chapeau10ksb063007ex10-32.htm


    
      

      

    

    
      
        Exhibit
          10.32

         

      

    

    
      SECURED
        PROMISSORY NOTE

      


       

      
        	
                Date:  September
                  11, 2007

              	
                $_____________________

              


      

       

       

      FOR
        VALUE
        RECEIVED, the undersigned, Chapeau, Inc., a Utah corporation (the
“Borrower”) promises to pay to the order of Gordon V. Smith, individually
        (the “Lender”), at 8716 Cider Brook Way, Potomac, Maryland 20854, or at
        such other address as the Lender may specify in writing, the principal sum
        of
        ___________________________ ($_________________) (the “Maximum Loan Amount”), or
        if less, the aggregate unpaid principal amount outstanding, with interest
        until
        maturity, whether by acceleration or otherwise, at the interest rates provided
        for on Exhibit A attached hereto and incorporated herein.  Interest
        shall be calculated on the basis of a 365-day year for the actual number
        of days
        the principal is outstanding.

       

      
        	
                1.

              	
                The
                  principal amount payable under this Note shall be the sum of all
                  advances
                  made by the Lender to or at the request of the Borrower, which
                  shall be
                  made in accordance with the schedule of advances set forth on Exhibit
                  B
                  attached hereto and incorporated herein or as otherwise mutually
                  agreed to
                  by the Lender and the Borrower in writing, less principal payments
                  actually received in cash by the
                  Lender.

              


      

       

      
        	
                2.

              	
                The
                  books and records of the Lender shall be the best evidence of the
                  principal amount and the unpaid interest amount owing at any time
                  under
                  this Note and shall be conclusive absent manifest
                  error.

              


      

       

      
        	
                3.

              	
                No
                  interest shall accrue under this Note until the date of the first
                  advance
                  made by the Lender; thereafter interest on all advances shall accrue
                  and
                  be computed on the principal balance outstanding from time to time
                  under
                  this Note until the same is paid in full.  Borrower shall make
                  regular monthly payments in arrears of all accrued and unpaid interest
                  at
                  the rates set forth and as more specifically provided for in Exhibit
                  A
                  attached hereto until the Maturity Date (as defined below) when
                  all
                  amounts outstanding under this Note shall be due and payable in
                  full.

              


      

       

      
        	
                4.

              	
                Commencing
                  on the fifth (5th) business day of the second calendar month immediately
                  following the last day of the Start-Up Period (as that term is
                  defined in
                  Exhibit A attached hereto), and continuing on the fifth (5th) business
                  day
                  of each calendar month thereafter, until and including the Maturity
                  Date,
                  at which time the unpaid principal balance of the Note then outstanding
                  and all accrued and unpaid interest thereon shall be payable in
                  full,
                  Borrower shall pay to Lender the amounts set forth in Exhibit
                  A.  The amount of principal included in each payment is that
                  amount that would amortize the Maximum Loan Amount ratably over
                  a period
                  of ten (10) years.

              


      

       

      
        	
                5.

              	
                All
                  payments in cash under this Note shall be in immediately available
                  United
                  States funds, without setoff or counterclaim.  If any payment of
                  principal or interest under this Note shall be payable on a day
                  other than
                  a business day such payment shall be extended to the next succeeding
                  business day and interest shall be payable at the rate specified
                  in this
                  Note during such extension.  “Maturity
                  Date”
means
                  September 11, 2017 unless
                  paid or prepaid in full or otherwise accelerated in accordance
                  with the
                  terms of this Note.

              


      

       

      
        	
                6.

              	
                The
                  Borrower shall pay the Lender a placement fee of three (3) points
                  on all
                  funds advanced, which the Lender shall withhold from the advances
                  disbursed to the Borrower under this Note from time to
                  time.

              


      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      
        	
                7.

              	
                The
                  principal amount hereof may be
                  prepaid at any time, in whole or in part, together with any interest
                  accrued thereon, without penalty or premium upon sixty (60) days
                  prior
                  written notice to the
                  Lender.

              


      

       

      
        	
                8.

              	
                As
                  soon as reasonably practicable
                  following the earlier to occur of (i) the advancement by the Lender
                  to the
                  Borrower of the Maximum Loan Amount; or (ii) written notice by
                  the
                  Borrower to the Lender of Borrower’s intention to prepay in its entirety
                  the outstanding principal amount together with any interest accrued
                  thereon, the Borrower shall issue to the Lender an option to purchase
                  from
                  the Borrower that number of shares of the Borrower’s common stock, par
                  value $0.001 per share (the “Common Stock”) representing a percentage of
                  the then current number of shares of Common Stock issued and outstanding
                  on a fully diluted basis, which percentage shall be calculated
                  as follows:
                  (a) _________% multiplied by (b) a fraction, the numerator of which
                  shall
                  be the aggregate amount of funds advanced by the Lender to the
                  Borrower
                  hereunder and the denominator of which shall be the Maximum Loan
                  Amount,
                  and which option shall have an exercise price of $3.00 per share,
                  shall
                  expire six months following the date of issuance, and shall be
                  in the form
                  attached hereto as Exhibit
                  C.

              


      

       

      
        	
                9.

              	
                As
                  soon as reasonably practicable
                  following the earlier to occur of (i) advancement by the Lender
                  to the
                  Borrower of the Maximum Loan Amount; or (ii) written notice by
                  the
                  Borrower to the Lender of Borrower’s intention to prepay in its entirety
                  the outstanding principal amount together with any interest accrued
                  thereon, the Borrower shall issue to the Lender a four (4) year
                  warrant to
                  acquire that number of shares of Common Stock representing a percentage
                  of
                  the then current number of shares of Common Stock issued and outstanding
                  on a fully diluted basis, which percentage shall be calculated
                  as follows:
                  (a) _________% multiplied by (b) a fraction, the numerator of which
                  shall
                  be the aggregate amount of funds advanced by the Lender to the
                  Borrower
                  hereunder and the denominator of which shall be the Maximum Loan
                  Amount,
                  and which warrant shall have an exercise price of $3.00 per share
                  and
                  shall be in the form attached hereto as Exhibit
                  D.

              


      

       

      
        	
                10.

              	
                The
                  Lender shall have a right of
                  first refusal with respect to the financing of each of the next
                  thirty
                  projects undertaken by the Borrower in connection with the execution
                  of a
                  discount energy purchase or similar agreement.  The Borrower
                  shall provide the Lender with written notice of each discount energy
                  purchase or similar agreement subject to the right of first refusal
                  and if
                  the Lender wishes to exercise its right of first refusal with respect
                  to
                  such agreement the Lender shall notify the Borrower in writing
                  of the same
                  within ten (10) business days of the Lender’s receipt of its right of
                  first refusal notice following which the two parties shall negotiate
                  in
                  good faith a definitive agreement containing mutually agreeable
                  terms and
                  conditions with respect to such financing.  The right of first
                  refusal granted hereby shall terminate in the event that termination
                  of
                  such right is a condition precedent to the Borrower receiving subsequent
                  financing from a third party financing source and under such circumstances
                  the right of first refusal shall automatically terminate upon the
                  receipt
                  by Borrower of funds from such third party financing source.  In
                  addition, the right of first refusal granted hereby shall terminate
                  immediately upon the payment in full, whether by prepayment, on
                  the
                  Maturity Date or otherwise, of the outstanding principal advanced
                  by the
                  Lender to the Borrower hereunder, together with any interest accrued
                  thereon.

