Document:

Filed by Bowne Pure Compliance

Exhibit 10.2

LEASE AGREEMENT

THIS LEASE AGREEMENT is made effective as of the 1st day of January, 2008, between Whittymore,
LLC (hereinafter referred to as “Landlord”) and Cereplast, Inc., a Nevada corporation (hereinafter
referred to as “Tenant”).

WITNESSETH:

WHEREAS, Landlord wishes to lease to Tenant, and the Tenant wishes to lease from Landlord,
that real estate described in Exhibit A, which is attached hereto, made a part hereof, and
incorporated herein.

NOW, THEREFORE, for and in consideration of the mutual promises, covenants, conditions, and
agreements herein contained, Landlord agrees to lease and demise the Leased Premises (as defined
herein), and the Tenant agrees to lease said Leased Premises from the Landlord, upon the following
terms and conditions:

Article I. Basic Lease Provisions

Section 1.1. Basic Lease Provisions.

	 	 	 	 	 
	(a)
	 	Commencement Date:	 	January 1, 2008 (the “Commencement Date”).
	 
	 	 	 	 
	 (b)
	 	Landlord:	 	Whittymore, LLC
	 
	 	 	 	c/o Dillard Whittymore III
	 
	 	 	 	PO Box 101
	 
	 	 	 	Brownstown, IN  47220
	 
	 	 	 	 
	 (c)
	 	Tenant:	 	Cereplast, Inc.
	 
	 	 	 	3421-3433 West El Segundo Boulevard
	 
	 	 	 	Hawthorne, CA 90250
	 
	 	 	 	 
	 
	 	 	 	and
	 
	 	 	 	 
	 
	 	 	 	2213 Killion Avenue
	 
	 	 	 	Seymour, IN 47274

(d) Lease Term: Subject to extension pursuant Section 9.8, the initial term (“Initial Term”)
of this lease shall be for ten (10) years. The Initial Term commences as of the Commencement Date,
and terminates on December 31, 2018, subject to extension.

(e) Option to Renew: The Tenant shall have one (10) ten-year renewal option and one five (5)
year renewal option to extend the term of this lease. The first option shall extend from January
1, 2019 through December 31, 2028; and the second option shall extend from January 1, 2029 through
December 31, 2033. In order to exercise the option to renew, the Tenant shall provide Landlord
with notice 180 days prior to the expiration of the previous lease term.

(f) Right of Early Termination: Tenant shall have the right to terminate the lease prior to
the expiration of any term by paying an early termination fee equivalent to one year’s rent to the
Landlord.

 

 

 

Upon notice of termination, Tenant shall surrender possession of the premises in thirty (30)
days or as otherwise allowed by Landlord in writing.

(g) Basic Rent. The Basic Rent shall be computed at a rate of $2.86 per square foot per year
for the initial Lease Term of this lease. Annual rental shall be $300,000.00 per year. Rent shall
be paid in the amount of Twenty-Five Thousand and 00/100 Dollars ($25,000.00) per month.

Said rent is due in equal monthly installments on the first day of each month beginning on the
Commencement Date. If the Commencement Date is not the first day of a calendar month, rent shall
be prorated based on the number of days in such month. Said payments shall continue from month to
month (prorated on a daily basis, if necessary due to the termination of this Lease on a day other
than the last day of any month), unless canceled by either party as provided herein.

(h) Leased Premises: The real estate located in Seymour, Jackson County, Indiana, the legal
description of which is described in Exhibit A annexed hereto; and the building and improvements
thereon, which are described in architectural renderings in Exhibit B, annexed hereto.

Landlord discloses and Tenant understands that Landlord has granted an emergency access
easement to Golden Endeavors, LLC over and along a gravel lane running from North to South along
the West side of demised real estate. Landlord represents and warranties that this easement is for
emergency use only and not for commercial ingress and egress. Landlord will provide a copy of the
access agreement and legal description to Tenant.

(i) Purpose of Lease: The purpose of this Lease is for the use of the Leased Premises for a
commercial warehouse, manufacturing, storage, and shipping facility with related office uses.

Section 1.2. Significance of Basic Lease Provisions. Each reference to any Basic Lease
Provision shall be deemed to incorporate all of the items provided under that Basic Lease
Provision.

Section 1.3. Option to Purchase. Tenant shall have the option to purchase the demised real
estate and improvements thereon at any time during the Initial Term of this lease. In the event
that Tenant exercises this option to purchase, the purchase price shall be $3,900,000.00.

(a) Period of Option and Exercise. This Option may be exercised by Tenant giving notice of
exercise to Landlord during the Initial Term. If Tenant exercised this Option, its obligation to
complete and close the purchase of the Leased Premises is subject to Landlord being able to convey
marketable title to the Leased Premises to Tenant subject only to:

(1) taxes and assessments which Tenant has agreed to pay;

(2) covenants, conditions, restrictions, agreements and easements, if any, of record, to
which Tenant has no obligation; and

(3) public streets, rights of ways and highways.

(b) Title Insurance. Within ten (10) days of notification by Tenant to Landlord that it is
exercising this Option, Landlord, at its sole cost and expense, shall furnish Tenant with a
commitment for an Owner’s Policy of title insurance, in an amount equal to the Purchase Price from
a title Company acceptable to Purchaser (“the title Company”) insuring Tenant as owner and insuring
marketable title in the name of Landlord, without exception as to mechanic’s or similar liens, and
free and clear of any and all secured debts, liens, judgments, encumbrances, leases, parties in
possession, licenses, covenants,
restrictions, easements, encroachments, and any other matters of any nature effecting title, except
as otherwise permitted herein.

 

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(c) Exceptions to Title. Tenant shall advise Landlord after receipt of the title Insurance
Commitment of Tenant’s objection to title, if any, specifying each objection in writing. If
written objections are received by Landlord, Landlord shall have thirty (30) days within which to
remove the objections, and if necessary, the Closing Date shall be extended accordingly. If the
objections cannot be cleared within this period of time, Tenant may waive the objections, in
writing, and close this transaction or may elect not to close.

(d) Closing Location. If Tenant exercises this Option, then the transaction shall be closed
at the offices of the Title Company within ten (10) days of Tenant notifying Landlord that all
conditions precedent have been satisfied and that it is satisfied as to the title to the Real
Estate.

(e) Deed. At closing, Landlord shall execute and deliver to Tenant a Warranty Deed in a form
acceptable to Tenant. A proposed form of the Deed shall be furnished to Tenant with the
Commitment. Tenant shall advise Landlord after receipt of the proposed form Deed of any objections
thereto. If Landlord does not agree to cure these objections, then Tenant may waive the objections
and close this transaction or may cancel this Option.

(f) Insured Closing. The closing shall be conducted as an insured closing. The Title Company
shall mark-up the Commitment to delete the Requirements Section and shall date the marked-up
Commitment as of the date of closing. The Title Company shall mark-up the Commitment to show
Tenant as the insured.

(g) Closing Costs.

(1) at closing, Landlord shall be charged with the following:

(i) the fees for preparation of the Deed;

(ii) the cost of title report, title search and of a title insurance policy in the amount
of the purchase price;

(iii) one-half (1/2) of the Sales Disclosure fee.

(2) At closing, Tenant shall be charged with the following:

(i) the cost of recording the Deed;

(ii) the closing fee;

(iii) one-half (1/2) of the Sales Disclosure fee.

Section 1.4 Right of First Refusal. During any renewal term of this Lease, Tenant shall have
the right of first refusal to purchase the Leased Premises. Upon the receipt of a bona fide offer
from a third party, Landlord shall provide Tenant with thirty (30) days notice within which to
exercise its right of first refusal to purchase the Leased Premises for the price and on the terms
of the intended sale.

 

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Section 1.5. Conditions Precedent. Tenant’s obligations under the Lease are subject to the
satisfaction of the following conditions prior to January 1, 2008, unless satisfaction of these
conditions are waived in writing by Tenant:

(a) Tenant having received an updated Phase I environmental site assessment showing the
environmental condition of the Leased Premises to be acceptable to Tenant. The environmental site
assessment shall be performed by an environmental engineering firm acceptable to Tenant at the sole
cost and expense of Landlord.

(b) Tenant having received a commitment for a leasehold policy of title insurance in the
amount of Three Million Dollars ($3,000,000.00) from a title insurance company acceptable to Tenant
insuring Tenant’s leasehold interest and which shows title to the Leased Premises in a condition
acceptable to Tenant. Seller shall bear the cost and expense of the commitment

(c) Tenant having received a survey conforming to a minimum standard for Indiana Land Title
Survey certified by a land surveyor or engineer registered in the State of Indiana and certified to
Tenant showing the location of all improvements and easements located on or about the Leased
Premises and the location of all encroachments on adjacent real estate or from adjacent real estate
onto the Leased Premises. Landlord shall bear the cost of the survey.

