
Borrowers, shall be added to the Obligations of the Borrowers and be secured by
the Collateral.  The provisions of this Section shall survive the
satisfaction and payment of the other Obligations and the termination of this
Agreement.

    
      
         

      

      
        Page
29 of 40

        
          

        

      

      
         

      

    

     

    9.14         Revival and Reinstatement of
Obligations.  If the payment of the Obligations by any Obligor
or the transfer to the Lenders of any property should for any reason
subsequently be declared to be void or voidable under any state or federal law
relating to creditors’ rights, including provisions of the Bankruptcy Code
relating to fraudulent conveyances, preferences, or other voidable or
recoverable payments of money or transfers of property (collectively, a “Voidable
Transfer”), and if the Lenders is required to repay or restore, in whole
or in part, any such Voidable Transfer, or elects to do so upon the reasonable
advice of its counsel, then, as to any such Voidable Transfer, or the amount
thereof that the Lenders is required or elects to repay or restore, and as to
all reasonable costs, expenses, and attorney’s fees of the Lenders, the
Obligations shall automatically be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.

     

    9.15         Joint and Several
Obligations.  All Obligations of Borrowers under this Agreement
and may be collected by Lenders from any are or both of them, the Note or any
other Loan Document are joint and several Obligations of Borrowers to
Lenders.

     

    9.16         Termination.  After
all Obligations have been paid and satisfied in full, this Agreement shall
terminate and the Lenders shall take all action reasonably requested by
Borrowers to release Lenders’ security interest in the Collateral.

     

    9.17         Amendment and
Restatement.  This Agreement amends, extends, renews,
continues, and restates (but does not release, or extinguish and is not in
novation of) the Prior Indebtedness, the Prior Loan Documents and all documents
executed by Borrowers in connection with the Prior Loan Agreement, with the
intention and agreement that all indebtedness, obligations, liens and security
interests relate back and continue to run, without lapse, from the effective
date of the Prior Loan Agreement and the date of attachment and perfection of
the Collateral of Borrowers under the Prior Security Agreement.

     

    [Remainder of the
page is intentionally blank; signature page on next
page]

    
      
         

      

      
        Page
30 of 40

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Borrowers and the Lenders have executed this Term Loan
Agreement as of the date first above written.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      	
                                              BORROWERS:

                                            	
                                              HEMIWEDGE
      INDUSTRIES, INC. , a Delaware

                                              limited
      liability company

                                            
	 
      	 
      	 
      
	 
      	
                                              By:

                                            	 
      
	 
      	
                                              Name:

                                            	
                                              Matthew
      C. Flemming

                                            
	 
      	
                                              Title:

                                            	
                                              CFO
      and Secretary

                                            
	 
      	 
      	 
      
	 
      	
                                              HEMIWEDGE
      VALVE CORPORATION,  a

                                              Texas
      corporation

                                            
	 
      	 
      	 
      
	 
      	
                                              By:

                                            	 
      
	 
      	
                                              Name:

                                            	
                                              Matthew
      C. Flemming

                                            
	 
      	
                                              Title:

                                            	
                                              CFO
      and Secretary

                                            
	 
      	 
      	 
      
	
                                              LENDERS:

                                            	
                                              EADS
      INVESTMENT I, LLC., a

                                            
	
                                                
      

                                            	
                                              Texas
      limited liability company

                                            
	 
      	 
      	 
      
	 
      	
                                              By:

                                            	 
      
	 
      	
                                              Name:

                                            	
                                              Rodney
      Eads

                                            
	 
      	
                                              Title:

                                            	
                                              Member

                                            
	 
      	
                                              Address:

                                            	
                                              18305
      Kitzman Road

                                            
	 
      	 
      	
                                              Cypress,
      Texas 77429

                                            
	  
      	
                                                
      

                                            	  
      
	 
      	
                                              D.
      BRADLEY McWILLIAMS, an individual residing in Texas

                                            
	 
      	 
      	 
      
	 
      	
                                              Address:

                                            	
                                              710
      North Post Oak Road

                                            
	 
      	 
      	
                                              Suite
      400

                                            
	 
      	 
      	
                                              Houston,
      Texas 77024

                                            
	 
      	 
      	 
      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
        

      

      
        Page
31 of 40

        
          

        

      

      
        
        

      

    

     

    DISCLOSURE
SCHEDULE

     

    This Disclosure Schedule has been
prepared in connection with the Amended and Restated Loan Agreement dated as of
June 30, 2010 (the “Agreement”) by and among
Shumate Industries, Inc., a Delaware corporation (the “Industries”), Hemiwedge Valve
Corporation, a Texas corporation (“Hemiwedge”) (each a “Borrower” and, collectively,
the “Borrowers”), and
EADS Investments I, LLC, a Texas limited liability company (”EADS”) and D. Bradley
McWilliams (“McWilliams”) (collectively,
the  “Lenders”).  Capitalized
terms not otherwise defined in this Disclosure Schedule shall have the same
meaning as in the Agreement.

     

    The disclosure of any matter in this
Disclosure Schedule should not be construed as indicating that such matter is
necessarily required to be disclosed in order for any representation or warranty
in the Agreement to be true and correct in all material respects.  Any
description of any document included in this Disclosure Schedule is qualified in
all respects by reference to such document.

    
      
         

      

      
        Page
32 of 40

        
          

        

      

      
         

      

    

     

    
      COGAN
& PARTNERS

      DRAFT
05.19.10

       

    

    SCHEDULE
6.5

    

    ADVERSE
CIRCUMSTANCES

    

    Bridge
Notes

    

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

    Other
Notes

    

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

    

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

    

    Lease

    

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

    
      
         

      

      
        Page
33 of 40

        
          

        

      

      
         

      

    

    

    SCHEDULE
6.7

    

    List of Litigation or
Adverse Claims:

    

    LITIGATION

     

    Sunbelt

    

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

    

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

    

    Lease

    

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

     

    
      
         

      

      
        Page
34 of 40

        
          

        

      

      
         

      

    

    

    SCHEDULE
6.8

    

    Debt

    

    See
Attached.

    
      
         

      

      
        Page
35 of 40

        
          

        

      

      
         

      

    

     

    SCHEDULE
6.10

    

    TAXES

    

    
      
        
          
            	
                    Federal

                  	 	 	 
	 
      	 	 	 
	
                    Form
      941 Tax Due, 2nd
      Quarter 2009

                  	 	$	42,824	*
	 
      	 	 	 	 
	
                    Form
      941 Tax Due, 4th
      Quarter 2009

                  	 	$	20,025	*
	 
      	 	 	 	 
	
                    State

                  	 	 	 	 
	 
      	 	 	 	 
	
                    Texas
      Unemployment Tax, 1st
      Quarter 2010

                  	 	$	13,500	*
	 
      	 	 	 	 
	
                    Personal
      Property tax for inventory

                  	 	$	34,000	*

          

        

      

    

    

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

    
      
         

      

      
        Page
36 of 40

        
          

        

      

      
         

      

    

     

    SCHEDULE 7.16
(b)

    

    Hemiwedge
Industries, Inc.

     

    Selling
Securityholder Notice and Questionnaire

     

    The
undersigned beneficial owner of common stock (the “Registrable
Securities”) of Hemiwedge Industries, Inc.., a Delaware corporation (the
“Company”),
understands that the Company has filed or intends to file with the Securities
and Exchange Commission (the “Commission”) a
registration statement (the “Registration
Statement”) for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the “Securities Act”), of
the Registrable Securities.

     

    Certain
legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus.  Accordingly,
holders and beneficial owners of Registrable Securities are advised to consult
their own securities law counsel regarding the consequences of being named or
not being named as a selling securityholder in the Registration Statement and
the related prospectus.

     

    NOTICE

     

    The
undersigned beneficial owner (the “Selling
Securityholder”) of Registrable Securities hereby elects to include the
Registrable Securities owned by it in the Registration
Statement.

    
      
         

      

      
        Page
37 of 40

        
          

        

      

      
         

      

    

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

     

    QUESTIONNAIRE

     

    
      	
               
      

            	
              1.

            	
              Name.

            

    

     

    
      	
               
      

            	
              (a)

            	
              Full
      Legal Name of Selling
Securityholder

            

    

     

      
        
          
            	
                     
      

                  
	 
      

          

        

      

    

     

    
      	
               
      

            	
              (b)

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

            

    

     

    
      
        
          
            	
                     
      

                  
	 
      

          

        

      

    

     

    
      	
               
      

            	
              (c)

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

            

    

     

    
      
        
          
            	
                     
      

                  
	 
      

          

        

      

    

     

    
      	
               
      

            	
              2.  Address
      for Notices to Selling
Securityholder:

            

    

     

    
      	 
      
	 
      
	 
      

    

    

    
      
        
          
            
              	
                      Telephone:

                    	 
      
	
                      Fax:

                    	 
      
	
                      Contact
      Person:

                    	 
      

            

          

        

      

    

     

    3.  Broker-Dealer
Status:

     

    
      	
               
      

            	
              (a)

            	
              Are
      you a broker-dealer?

            

    

     

    Yes    ̈                      No    ̈

     

    
      	
               
      

            	
              (b)

            	
              If
      “yes” to Section 3(a), did you receive your Registrable Securities as
      compensation for investment banking services to the
    Company.

            

    

     

    Yes    ̈                      No    ̈

     

    
      	
            	
              Note:

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

            

    

    
      
         

      

      
        Page
38 of 40

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              (c)

            	
              Are
      you an affiliate of a
broker-dealer?

            

    

     

    Yes    ̈                      No    ̈

     

    
      	
               
      

            	
              (d)

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

            

    

     

    Yes    ̈                      No    ̈

     

    
      	
            	
              Note:

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

            

    

     

    
      4.  Beneficial
Ownership of Other Securities of the Company Owned by the Selling
Securityholder.

    

     

    Except
as set forth below in this Item 4, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the securities
issuable pursuant to the Subscription Agreement.

     

    
      	
               
      

            	
              (a)

            	
              Type
      and Amount of other securities beneficially owned by the Selling
      Securityholder:

            

    

     

    
      
        
          
            
              
                	 
	
                         
      

                      
	 
      

              

            

          

        

      

    

    5.  Relationships
with the Company:

     

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

     

    
      State any
exceptions here:

    

     

    
      
        
          
            
              
                	 
	
                         
      

                      
	 
      

              

            

          

        

      

    

    The
undersigned agrees to promptly notify the Company of any inaccuracies or changes
in the information provided herein that may occur subsequent to the date hereof
at any time while the Registration Statement remains effective.

     

    By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 5 and the inclusion of such
information in the Registration Statement and the related prospectus and any
amendments or supplements thereto.  The undersigned understands that
such information will be relied upon by the Company in connection with the
preparation or amendment of the Registration Statement and the related
prospectus.

    
      
         

      

      
        Page
39 of 40

        
          

        

      

      
         

      

    

     

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

     

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                Dated:

                              	 
      	 
      	
                                Beneficial
      Owner:

                              	  
      
	 
      	 
      	 
      	 
      	 	 
      
	 
      	 
      	 
      	
                                By:

                              	 
      	  
      
	 
      	 
      	  
      	  
      	
                                Name:
      

                              	  
	  
      	  
      	  
      	 	
                                Title:

                              	  

                      

                    

                  

                

              

            

          

        

      

    

    

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

    

    Attn:

    
      
         

      

      
        Page
40 of 40AMENDED AND RESTATED
SECURITY AGREEMENT

    

    This AMENDED AND RESTATED SECURITY
AGREEMENT (“Security
Agreement”) is executed effective as of June 30, 2010 by and among
HEMIWEDGE INDUSTRIES, INC. (formerly called Shumate Industries, Inc.), a
Delaware Corporation (“Industries”),
HEMIWEDGE VALVE CORPORATION, a Texas corporation (”Hemiwedge”)
(Industries and Hemiwedge being hereinafter sometimes collectively referred to
as the (“Grantors”)
and EADS INVESTMENTS I, LLC., of 18305 Kitzman Road, Cypress, Texas, 77429,
(“Investments”)
and D. BRADLEY MCWILLIAMS (“McWilliams”),
of 710 North Post Oak Road, Suite 400, Houston, Texas, 77024, (Investments and
McWilliams herein collectively called the (“Secured
Parties”).

    

    RECITALS:

    

    A.  The Grantors are liable
to the Secured Parties for the indebtedness and obligations described in that
certain Amended and Restated Loan Agreement (“Loan
Agreement”) and Amended and Restated Promissory Note (Demand Note)
(“Note”) and
all other loan documents executed by the Grantors in connection with such Loan
Agreement and Note, each of even date herewith (collectively, the “Loan
Documents”).