              


      

       

      
        	
                11.

              	
                If
                  this Note is not paid when due, the Lender may, at his election,
                  and upon
                  written notice to the Borrower, do any one or more of the following:
                  (1)
                  declare all obligations under this Note immediately due and payable;
                  and
                  (2) exercise any one or more of the rights and remedies granted
                  to the
                  Lender by any agreement and/or applicable
                  law.

              


      

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      


      
        	
                12.

              	
                The
                  Lender shall hold all rights, preferences, privileges and remedies
                  granted
                  to Lender pursuant to this Note and at law senior (including with
                  respect
                  to lien and debt) to any and all other debtors of the
                  Borrower.

              


      

       

      
        	
                13.

              	
                The
                  Borrower hereby pledges and grants to the Lender a continuing security
                  interest in all of its right, title, and interest in and to the
                  Collateral
                  (as such term is defined below), to secure the prompt payment and
                  performance of all of the Borrower’s present and future debts,
                  obligations, and liabilities of whatever nature to the Lender,
                  including,
                  without limitation, all obligations of the Borrower arising from
                  or
                  relating to this Note.  The Borrower hereby agrees to execute
                  and deliver such further documentation and take such further action
                  as the
                  Lender may request in order to enforce and protect the aforesaid
                  security
                  interest.  The Borrower hereby authorizes the Lender to file one
                  or more financing statements or continuation statements in respect
                  thereof, and amendments thereto, relating to all or any part of
                  the
                  Collateral without the signature of the Borrower where permitted
                  by
                  law.  “Collateral” means all of the Borrower’s properties
                  and assets of any nature, including, without limitation, all of
                  the
                  Borrower’s right, title and interest in and to the following property
                  (whether now existing or hereafter arising or acquired, wherever
                  located):

              


      

       

      


      
        	
                 

              	
                (a)

              	
                All
                  present and future accounts, accounts receivable, agreements, contracts,
                  leases, contract rights, rights to payment, instruments, documents,
                  chattel paper, security agreements, guaranties, letters of credit,
                  undertakings, surety bonds, insurance policies, notes and drafts,
                  and all
                  forms of obligations owing to the Borrower or in which the Borrower
                  may
                  have any interest, however created or arising and whether or not
                  earned by
                  performance;

              


      

      


      
        	
                 

              	
                (b)

              	
                All
                  goods and equipment now owned or hereafter acquired, including,
                  without
                  limitation, all machinery, fixtures, vehicles, and any interest
                  in any of
                  the foregoing, and all attachments, accessories, accessions, replacements,
                  substitutions, additions, and improvements to any of the foregoing,
                  wherever located;

              


      

      


      
        	
                 

              	
                (c)

              	
                All
                  other contract rights and general intangibles now owned or hereafter
                  acquired, including, without limitation, goodwill, trademarks,
                  service
                  marks, trade styles, trade names, patents, patent applications,
                  leases,
                  license agreements, purchase orders, customers lists, route lists,
                  infringements, claims, computer programs, computer discs, computer
                  tapes,
                  literature, reports, catalogs, design rights, income tax refunds,
                  payments
                  of insurance and rights to payment of any
                  kind;

              


      

      


      
        	
                 

              	
                (d)

              	
                All
                  deposit accounts, securities, securities entitlements, securities
                  accounts, investment property, letters of credit and certificates
                  of
                  deposit now owned or hereafter acquired and the Borrower’s books relating
                  to the foregoing;

              


      

      


      
        	
                 

              	
                (e)

              	
                All
                  copyright rights, copyright applications, copyright registrations
                  and like
                  protections in each work of authorship and derivative work thereof,
                  whether published or unpublished, now owned or hereafter acquired;
                  all
                  trade secret rights including all rights to unpatented inventions,
                  know-how, operating manuals, license rights and agreements and
                  confidential information, now owned or hereafter acquired; all
                  mask work
                  or similar rights now owned or hereafter acquired; all claims for
                  damages
                  by way of any past, present and future infringement of any of the
                  foreign;
                  and

              


      

      



      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      


      
        	
                 

              	
                (f)

              	
                All
                  the Borrower’s books and records relating to the foregoing and any and all
                  claims, rights and interests in any of the above and all substitutions
                  for, additions and accessions to and proceeds
                  thereof.

              


      

      


      
        	
                14.

              	
                The
                  Borrower agrees that it will not change its state of incorporation
                  or
                  locations at which the Collateral is located without giving the
                  Lender at
                  least thirty (30) days prior written notice thereof.  In
                  addition, the Borrower agrees that it will not (i) change its name,
                  federal employer identification number, corporate structure or
                  identity,
                  or (ii) create or operate under any new fictitious name without
                  giving the
                  Lender at least thirty (30) days prior written notice
                  thereof.

              


      

       

      
        	
                15.

              	
                The
                  Lender shall have such rights and remedies with respect to the
                  Collateral
                  as are available under the provisions of the Uniform Commercial Code in
                  the applicable jurisdiction, in addition to all other rights and
                  remedies
                  existing at law, in equity, or by statute or provided in this Note,
                  which
                  may be exercised without notice to, or consent by, the
                  Borrower.

              


      

       

      
        	
                16.

              	
                The
                  Borrower waives presentment, demand, protest, notice of dishonor,
                  notice
                  of demand or intent to demand, notice of acceleration or intent
                  to
                  accelerate, and all other notices and agrees that no extension
                  or
                  indulgence of the Borrower or release, substitution or nonenforcement
                  of
                  any security, or release or substitution of the Borrower, any guarantor
                  or
                  any other party, whether with or without notice, shall affect the
                  obligations of the Borrower.

              


      

       

      
        	
                17.

              	
                Upon
                  commencement of any bankruptcy, reorganization, arrangement, adjustment
                  or
                  debt, relief of debtors, dissolution, insolvency, receivership
                  or
                  liquidation or similar proceeding of any jurisdiction relating
                  to the
                  Borrow, all amounts owed by the Borrower to the Lender shall become
                  immediately due and payable without presentment, demand, protest
                  or notice
                  of any kind in connection with this
                  Note.

              


      

       

      
        	
                18.

              	
                The
                  Borrower agrees to reimburse the holder or owner of this Note for
                  any and
                  all costs and expenses (including without limitation reasonable
                  attorneys’
                  fees) incurred in collecting or attempting to collect on this Note
                  or
                  incurred in any other matter or proceeding relating to this
                  Note.

              


      

       

      
        	
                19.

              	
                This
                  Note shall be interpreted and the rights and liabilities of the
                  parties
                  hereto determined in accordance with the internal laws and decisions
                  of
                  the State of Maryland without regard to conflict of law principles.
                  THE
                  BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION
                  OF
                  THE STATE AND FEDERAL COURTS LOCATED IN MONTGOMERY COUNTY, MARYLAND
                  WITH
                  RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER
                  OR IN
                  CONNECTION WITH THIS NOTE AND HEREBY WAIVES ANY OBJECTION TO SUCH
                  FORUM
                  BASED ON FORUM NON-CONVENIENS. IN ADDITION, THE LENDER AND THE
                  BORROWER
                  HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS
                  DIRECTLY OR INDIRECTLY TO THIS
                  NOTE.