(d) Tenant having received a letter from the company that installed a fire suppression system
that the system is in good working order and complies with all applicable codes as of the date of
the letter, which letter shall be dated no earlier than November 29, 2007.

(e) Tenant having received a survey depicting the emergency access easement described in
Section 1.1(h) an the agreement creating the easement which show that the emergency access easement
is not situated so as to interfere with Tenant’s rail expansion plans.

Article II. The Demise

Section 2.1. Demise. Landlord hereby leases and demises the Leased Premises to Tenant to have
and to hold the Leased Premises for the Lease Term to be used by Tenant for only the purposes
stated in Section 1.1(g) above, and for such other lawful purposes as to which Landlord has given
its prior written consent, which consent shall not be unreasonably withheld or delayed.

Section 2.2. Use and Compliance with Laws. Tenant shall keep the Leased Premises in a clean
and orderly condition and shall operate in a safe and careful manner and shall not maintain,
permit, or suffer any nuisance or waste to occur or exist on the Leased Premises. Tenant shall
comply with all federal, state, and local laws, rules, regulations, and ordinances applicable to
its business and the use and operation of the Leased Premises.

Article III. Rent, Taxes, and Other Charges

Section 3.1. Basic Rent. The Basic Rent, should any be due, shall be paid to Landlord at
the address set forth in Section 1.1(b) or to such other payee or at such other address as Landlord
may hereafter designate in writing to Tenant.

Section 3.2. Impositions. Landlord covenants and agrees to pay all real estate taxes and
assessments, including assessments for public improvements, utilities or benefits, which may be
laid, levied, assessed, or imposed, upon or become due and payable and a lien upon the Leased
Premises or any part thereof during the Lease Term (“Impositions”). Tenant shall forward or cause
to be forwarded to
Landlord a copy of all statements for real estate and other taxes as received. In the alternative,
Tenant may pay such taxes and Landlord shall reimburse Tenant for such payments within twenty (20)
days after receipt of written notice to do so, accompanied by a copy of the tax bill.

 

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Section 3.3. Contest of Impositions. Landlord shall have the right to contest the amount or
validity of any Imposition by appropriate legal proceedings, but this shall not be deemed or
construed in any way as relieving Landlord of its covenant to pay any such Imposition. Tenant
shall join in any such proceeding to the extent necessary to permit Landlord to properly prosecute
the same; provided, however, that Tenant shall not be subjected to any liability for payment of any
costs or expenses in connection with any such proceeding brought by Landlord, and Landlord hereby
covenants to indemnify and hold Tenant harmless from any such costs or expenses.

Section 3.4. Utility Charges. Tenant shall pay for all sewer charges, electricity, gas,
heat, cable, internet, television, telephone, and water used by it upon the Leased Premises. It is
specifically understood and intended that the Basic Rent does not include utilities. Landlord
warrants to Tenant that the Leased Premises are now connected to sewer, electric, water, gas, and
telephone utilities and the Tenant will not be required to install infrastructure to obtain service
from the utility providers; however, Tenant will be responsible for installation of its own
telephone system, if the wiring, control panels, etc. are not compatible with the system now on
site. The facility is not wired for cable or satellite television access and such connection
charges will be the responsibility of the Tenant.

Section 3.5. Public Liability and Property Damage Insurance. Tenant shall carry public
liability and property damage insurance against claims for bodily injury or death, in limits of not
less than One Million Dollars ($1,000,000.00) for any one occurrence upon request. Tenant shall
furnish Landlord with a certificate evidencing such coverage.

Section 3.6. Property Insurance and Re-Construction. Landlord shall maintain insurance on
the full, fair, insurable value of the Leased Premises so as to insure the improvements located on
the real estate described in Exhibit A to their full replacement cost without depreciation against
fire and other casualties normally covered by an “all risk” endorsement and in an amount sufficient
to prevent Landlord from becoming a co-insurer within the terms of the applicable policies. In the
event of any injury or damage to the improvements, Landlord shall promptly undertake the
restoration thereof to the condition that existed prior to injury or damage and rent shall abate in
proportion to Tenant’s inability to efficiently use the Leased Premises prior to completion of such
restoration work by Landlord. In the event the injury or damage in not capable of being, or is not
actually, restored by Landlord within ninety (90) days’ of the occurrence thereof, Tenant may, upon
written notice to Landlord, terminate this Lease.

Article IV. Quiet Enjoyment

Section 4.1. Quiet Enjoyment. Landlord, for itself, and its successors and assigns,
covenants that Tenant, its successors and assigns, shall have continuous, peaceful, uninterrupted,
and exclusive possession and quiet enjoyment of the entire premises during the term of this Lease.

Article V. Improvements

Section 5.1. Inspection. Landlord may, during the Lease Term at reasonable times and during
usual business hours, enter to view the Leased Premises and may show the Leased Premises to others
and may at any time within thirty (30) days next preceding the expiration of the Lease Term, affix
to any suitable part of the Leased Premises a notice for letting the Premises, and keep the same
affixed without hindrance or molestation. Landlord shall provide Tenant with 24 hours prior verbal
notice before inspection of the Leased Premises.

 

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Section 5.2. Alterations and Improvements. Tenant shall obtain the Landlord’s approval of
all plans and contracts for the construction of any alterations and improvements prior to the
commencement of construction, which approval shall not be unreasonably withheld, conditioned or
delayed. Tenant shall deliver to Landlord written notice describing the proposed alteration or
improvement and provide Landlord with copies of all plans and specifications therefor. Landlord
shall have thirty (30) days from the date of delivery of the notice and plans and specifications to
make objection thereto. If no objection is received by Tenant to Landlord within thirty (30) days
of delivery of the notice and of plans and specifications, Landlord shall be deemed to have
consented to the proposed alterations or improvements. Tenant shall insure that all contractors,
sub-contractors, laborers and suppliers performing work or supplying materials for the alterations
or improvements are paid in full. Tenant shall obtain lien waivers in a form acceptable to
Landlord from such contractors, sub-contractors, suppliers, and material men performing work or
supplying or leasing materials for the alterations or improvements. All alterations and
improvements constructed on the Leased Premises by Tenant shall be constructed in a good and
workmanlike manner; and in compliance with all applicable laws, ordinances, rules, regulations, or
orders of any State or other public authority and, when made, shall be deemed the property of
Landlord.

Section 5.3. Surrender Upon Termination. At the expiration of the Lease Term, Tenant shall
surrender the Leased Premises to Landlord in good condition and repair, ordinary wear and tear
excepted. Upon such expiration, Tenant shall be permitted to remove its trade fixtures, as well as
any personal property, machines, and equipment placed on the Leased Premises by Tenant. Tenant
shall surrender the premises broom clean. If Tenant has not removed such property within thirty
(30) days after the expiration of the Lease Term, the property not so removed shall be deemed
abandoned and shall become the property of the Landlord.

Section 5.4. Mechanics’ Liens. Tenant shall not suffer or permit any mechanics’ liens to be
filed against the fee of the Leased Premises nor against Tenant’s leasehold interest in the Leased
Premises by reason of work, labor, services, or materials supplied or claimed to have been supplied
to Tenant, its contractors, sub-lessees, licensees, or assigns, either prior or subsequent to the
commencement of the term hereof. If any such mechanics’ lien shall at any time be filed, Tenant
shall, within thirty (30) days after the filing thereof, initiate such action as it deems
appropriate, as provided by applicable Indiana law, to (a) post bond, or other surety, while
appealing or contesting such lien claim; or (b) give notice to the lien holder to file suit to
foreclose the lien; or (c) bring whatever other action against the lien holder Tenant deems
appropriate to cause the lien to be discharged of record.

Section 5.5. Maintenance. The Landlord agrees that it shall keep the structure, including
the roof, gutters, exterior walls, windows/ window frames, footings, foundations, and slab in good
repair, at Landlord’s sole cost and expense. The Landlord shall not be required to make any
repairs which may be occasioned by the act or negligence of the Tenant, except to the extent such
repair is covered by Landlord’s insurance.

The non-structural exterior of the building and the grounds shall also be kept in a clean and
safe condition at the sole expense of Tenant. By way of example, the parties intend this provision
to apply to outside storage, debris, snow removal, loading dock facilities, lawn mowing, parking
lot maintenance, etc.

Landlord represents and warrants to Tenant, its successors and assigns, that the plumbing,
heating, sprinkler and other mechanical appurtenances on or to the Leased Premises are in good
working order and comply with all applicable building laws, rules, regulations and codes as of
January 1, 2008.

