Exhibit 10.3


    
      

      

    

    
      EXHIBIT
        10.4

    

    

      THIS
        NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), NOR HAVE
        THEY BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE,
        AND
        THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED
        EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT
        WHICH
        HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR
        (ii)
        PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
        ACT.

       

      CONVERTIBLE
        PROMISSORY NOTE

       

      (“Note”)

       

      
        	
                Principal
                  Amount:

              	
                El
                  Dorado Hills, California

              
	
                $3,000,000

              	
                March
                  10, 2006

              


      

      


      1.    For
        value
        received, the undersigned, Chapeau, Inc., a Utah corporation, (the “Company”)
        promises to pay to the order of the Gordon V. and Helen C. Smith Foundation,
        8716 Crider Brook Way, Potomac, Maryland 20854 (“Lender”), in lawful money of
        the United States of America, the principal sum of Three Million Dollars
        ($3,000,000), or such lesser amount as is outstanding under this Note, plus
        simple interest thereon from the date hereof on the aggregate unpaid principal
        amount until such amount is paid in full at the annual rate of twelve percent
        (12%), or the maximum rate allowed by law, whichever is less (calculated
        on the
        basis of a 365 day year). Interest shall be payable quarterly on the last
        business day of each calendar quarter, commencing June 30, 2006. The Company
        covenants and agrees that it shall establish a separate bank account and
        deposit
        six hundred thousand dollars ($600,000) therein. Funds from such account
        shall
        be used solely to pay interest, when due, under this Note until such time
        as
        this Note has been paid in full or converted into the Company’s Common Stock in
        accordance with the terms herein.

       

      2.    The
        Company shall pay Lender a commitment fee of $30,000, which shall be deducted
        from the proceeds disbursed to the Company under this Note.

       

      3.    Principal
        and accrued interest under this Note shall be due and payable in full on
        March
        10, 2009 (the “Maturity Date”). All payments on or in respect of this Note or
        the indebtedness evidenced hereby shall be made to Lender without set-off
        or
        counterclaim and free and clear of and without any deductions of any kind.
        

       

      4.    This
        Note
        shall be convertible at any time into that number of shares of the Company’s
        Common Stock, (a) on or prior to March 10, 2007, as is determined by dividing
        the outstanding principal amount and accrued interest under this Note by
        $1.25
        per share and (b) after March 10, 2007, as is determined by dividing the
        outstanding principal amount and accrued interest under this Note by the
        lower
        of (i) seventy-five percent (75%) of the average closing price of the Company's
        common stock (as quoted on the OTC Bulletin Board or other listing service
        or
        exchange) for the ninety (90) calendar days immediately preceding the date
        of
        such conversion or (ii) $1.25 per share. 

       


      
        
          
          

        

        
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      5.    Upon
        conversion of this Note, the Company and Lender shall execute and deliver
        a
        Common Stock Purchase Agreement in substantially the form attached hereto
        as
Exhibit
        A.
        Lender
        also agrees to deliver the original of this Note (or a notice to the effect
        that
        the original Note has been lost, stolen or destroyed and an agreement acceptable
        to the Company whereby the holder agrees to indemnify the Company from any
        loss
        incurred by it in connection with this Note) simultaneously with the delivery
        of
        the Common Stock Purchase Agreement; provided, however, that upon satisfaction
        of the conditions set forth in this Section 5, this Note shall be deemed
        converted and of no further force and effect, whether or not it is delivered
        for
        cancellation as set forth in this sentence.

       

      6.    No
        fractional shares shall be issued upon conversion of this Note. In lieu of
        the
        Company issuing any fractional shares to Lender upon the conversion of this
        Note, the Company shall pay to Lender an amount equal to the product obtained
        by
        multiplying the applicable conversion price by the fraction of a share not
        issued pursuant to the previous sentence.

       

      7.    Upon
        conversion of this Note in full and the payment of any amounts specified
        in
        Section 6 above, the Company shall be forever released from all its obligations
        and liabilities under this Note.

       

      8.    This
        Note
        shall be secured by all of the assets of the Company and the Lender shall
        hold
        all rights and remedies pari passu with the Company’s other senior secured
        debtors.