    

    B.  The Grantors have agreed
to secure payment of the indebtedness and obligations under the Loan Documents
and other indebtedness and obligations described herein (collectively, the
“Indebtedness”)
by granting the security interests described in this Security
Agreement.

     

    C.  Pursuant to an Assignment
of Note, Loan Documents and Security Interests (“Assignment
Agreement”) by and between the Secured Parties (as Assignees) and
Stillwater National Bank and Trust Company), a national bank domiciled in
Oklahoma (the “Prior
Lender”)  the Secured Parties have taken an assignment of all
the liens, rights, titles and benefits of Prior Lender, under and pursuant to
that certain Amended and Restated Security Agreement, effective as of September
30, 2008, by and among the Borrowers, SHUMATE MACHINE WORKS, INC (“Shumate”)
and the Prior Lender (the “Prior Lender
Security Agreement”), which Prior Lender Security Agreement was given in
consideration of and as collateral for all indebtedness and obligations of the
Grantors to the Prior Lender under a Loan and Consolidation Agreement and an
Amended and Restated Promissory Note (Term Note), each dated with effect from
September 30, 2008, among the Grantors, Shumate and the Prior Lender and certain
other documents identified and described in the Assignment Agreement
(collectively the “Prior Loan
Documents”).

     

    D.  This Security Agreement
grants the liens and security interests set forth herein and also extends,
renews, amends and restates in their entirety, but does not extinguish or
release, the Prior Security Agreement.

     

    E.  All of the Recitals set
forth in the Loan Agreement and not otherwise revised herein or in conflict
herewith are incorporated herein and made applicable to this Security Agreement
verbatim.

    
      
         

      

      
        Page
1 of 38

        
          

        

      

      
         

      

    

    F.  A condition precedent to
the Secured Parties purchasing the Prior Loan Documents, for continuing to
extend and renew the indebtedness under by the Prior Loan Documents and for
executing the Loan Documents is that the Grantors shall execute and deliver this
Security Agreement to the Secured Parties.

     

    G.  The Grantors have each
determined that the execution, delivery and performance of this Security
Agreement directly benefits and are in the best interests of each such
Grantor.

     

    WITNESSETH:

     

    NOW, THEREFORE, in consideration of the
premises and the agreements herein and in order to induce the Secured Parties to
purchase the Prior Loan Documents and all liens and indebtedness of Grantors
thereunder from the Prior Lenders and to execute the Loan Documents, the
Grantors hereby each agree with the Secured Parties, for the benefit of each of
them, as follows:

    

    Section
1.         Definitions.

    

    (a)     
    Reference is hereby made to the Loan Agreement for a
statement of the terms thereof. All capitalized terms used in this Security
Agreement and the recitals hereof which are defined in the Loan Agreement or in
Article 9 of the Uniform Commercial Code as in effect from time to time in the
State of Texas (the "Code") and which are not
otherwise defined herein shall have the same meanings herein as set forth
therein; provided, that terms
used herein which are defined in the Code as in effect in the State of Texas on
the date hereof shall continue to have the same meaning notwithstanding any
replacement or amendment of such statute except as the Secured Parties Amended
otherwise determine.

     

    (b)      
   Further, the following terms shall have the respective
meanings provided for in the Code: "Accounts", "Cash Proceeds", "Chattel Paper",
"Commercial Tort Claim", "Commodity Account", "Commodity Contracts",
"Documents", "Equipment", "Fixtures", "Goods", "Instruments", "Inventory",
"Investment Property", "Letter-of-Credit Rights", "Noncash Proceeds", "Payment
Intangibles", "Proceeds", "Promissory Notes", "Record", "Security Account",
"Software", and "Supporting Obligations".

    

    (c)        
 As used in this Security Agreement the terms defined in the opening
paragraph and Recitals hereto bear the meanings given to them in such opening
paragraph and Recitals, respectively, and, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of such terms:

    

    “A/R
Facility” shall have the same meaning as set forth in the Loan
Agreement.

    

    “Collateral”
means all property, assets or rights in which a security interest is granted
hereunder.

    
      
         

      

      
        Page
2 of 38

        
          

        

      

      
         

      

    

    "Copyright
Licenses" means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensee or licensor and providing for
the grant of any right to use or sell any works covered by any copyright
(including, without limitation, all Copyright Licenses set forth in Schedule II
hereto).

    

    "Copyrights"
means all domestic and foreign copyrights, whether registered or
unregistered, including, without limitation, all copyright rights throughout the
universe (whether now or hereafter arising) in any and all media (whether now or
hereafter developed), in and to all original works of authorship fixed in any
tangible medium of expression, acquired or used by any Grantor (including,
without limitation, all copyrights described in Schedule II hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.

    

    "Deposit
Accounts" means all "deposit accounts" (as defined in the Code) or other
receipts, now owned or hereafter acquired by any Person or in which a Person has
or acquires any rights, covering, evidencing or representing proceeds of any of
the Collateral, including without limitation, proceeds of Accounts, General
Intangibles, Assigned Contracts and Pending Claims.

    

    "General
Intangibles" means all "general intangibles" (as defined in the Code),
now or hereafter owned or acquired by a Person or in which a Person now or
hereafter has or acquires any rights, including but not limited to, all
obligations or indebtedness owing to a Person and all rights, title and interest
which a Person may now have or hereafter have, in or under all contracts, causes
of action (including without limitation, the Pending Claims), franchises, tax
refund claims, customer lists, intellectual property, license royalties,
goodwill, trade secrets, proprietary or confidential information, data bases,
business records, data, skill, expertise, experience, processes, models,
drawings, materials and records, permits and licenses, warranties, manuals,
software and other intangible property of every kind and nature.

    

    “General
Intangible Accounts”
means all accounts receivable and right to receive payment of a monetary
obligation whether or not earned by performance, for General Intangibles,
including Intellectual Property, that have been sold, leased, licensed, assigned
or otherwise disposed of by Borrowers or either of them.

    

    "Intellectual
Property" means the Copyrights, Trademarks and Patents.

    

    “Liens”
has the meaning set forth in the Loan Agreement.

    

    "Licenses"
means the Copyright Licenses, the Trademark Licenses and the Patent
Licenses.

    

    “Loans”
means all outstanding loans and other financial accommodations granted
the Borrower under the Loan Documents.

    
      
         

      

      
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    “Loan Documents”
means collectively, the Loan Documents, and all Related
Documents.

    

     “Material Adverse
Effect” means (a) a material adverse change in, or a material adverse
effect upon, the assets, business, properties, prospects, condition (financial
or otherwise) results of operations of any Grantor, taken as a whole; (b) a
material impairment of the ability of any Grantor, taken as whole, to perform
any of their respective obligations under the Loan Documents; (c) a material
adverse change on any substantial portion of the Collateral; (d) a material
adverse effect on the perfection or priority of any lien granted to the Secured
Parties under the Loan Documents, taken as a whole; or (e) a material adverse
effect on the legality, validity, binding effect or enforceability against any
Grantor of the Loan Documents to which they are parties, except to the extent,
with respect to the preceding clauses (a) to (e), such material adverse effect
was caused by the Secured Parties or either of them.

    

    "Motor Vehicles"
has the meanings given such term in Section
4(1).

    

    “Obligations”
shall have the meaning set forth in Section
3.

    

    “Parties”
means the parties to this Security Agreement and “Party”
means any one of them.

    

    "Patent
Licenses'" means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensee or licensor and providing for
the grant of any right to manufacture, use or sell any invention covered by any
Patent (including, without limitation, all Patent Licenses set forth in Schedule II
hereto).

    

    "Patents'"
means all domestic and foreign letters patent, design patents, utility
patents, industrial designs, inventions, trade secrets, ideas, concepts,
methods, techniques, processes, proprietary information, technology, know-how,
formulae, rights of publicity and other general intangibles of like nature, now
existing or hereafter acquired (including, without limitation, all domestic and
foreign letters patent, design patents, utility patents, industrial designs,
inventions, trade secrets, ideas, concepts, methods, techniques, processes,
proprietary information, technology, know-how and formulae described in Schedule II hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office, or in any similar office or agency of the United
States or any other country or any political subdivision thereof), and all
reissues, divisions, continuations, continuations in part and extensions or
renewals thereof.

    

    "Pending Claims"
means all right title and interest now or hereafter owned or acquired by
a Person or in which a Person now or hereafter has or acquires any rights,
arising pursuant to or in connection with claims or causes of action, however
asserted, against any other Person.

    

    “Person”
means any individual, corporation, limited liability company, trust,
partnership, company, joint venture, governmental authority or other
entity.

    

    “Permitted
Liens” has the meaning set forth in the Loan Agreement.

    
      
         

      

      
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    “Related
Documents” has the meaning set forth in the Loan Agreement.

    

    "Trademark
Licenses" means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensor or licensee and providing for
the grant of any right concerning any Trademark, together with any goodwill
connected with and symbolized by any such trademark licenses, contracts or
agreements and the right to prepare for sale or lease and sell or lease any and
all Inventory now or hereafter owned by any Grantor and now or hereafter covered
by such licenses (including, without limitation, all Trademark Licenses
described in Schedule
II hereto).

    

    "Trademarks'"
means all domestic and foreign trademarks, service marks, collective
marks, certification marks, trade names, business names, d/b/a's, Internet
domain names, trade styles, designs, logos and other source or business
identifiers and all general intangibles of like nature, now or hereafter owned,
adopted, acquired or used by any Grantor (including, without limitation, all
domestic and foreign trademarks, service marks, collective marks, certification
marks, trade names, business names, d/b/a's, Internet domain names, trade
styles, designs, logos and other source or business identifiers described in
Schedule II
hereto), all applications, registrations and recordings thereof (including,
without limitation, applications, registrations and recordings in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any state thereof or any other country or any political
subdivision thereof), and all reissues, extensions or renewals thereof, together
with all goodwill of the business symbolized by such marks and all customer
lists, formulae and other Records of any Grantor relating to the distribution of
products and services in connection with which any of such marks are
used.

    

    (d)         
Other Interpretive
Provisions.

    

    (i)       The
meanings of defined terms herein are equally applicable to the singular and
plural forms of the defined terms.  Whenever the context so requires,
the neuter gender includes the masculine and feminine, the single number
includes the plural, and vice versa, and in particular the word Grantor and
“Grantor” and “Secured Party” shall be so  construed.

     

    (ii)      Section and Schedule references
are to this Agreement unless otherwise specified.  The words “hereof”,
“herein”, and “hereunder, and words of similar import when used in this Security
Agreement shall refer to this Security Agreement as a whole and not any
particular provision in this Security Agreement.

     

    (iii)     The
term “including” is not limiting, and means “including, without
limitation”.

    
      
         

      

      
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    (iv)    In the
computation of periods of time from a specified date to a later specified date,
the word “from” means “from and including”; the words “to” and “until” each mean
“to but excluding”, and the word “through” means “to and
including”.

     

    (v)     Unless
otherwise expressly provided herein, (A) references to agreements (including
this Security Agreement) and other contractual instruments shall be deemed to
include all subsequent amendments, restatements, supplements, and other
modifications thereto, and (B) references to any statute or regulation shall be
construed as including all statutory and regulatory provisions amending,
replacing, supplementing or interpreting such statue or regulation.

     

    Section
2.         Grant of Security
Interest. As collateral security for all of the Obligations (as defined
in Section 3
hereof), each Grantor hereby pledges and assigns to the Secured Parties for the
benefit of each of them jointly a continuing security interest in, all of the
following property of each such Grantor, wherever located and whether now or
hereafter existing and whether now owned or hereafter acquired, of every kind
and description, tangible or intangible (collectively, the "Collateral"), including, without
limitation, the following:

     

    (a)          all
Accounts

     

    (b)          all
Chattel Paper (whether tangible or electronic);

     

    (c)          all
Deposit Accounts, all cash, and all other property from time to time deposited
therein and the monies and property in the possession or under the control of
any Lender or any affiliate, representative, agent or correspondent of any
Lender;

     

    (d)          all
Documents;

     

    (e)          all
Equipment;

     

    (f)       
   all Fixtures;

     

    (g)          all
General Intangibles (including, without limitation, all Payment
Intangibles);

     

    (h)          all
General Intangible Accounts;

     

    (i)           all
Goods;

     

    (j)           all
Instruments (including, without limitation, Promissory Notes);

     

    (k)          all
Inventory;

     

    (l)           all
Investment Property;

     

    (m)         all
Copyrights, Patents and Trademarks, and all Licenses;

     

    (n)        
 all Letter-of-Credit Rights;

     

    (o)          all
Supporting Obligations;

     

    (p)          all
Pending Claims;

     

    (q)          all
Motor Vehicles;

    
      
         

      

      
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    (r)           all
assets and property of Grantors currently located in China or other parts of the
world outside of the United States, including all drawings, patterns, molds,
fixtures, gauges, tools and other materials used in the manufacture of Grantors’
products and inventory.