 

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Article VI. Condemnation

Section 6.1. Apportionment. If at any time during the Lease Term the whole or any part of
the Leased Premises shall be taken for any public or quasi-public use, under any statute, or by
right of eminent domain, then, in such event, the award, obtained by settlement or trial, shall be
paid to Landlord and Tenant in proportionate shares depending upon the assessment of damages and
their apportionment between the Landlord’s real estate and the Tenant’s improvements

Section 6.2. Reduction in Rent. Amounts received by Landlord upon such a taking shall reduce
the Basic Rent in proportion to the area taken. Such reduction shall take effect as of the date
upon which condemnation proceeds are paid to Landlord.

Section 6.3. Temporary Taking. If all or any portion of the Leased Premises is taken by the
exercise of the right of eminent domain for governmental occupancy for a limited period, this Lease
shall not terminate and Tenant shall continue to perform its obligations hereunder as though such
taking had not occurred except to the extent that it may be prevented from so doing pursuant to the
terms of the order of the authority which made the taking, but rent and other charges shall abate
to the extent and in proportion to Tenant’s loss of use of the Leased Premises during such
temporary taking.

Section 6.4. Control of Proceeding. In the event of any such proceedings, Tenant shall be
made a party to such proceedings. Landlord shall give Tenant written notice within five (5) days
of the receipt by Landlord of any official notice (written or otherwise) of any contemplated
condemnation or taking by eminent domain of any such land. Landlord and Tenant may negotiate
jointly or separately with respect to any such contemplated condemnation as each deems to be in its
best interest.

Section 6.5 Termination by Tenant. If the whole of the Leased Premises shall be taken or
condemned, or if such a portion of the Leased Premises shall be so taken that as a result thereof
the balance cannot be used for the same purpose and with substantially the same utility to Tenant
as immediately prior to such taking (for purposes of this paragraph, the parties agree that at
Tenant’s election, a taking or partial taking of any portion of Tenant’s parking or truck
turnaround area shall be deemed to prohibit Tenant’s use of the Leased Premises for the same
purpose and with substantially the same utility to Tenant as immediately prior to such taking),
Tenant may terminate this Lease by giving written notice thereof of to Landlord and the Lease term
shall terminate upon delivery of possession to the condemning authority.

Article VII. Default

Section 7.1. Default by Tenant. The occurrence of any of the following shall constitute an
event of default by Tenant:

(a) In the event that the monthly installment of basic rent is more than five (5) days late,
Tenant shall incur a ten (10%) percent penalty of the basic monthly installment, but the Tenant
shall not be deemed in default unless it exceeds a fifteen (15) day grace period after the due date
of the rent.

(b) Failure by Tenant to perform or comply with any of the conditions or covenants contained
in this Lease, other than those referred to in the foregoing subsection (a), for a period of thirty
(30) days after written notice of such failure is delivered to Tenant, except for any default not
susceptible of being cured within such thirty (30) day period, in which event the time permitted
Tenant to cure such default shall be extended for as long as shall be necessary to cure such
default, provided Tenant commences promptly and proceeds diligently to cure such default, and
provided further that such period
of time shall not be so extended as to jeopardize the interest of Landlord in this Lease or so as
to subject Landlord or Tenant to any civil or criminal liabilities.

 

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(c) Filing by Tenant in any court pursuant to any statute, either of the United States or any
state, of a petition in bankruptcy or insolvency, or for reorganization, or for an arrangement, or
for the appointment of a receiver or trustee of all or a portion of Tenant’s property, or an
assignment by Tenant for the benefit of creditors.

(d) Filing against Tenant in any court, pursuant to any statute, either of the United States
or of any state, of a petition in bankruptcy or insolvency, or for reorganization, or for
appointment of a receiver or trustee of all or a portion of Tenant’s property, if within sixty (60)
days after the commencement of any such proceeding against Tenant, such petition shall not have
been dismissed or stayed.

(e) The taking by any party of the Tenant’s interest in the Leased Premises, or any part
thereof, upon foreclosure, levy, execution, attachment, or other process of law or equity.

(f) Any warranty, representation, or statement made or furnished to the Landlord by or on
behalf of the Tenant which proves to have been false in any material respect when made or
furnished.

Section 7.2. Notice of Termination. Upon the occurrence of an event of default, Landlord,
within one hundred eighty (180) days of the occurrence, may give written notice to Tenant
specifying such event of default and stating that this Lease shall expire on the date specified in
such notice and upon the date specified in such notice, this Lease and all rights of Tenant
hereunder shall terminate if the default is not cured with the time provided by this lease.

Section 7.3. Surrender Upon Default. Tenant shall peacefully surrender the Leased Premises
to Landlord within one hundred eighty days of the occurrence of an event of default by Tenant.
Tenant shall be obligated to pay rent so long as it is possession of the leased premises.
Landlord, upon or at any time after such expiration, may without further notice re-enter the Leased
Premises and repossess it by force, summary proceedings, ejectment, or otherwise, and may
dispossess Tenant and remove Tenant and all other persons and property from the Leased Premises and
may have, hold, and enjoy the Leased Premises and the right to receive all rental income therefrom.

Section 7.4. Tenant’s Liability.

(a) In the event of surrender upon default Tenant shall be obligated to pay rent so long as it
in possession of the leased premises

(b) The prevailing party in any action to enforce the terms of this Lease Agreement shall be
liable to the other party for the prevailing party’s reasonable attorneys’ fees and expenses
necessary to enforce any term, condition, or covenant of this Lease.

Section 7.5. Advances and Interest. Upon the occurrence of any Event of Default, Landlord
may, if such default has not been cured, cure that default at the expense of Tenant. If Landlord
in curing such default is compelled to pay or elects to pay any sum of money or do any acts which
will require the payment of any sum of money, the sum so paid or incurred shall be reimbursed by
Tenant upon demand by Landlord. All sums as to which Tenant is in default of payment, including
rental payments, shall bear interest at the rate of ten percent (10%) per annum until paid.

 

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Section 7.6. Default by Landlord. Landlord’s failure or refusal to perform any provision of
this Lease which it is obligated to perform or the breach of any covenant made by Landlord herein
shall be a default by Landlord. In the event of a default by Landlord, and without waiving any
other remedy or claim for damages or breach of this Lease, Tenant may:

(a) Emergency Situation. In an Emergency Situation, as hereinafter defined, if the default is
not cured after reasonable notice to (or attempts to notify) Tenant may cure the default at
Landlord’s expense, provided that such cure is not more extensive than is reasonably necessary
under the circumstances; and

(b) Non-Emergency Situation. In a Non-Emergency Situation, if the default is not cured
without thirty (30) days of written notice from Tenant to Landlord (or, if such default is of such
a nature as to not be reasonably susceptible to cure within said thirty (30) day period, then the
period for cure shall be extended so long as Lessor commences its efforts to cure within said
thirty (30) day period and thereafter diligently pursues the same to completion), Tenant may cure
the default at Landlord’s reasonable expense.

If Tenant incurs any sum because of Landlord’s default, the reasonable sums paid by Tenant in
connection therewith shall be due from Landlord to Tenant upon demand, shall bear interest from the
date such expenses are incurred until repaid by Landlord at the rate of twelve percent (12%) per
annum, and may be offset against Tenant’s Rent obligations hereunder. “Emergency Situation” as
used in this Section means a situation that threatens the physical wellbeing of persons in or on
the Leased Premises, or that disrupts Tenant’s use and/or occupancy of he Leased Premises or any
portion thereof so as to materially interfere with the ordinary conduct of Tenant’s business.

Article VIII. Restrictions on Use

Section 8.1. Amendments or Revisions. It is further understood and agreed that in the event
any part, provision, or condition of this Lease Agreement be determined illegal or
unconstitutional, that the Landlord and Tenant shall make such amendment, revision, addition or
deletion of such condition or provision as shall be required, provided, however, that no such
amendment or revision shall affect the rights or agreement of the parties hereto or legal rights
and possession in the leasehold, its term or lease rental.

Section 8.2. Non-Discrimination and Equal Opportunity Federal and State Law and Regulations.
It is understood and agreed by the Tenant, its agents, or employees that, in the use of these
premises herein demised, either for the erection of any structure or building, or in the conduct
and operation of its business thereof, the Tenant, its agents, or employees shall comply and
conform with all Federal, State, or local law, statutes, regulations, or requirements pertaining to
non-discrimination against any person or persons by reason of race, color, creed, sex or national
origin, and further as such may relate to employment and equal opportunity of persons under any
such legal requirements of Federal, State or local statutes or regulations.