              


      

       

      
        	
                20.

              	
                Each
                  provision of this Note shall be interpreted in such manner as to
                  be
                  effective and valid under applicable law, but if any provision
                  of this
                  Note shall be prohibited by or invalid under applicable law, such
                  provision shall be ineffective to the extent of such prohibition
                  or
                  invalidity, without invalidating the remainder of such provision
                  or the
                  remaining provisions of this Note. Whenever in this Note reference
                  is made
                  to the Lender or the Borrower, such reference shall be deemed to
                  include,
                  as applicable, a reference to their respective successors and assigns;
                  provided, however, that the obligations of the Borrower
                  hereunder shall not be assignable or otherwise transferable without
                  the
                  prior written consent of the Lender. The provisions of this Note
                  shall be
                  binding upon the Borrower and its successors and assigns and shall
                  inure
                  to the benefit of the Lender and its successors and assigns. The
                  Borrower’s successors and assigns shall include, without limitation, a
                  receiver, trustee or debtor in possession of or for the
                  Borrower.

              


      

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      


      
        	
                21.

              	
                The
                  Borrower acknowledges and agrees that there are no contrary agreements,
                  oral or written, establishing a term of this Note and agrees that
                  the
                  terms and conditions of this Note may not be amended, waived or
                  modified
                  except in a writing signed by an officer of the Lender expressly
                  stating
                  that the writing constitutes an amendment, waiver or modification
                  of the
                  terms of this Note.

              


      

       

      
        	
                22.

              	
                THE
                  MAXIMUM INTEREST RATE PAYABLE PURSUANT TO THIS NOTE SHALL NOT EXCEED
                  THE
                  HIGHEST APPLICABLE USURY CEILING.

              


      

       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


      


       


      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      


      IN
        WITNESS WHEREOF, the Borrower has caused this Note to be duly executed as
        of the
        date first set forth above.

       

      


       

      
        	 	
                “BORROWER”

              
	 	 
	 	
                Chapeau,
                  Inc.,

              
	 	
                a
                  Utah corporation

              
	 	 
	 	
                By:__________________________

              
	 	
                Name:  Guy
                  A. Archbold

              
	 	
                Title:  Chief
                  Executive Officer

              


      

      


       

      


       

      


       

      


       

      


       

      


       

      


       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      EXHIBIT
        A

      


      INTEREST
        RATE SCHEDULE

      


      Interest
        shall accrue at a rate of twenty-two percent (22%) per annum starting on
        the
        date of the first advance of principal pursuant to the Note through the earlier
        of (i) the last day of the month immediately preceding the first month for
        which
        the Lender receives payment in cash for principal and interest
        accrued  thereon under the Note from payment for the Service (as
        defined in
        the DEPA) pursuant to that certain Discount Energy Purchase Agreement (the
        “DEPA”) with ____________________________; or
        (ii) December 12, 2007; provided that, if the Lender has not received a payment
        in cash as provided for in (i) above on or before December 12, 2007 then
        interest shall accrue at a rate of twenty-four percent (24%) per annum
        applicable retroactively starting on the date of the first advance pursuant
        to
        the Note through the last day of the month immediately preceding the first
        month
        for which Lender receives payment in cash for principal and interest accrued
        thereon under the Note from payment for the Service (such period, the
        “Start-Up Period”).

      


      Following
        the Start-Up Period, the Company shall pay to Lender an amount equal to the
        payment to Borrower for Service in connection with the DEPAs less: (i) the
        amount of direct costs of providing the Service in connection with the DEPAs,
        including contracted third-party service and maintenance of the Equipment
        (as
        defined in the DEPAs) (run-hour equivalent to $.0225 per kW); and (ii) premiums
        for property and liability insurance coverages in connection with the Equipment
        and as required under the DEPAs.  The foregoing payment shall first be
        applied to the principal as provided in and subject to Section 4 of the
        Note.  The remaining amount shall be the interest payment as provided
        for in the Note.

      


      Payment
        of interest accrued during the Start-Up Period shall be made in units and
        each
        unit shall be comprised of: (a) one (1) share of Common Stock, and (b) one
        (1)
        warrant (which shall be in the form attached hereto as Exhibit D) to purchase
        one (1) share of Common stock (each a “Unit”).  Payment for all
        interest accrued during the Start-Up Period shall be made in a single grant
        of
        Units in accordance with the methodology set forth below.  After the
        Start-Up Period, all payments of accrued interest will be made in arrears
        in
        immediately available United States funds, without setoff or counterclaim,
        within 5 business days of the end of each month.

      


      The
        number of Units to be issued in accordance with the foregoing shall be
        determined by dividing the dollar amount of interest accrued during the Start-Up
        Period by the lesser of (i) $2.25 or (ii) eighty percent (80%) of the closing
        price of the Common Stock on the last day of the Start-Up
        Period.  Each warrant shall be exercisable for a period of four (4)
        years from the date of issuance and the exercise price shall be the average
        of
        the closing price of the Common Stock on the last day of the Start-Up Period
        and
        the closing prices of the preceding four days.  In the event the last
        day of the Start-Up Period or the preceding four days are not dates for which
        a
        closing price of the Common Stock exists, the immediately preceding day or
        days
        for which a closing price exists shall be used for purposes of the foregoing
        paragraph.

      


      Any
        and
        all Units issued under the Note shall be issued pursuant to a form of stock
        purchase agreement the terms and conditions of which shall be mutually agreed
        to
        by the Lender and the Borrower and in accordance with all applicable federal
        and
        state securities laws.

      



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      EXHIBIT
        B

      


      SCHEDULE
        OF ADVANCES

      


      Funds
        shall be advanced in the amounts and upon the occurrence of the following
        events, unless otherwise mutually agreed to by the Lender and the
        Borrower:

      


      
        	
                1.

              	
                $_______________
                  upon execution of the Note (the Lender and the Borrower acknowledge
                  and
                  agree such amount represents fifty percent (50%) of the aggregate
                  funds to
                  be advanced in connection with the project, for which project the
                  Borrower
                  is in possession of the required engines and such engines are ready
                  for
                  assembly.

              


      

      


      
        	
                2.

              	
                $_______________
                  when the Equipment (as that term is defined in the Borrower’s form of
                  Discount Energy Purchase Agreement “DEPA”) is delivered to the _________
                  project location.

              


      

      


      
        	
                3.

              	
                $_______________
                  when the Equipment is commissioned for the __________ project and
                  the
                  Borrower is eligible to commence commercial delivery of the Service
                  (as
                  that term is defined in the DEPA) as set forth in the __________
                  DEPA.

              


      

      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      EXHIBIT
        C

      


      FORM
        OF
        OPTION

      


      
        	
                THIS
                  OPTION AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
                  NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933
                  ACT”).  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
                  HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
                  REGISTRATION STATEMENT UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL
                  SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
                  THE
                  1933 ACT AND APPLICABLE STATE SECURITIES
                  LAW.

              


      

      


      


      Option
        to Purchase Common Stock

      of

      Chapeau,
        Inc.