     

    (s)          all
other tangible and intangible personal property of each Grantor (whether or not
subject to the Code), including, without limitation, all bank and other accounts
and all cash and all investments therein, all proceeds, products, offspring,
accessions, rents, profits, income, benefits, substitutions and replacements of
and to any of the property of such Grantor described in the preceding clauses of
this Section 2
(including, without limitation, any proceeds of insurance thereon and all causes
of action, claims and warranties now or hereafter held by such Grantor in
respect of any of the items listed above), and including all books,
correspondence, files and other Records, all tapes, disks, cards, Software, data
and computer programs in the possession of or under the control of such Grantor
or any other Person from time to time acting for such Grantor that at any time
evidence or contain information relating to any of the property described in the
clause (preceding clauses of this Section 2 or are
otherwise necessary or helpful in the collection or realization
thereof;

     

    (t)         
all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of
any and all of the foregoing Collateral; in each case howsoever such Grantor's
interest therein may arise or appear (whether by ownership, security interest,
claim or otherwise). Notwithstanding anything contained in this Security
Agreement to the contrary, in no event shall the Collateral include, and no
Grantor shall be deemed to have granted a security interest in any of such
Grantor's right, title or interest in any license, contract or agreement to
which such Grantor is a party as of the date hereof or any of its right, title
or interest thereunder to the extent, but only to the extent, that such a grant
would, under the terms of such license, contract or agreement on the date hereof
result in a breach of the terms of, or constitute a default under, such license,
contract or agreement (other than to the extent that any such term (x) has been
waived or (y) would be rendered ineffective pursuant to Sections, 9.406, 9.408, 9.409 or other
applicable provisions of the Code of any relevant jurisdiction or any other
applicable law (including the Bankruptcy Code) or principles of equity);
provided, that in the case of this sub clause (ii), (A) immediately upon the
ineffectiveness, lapse or termination of any such provision, the Collateral
shall include, and such Grantor shall be deemed to have granted a security
interest in, all such right, title and interest as if such provision had never
been in effect and (B) the foregoing exclusion shall in no way be construed so
as to limit, impair or otherwise affect the Secured Parties' unconditional
continuing security interest in and liens upon any rights or interests of the
Grantor in or to monies due or to become due under any such license, contract or
agreement.

     

    Section
3.        Security for
Obligations. The security interest created hereby in the Collateral
constitutes continuing collateral security for all of the following obligations,
whether now existing or hereafter incurred (collectively, the "Obligations"):

     

    (a)          the
prompt payment by each Grantor, as and when due and payable (whether by
scheduled maturity, required prepayment, acceleration demand or otherwise), of
all amounts from time to time owing by it in respect of the Loan Documents,
including, (i) all principal of and interest on the Loans, and (ii) all fees,
commissions, expense reimbursements, indemnifications and all other amounts due
or to become due under any Loan Document; and

    
      
         

      

      
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    (b)          the
due performance and observance by each Grantor of all of its other obligations
from time to time existing in respect of the Loan Documents.

     

    Section
4.         Representations and
Warranties.  Each Grantor jointly and severally represents and
warrants as follows:

     

    (a)          Grantors’
Names.  Schedule I hereto
sets forth (i) the exact legal name of each Grantor and (ii) the organizational
identification number of each Grantor (or indicates that such Grantor has no
organizational identification number).

     

    (b)          Due
Organization/Qualification.  Each Grantor (i) is a corporation,
duly organized, validly existing and in good standing under the laws of the
state or jurisdiction of its organization as set forth on Schedule I hereto,
(ii) has all requisite power and authority to conduct its business as now
conducted and as presently contemplated and to execute, deliver and perform this
Security Agreement, and to consummate the transactions contemplated hereby, and
(iii) is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification necessary,
except where the failure to be so qualified could not reasonably be expected to
have a Material Adverse Effect..

     

    (c)          Due
Authorization.  The execution, delivery and performance by each
Grantor of this Security Agreement (i) have been duly authorized by all
necessary action, (ii) do not and will not contravene its charter or by-laws,
its limited liability company or operating agreement or its certificate of
partnership or partnership agreement, as applicable, or any applicable law or
any contractual restriction binding on or otherwise affecting it or any of its
properties, (iii) do not and will not result in or require the creation of any
Lien upon or with respect to any of its properties (other than pursuant to any
Loan Document), and (iv) do not and will not result in any default,
noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of
any permit, license, authorization or approval applicable to it or its
operations or any of its properties.

     

    (d)          Legal and Binding
Obligations.  This Security Agreement is, and when executed and
delivered, will be, a legal, valid and binding obligation of such Grantor,
enforceable against such Grantor in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws.

     

    (e)          No Pending
Actions.  There is no pending or, to the best knowledge of any
Grantor, threatened action, suit, proceeding or claim affecting any Grantor
before any court or other Governmental Authority or any arbitrator, that may
adversely affect the grant by any Grantor, or the perfection of the security
interests purported to be created hereby in the Collateral, or the exercise by
the Secured Parties of any of its rights or remedies hereunder.

     

    (f)           Tax
Returns.   Except as otherwise specifically set forth in the
Loan Agreement,  all federal, state and local tax returns and other
reports required by applicable law to be filed by any Grantor have been filed,
or extensions have been obtained, and all taxes, assessments and other
governmental charges imposed upon any Grantor or any property of any Grantor and
which have become due and payable on or prior to the date hereof have been paid,
except to the extent contested in good faith by proper proceedings which stay
the imposition of any penalty, fine or Lien resulting from the non-payment
thereof and with respect to which adequate reserves have been set aside for the
payment thereof in accordance with GAAP.

    
      
         

      

      
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    (g)          Equipment/Fixtures/Goods/Inventory.
All Equipment, Fixtures, Goods and Inventory now existing are, and all
Equipment, Fixtures, Goods and Inventory hereafter existing will be, located
and/or based at the addresses specified therefor in Schedule III hereto
(as amended, supplemented or otherwise modified from time to time in accordance
with the terms hereof). Each Grantor's chief place of business and chief
executive office, the place where such Grantor keeps its Records concerning
Trade Accounts and all originals of all Chattel Paper are located at the
addresses specified therefore in Schedule III
hereto.  Set forth in Schedule IV hereto is
a complete and accurate list, as of the date of this Security Agreement, of each
Deposit Account, Securities Account and Commodities Account of each Grantor,
together with the name and address of each institution at which each such
Account is maintained, the account number for each such Account and a
description of the purpose of each such Account. Set forth in Schedule II hereto is
(i) a complete and correct list of each trade name used by each Grantor and (ii)
the name of, and each trade name used by, each Person from which such Grantor
has acquired any substantial part of the Collateral.

     

    (h)        
Licenses.  Each
Grantor has delivered to the Secured Parties complete and correct copies of each
License described in Schedule II hereto,
including all schedules and exhibits thereto, which represents all of the
Licenses existing on the date of this Security Agreement. Each such License sets
forth the entire agreement and understanding of the parties thereto relating to
the subject matter thereof, and there are no other agreements, arrangements or
understandings, written or oral, relating to the matters covered thereby or the
rights of any Grantor or any of its Affiliates in respect thereof. Each License
now existing is, and each other License will be, the legal, valid and binding
obligation of the parties thereto, enforceable against such parties in
accordance with its terms. No default thereunder by any such party has occurred,
nor does any defense, offset, deduction or counterclaim exist thereunder in
favor of any such Party.

     

    (i)           Ownership of Intellectual
Property.  The Grantors own or license, or otherwise have the
right to use, all trademarks, Patents and Copyrights, which are the only
trademarks, patents, copyrights, inventions, trade secrets, proprietary
information and technology, know-how, formulae, and rights of publicity
necessary to conduct their business in substantially the same manner as
conducted as of the date hereof. Schedule II hereto
sets forth a true and complete list of all Intellectual Property and Licenses
owned or used by each Grantor as of the date hereof. All such Intellectual
Property is subsisting and in full force and effect, has not been adjudged
invalid or unenforceable, is valid and enforceable and has not been abandoned in
whole or in part. Except as set forth in Schedule II, no such
Intellectual Property is the subject of any licensing or franchising agreement.
No Grantor has any knowledge of any conflict with the rights of others to any
Intellectual Property, no Grantor is now infringing or in conflict with any such
rights of others and, to the best of Grantor’s knowledge, no other Person is now
infringing or in conflict with any such properties, assets and rights owned or
used by any Grantor, except for such infringements or conflicts which,
individually or in the aggregate, could not have a Material Adverse Effect. No
Grantor has received any notice that it is violating or has violated the
trademarks, patents, copyrights, inventions, trade secrets, proprietary
information and technology, know-how, formulae, rights of publicity or other
intellectual property rights of any third party.

    
      
         

      

      
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    (j)           Ownership of
Collateral.  The Grantors are and will be at all times the sole
and exclusive owners of, or otherwise have and will have adequate rights in, the
Collateral free and clear of any Lien except for (i) the Lien created by this
Security Agreement and (ii) the Permitted Liens. No effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any recording or filing office except (A) such as may
have been filed in favor of the Secured Parties relating to this Security
Agreement and (B) such as may have been filed to perfect or protect any
Permitted Lien.

     

    (k)       
No Contract
Breaches.  The exercise by the Secured Parties of any of their
rights and remedies hereunder will not contravene any law or any material
contract or any contractual restriction binding on or otherwise affecting any
Grantor or any of its properties and will not result in, or require the creation
of, any Lien upon or with respect to any of its properties (other than pursuant
to this Security Agreement and the other Loan Documents).

    

    (1)       
No Filing
Required.  No authorization or approval or other action by, and
no notice to or filing with, any Governmental Authority or other regulatory
body, or any other Person, is required for (i) the grant by any Grantor, or the
perfection, of the security interest purported to be created hereby in the
Collateral or (ii) the exercise by the Secured Parties of any of its rights and
remedies hereunder, except (A) for the filing under the Uniform Commercial Code
as in effect in the applicable jurisdictions of the financing statements as
described in Schedule
V hereto, all of which financing statements, filings, and other
recordings, as applicable, have been duly filed and are in full force and
effect, (B) with respect to the perfection of the security interest created
hereby in the United States Intellectual Property, for the recording of the
appropriate Assignment for Security in the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, (C) with respect to
the perfection of the security interest created hereby in foreign Intellectual
Property and Licenses, for registrations and filings in jurisdictions located
outside of the United States and covering rights in such jurisdictions relating
to the Intellectual Property and Licenses, (D) with respect to the perfection of
the security interest created hereby in motor vehicles (including, without
limitation, all trucks, trailers, tractors, service vehicles, automobiles and
other mobile equipment) for which the title to such motor vehicles is governed
by a certificate of title or ownership (collectively, the "Motor
Vehicles"), for the
submission of an appropriate application requesting that the Lien of the Secured
Parties be noted on the certificate of title or ownership, completed and
authenticated by the applicable Grantor, together with the certificate of title,
with respect to each Motor Vehicle, to the appropriate state agency, (E) with
respect to any action that may be necessary to obtain control of Collateral
described in Sections
5(i) and 5(k) hereof, the
taking of such action and (F) the taking possession of all Documents, Chattel
Paper, Instruments and cash constituting Collateral.

    
      
         

      

      
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    (m)        
Legal and Binding
Security Interest.  This Security Agreement creates in favor of
each of the Secured Parties, a legal, valid and enforceable security interest in
the Collateral, as security for the Obligations. The Secured Parties' having
possession of all Instruments, Documents, Chattel Paper and cash constituting
Collateral and obtaining control of all Collateral described in Sections 5(i) and
5(k) hereof
from time to time, the recording of the appropriate Assignment for Security
executed pursuant hereto in the United States Patent and Trademark Office and
the United States Copyright Office, as applicable, the submission of an
appropriate application requesting that the Lien of the Secured Parties be noted
on the certificate of title or ownership, completed and authenticated by the
applicable Grantor, together with the certificate of title or ownership, with
respect to such Motor Vehicles, to the applicable state agency, and the filing
of the financing statements and the other filings and recordings, as applicable,
described in Schedule
V hereto and, with respect to the Intellectual Property hereafter
existing and not covered by an appropriate Assignment for Security, the
recording in the United States Patent and Trademark Office or the United States
Copyright Office, as applicable, of appropriate instruments of assignment,
result in the perfection of such security interests. Such security interests
are, or in the case of Collateral in which any Grantor obtains rights after the
date hereof, will be, perfected, first priority security interests, subject only
to the Permitted Liens and the taking of actions described in this Section 4(m). Such
recordings and filings and all other action necessary or desirable to perfect
and protect such security interest have been duly taken, except for (i) the
Secured Parties’ having possession of Instruments, Documents, Chattel Paper and
cash constituting Collateral after the date hereof, (ii) the Secured Parties
obtaining control of any Collateral described in Sections 5(i) and
5(k) of this
Security Agreement after the date hereof, (iii) the other filings and
recordations described in Section 4(1) hereof,
and (iv) the submission of an appropriate application requesting that the Lien
of the Secured Parties be noted on the certificate of title or ownership with
respect to any Motor Vehicle, completed and authenticated by the applicable
Grantor, together with the certificate of title or ownership with respect to
such Motor Vehicle, to the applicable state agency.