Article IX. Miscellaneous

Section 9.1. Assignment. Tenant shall not assign, mortgage, encumber, or transfer this
Lease, its interest in this Lease, or any improvements permitted to be constructed by it on the
Leased Premises, in whole or in part, or sublet the leased premises, or any part thereof, nor grant
a license or concession in connection therewith without Landlord’s prior written consent, which
consent may not be unreasonably withheld. This prohibition shall include any act which has the
effect of an assignment or transfer and which occurs by operation of law. It is specifically
understood and agreed, however, that no such
assignment or subletting shall excuse or relieve the Tenant of responsibility for the full and
faithful performance of this Lease by any such assignee or subtenant.

 

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Notwithstanding the foregoing, Tenant shall have the unrestricted right, without obtaining
Landlord’s consent, to assign this Lease and/or to sublet all or a portion of the Leased Premises
to (i) any parent, subsidiary or affiliated company of Tenant, (ii) any corporation into which
Tenant may merge or be consolidated or to which Tenant may sell all or substantially all of its
assets, or to (iii) any contractor engaged by Tenant for the purpose of managing the Leased
Premises and/or Tenant’s inventory therein; provided, however, that no such assignment or
subletting shall release Tenant from any obligation or liability under this Lease.

Section 9.2. No Brokers. Landlord and Tenant each represent and warrant to the other that
there are no brokerage fees or real estate commissions due and payable as a result of this Lease.
In the event one of the parties breaches this warranty, the breaching party covenants to defend,
and indemnify and hold harmless, the other from and against all costs, claims, damages, expenses,
and disbursements of any kind whatsoever (including reasonable attorneys’ fees) for any
compensation, commission, or charge by, or due to, any broker or real estate agent who alleges to
have been employed by the breaching party in connection with this Lease or the negotiation thereof.

Section 9.3 Estoppel Certificates. At any time and from time to time, each party agrees,
upon request in writing from the other, to execute, acknowledge, and deliver to the other party a
statement in writing certifying that this Lease is unmodified in full force and effect (or if there
have been modifications, that the same is in full force and effect as modified and stating the
modifications), stating the dates to which the Basic Rent and other charges have been paid, and
making such other accurate certifications as the party or its mortgages may reasonably require.

Section 9.4. Right to Mortgage. Landlord shall have the right to mortgage the Leased
Premises at any time and without Tenant’s consent. Accordingly, Landlord shall have the right to
subordinate this Lease to any mortgage presently existing or hereafter placed upon the Leased
Premises by so declaring in such mortgage; and the recording of any such mortgage shall make it
prior and superior to this Lease regardless of the date of execution or recording of either
document. Tenant shall, at Landlord’s request, execute and deliver to Landlord, without cost, any
true and accurate instrument which may be deemed necessary or desirable by Landlord to confirm the
subordination of this Lease.

Any subordination of this lease to a mortgage pursuant to the terms of this paragraph, whether
by a mortgage placed upon the Leased Premises by Landlord or by the written subordination agreement
of Tenant, shall be on the express provision that so long as Tenant shall not be in default of this
Lease beyond any applicable notice and/or cure period, the mortgagee, in the exercise of any rights
by such mortgagee due to a default of Landlord under the mortgage, shall not disturb the Tenant in
its use or enjoyment of the Leased Premises in accordance with the terms of this Lease nor shall
Tenant be joined as a party in any such proceeding.

Section 9.5. Fees and Expenses. Each party shall pay the other party’s reasonable expenses,
legal costs, and attorneys’ fees incurred in successfully enforcing against the other party any
covenant, term, or condition of this Lease.

Section 9.6. Specific Performance. It is expressly provided that the rights and obligations
of the parties under this Lease shall be specifically enforceable.

 

10

 

Section 9.7. Indemnification and Release. Regardless of whether or not separate, several,
joint, or concurrent liability may be imposed upon Landlord, Tenant shall indemnify and hold
harmless Landlord from and against all reasonable expenses, legal costs, and attorneys’ fees, damages,
claims, and liability arising from or connected with Tenant’s control or use of Leased Premises,
including without limitation, any damage or injury to person or property. This indemnification
shall not include any matter for which the Landlord is effectively protected against by insurance;
nor shall it include any liability which is attributable to the Landlord’s conduct or negligence.
If Landlord shall, without fault, become a party to litigation commenced by or against Tenant, then
Tenant shall indemnify and hold Landlord harmless. The indemnification provided by this Section
shall include Landlord’s legal costs and fees in connection with any such claim, action, or
proceeding. Tenant does hereby release Landlord from all liability for any accident, damage, or
injury caused to person or property on or about the Leased Premises, except that due to negligence
on the part of Landlord, and notwithstanding whether such acts or omissions be active or passive.

Landlord shall indemnify and hold harmless Tenant from and against all reasonable expenses,
legal costs, and attorneys’ fees, damages, claims, and liability arising from or connected with any
act or omission of Landlord in or about the Leased Premises, including without limitation, any
damage or injury to person or property. This indemnification shall not include any matter for
which the Tenant is effectively protected against by insurance; nor shall it include any liability
that is attributable to the Tenant’s conduct or negligence. If Tenant shall, without fault, become
a party to litigation commenced by or against Landlord, then Landlord shall indemnify and hold
Tenant harmless. The indemnification provided by this Section shall include Tenant’s legal costs
and fees in connection with any such claim, action, or proceeding.

Section 9.8. Additional Improvements by Landlord.

(a) Paving Improvements. Landlord shall make the following improvements to the leased premises
on or before June 30, 2008: increase the number of parking spaces from 18 to to a minimum of 75, to
be agreed upon at the time of construction. In addition, Landlord shall within six (6) months of
notice by Tenant pave the exit/rail access area which is currently packed gravel.

(b) Expansion Facility. Upon request of the Tenant made during the Initial Term (years one
through 10) the Landlord will obtain design and construction bids for a building (“Expansion
Facility”) substantially similar to the demised premises to be located adjoining or adjacent
thereto. The expansion facility will include same core building infrastructure such as loading
gates, sprinkler systems, parking spaces, office area, washrooms and the like.

Upon instructions to proceed by the Tenant to the Landlord, the Landlord shall proceed to
construct the Expansion Facility at Landlord’s sole cost and expanse. The terms of this Lease
shall apply to the Expansion Facility except the following cost structure shall apply to the rent
for the Expansion Facility: (1) In the event that the cost of construction is $3,000,000 or less,
the rental rate for the Expansion Facility shall be $3.00 per square foot per year; (2) In the
event that the cost of construction is $3,000,000 to $4,000,000, the rental rate for the Expansion
Facility shall be no more than a twelve percent (12%) yield on the actual cost of construction.
For example if the cost of construction is $4,000,000, annual rent shall be no more than $480,000.

Tenant shall have the right to consult with Landlord and Architect, review and approve the
design of the Expansion Facility.

If Landlord cannot afford to make the expansion improvements, then Tenant shall have the right
to construct the expansion facility at its own cost and expense.

 

11

 

In the event an Expansion Facility is constructed, whether by Landlord or Tenant after the
first three (3) years of the Initial Term, the Initial Term shall not expire earlier than seven
years from the date of completion. For example, if the Expansion Facility is completed during the
third year of this lease, the Initial Term shall still terminate on December 31, 2018; if the
Expansion Facility is completed during the fourth year of this lease, the Initial Term shall still
terminate on December 31, 2019; if the Expansion Facility is completed during the tenth year of
this lease, the initial term shall still terminate on December 31, 2025; Tenant shall retain its
right to exercise its renewal options referenced in 1.1 (e), with appropriate adjustments to
termination dates.

Section 9.9. No Waiver. No waiver by Landlord of any default by Tenant shall be effective
unless in writing, nor operate as a waiver of any default or of the same default on a future
occasion. Landlord’s acceptance of Basic Rent shall not be deemed a waiver of any preceding
default.

Section 9.10. Applicable Law and Constitution. This Lease shall be deemed an Indiana
contract, and the laws of the State of Indiana shall govern the validity, performance, and
enforcement of this Lease. The invalidity or unenforceability of any provision of this Lease shall
not affect or impair any other provision. The headings of the several articles and sections
contained herein are for convenience only and do not define, limit, or construe the contents of
such articles or sections.

Section 9.11. Notice. All notices hereunder shall be given in writing and shall be deemed to
have been duly given on the date delivered or refused, if delivered personally, or, if mailed by
registered or certified mail, postage prepaid, to the respective addresses specified in paragraphs
(b) and (c) of Section 1.1.

Section 9.12. Construction of Terms. Whenever the singular or plural number, or masculine,
feminine, or neuter gender is used herein, it shall equally include the other, and the terms and
provisions of this instrument shall be construed accordingly.

Section 9.13. Agreement Binding Upon Successors. The covenants, agreements, and obligations
herein contained shall extend to, bind, and inure to the benefit not only of the parties hereto,
but to their respective successors and assigns. This provision does not modify the provisions
governing assignment found elsewhere in this Lease.