      


      Void
        after __________ ___, 20__

      


      This
        Option is issued to GORDON V. SMITH (the “Optionee”)
        by Chapeau, Inc., a Utah corporation (the “Company”), as of _______ ___, 20___
        (the “Option Issue Date”).  This Option is issued pursuant to that
        certain Secured Promissory Note dated as of September 11, 2007 (the
“Note”).

      


      The
        Company and the Optionee agree as follows:

       

      
        	
                1.

              	
                Grant
                  of Option

              


      

       

      Subject
        to the terms and conditions set forth herein, the Company grants to Optionee
        a
        nonqualified stock option (the “Option”) to purchase __________ shares of the
        Company’s authorized and unissued common stock, par value $0.001 per share (the
“Common Stock”), from the Company, with an exercise price of Three Dollars
        ($3.00) per share (the “Exercise Price”).

       

      
        	
                2.

              	
                Status
                  of Options

              


      

       

      The
        Option granted hereunder is granted to Optionee in connection with the Note,
        and
        it is not intended to qualify as an “incentive stock option” under Section 422
        of the Internal Revenue Code of 1986, as amended (the “Code”).

      


       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                3.

              	
                Term
                  of Option

              


      


      The
        Option shall terminate on, and shall not be exercisable after 5:00 p.m. Eastern
        on the six month anniversary of the Option Issue Date; provided that in the
        event (each a “Disposition Event”) of (i) the closing of the Company’s sale or
        transfer of all or substantially all of its assets, or (ii) the closing of
        the
        acquisition of the Company by another entity by means of merger, consolidation
        or other transaction or series of related transactions, resulting in the
        exchange of the outstanding shares of the Common Stock (unless (A) the
        shareholders of the Company immediately prior to such transaction or series
        of
        related transactions are holders of a majority of the voting equity securities
        of the surviving or acquiring corporation immediately thereafter, and (B)
        each
        of such shareholders immediately prior to such transaction or series of related
        transactions holds the same pro rata share of such majority of the voting
        equity
        securities of the surviving or acquiring corporation as each hold of the
        Company
        immediately prior to such transaction or series of related transactions),
        this
        Option shall, on the date of a Disposition Event, no longer be exercisable
        and
        become null and void. The Company shall notify the Optionee at least 20 days
        prior to the consummation of any Disposition Event; provided that the Optionee
        shall in any event have at least 40 days after the Option Issue Date to exercise
        this Option.

       

      
        	
                4.

              	
                Exercise

              


      

       

      4.1       Exercisability.  The
        Option shall be immediately exercisable with respect to the entire number
        of
        shares subject to the Option.

       

      4.2       Notice
        of Exercise.  The Optionee shall exercise the Option by delivering
        to the Company, either in person or by certified or registered mail, written
        notice of election to exercise, payment in full of the purchase price as
        provided in Section 4.3 below and payment of the sums required by, or other
        compliance with, the provisions of Section 4.4 below.  The written
        notice shall set forth the whole number of shares for which the Option is
        being
        exercised.  The Company shall notify Optionee of the expiration date
        of the Option thirty (30) days prior to their expiration.  Failure to
        do so shall extend the Option thirty (30) days from the date of receipt by
        the
        Optionee of such expiration notice.

       

      4.3       Payment
        of Purchase Price.  The purchase price for any shares of Common
        Stock of the Company with respect to which Optionee exercises this Option
        shall
        be paid in full at the time Optionee delivers the written notice of exercise
        to
        the Company.  The purchase price shall be paid (i) in cash, or (ii) by
        check.

       

      4.4       Withholding.  Upon
        exercise of the Option, or any portion thereof, Optionee shall pay to the
        Company, or make arrangements satisfactory to the Board for payment to the
        Company of, all federal, state and local taxes, if any, required to be withheld
        by the Company in connection with the exercise of the Option or the relevant
        portion thereof.

       

      
        	
                5.

              	
                Issuance
                  of Shares

              


      

       

      Promptly
        after the Company’s receipt of the written notice of exercise provided for in
        Section 4.2 above, Optionee’s payment in full of the purchase price, and
        Optionee’s compliance with the provisions of Section 4.4 above, the Company
        shall deliver, or cause to be delivered to Optionee, separate certificates
        for
        the whole number of shares with respect to which each portion of the Option
        is
        being exercised by Optionee.  Shares shall be registered in the name
        of Optionee.  If any law or regulation of the United States Securities
        and Exchange Commission or of any other federal or state governmental body
        having jurisdiction shall require the Company or Optionee to take any action
        prior to the issuance to Optionee of the shares of Common Stock of the Company
        specified in the written notice of election to exercise, or if any listing
        agreement between the Company and any national securities exchange requires
        such
        shares to be listed prior to issuance, the date for the delivery of such
        shares
        shall be deferred until the completion of such action and/or such
        listing.

       

      


       


      
        
          
          

        

        
          C-2

          
            

          

        

        
          
          

        

      


      
        	
                6.

              	
                Fractional
                  Shares

              


      

       

      In
        no
        event shall the Company be required to issue fractional shares upon the exercise
        of any part of the Option.

       

      
        	
                7.

              	
                Rights
                  as a Shareholder

              


      

       

      Prior
        to
        exercise of this Option, the Optionee shall not be entitled to any rights
        of a
        shareholder with respect to this Option, including without limitation the
        right
        to vote, receive dividends or other distributions thereon, exercise preemptive
        rights or be notified of shareholder meetings, and the Optionee shall not
        be
        entitled to any notice or other communication concerning the business or
        affairs
        of the Company. No adjustment shall be made for dividends (ordinary or
        extraordinary, whether cash, securities or other property) or distributions
        or
        other rights for which the record date is prior to the date such share
        certificate is issued, except as provided in Section 8
        below.  However, nothing in this Section 7 shall limit the right of
        the Optionee to be provided the notices required under this Option.

       

      
        	
                8.

              	
                Adjustment
                  of Exercise Price and Number of
                  Shares

              


      

       

      8.1       Subdivisions,
        Combinations and Other Issuances. If the Company shall subdivide
        the Common Stock, by split-up or otherwise, combine the Common Stock or issue
        additional shares of Common Stock as a dividend or other distribution with
        respect to any of its securities, the number of shares issuable on the exercise
        of this Option shall be proportionately increased in the case of a subdivision,
        dividend or distribution and shall be proportionately decreased in the case
        of a
        combination. Appropriate adjustments shall also be made to the Exercise Price,
        but the aggregate purchase price payable for the total number of shares
        purchasable under this Option (as adjusted) shall remain the same. Any
        adjustment under this Section 8.1 shall become effective at the close of
        business on the date the subdivision or combination becomes effective, or
        as of
        the record date of a stock dividend or other distribution, or in the event
        that
        no record date is fixed, upon the making of such dividend or
        distribution.

       

      8.2       Reclassification,
        Reorganization and Consolidation. In the event of any
        reclassification, capital reorganization or change in the Common Stock, other
        than as a result of an event provided for in Section 8.1 above, then, as
        a
        condition of such transaction, the Optionee shall have the right at any time
        prior to the expiration of this Option to purchase, at a total price equal
        to
        that payable upon the exercise of this Option, the kind and amount of shares
        of
        stock and other securities and property receivable in connection with the
        applicable transaction by a holder of the same number of shares of Common
        Stock
        as were purchasable by the Optionee immediately prior to the transaction.
        In any
        such case appropriate provisions shall be made with respect to the rights
        and
        interest of the Optionee so that this provision shall thereafter be applicable
        with respect to any securities deliverable upon exercise of this Option,
        and
        appropriate adjustments shall be made to  the Exercise Price; provided
        that the aggregate purchase price shall remain the same.