    

    (n)       
  No
Commercial Tort Claims.  As of the date hereof, no Grantor
holds any Commercial Tort Claims or is aware of any such pending claims, except
for such claims described in Schedule
VI.

    

    (o)         
Hemiwedge’s
Stock.  The shares and stock of Hemiwedge are (i) not dealt in
or traded on securities exchanges or in securities markets, (ii) securities for
purposes of Article 8 of any relevant Uniform Commercial Code, and
(iii)  evidenced by a stock certificate.

    

    Section
5.         Covenants as to the
Collateral. So long as any of the Obligations shall remain outstanding
and all Commitments shall not have expired or terminated, unless the Secured
Parties shall otherwise consent in writing, then:

    
      
         

      

      
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     (a)         Further
Assurances.  Each Grantor will at its expense, at any time and
from time to time, promptly execute and deliver all further instruments and
documents and take all further action that the Secured Parties may reasonably
request in order to (i) enable the Secured Parties to perfect and protect the
security interest purported to be created hereby; (ii) enable the Secured
Parties to exercise and enforce its rights and remedies hereunder in respect of
the Collateral; or (iii) otherwise effect the purposes of this Security
Agreement, including, without limitation: (A) marking conspicuously all Chattel
Paper, Licenses and Records pertaining to the Collateral with a legend, in form
and substance reasonably satisfactory to the Secured Parties, indicating that
such Chattel Paper, License or Collateral is subject to the security interest
created hereby, (B) executing and filing (to the extent, if any, that such
Grantor's signature is required thereon) or authenticating the filing of, such
financing or continuation statements, or amendments thereto, as may be necessary
or desirable or that the Secured Parties may reasonably request in order to
perfect and preserve the security interest purported to be created hereby, (C)
furnishing to the Secured Parties from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral in each case as the Secured Parties may
reasonably request, all in reasonable detail, (D) if any Collateral shall be in
the possession of a third party, notifying such Person of the Secured Parties'
security interest created hereby and obtaining a written acknowledgment from
such Person that such Person holds possession of the Collateral for the benefit
of the Secured Parties, which such written acknowledgement shall be in form and
substance reasonably satisfactory to the Secured Parties, (E) if at any time
after the date hereof, any Grantor acquires or holds any Commercial Tort Claim,
immediately notifying the Secured Parties in a writing signed by such Grantor
setting forth a brief description of such Commercial Tort Claim and granting to
the Secured Parties a security interest therein and in the proceeds thereof,
which writing shall incorporate the provisions hereof and shall be in form and
substance satisfactory to the Secured Parties, (F) upon the acquisition after
the date hereof by any Grantor of any Motor Vehicle or other item of Equipment
subject to a certificate of title or ownership causing the Secured Parties to be
listed as the lienholder on such certificate of title or ownership and
delivering evidence of the same to the Secured Parties, (G) if any Account shall
be evidenced by Promissory Notes or other Instruments or Chattel Paper,
delivering and pledging to the Secured Parties all such Promissory Notes,
Instruments or Chattel Paper, all in form and substance satisfactory to the
Secured Parties, and (H) taking all actions required by the Uniform Commercial
Code or by other law, as applicable, in any relevant Code jurisdiction, or by
other law as applicable in any foreign jurisdiction.

    

    (b)         
Location of Equipment
and Inventory.  Each Grantor will keep the Equipment and
Inventory (other than used Equipment and Inventory sold in the ordinary course
of business in accordance with Section 5(g) hereof
and any Equipment and Inventory that is located on any Vessel) at one or more of
the locations specified therefor in Section 4(g) hereof
or, upon not less than thirty (30) days' prior written notice to the Secured
Parties accompanied by a new Schedule III hereto
indicating each new location of the Equipment and Inventory, at such other
locations in the continental United States, as the Grantors may elect, provided
that (i) all action has been taken to grant to the Secured Parties a perfected,
first priority security interest in such Equipment and Inventory (subject only
to Permitted Liens), and (ii) the Secured Parties' rights in such Equipment and
Inventory, including, without limitation, the existence, perfection and priority
of the security interest created hereby in such Equipment and Inventory, are not
adversely affected thereby.

    

    (c)          Condition of
Equipment.  Each Grantor will maintain or cause the Equipment
to be maintained and preserved in good condition, repair and working order,
ordinary wear and tear excepted, and will forthwith, or in the case of any loss
or damage to any Equipment within a commercially reasonable time after the
occurrence thereof, make or cause to be made all repairs, replacements and other
improvements in connection therewith which are necessary or desirable,
consistent with past practice, or which the Secured Parties may reasonably
request to such end.

    
      
         

      

      
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    (d)          Property Taxes,
Etc.  Each Grantor jointly and severally agrees to pay promptly
when due all property and other taxes, assessments and governmental charges or
levies imposed upon, and all claims (including claims for labor, materials and
supplies) against, the Equipment and Inventory, except to the extent otherwise
provided in the Loan Agreement.

    

    (e)          Insurance.

    

    (i)       Each
Grantor will maintain insurance with respect to its properties in accordance
with Section
7.15 of the Loan Agreement.

     

    

    (ii)      Reimbursement
under any liability insurance maintained by any Grantor pursuant to this Section 4.5 shall be
applied in accordance with the provisions of Section 4.5 of the
Loan Agreement.

     

    (f)         
 Provisions
Concerning the Accounts and the Licenses.

     

    (i)       No
Grantor shall, without the prior written consent of the Secured Parties, change
(A) such Grantor’s name, identity or organizational structure, (B) its
jurisdiction of incorporation as set forth in Section 4(b) hereof,
or (C) its chief executive office as set forth on Schedule III hereto.
Each Grantor shall (x) immediately notify the Secured Parties upon obtaining an
organizational identification number, if on the date hereof such Grantor did not
have such identification number, and (y) keep adequate records concerning the
Chattel Paper and permit representatives of the Secured Parties pursuant to the
terms of the Loan Agreement to inspect and make abstracts from such Records and
Chattel Paper.

     

    (ii)      Each
Grantor will, except as otherwise provided in this Section 5(f),
continue to collect, at its own expense, all amounts due or to become due under
its Accounts in accordance with its usual business practices and terms of the
Loan Documents. In connection with such collections, each Grantor may (and, at
the Secured Parties’ direction, will) take such action as such Grantor or the
Secured Parties, as the case may be, deem necessary or advisable to enforce
collection or performance of General Intangible Accounts.  Upon the
occurrence and during the continuance of any Default an Event of Default,
Secured Parties may send notice in writing to all General Intangible Accounts’
payers requesting them to make all payments on such Accounts directly to the
Secured Parties.

     

    (iii)     Upon
the occurrence and during the continuance of any breach or default under any
License described in Schedule II hereto by
any party thereto other than a Grantor, (A) the relevant Grantor will, promptly
after obtaining knowledge thereof, give the Secured Parties written notice of
the nature and duration thereof, specifying what action, if any, it has taken
and proposes to take with respect thereto, (B) no Grantor will, without the
prior written consent of the Secured Parties, declare or waive any such breach
or default or affirmatively consent to the cure thereof or exercise any of its
remedies in respect thereof, and (C) each Grantor will, upon written
instructions from the Secured Parties and at such Grantor’s expense, take such
action as the Secured Parties may deem necessary or advisable in respect
thereof.

    
      
         

      

      
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    (iv)    Each
Grantor will, at its expense, promptly deliver to the Secured Parties a copy of
each notice or other communication received by it by which any other party to
any License referred to in Schedule II hereto
purports to exercise any of its rights or affect any of its obligations
thereunder, together with a copy of any reply by such Grantor
thereto.

     

    (v)     Each
Grantor will exercise promptly and diligently each and every right which it may
have under each License (other than any right of termination) and will duly
perform and observe in all respects all of its obligations under each License
and will take all action necessary to maintain such Licenses in full force and
effect. No Grantor will, without the prior written consent of the Secured
Parties, cancel, terminate, amend or otherwise modify in any material respect,
or waive any provision of, any License referred to in Schedule II
hereto.

     

    (g)          Transfers and Other
Liens.

     

    (i)      Except
to the extent expressly permitted by the Loan Agreement, no Grantor will sell,
assign (by operation of law or otherwise), lease, license, exchange or otherwise
transfer or dispose of any of the Collateral.

     

    (ii)     Except
to the extent expressly permitted by the Loan Agreement, no Grantor will create,
suffer to exist or grant any Lien upon or with respect to any
Collateral.

     

    (h)          Intellectual
Property.

     

    (i)      If
applicable, each Grantor will execute and deliver the applicable Assignment for
Security required by the U.S. Patent Office in the form acceptable to the
Secured Parties.  Each Grantor (either itself or through licensees)
will, and will cause each licensee thereof to, take all action necessary to
maintain all of the Intellectual Property in full force and effect, including,
without limitation, using the proper statutory notices and markings and using
the Trademarks on each applicable trademark class of goods in order to so
maintain the Trademarks in full force, free from any claim of abandonment for
non-use, and no Grantor will (nor permit any licensee thereof to) do any act or
knowingly omit to do any act whereby any Intellectual Property may become
invalidated; provided, however, that so long as no Event of Default has occurred
and is continuing, no Grantor shall have an obligation to use or to maintain any
Intellectual Property (A) that relates solely to any product or work, that has
been, or is in the process of being, discontinued, abandoned or terminated, (B)
that is being replaced with Intellectual Property substantially similar to the
Intellectual Property that may be abandoned or otherwise become invalid, so long
as the failure to use or maintain such Intellectual Property does not materially
adversely affect the validity of such replacement Intellectual Property and so
long as such replacement Intellectual Property is subject to the Lien created by
this Security Agreement or (C) that is substantially the same as another
Intellectual Property that is in full force, so long the failure to use or
maintain such Intellectual Property does not materially adversely affect the
validity of such replacement Intellectual Property and so long as such other
Intellectual Property is subject to the Lien and security interest created by
this Security Agreement. Each Grantor will cause to be taken all necessary steps
in any proceeding before the United States Patent and Trademark Office and the
United States Copyright Office or any similar office or agency in any other
country or political subdivision thereof to maintain each registration of the
Intellectual Property (other than the Intellectual Property described in the
proviso to the immediately preceding sentence), including, without limitation,
filing of renewals, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings and payment of maintenance
fees, filing fees, taxes or other governmental fees. If any Intellectual
Property is infringed, misappropriated, diluted or otherwise violated in any
material respect by a third party, the Grantors shall (x) upon learning of such
infringement, misappropriation, dilution or other violation, promptly notify the
Secured Parties and (y) to the extent the Grantors shall deem appropriate under
the circumstances, promptly sue for infringement, misappropriation, dilution or
other violation, seek injunctive relief where appropriate and recover any and
all damages for such infringement, misappropriation, dilution or other
violation, or take such other actions as the Grantors shall deem appropriate
under the circumstances to protect such Intellectual Property. Each Grantor
shall furnish to the Secured Parties, from time to time upon the Secured
Parties’ request, statements and schedules further identifying and describing
the Intellectual Property and Licenses, and such other reports in connection
with the Intellectual Property and Licenses as the Secured Parties may
reasonably request, all in reasonable detail and promptly upon request of the
Secured Parties, following receipt by the Secured Parties of any such
statements, schedules or reports, the Grantors shall modify this Security
Agreement by amending Schedule II hereto,
to include any Intellectual Property or License, as the case may be, which
becomes part of the Collateral under this Security Agreement, and the Grantors
shall execute and authenticate such documents and do such acts as shall be
necessary or, in the judgment of the Secured Parties, desirable to subject such
Intellectual Property and Licenses to the Lien and security interest created by
this Security Agreement. Notwithstanding anything herein to the contrary, upon
the occurrence and during the continuance of an Event of Default, no Grantor may
abandon or otherwise permit any Intellectual Property to become invalid without
the prior written consent of the Secured Parties, and if any such Intellectual
Property is infringed, misappropriated, diluted or otherwise violated in any
material respect by a third party, the Grantors will take such action as the
Secured Parties shall deem appropriate under the circumstances to protect such
Intellectual Property.