Section 9.14. Venue. In the event of any litigation between the Landlord and the Tenant, the
Tenant hereby waives a trial by jury, and further agrees that the venue of any such action shall be
in the County of Jackson, State of Indiana.

Section 9.15. Severance Provision. Any provision thereof which may prove unenforceable shall
not affect the validity of any other provision of any other contract.

Section 9.16. Complete Agreement. All negotiations, considerations, representations, and
understandings, between the parties are incorporated herein, and may be modified or altered only by
agreement in writing signed by the party to be bound.

Section 9.17. Storage of Supplies Equipment and Materials. The Tenants shall not be
permitted to stack or store items outside of the structure which the subject of this Lease
Agreement. All storage of supplies, equipment and material shall be, as much as practicable,
inside the building itself.

 

12

 

Section 9.18. Environmental Compliance. The Tenant shall not discharge, emit, cause, allow,
or threaten to discharge, emit, cause, or allow any contaminant or waste including any noxious
odor, either alone or in combination with contaminants from other sources, into the environment or
into any publicly
owned treatment works in any form which causes or would cause pollution which violates or would
violate rules, standards, or discharge or emission requirements adopted by any agency, federal or
state. In addition, the Tenant warrants that it shall comply with all federal and state statutes,
administrative regulations, and local ordinances with regard to environmental compliance including,
but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, as
amended (“CERCLA”), the Resource Conservation and Recovery Act, as amended (“RCRA”), the Toxic
Substance Control Act (“TSCA”), any of the regulations thereunder, and the Indiana Environmental
Code, Title 13 of the Indiana Code. From and after the date of this Lease Agreement, the Tenant
shall indemnify and hold the Landlord harmless from and against all claims, damages, losses,
costs, expenses (including, without limitation, reasonable attorneys’ fees), actions and
liabilities arising out of or as a proximate result of the treatment, storage, disposal or the
arranging therefor, or the existence on the Real Estate, of any hazardous or toxic substance
(including any constituent thereof) due to the act or negligence of the Tenant or the discharge
into the environment by the Tenant of any hazardous or toxic substance (including any constituent
thereof), including, without limitation, claims or natural resource damage, personal injury,
property damage or response or remedial costs, whether at common law or under any domestic or
foreign law, including, without limitation, the Comprehensive Environmental Response, Compensation
and Liability Act (“CERCLA”), the Resource Conservation and Recovery Act (“RCRA”), the Toxic
Substance Control Act, and any state or federal statute or municipal ordinance creating liability
for the treatment, storage or disposal, or the arranging therefore, or the existence on property,
of hazardous or toxic substances.

To the knowledge of Landlord, no pollutants or contaminants or other toxic or hazardous
substances, or petroleum products, including crude oil or any fraction thereof, including any
solid, liquid, gaseous or thermal irritant or contaminant such as smoke, vapor, soot, fumes, acids,
alkalis, chemicals or waste regulated by any local, state or federal agency, authority or
governmental unit, statute, law, ordinance or regulation (including materials to be recycled,
reconditioned or reclaimed) collectively the “Substances”) have been discharged, dispersed,
released, stored, treated, generated, disposed of or allowed to escape on or about the building or
the Leased Premises, or in or about the property of which the building is a part. Further,
Landlord represents and warrants to Tenant that (I) no asbestos or asbestos-containing materials
have been installed, used incorporated into or disposed of on the Leased Premises; (ii) no
polychlorinated biphenyls (“PCBs”) are located on or in the building in the form of electrical
transformers, fluorescent light fixtures with ballasts, cooling oils or any other device or form;
and (iii) no investigation, administrative order, consent order or agreement, litigation or
settlement with respect to Substances is proposed, threatened, anticipated or in existence with
respect to the building, or in or about the property of which the building is a part.

Landlord agrees to defend, indemnify and hold harmless Tenant, its directors, officers,
employees, agents, contractors, subcontractors, licensees, invitees, successors and assigns from
and against any and all claims, demands, judgments, damages, actions, causes of action, injuries,
administrative orders, consent agreements and orders, liabilities, penalties, costs and expenses f
any kind whatsoever, including claims arising out of loss of life, injury to persons, property or
business or damages to natural resources in connection with the activities of Landlord or parties
in a contractual relationship with Landlord, and which (I) arises out of the actual, alleged or
threatened discharge, dispersal, release, storage, treatment, generation, disposal or escape of
Substances in the building or in or about the property of which the building is a part; (ii)
actually or allegedly arises out of the use, specification or inclusion of any product, material or
process containing chemicals, the failure to detect the existence or proportion of chemicals in the
soil, air, surface water or ground water or the performance or failure to perform the abatement of
any pollution source or the replacement or removal of any soil, water, surface water or ground
water containing chemicals; or (iii) arises out of any duty to pay for the cleanup or removal of
any Substance or material from the building or the property upon which the same is located, under
any federal, state or local laws.

 

13

 

Section 9.19. Subrogation. Anything to the contrary in this Lease notwithstanding, neither
party, nor its officers, directors, employees, agents or invitees, shall be liable to the other
party or to any insurance company (by way of subrogation or otherwise) insuring the other party for
any loss or damage to any building, structure or other tangible property, when such loss is caused
by any of the perils which are or could be insured against under a standard policy of full
replacement cost insurance providing coverage at lease as broad as the Insurance Offices Causes of
Loss, “Special Form”, even though such loss or damage might have been occasioned by the negligence
of such party, its agents or employees (this clause shall not apply, however, to any damage caused
by intentionally wrongful actions or omissions).

9.20 Dispute Resolution. In the event of a dispute between the Landlord and Tenant regarding
any provision of this lease, the parties agree to the following dispute resolution procedure: (a)
the parties will first try to resolve their dispute by mediation pursuant to Indiana rules of court
governing alternative dispute resolution; (b) in the event mediation fails, the parties shall
submit their dispute to arbitration pursuant to the Indiana Arbitration Act as amended from time to
time. Each party shall bear their own costs of mediation or arbitration.

IN WITNESS WHEREOF, Whittymore, LLC, Landlord, and Cereplast, Inc., Tenant, each in the
presence of the undersigned witnesses, have executed this Lease Agreement on the dates below
indicated, but effective as of the date of execution of the last party to sign this document.

 

14

 

	 	 	 
	LANDLORD
	 	 
	 
	 	 
	Whittymore, LLC
	 	 
	 
	 	 
	/s/ Dillard Whittymore III
	 	 
	 	 	 
	Dillard Whittymore III, Managing Member

	 	 

Dated: 11/29, 2007

	 	 	 	 	 
	TENANT	 	 
	 
	 	 	 	 
	Cereplast, Inc	 	 
	 
	 	 	 	 
	By:

	 	/s/ Frederic Scheer	 	 
	 

	 	 	 	 
	 

	 	Frederic Scheer, CEO
	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	(Printed)	 

Dated: November 29, 2007

This instrument prepared by

	 	 	 	 	 
	Jeffrey J. Lorenzo, Esq.

	 	and
	 	David W. Paugh, Esq.
	Attorney at Law

	 	 	 	Attorney at Law
	208 West Second Street

	 	 	 	308 West Second Street
	Seymour, IN 47274

	 	 	 	Seymour, IN 47274
	(812) 524-9000

	 	 	 	(812) 522-4109

 

15

 

Exhibit A

Legal description.

 

16

 