       

      


       


      
        
          
          

        

        
          C-3

          
            

          

        

        
          
          

        

      


      8.3       Notice
        of Adjustment. When any adjustment is required to be made in the
        number or kind of securities receivable upon exercise of this Option, or
        in the
        Exercise Price, the Company shall promptly notify the Optionee thereof and
        of
        the number of shares or other securities thereafter receivable upon exercise
        of
        this Option and the adjusted Exercise Price per share.

       

      8.4       No
        Impairment.  The Company and the Optionee will not, by
        any voluntary action, avoid or seek to avoid the observance or performance
        of
        any of the terms to be observed or performed hereunder by the Company or
        the
        Optionee, respectively, but will at all times in good faith assist in the
        carrying out of all the provisions of this Section 8 and in the taking of
        all
        such action as may be necessary or appropriate in order to protect the rights
        of
        the Company and the Optionee against impairment.

       

      
        	
                9.

              	
                No
                  Transfer of Option

              


      

       

      Optionee
        may not transfer all or any part of the Option except by will or by the laws
        of
        descent and distribution, and the Option shall not be exercisable during
        the
        lifetime of Optionee by any person other than Optionee.

       

      
        	
                10.

              	
                Reservation
                  for Issuance

              


      

       

      The
        Company covenants that it will at all times keep available such number of
        authorized shares of Common Stock, free from all preemptive rights with respect
        thereto, which will be sufficient to permit the exercise of this Option for
        the
        full number of shares specified herein. The Company covenants that the shares,
        when issued pursuant to the exercise of this Option and in exchange for the
        Exercise Price, will be duly and validly issued, fully paid and non-assessable
        and free from all taxes, liens, and charges with respect to the issuance
        thereof.

       

      
        	
                11.

              	
                Investment
                  Representations

              


      

       

      The
        Holder hereby represents and warrants that:

       

      11.1     This
        Option and the shares to be received upon exercise of this Option (collectively,
        the “Securities”) are being acquired for investment for the Optionee’s own
        account, not as a nominee or agent, and not with a view to the resale or
        distribution of any part thereof, and the Optionee has no present intention
        of
        selling, granting any participation in, or otherwise distributing the
        Securities, in whole or in part.  The Optionee does not have any
        contract, undertaking, agreement or arrangement with any person to sell,
        transfer or grant participations to such person or to any third person, with
        respect to the Securities.

       

      11.2     The
        Optionee is an investor in securities of companies in the development stage
        and
        acknowledges that he is able to fend for himself, can bear the economic risk
        of
        his investment, has adequate means for providing for his current needs and
        contingencies and has no need for liquidity with respect to her investment
        in
        the Company, and has such knowledge and experience in financial or business
        matters such that he is capable of evaluating the merits and risks of the
        investment in the Securities.

       

      


       


      
        
          
          

        

        
          C-4

          
            

          

        

        
          
          

        

      


      11.3     The
        Optionee is an “accredited investor” as that term is defined in Rule 501 of
        Regulation D as a result of the Optionee being a member of the Board of
        Directors of the Company.

       

      11.4     At
        no time was the Optionee presented with or solicited by any publicly issued
        or
        circulated newspaper, mail, radio, television or other form of general
        advertising or solicitation in connection with the grant of this
        Option.

       

      11.5     The
        Optionee has received or has had full access to all the information it considers
        necessary or appropriate to make an informed investment decision with respect
        to
        the Securities. The Optionee further has had an opportunity to ask questions
        of
        and receive answers from the Company regarding the terms and conditions of
        the
        grant of the Securities and to obtain additional information (to the extent
        the
        Company possessed such information or could acquire it without unreasonable
        effort or expense) necessary to verify any information furnished to the Optionee
        or to which the Optionee had access.

       

      11.6     The
        Optionee understands that the Securities that it is purchasing or otherwise
        taking delivery of are or will be characterized as “restricted securities” as
        that term is defined in Rule 144 promulgated under the Securities Act of
        1933,
        as amended (the “1933 Act”) inasmuch as they are being acquired from the Company
        in a transaction not involving a public offering and that under the 1933
        Act and
        applicable federal and state statutes and regulations such securities may
        be
        resold without registration only in certain limited
        circumstances.  The Optionee represents that it is familiar with Rule
        144 promulgated under the 1933 Act, as presently in effect, and which permits
        limited resale of stock purchased in a private placement subject to the
        satisfaction of certain conditions, including among other things, the existence
        of a public market for the stock, the availability of certain current public
        information about the issuer, the resale occurring not less than one year
        after
        a party has purchased and paid for the stock to be sold, the sale being effected
        through a “broker’s transaction” or in transactions directly with a “market
        maker” and the number of shares of stock being sold during any three-month
        period not exceeding specified limitations.  The Optionee understands
        and hereby acknowledges that the Company may not be satisfying the current
        public information requirement of Rule 144 at the time the Optionee wishes
        to sell the Securities, and that, in such event, the Optionee may be precluded
        from selling such securities under Rule 144, even if the other requirements
        of Rule 144 have been satisfied.

       

      11.7     Optionee
        hereby agrees with the Company that Optionee may be required, as a condition
        to
        the issuance of the shares of Common Stock of the Company covered by the
        Option,
        to represent to the Company that the shares issued pursuant to the exercise
        of
        the Option are being acquired for investment and without a view to the
        distribution thereof; and that the Company may restrict the transfer of the
        Shares of Common Stock and may place a legend on the certificate(s) evidencing
        the shares of the Option reflecting the fact that the shares were acquired
        for
        investment and cannot be sold or transferred unless registered under Securities
        Act of 1933, as amended, and/or registered or qualified under applicable
        state
        securities laws, or unless counsel for the Company is satisfied that the
        circumstances of the proposed transfer do not require such registration or
        qualification.

       

      


       


      
        
          
          

        

        
          C-5

          
            

          

        

        
          
          

        

      


      
        	
                12.

              	
                Indemnification

              


      

       

      The
        Optionee agrees to indemnify and hold harmless the Company, its officers,
        directors, affiliates, subsidiaries, employees and agents from any and all
        losses suffered by them as a result of any liability related to a breach
        by
        Optionee of a representation or warranty or failure by Optionee to satisfy
        any
        covenant or obligation contained in this Option (including the reasonable
        fees
        and expenses of defending against such liability or alleged
        liability).

       

      
        	
                13.

              	
                Optionee’s
                  Status With Company

              


      

       

      Nothing
        in this Agreement shall confer, or be deemed to confer, upon Optionee any
        right
        to continue as a director of the Company or interfere in any way with any
        right
        of the Company or its shareholders to terminate Optionee’s service as a director
        at any time.

       

      
        	
                14.

              	
                Registration
                  Rights.