    
      
         

      

      
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    (ii)     In
no event shall any Grantor, either itself or through any agent, employee,
licensee or designee, file an application for the registration of any Trademark
or Copyright or the issuance of any Patent with the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, or in any
similar office or agency of the United States or any country or any political
subdivision thereof unless it gives the Secured Parties prior written notice
thereof. Upon request of the Secured Parties, each Grantor shall execute,
authenticate and deliver any and all assignments, agreements, instruments,
documents and papers as the Secured Parties may reasonably request to evidence
the Secured Parties’ security interest hereunder in such Intellectual Property
and the General Intangibles of such Grantor relating thereto or represented
thereby, and each Grantor hereby appoints the Secured Parties its
attorney-in-fact to execute and/or authenticate and file all such writings for
the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed, and such power (being coupled with an interest) shall be irrevocable
until the termination of all Commitments, the indefeasible repayment of all of
the Obligations in full and the termination of each of the Loan
Documents.

     

    (i)           [Intentionally
Deleted]

     

    (j)           Motor
Vehicles.

    
      
         

      

      
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    (i)      Each
Grantor shall (a) cause all Motor Vehicles, now owned or hereafter acquired by
any Grantor, which under applicable law are required to be registered, to be
properly registered in the name of such Grantor, (b) cause all Motor Vehicles,
now owned or hereafter acquired by any Grantor, the ownership of which under
applicable law (including without limitation, any Motor Vehicle Law), is
evidenced by a certificate of title or ownership, to be properly titled in the
name of such Grantor, with, upon Secured Parties’ request, the Secured Parties’
Lien noted thereon and (c) upon Secured Parties’ request, deliver to the Secured
Parties (or its custodian) originals of all such certificates of title or
ownership for such Motor Vehicles.

     

    (ii)     Upon
the acquisition after the date hereof by any Grantor of any Motor Vehicle or
other Equipment subject to a certificate of title or ownership (other than a
Motor Vehicle or Equipment to be acquired that is subject to a purchase money
security interest permitted by the Loan Agreement), such Grantor shall deliver
to the Secured Parties originals of the certificates of title or ownership for
such Motor Vehicle, together with the manufacturer’s statement of origin, and
,upon Secured Parties’ request, an application duly executed by the appropriate
Grantor to evidence the Secured Parties’ Lien thereon.

     

    (iii)    Each
Grantor hereby appoints the Secured Parties as its attorney in- fact, effective
the date hereof and terminating upon the termination of this Security Agreement,
for the purpose of (A) executing on behalf of such Grantor title or ownership
applications for filing with appropriate state agencies to enable Motor Vehicles
now owned or hereafter acquired by such Grantor to be retitled and the Secured
Parties listed as lienholder thereof, (B) filing such applications with such
state agencies, and (C) executing such other documents and instruments on behalf
of, and taking such other action in the name of, such Grantor as the Secured
Parties may deem necessary or advisable to accomplish the purposes hereof
(including, without limitation, for the purpose of creating in favor of the
Secured Parties a perfected Lien on the Motor Vehicles and exercising the rights
and remedies of the Secured Parties hereunder). This appointment as
attorney-in-fact is coupled with an interest and is irrevocable until the
termination of all Commitments, the indefeasible repayment of all Obligations in
full and the termination of each of the Loan Documents.

     

    (iv)    Any
certificates of title or ownership delivered pursuant to the terms hereof shall
be accompanied by odometer statements for each Motor Vehicle covered
thereby.

     

    (v)     So
long as no Event of Default shall have occurred and be continuing, upon the
request of any Grantor, the Secured Parties shall execute and deliver to such
Grantor such instruments as such Grantor shall reasonably request to remove the
notation of the Secured Parties as lienholder on any certificate of title for
any Motor Vehicle; provided that any such instruments shall be delivered, and
the release effective, only upon receipt by the Secured Parties of a certificate
from such Grantor, stating that the Motor Vehicle, the Lien on which is to be
released, is to be sold or has suffered a casualty loss (with title thereto
passing to the casualty insurance company therefor in settlement of the claim
for such loss), the amount that such Grantor will receive as sale proceeds or
insurance proceeds and any proceeds of such sale or casualty loss shall be paid
to the Secured Parties hereunder to be applied to the Obligations then
outstanding.

     

    (k)          Control of
Collateral.  Each Grantor hereby agrees to take any or all
action that may be necessary or desirable or that the Secured Parties may
request in order for the Secured Parties to obtain control in accordance with
Sections 9.104, 9.105, 9.106, and 9.107 of the Code
with respect to the following Collateral: (i) Deposit Accounts, (ii) Electronic
Chattel Paper, (iii) Investment Property and (iv) Letter-of-Credit
Rights.

    
      
         

      

      
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    (1)          Inspection and
Reporting.  Each Grantor shall permit the Secured Parties, or
any agents or representatives thereof or such professionals or other Persons as
the Secured Parties may designate at any time and from time to time, at the
expense of the Borrowers during normal business hours and upon reasonable
advance notice to the Grantors, (i) to examine and make copies of and abstracts
from such Grantor’s records and books of account, (ii) to visit and inspect its
properties, (iii) to verify materials, leases, notes, Inventory and other assets
of such Grantor from time to time, (iv) to conduct audits, physical counts,
appraisals and/or valuations, Phase I and Phase II Environmental Site
Assessments or examinations at the locations of such Grantor, and (v) to discuss
such Grantor’s affairs, finances and accounts with any of its directors,
officers, managerial employees, independent accountants or any of its other
representatives, in each case as provided in the Loan Agreement.

     

    Section
6.         Additional Provisions
Concerning the Collateral.

     

    (a)          Financing
Statements.  Each Grantor hereby (i) authorizes the Secured
Parties at any time and from time to time to file financing statements,
continuation statements and amendments thereto, relating to the Collateral and
(ii) ratifies such authorization to the extent that the Secured Parties has
filed any such financing or continuation statements, or amendments thereto,
prior to the date hereof. A photocopy or other reproduction of this Security
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by
law.

     

    (b)          Power of
Attorney.  Each Grantor hereby irrevocably appoints the Secured
Parties as its attorney-in-fact and proxy, with full authority in the place and
stead of such Grantor and in the  name of such Grantor or otherwise,
from time to time in the Secured Parties’ discretion, to take any action and to
execute any instrument which the Secured Parties may deem necessary or advisable
to accomplish the purposes of this Security Agreement (subject to the rights of
a Grantor under this Security Agreement), including, without limitation, (i) to
obtain and adjust insurance required to be paid to the Secured Parties pursuant
to Section 5(e)
hereof, (ii) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any Collateral, (iii) to receive, endorse, and collect any drafts or
other instruments, documents and chattel paper in connection with clause (i) or
(ii) above, (iv) to file any claims or take any action or institute any
proceedings which the Secured Parties may deem necessary or desirable for the
collection of any Collateral or otherwise to enforce the rights of the Secured
Parties with respect to any Collateral, and (v) to execute assignments, licenses
and other documents to enforce the rights of the Secured Parties with respect to
any Collateral. This power is coupled with an interest and is irrevocable until
the termination of all Commitments, the indefeasible repayment of all of the
Obligations in full and the termination of each of the Loan
Documents.

    
      
         

      

      
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    (c)         
Intellectual Property
License.  For the purpose of enabling the Secured Parties to
exercise rights and remedies hereunder, at such time as the Secured Parties
shall be lawfully entitled to exercise such rights and remedies, and for no
other purpose, each Grantor hereby grants to the Secured Parties, to the extent
assignable, an irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to any Grantor) to use, assign, license or
sublicense any Intellectual Property now owned or hereafter acquired by any
Grantor, wherever the same may be located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout thereof.
Notwithstanding anything contained herein to the contrary, but subject to the
provisions of the Loan Agreement that limit the right of a Grantor to dispose of
its property and Section 5(e) hereof,
so long as no Event of Default shall have occurred and be continuing, each
Grantor may exploit, use, enjoy, protect, license, sublicense, assign, sell,
dispose of or take other actions with respect to the Intellectual Property in
the ordinary course of its business. In furtherance of the foregoing, unless an
Event of Default shall have occurred and be continuing, the Secured Parties
shall from time to time, upon the request of a Grantor, execute and deliver any
instruments, certificates or other documents, in the form so requested, which
such Grantor shall have certified are appropriate (in such Grantor’s judgment)
to allow it to take any action permitted above (including relinquishment of the
license provided pursuant to this Section 6(c) as to
any Intellectual Property). Further, upon the indefeasible payment in full of
all of the Obligations and after the cancellation or termination of the Loan,
the Secured Parties (subject to Section III hereof)
shall release and reassign to the Grantors all of the Secured Parties’ right,
title and interest in and to the Intellectual Property, and the Licenses, all
without recourse, representation or warranty whatsoever. The exercise of rights
and remedies hereunder by the Secured Parties shall not terminate the rights of
the holders of any licenses or sublicenses theretofore granted by any Grantor in
accordance with the second sentence of this Section 6(c). Each
Grantor hereby releases the Secured Parties from any claims, causes of action
and demands at any time arising out of or with respect to any actions taken or
omitted to be taken by the Secured Parties under the powers of attorney granted
herein other than actions taken or omitted to be taken through the Secured
Parties’ gross negligence or willful misconduct, as determined by a final
determination of a court of competent jurisdiction.

     

    (d)         
Secured Parties May
Perform.  If any Grantor fails to perform any agreement
contained herein as and when required, the Secured Parties may itself perform,
or cause performance of, such agreement or obligation, in the name of such
Grantor or the Secured Parties, and the expenses of the Secured Parties incurred
in connection therewith shall be jointly and severally payable by the Grantors
pursuant to Section
8 hereof and shall be secured by the Collateral.

     

    (e)         
No Secured Party
Duty.  The powers conferred on the Secured Parties hereunder
are solely to protect its interest in the Collateral and shall not impose any
duty upon it to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Secured Parties shall have no duty as to any Collateral or as
to the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral.

     

    (f)           No Secured Party
Liability.  Anything herein to the contrary notwithstanding (i)
each Grantor shall remain liable under the Licenses and otherwise with respect
to any of the Collateral to the extent set forth therein to perform all of its
obligations thereunder to the same extent as if this Security Agreement had not
been executed, (ii) the exercise by the Secured Parties of any of its rights
hereunder shall not release any Grantor from any of its obligations under the
Licenses or otherwise in respect of the Collateral, and (iii) the Secured
Parties shall not have any obligation or liability by reason of this Security
Agreement under the Licenses or with respect to any of the other Collateral, nor
shall the Secured Parties be obligated to perform any of the obligations or
duties of any Grantor thereunder or to take any action to collect or enforce any
claim for payment assigned hereunder.

    
      
         

      

      
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    (g)          Subordination to A/R
Facility.  Secured Parties agree that in the event any Grantor
obtains financing secured by its Accounts pursuant to an A/R Facility, each of
the Secured Parties shall, and do hereby, subordinate its lien and security
interest granted hereunder in Grantors’ Accounts to any lender or factor
granting financing to such Grantor under such A/R Facility so that such lender
or factor shall have a first priority security interest in, but only in, such
Grantor’s Accounts, and the Secured Parties’ security interests therein shall be
second in priority to such lender or factor.