DESCRIPTION OF PARCEL FROM SEYMOUR INDUSTRIAL CORPORATION TO FOURTH STREET LEASING

A
PART OF THE SOUTH HALF OF SECTION 9, TOWNSHIP 6 NORTH, RANGE 6 EAST,
JACKSON COUNTY,
INDIANA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCING AT THE SOUTHWEST CORNER OF SECTION 9, TOWNSHIP 6 NORTH, RANGE 6 EAST;
THENCE NORTH ALONG THE WEST LINE, 1,034.00 FEET TO THE INDIAN BOUNDARY LINE; THENCE
ALONG THE INDIAN BOUNDARY LINE, NORTH 56 DEGREES 10 MINUTES 00 SECONDS
EAST, 1,184.14 FEET TO THE CENTERLINE OF OLD VERNON TO BEDFORD ROAD, (THE ABOVE PORTION OF THIS
DESCRIPTION BEGINNING WITH THE WORDS “COMMENCING AT...” IS QUOTED FROM DEED RECORD 235,
PAGE 501, AS FOUND RECORDED IN THE OFFICE OF THE RECORDER OF JACKSON COUNTY, INDIANA;
THENCE SOUTH 67 DEGREES 06 MINUTES 01 SECONDS EAST ALONG THE APPROXIMATE CENTER LINE OF COUNTY
ROAD 650 NORTH, A DISTANCE OF 85.00 FEET TO A P.K. NAIL, FOUND IN PLACE: THENCE CONTINUING SOUTH
67 DEGREES 06 MINUTES 01 SECONDS EAST ALONG THE APPROXIMATE CENTER
LINE OF COUNTY ROAD 650 NORTH,
A DISTANCE OF 342.59 FEET TO A P.K. NAIL, FOUND IN PLACE: THENCE SOUTH 68 DEGREES 55 MINUTES 20
SECONDS EAST ALONG THE APPROXIMATE CENTER LINE OF COUNTY ROAD 650 NORTH. A DISTANCE OF 504.40
FEET TO A P.K. NAIL, PLACED THIS SURVEY (THE AFORMENTIONED WORDS
BEGINNING WITH “COMMENCING AT...”
ARE COPIED DIRECTLY FROM DEED RECORD 246, PAGES 938-940) AT THE SOUTHWEST CORNER OF THE PARCEL
DESCRIBED IN DEED RECORD 246, PAGES 938-940; THENCE ALONG THE SOUTH LINE OF SAID PARCEL THE
FOLLOWING THREE COURSES, SOUTH 68 DEGREES 19 MINUTES 08 SECONDS EAST 440.73 FEET TO A FOUND P.K.
NAIL; THENCE SOUTH 69 DEGREES 39 MINUTES 11 SECONDS EAST 214.53 FEET TO A SET P.K. NAIL; THENCE
SOUTH 68 DEGREES 26 MINUTES 56 SECONDS EAST 212.78 FEET TO A SET P.K. NAIL; THENCE NORTH 00 DEGREES
22 MINUTES 09 SECONDS EAST 32.17 FEET TO A SET 5/8” CAPPED IRON PIN AT THE POINT OF BEGINNING;
THENCE CONTINUING NORTH 00 DEGREES 22 MINUTES 09 SECONDS EAST 786.03 FEET TO A SET 5/8” CAPPED
IRON PIN ON THE NORTH LINE OF THE PARCEL DESCRIBED IN DEED RECORD 246, PAGES 938-940; THENCE ALONG THE
NORTH AND EAST LINES OF SAID PARCEL THE FOLLOWING THREE COURSES, SOUTH 81 DEGREES 42 MINUTES 42 SECONDS
EAST 416.89 FEET TO A FOUND 5/8” IRON PIN; THENCE SOUTH 68 DEGREES 48 MINUTES 19 SECONDS EAST 184.58 FEET
TO A FOUND 5/8” IRON PIN; THENCE SOUTH 00 DEGREES 22 MINUTES 09
SECONDS WEST 917.04 FEET TO A SET 5/8”
CAPPED IRON PIN; THENCE NORTH 61 DEGREES 23 MINUTES 04 SECONDS WEST 94.52 FEET TO A SET 5/8” CAPPED
IRON PIN; THENCE NORTH 67 DEGREES 53 MINUTES 19 SECONDS WEST 350.42 FEET TO A SET 5/8” CAPPED IRON PIN;
THENCE NORTH 68 DEGREES 26 MINUTES 56 SECONDS WEST 237.28 FEET TO THE POINT OF BEGINNING, CONTAINING 12.450
ACRES, MORE OR LESS, SUBJECT TO THE RIGHT-OF-WAY FOR AN ELECTRIC TRANSMISSION LINE, AND ALL OTHER LEGALLY
ESTABLISHED RIGHTS-OF-WAY AND EASEMENTS.

 

17

 

Exhibit B

Architectural drawings provided by Landlord.

 

18

 

 

19

 

Addendum

Upgrades or changes by Landlord

1. Landlord will add additional paved parking to the existing 18 spaces for 50-75 spaces within 6
months of occupancy.

2. Landlord will pave exit / rail access area which is now packed gravel. (It is not paved
currently because it would need to be ripped up for rail installation.) This will be done in
coordination with Tenant and be based upon schedule for rail spur addition.

3. Landlord will provide updated Phase 1 environmental report prior to lease execution.

Other Improvements

Rail spur access will be granted and made available.

1. This is to be coordinated with State of Indiana economic authorities, but assumption is CSX
will approve a design and issue letter stating this. It will cost approximately $400,000 to
increase length to reach the site and add dual spur. One-half of this will be paid for by a State
grant. CSX will likely require the remaining one-half be in paid cash and returned in rebates, but
it is expected that the City and County will pay for this and be reimbursed in rebates from CSX so
Tenant is not out cash for rail spur construction.

2. Utilities. Duke Power will make available up to 5,000 amps of power as needed. It will
require Tenant to coordinate with Duke Energy for correct transformer sizing.

Other

The lease and right of first refusal would be subject to the site, facilities and structures
satisfactorily passing an environmental review that Tenant may require or as documented in an
updated Phase I environmental report provided by the Landlord. Required environmental permitting
for Tenant’s operations shall be its own responsibility.

Expansion option

1. At Tenant’s request, Landlord will construct and make available a ‘mirror image’ 105,000
square-foot building directly adjacent to the existing building within 9 months of Tenant’s
request, barring unforeseen circumstances.

2. The lease term length for the new structure will be 7 years.

3. The terms of this lease will be the same as for the existing structure (property tax
included, building insurance included, no CAM included or business personal property tax or
personal effects insurance, one year break fee, etc.)

4. Lease price. Because Landlord cannot be certain when Tenant will request the construction
of an additional building similar to the current demised premises, it cannot predict future
interest rates, costs of construction, materials, availability of labor, etc. Landlord will agree
to negotiate these items at the time that Tenant makes its request for the construction of an
additional building.

5. Cereplast and owner may discuss and agree to an expansion building that varies in some way
from existing building. If so, then adjustments to the lease rate may be needed and will be based
on the above as a reference.

6. Expansion Building will include same core building infrastructure such as loading gates,
sprinkler systems, parking spaces, office area, washrooms and the like.

 

20Filed by Bowne Pure Compliance

Exhibit 10.3

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this “Agreement”) is made as of the 1st day of August 2006, by and
between Cereplast, Inc., a Nevada corporation (the “Company”), and Frederic Scheer, an individual
(“Employee”), and is made with respect to the following facts:

R E C I T A L S

A. The Company and the Employee wish to ensure that the Company will receive the benefit of
Employee’s loyalty and service.

B. In order to help ensure that the Company receives the benefit of Employee’s loyalty and
service, the parties desire to enter into this formal Employment Agreement to provide Employee with
appropriate compensation arrangements and to assure Employee of employment stability.

C. The parties have entered into this Agreement for the purpose of setting forth the terms of
employment of the Employee by the Company.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, THE
PARTIES HERETO AGREE AS FOLLOWS:

1. Employment of Employee and Duties. The Company hereby hires Employee and Employee
hereby accepts employment upon the terms and conditions described in this Agreement. The Employee
shall continue to be the Chief Executive Officer and President of the Company with all of the
duties, privileges and authorities usually attendant upon such office, including but not limited to
overall supervision of the management of the Company’s operations. Subject to (a) the general
supervision of the Board of Directors of the Company, and (b) the Employee’s duty to report to the
Board of Directors periodically, as specified by it from time-to-time, Employee shall have all of
the authority to perform his employment duties for the Company.

2. Time and Effort. Employee agrees to devote his full working time and attention to
the management of the Company’s business affairs, the implementation of its strategic plan, as
determined by the Board of Directors, and the fulfillment of his duties and responsibilities as the
Company’s Chief Executive Officer and President. Expenditure of a reasonable amount of time for
personal matters and business and charitable activities shall not be deemed to be a breach of this
Agreement, provided that those activities do not materially interfere with the services required to
be rendered to the Company under this Agreement.

3. The Company’s Authority. Employee agrees to comply with the Company’s rules and
regulations as adopted by the Company’s Board of Directors regarding performance of his duties, and
to carry out and perform those orders, directions and policies established by the Company with
respect to his engagement. Employee shall promptly notify the Company’s Board of Directors of any
objection he has to the Board’s directives and the reasons for such objection.

4. Noncompetition by Employee. During the term of this Agreement, the Employee shall
not, directly or indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder (in a private company), corporate officer, director, or in any other
individual or representative capacity, engage or participate in any business that is in direct
competition with the business of the Company or its affiliates.

 

1

 

5. Term of Agreement. This Agreement shall commence to be effective on August 1, 2006
(the “Commencement Date”), and shall continue until July 31, 2011, unless terminated as provided in
Section 14 hereof.

6. Compensation. During the term of this Agreement, the Company shall pay the
following compensation to Employee:

6.1 Annual Compensation. Employee shall be paid a fixed salary of $400,000 per year,
payable in two installments per month of $16,700 each on the 1st and 16th day of each month,
corresponding to the second half of the previous month and the first 15 days of the current month,
respectively, commencing on August 16, 2006 for the period from August 1, 2006 until August 15,
2006. Employee shall receive an annual 7% increase in said fixed salary effective each January
1st during the term of this Agreement. Employee has the right is his sole discretion to
defer any portion of his salary in excess of $13,000 per month and have it paid at a later date by
notifying the Company on or before the scheduled date for a salary payment.