              


      

       

      Subject
        to any existing contractual restrictions on the Company with respect to granting
        registration rights, the shares issuable upon exercise of this Option shall
        be
        entitled to be included, pari passu, with any other shares of Common Stock
        under
        the terms of any registration rights, if any, that the Company may have
        heretofore granted or may hereafter grant to any other persons whomsoever,
        and
        the Company agrees to do all such things in connection with any registration
        rights agreements or registration of the Common Stock under the 1933 Act
        to
        ensure that the rights of the Optionee hereunder are recognized in connection
        therewith.

       

      
        	
                15.

              	
                General
                  Provisions

              


      

       

      15.1     Entire
        Agreement.  This Agreement contains the entire understanding
        between the parties with respect to the subject matter hereof, and supersedes
        any and all prior written or oral agreements between the parties with respect
        to
        the subject matter hereof.  There are no representations, agreements,
        arrangements or understandings, either written or oral, between or among
        the
        parties with respect to the subject matter hereof which are not set forth
        in
        this Agreement.

       

      15.2     Governing
        Law.  This Agreement shall be governed by and construed in
        accordance with the laws of the State of Maryland.

       

      15.3     Notices.  Any
        notice given pursuant to this Agreement may be served personally on the party
        to
        be notified or may be mailed, with postage thereon fully prepaid, by certified
        or registered mail, with return receipt requested, addressed as set forth
        by the
        party’s signature on this Agreement or at such other address as such party may
        designate in writing from time to time.  Any notice given as provided
        in the preceding sentence shall be deemed delivered when given if personally
        served or if mailed, ten (10) business days after mailing.

       

      


       


      
        
          
          

        

        
          C-6

          
            

          

        

        
          
          

        

      


      15.4     Further
        Acts.  Each party to this Agreement agrees to perform such further
        acts and to execute and deliver such other and additional documents as may
        be
        reasonably necessary to carry out the provisions of this Agreement.

       

      15.5     Severability.  If
        any term, provision, covenant or condition of this Agreement is held by a
        court
        of competent jurisdiction to be invalid, illegal or unenforceable for any
        reason, such invalidity, illegality or unenforceability shall not affect
        any of
        the other terms, provisions, covenants or conditions of this Agreement, each
        of
        which shall be binding and enforceable.

       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       

      


       


      
        
          
          

        

        
          C-7

          
            

          

        

        
          
          

        

      


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

       

      
        	 	
                “COMPANY”

              
	 	 
	 	
                CHAPEAU,
                  INC.

              
	 	 
	 	 
	 	
                _____________________________________

              
	 	
                By:
                  Guy A. Archbold

              
	 	
                Its:
                  Chief Executive Officer

              


      

      


      


      “OPTIONEE”

       

      


       

      ____________________________________

      Gordon
        V.
        Smith

      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      



      
        
          
          

        

        
          C-8

          
            

          

        

        
          
          

        

      


      NOTICE
        OF EXERCISE

      


      


      To:  Chapeau,
        Inc.

      


      The
        undersigned hereby elects to purchase _________ shares of the Common Stock
        of
        Chapeau, Inc. (the “Company”) pursuant to the terms of the attached Option, and
        payment of the Exercise Price per share required under the Option accompanies
        this notice.

      


      The
        undersigned hereby affirms each and every one of the representations and
        warranties contained in Section 11 of the Option as of the date of this Notice
        of Exercise.

      


      


      


      
        	 	
                OPTIONEE:

              
	 	 
	 	 
	 	
                _________________________________________

              
	 	
                By:

              
	 	
                Date:

              


      

      


      


      


      


      


      Name
        in
        which shares should be registered:

      


      


      _________________________________________

      


      


      


      


      


      


      


      


      



      
        
          
          

        

        
          C-9

          
            

          

        

        
          
          

        

      


      EXHIBIT
        D

      


      FORM
        OF
        WARRANT

      


      
        	
                THIS
                  WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
                  NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933
                  ACT”).  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
                  HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
                  REGISTRATION STATEMENT UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL
                  SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
                  THE
                  1933 ACT AND APPLICABLE STATE SECURITIES
                  LAW.

              


      

      


      


      Warrant
        to Purchase Common Stock

      of

      Chapeau,
        Inc.

      


      Void
        after __________ ___, 20__

      


      This
        Warrant is issued to GORDON V. SMITH, or his
        registered assigns (the “Holder”) by Chapeau, Inc., a Utah corporation (the
“Company”), as of _______ ___, 20___ (the “Warrant Issue Date”).  This
        Warrant is issued pursuant to that certain Secured Promissory Note dated
        as of
        September 11, 2007 (the “Note”).

      


      1.         Shares.Subject
        to the terms and conditions of this Warrant, the Holder is entitled, upon
        surrender of this Warrant at the principal office of the Company (or at such
        other place as the Company shall notify the Holder in writing), to purchase
        from
        the Company __________ fully paid and non-assessable shares of Common Stock,
        as
        constituted on the Warrant Issue Date. The number of shares of Common Stock
        issuable pursuant to this Section 1 (the “Shares”) shall be subject to
        adjustment pursuant to Section 9 below.

      


      2.         Exercise
        Price. The purchase price for the Shares shall be equal to $3.00 per
        share, as adjusted from time to time pursuant to Section 10 below (the “Exercise
        Price”).

      


      3.         Exercise
        Period.  This Warrant shall be exercisable, in whole or in
        part, during the term commencing on the Warrant Issue Date and ending at
        5:00
        p.m. Eastern on the four year anniversary of the Warrant Issue Date; provided
        that in the event (each a “Disposition Event”) of (i) the closing of the
        Company’s sale or transfer of all or substantially all of its assets, or (ii)
        the closing of the acquisition of the Company by another entity by means
        of
        merger, consolidation or other transaction or series of related transactions,
        resulting in the exchange of the outstanding shares of the Common Stock (unless
        (A) the shareholders of the Company immediately prior to such transaction
        or
        series of related transactions are holders of a majority of the voting equity
        securities of the surviving or acquiring corporation immediately thereafter,
        and
        (B) each of such shareholders immediately prior to such transaction or series
        of
        related transactions holds the same pro rata share of such majority of the
        voting equity securities of the surviving or acquiring corporation as each
        hold
        of the Company immediately prior to such transaction or series of related
        transactions), this Warrant shall, on the date of a Disposition Event, no
        longer
        be exercisable and become null and void. The Company shall notify the Holder
        at
        least 20 days prior to the consummation of any Disposition Event; provided
        that
        the Holder shall in any event have at least 40 days after the Warrant Issue
        Date
        to exercise this Warrant. The Company shall notify Holder thirty (30) days
        prior
        to expiration of Warrant.  Failure to do so shall extend the Warrant
        thirty (30) days from the receipt by Holder of such expiration
        notice.

      



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      4.         Method
        of Exercise.  While this Warrant remains outstanding and
        exercisable, the Holder may exercise this Warrant, in whole or in part, at
        one
        time or from time to time, by:

      


      (a)        the
        surrender of this Warrant, together with a duly executed copy of the form
        of
        Notice of Election attached hereto, to the Secretary of the Company at its
        principal offices; and

      


      (b)        the
        payment to the Company of an amount equal to the aggregate Exercise Price
        for
        the number of Shares being purchased.