     

    Section
7.         Remedies Upon
Default. If any Event of Default shall have occurred and be
continuing:

     

    (a)          Remedies Under the
Code.  The Secured Parties may exercise in respect of the
Collateral, in addition to any other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a secured party
upon default under the Code (whether or not the Code applies to the affected
Collateral), and also may (i) take absolute control of the Collateral,
including, without limitation, transfer into the Secured Parties’ name or into
the name of its nominee or nominees (to the extent the Secured Parties has not
theretofore done so) and thereafter receive, for the benefit of the Secured
Parties, all payments made thereon, give all consents, waivers and ratifications
in respect thereof and otherwise act with respect thereto as though it were the
outright owner thereof, (ii) require each Grantor to, and each Grantor hereby
agrees that it will at its expense and upon request of the Secured Parties
forthwith, assemble all or part of the Collateral as directed by the Secured
Parties and make it available to the Secured Parties at a place or places to be
designated by the Secured Parties that is reasonably convenient to both parties,
and the Secured Parties may enter into and occupy any premises owned or leased
by any Grantor where the Collateral or any part thereof is located or assembled
for a reasonable period in order to effectuate the Secured Parties’ rights and
remedies hereunder or under law, without obligation to any Grantor in respect of
such occupation, and (iii) without notice except as specified below and without
any obligation to prepare or process the Collateral for sale, (A) sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of the Secured Parties’ offices or elsewhere, for cash, on credit or for
future delivery, and at such price or prices and upon such other terms as the
Secured Parties may deem commercially reasonable and/or (B) lease, license or
dispose of the Collateral or any part thereof upon such terms as the Secured
Parties may deem commercially reasonable. Each Grantor agrees that, to the
extent notice of sale or any other disposition of the Collateral shall be
required by law, at least five (5) days’ prior notice to a Grantor of the time
and place of any public sale or the time after which any private sale or other
disposition of the Collateral is to be made shall constitute reasonable
notification. The Secured Parties shall not be obligated to make any sale or
other disposition of Collateral regardless of notice of sale having been given.
The Secured Parties may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. Each
Grantor hereby waives any claims against the Secured Parties arising by reason
of the fact that the price at which the Collateral may have been sold at a
private sale was less than the price which might have been obtained at a public
sale or was less than the aggregate amount of the Obligations, even if the
Secured Parties accepts the first offer received and does not offer the
Collateral to more than one offeree, and waives all rights that such Grantor may
have to require that all or any part of the Collateral be marshaled upon any
sale (public or private) thereof. Each Grantor hereby acknowledges that (i) any
such sale of the Collateral by the Secured Parties shall be made without
warranty, (ii) the Secured Parties may specifically disclaim any warranties of
title, possession, quiet enjoyment or the like, and (iii) such actions set forth
in clauses (i) and (ii) above shall not adversely affect the commercial
reasonableness of any such sale of the Collateral. In addition to the foregoing,
(i) upon notice to any Grantor from the Secured Parties, each Grantor shall
cease any use of the Intellectual Property or any trademark, patent or copyright
similar thereto for any purpose described in such notice; (ii) the Secured
Parties may, at any time and from time to time, upon ten (10) days’ prior notice
to any Grantor, license, whether general, special or otherwise, and whether on
an exclusive or non-exclusive basis, any of the Intellectual Property,
throughout the universe for such term or terms, on such conditions, and in such
manner, as the Secured Parties shall in its sole discretion determine; and (iii)
the Secured Parties may, at any time, pursuant to the authority granted in Section 6 hereof
(such authority being effective upon the occurrence and during the continuance
of an Event of Default), execute and deliver on behalf of a Grantor, one or more
instruments of assignment of the Intellectual Property (or any application or
registration thereof), in form suitable for filing, recording or registration in
any country.

    
      
         

      

      
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    (b)          Cash and Cash
Proceeds.  Any cash held by the Secured Parties as Collateral
and all Cash Proceeds received by the Secured Parties in respect of any sale of
or collection from, or other realization upon, all or any part of the Collateral
may, in the discretion of the Secured Parties, be held by the Secured Parties as
collateral for, and/or then or at any time thereafter applied (after payment of
any amounts payable to the Secured Parties pursuant to Section 8 hereof) in
whole or in part by the Secured Parties against, all or any part of the
Obligations in such order as the Secured Parties shall elect, consistent with
the provisions of the Loan Agreement. Any surplus of such cash or Cash Proceeds
held by the Secured Parties and remaining after indefeasible payment in full of
all of the Obligations after all Commitments have been terminated shall be paid
over to whomsoever shall be lawfully entitled to receive the same or as a court
of competent jurisdiction shall direct.

     

    (c)          Grantors’ Deficiency
Liability.  In the event that the proceeds of any such sale,
collection or realization are insufficient to pay all amounts to which the
Secured Parties are legally entitled, the Grantors shall be jointly and
severally liable for the deficiency, together with interest thereon at the
highest rate specified in the Loan Agreement for interest on overdue principal
thereof or such other rate as shall be fixed by applicable law, together with
the costs of collection and the reasonable fees, costs, expenses and other
client charges of any attorneys employed by the Secured Parties to collect such
deficiency.

     

    (d)          Disposition of
Collateral.  Each Grantor hereby acknowledges that if the
Secured Parties complies with any applicable state or federal law requirements
in connection with a disposition of the Collateral, such compliance will not
adversely affect the commercial reasonableness of any sale or other disposition
of the Collateral.

     

    (e)          No Marshalling
Required.  The Secured Parties shall not be required to
marshall any present or future collateral security (including, but not limited
to, this Security Agreement and the Collateral) for, or other assurances of
payment of, the Obligations or any of them or to resort to such collateral
security or other assurances of payment in any particular order, and all of the
Secured Parties’ rights hereunder and in respect of such collateral security and
other assurances of payment shall be cumulative and in addition to all other
rights, however existing or arising. To the extent that any Grantor lawfully
may, such Grantor hereby agrees that it will not invoke any law relating to the
marshaling of collateral which might cause delay in or impede the enforcement of
the Secured Parties’ rights under this Security Agreement or under any other
instrument creating or evidencing any of the Obligations or under which any of
the Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and, to the extent that it lawfully may,
each Grantor hereby irrevocably waives the benefits of all such
laws.

    
      
         

      

      
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    Section
8.          Indemnity and
Expenses.

     

    (a)          Claims, Damages,
Etc.  Each Grantor jointly and severally agrees to defend,
protect, indemnify and hold harmless each Secured Party from and against any and
all claims, damages, losses, liabilities, obligations, penalties, fees, costs
and expenses (including, without limitation, legal fees, costs, expenses, and
disbursements of counsel) to the extent that they arise out of or otherwise
result from this Security Agreement (including, without limitation, enforcement
of this Security Agreement), except claims, losses or liabilities resulting
solely and directly from such Person’s gross negligence or willful misconduct,
as determined by a final judgment of a court of competent
jurisdiction.

     

    (b)          Fees and
Courts.  Each Grantor jointly and severally agrees to pay to
the Secured Parties upon demand the amount of any and all costs and expenses,
including the reasonable fees, costs, expenses and disbursements of counsel for
the Secured Parties and of any experts and agents (including, without
limitation, any collateral trustee which may act as agent of the Secured
Parties), which the Secured Parties may incur in connection with (i) the
preparation, negotiation, execution, delivery, recordation, administration,
amendment, waiver or other modification or termination of this Security
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any Collateral, (iii) the exercise
or enforcement of any of the rights of the Secured Parties hereunder, or (iv)
the failure by any Grantor to perform or observe any of the provisions
hereof.

     

    Section
9.         Notices, Etc. All
notices and other communications provided for hereunder shall be in writing and
shall be mailed (by certified mail, postage prepaid and return receipt
requested), telecopied or delivered, if to a Grantor, to it at its address
specified in the Loan Agreement and if to the Secured Parties, to them at their
addresses specified in the Loan Agreement; or as to any such Person, at such
other address as shall be designated by such Person in a written notice to such
other Person complying as to delivery with the terms of this Section 9. All such
notices and other communications shall be effective (i) if sent by certified
mail, return receipt requested, when received or three (3) days after deposited
in the mails, whichever occurs first, (ii) if telecopied, when transmitted and
confirmation is received, or (iii) if delivered, upon delivery.

     

    Section
10.      Security Interest
Absolute.  All rights of the Secured Parties, all Liens and all
obligations of each of the Grantors hereunder shall be absolute and
unconditional irrespective of (i) any lack of validity or enforceability of the
Loan Agreement or any other agreement or instrument relating thereto, (ii) any
change in the time, manner or place of payment of, or in any other term in
respect of, all or any of the Obligations, or any other amendment or waiver of
or consent to any departure from the Loan Agreement or any other Loan Document,
(iii) any exchange or release of, or non-perfection of any Lien on any
Collateral, or any release or amendment or waiver of or consent to departure
from any part of the Obligations, or (iv) any other circumstance which might
otherwise constitute a defense available to, or a discharge of, any of the
Grantors in respect of the Obligations. All authorizations and agencies
contained herein with respect to any of the Collateral are irrevocable and
powers coupled with an interest.

    
      
         

      

      
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    Section
11.       Miscellaneous.

     

    (a)          Amendments.  No
amendment of any provision of this Security Agreement shall be effective unless
it is in writing and signed by each Grantor and the Secured Parties, and no
waiver of any provision of this Security Agreement, and no consent to any
departure by any Grantor therefrom, shall be effective unless it is in writing
and signed by the Secured Parties, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

     

    (b)        
No Deemed
Waivers.  No failure on the part of any Lender to exercise, and
no delay in exercising, any right hereunder or under any other Loan Document
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The rights and remedies the Secured Parties provided herein and
in the other Loan Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the Secured
Parties under any Loan Document against any party thereto are not conditional or
contingent on any attempt by such Person to exercise any of its rights under any
other Loan Document against such party or against any other Person, including
but not limited to, any Grantor.

     

    (c)          Severability.  Any
provision of this Security Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction and shall not render unenforceable or invalid any
other provisions of this Security Agreement not so prohibited or rendered
unenforceable, and such remaining provisions shall continue in full force and
effect.

     

    (d)         Continuing Security
Interest.  This Security Agreement shall create a continuing
security interest in the Collateral and shall (i) remain in full force and
effect until (A) the indefeasible payment in full of all of the Obligations, and
(B) the termination of all of the Commitments; and (ii) be binding on each
Grantor and all other Persons who become bound as debtor to this Security
Agreement in accordance with Section 9.203(d) of
the Code and shall inure, together with all rights and remedies of the Secured
Parties hereunder, to the benefit of the Secured Parties and their respective
permitted successors, transferees and assigns. Without limiting the generality
of clause (ii) of the immediately preceding sentence, to the extent permitted
under the Loan Agreement, the Secured Parties may assign or otherwise transfer
their rights and obligations under this Security Agreement and any other Loan
Document, to any other Person and such other Person shall thereupon become
vested with all of the benefits in respect thereof granted to the Secured
Parties herein or otherwise. Upon any such assignment or transfer, all
references in this Security Agreement to any such Secured Party shall mean the
assignee of such Secured Party.  None of the rights or obligations of
any Grantor hereunder may be assigned or otherwise transferred without the prior
written consent of the Secured Parties, and any such assignment or transfer
shall be null and void.

    
      
         

      

      
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    (e)          Security Agreement
Termination.  Upon the satisfaction in full of the Obligations
and the termination of all of the Commitments, (i) this Security Agreement and
the security interests and licenses created hereby shall terminate and all
rights to the Collateral shall revert to the Grantors and (ii) the Secured
Parties will, upon the Grantors’ request and at the Grantors’ expense, (A)
return to the Grantors such of the Collateral as shall not have been sold or
otherwise disposed of or applied pursuant to the terms hereof and (B) execute
and deliver to the Grantors such documents as the Grantors shall reasonably
request to evidence such termination, all without any representation, warranty
or recourse whatsoever.

     

    (f)          Governing
Law.  THIS
AGREEMENT SHALL BE GOVERNED BY, CONSTRUEDAND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW
AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND
THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST CREATED
HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF
TEXAS.

     

    (g)          Legal
Action.  ANY LEGAL ACTION, SUIT OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN THE
COURTS OF THE STATE OF TEXAS OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF TEXAS, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION AND DELIVERY
OF THIS AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS. WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.

     

    (h)         Waiver of
Jury Trial.  EACH OF THE GRANTORS AND
(BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) THE SECURED PARTIES WAIVES
ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON,
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN
STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.

     

    (i)           Service of
Process.  Each Grantor irrevocably consents to the service of
process of any of the aforesaid courts in any such action, suit or proceeding by
the mailing of copies thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such Grantor at its
address provided herein, such service to become effective ten (10) days after
such mailing.

    
      
         

      

      
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    (j)           Other Forms of
Service.  Nothing contained herein shall affect the right of
the Secured Parties to serve process in any other manner permitted by law or
commence legal proceedings or otherwise proceed against any Grantor or any
property of any Grantor in any other jurisdiction.

     

    (k)          Waiver of
Punitive/Consequential Damages.  Each Grantor irrevocably and
unconditionally waives any right it may have to claim or recover, in any legal
action, suit or proceeding arising out of this Security Agreement or any other
Loan Document, any special, exemplary, punitive or consequential
damages.

     

    (1)          Section
Headings.  Section headings herein are included for convenience
of reference only and shall not constitute a part of this Security Agreement for
any other purpose.

     

    (m)         Counterpart
Signatures.  This Security Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
constitute one in the same Security Agreement.

     

    (n)        
Joint and Several
Obligations.  All of the obligations of the Grantors hereunder
are joint and several. The Secured Parties may, in its sole and absolute
discretion, enforce the provisions hereof against any of the Grantors and shall
not be required to proceed against all Grantors jointly or seek payment from the
Grantors ratably. In addition, the Secured Parties may, in its sole and absolute
discretion, select the Collateral of any one or more of the Grantors for sale or
application to the Obligations, without regard to the ownership of such
Collateral, and shall not be required to make such selection ratably from the
Collateral owned by all of the Grantors. The release or discharge of any Grantor
by the Secured Parties shall not release or discharge any other Grantor from the
obligations of such Person hereunder.