6.2 Additional Compensation. In addition to the compensation set forth in Section 6.1
of this Agreement, Employee may be paid a bonus or bonuses during each year, as determined at the
sole discretion of the Company’s Board of Directors based on the Board’s evaluation of the
Employee’s definable efforts, accomplishments and similar contributions.

7. Fringe Benefits. Employee shall be entitled to all fringe benefits which the
Company or its subsidiaries may make available from time-to-time for persons with comparable
positions and responsibilities. Without limitation, such benefits shall include participation in
any life and disability insurance programs, profit incentive plans, pension or retirement plans,
and bonus plans as are maintained or adopted from time-to-time by the Company. The Company shall
also provide Employee with medical and dental group insurance coverage or equivalent coverage for
Employee and his dependents. The medical and dental insurance coverage shall begin on the
Commencement Date and shall continue throughout the term of this Agreement. The Company will also
provide and pay for a health club membership for Employee, reasonably selected by the Employee.

8. Office and Staff. In order to enable Employee to discharge his obligations and
duties pursuant to this Agreement, the Company agrees that it shall provide suitable office space
for Employee in El Segundo, California, together with all necessary and appropriate supporting
staff and secretarial assistance, equipment, stationery, books and supplies. Employee agrees that
the office space and supporting staff presently in place is suitable for the purposes of this
Agreement. The Company agrees to provide at its expense parking for one vehicle by the Employee at
the Company’s executive offices.

9. Reimbursement of Expenses. The Company shall reimburse Employee for all reasonable
travel, mobile telephone, promotional and entertainment expenses incurred in connection with the
performance of Employee’s duties hereunder, subject to Section 10 of this Agreement with respect to
automobile expenses. Employee’s reimbursable expenses shall be paid promptly by the Company upon
presentment by Employee of an itemized list of invoices
describing such expenses. All compensation provided in Sections 6, 7, and 9 of this Agreement
shall be subject to customary withholding tax and other employment taxes, to the extent required by
law.

10. Automobile. Notwithstanding anything else herein to the contrary, the Company
shall pay to the Employee a fixed amount equal to $500 per month on the last day of each month
during the term of this Agreement as reimbursement to the Employee on a non-accountable basis of
all expenses incurred by the Employee for the use of his automobile for Company business purposes,
including but not limited to depreciation, repairs, maintenance, gasoline and insurance. After the
expiration of the first year of the term of this Agreement, the Company’s Board of Directors will
review and may in its discretion determine to increase the Employee’s automobile allowance, or
authorize the Company to lease an automobile for the Employee. Employee shall not be entitled to
any other reimbursement for the use of his automobile for business purposes.

 

2

 

11. Vacation. Employee shall be entitled to three weeks of paid vacation per year or
pro rata portion of each year of service by Employee under this Agreement. The Employee shall be
entitled to the holidays provided in the Company’s established corporate policy for employees with
comparable duties and responsibilities.

12. Rights In And To Inventions And Patents.

12.1 Description of Parties’ Rights. The Employee agrees that with respect to any
inventions made by him or the Company during the term of this Agreement, solely or jointly with
others, (i) which are made with the Company’s equipment, supplies, facilities, trade secrets or
time, or (ii) which relate to the business of the Company or the Company’s actual or demonstrably
anticipated research or development, or (iii) which result from any work performed by the Employee
for the Company, such inventions shall belong to the Company. The Employee also agrees that the
Company shall have the right to keep such inventions as trade secrets, if the Company chooses.

12.2 Disclosure Requirements. For purposes of this Agreement, an invention is deemed
to have been made during the term of this Agreement if, during such period, the invention was
conceived or first actually reduced to practice. In order to permit the Company to claim rights to
which it may be entitled, the Employee agrees to disclose to the Company in confidence the nature
of all patent applications filed by the Employee during the term of this Agreement.

13. Termination. This Agreement may be terminated in the following manner and not
otherwise:

13.1 Mutual Agreement. This Agreement may be terminated by the mutual written
agreement of the Company and Employee to terminate.

13.2 Termination by Employee for Breach. Employee may at his option and in his sole
discretion terminate this Agreement for the material breach by the Company of the terms of this
Agreement. In the event of such termination, Employee shall give the Company 30 days prior written
notice.

13.3 Termination by the Company for Breach. The Company may at its option terminate
this Agreement in the event that the Employee intentionally performs his duties in bad faith under
this Agreement, or breaches his fiduciary duty to the Company, to the Board of
Directors or to the Company’s shareholders; provided, however, that the Company shall give the
Employee written notice of specific instances for the basis of any termination of this Agreement by
the Company pursuant to Section 13.3 of this Agreement. Employee shall have a period of 30 days
after said notice in which to cease the alleged violations before the Company may terminate this
Agreement. If Employee ceases to commit the alleged violations within said 30 day period, the
Company may not terminate this Agreement pursuant to this Section. If Employee continues to commit
the alleged violations after said 30 day period, the Company may terminate this Agreement
immediately upon written notification to Employee. Notwithstanding anything else herein to the
contrary, if the Employee is removed pursuant to Section 13.3 of this Agreement, the Employee shall
receive all of the benefits provided in Section 14(iii) of this Agreement, regardless of the terms
and conditions of the Company’s Stock Option Plan or any existing stock option agreements or any
amendments thereto governing the options described in Section 14(iii) of this Agreement.

13.4 Termination Upon Death. This Agreement shall terminate upon the death of the
Employee.

 

3

 

13.5 Termination Upon the Disability of the Employee. This Agreement shall terminate
upon the disability of the Employee. As used in the previous sentence, the term “disability” shall
mean the complete disability to discharge Employee’s duties and responsibilities for a continuous
period of not less than six months during any calendar year. Any physical or mental disability
which does not prevent Employee from discharging his duties and responsibilities in accordance with
usual standards of conduct as determined by the Company in its reasonable opinion shall not
constitute a disability under this Agreement.

13.6 Termination from or Changes in Position. Removal of the Employee from his
position as the Chief Executive Officer or President of the Company shall be deemed to be a
termination subject to the severance payment positions set forth in Section 14 of this Agreement.
The Company shall not be entitled to place the Employee in any other employment position without
the Employee’s consent. The Employee’s failure to consent shall not be a breach of any provision
of this Agreement.

13.7 Termination As A Result of A Change in Control of the Company. “Change of
Control” is defined as a sale of all or substantially all of the Company’s assets or more than
fifty percent (50%) of the Company’s outstanding stock, to a purchaser which is unaffiliated with
the Company, in a single transaction or a series of related transactions, or a merger pursuant to
which the Company is not the surviving corporation, with any entity which is unaffiliated with the
Company. In the event of a Change in Control of the Company, if the Employee, negotiating in good
faith, is unable to come to an agreement with the surviving company regarding an employment
agreement, then the Employee may terminate this Agreement pursuant to Section 13.2 of this
Agreement.

13.8 Other Termination by Employee. If this Agreement is terminated by Employee in
writing for a reason other than the Company’s breach of this Agreement (i.e. voluntary resignation)
then (a) Employer shall not be entitled to assert any claim against the Employee for consequential
or indirect damages or for lost profits as a result of the termination; and (b) Employee shall not
be entitled to any rights set forth in Section 14 of this Agreement except that Employee shall be
entitled to the right to exercise vested options, if any, for a period of 90 days after the date of
the written notification of termination by the Employee.

14. Improper Termination. If this Agreement is terminated by Employee for any reason
pursuant to Section 13.2, 13.6 or 13.7 of this Agreement or by the Company in any manner except
specifically in accordance with Section 13.1 or 13.3, 13.4 or 13.5 of this Agreement, then (i) the
Company shall immediately pay to the Employee a lump sum payment equal to the sum of the Employee’s
entire annual compensation and accrued but unpaid bonus (if any, with respect to bonus) payable
through the end of the term of this Agreement pursuant to Sections 6.1 and 6.2 herein,
respectively, plus an additional lump sum equal to 36 months of his last monthly payment on record
(ii) Employee shall be entitled to all of the benefits under Section 7 of this Agreement, as
amended, through the end of the term of this Agreement, and (iii) if applicable, all unvested stock
options owned by Employee will immediately vest, Employee shall be entitled to exercise all vested
stock options which he owns for the entire remaining exercise period of the stock options, no such
stock options shall terminate prior to said expiration dates, and no “severance” shall be deemed to
have occurred under the Company’s Stock Option Plan or under existing Stock Option Agreements
covering said stock options. It is specifically agreed that in such event Employee shall have no
duty to mitigate his damages by seeking comparable, inferior or different employment.