       

      9.    If
        one or
        more of the following events shall have occurred and be continuing: (a) default
        in the payment of all or any part of the principal or interest of the Note;
        or
        (b) the Company pursuant to or within the meaning of any bankruptcy law (i)
        commences a voluntary case or proceeding; (ii) consents to the entry of an
        order
        for relief against it in an involuntary case or proceeding; (iii) consents
        to
        the appointment of a custodian of it or for all or substantially all of its
        property; (iv) makes a general assignment for the benefit of its creditors;
        or
        (v) admits in writing its inability to pay its debts as the same become due;
        or
        (c) a court of competent jurisdiction enters an order or decree under any
        bankruptcy law that (i) is for relief against the Company in an involuntary
        case
        against the Company; (ii) appoints a receiver of the Company or for all or
        substantially all of the property of the Company; or (iii) orders the
        liquidation of the Company, and such order or decree remains unstayed and
        in
        effect for sixty (60) days; then
        Lender,
        by notice in writing to the Company, may declare this Note to be due and
        payable
        immediately, and upon any such declaration the same shall become immediately
        due
        and payable.

       

      10. 
          This
        Note
        may be transferred or assigned only with the prior written consent of the
        Company and only in compliance with applicable federal and state securities
        laws. In the event of such transfer or assignment, Lender shall surrender
        this
        Note for registration of transfer or assignment, duly endorsed, or accompanied
        by a duly executed written instrument of transfer or assignment in form
        satisfactory to the Company. Thereupon, a new Note for like principal amount
        and
        interest will be issued to, and registered in the name of, the transferee
        or
        assignee. Interest and principal are payable only to the registered holder
        of
        the Note.

       


      
        
          
          

        

        
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      11. 
          If
        any
        action or proceeding is commenced to enforce this Note or any right arising
        in
        connection with this Note, the prevailing party in such action or proceeding
        shall be entitled to recover from the other non-prevailing party the reasonable
        attorneys’ fees, costs, and expenses incurred by such prevailing
        party.

       

      12. 
          The
        Company and all endorsers, sureties and guarantors, jointly and severally,
        waive
        all presentments, demands for performance, notices of nonperformance, protests,
        notices of protest and notices of dishonor in connection with the delivery,
        acceptance, performance and enforcement of this Note.

       

      13. 
          This
        Note
        shall be deemed to be made under and shall be interpreted under the laws
        of the
        State of California (without giving effect to the conflict of law principles
        thereof). 

       

      


       

      
        	 	
                CHAPEAU,
                  INC.

              
	 	
                a
                  Utah corporation

                 

              
	 	
                By:

              	
                          
                  /s/ Guy A.
                  Archbold                              
                  

              
	 	 	
                Name:

              	
                Guy
                  A. Archbold

              
	 	 	
                Title:
                  

              	
                Chief
                  Executive Officer

              


      

      


      


      


      


      


      


      


      


      


      


      


      


      


      
        
          
          

        

        
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      EXHIBIT
        A

      


      


      Form
        of Common Stock Purchase Agreement

      


      CHAPEAU,
        INC.

      


      COMMON
        STOCK PURCHASE AGREEMENT

       

      This
        Common Stock Purchase Agreement (“Agreement”) is made effective as of
        ____________, 200__ (“Effective Date”), by and between Chapeau, Inc., a Utah
        corporation (the “Company”), and the Gordon V. and Helen C. Smith Foundation
        (“Purchaser”).

       

      For
        good
        and valuable consideration, the receipt and sufficiency of which are hereby
        acknowledged, the parties hereto agree as follows: 

       

      1.    Purchase
        and Sale of Common Stock.
        Subject
        to the terms and conditions of this Agreement, the Company hereby agrees
        to
        issue and sell to Purchaser and Purchaser hereby agrees to purchase from
        the
        Company upon the execution of this Agreement ________
        (_________________________) shares of its Common Stock (the “Shares”) for a
        purchase price of $____ per share, in consideration for payment of
        $_________________ cash. 