     

    (o)          Amendment and
Restatement.  The Parties hereto agree that, as set forth in
the recitals to this Security Agreement, with the intention that all
indebtedness, obligations, liens, and security interests relate back and
continue to run, without lapse, from the effective date of the Prior Loan
Documents and the date of attachment and perfection of the collateral under the
Prior Security Agreement. This Security Agreement continues, amends and restates
in its entirety but does not release or extinguish the Security Agreement. This
Security Agreement does not constitute a novation and, from and after the date
hereof, the Prior Security Agreement shall be of no force or effect except to
evidence the incurrence of each of the Grantor’s obligations thereunder and the
grant of Liens therein or pursuant thereto.

     

    (p)         
Construction.  Grantors
and Secured Parties each acknowledge that each of them has had the benefit of
legal counsel of its own choice and has been afforded an opportunity to review
this Security Agreement and the other Loan Documents with its legal counsel and
that this Agreement and the other Loan Documents shall be construed as if
jointly drafted by Grantors and Secured Parties.

    
      
         

      

      
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    (q)          ENTIRE AGREEMENT;
AMENDMENT.  THIS WRITTEN SECURITY AGREEMENT, THE OTHER LOAN
DOCUMENTS AND THE RELATED DOCUMENTS BETWEEN GRANTORS AND SECURED PARTIES
CONCERNING THE TERMS OF THE SECURITY INTERESTS GRANTED THEREUNDER REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT THERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEAOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL SECURITY
AGREEMENTS BETWEEN THE PARTIES.  THE PROVISIONS OF THIS SECURITY
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND RELATED DOCUMENTS MAY ONLY BE AMENDED
OR WAIVED BY AGREEMENT IN WRITING SIGNED BY THE PARTIES.

     

    [The signatures appear on the
following page]

    
      
         

      

      
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    IN
WITNESS WHEREOF, each Grantor has caused this Security Agreement to be executed
and delivered by its officer thereunto duly authorized, as of the date first
above written.

     

    
      
        
          
            
              
                
                  	
                          Grantors

                        
	 
      
	
                          HEMIWEDGE
      INDUSTRIES, INC.

                        
	 
      
	
                          By:

                        	
                           

                        
	
                          Name:  Matthew
      C. Flemming

                        
	
                          Title:  CFO
      and Secretary

                        
	 
      
	
                          HEMIWEDGE
      VALVE CORPORATION

                        
	 
      
	
                          By:

                        	
                           

                        
	
                          Name:  Matthew
      C. Flemming 

                        
	
                          Title:  CFO
      and Secretary

                        
	 
      
	 
      
	
                          Secured
      Parties

                        
	 
      
	
                          EADS
      INVESTMENTS I, INC.

                        
	 
      
	
                          By:

                        	
                           

                        
	
                          Name:
      Rodney Eads

                        
	
                          Title:  Member

                        

                

              

            

          

        

      

    

     

    
      
         

      

      
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                  By:

                	
                   

                
	
                  D.
      Bradley McWilliams

                

        

      

    

    

    SCHEDULE
I

    

    Grantors

    

    
      
        
          	
                  Company Name

                	 
      	
                  Jurisdiction of Organization

                	 
      	
                  Organizational I.D.

                
	
                  Hemiwedge
      Industries

                	 
      	
                  Delaware

                	 
      	
                  20-2091210

                
	
                  Hemiwedge
      Valve

                  Corporation

                	 
      	
                  Texas

                	 
      	
                  03-0453686

                

        

      

    

     

    
      
         

      

      
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    SHEDULE
II

    

    Intellectual
Property

    

    I.  Patents and
Patent Applications in USA- See Attached Schedule (Owned by Hemiwedge but
Licensed to Tejas/Gilmore)

    

    II.  Patents and
Patent Applications outside the USA-See Attached Schedule (Owned by Hemiwedge
but Licensed to Tejas/Gilmore)

    

    III.  Tradenames

    

    Company
Name

    

    Hemiwedge Industries, Inc.

    

    Hemiwedge Valve
Corporation

    

    IV.  Licences-See
Attached

    

    (i)           Trademark
Licenses

    (ii)           Patent
Licenses

    
      
         

      

      
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    SCHEDULE
II

     

    IV.  LICENSES

     

    LICENSES GRANTED BY
HEMIWEDGE

     

    Pursuant
to that certain Intellectual Property Transfer Agreement dated as of October 14,
2008 by and among Hemiwedge  (“Transferor”) and Tejas Research and
Engineering LP (“Transferee”), Hemiwedge licensed the Licensed Hemiwedge
Intellectual Property (see Schedule A attached hereto) to Tejas.

     

    LICENSES GRANTED TO
HEMIWEDGE

     

    Pursuant
to that certain Intellectual Property Transfer Agreement dated as of October 14,
2008 by and among Hemiwedge  (“Transferor”) and Tejas Research and
Engineering LP (“Transferee”).

     

    Tejas/Transferee
granted certain licenses back to Hemiwedge/Transferor as more particularly set
forth below and in Schedule B attached hereto:

     

    (a)           License for Hemiwedge
Cartridge Valves. TRANSFEREE grants to TRANSFEROR under the Licensed
Hemiwedge Intellectual Property the non-exclusive, royalty-free, and
sublicenseable right to make, use, sell, offer for sale, rent, offer for rent,
modify, reproduce, or otherwise commercialize or develop Hemiwedge Cartridge
Valves (i) for a production manifold above water on a production platform or
vessel in Canadian waters only, and (ii) in connection with offshore platforms
and other floating production vessels with TRANSFEROR’s ANSI class and API
Specification 6D product line.

     

    (b)           License for Sale of Mud
Diverter Valves.  TRANSFEREE grants to TRANSFEROR under the
Licensed Hemiwedge Intellectual Property the non-exclusive, royalty-free, and
sublicenseable right to make, use, sell, offer for sale, rent, or offer for rent
Hemiwedge Products consisting of above-ground mud diverter valves within ANSI
class product specifications for a period of eighteen (18) months from the
Effective Date; provided,
however, that the parties shall share equally the profits (defined as net
revenue minus cost of goods sold and sales commissions) from all TRANSFEROR’s
sales or rentals of such mud diverter valves to any third party other than Black
Gold Rental Tools, Inc., of Corpus Christi, Texas (“Black Gold”).  For
clarity, TRANSFEROR shall have the rights to all profits from sales or rentals
of such mud diverter valves to Black Gold.

     

    (b)(1)   Additional License for Sale
of Mud Diverter Valves.

     

    Black
Gold. On October 30, 2009 TRANSFEREE grants to TRANSFEROR under the Licensed
Hemiwedge Intellectual Property a non-exclusive, royalty bearing,
non-sublicensable right to make, use, sell, offer for sale, rent, or offer for
rent Hemiwedge Products consisting of above-ground mud diverter valves within
ANSI class product specifications solely to Black Gold Rental Tools Inc of
Corpus Christi, Texas it being understood that no such license is being granted
to make, use, sell, offer for sale, rent, or offer for rent to any other party
under this Section other than Black Gold. The licenses granted under this
Section shall begin on April 18, 2010 and expire on October 18,
2013.

    
      
         

      

      
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    (b)(2) MPO/CPD. On October
30, 2009 TRANSFEREE grants to TRANSFEROR under the Licensed Hemiwedge
Intellectual Property a non-exclusive, royalty bearing, non-sublicensable right
to make, use, sell, offer for sale, rent, or offer for rent Hemiwedge Products
consisting of above-ground mud diverter valves within ANSI class product
specifications solely to Managed Pressure Operations, PTE, LTD and or its joint
venture partner CPD Oilwell of Singapore (together “MPO/CPD”), it being
understood that no such license is being granted to make, use, sell, offer for
sale, rent, or offer for rent to any other party under this Section to any other
party under this Section other than MPO/CPD. The licenses granted under this
Section license shall be deemed effective on October 18, 2008 and expire on
October 18, 2013.

     

    (b)(3)    Royalties. In
consideration of the licenses granted pursuant to (b).(1). and (b)(2). above,
TRANSFEROR agrees to pay to TRANSFEREE a royalty equal to 5% of the gross
revenues received by TRANSFEROR  and its affiliates in any way
relating to the sale, rental, lease or other transfer of Hemiwedge Products by
TRANSFEROR or its affiliates to Black Gold and MPO/CPD. All such payments shall
be made on a calendar quarter basis within 30 days after the end of each
quarter.

     

    (c)           License of Specialty Valves
Outside the Combined Fields of Use.  TRANSFEREE grants to
TRANSFEROR under the Assigned Hemiwedge Intellectual Property the non-exclusive,
royalty-free, and sublicenseable right to make, use, sell, offer for sale, rent,
offer for rent, modify, reproduce, or otherwise commercialize or develop
Hemiwedge Products for any and all uses outside of any and all of the Combined
Fields of Use.

     

    (d)           Further
Licenses Granted to Hemiwedge. If Transferee prosecutes and maintains any of the
Licensed Hemiwedge Intellectual Property, Transferee shall grant to Transferor a
royalty free license to use any patent rights not within the Combined Fields of
Use.

    
      
         

      

      
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    SCHEDULE A – LICENSED
HEMIWEDGE INTELLECTUAL PROPERTY

     

    
      	
               
      

            	
              a.

            	
              U.S.
      Patent Number 4,962,911, titled “Hemiwedge Valve”
  (expired)

            

    

     

    
      	
               
      

            	
              b.

            	
              U.S.
      Patent Number 5,333,834, titled “Valve
Driver”

            

    

     

    
      	
               
      

            	
              c.

            	
              U.S.
      Patent Number 5,507,469, titled “Valve Actuator System for Initial Torque
      Reduction”

            

    

     

    
      	
               
      

            	
              d.

            	
              U.S.
      Patent Number 7,357,145, titled “High-pressure, Hemi-wedge Cartridge
      Valve”

            

    

     

    
      	
               
      

            	
              e.

            	
              U.S.
      Patent Application Publication Number 2008/0093575, titled “Rotatable
      Wedge Valve Mechanism And Method For
  Manufacture”

            

    

     

    
      	
               
      

            	
              f.

            	
              U.S.
      Patent Application Publication Number 2008/0099076, titled “Rotatable
      Wedge Cartridge Valve Mechanism And Method For Assembly And
      Disassembly”

            

    

     

    
      	
               
      

            	
              g.

            	
              U.S.
      Patent Application Publication Number 2008/0179558 (U.S. Patent
      Application Serial Number 11/699518), titled “Self-adjusting Seat For
      Rotary Valve” (abandoned)

            

    

     

    
      	
               
      

            	
              h.

            	
              WO2008/051886,
      titled “Rotatable Wedge Valve Mechanism And Method For
      Manufacture”

            

    

     

    
      	
               
      

            	
              i.

            	
              WO2008/055050,
      titled “Rotatable Wedge Cartridge Valve Mechanism And Method For Assembly
      And Disassembly”

            

    

     

    
      	
               
      

            	
              j.

            	
              WO1996/035068
      (PCT/US96/05980), titled “Valve Actuator System for Initial Torque
      Reduction” (expired)

            

    

     

    
      	
               
      

            	
              k.

            	
              WO1994/023228
      (PCT/US94/03360), titled “Valve Driver”
  (expired)

            

    

     

    
      	
               
      

            	
              l.

            	
              Trademark
      No.
  1983828  -Mark:  HEMIWEDGE

            

    

     

    
      	
            	
              

                m.

              

            	
              

                00101
      – PCT application Serial No. PCT/US2006/006206, filed February 22, 2006,
      entitled  “High-Pressure, Hemi-Wedge Cartridge Valve” with a
      priority of Provisional Application Serial No. 60/658,548, filed March 4,
      2005 entitled “High Pressure, Hemi-Wedge Cartridge
      Valve”  (Hemiwedge) –
Expired

              

            

    

     

    
      	
               
      

            	
              n.

            	
              00102
      – Australia National Phase Entry Application Serial No. 2006221029 with an
      effective file date of February 22, 2006, and a priority of PCT
      application Serial No. PCT/US2006/006206, filed February 22, 2006,
      entitled  “High-Pressure, Hemi-Wedge Cartridge Valve” with a
      priority of Provisional Application Serial No. 60/658,548, filed March 4,
      2005 entitled “High Pressure, Hemi-Wedge Cartridge Valve” (Hemiwedge) –
      Pending

            

    

     

    
      
         

      

      
        Page
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              o.