15. Indemnification of Employee. Pursuant to the provisions and subject to the
limitations of the California Corporations Code, and in particular Sections 204 and 317 therein,
the Company shall indemnify and hold Employee harmless as provided in Sections 15.1, 15.2 and 15.3
of this Agreement. The Company shall, upon the request of Employee, assume the defense and
directly bear all of the expense of any action or proceedings which may arise for which Employee is
entitled to indemnification pursuant to this Section.

 

4

 

15.1 Indemnification of Employee for Actions by Third Parties. The Company hereby
agrees to indemnify and hold Employee harmless from any liability, claims, fines, damages, losses,
expenses, judgments or settlements actually incurred by him, including but not limited to
reasonable attorneys’ fees and costs actually incurred by him as they are incurred, as a result of
Employee being made at any time a party to, or being threatened to be made a party to, any
proceeding (other than an action by or in the right of the Company, which is addressed in Section
15.2 of this Agreement), relating to actions Employee takes within the scope of his employment as
the Chief Executive Officer of the Company or in any other employment capacity, or in his role as a
director of the Company, provided that Employee acted in good faith and in a manner he reasonably
believed to be in the best interest of the Company and, in the case of a criminal proceeding, had
no reasonable cause to believe his conduct was unlawful.

15.2 Indemnification of Employee for Actions in the Right of the Company. The Company
hereby agrees to indemnify and hold Employee harmless from any liability, claims, damages, losses,
expenses, judgments or settlements actually incurred by him, including but not limited to
reasonable attorneys’ fees and costs actually incurred by him as they are incurred, as a result of
Employee being made a party to, or being threatened to be made a party to, any proceeding by or in
the right of the Company to procure a judgment in its favor by reason of any action taken by
Employee as an officer, director or agent of the Company, provided that Employee acted in good
faith in a manner he reasonably believed to be in the best interests of the Company and its
shareholders, and provided further, that no indemnification by the Company shall be required
pursuant to this Section 15.2 (i) for acts or omissions that involve intentional misconduct or a
knowing and culpable violation of law, (ii) for acts or omissions that Employee believed to be
contrary to the best interests of the Company or its shareholders or that involve the absence of
good faith on the part of Employee, (iii) for any transaction from which Employee derived an
improper personal benefit, (iv) for acts or omissions that show a reckless disregard by Employee of
his duties to the Company or its shareholders in circumstances in which Employee
was aware, or should have been aware, in the ordinary course of performing his duties, of a
risk of serious injury to the Company or its shareholders, (v) for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of Employee’s duties
to the Company or its shareholders, or (vi) for any other act by Employee for which Employee is not
permitted to be indemnified under the California Corporations Code. Furthermore, the Company has
no obligation to indemnify Employee pursuant to this Section 15.2 in any of the following
circumstances:

A. In respect of any claim, issue, or matter as to which Employee is adjudged to be liable to
the Company in the performance of his duties to the Company and its shareholders, unless and only
to the extent that the court in which such action was brought determines upon application that, in
view of all the circumstances of the case, he is fairly and reasonably entitled to indemnity for
the expenses and then only in the amount that the court shall determine.

B. In the event of the application of Section 15.2(A), then for amounts paid in settling or
otherwise disposing of a threatened or pending action without court approval.

C. In the event of the application of Section 15.2(A), then for expenses incurred in defending
a threatened or pending action which is settled or otherwise disposed of without court approval.

15.3 Reimbursement. In the event that it is determined by a trier of fact that
Employee is not entitled to indemnification by the Company pursuant to Sections 15.1 or 15.2 of
this Agreement, then Employee is obligated to reimburse the Company for all amounts paid by the
Company on behalf of Employee pursuant to the indemnification provisions of this Agreement. In the
event that Employee is successful on the merits in the defense of any proceeding referred to in
Sections 15.1 or 15.2 of this Agreement, or any related claim, issue or matter, then the Company
will indemnify and hold Employee harmless from all fees, costs and expenses actually incurred by
him in connection with the defense of any such proceeding, claim, issue or matter.

 

5

 

16. Assignability of Benefits. Except to the extent that this provision may be
contrary to law, no assignment, pledge, collateralization or attachment of any of the benefits
under this Agreement shall be valid or recognized by the Company. Except as provided by law,
payment provided for by this Agreement shall not be subject to seizure for payment of any debts or
judgments against the Employee, nor shall the Employee have any right to transfer, modify,
anticipate or encumber any rights or benefits hereunder; provided that any stock issued by the
Company to the Employee pursuant to this Agreement shall not be subject to Section 16 of this
Agreement.

17. Directors’ and Officers’ Liability Insurance. The Company will utilize its best
efforts in good faith to purchase directors’ and officers’ liability insurance for the officers and
directors of the Company, which would include the same coverage for Employee. The Company
covenants to maintain in effect a directors’ and officers’ liability insurance policy on the same
terms and conditions as applicable to all other officers and directors of the Company.

18. Notice. All notices and other communications required or permitted hereunder
shall be in writing or in the form of a telex or telecopy (confirmed in writing) to be given only
during the recipient’s normal business hours unless arrangements have otherwise been made to
receive such notice by telex or telecopy outside of normal business hours, and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand, messenger, or telex
or telecopy (as provided above) addressed (a) if to the Employee, at the address for such
Employee set forth on the signature page hereto or at such other address as such Employee shall
have furnished to the Company in writing or (b) if to the Company, to its principal executive
offices and addressed to the attention of the Chairman of the Board, or at such other address as
the Company shall have furnished in writing to the Employee.

In case of the Company:

Cereplast, Inc.

3433 El Segundo Boulevard

Hawthorne, California 90250

Attention: Chairman of the Board of Directors

Telephone Number: (310) 676-5000

Facsimile Number: (310) 676-5003

In case of the Employee:

Frederic Scheer

The address listed below Mr. Scheer’s

signature to this Agreement.

 

6

 

19. Attorneys’ Fees. In the event that any of the parties must resort to legal action
in order to enforce the provisions of this Agreement or to defend such suit, the prevailing party
shall be entitled to receive reimbursement from the nonprevailing party for all reasonable
attorneys’ fees and all other costs incurred in commencing or defending such suit.

20. Entire Agreement. This Agreement embodies the entire understanding among the
parties and merges all prior discussions or communications among them, and no party shall be bound
by any definitions, conditions, warranties, or representations other than as expressly stated in
this Agreement or as subsequently set forth in a writing signed by the duly authorized
representatives of all of the parties hereto.

21. No Oral Change; Amendment. This Agreement may only be changed or modified and any
provision hereof may only be waived by a writing signed by the party against whom enforcement of
any waiver, change or modification is sought. This Agreement may be amended only in writing by
mutual consent of the parties.

22. Severability. In the event that any provision of this Agreement shall be void or
unenforceable for any reason whatsoever, then such provision shall be stricken and of no force and
effect. The remaining provisions of this Agreement shall, however, continue in full force and
effect, and to the extent required, shall be modified to preserve their validity.

23. Applicable Law. This Agreement shall be construed as a whole and in accordance
with its fair meaning. This Agreement shall be interpreted in accordance with the laws of the
State of California, and venue for any action or proceedings brought with respect to this Agreement
shall be in the County of Los Angeles in the State of California.

24. Successors and Assigns. Each covenant and condition of this Agreement shall inure
to the benefit of and be binding upon the parties hereto, their respective heirs, personal
representatives, assigns and successors in interest. Without limiting the generality of the
foregoing sentence, this Agreement shall be binding upon any successor to the Company whether by
merger, reorganization or otherwise.

 

7

 

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

	 	 	 	 	 
	COMPANY:

	 	CEREPLAST, INC.

a Nevada corporation	 	 
	 
	 	 	 	 
	Attest:

	 	/s/ Fredric Scheer	 	 
	 

	 	 	 	 
	 

	 	Fredric Scheer, Chief Executive Officer,
President and Chairman of the Board of
Directors	 	 
	 
	 	 	 	 
	/s/ Brian Altounian
	 	 	 	 
	 	 	 	 	 
	Brian Altounian, Director
	 	 	 	 
	 
	 	 	 	 
	EMPLOYEE:
	 	 	 	 
	 

	 	/s/ Frederic Scheer
	 	 
	 

	 	 	 	 
	 

	 	Frederic Scheer	 	 
	 
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	 
	 

	 	Street Address	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	 
	 

	 	City, State and Zip Code	 	 
	 
	 	 	 	 
	 

	 	Telephone Number:  	 	 
	 
	 	 	 	 
	 

	 	Facsimile Number:                                         	 	 

 

8

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