      


      In
        the
        event of a partial exercise of this Warrant, the Company shall cause to be
        issued to the Holder a Warrant of like tenor to this Warrant for the number
        of
        Shares for which this Warrant has not yet been exercised.

      


      5.         Representations
        and Warranties of Holder.  The Holder hereby represents and
        warrants that:

      


      (a)        This
        Warrant and the Shares to be received upon exercise of this Warrant
        (collectively, the “Securities”) are being acquired for investment for the
        Holder’s own account, not as a nominee or agent, and not with a view to the
        resale or distribution of any part thereof, and the Holder has no present
        intention of selling, granting any participation in, or otherwise distributing
        the Securities, in whole or in part.  The Holder does not have any
        contract, undertaking, agreement or arrangement with any person to sell,
        transfer or grant participations to such person or to any third person, with
        respect to the Securities.

      


      (c)        The
        Holder is an investor in securities of companies in the development stage
        and
        acknowledges that he is able to fend for himself, can bear the economic risk
        of
        his investment, has adequate means for providing for his current needs and
        contingencies and has no need for liquidity with respect to his investment
        in
        the Company, and has such knowledge and experience in financial or business
        matters such that he is capable of evaluating the merits and risks of the
        investment in the Securities.

      


      (d)        The
        Holder is an “accredited investor” as that term is defined in Rule 501 of
        Regulation D as a result of the Holder being a member of the Board of Directors
        of the Company.

      


      (e)        At
        no time was the Holder presented with or solicited by any publicly issued
        or
        circulated newspaper, mail, radio, television or other form of general
        advertising or solicitation in connection with the issuance of this
        Warrant.

      



      
        
          
          

        

        
          D-2

          
            

          

        

        
          
          

        

      


      (f)         The
        Holder has received or has had full access to all the information it considers
        necessary or appropriate to make an informed investment decision with respect
        to
        the Securities. The Holder further has had an opportunity to ask questions
        of
        and receive answers from the Company regarding the terms and conditions of
        the
        issuance of the Securities and to obtain additional information (to the extent
        the Company possessed such information or could acquire it without unreasonable
        effort or expense) necessary to verify any information furnished to the Holder
        or to which the Holder had access.

      


      (g)        The
        Holder understands that the Securities that it is purchasing or otherwise
        taking
        delivery of are or will be characterized as “restricted securities” as that term
        is defined in Rule 144 promulgated under the Securities Act of 1933, as amended
        (the “1933 Act”) inasmuch as they are being acquired from the Company in a
        transaction not involving a public offering and that under the 1933 Act and
        applicable federal and state statutes and regulations such securities may
        be
        resold without registration only in certain limited
        circumstances.  The Holder represents that it is familiar with Rule
        144 promulgated under the 1933 Act, as presently in effect, and which permits
        limited resale of stock purchased in a private placement subject to the
        satisfaction of certain conditions, including among other things, the existence
        of a public market for the stock, the availability of certain current public
        information about the issuer, the resale occurring not less than one year
        after
        a party has purchased and paid for the stock to be sold, the sale being effected
        through a “broker’s transaction” or in transactions directly with a “market
        maker” and the number of shares of stock being sold during any three-month
        period not exceeding specified limitations.  The Holder understands
        and hereby acknowledges that the Company may not be satisfying the current
        public information requirement of Rule 144 at the time the Holder wishes to
        sell the Securities, and that, in such event, the Holder may be precluded
        from
        selling such securities under Rule 144, even if the other requirements of
        Rule 144 have been satisfied.

      


      
        	
                 

              	
                6.

              	
                Transfer
                  Restrictions.

              


      

      


      (a)        The
        Holder agrees not to make any disposition of all or any portion of the
        Securities unless and until the transferee has agreed in writing for the
        benefit
        of the Company to be bound by this Section 6, and:

      


      (i)         there
        is then in effect a registration statement under the 1933 Act covering the
        proposed disposition and such disposition is made in accordance with such
        registration statement; or

      


      (ii)        (A)
        the Holder 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 (B) if reasonably requested by the
        Company, the Holder shall have furnished the Company with an opinion of counsel,
        reasonably satisfactory to the Company, that such disposition will not require
        registration of the applicable Securities under the 1933 Act; and

      



      
        
          
          

        

        
          D-3

          
            

          

        

        
          
          

        

      


      (iii)        notwithstanding
        (i) and (ii) above, no such registration statement or opinion of counsel
        shall
        be necessary for a transfer by Holder (A) that is a partnership to a partner
        of
        such partnership or a retired partner of such partnership who retires after
        the
        date hereof, or to the estate of any such partner or retired partner or the
        transfer by gift, will or intestate succession of any partner to his or her
        spouse or to the siblings, lineal descendants or ancestors of such partner
        or
        his or her spouse, or (B) to any entity that is controlled by, controls or
        is
        under common control with the Holder; if the transferee agrees in writing
        to be
        subject to the terms of this Warrant to the same extent as if it were an
        original Holder hereunder.

      


      (b)        Certificates
        evidencing the Securities shall bear one or all of the following
        legends:

      


      (i)         “The
        securities represented hereby have not been registered under the Securities
        Act
        of 1933, as amended (the “Act”), or under applicable state securities
        laws.  These securities are subject to restrictions on transferability
        and resale and may not be offered, sold, pledged, hypothecated, assigned,
        transferred or resold except as permitted under the Act and applicable state
        securities laws pursuant to (i) a registration statement under the Act, which
        has become effective and is current with respect to these securities, or
        (ii) an
        exemption therefrom.  The issuer of these securities may require an
        opinion of counsel in form and substance satisfactory to the issuer to the
        effect that any proposed pledge, hypothecation, assignment, transfer or resale
        is in compliance with the Act and any applicable state securities laws.”
and

      


      (ii)        Any
        legend required by the laws of the State and any other applicable state of
        the
        United States.

      


      7.         Indemnification.  The
        Holder agrees to indemnify and hold harmless the Company, its officers,
        directors, affiliates, subsidiaries, employees and agents from any and all
        losses suffered by them as a result of any liability related to a breach
        by
        Holder of a representation or warranty or failure by Holder to satisfy any
        covenant or obligation contained in this Warrant (including the reasonable
        fees
        and expenses of defending against such liability or alleged
        liability).

      


      8.         Certificates
        for Shares.  Upon the exercise of the purchase rights
        evidenced by this Warrant, one or more certificates for the number of Shares
        so
        purchased shall be issued as soon as practicable thereafter (with appropriate
        restrictive legends, if applicable), and in any event within 15 days following
        compliance by the Holder with the requirements of Section 4
        above.  The Company shall not be required to issue any fractional
        shares, and if any fraction of a Share would be issuable on the exercise
        of this
        Warrant in full, the Company shall pay an amount in cash equal to the then
        current fair market value of a Share, as then determined in good faith by
        the
        Board of Directors of the Company, times the applicable fraction.

      


      9.         Reservation
        of Shares. The Company covenants that it will at all times keep
        available such number of authorized shares of Common Stock, free from all
        preemptive rights with respect thereto, which will be sufficient to permit
        the
        exercise of this Warrant for the full number of Shares specified herein.
        The
        Company covenants that the Shares, when issued pursuant to the exercise of
        this
        Warrant and in exchange for the Exercise Price, will be duly and validly
        issued,
        fully paid and non-assessable and free from all taxes, liens, and charges
        with
        respect to the issuance thereof.