       

      2.    Restriction
        Against Transfer.
        Purchaser agrees that it will not transfer, assign, hypothecate, or in any
        way
        dispose of any of the Shares, or any right or interest therein, whether
        voluntarily or by operation of law, or by gift or otherwise, without the
        prior
        written consent of the Company, except to the extent that a transfer is made
        in
        accordance with the terms of this Agreement. Any purported transfer in violation
        of any provision of this Agreement shall be void and ineffectual, and shall
        not
        operate to transfer any interest or title to the purported
        transferee.

       

      3.    Obligations
        of Subsequent Transferees.
        On the
        occurrence of a transfer of any Shares pursuant to the terms of this Agreement,
        the transferee shall execute an agreement to be bound by the restrictions
        on
        transfer set forth in this Agreement.

      


      4.    Notices.
        All
        notices required or desired to be given pursuant to this Agreement shall
        be in
        writing and shall be personally served (including by commercial delivery
        or
        courier service) or given by mail. Any notice given by mail shall be deemed
        to
        have been given and received when ninety-six (96) hours have elapsed from
        the
        time such notice was deposited in the United States mails, certified or
        registered and first-class postage prepaid, addressed, if intended to a party
        to
        this Agreement, at the address set forth below its signature or to such other
        address as such party may have designated by like written notice to each
        of the
        other parties from time to time.

       

      5.    Restriction
        on Certificates.
        All
        certificates representing Shares subject to the provisions of this Agreement
        shall have endorsed thereon, among others, the following legends:

       


      
        
          
          

        

        
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      (a)    “THESE
        SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
        THE
        SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF THE
        VARIOUS STATES, AND HAVE BEEN ISSUED AND SOLD PURSUANT TO AN EXEMPTION FROM
        THE
        ACT, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED BY THE HOLDER
        THEREOF
        AT ANY TIME, EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT,
        FILED UNDER THE ACT COVERING THE SHARES, OR (2) UPON DELIVERY TO THE
        CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT
        THE
        SHARES MAY BE TRANSFERRED WITHOUT REGISTRATION”; and

       

      (b)    Any
        other
        legend required to be placed thereon by state and federal securities
        authorities.

       

      6.    Purchaser
        Representations and Warranties.
        Purchaser acknowledges that the Shares have not been registered under the
        Securities Act of 1933, as amended, (the “Act”) in reliance upon certain
        exemptions from registration under the Act. In this connection, Purchaser
        represents and warrants to the Company as follows:

       

      (a)    Purchaser
        either has a preexisting personal or business relationship with the Company
        or
        its officers, directors or controlling persons or by reason of its business
        or
        financial experience or the business or financial experience of its professional
        advisors who are unaffiliated with and who are not compensated by the Company
        or
        any affiliate or selling agent of the Company, directly or indirectly, could
        be
        reasonably assumed to have the capacity to protect its own interests in
        connection with the transaction. 

       

      (b)    Purchaser
        is an “accredited investor” as defined in Regulation D promulgated under the
        Act.

       

      (c)    Purchaser
        recognizes that an investment in the Company involves substantial risks.
        Purchaser has taken full cognizance of and understands all of the risks related
        to the purchase of the Shares. Purchaser acknowledges that it has successfully
        considered and has, to the extent Purchaser believes such discussion necessary,
        discussed with Purchaser’s professional, legal, financial and tax advisers, the
        suitability of an investment in the Company for Purchaser’s particular financial
        and tax situation and has determined that the Shares are a suitable investment
        for him.

       

      (d)    Purchaser
        acknowledges that it has had the opportunity to ask questions of, and receive
        answers from, representatives of the Company concerning the terms and conditions
        of this Agreement and its investment in the Company. Any questions raised
        by
        Purchaser have been answers to the satisfaction of Purchaser. The Company
        has
        made available to Purchaser all documents and information that Purchaser
        has
        requested relating to an investment in the Company.

       

      (e)    Purchaser
        represents to the Company that it is purchasing the Shares for its own account,
        for investment only, and not with a view to, or for resale in connection
        with,
        any distribution thereof. Purchaser represents that it does not have any
        present
        intention of selling or otherwise transferring the Shares or any interest
        therein. Purchaser acknowledges and agrees that the Shares may not be sold,
        transferred, pledged or otherwise disposed of without registration under
        the Act
        and applicable state securities laws or in accordance with applicable exemptions
        therefrom.