            	
              00103
      – Brazil National Phase Entry Application Serial
      No.  PI0609353-1 with an effective file date of February 22,
      2006, and a priority of PCT application Serial No. PCT/US2006/006206,
      filed February 22, 2006, entitled  “High-Pressure, Hemi-Wedge
      Cartridge Valve” with a priority of Provisional Application Serial No.
      60/658,548, filed March 4, 2005 entitled “High Pressure, Hemi-Wedge
      Cartridge Valve” (Hemiwedge) –
Pending

            

    

     

    
      	
               
      

            	
              p.

            	
              00104
      – Canada National Phase Entry Application Serial No. 2599954 with an
      effective file date of February 22, 2006, and a priority of PCT
      application Serial No. PCT/US2006/006206, filed February 22, 2006,
      entitled  “High-Pressure, Hemi-Wedge Cartridge Valve” with a
      priority of Provisional Application Serial No. 60/658,548, filed March 4,
      2005 entitled “High Pressure, Hemi-Wedge Cartridge Valve” (Hemiwedge) –
      Pending

            

    

     

    
      	
               
      

            	
              q.

            	
              00105
      – EPO National Phase Entry Application Serial No. 06735740.0 with an
      effective file date of February 22, 2006, and a priority of PCT
      application Serial No. PCT/US2006/006206, filed February 22, 2006,
      entitled  “High-Pressure, Hemi-Wedge Cartridge Valve” with a
      priority of Provisional Application Serial No. 60/658,548, filed March 4,
      2005 entitled “High Pressure, Hemi-Wedge Cartridge Valve” (Hemiwedge) –
      Abandoned

            

    

     

    
      	
               
      

            	
              r.

            	
              00201
      – PCT application Serial No. PCT/US07/82048, filed October 22, 2007,
      entitled  “Rotatable Wedge Valve Mechanism and Method for
      Manufacture” with a priority of Nonprovisional Application Serial No.
      11/584,679, filed October 20, 2006, entitled “Rotable Wedge Valve
      Mechanism and Method for Manufacture” (Hemiwedge) –
  Expired

            

    

     

    
      	
               
      

            	
              s.

            	
              00205
      - Canada National Phase Entry Application Serial No. 2,667,123; national
      entry of 00201; entitled “Rotatable Wedge Valve Mechanism and Method for
      Manufacture” (Hemiwedge) – Pending

            

    

     

    
      	
               
      

            	
              t.

            	
              00301
      – PCT application Serial No. PCT/US07/82613, filed October 26, 2007,
      entitled “Rotatable Wedge Valve Mechanism and Method for Assembly and
      Disassembly” with a priority of Nonprovisional Application Serial
      No.11/588,685, filed October 26, 2007, entitled “Rotatable Wedge Cartridge
      Valve Mechanism and Method for Assembly and Disassembly” (Hemiwedge) –
      Expired

            

    

     

    
      	
               
      

            	
              u.

            	
              00501
      – PCT application Serial No. PCT/US10/37234, filed June 3, 2010, entitled
      “Hemi-Wedge Verifiable Shutoff Valve” with a priority of Nonprovisional
      Application Serial No. 12/478,496, filed June 4, 2009, entitled
      “Hemi-Wedge Verifiable Shutoff Valve” (Hemiwedge) -
  Pending

            

    

     

    
      
         

      

      
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    SCHEDULE B – GILMORE VALVE,
(ASSIGNEE FROM TEJAS) OWNED  HEMIWEDGE INTELLECTUAL PROPERTY THAT
TRANSFEROR HAS LICENSE TO

     

    
      	
               
      

            	
              a.

            	
              00202
      - EPO National Phase Entry Application Serial No. 07844488.2; national
      entry of 00201; entitled “Rotatable Wedge Valve Mechanism and Method for
      Manufacture” (Gilmore Valve Company) –
Pending

            

    

     

    
      	
               
      

            	
              b.

            	
              00203
      - Australia National Phase Entry Application Serial No. 2007309130;
      national entry of 00201; entitled “Rotatable Wedge Valve Mechanism and
      Method for Manufacture” (Gilmore Valve Company) –
  Pending

            

    

     

    
      	
               
      

            	
              c.

            	
              00204
      - Mexico National Phase Entry Application Serial No. MX/a/2009/004083;
      national entry of 00201; entitled “Rotatable Wedge Valve Mechanism and
      Method for Manufacture” (Gilmore Valve Company) –
  Pending

            

    

     

    
      	
               
      

            	
              d.

            	
              00206
      - UAE National Phase Entry Application Serial No. 353/2009; national entry
      of 00201; entitled “Rotatable Wedge Valve Mechanism and Method for
      Manufacture” (Gilmore Valve Company) –
Pending

            

    

     

    
      	
               
      

            	
              e.

            	
              00207
      - Brazil National Phase Entry Application Serial No. PI 0717637-6;
      national entry of 00201; entitled “Rotatable Wedge Valve Mechanism and
      Method for Manufacture” (Gilmore Valve Company) –
  Pending

            

    

     

    
      	
               
      

            	
              f.

            	
              00208
      - India National Phase Entry Application Serial No. 2435/DELNP/2009;
      national entry of 00201; entitled “Rotatable Wedge Valve Mechanism and
      Method for Manufacture” (Gilmore Valve Company) –
  Pending

            

    

     

    
      	
               
      

            	
              g.

            	
              00209
      - Norway National Phase Entry Application Serial No. 2009 1506; national
      entry of 00201; entitled “Rotatable Wedge Valve Mechanism and Method for
      Manufacture” (Gilmore Valve Company) –
Pending

            

    

     

    
      	
               
      

            	
              h.

            	
              00210
      - China National Phase Entry Application Serial No. 200780045104.2;
      national entry of 00201; entitled “Rotatable Wedge Valve Mechanism and
      Method for Manufacture” (Gilmore Valve Company) –
  Pending

            

    

     

    
      	
               
      

            	
              i.

            	
              00302
      - EPO National Phase Entry Application Serial No. 07863538.0; national
      entry of 00301; entitled “Rotatable Wedge Cartridge Valve Mechanism and
      Method for Assembly and Disassembly” (Gilmore Valve Company) –
      Pending

            

    

     

    
      	
               
      

            	
              j.

            	
              00303
      - Australia National Phase Entry Application Serial No. 2007313800;
      national entry of 00301; entitled “Rotatable Wedge Cartridge Valve
      Mechanism and Method for Assembly and Disassembly” (Gilmore Valve Company)
      – Pending

            

    

     

    
      	
               
      

            	
              k.

            	
              00304
      - Mexico National Phase Entry Application Serial No. MX/a/2009/004193;
      national entry of 00301; entitled “Rotatable Wedge Cartridge Valve
      Mechanism and Method for Assembly and Disassembly” (Gilmore Valve Company)
      – Pending

            

    

     

    
      
         

      

      
        Page
33 of 38

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              l.

            	
              00305
      - Canada National Phase Entry Application Serial No. 2,667,294; national
      entry of 00301; entitled “Rotatable Wedge Cartridge Valve Mechanism and
      Method for Assembly and Disassembly” (Gilmore Valve Company) –
      Pending

            

    

     

    
      	
               
      

            	
              m.

            	
              00306
      - UAE National Phase Entry Application Serial No. 382/2009; national entry
      of 00301; entitled “Rotatable Wedge Cartridge Valve Mechanism and Method
      for Assembly and Disassembly” (Gilmore Valve Company) –
      Pending

            

    

     

    
      	
               
      

            	
              n.

            	
              00307
      - Brazil National Phase Entry Application Serial No. PI 0718001-2;
      national entry of 00301; entitled “Rotatable Wedge Cartridge Valve
      Mechanism and Method for Assembly and Disassembly” (Gilmore Valve Company)
      – Pending

            

    

     

    
      	
               
      

            	
              o.

            	
              00308
      - India National Phase Entry Application Serial No. 2437/DELNP/2009;
      national entry of 00301; entitled “Rotatable Wedge Cartridge Valve
      Mechanism and Method for Assembly and Disassembly” (Gilmore Valve Company)
      – Pending

            

    

     

    
      	
               
      

            	
              p.

            	
              00309
      - Norway National Phase Entry Application Serial No. 2009 1507; national
      entry of 00301; entitled “Rotatable Wedge Cartridge Valve Mechanism and
      Method for Assembly and Disassembly” (Gilmore Valve Company) –
      Pending

            

    

     

    
      	
               
      

            	
              q.

            	
              00310
      - China National Phase Entry Application Serial No. 200780045093.8;
      national entry of 00301; entitled “Rotatable Wedge Cartridge Valve
      Mechanism and Method for Assembly and Disassembly” (Gilmore Valve Company)
      – Pending

            

    

     

    
      
         

      

      
        Page
34 of 38

        
          

        

      

      
         

      

    

     

    SCHEDULE
III

    

    Locations of
Grantors

    

    
      
        	
                Company

              	 
      	
                Chief Executive

                Office

              	 
      	
                Chief Place of

                Business

              	 
      	
                Books and

                Records

              	 
      	
                Inventory,

                Equipment, Etc.

              
	
                Hemiwedge
      Industries, Inc.

              	 
      	
                1011
      Beach

                Airport
      Road,

                Conroe
      Texas

                77301

              	 
      	
                1011
      Beach

                Airport
      Road,

                Conroe
      Texas

                77301

              	 
      	
                1011
      Beach

                Airport
      Road,

                Conroe
      Texas

                77301

              	 
      	
                1011
      Beach

                Airport
      Road,

                Conroe
      Texas

                77301

              
	
                Hemiwedge
      Valve Corporation

              	 
      	
                1011
      Beach

                Airport
      Road,

                Conroe
      Texas

                77301

              	 
      	
                1011
      Beach

                Airport
      Road,

                Conroe
      Texas

                77301

              	 
      	
                1011
      Beach

                Airport
      Road,

                Conroe
      Texas

                77301

              	 
      	
                1011
      Beach

                Airport
      Road,

                Conroe
      Texas

                77301

              

      

    

     

    
      
         

      

      
        Page
35 of 38

        
          

        

      

      
         

      

    

     

    SCHEDULE
IV

    

    Bank
Accounts

    

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                Company

                              	 
      	
                                Bank or Broker

                              	 
      	
                                Address

                              	 
      	
                                Account Number

                              	 
      	
                                Purpose

                              
	
                                Hemiwedge
      Industries, Inc.

                              	 
      	
                                NA

                              	 
      	
                                N/A

                              	 
      	
                                N/A

                              	 
      	
                                N/A

                              
	
                                Hemiwedge
      Valve

                                Corporation

                              	 
      	
                                Wells
      Fargo

                                Bank
      and Trust

                                Company

                              	 
      	
                                21314

                                Kuykendahl

                                Road,
      Spring

                                Texas
      77379

                              	 
      	
                                3214114674

                              	 
      	 
      

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         

      

      
        Page
36 of 38

        
          

        

      

      
         

      

    

    SCHEDULE
V

    

    UCC-1 Financing
Statements

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              	
                                                                      Filing Jurisdiction

                                                                    	 	
                                                                      Grantor

                                                                    	 	
                                                                      Secured Party

                                                                    
	 
      	 	 
      	 	 
      
	
                                                                      District
      of Columbia

                                                                    	 	
                                                                      Hemiwedge
      Industries, Inc.

                                                                    	 	
                                                                      Eads
      Investments I, LLC

                                                                    
	 
      	 	 
      	 	
                                                                      and

                                                                    
	 
      	 	 
      	 	
                                                                      D.
      Bradley McWilliams

                                                                    
	 
      	 	 
      	 	 
      
	
                                                                      District
      of Columbia

                                                                    	 	
                                                                      Hemiwedge
      Valve Corporation

                                                                    	 	
                                                                      Eads
      Investments I, LLC

                                                                    
	 
      	 	 
      	 	
                                                                      and

                                                                    
	 
      	 	 
      	 	
                                                                      D.
      Bradley McWilliams

                                                                    
	 
      	 	 
      	 	 
      
	
                                                                      Delaware

                                                                    	 	
                                                                      Hemiwedge
      Industries, Inc.

                                                                    	 	
                                                                      Eads
      Investments I, LLC

                                                                    
	 
      	 	 
      	 	
                                                                      and

                                                                    
	 
      	 	 
      	 	
                                                                      D.
      Bradley McWilliams

                                                                    
	 
      	 	 
      	 	 
      
	
                                                                      Texas

                                                                    	 	
                                                                      Hemiwedge
      Valve Corporation

                                                                    	 	
                                                                      Eads
      Investments I, LLC

                                                                    
	 
      	 	 
      	 	
                                                                      and

                                                                    
	 
      	 	 
      	 	
                                                                      D.
      Bradley
McWilliams

                                                                    

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         

      

      
        Page
37 of 38

        
          

        

      

      
         

      

    

     

    SCHEDULE
VI

    

    Commercial Tort
Claims

    

    NONE

    
      
         

      

      
        Page
38 of 38

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