      



      
        
          
          

        

        
          D-4

          
            

          

        

        
          
          

        

      


      10.       Adjustment
        of Exercise Price and Number of Shares. The number of and kind of
        Shares purchasable or receivable upon exercise of this Warrant and the Exercise
        Price shall be subject to adjustment from time to time as follows:

      


      (a)        Subdivisions,
        Combinations and Other Issuances. If the Company shall subdivide the Common
        Stock, by split-up or otherwise, combine the Common Stock or issue additional
        shares of Common Stock as a dividend or other distribution with respect to
        any
        of its securities, the number of Shares issuable on the exercise of this
        Warrant
        shall be proportionately increased in the case of a subdivision, dividend
        or
        distribution and shall be proportionately decreased in the case of a
        combination. Appropriate adjustments shall also be made to the Exercise Price,
        but the aggregate purchase price payable for the total number of Shares
        purchasable under this Warrant (as adjusted) shall remain the same. Any
        adjustment under this Section 10(a) shall become effective at the close of
        business on the date the subdivision or combination becomes effective, or
        as of
        the record date of a dividend or other distribution, or in the event that
        no
        record date is fixed, upon the making of such dividend or
        distribution.

      


      (b)        Reclassification,
        Reorganization and Consolidation. In the event of any reclassification,
        capital reorganization or change in the Common Stock, other than as a result
        of
        an event provided for in (a) above, then, as a condition of such transaction,
        the Holder shall have the right at any time prior to the expiration of this
        Warrant to purchase, at a total price equal to that payable upon the exercise
        of
        this Warrant, the kind and amount of shares of stock and other securities
        and
        property receivable in connection with the applicable transaction by a holder
        of
        the same number of shares of Common Stock as were purchasable by the Holder
        immediately prior to the transaction. In any such case appropriate provisions
        shall be made with respect to the rights and interest of the Holder so that
        this
        provision shall thereafter be applicable with respect to any securities
        deliverable upon exercise of this Warrant, and appropriate adjustments shall
        be
        made to  the Exercise Price; provided that the aggregate purchase
        price shall remain the same.

      


      (c)        Notice
        of Adjustment. When any adjustment is required to be made in the number or
        kind of securities receivable upon exercise of this Warrant, or in the Exercise
        Price, the Company shall promptly notify the Holder thereof and of the number
        of
        Shares or other securities thereafter receivable upon exercise of this Warrant
        and the adjusted Exercise Price per share.

      


      (d)        No
        Impairment.  The Company and the Holder will not, by any
        voluntary action, avoid or seek to avoid the observance or performance of
        any of
        the terms to be observed or performed hereunder by the Company or the Holder,
        respectively, but will at all times in good faith assist in the carrying
        out of
        all the provisions of this Section 10 and in the taking of all such action
        as
        may be necessary or appropriate in order to protect the rights of the Company
        and the Holder against impairment.

      



      
        
          
          

        

        
          D-5

          
            

          

        

        
          
          

        

      


      11.       No
        Shareholder Rights.  Prior to exercise of this Warrant, the
        Holder shall not be entitled to any rights of a shareholder with respect
        to this
        Warrant or the Shares, including without limitation the right to vote, receive
        dividends or other distributions thereon, exercise preemptive rights or be
        notified of shareholder meetings, and the Holder shall not be entitled to
        any
        notice or other communication concerning the business or affairs of the Company.
        However, nothing in this Section 11 shall limit the right of the Holder to
        be
        provided the notices required under this Warrant.

      


      12.       Transfers.  Subject
        to compliance with the requirements of Section 6 above, this Warrant and
        all
        rights (but only with all related obligations) hereunder are transferable
        in
        whole or in part by the Holder upon reasonable prior written notification
        to the
        Company. The transfer shall be recorded on the books of the Company upon
        (i) the
        surrender of this Warrant, properly endorsed, to the Company at its principal
        offices; (ii) the payment to the Company of all transfer taxes and other
        governmental charges imposed on such transfer; and (iii) the transferee’s
        agreement in writing to be bound by and subject to the terms and conditions
        of
        this Warrant.  In the event of a partial transfer, the Company shall
        issue to the Holders one or more appropriate new Warrants of like tenor to
        this
        Warrant.

      


      13.       Successors
        and Assigns. The terms and provisions of this Warrant shall inure to
        the benefit of, and be binding upon, the Company and the Holders and their
        respective successors and assigns.

      


      14.       Registration
        Rights. Subject to any existing contractual restrictions on the Company
        with respect to granting registration rights, the Shares issuable upon exercise
        of this Warrant shall be entitled to be included, pari passu, with any
        other shares of Common Stock and any securities issuable upon conversion
        of the
        Common Stock, under the terms of any registration rights, if any, that the
        Company may have heretofore granted or may hereafter grant to any other persons
        whomsoever, and the Company agrees to do all such things in connection with
        any
        registration rights agreements or registration of the Common Stock under
        the
        1933 Act to ensure that the rights of the Holder hereunder are recognized
        in
        connection therewith.

      


      15.       Amendments
        and Waivers.  Any term of this Warrant may be amended and the
        observance of any term of this Warrant may be waived (either generally or
        in a
        particular instance and either retroactively or prospectively), with the
        written
        consent of the Company and the Holder.

      


      16.       Captions.  The
        section and subsection headings of this Warrant are inserted for convenience
        only and shall not constitute a part of this Warrant in construing or
        interpreting any provision hereof.

      


      17.       Governing
        Law.  This Warrant shall be governed by the laws of the State
        of Maryland.

      


      


      


      


      


      [Remainder
        of Page Intentionally Left Blank]

      


      



      
        
          
          

        

        
          D-6

          
            

          

        

        
          
          

        

      


      IN
        WITNESS WHEREOF, this Warrant to be executed by the Company and
        acknowledged by the Holder _______ ___, 20__.

      


      


      


      
        	 	
                CHAPEAU,
                  INC.

              
	 	 
	 	 
	 	 
	 	
                ___________________________

              
	 	
                By:

              
	 	
                Its:

              


      

      


      


      


      ACCEPTED
        AND ACKNOWLEDGED:

      


      


      _________________________________

      Gordon
        V.
        Smith

      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      



      
        
          
          

        

        
          D-7

          
            

          

        

        
          
          

        

      


      NOTICE
        OF EXERCISE

      


      


      


      To:  Chapeau,
        Inc.

      


      The
        undersigned hereby elects to purchase _________ shares of the Common Stock
        of
        Chapeau, Inc. (the “Company”) pursuant to the terms of the attached Warrant, and
        payment of the Exercise Price per share required under the Warrant accompanies
        this notice.

      


      


      The
        undersigned hereby affirms each and every one of the representations and
        warranties contained in Section 5 of the Warrant as of the date of this Notice
        of Exercise.

      


      


      


      
        	 	
                WARRANT
                  HOLDER:

              
	 	 
	 	
                _________________________________________

              
	 	
                By:

              
	 	
                Date:

              


      

      


      


      Name
        in
        which shares should be registered:

      


      


      _________________________________________

      


      


      


      


      


      


      


      


       

       

       

       

       

       

       

      
 
D-8