       


      
        
          
          

        

        
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      (f)    Purchaser
        acknowledges that no representations or promises have been made concerning
        the
        marketability or value of the Shares. The Company has not agreed with or
        represented to Purchaser that the Shares will be purchased or redeemed from
        Purchaser at any time in the future. There have been no representations,
        promises or agreements that the Shares will be registered under the Act at
        any
        time in the future or otherwise qualified for sale under applicable securities
        laws. Purchaser acknowledges that it may be required to bear the economic
        risk
        of an investment in the Company for an indefinite period of time.

       

      (g)    The
        representations and warranties made by Purchaser herein are made by Purchaser
        with the intent that they be relied upon by the Company in determining the
        suitability of Purchaser as a purchaser of the Shares. In addition, Purchaser
        undertakes to notify the Company immediately of any change in any
        representation, warranty or other information relating to Purchaser set forth
        herein. Purchaser hereby agrees that such representations and warranties
        and any
        agreement, undertakings and acknowledgments herein shall survive the purchase
        of
        the Shares, and Purchaser hereby agrees to indemnify the Company, each of
        its
        affiliates and each of its and their respective officers and directors and
        hold
        them harmless from and against any and all loss, damages, liability or expense,
        including costs and reasonable attorneys’ fees, which they may incur by reason
        of or in connection with any misrepresentation or breach of representation,
        warranty or covenant of Purchaser set forth herein.

       

      7.    Federal
        Law Restrictions on Transfer.
        Without
        in any way limiting the representations set forth above or reducing any rights
        of the Company herein, Purchaser agrees not to make any disposition of all
        or
        any portion of the Shares unless and until:

       

      (a)    There
        is
        then in effect a Registration Statement under the Act covering such proposed
        disposition and such disposition is made in accordance with said Registration
        Statement; or

       

      (b)    Purchaser
        shall have notified the Company of the proposed disposition and shall have
        furnished the Company with a detailed statement of the circumstances surrounding
        the proposed disposition, and, if so requested by the Company, shall have
        furnished the Company with an opinion of Purchaser’s counsel to the effect that
        such disposition will not require registration of such shares under the Act,
        and
        such opinion of counsel shall have been concurred in by counsel for the Company
        and the Company shall have advised Purchaser of such concurrence.

       

      8.    Stop
        Transfer Instructions; Refusal to Transfer.
        Purchaser agrees that in order to ensure compliance with the restrictions
        referred to herein, the Company may issue appropriate “stop transfer”
instructions to its transfer agent, if any, with respect to such certificates
        or
        instruments and, if the Company transfers its own securities, it may make
        appropriate notations to the same effect in its own records. The Company
        shall
        not be required (i) to transfer on its books any Shares that have been sold
        or otherwise transferred in violation of any of the provisions of this Agreement
        or (ii) to treat as owner of such Shares or to accord the right to vote or
        pay dividends to any purchaser or other transferee to whom such Shares shall
        have been so transferred.

       


      
        
          
          

        

        
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      9.    Market
        Stand-Off.
        In
        connection with any underwritten public offering by the Company of its equity
        securities pursuant to an effective registration statement filed under the
        Act,
        Purchaser agrees not to sell, make any short sale of, loan, hypothecate,
        pledge,
        grant any option for the purchase of, or otherwise dispose of or transfer
        for
        value or otherwise agree to engage in any of the foregoing transactions with
        respect to the Shares without the prior written consent of the Company or
        its
        underwriters, for such period of time from and after the effective date of
        such
        registration statement as may be requested by the Company or such
        underwriters.

       

      10.  
          Piggy-back
        Registration Rights.
        

       

      (a)    If
        (but
        without any obligation to do so) the Company proposes to register (including
        for
        this purpose a registration effected by the Company for stockholders other
        than
        Purchaser) any of its securities under the Act in connection with the public
        offering of such securities solely for cash (other than a registration (i)
        on
        Form S-8 or any form which does not include substantially the same information
        as would be required to be included in a registration statement covering
        the
        sale of the Shares, or (ii) with respect to an employee benefit plan, or
        (iii)
        solely in connection with a Rule 145 transaction under the Act), the Company
        shall, each such time, promptly give Purchaser written notice of such
        registration together with a list of the jurisdictions in which the Company
        intends to attempt to qualify such securities under applicable state securities
        laws. Upon the written request of Purchaser given within twenty (20) business
        days after delivery of such written notice by the Company, the Company shall
        use
        its best efforts to cause to be registered under the Act all of the Shares
        that
        Purchaser has requested to be registered. 

       

      (b)    In
        connection with an offering pursuant to Section 10(a) including an underwriting
        of shares of the Company’s capital stock, the right of Purchaser to registration
        pursuant to Section 10(a) shall be conditioned upon Purchaser’s participation in
        such underwriting and the inclusion of Purchaser’s Shares in the underwriting to
        the extent provided herein. Purchaser shall (together with the Company and
        any
        other stockholders distributing their securities through such underwriting)
        enter into an underwriting agreement in customary form with the underwriter
        or
        underwriters selected by the Company. Notwithstanding any other provision
        of
        Section 10(a), if the underwriter determines that market factors require
        a
        limitation of the number of shares to be underwritten, the underwriter may
        exclude some or all Shares from such registration and underwriting and the
        Company shall so advise all persons requesting registration.

       

      11.  
          THE
        SALE
        OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED
        WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE
        ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
        CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE
        SALE
        OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTIONS 25100, 25102 OR 25105
        OF
        THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
        ARE EXPRESSLY CONDITIONED UNLESS THE SALE IS SO EXEMPT.

       


      
        
          
          

        

        
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      12.  
          Miscellaneous.
        

       

      (a)    Further
        Assurances.
        The
        parties agree to execute any additional instruments and to take any additional
        action as may reasonably be necessary to carry out the intent of this
        Agreement.

       

      (b)    Successors
        and Assigns.
        This
        Agreement shall inure to the benefit of the successors and assigns of the
        Company and, subject to the restrictions on transfer set forth in this
        Agreement, be binding upon Purchaser, its heirs, executors, administrators,
        successors, and assigns.

       

      (c)    Entire
        Agreement; Amendment.
        This
        Agreement, together with any exhibits hereto, constitute the entire agreement
        of
        the parties with respect to the subject matter hereof and thereof. No amendment
        or variation of the terms of this Agreement, with or without consideration,
        shall be valid unless made in writing and signed by all of the parties to
        this
        Agreement at the time of such amendment.

      


      (d)    Governing
        Law; Severability.
        This
        Agreement shall be governed by and construed in accordance with the laws
        of the
        State of California as such laws are applied to agreements between California
        residents entered into and to be performed entirely in California. To the
        extent
        that any of the agreements set forth herein, or any word, phrase, clause,
        or
        sentence thereof shall be found to be illegal or unenforceable for any reason,
        such agreement, word, phrase, clause, or sentence shall be modified or, if
        necessary, deleted in such a manner so as to make the Agreement, as modified,
        legal and enforceable under applicable laws.

      


      (e)    Counterparts.
        This
        Agreement may be executed in counterparts, each of which when executed and
        delivered will be deemed to be an original but all of which taken together
        will
        constitute one and the same Agreement.

       

      


       

      


       

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      IN
        WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
        date
        first written above.

       

      
        	 	
                CHAPEAU,
                  INC.

                 

              
	 	
                By:
                  

              	                                                                                    
                
	 	 	
                Name:

              	
                Guy
                  A. Archbold

              
	 	 	
                Title:

              	
                Chief
                  Executive Officer

              
	 	 	 	 
	 	 	
                Address:

              	
                1190
                  Suncast Lane, Suite 2

              
	 	 	 	
                El
                  Dorado Hills, CA 95762

                 

              
	 	 	 	 
	 	
                GORDON
                  V. AND HELEN C. SMITH FOUNDATION

                 

              
	 	
                By:
                  

              	                                                                                    
                
	 	 	
                Name:

              	 
	 	 	
                Title:

              	 
	 	 	 	 
	 	 	 	 
	 	 	
                Address:

              	
                8716
                  Crider Brook Way

              
	 	 	 	
                Potomac,
                  MD 20854

              


      

      
 

       

       

       

       

       

       

       

       

       

       

       

       

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